CONTINENTAL ZONE LTD v. MORE GLORY INTERNATIONAL LTD

HCMP 446/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 446 OF 2012

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J U D G M E N T

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THE ORIGINATING SUMMONS

1.  This is a vendor and purchaser summons.  The Plaintiff was the purchaser and the Defendant the vendor of Shop A (No. 27 Boundary Street) on Ground Floor, Hang Shun Building, Nos. 27-41 Boundary Street, Kowloon (“the Property”) under an agreement dated 23 June 2011 (“the Agreement”).

2.  The Originating Summons has been ordered by consent to be heard on the basis of the affirmations filed without cross-examination.  On the day of the hearing, Ms Wong (for the Plaintiff) and Mr Li (for the Defendant) confirmed to me that they remained contented to do that.

THE PARTIES’ RESPECTIVE CASE, AND THE RELIEF SOUGHT

3.  It is the Plaintiff’s case that the Defendant has failed to showed and give title.  In so far as the alleged failure to show title is concerned, it is said that the Defendant has failed to answer two alleged requisitions sufficiently or satisfactorily.  I said “alleged” as the Defendant denies that they were properly formulated requisitions.  I will come to that.  The two alleged requisitions related to certain unauthorized building works within the Property.  The first one was requisition no. 16 (“Requisition 16”) contained in a letter dated 17 August 2011 from the Plaintiff’s solicitors (Messrs. Wong & Co., “W&C”) to the Defendant’s solicitors (Messrs. Edmund W.H. Chow & Co., (“EC”).  The other one was said to be contained in another letter of 6 December 2011 (“the LLT Requisition”) from W&C.  The Plaintiff says further that due to the existence of those unauthorized building works, the Defendant has in any event failed to give title.  When opening her case before me, Ms Wong stated that her primary case was that the Defendant had failed to give title.  The Plaintiff seeks a number of declarations, primarily that the Defendant has failed to show and/or give title to the Property, and that the Plaintiff has lawfully rescinded the Agreement.  The Plaintiff seeks consequentially return of the deposit that it has paid in the amount of HK$1.2 million, and damages. 

4.  The Defendant’s position was summarised by Mr Li in his written submission as follows, that (1) in respect of Requisition 16, it was not a proper requisition or that it had been sufficiently dealt with; (2) in respect of the LLT Requisition, no requisition was in fact contained in the letter of 6 December 2011 from W&C.  Instead, the Plaintiff had by that same letter already repudiated the Agreement which the Defendant had reserved the right to accept and which it had subsequently accepted; and (3) if the letter of 6 December 2011 contained any valid requisition, it was late and/or the Defendant should have given reasonable time to deal with it and/or the Defendant had sufficiently dealt with it by an offer (to remove the unauthorized building works and to complete at a reduced price) which the Plaintiff did not accept.  The Defendant thus counterclaims for a Declaration that the Defendant was entitled to forfeit the deposit.  It also claims certain wasted conveyancing expenses.

THE FACTS

5.  By an assignment dated 16 December 2010, the Defendant was assigned the Property.

6.  The Plaintiff was incorporated on 4January 2011.  The amount of its paid up capital was HK$10.  Mr Tsang Ming Lun (“Mr Tsang”) was its director.

7.  On 23 June 2011, the parties entered into a preliminary agreement for the sale and purchase of the Property.  It was the Agreement mentioned in paragraph 1 above.  No plan defining the boundary of the Property was attached.  The Property was agreed to be sold subject to the existing tenancy and on “as is” basis.  The purchase price was HK$12 million.  The Plaintiff was required to pay deposit in the total sum of HK$1.2 million (“the Deposit”), which it did.  The Agreement provided for the execution of a formal sale and purchase agreement on or before 14 July 2011.  None has however been signed. Completion was set to take place on 14 December 2011.  The Agreement contained no provision regulating the making or answering of requisitions.

8.  Prior to the execution of the Agreement, Mr. Tsang had inspected the Property.

9.  On 5 August 2011, title documents of the Property were delivered by EC to W&C.  Amongst them was Assignment Memorial No. 3027195 which contained a plan of the Property.

10.  By a letter dated 17 August 2011 to EC, W&C on behalf of the Plaintiff raised a number of requisitions.  Requisition 16 was the one in dispute, and was in the following terms:-

“16. Please take instructions from your client and advise us whether there is/are any unauthorized or illegal structure(s) or alteration(s) of and in the Property.”

W&C further said in the letter that “We reserve all our client’s right to raise further requisitions on title of the Property.”

11.  The reply from EC was contained in their letter of 8 November 2011, in the following terms:-

“16. Our client has no such knowledge or information”.

12.  By letter of 8 November 2011 from W&C to EC, the Plaintiff requested an extension of time for completion for 3 months.  The Defendant did not agree.

13.  According to paragraph 10 of Mr Tsang’s first affirmation,

“…on 5^th December 2011 the Plaintiff learnt from Messrs. Lee, Leung Tsang (“LLT”), a firm of engineers and architects commissioned by the Plaintiff who were requested by DBS Hong Kong to inspect the Property, that there were indeed unauthorised building works existed at the Property…” 

14.  The nature of the alleged unauthorised building works (collectively called “the Unauthorized Building Works”) is important.  I reproduce in full the letter of 5 December 2011 issued by LLT (“the LLT Report”):-

“Pursuant to our recent site inspect of the above property, we discovered that the present state had been altered and were different from the approved plan obtained from the Building Department, our findings are as follows:-

Facing Boundary Street

(i) Shop area encroached on public foot path as marked “View 1” on the attached G/F part plan and photo. Such alteration would involve an increase of approximately 4.0068 Sq. M to the property.

(ii) Two unauthorized projected signage above the frontage of the property as marked “View 2 and “View 4” on the G/F part plan and photo.

Facing Scavenging Lane

(i) Steel deck and shop area encroached on existing scavenging lane as marked “View 3” on the attached G/F part plan and photo. Such alteration would involve an increase of approximately 1.925 Sq. M to the property.

As the above-mentioned building works do not have the Exemption under Section 41 subsection (3) of Building [sic.] Ordinance, therefore we would like to inform you that, unless those building (Alteration & Addition) works have obtained approval from the Buildings Department with completion to their satisfaction otherwise those building works will become Unauthorised Building works and will have necessary [sic.] remove or reinstate in respect thereof under Building Regulation.”

