MAPLE LEAF INVESTMENT CO LTD v. HONG KONG CYBERPORT (ANCILLARY DEVELOPMENT) LTD

   HCA891/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.891 OF 2009

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BETWEEN

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REASONS FOR JUDMENT

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1.  By summons dated 31 July 2009 the defendant applied to strike out the plaintiff’s statement of claim and asked for an order that the action against the defendant be dismissed.  The defendant also applied for summary judgment on its counterclaim.

2.  On 21 December 2009 I made an order that the plaintiff’s statement of claim be struck out and that the action against the defendant be dismissed. I also gave judgment to the defendant on its counterclaim as follows for:

(1)  a declaration that the agreement for sale and purchase dated 12 April 2007 (“the agreement”) for the property known as Flat B, 29^thFloor, Tower 2 and Private Cars Car Park No 216, Car Park Level 5, Bel-Air No. 8, Bel-Air on the Peak, Island South (Phase VI), Hong Kong has been validly terminated by the defendant on 27 March 2009;

(2)  an order that the plaintiff do pay the defendant damages for breach of the agreement such damages to be assessed by a master;

(3)  an order that the plaintiff do pay the defendant the sum of HK$177,942.50 being the interest on the unpaid balance of the purchase price for the period from 13 December 2008 to 27 March 2009.

3.  I also made an order that the costs of the action and the counterclaim including the costs of the application be paid by the plaintiff to the defendant.

4.  I indicated at the time that written reasons in writing would be given.  This I now do.

5.  This action concerns the property known as Flat B, 29^th Floor, Tower 2 and Private Cars Car Park No. 216, Car Park Level5, Bel-Air No. 8, Bel-Air on the Peak, Island South (Phase VI), Hong Kong (“the property”).

6.  The defendant was the developer of the residential project in which the property is located.  At the time of the agreement the development was under construction.

7.  The agreement dated 12 April 2007 was made between the plaintiff as purchaser and the defendant as vendor of the property whereby the defendant sold and the plaintiff purchased the property at the purchase price of HK$10,396,000.00 upon the terms and conditions contained in the agreement.  The agreement was in the standard form under the Consent Scheme which was agreed upon between the Director of Lands and the Law Society.

8.  In accordance with the terms of the agreement the plaintiff has paid the following sums to Messrs Woo, Kwan, Lee & Lo (“WKKL”) solicitors for the defendant :

(i)  HK$519,800.00 as deposit on signing the preliminary agreement;

(ii)  two further sums of HK$519,800.00 each towards part payment of the purchase price.

9.  The balance of the purchase price in the sum of HK$8,836,600.00 was payable by the plaintiff within 14 days of the purchaser being notified in writing that the defendant was in a position to validly assign the property to the plaintiff.

10.  By clause 5(1) of the agreement it was provided that

“The [defendant] shall notify the[plaintiff] in writing that he is in a position validly to assign the Property within one month of the issue of the Certificate of Compliance or the consent of the Director of Lands to assign, whichever shall first happen.”

11.  By clause 5(2) it was provided that

“The sale and purchase shall be completed at the offices of [WKLL] during office hours within 14 days of the date of the notification to the [plaintiff] that the [defendant] is in a position validly to assign the Property to the [plaintiff].”

12.  By clause 1(1)(e) of the agreement “Certificate of Compliance” is defined to mean

“ the certificate issued or to be issued by the relevant Government authority to the effect that all the positive obligations of the [defendant] under the Government Grant in relation to the land have been fulfilled.”

13.  The property was in Phase VI of the development.  The development was defined in clause 1(1)(n) to mean

“the development on the land comprising, inter alia, houses, residential tower blocks and car parking spaces now being constructed or to be constructed on the land in accordance with the building plans and intended to be known as “ISLAND SOUTH”. ”

14.  Phase VI was defined in clause 1(1)(w) to mean

“ the phase of the Development comprising 8 towers of residential block intended to be known as Tower 1, Tower 2, Tower 3, Tower 5, Tower 6, Tower 7, Tower 8A and Tower 8B, 744 car parking spaces and 60 motor cycle parking spaces, which is intended to be known as BEL-AIR NO. 8, BEL-AIR ON THE PEAK, ISLAND SOUTH.”

