Francesca Ha v. Tsai Kut Kan and Others

CACV000016/1981

Headnote

Striking out : no sufficient memorandum a matter of evidence : intervention by the undisclosed principal terminating the agent's action : what is intervention.

ON APPEAL FROM HIGH COURT ACTION NO. 581 OF 1979

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Coram: Silke J.A., Garcia and Power JJ.

Date: 26 July 1982

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JUDGMENT

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Silke J.A. :

1. On the 10th February 1979 Francesca Ha - "Ha" issued his writ number 581 of 1979 - "581".

2. He named as defendants Mr. Tsai Kut Kan - "Tsai", Neptune Realty Company Limited - "Neptune" - and Lucinda Gar len Limited - "Lucinda" - separately and in that order.

3. He claimed first : specific performance of an alleged agreement; second : further and/or alternatively damages for breach of contract; third, and as against Tsai only, damages for breach of warranty of authority or misrepresentation; fourth : $450,000 as commission and the usual interest and costs.

4. The offer alleged was one dated the 16th January 1979 - "Document 40" - and it was said that this was an offer by Tsai to sell, as owner thereof, certain property at a price of $45 million.

5. Paragraph 3 of the Statement of Claim alleged an acceptance of this offer by a letter dated 23rd January 1979 - the "Tsang and Chau letter" - and paragraph 4 alleged that this offer and acceptance constituted a binding agreement for sale by Tsai to Ha of the property - and it is of this agreement that specific performance is asked.

6. The property, as particularised in paragraph 1(a) of the pleadings, consists of ten houses, three of them in Hennessy Road and the remaining seven in Lockhart Road.

7. Paragraph 6 of the Statement of Claim indicates why it is said Neptune and Lucinda are involved. It alleges that after the agreement was made Ha discovered Tsai to have been a 50% shareholder and a director of Neptune at all material times and that Neptune was registered owner of eight of the ten houses. Further Lucinda was owner of the remaining two.

8. Paragraph 7 alleges that Tsai when he made the offer and entered into the agreement had the authority of Neptune and Lucinda to do so.

9. Paragraph 9 pleads in the alternative that if Tsai had no such authority he impliedly warranted his authority as agent and thereby induced Ha to enter into the agreement and paragraphs 10 and 11 allege an express or implied representation by Tsai to Ha.

10. Paragraph 12 alleges that if Tsai had no such authority then Ha has been unable to enforce the agreement and is at a loss as to the profits he could or would have made had the sale gone through. Paragraph 5 having alleged a failure or a refusal to complete the agreement.

11. Paragraph 13 refers to the commission which is alleged to have been one of the terms of Document 40.

12. This writ was registered as a lis pendens against the properties on the 15th February 1979 - and this registration is one of the main reasons why the several appeals have come before this Court.

13. On the 13th March 1979 Ha took out a summons for summary judgment under Order 14.

14. In his grounding affidavit Ha states himself as plaintiff to be truly and justly entitled to specific performance, he exhibited Document 40 and the Tsang & Chau letter. I should say here that Document 40 is written in Chinese characters and its translation at page 40 in Vol. 1 of Ha's bundle for this appeal - hence "Document 40" - is the accepted translation for the purpose of these proceedings.

15. Ha in his affidavit also alleged that the commission was due to him and concluded in the usual form that he believed there to be no defence to his claim.

16. The affirmation of Tsai opposing the granting of final judgment raises issues as to whether Document 40 was an offer to sell to Ha at all or whether it was merely an authorisation to Ha to procure purchasers, and he exhibits a letter from P.H. Sin & Co., Solicitors, dated the 19th January 1979 and directed to Tsai's then solicitors, which makes reference to Ha as a broker introducing an unnamed client of P.H. Sin who was prepared to purchase the properties. Tsai says there was discussion between himself, Ha and a Mr. Wu which was inconclusive though Ha is said to have stated that his client would pay a deposit of $10 million. Tsai says this was refused.

17. Tsai then makes reference to the Tsang and Chau letter having been received by him but denies that this letter constituted an acceptance of an offer. The letter purported to accept on behalf of Ha himself.

18. The order on the Order 14 summons was that there be unconditional leave to defend with the usual consequential orders. This was filed on the 3rd May 1979. Prior to that on the 25th April 1979 Ha's Statement of Claim was amended for the first time - the red amendments.

19. These amendments claim, in the alternative, that the Document 40 offer was an authorisation to Ha permitting Ha to sell the properties to any buyer including himself; that Ha did obtain a buyer, Like Soon Company Limited - "Likesoon" - and that the P.H. Sin letter was Likesoon's indication of its agreement to purchase. They further alleged that no reply having been received to the P.H. Sin letter, and the Tsang and Chau acceptance being ignored by Tsai, "evinced that (Tsai) did not wish to sell the said houses to the said prospective buyers".

20. These amendments were the first suggestion that Ha had a capacity other than that of personal purchaser.

21. Earlier in time, in respect of both the amendments and the hearing of the Order 14 summons, an agreement for the sale and purchase of the properties had been come to between Neptune and Lucinda as vendors and Tani Investment Ltd. - "Tani". This was on the 12th April 1979 and on the 5th May this agreement for sale and purchase was registered as against the properties.

