STAREX DEVELOPMENT LTD v. YAU SO CHING as the administrator of the estate of YEUNG LEUNG CHUEN, the deceased AND OTHERS

DCCJ 2372/2021
DCCJ 2374/2021

(Consolidated)

[2023] HKDC 96

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NOS 2372 OF 2021

AND 2374 OF 2021

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DECISION

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(A)  The Applications

1.  The plaintiff in this consolidated action took out a summons dated 22 February 2022 for applications of determination of a question of law or construction, summary judgment and striking out of the Defence of the defendants under Order 14A Rule 1, Order 14 Rule 1 and Order 18 Rule 19 of the Rules of the District Court (Cap. 336H) respectively.

2.  By its application under Order 14A Rule 1, the Plaintiff asked for the following questions of law and/or construction of two provisional sale and purchase agreements to be determined by the court, namely:-

"(i) On a true and proper construction of the 2 provisional sale and purchase agreements both dated 6 July 2019 entered into between the plaintiff and the 1^st and 2^nd defendants, and between the plaintiff and the 3^rd and 4^th defendants referred to in paragraphs 5(a) and 5(b) of the Consolidated Statement of Claim, in particular clause 10 thereof, in the event the plaintiff (purchaser) has not acquired 90% undivided shares of each building at Nos.63-79 Fung Tak Road by 30 July 2019, whether the plaintiff (purchaser) was required to make an election whether to proceed with the purchases:-

(a) within a reasonable time after 30 July 2019, or

(b) by the date of completion, i.e. by 28 April 2020?

(ii) In the event the answer to paragraph (i) above is (b), i.e. the plaintiff was only required to elect by 28 April 2020, whether the defendants still have any defence to the plaintiff's claims by reason of waiver and/or estoppel?"

3.  In the event that the answers to paragraph (i) of its Order 14A application is (b) and that to paragraph (ii) thereof is in the negative, the plaintiff asked for the following orders:-

(1)  final judgment be entered in favour of the plaintiff against the defendants;

(2)  the defendants' Consolidated Counterclaim be dismissed.

Alternatively,

(3)  that summary judgment under Order 14 Rule 1 of the Rules of the District Court (Cap. 336H) be entered in favour of the plaintiff against the defendants; and

(4)  the defendants' Consolidated Counterclaim be struck out under Order 18 Rule 19(1)(b) and (d) of the Rules of the District Court (Cap. 336H) on the ground that their counterclaim is frivolous and vexatious or otherwise an abuse of the court's process.

(B)  The Facts of the Present Case

4.  At all material times, the plaintiff was a limited company incorporated in Hong Kong and its business was property development.

5.  By an assignment dated 15 November 1972, Yeung Leung Chuen, now deceased ("the Deceased"), became the registered owner of All THOSE 2/19 parts or shares of and in New Kowloon Inland Lot No. 5026 with a right to the exclusive use occupation and enjoyment of the property known as Shop No. 2 on G/F, Kam Fung Building, Nos. 75-79 Fung Tak Road, Kowloon, Hong Kong (the “Property”).

6.  By a deed of gift dated 24 December 2004, the Deceased assigned 2/3 share of the Property to the 3^rd and 4^th defendants as tenants-in-common. Then, the Deceased held the remaining 1/3 share of the Property as tenant-in-common. The Deceased passed away intestate and Letters of Administration of the estate of the Deceased were granted to the 1^st and 2^nd defendants on 8 February 2017.

7.  On or about 6 July 2019, the plaintiff as purchaser and the 1^st and 2^nd defendants as vendors, through an estate agency known as Mandarin Property Limited (大華物業有限公司) (the “Estate Agent”) entered into a provisional sale and purchase agreement in Chinese dated 6 July 2019 (the “D1D2’s Agreement”). By the D1D2's Agreement, the plaintiff agreed to purchase 1/3 share of the Property at a consideration of HK$10,000,000 and the completion was to take place on 28 April 2020 but subject to other terms and conditions of the D1D2’s Agreement. The deposits in the total sum of HK$1,000,000 were paid by the plaintiff in the following manner:-

(a)  A deposit of HK$166,000 was paid to the 1^st and/or 2^nd defendant(s) through the Estate Agent on or about 6 July 2019; and

(b)  A further deposit of HK$834,000 was paid to the solicitors for the 1^st and 2^nd defendants through the plaintiff’s solicitors on or about 30 July 2019.

