XCHRX BEHRENS NG MO CHEE CINDY AND OTHERS v. CREDIT WORLD LTD.

HCA 4404/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 4404 OF 1999

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D E C I S I O N

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The background:

1. The plaintiffs are owners of 10 of 36 similar podium flats in Grand Palisades in Taipo, which is an estate built by the defendant. They filed a statement of claim together seeking recission of their sale and purchase agreements and consequential conveyance in respect of their respective podium flats or alternatively damages for misrepresentation against the defendant. The defendant now applies to have the plaintiffs' statement of claim struck out pursuant to Order 18 rule 19 of the Rules of the High Court, Cap. 4, or alternatively pursuant to Order 15 rule 5(1) that the plaintiffs' causes of action should be prosecuted separately.

The plaintiffs' case:

2. According to the plaintiffs' pleaded case, these podium flats share a common feature in that the sitting room of each of these podium flats opens out to a continuous adjoining strip of open space which is the roof top of the car park below. The open space is carved out into 36 small plots (hereinafter referred to as "podium gardens") by dividing walls erected by the defendant so that access to each podium garden could only be made through the respective podium flat. The defendant also installed a water tap in each podium garden with a metered water source from within the respective podium flat.

3. The flats in Grand Palisades were sold by the defendant before they were completed. During the sales promotion in August 1997, a scaled model showing the podium flats, their enclosed podium gardens and dividing walls was displayed in the defendant's sales office in Tsimshatsui. Pictures of the model were printed in the sales brochures presented to intending purchasers. The price of these podium flats was higher than that of the corresponding flats immediately above.

4. The plaintiffs were told by the sales representatives in the defendant's sales office words to the effect that these podium flats were more expensive because they had podium gardens; that the podium gardens would be for the owner's exclusive use because there were no access to the podium gardens except through the podium flats, and that the podium gardens would be included in the plan but not in the assignments. Some of the plaintiffs inquired from the solicitors acting for the defendant or their common solicitors in the sale and purchase and were given similar answers.

5. The plaintiffs were given possession of the podium flats with the podium gardens and the dividing walls. In the assignments and deed of mutual covenant the podium gardens were included in the common areas of the development. Recently, the defendant announced that the podium gardens were common areas and threatened to restrict the plaintiffs' use of the podium gardens. Hence the plaintiffs instituted the present action based on the defendant's representation through the scaled model and brochure, the oral representation by its sales representatives and in some cases by its solicitors.

The issues:

6. The sale and purchase of these ten podium flats were separate transactions between different plaintiffs and the defendant. Mr Wong for the defendant applicant submitted that in order that the 18 plaintiffs may join together in one action, there are two conjunctive requirements to be satisfied under Order 15 rule 4, which provides:

"Subject to rule 5(1) two or more persons may be joined together in one action as plaintiffs or as defendants with the leave of the Court or where -

(a) if separate actions were brought by or against each of them, as the case may be, some common question of law or fact would arise in all the actions, and

(b) all rights to relief claimed in the action (whether they are joint, several or alternative) are in respect of or arise out of the same transaction or series of transactions."

Common question of law or fact:

7. The first limb of this rule had been considered by the English Court of Appeal in Payne v. Daily Sketch & Daily Graphic Ltd., [1921] KB 1. Scrutton L.J. held at p.16:

"The result of the later decisions is that you must look at the language of the rules and construe them liberally, and that where there are common questions of law or fact involved in different causes of actions you should include all parties in one action, subject to the discretion of the Court, if such inclusion is embarrassing to strike out one or more of the parties.

It is impossible to lay down any rule as to how the discretion of the Court ought to be exercised. Broadly speaking, where claims by or against different parties involve or may involve a common question of law or fact bearing sufficient importance in proportion to the rest of the action to render it desirable that the whole of the matters should be disposed of at the same time the Court will allow the joinder of plaintiffs or defendants, subject to its discretion as to how the action should be tried."

8. Mr Wong submitted that the only thing in common among the plaintiffs is the "implied" representation by means of the model but that this faded into the background in the light of the oral representations allegedly made by the different sales representatives, and in some of the cases by the solicitors acting for the defendant or their common solicitors in the sale and purchase.

