QUANTUM ASSETS GROUP LTD v. TAI KWAI FA

DCCJ 4454/2019

[2019] HKDC 1462

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 4454 OF 2019

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REASONS FOR JUDGMENT

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1.  Before me today is an application for the entry of a default judgment against the defendant for failure to file the Defence. At the conclusion of the hearing, I enter judgment against the defendant in terms as set out in the penultimate paragraph below with reasons to be given later, which I now do.

2.  The Writ herein with a Statement of Claim endorsed was served personally to the defendant on 21 August 2019.  On 9 September 2019, the defendant acting in person filed an Acknowledgment of Service wherein she indicated that she would not defend this action.  On 2 October 2019, she filed an Admission (liquidated amount) (Form 16) under O 13A admitting the sum claimed.  However, as the plaintiff’s claim is not just for a liquidated amount and O 13A is therefore not applicable, the Form 16 was not processed by the court.

3.  The time prescribed for the filing of the Defence in any event has since lapsed, the plaintiff now proceeds to obtain judgment by default by it summons dated 14 October 2019.  In it, the plaintiff seeks:-

(1)  A declaration that the formal sale and purchase agreement entered into between the plaintiff and the defendant on 16 May 2019 has been rescinded;

(2)  Final judgment in respect of the plaintiff’s claim for the return of the deposit in the sum of HK$2,900,000; and

(3)  Costs.

4.  This action concerns a failed sale of a piece of real property.

5.  As a declaration is sought, the plaintiff’s application for default judgment therefore falls within O 19 r 7. It is trite that under this rule, the court cannot receive any evidence, but must give judgment according to the Statement of Claim alone, which must show right to the relief sought (§§19/7/11 & 19/7/14, Hong Kong Civil Procedure 2019).

6.  The facts and contentions pleaded in the Statement of Claim can be succinctly summarized as follows:-

(1)  By a sale and purchase agreement dated 19 April 2019 (“the Principal SPA”), the defendant agreed to buy from the head vendor the property known as Shop F on Ground Floor of Yen Dack Building Nos 93-101, 105-113 Chun Yeung Street and Nos 7A & 7B Tong Shui Road, Hong Kong (“the Property”) for the price of HK$13,000,000.  The Property is sold subject to a Tenancy Agreement dated 1 August 2018 between the head vendor and one Sze Yau Ka the term of which was between 15 July 2018 to 14 July 2020 at a monthly rent of HK$90,000 (“the Existing Tenancy”).

(2)  By a provisional agreement for sale and purchase dated 3 May 2019, the defendant agreed to sub-sell the Property subject to the Existing Tenancy to the plaintiff at the price of HK$29,000,000.

(3)  A formal sale and purchase agreement of the said sub-sale was signed between the plaintiff and the defendant on 16 May 2019 (“the Sub-sale SPA”) providing for the completion date to be 19 August 2019.  It was an express term therein that the Property is sold subject to the Existing Tenancy.

(4)  The plaintiff entered into the Sub-sale SPA in reliance of the defendant’s representation that there was subsisting the Existing Tenancy yielding the said rent.

(5)  The initial deposit of HK$1,450,000 and the further deposit of HK$1,450,000 has been paid by the plaintiff to the defendant respectively upon the signing of the said provisional agreement and the Sub-sale SPA.

(6)  On 26 July 2019, the solicitors for the plaintiff received a letter from Messrs K B Chau & Co, acting for the tenants of the Existing Tenancy (“the Tenants”), informing the plaintiff that the Tenants have commenced DCCJ 3348/2019 against the head vendor for failing to deliver vacant and exclusive possession of the Property to the Tenants in that the Property was still occupied by the previous tenant.

(7)  The plaintiff’s solicitors then by letter dated 30 July 2019 raised a number of requisitions which the defendant has thus far refused to answer.

(8)  By a letter dated 6 August 2019, the defendant’s solicitors gave the plaintiff 7 working days’ notice to annul the sale unless the plaintiff withdrew the requisitions pursuant to Clause 6(c) of the Sub-sale SPA.  By letter the next day, the plaintiff informed the defendant that it refused to withdraw the requisitions and that it accepted the defendant’s annulment of the sale and further demanded the return of the total deposit of HK$2,900,000.

(9)  By a further letter dated 13 August 2019 to the defendant, the plaintiff’s solicitors repeated its acceptance of the annulment and again demanded the return of the deposit.

(10)  By a further letter dated 19 August 2019, the plaintiff rescinded the Sub-sale SPA, as it was entitled to, by reason of the defendant’s failure to show good title and/or misrepresentation.