15.  Attached to the LLT Report were a Ground Floor Part Plan (“Ground Floor Part Plan”) and four photographs.  Marked on the Ground Floor Part Plan were amongst other things two elongated rectangles which extended and protruded from the building boundary line.  They were described as “Unauthorized shop area encroached on public foot path” and “Unauthorised steel deck and shop area encroached on existing scavenging lane”.  Also marked on the Plan were two other rectangles drawn in dotted lines which were described as “Unauthorized projected wall signage above” and “Unauthorized projected signage above”. The Unauthorized Building Works were also shown on the photographs.

16.  Also attached to the LLT report was a copy of the approved Ground Floor Plan showing the Property.  According to that floor plan, the building boundary line immediately outside the Property was smooth.

17.  The LLT Report was written on the letterhead of LLT, which described them as “Engineers & Architects” and “Chartered Structural Engineers & Authorized Persons”.

18.  By a letter of 6 December 2011, W&C notified EC of LLT’s findings.  W&C said:-

“Without prejudice to our right in raising further requisitions and our right to the outstanding requisitions, we are instructed to send you herewith a Report dated 5 December 2011 with plans and photographs from [LLT], Engineers & Architects. The Report explained the existence, in the subject property, of Unauthorised Building Works which will render the title of the property defective. We found that your client had failed to answer our Requisition 16 and failed to prove a good title to the property. As such, your client cannot give a good title of the property to our client which constitutes a breach of the [Agreement]. Therefore, our client is entitled to rescind the said [Agreement]. Please return the deposit to us in amount of HK$1,200,000 within 3 working day or else we will issue a V-P summons against your client.”

19.  EC replied by their letter dated 9 December 2011.  Its effects may be summarised as follows:-

a. EC pointed out that the Plaintiff had, by asserting that the Defendant had breached the Agreement and by demanding for return of the Deposit, already repudiated the Agreement and hence could not have reserved the right to pursue further requisitions;

b. Requisition 16 was not a proper requisition or the same had been sufficiently dealt with;

c. the tenor of W&C’s letter of 6 December 2011 was that the objection was not raised as a requisition for the Defendant to answer but as the purported basis for the Plaintiff’s unilateral repudiation of the Agreement;

d. the purported objection to title based on LLT’s report came very late being 6 working days before completion, and because of lateness the Defendant was not obliged to deal with it;

e. without prejudice to the Defendant’s stance, the Defendant made the offer of removing the Unauthorized Building Works within 3 days upon the Plaintiff’s acceptance of the offer and completion to take place 7 days thereafter (for which works the Defendant would engage competent contractor and authorized persons).  The Defendant also offered a reduction of price of HK$1.3 million;

f. at the penultimate paragraph of that letter, EC said that:

“Our client’s offer is open for acceptance on or before noon on 10^th December 2011. Once accepted, our client will commence works. If rejected or there is no response or unfavourable response, we take it that your client maintains its unilateral repudiation of the [Agreement] and we will advise our client to take the right course without further notice.”

20.  W&C replied on the same day of 9 December 2011.  The Plaintiff counter-offered to postpone the completion date to 30March 2012 at a reduced price (of HK$10.7 million) on payment of further deposit of HK$1.2 million, and with the Defendant’s consent to split up the Property by assignments, sub Deed of Mutual Covenants and Deed Poll.  No condition was attached to the removal of the Unauthorized Building Works.  The counter-offer was said to be without prejudice to the Plaintiff’s right in raising further requisitions, its right to the outstanding requisitions and its right to rescind the Agreement.  It was further said that “[The Plaintiff’s] counter-offer is open for acceptance until the close of business hours on 12 December 2011.  If [the Plaintiff’s] counter-offer is not accepted, please return the deposit to us in amount of HK$1,200,000.00 within 3 working days.”

21.  EC replied on 12 December 2011.  It was said that the Defendant’s earlier offer had been rejected by the Plaintiff’s counter-offer, and that as the Plaintiff had already by W&C’s letter of 6 December 2011 unilaterally repudiated the Agreement, the Defendant reserved the right to accept the Plaintiff’s repudiation.  But without prejudice to that stance, the Defendant made an alternative proposal of either having completion at the reduced price of HK$10.7 million on the original completion date or at the original price of HK$12 million on an extended completion date.  The Plaintiff was requested to revert before the close of business on 13 December 2011.

22.  By a letter to EC of 14 December 2011 (which was the scheduled completion date), W&C said that the follows:-

“Please note that we had rightfully repudiated the [Agreement] for reasons as stated in our previous correspondence.

Our client is neither ready nor willing nor able to purchase a property with substantial Unauthorized Building Works while you have not been able to give good title of the Property to our client.”

The Plaintiff then asked for refund of the Deposit within three working days.

23.  By a letter of 22 December 2011 from EC to W&C, the Defendant claimed to accept the repudiation of the Agreement by the Plaintiff and to forfeit the Deposit.

THE ISSUES

24.  A large number of issues have been raised, a lot of them in the alternative.  Wide ranging submissions have been made, a lot of them also in the alternative.  I may be excused for not reciting all of them.  In my view, the relevant issues are those analyzed below.

Whether Requisition 16 a properly formulated requisition

25.  Mr. Li submitted on behalf of the Defendant that Requisition 16 was not a proper requisition as it was too general.  In support, he referred me to Hong Kong Conveyancing and Practice Vol. 1A paragraphs VI[332.2] to VI[332.5].

26.  The observations made by Deputy Judge To (as he then was) at paragraph 47 of Goldmex Ltd v. Edward Wong Finance Co Ltd [2006] 2 HKLRD 795 are relevant, that:-

“Before embarking on the issue whether the requisitions had been sufficiently answered, I have the following observation to make. Most of the requisitions were speculative. Yen was just asking the Defendant to “confess” to breaches of the Government lease without making any reference to any evidence indicating any building structure might have exceeded the height restriction or that the parking spaces did not conform with the layout specified in the covenant. The series of requisitions was a pure fishing exercise. WKT was right that they were not obliged to answer the requisitions. However, they did answer the requisitions and Yen raised further requisitions.”

27.  In Essence Star Ltd v Mai Jianbo (1998) HCMP No. 299/98, Recorder Kwok had before him a requisition as to an alleged unauthorised structure.  His reasons for not satisfying that it was sufficiently precise were as follows:-

“7. Apart from stating that the alteration or the building works related to the wall between two washrooms, no particulars were given in this letter. There was no reference to any plan, approved or otherwise. It was not supported by any report, whether by an authorised person or other expert(s).