22. To return to the order of events : defences and counterclaims were filed by Tsai, Neptune and Lucinda at the end of May.

Vol. 1 P.143

23. On the 4th September a request was made by the defendants to Ha by and through their respective solicitors to vacate the 581 lis pendens.

24. On the 18th September Likesoon issued their writ : 1979 No. 4080 - "4080" . The five defendants named were Tsai, Neptune, Lucinda, Tani and Ha separately and in that order.

25. On the 19th September this writ was registered as a lis pendens against the properties.

26. I think it worth setting out at this point, and in full, certain paragraphs of the 4080 Statement of Claim in the light of the attack made upon the pleadings.

Vol. 1 P.147

27. It starts in its paragraphs 1, 2, 3 and 4 by making reference to Document 40 and its provisions and that which Likesoon say they mean. In its paragraph 5 it purports to set out the manner in which Tsai, Neptune and Lucinda acquired or held their respective interests in the properties.

28. The pleadings go on to allege Likesoon to be ready and willing to fulfill and perform its obligations under the agreement; that Tsai, Neptune and Lucinda have wrongfully failed to complete : that if, which is not admitted, Tsai had no authority to make Document 40, that document warranted he had such authority; that Tsai made express or implied representations as to his ownership of the properties and/or his authority to make Document 40 and to enter into the agreement for sale and purchase of the said 10 houses; that Likesoon relied on such representations : that if Tsai had no authority or if his representations were false Likesoon had suffered loss and damage : these being particularised as profits on redevelopment of the 10 houses. They refer to the purported sale to Tani by Neptune and Lucinda and that Tani was bound by the agreement for sale to Likesoon, having knowledge of it. This paragraph was amended in green to allege that Tani was beneficially owned or controlled by Tsai, Neptune and Lucinda and a Mr, Cheng Yu Tung at all material times : hence "to their knowledge".

29. And Likesoon claimed : as against Tsai, Neptune and Lucinda specific performance of the agreement for sale and purchase : accounts directions and enquiries and damages for breach of contract in lieu of or in addition to specific performance;

30. As against Tani a declaration that Tani is bound by the agreement for sale to Likesoon;

31. And as against Ha a declaration that Ha was acting as Likesoon's agent in accepting the Document 40 offer by the Tsang and Chau letter : and a further declaration that Ha "was and is pursuing High Court Action No. 581 of 1979 as the agent of the Plaintiff".

32. Tsai's defence, and the defence and counterclaim of Neptune and Lucinda, were filed in October as was the defence and counterclaim of Tani.

Vol. III P.33

33. I need, I think, refer only to one paragraph, other than the denial of Ha's agency, of those defences for the purpose of these proceedings and that, by amendment in September 1980, is paragraph 17A of Tsai's defence which raises the no sufficient memorandum point.

Vol. III P.35

34. He also filed a defence on the 22nd October and the contents of this has moment.

35. Ha admits paragraphs 1-8 and paragraph 9 of Likesoon's Statement of Claim. He also admits paragraphs 10-15.

36. He says that he is seeking leave of the Court to further amend his amended Statement of Claim in 581 "so as to continue the said action for the benefit of the plaintiff".

37. He says in paragraph 2(c) :

"         Apart from the claims on behalf of and for the benefit of the Plaintiff, the 5th Defendant also claims against the 1st Defendant Tsai Kut Kan by the said action the commission in the sum of $450,000.00"

38. Ha does not admit paragraphs 16 and 17 of Likesoon's Statement of Claim - which are the claims against Tani - but nothing turns on this.

39. In both 581 and 4080 the several replies and defences to counterclaims were filed, but again I do not think it is necessary to make reference to them nor to the various amendments to the pleadings carried out at various times save in respect of those to Ha's Statement of Claim in 581 and this I shall do later.

Vol. I P.95-97

40. The chronology continues with a summons being taken out on the 19th December by Neptune and Lucinda to dismiss 581 and/or to vacate the lis pendens. On the 21st December Tsai took out a summons to strike cut 581 and/or to vacate the lis pendens.

41. Upon these summons Mr. Registrar Blackwell made an order dated the 5th May 1980 dismissing 581 as against Tsai, Neptune and Lucinda with costs and further ordered the vacation of the lis pendens.

42. There were apparently no written reasons for these orders striking a plaintiff from the judgment seat.

Vol. I P.105

43. Ha promptly took out a summons to stay the vacation of the lis pendens pending appeal and an order was made in terms of that summons and dated the 9th May.

44. Notice of appeal against the decision of Mr. Registrar Blackwell was filed on the 12th May.

45. In November 1980, in 4080, Tsai, Neptune and Lucinda took out summons to strike out Likesoon's Statement of Claim in that action.

Vol. I P.110-112

46. On the 21st January 1981 Likesoon applied by summons to be added as plaintiff in 581 and to further reamend the Statement of Claim therein. Ha took out a summons at the same time applying to add Likesoon as plaintiff in 581 and to further reamend his Statement of Claim.

47. These further reamendments sought to raise, for the first time, trade custom, or that which has come to be called the "order paper" matter, the paragraph 7A amendment.

