KONG KING ONG ALEXANDER v. KAN HEUNG WING AND AOTHERS

DCCJ 3724/2008

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 3724 OF 2008

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D E C I S I O N

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Introduction

1. This is a hearing of:-

(1)  the Summons dated 21 October 2009 taken out by the Plaintiffs (By Counterclaim) for summary judgment on the Counterclaim against the 1^st and 2^nd Defendants (By Counterclaim) (“the Summary Judgment Application”); and

(2)  the Summons dated 26 October 2012 taken out by the 2^nd Defendant (By Counterclaim) for an order that the Counterclaim against it be struck out and/or dismissed.

2. For simplicity and easy understanding, I will hereinafter refer the Plaintiff (By Original Action) and the 1^st Defendant (By Counterclaim) as “Kong”, the Defendants (By Original Action) and the Plaintiffs (By Counterclaim) as “the Plaintiffs” and the 2^nd Defendant (By Counterclaim) as “Wong & Poon”.

3. By reason of Kong being adjudicated bankrupt on 27 August 2009, the Summary Judgment Application was adjourned sine die with liberty to restore pursuant to Registrar R Lai’s Order dated 6 November 2009 and the Order made by me as Master (as I then was) on 27 August 2010.

4. Pursuant to Master T Chan’s Order dated 17 January 2012, Kong filed his Affirmation dated 30 March 2012 to oppose the Summary Judgment Application, and the Plaintiffs filed the 2^nd Affirmation of Kan Heung Wingdated 8 May 2012 in reply.

Background

5. The following core facts are undisputed by the parties:-

(1)  By a preliminary sale and purchase agreement dated 25 May 2008 (“the preliminary agreement”), Kong agreed to purchase Flat No  358, 3/F, Tai On Building, Nos 57/87, Shau Kei Wan Road, Hong Kong (“the Property”) from the Plaintiffs, with the date of completion on or before 4 July 2008.

(2)  Under the preliminary agreement, it was agreed that a formal sale and purchase agreement would be signed on or before 6 June 2008 and completion was on or before 4 July 2008.  It further contained the following provisions:

  i.  Clause 7(2) provided that where the Purchaser was in default, the Vendors had the right to forfeit the deposit.

  ii.  Clause 7(3) provided that where the Vendors were in default, the Vendors shall compensate the Purchaser by a sum equivalent to twice the amount of deposit payable, i.e. in the sum of HK$70,000.

(3)  Kong paid HK$35,000 and HK$93,000 totalling HK$128,000 to the Plaintiffs as deposits (the “Deposits”) on the signing of the preliminary agreement and on 6 June 2008 respectively.  No formal sale and purchase agreement was ever signed by the parties.

(4)  By a letter dated 3 June 2008 from Messrs S T Poon & Wong (“S T Poon”) (solicitors for the Plaintiffs) to Wong & Poon (solicitors for Kong), S T Poon delivered the relevant title deeds and documents as listed in the schedule attached thereto.

(5)  By a letter dated 11 June 2008 from Wong & Poon to S T Poon, Wong & Poon acknowledged receipt of S T Poon’s letter dated 3 June 2008 and raised various requisitions (the “1^st Set of Requisitions”) concerning the title of the Property, which include, inter alia, the following:-

“…

2. In order to complete the chain of title, please let us have the original of the following title deeds and documents for our perusal before completion:-

(i) Agreement for Sale and Purchase Memorial No UB575036 (the “SPA”);

(ii) Agreement for Sub-Sale and Purchase Memorial No UB6847058 (the “SSPA1”);

(iii) Agreement for Sub-Sale and Purchase Memorial No UB6919348 (the “SSPA2”);…”

(the SSPA1 and the SSPA2 collectively as the “SSPAs”).

(6) By a letter dated 24 June 2008 from S T Poon to Wong & Poon, S T Poon answered the 1^st Set of Requisitions as follows:

“…

2. (i): Kindly note that the requested document is pre-intermediate root document which need not be produced.

  (ii) & (iii): Kindly note that the original of the said Agreement was withheld by the Land Registry pending for registration.…”

(7)  By a letter dated 30 June 2008 from Wong & Poon to S T Poon, Wong & Poon alleged that they had not received a reply to the 1^st Set of Requisitions.

