Eternal Summit Development Ltd v. Oriental Wealth Holdings Ltd
Read the full judgment text of HCA 5325/2001 on BabelCite. This High Court CFI judgment was delivered on 8 June 2005.
1. This is an application by the Intended Intervener Polyworld Development Ltd. (“Polyworld”) to intervene on the ground that its interests have been materially affected by the execution of a writ of delivery issued in this action by the plaintiff on 24 June 2004 (“the Writ”). Polyworld also seeks to set aside the Writ with costs on a full indemnity basis on the grounds of procedural irregularities and/or the Writ was frivolous, vexatious and/or constituted an abuse of process.
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HCA5325/2001 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO. 5325 OF 2001
BETWEEN
Coram: Deputy High Court Judge L. Chan in Chambers Date of Hearing: 31 May 2005 Date of Delivery of Decision: 8 June 2005
D E C I S I O N
Background 1.This is an application by the Intended Intervener Polyworld Development Ltd. (“Polyworld”) to intervene on the ground that its interests have been materially affected by the execution of a writ of delivery issued in this action by the plaintiff on 24 June 2004 (“the Writ”). Polyworld also seeks to set aside the Writ with costs on a full indemnity basis on the grounds of procedural irregularities and/or the Writ was frivolous, vexatious and/or constituted an abuse of process. 2.The action was instituted by the plaintiff against the defendant for delivery up of certain properties or alternatively damages for conversion. 3.The plaintiff used to be the owner of certain units (“the premises”) in a building at 260-266 Castle Peak Road Kowloon. The plaintiff used the premises for the operation of a restaurant by its subsidiary one Snack Specialty Stall Ltd. (“the tenant”). The plaintiff has pleaded in the statement of claim that certain decoration, fixture and fittings, furniture and equipment at a total value of $1,732,241.20 (“the restaurant properties”) were installed and provided by it inside the premises for the use of its subsidiary. However, it did not keep the premises for long. By an assignment dated 20 March 2001, the plaintiff assigned the premises to the defendant and the defendant became the landlord of the tenant. The plaintiff further pleaded that on 4 April 2001, the plaintiff, the defendant and the tenant entered into an agreement. The agreement provided for the surrender of the premises by the tenant to the defendant and, among other things, for the plaintiff to leave behind in the premises the restaurant properties and for the defendant to procure the new tenant to purchase the same at the price of $800,000. If the new tenant should decline to purchase the restaurant properties, the defendant should return the same to the plaintiff. However, after the premises were occupied by a new tenant known as Good City Ltd. which later changed its name to Greenland Café Ltd (“Greenland”), the defendant did not procure the purchase of the restaurant properties by Greenland or to return the same to the plaintiff. Hence, the plaintiff sued the defendant for redelivery of the restaurant properties or alternatively payment of the said $800,000 plus $25,895 representing deposits paid by it for a coffee machine, a Coca-Cola mixing machine and a water metre. 4.The defendant contested the action until 24 September 2002 when a Master of this court made an order allowing its solicitors to cease to act for it. After this, the defendant did not take any further step in the action and its defence was struck out by a Master on 5 March 2003 with judgment entered against it on the same day. 5.Whilst the defendant was still represented by solicitors in this action, it sold and assigned the premises to Polyworld and the assignment dated 12 August 2002 was subject to the tenancy of Greenland. Clause 1 of the sale and purchase agreement provided that the purchase by Polyworld was together with the fixtures, fittings, furniture and/or electrical appliances installed in the premises as set out in Schedule 7 of the agreement. However, there is only the word “NIL” appearing under Schedule 7. Madam Chan Che May, a director of Polyworld, dealt with this matter in an affirmation filed on 18 November 2004. She referred to clause 1.01 of Greenland’s tenancy which provided that the premises were let by the defendant to Greenland together with the existing finishing and fittings at the premises. She further referred to clause 1 of the assignment of 12 August 2002 which provided that the premises were assigned by the defendant to Polyworld subject to Greenland’s tenancy. She then said that she had been advised and believed that the by virtue of the assignment and the tenancy as well as by operation of law, Polyworld had acquired the legal and beneficial ownership of all fixtures, finishing and fittings located in the premises as at 12 August 2002. 