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HCA 2092/2017
[2024] HKCFI 3368
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
ACTION NO 2092 OF 2017
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| BETWEEN |
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ABERDEEN RESTAURANT ENTERPRIESES LIMITED |
Plaintiff |
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AND |
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GAIN PREMIUM HOLDINGS LIMITED |
Defendant |
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| Before: |
Hon K Yeung J in Court |
| Dates of Hearing: |
23, 24, 27-29 and 31 May 2024 |
| Date of Judgment: |
29 November 2024 |
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JUDGMENT
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A. Introduction
1. By an agreement reached on 17 March 2017 (the “Agreement”) after a process of tender, the plaintiff (“P”) agreed to sell to the defendant (“D”) some 509 car parking spaces (the “Properties” or “Property” as appropriate). The Properties were within Jumbo Court (珍寶閣) (the “Jumbo Court” or the “Building” as appropriate) at No.3 Welfare Road, Aberdeen, Hong Kong on the Remaining Portion of Aberdeen Inland Lot No.368 (the “Lot”). The Agreement fell through. The disputes between the parties centre around certain debentures (the “Debentures”, holders the “Debenture Holders”) which P had issued to members of the Aberdeen Car Park Club (the “Club”) for use and occupation of 23 car parking spaces within the Building, and the nature of the Debenture Holders’ interest under the Debentures. Both parties say the other party has been in breach. P seeks principally forfeiture of the deposit paid in the total sum of HK$50,000,000 (the “Deposit”) and damages. D counterclaims for refund of the Deposit, together with loss and damage.
2. This is the trial of parties’ disputes. Mr Benjamin Yu SC leading Ms Elizabeth Cheung and Mr Shaun Elijah Tan appeared for P. Mr Edward Chan SC leading Ms Queenie WS Ng appeared for D.
B. The Properties, and the parties
3. The Properties are, as said, 509 car parking spaces within the Building. They are on 8 different floors (Lower Basement (“LB”), Basement (“B/F”), Ground Floor (“G/F”), and 1st to 5th Floors (“1/F” to “5/F”). I will set out more facts on the Properties in the latter parts of this Judgment.
4. P is a limited company incorporated under the laws of Hong Kong. Its ultimate holding company is Melco International Development Limited (“Melco”).
5. P was the developer of Jumbo Court. It was all at the material times the registered owner of the Properties (though it has subsequently sold them to a third party).
6. D is a limited company incorporated in BVI in November 2016. At times material to the present action, its sole effective owner is Mr Lin Zhiqun Brett (“Mr Lin”). He is the only shareholder of the 100% holding company of D. Mr Lin is also a director of D.
C. Background facts
7. The facts are largely not in dispute. They are however not straightforward. I set them out as follows.
C.1. THE CONDITIONS OF SALE OF THE LOT
8. As said, P was the developer of Jumbo Court. It first held the Properties under the terms of the Conditions of Sale of the Lot (No. UB 10813) (the “Government Conditions of Sale”).
9. Special Conditions 10 and 11 of the Government Conditions of Sale therein are relevant:
“(10) (a) Subject to (b) hereof, the purchaser shall not erect or cause or permit or suffer to be erected upon the lot or any part thereof any building other than a multi-storey car park (hereinafter referred to as ‘the said multi-storey car park’) which shall contain a ground floor designed and used for the purposes specified in Special Condition No. (11)(b) hereof and adequate space for the parking of not less than 500 motor vehicles as defined in the Road Traffic Ordinance together with adequate means of access and circulation space, all to be designed to the satisfaction of the Director of Public Works.
(b) In addition to the said multi-storey car park but not in substitution therefor the purchaser may erect over or above the said multi-storey car park a building of a construction and design for residential purposes.
(11) (a) Subject to (b) hereof, the said multi-storey car park shall not be used for any purpose other than for the parking of not less than 500 motor vehicles which are currently licensed under the provisions of the Road Traffic Ordinance. Not less than 80% of the total number of parking spaces provided in the said multi-storey car park shall be available or in use at all times for the parking of private cars or goods vehicles not exceeding an unladen weight of 40 cwt. as defined in the said Ordinance.
(b) Except with the prior written consent of the Director of Public Works, the ground floor of the said multi-stotey car park shall not be used for any purpose other than for the parking of omnibuses as defined in the Road Traffic Ordinance provided that a maximum of 400 square feet of the said ground floor may be used for the purposes of selling goods of a tourist nature.
(c) Save as provided in Special Condition No.(13) hereof, any building erected or to be erected over or above the said multi-storey car park or any part or parts of such building shall not he used for any purpose other than purposes.”
10. Special Condition (15) of the Government Conditions of Sale restricts the disposition of the Properties of any form except “as a whole” unless with prior written consent of the Director of Public Works.
C.2. THE SINO TENANCY, AND THE SUB-TENANCY
11. By a tenancy agreement dated 30 September 2014 (“Sino Tenancy”) executed between P and Sino Parking Services Limited (“Sino”), P as landlord agreed to let the Properties[1] to Sino for a term of 3 years commencing on 1 October 2014. The minimum annual rent was HK$4.2 million, or, where Sino’s Gross Revenue (as defined in the Sino Tenancy)[2] in the lease year exceeded HK$4.2 million, then Sino should, in addition to the minimum annual rent, pay to P 66% of the difference between the Gross Revenue and the minimum annual rent.
12. Clause 12.6 of the Sino Tenancy expressly provided that Sino shall allow all Nominated Cars to use the Small Vehicles Spaces[3] free of charge and Sino shall ensure that there are at all times not less than 100 Small Vehicle Spaces available for use by the Nominated Cars. Clause 12.1 of the Sino Tenancy defines “Nominated Cars” as inter alia[4] [5] all those Small Vehicles[6] (not exceeding 40 in number at any one time) the occupants or owners of which shall be the members of the Club.
13. By sub-tenancy agreement dated 15 December 2014 executed between Sino and Security Garage Services Limited (the “Sub-Tenancy”), Sino agreed to sub-let car parking spaces Nos. 1-71 inclusive on 4/F to Security Garage Services Limited for a term of 3 years commencing on 1 October 2014 (the “Subleasee” and the “Subleased Permises”). Under the terms of the Sub-Tenancy, the Subleasee was required to spend not less than HK$2.5 million to build a garage and carry out repair works to 4/F.
14. The Sino Tenancy and the Sub-Tenancy were expressly mentioned under Annexure I of the Conditions (defined below).
C.3. THE CLUB, THE RULES, AND THE DEBENTURES
15. P was the proprietor and sole manager of the Club. It was founded in or around 1980. The Club was governed by the Rules of the Club[7] (“Rules”).
16. The Rules provided, inter alia,that:-
(a) Constitution: The Club is a proprietary club, of which (subject to the Rules) P (referred to as “the Company” in the Rules) are the proprietors and sole managers (Rule 3);
(b) Rule 4 specified the qualification for membership, that:
“Qualification for Membership: All persons who subscribe to the Debenture of the Company and are:-
(1) Holders of a valid proper driving licence, or
(2) Owners of a motor vehicle registered under the Road Traffic Ordinance, or
(3) Residents of the Jumbo Court at Welfare Road, Aberdeen, or
(4) Such persons as may be approved by the Company.”
(c) Facilities: P shall provide the Club with motor vehicles parking facilities on the first five storeys of the Building (Rule 5)[8];
(d) Rights and Liabilities of Members: every member of the Club shall, subject to the Rules and Bye-Laws for the time being in force, be entitled to the exclusive use and enjoyment of a unit car park or such units car park in the Building as P may approve (Rule 6)[9];
(e) Rule 9 provided, in relation to Debentures, that:
“Debenture: Every member shall, unless otherwise determined by the Company in respect of any member, subscribe for a Debenture issued by the Company, the terms and conditions of which are set out in Schedule A to these Rules.
The terms and conditions of Debenture set out in Schedule A to these Rules may from time to time be revoked, altered or added to by the Company, but not so as to revoke, alter or add to the terms and conditions of any Debenture in issue prior to the date of such revocation, alteration or addition, except with the consent in writing of the holder thereof.”
(f) Monthly Subscriptions: each member shall on the first day of each calendar month pay in respect of that month a management fee of such amount as P may from time to time in its sole discretion determine (Rule 10);
(g) Application for Membership: every person who wishes to be admitted as member shall sign a form of application for membership to be supplied by P (Rule 11);
(h) Resignation of Member: a member may resign his membership at any time by one month notice (Rule 16);
(i) Avoidance of Membership by Bankruptcy: a member adjudicated bankrupt, or who made a composition with creditors, or convicted of any indictable office shall cease to be a member (Rule 17);
(j) Expulsion of Member for Misconduct: P may expel from the Club any member whose conduct in the Properties is such as shall in its opinion be injurious to the interests of other members. A member so expelled shall forfeit all the privileges of membership and all rights against the Club (Rule 18);
(k) Amendment of Rules: The Rules may from time to time be revoked, altered or added to by P (Rule 24);
(l) Schedule A to the Rules provided for the terms and conditions of the Debentures, that, inter alia:
(i) A Debenture shall be of such principal sum as P shall in its sole discretion determine (§1);
(ii) No person shall be entitled to subscribe for a Debenture unless he is a candidate for membership of the Club (§2);
(iii) No person shall be entitled to have a Debenture transferred to him unless he is a candidate for membership of the Club (§3);
(iv) A Debenture shall be transferable only with P’s prior written consent (§5);
(v) §§7 to 9 made provisions in relation to redemption, and the position upon a member ceasing to be such, that:
“7. The holder of a Debenture shall have no right to require the Company (and the Company shall not be bound) to redeem or repay it in whole or in part.
8. The Company reserves the right at any time and from time to time to redeem and repay, upon and subject to such terms and conditions as it thinks fit, all or any of the Debentures and so that any such redemption and repayment may in respect of any one or more Debentures be a total or a partial redemption and repayment of the principal amount thereof.
9. If the holder of a Debenture ceases to be a member of the Club for any reason whatsoever he shall cease to have any rights under or in respect of such Debenture (including, in particular, any right to transfer such Debenture and any right in respect of the redemption or repayment of such Debenture or to receive payment of any monies payable on the redemption or repayment thereof) except as and to the extent that the Company may in any particular case determine, and the Company shall be at liberty to cancel such Debenture without prejudice to its right under the Rules of the Club to reissue the same.”
17. A member of the Club who had subscribed for a Debenture issued by P under the Rules of the Club (i.e. a Debenture Holder) had been allowed to use a car parking space of the Properties but was not allocated a specific car parking space.
C.4. THE TENDER, THE CONDITIONS, AND THE AGREEMENT BETWEEN THE PARTIES
18. In or around January 2017, P issued Particulars of Sale By Tender, which contained the Conditions of Sale by Tender[10] (the “Conditions”). Tenders for the purchase of the Properties were invited thereby.
19. The Conditions included the following express terms:-
(a) Condition 1(a) stated the manner in which tenders are to be made, that
“Each person desiring to purchase the [Properties] ... shall fill in and sign with his name and address on the form of tender (the “Tender”) at the end of [the Conditions] and shall send a copy of [the Conditions] together with the Tender completed and signed (all in duplicate) ... to Mayer Brown JSM (the “Vendor’s Solicitors”) ... at or before 12:00 noon on 15 March 2017 (the “close of tenders”).”
(b) Condition 2 described and defined the Properties in terms of undivided shares and “the sole and exclusive right and privilege to hold use occupy and enjoy” 509 specific car parking spaces within the Building, “AND SUBJECT ALSO to all subsisting rights and rights of way AND SUBJECT to and with the benefit of all existing lettings, leases, tenancies and licences thereof (if any).”
(c) Condition 3 stated how acceptance of tender is to be effected and communicated, that
“The person whose Tender is accepted by the Vendor shall be the purchaser (the “Purchaser”) of the [Properties] and the acceptance of the Tender (if any) shall be by way of a copy of the Tender with the Acceptance of Offer thereon (the “Vendor’s Acceptance”) signed and completed by the Vendor sent to the Purchaser by prepaid letter post to the address given in his Tender and despatched not later than 3 April 2017 (the “Vendor’s Acceptance Date”). Every prepaid letter mentioned above so sent shall be deemed to have been received in due course after it has been posted.”
(d) Condition 4 provided for the payment by the successful tenderer/purchaser of Tender Payment in the sum of HK$20,000,000, and their liabilities should they default in paying the Balance of Deposit, that:
“Each tenderer shall together with his Tender send a cashier order for a sum of HK$20,000,000.00 (the “Tender Payment”) issued by a bank licensed under the Banking Ordinance (Cap.155) and made payable to the order of the Vendor’s Solicitors, ‘Mayer Brown JSM’ (the “Vendor’s Solicitors”). In the event of any Tender in respect of the [Properties] being accepted, then, should the successful tenderer fail to pay the balance of deposit as referred to in Condition 6 below, the Tender Payment shall be absolutely forfeited, and such successful tenderer shall pay all stamp duty (if any) on the agreement constituted by the Vendor’s Acceptance (the “Agreement”) and shall keep the Vendor fully indemnified in respect thereof but without prejudice to any other rights or remedies available to the Vendor.”
(e) Condition 6(a) provided for the payment of the Balance of Deposit, that
“In the event that the Vendor shall accept a Tender the Purchaser shall, between the hours of 9:00 a.m. and 5:00 p.m. on a business day (as hereinafter defined) on or before 10 April 2017, pay to the Vendor's Solicitors, ‘Mayer Brown JSM’, a further sum which, when aggregated with the Tender Payment, will make up a deposit of 10% of the Purchase Price (as defined in the Tender), by way of cashier order in manner as stipulated in Condition 4 hereof. Upon the Purchaser paying the said balance of deposit, the Tender Payment shall be treated as part payment of the deposit for purchase of the [Properties] pursuant to [the Conditions].”
(f) Condition 7(a) provided for the payment of the balance of the Purchase Price on or before the completion date of 31 May 2017 (the “Completion Date”), that
“The Purchaser shall pay the entire balance of the Purchase Price and complete the purchase on or before 31 May 2017 (the “Completion Date”) at the office of the Vendor’s Solicitors aforesaid between the hours of 9:00 a.m. and 12:00 noon on a business day and time shall in every respect be of the essence of the contract.”
(g) Condition 8(a) provided for P’s obligations upon completion, that:
“On completion, against the payment of the balance of the Purchase Price in manner aforesaid ..., the Vendor as beneficial owner will execute an Assignment or other assurance of the [Properties] (the“Assignment”) to the Purchaser subject as hereinafter appears but otherwise free from encumbrances and thereafter deliver the same to the Purchaser ...”
(h) Condition 18 related to investigation and examination of title, that:
“All tenderers are advised that in preparing for the Tender, the Vendor has not caused the title to the [Properties] to be investigated or examined on its behalf and accordingly all tenderers should place no reliance upon the Vendor having done so. All tenderers are advised to instruct their solicitors to conduct their own searches against the [Properties] and to inspect and fully satisfy themselves as to the title to the [Properties] prior to the close of tenders and should they fail to do so they shall have no rights to raise any requisition or objection to the title subsequently or to be released from [the Conditions] or the contract hereunder or to lodge any claim against the Vendor whatsoever. A tenderer who does not conduct his own searches and cause the title deeds of the [Properties] to be inspected prior to the close of tenders shall proceed entirely at his own risk. The muniments of title in the Vendor’s possession are available for inspection and may be inspected at any time prior to the close of tenders during business hours (being 9:00 a.m. to 5:00 p.m. on a business day) at the offices of the Vendor’s Solicitors, and a tenderer who does not inspect or cause the same to be inspected on his behalf prior to the close of tenders shall proceed entirely at his own risk. The Purchaser, whether or not he shall have inspected the muniments of title prior to the close of tenders, shall be deemed to have inspected the same and to have satisfied himself in all respects with, and accepted the Vendor’s title. The Purchaser shall be deemed to have full knowledge of and to have accepted the title to the [Properties] upon submission of his Tender and no requisition or objection whatsoever in respect of the title or otherwise shall be made or raised by the Purchaser.”
(i) Condition 21 related to P’s right to give notice of termination upon the purchaser’s non-compliance of the Agreement, and the consequences of the resulting determination, that:-
“(a) Should the Purchaser fail to observe or comply with any of the terms and conditions herein contained (including without limitation any failure to pay the Purchase Price or any part thereof or to deliver the Certified Copy Presented Agreement (as defined in Condition 26(b)(ii) below) in the manner, on the date and within the time period herein stipulated or where there is any breach or contravention of Condition 8(a) hereof by the Ultimate Owner), the Vendor may (without tendering an assignment to the Purchaser) forthwith or at any time thereafter determine the contract hereunder by giving notice of termination in writing to the Purchaser or his solicitors to such effect and the Vendor shall thereupon be entitled to re-enter upon the [Properties] and repossess the same if possession shall have been given to the Purchaser free from any right or interest of the Purchaser therein and the Vendor shall be entitled to forfeit the Tender Payment and any further deposit paid to the Vendor absolutely without prejudice to any other rights and remedies of the Vendor. Upon such determination of the contract the Vendor may resell the [Properties] either as a whole or in lots and either by public auction or by tender or by private contract or partly by one and partly by another one or more of such methods subject to such stipulations as to title or otherwise as the Vendor may think fit and any increase in price on resale shall belong to the Vendor. Without prejudice to the Vendor’s right to recover the actual loss which may flow from the Purchaser’s breach of the contract, on such resale any deficiency in price (after taking into account the amount, if any, forfeited by the Vendor) shall be made good and all expenses attending such resale or attempted resale shall be borne by the Purchaser and such deficiency and expenses shall be recoverable by the Vendor from the Purchaser. Neither [the Conditions] nor the exercise by the Vendor of any right of forfeiture shall preclude or be deemed to preclude the Vendor from taking other steps or remedies to enforce the Vendor’s rights whether hereunder or otherwise or prevent the Vendor from recovering any damages which he may have suffered, including but not limited to, damages representing interest paid or lost by him by reason of the Purchaser’s failure ...