(8)  By a letter dated 2 July 2008 from Wong & Poon to S T Poon, Wong & Poon referred to the abovementioned letter dated 24 June 2008 and insisted on the production of the SPA and SSPAs.

(9)  By a letter dated 2 July 2008 from S T Poon to Wong & Poon, S T Poon restated that the production of the documents was unnecessary:-

(a)  In relation to the SPA, S T Poon stated that it fell within the pre-intermediate root period.  In any event, the SPA had merged with the subsequent Assignment and ceased to have any legal effect; and

(b)  In relation to the SSPAs, S T Poon stated that they were not properly registered in the Land Registry.  In any event, the SSPAs had merged with the subsequent assignment.  Nonetheless, on a without prejudice basis, S T Poon offered to send to Wong & Poon certified copies of the SSPAs as soon as possible.

(10)  By a letter dated 3 July 2008 from Wong & Poon to S T Poon, Wong & Poon still insisted on the production of the originals of the SPA and the SSPAs.

(11)  By a letter inadvertently dated 23 April 2008 but sent on 4 July 2008 from S T Poon to Wong & Poon, S T Poon reiterated its previous views on the 1^st Set of Requisitions.  Nonetheless, on a without prejudice basis, S T Poon offered to arrange the Plaintiffs to make a statutory declaration as to the loss of the SPA upon completion.

(12)  By a letter dated 4 July 2008 from Wong & Poon to S T Poon, Wong & Poon demanded the draft statutory declaration for the SPA and the originals of the SSPAs.

(13)  By a letter dated 4 July 2008 from S T Poon to Wong & Poon, S T Poon put on record that the Plaintiffs and Kong had agreed to postpone the completion date to 11 July 2008.

(14)  By a letter dated 9 July 2008 from Wong & Poon to S T Poon, Wong & Poon raised further requisitions (“the 2^nd Set of Requisitions”) concerning additional documents not referred to in the 1^st Set of Requisitions.

(15)  By a letter dated 16 July 7.2008 from Wong & Poon to S T Poon, Wong & Poon stated that the completion date was 4 July 2008 and they are instructed to terminate the preliminary agreement forthwith.

(16)  By a letter dated 7 August 2008 from Wong & Poon to S T Poon, Wong & Poon demanded the return of the Deposits plus compensation and threatened to commence legal action on behalf of Kong.

(17)  By a letter dated 19 August 2008 from S T Poon to Wong & Poon marked “Without Prejudice”, S T Poon enclosed a Cancellation Agreement signed by the Plaintiffs and a cheque drawn in favour of Kong in the sum of HK$128,000 (“the Cheque”).  In the said letter, S T Poon expressly stated that the sum represented the Deposits reimbursed to Kong upon signing of the Cancellation Agreement and that, if the Cancellation Agreement cannot be signed by Kong within the next 5 working days, it should be returned to S T Poon together with the Cheque.

(18)  By a letter dated 20 August 2008 from Wong & Poon to S T Poon, Wong & Poon returned the Cancellation Agreement unsigned by Kong together with the Cheque to S T Poon, indicating that Kong would not sign the Cancellation Agreement and would commence legal proceedings against the Plaintiffs.

(19)  By a letter dated 21 August 2008 from S T Poon to Wong & Poon marked “Without Prejudice”, and as requested by Wong & Poon, S T Poon resent the Cancellation Agreement signed by the Plaintiffs together with the Cheque.  In the said letter, it was expressly stated that the sum represented the Deposits reimbursed to Wong & Poon upon signing of the Cancellation Agreement and that, if the Cancellation Agreement cannot be signed by Kong within the next 5 working days, it should be returned to S T Poon together with the Cheque (“the Condition”).

(20)  On 25 August 2008, without the knowledge of S T Poon and the Plaintiffs, the Cheque was cashed.

(21)  Notwithstanding the cashing of the Cheque, by a letter dated 27 August 2008 from Wong & Poon to S T Poon, Wong & Poon enclosed a sealed copy of the Writ of Summons and stated that it has been served on the Plaintiffs.