8.  Also on or about 6 July 2019, the plaintiff as purchaser and the 3^rd and 4^th defendants as vendors, through the Estate Agent, entered into a provisional sale and purchase agreement in Chinese dated 6 July 2019 (the “D3D4’s Agreement”). By the D3D4's Agreement, the plaintiff agreed to purchase 2/3 share of the Property at a consideration of HK$20,000,000 and the completion was to take place on 28 April 2020 but subject to other terms and conditions of the D3D4’s Agreement. The deposits in the total sum of HK$2,000,000 were paid by the plaintiff in the following manner:-

(a)  A deposit of HK$334,000 was paid to the 3^rd and/or 4^th Defendant(s) through the Estate Agent on or about 6 July 2019; and

(b)  A further deposit of HK$1,666,000 was paid to the solicitors for the 3^rd and 4^th defendants through the plaintiff’s solicitors on or about 30 July 2019.

9.  Save and except the vendors' interest in the Property, the purchase price and the amount of deposits, D1D2's Agreement and D3D4's Agreement (collectively "the Agreements") essentially contained the same terms, including the same completion date, an express term that time is of the essence and the same clause 10 thereof which is the subject matter of the present dispute of the parties. At the material times, the plaintiff was represented by the same firm of solicitors in handling the the Agreements. The 1^st and 2^nd defendants and the 3^rd and 4^th defendants were also represented by the same firm of their solicitors.

Clause 10 of the Agreements

10.  Clause 10 of the Agreements expressly provided as follows:-

"10. 賣方確認買方擬收購[九龍鳳德道63-79號之每幢物業] (“收購物業”)即每幢大廈收購不少於90%或以上收購物業的相關業權份數或全部業權 (包括但不限於其所有物業單位、車位、天臺、天井、外牆、花園、平臺，後巷及任何預留用地)。即使本合約另行規定，買賣雙方同意，如（一）買方未能於2019年7月30日或之前與收購物業的相關業主簽署具約束力合約以購入收購物業不少於90%或以上相關業權份數；或（二）相關業權在買賣完成交易前，買方代表律師認為收購物業或其任何部份之業權不妥善，而導致未能與90%或以上相關業權份數完成交易，則買方有權選擇如下︰

(a) 繼續完成交易︰買賣雙方按本合約條款完成買賣該物業；或

(b) 放棄購入︰買方須於成交日或之前以書面通知賣方或其代表律師取消本合約。在此情況下，賣方必須在該書面通知日期後之7個工作天內，將已收之訂金全數無息退回給買方，之後雙方均不能向對方作出任何追討。"

11.  For the purpose of the present applications, the parties agreed that the English translation of Clause 10 of the Agreements read as follows:-

"10.  The Vendor confirms that the Purchaser intends to acquire each block of building at Nos. 63-79 Fung Tak Road, Kowloon (the "Property To Be Acquired"), that is, to acquire for each block of building no less than 90% or more of the undivided shares of the Property To Be Acquired or the entire property title (including but not limited to all of its property units, car parking spaces, roofs, light wells, exterior walls, gardens, flat roofs, rear lanes and all reserved lands). Notwithstanding what is otherwise stipulated in this Agreement, both the Purchaser and the Vendor agree that if (1) the Purchaser is unable to enter into binding agreements with the respective owners of the Property To Be Acquired on or before 30 July 2019 for purchasing no less than 90% or more of the undivided shares of the Property To Be Acquired; or (2) before the completion of the transaction for the sale and purchase of the relevant property title, the solicitors of the Purchaser find that the Property To Be Acquired or any part thereof is not of good title so as to result in its being unable to complete the acquisition of no less than 90% or more of the relevant undivided shares in the Property To Be Acquired, the Purchaser shall [*] have the right to elect as follows-

(a)  Continue to complete the transaction: the Purchaser and the Vendor shall follow the terms of this Agreement to complete the sale and purchase of the Property; or

(b)  Forgo the purchase: the Purchaser has to issue a written notice to the Vendor or his solicitors on or before the completion date to cancel this Agreement. In such event, the Vendor shall return all deposit received in full without interest to the Purchaser within 7 working days after the date of that written notice, after which neither party shall have any claim against the other thereafter."

For [*] hereinabove, the plaintiff's translation is "in either event", whilst the defendants' translation is "then". I shall interpret Clause 10 by reference to its original Chinese version. As a matter of translation, the English terms "in either event" or "then" need not be imported.

