WAN YEE SANG v. CHOW KAM CHUEN

HCA 948/2017
[2018] HKCFI 99

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 948 OF 2017

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D E C I S I O N

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INTRODUCTION

1.  This is the defendant’s application to strike out the plaintiff’s claim on the ground that there is no reasonable cause of action, that the plaintiff’s claim is frivolous or vexatious, that it may prejudice or embarrass the fair trial of the action, and that it constitutes an abuse of process in particular on res judicata.

PLAINTIFF’S CLAIM

2.  The plaintiff claims that in or around mid-2011, the defendant was in need of money, and thus at the defendant’s request, the defendant orally agreed to sell and the plaintiff orally agreed to purchase the 1^st floor of the building (the “Property”) to be erected on Ma Wan Lot No.738 under the New Grant No.21051 (the “Agreement”) for HK$1,200,000. Under the Agreement, the completion would take place upon satisfactory alienation of the Property by the defendant, and meanwhile the plaintiff would pay to the defendant up to HK$600,000 from time to time before completion, upon which the balance would be paid.  Further, under the Agreement, to secure and guarantee for the defendant’s performance of the Agreement, the defendant would from time to time and periodically issue cheques in favour of the plaintiff evidencing covering and adding up to the respective aggregate amounts of the sums paid.

3.  The plaintiff alleges that under the Agreement, the plaintiff has paid HK$684,000, and as security, the defendant has issued 4 cheques in the total amount of HK$616,000.  The certificate of compliance was issued on 4 October 2012, and thus the alienation should take place on 4 October 2015.  However, despite the plaintiff’s repeated demands, the defendant has failed to perform the Agreement, and thus commenced the present action for the return of the HK$684,000.

DEFENCE

4.  In his defence, the defendant alleges that the plaintiff and the defendant were friends, and they always paid on behalf of the other personal expenditures on a common understanding that the beneficial party would be fully reimbursed on demand.  Those cheques were given by the defendant to the plaintiff as account stated and the parties agreed that the cheques should not be presented.  The defendant denies the existence of the Agreement and any agreement alike.

5.  The defendant further alleges that when the account balance struck in favour of the plaintiff in the sum of HK$342,000 in 2012, the defendant let the plaintiff occupy and use the Property for 3 years from 1 June 2012 to end of May 2015 as full settlement of the balance. After that, by a lease in writing dated 15 December 2015 made between the plaintiff and the defendant (the “Lease”), the defendant agreed to demise the Property to the plaintiff for a term of 2 years from 15 December 2015 to 14 December 2017 at a monthly rent of HK$13,000 payable in advance.

ANALYSIS

6.  The main ground for the defendant’s striking out application is abuse of process by reason of res judicata.  The defendant submits that in the Lands Tribunal Action LDPD No.538 of 2017 commenced by the defendant against the plaintiff on 17 March 2017 for arrears of rents under the Lease and possession of the Property, the plaintiff raised the same factual matter as his defence and counterclaim for the Property.  The defendant submits that since the Lands Tribunal ruled in his favour on 15 May 2017, the plaintiff should be estopped from raising the same factual matters in the present action, which amounts to an abuse of process.  For the following reasons, I reject this ground.

7.  First, I note that there was no counterclaim as such.  In the Lands Tribunal Action, where both parties were not legally represented, the plaintiff only filed a notice of opposition stating essentially the same facts as the basis for his opposition to the application therein.  There was no counterclaim.  At most, it was in the course of the application that the plaintiff raised that he would like to claim on the Agreement.

8.  Second, in any event, the Lands Tribunal did not have jurisdiction to rule on such counterclaim. 

9.  Third, consistently with the absence of jurisdiction, I note from the transcript that in delivering the decision in favour of the defendant on 15 May 2017, the Presiding Officer reasoned that the Agreement would not affect the Lease, and the parties should perform the Lease.  It was the basis for the Presiding Officer to enter judgment in favour of the defendant, namely, for the arrears of rents and possession under the Lease.

10.  Fourthly, in his decision made on 29 May 2017 to refuse the plaintiff’s application for leave to appeal, while the Presiding Officer did mention his view that the Agreement was invalid and unenforceable, this mention was not part of the ratio.  In his decision, the Presiding Officer recounted at paragraph 17 that the plaintiff mentioned the Agreement and at paragraph 18 that the plaintiff had informed him that HCA 948/2017 (that is, the present action before me) had been commenced.  At paragraph 18, the Presiding Officer then continued to say that putting aside his view that the Agreement was invalid and unenforceable, he formed the view that the Agreement would not affect the validity of the Lease.  Further, at paragraph 19, the Presiding Officer clearly did not make any finding on the existence of the Agreement because when he mentioned the Agreement, he qualified it with a parenthesis “if any”.  Although he mentioned that the Agreement would breach the Special Conditions of the Grant governing the Property, he did not in any place of this decision rule on the legal effect of such breach.  He simply did not have the jurisdiction to do so.

