LO CHUN NIN, EDDY v. TAM YIU CHI

HCA20869/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.20869 OF 1998

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J U D G M E N T

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Dispute

1. The present dispute arose out of a Chinese agreement dated 14 October 1993 ("the Agreement") whereby Buildfont Company Limited ("Buildfont") agreed to sell to Tam Yiu Chi ("Tam") a property known as 2nd floor and the roof of Block 6 of Nam Shan Garden (Phase 2), Tai Po, New Territories, Hong Kong ("the Property") to be built on Lot No.1736 in Demarcation District No.11 at a price of HK$1.89 million. Lot No.1736 was granted to Lo Chun Nin, Eddy ("Lo") by way of New Grant No.13467 in exchange of certain lots which were assigned to Lo by BFC previously. Though envisaged in the Agreement, no formal agreement of sale and purchase had been entered into subsequently. In the event, the Agreement remains binding on the parties in all respects.

2. On 7 April 1998, upon completion of the premises, Buildfont and Tam entered into a memorandum whereby Tam was allowed to enter into possession on the condition that should Lo fail to complete, he would be obliged to return possession to Buildfont. At that time, Tam had paid a total of $661,500 as deposit, that is, 35% of the price.

3. According to Clause 5E of the Agreement, completion was to take place within one month after the issuance of the certificate of compliance and payment of the premium. The certificate of compliance of the New Grant was issued on 5 May 1998. On 12 October 1998, the premium for removing the non-alienation clause in the New Grant in the sum of HK$1.26 million was paid. Completion thus fell on 12 November 1998. In the end, completion did not take place, which gave rise to the present proceedings.

Lo's case

4. In short, Lo alleges in the statement of claim that Buildfont was at all material times its agent; that Lo and Tam had not been able to enter into the formal agreement; that Tam had failed or refused to complete on or before 12 November 1998 or at all; that Tam had thereby repudiated the Agreement, which repudiation was accepted by him. Tam claims against Lo for, inter alia, a declaration that he is entitled to forfeit the deposit paid and an order for delivery up of vacant possession.

Tam's case

5. In his defence and counterclaim, Tam first alleged that prior to the signing of the Agreement, there was representation by Buildfont to the effect that there would be paths and roads serving the development and linking the Property to the public road. Tam had tried but failed to secure a formal agreement in order to protect his interests under the Land Registration Ordinance as the Agreement was not made with Lo, the but registered owner of Lot No.1736 but with Buildfont because Lo's solicitors had unreasonably rejected the proposed amendments to the draft formal agreement. Secondly, Tam alleged that Lo's solicitors had failed to satisfactorily answer the requisitions raised. Thirdly, Tam alleges that Buildfont was the real owner of the lots used for exchange of Lot No.1736 and the government was not aware of it. The New Grant was thus obtained by a fraudulent representation and is liable to be revoked. Lastly, Tam alleges that he is ready, willing and able to perform the Agreement if the requisitions are satisfactorily answered and Buildfont could give an express grant of way to him. Tam counterclaims for, inter alia, a declaration that the Agreement is still binding and a decree of specific performance or damages in lieu.

Applications

6. The action was commenced on 7 November 1998. Exchange of witness statements had already been completed in February 2000. Further amendments had been caused to the amended statement of claim in June 2000 and to the amended defence and counterclaim in September 2000. Almost a year later, by a summons dated 26 August 2001, Lo applied for (1) summary judgment under Order 14 and/or Order 86 of the Rules of the High Court ("the summary judgment application"); (2) a determination of a question of law as to whether Lo or Tam had been in repudiatory breach of the Agreement under Order 14A and upon such determination, such judgment be entered against the relevant party ("the Order 14A application"); and (3) striking out of certain paragraphs of the re-amended defence and counterclaim ("the striking out application").

Applications to amend

7. The draft minutes of judgment attached to the summons contained a declaration that Lo had rescinded the Agreement upon Tam's repudiation. Such a relief was, however, not pleaded in the re-amended statement of claim. Mr Chong, counsel for Lo, therefore applied to amend the prayer to add this relief. Mr Li, counsel for Tam, did not oppose. Leave to amend was accordingly granted.

8. Mr Chong also sought to introduce two amendments to the summons. The first one was to replace paragraph 1 of the summons relating to the summary judgment application with a completely new paragraph to the effect that (1) interlocutory judgment be entered against Tam for an interlocutory judgment in terms of the declaration introduced by the new amendment referred to in paragraph 8 above and damages to be assessed; and (2) final judgment be entered against Lo for vacant possession. Mr Li likewise did not oppose the application. Leave was then granted. I will refer to this application in its amended form "the summary judgment application as amended".

9. The second amendment was in relation to the Order 14A application. Mr Chong essentially based his submissions regarding the Order 14A application on the interpretation he sought to put on Clause 5E of the Agreement. Mr Li complained that the summons did not set out the question of law in the way as suggested by Mr Chong in his submissions. To meet this complaint, Mr Chong applied to replace the relevant paragraph in the summons by a new paragraph to the effect that having regard to Clause 5E of the Agreement, failure on the part of the Tam to pay the balance of the purchase price on or before 11 November 1998 constitute repudiation thereof. Mr Li opposed the application. I refused the application because that was not how Lo pleaded his case in the re-amended statement of claim. In my view, in the absence of the requisite amendment to the pleadings (which Mr Chong did not pursue), it would be wrong to permit an amendment to enable the Order 14A application to be argued on a non-pleaded case. After I had refused the application to amend, Mr Chong did not proceed with the Order 14A application any further.

