YAU SIMON SHIK MAN AND OTHERS v. YAU SHIK YIN AND ANOTHER

HCA 330/2013

[2018] HKCFI 1733

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 330 OF 2013

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D E C I S I O N

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The application

1.  This is the second hearing of the summons of 7 December 2017 (the “Summons”) taken out by the 1^st defendant (“D1”) against the 1^st and 2^nd plaintiffs (“P1” and “P2”) for an order to enforce certain terms of an agreed Tomlin Order (the “Tomlin Order”) in relation to the sale of three properties set out as Items 14, 15 and 17 in the Revised Schedule attached thereto (the “Revised Schedule”).  The Summons first came before me on 18 January 2018.  For reasons set out in my Reasons for Decisions given on that same day, I adjourned the Summons for full argument.  I refer to that Reasons for Decision the contents of which I will not repeat.

The parties, and facts leading to the Tomlin Order

2.  The parties are all family members.  The 3^rd and 4^th plaintiffs (“P3” and “P4”) are the parents.  P1, P2, and D1 are brothers and sisters.   D1 and the 2^nd defendant (“D2”) are husband and wife.  The parties have been locked in legal battles for several years.  In the written submissions of Mr Patrick Chong, counsel for D1, their relationship is described as beyond salvage.  Various legal actions have been commenced and vehemently pursued.  They were originally in the nature of shareholder disputes.  Subsequently, the parties attended mediation.  An agreement was apparently reached.  There was then a question as to whether that agreement was intended to be a legally binding one.  The issue came before Harris J under HCCW 420/2012, HCCW 421/2012 and HCCW 422/2012.  By his Decision on 15 July 2015 (the “Decision of Harris J”), His Lordship ruled that it was. 

3.  After that ruling by Harris J, the parties proceeded to finalize their settlement agreement.  It was a drawn out process.  It was not until 30 March 2016 when they filed a Consent Summons for the Tomlin Order with a schedule attached.  On 22 April 2016, the Tomlin Order was approved.  By another Consent Order dated 7 February 2017, the schedule attached to the Tomlin Order was amended, resulting in the Revised Schedule.  The agreement now embodied in the Revised Schedule (the “Settlement Agreement”) is in effect one of a family arrangement whereby the shareholding in certain companies, funds in an account held with the Bank of China, and certain landed properties (collectively “Family Assets”) were divided amongst the parties.

4.  However, it has not been all plain sailing afterwards.  The parties on a number of occasions had to resort to legal proceedings to enforce some terms of the Tomlin Order.  In August 2016, D1 took out an application against P3 to enforce Clause 2.III.5 of the Revised Schedule.  Parties reached agreement afterwards.  In early 2017, D1 and D2 made another application to enforce Clauses 2.I.1 and 2.IV.2.  On 26 April 2017, they obtained judgment from Master S Lo against P1 and P2.

5.  The present Summons is another of such proceedings.

The Summons, and development since last hearing

6.  By the Summons, D1 is seeking to enforce certain terms of the Revised Schedule concerning the sale of three properties (collectively the “Properties”) referred to separately as (1) the “Parc Palais Property” (Item 14 in the Revised Schedule), (2) the “Skylodge Property” (Item 15 in the Revised Schedule), and (3) the “Duplex” (Item 17 in the Revised Schedule).  Between the time when the Summons was taken out and the hearing, the parties had reached agreement concerning the Duplex.  The present application now concerns only the Parc Palais and Skylodge Properties.

7.  The Summons originally sought a number of alternative orders, including an order for the sale of the Properties, appointment of receiver, a mandatory injunction and/or specific performance.  I during the hearing on 18 January 2018 expressed concern as to whether some of the orders sought had the effect of varying (as opposed to enforcing) the Settlement Agreement embodied in the Revised Schedule.  I invited submissions on whether, if they do, the Court has jurisdiction to do so—see Re Estate of Shum Kwok Hang (deceased) [2018] 1 HKLRD 434 and Community Care North East (a partnership) v Durham County Council [2012] 1 WLR 338.   During the hearing on 17 May 2018, Mr Chong informed me that he would abandon most of the relief sought, and would proceed only with paragraphs 7(a), 8, 9 and 10 of the Summons.  Those paragraphs, in so far as they relate to the Parc Palais and Skylodge Properties, read as follows:

“7. [an Order that P1 and P2] shall specifically perform Clauses 2(II)(2), 2(II)(3)(d)…of the Revised Schedule or a mandatory injunction directing [P1] and [P2] do, within 7 days of the order to be made herein:

a. cause Goldrite Limited to instruct CS Property Group to use it [sic] best endeavor to sell Skylodge, Parc Palais … by way of auction to take place within 2 months from the date of the order to be made herein.

b. …

8.  in default of [P1] and [P2], [D1] or his legal representatives or his nominee(s) or, alternatively the Registrar of High Court, be authorized under section 25A of the High Court Ordinance, Cap.4 to sign and execute the necessary documents, including but not limited to authorization letters, powers of attorney and/or board resolutions on their behalf and on behalf of Man Shing and Goldrite for instructing CS Property Group

9.  further, [P1] shall within 14 days from the date of the order to be made herein vacate Skylodge.

10.  [P2] shall within 14 days from the date of the order to be made herein vacate Parc Palais.”

Relevant terms of the Tomlin Order and the Revised Schedule

8.  The Tomlin Order contains the usual liberty-to-apply clause, as follows:

“… all further proceedings in this action be stayed except for the purpose of carrying into effect and enforcing the terms of settlement set forth in the Revised Schedule to the Tomlin Order and for that purpose the parties are to be at liberty to apply.”

9.  The terms of the Revised Schedule are not the simplest of their kind.  I reproduce below those that are relevant to the present application:

“1. The Family assets which the Four Families agree for division consist of the following properties:

(I) Companies incorporated in Hong Kong

…

(II) Bank account in Hong Kong

Bank of China [‘BoC’] Account 00301362 …

(III) Landed Properties (the word ‘owned’ hereinbelow refers to legal ownership only, not beneficial interest)

(1) …

…

(13) …

Landed Property Held under Goldrite:-

(14) [The Parc Palais Property], occupied by [P2] and her family;

(15) [The Skylodge Property], occupied by [P1] and his family;

(16) … Tropicana 7 …, occupied by Parents

(17) [The Duplex], occupied by [D1] and his family

(hereinafter collectively called ‘Family Assets’)

2.   How the Family Assets are to be Divided

(I)  BoC Account

…

(II)  Goldrite’s Landed Properties

II.1  Parents would remain occupying their existing property in … Tropicana 7 … By so doing, they are considered to have received a distribution of HK$14,000,000 out of the Family Assets.

II.2  To avoid arguments on the valuation in respect of the properties held under Goldrite but are occupied by [P1], [P2] and [D1] respectively, [P1], [P2] and [D1] agree and will procure Goldrite to dispose of the same (i.e. landed properties items 14, 15 and 17 above) and the net proceeds thereof are to be divided into 4 equally (subject to and taking into account the matter stated in II.1 hereinabove concerning Unit E, 9/F by Parents).

II.3  And to facilitate the disposal of Goldrite’s landed properties items 14, 15 and 17 hereinabove, [P1], [P2] and [D1] agree to take the following approach in terms of disposal.

(a)  A property agency shall be appointed as the estate agent for the sale for these 3 properties (i.e. items 14, 15 and 17) with an agency fee not more than 1% of the sale price.

(b)  [P1], [P2] and [D1] shall forthwith assist the property and potential purchasers to inspect the properties.

(c)  [P1], [P2] and [D1] shall deliver vacant possession of his or her respective residing properties in items 14, 15 and 17 within 3 months from the date of this Formal Agreement,whether or not a potential purchase has been secured to not;

(d)  If these 3 properties cannot be sold within 6 months from the date of this Formal Agreement,these 3 properties shall be auctioneered by CS Property Group, the Four Families are eligible to bid for the same.

(e)  [P1], [P2] and [D1] agree that Kwok Ng & Chan Solicitors act as vendor solicitors for the disposal of these properties but Kwok Ng & Chan will keep the Parents’ and [D1’s] lawyers duly informed of the disposal and the receipt of proceeds as well as subsequent transfer of the net proceeds into the newly set up bank accounts to be held by their legal representatives for distribution of the same pursuant to Clause II.2 above to the Family Families.