11.  Thus, there is no res judicata in the strict sense.  The issue in the present case, different from that in the Lands Tribunal Action, has not been decided upon.  Nor is there any res judicata in the wider sense (see Endozo Maylin Palomar v Lee Chi Ming [2014] 4 HKLRD 470) as to constitute abuse of process because the plaintiff could have raised his claim in the Lands Tribunal Action, since the Lands Tribunal simply did not have the jurisdiction on this matter.  Thus, I reject the defendant’s ground on abuse of process and res judicata.

12.  The defendant also submits that there is no reasonable cause of action for specific performance prayed for in the Statement of Claim because the Agreement is an oral agreement and by virtue of sections 3, 5 and 6 of the Conveyancing and Property Ordinance (Cap 219), the Agreement is unenforceable.  To this, the plaintiff refers me to section 3(2) which provides that if the oral contract has been partly performed, then the Agreement could still be enforceable.  The plaintiff refers to the plea that he has made payments under the Agreement.  I agree with the plaintiff that by virtue of section 3(2) and such pleaded facts, there is a reasonable cause of action for specific performance.  Thus, I also reject the defendant’s such submission in relation to the relief for specific performance.

13.  The defendant also submits that the Agreement is unenforceable as it was contrary to the Special Conditions of the Grant in relation to the Property.  The defendant specifically referred me to Special Conditions 9(a) and 9 (d), which provided:-

“9(a) Except as provided in sub-clauses (b), (c) and (d) of this Special Condition, the Grantee… shall not assign, partition, mortgage, charge, demise, underlet, part with the possession of or otherwise dispose of the lot or any part thereof or any interest therein or any building or part of any building thereon or enter into any agreement so to do…

9(d) After a period of three years has elapsed from the date of a letter issued by the District Lands Officer certifying that these Conditions have been complied with to his satisfaction the Grantee may, with the prior written consent of the District Lands Officer and on such conditions as may be imposed by him… mortgage or charge the lot… or… any interest or undivided share therein or part with possession of the lot and the building thereon or part with possession of part of the building on the lot, or enter into any agreement so to do but only to [certain categories of persons]…”

14.  The plaintiff points out to me that the Statement of Claim pleads that the completion of the Agreement shall take place only upon satisfactory alienation of the Property, and pleads that the alienation took place in 2015, 3 years after the issuance of the certificate of compliance.  The defendant points out that Special Condition 9(d), read together with Special Condition 9(a), would mean that no agreement shall be entered into before the expiry of the 3 years to alienate the interest.  In my judgment, the wording is not so clear.  It is at least arguable that there is no prohibition over any agreement to alienate the interest only after the expiry of the 3 years.  Thus, it is not plain and obvious that the Agreement is contrary to the Special Conditions and unenforceable.  Therefore, I reject the defendant’s such submission.

15.  In relation to the monetary claim of HK$684,000, the defendant submits that if I would strike out the parts relating to the Agreement, the monetary claim would be partially time-barred.  His submission is based on the defendant’s version of the story, while the Statement of Claim is not clear when the repayments would be due.  In any event, given my refusal to strike out the parts relating to the Agreement, the obligation to repay would trigger only upon the breach of the Agreement at earliest on 4 October 2015, the expiry of the 3 years, the date when the alienation should take place.  The Writ was issued within the 6-year period from 2015.  I also note that at the hearing before me, the defendant withdrew this ground of time-bar for striking out.

16.  Thus, the plaintiff’s claim on the pleading constitutes a good cause of action.  As regards the diametric stories of the two sides, given that there are no written records of what those cheques were exactly for and the merits depend on whose evidence would be accepted, it is not a plain and obvious case that the plaintiff’s claim shall fail.  Thus, I do not find it appropriate to strike out the plaintiff’s claim on the ground that there is no reasonable cause of action, that the plaintiff’s claim is frivolous or vexatious and that it may prejudice or embarrass the fair trial of the action.

CONCLUSION

17.  In the circumstances, I dismiss the defendant’s application.

18.  I shall hear submissions on costs.