9. These transactions were sale and purchase of uncompleted flats in a development under the consent scheme. Thus what was presented by the model and in the brochure must be the best evidence of what the vendor represented as the final product it was offering to sell. If the plaintiffs indeed were able to prove that this representation was operative, it is an actionable misrepresentation, although it is not the only misrepresentation: see Barton v. Armstrong, [1976] AC 104. It is therefore wrong to treat this representation as having faded into the background as Mr Wong put it.

10. Mr Wong submitted that the oral representations in the ten transactions are all different. He prepared an appendix summarising these alleged representations. I have examined the appendix as well as the schedule of representations as pleaded in the plaintiffs' statement of claim carefully. I have also outlined these representations above. All but one plaintiffs pleaded that they were told that the podium gardens were for their exclusive use. The remaining one alleged that he was told that the podium garden could only be used by the owner, which in my view, is to the same effect. The representations were all allegedly made by the defendant's sales representatives. The plaintiffs in seven of the transactions were told that the podium garden would be included in the plan but not in the assignment. The plaintiffs in two of the other three transactions were told that the podium garden would not be included in the assignment, without mentioning whether they would be included in the plan. Only the 9th plaintiff was not told of such technicalities. There may be differences in presentation and in the language used, but there exists a strong common thread among these representations, i.e. the podium gardens were intended for private or exclusive use of the respective podium flat owners but the right to exclusive use is not a right which would be or could be included in the assignments. In the light of this common thread, I do not think the minor differences in the alleged representations justify severance.

11. Mr Wong argued that whether the alleged representations were made at all will have to be considered separately and independly in each of the ten transactions. He drew support from the dicta of Keith J.A. when this matter was before the Court of Appeal, Civil Appeal No. 173 of 1999. At page 5, Keith J.A. held:

"However, if those acts (representation) are disputed by the Defendant, they will have to be proved. The judge thought that the preliminary issues could be determined on the assumption that the acts relied on would be proved. However, since the nature of the representations alleged, particularly the oral representations, depended so much on what facts are in fact proved, it was in my opinion inappropriate for the judge to order the determination of preliminary issues on what would necessarily have been hypothetical facts."

I do not seek to differ from the well considered opinion of Keith JA, which in my opinion is absolutely correct. However, there he was asked to consider whether it was appropriate to have preliminary issues framed for hearing. Of course, if there is no common finding of facts, there is no basis on which to frame the preliminary issues.

12. The matter now before me is different. The issue before me is whether there is a common question of fact or law bearing sufficient importance in proportion to the rest of the action to render it desirable that there should be a joinder of the plaintiffs. In my opinion, a common question of fact does not mean a common finding of fact so that in respect of all the plaintiffs, the finding of fact is identical. So long as the question of fact to be determined is common among the plaintiffs, the fact that the eventual outcome may be resolved differently among the plaintiffs does not mean that the question of fact is not a common one.

13. Here, the common question of fact is whether there was implied representation by the model, the brochure and the price, assuming that the oral representation by the sales representatives to the different plaintiffs were different. The installation of the water tap from a metered source from within the podium flat and the building of the partition wall by the defendant dividing the various podium gardens, if proved, will be literally "concrete" evidence supporting the allegation that the implied representations and the oral representations by the sales representatives were in fact made. All these matters together formed the common question of fact which in my opinion require identical investigation. Of course, I am not excluding the possibility that the court may resolve in favour of some of the plaintiffs and may resolve against the others. The legal effect of the deed of mutual covenant is of course a common question of law which also requires identical investigation.

14. As for the oral representations made by the sales representatives, these were made under similar circumstances, though involving different members of the sales team and may be on different dates. However, the provisional sale and purchase agreements were all signed on the same day. Even assuming that these representations do not form part of the common question of fact and would require separate investigations, I would have thought the conversation between the respective plaintiff and the sales representative during which the oral representations were made would have taken no more than a few minutes. Even if this conversation is hotly contested at trial, this issue is a proportionately small one when compared with the other common issues of fact and law requiring identical investigations. If the oral representations are proved, there will be the further common question of law as to the legal effect of the representation.

15. The defendant has not filed any defence at this stage. While I agree with Mr Wong that the defendant is entitled to have this preliminary matter dealt with first and I am not passing any criticism on the defendant, I do not have the benefit of seeing what the defences are. I can only consider the defendant's application on the basis of the plaintiffs' statement of claim and whatever likely defence I could reasonably anticipate on the basis of the plaintiffs' pleading and common sense. At this stage, it appears to me that the likely defences are one of factual denial and another one based on point of law.