(b) Nothing in this contract shall be so construed as to prevent the Vendor from bringing an action and obtaining a decree for specific performance of the contract either in lieu of the aforesaid damages or in addition to such damages as the Vendor may have sustained by reason of the breach by the Purchaser of the contract.”
(j) Condition 23(a) concerned the tenancies, leases etc. which the Properties are sold subject to, that:
“Subject as herein provided, the [Properties are] and shall be sold subject to and with the benefit of the lettings, tenancies, sub-tenancies, leases, sub-leases, licences and occupation subsisting at the time of completion. Brief particulars of the existing lettings, tenancies, sub-tenancies, leases and licences (subject as herein provided and subject, in particular, to Conditions 23(b) and 23(c) below) are set out in Annexure I[11] for the Purchaser’s reference only. The expression “Tenancies” used in these Conditions shall mean collectively all existing lettings, tenancies, sub-tenancies, leases, sub-leases and licences of the Property and shall include, where the context permits, the lettings, tenancies, sub-tenancies, leases, sub-leases and licences entered into by the Vendor pursuant to Conditions 23(n) and (o), and the expression “Tenancy” shall be construed accordingly …”
The Sino Tenancy and the Sub-Tenancy are set out in Annexure I;
(k) Condition 23(b) contained further provisions relating to investigation and examination of title or related documents, that:
“(b) The Purchaser hereby acknowledges and agrees that the leases, sub-leases, tenancy agreements, sub-tenancy agreements, licence agreements, related guarantees (if any), and other documents (collectively, the “Tenancy Documents” and each a “Tenancy Document”) in respect of and in connection with the Tenancies are available for inspection and may be inspected at any time prior to the close of tenders during business hours (being 9:00 a.m. to 5:00 p.m. on a business day) at the offices of the Vendor’s Solicitors, and a tenderer who does not inspect or cause the same to be inspected on his behalf prior to the close of tenders shall proceed entirely at his own risk. The Purchaser, whether or not he shall have inspected the Tenancy Documents prior to the close of tenders, shall be deemed to have inspected the same prior to the close of tenders and to have satisfied himself in all respects with the Tenancies. Upon submission of his Tender, the Purchaser shall be deemed to have duly inspected and perused all Tenancy Documents and accepted fully and in all respects (and to have waived his right to any requisition or objection on) the Tenancies and all Tenancy Documents, and shall be deemed to purchase the [Properties] with full knowledge thereof, and shall take the [Properties] subject to the rights of the lessees, sub-lessees, tenants, sub-tenants, licensees and occupiers (collectively, the “tenants” and each a “tenant”) thereunder, and no requisition or objection whatsoever in respect of the Tenancies or the Tenancy Documents shall be made or raised by the Purchaser.”
(l) Condition 23(o) regulated P’s power to create new lettings, tenancies or licences prior to completion, that:
“(o) The Vendor shall be at liberty prior to completion to create new lettings, tenancies or licences in favour of such person(s), firm(s) or company(ies) as the Vendor shall see fit in respect of any portions of the Property which are or shall become vacant. However, the consent of the Purchaser to any new lettings, tenancies or licences made after the Vendor’s Acceptance shall be required (but such consent shall not be unreasonably withheld or delayed or be granted subject to unreasonable conditions). Any such new lettings, tenancies/ sub-tenancies or licences, if and when created, shall be binding on the Purchaser who will complete the purchase of the Property subject also to and with the benefit thereof and they shall be deemed to fall within the definition of the “Tenancies” for the purposes of these Conditions.”
(m) Condition 26 related to the purchaser’s obligation to pay stamp duty, their duty to deliver to P’s solicitors the Certified Copy Presented Agreement, that
“(a) All stamp duties and registration fees payable on contract constituted by Agreement and any prior agreement for sale as defined in Section 29A of the Stamp Duty Ordinance (Cap.117) (“prior agreement”) between the parties hereto in respect of the [Properties] and/or the subsequent Assignment shall be wholly paid by the Purchaser, and the Purchaser shall keep the Vendor fully indemnified in respect thereof. In the event of the consideration stated in the relevant documents between the parties hereto relating to this transaction not being accepted by the Collector of Stamp Revenue as representing the true value of the Property the excess or additional stamp duty charged in accordance with his valuation of the Property and the additional Land Registry registration fees (if any) shall be borne by the Purchaser solely and the provisions of [the Conditions] shall survive completion of the sale and purchase of the [Properties].
(b) The Purchaser shall, within the prescribed period for the stamping of the Agreement or the prescribed period for the stamping of any prior agreement, whichever shall be the first to expire,
(i) cause the Agreement and (where required by the Stamp Duty Ordinance) any prior agreement to be stamped with the stamp duty payable thereon; and
(ii) deliver to the Vendor’s Solicitors a copy of the Agreement and (where applicable) a copy of the prior agreement as so stamped or endorsed and certified as true and complete by the Purchaser’s Solicitors (the “Certified Copy Presented Agreement”).”
20. By letter dated 3 March 2017 from D’s solicitors (Messrs Terry Yeung & Lai, “TYL”) to P’s solicitors (Messrs Mayer Brown JSM, “MB”), D requested to inspect the title documents of the Properties.
21. On 6 March 2017, D through Mr Hung Chun Leung of TYL (“Mr Hung”) inspected the muniments of title of the Properties (including the Sino Tenancy) at the offices of MB. Mr Hung is a partner of TYL. There is no dispute that Mr Hung did inspect on that occasion the Sino Tenancy. There is also no dispute that he was on that occasion not provided for inspection the Rules, the Debenture, or the 28/2 Notices[12].
22. By a tender dated 15 March 2017 signed by D (the “Tender”) and sent to MB together with a copy of the Conditions and a cashier order for HK$20 million in payment of the Tender Payment, D offered to purchase from P the Properties at the sum of HK$500 million (the “Purchase Price”).
23. According to the Acceptance of Offer[13], P accepted D’s offer on 17 March 2017. The Acceptance of Offer, said by MB to have been signed and completed by P on 17 March 2017, was sent by MB to D under cover of their letter of 21 March 2017[14]. An agreement for the sale of the Properties by P to D was thereby constituted (i.e the Agreement).
24. There is some ambiguity as to the exact date when the Agreement was constituted – the date of the Acceptance of Offer, or the date of communication of the same. The only relevance of the date of constitution relates to the commencement of the period for the payment of stamp duty. In the Agreed Chronology, parties adopt the date of 17 March 2017 as the commencement date. That was also the date which Mr Chan has been using[15]. In the end, that ambiguity has no consequence. As will be seen later, whatever the deadline for payment, the stamp duty has never been paid.
25. D through TYL paid P the sum of HK$30 million on 10 April 2017. That was the balance of the 10% deposit of the Purchase Price less the Tender Payment. Deposit in the total amount of HK$50,000,000 had therefore been paid.
C.5. P’S NOTICE TO WIND UP THE CLUB, REDEMPTION OF THE DEBENTURE, AND DEBENTURE HOLDERS’ OBJECTIONS
26. On around 28 February 2017, P issued a “Notice to Debenture Holder” of even date (the “28/2 Notices”) individually to Debenture Holders of the Club to, inter alia,(i)fully redeem and repay the Debentures, (ii) serve notice on the Debenture Holders that the Club would be dissolved as from 1 April 2017, and (iii) request vacation. It stated inter alia as follows:
“We further write to formally serve notice on you that we will dissolve the Club as from 1 April 2017 (Saturday). Following our dissolution of the Club, you will cease to be a member of the Club and will no longer be entitled to enjoy the use of any of the car parking spaces and/or facilities of Jumbo Court (珍寶閣). Please vacate your car(s) bearing car plate no(s) … from the existing car parking space(s) of Jumbo Court (珍寶閣) before 1 April 2017 (Saturday) and arrange for alternative parking arrangement. If you wish to use any of the car parking spaces and/or facilities of Jumbo Court (珍寶閣) on or after 1 April 2017 (Saturday), please contact Mr. Kanis So of Sino Parking Services Limited (“Sino Parking”) … directly. Any car parking services/arrangement of Jumbo Court (珍寶閣) offered to you on or after 1 April 2017 (Saturday) will be provided by Sino Parking directly and we shall take no responsibility of such services/ arrangement.”
27. Enclosed to each of the 28/2 Notices was a cheque for the full redemption amount (the “Redemption Cheque”).
28. From around March to June 2017, there was some correspondence between MB and the Debenture Holders or their legal representatives, wherein the Debenture Holders and/or their legal representatives objected to the termination of their rights to use the car parking spaces amongst the Properties. In particular:
(a) On 30 March 2017, 17 of the Debenture Holders wrote to P[16]:
(i) They protested against the dissolution of the Club and the cessation of the provision of the parking facilities;
(ii) They said that originally, back in 1978 when they each purchased a unit within Jumbo Court, they also purchased a car parking space. The sale price was between HK$35,000 and HK$40,000 for each space. They said they paid 10% deposit for it, and that they got receipts for that;
(iii) They then stated the background which led to the formation of the Club, and their objection of its dissolution. They said that:
“2. 到了1982年，[P]告訴我們不能做車位契，原因是賣地條款中車位不能分割買賣。所以成立了一個泊車會，以會員形式擁有此車位，並保証我們有永遠泊車和自由買賣權利。當時我們的確需要車位及相信[P]的保證，要求我們用1978年購買車位的單據換成一個債權證，而這些債權證是由胡關李羅律師樓負資辦理。另外，從1982年至2017年初，均有債權證買賣交易，而這些交易，均需由 貴公司通知胡關李羅律師樓辦理，並多交HK$20.-的費用才能轉名。
3. 大約在1982年之前，貴公司並沒有要求我們繳交停車場管理費。直至1982後，至此已超過35年，當中管理費由每年HK$100.-遞升至現時HK$3,000.-
4. 直至2017年3月1日，[P]通知我們要解散泊車會，並通知我們4月1日開始便不能使用車位。並以支票方式，交回當初我們購買車位的價錢，即HK$35,000.-至HK$40,000-。特此通知貴公司對於以上貴公司之安排其17名泊車會苦主一致同意不可接受。
5. 及後至2017年3月尾的時候，我們幾經交涉，才可繼續使用車位至2017年5月31日，但這並不表示我們接受解散泊車會。而且我們強烈要求保留使用車位的權利。
6. 貴公司身為上市公司的子公司，應有誠信履行曾出的承諾與責任：恢復我們使用車位及自由買賣的權利。另外我們每年所繳交的HK$3,000-管理費，其他約500位會員是否都有繳交？” (original emphasis)
(b) Also on 30 March 2017, P issued to members of the Club a further notice[17] (the “30/3 Notices”):
“We wish to clarify that pursuant to the [Rules], we have already informed the Club members on 28 February 2017 that the Club will be dissolved on 1 April 2017 and we have delivered cheques issued by us to the Club members for redemption and repayment of the relevant Club’s Debentures. After dissolution of the Club, you are no longer entitled to any car parking right in the Jumbo Court Carpark in the capacity of a Club member. To express our sincere gratitude for your many years of support, after our friendly discussion with [Sino], Sino agrees to offer to you one (1) complimentary small vehicle car parking space for two months commencing from 1 April until 31 May 2017. If you accept the above complimentary arrangement, please liaise and fill in <Sino Parking Services Limited Application for Monthly Parking Ticket(s) Form>. If you have any question, please contact Jumbo Court Sino Parking office at … directly.”
(c) At least one Debenture Holder engaged lawyers in respect of the matters. Amongst the bundle is one letter dated 31 March 2017[18] issued by Messrs Y.T. Szeto & Co on behalf of one Debenture Holder to P. Therein it was said that “our client opposes the [28/2] Notice, and does not agree to cease its rights and interests, inter alia, to enjoy the use of any of the car parking spaces and/or facilities of Jumbo Court.” They requested P to provide to them certain documents for their further consideration;
(d) On 7 April 2017, one of the Debenture Holders Mr Law Chung Fai (“Mr Law”) issued to P a letter[19] (the “DH Letter”). He issued the same on behalf of himself and 17 other Debenture Holders (whose names were set out in a list attached to the letter). He made reference to the 28/2 Notices and the 30/3 Notices. He said that they did not accept P’s arrangements. They returned the Redemption Cheques. They reiterated that they were the Debenture Holders and they had the right to permanent use of the respective car parking spaces. The relevant paragraphs of that letter are as follows (original emphasis):
“ 我們絕不接受貴公司上述安排及手法！為表達抗議，我們現退回債權證本金支票。我們重申，作為停車場車位債權證持有人，我們擁有相關車位的永久使用權。因1978年 貴公司以當時市價出售車位業權予我們，並指1979年有入伙紙後就可使用車位，1982年時 貴公司卻通知我們因賣地條款所限，不能拆售車位，故成立「俱樂部」。在成立過程中，處理上述安排的律師行同時代表 貴公司及我們一眾小業主，貴公司當時收回了我們買車位時的收據，再換給我們一張債權證，並承諾車位可自由買賣及我們可以永久泊車。因當時我們有泊車需要，同時相信 貴公司的承諾以及律師行的專業才加入「俱樂部」。
我們強調，我們擁有相關車位的永久使用權；即使 貴公司出售車場，我們的使用權亦不受影響；在業權轉讓過程中，貴公司完全可以在買賣協議中寫明新業主必須確保我們的永久使用權。
我們的會繼續維護我們應有的權益，除了保留法律權利，我們亦會尋求政府、政黨、議員、傳媒等協助。敬請 貴公司維護公司商譽、個人信譽及保持大小業主數十年的友好關係，與我們積極商討，妥善解決爭議。”
(e) By letters of 18 April 2017 to the Debenture Holders[20] (whom P addressed therein as “已解散的Aberdeen Car Park Club 的前會員”), P stated its stance that the Debenture Holders’ position was without basis. It however notified the Debenture Holders of a special arrangement (the “Special Arrangement”) in the last paragraph, that:
“雖然如此，儘管本司看不到你們有任何理據可繼續佔用珍寶閣停車場泊車位，但考慮到你們過去多年作為該會會員與本司所建立的長久關係，本司已與現時珍寶閣停車場的經營者信和停車場管理有限公司(簡稱“信和”)作出特別安排，該會每位前會員將可享用免費私家車泊車位乙(1)個，直到2017年6 月30日止。”。
(f) On 16 May 2017, Mr Law wrote to P again[21]. He said inter alia that unless they received P’s active response within 7 days, they would lodge a formal complaint to the Lands Department.
29. It is convenient to introduce here a number of older documents which P has disclosed (which I will call the “Archival Documents”). They are Items 7 to 37 in Bundle [C1]. P’s factual witnesses do not have contemporaneous knowledge of most of them, and are not able to speak specifically about them. Their contents on the face are as follows:
(a) Documents relating to Mr Yuen Hung Kwan (“Mr Yuen”):
(i) A receipt dated 18 July 1979 issued by P to Mr Yuen, acknowledging receipt from Mr Yuen of HK$7,000 “for account of 車位兩個定金”[22];
(ii) An “Application For Membership and Debenture” dated 2 December 1980 from Mr Yuen to P’s Board of Directors[23]. The first 2 paragraphs stated (the italicized words being in manuscript):
“ I wish to apply for membership in [the Club] and if admitted, I will be absolutely bound by all present and future Rules and Bye-Laws of the Club.
I also enclose herewith a cheque for HK$63,000.- plus dep.$7000.- being payment in full for the Debenture of HK$35,000.- 35,000.-in [P] and I hereby apply and request you to issue such Debenture to me subject to the terms and conditions set out in the Schedule A of the [Rules].”
(iii) An “Official Receipt” dated 19 October 1982 issued by P to Mr Yuen acknowledging receipt from Mr Yuen of HK$35,120 for “1. HK$35,000.00 being full payment for the debenture of HK$35,000.00 in [P]. 2. HK$100.00 being full payment of entrance fee for membership of [the Club]. 3. HK$20.00 being full payment of [the Club] management fee for the 1st month”[24];
(b) Documents relating to Mascotte Industrial Associates (“Mascotte”):
(i) A received dated 9 November 1979 issued by P to Mascotte, acknowledging receipt from Mascotte of HK$7,000 “for account of 車位兩個定金”, together with a copy of the relevant payment cheque[25];
(ii) A letter of 3 December 1986 issued by Woo, Kwan, Lee & Lo (“WKLL”) to Mascotte[26]. Therein, WKLL stated that it acted for P. They then stated that:
“ We are given to understand that you have agreed to become a member of the [Club] and to subscribed a sum of HK$70,000.00 for the debenture of [P] for the exclusive use and enjoyment of two unit(s) car park in the Jumbo Court Public Car Park … We are further given to understand that you have paid a deposit of HK$7,000.00 as subscription money on or about 9/11/1979.
