China Citic Bank International Ltd Formerly Known As Citic Bank International Formerly Known As Citic Ka Wah Bank Ltd v. Li Yan Hung and Others

HCMP 2208/2019

[2023] HKCFI 2978

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2208 OF 2019

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J U D G M E N T

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A.  INTRODUCTION

1.This is the appeal by the 2^nd third party, Messrs George Y C Mok & Co (the “Firm”) by way of its Notice of Appeal dated 23 March 2023 (as amended at the hearing) against the Order of Master KW Wong (“Master”) dated 10 March 2023 (as amended) (“Order”), allowing the plaintiff’s application by its Summons dated 25 October 2022 (as amended on 10 March 2023) (“P’s Summons”) for retrospective leave to issue a Third Party Notice dated 17 February 2023 against the Firm (“TPN”) in respect of the 1^st defendant’s counterclaim.

2.In the main action between the plaintiff and the defendants (“Main Action”): (i) the plaintiff seeks to enforce a mortgage dated 16 October 2009 over the Property registered in the 1^st defendant’s name (the “Mortgage”) upon the 2^nd defendant’s default in repaying its secured indebtedness; and (ii) the 1^st defendant counterclaims for various reliefs on the purported basis that (inter alia) her son (“Son”) has a beneficial interest in the mortgaged property under a Declaration of Trust (“DT”) which binds the plaintiff, and that the Mortgage should be set aside/rescinded by reason of non est factum, misrepresentation and/or undue influence.

3.By the intended third party proceedings, the plaintiff seeks an indemnity and damages against the Firm on the purported basis that the Firm breached its contractual/tortious duty of care owed to the plaintiff insofar as: (i) the Firm prepared the DT for the 1^st defendant’s execution (“DT Claim”); and (ii) the 1^st defendant is able to vitiate the Mortgage in the Main Action for reasons attributable to the Firm (“Li Claim”). The plaintiff also seeks a determination of various issues (“Issues”) relating to these third party claims (“TP Claims”).

4.The 1^st defendant has previously commenced third party proceedings against the Firm as well. By this court’s decision in China Citic Bank International Limited v Li Yan Hung & Ors [2022] HKCFI 354 (overturning a decision also made by the Master), such proceedings were struck out on the basis that (i) the 1^st defendant’s intended third party claims against the Firm, which (like the TP Claims) were based on events taking place in 2009, were all time-barred; and (ii) in any event, none of these claims fell within any of the limbs under Order 16, rule 1(1) of the Rules of the High Court, Cap 4A (“RHC”).

5.In summary, the Firm’s position is that the Order should be set aside by reason that:

(1)  First, granting leave to the plaintiff to issue the TPN would enable the plaintiff to abuse the court process, for the plaintiff has already commenced a writ action against the Firm in HCA 27/2023 (which remains extant) based on the same causes of action as those stated in the TPN: see Section D below.

(2)  Second, in any event, the TP Claims are all frivolous, obviously unsustainable and are bound to fail, in that:

(a)  As regards the DT Claim: (i) the intended contractual claim is clearly time-barred; and (ii) both the intended contractual claim and the intended claim in tort are plainly unarguable for want of actionable loss/damage (in that the DT is not registered and does not have priority over the Mortgage): see Section E1 below; and

(b)  As regards the Li Claim, it is based on the 1^st defendant’s assertions against the Firm which are wholly incredible and unarguable even on her own evidence and the undisputed contemporaneous documents before the court: see Section E2 below.

(3)  Third and in any event, the plaintiff has failed to demonstrate a prima facie case that the TP Claims fall within any of the three limbs of Order 16, rule 1(1) RHC which permit the issuance of third party notices: see Section F below.

B.  RELEVANT FACTUAL BACKGROUND

6.The following undisputed factual background is extracted from the Skeleton Submissions of the Firm.

B1.  The Main Action

7.The Main Action arises out of the plaintiff’s enforcement of a tripartite legal charge/mortgage (ie the Mortgage) over a property in Yuen Long (the “Property”).

8.On the plaintiff’s pleaded case (insofar as relevant to the TP Claims):

(1)  The plaintiff is a bank and a licensed money lender, and since around August 2007 had extended banking facilities to the 2^nd defendant, which was its corporate customer at the material times.