(f)  The sale price of these 3 Properties items 14, 15 and 17 are to be set at the average values of the quotations from HSBC, BEA, Midland, Centraline, and HSB as of 17 January 2014 (with the highest and lowest values excluded, and only 3 values are counted) less 10% as target price for sale in the market.

(g)  If any of the parties, namely [P1], [P2] and [D1] wishes to take up his or her concerned Property without putting out for sale, he or she has the option to offer at the average value in (f) above without discount.  In any event, if there is a third party offering a price higher than that price, that Property must be put up for sale and the net proceeds to be distributed in accordance with II.2 of this Formal Agreement.  

(III)  Other Landed Properties

III.1  The Four Families agree the following disposal of properties by setting the agreed values or other methods of disposal, and by putting ‘XX’ into the box to indicate their agreed preference to legal and beneficial ownerships.

[Table inserted]

…

III.3  If there are discrepancies of value entitled by Parents,[P1], [P2] and [D1] in the allocation of properties in this Clause III.1, the difference is to be adjusted through other Family Assets distribution.

…

(V)  Miscellaneous

V.1    The above arrangements are made for overall amicable settlement on a without-admission-of-liability basis.  A new bank account is to be opened and to be operated by the 3 lawyers representing the respective Four Families to collect the funds under Clauses I, II and III for distribution accordingly.

V.2    The Four Families agree to stay HCA 330/2013 … The Four Families agree not to take any further proceedings in respect of HCCW 420/2012, HCCW 421/2012 and HCCW 422/2012 … Upon compliance with the terms set out in the Schedule to the Tomlin Order … the Four Families agree to waive herein all mutual and cross claims against each other.  Any rights and obligations remaining are those set out in this Formal Agreement.  If any one of the Four Families does not perform the terms under this Formal Agreement as encapsulated in the Schedule to this Tomlin Order, others are entitled to apply to Court claiming for specific performance of the terms of this Formal Agreement as encapsulated in the Schedule to this Tomlin Order against the party in default and costs should be borne by the party in default on an indemnity basis.

…

V.8    Time to complete the above steps is of the essence. Once a landed property is disposed of and net proceeds have been received by Messrs. Kwok Ng and Chan, they as vendor solicitors shall, unless otherwise agreed, deposit the net proceeds into the newly opened joint account by 3 legal representatives within 14 days after receipts thereof for distribution in accordance with the terms of this Formal Agreement or Schedule to this Tomlin Order.”  

10.   The following effects of the terms are not in dispute:

(a) P1, P2 and D1 have under Clause 2.II.3(g) an option (the “Option”) to take up his or her residence (namely the Skylodge Property, the Parc Palais Property and the Duplex respectively) at prices to be set in accordance with the valuation method set out in Clause 2.II.3(f);

(b) any of those Properties not so taken up will be put up for sale, and vacant possession should be delivered within 3 months of the date of the Tomlin Order;

(c) the sale will firstly be conducted with the assistance of a property agency to be appointed; and

(d) any of the Properties not so sold within 6 months from the date of the Tomlin Order shall be auctioned by CS Property Group.

11.  What the parties cannot agree on is exactly how a sale or transfer resulting from the exercise of the Option should be effected under the Settlement Agreement.  At the centre of their dispute is (1) whether a formal sale and purchase agreement has to be executed and formally completed, and (2) whether the purchase prices concerned have to be physically paid over (the “Payment Approach”, as D1 in correspondence contended), or whether they can be accounted for by making adjustments to and set-offs of the parties’ entitlement to the final distribution of the Family Assets (the “Set-off Approach”, as P1 in correspondence contended).  I will come back to these controversies below.

The issues

12.  The Tomlin Order is dated 22 April 2016.  Despite the provisions of the Revised Schedule, the Parc Palais and Skylodge Properties have remained unsold.  It is common ground that P1 and P2 have sought to exercise the Option.  It is also common ground that when seeking to do so, they did not follow the valuation method set out in Clause 2.II.3(f).  The issue which falls to be considered is whether P1 and/or P2 has been in breach of the Settlement Agreement so that, on the facts of this case, a decree of specific performance should be granted.

