KWAN KWOK KI v. TANG SHING BOR AND ANOTHER

HCA 1465/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 1465 OF 2012

_______________

HCA 85/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 85 OF 2013

_______________

__________________

D E C I S I O N

__________________

1. I have before me a summons taken out by Kwan Kwok Ki (“Kwan”) seeking an order that the amendments contained in paragraphs 28(c)(ii)-(iv), 28(ca), 28(cb) and 42(ca)(ii) of the Re-Amended Consolidated Defence and Counterclaim (“Re-Amended Defence”) filed on 5 October 2016 be disallowed on the grounds that:-

(1)  the amendments are not consequential upon the amendments made by Kwan in his Amended Consolidated Statement of Claim (“Amended Statement of Claim”) filed on 28 September 2016 pursuant to paragraph 2 of the consent order dated 26 September 2016; and

(2)  Kwan has been deprived of an opportunity to sufficiently address the above amendments by way of pleadings or evidence before the commencement of the trial, thereby suffering serious prejudice.

2. The amendments being objected to came about in the following circumstances.  On 26 September 2016, a consent order was made by the court under which Kwan was given leave to file and serve his Amended Statement of Claim as per a draft attached to a consent summons, and leave was given to Tang Shing Bor (“Tang”) and Kaiser 2000 Limited (“Kaiser”) to file and serve a re-amended consolidated defence and counterclaim consequential upon the amendments made by Kwan within 7 days thereafter.

3. Kwan’s Amended Statement of Claim was filed on 28 September 2016.  Two points are of note here.  First, Kwan did not make any amendments to paragraphs 24, 25 and 42 of his existing Consolidated Statement of Claim.  Second, at the time when Tang and Kaiser signed the consent summons, they were aware of the nature of the amendments that Kwan intended to make.  They only asked for leave to make consequential amendments, but not other amendments which they might have thought would be justified or appropriate having regard to the recent discovery given by Kwan in August 2016.

4. I shall first deal with paragraph 42(ca)(ii) of the Re-Amended Defence.  Paragraph 42 of the Re-Amended Defence contains Tang and Kaiser’s answer to the plea raised in paragraph 39 of the Amended Statement of Claim, which pleads that, in reliance on an alleged proceeds-sharing arrangement (as part of the terms of the JV Agreement), Kwan had and has acted to his detriment (with certain particulars given).  By paragraph 42(ca)(ii) of the Re-Amended Defence, Tang and Kaiser seek to raise the point that they are unable to give further particulars of the profits and/or benefits that Kwan had or has already obtained (a matter already pleaded in paragraph 42(ca)(i)) by reason of Kwan’s failure to comply with a discovery order made by the court on 19 July 2016.  While that point may or may not be correct and it is possible that Ms Audrey Eu SC may be entitled to pursue it in her cross examination of Kwan, I am unable to see how paragraph 42(ca)(ii) of the Re-Amended Defence can be said to be consequential upon any amendments in the Amended Statement of Claim, in particular paragraph 39 thereof which, as earlier mentioned, was in fact not amended.

5. In so far as paragraph 28 of the Re-Amended Defence is concerned, it contains Tang and Kaiser’s answer to the pleas raised in paragraphs 24 and 25 of the Amended Statement of Claim to the effect that, pursuant to the JV Agreement, Kwan devoted time and effort for the joint venture, spending approximately 70-80% of his time and effort and consequently spending much less time than before on his other businesses.  In the paragraphs objected to, Tang and Kaiser raise, effectively, the point that Kwan and his companies have in fact received substantial management fees from the joint venture companies, and furthermore have received substantial sums (or loans) from the joint venture companies.

