KONG LAI NA v. PRIME ASPECT LTD AND OTHERS

HCA 196/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 196 OF 2012

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J U D G M E N T

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1. On or about 27 June 2009 the plaintiff signed a Chinese Purchase and Sale Agreement with the 4^th defendant whereby the plaintiff was to convey her title to a certain property in return for a money consideration and, it appears, as a security for some banking facilities to enable her to operate a business.

2. It appears that the initial deposit was not paid to the plaintiff.  A further deposit was to be paid to the plaintiff and then transferred to the 3^rd defendant on whose behalf the 4^th defendant had signed the Agreement as well as on her own behalf.  It is not clear whether this second deposit was paid.  The property itself was assigned on 28 August 2009 of the 1^st defendant, a company owned and controlled by the 4^th defendant.

3. However the critical provision in the Chinese Agreement was what is commonly called a “buy-back” option or clause.  By this the plaintiff or her husband would be entitled to re-purchase the property within 2 years — i.e. before 27 June 2011, for a sum within 5% of the original sale price (whether up or down is not stated).

4. It is common ground that the Chinese Agreement, though registrable, was not in fact registered.  Therefore a purchaser for value of the property would not have any notice of the plaintiff’s interest, in the form of the option, from a search at the Lands Registry.

5. On or about 11 May 2009, about six weeks before the option expired the 1^st defendant assigned the property to the 2^nd defendant.

6. The plaintiff commenced proceedings against these four defendants.  I am not concerned with her case against the 1^st, 3^rd and 4^th defendants.

7. Her contention is that the transaction between the 1^st and 2^nd defendants is a sham.  There is a bare assertion against the 2^nd defendant that it is owned and controlled by one Lee Hei Wun, a director of the 1^st defendant.  Mr Billy Poon, counsel for the defendant concedes that the plaintiff has no evidence to support such an allegation and that company searches do not disclose any such situation.

8. As particulars of such an averment — and they are vague and imprecise in the extreme — it is alleged that a director of the 2^nd defendant, one Lam, has a certain telephone number registered in his name and that was the telephone number given to the plaintiff’s husband, one Chan, by the 4^th defendant when the latter informed Mr Chan to contact one of its employees (said to be Man Junior) regarding some transactions involving the 4^th defendant. There is no further detail of this convoluted “particular”.  However the plaintiff makes a ‘leap’ to allege in paragraph 12 that “the 2^nd defendant has knowledge and ought to have knowledge, (whether actual, constructive or imputed) of the plaintiff’s interest in the property”.  That, in my view, is a simple “non sequitur”.

9. There is no affirmation containing evidence which would go some way to supporting the plaintiff’s case against the 2^nd defendant. Indeed Mr Poon says there is none and that the source of the averment in the Statement of Claim, is simply what the plaintiff herself has instructed without substantiation.

10. There appear to have been peripheral proceedings in the Lands Tribunal after the 2^nd defendant acquired the property.  It is stated in Mr Lam’s affirmation that he acquired the property subject to an existing tenancy in favour of the plaintiff’s husband, though he was under the impression that the actual occupants were the plaintiff’s parents.  When the tenancy expired the 2^nd defendant had some difficulty in obtaining possession.  He did so on 30 January 2012.  This is an odd aspect of the matter which the plaintiff has neglected to deal with.  I have not been required to consider it, or its relevance or effect if any.  The plaintiff’s action was commenced in late February 2012.  For some reasons which are not obvious, the plaintiff or her solicitors behaved somewhat oddly concerning discovery of documents which it was obvious, would have to be disclosed. 

11. There were numerous interlocutory applications on behalf of the 2^nd defendant most of which ended with orders for costs against the plaintiff.  The plaintiff’s case against the 2^nd defendant has certainly not been enhanced over that period of time.

12. In my judgment the 2^nd defendant’s application to strike out the Statement of Claim as against him succeeds. Apart from that he seeks relief from the “lis pendens” registered against the property owned by him.  That must follow in view of my order in respect on the Statement of Claim. 

13. There will be an order that as against the 2^nd defendant the Statement of Claim is struck out as disclosing no reasonable cause of action and the claim against the 2^nd defendant be dismissed. The 2^nd defendant’s counterclaim is concerned with the registration of the “lis pendens” and its effect.  The “lis pendens” is to be vacated.  The 2^nd defendant is to have the costs of the action and of this application and the costs of vacating the “lis pendens”, to be paid by the plaintiff.