(2)  By a facility letter dated 24 August 2009 (“Facility Letter”) accepted by the defendants, the plaintiff offered banking facilities (“Facilities”) to the 2^nd defendant, secured by, inter alia, the Mortgage executed in the plaintiff’s favour by the 1^st defendant, the registered owner of the Property.

(3)  On around 16 October 2009, the 1^st defendant executed the Mortgage to secure the 2^nd defendant’s indebtedness to the plaintiff under the Facilities (“Indebtedness”). Under the terms of the Mortgage, the 1^st defendant was liable (jointly and severally with the 2^nd defendant) to the plaintiff for the repayment of the Indebtedness.

(4)  In late September 2019, the 2^nd defendant defaulted on its repayment obligations and the plaintiff demanded payment of the outstanding Indebtedness from, inter alios, the 1^st defendant, who failed to comply with the demand.

(5)  By reason of the aforesaid, the plaintiff claims, inter alia, against the 1^st defendant for vacant possession of the Property and repayment of the outstanding indebtedness pursuant to the terms of the Mortgage.

9.On the 1^st defendant’s pleaded case (insofar as relevant to the TP Claims):

(1)  the 1^st defendant is the former co-habitee of Mr Suen Ming Kuen (“Suen”), the sole shareholder and director of the 2^nd defendant.

(2)  On 1 November 2005, the 1^st defendant gave birth to Son, whose natural father was Suen.

(3)  In around 2008, Suen suggested to the 1^st defendant that he would purchase a property in Hong Kong as a residence for the 1^st defendant and Son, and that he would pay for the purchase and repay all mortgage loans such that the 1^st defendant would not be liable to pay anything.

(4)  In early 2009, Suen told the 1^st defendant that the Property had already been purchased in the 2^nd defendant’s name, and that he would arrange for the transfer of the Property to the 1^st defendant for her to hold on trust for Son until he turned 18 years old, at which point the 1^st defendant would transfer the Property to Son (“Trust Arrangement”).

(5)  On 12 October 2009, the 1^st defendant attended the Firm’s office on Suen’s arrangement to execute certain documents which, according to Suen, would affect the transfer of the Property to her in accordance with the Trust Arrangement. At the Firm’s office:

(a)  Suen and/or the Firm’s staff represented to the 1^st defendant (“Alleged Misrepresentation”) that she should execute the documents presented to her and that the effect of those documents was to transfer the Property to the 1^st defendant to be held on trust for Son, in line with the Trust Arrangement.

(b)  The Firm’s staff did not explain the contents, nature or effects of the documents presented to her for execution (“Documents”), which included the Mortgage and the Facility Letter.

(c)  Accordingly, the 1^st defendant signed the Documents without knowing their nature, contents or effect.

(d)  The 1^st defendant also signed the DT pursuant to the Trust Arrangement.

(6)  By reason of the aforesaid, the 1^st defendant counterclaims against the plaintiff for, inter alia:

(a)  A declaration that the plaintiff’s rights under the Mortgage are subject to Son’s beneficial interests in the Property;

(b)  A declaration that the Mortgage is rescinded and/or set aside on the basis of (i) non est factum, (ii) Suen’s undue influence over the 1^st defendant, of which the plaintiff had constructive notice via the Firm, and (iii) the Alleged Misrepresentation on the part of Suen and/or the Firm as the plaintiff’s agent; and

(c)  Damages in the event that the Mortgage is binding and enforceable against the 1^st defendant.

B2.  The plaintiff’s intended third party action

10.On 25 October 2022, the plaintiff took out P’s Summons to seek leave to issue its own third party proceedings against the Firm in respect of the 1^st defendant’s counterclaim, claiming an indemnity and damages on the purported basis that:

(1)  At the material times, the Firm was retained by the plaintiff to perfect the security offered and provided under the Mortgage: TPN Ground 2 (“Retainer”);

(2)  It was an implied term under the Retainer (or alternatively, a tortious duty) that the Firm would exercise reasonable skill and care in performing its duties: TPN Ground 3;

(3)  Insofar as the Firm prepared the DT and supplied the same to the 1^st defendant for execution, the Firm breached its duty of care under the Retainer (or alternatively, acted negligently): TPN Ground 5; and

(4)  Insofar as the 1^st defendant is able to establish her pleaded case of non est factum, undue influence or misrepresentation attributable to the Firm, the Firm breached its duty of care under the Retainer (or alternatively, acted negligently): TPN Ground 6.

