KWONG YICK METALS LTD (In Liquidation) v. TANG CHEUNG

DCCJ 4313/ 2008

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 4313 OF 2008

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REASONS FOR DECISION

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Introduction

1.  P as the vendor agreed to sell, whereas D as the purchaser agreed to purchase, a number of land lots in Yuen Long at $1,380,000 (“the Property”).  Completion did not take place.  P alleged that it was because D had paid $1,000,000 only but not paid the remaining $380,000.  D alleged that full payment, including such $380,000 had been paid.  P subsequently discovered that D had let out the property. 

2.  P took out a summons under O. 14 RDC for, inter alia, summary judgment for $380,000 and specific performance, alternatively forfeiture of the payments made by D and return of the Title Deeds which was and is in the D’s possession, rent, interest, and costs. 

3.  P also took out another summons under O. 18 r. 19(1)(a) RDC to strike out D’s Amended Defence and Counterclaim (“ADC”) for it disclosed no reasonable defence and under O. 18 r. 19(1)(c) RDC for it may embarrass, prejudice or delay the fair trial of the action.   

4.  There are 2 bundles, Court Documents Bundle, and Exhibits Bundle respectively.  Page 1 of the Court Documents Bundle, say, is referred to as “[1]”.  Page 2 of the Exhibits Bundle, say, is referred to as “[E2]”.  There is some confusion in the Exhibits Bundle because 2 sets of pagination at the bottom right corner are present.  The correct pagination is in the smaller and darker font.  The other one can be ignored.    

Facts not in dispute

5.  There was no written preliminary agreement, sale and purchase agreement or assignment deed adduced as evidence in the present hearing.

6.  To begin with, P as the vendor agreed to sell, whereas D as the purchaser agreed to buy, the Property at $1,380,000.  At all material times, P was represented by Francis Tsang (“Tsang”), its managing director, whereas D was represented by D’s wife, Chan Shui Fun (“Chan”). 

7.  On 22 December 1999, D paid $100,000 into P’s bank account as part of the purchase price [E18].

8.  On 6 January 2000, D paid $400,000 into P’s bank account also as part of the purchase price [E18]. 

9.  A completion date was fixed.  Messrs. John Ku Tam & Ho, a firm of solicitors (“JKTH”), acted for both P and D.   At all material times of this transaction, JKTH acted through its principal, T. W. Tam (“Solicitor Tam”).    In the present hearing, there is no practical need to differentiate between JKTH and Tam.  For the sake of simplicity, I will refer to “Solicitor Tam” invariably unless the context requires a distinction.   

10.  Although there were some prior complaints by the D about the defects in title and documentation to the Property, D wrote on 13 April 2000 [E123] to instruct Solicitor Tam to waive such complaints and proceed with completion notwithstanding such complaints.  There is no evidence that Tsang or P knew of such waiver.      

11.  For unknown reasons with which we do not have to bother, Solicitor Tam sent a letter dated 13 April 2000 [E21-22] to Messrs. Johnny K. K. Leung & Co. (“KKL”) treating KKL as the solicitors acting for P.  As stated in KKL’s letter dated 12 January 2009 [E23] to clarify this point for the purpose of this action, KKL did not actually act for P at all and did not respond to this letter.  The letter stated that “$880,000” was to be paid upon completion.  This letter is of some importance as will be seen in due course. 

12.  From the documentary record, D had already paid $1,000,000 to P up to that juncture.  The outstanding balance was $380,000.  There was no documentary record of any payment of such $380,000.  D alleged that it was paid in cash on 9 or 10 April 2000. P put D to strict proof.  For reasons unknown and not revealed in D’s case, the completion did not take place on the appointed date or at all despite D’s said letter of waiver [E123].    

13.  Tsang died several months later [32 Ans 7.1].  Not long afterwards, P was liquidated.  Joint liquidators were appointed to manage P’s financial affairs [E88].  At all material times, James Wardell (“JW”), a certified public accountant, represented the liquidators.  JW discovered that the Title Deed to the Property was missing.  It soon transpired that it was in the possession of Solicitor Tam to the order of D.  JW retained Messrs. Stephenson Harwood & Lo, a firm of solicitors (“SHL”) to act for the liquidators.  In the present hearing, there is no practical need to differentiate between JW and SHL. 

14.  When JW caused letters to be sent to seek the return of the Title Deed [E55-57], Solicitor Tam, acting for and on behalf of D, alleged [E58] that D could keep it because D had fully paid the purchase price, including the $380,000 in question.  JW stated that there was no such record in P’s bank account [61-62 para 12].  SHL requested Solicitor Tam for proof [E65].  Solicitor Tam wrote in reply [E68] that before the scheduled date of completion, Tsang had admitted to him (Solicitor Tam) over the phone that he (Tsang) had already received the $380,000 in cash from D and was ready to complete the transaction. 

