LEAD WELL INVESTMENTS LTD v. QUALI-WELL DEVELOPMENT LTD

CAMP 221/2024, [2025] HKCA 457

On an intended appeal from [2024] HKCFI 2264

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO 221 OF 2024

(ON AN INTENDED APPEAL FROM HCA NO 1914 OF 2020)

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J U D G M E N T

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Hon Poon CJHC (giving the Judgment of the Court):

A.  Introduction

1.  By a decision dated 13 September 2024 ([2024] HKCFI 2264) (“Decision”), Deputy High Court Judge Phoebe Man (“the Judge”) dismissed the plaintiff’s appeal against an order of a master dismissing its application for summary judgment under Order 86 of the Rules of the High Court (“RHC”). By another decision dated 4 November 2024 ([2024] HKCFI 3099), the Judges refused to grant leave to appeal to the plaintiff. It now renews that application before this Court.

2.  Having considered the papers before us, we take the view that it is appropriate to deal with the present application on paper without an oral hearing, pursuant to Order 59, Rule 2A(5)(a) of the RHC.

3.  The basic facts of this case have been set out in the Decision, and will not be repeated here. The principal issue is whether the defendant as vendor had shown a good title to the property in question to the plaintiff as purchaser. For the reasons that she gave, the Judge held that the defendant has raised a triable issue or an arguable defence that the plaintiff, as a willing purchaser, should have accepted the defendant’s offer to deduct a sum of HK$460,000 from the balance of the purchase price upon completion, which would be held at the defendant’s solicitors’ office as stakeholders for contribution required to be made for the compliance of the Mandatory Building Inspection Scheme Notice (“MBIS Notice”), and to undertake to pay any shortfall in such contribution (“Offer”).

B.  Discussion

4.  The applicable principles for leave to appeal are well established:

(1)  Leave can be granted if the court is satisfied that (a) the appeal has a reasonable prospect of success; or (b) there is some other reason in the interests of justice why the appeal should be heard. Reasonable prospects of success involve the notion that the prospects of succeeding must be “reasonable” and therefore more than “fanciful”, without having to be “probable”. As the leave requirement was introduced largely to address satellite litigation on interlocutory issues which almost invariably gives rise to major delay and expense, so for the court to be satisfied that the appeal does have “reasonable prospects of success”, merely showing that the appeal is “arguable” and “not fanciful” would not be sufficient.

(2)  Even if the threshold test of reasonable prospect of success is satisfied, the court still retains discretion whether to grant leave, although the fact there is, ex hypothesi, a reasonable prospect of success would heavily influence the court’s exercise of discretion. The court may refuse leave to appeal in the interests of procedural economy and proportionality.

See in Wong Kar Gee Mimi v Severn Villa Ltd [2012] 1 HKLRD 887 at [29] to [30].

5.  The plaintiff raised 5 grounds of appeal, which we will consider in turn below. We would preface our discussion with the well established proposition that a good title does not mean a perfect title, free from every possible blemish. Whether a good title has been shown must be approached from the stand-point of a willing purchaser and a willing vendor, both possessed of reasonably robust commonsense, both intending to see the transaction through to completion in terms of their own bargain: see Mexon Holdings Ltd v Silver Bay International Ltd (2000) 3 HKCFAR 109 at 117D-118A.

B1.  Ground 1

6.  Under Ground 1, the plaintiff contends that the Judge erred in holding that it is at least arguable that, regardless of whether the costs of the renovation is ascertained, the Offer is sufficient to provide adequate provision for the costs of the prescribed inspections and repair works necessary for the eventual discharge of the MBIS Notice. It is because as of the completion date, the total amount of the costs of the prescribed inspections and repair works necessary for the discharge of the MBIS Notice was unknown. Accordingly, the defendant plainly failed to prove (let alone proving beyond reasonable doubt) that the sum of HK$460,000 offered would be sufficient to meet the required contribution for the eventual discharge of the MBIS Notice. A bare promise by the defendant to pay for any shortfall but without the provision or fortification is insufficient.

7.  It is not disputed that if adequate provision by the defendant as vendor for the costs of the prescribed inspections and repair works necessary for the eventual discharge of the MBIS Notice have been provided for, good title can be given. The principal issue is therefore whether the costs of the prescribed works have been adequately provided for by the defendant.

8.  Contrary to the plaintiff’s submissions, there is no authority to support the contention that where a MBIS notice exists, and if no investigation or no steps had yet been taken to ascertain the costs of compliance, good title can never be shown. Instead, applying the test in Mexon, it cannot be said that a willing vendor will never accept an offer or undertaking to pay for the costs required to discharge an MBIS notice solely because the precise amount of such costs has yet been ascertained. It must depend on the actual facts in a given case.

