Asgain Co Ltd v. Cheng Ka Yan

DCCJ 81/2014

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 81 OF 2014

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DECISION

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1.The defendant took out a summons on 24 January 2017 asking for leave to appeal against my decision handed down on 19 December 2016 (“the Judgment” and/or “the Order”).  She also asked for extension of time as apparently the application was late for about a week.  Another summons was taken out on 28 March 2017 by which the defendant asked for stay of execution of the Order.

2.In the Judgment, I found against the defendant and entered judgment for the plaintiff’s claim.  By the Order, the defendant was to pay the plaintiff a sum of $683,000 as outstanding balance of purchase price of a property with interests and costs.

3.The time application shall be dealt with first.  From the court’s record, a letter was sent to the defendant and the plaintiff’s solicitors on 14 December 2016 giving them notice that the Judgment would be handed down on 19 December 2016 at 4 pm at Court 4 of the Lands Tribunal.  The notice had to be sent to the defendant because the lawyer representing her at trial had ceased to act not long thereafter.  The notice to the defendant was however sent to an address which had been deleted by amendment made in May 2014 and that address had therefore became obsolete.  The notice was returned to this court.  The defendant did not come to collect the Judgment on 19 December 2016.  In her affirmation she said she had never received this notice.  In fact, she also said that she had received no notice that her former lawyer would no longer represent her.   She learned from the plaintiff that judgment had been handed down 1 day before the last day she could file an application for appeal.  She said she had done her best to instruct another lawyer to file the summons and was 8 days late.  She asked for time extension.

4.Mr Wong, counsel for the plaintiff was given an opportunity to see relevant correspondence at the hearing and he rightly withdrew his opposition for extension of time and agreed that costs of the application for time extension be in the cause of the substantive application for leave to appeal.

Background

5.The dispute between parties arose from a property transaction made between close relatives.  The main issue was whether payment had been made by the defendant to the plaintiff in full, ie a total sum of $750,000.  The defendant also said that even if the purchase price had not been fully paid, by operation of the doctrine of contractual estoppel the plaintiff could not now make any claim because it had already acknowledged receipt of full payment by signing on two documents (“the Documents”) which included a memorandum of agreement for sale and purchase (“the Memorandum”) dated 30 August 2010 and an assignment dated 31 January 2011 (“the Assignment”); in each of which a receipt clause (collectively to be referred to as the “Receipt Clauses”) was contained.

6.The defendant also relied on section 18(1) of the Conveyancing and Property Ordinance (“s 18(1)”) to deny the plaintiff’s claim saying that the defendant had been discharged from the obligation to pay because of the Receipt Clauses.

Findings of fact and decision

7.At the conclusion of the trial, it was found by this court that:-

(i)   The defendant had not made full payment for the purchase of the Workshop as she had alleged but only a sum of HK$67,000 altogether, that means a sum of $683,000 was still due and owing at the time of trial;

(ii)   When the plaintiff executed the Memorandum and the Assignment through its directors (one of them being the brother of the defendant and was called as witness for the defendant) it was not made aware of the Receipt Clauses and that the plaintiff had no intention for the Receipt Clauses to be included;

(iii)   Notwithstanding the Receipt Clauses, the defendant had continued to pay part of the purchase price after execution of the Memorandum and the Assignment.  She did not rely on the Receipt Clauses.  Her conduct indicated that there was no agreement between the parties that they would act upon an assumed state of facts and she should not be entitled to rely on the same at trial.

Arguments for the intended appeal

8.For the purpose of the leave application, Mr Leon Ho, counsel for the defendant argued that this court had failed to consider the legal principles of contractual estoppel which had been set out in Prime Sight Ltd v Lavarello [2014] AC 436 (“Lavarello”) and later adopted in DBS Bank (Hong Kong) Ltd v Sit Pan Jit HCA 382/2009, unreported 2 April 2015  (“DBS”), Best Joint Investments Limited v Kagani Ltd 及另一人 HCA 2608/2006, unreported, 13 July 2015, Wong Lai Ling v Lam Kin Chung HCA 828/2011, unreported, 10 August 2012, thus the conclusion that the parties did not intend to include the Receipt Clauses in the Documents merely because Ming (or any of the parties) was not aware of the Receipt Clauses was wrong.

9.He relied on the passages in the Judgment below:-

“72. …… The relevant question in the present case is whether the parties had agreed to admit or treat that payment of $750,000 had been fully made putting aside whether that was factually true or not. This goes to whether they had actually agreed to the inclusion of the Receipt Clauses.

74. From my above finding of fact that Ming was not aware of the Receipt Clauses I do not find that the Plaintiff had intended the inclusion of the Receipt Clauses in the Memorandum and had agreed to their effects …...  I find that there was no evidence to prove that the Plaintiff had through Ming admitted that money had been paid by the Defendant or that the parties had agreed to treat that payment had been made at the time of the Memorandum.”