10. In the event, only the summary judgment application as amended and the striking out application remain. I will deal with them in turn.

Summary judgment application as amended

11. Mr Chong's submissions were built upon his interpretation of Clause 5E of the Agreement. It read :

"E. 賣方獲得香港地政署簽發給上述樓宇的滿意紙及賣方補'妥地價日起計，壹個月內買賣雙方進行正式買賣手續，賣方做好分層樓契，買方付清賣方樓價餘款，計港幣：尚餘1,228,500 。如買方不能付清上述餘款，賣方可以沒收買方以前所付之訂金，並將買方所認購之單位另行出售，樓價全歸賣方所有。"

12. Mr Chong contended that on a clear and proper interpretation of Clause 5E, the parties were obliged to proceed with "formal sale and purchase" within one month after the issuance of the certificate of compliance and the payment of premium; that the procedure for formal sale and purchase mean the commencement of negotiation for the formal sale and purchase agreement; that within the one month period, the balance of the purchase price must be paid by Tam; and that if Tam did not pay, Lo was entitled to forfeit the deposit. The central point of Mr Chong's submissions is that Tam's obligation to pay the balance of the purchase price was not conditional upon or linked to Lo showing a good title to the Property or completion. In short, the balance of the price must be paid within the one-month period even before completion and irrespective of whether Lo was able to prove good title.

13. That is, however, not how Lo's case was pleaded in the re-amended statement of claim. The relevant paragraph is paragraph 5 which averred, inter alia, that Tam should within 30 days of the payment of the additional premium complete the sale and purchase and pay the balance of the purchase price (Emphasis supplied). Completion and payment of the balance of the price were to take place within the one-month period. No where in the re-amended statement of claim was it pleaded that payment of the balance under Clause 5E was independent of completion or proof of good title. It is trite law that summary judgment can only be given on the pleaded case : Super Electric Motor Limited v. Pai Chung Ying, CACV No.225 of 1994, per Bokhary JA (as he then was) at p.2. Since this is not the pleaded case of Lo, the summary judgment application as amended must fail on this ground alone.

14. Even if I were wrong on the pleading point, the application would still fail. Given the nature of this application, I do not wish to say anything more than what is necessary to dispose of the issues before me. Obviously, how to interpret Clause 5E is a matter for trial and it would be undesirable if I were seen to have pre-empted the determination of this crucial issue here. For present purposes, it is sufficient for me to simply say that in my view, it is certainly and obviously arguable that under the Agreement, Tam's obligation to pay the balance of the purchase price is conditional upon completion and Lo's duty to prove good title to the Property, as contended by Mr Li.

15. In light of my ruling on the central issues, it is not necessary to address other subsidiary points raised by counsel pertaining to this application.

16. For the above reasons, the summary judgment application as amended must fail.

Striking out application

17. The paragraphs of the re-amended defence and counterclaim that Mr Chong sought to strike out can be grouped into three categories : (1) those on why the parties could not enter into a formal sale and purchase agreement; (2) those on the various provisions of the Land Registration Ordinance; and (3) those on requisitions raised.

18. In connection with the first category, Mr Chong submitted that it was not Lo's case that the failure to enter into a formal sale and purchase agreement is an actionable wrong. The matters pleaded in those paragraphs are thus irrelevant and unnecessary. Mr Li contended that this objection is misconceived in that the matters pleaded is relevant to Tam's defence and explained why no formal agreement was signed. In connection with the second category, Mr Li submitted that the paragraphs on the ordinance did not plead law but merely raised a point of law with elaboration on it.

19. I do not wish to overburden this judgment by setting out and examining each of the paragraphs objected to. Having considered the relevant paragraphs and the defence as a whole carefully, I agree with Mr Li's submissions on both the first and second category.

20. In connection with the third category, Mr Chong submitted that it was not necessary to plead each and every correspondence between the solicitors in order to aver that the requisitions raised had not been satisfactorily answered. What is sufficient, according to counsel, is to simply plead that the requisitions had not been answered satisfactorily.

21. With respect, that is not sufficient. A purchaser alleging that the vendor had failed to answer his requisitions satisfactorily needs to set out in his pleading (1) each of the requisitions relied on, (2) the answers thereto and (3) why the answers were insufficient or unsatisfactory. The paragraphs objected to did put forward these matters. Although the way they did it is far from satisfactory and certainly can be improved, it is not a ground for striking out.

22. In the premises, the striking out application must also fail.

Conclusion

23. For the above reasons, both the summary judgment application as amended and the striking application are dismissed.

24. In my view, these late applications are entirely unmeritorious and should not have been brought at all. Indeed, they were not properly thought out in the first place. Last minute application to amend both the re-amended statement of claim and the summons itself were made in the course of submissions in order to cure some elementary and obvious defects. As noted in paragraph 6 above, the action was commenced on 7 November 1998. It has now progressed to a stage that it is ready and should be set down for trial. There has been delay, which is not insignificant. Satellite litigation, like the present applications, which only serves to prolong the proceedings and inflate the costs unnecessarily, should be discouraged. To mark the court's strong disapproval of such litigation behaviour, Lo should be visited with a more stringent costs order than usual. I will therefore make an order nisi that costs of and occasioned by the summons of the plaintiff by original action, including any related costs reserved, be to the defendant by original action, to be paid forthwith and to be taxed on a common fund basis if not agreed. The order nisi will be made absolute within 14 days after handing down.