15.  Under recital (1) of the agreement it was recited that the defendant was obliged under Special Condition No. (12)(b) of the Government Grant to erect and complete upon the land before 30 June2008, inter alia,

“the Building in all respects complying with the General and Special Conditions contained in the Government Grant.”

16.  The “Building” means the building or buildings comprised in Phase VI of the development(clause 1(1)(c)).

17.  “Government Grant” means the Government Grant document specified in Schedule 2 (clause 1(1)(r)).  Schedule 2 identifies the document as the Conditions of Grant No. 12572 and gives details of the parties, date, term, user and lot number.

18.  By clause 4(1) of the agreement the defendant covenanted to :

(a)  continue the construction of the development with all due expedition;

(b)  comply with the requirements of the Building Authority and of any other relevant Government authority relating to the development; and

(c)  complete the development in all respects in compliance with the conditions of the Government Grant, the building plans and the agreement, incorporating the fittings and finishes as set out in Schedule 5 into the property, on or before 30 September 2008 “subject to such extensions of time as may be granted by the Authorized Person in accordance with sub-clause (5)(a)”.

19.  The Authorised Person was Mr Robert P. H. Lam of Wong & Ouyang (HK) Ltd (“the AP”) (clause 1(1)(b)).

20.  By letter dated 30 June 2008 from the Lands Department the defendant was granted a 3 months extension of time to comply with the building covenant under Special Condition No. (12)(b) of the Government Grant thereby extending the time from 30 June 2008 to 30 September 2008.  The defendant had paid a premium of HK$109,663,100.00 for this extension.

21.  By letter dated 13 October 2009 the AP certified, inter alia, that

“5.  the building covenant under Special Condition No. 12(b) of the [Government Grant] is considered by the Lands Department to have been fulfilled on 1 August 2008 when the Occupation Permit for Phase VI of the Development was issued.”

22.  By clause 4(5)(a) of the agreement the defendant was entitled to such extensions of time for completion of the development beyond the date stated in sub-clause (1)(c) as shall be granted by the AP and appear to him to be reasonable having regards to delays caused exclusively by,inter alia, inclement weather.

23.  By clause 4(5)(b) of the agreement the defendant was required to notify the plaintiff in writing within 14 days from the issue of any such extension of time granted by the AP and furnish the plaintiff with a copy of the relevant certificate of extension.

24.  By letter dated 23 September 2008 the AP granted an extension of time of 60 days to the defendant for the completion of Phase VI of the development in compliance with the Government Grant from 30 September 2008 to 29 November 2008 and stated that “such extension of time appears to me to be reasonable, having regard to delays caused by inclement weather which occurred during the construction of Phase VI of the Development from 26 January 2007 to 11 September 2008”.

25.  Pursuant to clause 4(5)(b) of the agreement by letter dated 25 September 2008 WKKL notified the plaintiff that an extension of time was granted by the AP from 30 September 2008 to 29 November 2008 and enclosed a copy of the AP’s certificate of extension.

26.  On 11 November 2008 the Lands Department issued the Certificate of Compliance certifying that all the positive obligations imposed under the General and Special Conditions of the Government Grant have been satisfactorily complied with.

27.  By letter dated 28 November 2008 from WKLL to the plaintiff the plaintiff was notified that the defendant was in a position to validly assign the property to the plaintiff.  The plaintiff was required to complete the purchase of the property on or before 12 December 2008 pursuant to clause 5(2) of the agreement.

28.  The plaintiff failed to complete the purchase of the property on 12 December or at any other time.

29.  By letter dated 20 December 2008 WKLL demanded the balance of the purchase price from the plaintiff and gave notice that unless the balance was paid with interest within 21 days the defendant may exercise its right under clause 16 of the agreement to forfeit the deposit already paid and determine the agreement and resell the property.

