The Hong Kong Land Co Ltd v. Sun Hung Kai Properties Ltd

HCA009951/1983

1983, No. 9951

IN THE HIGH COURT OF JUSTICE

BETWEEN

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Coram: Hon. Clough, J.

Date: 10th November 1983

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J U D G M E N T

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Oral Reasons for judgment on Order 14 application

1. I find this a very difficult matter because I come from the branch of the Bar where we often proceeded by originating summons and never claimed to be pleaders. The view I take, in relation to the pleading, with some regret because it was a difficult matter to me, is the "narrow" view.

2. First of all I rely for guidance, as I always do on matters of pleading, on the statement in the current      edition of Bullen & Leake at p.36 where the editor cites the following dictum of Brett L.J. in Philipps v Philipps (1878) 4 QBD 127 at p.133:

"If the parties were held strictly to their pleadings under the present system, they ought not to be allowed to prove at the trial ... any fact which is not stated in the pleadings. Therefore, again, in their pleadings they ought to state every fact upon which they must rely to make out their right or claim."

3. That eitation of Brett L.J., admittedly in 1878 appears nevertheless in the current edition of Bullen & Leake which I regard as a sound guide on these matters.

4. I leave aside for the moment the question of condition precedent which is governed by Order 18 rule 7. I will deal with that in a moment and I assume for the moment this is not a condition precedent.

5. I accept that the Plaintiff has pleaded completely and fully the relevant clauses of this Agreement and also that he has pleaded in paragraph 6 of the Statement of Claim that in breach of the terms of the Agreement the Defendant failed to pay and so on the sums which were duly demanded by Fulcrum in accordance with the revisions of the joint venture Agreement. However, in my judgment that pleading is too general in its terms to be the equivalent of the pleading of compliance with the provisions of clause 10 by Fulcrum in connection with the raising of money. In particular there is the provision regarding the respective proportions of the contribution to be made by the members of the joint venture who are the parties to the agreement and the determination by the directors, by resolution within 7 days, of the amount to be advanced by each of the parties referred to in the previous passage to Fulcrum within 7 days after the directors of Fulcrum have passed the resolution to that effect unless the directors of Fulcrum resolve otherwise.

6. In my judgment if this matter went to trial, one of the facts as distinct from pure evidence, to give an example, which would have to be proved by the Plaintiff would be the holding of this meeting and the passing of the resolution on the date thereof and so on. In my judgment there has not been a sufficient pleading of these facts which I regard as material facts. The compliance with clause 10 is a material fact and the pleading in the form that it now stands contains what I regard as an indirect reference to this by words such as "duly demanded" and "in accordance with the provisions of the Joint Venture Agreement" in paragraph 6 of the Statement of Claim does not amount, on a fair reading, to a pleading of the facts which would establish the liability of the Defendant to make this payment. In my view it is a matter on which different minds clearly would differ and may well go further.

7. Doing the best I can I do not regard paragraph 6 of the Statement of Claim as an adequate or clear pleading of the facts which give rise to the liability to pay. I regard it as a pleading only of the demand as distinct from a pleading of the occurrence of the circumstances which gives rise to the validity of the demand and hence the liability to pay. To put it briefly those are my views on the pleading.

8. Of course if this were a condition precedent then it would not be necessary to be pleaded because Order 18 rule 7(4) expressly so provides.

9. Doing the best I can with the guidance in the English Annual Practice from p.302 onwards and looking at the notes there it seems to me that really the facts or circumstances giving rise to the liability to pay here and to the validity of the demand are really of the essence of the cause of action in the present case. There is really no cause of action until these facts come into being. It is not a situation as indicated at p.302 in the notes where everything has happened which would give rise to a prima facie entitlement. There simply is no entitlement at all until these facts arise. For those reasons, put shortly, I do not consider this is a case of condition precedent. I emphasise this is a matter which has given me considerable difficulty.

10. Looking at the pleading, the Statement of Claim, as being a document in which the pleader is required to plead all material facts which he will have to prove at the trial in order to establish his cause of action, I am unable to read into this pleading adequate pleading of the material facts in relation to the circumstances under which the liability to make contribution arises. There is the apportionment to be determined and there is the resolution of the Board which has to be proved. In my judgment that has to be pleaded in order to complete the cause of action.

Oral Reasons for judgment on application for stay under section 6 of Arbitration Ordinance (Cap. 341)

11. My decision in this matter is to grant the stay and my reasons briefly are these.

12. The evidence filed in support of the application for the stay indicated a measure of disarray in relation to the formulation of the grounds upon which it was contended that there was a matter in dispute giving rise to the application of the arbitration clause in the agreement, clause 17.

13. Also the letter which was exhibited to the first affidavit of Mr. Dominic Hung "DHCH-2" dated the 18th July 1983 contends that there was an implied term in the agreement that the joint venture should only be pursued for profit and it should not be pursued if it meant involving parties thereto in further financial loss. This was followed by evidence in his second affidavit which, as Mr. Faulkner has rightly pointed out, shows inconsistency in relation to the alleged implied term and demonstrates the difficulty of defining what that term is.