8. Before the plaintiff purchaser could succeed on a declaration that this “requisition” has not been sufficiently answered by the defendant, I must be satisfied that it was properly raised.

9. One issue in Chan Chik-sum v Great Pearl Industries Limited, [1997] 1 HKC 27, was whether the purchaser’s requisitions were properly made. On this issue, Nazareth VP said:-

“As to the requisition itself, its imprecise nature, with its confusing and repeated use of ‘and/or’ is apparent from its text. The excuse given for this is that such was the way in which the surveyor cast his advice. That does not begin to explain the purchaser’s solicitors’ failure to state precisely and clearly what it was they wanted in clarification of the vendor’s title. The statement that they ‘were instructed that approval would be required’ simply abrogated their duty to ascertain the legal position; moreover, the requisition was obscure and confusing. Some consideration given to the Buildings Ordinance (Cap 123) and Regulations in the course of the hearing before us served only to demonstrate the obscurity of what the requisition was directed to ...

Whatever is meant by ‘structural elements’ has never been explained. It was no wonder, therefore, that the deputy judge preferred the opinion of the vendor’s expert, also an architect, that the railings were non-structural works for which no approval was required, and made the finding that the railings were ‘non-structural and so required no approval.’

Reverting then to the first issue, it is difficult therefore to resist the conclusion that the requisitions were not properly raised in the sense that they were materially confusing and obscure. However, that point not having been taken in that sense below, I proceed to address those points that were taken.” (at p. 31)

10. On that point, Bokhary JA, as he then was, said:-

“Even assuming that there was material on the basis of which the purchaser could have formulated a proper requisition here, I am of the view that no properly formulated requisition has actually been raised. The requisitions in questions are insufficiently precise to be effective.

Formalism has no place in these matters. But there is a world of difference between formalism and necessary precision.

Requisitions on title must be formulated with reasonable precision if they are to be effective.

... If requisitions on title were treated as effective even though they are not at least reasonably precise, they would become a snare for vendors and a means of destroying bargains.” (at p. 33)

11. In my judgment I am not satisfied that there were materials before me which justified the question about any alleged alteration. Nor am I satisfied that the “requisition” was sufficiently precise.”

28.  I refer to the wording of Requisition 16.  It made no reference to any plan, approved or otherwise.  It was not supported by any expert report.  It in fact did not even refer to any particular structure.  In effect, it simply requested the Defendant to make a confession as to the existence of any illegal structure.  In my view, it lacked the specificity and precision to qualify as a proper requisition.  The Defendant was not obliged to answer it.

29.  The main thrust of Ms Wong’s submission in this regard was this, that whether Requisition 16 was properly formulated had become irrelevant, because by answering it in unqualified terms on 8 November 2011, the Defendant had waived its right to challenge the propriety of that requisition.  It was further submitted that had any objection been raised, the Plaintiff could have rectified the alleged defect.

30.  I enquired with Ms Wong as to whether she had any authority in support of this submission of hers.  She told me that she could not find any.  She however sought to rely upon Goldmex in support of the proposition that lateness in raising requisitions can be waived, and that, in her submission, if lateness can be waived, other defects should also be capable of being waived.

31.  In the absence of any authority in support, I do not accept Ms Wong’s submissions on this issue.  A late but otherwise proper requisition is fundamentally different from a purported requisition which lacks the specificity and precision to be a proper requisition.  While lateness can be waived, no waiver can change the nature of a purported requisition or to provide specificity and precision to a purported requisition which it otherwise lacks.

32.  The fact that the Defendant had answered Requisition 16, while in my view could not cure the defects it had, may however be relevant to the following matters:-

a. if the Plaintiff had followed up the answer given by the Defendant with a subsequent and properly formulated requisition, namely the LLT Requisition, the issue would then become whether the Defendant had sufficiently answered the LLT Requisition.  The fact that the LLT Requisition was raised as a result of an answer which the Defendant was not obliged to give may not be relevant;

b. if the LLT Requisition was a properly formulated requisition but had been raised late, and the Defendant objected on that basis:-

a. whether the Plaintiff could meet the objection by saying that it had been misled by the answer given by the Defendant to Requisition 16, and

b. whether the Defendant should in any event have been given time to deal with it.

33.  The consideration of these other matters requires me to decide first of all whether W&C’s letter of 6 December 2011 (said by the Plaintiff to contain the LLT Requisition) in fact contained any properly formulated requisition.  If it did not, those other matters fall away.  It is to this issue I now turn.

W&C’s letter of 6 December 2011 – whether contained any requisition, and whether repudiation

34.  I turn to the contents of E&C’s letter of 6 December 2011.  Two issues are involved: (1) whether W&C’s letter of 6 December 2011 contained any requisition, and (2) if not, whether the Plaintiff had in fact thereby rescinded the Agreement by evincing an intention no longer to be bound by the same.

35.  Mr Li submitted that the Plaintiff did not raise any requisition in W&C’s letter of 6 December 2011, and the Plaintiff had in fact thereby repudiated the Agreement.

36.  Ms Wong submitted that the letter in fact contained a requisition which was raised “in furtherance of” Requisition 16.  She further, with reference to the opening words of that letter, namely “Without prejudice to our right in raising further requisitions and our right to the outstanding requisitions…”, submitted that the Plaintiff had not ‘unequivocally evinced an intention to treat the Agreement as at an end”.

37.  I have considered the contents of that letter objectively and carefully. I note that immediately after the opening words reproduced above, W&C proceeded to refer to the contents of the LLT Report and said that “We found that your client had failed to answer our Requisition 16 and failed to prove a good title to the property.  As such, your client cannot give a good title of the property to our client which constitutes a breach of the [Agreement].” W&C did not ask EC or the Defendant to address or clarify any title issues which the LLT Report might have raised.  They simply stated their conclusions that the Defendant had failed to answer Requisition 16, failed to prove a good title, and could not give a good title.  They then concluded by demanding return of the deposit paid within 3 days.  That demand is in my view particularly important.  It was not a warning.  It was an immediate demand.  The only legal basis upon which that demand could have been made was that the Agreement had come to an end.  Otherwise, the Plaintiff simply had no entitlement to the return of any deposit.

38.  Thus, having considered the contents of the letter as a whole, and despite the opening words, I form the view that no requisition was contained in W&C’s letter of 6 December 2011.  Rather, the Plaintiff had thereby rescinded the Agreement by unequivocally evincing an intention to treat the Agreement as at an end or no longer to be bound by the same.  However, at this stage, I have not reached any conclusion as to whether that rescission was wrongful.

