WISE WAVE INVESTMENTS LTD v. TKF SERVICES LTD

HCA 389/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 389 OF 2005

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J U D G M E N T

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1.  I am not persuaded that this is a case for summary judgment.  In my view, the Master was right to grant TKF unconditional leave to defend.

2.  Since this action must go to trial, the less I say about its merits the better.  Nonetheless, I should briefly indicate why I believe that the appeal should be dismissed.

3.  Mr. Hung (appearing for Wise Wave) argues that TKF has failed to show good title as at the completion date.  This is because (according to Mr. Hung) by the DMC and Sub-DMC the management fees, electricity deposit and repair costs (collectively, the fees) unpaid by TKF automatically stood charged against the property.  It follows (Mr. Hung reasons) that, there being an equitable charge against it, the property cannot have been unencumbered on the completion date.

4.  TKF hotly and (it seems to me) bona fide disputes any entitlement by the Incorporated Owners and manager of the building to levy the fees against the property.  I do not think that the merits of TKF's dispute with the Incorporated Owners can be summarily evaluated today, even if only as an incidental issue.  All that I can say at this stage is that TKF may be right in claiming to set off alleged damages against the fees such that no balance is due to the Incorporated Owners.

5.  If TKF is right that nothing is owing to the Incorporated Owners, I do not see how there can be a charge (automatic or otherwise) against the property.

6.  TKF further says that it drew Wise Wave's attention to its ongoing dispute with the Incorporated Owners over the fees.  That disclosure led to the inclusion of a special clause in the Provisional Sale and Purchase Agreement and later the Sale and Purchase Agreement (SPA).  That clause in effect provided for TKF to be responsible for the fees in the event that it should ultimately fail in its dispute with the Incorporated Owners.  For the purposes of this hearing, I assume that TKF is correct in its assertion.

7.  Mr. Hung submits that the clause is neither here nor there.  It does not (Mr. Hung contends) qualify the obligation to convey the property with good title, free from encumbrance.

8.  But again it is arguable that on its true construction the clause is contrary to any suggestion that TKF had to pay the fees before the completion date.  The clause could indicate an understanding among the parties that the dispute over fees may be unresolved (and the fees thus remain unpaid) even by the completion date.  The parties could have been agreeing by the clause that TKF was to remain liable for the fees if it eventually lost to the Incorporated Owners after completion.  Accordingly, reading the SPA as a whole, I cannot discount the argument that the clause qualifies any obligation to assign the property free from encumbrance.

9.  Wise Wave submits that it makes no commercial sense for it merely to have accepted a personal undertaking from TKF to be liable for the fees if TKF loses its dispute with the Incorporated Owners.  Wise Wave argues that TKF should have paid the fees first by way of escrow and without prejudice to TKF’s claims.  Wise Wave may or may not be right in that.  Again that is something that cannot be assessed definitively one way or another, without a consideration of the factual matrix at the time when the clause was agreed.  Such assessment requires a trial.

10.  For those reasons, Wise Wave's appeal is dismissed.