KAN MING CONSTRUCTION INVESTMENTS LTD v. KWOK MOON CHI

HCA2060/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.2060 OF 2005

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R U L I N G

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1. This is an appeal against the decision of Master Kwan of 16 November this year in which she dismissed the appellant plaintiff’s application for leave to amend its Re-Amended Statement of Claim.

2. Mr Hung for the plaintiff has informed the court that the application arises from what was realized to be a mistake in the Re-Amended Statement of Claim during the course of preparing a witness statement of Mr Kan Choi Ming, a former director of the plaintiff.  Whereas the Re-Amended Statement of Claim alleged only one agreement in writing which was dated 1 May 1995, the witness statement of Mr Kan Choi Ming revealed that he was alleging that there had been a previous written agreement made in May 1995 which had been destroyed at the request of the defendant in 1997 and replaced with the written agreement in question which although dated 1 May 1995 had in fact been made in 1997 but dated 1 May 1995 to reflect the fact that the earlier written agreement had been signed on that day.

3. The only, or at least the principal, difference between the two agreements was that the earlier destroyed agreement had recorded that the defendant should pay the premium to the Government for the two small houses which were to be assigned to him, whereas the replacement agreement recorded that the plaintiff should pay the premium for one of the two houses to be transferred to the defendant but the defendant should pay the premium for the remaining house.

4. The amendment sought by the plaintiff to the Re-Amended Statement of Claim recorded the history of the two written agreements and alleged that the second written agreement signed in 1997 (“the varied written agreement”) came about after the defendant had refused to execute a deed poll carving out Lot 689 R.P. into small sections on the ground that his son was unhappy with the terms of the first agreement.  There had followed a meeting involving the defendant’s son and a Mr Lee Hang Kwong and, as a result, the plaintiff had agreed to a demand by the defendant’s son to pay the premium of one of the small houses to be assigned to the defendant.  The proposed amendment stated : “The plaintiff accepted the demand in order to ensure that the joint venture could be proceeded without further delay.”

5. Mr Hung sought the amendment in order that the pleadings reflect the correct history of the matter.  He relied on the well established principle that the object of the courts is to decide the rights of the parties and not to punish them for mistakes in the conduct of their cases and that the courts should allow errors to be corrected if they can be effected without injustice to the other party.

6. Mr Chik for the defendant accepted those principles but nonetheless argued that the amendments should not be permitted.

7. An allegation made in the affirmation of the defendant’s brother, Kwok Sau Chung, was that he had been advised by his legal advisors that the plaintiff was for the first time alleging fraud and that the plaintiff should be required to substantiate the truth of the proposed allegation.  It was in this context apparently that it was said that particulars should be provided of the circumstances in which the solicitor, Miss Grace Tong, attested the alleged varied written agreement, such as whether the agreement was dated when she signed it and whether she was aware that it was backdated.  Mr Chik was prepared to concede that it might be an exaggeration to say that the proposed amendments allege fraud but he asked the court to take into account the lack of particulars regarding the circumstances in which Miss Tong attested the document.  I do not see the absence of these details in the proposed amendments as being of significance.  Whether or not the agreement was dated when Miss Tong attested it and whether she was aware it was backdated are all matters of evidence.  I am satisfied that it is not for this court to consider the merits of the case on the evidence.

8. Mr Chik said that the defendant was concerned as to whether there was an allegation that the consideration for the varied written agreement was an agreement that the road to be erected on Lot 689 R.P. could be used as an access road to the houses to be erected on Lot No.539 although the proposed amendments to the Re-Amended Statement of Claim made no such allegation and merely recite that “The Plaintiff accepted the demand in order to ensure that the joint venture could be provided without further delay”.  Mr Chik referred to a passage in the Reply and Defence to Counterclaim which he suggests might amount to such an allegation.

9. Mr Hung expressly confirmed that the plaintiff was not alleging that an agreement to give access to Lot No.539 was any part of the consideration for the varied written agreement, and he stated that that was not what was being alleged in the Reply and Defence to Counterclaim.  He said that the allegation that the defendant had agreed that the road to be constructed on Lot 689 R.P. should give access to the small houses to be erected on Lot No.539 was simply part of the background to the agreement entered into in 1995 which was varied in 1997.

10. Mr Chik expressed concern that on the basis of the proposed amendment to the pleading, it might be argued that there was no consideration for the alleged varied written agreement, as performance of an existing obligation cannot amount to a consideration.  Mr Hung expressly confirmed that the plaintiff was not alleging any lack of consideration for the alleged varied written agreement.  Indeed he stressed that that he was seeking specific performance of that agreement.  In particular he accepted the obligation of the plaintiff under the agreement to pay the premium of one of the two small houses to be transferred to the plaintiff.

11. In the circumstances, I see no reason why the proposed amendment should not be made without causing any injustice to the defendant.  It is in the interests of justice that the matter not proceed on an artificial basis but against the background of the fact as alleged by the parties.

12. Mr Chik expressed concern that Mr Kan of the plaintiff might change his allegations at a later stage.  That is purely a speculative hypothesis and should not concern this court.

13. I allow the appeal.  I give leave to the plaintiff to amend its Re-Amended Statement of Claim and to file the same within seven days from today.  Service of the Re-Re-Amended Statement of Claim be dispensed with.  I give leave to the defendant to amend his Re-Re-Amended Defence and Counterclaim and to file and serve the same within 14 days from the date of this order and leave to the plaintiff to amends its Reply and Defence to Counterclaim if so advised and to file and serve the same within 14 days thereafter.

14. I order that the costs of and occasioned by the amendment be to the defendant in any event.

15. In so far as the costs of the hearings before Master Kwan and on appeal are concerned, the usual order would be the costs should go to the successful party, in other words the plaintiff.

16. In this case, I am persuaded that there are reasons to depart from the usual order for costs.  Not only was this an application to re-re-amend the Statement of Claim but the defendant had some justification from the wording of the proposed amendment in having some misgiving as to the consistency of the plaintiff’s case and uncertainty exactly what it was the plaintiff was seeking to allege, in particular as to the nature of the consideration for the alleged varied written agreement.  These matters have been clarified by Mr Hung.

17. In such circumstances, I decline to make an order that the appellant plaintiff should have its costs of the hearings before Master Kwan or on appeal.