HCA 1681/2015
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
ACTION NO 1681 of 2015
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BETWEEN
TSOI WAI KI, VICKIE (蔡慧琪)
Plaintiff
and
YIP KAM KUEN also known as
1st Defendant
CORPORATE INSIGHTS LIMITED
2nd Defendant
(慧商投資管理有限公司)
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Before: Deputy High Court Judge Le Pichon in Chambers
Date of Hearing: 5 February 2016
Date of Decision: 5 February 2016
Date of Handing Down of Reasons for Decision: 18 February 2016
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REASONS FOR DECISION
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1. This was an application by summons dated 19 October 2015 of Tsoi Wai Ki Vickie (“the plaintiff”) for summary judgment against Corporate Insights Ltd (“the 2nd defendant”). The plaintiff sought repayment of $2 million as money had and received, a declaration that the 2nd defendant held the said sum on trust for the plaintiff, an order restraining the 2nd defendant from parting with, charging or in any other way disposing of the same as well as tracing relief. At the conclusion of the hearing, the summons was dismissed with costs, summarily assessed. My reasons appear below.
Background facts
2. Sustainable Forest Holdings Ltd (“SFHL”) is a company listed on the Hong Kong Stock Exchange.
3. Prior to April 2010, Yip Kam Kuen also known as Matthew Yip (“the 1st defendant”) was acquainted with the plaintiff as well as Loh Jia Yee Katherine (“Ms Loh”).
4. The 2nd defendant was not a registered shareholder of SFHL but it had a 50% interest in a Panamanian subsidiary, Corporate Insights Holdings Inc (“CII”), which held shares in SFHL.
5. Ms Loh was the sole director and controller of both the 2nd defendant and CII.
6. On 29 April 2010 the plaintiff agreed to purchase shares in SFHL of a total market value of $2 million from a shareholder of SFHL (“the Shares”) to be arranged by the 1st defendant (“the agreement”).
7. The agreement was made orally.
8. It would appear that at the time of entering into the agreement, the plaintiff was not aware of the identity of the seller of the Shares. She only came to learn of its identity subsequently.
9. The 1st defendant was the conduit through whom the transaction was conducted and concluded. There was no direct communication between the plaintiff and Ms Loh and/or the 2nd defendant in relation to the agreement.
10. On 29 April 2010, after obtaining from Ms Loh details of the bank account into which the purchase price for the Shares should be paid, the 1st defendant provided the same to the plaintiff who then caused $2 million to be transferred.
11. The account into which the monies were paid was the account of the 2nd defendant.
12. On 18 June 2015, more than five years after the agreement, the plaintiff’s solicitors sent a letter to the 2nd defendant alleging a total failure of consideration and demanding the return of the sum of $2 million on the basis of money had and received.
13. Prior to that letter, the plaintiff had not made any request or demand to either the 2nd defendant or Ms Loh for the Shares or for the return of the $2 million.
14. It is not disputed that the plaintiff has not provided to either the 2nd defendant, Ms Loh or CII the requisite details for effecting the transfer of the Shares.
15. The writ indorsed with the statement of claim was issued on 28 July 2015 and the present summons was taken out on 19 October 2015.
16. It should be mentioned that since late April 2010 the share price of SFHL shares has fallen from $0.76 to $0.172 per share, a drop in value of approximately 77%.
The plaintiff’s case
17. The plaintiff’s primary case is that the agreement is a binding agreement between the plaintiff and the 2nd defendant, with the 1st defendant acting as the 2nd defendant’s agent in the transaction and despite repeated requests made to the 1st defendant (as agent for the 2nd defendant) for the Shares to be transferred to the plaintiff, no transfer has ever been made.
18. There are also claims based on acts of the 1st defendant allegedly as the 2nd defendant’s agent entitling the plaintiff to rescind and to the return of the monies paid for total failure of consideration.
19. As appears from §§11(1) and 14 of the Statement of Claim and §§8‑9 of the plaintiff’s 1st affirmation, other than that the selling shareholder was a shareholder of SFHL, the plaintiff did not know his/its identity at the time but only “subsequently”.
20. On the papers before the court (and absent evidence as to what was actually passed between the 1st defendant and the plaintiff) one possible reading of those paragraphs is that the plaintiff’s understanding of the identity of the selling shareholder was an inference or surmise made from the bank account details supplied to her for making payment. In any event, when and how the plaintiff came to learn of the selling shareholder’s identity is a matter for trial.
21. The plaintiff’s alternative case is that there was no binding agreement and that payment had been made under the misapprehension that the agreement was in place. On that basis that the plaintiff claimed repayment by the 2nd defendant as money had and received and an account from the 2nd defendant as constructive trustee.
The 2nd defendant’s defence
22. The 2nd defendant’s case is that there is a binding and subsisting agreement between the plaintiff and CII and that the plaintiff became the beneficial owner of the shares upon payment of the consideration into the 2nd defendant’s account.
23. The 2nd defendant’s version of events can be stated briefly as follows:
(1) When in late April 2010 the 1st defendant represented to Ms Loh that a friend wanted to purchase shares in SFHL of a market value equivalent to $2 million, CII (in which the 2nd defendant had a 50% interest) was a shareholder of SFHL and the amount of the proposed investment represented but a very small portion of CII’s shareholding in SFHL.
(2) The identity of the selling shareholder did not appear to be material since all the plaintiff wanted was a quantity of SFHL shares equal to $2 million at the date of the agreement.
(3) Ms Loh therefore indicated to the 1st defendant that the proposed sale and purchase was possible.
(4) When the 1st defendant proceeded to obtain bank details, Ms Loh provided the bank account details of the 2nd defendant since CII (being a Panamanian corporation) did not maintain a bank account in Hong Kong.
(5) After receiving payment, there were repeated requests made to the 1st defendant for details for the transfer and/or delivery of the shares but the 1st defendant failed to provide them.
24. The 2nd defendant’s stance communicated in the July letter and repeated in the defence is that it is and was ready and willing to procure CII to formalise the transfer of the shares pending provision of transfer details from the plaintiff.
The summary judgment application
25. The application was made on the basis of the plaintiff’s alternative case premised on there being no binding agreement between the plaintiff and the 2nd defendant. Ms Chow (counsel for the plaintiff) relied heavily on a letter dated 17 July 2015 from the 2nd defendant’s former solicitors sent in response to the plaintiff’s solicitor’s letter of 18 June 2015 mentioned in §12 above. I do not see the relevance of that exchange given the premise of the application since at best the letter could be said to be an implicit acceptance that the 2nd defendant was the contracting party.
26. But the insurmountable obstacle in the way of summary judgment given the known facts is that the premise necessarily involves a decision on the fundamental issue in the action, namely, whether or not the facts gave rise to a binding agreement. That issue can only be resolved at trial and is not a matter for summary determination.
27. The plaintiff’s alternative case is but the obverse to her primary case, being the other side of the same coin. Either the facts gave rise to a binding agreement or they did not. Logically the alternative case does not arise for consideration unless and until it is found that the facts did not give rise to a binding agreement. I do not consider it open to the court to proceed on the assumption that they did not.
28. In my view the summons was misconceived and fell to be dismissed.
(Doreen Le Pichon)
Deputy High Court Judge
Ms Theresa Chow, instructed by Lau & Ngan, for the plaintiff
Mr Jonathan Wong, instructed by Zhong Lun Law Firm, for the 2nd defendant