6.After the plaintiff had obtained judgment against the defendant on 5 March 2003, its solicitors issued a letter on 20 March 2003 to Greenland seeking delivery up of the restaurant properties. Greenland passed the demand to the Polyworld which disputed the plaintiff’s claim and asserted ownership over the restaurant properties through solicitors. 7.Since the defendant did not pay the judgment sum or redeliver the restaurant properties, the plaintiff on 25 April 2003 issued a petition to wind up the defendant. A winding up order was made on 18 June 2003. On 16 March 2004, the plaintiff applied for and was granted leave by a Master to continue this action for the purpose of enforcing the judgment against the defendant notwithstanding the winding up order made against it. 8.After leave to continue the action was given, the plaintiff applied for and was issued with the Writ. The Writ was executed on 12 July 2004. There are some disputes as to what exactly happened on that day. It seems that the plaintiff had removed some of the restaurant properties pursuant to the Writ, but the removal was halted by the intervention of some individuals which necessitated the intervention of the police. 9.Polyworld then started HCA 1657 of 2004 against the plaintiff herein and applied for an interim injunction against it. The application was resolved by undertakings given by the parties to the court. The plaintiff as defendant in that action gave an undertaking to inform the Bailiff to withhold execution of the Writ and not to enter the premises or to interfere with Greenland’s business. Polyworld also gave an undertaking to, among other things, keep those of the restaurant properties as listed in the Writ that were still in the premises and not to dispose of or sale of the same to anyone. 10.In Greenland’s tenancy, there is a special condition no. 3 in Chinese saying “租客完成三年租約後，該鋪之裝修及生財工具，將屬於租客所擁有。” which reads in translation as “upon the tenant finishing the 3 year tenancy, ‘the decoration and equipment for doing business’ present in the shop shall become the property of the tenant”. That 3-year tenancy expired on 9 September 2004. 11.In HCA 1657 of 2004, Polyworld pleaded in its Reply that the Writ was defective and liable to be set aside, hence this application. Grounds to intervene 12.Mr Wong, counsel for Polyworld, submitted that a party whose interest is materially affected by an order made in an action may apply to join in the action and set aside such order. He said that Polyworld is still being materially affected by the Writ and should be allowed to intervene in this action. He also referred me to paragraph 15/6/9 of the Hong Kong Civil Procedure 2004 which reads:
13.He gave three reasons to support this contention. First, he said Polyworld is still affected by the undertaking given in HCA 1657. It is Polyworld’s intention to set aside the Writ first and then to apply to withdraw the undertaking given in that action. He said that the setting aside of the Writ would enhance the chance of success in the contemplated application to withdraw the undertaking. 14.Second, Polyworld has pleaded in its Reply in HCA 1657 that the Writ is invalid, irregular or otherwise liable to be set-aside on various grounds pleaded therein. Polyworld wants this issue as pleaded in that action to be determined in this application. 15.Third, he said Polyworld is under some contractual obligation to Greenland to ensure the vesting unto Greenland the title of “the decoration and equipment for doing business” as referred to in special condition number 3 of Greenland’s tenancy. 16.In his written submissions, he also stated one more ground which is that the premises as owned by Polyworld had been subjected to execution of the Writ, but he did not appear to have pursued this point in his oral submissions. 17.It is Polyworld’s case that it is no longer the owner of “the decoration and equipment for doing business” as they had become the properties of Greenland since last September. It thus has sufficient grounds to justify the withdrawal of the undertaking given in HCA 1657. Its position is that the undertaking should not be there anymore. Considering this point logically, if the undertaking should not be there anymore, an application should be made in that action as soon as possible for its withdrawal. Polyworld cannot say that because it is affected by the undertaking which should not be there, the unjustified continuance of the undertaking would justify the setting aside of the Writ because the setting aside of the Writ would enhance the chance of success for the withdrawal of the undertaking. If the undertaking should not be there, it should not be there. To rely on it as a ground for setting aside the Writ in this action is to rely on something which should not be in existence. It is just like trying to pull oneself up by holding onto the image of parallel bars when the parallel bars in fact do not exist. 