Whether Defendant failed to give title

39.  I now consider Ms Wong’s primary case, which was that the Defendant had failed to give title.  She elaborated it as follows: The Defendant’s duties as vendor included the duties to show and give title.  The two duties were distinct.  The issues as to whether Requisition 16 was a proper requisition, and as to whether W&C’s letter of 6 December 2011 contained any requisition, go only to the Defendant’s duty to show title.  Even if both of those issues were to be answered in the negative, the Defendant remained under the duty to give title on the contractual completion date.  The Defendant’s duty to give title survived any rescission on the part of the Plaintiff by W&C’s letter of 6 December 2011, because either the Plaintiff was entitled to rescind on 6 December 2011 as the title defects associated with the Unauthorized Building Works were irremovable (at least by the contractual completion date), or because the Agreement had been kept alive by the Defendant’s conduct subsequent to the rescission.  On the contractual completion date, the Agreement remained binding upon both parties, and the Unauthorized Building Works had not been removed.  It was therefore the Defendant who had breached the Agreement.

40.  I consider each of the sub-issues in turn.

The Defendant’s duty to give title

41.  In the course of her submissions, Ms Wong helpfully took me through a number of authorities on the nature of the Defendant’s duties to show and give titles.  A lot of them are not in dispute.  But of particular relevance is Strong & Associates v Flywin Co. Ltd. [2002] 1 HKC 54, wherein Le Pichon JA observed, at p.60 F-G, that:-

“First, I do not agree that there was an obligation upon the plaintiff to raise requisitions simply because it was informed by the vendor that some of the alterations might be unauthorised. Insofar as it may be suggested that the purchaser has a positive duty to ascertain whether or not unauthorised structures exist, it is wrong. The legal burden is on the defendant to give a good title. To hold that the purchaser is under such an obligation would effectively reverse the legal burden for giving good title in contracts for the sale and purchase of land.”

42.  In Profit World Trading Ltd v Ho So Yung [2011] 2 HKLRD 773, Le Pichon JA at p.779-780 made similar observations at paragraphs 21 and 23, that:-

“21…As I have endeavoured to explain, requisitions have to do with the vendor’s obligation to show a good title. The vendor’s obligation to give a good title is an entirely independent obligation. In the first place, implicit in the judgment of this court in Strong & Associates Ltd v Flywin Co Ltd [2002] 1 HKC 54 is the proposition that the vendor’s obligation to give a good title is irrespective of requisitions.”

…

“23 Logically, a vendor’s obligation to give a good title on completion cannot depend on whether a requisition as to defects was raised within time or was raised late or not at all. Either he is in a position to give a good title on completion or he is not. Requisition cannot alter the nature of that obligation.”

43.  The law in my view is clear.  The Defendant’s duty to give title is independent of its duty to show and prove title.  Even though, as I have found, Requisition 16 was not a proper requisition, and even though W&C’s letter of 6 December 2011 did not contain any requisition, and even if the Plaintiff had not raised the purported requisition at all, the Defendant, subject to what are to be considered below, remained obliged to give title to the Property on the contractual completion date.

Whether Defendant’s duty to give title survived the rescission by the Plaintiff

44.  If the rescission by the Plaintiff on 6 December 2011 had been wrongful and had been accepted by the Defendant, the Defendant would have been from the time of the acceptance relieved from further performance of its duties under the Agreement.  In other words, the Defendant would have been discharged from the duty to give title.

45.  Ms Wong countered that by submitting that the Defendant was not so discharged.  The reasons, in her submission, were either that the Plaintiff was entitled to rescind on 6 December 2011 as the title defects associated with the Unauthorized Building Works were irremovable (at least irremovable by the contractual completion date), or because the Agreement had been kept alive by the Defendant’s conduct subsequent to the rescission. 

46.  I consider the first reason given by Ms Wong first.  In Peyman v Lanjani [1985] Ch. 457, Slade L.J. stated, at pages 496-497, that:-

(1) “Since a vendor’s title to land is exclusively within his own knowledge, he is bound to disclose all latent defects in his title to an intending purchaser. If a purchaser subsequently becomes aware of an irremovable defect of title which the vendor did not disclose to him before entering into the contract, he may rescind the contract. . .” Halsbury’s Laws of England, 4th ed., vol. 42 (1983), para. 61, p. 56.

Any fact which will prevent him from obtaining such a title to the property as he was led to expect constitutes a defect: para. 63, p. 57.

(2) In this context an “irremovable” defect of title means one which cannot be removed by the vendor without the concurrence of persons on whose concurrence he cannot insist: para. 50 and note 2, p. 47.”

47.  Peyman v Lanjani was followed, albeit obiter, by Barnett J in Lucky Health International Enterprise Ltd v. Chi Kit Co Ltd [1998] 4 HKC 656. At page 671, his Lordship observed that:-

“…on the authorities, e.g. Peyman v Lanjani, it is clear that a purchaser may rescind, without waiting for the completion date, when he becomes aware of an irremovable defect in title.”

48.  The first reason put forward by Ms Wong is in my view correct in law. Whether it is in fact valid is however facts sensitive, and is dependent upon whether the title problems associated with the Unauthorized Building Works were irremovable. I will come back to this issue at the latter part of this judgment after I have considered the question of “substantial performance”.

49.  In respect of the second reason put forward by Ms Wong, I am of the view that it is a valid one.  EC had never expressly accepted the Plaintiff’s rescission until its letter of 22 December 2011.  In EC’s letter of 9 December 2011 (in reply to W&C’s letter of 6 December 2011), no acceptance was communicated.  Rather, the Defendant made an offer to remove the Unauthorized Building Works and to complete at a reduced price.  It was indeed Mr Li’s own case that the Defendant had only reserved its right to accept the Plaintiff’s rescission, and had not actually accepted it until 22 December 2011.

50.  As held by Yuen J (as she then was) in First Shanghai Enterprises Ltd. V Dahlia Properties Pte Ltd [2001] 3 HKC 443 at 455I:-

“Once the contract is kept alive, it is kept alive for the benefit of both parties.”

51.  Thus, as the Agreement had been kept alive, the Defendant, subject to what are to be discussed below, remained under the duty to give title.

