World Speed Co Ltd v. Lai Sau Lin

Case No.CACV 190/1989

Court

Court of Appeal

Date—

Judge—

Case Document

100%Judiciary

CACV000190/1989

IN THE COURT OF APPEAL	1989, Nos. 162 & 190
	(Civil)

BETWEEN
	WORLD SPEED COMPANY LIMITED	Plaintiff (Respondent)
	AND
	LAI SAU LIN	Defendant (Appellant)

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Coram: Fuad, V.-P. and Hunter, J.A.

Date of hearing: 27 April 1990

Judgment handed down: 8 May 1990

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JUDGMENT

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Fuad, V.-P.:

1. On 1st May 1990, at the conclusion of the hearing of these two interlocutory appeals (which we heard together with the consent of the parties) we allowed both appeals and now give our reasons as we undertook to do. The defendant in this action, Madam Lai Sau Lin, had appealed against an order dated 12th October, 1989 whereby Jones, J. had granted a Mareva injunction in favour of the plaintiff company, World Speed Company Ltd. ("the Company") and against an order made by the same judge, on 28th November, 1989, granting the Company a Mareva injunction in order to assist the execution of their judgment entered against the defendant.

2. The dispute between the parties arose out of a written agreement dated 31st January, 1989 whereby the defendant agreed to sell and the Company agreed to buy two properties in Orchard Street, Kowloon. This agreement was registered in the Land Office on 23rd February, 1989. The Company's search revealed that the properties had been charged in favour of another company on 28th January, 1989 for $17,500,000, a charge which was not registered until 18th May, 1989.

3. The Company paid the defendant $300,000 before signing the agreement, as an initial deposit. In terms of the agreement $2,670,000 was to be paid by them on or before signing the agreement (reduced to $2,370,000 because of the initial payment), and the balance of $24,030,000 was to be paid on completion. On 27th January, 1989 the Company sent the $2,370,000 via the solicitors then acting for them to the defendant's solicitors. The Company also paid the defendant three instalments of interest totalling $579,630 in accordance with the agreement.

4. Completion was due on or before 27th May, 1989 but the agreement allowed the Company to call for earlier completion on seven days' notice. Time was epxressed to be of the essence of the agreement. Vacant possession was to be given on completion. By a supplemental agreement entered into between the parties, the Company obtained vacant possession on toe date of the signing of that agreement - 31st January, 1989.

5. On 14th February 1989 the solicitors acting for the Company raised certain requisitions concerning the defendant's title to the two properties. Despite correspondence between the solicitors representing the parties the requisitions were not satisfactorily answered (as Mr. Benjamin Chain concedes) and on 29th May 1989 the Company rescinded the sale and purchase agreement.

6. On 19th September 1989 the Company obtained an ex parte Mareva injunction against the defendant from Hooper, J. In passing, we note that paragrapn 2 of the learned judge's order began :

"The Defendant do forthwith disclose to the person serving this Order on her and do so in writing if requested the full value of her assets within the jurisdiction .... whether .... need solely by her or jointly ... identifying with particularity the nature of all such assets and their whereabouts ...."

We need only say that the order made in these terms should not have been asked for or made for it imposed an impossible burden on the defendant.

7. The Company issued their writ, accompanied by a Statement of Claim, on 20th September 1989. They pleaded the essential terms of, and relied upon the sale and purchase agreement of 31st January 1989 and the supplemental agreement of the same date. They also pleaded an agreement "for the sub-sale and purchase" of the two properties, dated 1st March 1989, to Big Prize Ltd. for the sum of $33,000,000 which they say they lost due to the defendant's breaches of contract.

8. Apart from the alleged failure by the defendant to prove good title to the properties sold to them, entitling the Company to rescind the agreement, they rely on other grounds of which particulars are given :

	(a)	the failure by the defendant to pay all outstanding "Determined Annual Instalments of Premium" (10 of them) on or before the completion date (clause 28);
	(b)	because the application for a change of the permitted user of the properties from "domestic" to "shop and restaurant" had not been granted on or before the completion date (clause 29).

9. The Company claimed the following relief by their action :

	(a)	a declaration that they had effectively rescinded the agreements of 31st January 1989;
	(b)	the sum of $2,670,000 deposit;
	(c)	the sum of $6,300,000 being the difference between the sale price to Big Prize Ltd. and the contract price. Alternatively, an inquiry as to what damages the Company had suffered by reason of the defendant's breaches of the agreements.

10. In the alternative, the Company claims :

	(i)	the sum of $579,630 being the interest paid under the agreements;
	(ii)	the sum of $115,035 being solicitors' and engineers' fees for investigating title etc. and for the change of user application;
	(iii)	a declaration that they are entitled to a lien on the properties for the sums in aggregate representing the deposit, interest, professional fees and the costs of the action;
	(iv)	interest on the sums found to be due.