We are instructed to inform you that you have been appointed to become a member of the [Club]; pursuant to Rule 12 of the [Rules] …, you are requested to send to our client a sum of HK$63,120.00 being the total of the entrance fee ($100.00), first monthly management fee ($20.00) and the balance of subscription fee ($63,000.00) within the next 7 days from the date hereof, failing which our client may annual your appointment …”
(c) Debentures:
(i) 23 Debentures (certificates nos. 1-23) have also been produced[27]. Some were original issues, some were for replacements, and some were upon transfers;
(ii) The material contents of each are the same;
(iii) At the top is the P’s name and the fact that it was incorporated in Hong Kong as a public company limited by shares;
(iv) Each bears the title “ISSUE OF DEBENTURE”;
(v) For those original issues and replacement issues (other than transfers), they recited the fact that the holder (with ID card number and address) “has made an application to [P] and thereupon subscribe the sum of [the amount of subscription] for the issue to him of a Debenture in accordance with and subject to the terms and conditions contained in the said application”;
(vi) For replacement issues upon transfers, they recited the fact that the holder (with ID card number and address) “has made an application to [P] for transfer to him of the Debenture Certificate No. [ ] for the sum of [ ] in accordance with and subject to the terms and conditions contained in the said application”;
(vii) Then, each stated that:
“NOW THEREFORE THIS IS TO CERTIFY that the Holder is the holder of a Debenture in the principal sum of [ ] in [P] subject to the terms and conditions (as in effect on the date hereof) set out in the Schedule A of [the Club].”
(viii) The Debenture was then stated to be given under P’s common seal, followed by a number of signatures;
(ix) The above were materially the totality of the contents of each Debenture.
30. P says that the Club was dissolved on 1 April 2017, prior to the due completion date of the Agreement of 31 May 2017 (“Completion”). The Club’s business registration was cancelled as from 30 September 2017 upon P’s application to the Inland Revenue Department (the “IRD”) on 27 September 2017.
C.6. POST-AGREEMENT CORRESPONDENCE, REQUISITIONS, AND P’S NOTICE OF TERMINATION
31. On 12 April 2017, TYL wrote to MB and required provision of the “relevant title deeds and documents including the tenancy agreement(s)[28].
32. The date of 16 April 2017 has some significance:
(a) As mentioned above, P signed and completed the Acceptance of Offer on 17 March 2017;
(b) This is no dispute in respect of the following matters:
(i) According to the Stamp Duty Ordinance Cap 117:
(1) the applicable statutory time for stamping is 30 days after the date on which the Agreement was made;
(2) the applicable stamp duty payment in the present case is 8.5% of the Purchase Price, i.e. HK$42,500,000;
(3) penalty for late stamping is governed by section 9 of the Stamp Duty Ordinance, which shall be, depending on the time of stamping, double, 4 times or 10 times the amount of the stamp duty;
(c) According to the Agreed Chronology, the deadline for D to deliver the Certified Copy Presented Agreement under Condition 26(b) was 16 April 2017;
(d) None had been delivered by the deadline;
(e) There was no immediate request by P for compliance of Condition 26(b). As will be seen, that came later.
33. On 19 April 2017, MB provided to D various documents[29]. The Sino Tenancy and the Sub-Tenancy were amongst them. Despite provision of those documents, MB in that same letter also said “Please note that as your client has already accepted title when they submitted the tender, your client is not entitled to raise and we will not entertain any requisitions on title (if any).”
34. On 10 May 2017, MB provided to TYP the proforma assignment and proforma novation agreement for the purpose of the anticipated completion[30].
35. On 19 May 2017, TYL wrote to MB[31] and requested for the provision of 5 items (items (a) to (e)) of documents “of the Property for completion of the sale and purchase of the same.” Items (c) and (d) were respectively the original of the Sub-Tenancy with plan properly coloured, and plans annexed to the Sino Tenancy with proper colour or colour code.
36. MB replied by letter of 22 May 2017[32]. They reiterated that as D had accepted title to the Properties when they submitted the Tender, and that D was not entitled to raise and MB would not entertain any requisition. MB nonetheless dealt with the requests on a without prejudice basis (that “Without prejudice to [P’s] position above and without admission of any obligation/liability on the part of our client to produce the requested documents to your client but entirely as a gesture of goodwill”). One document was provided. Requests for provision of items (c) and (d) were still refused, on the specific basis that D was under Conditions 23(b) and (c) not entitled to raise any requisition or objection in respect of those items.
37. On 26 May 2017, MB gave TYL split cheque directions. MB further requested compliance of Condition 26(b)[33] and requested D to let them have “as soon as possible” inter alia the Certified Copy Presented Agreement “showing that the stamp duty and the penalty (if any) have been fully paid…”.
38. According to Mr Lin, on or about 26 May 2017, he discovered a poster[34] (the “Poster”) of a District Councillor posted at the lift lobby of Jumbo Court. It concerned disputes between individual owners of the Building and P over the use of car parking spaces.
39. On 28 May 2017, D itself (not through its legal advisers) wrote a Chinese letter to P[35] (“D’s 28/5 Letter”):
(a) D’s 28/5 Letter was signed by Mr Lin. It is one of the 2 letters D relies on as the requisitions it administered upon P[36];
(b) Its material contents are as follows:
“正值我司準備好樓價餘款並準備於2017年5月31日成交之時，最近才獲悉有人自稱於30多年前與 貴司簽訂了一份以debenture形式的長期租賃合同，直至本物業的地契年限完成為止。若這是屬實，這類超長租賃合同的性質，基本上與買賣無異，對本物業的整體出售構成重大的影響，但竟然在土地註冊署及有關招標文件，均沒有披露。
據我司初步瞭解，應該有24個停車位涉及上述情況，而民主黨南區區議員徐遠華更主動聯繫這批於1980年購買了由“香港仔飲食企業有限公司”發行的停車位債券的持有人，為 貴司單方面結束“香港仔停車場俱樂部”並只退回當年有關費用而不作任何補償，提供法律意見及聯合所有涉及人士商討一切追討對策。有些受影響的人士更聲言不會交回有關停車位的使用權及會採取所有行動去保衛他們的權益，包括向政黨及傳媒求助及阻止我們收樓等等。
我司是首次在香港投資地產，不想涉及這麼複雜的形勢。原本我司已準備好於2017年5月31日成交，但希望 貴司在成交前證明已解決上述爭議，以免影響我司的合法權益。”
40. By letter from MB to TYL dated 31 May 2017[37] (“1st MB Letter”), P replied to D’s 28/5 Letter as follows:
“1. The persons alleging interest in these car parking spaces (a total of 24 according to [D’s 28/5] Letter) have never acquired any land interest in the car parking spaces. They were only entitled to use these car parking spaces in the past through their capacity as debenture holders and members of the [Club] which has already been dissolved as from 1 April 2017 in accordance with the Club rules.
2. The dissolved Club is a proprietary club which only entitled these persons to use these car parking spaces as members of the Club only. These ex-members had not acquired any land interest in these car parking spaces and with the dissolution of the Club, they are no longer entitled to use these car parking spaces.
3. Even for the sake of argument that these ex-Club members had acquired any land interest in these car parking spaces (which our client strongly and categorically refutes), the fact that they had not registered any instrument in the Land Registry against the Property would also render their interest to rank in priority after your client if your client had properly stamped the Conditions of Sale of the tender and registered it at the Land Registry. On this, we would like to remind your client’s obligations under Condition 26 of the Conditions of Sale as follows …[38]
4. Pursuant to Condition 26 of the Conditions of Sale, we are instructed to demand your client to provide the Certified Copy Presented Agreement … to our client upon completion of the transaction later today.”
MB also reminded D of its completion obligations under the Conditions, and warned D of P’s exercise of its right to determine the Agreement in the case of default.
41. D through TYL replied by letter dated 31 May 2017 to MB[39] (the “1st TYL Letter”):
(a) The 1st TYL Letter is the other of the 2 letters D relies on as the requisitions it administered upon P[40];
(b) D said therein, inter alia, that pursuant to the Agreement, D shall be entitled to the sole and exclusive right and privilege to hold use occupy and enjoy the Properties. It was not until recently about two days ago that D was approached by some Debenture Holders and came to know about the Debenture Holders’ claim. The existence of the debentures had not been disclosed in the tender offer documents or registered with the Land Registry. A copy of the DH Letter was enclosed for P. TYL suggested that those Debenture Holders’ claim would constitute a blot on the title to the Properties and requested P to provide evidence that all Debenture Holders have accepted to surrender their debentures before completion. D reiterated its sincerity to acquire the Properties and readiness to complete the transaction subject to the full settlement of the said debentures’ disputes;
(c) The original contents of that letter are reproduced here for ease of reference:
“We … would like to emphasis [sic.] that [D] are sincere to complete the transaction …
By the Tender Agreement, [D] shall be entitled to the sole and exclusive right and privilege to hold use occupy and enjoy all those car parks spaces as described in clause 2 under the particulars of the property.
However, it was not until recently about two days ago [D] has been approached by some holders of the debenture issued by [P] and the debenture holders invited [D] to meet with the other debenture holders together with the District Councillor. [D] has then come to know and discover that the debenture holders are entitled to a perpetual usage of the car parks spaces with each debenture. [D] further understands that there are all together 24 of such debentures issued by [P] in 1980’s. However, the existence of Debentures had not been disclosed in the Tender Offer Document nor registered with Land Registry. Enclosed please find a copy [of the DH Letter] issued by a representative of those Debenture holders who claimed to have perpetual exclusive right to use car parking spaces in Jumbo Court, content of which is self-explanatory.
As [D] was told that such debenture holders did not accept the redemption and repayment arrangement offered by [P] and they will take whatever action to protect their interests, we believe that unless all the debenture holders have accepted to surrender their lawful right under the debenture, [D] could not have undisputed and unencumbered sole and exclusive right and privilege to use occupy and enjoy the 24 car parking spaces that had been granted the perpetual usage to the debenture holders. Those Debenture holders’ claim would no doubt constitute a blot on title to the Property. It is trite law that a purchaser cannot be forced to buy a lawsuit.
For the avoidance of doubt, [D] hereby requests the Vendor to provide evidence that all the debenture holders have accepted to surrender their Debentures before completion is to take place between our respective clients.
As mentioned earlier, [D] are sincere to acquire the Property and ready to complete the transaction at any time with reasonable notice and subject to the full settlement of the captioned debentures disputes.”
42. By a second letter from MB to TYL of 31 May 2017[41] (the “2nd MB Letter”), P reiterated its position in the 1st MB Letter saying that those Debenture Holders have never acquired any land interest in those car parking spaces and D should not be concerned about that and noted that TYL failed to respond to P’s request for D to provide evidence of due stamping of the Conditions within the prescribed period. The material terms of that letter are as follows:
“Regarding the alleged dispute with the previous debenture holders and ex-members of the [Club], we are instructed to reiterate what we have already stated in our earlier letter to you these persons have never acquired any land interest in these car parking spaces and your client should not be concerned about this.
We also noted that you had not replied to our client’s request on your client to provide evidence of due stamping of the Conditions of Sale within the prescribed period. On this point, we would also like to put on record that the Conditions of Sale had not been registered at the Land Registry against the Property as revealed from our update land search this morning which suggests that there might be a breach of Condition 26 by your client.
Lastly, we are instructed that in case your client fails to complete the transaction in accordance with the Conditions of Sale by 12:00 noon on 31 May 2017 today, our client shall exercise its right under Condition 21 of the Conditions of Sale to determine the contract and forfeit the deposit paid by your client which is without prejudice to any other rights and remedies that our client has against yours under contract and at common law.”
43. D (i) did not pay the balance of the Purchase Price in the sum of HK$450 million to P between 9 am and 12 noon on or before Completion as required by Condition 7(a), and (ii) did not within the prescribed period of stamping of the Agreement (i.e. within 30 days from 17 March 2017) deliver to MB the Certified Copy Presented Agreement, as required by Condition 26(b)(ii).
44. By a letter dated 31 May 2017 from MB to TYL[42] (the “3rd MB Letter”), P gave notice of termination to D to determine the Agreement pursuant to Condition 21 on account of the breaches of the Agreement and to forfeit the deposit (the “Notice of Termination”).
45. By a second letter from TYL to MB[43] (“2nd TYL Letter”), D said that P had never disclosed to D about the debentures so issued, let alone the right of those Debenture Holders to use the relevant car parking space. D claimed that P chose not to disclose but withhold the DH Letter from D. It was P’s duty to show good title to the Properties before D was obliged to deliver the balance of the Purchase Price. D claimed that P was in fact the one who was in wrongful breach of the Conditions. D reiterated its willingness to complete the sale “provided that [P] shall have proved that the claim(s) of all those [Debenture Holders] shall have been fully settled”. P was asked to reconsider the position and to extend the completion date to a date to be agreed by parties.
46. Date of cessation/dissolution of the Club as shown in the record of the Inland Revenue Department Business Registration Office[44] was 30 September 2017.
47. In or around June 2021, P appointed Savills (Hong Kong) Limited as sales agent to sell the Properties by public tender.
48. On 15 July 2021, Nice Crown Limited (“Nice Crown”) offered by tender to purchase the Properties for HK$410.3 million. P accepted Nice Crown’s offer on 22 July 2021. On 30 September 2021, the sale and purchase was completed by an assignment of even date.
D. Parties’ further interlocutory applications
D.1. D’S APPLICATION FOR LEAVE TO AMEND
49. On 9 May 2024, D took out a summons, returnable on the first day of the trial, for leave to file its Re-Re-Amended Defence and Counterclaim (“RRA-D&C”). A number of amendments were proposed. The principal one goes to the addition of §24A. It relates to the part of P’s pleaded case that D had breached Condition 26(b). It seeks to add the defence that P has waived or lost the right to terminate by reason of P having continued to deal with D’s requisition of 19 May 2017, by demanding payment of the balance of the Purchase Price on 26 May 2017, and by purporting to answer further requisitions by letters of 31 May 2017.
50. Parties ultimately reached agreement on the same. On the first morning of the trial. I granted D the leave sought in terms of the consent summons that was placed before me that morning.
51. P has since filed a Re-Re-Amended Reply and Defence to Counterclaim (“RRA-R&DC”) to effect certain consequential amendments.
D.2. P’S APPLICATION FOR LEAVE TO FILE (1) A FURTHER WITNESS STATEMENT AND (2) SUPPLEMENTAL LIST OF DOCUMENTS
52. P intends to call 2 factual witnesses. One of them is Kwong Chi Chun, Rickie (“Mr Kwong”). Mr Kwong is the former Senior legal counsel of Melco. He has made 1 witness statement (“Kwong/WS1”). The contents therein relates to a meeting on 15 March 2017 between P’s representatives and inter alios certain members of the Club.
53. By summons of 20 May 2024, P seeks leave to file a supplement witness statement signed by Mr Kwong (“Kwong/WS2”). He seeks to produce thereby an email he circulated on 16 March 2017 which recorded the discussion during the meeting on 15 March 2017. He says that he only retrieved it upon being asked on 16 May 2024 by P’s legal advisers as to whether he had kept any contemporaneous notes of that meeting. The proposed supplemental list of documents seeks to disclose that email.
54. The email is clearly relevant to the issues before this Court. It should have been disclosed earlier had it been retrieved earlier.
55. Parties on the day before commencement of the trial also reached agreement on this summons. On the first morning of the trial, I granted P the leave sought, in terms of the consent summons that was placed before me that morning.
E. Parties’ respective cases
56. Upon disposition of the application to amend as summarised above, the current set of pleadings comprises:
(a) P’s Statement of Claim (“SOC”);
(b) D’s RRA-D&C;
(c) P’s RRA-R&DC;
(d) D/F&B#1 mentioned above;
(e) D’s Voluntary Particulars on the Amended Defence and Counterclaim of 28 October 2019 filed on 7/11/2019 (“D/F&B#2”).
57. P’s case is a straight-forward one. As summarised by Mr Yu[45]: D is in breach of the agreement by reason of its failure to comply with contractual terms requiring D to (i) pay to P the balance of the Purchase Price between 9 am and 12 noon on or before the Completion Date, and (ii) deliver a copy of the stamped agreement within the relevant prescribed period. Consequently, P exercised its rights of termination and is claiming for forfeiture of the Deposit, indemnification for stamp duties and registration fees payable, and damages.
58. D’s case, as summarised by Mr Chan[46], is to the following effects:
(a) P as vendor has an obligation to convey the sole and exclusive right and privilege to hold use occupy and enjoy the Properties to D subject to and with the benefit of inter alia the existing Sino Tenancy. P has a duty to show (and prove) good title to the Properties on completion and to give (and deliver) a good title to the Properties. D was entitled to raise requisitions despite Conditions 18 and 23. D properly did so on the claims by the Debenture Holders that they had the right to permanent use of some car parking spaces. P’s answers were inadequate and not satisfactory to remove the doubts or to made D assured that there was no real risk of litigation if D completed. D’s obligation to complete had not arisen by 12:00 of the Completion Date. P was in repudiatory breach by terminating the Agreement;
(b) Even though D was in breach in failing to stamp and supply a copy of the Certified Copy Presented Agreement within 30 days of the Agreement, P had waived the right to terminate the Agreement by continuing to perform and asking D to proceed to complete and allowing D to supply the stamped agreement on completion. As D’s obligation to complete had never arisen, P lost its right to terminate on this ground. D is hence entitled to return of the Deposit with interest, and also to damages with interest.