15.  SHL sought [E71] to have an affirmation from Solicitor Tam and the relevant telephone conversation notes (the “Notes”) as proof of Tsang’s admissions.  Despite SHL’s repeated requests [E72, 74, 75, 76] and for unknown reasons, Solicitor Tam tendered [E77-83], inter alia, the Notesand a “proposed” only after 1 year and 2 months later.  For unknown reasons, it was a “proposed” affirmation [E82-83] not signed by Solicitor Tam or anyone.  For unknown reasons, the date Tsang had allegedly admitted receiving the $380,000 was on “about 10 April 2000”, being different from Tam’s reply letter to JW 1 year and 8 months ago      [E68] which had stated on “about 9 April 2000”.   

16.  The Notes in Tam’s own handwriting [E78] were barely legible.  There was a handwritten date, “10 April 2000”, at the left margin which referred to something underneath which was deleted.  There were a lot of scribbles and deletions but no apparent reference to Tsang’s admissions. 

17.  JW disputed Solicitor Tam’s allegation that D had already paid the $380,000.  Solicitor Tam refused to return the Title Deed to SHL. 

18.  A trainee solicitor, Leung Wing Chak (“Leung”), of SHL went to the Property to take pictures.  There were concrete huts, containers, and vehicles.  A workman there told him that his (the workman’s) boss had rented out the Property for parking cars [54-56].

19.  No one can tell the date D took possession of the Property.

20.  P took out a Writ of Summons to claim, inter alia, the $380,000 and special performance, alternatively forfeiture of the part payment in the sum of $1,000,000 and return of the Title Deed, rent, interest, and costs.

21.  D defended and counterclaimed a number of declarations in recognition of his full payment and title.   

22.  P took out the summonses for summary judgment and striking-out, the subject-matters of the present hearing. 

Additional facts for consideration

23.  In his affirmation, D alleged to know nothing because the transaction was handled by Chan [71-72]. 

24.  In her affirmation [75-81], Chan explained that she had dealt with Tsang in other transactions and for a long time.  As they both trusted each other, she would not require any receipt for payments she made, such as a cheque (unrelated to the present hearing) that she had paid to his daughter. 

25.  In his affirmation [E111-114], Tommy Ma Yuk Kwok (“Ma”) alleged to be a director in P at all material times.  He asserted, inter alia, that he was aware of the full payment of purchase price.  He did not give the source of his knowledge, or how, when, where the payment of $380,000 was made.     

26.  In both of his affirmations, the proposed one [E82-83] provided to JW and the other one [84-86] for the present hearing, SolicitorTam stated that the assignment deed had not been made.   

27.  On this identical point, in an oral affirmation made in the present summons with leave of this Court and without objection by P, Mr. Ho, solicitor for D in the present hearing, states his instructions from Chan.    He has been told by Chan that D had actually signed an assignment deed prepared by Solicitor Tam.  Mr. Ho has no idea as to whether P had also signed it or where it is at this moment.  For reasons unknown, Tam’s evidence is inconsistent with Mr. Ho’s said evidence from Chan.    

Facts in dispute

28.  The paramount fact in dispute in the present hearing is whether D has made out the defence that he had already paid the $380,000.   

The legal principles

For summary judgment

29.  Para 14/4/9 HKCP 2009 stated that:

Unless it is obvious that the defence put forward by the defendant is “frivolous and practically moonshine”, O. 14 ought not to be applied……  Summary judgment under this Order should not be granted when any serious conflict as to matter of fact or any real difficulty as to matter of law arises.      

For Striking-out under O. 18 r. 19(1)(a)

30.  Para 18/19/6 HKCP 2009 stated that:

A reasonable cause of action means a cause of action with some chance of success when only the allegations in the pleading are considered ……  [T]he mere fact that the case is weak, and not likely to succeed, is no ground for striking it out……  Where a pleading is defective only in not containing particulars to which the other side is entitled, application should be made for particulars under r. 12, and not for an order to strike out the pleading under this rule.  Even a serious want of particularity in a pleading may not justify striking out if (1) the defect can be remedied, and (2) the defect is not the result of a blatant disregard of court orders……

For Striking-out under O. 18 r. 19(1)(c)

31.  Para 18/19/6 HKCP 2009 stated that:

The mere fact that an opponent’s pleading contains some unnecessary matter is not sufficient ground for an application under this rule.  A statement will not be struck out merely because it is unnecessary, so long as it is otherwise harmless…….  Similarly a pleading will not be struck out unless it is clear on the face of the allegations that they are irrelevant.  It is no part of the [party’s] duty to reform the [other party’s] pleading; but if wholly immaterial matter be set out in such a way that the applicant must plead to it, and so raise irrelevant issues which may involve expense, trouble, and delay, then the irrelevant matter will be struck out, as it will prejudice the fair trial of the action……

This Court’s findings

On the summary judgment application

32.  Mr. Ho queries why P did not forfeit D’s deposit of $1,000,000 if D did not pay up the $380,000 balance in time for completion.  I think the simple answer is that P would hardly care about the $380,000 if he had already got the $1,000,000 upfront.  P was only aware of P’s complaints about the title and documentation to the Property.  There is no evidence that P was also aware of D’s subsequent waiver [E123] of such complaints.  At all material times, P could not exclude the possibility of the transaction not completing eventually.     