B3.  The plaintiff’s extant writ action against the Firm in HCA 27/2023

11.On 13 January 2023, the plaintiff issued a generally indorsed writ against the Firm in HCA 27/2023, invoking completely identical causes of action to those stated in the TPN, namely:

(1)  A breach of an implied duty of care under the Retainer to perfect the security offered and provided under the Mortgage;

(2)  An alternative claim for negligence; and

(3)  A claim for indemnity against any claims brought by (inter alios) the 1^st defendant against the plaintiff in respect of the validity of the Mortgage.

C.  RELEVANT PRINCIPLES ON LEAVE TO ISSUE THIRD PARTY PROCEEDINGS

12.Under Order 16, rule 2 RHC, the court has a general discretion in deciding whether to allow a third party notice to be issued.

13.At the leave stage, where it can be shown that the intended third party claims are bound to fail such that granting leave serves no useful purposes, the court should take that into consideration in the discretionary exercise: Chinacast Education Corp v Chan Tze Ngon, HCA 1062/2012 (unrep, 9/10/2014) at §8 (Mr Registrar KW Lung).

14.The court may therefore refuse to grant leave on the basis that the intended third party claims are frivolous.

15.In determining whether a third party claim is bound to fail (or frivolous), the relevant principles in a strike-out application are instructive and should be applied. In this regard, where it is plain and obvious that the plaintiff’s case has no factual basis, has no “solid basis capable of proof”, and is a “myth” with “no substantial foundation”, the court may exercise its power to strike out. Thus, if a plaintiff pleads as a fact something which can clearly be shown to be “incontrovertibly false”, then on an application to strike out the court is not bound to accept the allegation as true and to proceed on a fictional basis: Lam Kit Sing v Chungshan Commercial Association, Hong Kong, HCA 2011/2014 (unrep, 29/06/2016) at §18 (G Lam J, as he then was).

16.Here, the Firm submits that the plaintiff’s third party claims against the Firm are based on allegations by the 1^st defendant, which have no factual foundation.

D.  WHETHER ISSUE OF THE TPN WOULD BE AN ABUSE OF PROCESS OF THE COURT

17.The Firm submits it is an abuse of court process to bring two actions in respect of the same cause of action and the subsequent action is liable to be struck out: see Buckland v Palmer [1984] 1 WLR 1109 at 1115 (Sir John Donaldson MR); Weng Chi-Cheong v Barclays Capital Asia Limited, HCA 741/2016 (unrep, 6/12/2016) at §59 (DHCJ Marlene Ng, as she then was).

18.The rationale is: (i) to avoid any possibility of two courts reaching inconsistent decisions on the same issue; and (ii) the public interest in there being finality in litigation and in protecting citizens from being vexed more than once.

19.The plaintiff does not dispute the above general principles. However, the plaintiff asks the court to note that the writ in HCA 27/2023 has not been served, and it was issued solely for the purpose of protecting and safeguarding the plaintiff’s position on time limitation concerns.

20.The plaintiff refers to Kwok Chin Wing v GFT Holdings Ltd, HCA 2332/2004 (unrep, 19/04/2007), where Burrell J dealt with an application for joinder of a party, with consequential amendments to the claim. There, the plaintiff issued several protective writs pending the outcome of the joinder application. Similar to the present case, a complaint of abuse of process was made against the plaintiff. The learned Judge did not agree, and allowed the application for joinder. He stated this at §23 of his Decision:

“23. This complaint arises out of the fact that, at present, the plaintiff is pursuing concurrent actions against Chan, firstly by this application to join and, secondly by the filing of the protective writ naming him as a defendant. Given the fact that it is obvious that the protective writ will not proceed if this application succeeds and given also the fact that the plaintiff has affirmed that there will be no application to consolidate, I am satisfied that there neither is nor will be any abuse of process.”