(c) Arising from the Special Arrangement, D pleads that it “amounts to creation of further lettings, tenancies or licences”[47], that D was not informed for it, had never given any consent, so that P gave the same in breach of Condition 23(o). It was a fundamental breach by P which would justify D’s non-completion of the purchase.
F. Absence of agreed issues
59. Parties have not been able to agree upon a list of issues. They have each put forward theirs. I have considered them. I am of the view that the following discussions adequately deal with in the round all the relevant ones put forward.
G. Factual witnesses and their evidence
60. Altogether, 4 factual witnesses have been called.
61. While not all facts are agreed, those that are not carry few material consequences. Counsel are at idem in this regard.
62. I summarise the witnesses’ factual evidence as follows.
G.1. FACTUAL WITNESSES FOR P
63. P has called as factual witness Mr Leung Hoi Wai (“Mr Leung”) and Mr Kwong. Their evidence was not subject to any significant challenge during cross-examination.
64. In respect of Mr Leung:
(a) Mr Leung has made 3 witness statements (“Leung/WS1”, “Leung/WS2” and “Leung/WS3”);
(b) Mr Leung Joined Melco in 2015. He is the Group General Counsel. He has been a director of P since June 2018;
(c) He explains the nature of the Properties, the Sino Tenancy, and how the Agreement was reached and how it fell through. He deals with the correspondence, D’s failure to deliver the Certified Copy Presented Agreement, its failure to pay the balance of the Purchase Price, and P’s issue of the Notice of Termination;
(d) In respect of the Club:
(i) He says that he has not been able to find amongst P’s records any document or material pertaining to the circumstances under which the Club was formed. Nor does he have any personal knowledge of the same. He said further that enquiry had also been made with WKLL who were P’s solicitors at the material times. He said that WKLL were not able to come up with any record. The documents which P has produced (Items 7 to 37 in Bundle [C1] principally, the material ones of which I have summarised above) are all that could be retrieved. He did not have contemporaneous knowledge of their preparation, and was not able to speak about them;
(ii) He explains that the Club was a proprietary club. P was its proprietor and sole manager. He recites the Rules. He says that since the formation of the Club, P had received applications for membership of the Club and subscription of Debentures. P had altogether issued 23 of them. Replacement Debentures had also been issued from time to time, either to replace Debentures which had been repaid or by way of transfer to new holders. P also collected management fees. He explains that members of the Club had been provided with the use and enjoyment of car park spaces of the Properties in accordance with Rule 6 of the Rules, but that the Club had not assigned to any member of the Club a specific car parking space. He says that therefore, no member of the Club had been entitled to use or enjoy any specific car parking space of the Properties;
(iii) He explains how P later issued the 28/2 Notices. He deals with the correspondence between P and some of the Debenture Holders;
(iv) He says that upon dissolution of the Club from 1 April 2017, the Club had ceased its business. The business registration of the Club obtained by P was originally valid up to 26 October 2017. P on 27 September 2017 applied to the IRD to cancel the business registration of the Club as from 30 September 2017;
(v) In respect of the Redemption Cheques, he in Leung/WS2 and Leung/WS3 explains that all had been cleared on divers dates between 15 March 2017 and 30 January 2020;
(e) During cross-examination, he was asked about the layout of certain floors of the Properties. Amongst other matters, he was asked as to whether the 4/F of the Properties was air-conditioned and luxuriously renovated, and that there was a bar gate between 3/F and 4/F. He said that those matters accorded with his understanding, though he had not visited the relevant floors.
65. In respect of Mr Kwong, he has made Kwong/WS1 and Kwong/WS2, which contents I have summarised above.
66. The evidence of Mr Leung and Mr Kwong are not inherently improbable, and does not suffers from any material inconsistence. They were not subject to any significant challenge during cross-examination. I accept the factual aspects of their evidence.
G.2. FACTUAL WITNESSES FOR D
67. D has called 2 factual witnesses: Mr Lin and Mr Hung.
68. As said above, Mr Lin is a director of D. He emigrated to Australia in 1990. He engaged in development of real estate, and invested in land, infrastructure and petrol chemicals. He started investing in real estate in China in 1992, and in Australia in 2001. He was the only person financially interested in the transaction.
69. Mr Lin has made 2 witness statements (“Lin/WS1” and “Lin/WS2”). In Lin/WS1, he describes how D decided to tender for the purchase of the Properties, how he on about 26 May 2017 saw the Poster. That led to his discovery about P’s issue of the Debentures. He says that D was willing and ready to complete the Agreement, but that P terminated the Agreement in breach of the same. In Lin/WS2, he explains how he made arrangements to finance the purchase. He discussed the purchase with Mr Fan Kwok Keung (“Mr Fan”). Mr Fan was a wealthy businessman, and was one of his best friends. Mr Fan was supportive. He and Mr Fan agreed to sign a Chinese “Loan-Guaranteed Agreement” to lend D HK$500 million (the “Loan Agreement”). But ultimately, due to the Debenture issues, he and Mr Fan agreed to withhold execution of that agreement. Ultimately it was not signed. An unsigned version was produced. Mr Fan passed away in about May 2019.
70. Mr Hung has prepared one witness statement (“Hung/WS”). He states that when he attended MB on 6 March 2017 to inspect the muniments of title of the Properties, he was not provided with any documents relating to the Club, the Rules or the Debenture Holders. He confirmed during cross-examination that he had explained to Mr Lin the relevant terms of the Government Conditions of Sale, the Sino Tenancy, and the Conditions.
71. During cross-examination, Mr Lin accepted and confirmed that Mr Hung had explained to him fully the relevant terms of the Government Conditions of Sale, the Sino Tenancy, and the Conditions. He said that he was not aware of P’s issue of the Debentures until he saw the Poster on 26 May 2017. He said that he then instructed the estate agent (周祐德, “Mr Chau”) involved in the transaction to look into the matter. One or 2 days later, Mr Chau gave him a copy each of the 28/2 Notices and the DH Letter. 26 May 2017 was a Friday. Over the weekend, he could not find Mr Hung. He wrote D’s 28/5 Letter himself. Afterwards, the matter was handled by D’s legal advisers, as the matters had become beyond his capacity.
72. There are several aspects of Mr Lin’s evidence given during cross-examination that requires specific consideration, as follows.
G.2.A THE PAYMENT OF STAMP DUTY
73. In respect of D’s obligation to pay stamp duty under the Agreement,Mr Lincon firmed that he was aware of it. During cross-examination, he said that after his successful bid, he went to the offices of the IRD at Wanchai to enquire about the payment of stamp duty. He said that he talked to a woman supervisor there. He showed her the tender documents. He asked whether he could pay the stamp duty only upon completion. He said that he was explained the penalty which could be imposed. He said he was however told that the penalty would only be imposed upon “malicious evasion” (惡意逃稅), otherwise, the IRD would only imposed interest of 8% per annum. He thought that that would only involve about HK$400,000. He made a business decision to pay stamp duty only on completion.
74. Mr Lin was not able to recall the name of the officer he talked to. He did not have a record of the same. He has not mentioned the enquiry in either of his witness statements. It is also odd that he chose to consult an officer of IRD and accepted her advice when TYL were acting for D. The explanations he said he had given were also inconsistent with the information on the prevailing guidance note promulgated by the IRD[48] (to the effect that if the delay is not deliberate, the IRD might charge instead daily interest of 14% of the amount payment divided by 365 days).
75. I have considered the evidence. I have considered Mr Yu’s submissions in this regard. I have considered the authority cited to me[49]. Mr Lin’s evidence in this regard sounds suspicious. However, his evidence, at least to the extent that he attended the office of IRD to make enquiry on payment of stamp duty, is supported by Mr Hung. Mr Hung during cross-examination said that when he asked Mr Lin to put his firm in funds for the Stamp Duty, Mr Lin told him about his enquiry with the IRD. Mr Hung said that he advised Mr Lin that the matter would be subject to the IRD’s discretion, and that there was the risk that P would enforce the terms of the Agreement on the payment of stamp duty, on delivery of the Certified Copy Presented Agreement, and might seek to forfeit the Deposit. Mr Hung’s evidence in this regard was not challenged.
76. On the evidence before me, I accept that Mr Lin did made the enquiry which he said he did. I am however not satisfied that his recollection of what he said was explained to him by the officers were correct. But importantly, whatever the explanations given to him, I find that Mr Lin was aware of D’s obligation to pay stamp duty under the Agreement,but made a business decision not to pay it until after the 30-day statutory period.
G.2.B. MR LIN’S BELIEF IN RELATION TO RENT PAYABLE FOR THE 100 PARKING SPACES RESERVED FOR THE NOMINATED CARS
77. During cross-examination, Mr Lin said that he believed that D as landlord could upon completion immediate levy rents on the 100 car parking spaces reserved for Nominated Cars. During cross-examination, Mr Hung said that he had indeed expressed to him the view that Clause 12.6 of the Sino Tenancy prohibited only the Tenant (but not the landlord) from charging. I accept on that basis that Mr Lin did hold that belief. I however do not agree with that interpretation. The Properties were sold subject to the Sino Tenancy. It did not expire until 30 September 2017. It would have remained until expiry binding on D. These matters however are not material when it comes to the resolution of the parties’ disputes in this case.
G.2.C. THE LOAN AGREEMENT
78. During cross-examination, Mr Yu challenged the commercial sense of the Loan Agreement, on the principal basis that Mr Fan would have to have the funds ready for Mr Lin to decide when to draw down, but would have nothing in return if Mr Lin ultimately decided not to. Mr Yu pointed to the letter of 23 May 2017 whereby TYL made enquiry with MB as to whether the Tender “was only awarded to our client” and that “our client is the only purchaser”. Mr Yu suggested to Mr Lin that that D was trying to get out of the purchase. Mr Lin denied that. Mr Yu also pointed out that the Loan Agreement was not mentioned in Lin/WS1 despite Mr Fan’s death in May 2019 shortly before Mr Lin filed Lin/WS1, which facts would not have escaped him (Mr Fan being one of his best friends), and despite the attempts which Mr Lin said he made in May 2019 to contact Mr Fan with the view of getting him as a witness.
79. I have considered the evidence. Agreements between friends may not always make full commercial sense. Whether the Loan Agreement made any commercial sense involved various factors (like the nature of the funds, whether they were facilities or cash, their otherwise use etc) which may need to be investigated with Mr Fan. He has however passed away. As to why the Loan Agreement was not mention in Lin/WS1, Mr Chan informed me that the subsequent deemed need to deal with the question of financing was triggered by an interlocutory application which papers are not before this Court. I have nothing to doubt that.
80. On the evidence, I am prepared to accept that Mr Lin had in fact had the Loan Agreement lined up ready to finance the purchase upon completion.
G.2.D. OVERALL ASSESSMENT OF D’S FACTUAL WITNESSES
81. I have considered all the relevant evidence. I accept that Mr Hung is an honest and reliable witness.
82. There are aspects of Mr Lin’s evidence which are unreliable. But overall, I am prepared to find that he has endeavored to tell this Court what he could recall.
H. The expert witnesses
83. 2 expert witnesses have been called:
(a) P’s expert is Mr Charles C.K. Chan (“Mr C Chan”). He is from Savills Valuation and Professional Services Ltd. He has prepared one expert report dated 17 January 2020 (“Chan/Report”);
(b) D’s expert is Dr Wong Tsz Choi (“Dr Wong”). He from Albert So Surveyors Ltd. He has prepared on expert report dated 10 May 2021 (“Wong/Report”);
(c) The 2 experts have prepared a joint report dated 15 October 2021 (“JR”).
84. I find both of them to be honest witnesses. I will consider their evidence and state my findings in the latter part of this Judgement which I consider quantum.
I. Whether D was in breach of Conditions 7(a) and/or 26(b)(ii), and if so, whether P was entitled to terminate the Agreement and forfeit the Deposit
85. This is the issue which Mr Yu submits should first be considered.
86. Mr Chan does not agree. He submits that the starting issues to be considered concern the interpretation of Conditions 18 and 23(b), in particular whether P had, despite those Conditions, the obligations to show and give title, and if so, whether P had done so before the time set for Completion.
87. During the Pre-trial Review, this Court directed the parties to endeavor to agree upon a list of issues. That was intended to assist both the parties and the Court to focus on the real issues agreed to be in dispute. That was not intended to introduce further disputes between the parties for the Court to resolve.
88. In the present case, D accepts that it did not pay the stamp duty, and did not deliver the Certified Copy Presented Agreement during the agreed period. D also accepts that it did not before the time set for Completion pay the balance of the Purchase Price. Mr Yu submits that those non-compliances per se entitle P to issue the Notice of Termination.
89. On the facts, and given the way P puts its case and what D has accepted, I agree that the captioned issue should be considered first. But as I have said above, other relevant issues will later be considered in the round.
I.1. D’S NON-COMPLIANCE OF CONDITION 26(B)(II)
90. D’s non-compliances of Conditions 7(a) and 26(b)(ii) are separate non-compliances. They need to be considered separately.
91. D’s duty to comply with Condition 26(b)(ii) arose earlier in time. I consider it first.
I.1.A. THE APPLICABLE LEGAL PRINCIPLES ON WAIVER
92. Mr Chan has not cited to me any authorities.
93. Mr Yu has in this regard cited a number of authorities for this Court’s consideration:
(a) As explained by Yuen JA in Large Land Investments Ltd v Cheung Siu Kwai [2003] 1 HKLRD 313 at §15 that (with citations omitted):
“Waiver by election
15. The principles to be applied in this area of law are as follows:
(1) A waiver by election occurs:
... in the context of a binding contract, when a state of affairs comes into existence in which one party becomes entitled, either under the terms of the contract or by the general law, to exercise a right, and he has to decide whether or not to do so. His decision, being a matter of choice for him, is called in law an election …
(2) It is a prerequisite of election that the party making the election must first be aware of the facts which have given rise to the existence of his right …
(3) It may be that the party must also be aware of his legal right of affirming or rescinding the contract when there has been a repudiation by the other party… – although this aspect was not disputed and therefore not considered by the House of Lords in Motor Oil Hellas (Corinth) Refineries SA v Shipping Corp of India (The Kanchenjunga).
(4) Further, since a party who elects not to exercise a right which has become available to him is abandoning that right, he will only be held to have done so if he has so communicated his election to the other party in clear and unequivocal terms …”
(b) In BDW Trading Ltd v JM Rowe (Investments) Ltd [2011] EWCA Civ 548, Lord Justice Patten explained that not all rights to terminate a contract have the effect of putting the party with the right to rescind to an immediate election. One example the Lord Justice gave was a lease with a break clause entitling the landlord or tenant to terminate the lease after the end of part of the term. That does not have to be exercised immediately unless the lease so provides. In most cases, it will remain exercisable at any time after the right has arisen. The same principles applied to the facts of that case[50], and that whilst the claimant could have chosen to waive its right to rescind, but for that to occur, the claimant would need to have indicated the intention to abandon its right in clear and unequivocal term;
(c) BWD Trading was explained and applied by Judge Hodge QC at §92 in Wigan BC v Scullindale Global Ltd [2021] EWHC 779 (Ch) (emphasis added for ease of presentation), that:
“First, waiver by election only applies where there are mutually inconsistent rights. A right to terminate the Lease ‘at any time’ is not inconsistent with allowing the Lease to continue and treating it as on foot after the right to break has arisen (for example, to see whether the Milestone could be met, albeit late). The principle which is in operation in present circumstances is not like the situation where a party repudiates a contract and the innocent party has to elect timeously whether to affirm it or to terminate the contract by accepting the repudiation. This is made clear in the BDW Trading case itself. The question whether a party with a contractual right to rescind has waived that right by electing to affirm the contract must depend on an analysis of the terms of the particular contract and the circumstances in which the right has arisen. As in the BDW Trading case, it is difficult to see how, where the right to terminate can be exercised at any time, the Council's delay in exercising that right could ever have amounted to acting in a way inconsistent with the right. The Council did not have to choose, because the Lease said it did not have to. Furthermore, as the BDW Trading case also shows, until it exercised the right, the Council was entitled to enforce the Lease terms as much as it was also obliged to comply with its own obligations under the Lease as landlord. Secondly, it follows that it does not matter that the right to break was only exercised 16 months’ after the Milestone date unless, in the meantime, the Council had, by clear and unequivocal communication to Scullindale, made it clear that it had decided to abandon its right to terminate under the break clause. I accept these submissions.”
I.1.B. CONSIDERATION OF THE FACTS
94. I have set out the terms of Condition 26(b)(ii). The time for payment of stamp duty was 30 days from 17 March 2014. The obligation to do so was on D. The amount if paid within the statutory deadline would have been HK$42.5 million. Afterwards there would be penalty, 2 to 10 times on top depending on the degree of lateness, subject to the discretion to charge daily interest instead as described in exhibit P1. D was aware of its liability to pay stamp duty. D was also aware of its contractual duty to delivery to P within that same time frame the Certified Copy Presented Agreement. Mr Hung had given Mr Lin full advice in those regards. Mr Lin said that he had made enquiries with the Stamp Duty Office. Mr Hung had advised him of the risk, both in terms of the Stamp Duty Office’s discretion in imposing statutory penalties, and P’s option of enforcing Condition 26(b)(ii). D did not pay stamp duty by 16 April 2017, and also failed to deliver to P the Certified Copy Presented Agreement within that same time frame. Mr Lin for D made a deliberate business decision to pay stamp duty only on Completion. In the end, none had been paid.