52.  I have considered Ip Cho Sau v Leung Kai Cheong HCMP 1288 of 1998 which Mr Li referred me to.  In that case, the plaintiffs/purchasers complained to the vendors about the existence of certain illegal structures.  But instead of raising a requisition, they announced that they did not intend to perform the agreement and repudiated it. They further failed to pay certain further deposits which they were contractually bound to do.  At paragraph 20 of the judgment, Deputy Judge Woolley observed that:-

“It is in my view not open to the plaintiffs to say, in support of their argument that the defendants have still not rectified the matter. Once they have called off the contract the defendants are entitled to consider that the matter is at an end, and there are relieved of any further obligations under it, including proving title or rectifying matters such as this.”

That conclusion however has to be considered in the context of the facts of that case.  After the purchasers’ repudiation, and after some negotiations between the parties, the vendors ultimately expressly accepted the repudiation, and they did so nearly a month before the contractual completion date.  That having been the case, the venders were no doubt relieved of any further duties to rectify the problem or to give title on the completion date.  That was however not what had happened in our present case.

Whether failure to give title – The parties’ submissions

53.  As it turned out, the Unauthorized Building Works were not removed by the contractual completion date.  Has the Defendant therefore failed to give title?

54.  Ms Wong on behalf of the Plaintiff submitted yes.

55.  The submissions made by Mr Li in reply were quite complicated.  He relied upon the doctrine of “substantial performance”.  His basis premise was that good title can be given by substantial performance.  Whilst the Unauthorized Building Works had not been removed by the contractual completion date, he relied upon the offer contained in EC’s letter of 9 December 2011.  He submitted that as “substantial performance” is an equitable remedy, the conduct of the parties would therefore have to be looked at.  He submitted further that the offer made by the Defendant was a reasonable one, which the Plaintiff had failed to accept.  By not accepting the offer, it became not a pre-requisite for the Defendant to remove the Unauthorized Building Works before the Defendant could invoke “substantial performance” as the basis to justify the Defendant’s stance that it was the Plaintiff which had been in breach.  In particular, it was said that by failing to accept the offer, and by maintaining the position first evinced in W&C’s letter of 6 December 2011, the Plaintiff had evinced an intention not to perform the Agreement, and that that was sufficient to support the proposition that it was the Plaintiff who was in breach of the Agreement.

Substantial performance – the law

56.  Two legal issues are involved, being (1) whether the doctrine of substantial performance is applicable to a claim for forfeiture of deposit when the underlying agreement has been terminated, and (2) what the test is in deciding whether substantial performance has been tendered.

57.  In relation to the first issue, Ms Wong submitted that the doctrine of substantial performance was not applicable to the present case because the Defendant had by its letter of 22 December 2011 sought to terminate the Agreement and that it is now seeking forfeiture of deposit.  She referred me to G.C. Kirby & Sons (a firm) v Sharman (1990) unrep., 19.11.1990 CA (LexisNexis Transcript) and Chitty on Contract (31^st edition) paragraphs [27-054] to [27-055].  She relied heavily upon the obiter observations made by Lam J (as he then was) in Cashew Holdings Ltd v Pacific Success Enterprise Ltd [2004] 2 HKC 594, that:-

“71. Before I end this judgment, I will like to come back to my reservations about the proper scope of operation of the doctrine of substantial performance. The basis of the doctrine as explained in Goldlful Way is the equitable remedy of specific performance with abatement of price at the instance of a vendor who could tender substantial performance. It should be remembered that on the facts of Goldful Way, the contract was kept alive by the parties (see p. 684G). Hence, although the matter came before the court by way of a vendor and purchaser summons and the question was framed by reference to whether good title can be given, Yuen J in substance considered the matter as if she was dealing with a claim for specific performance with abatement of price by the vendor.

72. The situation could be quite different if by the time the parties came before the court the contract had been terminated (as in the present case). Due to the termination of the contract, there is no scope for either party seeking any relief by way of specific performance, not to mention specific performance with an abatement of price (see Spry, Equitable Remedies 6^th Edn. p. 221-4). As in the present case, the vendor is not seeking specific performance, he called off the contract by his own act in forfeiting the deposit. A fundamental distinction is that if the remedy sought is specific performance, the purchaser would still have an opportunity to pay the abated price after the court has decided on the issues and his deposit would not be forfeited in the meantime. The hardship to a purchaser is obviously lessen accordingly. I have some doubts whether a vendor can rely on substantial performance to forfeit deposit. In so doing, a vendor is in effect elevating a remedy into a contractual right. In Pang Chor Ying Annie v Lifton Investment [1993] 2 HKC 57, Litton JA (as he then was) held that this should not be permitted. After referring to the equitable remedy of specific performance with an abatement of price, His Lordship said at p. 61G

“This is a remedy which a court of equity is entitled to give; it is not to be translated into a contractual obligation falling on the shoulders of the purchaser, in anticipation of the vendor’s default, on the day fixed for completion.”

73. Yuen J also referred to this point in Goldful Way at p. 686E to G although on the facts of that case, the difficulty that could be faced by a purchaser as to the uncertainty of the abated price did not arise. However, one could see how a purchaser like the Plaintiff would be put into a difficult position. In our case, Mr Tung got an offer of abatement of $1,560,000 from the Defendant. Suppose the facts are slightly different, let us assume that the Plaintiff was advised by Dudley Surveyors Ltd and the Defendant was advised by Landscope before the deadline for completion. The Plaintiff got a valuation of $1,560,000 whilst the Defendant got one for $300,000. The Defendant made an offer of $300,000 by way of abatement. How did the Plaintiff suppose to react? How much time would he be given to react? No-one can tell which valuation would be accepted by the court and if the Plaintiff acted on its surveyor’s advice and rejected the offer, it took the risk of its deposit being forfeited and the risk of litigation with it. This hypothetical scenario illustrates the mischief that could be introduced into the conveyancing field if the doctrine of substantial performance can be relied upon as a ground for forfeiting deposit when an offer of abatement of price was not accepted.

…

75.       In Summit Link v Sunlink Group [2000] 2 HKLRD 724, the doctrine was applied in favour of a vendor who had terminated the contract. However, it was conceded by counsel that the doctrine was available and no point seems to have been taken as to whether it was applicable when the vendor was terminating the contract instead of seeking specific performance (see p. 742J to 743B). Hence, the decision of the Court of Appeal did not deal with the issue.”

58.  I find it difficult conceptually to divorce the concept of substantial performance from the nature of the title which a vendor has to give, or to make the applicability of the doctrine of substantial performance conditional upon the forms of relief sought.  As held by Yuen J (as she then was) in Goldful Way Development Ltd v. Wellstable Development Ltd [1998] 4 HKC (686A-E):-

“The first question posed by Counsel for the Purchaser is a general one:- whether good title can be given if the Vendor offers substantial performance. In my view, good title can be given.