18.Furthermore, the undertaking was given in HCA 1657 based on facts pertaining in that action. To set aside the Writ in this action with a view to withdraw the undertaking in that action smacks of an abuse of process because there is an ulterior purpose in this application. It is not Polyworld’s case that if the Writ is not set aside, the undertaking cannot be withdrawn. Its case is only that the setting aside of the Writ may enhance the chance of withdrawal of the undertaking. In my view, the continuation or withdrawal of the undertaking is a separate matter from the continued existence of the Writ. If Polyworld should consider that it is affected by the undertaking, it should go and apply for its withdrawal. Once the undertaking is withdrawn, it would cease to be affected by it. There is no need to apply to set aside the Writ for this ground. 19.On the second round, Polyworld has pleaded in its Reply in HCA 1657 that the Writ was invalid, irregular or otherwise liable to be set-aside on various grounds. These matters should be resolved in that action. To have those issues determined in this application for the purpose of that action again smacks of an abuse of process. Polyworld has pleaded the validity of the Writ in that action. If it should be affected by this pleaded issue, it is a self-induced issue in that action and it should be resolved there. In this application, Polyworld has to show that it is affected by the existence of the Writ per se in order to justify its setting aside. Since the “the decoration and equipment for doing business” (including those that have been removed on 12th July 2004) had become the properties of Greenland since last September, Polyworld cannot say that it is still being affected by the Writ per se. 20.For the third ground, Greenland’s tenancy was made between the defendant and Greenland and Polyworld’s purchase of the premises was subject to it. However, the sale and purchase agreement between the defendant and Polyworld provided that the fixtures, fittings, furniture and/or electrical appliances installed in the premises that were to be sold to Polyworld was “NIL”. Even if Polyworld can rely on the effect of assignment to say that the ownership of the fixtures and fittings had been transferred to it automatically despite the terms of the agreement (which had merged into the assignment), the many chattels referred to in the writ that were present in the premises at the time of the assignment still belonged to the defendant. If Greenland should have failed to rent the premises for 3 years as required by special condition 3, it was the defendant that could have come back and reclaim them. Therefore, Polyworld did not have any title to the chattels and would not have been obliged to vest such title unto Greenland. 21.Even for the fixtures and fittings the ownership of which Polyworld might or might not have acquired, Polyworld at most could have an obligation not to do anything to prevent the vesting of their title unto Greenland. I cannot see how Polyworld could have an obligation to take positive steps to ensure the vesting of such title unto Greenland. Mr Wong argued that there should be an implied term that Polyworld should take positive steps to ensure vesting. However, I cannot see the necessity for implying such a term in order to make the tenancy with Greenland workable and I do not think the officious bystander would agree with him. 22.On the last ground that the premises had been subjected to execution of the Writ on 12th July 2004, I cannot see how Polyworld can still be affected by that execution bearing in mind that it could not have claimed to be the owner of the fixtures, fittings, furniture and/or electrical appliances installed in the premises since 9 September 2004. 23.In the premises, Polyworld has failed to demonstrate that it is still affected by the Writ and there is therefore no basis for it to intervene in this action. This application should be dismissed. However, in deference to the efforts of counsel on both sides, I would also consider Polyworld’s grounds for setting aside the writ. Ground to set aside 24.On the setting aside of the Writ, Polyworld has two main grounds namely: (1) the issue of the Writ involved procedural irregularities; and (2) the issue and execution of the Writ was vexatious, oppressive and/or constituted an abuse of process.
