GOLDFAME CONSULTANTS LTD v. TSE SAI MING AND ANOTHER

HCA 1065/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO. 1065 OF 2011

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D E C I S I O N

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1.  Two summonses taken out by the plaintiff are before me today: firstly that to amend the statement of claim; and secondly that to file a supplemental witness statement for the plaintiff.

BACKGROUND

2.  Briefly the plaintiff claims to have entered into an agreement with Tse Chun Shang, deceased (“the Deceased”) during the latter’s lifetime in 2005 for the purchase from the Deceased 2 plots of land in the New Territories (“the 2005 Agreement”).  Completion was agreed to take place on a date to be agreed; yet the purchase price in the sum of HK$900,000 was fully paid.  The Deceased passed away in 2008, whilst there was still no completion under the 2005 Agreement.  His son, the 1^st defendant, became the administrator of his estate.  In November 2010, the 1^st defendant, as administrator of the estate, sold the 2 plots of land in question to the 2^nd defendant at HK$500,000.  The plaintiff now claims against the defendants on the basis that the interest in the land in question was always vested in him.

3.  The plaintiff has pleaded the following case:

(1) The 1^st defendant was fully aware of the plaintiff’s interest; and in breach of his duties as the administrator of the Deceased’s estate and wilful default, he did not transfer the land to the plaintiff.

(2) The sale to the 2^nd defendant was at undervalue and liable to be set aside.  It was not a bona fide purchase but executed dishonestly with a view to defeating the prior interest of the plaintiff.

(3) Pursuant to section 60(1) of the Conveyancing and Property Ordinance, Cap 219 (“CPO”), the sale and purchase between the defendants was a disposition with intent to defraud creditors and thus voidable at the plaintiff’s option.

(4) The 2^nd defendant has actual or constructive knowledge that the sale and purchase with the 1^st defendant was at undervalue and a dishonest design performed by both of them.

(5) The transaction between the defendants carries an intention to defraud the creditors including the plaintiff and/or defeating the beneficial interest of the plaintiff.

(6) The plaintiff has thus suffered loss and damage.

(7) The plaintiff is entitled to specific performance; alternatively damages from the Deceased’s estate.

4.  As far as the relief is concerned, the plaintiff claims for declaration and injunction; alternatively damages.

5.  This case came before me for pre-trial review on 13 March 2014.  Mr Chu for the plaintiff then indicated the intention to amend the pleading in order to include an alternative claim against the 1^st defendant for the refund of HK$900,000 allegedly paid to the Deceased as mentioned above.  In view of the lack of a summons or draft amendment, I directed a proper application to be taken out in 7 days.  This the plaintiff did; and hence its summons dated 19 March 2014 (“the Amendment Summons”).

6.  The plaintiff’s summons was fixed before me on 22 April 2014 for 3 minutes only.  Indeed the plaintiff seeks to introduce the amendment suggested during the previous hearing.  The 2^nd defendant has indicated no objection to that.  But the plaintiff goes further than that, which brought about the need for argument.  Not scheduled or able to hear the parties at length on the day, I had no choice but to adjourn the summons for argument.  Hence this hearing.

7.  On 7 May 2013, the plaintiff took out another summons for leave to file and serve the supplemental statement of one of the witnesses for the plaintiff (“the Statement Summons”).

THE AMENDMENT SUMMONS

8.  Following the pleaded contention (at §15 of the statement of claim) that the 2^nd defendant had knowledge that his transaction with the 1^st defendant was at undervalue and this was a dishonest design performed by them (ie §3(4) above), the plaintiff seeks to add:

“The 1^st Defendant (acting on his own and/or as the Administrator of the Estate) and the 2^nd Defendant conspires to injure the Plaintiff aforesaid.”

9.  The parties disagree on whether this particular amendment should be allowed (“the Objected Amendment”).

10.  Mr Cheung for the 2^nd defendant takes 3 points:

(1) delay;

(2) prejudice; and

(3) defective plea.

11.  Considering the procedural history leading to the pre-trial review, I think it is clear that the plaintiff has never indicated the intention to introduce the Objected Amendment.  Nor did Mr Chu do so during the pre-trial review.

12.  The parties differ in respect of the prejudice that may follow from the Objected Amendment. Mr Cheung suggests that the Objected Amendment, if allowed, will cause his client to have to amend his pleading and to consider adducing further evidence such as that of the middleman who introduced the 1^st defendant to him.  Derailing of the trial, which is due to commence on 19 June 2014, is projected.  Mr Chu, however, disagrees because he submits that the additional allegation is based on the matters already pleaded and the existing evidence, and nothing more.

13.  Mr Cheung may have a point in the possibly different assessment of the risk to his client’s case in not calling the middleman as a witness, if the Objected Amendment is allowed.  But the key today, in my view, is whether the Objected Amendment is indeed permissible on the basis of the matters already pleaded.  In other words, do the matters already pleaded constitute the essential ingredients of a cause of action for conspiracy between the defendants to injure the plaintiff?