33.  Mr. Ho originally queries why P would still accept the payment of $500,000 (as part of the remaining balance of $880,000) if the $380,000 had remained outstanding.  In the course of submissions, Mr. Ho has abandoned this point.  I think Mr. Ho has rightly done so because P would not object to receiving whatever payment made by D.

34.   Mr. Ho queries why P would allow D to possess the Property before full payment.  No one could tell what possession was taken by D [80 para 21].  Chan stated that the Property was bare and P had discharged the watchman after D’s possession [80 para 22].  I think P had good reasons to let D have possession.  P was only aware of the complaints about, but not D’s subsequent waiver of, the title and documentation to the Property.  P had already got $1,000,000.  P had to pay a watchman.  D would still have to pay back all rent in case the transaction completed.  With D’s complaints about the title and documentation to the Property hanging over P’s head, nothing could have been as good to P as $1,000,000 in hand and not having to pay a watchman.

35.  The $380,000 would be a huge sum of cash.  There was no record in either P’s or D’s bank account.  Ma had no idea of the circumstances of payment or where the sum had gone upon being received by P. 

36.  Chan was the person paying the $380,000.  There was no reason for her to forget, as she did, as to when, where the payment of $380,000 was made.  There was no reason for Chan not to get a receipt.  It would be hers for the asking.  There was no reason for Solicitor Tam not to keep an official record, as opposed to the Notes, of Tsang’s acknowledgment of having received the $380,000 in his office.   

37.  Assuming that the Notes had correctly assisted Solicitor Tam in his memory that Tsang’s admission of having receiving the $380,000 was made on around 10 April 2000.  There was no reason that he would, as he did, send a letter dated 13 to KKL stating that “$880,000” was to be paid on completion.  This letter clearly illustrated that on 13 April 2000, Solicitor Tam’s knowledge was that $880,000 was still outstanding.  This strongly suggested that Tsang had not so admitted to him.      

38.  There was no reason for Solicitor Tam to take 1 year and 2 months to provide JW with the Notes and the affirmation.  There was no reason for the affirmation to be only “proposed” and not signed by Solicitor Tam.

39.  The affirmation was made 1 year and 2 months after Tsang’s alleged admission.  Mr. Ho accepts in submission that Tam would necessarily have to refresh his memory from the Notes as there were no other records.  Notwithstanding its illegibility, the Notes did not bear any date of “9 April 2000”.  There was no reason for Solicitor Tam to give a date (around “10 April 2000”) in his affirmation which was different from his own reply letter (around “9 April 2000”) much earlier on to SHL.  These strange circumstances were not explained.  Were the Notes in existence when Solicitor Tam first replied to SHL 1 year and 2 months ago?

40.  As D had expressly waived his complaints about the title and document to the Property, if he had already tendered full payment, there was no reason why he would be dormant for years without urging for completion and until D was sued in this action.  

41.  In my judgment, the evidence of Solicitor Tam, Chan, and Ma are frivolous and practically moonshine.  

On the striking-out application under O. 18 r. 19(1)(a)

42.  Mr. Wither, solicitor for P, challenges the sufficiency or clarity of pleadings in the Amended Defence and Counterclaim [7-12 “ADC”] as to the precise circumstances in which the $380,000 was paid.  On the face of the pleadings and not being permissible to look into the evidence under this rule, I do not think that no reasonable cause of defence is pleaded.    

On the striking-out application under O. 18 r. 19(1)(c)

43.  Mr. Wither submits that D’s pleadings of the old business relationship between P and D, and the retainer of solicitors for the transaction are irrelevant and unnecessary.  I do not think that these facts are clearly irrelevant or unnecessary.    

P not relying on O.18 r. 19(1)(b)

44.  One point which is apparently liable to be struck out under the “scandalous, frivolous and vexatious” ground of O. 18 r. 19(1) but not made part of the present summons, is a crucial contradiction between D’s pleading and the evidence.  On the one hand, D pleaded that P was unable to complete the transaction due to the problem with the Assignment Plans [ADC para 13].  On the other hand, D put forward the evidence of Solicitor Tam that D had waived such complaints and instructed Tam to proceed with completion [E123].    

45.  Another point is the contradiction between the pleading [8 ADC para 8] that KKL acted for P in the transaction and the D’s evidence from Solicitor Tam [84-85 para 4] that he acted for both P and D in the transaction.

Conclusion

46.  I grant P all reliefs, except for the payment of the $380,000 and specific performance, as sought in the summary judgment application [41-42] with costs.  I dismiss P’s striking-out application [38-39] with costs.  P will get three-quarters whereas D will get one-quarter of the costs of the present hearing.  This costs order nisi will become absolute after 14 days from today.