30.  By letter dated 27 March 2009 WKLL notified the plaintiff that the defendant exercised its rights to determine the agreement, forfeit the deposit of HK$519,800.00 and that the defendant would retain the partial payment of HK$1,039,600.00 and apply it towards the settlement of damages as a result of the plaintiff’s breach of the agreement.

31.  By an agreement for sale and purchase dated 30 March 2009 between the defendant as vendor and another party as purchaser, the defendant resold the property at the purchase price of HK$8,989,200.00.

32.  By its statement of claim the plaintiff claims that thedefendant has been in breach of the agreement.  The plaintiff’s primary claim is as pleaded at paragraph 8 of the statement of claim which pleads

“ (a)  According to the letter issued by the Authorized Person Wong & Ouyang (HK) Ltd on 13^th October 2008 to the Defendant, the Lands Department considered the building covenants under the Conditions of Grant fulfilled on 1^st August 2008.

(b)  As a result, the Defendant was required under the Agreement to notify the Plaintiff under Clause 5(1) before 1^st September 2008, that the remaining purchase price ought to be paid before 15^th September 2008.

(c)  The Defendant did not notify the Plaintiff pursuant to Clause 5(1) until 28^th November 2008 that the remaining purchase price ought to be paid before 12^th December 2008.

(d)  Title deeds for the Property were not completely furnished by the Defendant until 4^th November 2008.”

33.  Mr Wong, for the plaintiff, submitted that on the plaintiff’s primary claim there was a triable issue as to whether the defendant ought to have notified the plaintiff on 1 September 2008 that the defendant was in a position to validly assign the property on 15 September 2008.  As it was only on 28 November 2008 that WKLL notified the plaintiff that the defendant was in a position to validly assign the property the defendant was, it was submitted, in breach of the agreement.  The plaintiff claims a refund of the total sum of HK$1,559,400.00 paid by the plaintiff to the defendant, a declaration that the agreement has been validly rescinded by the plaintiff and damages to be assessed with interest and costs.

34.  Mr Wong sought to argue that the AP’s letter of 13 October 2008 effectively certified that the issuance of the Certificate of Compliance or the consent of the Director of Lands to assign the property was only a matter of formality or procedure.  It was submitted that the defendant should have notified the plaintiff on 1 September 2008 that it was in a position to validly assign the property and that completion should have been within 14 days of 1 September 2008.

35.  I am unable to accept this submission.

36.  In my view the plaintiff’s primary claim is misconceived.

37.  When completion is to take place is clearly and unequivocally spelt out in the agreement.

38.  Clause 5(1) of the agreement clearly stipulates that the defendant shall notify the plaintiff in writing that it is in a position to validly assign the property “within one month of the issue of the Certificate of Compliance or the consent of the Director of Lands to assign whichever shall first happen”.  That is the time when the defendant is obliged to notify the plaintiff in writing that it is in a position to validly assign the property and not earlier.

39.  And by clause 5(2) of the agreement the sale and purchase shall be completed at the offices of WKLL within 14 days of the date of notification to the plaintiff that the defendant is a position validly to assign the property to the plaintiff.

40.  It is accepted by Mr Wong that the Certificate of Compliance was issued only on 11 November 2008 by the Lands Department.  There is no evidence of the consent of the Director of Lands to assign the property.  Hence on a clear reading of clause 5(1) of the agreement the defendant was required to notify the plaintiff in writing that it is in a position to validly assign the property within one month of 11 November 2008 which it did by the letter from WKLL dated 28 November 2008.  And completion was to take place on or before 12 December 2008 which is within 14 days of the date of notification to the plaintiff that the defendant is in a position to validly assign the property to the plaintiff.

41.  I see no merit in the plaintiff’s primary claim which, in my view, is unsustainable and ought to be struck out.

42.  I would also observe that in his oral submissions Mr Wong accepted that the plaintiff has not rescinded the agreement. That being so, I fail to see how the plaintiff can even begin to claim a declaration that the agreement has been validly rescinded by the plaintiff.