(22)  By a letter dated 29 August 2008 from S T Poon to Wong & Poon marked “Without Prejudice”, S T Poon wrote to put on record that Kong had failed to sign the Cancellation Agreement within 5 working days from the date of S T Poon’s letter dated 21 August 2008 and demanded Wong & Poon to return the Cheque together with the Cancellation Agreement immediately.

(23)  By a letter dated 1 September 2008 from Wong & Poon to S T Poon, Wong & Poon stated that Kong would accept the Cheque as refund of the Deposits but would not sign the Cancellation Agreement, enclosing the Cancellation Agreement unsigned by the Plaintiffs without returning the Cheque. 

(24)  By a letter dated 2 September 2008 from S T Poon to Wong & Poon, S T Poon made it clear that the release of the Cheque to Kong and Kong’s cashing of the Cheque, without his signing and returning the Cancellation Agreement were wrongful and in breach of the Condition. S T Poon subsequently complained against Wong &Poon releasing the Cheque to Kong. Afterwards, the Plaintiffsfiled the Counterclaim in these proceedings against both Kong and Wong &Poon.

The Summary Judgment Application

6. The Plaintiffs’ Counterclaim consists of 3 parts:-

(1)  As against Kong, the Plaintiffs claim the forfeiture of the Deposits for wrongful repudiation of the preliminary agreement;

(2)  As against Kong and Wong & Poon, the Plaintiffs claim damages for wrongful registration of a lis pendens on the Property;

(3)  As against Kong and Wong & Poon, the Plaintiffs claim for the return of a sum paid subject to the Condition which was not satisfied.

The Legal Principles

7. The principles on summary judgment are well-established and may be briefly summarised as follows:-

(1)   A plaintiff may apply for summary judgment on the ground that the defendant has no defence to a claim included in the writ or to a particular part of such a claim.

(2)   The onus is on the defendant to show, on the balance of probabilities, that there are triable issues or that he has a real or bona fide defence.

(3)   The test at the summary stage is whether the defendant’s assertions are believable by taking them in the context of so much of the background as is either undisputed or beyond reasonable dispute and having regard to contemporaneous documents.

(4)   In deciding whether a bona fide defence exists, the Court would not embark on a mini-trial on the affidavits. 

See: Hong Kong Civil Procedure 2013, Vol 1, §§14/4/9-14.

The Summary Judgment Application as against Kong

8. Kong was adjudicated bankrupt on 27 August 2009 and the annulment order for the bankruptcy was granted on 11 July 2012. He said at the hearing that it was him who applied for the annulment order since he was able to get the consent from the creditors having 75% of his total debt for the IVA arrangement ie restructure of his debts. He further said that according to the information and record available to him at the hearing, the Plaintiffs are 2 of these creditors and that they are receiving payment under the IVA arrangement.

9. Based on the instruction given by his instructing, Mr Wong, Counsel for the Plaintiffs, submitted that the Plaintiffs are not 2 of these creditors and that they have received not a penny from the IVA arrangement.

10. It is my preliminary view that if the Plaintiffs are 2 of these creditors and are currently receiving proper payment under the IVA arrangement which shall be binding on them, it is totally unnecessary for the Plaintiffs to restore the Summary Judgment Application against Kong.  Nonetheless, it is improper for me to accept parties’ evidence in this chambers hearing, especially when their evidence is in conflict.  More importantly, Kong is unrepresented in this hearing.  To be fair to him, in my view, he should clarify the position with the Official Receiver.

11. Accordingly, I consider appropriate to adjourn the Summary Judgment Application against Kong to a date to be fixed with the directions, inter alia, that Kong and the Plaintiffs to file and serve their respective affidavits with costs reserved as between them.  However, I will proceed with the Summary Judgment Application against Wong & Poon and its striking out summons.

The Summary Judgment Application as against Wong & Poon

12. To start with, I am of the view that it is not necessary for me to deal with the “title” issue or dispute in this case due to the adjournment of the Summary Judgment Application against Kong. Such issue or dispute shall be dealt with at the restored hearing, if necessary.

13. Besides, I consider that even if the Plaintiffs can successful get the summary judgment against Kong, it does not mean that Wong & Poon will have no defence in this case since the Plaintiffs’ causes of action against them are not the same and their defences are totally different.

