FUNG KAN WAI AND ANOTHER v. LEUNG SHUI FAT AND OTHERS

CACV 71/1999 & CACV 290/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NOS. 71 AND 290 OF 1999

(ON APPEAL FROM HCA 6859 OF 1997)

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J U D G M E N T

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Nazareth V-P (giving the judgment of the Court) :

1. There are before this Court two matters. First, the plaintiffs' application in CACV 71/99 that the costs order nisi made by this Court on 15 July 1999, that the defendants are to have 50% of the costs of the appeal, be varied. The second is the defendants' appeal, made with leave granted by Keith JA, against the costs order nisi as varied on 1 June 1999 by Suffiad J in HCMP 5989/99, that there be no order for costs in the action before him. Keith JA directed that the appeal be heard with the plaintiffs' application to vary this Court's order nisi.

2. To a significant extent, similar or the same considerations arise in both matters. In particular, counsel on each side pursuing the application or appeal, contends that his clients succeeded in substance; each submission, as may be expected, being resisted.

3. The background to both matters is apparent in the judgment of this Court handed down on 15 July 1999. We therefore propose to refer to it only in outline and to the extent necessary. The plaintiffs, husband and wife, agreed to purchase the premises in question from the 2nd and 3rd defendants. They are also husband and wife and were involved as developers for the 1st defendant who was entitled to build a village-type house on the land in question in his capacity as an indigenous villager in the New Territories. The sale and purchase agreement was entered into on 31 March 1994 in a standard form printed in Chinese. The purchase price was $1,480,000. Payment was to be made in three stages.

"Stage 1 : 20% of purchase price payable upon signing this agreement, HK$296,000 (including initial deposit of $30,000).

Stage 2 : The purchaser shall, within two weeks of the completion of construction works in respect of the second floor of the building, pay 10%, $148,000.

Stage 3 : The balance of $1,036,000 shall be paid within one month of the issuance of the certificate of compliance and the payment of premium (pay all balance)."

At the signing of the agreement on 31 March 1994, the plaintiffs had paid $296,000 to the defendants. There was a dispute between the parties as to when the stage 2 payment became due, the plaintiffs contending that they were entitled to 14 days notice of the time of completion. The plaintiffs delivered cheques in person and by post to the defendants on 17 and 20 January 1996 respectively, but these were not accepted by the defendants. There were several aspects to the dispute but it is not necessary for present purpose to go into those. The defendants took the view that the plaintiffs repudiated the agreement by not making the second stage payment in time. They accepted the plaintiffs' repudiation, by their letter of 15 January 1996, forfeited the stage 1 payment, and sold the property in March 1996 for $2,180,000.

4. By their writ issued on 27 June 1997, the plaintiffs claimed:

(1) Payment of $592,000 by way of refund of the deposit they had paid as the stage 1 payment and compensation in the same amount as provided for in the agreement,

(2) Alternatively

(a) A declaration that the agreement of 5 March 1997 is void and of no force or effect;

(b) A decree of specific performance of the agreement;

(3) Damages for breach of the agreement

(4) Further or other relief.

The defendants counterclaimed for:

(a) A declaration that the agreement was validly terminated by their letter of 15 January 1996.

(b) A declaration that they were entitled to "forfeit the deposit in the sum of $296,000 paid by the plaintiffs and to resell the said property"; and

(c) A declaration that they were entitled to recover from the plaintiffs such damages for which they might be held liable to pay the final purchaser in respect of the lis pendens (which had been registered by the plaintiffs).

Suffiad J, before whom the action came for trial, held that:

(1) The agreement was terminated by the defendants' letter of 15 January 1996.

(2) There would be no award for damages for the plaintiffs' breach of the agreement as the defendants had suffered none.

(3) The defendants were entitled to forfeit the initial deposit of $30,000, the balance of $266,000 to be returned to the plaintiffs.

(4) The defendants' counterclaim for damages for wrongful registration of the lis pendens by the plaintiffs was dismissed.