43.  The plaintiff’s alternative claim is pleaded at paragraph 9 of the statement of claim which pleads

“ Further and/or alternatively, the Plaintiff avers that, in addition to contravening paragraph (1) of the recitals in the Agreement,

(a)  The Defendant has, in breach of Clause 4(1)(a) of theAgreement, failed to continue the construction of the Development, of which the Property is a part (as defined in Clause l(n) of the Agreement), with due expedition.

(b)  In breach of Clause 4(1)(c) of the Agreement, the Defendant failed to complete the Development, of which the Property is a part, on or before 30^th September 2008.

(c)  As a result of the Defendant’s breach of Clause 4 of the Agreement, the Plaintiff is entitled to rescind the Agreement under Clause 4(4)(a) and be discharged from further performance of its obligations under the Agreement.”

44.  Mr Wong submitted that there was a triableissue on the alternative claim of the plaintiff that the expiry date of 30 September 2008 for the completion of the development has not been extended.  As the development was completed late without an extension being granted, it was submitted that the defendant was in breach of clause 4 of the agreement and that the plaintiff was entitled to rescind the agreement.

45.  However, as I have observed, the plaintiff has not exercised its right to rescind under the agreement as is accepted by Mr Wong.  On its alternative claim the plaintiff complains that the defendant failed to complete the development by the specified date of 30 September 2008 and that the development was completed late after that date without an extension being granted.

46.  By clause 4(4)(a) of the agreement it was provided that if the defendant fails to complete the development by the date specified the plaintiff shall be at liberty by notice in writing to the defendant to rescind the agreement and upon service of the notice the agreement shall be rescinded within 7 days thereafter.  And in clause 4(5)(b) of the agreement it was provided that if the plaintiff does not rescind the agreement under clause 4(4)(a) within 28 days from the specified date “he shall be deemed, without prejudice to his rights under sub-clause (4)(c) hereof, to have elected to wait for completion of the Development”.

47.  The plaintiff has not given a notice to rescind within the 28 days period provided for in clause 4(4)(a) or at any other time.

48.  As the plaintiff failed to rescind the agreement the plaintiff is, on a clear reading of clause 4(5)(b) of the agreement, deemed to have elected to wait for completion of the development.

49.  By letter dated 23 September 2008 the AP has clearly granted an extension of time from 30 September 2008 to 29 November 2008 pursuant to clause 4(5)(a) of the agreement.  There is no valid basis to challenge the AP’s certificate of extension.

50.  There is no merit in the plaintiff’s alternative claim which, in my view, is unsustainable.

51.  As the plaintiff’s primary claim and alternative claim are unsustainable the statement of claim should be struck out and the action against the defendant should be dismissed.

52.  The plaintiff has also failed to raise a triable issue on the defendant’s counterclaim.

53.  It is clear on the evidence that the plaintiff failed to pay the balance of the purchase price on completion or to make good its default when given notice to do so by the letter from WKLL dated 20 December 2008.

54.  By the letter dated 27 March 2008 the defendant determined the agreement.

55.  Upon determination of the agreement the defendant was entitled to:

(1)  forfeit the deposit of HK$519,000.00 pursuant to clause 16(2) of the agreement,

(2)  resell the property and to recover from the plaintiff in the event of a resale any deficiency in price and all expenses attending such resale as and for liquidated damages if the property is resold within 6 months of the determination of the agreement pursuant to clause 16(3) of the agreement.

56.  The property was resold at the purchase price of HK$8,989,200.00 by the agreement for sale and purchase dated 30 March 2009.

57.  The defendant is entitled to damages for breach of the agreement to be assessed.

58.  The defendant is also entitled to interest on the balance of the purchase price from 13 December 2008 to 27 March 2009 at the rate of 2% per annum above the prime rate specified by HSBC amounting to HK$177,942.50.

59.  The plaintiff has failed to raise a triable issue on the defendant’s counterclaim and the defendant is entitled to judgment on its counterclaim.

60.  For the above reasons, I made the ordersand gave judgment to the defendant as set out above at paragraph 2.