BEHRENS NG MO CHEE CINDY AND OTHERS v. CREDIT WORLD LTD.

HCA 4404/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 4404 OF 1999

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D E C I S I O N

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The background:

1. The plaintiffs are owners of 10 of 36 similar podium flats in Grand Palisades in Taipo, which is an estate built by the defendant. They filed a statement of claim together seeking recission of their sale and purchase agreements and consequential conveyance in respect of their respective podium flats or alternatively damages for misrepresentation against the defendant. The defendant now applies to have the plaintiffs' statement of claim struck out pursuant to Order 18 rule 19 of the Rules of the High Court, Cap. 4, or alternatively pursuant to Order 15 rule 5(1) that the plaintiffs' causes of action should be prosecuted separately.

The plaintiffs' case:

2. According to the plaintiffs' pleaded case, these podium flats share a common feature in that the sitting room of each of these podium flats opens out to a continuous adjoining strip of open space which is the roof top of the car park below. The open space is carved out into 36 small plots (hereinafter referred to as "podium gardens") by dividing walls erected by the defendant so that access to each podium garden could only be made through the respective podium flat. The defendant also installed a water tap in each podium garden with a metered water source from within the respective podium flat.

3. The flats in Grand Palisades were sold by the defendant before they were completed. During the sales promotion in August 1997, a scaled model showing the podium flats, their enclosed podium gardens and dividing walls was displayed in the defendant's sales office in Tsimshatsui. Pictures of the model were printed in the sales brochures presented to intending purchasers. The price of these podium flats was higher than that of the corresponding flats immediately above.

4. The plaintiffs were told by the sales representatives in the defendant's sales office words to the effect that these podium flats were more expensive because they had podium gardens; that the podium gardens would be for the owner's exclusive use because there were no access to the podium gardens except through the podium flats, and that the podium gardens would be included in the plan but not in the assignments. Some of the plaintiffs inquired from the solicitors acting for the defendant or their common solicitors in the sale and purchase and were given similar answers.

5. The plaintiffs were given possession of the podium flats with the podium gardens and the dividing walls. In the assignments and deed of mutual covenant the podium gardens were included in the common areas of the development. Recently, the defendant announced that the podium gardens were common areas and threatened to restrict the plaintiffs' use of the podium gardens. Hence the plaintiffs instituted the present action based on the defendant's representation through the scaled model and brochure, the oral representation by its sales representatives and in some cases by its solicitors.

The issues:

6. The sale and purchase of these ten podium flats were separate transactions between different plaintiffs and the defendant. Mr Wong for the defendant applicant submitted that in order that the 18 plaintiffs may join together in one action, there are two conjunctive requirements to be satisfied under Order 15 rule 4, which provides:

"Subject to rule 5(1) two or more persons may be joined together in one action as plaintiffs or as defendants with the leave of the Court or where -

(a) if separate actions were brought by or against each of them, as the case may be, some common question of law or fact would arise in all the actions, and

(b) all rights to relief claimed in the action (whether they are joint, several or alternative) are in respect of or arise out of the same transaction or series of transactions."

Common question of law or fact:

7. The first limb of this rule had been considered by the English Court of Appeal in Payne v. Daily Sketch & Daily Graphic Ltd., [1921] KB 1. Scrutton L.J. held at p.16:

"The result of the later decisions is that you must look at the language of the rules and construe them liberally, and that where there are common questions of law or fact involved in different causes of actions you should include all parties in one action, subject to the discretion of the Court, if such inclusion is embarrassing to strike out one or more of the parties.

It is impossible to lay down any rule as to how the discretion of the Court ought to be exercised. Broadly speaking, where claims by or against different parties involve or may involve a common question of law or fact bearing sufficient importance in proportion to the rest of the action to render it desirable that the whole of the matters should be disposed of at the same time the Court will allow the joinder of plaintiffs or defendants, subject to its discretion as to how the action should be tried."

8. Mr Wong submitted that the only thing in common among the plaintiffs is the "implied" representation by means of the model but that this faded into the background in the light of the oral representations allegedly made by the different sales representatives, and in some of the cases by the solicitors acting for the defendant or their common solicitors in the sale and purchase.