The parties’ respective cases, and the submissions on their behalf

13.  On behalf of D1, Mr Chong submitted that the Settlement Agreement had been breached in so far as the sale of the Parc Palais and Skylodge Properties were concerned.  P1 and P2 had failed to exercise the Option under and in strict compliance with Clause 2.II.3(g).  The valuation method stipulated in Clause 2.II.3(f) had not been followed.  The two Properties had not been sold to any outsiders within 6 months from the Settlement Agreement.  Clause 2.II.3(d) hence has been triggered, so that they have to be put up for auction.  P1 and P2 have failed to deliver up vacant possession pursuant to Clause 2.II.3(c).  D1 therefore seeks pursuant to Clause 2.V.2 specific performance of (a) Clause 2.II.3(d) for the auction of the two Properties, and (b) Clause 2.II.3(c) for P1 and P2 to deliver up vacant possession of the Skylodge and Parc Palais Properties.

14.  Mr Ng for P1 and P2 accepted that when P1 and P2 were seeking to exercise the Option, the valuation method stipulated in Clause 2.II.3(f) was not followed.  He submitted that that was because it was impracticable and infeasible to strictly comply with that Clause.  That Clause required the parties to obtain valuations of the two Properties from five different entities “as of 17 January 2014”.  By the time Harris J ruled on the binding nature of the agreement between the parties, that date had already passed.  He submitted that the Option had however not been abandoned, that the parties had agreed not to follow the contractual valuation method, and that they had indeed agreed upon the prices at which the Option was to be exercised: HK$22.5 million for Skylodge and HK$28.5 million for Parc Palais.   He submitted that P1 and P2 had therefore validly exercised the Option at those agreed prices.  He further submitted that the contemporaneous correspondence between the parties supported this conclusion.  As there had been no breach of the Settlement Agreement, he submitted that the Summons should be dismissed.

15.  In reply, Mr Chong submitted that as the Option had gone, if the P1 and P2 wanted to take up the Properties, new agreements would have to be reached.  He further submitted that no new agreements had been reached, as there had been no offer and acceptance, no meeting of the minds,and no consideration having been given by P1 and P2.  He submitted that in any event, as P4 was not a party to any negotiation between P1, P2 and D1, not all parties had agreed on any new agreement.

16.  The differences between Mr Ng and Mr Chong can immediately be seen.  Mr Ng’s stance is that the Option, with the agreed variation of the method of valuation, continued to be open for P1 and P2 to exercise, which they did exercise.  Mr Chong’s position is that the Option has gone.  D1 is therefore entitled to demand from scratch any terms he likes independent of the Settlement Agreement.  As those terms have never been agreed upon, no variation agreement has come into existence in place of the Option.  The Properties would therefore have to be auctioned. 

The principle of strict performance

17.  For an option to be effectively exercised, all conditions have to be strictly performed.  Mr Chong cited The Interpretation of Contracts (6^th ed) by Sir Kim Lewison, where the learned author explains at paragraph 16.14 that:

“In the case of unilateral contracts, such as options, all conditions must be strictly performed, otherwise no binding contract comes into existence at all.

Compliance with time stipulations in an option or unilateral contract has already been considered. Precisely the same principles apply to compliance with other conditions. As Lord Hoffmann graphically put it in Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] A.C. 749:

‘ If the clause had said that the notice had to be on blue paper, it would be no good serving a notice on pink paper, however clear it might have been that the tenant wanted to terminate the lease.’

…

One reason why this should be so was given by Diplock L.J.in United Dominions Trust (Commercial) Ltd v Eagle Aircraft Services Ltd [1968] 1 WLR 74 in the following terms:

‘ … as respects the promisor, the initial inquiry is whether the event, which under the unilateral contract gives rise to obligations on the part of the promisor, has occurred.  To that inquiry the answer can only be a simple ‘Yes’ or ‘No.’  The event must be identified by its description in the unilateral contract; but if what has occurred does not comply with that description, there is an end of the matter.  It is not for the court to ascribe any different consequences to non-compliance with one part of the description of the event than to any other part if the parties by their contract have not done so.  See the cases about options[1].  For the inquiry here is: ‘What have the parties agreed to do?’—not ‘What are the consequences of their having failed to do what they have agreed to do?’ as it was in the Hongkong Fir case[2].  Such an inquiry cannot arise under a unilateral contract unless and until the event giving rise to the promisor's obligations has occurred.”

