HEUNG YUK HAN v. WINNIE CHOI AND ANOTHER

HCA 2088/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2088 OF 2008

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REASONS FOR DECISION

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Introduction

1.  This is the application of the 2^nd defendant (“D2”) to vacate the registration of the lis pendens and writ of summons herein upon the payment-into court of $1.6 million.  At the end of the hearing, I granted the orders sought.  These are the reasons.

Background

2.  The affirmations filed for the purpose of this application disclose that the plaintiff and the 1^st defendant (“D1”) agreed to jointly invest in real property.  A verbal agreement was reached in May 2007 whereby the plaintiff would contribute $1 million for such purpose (“the said agreement”).

3.  A shop unit in an industrial building was purchased in August 2007 for $12.9 million.  D2 is the registered owner of the shop unit, and a company allegedly controlled by D1.

4.  Disagreement between the parties emerged when the shop unit was sold in September 2008 for $13.8 million.

The Plaintiff’s Claim

5.  Despite the plaintiff’s argument to the contrary, the cause of action pleaded in the statement of claim is breach of contract.

6.  The said agreement was relied on.  Its terms are said to be (among other things):-

(a)  the plaintiff would become one of the registered and beneficial tenants-in-common of the shop unit (proportionate to the respective amounts of financial contribution);

(b)  the plaintiff would be entitled to the particulars of the purchase; in particular, particulars pertaining to the mortgage and tenancy of the shop unit.

7.  It is averred D1 breached the said agreement by failing to:-

(1)  register the plaintiff as one of the co-owners;

(2)  provide information about the amount of mortgage payment and rental income.

It is also averred D1 should not have sold the shop unit without the plaintiff’s consent, and should have provided information relating to the said sale.

8.  The statement of claim alleges, upon breach of the said agreement, D1 has evinced an intention not to be bound by it.  The averment therein which is important to this application is that the plaintiff has accepted D1’s repudiation of the agreement.

Registration of lis pendens and Writ of Summons

9.  Writs of summons and lis pendens are registrable pursuant to ss. 2(1) and 14, Land Registration Ordinance (Cap. 128).  To fall within those provisions, the documents must either be (i) “instruments in writing … by which … any parcels of ground, tenements or premises in Hong Kong may be affected” or (ii) lis pendens.  S. 1A, Cap. 128 defines lis pendens as:-

“any action or proceeding pending in a court or tribunal that relates to land or any interest in or charge on land”.

Are the Court Documents in This Action Registrable?

10.  The court documents herein are not properly registrable pursuant to the above provisions.

11.  As stated above, the plaintiff’s claim is premised purely on contract (para. 2 to 16, statement of claim).

12.  The plaintiff’s acceptance of the alleged repudiation of the said agreement is fatal to her entitlement to register the court documents.  The legal consequences of an acceptance of repudiation is settled.  They are summarized in Chitty on Contracts (1999) 28^th Ed., para. 25-046:-

“The true position was there stated to be―where the innocent party elects to terminate the contract, i.e. to put an end to all primary obligations of both parties remaining unperformed―that ‘(a) there is substituted by implication of law for the primary obligations of the party in default which remain unperformed a secondary obligation to pay money compensation to the other party for the loss sustained by him in consequence of their non-performance in the future and (b) the unperformed primary obligations of that other party are discharged’” (emphasis supplied) (citing Photo Production Ltd. v. Securicor Transport Ltd. [1980] AC 827, 849).

13.  Applying the above legal propositions to the facts pleaded by the plaintiff, the relevant unperformed primary obligation (that is, the relevant repudiatory act) was the failure to register her as one of the co-owners.

14.  It is true the statement of claim also avers:-

“[By reason of the matters set out in para. 2 to 4 and 6 to 8 above], the beneficial interest in the Property is owned by the Plaintiff and [D1] in shares proportionate with their respective contributions to the purchase price” (para. 17 thereof).

But that averment is expressly founded on contract.

15.  Further, it is the plaintiff’s own case the purchase of the shop unit was for investment purposes (that is, for profit from its subsequent sale) (see, for example, the plaintiff’s affirmation dated 8 December 2008, para. 7).

16.  As has been quoted in Snell’s Equity (2005) 31^st Ed.:

“It is of the first importance not to impose fiduciary obligations on parties to a purely commercial relationship … ”

(quoted from Millett, “Equity’s Place in the Law of Commerce” (1998) 114 LQR 214, 217).

17.  As stated above, there is no dispute the shop unit was the subject-matter of a commercial agreement to invest.  It is in nature no different from a lot of goods in a sale of goods contract.

18.  The plaintiff also agreed to the shop unit being sold off after it was purchased.  Her affirmation states:-

“In the meeting at Yau Yat Chuen Club there was also a discussion on the sale of the Property.  However no one has ever mentioned that the Property might even fall below the price of [$12.9 million].  On the sale of the Property, an agreement was reached that I would try to find purchaser of the Property … ” (emphasis supplied) (para. 34 thereof).

Hence, the plaintiff’s real complaint is more about a sale below the agreed price (or at least the market price) than about a sale simpliciter.

19.  With the above in mind, there is no valid basis to separately imply a resulting trust or constructive trust upon the breach of the said agreement.  As a result, any right which may be available to the plaintiff subsequent to her acceptance of the repudiation of the said agreement lies in damages only.