Vol. III P.16

48. On the 2nd, 3rd and 4th February 1981 Mayo J. heard all these matters and made, in 581, an order that : Ha's appeal against the striking out be dismissed : that the applications by Ha and Likesoon to join Likesoon as plaintiff in 581 be dismissed : and, in 4080, an order that the applications by Tsai, Neptune, Lucinda and Tani to strike out 4080 and vacate the lis pendens be dismissed.

49. This Court has now before it : in 581 : an appeal by. Ha from the dismissal of his action and the vacation of his lis pendens and a further appeal from the refusal of his application to further reamend in green - the "order paper" amendments : A Respondent's notice from Tsai dated 24th February 1981, of which items (1) and (2) do not concern us the "different case" argument was not pursued and there being now no appeal against the refusal of the joinder of Likesoon. Item (3) alleges the Statement of Claim to be unarguably bad or is otherwise frivolous, vexatious or an abuse of process. Item (4) alleges that even if amended in green it is still bad and ought to be struck out. Item (5) says that by virtue of Ha's defence in 4080 Ha has abandoned the case put forward by him in 581 and on which he originally sought to obtain summary judgment. And Item (6) says that in all the circumstances it is "just and convenient" - words used by Mayo J. in his abbreviated reasons for the orders he made on the 4th February - that the proposed action be struck out and the amendments disallowed.

Vol. I P.18

50. Also a Respondent's notice from Neptune and Lucinda desiring to contend that the orders of Mayo J. be affirmed on the additional ground that Mayo J. erred in law in coming to the conclusion that Ha had an arguable case upon which to proceed to trial. This refers to that which the Judge said in his reasons as to his being satisfied there were arguable issues on Ha's pleadings.

51. Neptune and Lucinda filed a supplemental Respondent's Notice repeating, in effect, that which Tsai's Respondent's notice had contended.

Vol. III P.1

52. In 4080 : an appeal by Tsai against the Judge's refusal of his application to dismiss Likesoon action and to vacate that lis pendens with seven grounds in support;

Vol. III P.5

an appeal by Neptune and Lucinda against the refusals of their similar applications.

53. In both these notices of appeal the no arguable case and no sufficient memorandum points are taken. There is also urged a wrongful exercise of discretion by the Judge.

54. Further an appeal by Tani also against the same refusals. That notice of appeal takes the no arguable case point.

55. I have thought fit to set out in some detail the matters, as multitudinous as the colours in Jacob's coat, which have preceded the coming on for hearing of this appeal in the hopes that by so doing at least some of the possible obscurity in that which is to follow may have light shone upon it.

56. Before us Richard Scott Q.C., John Swaine Q.C., with them K.H. Woo Esq., instructed by Tsang Chau and Shuen, appeared for Ha;

57. Denis Chang Q.C. instructed by Yung, Yu, Yuen & Co., for Tsai;

58. Charles Ching Q.C. with him David Yuen Esq., instructed by David Y.Y. Fung & Co., for Neptune and Lucinda;

59. Andrew Li Esq. with him Daniel Fung Esq., instructed by S.H. Leung & Co., for Tani;

and Richard Mills-Owens Q.C. with him R. Tang Esq., instructed by K.K. & Winston Chu & Co., for Likesoon.

60. It was agreed that We should be addressed first by Mr. Scott for Ha, then Mr. Chang for Tsai, Mr. Ching for Neptune and Lucinda, Mr. Li for Tani and Mr. Mills-Owens for Likesoon. Mr. Li, Mr. Chang and Mr. Ching then replied to Mr. Mills-Ovens and Mr. Scott replied generally. We are indebted to Counsel for the clarity and detail of the arguments which were advanced to us over a period from 7th to the 14th of October 1981.

61. I think now to be the appropriate time for me to tender my apologies, and the blame is entirely mine, for that which I recognise to be the inordinate delay in the delivery of this judgment. These apologies go not only to Counsel and their instructing solicitors but also to the parties.

62. My attention has been directed by Counsel to the principles upon which the Court acts on striking out applications. If I may encapsulate them. Striking out should only be done in plain and obvious cases, there should be no trial upon affidavit. Disputed facts are to betaken in favour of the party sought to be struck out. The claim must be obviously unsustainable, the pleadings inarguably bad and that it be impossible, not just improbable, for the case to succeed before a Court will strike out. If the Court does not think the matter to be clear beyond doubt or if it fails to be satisfied that there is no reasonable cause of action or that the proceedings are frivolous or vexatious then there should be no striking out. One must be careful not to drive a plaintiff from the judgment seat nor should the Court decide difficult points of law in proceedings such as this.

63. But that having been said if, however difficult it may be, if the issue is plain then the Court can accede to a striking out application. There lies a discretion in the Judge which discretion must of course be exercised judicially, these proceedings being interlocutory, but the discretion of the Judge can be interferred with by an Appeal Court if he is shown to be wrong in principle or that he has not given the proper weight, or no weight, to considerations which should have weighed with him or has allowed himself to be influenced by considerations which ought not to have weighed with him. These matters I bear in mind in considering the arguments advanced here.

