XCHRX KU SING MAN v. CHUNG YUET WAH

HCMP 4483/97

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 4483 OF 1997

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R E A S O N S

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1. These are my reasons for dismissing the Appellant's (Defendant's) appeal against Master Jones' decision on 11 September 1998 to dismiss the Appellant's summons for specific discovery under O.24, r.3.

2. By an agreement dated 20 May 1997 ("the 1st Agreement"), one Begin Win Limited agreed to purchase and the owner agreed to sell a shop known as Shop D, Ground Floor, Lung Mong Building, Nos. 38-44 Mongkok Road, Kowloon. By a provisional agreement dated 25 April 1997 ("the 2nd Agreement"), the Respondent (Plaintiff) agreed to purchase from Begin Win Limited one portion of the above property known as "Portion 3" at a price of $7.7 million. The 2nd Agreement expressly provided, inter alia, that it was made subject to the 1st Agreement. It was provided in the 2nd Agreement that a formal agreement should be made on or before 12 May 1997.

3. By a provisional agreement dated 29 July 1997 ("the 3rd Agreement"), the Appellant agreed to purchase and the Respondent agreed to sell that portion of the Shop at a price of $15.8 million. The 3rd Agreement expressly provided that it was made subject to the 2nd Agreement.

4. Under the 3rd Agreement, it was provided that the Appellant is to pay an initial deposit of $500,000 upon the signing of the 3rd Agreement. The amount was duly paid. A further deposit of $1.08 million was payable upon signing of the formal agreement on or before 12 August 1997. There were further provisions for payment of the balance of the purchase price.

5. Upon being required to pay the further deposit of $1.08 million and to enter into a formal agreement for the sale and purchase of the property, the Appellant took the stance that the sum should not be released to the Respondent's solicitors unless and until the formal agreement had been executed. No further money under the provisional agreement was paid by the Appellant. The Respondent alleged that the Appellant's failure to pay the sums due under the 3rd Agreement amounted to a repudiation of the contract and such repudiation was accepted by the Respondent.

6. The Respondent commenced the present action by way of Originating Summons and pursuant to the direction of Yeung J on 8 January 1998, the Statement of Claim was filed on 27 January 1998.

7. It is apparent from the history of the transaction that the Respondent's interest under the 2nd Agreement wholly depended on the performance of the 1st Agreement to which the Appellant did not have any knowledge. The Respondent was in fact acting in the capacity of a confirmor.

8. It was pleaded in paragraph 17 of the Defence that the 1st and/or 2nd Agreements had fallen through, rendering the performance of the 3rd Agreement impossible and the Appellant was therefore discharged from further performance his obligations under 3rd Agreement.

9. It was further contended in paragraph 18 of the Defence that there being an implied term under the 3rd Agreement, the Respondent was required to disclose all material facts relating to his title and interest in the property under the 2nd Agreement.

10. On 7 August 1998, the Appellant issued a summons requiring the Respondent to serve a supplemental list of documents, including and not limited to letters between solicitors which are, or have been in his possession, custody or control relating to the transaction under the 2nd Agreement.

11. The summons was heard and dismissed by Master Jones on 11 September 1998.

12. In this appeal it was contended by Mr Tam for the Appellant that the documents under application are relevant and necessary in a sense that it is reasonable to suppose they contain information relating to the transaction under the 1st and 2nd Agreements to which the 3rd Agreement was made subject to. The same documents, it was said, will throw light on the issue whether the Respondent was in breach of his duty under the 3rd Agreement.

13. The Appellant relied on Compagnie Financiere du Pacifique v. Peruvian Guano Co. (1822) 11 QBD 55. I think one must not lose sight of the principle which is succinctly stated in Matthews and Malek's Discovery :

"The fact that an issue is raised in the pleadings is not determinative as to whether it relates to a matter in question. Discovery is not required of documents which relate to irrelevant allegations in pleadings which even if substantiated could not affect the result of the action."

The above statement was cited and applied by Nazareth V-P in Allington Investments Corp. v. First Pacific Bancshares Holdings Ltd. [1995] 2 HKC 139.

14. I have also in mind the English Court of Appeal case, Martin v. Scrib [1950] 67 RPC 127. In the judgment of Jenkins LJ at p.131, his Lordship made the following observation :

".... The Court must be satisfied that the documents of which discovery is sought are relevant to the matters properly in issue in the action and are not merely made relevant by the inclusion by a defendant in his pleadings of irrelevant matter which, even if substantiated, could not affect the result of the action. ....

I do not deny that there may well be arguable points of law raised in pleadings which ought to be left to be dealt with at the trial and which in the meantime might justify further discovery relevant to the facts giving rise to the point of law; but there are points of law and points of law, and, if a point which prima facie appears to be a thoroughly bad point is set up to justify further discovery, in my judgment it is proper for the Court, if satisfied that the point taken is really a bad one as far as can be seen at the time, to refuse discovery as being not sufficiently relevant on the case as it stands."

In the light of the aforesaid passage, I am of the view that the Appellant's contentions as set out in his Defence that the 1st and/or the 2nd Agreements had fallen through or become determined, is no longer a life issue. Those contentions are both unsustainable and irrelevant to the matters in issue for the following reason : completion of the subject property had in fact taken place on 31 January 1998 as deposed to in paragraphs 5-7 of Ku Sing Man's 2nd Affirmation. Relying again on the same principles, the contention by the Appellant that the Respondent had failed to disclose material facts relating to his title or interest in the property under the 2nd Agreement prior to 12 August 1997 are equally unsustainable at law. It was common ground under the 3rd Agreement that completion was to take place on 31 January 1998. To require the Respondent to show a good title on 12 August 1997 which was five months before completion was certainly not reasonable. In any event, the showing of a good title on the part of the Respondent was never a condition precedent to the execution of the formal agreement, and I do not think it can be implied into the 3rd Agreement. In a property transaction, the seller, in this case the Respondent, has a duty to give good title. In the absence of an expressed provision governing the time within which title must be given, it will be implied to be the date fixed for completion. Nowhere in the Defence did the Appellant suggest that the Respondent had failed to give good title to the subject property prior to completion.

15. In light of the aforesaid, the Appellant is not entitled to discover the letters between solicitors presently sought to be discovered since they do not relate to one or more of the matters in question in the cause or matter.

16. For the reasons given, the Appellant's appeal is dismissed with costs.