(11)  To date, the defendant has not returned the deposit of HK$2,900,000 to the plaintiff.

7.  On the facts pleaded in the Statement of Claim as summarized above, I am satisfied that they give rise to and support the plaintiff’s claim to the reliefs now sought.

8.  Regarding the granting of the declaration sought, I am also satisfied that despite the well-established rule of practice that the court will not make a declaration by consent or in default without a trial, this is an appropriate case to make the declaration sought so as to do the fullest justice to the plaintiff to which he is entitled (Hong Kong Civil Procedure 2019, paragraph 15/16/2).  As noted in the said paragraph 15/16/2, one example where it may be appropriate is where the undefended claim is for breach of contract, and to declare that the contract is at an end by reason of the defendant’s repudiation and that the plaintiff is no longer bound by it would free the plaintiff to negotiate a fresh contract with a third party (Pattern v Burke Publishing Co Ltd [1991] 1 W L R 541).  A fortiori, where the contract in question, as in the present case, concerns the sale and purchase of real property, there is the added reason, for the certainty of land title, to grant the declaration sought.

9.  However, this is not the end of the matter.  The jurisdiction of this court to grant a declaration of right is governed by Section 52 of the District Court Ordinance Cap 336, which reads:-

“Extension of jurisdiction to grant injunctions and to make declarations

(1) The Court shall have jurisdiction to grant and to enforce injunctions of whatsoever nature and as the case may require and to make binding declarations of right—

(a) in all matters affecting movable property, including money and choses in actions, where the amount or value thereof does not exceed $3,000,000; and (Amended 68 of 1973 s. 2; 79 of 1981 s. 2; L.N. 387 of 1983; 49 of 1988 s. 4; 28 of 2000 s. 25; L.N. 241 of 2003)

(b) with respect to any apprehended distress; and

(c) in all matters affecting immovable property, including any right, licence or easement in, to, through or over any immovable property and any agreement, covenant or condition respecting immovable property, where the annual rent or the rateable value, determined in accordance with the provisions of the Rating Ordinance (Cap. 116) or the annual value, whichever is the less, of the property does not exceed $320,000; and (Amended 68 of 1973 s. 3; 79 of 1981 s. 2; L.N. 387 of 1983; 49 of 1988 s. 4; L.N. 145 of 1992; 28 of 2000 s. 25)

(d) in all matters of contract not falling within paragraph (a), (b) or (c) where the amount or value of the subject matter of the contract does not exceed $3,000,000, (Amended 68 of 1973 s. 2; 79 of 1981 s. 2; L.N. 387 of 1983; 49 of 1988 s. 4; 28 of 2000 s. 25; L.N. 241 of 2003)

notwithstanding that any claim for damages or for any other relief or remedy which the Court is competent to grant shall be made in the proceedings. (Amended 35 of 1966 s. 4; L.N. 131 of 2018)” 

10.  Under Section 52(1)(c), this court has jurisdiction to grant a declaration of right in all matters affecting immovable property, including any agreement respecting immovable property – which is the present case, where the rateable value of the property does not exceed HK$320,000.

11.  The Property is a shop in North Point respectively sold by the head vendor and the defendant at the price of HK$13,000,000 and HK$29,000,000; and which apparently has been fetching a monthly rent of HK$90,000.  Without a doubt, and the plaintiff does not dispute it in the hearing, that its rateable value well exceeded HK$320,000.

12.  I must therefore conclude that this court has no jurisdiction to grant the declaration sought.

13.  Having taken instructions, Mr Ho, counsel for the plaintiff, confirms that the plaintiff is now abandoning its claim for the declaration.

14.  Accordingly, I enter judgment in favour of the plaintiff for:-

(1)  Final judgment in respect of the plaintiff’s claim for the return by the defendant of the deposit in the sum of HK$2,900,000 paid to her pursuant to the formal sale and purchase agreement made between the parties on 16 May 2019; and

(2)  Costs of the action, including the costs of this application, with certificate for counsel, summarily assessed at HK$52,000.

15.  By way of postscript, practitioners are reminded that under paragraph 4 of PD 27 “Civil Proceedings in the District Court”, all writs and originating summonses should contain a plea that the relief sought do fall within the jurisdiction of this court, specifying which section(s) of sections 32 to 39 of the District Court Ordinance applies to the case.  In the present case, I wonder whether the lack of such a plea in the Statement of Claim here has deprived the plaintiff the opportunity to review this aspect of its claim.