9. These transactions were sale and purchase of uncompleted flats in a development under the consent scheme. Thus what was presented by the model and in the brochure must be the best evidence of what the vendor represented as the final product it was offering to sell. If the plaintiffs indeed were able to prove that this representation was operative, it is an actionable misrepresentation, although it is not the only misrepresentation: see Barton v. Armstrong, [1976] AC 104. It is therefore wrong to treat this representation as having faded into the background as Mr Wong put it.

10. Mr Wong submitted that the oral representations in the ten transactions are all different. He prepared an appendix summarising these alleged representations. I have examined the appendix as well as the schedule of representations as pleaded in the plaintiffs' statement of claim carefully. I have also outlined these representations above. All but one plaintiffs pleaded that they were told that the podium gardens were for their exclusive use. The remaining one alleged that he was told that the podium garden could only be used by the owner, which in my view, is to the same effect. The representations were all allegedly made by the defendant's sales representatives. The plaintiffs in seven of the transactions were told that the podium garden would be included in the plan but not in the assignment. The plaintiffs in two of the other three transactions were told that the podium garden would not be included in the assignment, without mentioning whether they would be included in the plan. Only the 9th plaintiff was not told of such technicalities. There may be differences in presentation and in the language used, but there exists a strong common thread among these representations, i.e. the podium gardens were intended for private or exclusive use of the respective podium flat owners but the right to exclusive use is not a right which would be or could be included in the assignments. In the light of this common thread, I do not think the minor differences in the alleged representations justify severance.

11. Mr Wong argued that whether the alleged representations were made at all will have to be considered separately and independly in each of the ten transactions. He drew support from the dicta of Keith J.A. when this matter was before the Court of Appeal, Civil Appeal No. 173 of 1999. At page 5, Keith J.A. held:

"However, if those acts (representation) are disputed by the Defendant, they will have to be proved. The judge thought that the preliminary issues could be determined on the assumption that the acts relied on would be proved. However, since the nature of the representations alleged, particularly the oral representations, depended so much on what facts are in fact proved, it was in my opinion inappropriate for the judge to order the determination of preliminary issues on what would necessarily have been hypothetical facts."

I do not seek to differ from the well considered opinion of Keith JA, which in my opinion is absolutely correct. However, there he was asked to consider whether it was appropriate to have preliminary issues framed for hearing. Of course, if there is no common finding of facts, there is no basis on which to frame the preliminary issues.

12. The matter now before me is different. The issue before me is whether there is a common question of fact or law bearing sufficient importance in proportion to the rest of the action to render it desirable that there should be a joinder of the plaintiffs. In my opinion, a common question of fact does not mean a common finding of fact so that in respect of all the plaintiffs, the finding of fact is identical. So long as the question of fact to be determined is common among the plaintiffs, the fact that the eventual outcome may be resolved differently among the plaintiffs does not mean that the question of fact is not a common one.

13. Here, the common question of fact is whether there was implied representation by the model, the brochure and the price, assuming that the oral representation by the sales representatives to the different plaintiffs were different. The installation of the water tap from a metered source from within the podium flat and the building of the partition wall by the defendant dividing the various podium gardens, if proved, will be literally "concrete" evidence supporting the allegation that the implied representations and the oral representations by the sales representatives were in fact made. All these matters together formed the common question of fact which in my opinion require identical investigation. Of course, I am not excluding the possibility that the court may resolve in favour of some of the plaintiffs and may resolve against the others. The legal effect of the deed of mutual covenant is of course a common question of law which also requires identical investigation.

14. As for the oral representations made by the sales representatives, these were made under similar circumstances, though involving different members of the sales team and may be on different dates. However, the provisional sale and purchase agreements were all signed on the same day. Even assuming that these representations do not form part of the common question of fact and would require separate investigations, I would have thought the conversation between the respective plaintiff and the sales representative during which the oral representations were made would have taken no more than a few minutes. Even if this conversation is hotly contested at trial, this issue is a proportionately small one when compared with the other common issues of fact and law requiring identical investigations. If the oral representations are proved, there will be the further common question of law as to the legal effect of the representation.