64. The facts, as retailed to us by Mr. Scott and as emerging from various affidavits mid affirmation filed supporting the several summons, are that Ha is a broker. He knows Mr. Fong, who is effectively Likesoon, and both of them know Tsai. Ha had previously had property dealings with Tsai. In late 1978 Ha's attention was drawn to Tsai's property. There were abortive negotiations between Tsai and Fong who were brought together by Ha. Mr. Fong took the view that Tsai had gone back on an oral offer. Then negotiations were reopened but Mr. Fong was not willing to proceed with these negotiations unless Tsai committed himself in writing. This in view of past experience.

65. Ha conducted negotiations with Tsai and returned to Mr. Fong and said he had told Tsai about Mr. Fong's desire for something in writing.

66. It would seem that as a result of this there was drafted by a Mr. Wu Hon Cheung, who signed it as witness, Document 40. Tsai also signed it and it reads:

Vol. I P.40

67. Mr. Scott, as I understand him, concedes that without the annexure of a trade custom to this document he would be in some difficulty in sustaining it as a solid offer. This trade custom is contained in the "order paper" amendment and it is contended that the custom turns Document 40 into an Order Paper which gives Ha the right to accept that which is now an offer for sale for himself or for someone else.

Vol. I P.41

68. On the 23rd January Ha purports to accept - the Tsang and Chau letter - Tsai's offer for sale on the terms and conditions contained in Document 40. Ha's solicitors ask Tsai to get his solicitors to send to them all the title deeds and documents. And it is his case that the sale contract was effected when this letter reached Tsai.

69. The issues says Mr. Scott, in 581, are twofold : (1) Is there an arguable case of contract disclosed; (2) Is Ha's right to continue his suit terminated by the bringing of their action by Likesoon.

Vol. I P.29

70. He starts his attack on the dismissal of 581, and the Judge's reasons therefor, by saying that the Judge overlooked the fact that, by the denial of Ha's agency by the defendants in 4080, that that issue is still alive and that it cannot be said how the issue will be resolved until trial.

71. But in this connection it must not be forgotten that it is Ha who seeks to maintain 581 and who admits he was acting for an undisclosed principal, Likesoon, who have now brought their own action. Mr. Scott of course does say that this intervention point is a difficult point of law and he stresses that it is not a fit subject for striking out proceedings.

72. He goes on that the Judge misdirected himself in considering the effect of 4080 on Ha's right to present his own action. It is also his submission, in this context, that the cause of action relied on in 4080 is not the same as that relied on in 581.

73. As I said earlier the lis pendens in 581 is mainly what this fight is about. If 581 goes then so does Ha's priority which leaves Tani leading the field with Likesoon a distant second in the priority stakes. One of the most difficult matters for decision here is the question : if Ha was the properly constituted agent for Likesoon and if he accrues a benefit for his principal does that principal, by emerging from the shadows and instituting its own proceedings, effectively deprive itself of any such benefit? Is it to be hoisted by its own petard?

74. That there are many issues arising as to Ha's capacity and as to the construction of Document 40 cannot be in doubt. Whose agent was Ha? Was he a double agent? Could Ha accept the offer, if it be an offer, for himself? Was there a breach of duty? What was the effect of the Tsang and Chou letter? Did it constitute an agreement giving rise to a cause of action. And these matters impinge also on Likesoon action. Is it arguable, asks Mr. Scott, that Document 40 created a contract?

75. I accept that trade customs Must be reasonable, certain, known to the parties to be governed by it, capable of being annexed to a written contract so as to interpret it and not repugnant to the terns of that contract. If unreasonable it can be acted upon by an agent provided that his principal had notice of the custom at the time when he conferred his authority. Which in turn brings us back to the question: is Document 40 an offer for sale or an authority to sell?

76. If Ha was acting as Likesoon's agent, and he sues successfully, he holds the fruits of his success for Likesoon his principal. In Pople v. Evans ⁽¹⁾ the issue was raised of whether an agent for a principal, whose identity and existence are undisclosed to a third party when the agent enters into a contract with that third party is, vis-à-vis the third party, a trustee for the principal. Ungoed-Thomas J. at p.261 summarised the rights of the principal and agent on one hand and the third party on the other hand as being in an ordinary case:

"The contract may be enforced by the principal and the third party against each other (see Halsbury : Laws of England 3rd Ed. Vol. 1 1952 pares 494) and by the agent and the third party against each ether (see paras 516 and 527). The agent's rights against the third party are lost by the intervention of the principal and are subject to any settlement with the principal (para 528). ..................... The third party's rights against the principal or agent are lost by election of the third party, with full knowledge of the facts, to look exclusively to the agent or principal respectively or by judgment against the agent or the principal respectively ..........

This mere summary of itself suggests that, as a general rule, in ordinary cases, the rights and obligations of the principal vis-à-vis the third party and of the agent vis-à-vis the third party are independent rights and obligations save that the agent's rights are subordinate to those of the principal."

77. While Pople v. Evans ⁽¹⁾ bears more directly upon the intervention point it is a most useful analysis of the relationships between principals, agents and third parties and serves to underline the necessity for establishing exactly what capacity Ha had in respect of his dealings with Likesoon and Tsai. Mr. Scott says one must decide what exactly is intervention, and its quality must be inconsistent with the continuation of the agent's action before it can terminate that action. I shall come back to this.