21.During the hearing, I enquired with the plaintiff whether it was prepared to give a similar affirmation. After taking instructions, the plaintiff’s counsel informed the court that the plaintiff offered to give the following undertaking to the court:

“Subject to the present appeal being dismissed and there being no further appeal from the decision of the court within the prescribed time, alternatively that any further appeal be dismissed, the plaintiff undertakes to discontinue HCA 27/2023 forthwith.”

22.With such an undertaking having been given by the plaintiff, I am satisfied that there is no abuse of process by the plaintiff.

E.  WHETHER TP CLAIMS ARE ALL FRIVOLOUS AND BOUND TO FAIL IN ANY EVENT

23.As can be seen from paragraph 10 above, the basis of the TP Claims is two-fold, namely the Firm’s alleged breach of duty of care in: (i) preparing the DT (ie the DT Claim); and (ii) its handling of the execution of the Mortgage as alleged by the 1^st defendant (ie the Li Claim). The Firm submits that neither basis is supportable and P’s Summons should be dismissed on the ground that the TP Claims are all frivolous and bound to fail.

E1.  The DT Claim

E1.1  Whether the intended contractual claim for breach of duty is time-barred

24.A claim for breach of contract accrues at the time of breach: McGee on Limitation Periods (9^th edn; 2022) at §10.002. The applicable limitation period for a contractual claim is 6 years: Limitation Ordinance, Cap 347 section 4. It follows that a breach of contract claim is time-barred upon the expiry of 6 years since the date of breach.

25.In the instant case, the DT Claim is partly based on an alleged breach of implied term under the Retainer: TPN Ground 5. The Firm submits that such contractual claim is obviously prima facie time-barred, in that:

(1)  The claim was premised upon the Firm’s preparation of the DT and provision of the same for the 1^st defendant’s execution: TPN Ground 5.

(2)  There is no dispute that, insofar as the DT was in fact executed, such execution took place either on 12 October 2009 (as the 1^st defendant alleges) or on 22 October 2009 (as the Firm alleges).

(3)  It follows that any contractual breach by the Firm would have occurred in October 2009, and the limitation period for the plaintiff’s contractual claims against the Firm would have expired by October 2015.

26.To counter the Firm’s argument on limitation, the plaintiff seeks to rely on section 26(1) of the Limitation Ordinance, insofar as it relates to the deliberate concealment from the plaintiff of the fact that the DT was prepared and executed, in which case the period of limitation shall not begin to run until the plaintiff has discovered the concealment or could with reasonable diligence have discovered it.

27.In this regard, the Firm submits that such reliance was misplaced:

(1)  To invoke this provision, the plaintiff must prove that some fact relevant to its right of action has been concealed from it either by a positive act of concealment or by any withholding of relevant information, but in either case, with the intention of concealing the fact or facts in question. It is necessary for the plaintiff to prove that there was a conscious decision on the part of the Firm to conceal or withhold the relevant information.

(2)  The Firm goes on to submit that the plaintiff’s contentions on deliberate concealment are a complete non-starter, for there is no evidence suggesting that the Firm made a conscious decision to conceal or withhold the DT from the plaintiff. In particular, even taking the plaintiff’s evidence to its highest, it was the 1^st defendant and Suen who intended to do so. This does not assist the plaintiff at all where there is no evidence that the Firm somehow shared this intention.

28.I do not agree with the Firm’s submissions.

29.As pointed out by the plaintiff, it is not disputed that the DT was prepared by the Firm on the insistence of the 1^st defendant and Suen and was deliberately withheld and concealed from the plaintiff as the 1^st defendant and Suen did not want the plaintiff, as well as Suen’s wife and family, to know about it.

30.The firm argues that there is no evidence suggesting that the Firm made a conscious decision to conceal or withhold the DT from the plaintiff. I do not agree. Quite to the contrary, the decision to conceal has been apparent from the facts which are not capable of dispute. It might have been the 1^st defendant and Suen (and not the Firm) who wished to conceal the DT from the plaintiff, but the Firm had clearly assisted in carrying out that wish by not registering the DT at the Land Registry, thus concealing the same from the plaintiff.

