CHINALYNX INTERNATIONAL LTD v. YEUNG YIN ALICE AND ANOTHER

HCA314/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 314 OF 2008

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Reasons  for  Decision

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1. On 10 February 2009, I dismissed the defendants’ appeal against the Registrar’s order dated 16 October 2008 entering summary judgment against them for possession of the suit property and RMB3,258,986.30 with interest. 

2. These are my reasons. 

Background

3. The plaintiff and the defendants through a company of theirs owned 85% and 15% shares in a Mainland company called Kunming Namfatt Dianchi Development Co. Ltd (“the JV Company”).  The JV Company desired to develop a piece of land in Kunming.  

4. On 11 September 2006, the plaintiff and the 1^st named defendant entered into an agreement (“the Agreement”) in Chinese.  The Agreement provided that :

“第一条     乙方保证昆明南发以人民币70,000(柒万)元/亩的价格(即包干价，含征地补偿、拆迁补偿、土地出让金以及其他相关费用及税收)，依法取得昆明浪泥湾一期土地的国有土地使用权。以上所指昆明南发取得土地的价格，是指依法取得的全部实际土地总量与总价格的比例关系来计算的每亩的平均价。

第二条     乙方保证昆明南发依法取得的国有土地的用途符合昆明南发的《浪泥湾国际度假村用地分布图》设计规划的要求(具体见附件一为准)。乙方并保证该国有土地使用权的期限为符合《中华人民共和国城镇国有土地使用权出让和转让暂行条例》中的规定期限(即商业旅游40 年，文化体育50 年，住宅70 年)。并保证昆明南发及时取得国有土地使用证、并协助昆明南发，按国家和昆明市城建部门的法规办理建设用地规划许可证等相关文件。

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第四条     甲方承诺，在乙方达到本协议第一条至第三条的要求后，甲方愿意支付乙方奖励金。该奖励金为甲方实际支付的土地价格低于本协议第一条约定的土地价格的差额部分，并按甲方实际依法取得的土地总量计算总的支付数额。但乙方未能满足本协议第一条至第三条的任何一条要求时，甲方不支付乙方的奖励金(具体结算方式见附件二)。乙方须于合同生效之日起90日内(以下简称约定期限)办妥本协议条款第一条至第三条约定的事项。

第五条     甲方对土地出让信息有知情权。乙方应分阶段向甲方报告土地出让信息情况，并对该信息情况的真实性负责；甲方则预付给乙方必要的办理费用(以下简称该预付费用)。如乙方成功按本协议的约定办理好土地出让事宜，乙方无需将该预付费用退回甲方；如乙方未能按本协议约定期限办理好土地出让所有相关事宜，该预付费用则由乙方在约定期限满30天内退还给甲方。

第六条     甲方在乙方分阶段报告土地出让办理进展情况后，按以下阶段向乙方支付该预付费用：

1、 在本合同签订之日起3至5 天内，甲方向乙方支付第一期费用人民币300 万元；

2、 在出让土地拟在招、拍、挂之前3 天内，乙方向甲方报告拟出让土地已与有关部门或负责人商议的土地征地费、拆迁费、土地出让金及其他费用的协商价格及付款方式，如乙方已达到本协议第一条至第三条的要求，甲方须在出让土地拟在招、拍、挂完成之后14 天内，向乙方支付第二期费用人民币300 万元；如乙方不能达到本协议第一条至第三条的要求，甲方不再需要向乙方支付第二期费用人民币300 万元，而乙方则须按照本协议第五条规定将甲方已付的第一期费用人民币300 万元退还给甲方。

3、 在昆明南发与政府土地管理部门签订国有土地出让合同，并由昆明南发支付征地费、拆迁费、土地出让金及其他相关费用，即乙方协助甲方完成本协议第一条至第三条的所有事项后的10 天内，甲方与乙方进行奖励金支付结算。

第七条     为确保双方均能履行本协议，甲方愿意以香港中驱国际有限公司作担保，乙方愿意以乙方及其丈夫刘杰拥有的香港物业(位于：香港九龙柯士甸道西1 号漾日居第六座30 楼A 室)(以下简称该香港物业)以按揭方式抵押给甲方作担保，且负责办理相关的担保手续。双方均要在签订本协议之后同时分别由甲乙双方出具担保书及按揭文件。……”

5. Pursuant to Clause 7 of the Agreement, the defendants executed a legal charge on 11 September 2006 charging the suit property in favour of the plaintiff. 