78. Mr. Ching mounted a strong and detailed attack on the pleadings in both 581 and 4080 and submits that, if 581 goes, then so must 4080. Indeed 4080, is in an even more parlous condition than 581 for there there has been no attempt to plead custom as attaching to Document 40. He contends that Document 40 is unclear and highly ambiguous and further he is entitled to clear and ambiguous pleadings.

79. He would have it that Document 40 is not an offer to sell at all and if there is no offer then there can be no acceptance. In support of this contention he submits that the reference to commission excludes the possibility of its being an offer.

80. He makes reference to Produce Brokers Co. v. Olympia Co. ⁽²⁾ and that which Lord Atkinson had to say as to trade custom at pages 324 and 325. With great respect I would have no hesitation in adopting the following passage from those panes as setting out the true position of the importation of a trade custom into a contract :

"The language expressing a trade custom is taken to be imported into the language used by the contracting parties, whether written or verbal, because it is presumed that they had the usage in their minds when they made their contract, made it in reference to that usage and intended that the usage or custom should form part of it. If they have used language in their contract inconsistent with the custom, that is one of the most effectual ways of negativing this presumption, excluding the custom, and declaring that their contract is unaffected by it."

81. He submits custom cannot be used to clear an ambiguity and here, if the contract excludes custom, Ha cannot get to trial at all.

82. It may well be that at the end of a very long day Mr. Ching's submissions as to Ha's status, his bona fides and the matter of custom will prevail. But that day has not yet come. The harvest of the facts has not been gathered and while the existence of a custom is a matter of law the issue of law is winnowed from the harvest of the facts.

83. There being so many issues which are at the least arguable, and it not being in my judgment so plain and obvious that Ha cannot succeed once custom is annexed, if it can be, to Document 40, it cannot be said that the Judge erred in finding arguable issues on 581. Therefore on that ground I would refuse to strike out and I would not refuse the ''order paper" amendments.

84. But that is not the end of the application to strike out 551. However I think it advisable to deal now with the application to strike out 4080 before returning to the intervention point.

85. I have set out earlier the passages in the pleadings under the strongest attack. The basis of Likesoon's case is that they have an enforceable agreement and even if they have they seek to endorse 581 and to obtain benefit from it. Whether or not 581 is well founded remains, subject to the decision upon the intervention point, for the Judge at trial.

86. The issues on 4080 are first : that there is no valid cause of action disclosed on the pleadings : second that there is no sufficient memorandum to satisfy Section 5 of the Law Amendment and Reform (Consolidation) Ordinance CAP 23 : third the "agreement" relied upon is net pleaded with sufficient particularity and this is not curable by the giving of further and better particulars.

87. Mr. Li attempted to mount a two pronged attack on 4080 : first he joins Mr. Ching in saying that there is no claim in contract as against Tsai, Neptune and Lucinda. Mr. Mills-Ovens accepts that if that be so then Mr. Li's submission that there is no claim against Tani either succeeds.

88. His second prong was that there was no case pleaded against Tani in support of the claim that Tani is bound by the "agreement" if such exists at all. The taking of this second point was objected to by Mr. Mills-Owens as not being open to Mr. Li, it not having been taken before the Judge and it not being referred to in the Notice of Appeal. We thought this objection to be well founded and did not allow it to be taken before us.

89. This left the bound to fail submission and Mr. Li bases it on the proposition first : that the paragraph 6 pleading is based on Document 230 but this document, made between Mr. Fong and Ha is not a contract and does not amount to an acceptance of the Document 40 offer, if that be an offer at all and not merely an authority and that there is no offer : second that Document 40 discloses no case in contract and in this connection it must be remembered that trade custom is not pleaded in 4080 : and third that there is no sufficient memorandum, Document 230 not being signed by Ha as an agent for the person to be charged.

90. Of paragraph 7 he submits this to be couched in the alternative and it also relies on Document 40 and an acceptance by Document 230 and that it is bad for the same reasons that paragraph 6 is bad.

91. Of paragraph 8 of the 4080 pleading, which seeks to rely in the further alternative on Document 40 and the Tsang and Chau letter he relies on the attack Mr. Ching has made upon these documents and adds his own criticism.

Vol. II P.230

92. Document 230 which figures largely in 4080 is addressed to Lee On Construction Co. Ltd. and it reads:

"I recommended your company to write to Messrs. C.C. Lee & Co. (Solicitors)" - Tsai's solicitors - "to buy 10 old houses in Lockhart Road and Hennessy Road. No reply has been received to date, but the time limit is up. I am willing to immediately purchase the said houses on your company's behalf or I shall purchase the said houses first and then resell them to your company. All terms as set out in the order of the owner Tsai Kut Kan. Lest words of mouth can be no proof, this document is made as proof.

93. It is signed by Mr. Fong and dated the 23rd January 1979.

94. For myself I would have thought that before this document could be termed a document of contract there would be need of considerable and persuasive argument.

95. I would accept that Likesoon are in considerable difficulty in elevating Document 40 into a document of contract without annexing trade custom to it. Mr. Mills-Owens' point that custom is Ha's point not that of Likesoon does not avail him much, though of course he seeks to rely upon and obtain the benefit of Ha's action.