15. The defendant has not filed any defence at this stage. While I agree with Mr Wong that the defendant is entitled to have this preliminary matter dealt with first and I am not passing any criticism on the defendant, I do not have the benefit of seeing what the defences are. I can only consider the defendant's application on the basis of the plaintiffs' statement of claim and whatever likely defence I could reasonably anticipate on the basis of the plaintiffs' pleading and common sense. At this stage, it appears to me that the likely defences are one of factual denial and another one based on point of law.

16. Mr Wong referred to the possibilities that the representations, even if made, may be made without authority. If the dividing walls were built by the defendant according to the model and plan, I do not think the defence of lack of authority could be taken seriously. In any event, no defence to that effect has been filed nor has Mr Wong suggested lack of authority as the intended defence. He also referred to the possibility of a diversity of defences and/or complications raised by the difference in size among the ten podium gardens, the ten different sets of conveyancing documents, the different number of solicitors firms acting for the plaintiffs, the correspondence between the solicitors acting for the vendor and purchasers and the possibility of third party action against the solicitors then acting for the defendant in the sale and purchase. In my view, these are fanciful defences and are not what may reasonably be anticipated. But if they do arise, the matter could be addressed to at the appropriate stage.

17. The oral representation is just one aspect of the plaintiffs' case. In addition, there are the scaled model, the brochure, the taps, the dividing walls built by the defendant, the design of the podium flats with the glass doors opening into the podium gardens, the price, the conduct of the defendant and all the surrounding circumstances and the legal effect of the deed of mutual covenant. In my judgment, the commonality, i.e. the common question of law and fact, does bear sufficient importance in proportion to the rest of the action raised by the minor differences in the alleged oral representation, as to render it desirable that the whole of the matters should be disposed of at the same time. Whatever view one takes, it certainly does not justify ten separate trials requiring formal proof of all common facts and repetition of legal arguments just because of the small variance in the oral representation. In the final resort, the court's discretion must be in favour of the joinder.

Identical investigation:

18. Mr Wong submitted that the second requirement under the rule is that the transactions must involve investigations which would to a great extent be identical. The provisional sale and purchase agreements were all signed on 16 August 1967. Given the circumstances as pleaded, I have no difficulties in finding that the ten transactions and the relief sought arose out of the same set of circumstances. The common question of fact as identified above must in the circumstances invite investigations which to a great extent would be identical, though the outcome may be different for different plaintiffs.

19. There is of course, the question of relief which may vary according to the circumstances of each plaintiff, as pointed out by Keith J.A. However, this has no impact on the issue of liability and I believe could be resolved by good case management once the issue of liability is resolved in favour of the plaintiffs. As Scrutton L.J. said in Payne v. Daily Sketch & Daily Graphic Ltd., the joinder should be allowed subject to the Court's discretion as to how the action should be tried. That will have to be addressed to during pre-trial reviews after close of pleading. Of course, if the issue of liability is resolved in the defendant's favour, this problem would not arise at all. I consider that the requirement under the second limb of the rule is also satisfied.

Prejudice:

20. Mr Wong's other objection is that the defendant will suffer irredeemable prejudice unless the claims were severed because the strength of the good case would be more likely to help the bad one than vice versa. He submitted that without severance, inadmissible evidence in the form of "similar fact evidence" would be permitted to be adduced to wrongly influence the decision making process. His worry is built on the basis that the plaintiffs' claim stands or falls on the alleged oral representations by the sales representatives and that the case of each plaintiff is different. I have already analysed that the oral representations are but one aspect of the plaintiffs' case. Mr Wong's worry is therefore not justified.

21. Furthermore, it has been well accepted that a professional judge is more than capable of compartmentalising mentally the evidence relating to the different alleged oral representations made to the different plaintiffs. If Mr Wong has confidence in the same trial judge conducting sequential trials, I do not see how he can mount an argument of prejudice. I consider Mr Wong's worry not a real one.

22. The defendant's application under Order 18 rule 19 is also based on severance of the causes of action. In the eventual analysis, that application stands or falls with the alternative application under Order 15 rule 4 and 5.

Conclusion:

23. Having considered the commonality, the proportionality, the identical investigation, the likely defences open to the defendant, I am satisfied that the plaintiffs have discharged the burden of justifying the joinder under Order 15 rule 4. Accordingly, I dismiss the application with costs against the defendant.

