Paul Y Management Ltd v. Eternal Unity Development Ltd and Others
Read the full judgment text of HCA 571/2007 on BabelCite. This High Court CFI judgment was delivered on 1 June 2009.
1. I refuse the application. It is a very late application taken out only several days before this scheduled hearing, whereas the application to strike out was made back in September 2007.
Cites 1 case
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HCA 571/2007 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO 571 OF 2007 ---------------------- BETWEEN
---------------------- Before: Hon A Cheung J in Chambers Date of Hearing: 1 June 2009 Date of Judgment: 1 June 2009 -------------------------- J U D G M E N T ------------------------ [Submissions on adducing further evidence] 1.I refuse the application. It is a very late application taken out only several days before this scheduled hearing, whereas the application to strike out was made back in September 2007. 2.Moreover, given the nature of the application, the factual assertions contained in the proposed evidence will be of little use at the hearing because the Court simply cannot resolve any factual disputes between the parties insofar as they are relevant to the present application, and I am afraid there are many factual disputes. So the application is refused. [Submissions on applications to strike out] 3.I have two applications before me. The first application is by the 1st third party to strike out the third party notice against the 1st third party. 4.The relevant facts and disputes between all the parties can be gleaned from the judgment of the Court of Appeal handed down on 12 August 2008. In that judgment, the Court of Appeal dealt with an appeal by the defendants from the summary judgment granted against them in favour of the plaintiff. The Court, of which I sat as a member, reversed the judgment below and granted the defendants unconditional leave to defend. 5.At the heart of the dispute between the parties is whether there was made between the defendants and the 1st third party a master agreement for the financing of a project in Beijing to the extent of RMB 420 million. 6.It is the defendants’ case that pursuant to that master agreement, various written agreements were entered into with different companies belonging to the Paul Y Group, of which the plaintiff, the 1st third party, as well as the 2nd third party, are members. 7.In reversing the judgment below, the Court of Appeal took the view that the loan deed which the plaintiff sues on as a standalone agreement might arguably be part of the financing arrangement, the subject matter of the master agreement alleged by the defendants. 8.In paragraph 37 of the judgment, the Court observed that there was ‘almost overwhelming evidence’ that the parties had indeed entered into a master agreement concerning the 1st third party’s promise to advance money in relation to the Beijing project. 9.Mr Rimsky Yuen SC, appearing for the 1st third party at today’s application, submits that there is no res judicata arising from the Court of Appeal’s judgment because the 1st third party was not involved in the relevant hearing. Counsel takes me to a number of documents in the hearing bundles, including pages 42, 55, 57, 65, 72, 80, 100, 105, 139, 141, 144 and 145 in bundle B, with a view to demonstrating principally two matters. First, the master agreement was never referred to in these contemporaneous documents. Secondly, the 1st third party was not named in these documents. Counsel very fairly accepts that in one or two of these documents, the name of the 1st third party did feature. Particularly, there was a public announcement on page 105 that was made by the 1st third party itself. 10.Counsel’s point is that looking at the contemporaneous documents as a whole, it is plainly unarguable that there was this master agreement concluded, but in any event, even if any such agreement had been concluded, there is not any arguable evidence that the contracting party to the agreement was the 1st third party. 11.I do not wish to repeat what the Court of Appeal has already observed in relation to the arguability of the alleged master agreement. As I said at the outset, the Court of Appeal has observed that there was almost overwhelming evidence of the existence of the master agreement between the defendants and the 1st third party. 12.I appreciate the points made by counsel in relation to the contemporaneous documents that he has carefully referred the Court to. I take the view that these are arguments that should be made at trial. They are certainly relevant points that should be brought to the notice of the trial judge, who has to make up his mind as to whether the alleged master agreement did exist as a matter of fact or not. 13.But given the nature of today’s application, namely a strike-out application, I am unable to conclude that this is a plain and obvious case for striking out the third party notice on the ground that the defendants’ case about the master agreement is wholly unarguable. Indeed, as the Court of Appeal has observed, there is evidence to support the allegation. It is not for this Court to engage in a mini-trial of the issues on the documents before the Court. 14.The importance of contemporaneous documents cannot be underplayed, but one must not forget the oral assertions made by the witnesses of the defendants regarding the making of the master agreement and the identity of the contracting party to this agreement, nor can one ignore the inherent probability of the existence of the agreement; nor, I should add, can one ignore, for instance, the public announcement made by the 1st third party itself about its involvement in the Beijing project. 15.There is also, for instance, on page 55 of bundle B, a handwritten note which appears, on the face of it, to lend some support to the story put forward by the defendants. 16.There is no way this Court can conclude that the defendants are bound to fail at trial in relation to the alleged master agreement. 17.Mr Yuen also takes the point that the master agreement is not good in law for being incomplete. The relevant legal principles are not in doubt, but it is fair to say that when parties have made an agreement and that agreement has been partly performed, as the defendants allege to be the case here, the courts generally are slow to conclude that the agreement is incomplete and is incapable of performance in law. 18.Whether the master agreement, if it has ever been made, is so incomplete that it is incapable of performance or enforcement in law is a question of mixed law and fact. Put another way, it is a fact-sensitive question, and everything turns on the facts. 