95. As said, D does not dispute that it had failed to comply with Condition 26(b)(ii), both in terms of payment of stamp duty and delivery of the Certified Copy Presented Agreement.
96. I have set out Condition 21(a) above. Upon D’s failure to comply with any of the terms of the Agreement, P had the express contractual entitlement to issue a notice of termination. Non-compliance of Condition 26(b)(ii) was specifically mentioned therein.
97. During his oral closing submissions, Mr Chan acknowledged and accepted that if breach on D’s part of Condition 26(b)(ii) is proved, that would be the end of D’s defence on liability.
98. The only defence which D seeks to rely on is P’s alleged waiver of its entitlement to determine the Agreement, as I have summarised above. Mr Chan in his oral closing submissions called waiver D’s only “savior” in this regard.
99. I interpose one point here:
(a) Whilst Mr Chan referred waiver as D’s only savior, D has in its RRA-D&C pleads[51] that “Even if [D’s] failure to stamp the Agreement or to deliver the same to [P], did amount to a breach of the Agreement (which is denied), it was not a repudiatory breach and [P] suffered no loss and damage as a result thereof”;
(b) In my view, whether any breach of Condition 26 was a repudiatory breach is not relevant, and does not offer D any defence;
(c) The contract itself can contain provisions for discharge. This is explained by Chitty on Contracts (35th Ed., 2023) in Volume 1 §26-051, that:
“Express provision The parties may expressly provide in their contract that either or one of them is to have an option to terminate the contract. This right of termination may be exercisable upon a breach of contract by the other party or upon the occurrence or non-occurrence of a specified event other than breach, or simply at the will of the party upon whom the right is conferred. The scope of the right to terminate will depend upon the interpretation of the particular term and the principles ordinarily applicable to the interpretation of contracts are therefore applicable to the interpretation of express termination clauses.”
(d) I repeat that under Condition 21(a), upon D’s failure to comply with any of the terms of the Agreement, P had the express contractual entitlement to issue a notice of termination, and non-compliance of Condition 26(b)(ii) was specifically mentioned therein. The effect and interpretation of Condition 21(a) are clear;
(e) This is a case of the Agreement containing express provisions for discharge. The issue as to whether the triggering event being a repudiatory breach or otherwise is not engaged.
100. I come back to the question of waiver. In his endeavors to establish the same, Mr Chan places reliance on the correspondence between the parties after 16 April 2017. He in the course of his opening took me through them. I have set them out above. To recap on the material ones – on 19 April 2017, MB provided to D documents which TYL on 12 April 2017 requested; on 10 May 2017, MB provided to TYL the proforma assignment and proforma novation agreement for the anticipated completion; on 22 May 2017, MB replied to TYL’s request made on 19 May 2017 for certain additional documents, and provided to D some; on 26 May 2017, MB gave TYL the split cheque directions, and requested compliance of Condition 26(b); on 31 May 2017, MB by the 1st MB Letter responded to D’s 28/5 Letter and demanded D to provide the Certified Copy Presented Agreement “upon completion of the transaction later today”. Mr Chan places particular reliance on the 1st MB Letter, and submitted that determination of the Agreement upon non-compliance with Condition 26(b) had been postponed till Completion.
101. It is important to note that under Condition 21(a), P was entitled upon D’s non-compliance to “forthwith or at any time thereafter determine the contract hereunder by giving notice of termination”. P was not obliged to make any option immediately.
102. In my view, the reasoning by Judge Hodge QC in Wigan BC (see the bolded part of the decision as cited above) equally apply. No mutually inconsistent rights were involved here. A right to terminate the Agreement “at any time” was not inconsistent with allowing the Agreement to continue and treating it as on foot after the right to issue notice of termination had arisen (for example, to see whether D had paid the stamp duty, albeit late, in which case with penalty[52]). This is particularly so when, as submitted by Mr Yu, compliance with Condition 26 was within D’s sole knowledge and control, and P would not be in the position to verify save that it was for D to provide evidence of compliance.
103. On the facts, there is further nothing which indicated P’s intention to abandon its right to terminate the Agreement, still less having done so in “clear and unequivocal terms”. Quite the contrary in fact, and as submitted by Mr Yu which I accept:
(a) as expressly qualified in MB’s letter of 22 May 2017, TYL’s requests made by their letter of 19 May 2017 was responded to on the stated without prejudice basis and as a gesture of goodwill;
(b) as indicated by MB’s letter of 26 May 2017, compliance with Condition 26(b) remained demanded;
(c) the 1st MB Letter should be understood in context. Despite MB’s previous request, D had remained failed to comply with Condition 26(b). The 1st MB Letter was issued on Completion Date. D was reminded of its obligations under Condition 26. Condition 26 was recited in full there. D was further reminded of its completion obligations. In my view, and properly construed, the contents of the letter falls far short of any clear and unequivocal abandonment of P of its entitlement to terminate “at any time”.
I.1.C. AN ALTERNATIVE VIEW
104. Mr Yu has put forward an alternative way of analyzing the matter:
(a) In Fercometal SARL v Mediterranean Shipping Co SA, The Simona [1989] AC 788, Lord Ackner explained the effect of an unaccepted repudiation, that (805 D – F):
“… When A wrongfully repudiates his contractual obligations in anticipation of the time for their performance, he presents the innocent party B with two choices. He may either affirm the contract by treating it as still in force or he may treat it as finally and conclusively discharged. There is no third choice, as a sort of via media, to affirm the contract and yet to be absolved from tendering further performance unless and until A gives reasonable notice that he is once again able and willing to perform. Such a choice would negate the contract being kept alive for the benefit of both parties and would deny the party who unsuccessfully sought to rescind, the right to take advantage of any supervening circumstance which would justify him in declining to complete.”
(b) As put by Cockburn C.J. in Frost v Knight L.R. 7 Ex. 111, 112-113 (cited by Lord Ackner in Fercometal in p.799 F-G), the innocent party can choose to keep the contract alive, but:
“in that case he keeps the contract alive for the benefit of the other party as well as his own; he remains subject to all his own obligations and liabilities under it, and enables the other party not only to complete the contract, if so advised, notwithstanding his previous repudiation of it, but also to take advantage of any supervening circumstance which would justify him in declining to complete it.”
(c) Fercometal has been applied in Hong Kong – Chao Keh Lung v Don Xia [2004] 2 HKLRD 11 §74 per Ma JA (as he then was), that:
“I would also take the opportunity again to reiterate the point that there is no halfway situation whereby the innocent party is able to keep the contract alive and yet not perform his obligations arising thereunder. Any misconceptions in this regard arising from the case of Braithwaite v Foreign Hardwood Co [1905] 2 KB 543 (and the numerous cases that followed this decision) have now been swept away by the decision of the House of Lords in Fercometal …”
(d) Mr Yu hence submits that even if P had been in breach for having failed to show good title at a reasonable time before Completion, D had not accepted the breach, so that the Agreement remained on foot, so that P remained entitled to serve the Notice of Termination.
105. I have considered this alternative submissions. I am of the view that it is also supported by the authorities cited to me. I accept them.
I.1.D. CONCLUSION ON D’S NON-COMPLIANCE OF CONDITION 26(B)(II)
106. For the reasons set out above, I am of the view that D was in breach of Condition 26(b)(ii). That entitled P to issue a notice of termination at any time thereafter. There had been no waiver by P whether of D’s breach or P’s entitlement to serve D a notice of termination at any time thereafter. The Notice of Termination was validly served via the 3rd MB Letter.
107. I will consider below whether P had failed to show title, as alleged by D. But even if it had, for the alternative reasons set out above, P would remain have entitled to serve the Notice of Termination, and the result would remain have been the same.
108. As acknowledged by Mr Chan, this can be the end of D’s defence on liability. In deference to submissions made, and in case this Court is erroneous in reaching this conclusion, I proceed to consider the other matters raised.
I.2. D’S NON-COMPLIANCES OF CONDITION 7(A)
109. D’s case in this regard can best be understood with reference to what Mr Chan submits in §10 of his written closing, that “In consequence” of P having failed to show title by the time fixed for Completion, “D’s obligation to complete had not yet arisen by 12:00 on 31 May 2017.”
110. The question arising is this: was D’s contractual duty to pay the balance of the Purchase Price under Condition 7(a) contingent upon P having by then shown title.
111. Mr Chan submits that it was. No authority has been cited to me in his written closing.
112. Mr Yu submits that it was not. In support of that submission, Mr Yu has cited a number of authorities. As follows.
I.2.A THE APPLICABLE LEGAL PRINCIPLES
113. The general position is explained in Chitty at §25-025, that:
“Independent promises Promises are said to be independent when the obligation of one party is absolute and not conditional upon the performance by the other of his part of the bargain. Independent promises are to be contrasted with dependent promises where the obligation of one party depends upon the performance, or the readiness and willingness to perform, of the other:
‘The question whether covenants are to be held dependent or independent of each other, is to be determined by the intention and meaning of the parties as it appears on the instrument, and by the application of common sense to each particular case; to which intention, when once discovered, all technical forms of expression must give way.’
Where the promise is held to be independent, each party has their remedy on the promise made in their favour without performing their part of the contract and conversely neither party can claim to be discharged from liability on the contract by reason of the failure of the other to perform their part.”
114. There are a number of authorities which have special relevant to the issue in the present context:
(a) In Yeung Kwok Leung v Lam Cheuk Lai [1991] 2 HKLR 557[53], Godfrey J (as he then was) rejected the submissions that the purchaser’s obligation to pay the purchase money was subject to the condition precedent of the vendor having shown a good title, that (at 561E-H):
“ It was submitted to me, on behalf of the plaintiff, that it is a condition precedent to the obligation of the purchaser to pay the purchase money under this contract that the vendor shall first have shown a good title. But I am driven to conclude that there is no warrant for implying any such condition precedent into this contract. The contract provides for the balance of the purchase price to be paid on or before 22nd September 1988. It provides that time is to be of the essence of this contract in every respect. And it provides for a later date than 22nd September 1988 (or what might well turn out to be a later date) for the completion of the agreement, in the sense of ‘the final settlement of the business’.
What went wrong here was that, because the proposed mortgagee could not be satisfied in time about the powers of attorney, the plaintiff was unable to come up with the money on 22nd September 1988. Accordingly, the defendant treated the plaintiff as in breach of a fundamental term of the contract and called the contract off. It seems to me that the defendant was perfectly entitled so to do. He had a contract which provided for the payment of the balance of the purchase price on or before 22nd September 1988; and he had a purchaser who, for whatever reason, good, bad, or indifferent, understandable or not, was unable to come up with the purchase money in accordance with the contract on the relevant date.”
(b) Yeung Kwok Leung was followed and applied by Ribeiro J (as he then was) in Wong Jong King Wei v Yam Leung Kwong (HCA 21099/1998, 30 July 1999), wherein his Lordship, having cited the above passages from Leung Kwok Leung, observed at p.13 that:
“ In the present case, the fundamental ground relied on by the Plaintiffs for seeking summary relief is the failure of the Defendants to pay the deposit on 15 October 1998. Whatever doubts the Defendants may have formed as to the ultimate ability of the Plaintiffs to give good title at the end of November, they were not in law entitled in the meantime to refuse payment of the deposit when due.”
(c) In Kensland Realty Ltd v Whale View Investment Ltd (2001) 4 HKCFAR 381, the issue before the Court of Final Appeal was whether a term extending the time set for completion should be implied into a sale and purchase agreement:
(i) In that case, the Courts were concerned with the sale and purchase of a property between the confirmor and the purchaser. It provided that time was of the essence. It also gave the confirmer power to give split cheque directions. It however did not set any deadline for giving them. The confirmor gave the directions late. The purchaser was not able to deliver to the confirmer all the necessary cheques and cashier orders before the time set for completion, and was 6 minutes late in respect of 2. The vendor refused to accept them, treated the late payment as a repudiatory breach, and forfeited the deposit;
(ii) In the Court of Appeal, Keith JA held that it was appropriate to imply a 2-limbed implied term in relation to the timeous giving of a split cheque direction, in the following terms (as summarised by Bokhary PJ at :
“(i) … the Confirmor would give that [split-cheque] direction in sufficient time for the Purchaser to be able to comply with it, without undue pressure, by the deadline for completion, and
(ii) in the event of such a direction being given too late for the Purchaser to be able to comply with it, without undue pressure, by the deadline for completion, the Confirmor would grant the Purchaser such an extension of time as the Purchaser reasonably required to comply with the direction.”
(iii) In the Court of Final Appeal, Ribeiro PJ did not support the implication of the second limb, on the basis that it contradicted the express terms of the agreement. His Lordship observed in §§59 to 62 as follows:
“59. In a well-known passage, Lord Simon, expressing the majority opinion of the Privy Council, sets out the requirements for implying a term in a written contract:
… for a term to be implied, the following conditions (which may overlap) must be satisfied: (1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that ‘it goes without saying’; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract.” BP Refinery (Westernpoint) Pty Ltd v Shire of Hastings (1978) 52 ALJR 20 at p.26.
60. The fifth requirement is of importance. While room for argument exists as to how precisely the first limb of the Court of Appeal’s implied term ought to be formulated, no one doubts that some such term, importing a ‘reasonable time’ condition, must be implied. However, the second limb of the Court of Appeal’s implied term offends against Lord Simon’s fifth requirement and cannot be supported.
61. By the combined effect of cls.3 and 12, the parties expressly agreed (i) that the purchaser was bound to tender the balance on completion and, as completion was to take place between 10:00 am and 1:00 pm on 2 September, the balance was to be tendered by no later than 1:00 pm; and (ii) that time was of the essence in respect of that obligation, so that, in the absence of any supervening event excusing late tender, the vendor was entitled to treat non-observance of the time limit as a breach of an essential term entitling the vendor to rescind. To hold that the vendor was under a duty by virtue of an implied term to extend the time for completion beyond 1:00 pm and therefore under a duty to accept tender at 1:06 pm, is unsustainable since such a term contradicts the two express clauses and cannot be implied.
62. This flaw in the Court of Appeal’s reasoning wholly undermines its decision …”
I.2.B. APPLICATION TO THE FACTS
115. For the purpose of the present discussion, I assume and proceed in D’s favour that Conditions 18 and 23 did not oust P’s duty to show and prove title.
116. At §10 of his written closing, Mr Chan submits that (with emphasis added for ease of presentation):
“P’s answers to the requisition … were inadequate and not satisfactory to remove the doubts or to make D assured that there was no real risk of litigation if D should complete. In consequence D’s obligation to complete had not yet arisen by 12:00 on 31 May 2017.”
117. No legal basis has been offered for the submission that P’s alleged failure in adequately answering the requisition had led to the stated consequence.
118. Condition 7(a) set the time for payment of the balance of the Purchase Price. It provided expressly that “time shall in every respect be of the essence of the contract.”
119. There is hence no express terms that D’s obligation of the balance of the Purchase Price was contingent upon P’s satisfactory proof of title.
120. The implication of any condition precedent to that effect is inconsistent with Yeung Kwok Leung and Wong Jong King Wei discussed above.
121. A more principled approach in considering the matter may be as follows:
(a) In the Agreement, there is no express term to the effect which Mr Chan is contending;
(b) No implied term has been pleaded in the RRA-D&C;
(c) Even if one has been pleaded, the implication of such a term would contradict Condition 7(a) that “time shall in every respect be of the essence of the contract”, and hence offends against Lord Simon’s fifth requirement propounded in BP Refinery, as explained in, Kensland;
(d) The implication of such a term is also inconsistent with Yeung Kwok Leung and Wong Jong King Wei.
I.2.C. MR CHAN’S RELIANCE UPON ACTIVE KEEN
122. In the course of his oral closing submissions, this Court invited Mr Chan’s assistance on Mr Yu’s written submission under this topic.
123. Mr Chan relied on and referred to Active Keen Industries Ltd v Fok Chi-keong [1994] 1 HKLR 396, and in particular p.406 (lines 30-35), wherein Litton JA observed as follows:
“Obviously, if a purchaser raises a substantial objection as to the vendor’s title and there are facts within the vendor’s knowledge which, if revealed, might meet the objection, and the vendor chooses to withhold that from the purchaser, the vendor clearly cannot, on the day fixed for completion, turn round and say to the purchaser: ‘Now I will both show you a good title and make you good title; you pay the balance of the purchase price today or I will rescind.’ The purchaser must be given reasonable time to consider the title of the vendor and his own position; the implied obligation of showing a good title would not have been discharged by disclosure on the day fixed for completion.” (original emphasis)
124. In understanding those observations in Active Keen, as submitted by Mr Yu in the course of his oral closing submissions which I accept, appreciation of the facts are important:
(a) In Active Keen, the contract which gave rise to the dispute was an informal one. It is in that context that the term “implied obligation of showing a good title” was used in the above passage;
(b) The other factual point to note is that in Active Keen, it was the purchaser who had rescinded the agreement. It was in that context that consideration was given as to whether the purchaser, upon the vendor’s failure to show title, was entitled to do that. In the present case, D did not at any stage prior to P’s issue of the Notice of Termination purport to accept any repudiation by P. It was P, consistent with the principles and mechanics explained in Fercometal, who, while the Agreement was still on foot, exercised its contractual entitlement to serve the Notice of Termination;
(c) Active Keen is no authority for any proposition that an obligation of showing a good title would be implied into an agreement as a condition for payment.