5. Suffiad J made the following orders:

(1) The plaintiffs' claim was dismissed;

(2) A declaration that the agreement was terminated by the defendants' letter of 15 January 1996;

(3) There would be no damages awarded for the plaintiffs' breach of the agreement as the defendants had suffered none;

(4) He made a declaration that the defendants were "entitled to forfeit the initial deposit of $30,000, the balance amount of $266,000 to be returned to the plaintiffs".

6. Suffiad J also made an order nisi that the costs of the plaintiffs' claim and the costs of the defendants' counterclaim be to the defendants to be taxed if not agreed. However, later, on 1 June 1999, by which time the notice of appeal had been taken out but not yet heard, the judge varied his costs order to one that there be "no order as to costs".

7. The defendants appealed to this Court seeking the following declarations:

(1) That they were entitled to forfeit the deposit in the sum of $296,000;

(2) That the registration of the writ of summons and subsequently the amended Statement of Claim in the Land Registry as lis pendens were unlawful; and

(3) That the defendants were entitled to recover from the plaintiffs such damages for which they might be held liable to pay the final purchaser in respect of the lis pendens being wrongfully registered and an order that such damages be assessed.

8. We allowed the appeal only to the extent of declaring the registration of the lis pendens to have been wrongful.

9. Upon that basis, Mr Walker Sham, for the plaintiffs, submits that the defendants failed in respect of all the relief they sought save in the registration of the lis pendens being declared to have been wrongful. However, in that regard, Mr Andrew Mak, for the defendants, contends that the defendants' objective or at any rate their main objective was always to have the registration of the lis pendens removed. Mr Sham counters by submitting that equally, the plaintiffs wanted their first stage payment back and of all of that payment, the defendants were entitled to and have been permitted to retain only $30,000 or 10% of the $296,000.

10. It follows from our substantive judgment, that the lis should not have been registered and that the defendants were entitled to institute proceedings to have the registration vacated. But far from acceding to any such action, the plaintiffs resisted this even to the extent, when their original claim was shown to be deficient, of amending it to rely upon a lien.

11. On the other hand, we confirmed the judge's decision that the defendants were entitled to forfeit only $30,000 of the $296,000. The defendants' appeal claiming that entire amount was dismissed.

12. It does not seem to us that the revision of the judge's original view weighs one way or another. Originally he must have regarded the defendants as having succeeded or as otherwise entitled to all the costs. But he changed his mind and we do not propose to indulge in what could only be speculation as to his reasons. It suffices that his final order has not been shown to be plainly wrong or made upon some error of principle.

13. On one view perhaps the proceedings commenced by the plaintiffs were rather more justified than those of the defendants, in that the former had to resort to them to get back their deposit or at any rate 90% of it. On the other hand, the wrongful registration of their lis by the plaintiffs, and the compounding of that action by amending their cause of action to preserve the registration when the basis of registration had been removed by Deputy Judge Whaley, do detract from the foregoing consideration.

14. As for the defendants, it was they who appear to have set off the legal proceedings by forfeiting the whole deposit.

15. We do not regard as significant the other matters raised. In broad terms, given the major countervailing considerations mentioned, which tend to neutralise each other, we do not think it possible to say the judge was plainly wrong in making his final costs order. Nor, as we have indicated, are we able to see any error of principle on his part. In the result we dismiss the defendants' appeal.

16. As to the plaintiffs' application to vary the costs order nisi we made on 15 July, we do not think it is a matter of simply totalling the items of relief claimed, which failed. Rather, it must inter alia be the nature of each party's case, the time it occupied, and whether it succeeded. Upon that basis, we see no good reason for varying the costs order nisi we made on 15 July. We accordingly dismiss the plaintiffs' application to vary the costs order nisi.

17. As both the plaintiffs' application and the defendants' appeal are dismissed, we think that each party should bear their own costs in both matters. There will be a costs order nisi to that effect.