Mok Mei Ling Rekei v. Lau Muk Fat

CACV 339/2019

[2021] HKCA 706

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 339 OF 2019

(ON APPEAL FROM HCMP NO 944 OF 2018)

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BETWEEN

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Before:  Hon Cheung, Au JJA and Lisa Wong J in Court

Date of Hearing:  15 May 2020

Date of Judgment:  14 May 2021

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J U D G M E N T

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Hon Au JA (giving the Judgment of the Court):

A.  INTRODUCTION

1.This is the defendant’s appeal against the judgment of Recorder Linda Chan SC (as she then was) (“the Judge”) dated 28 June 2019 (“the Judgment”) as respects an Originating Summons (“OS”) taken out by the plaintiff dated 25 June 2018.

2.Essentially, by the OS, the plaintiff applied to have the defendant withdraw (or the Court vacate) the registration of three instruments lodged by the defendant with the Land Registry against nine lots of land in the New Territories (collectively, “the 9 Lots”).[1] Those three instruments (“the 3 Instruments”) are:

(1)  A Memorandum of Notice dated 16 May 2013 (“2013 Memorandum”) submitted on 24 May 2013, which, prior to the Judgment, had been withheld by the Land Registry from registration;

(2)  A sealed copy of the Amended Writ of Summons in HCA 1879/2011 (“2011 Action”) dated 23 March 2012 (“2011 Writ”) submitted on 24 October 2016, which, prior to the Judgment, had been withheld by the Land Registry from registration; and

(3)  A sealed copy of the Writ of Summons in HCA 1006/2017 (“2017 Action”) dated 26 April 2017 (“2017 Writ”) submitted on 28 April 2017, which, prior to the Judgment, had been registered in the Land Registry against the 9 Lots.

3.In the Judgment, the Judge found, amongst others, that the 2013 Memorandum and the 2011 Writ were not registrable instruments under the Land Registration Ordinance (Cap 128) (“the LRO”), and that the 2017 Writ had not been prosecuted bona fide.  Accordingly, the Judge ordered that, as against the 9 Lots, the defendant do (a) withdraw the 2013 Memorandum and the 2011 Writ from registration and (b) vacate the registration of the 2017 Writ.

4.In this appeal, the defendant advances seven grounds of appeal identifying various errors of fact or law which he claims the Judge has made.  We however note that Mr Kenneth Chan (together with Mr Billy Ma) for the defendant confirmed (rightly so) at the hearing that the defendant was no longer seeking to contend that the 2013 Memorandum was a registrable instrument.  In other words, as we understand it, the defendant has accepted that the 2013 Memorandum cannot be registered and thus would not seek to set aside the part of the Judgment where the Judge ordered the withdrawal of the registration of the 2013 Memorandum.

5.Before we consider the merits of the appeal, it is important to set out the relevant background as follows to put the matter in proper context.

B.  FACTUAL BACKGROUND

6.The material facts leading to the OS are set out in [4] - [27] of the Judgment.  It suffices for us to summarize below the pertinent parts that are most relevant to this appeal.

7.The defendant is the manager of Lau Shau Wo Tso (劉壽和祖) (“Tso”), which, until 31 August 1995, owned various plots of agricultural land in Demarcation District 258 (“DD 258”), including the 9 Lots.

8.The plaintiff is the wife of Wong Kwok Wa (黃國華) (“Wong”).

9.By a joint venture agreement dated 15 December 1994 (“Development Agreement”) between Tso as owner and Wong as developer, as varied by a supplemental agreement dated 31 August 1995, the parties agreed to jointly develop several plots of land (including the 9 Lots) into small village houses.

10.Pursuant to the Development Agreement:

(1)  Tso shall transfer the relevant land to Wong;

(2)  Wong shall then identify indigenous villagers eligible to apply to the Government for building lots on which to build small village houses.  Tso’s land would be surrendered for new grants of building lots.

(3)  The building lots would be conveyed to these indigenous villagers.

(4)  After houses were constructed on the building lots, Wong and Tso shall split them in a 60:40 ratio.  Furthermore, for every five completed houses built on the lots, Wong would first select his house/lot, followed by Tso, such that three houses/lots would be selected by Wong and two by Tso (“Selection Mechanism”).

