NGAN SHUN WAH AND OTHERS v. TIM HEUNG TEA HOUSE LTD

HCA 2074/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2074 OF 2009

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BETWEEN

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J U D G M E N T

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I. INTRODUCTION

1.  The Administratrix seeks an interlocutory injunction against Mr Ngan Chuen Fai (NCF). The Administratrix represents the Estate of her late father Mr Yien Chi Ren. Until shortly before his death on 4 March 2008, Mr Yien had been the sole surviving partner of Lin Heung Tea House and Bakery (the Business).

2.  The Administratrix claims that the Business belongs to the Estate. She accuses NCF of intermeddling with the Estate by running the Business as if it were NCF’s own. She also contends that NCF and Mr Wong Pak Wing have been passing off their restaurant (known as “Lin Heung Kui”) as part of the Business.

3.  In reply, NCF says that by a Sale and Purchase Agreement (SPA) dated 13 January 2007 Mr Yien sold the Business to him for a consideration of $20 million. This was not an undervalue (NCF continues) because under the SPA Mr Yien was entitled to the Business’ profits up to 31 December 2006. Accordingly, shortly before his death, Mr Yien withdrew for himself over $50 million of the Business’ monies. The $20 million represented the value of the Business after Mr Yien’s withdrawal.

4.  NCF has provided evidence of cheque payments totalling $17 million. This represents part of the $20 million consideration. NCF had tendered a final cheque for $3 million to Mr Yien. But Mr Yien had not cashed the same at the time of his death. NCF has since tendered a replacement cheque for $3 million to the Administratrix as representative of the Estate. However, the Administratrix has refused to accept NCF’s cheque.

5.  This is not the first time that the Administratix has sued NCF. In HCA 1319 of 2009, on 12 October 2009 Master Kwang struck out a nearly identical claim brought by the Administratix then acting in her personal capacity. The claim was struck out as disclosing no reasonable cause of action and as being frivolous, vexatious and an abuse of court. The allegations here are to all intents and purposes identical to those in HCA 1319. There was no appeal against Master Kwang’s decision.

6.  The Administratrix asks for an order that, pending trial, NCF pay the income of the Business into a designated account. She also wishes an order that, pending trial, NCF “manage the Business and pay its running expenses in the ordinary course of the Business in the manner which prevailed as at 30^th June 2009”.

II. DISCUSSION

7.  In my view, there is no serious question to be tried in the present proceedings.

8.  The Administratix does not accept the validity of the SPA. But precisely why is left vague. She does not plead that Mr Yien’s signature on the document is a forgery. Nor does she allege in her pleading that Mr Yien was of unsound mind or subject to undue influence, duress or other vitiating factor when he executed the SPA. On the contrary, the Administratrix seems to be saying that Mr Yien was lucid and of sound mind until he fell into a coma very shortly before he passed away. The Administratrix does not pray for specific relief in the form of setting aside the SPA for some reason or another.

9.  In those circumstances, as Mr Johnny Mok SC (appearing for NCF) submits, it is not for the Court to speculate why Mr Yien would or would not have entered into the SPA. There is the hard fact of the SPA which bears the signatures of Mr Yieh and NCF and which attests to a contractual bargain to transfer the Business from the former to the latter.

10.  The Administratix pleads that she puts NCF to “the strict proof” of the SPA. But this confuses the role of plaintiff and defendant. It is for a plaintiff to advance a viable cause of action and discharge a probative and evidential burden in relation to such action. A defendant does not have to do anything, but can simply require a plaintiff to prove the case advanced. In interlocutory proceedings, a plaintiff must typically show at least an arguable case in order to obtain interim relief. That means that a plaintiff has to show some evidential basis, whether by affidavit statements or documents exhibited to an affidavit, in support of the cause of action advanced. Where (as here) fraud is being insinuated, the plaintiff must condescend to full particulars of the wrongful conduct alleged. It is not enough for a plaintiff to say that this or that matter may be “suspicious” and then put the other side to proof. That is not advancing an arguable cause of action, but merely inviting the court to enter into an investigation based purely on speculation.

11.  The Administratrix says that she has engaged a handwriting expert to examine whether Mr Yien’s signature on the SPA is genuine. But no handwriting report has been filed in support of this application. It appears that the handwriting expert has yet to express a view. No adjournment, however, has been sought of the present hearing to await the results of any report.

12.  If the Administratrix has a case on forgery (a form of fraud), it has to be cogently stated to the Court. It should not be for anyone, least of all the Court, to guess what that case might be and to act upon that guess. I cannot find an arguable case of forgery on the possibility that a handwriting expert may come to one conclusion as opposed to another.

13.  There is a further hurdle for the Administratrix. That is the dismissal by Master Kwang of the Administratrix’ previous personal action. I think that Mr Mok is right in submitting that, as a result of the dismissal, this dispute is res judicata. Absent compelling reason, the Administratix is estopped from further vexing NCF on similar grounds.

14.  Mr Albert Yau (appearing for the Administratrix) argues that there is new material being put forward here. He suggests that, on that basis, the present action should be allowed to continue.