18.  While the principle of strict performance appears non- controversial, it should be noted, as has been further explained at page 790 of Lewison, that:

“ Nevertheless, some breaches have been made in this principle …

Second, where a particular method of exercising the option is prescribed, it will not necessarily be mandatory. … A similar view in the context of a tender was reached by Buckley J. in Manchester Diocesan Council of Education v Commercial and General Investment Ltd [1970] 1 W.L.R. 241, in which he said:

‘ It may be that an offeror, who by the terms of his offer insists upon acceptance in a particular manner, is entitled to insist that he is not bound unless acceptance is effected or communicated in that precise way, although it seems probable that, even so, if the other party communicates his acceptance in some other way, the offeror may by conduct or otherwise waive his right to insist upon the prescribed method of acceptance. Where, however, the offeror has prescribed a particular method of acceptance, but not in terms insisting that only acceptance in that mode shall be binding, I am of opinion that acceptance communicated to the offeror by any other mode which is no less advantageous to him will conclude the contract.’” (Emphasis supplied)

19.  Even in the absence of any more direct authority (at least none cited before me), I have little doubt, based on the notion of freedom of contract, that the terms and conditions upon which an option is to be exercised, which otherwise may have to be strictly performed, can be waived by the grantor of the option.

20.  Indeed, the fourth “breach” explained at page 790 of Lewison supports the above proposition:

“Fourth, it may be possible to construe the option as requiring the conditions to be fulfilled only if the grantor of the option requires it to be fulfilled. In Little v Courage Ltd (1993) 70 P. & C.R. 496 CA, a lease contained an option to renew subject to the condition (among others) that the landlord and the tenant should have agreed a business plan. The Court of Appeal held that the condition should be construed as meaning that a business plan was to be agreed only if the landlord required it to be agreed.”

21.  On the legal test to apply when deciding whether or not a binding agreement has arisen between the parties, I respectfully refer to and adopt the summary of the law set out at paragraphs 19 to 22 of the Decision of Harris J.  In gist, the test is an objective one.  The decisive issue is always the intention of the parties which must be objectively ascertained from the terms of the document when read in the light of the surrounding circumstances.

The contemporaneous correspondence between the parties

22.  I have been taken through the parties’ correspondence during the period between May 2016 and early 2018.  I have considered them carefully.  The following matters are in my view important.

23.  The Tomlin Order is dated 22 April 2016.  P1 and P2 had 6 months from that date to exercise the Option.

24.  At that stage, even though the date of 17 January 2014 had already passed, retrospective valuation for the Properties as of 17 January 2014 could still have been obtained.

25.  However, by letter dated 9 May 2016 from Howell & Co (“Howell”, then solicitors for D1) to Messrs Kwok, Ng & Chan (“KNC”, solicitors for P1, P2 and P3 (the mother)), it was suggested inter alia that:

“With the view to simplify the process and to save the costs of all parties, we now have instructions to put forward the followings for your clients’ consideration:

1. [The Parc Palais Property] … can be transferred into the name of [P2] at a price to be agreed by all parties instead of sale in the open market.

2. [The Skylodge Property] … can be transferred into the name of [P1] at a price agreed by all parties instead of sale in the open market.”

26.  Importantly, D1 in that letter did not mention the valuation method set out in Clause 2.II.3(f).  He mentioned “at a price to be agreed by all parties”.

27.  Mr Chong drew my attention to the fact that that letter was marked “Without Prejudice”, that it was “Subject to Contract”, and that the last paragraph clarified that “For the avoidance of doubt, nothing herein binding on our client until and unless formal agreement is signed by all the concerned parties.”  That might be so. But the fact remains that the suggestion of transferring the Properties “at a price to be agreed by all parties” came from D1.

28.  On 25 May 2016, KNC wrote back and said that “… our clients agree that” the Properties “be transferred … at a price to be agreed by the parties instead of a sale in the open market”.  No specific prices were suggested at that stage.