It is well-established that in considering whether a vendor has shown good (albeit not perfect) title, the test is whether a court would at the instance of the vendor force the title upon an unwilling purchaser in a suit for specific performance (Farrand, Contract and Conveyance 4th ed p.87, Manning v Turner [1957] 1 WLR 91, Pyrke v Waddingham 10 Hare 1).

It is equally well established that a court of equity would decree specific performance at the suit of a vendor where he is able to convey substantially (albeit not all of) what he has contracted to sell (Spry, Principles of Equitable Remedies, 5th ed. pp.292-6).

Accordingly, as a general proposition, good title can be given where a vendor is able to offer substantial performance. To say otherwise would lead to the anomalous situation that whereas in a Vendor and Purchaser Summons, the court would have to find that no good title is given; yet on the same material, the court would decree specific performance if the claim is heard at the same time.”

59.  In Goldful Way, the unauthorised structure concerned was a greenhouse covering about 3.93% of the total floor area of the property in question.  The issue was whether its existence would lead to the vendor being unable to complete the sale for want of good title.  The parties by consent kept the agreement alive and extended the completion date until 5 days after the delivery of the judgment.  Yuen J, having applied the test of whether the vendor was able to convey substantially what he had contracted to sell (thus in effect invoking the doctrine of substantial performance), and on the facts, held that the vendor could demolish the greenhouse prior to completion and still be in the position to complete by substantially performing the agreement.  Good title could be given.  There was no breach on the part of the vendor.  But suppose the facts were slightly different in the following ways:  the vendor had decided to demolish the greenhouse which he in fact did before the original completion date.  The purchaser however found that objectionable on the basis that he did not get what he thought he bargained for and refused to complete.  The vendor then forfeited the deposit.  The purchaser took him to court.  When before the Court on this slightly different set of facts, the issue would still be the same (whether the vendor had given or would have been able to good title), the test to be applied would be the same (whether the vendor was able to convey substantially (albeit not all of) what he has contracted to sell), and the answer should be the same (namely he was able to give good title).  The vendor committed no breach.  It was the purchaser who did.  Why should the vendor then not be able to keep the forfeited deposit merely because the purchaser had taken what turned out to be a wrongful move which led to the termination of the agreement?  I see no legal or logical reason for that.

60.  In my view, the concern that Lam J (as he then was) expressed in Cashew Holdings may better be addressed by the application rather than the applicability of the doctrine of substantial performance.  That was indeed what Yuen J has alluded to in Goldful Way at p.686 E-H when she warned that every case will have to depend on its own fact:-

“I am conscious that specific performance is an equitable remedy and not a contractual right (Annie Pang v Lifton, 61) and that in some cases, the concept of substantial performance might introduce an unwelcome ambiguity into the agreement, because a purchaser would not be in a position to know how much to pay by way of an abated purchase price. But in this case, at least, the Purchaser is not confronted with any such ambiguity or uncertainty - it is obtaining a court’s determination on whether there is substantial performance, and since the only unchallenged evidence is that there is no real difference in the value of the Property, no question of abatement arises when completion date arrives.

So it may not be safe for a vendor in every case to assert that he has offered substantial performance by demolishing unauthorised building works - every case will have to depend on its own facts. As an example, the vendor in Sun Great v Polly Hui would clearly not be able to say that it had offered substantial performance.”

61.  Further, Ms Wong has not referred me to any cases since Cashew (decided in 2004) which has made the applicability of the doctrine of substantial performance conditional upon the types of relief sought or whether the underlying agreement is still on foot.  On the contrary, I note that as recent as 2011, the Court of Appeal in Profit World Trading Ltd v. Ho So Yung [2011] 2 HKLRD 774 proceeded on the basis that the doctrine of substantial performance was applicable even though the underlying contract in that case had been terminated. 

62.  I am therefore of the view that the doctrine of substantial performance is applicable to the present proceedings even though the Agreement has been terminated, and even though the Defendant is seeking forfeiture of the deposit paid.

63.  I turn next to the test to be applied in deciding whether substantial performance has been tendered.  The test has both subjective and objective elements.  In Goldful Way, Yuen J (as she then was) held at 686I to 687C that:-

“As stated in Spry, whether a deficiency is essential and prevents substantial performance depends on the nature of the defect and also on the proportion of the whole of the land that is affected by it, and the purposes or uses for which the parties knew that it was being sold, or ought reasonably to have known that it was being sold, and on any other matters which might reasonably have affected the decision of the purchaser to enter into the agreement or which were known by the vendor to have affected the decision (see also Shepherd v Croft [1911] 1 Ch 521, 528-9, Flight v Booth 5 Will IV 370, 377, Hamilton v Munro (1951) 51 SR (NSW) 250, 253-4).

It is a matter of fact and degree in each case”

64.  In Chan Man Choi v Poon Fook Wah [2001] 3 HKC 493, Woo JA at 511E to 512B accepted as correct the approach submitted by counsel:-

“While Mr Tang accepted that it is for the court to decide whether a difference between the property agreed to be sold and the property as misdescribed is substantial and whether such difference would prejudice the affected party, he submitted that the court should first start by looking at the evidence of the subjective view of the affected party, if such evidence is available, and then examine whether such subjective view was justified or not in the circumstances. In such examination, the court should consider whether the subjective view had been reasonably held or not, and even in the absence of evidence of the subjective view, the court could and should examine all the circumstances of the case to decide if the difference is substantial and if the affected party would be prejudiced by it…”

65.  In Leung Wing Fai v. Onlink Investments Ltd [2000] 1 HKLRD 725, Yuen J (as she then was) summarised the relevant considerations at 731 as follows:-

“Whether a deficiency was essential and prevented substantial performance depended on

a) the nature of the defect;

b) the proportion of the whole of the land that was affected by it;

c) he purposes or uses for which the parties knew that it was being so d or ought recently to have known that it was being sold and

d) on any other matters which might reasonably have affected the decision of the purchaser to enter into the agreement or which were known by the vendor who have affected the decision.

In each case it was a matter of fact and degree.”

66.  When approaching the issue of substantial performance, I will adopt the approach as discussed above.

Substantial performance – whether substantial performance by the Defendant

67.  In respect of the objective elements of the test, I have referred to the contents of the LLT Report.  I have also summarised the effects of the Ground Floor Part Plan attached thereto.  I have also compared that plan with the assignment plan produced by Mr Tsang (page 87 of the Bundle).  I note that on the assignment plan, the building boundary line of the Property was smooth. There were no extensions or protrusions as drawn on the Ground Floor Part Plan.