11.In the event, a total of 17 small village houses were built on 17 building lots under the Development Agreement, of which:

(1)  6 were allocated to, and are presently owned by, Tso (“6 Houses/Lots”);

(2)  9 are situated at the 9 Lots (“9 Houses/Lots”); and

(3)  2 are situated at 2 lots in Section B and Section C of Lot No 85 in DD 258 (“2 Houses/Lots”).

12.Tso was dissatisfied with Wong’s performance of the Development Agreement.  Pertinent to this appeal is Tso’s complaint that (a) Wong had failed to select 9 houses from the 11 unallocated houses/lots (comprising the 9 Houses/Lots and the 2 Houses/Lots) (“11 Unallocated Houses/Lots”) as per the Selection Mechanism, and that (b) for the two remaining houses, Tso should have been given 40% interest as per the Development Agreement.

13.By way of an overview, the defendant (acting for and on behalf of Tso) brought numerous actions against various individuals (including Wong in all instances) to ventilate Tso’s complaints, including the 2011 Action, the 2017 Action, and the 2019 Action (as defined in [24] below).

14.On 3 November 2011, the defendant commenced the 2011 Action against Wong and certain indigenous villagers who were then the registered owners of land transferred away by Tso under the Development Agreement, but which was in the event undeveloped.  It is noteworthy that these villagers are unconnected to the 9 Houses/Lots.

15.In the 2011 Writ, the defendant sought various relief, including (a) a decree of specific performance compelling Wong to select 9 Houses/Lots out of the 11 Unallocated Houses/Lots, and (b) a declaration that the defendant was entitled to 2/11 shares of the 11 Unallocated Houses/Lots, and (c) ”an order that there be a charge” in favour of the defendant in respect of the 2/11 shares.

16.On 24 May 2013, the defendant submitted the 2013 Memorandum (stating that Tso was entitled to and did claim against Wong and the registered owners of the 11 Unallocated Houses/Lots for, inter alia, interests therein) for registration in the Land Registry against, inter alia, the 9 Lots, which registration was withheld on 6 June 2013.

17.On 22 June 2015, the defendant lodged the 2011 Writ for registration in the Land Registry against, inter alia, the 9 Lots, which registration was withheld on 16 January 2017.

18.By a sale and purchase agreement dated 21 April 2017 (“SPA”), the registered owners of the 9 Houses/Lots (“the 9 Indigenous Villagers”), who were all indigenous villagers solicited by Wong under the Development Agreement, purported to sell the 9 Lots to the plaintiff at the price of HK$103,500,000.  One other lot was purportedly sold by another indigenous villager to the plaintiff under the SPA, but that need not concern us.

19.On 26 April 2017, the defendant issued the 2017 Writ against (among others) Wong and the 9 Indigenous Villagers.  In the 2017 Writ, the defendant again sought various relief, including (a) a declaration that the defendant was entitled to 40% of the 2/11 shares on all the 11 Unallocated Houses/Lots and (b) a charge/lien over all the 11 Unallocated Houses/Lots for such “proprietary interest”.

20.On 28 April 2017, the 2017 Writ was registered against, inter alia, the 9 Lots.

21.By an assignment dated 6 July 2017 (“Assignment”), the 9 Lots were purportedly assigned by the 9 Indigenous Villagers to the plaintiff in completion of the transaction contemplated under the SPA.

22.It is notable that, when the 2017 Writ was issued (and subsequently registered), the SPA had yet to be registered.  In fact, the SPA was only registered on 25 July 2017, ie about three months after the date of the SPA and the issue of the 2017 Writ.

23.On 12 February 2018, Wong sent a letter to the defendant through his legal representatives (“Selection Letter”), purporting to select 9 Houses/Lots as per the Selection Mechanism.  It is worth setting out the letter in full:

“We refer to the above actions.

We are instructed by our client Wong Kwok Wa (‘Wong’) that in response to the claim of the Plaintiff under prayer (6) of his Amended Statement of Claim filed herein on 23^rd March 2012, Wong hereby selects the following 9 village houses, being Nos 1, 4, 5, 6, 7, 8, 9, 10 and 11 of the Schedule 1 as attached hereto, as his own.