25.There are two grounds under the first main ground. For the first ground, Polyworld relies on Order 46 rule 2(1)(b) and rule 2(2) which provide:
26.Mr Wong submitted that there was a change in the defendant due to the winding up order and hence the plaintiff should have applied for leave under order 46 rule 2(1)(b) for the issuance of the Writ. He said that the leave granted by the Master for the plaintiff to continue this action for the purpose of enforcing the judgment against the defendant notwithstanding the winding up order is insufficient and he relied on Order 46 rule 2(2). 27.Mr McLeish, counsel for the plaintiff, however submitted that the making of the winding up order did not result in a change in the defendant. He drew my attention to paragraph 15/7/13 of Hong Kong Civil Procedure 2004 which reads:
28.I think Mr McLeish is right. The winding up order did not result in any change in the defendant and there was no need for the plaintiff to apply for leave under order 46 rule (2)(1)(b). 29.For the second ground under the first main ground, Polyworld relies on order 45 rule 4(1)(a) and rule 4(2)(a) and (b) which provide:
30.Part of the correspondence between the plaintiff’s solicitors and the Bailiff’s office has been produced in an affirmation filed by the plaintiff. It shows that the plaintiff at one stage intended to issue a writ of specific delivery which should be in Form 64 and could only be issued by order of court. However, a perusal of the Writ showed that it was issued in Form 65 and not Form 64. Despite this, Mr Wong still argued that because the plaintiff had intended to issue a writ of specific discovery in Form 64 but without making an application as required by order 45 rule 4(2), the Writ should be set aside regardless of the fact that it was issued in the correct Form 65. He made this submission with full awareness that the Writ as issued was not in Form 64 but was in the correct Form 65 which did not require an application to the Court. I am unable to grasp the wisdom of this argument and can only dismiss it.
31.Mr McLeish accepted that the court has inherent jurisdiction to set aside a writ of execution if the circumstances of its issue and execution reveal oppression. Mr. Wong also referred me to The Mayor and Burgesses of the London Borough of Camden v. Akanni (1997) 29 HLR 845 (lexus transcript) where Brooke LJ said:
32.Polyworld also has two grounds under this second main ground. They are: (1) the Writ does not have specific and precise descriptions of the goods to be delivered up and that per se constitutes an oppression and/or an abuse of process; and (2) the circumstances demonstrate a clear case of oppression and abuse of process by the plaintiff. 33.For the first ground, Mr Wong submitted that it would be obvious to any reasonable person that the descriptions set out in the Writ was hopelessly devoid of particularity. He also pointed out that Polyworld’s solicitors had by a letter of 31 March 2003 already complained about the ambiguous and imprecise descriptions of goods in the judgment which were repeated in the Writ. 34.Madam Chan Che May in her affirmation also dealt with this matter in her affirmation filed on 18 November 2004. She said she represented to the Bailiff that Polyworld owned all the fittings, fixtures and furniture and equipment in the premises, but her assertion of title was ignored. She noticed that many goods on the premises were pasted with red mark indicating that the same had been seized by the Bailiff in execution of the Writ. She also said that the items set out in the Writ were in extremely vague, general and imprecise terms and it was impossible to identify with any degree of procession what items in the premises had to be delivered up. She also referred to the plaintiff’s case that the plaintiff allegedly installed the items in the Writ before December 2000 and unless they were set out in sufficiently precise terms, the issue and execution of the Writ would lead to serious injustice to Polyworld and Greenland. 35.Madam Tso Yuk Yin, a shareholder and director of the plaintiff responded to this in her affirmation filed on 9 May 2005. She said on 12 July 2004 upon arrival at the premises, the Bailiff explained to one Madam Chan, a representative of Greenland (not Madam Chan Che May of Polyworld), the purpose of the visit and Madam Chan sought independent legal advice. After that, Madam Chan told the Bailiff and Madam Tso to identify the goods as described in the Writ and they had no difficulty in doing so. The Bailiff then seized goods by fixing red stickers thereon and delivered the same to Tony Kan & Co. on behalf of the plaintiff. 36.Polyworld replied to this by an affidavit of Madam Chan Shuk Yee Michelle filed on 25 May 2005. Madam Chan disagreed that the parties had no difficulty in identifying the goods from the descriptions in the Writ. She said the Bailiff applied red stickers on every item which fell within the extremely loose and imprecise descriptions in the Writ unless Madam Chan of Greenland expressly said that the goods belonged to Greenland. 