29.  On 10 June 2016, KNC suggested the prices of HK$24.64 million for the Parc Palais Property and HK$21.1 million for the Skylodge Property.

30.  On 20 June 2016, KNC wrote further and said that:

“By way of our without prejudice letter dated 10 June 2016, our clients had given notice to your client that they would exercise the option to take up their concerned Property pursuant to Clause 2(II.3(g)) of the Schedule. It is therefore no need to put the same out for a sale. The offers on the purchase price had been set out in our said letter. Please confirm if the offers are agreeable to your client as soon as possible.”

31.  Then after some further correspondence, Howell themselves on behalf of D1 counter-proposed some prices.  They did so in a letter dated 22 July 2016.  It was said therein that “Our client has conducted a search on the values of the subject properties on 6^th July 2016 …”.  Bank valuations as of that date were attached.  The valuation method set out in Clause 2.II.3(f) (of seeking valuations from five entities as of 17 January 2014) was again not mentioned.

32.  Ultimately, and after further (and a lot of) intervening correspondence, KNC wrote on 28 November 2016 that:

“We are instructed to confirm that our respective clients have reached the following agreement on the prices for disposing the captioned properties:-

(1) [The Parc Palais Property] at the price of HK$28,500,000.00 (to be taken by [P2]);

(2) [The Skylodge Property] shall be HK$22,500,000.00 (to be taken up by [P1])”

33.  In reply Messrs K B Chau & Co (“KB Chau”, who had by then taken over from Howell and become the solicitors for D1 and D2) said in their letter dated 9 December 2016 that:

“We refer to your letter dated 28 November 2016 and are instructed to confirm our client’s agreement to the prices stated therein.”

34.  The parties’ subsequent disputes shifted to the exact mechanism in which a sale or transfer resulting from the exercise of the Option should be effected (see paragraph 11 above).  As D1 himself put it at paragraph 7 of his latest affirmation of 1 February 2018 (though he has apparently got the identity of his then solicitors wrong):

“I am not disputing the fact that through my then solicitors Howell & Co., on 9 December 2016 I have confirmed my agreement that [P2] to purchase Parc Palais at $28.5 million, [P1] to purchase Skylodge at $22.5 million, but subject to other terms to be agreed like the completion date, and in particular I was most concerned when I would get my share from the sale…”

35.  In respect of those subsequent disputes, and in particular on the question as to whether the Payment Approach or Set-off Approach should be adopted, Mr Ng referred the Court to certain correspondence exchanged between the parties after the sales of two factory properties set out under Clause 2.III.1.  For the purpose of working out how those proceeds and other Family Assets were to be distributed, KNC worked out a draft distribution table (the “Table”).  It was attached to their letter of 11 December 2017 to KB Chau for the latter’s comment.  That Table contemplated the use of the Set-off Approach in so far as the purchase prices of the Parc Palais and Skylodge Properties were concerned.  No objection was raised by KB Chau in that regard.  The only objections raised concerned the alleged absence of certain breakdowns, absence of supporting documents, etc.  The absence of any in-principle objection in that regard is also clear from paragraph 10 of D1’s latest affirmation of 1 February 2018, where he said that:

“After our taken out the present Summons on 7^th December 2017, KNC on 11^th December 2017 wrote us a letter which was produced and marked ‘YSSM-9’ in [P1’s] Affirmation. It is true that references were made to the two subject properties but the Table by itself does not help to resolve the problems:

(a) There is no breakdown of the figures shown in the Table;

(b) There are no explanations of why certain items/claims were included; and

(c) There are no supporting documents to support the items/‌claims which were shown in the table.”

Discussion

36.  It is clear from the above that within days after the conclusion of the Settlement Agreement, the suggestion of transferring the Properties “at a price to be agreed by all parties” was raised.  It was raised by D1.  It was taken up by P1 and P2. Adherence to the valuation method set out in Clause 2.II.3(f) was waived.  The parties had never returned to it.  Despite that, the parties continued to regard the Option as extant.  The parties’ main emphasis then shifted to the prices at which the Option was to be exercised.  Ultimately P1, P2 and D1 (amongst other) reached agreement on the prices.  The conclusion of that agreement is clearly borne out by an objective appraisal of the correspondence between the parties, and in particular the letter from KB Chau of 9 December 2016.  The existence of that agreement has in fact also been confirmed by D1 on oath.