We are further instructed by Wong that after his selection of the 9 village houses as aforesaid, he agrees to share with the Plaintiff the interest and benefit of the remaining 2 village houses, being Nos. 2 and 3 of the Schedule 1, erected on Lot No. 85 Section B, and Lot No. 85 Section C in DD258 in the ratio of 60:40 in that Wong will according to the choice of the Plaintiff either (a) transfer 40% of the ownership in respect of these 2 village houses to the Plaintiff, or alternatively, (b) put these 2 small village houses in the property market for sale and shall, upon completion of such sale and purchase, share and apportion the net proceeds thereof as between Wong and the Plaintiff in the ratio of 60:40. Please therefore take your client’s instructions and revert.

For the avoidance of doubt, nothing herein contained shall prejudice to Wong’s Amended Defence and Counterclaim filed herein.”

24.On 7 May 2019, the defendant brought another new action under HCA 802/2019 (“2019 Action”) against, among others, Wong, the plaintiff and the 9 Indigenous Villagers.  In the statement of claim (“2019 SoC”), the defendant repeated many of the claims raised in the 2011 Writ and the 2017 Writ, but crucially added averments in relation to the SPA and the Assignment (from paragraph 71 onwards).

25.In particular, it was averred that the SPA, the Assignment, and the underlying transactions were in fact “shams” or “fraudulent transactions” created in circumstances involving various wrongs.  It is not necessary to go into the details of the defendant’s pleaded case therein, except to note that the defendant averred that (a) the plaintiff had no interest in the 9 Houses/Lots (paragraph 71(j)(iv)), and (b) the Selection Letter did not constitute a valid selection under the Development Agreement (paragraph 71(i)).  It is also noteworthy that the defendant sought the following relief in the 2019 Action:

(1)  A declaration that the SPA is unlawful, invalid, and to be voided (Prayer (1));

(2)  A declaration that the Assignment is unlawful, invalid, and to be voided (Prayer (2));

(3)  A declaration that the plaintiff does not have legal title or any interest in the 9 Houses/Lots (Prayer (3));

(4)  A declaration that the plaintiff is holding her legal title to the 9 Houses/Lots on resulting and/or constructive trust for the defendant and Wong “as the constructive trustee” (Prayer (4));

(5)  Further and/or alternatively, a declaration that the plaintiff and two others are holding the legal title of the 11 Unallocated Houses/Lots on resulting and/or constructive trust for the defendant and Wong (Prayer (5)); and

(6)  A declaration that the Selection Letter is not a valid or binding selection by Wong under the Development Agreement (Prayer (6)).

26.These prayers for relief should give a flavour of the case that the defendant seeks to advance in the 2019 Action. We should point out that Prayer (3), on the one hand, and Prayers (4) - (5), on the other, are obviously alternative pleas.  That being said, it seems clear that the defendant’s primary position in the 2019 Action is that the plaintiff has no interest in the 9 Houses/Lots. This is evident in 2019 SoC at paragraph 71(j)(iv), where the defendant averred that:

“[the plaintiff] simply has no interest in the [9 Houses/Lots] and hence, she has no locus to institute [the action herein] or to dispose of the same.”

C.  THE JUDGMENT

27.The Judgment divides into the following sections:

(1)  opening paragraphs ([1] - [3]);

(2)  “Background fact” ([4] - [27]);

(3)  “Discussion” ([28] - [30]);

(4)  “Applicable principles” ([31] - [39]);

(5)  “Locus standi” ([40] - [41]);

(6)  “2013 Memorandum” ([42] - [45]);

(7)  “2011 Writ” ([46] - [56]);

(8)  “2017 Writ” ([57] - [65]);

(9)  “Summary determination” ([66]); and

(10)  “Disposition” ([67] - [70]).

28.In the “Background fact” section, the Judge held at [27] that it was impermissible for the defendant to rely on the 2019 Writ and the 2019 SoC at the hearing as they did not form part of the evidence in the proceedings, presumably because those materials had not been exhibited to the parties’ Affirmations.