14. Notwithstanding the above matters I consider that leading counsel Mr. Ching is justified in contending first of all that there is a dispute. In my judgment there clearly is a dispute in all the circumstances of this case regarding the validity of the demand for payment which was made to the Defendant in a situation where the Defendant is alleging, admittedly not in evidence but through its leading counsel who is coming late into this case, that the Plaintiff is not able to prove the necessary resolutions or resolution and the compliance with the necessary prerequisites for the existence of the liability of the Defendant company to pay substantial sums in issue.

15. I have difficulty with this point because there is no positive evidence from the Defendant in support of the application for stay asserting that there has not been compliance with these requirements. I am influenced rightly or wrongly by the fact that the Defendant has successfully attacked the pleadings of the Plaintiff today at this hearing on the basis that there is no positive pleading, particularly of the necessary resolution of the directors.

16. The Plaintiff has been unable to put itself in a position to apply in specific terms for amendment of the pleading to specify the particulars of the relevant resolution and relevant meeting. It seems to me that in those circumstances it is not right for me to conclude that simply because there has been no actual positive evidential assertion of failure to comply with these requirements there is not a dispute on these important issues, and there is a large amount of money involved here. It seems to me that whether the proceedings took place in court or on arbitration this is a matter which will be the subject of proof by the Plaintiff.

17. If the matter had been specifically pleaded or there have been evidence of the existence of this resolution it would be different and I would approach the matter in a different way. I consider it is proper for me when entertaining the application to stay to treat this ground of resistance, if I can use that expression, or defence as being a genuine one. In the circumstances I have outlined, that alone in my view would justify a stay in this case. It is just a question of which forum this issue should be litigated in. In my judgment it is a genuine dispute.

18. The second ground which has been advanced is a much more difficult one advanced by leading counsel. Leading counsel has sidestepped the submissions of Mr. Faulkner, counsel for the Plaintiff, regarding the alleged implied term. I think it is quite clear that he has not had great enthusiasm for that point.

19. This is a very complex situation of a joint venture of four principal companies and their subsidiaries with a very complicated agreement providing for the company Fulcrum to be the vehicle for the development. Complex issues arise not only in relation to company law but in relation to the interpretation of this agreement, particularly in the circumstances which have now transpired.

20. In my judgment there clearly is an argument, I would not put it higher than that, but there is a genuine argument here for the following proposition. The site value of the property in Singapore having very substantially decreased in value and there being evidence from Mr. Dominic Hung which is not controverted that the transaction is not a viable one involving very substantial sums of money, for the proposition is that it is the duty of the directors to call a halt to this venture and not to go on increasing the losses of the company to the detriment of the parties to the joint venture if that was the position in November 1982 or thereabouts when the demand for payment was made upon the Defendant and from then onwards.

21. Although these are all points of law, as Mr. Faulkner has rightly pointed out, in my judgment, there being another aspect of dispute concerning the prerequisites for the payment of the money, the directors' resolution and so on, these are matters which can properly be dealt with on arbitration particularly when the arbitration clause, clause 17 of the relevant agreement is expressed to relate to disputes arising in connection with this agreement or the interpretation thereof.

22. In my judgment both these disputes or issues fall squarely within the terms of the arbitration clause and the first dispute is one which is substantially one of fact and the second dispute must involve questions of fact as well as questions of law. They also clearly involve questions of commercial expertise which an arbitrator would be qualified to deal with. For those reasons stated as briefly as I can and not doing full justice, with respect, to the arguments that I have had, I conclude that I should grant the stay.

23. I should have added and I add this to my grounds, to do justice to Mr. Faulkner's argument, that he has made the point which I have not dealt with in these reasons, that leading counsel has in effect slipped on a forensic banana skin by asking for and obtaining unconditional leave to defend under Order 14.

24. At first I was very impressed by this point. However I have to look at the obtaining of that order in the context of an Order 14 summons being heard by agreement in conjunction with an application for a stay under section 6 of the Arbitration Ordinance. In my judgment, section 6 governs this situation and that section expressly provides that the party to an arbitration agreement who is at the receiving end of proceedings may before delivering any pleadings or taking any other steps in the proceedings apply to the court for a stay and it seems to me that the vital time under this section is the time when the application for the stay is made.

25. Therefore, as Mr. Faulkner rightly conceded subsequently, the relevance of the obtaining of the order for unconditional leave to defend is only left to the discretion of the court in deciding whether or not to grant the stay. In the present circumstances where the two matters are married up together I do not consider that I should exercise my discretion against the Defendant who has obtained this order in these very proceedings.

Representation:

Mr. Faulkner instructed by Messrs Slaughter & May for the Plaintiff

Mr. Charles Ching, QC. with Mr. Robert Tang instructed by Messrs K.K. & Winston Chu for the Defendant