I.2.D. CONCLUSION ON D’S NON-COMPLIANCE OF CONDITION 7(A)
125. For the reasons set out above, I am of the view that D was also in breach of Condition 7(a). D’s contractual obligation to pay the balance of the Purchase Price was not contingent upon P having satisfactorily proved or shown good title. No term to that effect can be implied into the Agreement. D’s breach entitled P under Condition 21(a) to issue a notice of termination at any time thereafter. The Notice of Termination was validly served via the 3rd MB Letter. P did so while the Agreement was on foot, before any purported acceptance by D of any breach by P (even if there had been any).
J. The construction of Conditions 18 and 23(b)
126. Again, in deference to submissions, and in case this court is erroneous in reaching the conclusions above, I proceed to consider the other issues raised.
127. The construction of Conditions 18 and 23(b) is one of them. The issue is whether they have the effect of cutting down P’s duties which it otherwise had as vendor in showing and giving title.
128. As I will explain, the construction of those conditions are entwined with the other issues that parties have raised, and in particular those issues as to the nature of any rights which the Debenture Holders might have, and whether P had knowledge of the same.
J.1. THE APPLICABLE LEGAL PRINCIPLES
129. In common law, a vendor in general has the duties to show (or prove) and give (or make) good title.
130. In De Monsa Investments Ltd v Whole Win Management Fund Ltd (2013) 16 HKCFAR 419, and with reference to MEPC Ltd v Christian-Edwards [1981] AC 205, Litton PJ explained the meaning of “good title” in this context as follows:
“107. What then is meant by the vendor’s obligation to make good title? The principle as stated in the leading textbook in Hong Kong, Hong Kong Conveyancing: Law and Practice Chapter VI, para.2 is as follows:
In a case where the vendor has agreed to give or make good title, his duty is to ensure that, by the completion date … the nature of his title is neither defective nor defeasible. He must deal, in a way acceptable ultimately to the court, with all defects in that title so that, paraphrasing the words of Lord Russell of Killomen in MEPC …, the facts and circumstance are to compelling that, beyond reasonable doubt, the purchaser will not be at risk of a successful assertion against him of any encumbrance …”
131. The nature of a “good title” which the vender has ultimately to make is closely linked to how the duty to show good title can be discharged. That has been explained by Litton JA in Active Keen at pp.406 (line 30) to 407 (line 20).
132. But contracts for the sale of land are not exceptions to the principle that parties have freedom of contract, who may agree to whatever terms they like – Jumbo King Ltd v Faithful Properties Ltd (1999) 2 HKCFAR 279, per Lord Hoffmann NPJ at 299 C-D.
133. When it comes to the effects of contractual terms limiting the vendor’s duties to show and give title, the learned authors in Hong Kong Conveyancing Law and Practice state the general principles at [148] as follows:
“Will the limiting clause be effective against the purchaser? First, to be effective, the clause must have been drafted with sufficient precision and ambit to limit the title that the vendor is contractually obliged to give or show. Secondly, the courts may decide that the limiting clause does not, as a matter of construction, protect the vendor, notwithstanding the words used, on the grounds that the purchaser has been misled.”
134. There is one school of thoughts suggesting that there is in operation in this context a rule of law dictating what those effects are. But after Jumbo King, the Courts have leaned towards regarding the question as one of construction of the relevant contractual provisions. In Jumbo King, Lord Hoffmann observed as follows (emphasis added for ease of presentation):
“… What the cases show is that the courts will be very reluctant to construe such a term as enabling the vendor to mislead the purchaser. As is stated in Farrand, Contract and Conveyance (4th ed.) at p.93, such conditions are ‘subject to the overpowering principle that the vendor must not mislead the purchaser in any way; this means that a sufficient indication of the risk must be given before the contract is made’. This may be said to leave it unclear whether the ‘overpowering principle’ is an aid to construction of the contract or something which operates outside the contract. It probably does not matter, although for my part I think it is better regarded as a matter of construction. Thus it is inconceivable that a term will be construed as enabling a vendor to impose upon a purchaser a serious defect in title of which he actually knew. No purchaser would sign a contract which was bare-faced enough to stipulate expressly that the vendor need not disclose serious defects in title of which he had actual knowledge and, even if there was no objection on grounds of public policy, nothing less than the most express language would do. On the other hand, the position is different if the vendor did not actually know of the defect but had the means of knowledge, or if the matter was technically a defect in title but something which a purchaser might reasonably be prepared to accept. Prima facie, it is the duty of the vendor to deduce and then convey a good title and if he relies upon the terms of the contract to shift the risk of any defect in title to the purchaser, the language must clearly do so. As Farrand says, the question is whether the purchaser would have been aware of the risk he was being asked to take. So, for example, general words which did not identify any specific defect in title have been held inadequate to protect the vendor against liability for a serious defect which he could easily have discovered: Becker v Partridge (1966] 2 QB 155 …”
135. The observations of Bokhary PJ in Chi Kit Co Ltd v Lucky Health International Enterprise Ltd (2000) 3 HKCFAR 268 are to similar effects:
(a) That case was, similar to the present one, one of sale by tender. The clause (clause 26) limiting the vendor’s duties to show and give title was on its face a broad one, that:
“The purchaser shall not be entitled to raise any objection or requisition in respect of the title to the property and shall be deemed to have accepted the vendor’s title to the property prior to the purchaser’s submission of his tender. The purchaser further declares confirms undertakes and warrants that the purchaser shall complete the purchase of the property in accordance with the terms contained herein irrespective of whether the vendor’s title to the property is good or defective notwithstanding any rule of law or equity to the contrary.”
(b) On the effects of that clause, Bokhary PJ observed:
“There are two relevant elements in cl.26. The first is that the purchaser shall be deemed to have accepted the vendor’s title prior to the submission of the tender. The second is the undertaking to complete whether the vendor’s title is good or defective ‘notwithstanding any rule of law to the contrary’.
Clauses of this kind have not been regarded as compelling a purchaser to accept a defective title when the vendor has failed to disclose defects of which he was aware (Becker v Partridge [1966] 2 QB 155 at p.171, per Danckwerts LJ). This result has been attributed to a rule of law which overrides the contractual provision. But the preferable view expressed by Lord Hoffmann NPJ (with whom Li CJ and Nazareth NPJ concurred) in Jumbo King …, is that the question is one of construction of the relevant contractual provision.”
Having cited Lord Hoffmann NPJ’s observations made in Jumbo King (the part bolded above), Bokhary PJ concluded that:
“That is the case here. The respondent was not aware of the risk it was being asked to take. It was not aware of the defect.”
136. Hence, whilst the scope and effects of a limiting clause is one of contractual interpretation, the question cannot be decided in vacuum, but has to be decided on the facts, the nature of the alleged defects concerned, whether in the context of the alleged defects the vendor was aware of the same, the extent of disclosure, the purchaser’s degree of realization of the same (and the associated risk) as a result, and whether the purchaser had been misled. Such an approach is aptly demonstrated by G Lam J (as he then was) in Long Life Chinese Health Food Ltd v Luen Fat Air Condition (HK) Trading & Engineering Co Ltd [2015] 3 HKLRD 511 at §50, that:
“… But each case has to be decided on its own facts. In Jumbo King, as Litton PJ stated, neither party knew the cocklofts were actually illegal structures, though both parties were aware of the possibility that some or all of the cocklofts were unauthorised (see p.292D–F). So there was no failure by the vendor to disclose a defect he actually knew, and having regard to the words they used the court concluded both parties contracted on the basis that the purchaser was to take the risk. As can be seen from the last part of the passage quoted in [38] above, the absence of evidence that the vendor actually knew the cocklofts were unauthorised was of some importance to the conclusion of Lord Hoffmann in that case.”
137. As His Lordship continued to observe (§§51 and 52), the approaches adopted by the Courts in Ip Kam Wah v Fair City Group Ltd [2005] 4 HKLRD 168 and Channel Green Ltd v Huge Grand Ltd [2015] 1 HKLRD 655 were consistent with the above.
138. In my view, Mr Yu in the course of his oral closing summarised the legal principle aptly and accurately, that when one construes a provision which excludes the right to ask requisition, or when one construes a provision which says that the purchaser must accept title, it is a rule of construction that the Court will not construe the provision as allowing the vendor to mislead the purchaser; and what that means is that if the vendor is aware of a particular defect in title, and he fails to disclose that defect in title, the court would construe a general provision excluding the right to raise requisition or excluding the right to challenge title as not applicable to defect which the vendor knew or reasonably ought to have known and which the vendor has failed to draw that to the attention of the purchaser.
J.2. THE NATURE OF THE DEBENTURE HOLDERS’ RIGHTS AND CLAIMS
139. Mr Chan’s submissions in gist are as follows: the claims by some of the Debenture Holders were that they had permanent use of some parking spaces, that those claims fell within latent defects, and that D properly raised requisitions on the same. The rights were based on proprietary estoppel, and were attached to membership of the Club and not to the Debentures[54].
140. In the course of his oral submissions, Mr Yu urged this Court to draw the important distinction between, on the one hand, the contractual rights which the Debenture Holders had as such and as members of the Club, and on the other any proprietary interest which they asserted that they had. Mr Yu submitted that Mr Chan had conflated the two concepts.
141. The position definitely warrants closer analysis, both in terms of the Debenture Holders’ rights and the timing of their assertions.
J.2.A. THE DEBENTURE HOLDERS’ CONTRACTUAL RIGHTS
142. In relation to the Debenture Holders’ contractual rights, the following matters, which I note and find, are material:
(a) The Club was a proprietary club;
(b) Members of a proprietary generally have no interest in the club property. As explained in Law of Clubs by Josling and Alexander (6th Ed. 1987):
“A proprietary club is in essence a business in which an individual or a partnership of individuals, or a company, provides the facilities and amenities of a club for the use of persons who are in reality customers, but who generally pass under the description of members. These members will have no interest in the club property or income; they stand in a contractual relationship, not with each other, but with the proprietor, the incidents of the contract being construed out of the rules which he lays down for them to observe …”;
(c) On the question of dissolution, as explained in Ashton & Reid on Clubs and Associations (3rd Ed., 2021) at §3.30:
“It is not strictly necessary for the rules of a proprietary club to deal with the question of dissolution of the club because of the nature of the contractual relationship between the proprietor and the club member. On the expiry of the period of the subscription, which no doubt will be the same date for all the members, the proprietor can simply say that he has decided to close…”;
To similar effects are the following passage from Daly’s Club Law (7th Ed., 1979) at 207, that:
“In the absence of express stipulation to the contrary in his agreement with each member the proprietor is bound to carry on the club only to the date of the expiration of that member’s current subscription, and can therefore dissolve the club by refusing to accept further subscriptions”;
(d) I have set out the relevant parts of the Rules. They governed the contractual rights of the Debenture Holders, entitling them to use a parking space of the Properties. As agreed between the parties, a Debenture Holder was not allocated a specific car parking space[55], but parked on a floating basis;
(e) A licence to enter land does not, unlike a lease, create an interest in land. It is a personal right – Hong Kong Conveyancing (Vol 1, 2024), Chapter XII at §452, and Chen Tek Yee v Chan Moon Shing(CACV 136/2015, 29 February 2016) at §34(1);
(f) While the court may impose a constructive trust[56] if it is satisfied, having regard to all the circumstances, that the conscience of the purchaser is affected such that it would be inequitable to allow him to deny the licensee the right the licensee claims in the land, the court should be careful not to impose a constructive trust when the licensee’s case is based on slender materials only, certainty being of paramount importance in dealings with land – Chen Tek Yee,§34(3)-(6);
(g) Membership of the Club was confined to “persons who subscribe to the Debenture”, and that every member shall, “unless otherwise determined by the Company in respect of any member, subscribe for a Debenture” (emphasis added). I do not accept Mr Chan’s submissions to the effect that the mere act of having applied for a Debenture satisfied that qualification and condition;
(h) P reserved the right at any time and from time to time to redeem and repay, upon and subject to such terms and conditions as it thinks fit, all or any of the Debentures;
(i) On the face of the Rules and the Debentures, any interest which the Debenture Holders had was contractual and personal. The sort of licence coupled with a proprietary interest in property, or “rather more accurately, the grant of a proprietary right to which is attached a licence facilitating its exercise”, as explained in The Law of Real Property by Megarry and Wade (10th Ed., 2024) at §33-005 is not engaged in the present case;
(j) On 28 February 2017, P issued the 28/2 Notices and the Redemption Cheques;
(k) Mr Chan submits that the Rules contained no provision for dissolution. But as explained in Ashton & Reid[57], such provisions are not necessary;
(l) Mr Chan submits that the length of the 28/2 Notices was too short. But as explained in the passages from Ashton & Reid and Daly’s cited above, in the absence of express stipulation to the contrary, the proprietor of a proprietary club is only bound to carry on the club till the expiration of members’ current subscription. Rule 10 is relevant here, which prescribed monthly subscriptions. Even if P were required to serve reasonable notice to dissolve the Club and that the notice it gave via the 28/2 Notices was shorter than what turned out to be reasonable, the 28/2 Notices still would not be invalidated as notice of P’s election to terminate or dissolve – see Australian Blue Metal Ltd v Robert Frank Hughes[1963] AC 74, at pp.98, 100 and 102;
(m) D relies on the contents of the Business Registration Record submitted by P showing that the “Date of Cessation/Dissolution” was 30 September 2017[58]. I accept Mr Yu’s submission that the date of dissolution of the Club is dependent upon when P chose to do so, but not when the IRD registered the same;
(n) In my view, the Club was validly dissolved from 1 April 2017, and any contractual rights which members of the Club and Debenture Holders had as such had been terminated from that same date;
(o) But more importantly for the purpose of the present discussion, the Sino Tenancy and the Sub-Tenancy were referred to in in Annexure I of the Conditions. I have set out the relevant terms of Clause 12 of the Sino Tenancy. The existence of the Club, and the use of car parking spaces by 40 of the Nominated Cars, were also disclosed – see Clauses 12.1 and 12.6 in particular;
(p) Conditions 18 and 23(a) and (b) are in wide but embracing terms. Condition 18 applied more in general, whilst Conditions 23(a) and (b) applied specifically to “the lettings, tenancies, sub-tenancies, leases, sub-leases, licences and occupation subsisting at the time of completion”. They excluded D’s right to raise requisitions, and deemed D to have accepted P’s title. Condition 18 provided that the “Purchaser, whether or not he shall have inspected the muniments of title prior to the close of tenders, shall be deemed to have inspected the same and to have satisfied himself in all respects with, and accepted the Vendor’s title”. Condition 23(b) provided that upon submission of the Tender, the purchaser is “shall be deemed to have … accepted fully and in all respects (and to have waived his right to any requisition or objection on) the Tenancies and all Tenancy Documents, and shall be deemed to purchase the [Properties] with full knowledge thereof, and shall take the [Properties] subject to the rights of the lessees, sub-lessees, tenants, sub-tenants, licensees and occupiers … thereunder, and no requisition or objection whatsoever in respect of the Tenancies or the Tenancy Documents shall be made or raised by the Purchaser.” The Conditions applied irrespective of whether the Tenancy Documents had in fact been inspected;
(q) As things turned out, D in fact through Mr Hung inspected and obtain copies of the Sino Tenancy;
(r) In respect of the Debenture Holders’ contractual rights, and vis-à-vis any title defects that might arise from those rights, construing Conditions 18 and 23 (a) and (b) as having the effects of excluding D’s right to ask requisitions and deeming D to have accepted P’s title in those regards would not be construing those Conditions as enabling P to mislead D;
(s) I so construe them.
J.2.B. THE DEBENTURE HOLDERS’ ASSERTIONS OF HAVING PERMANENT RIGHTS TO USE THE CAR PARKING SPACES
143. I have set out above those Archival Documents which related to Mr Yuen and Mascotte. I have also set out above various correspondence between some Debenture Holders and P. Some Debenture Holders claimed that they had the permanent rights to use the car parking spaces.
144. Plainly, those Debenture Holders had not purchased any interest in land entitling them to occupy any car parking spaces. The Debentures on their face did not create or convey any interest in land.
145. The Archival Documents tend to suggest that at some stage, strata sales of car parking spaces within the Property had been contemplated. However, that was not allowed by the Government Conditions of Sale. I have set out the effects of Special Condition (15) of the Government Conditions of Sale above. It is possible that the use of the Club was then employed to enhance some form of parking arrangements. As submitted by Mr Yu and I accept, the employment of such arrangements, without more, would remain contractual, and would not have given rise to any proprietary interest.
146. Mr Chan submits proprietary interest had arisen by virtue of the doctrine of proprietary estoppel. We have seen that some Debenture Holders claimed that assurances had been made to them to the effect that, in summary, they could use the car parking spaces permanently, and that the rights were transferrable (the “Alleged Assurances”).