24. I understand that the defendant is the investing arm of a well established property developer. I suggest the defendant should adopt a responsible attitude in having the differences resolved promptly, albeit through litigation, rather than to engage in time and costs wasting interlocutory proceedings of this kind. Prompt resolution is particularly important before the matter becomes complicated by third party interests and by witnesses having lost through time. Nine months have lapsed since the filing of the statement of claim by the plaintiffs, the defendant had ample time to consider its case and file its defence. Accordingly, I give direction that the defendant shall file its defence within 14 days from date hereof.

HCA 4404/99

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 4404 OF 1999

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REASONS FOR DECISION

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The eighteen Plaintiffs in this case are the owners of 11 residential units situated on the podium level of various blocks in a development called Grand Palisades in Tai Po, New Territories (the podium units). The Defendant is the nominal developer of the Grand Palisades. I am told that the real developer is actually Sino Land.

2. Each of the podium units has an open space linked to it ("the podium garden"). The shapes of the podium gardens vary and their sizes range from 300 odd to over 1,000 square feet. The Plaintiffs bought their respective podium units as uncompleted flats. According to the Amended Statement of Claim, before the Plaintiffs bought their respective podium units, the Defendant mounted a promotion campaign through newspaper advertisements and display of a scaled model of the development in its sales office. The newspaper advertisements also contain a picture of the scaled model. Both the picture and actual scaled model show the podium garden linked to the respective podium unit by an access door that can only be opened from inside the podium unit. Also, each podium garden is enclosed. The Plaintiffs aver that they were attracted by this exclusive podium garden feature.

3. Before the Plaintiffs actually acquired their respective podium units, they made enquires with either the sales staff of the Defendant or staff of solicitors handling the conveyance for the Defendant. The enquiries and responses are particularized in the Third Schedule to the Amended Statement of Claim. The responses to the enquiries are not all the same. In some cases, the response is that the owner of the podium unit would have exclusive use of the podium garden linked to the podium unit. In other cases, the owners were allegedly told that the podium garden would be "included in the plan but not included in the deed of assignment." In due course, the Plaintiff completed their purchase and entered into a deed of mutual covenant. The deed of mutual covenant defines the podium gardens as part of the common areas and facilities.

4. Whilst the Plaintiffs believe that they were entitled to exclusive use of the podium garden linked to their respective podium units, the owners of other flats in development take the view that, since the podium gardens are part of the common area or facilities, the podium gardens should be open to common use. The Owners' Committee demands, inter alia, that the enclosure walls of the podium gardens be pulled down to allow general access. The Plaintiffs, therefore, claim against the Defendant for misrepresentation and pray for rescission of the assignment.

5. The problem presented to me by the Defendant's summons is this: the case for each podium unit/podium garden is different from the others in that the alleged oral representations in the response to enquiries by the Plaintiffs concerned who were potential buyers then were not the same and/or the shapes and sizes of the podium gardens are so different. Hence the Plaintiffs should pursue their claim on per podium unit basis rather than in one action involving multiple plaintiffs. The court is invited to either strike out the Amended Statement of Claim as it is or sever the Plaintiffs' action into separate cases on per podium unit basis.

6. Mr. Wong for the Defendant relied on Order 18 rule 19(1) and Order 15 rule 5(1) of the Rules of the High Court, Cap. 4. I will not set out in full the relevant rules because both Mr. Yau for the Plaintiffs and I accepted that if the Defendant is prejudiced or embarrassed by the Plaintiffs' pleaded case as it is, there should be severance. The question is what prejudice or embarrassment there is to the Defendant? I shall try to deal with the powerful arguments advanced by counsel under separate headings.

Pleadings

7. Mr. Wong contended that because the particulars in the Third Schedule to the Amended Statement of Claim relating to the pre-contract enquiries and responses are different for each podium unit, the Defendant cannot frame its Defence. With respect, I cannot accept that. Basically, there are four types of misrepresentation pleaded by the Plaintiffs:-

(1) misrepresentation by newspaper or picture of the scaled model;

(2) misrepresentation by display of the actual scaled model;

(3) oral misrepresentation by alleged agents that the owners of the podium units would have exclusive use of the corresponding podium garden; and

(4) oral misrepresentation by alleged agents that the podium gardens would be included in the plan but not included in the deed of assignment for the corresponding podium unit.