15.  But what is this “new evidence”?

16.  First, it is said that there is fresh evidence of the poor relationship between Mr Yien and NCF’s father (Mr Ngan Tung Chun (NTC)). NTC (who passed away in 2006) was Mr Yien’s former partner in the Business. Mr Yien is alleged to have discovered that NTF wrongly withdrew $29.48 million from the Business. Mr Yien is said to have been very unhappy about this matter. It is argued that, if so, it is “suspicious” that Mr Yien should give the Business to NTC’s son, NCF.

17.  I do not see how the alleged “poor relationship” (even if assumed to be true) constitutes evidence of anything. The inferences sought to be drawn by the Administratrix from the premise are highly speculative. Mr Mok points out that there was no “giving” of the Business to NCF as some sort of gift. NCF agreed to allow Mr Yien to withdraw over $50 million from the Business and to pay $20 million for what remained. There is nothing to suggest that the SPA was other than a commercial arm’s length bargain.

18.  Second, it is said that there is new evidence that Mr Yien suddenly owed Lin Heung Bakery & Restaurant Ltd. (a company related to the Business) some $3.4 million in 2007. NCF is a director of the Company. The loan is stated in the Company’s accounts.

19.  I do not see how this allegation (even if it is assumed to be correct) has any bearing on any relevant issue.

20.  In oral submission, Mr Yau accused NCF of fraudulently representing by the SPA that NCF was willing for Mr Yien to withdraw all the profit made by the Business up to 31 December 2006.

21.  Mr Yau submits that, by the Company in its accounts saying that Mr Yien owed the Company $3.4 million, NCF (a Company director) must be taken in reality not to have been prepared to allow Mr Yien to withdraw all the Business’ profit. This is because the $3.4 million in all likelihood (Mr Yau suggests) constituted part of the profit of the Business which Mr Yien was entitled to withdraw under the SPA. NCF’s original representation of a willingness to allow Mr Yien to withdraw profit must therefore (Mr Yau concludes) have been a fraudulent misrepresentation. This (it is suggested) vitiated the SPA.

22.  I reject Mr Yau’s submission.

23.  On the evidence, no one (neither the Company nor NCF) is claiming repayment of the $3.4 million from the Estate, whatever the Company’s accounts rightly or wrongly say about there being such a loan. There is no evidence of any backtracking by NCF on any representation of willingness that Mr Yien withdraw and retain profit pursuant to the SPA. The apparent loan entry is hardly evidence for alleging fraud against NCF.

24.  If in the future someone claims $3.4 million from the estate and if the $3.4 million actually constituted part of the profit to which Mr Yien was entitIed, there may be a breach of the SPA. On a correct analysis, the operative cause of action would be breach of a subsisting contract, not misrepresentation (of whatever sort) vitiating a contract. I frankly do not see how the entry in the Company’s books remotely supports an argument that the SPA has somehow been vitiated by fraud.

25.  I regret to say that Mr Yau’s suggestion of a fraud was not consistent with his professional obligations to the Court. Counsel should not allege fraud unless there is a clear basis for so doing. There is plainly no basis for so doing on the material before me.

26.  Mr Yau makes much play of the fact that $3 million of the $20 million consideration agreed in the SPA remains outstanding. He suggests that there has been no proper tender thereof. The Administratrix is therefore entitled (he submits) to treat the SPA as repudiated. On behalf of the Estate, she has (it is said) accepted the termination. This (it is suggested) is a new matter, not previously before the Master.

27.  There is no substance to the argument. NCF gave Mr Yien a cheque for the $3 million. Mr Yien unfortunately passed away before he could cash the same. NCF tendered a replacement cheque in October 2009 to the Administratrix. The cheque was made out to the Estate. But the cheque was rejected by the Administratrix.

28.  In light of those facts, there is no basis for criticising NCF. He performed his obligations. As Mr Mok points out, time was not of the essence under the SPA. No notice was ever given to NCF by anyone making time of the essence. In the circumstances, I am unable to see how the failure to pay $3 million on some date (if there was such a failure) can amount to a repudiatory breach.

29.  Mr Yau queries the fact that the replacement cheque was made out to the “Estate of Mr Yien”. He says that, technically, that was wrong. I confess that I see no serious error with the cheque. By tendering the replacement cheque, NCF showed that he was ready, willing and able at all times to pay the $3 million balance. There is no suggestion to the contrary. If for some reason, the Administratrix thought that the cheque was wrongly made payable to the Estate as opposed to some other person, she could have told NCF and the cheque would no doubt have been quickly amended. Instead, she appears to have refused the cheque purely on the basis that she was suing NCF and wished to protect the Estate.

30.  In summary, Master Kwang considered whether the Administratrix had an arguable case. The Master rightly decided that, on the merits of the issue before him, there was no arguable case. The Administratrix is bound by that decision. It is an abuse to re-litigate practically the same issue before this Court.

III. CONCLUSION

31.  There is no merit to the application for interim relief. It is dismissed.