37.The goods as referred to in the Writ fall into two categories; namely decoration and furniture and equipment. For the goods under the category of furniture and equipment, most of them are described in sufficiently clear terms for identification. For the goods under the category of decoration, most of them can be said to be quite general. They are for example general decoration, installation of gas meter and removal of all pipes, gas connection, installation of electricity, glass engineering, stainless steel engineering. 38.However, it may well be the case that except those furniture and equipment brought into the premises by Greenland, all the fittings, fixtures, furniture and equipment therein were installed and provided by the plaintiff initially for the operation of a restaurant by its subsidiary. If that should be the case, it would not have been difficult to identify the goods inside the premises and relate them to those contained in the Writ and it would only be necessary to exclude all the furniture and equipment of Greenland. In the circumstances of this case and because of the factual dispute between the parties, whether the descriptions of the goods in the Writ were so loose and general that its execution at the premises amounted to an oppression and/or an abuse of process is best decided by a trial in HCA 1657. 39.On the second ground that the Writ was used and abused unfairly to the oppression of Polyworld, Mr Wong raised to a number of points. The first point is that at all material times, the plaintiff and its legal advisers should know that many of the items set out in the judgment were in fact fixtures instead of chattels and the ownership would be transferred from the defendant to Polyworld upon assignment of the property. 40.However, the plaintiff’s solicitors had by letter of 5 May 2003 already pointed out that Polyworld had not purchased any fixtures, fittings, furniture or electrical appliances in the sale and purchase agreement. Bearing in mind the substantial worth of the fixtures, fittings and chattels, it was unlikely that they would not have been mentioned in the agreement if it was intended that they should form part of the sale and purchase. It was also unlikely that they would not have been discussed between the defendant and Polyworld in their negotiation of the sale and purchase of the premises as they were the subject matter of special condition 3 of Greenland’s tenancy and Polyworld’s purchase was subject to the tenancy. Mr. Wong said that the assignment could have the effect of transferring to Polyworld all the fixtures and fittings (see Goldful Way Development Ltd. V. Wellstable Development Ltd. [1998] 4 HKC 679 at 683A to I and section 16 of the Conveyancing and Property Ordinance, Cap. 219). However, the provision of no fixtures and fittings in the sale and purchase agreement may indicate the state of mind of the parties thereto and their knowledge of whether the defendant had a title to the fixtures and fittings that it could convey to Polyworld. 41.I also have not lost sight of the fact that the plaintiff and Polyworld were not arguing over the ownership of the fixtures and fittings separately from that of the chattels. Polyworld’s claim of ownership extends to all the things in the Writ which includes all the chattels. I therefore do not think that Polyworld’s claim has, prima facie, disclosed sufficient merits to deter the plaintiff from executing the Writ. 42.The second point is that the plaintiff was fully aware that Polyworld had claimed ownership over the items in the Writ; Polyworld had also objected to the vagueness of the descriptions and the lack of accurate means of identification of those items; and the plaintiff was aware that the proper steps for it to take was to issue a writ of summons against Polyworld for conversion. 43.I have already dealt with the question of ownership and the criticism on the descriptions of the items. On the proper steps to be taken, the plaintiff’s solicitors had by a letter of 5 May 2003 demanded Polyworld to return the items set out in the judgment. Paragraph 5 of the letter reads:
44.Polyworld’s solicitors replied on the same day and said:
45.No doubt, the plaintiff was aware that one of the options open to it was to issue a writ for conversion against Polyworld. However, even if the plaintiff did not resort to that procedure and instead used a writ of delivery to enforce the judgment, I cannot see how the plaintiff can be said to have acted vexatiously, oppressively or having abused the process for issuing and executing a writ of delivery. The plaintiff had not represented to Polyworld that it would resort to a writ for conversion instead of a writ of delivery. The letter of 5 May 2005 only said that if Polyworld should confirm that it did not return the goods on the ground that it was not a party to the action, the plaintiff would issue a writ of conversion against it, but Polyworld never gave that confirmation and nothing would have estopped the plaintiff from using the Writ to enforce the judgment. I also say that Polyworld had not been lured into a false sense of security that the plaintiff would only sue it for conversion and would not resort to execution by a writ of delivery. It was open to the plaintiff to issue a writ for conversion as much as it was open to Polyworld to issue a writ to seek a declaration of its right and title over the restaurant properties. 