6. In view of the fact that paragraphs 24 and 25 of the Amended Statement of Claim have not in fact been amended, Ms Eu seeks to argue that the amendments objected to are nevertheless “consequential” because Kwan has raised, in other parts of the Amended Statement of Claim, a new allegation that Gaineer Limited is one of the joint venture companies (in addition to Wealthy Vantage Limited and Golden Field Holdings Limited).  It is, however, apparent from the contents of the amendments objected to that apart from alleged payments or loans made by Gaineer Limited, the bulk of the alleged payments or loans in fact came from Wealthy Vantage Limited and Golden Field Holdings Limited.  In my view, Mr Paul Shieh SC is correct in his submission that there is a distinction between amendments consequential upon the amendments in Kwan’s Amended Statement of Claim and those consequential upon Kwan’s discovery which is said to be late. Again, I consider that Ms Eu may be entitled to pursue the matters raised in the various paragraphs objected to in her cross examination of Kwan (subject of course to any objection which may be raised by Mr Shieh), but I do not consider that those paragraphs can properly be regarded as consequential upon the amendments in the Amended Statement of Claim.

7. In all, I would disallow the amendments in the Re-Amended Defence referred to in paragraph 1 of Kwan’s summons.

HCA 1465/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 1465 OF 2012

_______________

_______________

HCA 85/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 85 OF 2013

_______________

_______________

_______________

D E C I S I O N

_______________

INTRODUCTION

1. I have before me the following two summonses:-

(1)  a summons dated 22 May 2015 taken out by Kwan Kwok Ki (“Kwan”) seeking an order that interrogatories 1(e) and (f) without order served on him by Tang Shing Bor (“Tang”) and Kaiser 2000 Limited (“Kaiser”) on 8 May 2015 be withdrawn; and

(2)  a summons dated 9 September 2015 issued by Tang and Kaiser seeking an unless order to compel Kwan to (a) comply with the previous directions given by the court by consent for the exchange of provisional expert reports and (b) answer the interrogatories without order served on him on 8 May 2015 (including interrogatories 1(e) and (f) mentioned in (1) above).

2. At the commencement of the hearing this afternoon, I was informed by Mr Lee (for Tang and Kaiser) and Mr Lam (for Kwan) that save in relation to interrogatories 1(e) and (f), the parties had reached agreement on how to dispose of the summons of 9 September 2015.  Accordingly, the focus of this decision will be on interrogatories 1(e) and (f).

Basic facts

3. The background facts of this case are of some considerable complexity.  However, for the present purposes, it is necessary only to mention the following.

4. Kaiser, a company incorporated in Hong Kong, was at all material times and is:-

(1)  beneficially owned and controlled by Tang; and

(2)  the registered owner of the property (“the Property”) known as 297-303, Jaffe Road, Wanchai, Hong Kong, on which a 25-storeyed building (“the Building”) has been erected.

5. Kwan and Tang were at all material times and are each a 50% beneficial owner of two Hong Kong ong Kong companies known as Wealthy Vantage Limited (“Wealthy”) and Golden Field Holdings Limited (“Golden”).  These two companies were at all material times, and are, actively operated by Kwan.

6. In addition, Kwan, Tang and a third party hold 50%, 40% and 10% respectively of another Hong Kong company called Gaineer Limited (“Gaineer”).

7. It is not in dispute that Kaiser entered into a sale and purchase agreement in respect of the Property on 26 November 1999 and paid the price of HK$135,000,000 for the purchase of the Property.  At the time of that agreement, construction of the Building had not yet been completed.  It was completed in or about mid-2002 by Kaiser after its purchase of the Property.

8. Although the Property was purchased and paid for by Kaiser, Kwan alleges that in or around mid 2003, he and Tang entered into an oral joint venture agreement (“the Alleged JV Agreement”) under which, inter alia:-

(1)  Kwan and Tang would each have a half-share in the joint venture in respect of an entertainment and hotel business to be run or operated at the Property;

(2)  the Property would eventually be sold at a resale price to be agreed by Kwan and Tang, and the net profit (ie the difference between (i) the resale price and (ii) the purchase price and all expenses incidental to the resale) would be shared equally between Kwan and Tang; and

(3)  during the currency of the joint venture, in consideration of the payment by Kwan of a monthly licence fee in the sum of HK$400,000, Kaiser would grant to Kwan a licence to use and occupy the Property for the purpose of setting up, running, managing and operating an entertainment cum hotel complex at the Property.