29.In the “Locus standi” section, the Judge rejected the defendant’s submissions that the plaintiff had no locus to take out the OS as “misconceived”.  Her reasoning was as follows:

(1)  The plaintiff was and had been the registered owner of the 9 Lots since 6 July 2017, and, as such, was a person interested in the 9 Lots against which the 2013 Memorandum, the 2011 Writ, and the 2017 Writ were registered ([40]);

(2)  The defendant’s contention that the SPA and Assignment were sham transactions as they did not represent a genuine sale and purchase of the 9 Lots, but was instead part of an alleged scheme of “fraudulent transactions” to defraud the defendant, was unfounded, in the light of the following matters ([41]):

(a)  It was the defendant’s own case that the 9 Indigenous Villagers never acquired any interest in the 9 Lots;

(b)  It was the defendant’s own case that Wong had the right to choose his share of 9 Houses/Lots out of the 11 Unallocated Houses/Lots.

(c)  Until the commencement of the 2019 Action, the defendant had never sought to set aside the SPA or the Assignment.

(d)  The mere fact that the defendant belatedly commenced the 2019 Action did not change the fact that the plaintiff was the registered owner of the 9 Lots.

30.In the “2011 Writ” and “2017 Writ” sections, in finding that the defendant no longer had any interest in the 9 Lots for the two writs to be lites pendentis, the Judge drew on the fact that Wong had, as a matter of fact, already made a selection of 9 Houses/Lots as per the defendant’s demands thereunder by (a) ”causing the 9 indigenous villagers to enter into the SPA for the purpose of transferring the 9 Lots to the plaintiff, Wong has in effect [selected] the 9 Houses/Lots as his own” or (b) issuing the Selection Letter through his solicitors ([53] - [54], [65]).

31.In the “2017 Writ” section, the Judge concluded that the defendant had not prosecuted the 2017 Writ bona fide in circumstances where ([63]):

(1)  The records maintained by the Land Registry showed that, by the time the 2017 Writ was issued on 26 April 2017, the defendant would have known from a search at the Land Registry that the plaintiff had already entered into the SPA dated 21 April 2017 as respects the 9 Lots because the SPA was registered on 25 April 2017; and

(2)  The defendant chose to issue the 2017 Writ on the date after the SPA was registered, instead of confirming with Wong as to whether the SPA constituted a selection of the 9 Lots by Wong.

D.  THIS APPEAL

D1.  Grounds of appeal

32.As alluded to above, the defendant raises seven grounds of appeal before us.  For present purposes, they may be summarised as follows:

(1)  The Judge erred in accepting the plaintiff’s case that Wong had already made a selection pursuant to the Development Agreement for the following reasons:

(a)  Since Wong’s defence to the 2011 Action was that the Development Agreement was tainted by illegality, it was not open to his wife (ie the plaintiff) to contradict his stance by suggesting that a selection had been made pursuant to the Development Agreement, and further that the selection should be given legal effect in the OS (Ground 1);

(b)  The plaintiff was barred from running the selection case because that case could and should have been (but was not) run in the 2011 Action, and acceptance of the selection case would have had the effect of disposing of the 2011 Action (Ground 2);

(2)  The Judge erred in rejecting the defendant’s claim that the 2011 Writ was a lis pendens affecting interests in the 9 Lots by virtue of the proprietary relief sought thereunder (Ground 3);

(3)  The Judge erred in fact by finding that the SPA was registered on 25 April 2017, when it was in fact registered on 25 July 2017, which error infected the rest of her analysis of the bona fides of the 2017 Writ (Ground 4);

(4)  The Judge erred in rejecting (or not giving sufficient consideration) to the defendant’s claim that, because the SPA and the Assignment were sham and fraudulent transactions, the plaintiff had no locus or authority to take out the OS (Ground 5).

(5)  It was not appropriate for the Judge to resolve such complex legal and factual issues as those arising herein by way of the OS (Ground 6);

(6)  The Judge erred in making a personal costs order against the defendant (Ground 7).

33.Ground 5 is the ground concerning the plaintiff’s locus which relates to the question of whether the OS is properly constituted.  We are of the view that we should consider this ground first as if there are questions about the plaintiff’s locus to bring the application by way of the OS, the Judge’s summary determination of the issues relating to the registration of the 2011 Writ and the 2017 Writ must also be set aside.  We therefore will now turn to consider Ground 5.