6. On 25 September 2006, the plaintiff advanced a sum of HK$2,941,176 (equivalent to RMB3,000,000 at the then prevailing exchange rate) to the 1^st named defendant. 

7. The plaintiff subsequently complained that the 1^st named defendant had failed to discharge her obligations under the Agreement and demanded the defendants to repay the said sum of RMB3,000,000.  When they failed to do so, it commenced the present action. 

The 1^st named defendant’s breach

8. For present purposes, it is only necessary to consider whether the 1^st defendant had failed to discharge her obligations under Clause 2 of the Agreement.  If yes, there is no defence to the plaintiff’s claim.  Nor will there be any basis for the defendants’ counterclaim. 

9. Under Clause 2, the 1^st defendant had to ensure that the user of the land offered for sale by the land authority in Kunming was for “商业旅游40 年，文化体育50 年，住宅70 年”.  However, when the land authority placed the land for auction, the user was for “生态旅游40 年” : see the notices dated 11 June and 3 July 2007 (“the Notices”).  That was significantly different from the user stipulated in Clause 2.  Prima facie, the 1^st defendant had failed to discharge her obligations under Clause 2. 

10. The defendants alleged, through the submission of their counsel, Mr Wong, that by conduct the parties had varied Clause 2 to the extent that the 1^st defendant was only obliged to ensure that the user would be for “生态旅游40 年”.  They relied principally on a letter issued by the JV Company to the 1^st named defendant dated 9 July 2007 (“the Letter”).  In the Letter, the JV Company referred to the notice dated 11 June 2007 issued by the land authority, indicated its intention to auction for the land and made 3 proposals for the 1^st defendant to follow up.  Mr Wong argued that by instructing the 1^st defendant to continue liaising with the land authority after the Notices had been issued, the plaintiff must have agreed to accept the user laid down by the authority for the auction, thereby agreeing to vary the obligations the 1^st named defendant had to perform under Clause 2.  I disagree.

11. The alleged variation does not make any commercial sense.  At the time of the Agreement in September 2006, the land authority had yet to stipulate what the user of the land would be.  Plainly, the users as set out in Clause 2 of the Agreement were what the plaintiff wanted to obtain, which explained why it was willing to pay the 1^st named defendant a bonus of up to RMB6,000,000 if she were able to procure the land authority to lay down the users accordingly.  When the land authority issued the Notices in June and July 2007, the 1^st named defendant had failed to deliver what she had promised.  Her default occurred there and then.  On the evidence before me, I fail to see any reason why the plaintiff would still agree to vary the 1^st defendant’s obligations under Clause 2 as contended, which would effectively allow her to keep the bonus despite her default. 

12. The Letter, heavily relied on by the defendants, does not take their case any further.  On a fair reading, the Letter concerned the acquisition of the land by the JV Company.  It made no reference, expressed or implied, to the 1^st named defendant’s obligations under Clause 2 of the Agreement or the Agreement at all, which is plainly a separate agreement entered between the plaintiff and her.  The mere fact that the JV Company or even the plaintiff was still interested in acquiring the land after the Notices were issued, as demonstrated by the Letter, does not mean that the plaintiff had agreed to vary the 1^st defendant’s obligations under Clause 2. 

13. In my view, there is no defence to the plaintiff’s claim based on the breach of Clause 2. 

Conclusion

14. For the above reasons, the Registrar was plainly correct when she entered summary judgment against the defendants.  Accordingly, I dismissed the appeal with costs.