HEMRAJANI ARJANDAS GOBINDRAM v. CHAND JETHANAND HIRA AND OTHERS

HCA10585/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.10585 OF 2000

----------------------

-----------------------

---------------------

D E C I S I O N

----------------------

1. The plaintiff applied for leave to sign judgment on admissions against the 1st defendant. Leave is sought because the plaintiff has previously undertaken on the pre-trial review checklist form that there will be no further application without leave of the court.

2. The plaintiff took out the writ on 20 December 2000, suing for $750,000 being the balance of a loan repayable on demand under two promissory notes, both dated 2 November 1998, respectively signed by the 1st defendant and the 2nd and 3rd defendants. The plaintiff also claimed interest at the rate of 1% below the fluctuating interest rate on the mortgage loan of the property known as Office B, 14th Floor, and Flat Roof, Minden House, 13-15 Minden Avenue, Kowloon ("the Property") owed by the 1st defendant to the Wing Lung Bank.

3. The three defendants admitted that in about November 1998, the plaintiff lent to the 1st defendant $900,000 under the terms of an oral agreement : (i) the loan shall be interest free; (ii) the 1st defendant shall let the Property at $4,500 per month to the plaintiff for a term of three years; (iii) the loan shall be repayable at the end of the three years after the 1st defendant delivered to the plaintiff vacant possession of the Property; and (iv) upon maturity of the loan, the 1st defendant shall have an option to sell the Property to the plaintiff at the price of $900,000 in lieu of repayment of the loan by him.

4. The defendants alleged that vacant possession was delivered to the plaintiff on or about 1 February 1999. The rent of $4,500 was below market rent. The rent the 1st defendant was receiving before the existing tenant was asked to move out to deliver vacant possession to the plaintiff was $8,000 per month. But the plaintiff has never paid any rent. The plaintiff, on the other hand, denied it had ever taken possession of the property.

5. The defendants alleged that the two promissory notes were signed by them after the loan upon the oral agreement had been made. It was signed on or about 10 August 1999 and backdated to 2 November 1998. They were not supported by fresh consideration.

6. The defendants admitted that they have made repayment of $150,000, and $97,463.25 purportedly as interest, which they were not obliged to pay under the oral agreement but, nevertheless, did so in order to pacify the plaintiff's demand of repayment of the loan. The defendants counterclaimed $97,463.25 as set off against the loan.

7. The defendants alleged that the plaintiff gave up vacant possession of the property on 1 October 1999. The property was re-let on 15 January 2001. The defendants counterclaimed loss of monthly rent of $4,500, rates and management fee for the period from the delivery of vacant possession to the plaintiff until the subsequent re-letting. The sum was $153,432.84.

8. In January 2001, the plaintiff applied for summary judgment against the three defendants. The application was dismissed by the Master. There was no appeal against that decision. The case has been set down for trial in December 2002.

9. The plaintiff now seeks judgment against the 1st defendant on admissions in the pleadings, witness statements and correspondence. The plaintiff is not relying on the two promissory notes but simply on the admission by the 1st defendant that $750,000 was due and outstanding.

10. Miss Chan for the 1st defendant submitted, firstly, that the defendant's admission was that the loan was only due in February 2002. If the plaintiff were relying on that admission, it was not an admission to the plaintiff's claim that the loan was repayable on demand as at the date of the writ on 20 December 2000. Secondly, that admission was subject to the qualification of an option to sell the property to the plaintiff in lieu of repayment of the loan.

11. For the first point, Miss Chan relied on Moscow Narodny Bank Limited v. Wong Wing Cheung, Edward [1981] HKC 416, per Liu J (as he then was). Miss Chan relied on the following two propositions : (i) a cause action for the recovery of a debt allegedly accrued at the time of or before the commencement of an action could not be said to have been admitted to by an averment that the obligation to repay the same or part of the same debt only arose some years thereafter, therefore the 1st defendant's admission of a debt with a due date subsequent to the commencement of the action was not an admission to the cause of action; and (ii) the plaintiff could not so amend to include the cause of action which did not exist at the commencement of the action.

12. Mr Acton-bond for the plaintiff does not argue with the Moscow Narodny Bank case. Instead, he submitted that in all the circumstances of the case, the court should accept the 1st defendant's admission of the falling due of the loan and ignore its qualifications because they were plainly insupportable. It was submitted that : (i) if the loan were only due in February 2002, there was no reason for the 1st defendant to make the repayment of $150,000 before that date; (ii) if the loan were interest-free, there was no reason for the 3rd defendant to pay the interest of $97,000. It was the case of the plaintiff that the interest so paid was calculated by the 3rd defendant with reference to the repayment schedule of the Wing Lung Bank. That allegation was not traversed by the defendants and it amounted to an admission. It was submitted that the 1st defendant's case that the loan was only due in February 2002 was plainly incredible, and minus that qualification, there was an admission of the loan at the commencement of the action.

13. As to the option to sell point, Mr Acton-bond submitted that the alleged option was not evidenced in writing and is not enforceable by virtue of section 3(1) of the Conveyancing and Property Ordinance (Cap.219). Secondly, the allegation of the option was not credible because it was inconsistent with the fact that the plaintiff has drawn an undated cheque as security for the repayment of the $900,000. That cheque has been admitted to in a letter dated 17 November 2000 sent by the defendants' solicitors to the plaintiff's solicitors. However, Miss Chan for the 1st defendant pointed out that in the same letter it was stated that the cheque was deposited with the plaintiff subject to a condition precedent that it should not be presented until year 2002.

14. As to the point on part-performance by entering into possession, Mr Acton-bond submitted that, notwithstanding that there is a dispute of fact as to whether the plaintiff was in possession for the period between February and October 1999, the circumstances pointed to that the plaintiff was actually never in possession for the following reasons : (i) if any rent were due from the plaintiff to the defendant, the defendant would not have paid any interest calculated with reference to the repayment of the mortgage loan to the bank; (ii) the fact that the defendants have actually paid interest must imply that no rent was due; (iii) if no rent were due, it must imply that the plaintiff was not in possession of the property. Miss Chan, on the other hand, submitted that there must be a triable issue as to whether the plaintiff was in possession and, if so, whether the possession was part-performance referable to the option, or to the loan only.

15. Mr Acton-bond submitted that upon an application for judgment on admissions under Order 27, rule 3 of the Rules of the High Court, the court has a wide discretion to give such judgment, or make such order, on the application as it thinks fit upon those admissions which the plaintiff may be entitled to. It was a broad jurisdiction and the court could attach such weight to the admissions and ignore those qualifications which are plainly insupportable. Mr Acton-bond also submitted that if the court were with him but was worried about the lesser amount of the counterclaim, the court could order payment into court for the trial of the counterclaim.

16. In the exercise of the discretion under Order 27, rule 3, the admissions relied on must be clear and unambiguous. In this case, it is far from being so. Not only the plaintiff is asking the court to strike out the defence of the option, he is asking the court to go through an exercise of summary judgment on the due date of the loan. I dare say it actually amounts to a mini-trial on the documents before the court. In considering whether leave should be granted, I also bear in mind that the trial of this matter is to take place in two months' time. In all the circumstances, I shall refuse leave for the application. I shall not sign judgment, nor make any order of payment into court. I shall hear the parties as to costs.

[Discussion re costs]

17. I shall order costs to be paid by the plaintiff to the 1st to 3rd defendants.