147. What the doctrine of proprietary estoppel entails is not in dispute:
(a) Mr Chan cites to me The Law of Real Property , at § 15-001, that:
“(i) An equity by estoppel arises where :
(a) the owner of land (O) induces, encourages or allows the claimant (C) to believe that C has or will enjoy some right or benefit over O’s property, provided that inducement etc is not specifically limited to a mere personal use of the land;
(b) in reliance upon this belief, C acts to his or her detriment to the reasonably determined knowledge of O; and
(c) O then seeks to take unconscionable advantage of C by denying C the right or benefit which C expected to receive.
(ii) This equity gives C the right to go to court to seek relief. C’s claim is an equitable one and subject to the normal principles governing equitable remedies.
(iii) The court has a wide discretion as to the manner in which it will give satisfy the equity in order to avoid an unconscionable result, having regard to all the circumstances of the case, including, but not limited to, the expectations and conduct of the parties.
(iv) The relief which the court may give may be either negative, in the form of an order restraining O from asserting his or her legal rights, or positive, by ordering O either to grant or convey to C some estate, right or interest in or over the land, to pay C an appropriate amount in money, or to act in some other way.
(v) The issue in any given case is whether it would be unconscionable for O to deny that which O has allowed or encouraged C to assume to C’s detriment. The courts no longer inquire (as once they did) whether the circumstances can be ‘fitted within the confines of some preconceived formula’.”
(b) Mr Yu cites to me Kwan Chun Investments Ltd v Sik Tak Kwong [2021] HKCFI 71, §98. He stressed the need for the “representation or assurance”, that they should be “sufficiently clear and unequivocal”[59], and that they should relate to identified property owned by the representor[60].
148. What could have triggered the operation of the doctrine is the allegations of the Alleged Assurances. But conversely, without the Alleged Assurances, the doctrine would not be engaged.
149. It is important here to recapitulate what is under consideration here – the nature of the Debenture Holders’ claim, whether P had knowledge of the same, the adequacy of disclosure, and whether D could have been misled, so as to consider the interpretation of Conditions 18 and 23(a) and (b).
150. The chronology of events becomes important. The Particulars of Sale By Tender was issued by P in January 2017. TYL requested to inspect title documents on 3 March 2017. Title documents were inspected on 6 March 2017. D issued the Tender on 15 March 2017. The Tender was accepted on 17 March 2017. The Conditions became binding, latest by 21 March 2017.
151. P issued the 28/2 Notices on around 28 February 2017. Whilst P all along had the Archival Documents, they do not reveal the existence of any Alleged Assurances, or any suggestions/allegations of they having been made. There is no evidence which shows that P at that stage knew of any such allegations.
152. According to the documents and evidence before me, 30 March 2017 was the first time when certain of the Debenture Holders alleged that P had made the Alleged Assurances to them. But by that stage, the Agreement had been concluded.
153. In respect of the Debenture Holders’ claims based on the Alleged Assurances and their rights of permanent use, even if the doctrine of proprietary estoppel is engaged and triggered, there is no evidence that P was prior to 30 March 2017 aware of such claims, or any title defects that might arise as a result.
154. I repeat my discussion of the law above. I reiterate in particular the words of Bokhary PJ in Chi Kit Co, that clauses of the kind of Conditions 18 and 23(a) and (b) “have not been regarded as compelling a purchaser to accept a defective title when the vendor has failed to disclose defects of which he was aware” (emphasis added).
155. Hence, and for the above reasons, vis-à-vis any title defects arising from the Debenture Holders’ claims based on the Alleged Assurances and their rights of permanent use, construing Conditions 18 and 23(a) and (b) as having the effects of excluding D’s right to ask requisition and deeming D to have accepted P’s title in those regards would not be construing those Conditions as enabling P to mislead D.
156. I so construe those Conditions.
J.3. CONCLUSION
157. For the above reasons, I conclude that in respect of D’s requisitions arising from the Debenture Holders’ claims, D’s entitlement to raise the same had been excluded by Conditions 18 and 23(a) and (b), and that he had been contractually deemed by those Conditions to have accepted P’s title in those regards.
K. Whether P had sufficiently answered the requisitions
158. Given by views above, the issue as to whether P had sufficiently answered the requisitions is not engaged. I simply record as follows:
(a) I have considered the relevant principles of law which Mr Chan has submitted under this topic[61];
(b) The issue cannot be considered in vacuum;
(c) I have considered above the facts and the context in which the requisitions were raised;
(d) On the papers, excluding for the time being the claims by certain of the Debenture Holders for permanent use based on the Alleged Assurances, the Debenture Holders were personal and contractual;
(e) P had dissolved the Club from 1 April 2017 and terminated those rights;
(f) Even if the Debenture Holders had acquired any interest in land, and if there had been any registrable documents, their non-registration would have rendered the interests concerned lower in priority compared with D’s upon registration of the Agreement;
(g) In relation to the claims for permanent use based on the Alleged Assurances, they lacked specificity, and did not attach to any particular car parking spaces;
(h) I have specifically considered the observations given by Litton JA in Active Keen[62] as to how requisitions, substantial or having no substance, may be answered;
(i) There is force in Mr Yu submissions[63], which if necessary I would accept, that in any event, under circumstances where the allegations made in the requisitions were so tenuous, the 1st MB Letter provided a sufficient response.
L. Alleged breach of Condition 23(o)
159. The alleged breach arose from the Special Arrangement summarised above.
160. D says that the Special Arrangement was made without their prior consent, contrary to Condition 23(o). Mr Chan submits that in any event[64]:
“the [Special Arrangement] reached between P and Sino in allowing debenture holders to park till 30 June 2017 would affect D’s right in that after completion it is up to D to release Sino of the obligation to set aside the 100 car parks for free parking and the [Special Arrangement] would affect Sino’s gross income from parking and indirectly D’s right to collect the percentage rent. At any rate, after completion it is D who could decide how much to charge for people to be qualified for parking as nominated cars. The existing nominated car owners cannot enforce the Sino agreement as they were not party to it.”
161. Mr Yu has given 5 layers of responses. I will deal with them in turn.
L.1. WHETHER THE LETTERS OF 18 APRIL 2017 PROTECTED BY “WITHOUT PREJUDICE” PRIVILEGE
162. There is no dispute as to what need to be established to claim the without prejudice privilege. As explained by Kwan J (as the V-P then was) in Re Jinro (HK) International Ltd [2002] 4 HKC 90 at §13:
“... the party claiming it must establish that the communication in question was made ‘(1) in a bona fide attempt to settle a dispute between the parties, and (2) with the intention that, if negotiations failed, it could not be disclosed without the consent of the parties’. In establishing that there is a bona fide attempt to settle a dispute, the party seeking to assert privilege must show that ‘at the time the communication was made, a dispute existed between the parties in respect of which legal proceedings had commenced or were contemplated and the communication was made in a genuine attempt to further negotiations to settle that dispute. The fact that a communication concerns a dispute between the parties is not sufficient to confer privilege — it must be made in furtherance of the settlement of the dispute’ ... It does not matter that the ‘without prejudice’ stamp was not expressly applied to the negotiations if it is clear from the surrounding circumstances that the parties are genuinely seeking to compromise their dispute …”
163. I am not satisfied that P has established that those letters are so protected. The Special Arrangement was not offered in recognition of any rights the Debenture Holders had or in any attempt to settle any dispute, but for reasons of “你們過去多年作為該會會員與本司所建立的長久關係”. The basis of the offer does not support any intention that, if negotiations failed, the letters could not be disclosed without the parties’ consent. There is also force in Mr Chan’s submissions[65] that as D relies on those said letters as proof of the Special Arrangement (but not any acknowledgement by P of any rights of the Debenture Holders), no question of admissibility arises.
164. I hold that those letters are not protected from disclosure by any without prejudice privilege.
L.2. CONDITION 23(O) NOT APPLICABLE
165. 2 responses are dealt with here.
166. 2 aspects of that clause were involved (emphasis added to assist presentation):
(a) “The Vendor shall be at liberty prior to completion to create new lettings, tenancies or licences in favour of such person(s), firm(s) or company(ies) as the Vendor shall see fit …”
(b) in respect of any portions of the Property which are or shall become vacant …”
167. Mr Yu submits that since Sino was still the tenant for the Property, so that no part of the Property had not or had not become vacant, and that as any licence under the Special Arrangement was going to be granted by Sino (but not Vendor), Condition 23(o) had no application.
168. Mr Chan disagrees. He submits[66] that P’s interpretation of the words “are or shall become vacant” will mean that the clause is deprived on any application in the circumstances of the present case. He submits that “vacant should be construed to mean that the parking spaces are left unused or ‘unlettable’ by Sino.”
169. I do not accept the interpretation Mr Chan puts forward. Condition 23(o) could have application if Sino, for whatever reasons, decided to for example surrender the Sino Tenancy earlier. Mr Chan’s interpretation is also contrary to the plain meaning of the wording of the condition.
170. For the above reasons, I hold that Condition 23(o) had no application to the Special Arrangement.
L.3. NOT REPUDIATORY, AND NO ACCEPTANCE
171. The balance of the 2 responses are dealt with here.
172. Even if Condition 23(o) had application, any breach that the Special Arrangement would have given rise to would not have deprived D of “substantially the whole benefit” – Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd[1962] 2 QB 26, at p,66. This is particularly so given the fact that D did not contract to purchase the Properties with vacant possession, and that any licence given pursuant to the Special Arrangement would have expired in June 2017, before the expiry of the Sino Tenancy when D could under the Agreement obtain vacant possession.
173. Further, even if the breach had been repudiatory in nature, which was clearly not, D had not prior to P’s issue of the Notice of Termination accepted the same. I have discussed Fercometal and Chao Keh Lung. The same principles and considerations apply.
L.4. CONCLUSION
174. For the above reasons, I hold that D has failed to establish any breach of Condition 23(o) by P.
M. Conclusion on liability
175. For the above reasons, I hold that P is successful on liability. D’s Counterclaim fails.
176. I will come back to the question of relief after consideration of the expert valuation evidence.
N. The valuation evidence
177. The purpose of the valuation is to assess the market value of the Properties as at the date of completion, i.e. 31 May 2017 (the “Valuation Date” in the present context).
N.1. MATTERS WHICH THE EXPERTS AGREE
178. I start with the matters that the experts agree. They are, amongst others, the following:
(a) In terms of valuation methodology, both experts agree that the Market Approach (or the Direct Comparison approach), otherwise the preferred approach, cannot be applied. That is due to the absence of appropriate comparables. That in turn is due to the special characteristics of the Properties, which include the restriction against strata sale in the Government Conditions of Sale, the existence of the Sino Tenancy and the Sub-Tenancy, and the supply and demand position of the Properties;
(b) The preferred methodology agreed to be applicable in the circumstances is the Income Capitalization Approach. It has also been called “Term and Reversion”[67]. Both experts have explained what that approach means. It is, in the words of Mr C Chan, based on the capitalization of rental income potential at the date of valuation at appropriate investment yield to arrive at the capital value[68]. The explanations given by Dr Wong[69] are to similar effect;
(c) The consideration of “Term and Reversion” is necessary in the present case as the Sino Tenancy straddled over the completion. Hence, and as explained by Dr Wong[70], the market value of the Properties as at 31 May 2017 would be the summation of (a) the capitalized income of the Properties in the remaining term of the Sino Tenancy (the “Term Interest”), and (b) the time discounted capitalized market income of the Properties upon the expiry of the Sino Tenancy (the “Reversionary Interest”). Mr C Chan’s explanations are to the same effect[71];
(d) The experts are able to agree on the value of the Term Interest, in the amount of HK$1,474,000[72];
(e) The experts are also able to agree that the Reversionary Interest involves 2 key elements. There are (1) the Capitalization Rate, and (2) the Market Annual Rental (“MAR”) of the Properties;
(f) The experts are however not able to agree on the estimated values of the Capitalization Rate or the MAR.
N.2. THE CAPITALIZATION RATE
179. In estimating the Capitalization Rate, the 2 experts have considered as comparables the same 2 transactions (the “2 Transactions”): one being the sale and purchase of the Car Port of Euston Court (the “Euston Transaction” and “Euston Car Port”), and the other concern 141 car parking spaces within Serenity Park (the “Serenity Transaction” and “Serenity CPS”).
180. The raw data which the 2 experts have gathered in respect of those 2 Transactions are the same. That is so down to the data on the monthly gross incomes of the 2 comparables. The main differences between the experts concern (a) whether those incomes should be adjusted from gross to net (Dr Wong does so, whilst Mr C Chan does not), and (b) adjustments to the Captialization Rate assessed from the 2 Transactions when applying to the Properties. Details are as follows.
181. I have explained that the assessment of the Reversionary Interest involves the 2 elements of MAR and Capitalization Rate. Both elements can be reached on a gross or a net basis. Theoretically, so long as both elements are reached consistently using the same gross or net basis, the resultant market value should be consistent.
182. Mr C Chan use the gross basis in assessing both the Market Rent and the Capitalization Rate. There is therefore no need for him to make any adjustment to the incomes for the 2 Transactions.
183. Dr Wong sees the need to adjust from gross to net because government rent has to be taken into account for Serenity CPS. As explained by him, “Estimated monthly net income is calculated by deducting the assumed management fee at $250 per space, 5% allowance for Rates and 3% allowance for Government Rent (for Transaction 2 only)”[73].
184. Dr Wong however has no data in support of that level of monthly management fee. He adopts it as he regards the level reasonable.
185. The problem with that approach is that having gone for the gross basis when assessing the Capitalization Rate, he had to assess the MAR also on a gross basis. He similarly does so by deducting from the figures the assumed monthly management fee of HK$250 for each car parking space[74].
186. It appears that there can be other ways of dealing with the effect of the government rent upon the Serenity CPS, e.g. by simply removing the government rent from the Serenity Transaction. In my view, the approach adopted by Dr Wong has the effect of unnecessarily introducing uncertainties to the exercise both at the stage of assessing the Capitalization Rate and the stage of assessing MAR. I prefer the approach adopted by Mr C Chan.
187. Having adopting the net basis, Dr Wong in respect of both comparables reached the Capitalization Rate of 2.15%. He however adjusted it upwards to 2.35% when applying it to the Properties. He opines that that is because of the differences in scale and location of the Properties. He says that that is equivalent to a gross Capitalization Rate of about 2.73%. How the adjustments are arrived at are however not detailed in Wong/Report.
188. On the evidence and data before me, I do not see the justification of doing the various adjustments as Dr Wong has done by inter alia introducing the assumed figure of HK$250 per month. I prefer the approach adopted by Mr C Chan.
189. On the gross basis, the annual gross yields of the Euston Car Port and the Serenity CPS are respectively 2.4% and 2.6%. Mr C Chan is hence of the opinion that 2.5% may be adopted as the Capitalization Rate for assessing of the market value of the Property, and he does so.
190. I find that Mr C Chan’s opinion is supported by the 2 Transactions. It is rational, and does not required the assumption of any figures. I accept his opinion on the value of the Capitalization Rate.
N.3. THE MAR
N.3.A. THE LETTING STATUS OF THE PROPERTIES AS AT THE VALUATION DATE
191. Relevant to the assessment of the MAR is the letting status of the Properties as at the Valuation Date. It is agreed[75]. The relevant information is as follows.
192. I have stated that the Properties comprise 509 parking spaces. They are on different floors, as follows:
|
Floor |
Number[76]
|
|
LB |
74 |
|
B/F |
74 |
|
G/F |
9 omnibus parking spaces (“Omni PS”) |
|
1/F |
65 |
|
2/F |
71 |
|
3/F |
71 |
|
4/F |
71 |
|
5/F |
74 |
|
Total |
500 + 9 Omni PS |
193. They are of different types, as follows:
|
Type of Parking Space |
Number
|
|
Covered car parking spaces on LB to 4/F |
426 |
|
Covered car parking spaces on 5/F |
None |
|
Semi-open car parking spaces on 5/F |
19 |
|
Open car parking spaces on 5/F |
55 |
|
Omnibus PS on the G/F |
9 |
194. As stated above, the Properties had all been leased to Sino under the Sino Tenancy.
195. The Sub-Tenancy and licensing status were as follows:
|
Spaces[77] |
Nature |
Rental
|
|
71 on 4/F |
As per Sub-Tenancy |
$71,000/month |
|
33 |
Monthly in one batch |
$50,750/month |
|
135 |
Monthly individually |
$2,000/space/month |
|
9 Omni PS |
Monthly individually |
$3,000/space/month |
|
17 motor cycle spaces |
Monthly individually |
$600[78] - 650[79]/space/month |
Hourly
(Private car) |
Hourly |
$14/space/hour for weekdays (subject to maximum $70/day)
$18/space/hour for weekends and public holidays (subject to maximum $100/day) |
196. Also relevant is that at the ramp between 3/F and 4/F, there was a barrier, so that vehicular access from 3/F to 4/F was restricted. Between 4/F and 5/F there was a roller shutter, so that vehicular access from 4/F to 5/F was also restricted. The result was that the 74 spaces on 5/F were vacant and not leased out, hourly or otherwise.
197. There is no dispute that the total gross incomes received by Sino for the financial years of 2014/15, 2015/2016 and 2016/2017 were respectively HK$6,311,770, HK$6,355,687 and HK$6,664,439. The total gross income for May 2017 was HK$556,296[80].