14. Mr Wong, Counsel for the Plaintiffs leading Ms Ling, submitted that the Plaintiffs’ claim for the return of HK$128,000 from Wong & Poon is based on its breach of the agreement between them, under which Wong & Poon is obliged to return the Cheque to the Plaintiffs in the event that Kong fails to sign the Cancellation Agreement:-

(1)  By the letter dated 21 August 2008 (“the said Letter”) and Wong & Poon’s acceptance of the Cheque, there was an agreement between the Plaintiffs and Wong & Poon, pursuant to which the Plaintiffs had sent the Cheque to Wong & Poon. 

(2)  As stated in the said Letter, it was an express term of the agreement that Wong & Poon would return the Cheque if Kong does not sign the Cancellation Agreement within the next five working days.

(3)  In its letter to S T Poon dated 1 September 2008, Wong & Poon stated that Kong would not sign the Cancellation Agreement.

15. Mr Wong for the Plaintiffs further submitted that by failing to return the Cheque notwithstanding Kong’s refusal/failure to sign the Cancellation Agreement, Wong & Poon was in clear breach of the agreement.

16. Although the material facts have been pleaded in the Statement of Claims, I observe that it was not clearlypleaded that the cause of action of the Plaintiffs’ claim for the return of HK$128,000 from Wong & Poon is its breach of the agreement between them. It was not even expressly pleaded that there was an agreement between them or that when and how such an agreement was made.

17. Indeed, it was only pleaded in para 37 of the Plaintiffs’ Defence and Counterclaim that Kong and Wong & Poon were in wrongful breach of the Condition imposed under the said Letter and are therefore jointly and severally liable to return to the Plaintiffs the sum of HK$128,000.

18. Further,it was pleaded in para 7 of the Plaintiffs’ Reply to Wong & Poon’s Defence to Counterclaim thatWong & Poon breached its undertaking to S T Poon (rather than breach the agreement) that Wong & Poon would return the Cancellation Agreement together with the Cheque to S T Poon if the Cancellation Agreement was not signed.

19. Mr Wong for the Plaintiffs submitted that the said Letter is the offer whereas Wong & Poon accepted the offer by conduct, namely its acceptance of the Cheque, thus there was a binding agreement made between the Plaintiffs and Wong & Poon. With respect, I do not agree with his submission. First, it is arguable that Wong & Poon was all along instructed by and was acting as the agent of Kong in the sale and purchase transaction. Therefore, even if the court agrees that the offer was accepted by Wong & Poon, it might be done on behalf of its disclosed principal, namely Kong and it shall not be liable as agent. I find that this argument is very sound and sensible because when sending out the said Letter, S T Poon must be acting as the agent of the Plaintiffs rather than in its personal capacity. I can see no reason why the Plaintiffs would regard that the offer was accepted by Wong & Poon in its personal capacity rather than as the agent of Kong.

20. Secondly, in the letter from Wong & Poon to S T Poon dated 1 September 2008, it only stated, inter alia, that Kong should accept the Cheque as refund of the deposits and he would not sign the Cancellation Agreement. It never stated that Wong & Poon and/or Kong would accept the offer or the Condition in the said Letter. Hence, it is arguable that the offer or the Condition in the said Letter has never been accepted and that there was no agreement made between them.

21. I consider that there must be a triable issue as to whether there was a binding agreement and if so, whether Wong & Poon entered into such an agreement in its personal capacity or as the agent of Kong.

22. Regarding the alleged breach of undertaking of Wong & Poon, I am of the view that the Plaintiffs shall plea it as an alternative in the Statement of Claim instead of pleading in their Reply to Wong & Poon’s Defenceto Counterclaim since breach of agreement and breach of undertaking are totally different causes of action. In any event, it is arguable, in my judgment, that the Plaintiffs are generally lack of standing to enforce any such undertaking.

23. I agree with the submission made by Mr Lee, Counsel for Wong & Poon that while the Court has, as part of its inherent jurisdiction to supervise the conduct of solicitors, the power to enforce an undertaking given by a solicitor (Hoffman & Dorchik v Agnew, Nykyforuk, Purdy & Davis [1985] 1 WWR 656), an undertaking could only be enforced by the recipient of the undertaking. In this case, it is certainly arguable that the recipient is S T Poon but not the Plaintiffs.