11. The Company took out the inter partes summons for the Mareva relief they sought on 21st September, 1989. The return was before Barnett, J. on 26th September but on that date the hearing was adjourned for argument before Jones, J. on 12th October, 1989. In the meantime, on 10th October 1989, the Company took out an application under R.S.C. O.86.

12. Jones, J. had a number of affirmations before him. We will not refer to them all. The principal supporting affirmation for the Mareva injunction was that of Mr. Lam Cho Choy, one of the Company's directors. Paragraph 22 of his affirmation is in the following terms :

"However, it has very recently been discovered that the Defendant has been disposing of or alienating her full interest in her properties in an alarming manner, namely, at well below market price. I respectfully refer this Honourable Court to the Affirmation of Mr. Tam Fung Cheung affirmed on 16th September, 1989 to be filed herein the contents of which have been explained to me and which I verily believe to be true."

13. Mr. Lam then identifies five properties which searches have revealed are owned by the defendant, apart from the properties agreed to be sold to the Company. This is what Mr. Lam says about the five :

	(a)	relying on the affirmation of Mr. Tam Fung Cheung, a Chartered Surveyor, which was also before Jones, J., the property in Kingston Street, 1,169 square feet in size, had been sold for $1,280,000, about $420,000 short of its proper open market price. His (Mr. Lam's) suspicions were heightened by the fact that the sale which ostensibly took place on 20th May, 1989 was not registered at the Land Office until 21st July.
	(b)	the timing of the mortgage of the Patterson Street property "in relation to the completion date is likely to be connected". The property was mortgaged on 26th May 1989 which was the very day upon which his solicitors wrote two letters urging completion on the following day.
	(c)	about properties in Lyttelton Road, Observatory Road and Shanghai Street, he said that as far as he could ascertain these properties had not so far been sold or encumbered. He added : "However this does not necessarily mean that no transactions have taken place recently since there can be one month within which to register such documents in Land Office. I am informed .... and believe that the defendant resides in the Lyttelton Property."

14. Mr. Lam also affirmed that he had been told and believed that the defendant and her husband had ceased to occupy business premises in the International Building, Des Voeux Road - on several occasions, during business hours in early September, the roller shutters were seen to be down.

15. Mr. Lam then says : "From the above, I verily fear that the defendant is engaged in a series of transactions to dissipate her assets in order that my Company's attempts at recovering it's losses will be frustrated."

16. After referring to an advertised sale of the properties involved in the abortive sale to the Company, Mr. Lam deposes : "As the claim of my Company against the Defendant is one which is very substantial, I verily fear that in view of the recent traits of the defendant, my Company may well be without any or sufficent recourse in recovering damages against her."

17. Madam Lai responded to Mr. Lam's affirmation by one she affirmed on 4th October 1989. She denied that she was dissipating her assets and said she did not intend to do so. As regards the Kingston Street property, she said she had bought and sold the flat subject to an existing tenancy. We mention here that Mr. Tam's estimate, upon which Mr. Lam relied was clearly based on a sale with vacant possession.

18. As to the Patterson Street property, she affirmed that the full story was that the property had been mortgaged for $670,000 in 1986 when there was a sitting tenant, and she only obtained vacant possession in 1989. She had then mortgaged it to a finance company for $1,900,000. She had used $900,000 to pay interest due on other mortgages she had not until then been able to pay and had used $400,000 to decorate the premises. The rest she had used for everyday expenses during a time when her income was low. The fact that the mortgage was executed on 26th May, 1989 was just a coincidence.

19. Madam Lai explained that the office in the International Building had been rented by another company which had closed down because it could not pay rent to the landlord. She had used the premises sometimes in the past but, of course, no longer did so.

20. Madam Lai went on to point out that the properties she had agreed to sell to the Company were put up for tender by her mortgagees because she had defaulted in paying interest.

21. We do not think it necessary to recite the rest of the contents of Madam Lai's affirmation which deals with the defences she has been advised that she has to some of the Company's claims, for reasons which will appear.

22. Jones, J., as we have seen, granted the Company an injunction restraining the defendant until judgment or further order from removing from the jurisdiction or otherwise disposing of or dealing with her assets within the jurisdiction so as to reduce the value thereof below $8,970,000. An allowance was made for her living and legal expenses.

23. On 28th November, 1989 Master Perrior gave judgment in the Company's favour under O.86, declaring that the Company had effectively rescinded the two agreements of 31st January, 1989. Judgment was entered for the Company in the sum of $2,670,000 (the deposit) plus $579,630 (the interest). An inquiry was ordered as to what damages the Company had suffered "by reason of the wrongful acts of the defendant" (the loss of profits claim). It was also declared that the Company was entitled to a lien over the two properties in Observatory Road agreed to be sold to them under the abortive sale and purchase agreement for the sums due by the defendant as well as the costs of the action. Interest from 20th September, 1989 on all sums found to be due was awarded as well as the costs of the action.

