XCHRX Mak Kwai Ming v. Polyline Development Ltd.

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 6585 OF 2001

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J U D G M E N T

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1. This is an application for summary judgment under Order 14, or alternatively, relief under Order 14A by the plaintiff against the defendant.

2. According to the pleaded case of the plaintiff, the defendant was the developer of certain small houses under the government policy for small houses in the New Territories and relating to DD No. 23 in Tai Po.

3. According to the plaintiff, the parties signed an agreement in Chinese dated 18 July 1997, whereby the defendant agreed to sell and the plaintiff agreed to buy a property known as the 2nd Floor, Po Fu Garden, Po Sam Pai, Tai Po, New Territories, on Lot No. 864, DD No. 23, for the price of $2.5 million. Pursuant to the agreement, the plaintiff paid to the defendant an initial deposit of $100,000 and a further deposit of $400,000, totalling $500,000.

4. According to the pleaded case of the plaintiff, the agreement expressly provided that if "the paper(s) required to commence work" were not obtained by the end of the year 2000, the deposits, free of interest, would have to be returned by the defendant to the plaintiff.

5. The plaintiff said that "the paper(s) required to commence work" referred to government approvals, certificates of exemption, building licences and so forth, from the government relating to the erection of the building on the lot. The plaintiff further said that despite the lapse of the year 2000, those documents were not forthcoming and in the circumstances they were entitled to the return of the deposits in the sum of $500,000, and, as I have said, they applied for summary judgment before me today.

6. Upon an objection taken by the defendant, I ruled that since the agreement in Chinese had not been stamped and no personal undertaking by those acting for the plaintiff was forthcoming relating to its stamping, the agreement could not be received in evidence in these proceedings before me pursuant to section 15 of the Stamp Duty Ordinance.

7. That notwithstanding, Miss Lau, acting for the plaintiff, decided to proceed with her application for summary judgment before me, but given my ruling she could not refer to the Chinese agreement, a copy of which had been exhibited to one of the affirmations filed by her client for the purpose of this application. She was forced to refer to the pleadings for the more material terms of the agreement, as well as the affidavit evidence filed, from which she tried to tell the court what the contents of the agreement were and why "the paper(s) required to commence work" should be construed in the way the plaintiff contended the phrase should be construed.

8. The defendant took full advantage of my ruling and pointed out repeatedly to me through counsel during submissions that the crux issue raised was one of construction of the phrase "the paper(s) required to commence work" and without the entire agreement before me by way of evidence, there was no way the court could properly construe the meaning of the phrase. The defendant said that the phrase actually meant a written consent from an indigenous owner of the lot for the commencement of work. The defendant's counsel explained to me that since the property in question was a small house, its erection could only be applied for by an indigenous male in the New Territories. At the time when the agreement was entered into, an associated company of the defendant was the registered owner of the lot. So it was clear to everyone concerned that the defendant, although contracting to sell the property or to procure the sale of the property to the plaintiff, had to secure an indigenous male to become the owner of the land to make the relevant application to the government authorities for the erection of the small house, to authorise the defendant or its contractor to erect the house and to assign the various flats in the house after its erection to the purchasers nominated by the defendant, before the transaction between the plaintiff and the defendant relating to the property could go through.

9. According to the defendant's counsel, the phrase and the provisions relied on by the plaintiff in the present case were actually included to provide for the eventuality that the defendant could not secure such an indigenous male to become the owner of the property, to make the application and then to assign the property back to the nominated purchasers of the defendant after the property's erection. So the clause was meant to work thus: that assuming by the end of the year 2000 they could not secure such a person, then the deposits would be returned to the plaintiff, and the evidence relating to such a person's agreement to participation in the whole scheme would be a piece of paper written by such a person signifying his consent that he would go along with the whole plan and so forth. So by and large, that was the explanation or the true construction of the phrase "paper(s) required to commence work" put forward by the defendant.

10. I must say that without the whole agreement before me, it is quite impossible to properly construe the phrase "the paper(s) required to commence work." It is trite law that a clause in a contract cannot be construed in isolation. The whole contract has to be looked at and in fact the objective background and the context would have to be considered. If the clause involves a technical term, trade term or term with special meaning, then the parol evidence rule notwithstanding, extrinsic evidence will be admissible to assist the court in construing the proper meaning of the term.