D2.   Ground 5 – The plaintiff’s locus

34.It is not disputed before this Court that a party applying to vacate a registered instrument must have the requisite locus. In relation to a lis pendens, the standing requirements are set out in section 20 of the LRO, which provides as follows:

“The application to vacate a lis pendens under section 19 may be in a summary way by petition or motion in court or by summons in chambers, and may be made by any person interested in the property against which the lis pendens has been registered, whether such person is a party to the lis pendens or not.” (emphasis added)

35.In other words, a person seeking to vacate a lis pendens must be interested in the property against which it has been registered.

36.As respects other instruments (including documents pending registration), the Judge held that “the Court may take into account the matters listed in section 20 when considering whether a person has locus to make the application”: Judgment at [37].  There is no quarrel about the correctness of this analysis, and we would proceed on the assumption that it is correct.

37.On the other hand, if there is a triable issue as to whether a plaintiff has the locus or authority to sue, the proper course of action for the Court is to decide that preliminary issue first – at a hearing where viva voce evidence can be taken and tested – before proceeding to consider the substantive claim: see Kammy Town Limited v Super Glory Corporation Limited (unreported, HCA 3524/2003, 14 January 2005), [18] - [19], [21] per Andrew Cheung J (as he then was) on the proper procedure where a person’s authority to sue on behalf of a company is triable.

38.The defendant’s submissions that the plaintiff lacks the necessary locus to take out the OS are in gist these:

(1)  The sole source of the plaintiff’s locus is the SPA and the Assignment, by virtue of which the plaintiff claims to have become the paper or legal owner of the 9 Lots;

(2)  However, the SPA and the assignment are sham transactions with no legal effect.  They are in other words “null and void” and thus do not have the effect of conveying any title to the plaintiff.

(3)  That removes the only source of the plaintiff’s locus, and the OS is therefore misconstituted.

39.In support of his contention that the SPA and the Assignment are shams, counsel for the defendant highlight the following “unusual features” in their submissions[2]:

(1)  Although the SPA was dated 21 April 2017, it was registered only on 25 July 2017.  The date of registration thus falls outside the 1-month period from the date of execution within which the priority date would be backdated to the date of execution under section 5 of the LRO.  This is very unusual in Hong Kong conveyancing practice.

(2)  Although the SPA was dated 21 April 2017, it was submitted to the Stamp Office for stamping only on 12 June 2017.  This exposed the plaintiff to potential late stamping penalty to the tune of millions, which is more unusual still.

(3)  The 9 Lots were assigned to the plaintiff alone for the stated consideration of HK$103.5 million, which consideration was admittedly never paid: see the Judgment at [15].

(4)  The stated consideration was in any event far below the market value of the 9 Lots at the time of the SPA.

(5)  No banks or financial institutions would have been willing to provide financial assistance to the plaintiff to execute the transactions.  Without financial assistance, the plaintiff would not have been able to afford the 9 Lots.

(6)  It is curious that the assignee of the 9 Lots was the plaintiff, instead of Wong himself.

(7)  Wong did not inform Tso of the SPA or the Assignment contemporaneously even though he must have known that Tso was urging Wong to make a selection of land.

(8)  Wong curiously did not mention the SPA or the Assignment in the Selection Letter, and purported to have made the selection for 9 Houses/Lots for the first time therein (which was seven months after the date of the Assignment).

40.In response to some of these features, the plaintiff has in her second affirmation at paragraphs 17 - 28 offered certain explanations.  In light of these prima facie rather unusual features of the transactions and the explanations offered (which involve various factual allegations), we are of the view that they clearly raise at least a triable issue as to whether the SPA and the Assignment are sham transactions not intended to create any legal rights and obligations amongst the parties despite their appearance.  If it transpires that they are, they would be of no legal effect, and thus would not have the effect of transferring any title to the 9 Lots from the 9 Indigenous Villagers to the plaintiff.  It must then follow that the plaintiff would have no interest relating to the 9 Lots, in which case she would have no standing to bring the proceedings below.

41.In this respect, it is first pertinent to note that the Judge in rejecting the sham contentions in the Judgment did not in any way seek to deal with these features against the explanations.

42.Further, in dismissing the defendant’s sham contentions on the bases as summarized at [29] above, we consider that the Judge has fallen into the following errors:

(1)  In light of the contentions raised, the fact that the plaintiff is registered as the owner of the 9 Lots in the Land Registry does not mean that she in fact has any title thereto: cf the Judgment at [40] - [41].  This is so as it is trite that a registration determines priority, not validity, of instruments.  What the Judge should have done was to start with the conveyancing documents that the plaintiff claimed to have given her locus for the OS, and to determine if they indeed had such effects.