So far as (1) and (2) are concerned, they are relied upon by all the Plaintiffs. The third type of misrepresentation is relied upon by some Plaintiffs only whilst the fourth type of misrepresentation is relied upon by others. For the last two types of misrepresentation, the Defendant may well have a schedule to their Defence to traverse specifically the particulars pleaded for each podium unit. There is no prejudice or embarrassment at all. The Defendant is free to deny, not admit or otherwise demur to each set of particulars.

Individuality

8. Mr. Wong contended that the particulars pleaded for each individual podium unit are so different that the Plaintiffs should not be joined in one action. Counsel fairly accepted that the alleged representations in the newspaper and by display of actual scaled model are common to the Plaintiffs. But he said that these pale into the background when the crucial issues are the alleged oral representations. He in effect said that the Plaintiffs cannot possibly succeed on the pleaded common representations because each of the Plaintiffs by pleading subsequent pre-contract oral enquiries admits that he or she did not rely on the earlier common representations.

9. My view was and still is that the point raised by Mr. Wong is the very sort of argument for either trial or hearing for determination of preliminary issues. I suggested that perhaps the better thing to do is to frame issues based on the common threads relied upon by the Plaintiffs and place those issues before a judge to determine as preliminary issues. Depending on the ruling of the judge dealing with the preliminary issues, either the commonality is removed as irrelevant or is accepted as relevant and then the court is in a better position to consider the question of severance. For all we know, the judge dealing with the preliminary issues may find, for instance, that even accepting every one of the four misrepresentations pleaded by the Plaintiffs as proven, the Plaintiffs' claim of exclusive right to use common area is unknown or unsustainable in law. I may add that the Plaintiffs face formidable legal obstacles because they executed the deed of mutual covenant acknowledging the podium gardens as common area despite all the earlier representations.

Evidence

10. Mr. Wong argued that a hearing for determination of preliminary issues would not be helpful, it could complicate matters, because the Defendant challenges in the very least the third and fourth types of representations alleged by the Plaintiffs. I would have thought that Mr. Wong with his reputation should know every well that at a hearing for determination of preliminary issues, the issues can be framed on the basis of putting one or the other side's case at its highest as pleaded. If on assumed proven facts, the court decides as a matter of law against the party relying on the assumed proven facts, obviously trial involving hearing of evidence is averted or shortened. If on the other hand, the court decides as a matter of law in favour of the party relying on the assumed proven facts, there is still nothing to prevent the other party to ask for trial putting the successful party in the hearing for preliminary issues to strict proof of the assumed proven facts. Really, I could not see how the Defendant can object to framing preliminary issues.

Similar fact

11. Counsel for the Defendant was concerned that some Plaintiffs will use individual instances of oral misrepresentation to strengthen the case of those Plaintiffs whose credibility or alleged misrepresentation may be doubtful. I wondered if it is a hard and fast rule that similar fact evidence is inadmissible in civil cases. Mr. Wong conceded that he cannot advocate such rule but he says that similar fact evidence is not admissible in the circumstances of this case. In the event, Mr. Yau for the Plaintiffs made it clear that the Plaintiffs will not ask the trial judge to rely on similar fact evidence. But Mr. Wong would not rest on that.

12. Mr. Wong went on to argue that if the Plaintiffs are not intending to prove a pattern of misrepresentation in an action, there is all the more reason for the action to be severed. The Plaintiffs should prove their respective case individually through separate trials even though all the trials may be heard by one judge sequentially. I thought once the Plaintiffs make it clear to the trial judge that he or she should not decide on similar fact evidence, there must be confidence in the judge to separate the evidence for each Plaintiff in a consolidated trial. The evidence in relation to oral misrepresentations, as can be seen from the Third Schedule to the Amended Statement of Claim, are easily capable of compartmentalisation. It may be argued, as indeed Mr. Wong did, that the decision of the trial judge may be coloured by similar fact evidence even though he or she conscientiously tries to separate the evidence for one Plaintiff's case from that for another. Mental gymnastics is easier said than done. But, if the risks of confusion or sub-conscious prejudice are so great, I did not understand why Mr. Wong envisaged that separate trials can be conducted by one judge sequentially.