E1.2  Intended contractual and tortious claims are plainly unarguable as there can be no actionable loss on the part of the plaintiff

31.At common law, a breach of duty of care is only actionable where the claimant has suffered damage: Clerk and Lindsell on Tort (23^rd edn; 2020) at §7-07.

32.In the present case, insofar as the DT Claim is based on the Firm’s alleged negligence in tort (TPN Ground 5), this claim is bound to fail in that the plaintiff could not possibly have suffered any loss as a result of the execution of the DT. In particular, the Firm submits that:

(1)  By virtue of section 3(2) of the Land Registration Ordinance, Cap 128 (“LRO”), any unregistered “instruments in writing” are null and void for all intents and purposes as against any subsequent bona fide purchaser or mortgagee for valuable consideration.

(2)  A written declaration of trust over landed interests is registrable under the LRO and a failure to register the same would attract the consequences under section 3(2): Chu Yam On & Anor v Li Tam Toi Hing (1956) 40 HKLR 250 at 257 (Lord Somervell).

(3)  No notice of any prior unregistered instrument (whether actual or constructive) shall affect the priority of a duly registered instrument: LRO section 4. Thus, a lack of bona fides for the purpose of LRO section 3(2) cannot be established merely by notice of a prior unregistered instrument: Keep Point Development Ltd v Chan Chi Yim & Ors [2000] 2 HKLRD 145 at 152D-F (DHCJ Woolley).

(4)  Here, even if the Mortgage was executed after the DT, it is incontrovertible that the Mortgage has priority over the DT under LRO section 3(2) and that the plaintiff is accordingly not bound by the Son’s alleged beneficial interest under the DT:

(a)  First, the Mortgage was duly registered whereas the DT, despite being registrable under the LRO, has never been registered.

(b)  Second, the plaintiff is and was plainly a mortgagee for valuable consideration by reason of the Facilities provided to the 2^nd defendant.

(c)  Third, the 1^st defendant has not pleaded any case of mala fides as the basis for binding the plaintiff to the DT. Although the 1^st defendant contends that the plaintiff had actual/constructive notice of the Son’s alleged beneficial interest, this (even if proved) does not itself demonstrate a lack of bona fides, and there is no discernible basis for suggesting otherwise. It is not open for the plaintiff to argue that the facts of this case went beyond having actual or constructive notice when no such case of bad faith is pleaded by the 1^st defendant at all. It follows that the only available finding in this regard is that the plaintiff acted bona fide at the material time.

(d)  Accordingly, the plaintiff is and was a bona fide mortgagee for valuable consideration and by virtue of LRO section 3(2), took the Mortgage free of Son’s alleged beneficial interests under the DT.

33.Further, given the plaintiff could not possibly have suffered any loss by reason of the DT and the plaintiff is only seeking reliefs by way of an indemnity and damages for “any loss suffered” via its contractual claims, such contractual claims are equally unarguable even when they are not time-barred as held above.

34.In purported answer to the point, the plaintiff indeed argues that the circumstances of the present case were that, if the 1^st defendant’s case is established, it would be a situation that exceeded a mere question of actual or constructive notice, as the preparation of the DT “was part of the same set of manoeuvres by the same firm, who undoubtedly was acting as an agent of the plaintiff under the retainer”.

35.With respect, the plaintiff’s contention must be rejected. The Firm was only the agent of the plaintiff for the purpose of preparing the Mortgage, not for the DT. Indeed, the whole point of not registering the DT at the Land Registry was to prevent the plaintiff from having knowledge of the DT.

36.Further, the plaintiff simply has no answer to the point that a lack of bona fides on the part of the plaintiff has not been pleaded by the 1^st defendant.

37.In the premises, even if the Firm breached its contractual or tortious duty of care to the plaintiff in preparing the DT for the 1^st defendant’s execution, the plaintiff could not possibly have sustained any loss as a result of the DT. It follows that the DT Claim is wholly unarguable for want of loss.

E2.  The Li Claim

38.The Li Claim is contingent upon the 1^st defendant successfully rescinding the Mortgage in the Main Action on the ground of non est factum, undue influence, and/or misrepresentation: TPN Ground 6.

39.This rescission claim is in turn premised upon the 1^st defendant’s assertion that she did not understand the nature, content and effect of the Mortgage at the time of execution (the “Premise”).