14.  A pleading alleging conspiracy to injure must contain the following elements:

(1)   The agreement between 2 or more persons and the means, whether lawful or unlawful, of carrying it out;

(2)   The predominant motive to injure the plaintiff in the case of conspiracy by lawful means; or an intention to injure the plaintiff in the unlawful means conspiracy;

(3)   The acts that were carried out pursuant to the agreement and the stated motive or intention; and

(4)   The damage caused to the plaintiff.

15.  In summarising the above elements, the Court of Appeal in Pido v Compass Technology Co Ltd [2010] 2 HKLRD 537 (at §§14-17) emphasized (at §25) that formulation of a party’s cause of action should clearly and cogently be made in the pleadings, instead of leaving it to an exercise of drawing inference.

16.  In Aktieselskabet Dansk Skibsfinansiering v Wheelock Marden & Co Ltd [1994] 2 HKC 264, the Court of Appeal made clear (at 273E-274A) that the conspiracy plea must go against each and every alleged conspirator.  This is particularly true in a 2-party conspiracy as that alleged in the present case.

17.  There is no dispute that none of the documents in relation to the 2005 Agreement has been registered.  This was apparently a conscious decision on the part of the plaintiff, the director of which is also its representing solicitor in the present case.  The allegation is that the 1^st defendant has been informed of the sale and purchase under the 2005 Agreement (which the 1^st defendant denies).

18.  As far as the 2^nd defendant is concerned, the allegation, as currently pleaded, is that he has actual or constructive knowledge of the transaction between him and the 1^st defendant was for undervalue.  That is the basis for alleging that this was a dishonest design and not a bona fide sale and purchase.

19.  Further particulars of the plaintiff’s pleaded case have been sought by correspondence in 2011 and 2012.  As to the request in respect of the above allegation against the 2^nd defendant, all that the plaintiff added was that a reasonable person would have checked and known the market price of the land in question; and therefore the 2^nd defendant has actual or constructive knowledge that he purchased the land at undervalue.  Follow-up request for better particulars in this respect was turned down by the plaintiff.

20.  It is difficult to see how the sale and purchase of the land at undervalue per se suggests the fact of a conspiratorial agreement between the defendants, whether in form of an agreement prior to the deal between the defendants or the very sale and purchase agreement between them, with the predominant motive to injure the plaintiff.  I stress that the alleged motive must be that of the 2^nd defendant, not only the 1^st defendant.

21.  Mr Chu refers to the claim on the basis of section 60(1) of the CPO (above).  However, that is not the answer.  Section 60(3) actually provides that the section does not extend to any interest in land disposed of for valuable consideration and in good faith or upon good consideration and in good faith to any person not having, at the time of the disposition, notice of the intent to defraud creditors. Section 50(1) further provides that no purchase, made bona fide and without fraud, of any interest in property of any kind shall be opened or set aside merely on the ground of undervalue.

22.  As far as the current pleading goes, the major, if not the only material, allegation against the 2^nd defendant is that he has notice of the sale by the 1^st defendant to him at undervalue.  The gap between this point and the point of dishonest design between the defendants, let alone conspiratorial agreement with the predominant motive to injure the plaintiff, is quite obvious.  It is question of what facts the plaintiff bases on in alleging the conspiratorial agreement with the requisite motive to injure.

23.  Mr Chu refers to the witness statement of the 2^nd defendant; and suggested that it is possible to infer that he might have knowledge, actual or constructive, about the development plan concerning the plaintiff.  Firstly, such reading of the evidence is not as apparent to me as Mr Chu suggests.  I also say the same after considering all the witness statements.  Secondly, and more importantly, this does not answer the question as to the propriety and sufficiency of pleading.  Unlike the fact finding process at trial, pleading, as mentioned, is not an exercise of drawing inference.

24.  I refuse leave to the Objected Amendment.

THE STATEMENT SUMMONS

25.  This is to adduce a further statement of the plaintiff’s witness to elaborate what was mentioned in his first statement.  In principle, this is not objected to, subject to leave to the 2^nd defendant to file further witness statement in response.

ORDER

26.  As to the Amendment Summons, I give leave to amend the statement of claim as per the draft annexed to the summons save that:

(1)   the Objected Amendment is not allowed; and

(2)   the reference to the 2^nd defendant in paragraph (5) of the prayer for relief should also be deleted[1].

27.  As to the Statement Summons, I give an order in terms with leave to the 2^nd defendant to file and serve witness statement in response to the supplemental statement for the plaintiff, if so advised, within 14 days from today.

28.  As to costs, I order that those of and occasioned by the Amendment Summons shall be to the 2^nd defendant in any event, to be taxed if not agreed, with certificate for counsel.  Costs of and occasioned by the Statement Summons are in the cause.