(2)  Further, it is unclear how the Judge’s reference to the position that “it was the defendant’s own case that the 9 indigenous villagers never acquired any interest in the 9 Lots”[3] would have assisted the disposal of the sham transactions argument:

(a)  If, by “interest”, the Judge meant to say that the 9 Indigenous Villagers were not even the paper owner of the 9 Lots at the time of the SPA and the Assignment, it ought to have followed that the plaintiff could not have acquired any interest in the 9 Lots from them.  This would have been fatal to any claim of locus by the plaintiff for commencing the proceedings below.

(b)  On the other hand, if the Judge merely meant to say that the 9 Indigenous Villagers were not the beneficial owners of the 9 Lots (but instead held the land on trust for Wong and/or the defendant), the question remained whether the SPA and Assignment were sham transactions.  If they were, they would be legally ineffective and could not have conveyed any interest in the 9 Lots to the plaintiff.

(3)  The fact that it was the defendant’s own case that Wong had the right to choose his share of 9 Houses/Lots out of the 11 Unallocated Houses/Lots is neutral as to whether the SPA and the Assignment are sham transactions.  The thrust of the Judge’s reason appears to be this: if the defendant accepts that Wong has the right to make a selection, and Wong has made a selection through the SPA and the Assignment, what is the problem?  The problem, with respect, is that the defendant was (and still is) challenging the genuineness of that very selection by claiming that the SPA and the Assignment were in fact sham transactions.  The Judge should not have assumed the genuineness of the selection (to defeat the defendant’s contentions to the contrary) when that was the very issue which was being contested and which called for the Judge’s determination.

(4)  The last factor canvassed by the Judge, namely that the defendant had never sought to set aside the SPA or the Assignment until the 2019 Action, is no doubt relevant to the credibility of the defendant’s sham case.  However, that should have been considered alongside the “unusual features” relied upon by the defendant both below and before this Court.  What the Judge should have done, but failed to do, was to consider all these pointers in the round and decide if there was at least a triable issue of sham.

43.In this respect, we should add that, given that there is a triable issue as to whether the SPA and the Assignment are sham transactions, there is also a triable issue as to whether Wong has made any selection of 9 Houses/Lots out of the 11 Unallocated Houses/Lots in accordance with the Development Agreement.  As can be seen in the Judge’s reasoning (the Judgment at [53] - [54], [65]), she relied on two matters to say that he had: (a) the transactions under the SPA and the Assignment, and (b) the Selection Letter.  The defendant’s sham case obviously has a direct bearing on (a), and we understand that, as to (b), the effect of the Selection Letter is a subject of dispute in the 2019 Action: see 2019 SoC at paragraph 71(i).  Whether Wong has made a valid selection in turn impacts on whether the defendant still has any possible claims of proprietary interests in the 9 Houses/Lots.  These are, nevertheless, not issues which we shall resolve on this occasion.  The content of the 2019 SoC (see paragraph 71 and the prayers for relief summarised in [25] above) indicates that those issues are live in the 2019 Action.

44.In their written submissions, Mr Alan Leong SC (leading Mr Alfred Cheng) for the plaintiff submitted that “D’s allegation of sham transaction only aims to confuse, in the hope that one would agree P’s application should not be dealt with summarily”.

45.We do not agree.  As explained above, the sham contentions relate to the prior and fundamental question as to whether the plaintiff has locus to bring the application under the OS.

46.At the hearing, in seeking to address the above observation on the triable nature of the plaintiff’s locus in light of the sham contentions, Mr Leong repeatedly emphasized that the sham issue was a “red herring” because it was irrelevant to the questions of whether the 3 Instruments are registrable. To a certain extent, Mr Leong is obviously right to say the issue of locus did not bear on these substantive questions.  But the question of locus is clearly relevant for the determination of the OS, in that if the plaintiff had no locus to take out the OS, the OS was not properly constituted and the court would have no jurisdiction to deal with those substantive questions[4].