24. Further, an undertaking given by a solicitor is independent from the underlying transaction which provided the context in which the undertaking was given.  This was emphasized by the Privy Council in the leading case in this area, T Damodaran s/o PV Raman v Choe Kuan Him [1980] AC 497.

25. In Damodaran, a solicitor gave an undertaking to the vendor in a contract for sale of land that the balance of the purchase price he received from the purchaser would be released to him upon registration of the transfer.  The vendor duly obtained the registration of the transfer as required, but the solicitor refused to pay over the balance on the ground that a lis pendens was registered for the land in favour of the claimant.  Upon an application by the vendor to enforce the undertaking, the Federal Court of Malaysia ordered the solicitor to pay the sum into court.  The Privy Council overturned the decision of the Federal Court and ordered that the balance be paid to the vendor.

26. In giving the advice of the Privy Council, Lord Diplock noted the position of the claimant and the purchaser in relation to the undertaking given by the solicitor to the vendor:

“The claimant was a stranger to the proceedings between the vendor and the solicitor. In their Lordship’s view, the protection of the interests of the claimant was not a ground on which the judge could properly exercise a discretion to order payment unto court in those proceedings instead of to the vendor…

If the claimant’s suit against the vendor [claiming an interest in the land] were ultimately to succeed, the Lord President [of the Federal Court] was of the opinion that the purchaser would not have obtained an unencumbered title by his having been registered as proprietor of the land…

The purchaser, like the claimant, was a stranger to the proceedings between the vendor and the solicitor; and their Lordships do not consider that the possibility of claims being made in the future by a stranger to the proceedings, even where those claims arise out of the transaction in relation to which the undertaking was given, is a matter which the court is entitled to take into consideration as a ground for ordering payment into court instead of to the vendor himself of money adjudged due to him by the solicitor. The main purpose and value of a solicitor’s undertaking in transactions for the sale of land is that it is enforceable against the solicitor independently of any claims against one another by the parties to the contract of sale.” (at 504A-F) (Emphasis added)

27. Thus, the enforcement of an undertaking is strictly a matter between the solicitor giving the undertaking and the recipient of the undertaking, and this is independent of the underlying transaction which provided the context in which the undertaking was given.

28. Mr Lee, Counsel for Wong & Poon submitted that Damodaran was followed in various Canadian authorities.  In Hoffman & Dorchik v Agnew, Nykyforuk, Purdy & Davis [1985] 1 WWR 656, the defendant solicitors (acting for the purchaser in a transaction for sale of property) sent to the plaintiff solicitors (acting for the vendor) a cheque representing part of the purchase price for a property, against an undertaking that they not be released until the purchaser’s caveat registered.  After the transaction fell through, the plaintiff solicitors applied for the release of the cheque to its clients.  The application was dismissed on the basis that this did not fall within the jurisdiction of the court to enforce undertakings. In the course of so holding, the Court noted Damodaran and emphasized that:

“17… the action by the plaintiffs arises out of the relationship that the solicitors entered into when representing their respective clients to close the sale transaction. It is not based in contract or tort but arises out of that special relationship between the lawyers. The clients are not parties to the dispute between the solicitors…”

29. In Hoffman, the court also refused to add the vendor as a party.  Any actionable cause in relation to the sales transaction would be against the purchasers and not the solicitors representing the purchasers (see §18 of the judgment).

30. In my judgment, it is arguable that S T Poon just unilaterally imposed such undertaking andthat the undertaking by Wong & Poon, if any, was given to S T Poon rather than the Plaintiffs who arethe stranger to the undertaking and have no locus to enforce any such undertaking.  This is a triable issue as to whether any such undertaking is independent in nature from the preliminary agreement and whether any claim that the Plaintiffs may have on the deposit shall be founded in the preliminary agreement and be directed against Kong only but not Wong & Poon. 

31. Mr Lee, Counsel for Wong & Poon, refers me to Commentary 7 to Principle 14.01 of The Solicitor’s Guide, in which an undertaking is defined in the following terms:

“An undertaking is any unequivocal declaration of intention addressed to someone who reasonably places reliance on it and made by:

(a) a solicitor in the course of his practice, either personally or by a member of his staff; or

(b) a solicitor as ‘solicitor’, but not in the course of practice.”