Trial

13. According to Mr. Wong, the Plaintiffs' action should be severed. There should be a series of trials. Whatever common issues linking the cases of the Plaintiffs can be resolved at the first trial which in effect will be a test case. Then the subsequent trials will take heed of the decision in the test case on common issues and concentrate on the particular facts of each Plaintiffs' case. In my view, the test case is no better than a hearing to determine preliminary issues. The advantage of a hearing to determine preliminary issues over a test case is that at least much paperwork required for issuing multiple writs can be avoided. Moreover, having had the action severed, there is nothing to prevent the Defendant from applying for trial by different judges for speedy disposal. I cannot image the consequences should different judges come to diverse decisions on issues common to each Plaintiff's case.

14. As I saw it, the major difference in the Plaintiffs' cases lie in the part relating to alleged oral misrepresentations. These oral misrepresentations were allegedly made during very brief conversations. I should think the relevant part of each conversation cannot last more than 10 minutes. No matter how important these conversations are, surely it is not good case management to have a series of at least 11 trials each requiring formal proof of common representation by newspaper and display of scaled model and then a very short battle over oral evidence.

Costs

15. Mr. Yau submitted that in this unified action the Plaintiffs are pooling their financial resources. Split actions will force each Plaintiff to foot the entire bill of costs of a full High Court action. Some of the Plaintiffs will have difficulty in pursuing their claim due to financial difficulties. Mr. Wong counters by saying that the Plaintiffs may still retain the same set of solicitors and counsel to achieve savings. I thought the suggestion from Mr. Wong does not overcome the problem of each Plaintiff in a separate action having to repeatedly prove facts common to all of them. Indeed, I had a lurking suspicion that it is exactly on account of the costs burden on individual Plaintiffs taking separate action that the Defendant is so keen for severance.

Conclusion

16. The more I thought of it, the more I was convinced that a hearing for preliminary issues should be held. A decision on severance should not be made until the court has fully considered the significance of common issues. Even if the alleged subsequent oral misrepresentations are crucial, the court may find that those misrepresentations cannot be the basis of a recognizable right contended by the Plaintiffs. Moreover, as I have already mentioned in passing, the fact that each of the Plaintiffs has executed the deed of mutual covenant acknowledging that the podium gardens are part of the common area may be fatal to their claim, collectively or individually. In either case, it is better that the parties have judgment on decisive legal issues as soon as possible rather than stringing the unfortunate Plaintiffs along.

17. The alternative application for striking out, actually, is the corollary to severance. It is not supported by any separate ground. I did not think it merits attention on its own.

18. Accordingly, I framed the following preliminary issues.

"The legal effect of the alleged representation made in newspapers and the remedy or relief that should follow on such effect."

"The legal effect of the alleged representation made by [the display of model at the sales office of the Defendant] and the remedy or relief that should follow on such effect."

"The legal effect of the alleged oral representation that a podium flat owner would have the exclusive use of the "garden" annexed there to and the remedy or relief that should follow on such effect."

"The legal effect of the alleged oral representation that the "garden" annexed to a podium flat would be included in the building plan for the flat but not in the title deed for the flat and the remedy or relief that should follow on such effect."

19. I have already indicated in court that the issues are not meant to be exhaustive or binding upon the judge at the hearing to determine preliminary issues. He or she may well discard, add or modify the issues. The parties may also suggest additions or modifications.

20. I should also explain that the part relating to "the remedy or relief that should follow on such effect" is meant to elicit a ruling on whether the Plaintiffs should be entitled to rescission, instead of just damages, in the circumstances of the case. If rescission is not a just option in this particular case, the parties might be more inclined to settle.

Order

21. For the reasons given, I made the following order:-

(1) there be a hearing to determine preliminary issues by a judge; two days reserved;

(2) the question of severance or consolidation be reserved to the judge at the hearing to determine preliminary issues;

(3) liberty to the parties to frame additional preliminary issues;

(4) costs of the hearing before me be costs in the cause.

22. On second thought, I think it is better that the hearing to determine preliminary issues be presided by a judge other than me. I hereby direct the Listing Officer to bear this in mind.

Representation:

Mr. Albert Yau instructed by M/s Derek Wong & Co. for the Plaintiffs

Mr. Wong Yan Lung instructed by M/s Woo, Kwan, Lee & Co. for the Defendant