37.  Having analyzed the law and the facts as I have above, I hold that the strict compliance of the valuation method set out in Clause 2.II.3(f) has been waived.  P1, P2 and D1 have then reached agreement on the purchase prices.  I accept Mr Ng’s submissions in this regard.

38.  Mr Chong’s submissions that there was no offer and acceptance, no consideration, no meeting of minds, and absence of P4’s involvement were made on the premise that the Option had altogether gone, and that D1 could demand whatever fresh terms he liked.  I reject the validity of that premise.  I hold that the Option had all along (until exercise) remained extant subject only to the waiver concerning the valuation method.  P1, P2 and D1 (amongst others) have reached agreement on the purchase prices, and P1 and P2 have validly exercised the Option.  The balance of the Settlement Agreement continues to be valid and binding upon the parties in relation to the manner in which the resulting transfers should be conducted.  There was no need for P1 or P2 to rely on a new agreement.  I reject accordingly Mr Chong’s submissions.

39.  In relation to how the resulting transfers should be conducted, the parties are not in agreement.  I have explained the disputes above.  However, that provides no basis for D1 to seek a decree of specific performance for the purpose of auctioning the Parc Palais and Skylodge Properties.  As provided in the Revised Schedule, an auction should be conducted only if P1 and P2 chose not to exercise the Option and that the two Properties could not otherwise be sold as per Clauses 2.II.3(a).  I have found that the Option has been validly exercised.  There has been no breach in this regard by P1 or P2.  On this basis, the present application ought to be refused.

40.  Further, the suggestion of transferring the Properties “at a price to be agreed by all parties” came from D1.  It was taken up by P1 and P2.  The parties then conducted discussions on that basis.  Given that conduct on the part of D1, it would in my view be inequitable for him to now seek specific performance on the basis that P1 and P2 have failed to adhere strictly to the contractual valuation method.  On this basis also, I would in any event, in exercise of my discretion, refuse D1 the equitable relief of specific performance sought.

41.  Having decided for the reasons expressed above that the application for a decree of specific performance ought to be refused, and tempting though it is to do so in the hope of assisting the parties to finally settle their disagreements, I have decided not to express any concluded view upon the other disputes between the parties on the interpretation of the Revised Schedule.  In particular, I express no concluded view on whether the Payment Approach or the Set-off Approach should be applied.  I note the correspondence between the parties exchanged after the sales of the two factory properties.  I note the absence of any in-principle objection expressed by KB Chau in correspondence and D1 on affirmation.  These are important and very weighty facts and factors to be taken into account.  However, parties’ submissions have not been focused on that issue.  I have not had any submissions on what differences the adoption of the two Approaches would bring about, and the relevance of such differences.  I note further the non-committing stance Mr Chong took at paragraphs 38 and 39 of his written submissions, that:

“38. As the court would see from the correspondences exchanged between the parties, Howell on behalf of D1 had already expected that there would [sic] a formal completion, with certainty of a completion date, and deposits would be paid. D1 wanted to avoid any ‘set-off’ arrangement (as contended by P1 and P2).

 

39. Even if, which is denied, there is such set-off arrangement under the Settlement Agreement, it is irrelevant as the focus is not on the Settlement Agreement.  Here, the question is whether a new agreement has been formed to vary the Settlement Agreement.  D1 was free to impose whatever conditions and if such conditions are not met, he is not prepared to vary the Settlement Agreement.”

    ( Emphasis added.)

42.  The Court is requested to rule on the application before it.  It is an application for specific performance.  It is not an application for any declaratory relief on the meaning of any terms of the Settlement Agreement (if one can be made).  It was not prepared and presented as such.  The Court is cautious that it should not be, and should not be perceived to be, rewriting the Settlement Agreement for want of clarity.  In the circumstances, I form the view that I should merely dismiss the application for the reasons explained above. 

Costs

43.  I consider that this is an appropriate case to adopt the approach of costs to follow the event.  I made an order nisi that the costs of and incidental to this application, including that of the adjourned hearing of 18 January 2018, should be paid by D1 to P1 and P2, to be taxed if not agreed.