68.  Mr Li has made some comments on the LLT Report.  First, he commented that its author was apparently only a Chartered Structural Engineer.  But as I have said above, the LLT Report was written on the letterhead of LLT, which described them as “Engineers & Architects” and “Chartered Structural Engineers & Authorized Persons”.  They were also described by Mr Tsang as “a firm of engineers and architects.”  The available evidence suggests that they were qualified to give the opinion in their report. 

69.  Mr Li further commented that although the words “encroached” was used in the LLT Report, there was no evidence as to the exact boundary line of the Property, and as a result one simply could not just take from the LLT Report that the extended shop fronts had trespassed onto common or public area. 

70.  I have considered those submissions.  I have also considered the totality of the LLT Report, including in particular the Ground Floor Part Plan attached thereto.  Their combined effects were clear.  The Unauthorized Building Works were additions and alterations.  They were different from what were shown on the approved plan.  The extended shop fronts were described as having encroached onto public area.  The projected signage was also described as unauthorised.  No contrary evidence has been adduced by the Defendant.  I in the circumstances accept and place weight upon the LLT Report.  In particular, I accept LLT’s opinion that the extended shop fronts on the Boundary Street side and the scavenging lane side encroached upon the public footpath and the scavenging lane respectively.

71.  The fact that the extended shop fronts encroached upon the public footpath and scavenging lane is an important one.  On the evidence, the Defendant could have no title to give in respect of those parts.  I refer to the analysis of Lam J (as he then was) in Cashew Holdings in respect of the distinction from a legal point of view between an illegal structure within the boundaries of the property and one encroached upon common area or land of the others.

72.  According to Mr. Tsang’s evidence and a letter of 29 February 2012 from LLT, the net area of the Property was approximately 59.358m². The total area of the extended shop fronts was 5.9318m²(4.0068 m² on the Boundary Street front and 1.925m² on the scavenging lane front), which represented about 10% of the net floor area.

73.  Turning to the subjective matters, I have considered Mr Tsang’s evidence.  He said that the Plaintiff entered into the Agreement knowingly with the benefit of sitting tenancies and would have been “happy to earn the yield by way of rental income.”  He said he was impressed by the signage which would be an attraction to potential tenants and would enhance the rental value of the Property.  He said further that “[a]part from the signage, the extended shop area which was found to have encroached upon the scavenging lane is also an important feature of the Property.”  When he inspected the Property, it was partitioned into two portions, one bigger and one smaller.  The extended shop front on the scavenging lane was enjoyed by the smaller portion. Without the extended shop fronts, and in particular, without the extended shop front on the scavenging lane side, the smaller portion would be even smaller. He said that “without the Unauthorized Building Works, there was not much point for the Plaintiff to purchase the Property since in that case not only the Property’s yield by way of rental income would be much lower, the Property would be less attractive to potential tenants.”

74.  Although Mr Tsang’s evidence was not tested by cross-examination, I still have to consider whether his subjective views were reasonably held in the light of all the evidence.  In respect of the signage, he might genuinely have been impressed by them.  I have no basis to doubt that.  But in my judgment, his view on the effect of the removal of the signage upon the marketability of the Property was exaggerated.  As pointed out by EC in their letter of 9 December 2011, which I accept, the signage, even if removed, could always be re-erected upon application to the relevant authorities.  At least similar ones could be re-erected.

75.  I am however more concerned about the extended shop fronts.  I find that they formed part of the Property agreed to be sold.  That is the effect of Mr Tsang’s evidence.  That is also consistent with the contemporaneous conduct of the parties.  The extended shop fronts together represented about 10% of the net floor area.  Without them, the Property, and in particular the smaller portion thereof, would be appreciably smaller.  In the absence of any cross-examination and specific challenge, there is no basis for me not to accept Mr Tsang’s evidence that the extended shop fronts were important features of the Property.

76.  It is against the above matters that I consider whether the Defendant did tender or could have tendered substantial performance.

77.  Ms Wong submitted that the burden of proving substantial performance was on the Defendant.  She cited Grandco (Holdings) Ltd v Harbour Wealth Co Ltd., HCA 3388/1998.  I agree.

78.  The Defendant had not actually removed the Unauthorized Building Works by the contractual completion date.  It relied on its offer to do so.  I repeat Mr Li’s submissions made to me which I have summarised in paragraph 55 above. I have considered them.

79.  In my judgment, even if the Defendant had removed the Unauthorized Building Works by the contractual completion date, and even taking into account the reduced price, it still would not have been able to give good title.  The Property would have been a substantially different one both objectively and from Mr. Tsang’s subjective perspective.  The Defendant could not have substantially performed the Agreement.  I repeat my findings and considerations set out in paragraph 75 above.

80.  Having so found, and on the basis of my findings, I cannot accept that the refusal on the Plaintiff’s part to accept the Defendant’s offer amounted to any repudiation, as Mr Li submitted to me.

81.  Mr Li relied on Victory Star Ltd v. Ng Fung Ying [2003] 4 HKC 677 and submitted that the Plaintiff’s counter-offer gave rise to some sort of estoppel so that it should not be allowed to rely on the Unauthorised Building Works to rescind the Agreement. 

82.  Victory Star involved a very different set of facts.  There, the vendors, having received a requisition concerning certain unauthorised structures on the property which they had agreed to sell, informed the purchaser that they were going to demolish them before completion.  The purchaser did not respond.  The vendor then informed the purchaser that the demolition work would be carried out unless the purchaser stated otherwise within the next seven days. The purchaser again did not respond and the work was completed. Subsequently, the purchaser purported to rescind the agreement on the basis that it was an implied term of the sale and purchase agreement that the property was to be sold on an “as is” basis, and there had been a substantial variation of the property agreed to be sold. On the purchaser’s application for summary judgment, the vendors were granted unconditional leave to defend on the ground that there was a highly arguable defence of estoppel by way of the purchaser’s silence. The purchaser appealed.  On appeal, the Court of Appeal held that there was an arguable case that the purchaser had been under a legal duty to respond, and that:-

“the plaintiff’s lack of response amounted to a representation that it would accept the defendants’ proposal to resolve the requisition on title and is therefore estopped from alleging that the defendants would not be able to substantially perform the agreement.” (page 523F-G)

83.  In the present case, the Defendant’s offer was first made on 9 December. The Plaintiff made a counter-offer on the same day.  The Defendant’s original offer was rejected thereby.  The Defendant itself said so in its letter of 12 December.  In that letter, the Defendant in turn made its counter-proposal (of either having completion at the reduced price of HK$10.7 million on the original completion date or at the original price of HK$12 million on an extended completion date), thus rejecting the Plaintiff’s counter-offer.  The Defendant imposed a deadline of 13 December for the Plaintiff to answer.  It is true that the Plaintiff did not expressly respond to that letter.  But on the day immediately after the deadline imposed, the Plaintiff issued the letter of 14 December terminating the Agreement.  Given such facts, I do not find any conduct on the Plaintiff’s part which could be construed as any estoppel so that it should not be allowed to rely on the Unauthorised Building Works to rescind the Agreement. 