96. I would also accept that the pleadings are equivocal and further that the double agency, if such could exist at all, of Ha is in issue. Both

97. Both Mr. Scott and Mr. Mills-Owens advanced the proposition that the cause of action in 581 is different from that pleaded in 4080. But both rely on Document 40 as the root, so to speak, of the claims for specific performance. I have already held that there are arguable points arising on this document and however equivocal the pleadings in 4080 may be those points still remain for decision.

98. If Document 40 is held to be a document of contract there then falls to be considered, in 4080, what if any acceptance there has been, by whom and what constitutes it.

99. I would, and this generally applies to the striking out of both 581 and 4080 - leaving aside for a moment both the intervention point in the one and the memorandum point in the other - with respect adopt the words of Lindley L.J. in Attorney-General of the Duchy of Lancaster v. London and North Western Railway Company ⁽³⁾ - though there the English Court of Appeal had for consideration a point of law - at p.277 where he said of the then Order XXV Rule 4 :

"It appears to me that the object of the rule is to stop cases which ought not to have been launched - cases which are obviously frivolous or vexatious, or obviously unsustainable; ?

100. In an unreported decision of the English Court of Appeal - Raymond v. Seley and Hetherington ⁽⁴⁾ of which we have a transcript of the judgments - Donaldson L.J. at p.6 cited the judgment of Bowen L.J. in Lawrence v. Lord Norreys ⁽⁵⁾ where the Lord Justice, dealing with an argument that where there are triable issues of fact it is never possible to strike out a statement of claim, said :

" 'I have known many actions stayed which would have been maintainable if the allegations of fact, which were on the face of them absurd and outrageous, could by any possibility be proved. I quite agree that this power ought to be exercised with the very greatest care, that it is not for this Court on a motion of this kind to discuss the probabilities of the case which is going to be made, except so far as to see whether the case stands outside the region of probability altogether and becomes vexatious because it is impossible."'

Donaldson L.J. then sent on :

"For my part, I would echo the learned Lord Justice's remark that this is a power, the power to strike out when there are disputed questions of fact, which ought to be exercised with the very greatest care."

101. I am by no means unmindful of the cogent arguments advanced by Counsel seeking to strike out these actions nor do I entirely discount the possibility of both the actions, that maintained by Ha and the one maintained by Likesoon, being sham actions, but there are in my judgment triable issues on the facts, on the construction of documents and on the law and the pleadings are not so unarguably bad that the plaintiff should be at this stage driven from the judgment seat.

102. That being so I would refuse to strike out the Likesoon action on the first head.

103. That leaves for consideration the memorandum point. This turns on whether or not a memorandum must exist before action and if so whether its existence is a matter of law simpliciter, analogous to a limitation period, or whether it is an evidential matter. I would accept in general Mr. Mills-Owens' contention that if the memorandum point is a triable issue then in the light of Tiverton Ltd. v. Wearwell ⁽⁶⁾ it should go to trial and not be the subject of a striking out.

104. Mr. Li relies on Riches v. A.P.P. ⁽⁷⁾ for the proposition that if the point is bound to succeed then there should be a striking out.

105. The view I take is that it first has to be decided what Document 40 is and then what its effect on the remaining documents is before a decision can be come to as to the existence or non existence of sufficient memorandum. If it is an offer it could be considered a sufficient memorandum. If it is a mere authority then is Document 230 an agreement or not and is it capable of being a sufficient memorandum and what status has the Tsang and Chau letter.

106. In my judgment, in the context here, the issue of the memorandum goes to evidence and I am fortified in the view I take bywords of Collies M.R. in Fraser v. Pape ⁽⁸⁾ at 341 where he said of section 4 of the Statute of Frauds :

"Now in the first place this section of the Statute of Frauds does not go to merits, it merely deals with evidence."

107. And again, having held that there was no inherent weakness in the Statement of Claim which lay for consideration,

"As I have said the objection that the defendant may raise in his defence is one that goes purely to evidence. Though the plaintiff may not have any memorandum or note of the agreement in writing which would satisfy the Statute, yet such a memorandum or note may be in existence and until the plaintiff gets discovery it is impossible to say whether or not such a memorandum may be brought to light."

Here I would have thought it impossible to say until the several documents have been finally construed whether there is or is not a memorandum.

108. For these reasons I would refuse the application to strike out 4080.

The Intervention Point

109. To turn now to the intervention point as regards 581.

110. Likesoon have emerged as an undisclosed principal with Ha acting as their agent. Ha admits this without reservation in his defence to 4080. The defendants in 4080 deny Ha's agency, as they must if they wish to contest the validity of the documents of contract. Likesoon seeks to annex the benefits of 581 to themselves and Ha seeks to pursue it on their behalf so that the fruits of that action become the benefits of Likesoon.

111. Mr. Scott advances the argument that an intervention must be either a revocation by the undisclosed principal of the agent's right to maintain his suit, when he emerges from the shadows, or an election by that undisclosed principal to maintain his own action in place of that of his agent; or an amalgam of both.

112. Mr. Chang, and Mr. Ching adopting his argument, would have it that intervention is an aspect of privity of contract, of which revocation or election are simply instances ,which goes back to first principles.

113. Neither Counsel can draw the attention of the Court to any direct authority for their disparate propositions of law.