(C)  The Disputes

the plaintiff's case

12.  The plaintiff's case is that its intended purchases under the Agreements were part of the plaintiff’s plan for acquiring all of the 4 old buildings, i.e. Nos. 63-65, Nos. 67-69, Nos. 71-73 and Nos. 75-79 ("the 4 Buildings/Property To Be Acquired"), at Nos. 63-79 Fung Tak Road, Kowloon for the purpose of redevelopment. The plaintiff had to acquire at least 90% of the undivided shares of each of the 4 Buildings ("the Requisite Undivided Shares"). All of the plaintiff's sale and purchase agreements with the owners of the 4 Buildings were to be completed on 28 April 2020.

13.  According to the plaintiff's case and evidence, as of 30 July 2019, the plaintiff was only able to enter into sale and purchase agreements to acquire:-

(a)  80% of the undivided shares in Nos. 63-65 Fung Tak Road;

(b)  85.7% of the undivided shares in Nos. 67-69A Fung Tak Road;

(c)  87.5% of the undivided shares in Nos. 71-73 Fung Tak Road; and

(d)  100% of the undivided shares in Nos. 75-79 Fung Tak Road.

14.  The plaintiff averred that it had tried its best endeavour to secure the purchases of the remaining undivided shares in the 4 Buildings, but to no avail. In about March or April 2020, the plaintiff concluded that it was indeed unable to acquire the Requisite Undivided Shares.

15.  On about 16 April 2020, the plaintiff's solicitors issued letters to all vendors, including the defendants hereof, to terminate the respective purchases. In particular, by the plaintiff's solicitors' letter dated 16 April 2020, the plaintiff's solicitors stated that pursuant to clause 10(b) of the Agreements, they were instructed to give notice to terminate the Agreements. The plaintiff's solicitors also demanded for the return of the deposits within 7 working days.

The Defendants' case

16.  The facts of the present case were not disputed by the defendants, including the fact that the plaintiff was unable to acquire no less than 90% shares of the 4 Buildings, i.e. the Requisite Undivided Shares.

17.  By their consolidated Defence and Counterclaim, the defendants pleaded that:-

(a)  it was an implied term of the Agreements by operation of law and/or so as to give business efficacy to the same and/or to be derived from the real property practice and/or to reflect the obvious common intention of the parties to the Agreements that time should be of the essence in respect of all of the terms of the Agreements ("Implied Term Argument");

(b)  on a proper construction of Clause 10 of the Agreements:-

(i)  if the plaintiff was unable to acquire the Requisite Undivided Shares on or before 30 July 2019, it could elect either to continue to perform the terms of the Agreements to complete under Clause 10(a) of the Agreements or to give up the sale and purchase of the Property by issuing a termination notice under Clause 10(b) of the Agreements;

(ii)  once the plaintiff had elected not to issue a termination notice to terminate the Agreements immediately or within a reasonable time after 30 July 2019 and elected to continue to perform the terms of the Agreements for the completion of the Property, the plaintiff could no longer be entitled to terminate the Agreements by reason of its failure to acquire the Requisite Undivided Shares by 30 July 2019 under Clause 10(1) of the Agreements.

(iii)  Alternatively, the plaintiff had waived its right to terminate the Agreements on the ground of its failure to acquire the Requisite Undivided Shares by 30 July 2019 under Clause 10(1) of the Agreements and/or was estopped from asserting its right to terminate the Agreements.

(''Election Argument' collectively)

18.  The defendants averred that once the plaintiff had elected not to issue a termination notice under Clause 10(b) of the Agreements ("the Termination Notice") immediately and/or within a reasonable time knowing that the plaintiff had failed to acquire the Requisite Undivided Shares after 30 July 2019, the only basis for the plaintiff to terminate the Agreements would be title defects resulting in its failure to acquire the Requisite Undivided Shares under clause 10(2) of the Agreements. The defendants said that the above interpretation must be the correct interpretation of clause 10 of the Agreements.

19.  Hence, the defendants counterclaimed that the plaintiff had failed to complete the sale and purchase of the Property and was in breach of the Agreements.

20.  For the purpose of the present hearing, the parties contended that the plaintiff's applications shall stand and fall together.