16. Mr Wong referred to the possibilities that the representations, even if made, may be made without authority. If the dividing walls were built by the defendant according to the model and plan, I do not think the defence of lack of authority could be taken seriously. In any event, no defence to that effect has been filed nor has Mr Wong suggested lack of authority as the intended defence. He also referred to the possibility of a diversity of defences and/or complications raised by the difference in size among the ten podium gardens, the ten different sets of conveyancing documents, the different number of solicitors firms acting for the plaintiffs, the correspondence between the solicitors acting for the vendor and purchasers and the possibility of third party action against the solicitors then acting for the defendant in the sale and purchase. In my view, these are fanciful defences and are not what may reasonably be anticipated. But if they do arise, the matter could be addressed to at the appropriate stage.

17. The oral representation is just one aspect of the plaintiffs' case. In addition, there are the scaled model, the brochure, the taps, the dividing walls built by the defendant, the design of the podium flats with the glass doors opening into the podium gardens, the price, the conduct of the defendant and all the surrounding circumstances and the legal effect of the deed of mutual covenant. In my judgment, the commonality, i.e. the common question of law and fact, does bear sufficient importance in proportion to the rest of the action raised by the minor differences in the alleged oral representation, as to render it desirable that the whole of the matters should be disposed of at the same time. Whatever view one takes, it certainly does not justify ten separate trials requiring formal proof of all common facts and repetition of legal arguments just because of the small variance in the oral representation. In the final resort, the court's discretion must be in favour of the joinder.

Identical investigation:

18. Mr Wong submitted that the second requirement under the rule is that the transactions must involve investigations which would to a great extent be identical. The provisional sale and purchase agreements were all signed on 16 August 1967. Given the circumstances as pleaded, I have no difficulties in finding that the ten transactions and the relief sought arose out of the same set of circumstances. The common question of fact as identified above must in the circumstances invite investigations which to a great extent would be identical, though the outcome may be different for different plaintiffs.

19. There is of course, the question of relief which may vary according to the circumstances of each plaintiff, as pointed out by Keith J.A. However, this has no impact on the issue of liability and I believe could be resolved by good case management once the issue of liability is resolved in favour of the plaintiffs. As Scrutton L.J. said in Payne v. Daily Sketch & Daily Graphic Ltd., the joinder should be allowed subject to the Court's discretion as to how the action should be tried. That will have to be addressed to during pre-trial reviews after close of pleading. Of course, if the issue of liability is resolved in the defendant's favour, this problem would not arise at all. I consider that the requirement under the second limb of the rule is also satisfied.

Prejudice:

20. Mr Wong's other objection is that the defendant will suffer irredeemable prejudice unless the claims were severed because the strength of the good case would be more likely to help the bad one than vice versa. He submitted that without severance, inadmissible evidence in the form of "similar fact evidence" would be permitted to be adduced to wrongly influence the decision making process. His worry is built on the basis that the plaintiffs' claim stands or falls on the alleged oral representations by the sales representatives and that the case of each plaintiff is different. I have already analysed that the oral representations are but one aspect of the plaintiffs' case. Mr Wong's worry is therefore not justified.

21. Furthermore, it has been well accepted that a professional judge is more than capable of compartmentalising mentally the evidence relating to the different alleged oral representations made to the different plaintiffs. If Mr Wong has confidence in the same trial judge conducting sequential trials, I do not see how he can mount an argument of prejudice. I consider Mr Wong's worry not a real one.

22. The defendant's application under Order 18 rule 19 is also based on severance of the causes of action. In the eventual analysis, that application stands or falls with the alternative application under Order 15 rule 4 and 5.

Conclusion:

23. Having considered the commonality, the proportionality, the identical investigation, the likely defences open to the defendant, I am satisfied that the plaintiffs have discharged the burden of justifying the joinder under Order 15 rule 4. Accordingly, I dismiss the application with costs against the defendant.

24. I understand that the defendant is the investing arm of a well established property developer. I suggest the defendant should adopt a responsible attitude in having the differences resolved promptly, albeit through litigation, rather than to engage in time and costs wasting interlocutory proceedings of this kind. Prompt resolution is particularly important before the matter becomes complicated by third party interests and by witnesses having lost through time. Nine months have lapsed since the filing of the statement of claim by the plaintiffs, the defendant had ample time to consider its case and file its defence. Accordingly, I give direction that the defendant shall file its defence within 14 days from date hereof.