114. Mr. Scott emphasizes, as I have already said, that this being a difficult point of law it is not a fit matter for a striking out. If at all, it should be tried as a preliminary issue under the provisions of Order 33.

115. Boustead on Agency, 14th Edition, at p.402 says, in considering the rights of agents as against third parties :

"Where the agent is entitled to sue on the contract which he has negotiated for his principal, it seems, though there is little authority, that the principal's right is superior to that of the agent ..........." (emphasis mine)

116. Accepting that the point is difficult and that there is little authority directly upon it I think this Court, in the light of that which has transpired, to be in just as good a position to decide it as a trial Judge.

117. In this context I bear in mind the words of Lord Blackburn in Metropolitan Bank v. Pooley ⁽⁹⁾ when he said :

"It is obvious to my mind that as regards both that which was done under the common law jurisdiction of the Court and that which may be done under the more extensive jurisdiction now given to the Courts, although it should not be lightly done, yet it may often be required by the very essence of justice to be done."

118. The House of Lords was there considering the effect of the Judicature Rules of 1883 which extended, by its new Order XXV, the inherent jurisdiction of the Court to protect itself from abuse.

119. I would accept Mr. Scott's proposition, based as it is on Atkinson v. Cotesworth ⁽¹⁰⁾ that the quality of the intervention has to be such as is inconsistent with the continuation of the agent's action. There the master of a ship proceeded upon assumpsit to bring a claim for non payment of freight. Abbott C.J. at p.649, it having been argued for the defendants that when the owner intervened and desired the freight to be paid to a third person the authority of the captain was at an end, said :

"Now the charterparty entered into by the plaintiff and defendant does not specify to whom the freight was to be paid; in that respect, therefor, the case is the same as if the freight had been stipulated for by a common bill of lading. The master of a ship has no prospective lien on the freight, and cannot insist upon having it paid to himself, although payment to him in the absence of any notice by the owner to the charterer to withhold it, would be good and valid payment. For these reasons I think that this rule must be discharged."

120. Mr. Scott urges that here, where Likesoon is claiming the benefit of the suit maintained by its agent, how can they be said to have intervened so as to terminate that agent's suit.

121. It would be ludicrous, he says, for Likesoon to deliberately deprive itself of the benefit of the lis pendens. And he relies further on Sadler v. Leigh ⁽¹¹⁾ .

122. He also submits that the mere issue of a writ is not, of itself, a sufficient election because it is not necessarily an unequivocal act and such an election must be unequivocal. He cites in support Clarkson, Booker Ltd. v. Andjel ⁽¹²⁾ where the claimant having issued a writ against the undisclosed principals did not proceed with those proceedings but issued a subsequent writ against the agent, the undisclosed principals having become insolvent. It was held :

"Although the commencement of proceedings by the plaintiff against the principals was prima facie evidence of election, the issue of the writ against them was not necessarily an abandonment of the plaintiff's cause of action against the defendant, the agent; and on the facts in the present case there had not been any final election by the plaintiff to rely on the liability of the company in exoneration of the defendant."

Wilmers L.J. at p.266 said :

"In order to constitute an election which will bar the present proceedings against the defendant the decision to sue Peters & Milner Ltd. must, in the first place, be shown to have been taken with full knowledge of all the relevant facts. In the circumstances of this case I feel no difficulty on that point, for it cannot be suggested that when the plaintiffs made their decision to sue Peters & Milner Ltd. they were in any way ignorant of their rights against the defendant. Secondly, it must be shown that the decision to institute proceedings against Peters & Milner Ltd. was a truly unequivocal act, if it is to preclude the plaintiffs from subsequently suing the defendants. This, I think, involves looking closely at the context in which the decision was taken, for any conclusion must be based on a review of all the relevant circumstances."

123. Here Mr. Scott says there is no truly unequivocal act. At the very most Likesoon seek to run their claim alongside and in conjunction with Ha's claim, and the contents of their Statement of Claim, relying as he submits it does on separate causes of action, makes it clear that the act is equivocal.

124. Mr. Chang, as I have said, bases his argument on privity of contract and urges that the Court must distinguish as between the agent's right of suit and his duty to account for the fruits of his action. It is a rule of law that upon intervention by the principal the right of action of the agent ceases. Here what is lost is the right of the agent to sue upon the contract made by him by virtue of the principal asserting his right directly as against the third party thereby seeking to establish a contract as between that principal and that third party. And on this point the very absence of authority shows how basic theprincipal is.

125. Mr. Chang goes on that Likesoon prays in aid of its claim the contract made by Ha, its agent, and by making its own claim in this manner exposes the third party to direct liability to itself, if it establishes its claim. Once it does that there is intervention and the agent's action ends. Ha cannot keep 581 alive under the guise of principal. The Likesoon pleadings rely, in paragraph 8, upon a clear assertion that the contract made by Ha was not his contract at all but was that of Likesoon. They do not rely merely on Document 230 for, common to all their variations of what is an agreement, is Document 40.

126. Ha, having pleaded his acceptance of that which Likesoon say, in so doing is precluded under Order 18 Rule 10, and this despite his admissions being contained in the pleadings in another action, from resiling from those admissions in 581. And Mr. Chang says that Likesoon's intervention is so decisive that they make Ha a defendant in 4080, hence his opportunity to plead in that action.