9.  Accordingly, for the present purposes, the question to ask is not whether the defendant has proved beyond reasonable doubt that the Offer was sufficient to provide adequate provision for the costs of the prescribed inspections and repair works necessary for the eventual discharge of the MBIS Notice. Rather, it is whether the defendant has raised a triable issue or an arguable defence that a willing purchaser should have accepted the Offer.

10.  The plaintiff’s criticism that the Offer was not sufficient both in terms of quantum and provision of security or fortification does not take its case any further. As pointed out at [13(3)-(6)] of the Decision, the sum of HK$460,000 was what the defendant considered to be an amount more than sufficient to cover the likely costs of inspection and the plaintiff has not counter-proposed any amount despite being requested to do so. Further, the plaintiff did not ask for any security or fortification of the defendant’s undertaking to pay any shortfall if the stakehold sum turns out to be insufficient. In the circumstances, it is reasonably arguable that the plaintiff cannot rely on the criticism in contending that there is no triable issue or that the defendant has no reasonable defence.

11.  For completeness, we agree with the Judge’s reasons set out at [13] of the Decision in concluding that the defendant has raised a triable issue or an arguable defence that the plaintiff, as a willing purchaser, should have accepted the Offer.

B2.  Ground 2

12.  Under Ground 2, the plaintiff contends that the Judge erred in failing to distinguish the facts in E-Global Ltd v Trenda Ltd [2013] 5 HKC 192 from the facts in the present case. However, we are of the view that the Judge was entitled, for present purposes, to deal with E-Global in the way as she did at [13(8)] of the Decision.

B3.  Ground 3

13.  Under Ground 3, the plaintiff argues that the Judge erred in holding that the facts in To Yung Sing Herman v Szeto Chak Mei [2018] 3 HKLRD 370 were distinguishable on the basis that it concerned the sale of a whole building, which meant that a notice requiring the repair and renovation of the common area would affect the purchaser’s enjoyment of the property therein, namely the building, whereas the subject property in the present case is a unit and thus any effect of the liability under the MBIS Notice is purely monetary. For it is irrelevant to consider whether the MBIS Notice would affect the plaintiff’s enjoyment of the subject property; or whether the MBIS Notice was in relation to common parts of the building or the subject property. However, we do not agree that these distinguishing features in To Yung Sing Herman can be ignored for present purposes.

14.  The plaintiff further argues that even if the effect of the MBIS Notice was “purely monetary”, it nonetheless amounted to an encumbrance on title until it has been complied with. We reject this argument for the reasons set out in Part B1 above.

B4.  Ground 4

15.  Under Ground 4, the plaintiff contends that the Judge erred in holding that a willing purchaser would, if necessary, seek fortification on the promise to pay for the shortfall. In particular, by the completion date, the amount of such shortfall was still an unknown and therefore seeking fortification on an unknown amount was nonsensical.

16.  Again, the issue must be approached from the stand-point of a willing purchaser and a willing vendor, both possessed of reasonably robust commonsense, both intending to see the transaction through to completion in terms of their own bargain. Whether or not the available materials and information are sufficient for such estimation and for the fortification of the shortfall to be provided and what has a willing purchaser would seen such fortification are matters for trial.

B5.  Ground 5

17.  Under Ground 5, the plaintiff argues that the defendant never suggested that the sum of HK$460,000 was what it thought would be more than sufficient to cover the likely costs for compliance with the MBIS Notice. It therefore failed to prove beyond reasonable doubt that HK$460,000 was certainly sufficient. Further, in suggesting that the plaintiff had not made a counter-proposal, the Judge was in effect reversing the burden of proving title.

18.  In our view, whether the plaintiff as a willing purchaser should have accepted the Offer is plainly a matter for trial. The Judge is entitled to take into account the fact that the plaintiff did not counter-propose any amount to be stakeheld in assessing the sufficiency of the Offer for present purposes. She has not reversed the burden of proving title as contended.

Conclusion

19.  In the circumstances, none of the grounds of appeal is reasonably arguable and the plaintiff’s intended appeal has no reasonable prospect of success. Nor is there any other reason in the interests of justice why the appeal should be heard.

20.  Accordingly, we dismiss the plaintiff’s renewed application for leave with costs to the defendant, to be summarily assessed. The plaintiff is further directed to file and serve a statement of objection (limited 2 pages) in response to the defendant’s statement of costs dated 20 November 2024 within 14 days. Subject to such further directions, we will assess the defendant’s costs summarily on paper.

21.  As the plaintiff’s application is totally without merit, we make an order that no party may request the present determination to be reconsidered at an oral hearing inter partes pursuant to Order 59, rule 2A(8) of the RHC.