40.The Firm submits that the Li Claim is frivolous and bound to fail by reason that the Premise is wholly incredible and could not possibly succeed in light of (i) the indisputable contemporaneous evidence; (ii) the 1^st defendant’s own evidence; and (iii) the 1^st defendant’s giving of incontrovertibly false evidence.[1]

41.First, the Premise is flatly contradicted by contemporaneous evidence which shows that the 1^st defendant knew full well the nature and effect of the Mortgage. In particular:

(1)  It is undisputed that prior to the execution of the Mortgage, the 1^st defendant signed a confirmation letter (“Confirmation Letter”) in the presence of a former solicitor of the Firm.

(2)  The Confirmation Letter recorded in Chinese (which the 1^st defendant is able to read) as well as English that she clearly understood “all the terms and legal consequences of the Mortgage … in favour of [the plaintiff] and the consequential legal obligations and liabilities on our part therefrom” (我們清楚明白有關我們簽立上述惠及承按人之合法押記的所有條文及其法律後果與及該合法押記對我們所產生的所有法律責任及債務).

(3)  When being confronted with the Confirmation Letter, the 1^st defendant explained that it “may have been among the Documents, so I probably would not have had the opportunity to know that it was there”. This is wholly incredible and contradicted by the undisputed fact that the 1^st defendant could read Chinese and did place her signature on the Confirmation Letter (so she must have known at the time that it was among the Documents signed).

42.Second, the Premise is further destroyed by the 1^st defendant’s own evidence:

(1)  On the 1^st defendant’s own case, the Firm subsequently provided her with all the Documents on 10 November 2014 and those documents were then explained to her, whereupon she came to realise that the Documents contained a mortgage of the Property in which she was the mortgagor, as security of the 2^nd defendant’s loans from the plaintiff. Indeed, the attendance notes taken by the Firm on 31 October 2014 show that the 1^st defendant requested to “redeem” the Property from the plaintiff as the “Lender”, which indicates the 1^st defendant’s contemporaneous knowledge that the Documents concerned a mortgage of the Property. As held by this court in China Citic Bank International Limited v Li Yan Hung (Supra) at §52(2), the 1^st defendant “clearly could and did in fact find out about the nature of the Documents in November 2014”.

(2)  If the Premise were true, it would be wholly incredible that the 1^st defendant made no complaints at the time (whether to the plaintiff or the Firm) but only sought to make claims against the Firm many years thereafter in December 2020. Notably, the 1^st defendant’s evidence contains no explanation in this regard. This shows that there is nothing whatsoever in the Premise.

43.Third, the Premise is plainly incredible in light of the incontrovertibly false evidence which the 1^st defendant has given on the issue. Notably:

(1)  The 1^st defendant asserted in her affidavit evidence that she “had never thought that the Documents related to a bank mortgage” and that she “would never have executed the Documents had she known their purpose was to secure Suen’s business loans”. This assertion runs contrary to the Confirmation Letter, which described in Chinese as well as English that the 1^st defendant was the “mortgagor” (按揭人) of the Property; (ii) the Mortgage was executed in favour of the plaintiff as the “mortgagee” (承按人); (iii) the 2^nd defendant was the “borrower” (借款人) under the Mortgage; and (iv) the 1^st defendant understood all the terms and legal consequences of the “Mortgage” (押記).

(2)  Moreover, the 1^st defendant asserted that she did not understand the nature of the Documents because they were all in English. However, the Confirmation Letter indisputably sets out the nature of the Mortgage in Chinese.

44.Looking at the totality of the evidence and cumulatively, in particular, evidence which is either undisputed or indisputable, the above matters put beyond doubt that the Premise is without substantial foundation and incapable of proof. I agree that on this basis, the Li Claim is frivolous and bound to fail. The plaintiff cannot be allowed to rely on the 1^st defendant’s fictitious allegations which have no evidentiary foundation to commence third party proceedings against the Firm.

45.The plaintiff’s answer to this analysis is that the court should not resolve issues of fact summarily, instead, all the factual issues will need to be resolved properly at a trial (see §§57-58 of the Plaintiff’s Submissions). I agree with the Firm that this is legally wrong as the court plainly has the power to do so in a case where the Li Claim is wholly incredible and unfit for trial, as discussed in paragraphs 12 to 16 above.

