BOLD SHINE INVESTMENT LTD v. TSUI YEE KWAN

HCA 1867/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1867 OF 1999

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J U D G M E N T

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1.  This is an application by the plaintiff by its summons dated 15 November 2012 (“the summons”) for summary judgment under O.14 RHC of the relief claimed in the statement of claim.

2.  The statement of claim was filed on 1 February 1999.  The defendant filed her defence and counterclaim on 23 March 1999.

3.  Notwithstanding the fact that the defence and counterclaim was filed and served way back in March 1999 the plaintiff did not issue the summons until 15 November 2012.  This is more than 13 years later.

4.  By any standard there has been gross delay which is clearly undue delay on the part of the plaintiff in issuing the summons. What is the reason for this gross delay?  No explanation at all has been proferred in the evidence before me.

5.  In Resona Bank Ltd v Lam Sie and others (HCA 11870 of 1999) 26 November 2004, Tang J (as he then was) was dealing with an application where there was 4 years delay in issuing the summons for summary judgment.  At paragraph 19 of his judgment he said:

“In a suitable case, delay of itself would entitle the court to refuse to entertain an application for summary judgment. This was what was said by Fuad J (as he then was) in Stephen P. Kaufman v Maker Industrial Company Limited [1982] HKLR 20, at 22:

‘… Speaking for myself if the delay was not too great, provided a defence filed did not disclose any arguable case, I would be inclined to grant an application for summary judgment notwithstanding the delay, and consider penalizing the delay by an appropriate order for costs.’

But delay would not necessarily preclude the applicant from succeeding.  But I think having regard to the delay, I should look at the plaintiff’s case with great circumspection.”

6.  By paragraph 1 of the prayer for relief in the statement of claim filed on 1 February 1999 the plaintiff claims against the defendant for a declaration that the property known as Flat C on 6^th floor, 77B and 77C Waterloo Road, Kowloon, Hong Kong (“the property”) had been held by the defendant on trust for the plaintiff “for the whole beneficial interest thereof or in such share or portion as this Honourable Court shall determine.”

7.  The plaintiff also claims an injunction to prevent the defendant from transferring, disposing of, charging or otherwise dealing with the property and consequential relief as to execution of documents together with costs.

8.  The plaintiff’s pleaded case in the statement of claim is that various sums of monies were paid out of the plaintiff’s account for the purchase of the property in 1994.  However, at paragraphs 3, 4 and 7 of the statement of claim the plaintiff pleaded that the payments mentioned therein were paid by the defendant.

9.  An important plea by the plaintiff is in paragraph 10 of the statement of claim which pleads that:

“There was a common intention of the Plaintiff and the Defendant that the Defendant should hold [the property] upon trust for the Plaintiff.”

10.  Because of this plea it is averred that the plaintiff is the sole beneficial owner of the property.

11.  The defendant in her defence and counterclaim admits the payments as pleaded in the statement of claim.  She admits that the payments were made out of the plaintiff’s account.  However, as submitted on behalf of the defendant, there is no clear and unequivocal admission by the defendant that the payments were monies belonging to the plaintiff. 

12.  The defendant specifically denied that there was the common intention as pleaded and relied on by the plaintiff at paragraph 10 of the statement of claim.

13.  The defendant further pleaded at paragraph 4 of her defence and counterclaim that on or about 8 August 1995 at the request of Zheng De Li (“Zheng”), a director of the plaintiff, she made a loan of HK$3,000,000 to the plaintiff (“the loan”) and that the said sum was paid to Messrs Phyllis K.Y. Kwong & Leung, a firm of solicitors.  She also pleaded that it was also agreed that the plaintiff would pay the defendant interest on the loan at the rate of HK$400,000 per annum.

14.  On the evidence Zheng is the defendant’s husband.

15.  At paragraph 5 of her defence and counterclaim the defendant pleaded that it was further agreed between the plaintiff and the defendant that although the plaintiff had previously made all the relevant payments as pleaded in the statement of claim, the defendant would hold the property as security for the repayment of the loan and interest thereon to the defendant until such time as the loan and interest had been repaid in full to the defendant.

16.  As no repayment of the loan and interest had been made by the plaintiff to the defendant, the defendant claims to be entitled to continue to hold the property as security for the repayment of the loan and interest until repayment of the loan and accrued interest.

17.  In the alternative the defendant seeks to set off the plaintiff’s liability to repay the loan and interest against the value of the property or such share or portion thereof.

18.  She also counterclaims for the said sum of HK$3,000,000 with interest and a declaration that she is entitled to continue to hold the property as security for the repayment of the loan and interest.

19.  It seems to me that the defendant has clearly denied that there was ever the common intention as pleaded by the plaintiff at paragraph 10 of the statement of claim.  That is an issue of fact which needs to be determined at trial.