84.  In Victory Star, Cheung JA observed that:-

“18. Conveyancing is not a game. It is a transaction involving substantial sums of money between the parties. If the parties had chosen to enter into an agreement for the sale and purchase of a property, one has to proceed on the basis that they are willing parties to a deal and their wish is to complete the deal in accordance with the terms of the agreement. Likewise in the context of a requisition as to title, one has to proceed on the same basis. One would expect the parties to possess the requisite level of commonsense to guide them in their decision. Authorities for this approach are plenty, see: for example, Mexon Holdings Ltd v Silver Bay International Ltd (2000) 3 HKCFAR 109 (per Litton PJ).

19.    It goes without saying that the parties may be motivated by extraneous consideration such as a purchaser wishing to withdraw from a transaction because of a falling market. However, in deciding the legal obligations of the parties one must only be guided by the principle I have earlier stated.”

85.  Mr Li has repeatedly commented that the Plaintiff was a speculator and that it raised the issue of the Unauthorized Building Works as an excuse to get out of the Agreement.  He pointed to the Plaintiff’s request for extension, and the fact that the counter-offer it made on 9 December 2011 contained no term about the removal of the Unauthorized Building Works.

86.  I have considered those submissions and the related evidence.  Mr Tsang in his affirmations has denied that the Plaintiff raised the issue of the Unauthorized Building Works to get out of the Agreement (paragraph 13 of his first affirmation).  I refer further to his evidence recited in paragraph 13 above in relation to the circumstances leading to the preparation of the LLT Report.  I have no reason not to accept his evidence.  I note in this regard also the Defendant’s case (as is apparent from its answer to Requisition 16) that even the Defendant was not aware of the Unauthorized Building Works until the LLT Report.

87.  In the end, and having analysed the facts and evidence as above, my views are:-

a. the extended shop fronts formed part of the Property intended to be sold under the Agreement;

b. the extended shop fronts on the Boundary Street side and the scavenging lane side encroached upon the public footpath and the scavenging lane respectively.  On the evidence, the Defendant had no title to give in respect of those parts of the Property;

c. on the contractual completion date, the Unauthorized Building Works had not been removed.  The Defendant had only made an offer to do so; and

d. even if the Unauthorized Building Works had been removed, the Defendant still would not have been able to give a good title, because it would not have been able to substantially perform the Agreement;

e. the Defendant breached the Agreement by failing to give title to the Property on 14 December 2011.

88.  I also rule that the Agreement had been brought to an end by the Plaintiff’s letter of 14 December 2011.  The third paragraph thereof made the Plaintiff’s position clear, that “Our client is neither ready nor willing nor able to purchase a property with substantial Unauthorized Building Works while you have not been able to give good title of the Property to our client.” The breach by the Defendant was thereby accepted. 

89.  I now come back (though strictly speaking not necessary in the light of my reasoning above) to the issue left open in paragraph 48 above as to whether the title problems associated with the Unauthorized Building Works were irremovable. If necessary I would rule that the title problems were irremovable.  I repeat my views set out immediately above.  With the Unauthorised Building Works as they were on the completion date, the Defendant had no title to give in respect of those parts of the Property.  Even if they had been removed, the Defendant still would not have been able to substantially perform the Agreement.

CONCLUSIONS ON THE CLAIM AND COUNTERCLAIM

90.  By reason of the above, I allow the Plaintiff’s claim on the basis that the Defendant has failed to give title to the Property.  I accordingly dismiss the Defendant’s counterclaim.

LOSS AND DAMAGE

91.  In the light of my judgment, the Plaintiff is entitled to have its deposit in the total sum of HK$1,200,000 back.

92.  The issue of loss of bargain does not arise as the joint surveyor’s evidence shows a drop in price.

93.  In his first affirmation, Mr Tsang sought various costs and expenses, in the total sum of HK$170,000.  In the affirmation filed on behalf of the Defendant, those claims were criticised as mere assertions, as no documentary proof of those costs had been produced.  Despite such specific challenge, Mr. Tsang in his second affirmation was only able to produce a bill from W&C for HK$20,000 and a debit note from LLT for HK$15,000.  That is the extent of the Plaintiff’s claim for expenses which I am prepared to allow. 

ORDER

94.  I make the following Orders:-

a. A declaration that the Defendant breached the Agreement by failing to give title to the Property on 14 December 2011, which breach was accepted by the Plaintiff on the same day;

b. An Order that the Defendant do return to the Plaintiff the sum of HK$1,200,000 being the total amount of the deposit paid by the Plaintiff to the Defendant under the Agreement, together with interest from 15December 2011 to date of judgment at the rate of HSBC prime plus 1%, and thereafter at judgment rate;

c. An Order that the sum of HK$1,200,000 paid into Court pursuant to the Order of Master Pang of 4 May 2012 together with any interest accrued be released to the Plaintiff in partial satisfaction of the amount payable under b. above;

d. An Order that the Defendant do pay the Plaintiff:-

i. the sum of HK$20,000 being the charges and disbursements charged by W&C;

ii. the sum of HK$15,000 being the professional fee charged by LLT;

iii. interest on the above sums from 15December 2011 to date of judgment at the rate of HSBC prime plus 1%, and thereafter at judgment rate;

e. An Order that the Defendant’s Counterclaim be dismissed;

f. An Order nisi that the costs of the Plaintiff’s claim and the costs of the Defendant’s counterclaim be paid by the Defendant to the Plaintiff (including all costs reserved), to be taxed if not agreed, which Order nisi will become absolute 14 days after the date of this judgment unless an application in writing to vary is filed and served within the said 14 days.