N.3.B THE EXPERTS’ RESPECTIVE APPROACHES
198. In assessing the Market Rent, and in respect of 400 of the 509 parking spaces which make up the Properties, Mr C Chan places weight on the historical gross incomes earned by Sino. He sets out those gross annual incomes (as I have summarised above). He explains in §7.2.2.1 of Chan/Report as follows:
“Though the total number of car parking spaces of the Property is 509, the above annual total gross income was actually generated from 400 car parking spaces only because all the 9 parking spaces on the Ground Floor[81] and 100 parking spaces on other floors were reserved for free parking … and thus no incomes were generated from these 109 car parking spaces.
With reference to the historical gross incomes, I am of the opinion that the annual gross income of the 400 car parking spaces which exclude the 109 reserved free parking spaces as at the Date of Valuation was approximately $7,200,000 representing a monthly gross income of $600,000 ...”
199. In respect of the other of the 509 spaces, he explains in §7.2.2.2 of Chan/Report as follows:
“Upon expiry of the [Sino Tenancy], all the 509 parking spaces are assumed to be let at their market rent as at the Date of Valuation. As mentioned above, I am of the opinion that the monthly market rent of the original 400 income generating parking spaces was $600,000. The remaining 109 car parking spaces would no long be reserved for free parking and they will generate income upon letting out.
The 9 car parking spaces on the Ground Floor out of the 109 parking spaces are superior to other parking spaces in the carpark of the Building because these parking spaces can accommodate buses and provide parking convenience on the Ground Floor. I am of the opinion that the market rent of these 9 parking spaces as at the Date of Valuation was $3,000 per space per month.
There were historical lettings for batches of car parking spaces at discounted rents. This suggests that the original 400 income generating car parking spaces already exceeded the demand of local residents and visitors. Therefore, the rental level of the remaining 100 car parking spaces released from reservation for free parking would be subject to the above market constraint. I am of the opinion they would be let at discounted rents. According to the information provided by the instructing party, a batch of 71 car parking spaces was let at $74,400 per month starting from October 2017 representing a rate of approximately $1,050 per space. I adopt this rate for the 100 parking spaces in my valuation.”
200. On the above basis, Mr C Chan assessed the gross MAR of the Properties to be HK$8,784,000. After time adjustment (deferred by 0.33 years), and applying the Capitalization Rate of 2.5%, Mr C Chan assesses the market value of the Properties as at the Valuation Date at HK$350,000,000.
201. Dr Wong approaches the assessment differently. He does not agree with Mr C Chan’s view that the Properties had been of low occupancy. He said, based on his enquiry with the Shroff office when he visited the Properties in April 2021, that there was at that time “no immediate vacancy of monthly parking space and the queueing time was more than 8 months for a monthly parking licence.”[82] Inrespect of the Sub-Tenancy, he notes the obligation on the part of the Subleasee to incur no less than HK$2.5 million to renovate, the long rent-free period, and the installation of the barrier at the ramp connecting 3/F and 4/F which rendered 5/F inaccessible. He is of the view that the letting under the Sub-Tenancy was not at market terms. He does not agree that the Properties were of low demand. He considers the demands in the vicinity (though during cross-examination he accepted that the subsequent CDA Development of the MTR Wong Chuk Hang Station, which he mentions in §§3.5 and 7.15 (3rd bullet) of Wong/Report was irrelevant). He places little weight on the historical income received by Sino. He takes into account the rates of the parking fees charged in a number of other car parks, and in particular the Marinella[83], South Wave Court[84], Grandview Garden[85], One Island South[86], various Housing Authority Carparks, the Aberdeen Government Car Park[87] and short-term tenancies carparks in Southern District. He forms the opinion that as at May 2017[88], the monthly charge of the Properties should be as follows:
|
Types of Spaces |
No. |
Charge per month |
Sub-total
|
|
Private Cars, Covered |
426 |
$2,600 |
$1,107,600 |
|
Private Cars, Semi-Open |
19 |
$2,400 |
$45,600 |
|
Private Cars, Open |
55 |
$2,200 |
$121,000 |
|
Omnibuses, Covered |
9 |
$3,900 |
$35,100 |
| |
|
|
$1,309,300
|
As I have mentioned above, Dr Wong then adjusts the gross income to net, giving the net monthly income of HK$1,125,762, or net annual income of HK$13,509,144. Applying the Capitalization Rate of 2.35% (reached on the net basis as explained above), he assessed the Reversionary Interest at HK$570,488,390.
202. As can been seen above, the difference between the MAR of the Properties assessed by Mr C Chan (HK$8,784,000) and Dr Wong (HK$13,509,144), even ignoring the gross vs net disagreement, is very substantial. That substantial difference traces its source to (1) the different weight which the experts attach to the historical incomes received by Sino, and (2) the suitability of the various car parks as “comparables” for the determination of market value.
203. In terms of the weight of the historical incomes:
(a) On matter that relates to it is the supply and demand position of the Properties. Mr C Chan states in Table B2 of the JR[89], that;
“Mr Wong failed to consider the car parking spaces were operated as a public car park with letting on monthly or hourly bases. Not all the parking spaces in the Property could be let on monthly basis at the rental suggested by Mr Wong because the number of car parking spaces exceed the local demand. The over-supplied car parking spaces can only be let to visitors on hourly basis.
My estimated monthly rental took into account the over-supplied car parking spaces of the Property. The historical income provides good indication for my valuation analysis.”
(b) As I have stated above, Dr Wong does not agree that the Properties were of low demand. His evidence on demand is based on his enquiry with the Shroff office in April 2021. He did not verify it. He assumes that the demand position would have been similar in back 2017. But in the meantime, there had been Covid, during which time the public tended to avoid public transportation and drove more. I do not find his opinion on the issue of demand reliable;
(c) Dr Wong was of the view that the Sub-Tenancy was not a commercial one. He based his views on a number of matters, which include the level of rental, the costs of renovation, and the 5/F having been rendered inaccessible as a result. I do not accept that. Sino is a professional and commercial carpark operator. It is a subsidiary of a listed company. There is no evidence that it was in any way connected to P. There is no basis to suggest that, if the demand had been there, it would not have maximized the yield by e.g. making the 5/F assessable again. Dr Wong’s reliance and reference to the overall and general shortage of car parking spaces in Hong Kong adds little to his opinion, and ignores the special feature of the Properties. I accept Mr C Chan’s view that there had been an over-supply of car parking spaces of the Properties;
(d) Dr Wong’s approach of ignoring the historical data also leads to one anomaly. As I have set out above, the actual total gross income received by Sino for the financial year of 2016/2017 was HK$6,664,439. However, according to Dr Wong’s assessment, the net monthly income of the Property as at May 2017 was HK$1,125,762. Adjusting that figure back to gloss annual income gives the figure of HK$15,711,601[90]. That represents 236% of the actual income. In my view, even if Sino had not been able to maximize the yield, it is inherently most unlikely that the difference would have been by so much. This anomaly give me concern as to the reliability of Dr Wong’s assessment.
204. In terms of the suitability of the “comparables”:
(a) I am of the view that Marinella is of little relevance. It belongs to a different market;
(b) The car parking to residential units ratios in Marinella (1 to 1), South Wave Court (1 to 5) and Grandview Garden (1 to 8) are also materially different from that of Jumbo Court (3 to 1). The units in Jumbo Court are also relatively small, and the occupants might not want to own a car. As Mr C Chan opines which I accept:
“Residential developments in the vicinity of the Property have much lower carpark to flat ratios as all carparks are intended for the uses of occupiers within the same development only. The Property is a public carpark intended for use by the public such as customers of Jumbo Restaurant. Direct comparison of monthly rental of carparks in neighbouring residential developments with that of the Property is obviously inappropriate unless huge adjustment factors were allowed.”
(c) Parking charges are location sensitive. The Housing Authority Carparks[91], the Government Carparks[92] and the short-term tenancy carparks[93] are located at different locations over Hong Kong Island, Kowloon and Outlying Islands. This factor adversely affects their relevance;
(d) Specifically in respect of the rates set and charged in Housing Authority Carparks, public policies are involved. I accept Mr C Chan’s evidence in this regard. The involvement of public policies is also supported by the “Memorandum for the Commercial Properties Committee of the Hong Kong Housing Authority – Review of Carpark Charges for 2021”[94] which Dr Wong produces[95];
(e) The Aberdeen Government Car Park is also of little assistance in the valuation exercise. It is built along a slope, and is some 28-minute walk from the Properties[96];
(f) I am of the view that any assessment of the Properties’ MAR based on those “Comparables” will not yield any reliable result.
205. I have summarised Mr C Chan’s approach above. In contrast, his reliance on the historical figures are logical and objective. I accept his evidence and opinion.
N.4. CONCLUSION ON THE VALUATION EVIDENCE
206. For the reasons set out above, I accept Mr C Chan’s valuation that as at the Valuation, the market value of the Properties was HK$350,000,000.
O. Judgment and Relief
207. I now come back to the question of relief.
208. For the above reasons, I hold that P has validly and effectively terminated the Agreement. I hold also that P is entitled to forfeit the Deposit. In fact, Mr Chan fairly accepts that if this Court is to decide liability against D, P can forfeit the Deposit and claim damages.
209. I note that P in the Prayer seeks Declarations to the above effects. However, this is a contractual claim between the immediate parties. Any relief is in personam. I do not believe that any formal Declaration acting in rem is necessary.
210. I hold that D has been in breach of the Agreement. D is liable to P for damages. I have set out my view on the valuation evidence. The quantum of the damages which D shall pay P is the difference between the Purchase Price and the assessed market value of the Properties as at the Valuation Date, with credit to the forfeited Deposit, namely HK$500,000,000 – HK$350,000,000 – HK$50,000,000 = HK$100,000,000. I grant P judgment in that amount.
211. The Deposit has pursuant to the Order of Master Queenie Lau dated 12 May 2021 been paid into Court. I order and direct that it with any interest be paid out to P or its order.
212. P also seeks a Declaration that D is liable to indemnify P for any stamp duties and registration fees payable on the Agreement:
(a) The granting of Declaration is discretionary;
(b) P has not paid any stamp duty;
(c) There has not been any demand against P for any stamp duty;
(d) The Stamp Duty Office has adjudicated that no stamp duty is now payable[97];
(e) The Declaration sought will have no utility;
(f) In exercise of my discretion, I refuse to grant any.
213. I dismiss D’s Counterclaim.
P. Interests and costs
214. I make the following orders nisi:
(a) The damages which D is ordered to pay P in the said assessed amount of HK$100,000,000 carries interest from 31 May 2017 to the date of this Judgement at the rate of prime plus 1%, and thereafter at judgment rate till date of payment;
(b) D shall bear and pay P the costs of this action, inclusive of the Claim and Counterclaim, with certificate for 3 counsel in so far as the trial is concerned, to be taxed if not agreed.
| |
(Keith Yeung) |
| |
Judge of the Court of First Instance |
| |
High Court |
Mr Benjamin Yu SC leading Ms Elizabeth Cheung and Mr Shuan Elijah Tan, instructed by Mayer Brown, for the Plaintiff
Mr Edward Chan SC leading Ms Queenie WS Ng, instructed by Terry Yeung & Lai, for the Defendant
[1] Which are set out in Item 1 of the Schedule thereto.
[2] “Gross Revenue” as defined in Clause 2.5(1)(a) refers to all the revenue of Sino from car parking and other sources derived from or upon the leased premises whether by cash or credit less (i) net amount of discounts, (ii) uncollectable credit accounts and (iii) amount of value added, tax, (if any) imposed upon the price or cost of provision of services.
[3] Defined in Clause 12.1(h) as meaning “All Those car parking spaces named in Item 1 of the Schedule hereto Save and Except the Ground Floor Car Parking Spaces and the Sub-leased Premises.”
[4] Its full definition in Clause 12.1(b) being “(1) all those Small Vehicles (not exceeding 60 in number at any one time) the occupants or owners of which shall be visiting any of the Nominated Restaurants; and (2) all those Small Vehicles (not exceeding 40 in number at any one time) the occupants or owners of which shall be the members of the Aberdeen Car Park Club or the directors or staff of the Landlord or the Landlord's associated companies.”
[5] “Nominated Restaurants” is defined in Clause 12.1(d) as meaning “floating restaurants now known as Jumbo Floating Restaurant and Tai Pak Floating Restaurant and shall include their replacements and such other restaurants as the Landlord may from time to time by notice in writing specify (including tenants or occupants of space(s) in such restaurants).”
[6] Defined in Clause 12.1(g) as meaning “private cars or goods vehicles not exceeding an unladen weight of 40 cwt.”
[7] [C1/949 – 955].
[8] The full text being “Facilities: The Company will provide the Club with motor vehicles parking facilities on the first five storeys of a building known as Jumbo Court … (hereinafter called the ‘Premises’) and with such other facilities as the Company shall in its sole discretion from time to time determine. The Company will provide the Club with everything reasonably necessary to enable the Club to carry out its objects in accordance with these Rules and will be solely responsible for all expenses connected therewith and for the engagement and payment of watchman and for matters involving the management and maintenance of the parking facilities on the Premises.”
[9] The full text being “Rights and Liabilities of Members: Every member of the Club shall, subject to these Rules and Bye-Laws for the time being in force, be entitled to the exclusive use and enjoyment of a unit car park or such units car park in the Premises as the Company may approve together with such rights to pass and repass over such common parts of the Premises designated for the parking facilities of the Club and are also entitled to other facilities including lift services provided by the Company for the use by the Club, but shall not, by reason of his membership, be under any financial liability except as expressly provided in these Rules.”
[10] [C1/810 – 854].
[11] Referred to below as “Annexure I”.
[12] Defined below.
[13] [C1/841].
[14] [C2/1024].
[15] §2 of his written closing.
[16] [C2/1025-1026].
[17] [C2/1027].
[18] [C2/1028].
[19] [C2/1029-1030].
[20] [C4/1612].
[21] [C2/1038].
[22] [C1/956].
[23] [C1/958].
[24] [C1/956].
[25] [C1/957].
[26] [C1/959].
[27] [C1/960-964, 966-977, 979, 981-982 and 984-985].
[28] [C2/1033].
[29] [C2/1034-1036].
[30] [C2/1037].
[31] [C2/1039].
[32] [C2/1040-1041].
[33] [C2/1048].
[34] [C4/1604].
[35] [C2/1050].
[36] Answer 9 of D’s Answer to the Plaintiff's Request for Further and Better Particulars of Defence and Counterclaim filed on 17 July 2018 (“D/F&B#1”).
[37] [C2/1051-1053].
[38] Condition 26 is then recited in full.
[39] [C2/1054-1055].
[40] Answer 9 of D/F&B#1.
[41] [C2/1056-1057].
[42] [C2/1058-1059].
[43] [C2/1061-1063].
[44] [C4/1609].
[45] §29 of his written opening, and §4 of his written closing.
[46] §14-16 and §32 of his written opening, and §§6-18 of his written closing.
[47] §19 of D’s RRA-D&C.
[48] Produced by P as exhibit P1, later inserted in C4/95B/1603-4 to 1603-6.
[49] Hui Cheng Fai v Daiwa Development Ltd (HCA 1734/2009, 8 April 2014).
[50] See §§79 to 82.
[51] §8 thereof.
[52] See MB’s letter of 26 May 2017, wherein D was requested to provide as soon as possible the Certified Copy Presented Agreement “showing that the stamp duty and the penalty (if any) have been fully paid…” (emphasis added)
[53] And see also Kiu Wai Ming v Ng Chek Kok (CACV78/1991, 6 August 1991) p.17.
[54] See in particular §§8-9 and 56-62 of his written closing.
[55] §6 of the Agreed Statement of Facts.
[56] I will consider the position of proprietary estoppel next.
[57] Op. cit.
[58] [C4/1609].
[59] Thorner v Major [2009] 1 WLR 776, §15.
[60] Thorner §61.
[61] §§19 to 23 of his written closing in particular.
[62] P.406 line 30 to p.407 line 20.
[63] §92 of his written closing.
[64] §68 of his written closing.
[65] §66 of his written closing.
[66] §67 of his written closing.
[67] Table B1 of the JR, [B3/520].
[68] §7.1 of Chan/Report.
[69] §7.7 of Wong/Report.
[70] §7.8 of Wong/Report.
[71] §7.1 of Chan/Report.
[72] Table B2, [B3/520].
[73] Footnote **, [B2/322].
[74] §7.25 of Wong/Report.
[75] Table A4 of the JR.
[76] Car parking spaces unless otherwise specified.
[77] Car parking spaces unless otherwise specified.
[78] For the 15 spaces not on G/F.
[79] For the 2 spaces on G/F.
[80] The income summary are set out in a table by Mr C Chan (Appendix II of Chan/Report, [B1/220].
[81] Clauses 12.3 and 12.4 of the Sino Tenancy.
[82] §5.24 of Wong/Report, [B2/306].
[83] At No.9 Welfare Road.
[84] At No.3 Shum Wan Road.
[85] At No.8 Nam Long Shan Road.
[86] At No.2 Heung Yip Road.
[87] At 18 Aberdeen Reservoir Road.
[88] [B3/670].
[89] [B3/520].
[90] Footnote 144 to Mr Yu’s written closing, which has also been put to Dr Wong during cross-examination.
[91] [B2/475].
[92] [B2/457-458].
[93] [B2/445].
[94] And in particular §§4 and 10 thereof.
[95] As part of Appendix 12 of Wong/Report.
[96] See Exhibit P3, later inserted in C4/95D/1603-37.
[97] [C4/1613].
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