20.  The principles governing applications for summary judgment are well settled and it is not necessary to repeat these here.

21.  It is wholly inappropriate for the court to conduct a mini-trial on affidavit evidence as has frequently been re-iterated by the courts.

22.  It is also useful to bear in mind the observations of Rogers VP in Pacific Electric Wire & Cable Co. Ltd v Harmutty Ltd [2009] 3 HKLRD 94 at 98:

“Applications for summary judgment are only suitable where the court can be satisfied that not only is there no defence but there is no fairly arguable point to be argued on behalf of the defendant. The court cannot embark upon a mini-trial based on affidavit. Except in the most clear and blatant case, it is impossible for a court to put itself in the position of having to make findings of fact.”

23.  I would also refer to what Godfrey JA (as he then was) said in Man Earn Ltd v Wing Ting Fong [1996] 1 HKC 225 at 228:

“I would express the hope that practitioners of whom there are too many, who appear to be prepared to advise every client with what seems to be a good case to invoke this extraordinary procedure, without reflecting on the fact that, if the attempt fails, the result will be to keep the plaintiff out of the judgment to which he may well be entitled for far longer than would have been the case if they had concentrated, instead, on bringing the matter to trial, will in future think twice before giving such advice”.

24.  Had the plaintiff progressed the action to trial in the normal course of events there is no doubt that the trial of the action would have been concluded many years ago.

25.  The application for summary judgment by the summons was made more than 13 years after the defendant has disclosed her defence in her defence and counterclaim.

26.  In the absence of any explanation for the gross undue delay on the part of the plaintiff in issuing the summons the court would, in my judgment, be entitled to dismiss the summons.  As I have said, no explanation for the delay has been proferred.

27.  It is also plain that the summons for summary judgment under O.14 must be supported by an affidavit which complies with O.14, r.2(1) RHC.  This requires an affidavit verifying the facts on which the application relates.  And by r.2(2) such an affidavit may contain statements of information or belief with the sources and grounds thereof.

28.  As stated at paragraph 14/2/5 Hong Kong Civil Procedure 2013:

“It is a necessary condition for proceeding under O.14 that the application must be supported by an affidavit which complies with this rule, otherwise the summons may be dismissed.”

29.  O.41, r.5 RHC makes it plain that an affidavit may contain only such facts as the deponent is able of his own knowledge to prove.  If the deponent relies on statements of information and belief the sources and grounds thereof must be provided.

30.  And as stated at paragraph 41/5/3 of Hong Kong Civil Procedure 2013:

“It is of particular importance to ensure strict compliance in affidavits in relation to an application for summary judgment: see Wing King Fong v Fook Hong Chan [1961] HKLR 448.”

31.  The affirmation of Feng Biao Wen (“Feng”) in support of the summons does not comply with the rules.

32.  Feng is a director of the plaintiff.  He affirms at paragraph 2:

“Unless otherwise stated, all matters deposed to herein are within my personal knowledge and/or are gleaned from documents in my possession, custody or power and are true to the best of my knowledge, information and belief.”

33.  On the undisputed evidence Feng only became a director of the plaintiff in 2000.  He has no personal knowledge of any of the events pleaded in the statement of claim and the defence and counterclaim which events took place years before he became a director of the plaintiff.

34.  On what basis does Feng verify the facts as pleaded in the statement of claim if he had no personal knowledge of the same and he has not disclosed the source and grounds of his information and belief? It seems to me that much of his affirmation is inadmissible.

35.  Mr Chow, for the plaintiff, accepted that much of what Feng says in his affirmation is inadmissible.

36.  It is plain that Feng is in no position to say as he does at paragraph 12 of his affirmation that at all material times it was the common intention between the plaintiff and the defendant that the defendant should hold the property upon trust for the plaintiff.

37.  The same criticism can be made of the 2^nd affirmation of Chiu Liang (“Chiu”) the assistant solicitor in the firm of solicitors acting for the plaintiff.

38.  At paragraph 2 Chiu states:

“Unless otherwise stated, all matters deposed to herein are within my personal knowledge and are true to the best of my knowledge, information and belief. Further in making this affirmation, I have relied upon other sources of information which I verily believe to be true and reliable”.

39.  None of the matters in Chiu’s 2^nd affirmation is within his personal knowledge.  And he has not identified any source or grounds of the information and belief on which he relies on.  Mr Chow accepted that Chiu’s 2^nd affirmation is inadmissible.

40.  In my view, it is wholly inappropriate to state in affidavits or affirmations that there are matters within a deponent’s personal knowledge when clearly there are not.  By so stating a misleading impression is given to the court.  Care should be taken by practitioners in preparing affidavits or affirmations so as not to give a misleading impression.  Particular care should be taken where an application is made to enter summary judgment.