F.  NO PRIMA FACIE CASE UNDER ORDER 16, RULE 1(1) RHC

46.In view of my findings made in Sections E1.2 and E2 above, it is strictly speaking not necessary for this court to make a determination on the issues raised in Section F of the Skeleton Submissions of the Firm.

47.However, for the sake of completeness, I shall briefly give my views on the submissions of the Firm in that regard.

48.The Firm submits that P’s Summons ought to be dismissed in any event because the plaintiff has not shown a prima facie case that the TP Claims fall within any of the three limbs under Order 16, rule 1(1) RHC.

49.In particular, the Firm submits that the plaintiff has no enforceable right to indemnity (whether under the Retainer or otherwise) and so cannot avail of rule 1(1)(a).

50.A right to indemnity may arise by contract, statute or implication of law.

51.As to a contractual right to indemnity, generally a promise is not binding as a contract unless it is either made in a deed or supported by consideration: Chitty on Contracts (34^th edn; Vol 1) at §6-001.

52.The consideration for a promise must be given in return for the promise, such that: (i) an act which has already been done before (and independently of) the giving of the promise does not in law amount to good consideration for that promise; and (ii) the consideration must move from the promisee: Chitty at §§6-029, 6-040.

53.In the instant case, the only conceivable basis for the plaintiff to seek an indemnity against the Firm is the indemnity clause contained in clause 18 of the Retainer, which purports to confer a right to indemnity in the event that the Firm “committed any mistake(s) in preparing or completing the mortgage document(s) or in approving title”.

54.The Firm submits that nevertheless, this clause does not assist the plaintiff because it is indisputably non-contractual and unenforceable for want of consideration:

(1)  The Retainer was not a deed. Thus, for the indemnity clause to have contractual effect, it must be supported by consideration moving from the plaintiff.

(2)  The indemnity clause is unsupported by such consideration, for it is undisputed that the Firm did not receive any remuneration from the plaintiff under the Retainer.

(3)  That the Firm was placed on the plaintiff’s list of approved solicitors’ firms for preparing and executing mortgages does not assist, for this had plainly happened before the Retainer was agreed in 2009 and was therefore past consideration which was legally invalid.

(4)  Accordingly, clause 18 of the Retainer is obviously non-contractual and does not give rise to any enforceable right to indemnity.

55.I do not agree with the Firm’s submissions.

56.Although there was no payment from the plaintiff, the fees for preparing the Mortgage was paid by Suen/the 2^nd defendant pursuant to a clause in the Facility Letter providing that:

“5.2 Cost Indemnity: The Borrower shall indemnify the Bank against all costs and expenses (including the legal fees on a full indemnity basis) incurred by the Bank in connection with the Facilities, including all costs and expenses incurred by the Bank as a result of:

…

(b) the preparation, execution or amendment of any documents in connection with the Facilities or any security or guarantee in relation to the Facilities; …”

57.Thus understood, the fact of the plaintiff engaging the Firm on the Retainer (which the plaintiff was not legally bound to do) in return for the promise by the Firm to undertake the preparation of the Mortgage, would in my view be sufficient consideration moving from the plaintiff in the circumstances.

G.  CONCLUSION

58.For the reasons set out in Sections E1.2 and E2 above, I would allow the Firm’s appeal and make the following order:

(1)  the Order be set aside; and

(2)  P’s Summons be dismissed.

59.At the hearing, the parties agreed that costs should follow the event. Accordingly, I make the following order as to costs:

(1)  the costs of P’s Summons and all costs of and occasioned by the TPN be paid by the plaintiff to the 2^nd third party, with certificate for two counsel; and

(2)  the costs of this appeal be paid by the plaintiff to the 2^nd third party, with certificate for two counsel.

60.Lastly, I express my gratitude to counsel on both sides for their helpful assistance in this matter.

Mr Joseph Vaughan, instructed by Messrs S K Wong & Co, for the plaintiff

Ms Sara Tong, SC, leading Mr Cedric Yeung, instructed by Messrs P C Woo & Co, for the 2^nd third party