9. According to Kwan, pursuant to the aforesaid licence, he has, since around 2004, been in possession of the Property for the purpose of operating, running and managing an entertainment cum hotel complex at the Property, and to that end has permitted Wealthy and Golden (as sub-licensees) to use and occupy different parts of the Property for operating the businesses carried on at the Property.  Further, it is Kwan’s pleaded case that Gaineer has been responsible for the management and operation of a restaurant and karaoke at the Property since December 2004.

10. Tang and Kaiser deny the Alleged JV Agreement.  It is their case that Wealthy and Golden were Kaiser’s tenants in respect of the Property pursuant to written tenancy agreements dated 12 December 2003. Notices to quit were issued by Kaiser on 5 June 2012, and the tenancy agreements of Wealthy and Golden expired on 31 December 2012.

11. By this consolidated action, Kwan seeks (inter alia) declaratory relief in respect of the Alleged JV Agreement, as well as specific performance of that agreement.  By their counterclaim, Kaiser seeks (inter alia) orders for possession of the Property against Kwan, Wealthy and Golden, as well as mesne profits from 1 January 2013 to the date of delivery up of possession of the Property.

Interrogatories 1(e) and (f)

12. It appears, from documents previously discovered by Kwan, that different parts of the Property have been sub-let or sub-licensed by Wealthy, Golden and/or Gaineer starting from around 2004. However, according Mr Lee (which is not disputed by Mr Lam) the discovery produced by Kwan is not complete in that the documents discovered relate to some floors of the Building only.

13. By interrogatories 1(a) to (f), Tang and Kaiser seek answers from Kwan in respect of the sub-tenancies or sub-licences during the period from 1 January 2004 to date, including:-

(a)  the names of the sub-tenants or sub-licensees;

(b)  the periods of their occupation;

(c)   the business names of the sub-tenants or sub-licensees;

(d)  the dates of the sub-tenancy agreements or sub-licence agreements;

(e)   the relevant rents or licence fees payable by the sub-tenants or sub-licensees; and

(f)   the actual rents or licence fees received by Wealthy, Golden and/or Gaineer.

14. Mr Lam submits that the rents or licence fees payable or actually paid by the sub-tenants or sub-licensees are not relevant to any of the remedies sought by Tang and Kaiser.  Furthermore, requesting Kwan to provide the information sought is over-burdensome and will escalate rather than save costs pursuant to Order 26, rule 1(1)(b) of the Rules of the High Court.  On the other hand, Mr Lee submits that the information sought is directed at “undermining or weakening” Kwan’s case regarding the Alleged JV Agreement, in that the rents or licence fees payable to and received by Wealthy, Golden and/or Gaineer, which would accrue to the benefit of Kwan (through his 50% shareholding in those companies), would provide sufficient compensation for his time and effort in the joint venture and there was no reason why he should, in addition, be compensated by 50% of the net profit upon the resale of the Property.

15. In my view, the information sought by Tang and Kaiser is relevant to place the whole transaction between the parties into proper context, and provide the essential background for assessing Kwan’s claim in respect of the Alleged JV Agreement.

16. Also, I note that Kwan has no objection to answering interrogatories 1(a) to (d).  That being the position, it seems to me that the answers to interrogatories 1(e) to (f) should also be provided to give a complete picture.  I do not accept Mr Lam’s submission that it would be burdensome for Kwan to provide the answers to interrogatories 1(e) to (f). Wealthy, Golden and/or Gaineer are all Hong Kong companies.  In the ordinary course of the events, the relevant information should be readily ascertainable from their books or records.

17. In all, I consider that Kwan should provide answers to interrogatories 1(e) to (f).  I shall hear the parties on the exact form of the order and on the question of costs.