32. Although this Commentary is in no way binding on this court, I still find the above definition of undertaking very helpful.  If the Plaintiffs said that there was an implied undertaking by Wong & Poon with respect to the Cheque, I think that the court will need to consider the intention of Wong & Poon when the Cheque was received to determine whether an undertaking in fact existed or was given.  I note that the word “undertaking” was not even used in the correspondence, and it is therefore arguable that that Wong & Poon did not intimate any unequivocal declaration of intention to S T Poon that they could be relied on for the return of the Cheque.

33. With respect to the claim against both Kong and Wong & Poon for wrongfully causing the Writ to be registered at the Land Registry, the relief for vacating the registration of the Writ had been rendered academic since the first mortgagees of the Plaintiffs, Prime Credit Limited, had exercised its power of sale under a legal charge and sold the Property for HK$1,900,000 in late 2011. In any event, I am of the view that it is arguable that Wong & Poon was instructed by and was acting as the agent of Kong incausing the Writ to be registered at the Land Registry.  So it shall not be liable for any loss and damages suffered by the Plaintiffs.

34. It is further arguable that Wong & Poon generally owes no duty of care to the opponent: see Business Computers International Ltd v Company Registrar [1988] 1 Ch 229.  In that case, the second defendant, a firm of solicitors, presented a winding-up petition to wind up the plaintiff company.  The plaintiff company, which succeeded in setting aside the winding-up order against it, sued them for being negligent in the service of the petition with the result that they did not receive the petition.  Scott J, in striking out the claim, held that the solicitors owed no duty to the plaintiff.  It was stated at 241 that:

“In my judgment, there is no duty of care owed by one litigant to another as to the manner in which the litigation is conducted, whether in regard to service of process or in regard to any other step in the proceedings. The safeguards against impropriety are to be found in the rules and procedure that control the litigation and not in tort.”

35. I agree with the submission made by Mr Lee, Counsel for Wong & Poon that similar principle should apply to the registration of the Writ.  As explained by Bingham LJ (as he then was) in Al-Kandari v JR Brown and Co[1988] QB 665, 675, a solicitor generally owed duty to his client only but not his client’s opponent and under the adversarial system of litigation, each party in a case should take care of their own interests:

“In the ordinary course of adversarial litigation a solicitor does not owe aduty of careto his client’s adversary. The theory underlying such litigation is that justice is best done if each party, separately and independently advised, attempts within the limits of the law and propriety and good practice to achieve the best result for himself that he reasonably can without regard to the interests of the other party. The duty of the solicitor, within the same limits, is to assist his client in that endeavour, although the wise solicitor may often advise that the best result will involve an element of compromise or give and take or horse trading. Ordinarily, however, in contested civil litigation a solicitor’s proper concern is to do what is best for his client without regard to the interests of his opponent.”

36. Lord Goff in White v Jones [1995] 2 AC 207 stated at pg 256 that:

“(1) First, the general rule is well established that a solicitor acting on behalf of a client owed a duty of care only to his client. The relationship between a solicitor and his client is nearly always contractual, and the scope of the solicitor’s duties will be set by the terms of his retainer. But a duty of care owed by a solicitor to his client will arise concurrently in contract and in tort: see Midland Bank Trust Co Ltd v Hett, Stubbs & Kemp [1979] Ch 384, recently approved by your Lordships’ House in Henderson v Merrett Syndicates Ltd [1995] 2 AC 145. But, when a solicitor is performing his duties to his client, he will generally owe no duty of care to third parties. Accordingly, as Sir Donald Nicholls V-C pointed out in the present case, a solicitor acting for a seller of land does not generally owe a duty of care to the buyer: see Gran Gelato Ltd v Richcliff (Group) Ltd [1992] Ch 560. Nor, as a general rule, does a solicitor acting for a party in adversarial litigation owe a duty of care to that party’s opponent: see Al-Kandari v J R Brown & Co [1988] QB 665, 672, per Lord Donaldson of Lymington M R” (emphasis added)

37. In the circumstances, I am of the firm view that the Plaintiffs’ application for summary judgment against Wong & Poon must be dismissed.