19.At this stage, I am afraid I cannot accept counsel’s suggestion that it is a plain and obvious case that the master agreement was an incomplete one and could not be enforced at law. 20.That leaves counsel’s argument based on agency. Again, the principles are not in doubt. The question is whether Mr Tom Lau had the actual or apparent authority to represent the 1st third party in entering into the master agreement alleged by the defendants. This again turns on the facts, and even in relation to the question of actual authority this cannot be finally determined until after full discovery of all relevant documents, including all relevant internal documents of the 1st third party on this subject matter. Nor can it be finally resolved without regard to the past practice as to how things were done within the Paul Y Group in general and within the 1st third party in particular, because when one is dealing with actual authority, one is also concerned with implied authority apart from express authority, and this is so even in the case of a limited company. And of course there is the question of apparent authority and how things were generally dealt with in the past must be a relevant matter to take into account. 21.So for all those reasons, I am afraid I am not with Mr Yuen, who has obviously got a difficult task to perform today in light of the Court of Appeal’s judgment. Counsel has said everything that can be said on behalf of the 1st third party, but I am afraid the application to strike out must be dismissed for those reasons. 22.Turning to the second application before me, the 2nd third party’s application to strike out the third party notice, I accept that there are two matters to consider. First, whether the third party claim against the 2nd third party falls within the provisions in Order 16 rule 1(1) of the Rules of the High Court, Cap 4. Secondly, whether as a matter of discretion, the Court should allow the third party claim to be made in the present action. See Chatsworth Investments Limited v Amoco (UK) Ltd [1968] 1 Ch 665. 23.The claim against the 2nd third party centres on the defendants’ allegation that under an alleged hotel extension agreement, the 2nd third party has incurred liability to the extent of RMB 40 million towards the defendants. The defendants further allege that they have made an agreement with the 1st third party to set off that liability against the monies advanced to the defendants in relation to the Beijing project pursuant to the alleged master agreement (including the $10 million advanced under the loan deed that the plaintiff relies on). 24.I take the view that the third party claim against the 2nd third party falls within rule 1(1)(c) of Order 16, ie there is a question or issue to be tried that is related to the original subject matter that should be determined not only between the plaintiff and the defendants but also between the defendants and the 2nd third party. 25.However, I still have a discretion to exercise, and here I am concerned by the fact that apart from the set-off which provides a link between the issues concerning the defendants and the 2nd third party and those involved in the main action and the 1st third party proceedings, the 2nd third party is basically unconnected with the latter disputes which are serious and complicated ones which will require many days to try. 26.The main point advanced on behalf of the 2nd third party in relation to discretion is that it should not be made to expend time and costs unnecessarily in the trial of the third party proceedings as well as the main action which will mostly be concerned with issues not involving the 2nd third party itself. 27.I see some force in this submission, but in my view, the best way to cater for the concern is to hive off the issues pertinent to the third party proceedings involving the 2nd third party from the disputes in the main action and the issues involved in the third party proceedings insofar as they relate to the 1st third party. 28.The issues relating to the 2nd third party need only be tried after the outcome of the disputes in the main action and the third party proceedings involving the 1st third party is known. So for instance, if the defendants should fail at trial in establishing the master agreement, the set-off agreement which premised to some extent on the master agreement and the liability of the 1st third party towards the defendants under the master agreement would be difficult to make out. Of course there could be many possibilities, and I need not list them all out here. 29.I am pleased to say that after this possibility has been mentioned by the Bench to the parties, both the defendants as well as the 2nd third party are receptive to it. In my view, the Court’s discretion should be exercised along those lines. 30.But returning to the 2nd third party’s application to strike out the third party notice, I take the view that it should be dismissed for the reasons explained, subject to the rider that appropriate directions should be given in relation to how the third party proceedings against the 2nd third party should be proceeded with. [Submissions re directions] 31.I note the concern of the plaintiff about delay, but the new rules now allow parties 28 days to file pleadings. I see no reason why the third parties should be made to file their pleadings within 14 days. 32.I will deal with the 1st third party’s position first:
[Discussion] 33.In relation to the 2nd third party, I will give similar directions in terms of (i) and (ii) of the directions that I have just given for the 1st third party, i.e. defence within 28 days, reply within 14 days. I give these further directions:
[Submissions]
[Submissions on costs] 34.I will deal with the costs of the strike-out application by the 1st third party first. Costs should follow the event, so I order that costs be to the defendants to be taxed if not agreed. 35.On the striking-out application by the 2nd third party, I bear in mind the submissions. I think the fairest order would be the defendants’ costs in the cause. 36.The third party directions – costs in the cause.
Pinsent Masons for the plaintiff, excused from attendance Mr Calvin Cheuk, instructed by Siao, Wen and Leung, for the 1st, 2nd and 3rd defendants Mr Rimsky Yuen SC, instructed by Minter Ellison, for the 1st third party Mr Jose-Antonio Maurellet, instructed by DLA Piper Hong Kong, for the 2nd third party |
Cases cited in this judgment
Further hearings and rulings under HCA 571/2007