46.Polyworld’s next point under this heading is that the plaintiff had seized items that would not yield too much monetary return to it but would certainly cause extensive destruction to the internal fittings and decoration of the premises and such was also abusive conduct of the plaintiff. Furthermore, the plaintiff also demanded a sum of HK$900,000 as a condition for withholding the execution. Since there are factual disputes on what happened at the execution of the writ on 12th July, I think this issue should best be resolved at the trial of HCA 1657. 47.Polyworld’s last point is that the plaintiff had deliberately chosen to issue the Writ and executed the same without giving Polyworld any prior notice. I do not understand why the plaintiff should have been obliged to give such prior notice. Polyworld was legally advised at the material time. It should be aware that the plaintiff might choose to execute the judgment at any time as the plaintiff had not represented in an unqualified sense that it would only resort to a writ for conversion and not a writ of execution. If it indeed wanted to assert rights over the restaurant properties, it should have taken out a writ seeking a declaration of its rights and title over them. To notify the party liable to execution before actually executing may make the execution less effective and such is not the usual practice that I am aware of. Can the Writ still be executed? 48.The plaintiff, in addition to responding to the grounds raised by the defendant, also argued that the Writ had been completely executed and could not be executed again. Therefore there was no more writ to be set aside. On this issue, I am referred to some letters exchanged between Polyworld’s solicitors and the Chief Bailiff. In the letter dated the 13 July 2004 from Polyworld’s solicitors to the Chief Bailiff, solicitors said:
49.The Chief Bailiff replied on 19 July 2004 as follows:
50.The Chief Bailiff made a further reply on 26 July 2004 to another letter from Polyworld’s solicitors dated 22 July 2004. Only the Chief Bailiff’s letter has been produced and it reads:
51.The plaintiff also produced a receipt dated 12 July 2004 and signed by a clerk of its solicitors acknowledging the receipt of the goods listed in the Writ and undertook for the safe custody of the same. 52.Mr Wong referred me to Halsbury’s Laws of Hong Kong volume 5(2) 2003 Reissue, para. 90.1343 under the heading of “Retaining possession after seizure”. It reads:
53.Mr. Wong drew an analogy between a writ of delivery and a writ of fieri facias and said that the bailiff had only withdrawn from the premises and the plaintiff could at any time direct the bailiff to return there and to seize the restaurant properties again. Therefore, he said it was necessary to set aside the Writ in order to prevent the plaintiff from abusing it again. 54.Mr McLeish however relied upon the above correspondence and the receipt and argued that the execution of the Writ had been completed and the custody of the fruits of the execution had been handed over to the plaintiff’s solicitors. There was therefore no more writ that the plaintiff could ask the bailiff to execute as the Writ and had become spent. He further referred me to Form No. 56 in Appendix A of the Rules of the High Court which is a form for a “writ of fieri facias after levy of part”. He submitted that even for a writ of fieri facias, it could not be executed more than once. If the first execution was incomplete, further execution could only be levied by the issuance of a “writ of fieri facias after levy of part” in Form No. 56. He then drew an analogy between a writ of fieri facias and a writ of delivery and said that the plaintiff’s writ could not be executed again. 55.I agree with Mr McLeish that the execution of the Writ had been completed. I do not think the plaintiff could have on 19th of November 2004, when the summons to set aside was issued, direct the bailiff to re-enter the premises and resume possession of the restaurant properties as these are the goods listed in the Writ which had already been handed over by the bailiff to the plaintiff’s solicitors on 12 July 2004. The tenor of the Chief Bailiff in the letters referred to above also confirms that the Writ had been executed completely on 12 July 2004. There is therefore no point in setting aside a spent writ. Decision 56.In the premises, I dismiss Polyworld’s summons to intervene and to set aside the Writ. I also make an order nisi that Polyworld should pay the plaintiff the costs of this application. Though Mr McLeish has suggested the indemnity scale, I do not think the conduct of Polyworld is so bad that I have to order costs on that basis. However, I am only making an order nisi and will be happy to hear submissions if there should be any application for variation.
Mr Robin McLeish, instructed by Messrs Tony Kan & Co., for the Plaintiff Mr Anson M K Wong, instructed by Messrs Bobby Tse & Co., for the Intended Intervener | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||