41.  I would also observe that the statement of claim relies on a common intention constructive trust.  The statement of claim does not rely on a resulting trust.

42.  As Recorder Kotewall SC said in Re Superyield Holdings Ltd [2000]2 HKC 90 at 111:

“In my judgment, the court resorts to the presumption of resulting trust and advancement only where there is no acceptable evidence of the actual intention of the provider or providers of the purchase money as to the vesting and apportionment of the beneficial interest. Where there is evidence of actual intention upon which the court may act and where the intention proved is not consistent with the legal title, the court gives redress, no longer under a resulting trust, in my view, but under a common intention constructive trust or an equitable proprietary estoppel.”

43.  The plaintiff’s pleaded case is that there was a common intention that the defendant should hold the property on trust for the plaintiff.  That is a plea of a common intention constructive trust and not a plea based on resulting trust.

44.  The determination of a claim of beneficial ownership under a common intention constructive trust involves a two-stage test.  As Deputy Judge Au-Yeung (as she then was) said in Chan Gordon v Lee Wai Hing [2011] 2 HKLRD 506 at 520-521:

“The determination of beneficial ownership under a common intention constructive trust involves a two-stage test. First, the key was to establish the parties’ true common intention that the claimant should have a beneficial interest. Second, it was necessary to ascertain the extent of the parties’ respective interests in the property, by adopting a holistic approach to quantification, surveying the whole course of dealing and conduct which threw light on what shares the parties must have intended. The court could not impose its own view of what it considered fair: Chan Chui Mee v Mak Chi Choi.”

45.  Whether or not there was the common intention as pleaded and relied on by the plaintiff is a question of fact to be resolved at trial.

46.  As pleaded at paragraph 4 of the defence and counterclaim, the defendant made the loan to the plaintiff which was paid to the firm of solicitors as directed by Zheng. 

47.  The fact that the receipt of the firm of solicitors says that the payment was made by Zheng does not, in my view, necessarily undermine the defenddant’s case that she delivered or caused to be delivered the cashier’s order for HK$3,000,000 to the solicitors.  What is clear from the evidence is that it was the defendant and not the plaintiff who had a copy of the cashier’s order which was produced in evidence.  Her case is that the cashier’s order represented the loan to the plaintiff.  According to the defendant, the source of the funds for the purchase of the cashier’s order came from her account with Sin Hua Bank Ltd.  This is denied by the plaintiff.  This is clearly an issue of fact which must be resolved at trial.  It cannot be said that the defendant’s assertions are unbelievable.

48.  As further evidence in support of the loan to the plaintiff, the defendant also relies on the minutes of Da Ming (Holdings) Ltd signed by the directors of the plaintiff where it is recorded that:

“Hong Kong Da Ming Company (transliteration) borrowed HK$3 million from [the defendant].”

49.  I was informed by counsel that the transliteration of the plaintiff’s name in Chinese is Da Ming Investment Co. Ltd.

50.  The plaintiff denies the loan and disputes that the minutes in evidence are the minutes of the plaintiff.  These, however, are issues of fact which should be resolved at trial.

51.  The plaintiff also relied on sections 3 and 5 of the Conveyancing and Property Ordinance, Cap 219.

52.  By section 3(1) it is provided that no action shall be brought upon any contract for the sale or other disposition of land unless the agreement upon which such action is brought or some memorandum or note thereof is in writing and signed by the party to be charged or by some person lawfully authorized by him for that purpose.

53.  By section 5(1)(a) it is provided that no equitable interest in land can be created or disposed of except by writing signed by the person creating or disposing of the same or by his agent lawfully authorized in writing or by will or by operation of law.

54.  It was submitted on behalf of the plaintiff that the defendant was not entitled to maintain its defence and counterclaim in view of the provisions as to writing in sections 3(1) and 5(1)(a).

55.  It seems to me that these are matters which should also be resolved at trial.

56.  It was submitted by Mr Chang, for the defendant, that the defendant is not seeking to dispose of the property.  Since its acquisition the property has been registered in the name of the defendant and remains so.  The defendant seeks to retain that position by the declaration it seeks in its counterclaim that the defendant is entitled to continue to hold the property as security for the repayment of the loan and interest which, on the defendant’s case, has yet to be repaid.  It seems to me to be arguable that the defendant is not bringing an action upon any contract for the sale or other disposition of land.  These are matters to be resolved at trial

57.  As there will be a trial of the action, it is neither necessary nor desirable for me to express a view on the strength or weakness of the respective parties’ case.

58.  In my judgment the appropriate course is to dismiss the summons.  The summons is dismissed.

59.  I also make an order nisi that the costs of the summons be

costs to the defendant such costs to be taxed, if not agreed, and to be paid forthwith.