24. Later on the same day (28th November 1989) Jones, J. granted a fresh Mareva injunction in much the same terms as the earlier one, but this time restraining the defendant until the judgment obtained from Master Perrior was' satisfied.

25. We were told from the Bar that the judge gave no reasons for his decision on 12th October, 1989. With every respect to the learned judge, we think we can do no better than to endorse what was said by Cons, J.A. (as he was) in two unreported decisions of this Court. In Ever Finance Limited v. Yuen Wai Pin, Civil Appeal No. 53 of 1982, 23rd June, 1982, he said :

"The giving of reasons is one of the fundamentals of good administration: Breen v.Amalgamated Engineering Union [1971] 2 Q.B. 175 at 191. Even more so is it one of the fundamentals of a good system of justice. Lord Denning would have thought that went without saying. And it matters not whether that decision is final or interlocutory or in what particular court it is given. The principle holds good for all levels of adjudication. Parties are entitled to know by what the judge was influenced, particularly the party who has lost. As Mr. Megarry (as he then was) said

'..... no defeated litigant should leave an English court with the feeling that the judge has failed to appreciate his case. This view is reinforced by the fact that under the common law system the judgment is no mere formal document, but a reasoned speech, often of considerable length, explaining just what are the facts, the issues, the rival contentions and the reasons for the result.': 'Lawyer and litigant in England', Hamlyn Trust Lecture, 1962. ...."

"This does not mean that the judge must reduce his reasons to writing. In the High Court there will usually be solicitor or counsel present who will take a note of what the judge says, and should it ever afterwards be necessary to refer to it, counsel will submit that note to the judge for his agreement. Nor does it mean a lengthy speech on each and every occasion. That would be quite unnecessary in most interlocutory matters, where all that is needed is some indication of the 'why' as well as of the 'what'."

26. These observations were echoed by Sir Derek in Allen Pat Yung Waung v. Sir Y.K. Pao, Civil Appeal No. 45 of 1984, 18th May 1984, and he added the following, with which we respectfully agree:

"Should [the judge] in any instance not give that indication [a general indication of what was in his mind] we consider it to be the duty of counsel, and in particular if there is a possibility that the matter will be taken further, to invite the judge to do so."

27. Whatever might have been the position at the ex parte stage, once Madam Lai had filed the affirmation she relied upon, could it fairly be said that as the evidence then stood, the Company had discharged the burden of showing that the refusal of the Maareva injunction sought would involve a real risk that a judgment in favour of the Company would remain unsatisfied? As we have pointed out, we do not have the benefit of the judge's evaluation of the evidence before him but it seems to us that Madam Lai gave what was, in the absence of any further evidence, an entirely satisfactory explanation for the sale of the Kingston Street property at a price the Company's valuer thought was an undervalue - the whole basis of the valuation was vitiated if the sale was without vacant possession. We think, too, that the Company's suspicions about the mortgage of the Patterson Street property turned out to have a very frail foundation once Madam Lai had explained the position. There is nothing in tine allegations based on the use of the business premises in the International Building, and the highly speculative remarks about Madam Lai's properties in Lyttelton Road, Observatory Road and Shanghai Street should not have influenced the Court in exercising its discretion.

28. Presumably the learned judge took the view that in all the circumstances there was enough material before him to justify the Company's suspicions regarding the risk of dissipation by Madam Lai of her assets, but we found ourselves unable to agree, more particularly since she disposes of property in the ordinary course of her business. On this ground alone, therefore, we concluded that neither of the orders appealed against could stand.

29. However, we will briefly indicate why we felt that the evidence before the judge in support of the Company's claims which went beyond the return of the monies they had pain (plus legal expenses) under the abortive sale could fairly be described as exiguous and it certainly needed careful scrutiny by the judge. This is because the claim for the return of the deposit etc., on the face of it, was amply secured by the purchaser's lien on the property intended to be sold - as we have seen, the prior incumbrance of 28th January, 1989 was not registered until May, whereas the sale agreement which fell through was duly registered within one month so that it gained priority. In the light of the fact that the Company's further claims will now have to be gone into in the inquiry which has been ordered, we think we should say no more than that on the arguments addressed so far addressed to us, we would have hesitated long before holding that the Company had made out "a good arguable case" for what has been called "loss of profits".

30. It was for these reasons that we allowed the appeals and set aside the orders made on 12th October and 28th November 1989.

Representation:

Mr. Benjamin Chain (Ip and Willis) for the Appellant/Defendant.

Miss Priscilla Wong (Fred Kan and Co.) for the Respondent/Plaintiff.