11. In the present case, the context in which the dispute arose is that this is a small house development. The story put forward by the defendant is not one, according to my own experience, totally incredible and in my judgment it all depends on the background circumstances, the intention of the parties and the parties' discussions, and it also turns on the proper construction of the contract as a whole. While it is attractive to say that the phrase "paper(s) required to commence work" must mean approval papers from the Government, in my judgment, given the outline of the facts I gave above, the phrase is capable of sustaining other meanings.

12. Moreover, one additional difficulty faced by the plaintiff in this application is this: the defendant said that under the agreement, time was not of the essence of the agreement. So even assuming that they had failed to obtain such a written consent, that would not be the end of the matter. Miss Lau for the plaintiff contended otherwise. She said that time was of the essence. Now that again highlights the difficulty Miss Lau faced in this application without the agreement before me. Without the agreement, there is no way I can tell on the proper construction of the agreement whether time was of the essence or was not of the essence.

13. Now, assuming that time was not of the essence, that again need not be the end of the matter if, subsequently, time was made of the essence. By "subsequently", I am referring to the period after the year 2000. But there is no evidence before me at all relating to whether time had since been made of the essence of the agreement. There was no correspondence between the parties or their representatives in this regard and there was not even any mention in the affidavit evidence of any attempts to make time of the essence orally on the part of the plaintiff.

14. In fact I should add that according to the defendant, "the paper(s) required to commence work" refers to a written consent from the owner and according to them, they have indeed secured such an indigenous male to become the owner of the land and a written consent has been obtained from such an owner. So a piece of paper is in evidence before me.

15. So for all these reasons, I do find that this is not a suitable case for granting summary judgment, particularly bearing in mind that the Chinese agreement is not in evidence before me.

16. There is an arguable issue relating to the proper construction of the phrase "paper(s) required to commence work". There is another arguable issue relating to whether time was of the essence or had been made of the essence, in the absence of which the plaintiff's claim for the return of the deposit would be problematic. So, for all these reasons I am not minded to grant summary judgment in favour of the plaintiff.

17. The plaintiff also submitted by way of an alternative argument that if I was not minded to grant summary judgment, I should at least impose a condition before giving leave to defend. I do not agree. Given the outline of the facts and issues and the difficulties faced by the plaintiff in this application, I cannot say that the defence is a shadowy one. Everything would depend on the proper construction of the contract and the surrounding circumstances, including the consideration of any admissible extrinsic evidence. So I am not imposing any condition either.

18. This application was taken out on 25 May 2001, whereas the defence was filed on 24 April 2001. Further particulars were supplied by the defendant of the defence on 4 May 2001. In the defence and further and better particulars, the defendant put forward his defence. But I must say that before hearing detailed submissions from Mr Yip, for my part I had difficulty in understanding the real nature of the defendant's case. Apart from the pleadings and the particulars, I had also got Mr Ching Lin-chuen's affirmation filed on behalf of the defendant in opposition to the present application, yet I still could not understand the real nature of the defendant's case. So if the plaintiff did not understand the true nature of the defendant's defence pleaded in the defence and amplified in the further and better particulars before they took out the Order 14 summons, that was something very understandable. So, I am not minded to dismiss the summons. I will simply grant unconditional leave to defend.

19. As for Order 14A, I do not think this was seriously pressed by Miss Lau on behalf of the plaintiff before me this afternoon and I think this was very wise. Given my outline and analysis of the facts and issued involved, I do not think this is a suitable case for Order 14A relief either. So I would dismiss the application for relief under Order 14A.

(Submissions on costs and further directions)

20. Mr Yip says this application is a waste of everybody's time. I do not agree. It was only with the benefit of today's hearing that I could understand the true nature of the defendant's defence. So I think in all fairness I should order that the costs of this application including today's hearing be costs in the cause. I will grant a certificate for counsel. Costs are to be taxed if not agreed.

(Discussion re directions)

21. Since the parties do not feel it necessary to ask for any further direction, I make no order in relation to it.