10.To substantiate his argument, he said that the plaintiff was bound by the Receipt Clauses for the following reasons;

(a)   it was never the pleaded case of the plaintiff that the Receipt Clauses do not form part of the agreements made; and

(b)   subsequent conduct of parties are irrelevant.

11.Mr Ho relied on the same argument to say that this court had erred in law when finding that the defendant could not rely on s 18(1) and in effect he agrees that this line of argument would stand or fall together with his argument made under the doctrine of contractual estoppel.

12.Mr Ho’s argument on the doctrine of contractual estoppel was that when parties had agreed to act upon an assumed state of facts, their rights between themselves are justly made to depend on the conventional state of facts, and not the truth.  (McCance v London & North Western Railway Co [1871] LR 7 Exch 26).  It seems there is no divergence of view between Mr Ho and this court on this basic principle.

13.At the present hearing Mr Ho confirmed that what he could not agree with this court was on my finding that the plaintiff had not intended to include the Receipt Clauses in the Documents.  It is his submission that once the plaintiff had put his signature on the Documents, they become binding on the plaintiff unless some vitiating factors had been successfully established.  Mr Ho said that in the present case the plaintiff had failed to establish that there were any vitiating factors not to say that such vitiating factors had never been pleaded. For these reasons, the plaintiff must be bound by the Documents including the Receipt Clauses.   

14.I am of the view that when seeking to rely on the doctrine of contractual estoppel, the burden is on the defendant herein to establish her case that parties had “agreed to act on an assumed state of facts” even though the facts were untrue, ie the Receipt Clauses be included when purchase price had not been fully paid.  I do not agree with Mr Ho’s submission that the signatures appended to the Documents themselves constituted sufficient proof. The operation of doctrine allows “an assumed state of facts” to form the basis of an agreement and the truth of it becomes irrelevant so far as parties have agreed to act upon it.  It calls for evidence from the party relying on the doctrine to prove that there was such an agreement.   I am also of the view that this court is entitled to examine such evidence to see whether parties had “agreed to act upon an assumed state of facts” notwithstanding the apparent execution of the Documents.

15.The evidence of the defendant was that the Receipt Clause in the Assignment reflected the truth because by that time full payment had already been made.  I am of the view that, in that case, she did not have to rely on the operation of doctrine.  It was just a matter of fact for this court to decide, ie whether purchase price had been fully paid.  As to the inclusion of the Receipt Clause in the Memorandum, the defendant gave no evidence on what the agreement was.  She made no discernable explanation as to why it was there when it did not reflect the truth and why she and the plaintiff had agreed to include the clause to acknowledge receipt of full payment.   She herself had not acted upon the Receipt Clauses in the sense that she continued to pay after execution of the Documents.   In such circumstances, I am of the view that there was no evidence from the defendant that parties had agreed to act on an assumed state of facts even though it was no true.

16.The evidence from the plaintiff was that he was not aware of the Receipt Clauses and had never intended the same to be included and to take effect as such.  The evidence of the defendant’s own witness in this regard was that the Receipt Clauses were not explained to them by the lawyer and this supported the evidence of the plaintiff.  It was on this basis I found that the plaintiff had no intention to include the Receipt Clauses in the Documents.   In the circumstances, the conclusion I made was that the defendant had not proved that the parties had in the first place “agreed to act on an assumed state of facts” and therefore ought not be allowed to seek relief under the doctrine.

17.As I do not agree with Mr Ho that it was for the plaintiff to prove the vitiating factors, the pleading point taken by him could not stand.

18.The application for leave is made under section 63 of the District Court Ordinance.  Section 63A provides that:-

(1)   Leave to appeal granted under section 63 may be granted-

(a)   in respect of a particular issue arising out of the judgment, order or decision; and

(b)   subject to such conditions as the judge, the master or the Court of Appeal hearing the application for leave considers necessary in order to secure the just, expeditious and economical disposal of the appeal.

(2)   Leave to appeal shall not be granted unless the judge, the master or the Court of Appeal hearing the application for leave is satisfied that-

(a)   the appeal has a reasonable prospect of success; or

(b)   there is some other reason in the interests of justice why the appeal should be heard.

19.I have already given reasons for my findings and decision in the Judgment and for reasons given in the above, I am not satisfied that the appeal has a reasonable prospect of success.  The defendant’s application for leave to appeal is therefore dismissed.

20.As mentioned, the defendant has also asked for stay of execution.  As her application for leave to appeal is now dismissed, I see no reason for her application for stay of execution to be allowed.  

Costs

21.Costs of these applications (time extension, leave to appeal and stay of execution) be to the plaintiff to be taxed if not agreed with counsel certificate.

Mr Tim Wong, instructed by Leung, Tam & Wong, for the plaintiff

Mr Leon Ho, instructed by Philip KY Lee & Co, for the defendant