Wong & Poon’s Summons for striking out

38. An action is liable to be struck out under O18, r19(1)(a), RDC if it discloses no reasonable cause of action.  As set out in Hong Kong Civil Procedure 2013, vol1, §18/19/6:

“A reasonable cause of action means a cause of action with some chance of success when only the allegations in the pleading are considered (perLord Pearson in Drummond-Jackson v British Medical Association[1970] 1 WLR 688, CA). So long as the statement of claim or the particulars (Davey v Bentinck[1893] 1 Q B 185) disclose some cause of action, or raise some question fit to be decided by a judge or jury, the mere fact that the case is weak, and not likely to succeed, is no ground for striking it out (Moore v Lawson(1915) 31 TLR 418)…” (emphasis added)

39. It is summarised in para 12 of the judgment in Pak Win Investment Ltd (in compulsory liquidation) v Chung Yuet Sheung, Lorrain and others (unrep, HCA419/2011, 9 February 2012)that:

“The principles on striking out are not in dispute. It is only in plain and obvious cases that pleadings should be struck out. The burden to establish this is on the applicant… in this case. Disputed facts are to be taken in favour of the party whose pleadings are sought to be struck out. The claim must be obviously unsustainable, pleadings unarguably bad and it must be impossible, not just improbable, for the claim to succeed. Even if a case only has a slim chance of success, this is not sufficient to strike it out:Karex (HK) Ltd v Fortune Talent Development Ltd[1999] 4 HKC 203,at 210F. Nor should sparsity of detail lead to a similar result. The sufficiency of the facts pleaded should be assessed in the overall context of the pleadings and the case:The Bank of East Asia Ltd v Labour Buildings Ltd & ors[2007] HKCFI 1129.”(emphasis added)

40. In deciding whether there is a reasonable cause of action, the court would only look at the pleadings without resort to extrinsic evidence: see Hong Kong Civil Procedure 2013, vol1, §§18/19/3, sub-para(4).  O18, r19(2) bars the admission of evidence for applications under this ground. 

41. An action can also be struck out for being frivolous under O18, r19(1)(b) when it is not capable of reasoned argument. Hong Kong Civil Procedure 2013, §18/19/8, explains that a proceeding is frivolous “when it is not capable of reasoned argument, without foundation or where it cannot possibly succeed.”

42. As to the contractual claim against Wong & Poon for $128,000, I do not think that the Plaintiffs have no reasonable cause of action when the court just looks at the pleadings without resort to extrinsic evidence. In determining whether there is an agreement reached between the Plaintiffs and Wong & Poon, the court will usually look at the extrinsicevidence, especially when it is not very clear from the correspondence. It is impossible for the court to make finding of facts at this stage.  Bearing in mind that the disputed facts are to be taken in favour of the Plaintiffs whose pleadings are sought to be struck out, that is to say a binding agreement had been reached between the Plaintiffs and Wong & Poon. Thus,I do not think that such claim is not capable of reasoned argument and shall be struck out for being frivolous under O18, r19(1)(b).

43. Regarding the breach of undertaking, express or implied, by Wong & Poon and the wrongful registration of the Writ at the Land Registry by Wong & Poon, although I agree that the Plaintiffs have a very slim chance of success and their case is weak, this is still not sufficient to strike them out. Furthermore, even if the Plaintiffs’ claims for Wong & Poon’s breach of undertaking and wrongful registration of the Writ can be struck out at this stage, the Plaintiffs’ contractual claim against Wong & Poon still has to be tried.

44. I conclude that Wong & Poon’s Summons for striking out be dismissed.

Costs

45. As costs shall generally follow event, the Plaintiffs shall therefore pay costs of the Summary Judgment Application to Wong & Poon whereas Wong & Poon shall pay costs of its Summons for striking out to the Plaintiffs. However, I find that 2 applications were heard together and they are inter-related. For taxation purpose, it is quite difficult though not impossible to separate the costs of these 2 applications clearly.  Hence, I exercise my discretion to make no order as to costs of these 2 applications as between the Plaintiffs and Wong & Poon. This is an order nisi which shall become absolute unless any of the parties makes application to vary it by way of summons within 14 days.