47.Mr Leong also made extensive arguments during the hearing about the defendant’s interests in the 9 Houses/Lots.  The thrust of Mr Leong’s arguments is that there is no conceivable basis on which the defendant could establish a proprietary interest in the 9 Houses/Lots in the 2011 and 2017 Actions, for the following reasons:

(1)  The basis of the defendant’s proprietary claims is the Development Agreement;

(2)  The Development Agreement does not in terms create any property rights in favour of the defendant;

(3)  Rather, all that the Development Agreement does is give the defendant a power to compel Wong to select 9 Houses/Lots out of the 11 Unallocated Houses/Lots;

(4)  Further, the defendant has failed to plead any basis for equity to intervene, so as to sustain their case of an equitable right in rem (such as a trust or a floating charge).

48.Thus, the point is that, taken to its highest, the defendant’s pleaded case in the 2011 and 2017 Actions would only support an in personam claim against Wong, but not the defendant’s claim of proprietary interests in the 9 Houses/Lots.  On that basis, as the argument goes, the 2011 and 2017 Writs must be vacated, for they do not affect the 9 Lots.

49.With respect, although Mr Leong may have a point about the substantive merits of the plaintiff’s application, this is not a matter which we would consider in the present appeal.  The merits of the plaintiff’s application have no bearing on (and should only be considered after) the determination of the preliminary issue of the plaintiff’s locus.  Given our conclusion that the defendant’s locus point is triable, it is inappropriate for this Court to look at and consider the substantive merits of the plaintiff’s application under the OS.

50.In these premises, for the above reasons, we are satisfied that the Judge erred in rejecting the defendant’s contention that the plaintiff had no authority or locus to bring the OS proceedings.  This is a triable issue which should have been (but was not) decided first at a hearing where viva voce evidence can be taken before the OS could be properly disposed of.

51.The appeal should be allowed on this ground alone.

D3.  Two other errors

52.Given our decision to allow the appeal on the sole basis that the OS should and could not be determined in a summary way (as the Judge did) because there is at least triable issue on the plaintiff’s locus to bring the application, it is both inappropriate and unnecessary for us to consider the other grounds of appeal advanced by the defendant.

53.However, we would wish to briefly point out two other errors which the Judge has committed in the Judgment.

54.The first is an error of fact.  The Judge fell into error when she said (the Judgment at [63]) the SPA was registered on 25 April 2017, when it was common ground that it was in fact registered on 25 July 2017[5]. This is a material error, as that formed a crucial basis on which she held the 2017 Writ was not prosecuted bona fide.

55.The second error concerns the defendant’s attempt to refer to and rely on the 2019 Writ and the 2019 SoC in support of his contentions made before the Judge.  The Judge refused to consider them on the basis that they were not part of the evidence before her.  That is incorrect.  As stated at paragraph 4(c) of Practice Direction 10.1 relating to affidavit evidence, court documents need not be exhibited and office copies thereof prove themselves[6]. In the premises, the Judge ought to have allowed the defendant to rely on those court documents at the hearing.

E.  DISPOSITION

56.For the above reasons, we would allow this appeal, set aside the Judgment[7] and remit the OS to the Court of First Instance for trial.

57.Further, given that the locus issue under the OS raises “substantial factual issues which cannot be resolved by affidavits” and will require viva voce evidence for proper determination, it (together with the other issues arising under the OS) should not be resolved by the originating summons procedure[8].

58.Accordingly, we further order the OS to continue as if the cause had begun by writ.  For this purpose, the parties shall seek further directions from the Court of First Instance on the future conduct of the proceedings, including (a) directions on the filing of pleadings and evidence as appropriate, and (b) directions on whether, and if so, how the proceedings should be tried together with the 2019 Action[9].

59.As to the costs of this appeal, there are no reasons why costs should not follow the event.  Thus, we order on a nisi basis that the plaintiff do pay the defendant the costs of this appeal, to be taxed if not agreed, with certificate for two counsel.  Insofar as the costs below is concerned, given that we have remitted the OS back for trial, we believe a fair and just costs order would be costs in the cause of the OS, and we so order on a nisi basis.

Mr Kenneth KL Chan and Mr Billy NP Ma, instructed by Hong Lee & Co, for the appellant (defendant)

Mr Alan KK Leong SC and Mr Alfred CP Cheng, instructed by KB Chau & Co, for the respondent (plaintiff)