127. Further he relies on Allen and Others v. F.O.' Hearn and Company ⁽¹³⁾ for the proposition that an agent does not hold his right of suit in trust for his undisclosed principal. Therefore he says the attempt by Likesoon to plead reliance upon this in 4080 is bad law.

128. At p.218 in Allen ⁽¹³⁾ Lord Atkin said :

"So far as the rights of the parties depend upon contract either Clarke customers were undisclosed principals in relation to the defendants, and had contractual rights of such principals, or they were not. If they were they had the right of suit for breaches of contract, or alternatively until they exercised their rights Clarke could sue : but these are ordinary legal rights. The supposed agent's rights would be to recover the damage suffered by him on the footing that he had been principal. He has no claim against the other party in the capacity of trustee : and though there have been countless actions in which an agent for undisclosed principal has sued in his own name, there appears to be no precedent for such an agent suing as trustee for his principals. What happens to the proceeds of a successful claim by such an agent is another matter. By virtue of his fiduciary relation to his principals he may have to account to them for what he receives : but this is not the concern of the other party."

129. Lord Atkin's dicta was followed in Pople v. Evans ⁽¹⁾.

130. Mr. Scott in a detailed, subtle and, if I may say so at times ingenious, reply submits that, if the privity of contract point be good law, the privity as between the third party and the agent continues despite the undisclosed principal's intervention and that intervention is irrelevant to that privity. In effect that Mr. Chang's approach is fallacious in law and Allen v. O'Hearn ⁽¹³⁾ has nothing whatsoever to do with intervention but relates to a trust form of action.

131. I accept that in 1981 election, and its base the equitable doctrine of estoppel, has progressed from 1825, through Scarff v. Jardine ⁽¹⁴⁾ in 1882 to its present day aspects of the two alternative and inconsistent rights and the election of one excluding the other. But I do not accept that this proposition removes tae possibility of intervention in the circumstances here as Mr. Scott would have it.

132. I also accept that the simple emergence of the undisclosed principal is not, of itself, enough to amount to intervention.

133. Having considered the arguments advanced, in my judgment, the tests are : did the undisclosed principal emerge : did lie institute proceedings : did he in so doing have full knowledge of all the relevant facts : was the subject matter of the agent's suit tire same as that claimed in that of the undisclosed principal when he did emerge : is a cause of action which bases the claim of the undisclosed principal the same as that basing the agent's suit even if there be, arguably, additional causes of action claimed by the undisclosed principal : was the issuing of proceedings a truly unequivocal act by the undisclosed principal and does a review of all relevant circumstances show this to be so : what rights, if any, are left in the agent after the undisclosed principal issues his proceedings : does the undisclosed principal look exclusively to the third party for his remedy, though praying in aid the acts of his agent.

134. Looking at all the circumstances here, in my judgment, Likesoon, by issuing their proceedings, effectively intervened so as to revoke Ha's right of suit and so as to remove the apparent privity of contract existing as between Ha and the third parties Apart from his commission Ha is not entitled, for himself or in his capacity as agent, to any judgment as against the third parties. He can claim his commission in separate proceedings should he so wish.

135. That being the case I would confirm the dismissal of 581 and the order vacating the lis pendens. However much Likesoon may wish, through its pleadings, to retain 581 and the benefit of the lis pendens attaching to that action, I do not think that they can succeed in so doing. It would be quite wrong for the shadow to remain to face the third parties when the substance has gone, even if this be by no means "convenient" to Likesoon.

136. The result of these appeals therefore is that Ha's appeal against dismissal of 581 and the order vacating the lis pendens fails.

137. That the defendant's several appeals as against the refusal to strike out 4080 fail.

138. That the contentions in the Respondent's notice of Neptune and Lucinda in 581 fail.

139. This judgment, the judgment of the Court, is being handed down. There sill therefore be an order nisi as to costs that costs follow the event.

(1) [1969] 1 Ch. 255

(2) [1916] A.C. 314

(3) [1892] 3 Ch. 275

(4) 1978 R. No. 2137

(5) 39 Ch. 213

(6) [1975] 1 Ch. 146

(7) [1973] 1 W.L.R. 9099

(8) [1904] 91 Law Times 340

(9) [1885] 10 Ch. 210 at 221

(10) [1825] 3 Barnewll & Cresswell 647

(11) [1815] 4 Camp. 195

(12) [1964] 3 All E.R. 260

(13) [1937] A.C. 213 (P.C.)

(14) [1882] 7 A.C. 345

Representation:

Richard Scott Esq., Q.C. and John Swaine Esq., Q.C. and K.H. Woo Esq. (Tsang, Chau and Shuen) for Francesca Ha Esq.

Denis Chang Esq., Q.C. (Yung, Yu, Yuen & Co.) for Tsai Kut Kan Esq.

Charles Ching Esq. Q.C.and David Yuen Esq. (David Y.Y. Fung & Co.) for Neptune Realty Co. Ltd. and Lucinda Garden Ltd.

Mills-Owens Esq., Q.C. and R. Tang Esq. (K.K. & Winston Chi & Co.) for Like Soon Co. Ltd.

Andrew Li Esq. and Daniel Fung Esq. (S.H. Leung & Co.) for Tani Investment Ltd.