21.  According to Order 14A rule 1 of the Rules of the District Court, the court may upon the application of a party or of its own motion determine any question of law or construction of any document arising in any cause or matter at any stage of the proceedings where it appears to the court that such question is suitable for determination without a full trial of the action and such determination will finally determine the entire cause or matter or any claim or issue therein. Upon such determination the court may dismiss the cause or matter or make such order or judgment as it thinks just pursuant to O.14A rule 2. It is inappropriate to invoke O.14A application if the issues of facts are interwoven with the legal issues to be determined: Shell Hong Kong Ltd v Yeung Wai Man Kiu Yip Co Ltd & Another (2003) 6 HKCFAR 222 at paras. 24 to 25. In the present case, I am satisfied that the present consolidated action can be dealt with by O.14A application.

(D)  The Implied Term Argument

22.  The requirements for a term to be implied in a contract were summarized by the Court of Final Appeal in Kensland Realty Ltd v Whale View Investment Ltd & Anor [2002] 1 HKLRD 87 as follows:-

"59. In a well-known passage, Lord Simon, expressing the majority opinion of the Privy Council, sets out the requirements for implying a term in a written contract:

… for a term to be implied, the following conditions (which may overlap) must be satisfied: (1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that “it goes without saying”; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract.” BP Refinery (Westernpoint) Pty Ltd v Shire of Hastings (1978) 52 ALJR 20 at p. 26." (per Ribero PJ at pp 106-107.)

23.  Clause 10 of the Agreements consists of 4 parts. Clause 10(1) concerns the plaintiff's failure to acquire the Requisite Undivided Shares. Clause 10(2) concerns the title defects. Clause 10(a) and Clause 10(b) concern the plaintiff's contractual right if the events of Clause 10(1) or Clause 10 (2) occurred.

24.  It is pertinent to note that there is an express term in Clause 10(b) that the plaintiff can forgo the purchase by issuing the Termination Notice on or before the completion date, i.e. 28 April 2020. It is a drop-out clause. Clause 10(b) is so clear that the time for the plaintiff to exercise its right thereunder is not on 30 July 2019 which is also the same time for payment of the further deposit. Hence, the defendants' contention of implied term contradicts the express term of Clause 10(b).

25.  Secondly, Clause 10, including Clause 10(b), works effectively without the alleged implied term. Hence, one cannot argue that Clause 10 is ineffective without the alleged implied term.

26.  Mr Lin, leading counsel for the defendants, referred to the approach to the construction of documents by citing Jumbo King Ltd v Faithful Properties Ltd (1999) 2 HKCFAR 279:-

"... The construction of a document is not a game with words. It is an attempt to discover what a reasonable person would have understood the parties to mean. And this involves having regard, not merely to the individual words they have used, but to the agreement as a whole, the factual and legal background against which it was concluded and the practical objects which it was intended to achieve. Quite often this exercise will lead to the conclusion that although there is no reasonable doubt about what the parties meant, they have not expressed themselves very well. Their language may sometimes be careless and they may have said things which, if taken literally, mean something different from what they obviously intended. In ordinary life people often express themselves infelicitously without leaving any doubt about what they meant. Of course in serious utterances such as legal documents, in which people may be supposed to have chosen their words with care, one does not readily accept that they have used the wrong words. If the ordinary meaning of the words makes sense in relation to the rest of the document and the factual background, then the court will give effect to that language, even though the consequences may appear hard for one side or the other. The court is not privy to the negotiation of the agreement – evidence of such negotiations is inadmissible – and has no way of knowing whether a clause which appears to have an onerous effect was a quid pro quo for some other concession. Or one of the parties may simply have made a bad bargain. The only escape from the language is an action for rectification, in which the previous negotiations can be examined. But the overriding objective in construction is to give effect to what a reasonable person rather than a pedantic lawyer would have understood the parties to mean. Therefore, if in spite of linguistic problems the meaning is clear, it is that meaning which must prevail." (per Lord Hoffman NPJ at p.296D)

27.  Mr. Lin also relied on Fully Profit (Asia) Ltd v Secretary for Justice (2013) 16 HKCFAR 351 at para.15 and submitted that the relevant background against which the relevant contract and contractual terms must be viewed.

28.  It is submitted on behalf of the defendants that without the alleged implied term, Clause 10(b) gave the plaintiff the prerogative to terminate the Agreements until the completion date which was unfair and unreasonable to the defendants.

29.  The express term of Clause 10(b) of the Agreements, literally construed, does give the plaintiff a contractual right to serve the Termination Notice and drop out from the deal before completion. The defendants have not raised any complaints about Clause 10(b) at the material time.

30.  With respect to the defendants' Implied Term Argument, the issue is whether Clause 10, including Clause 10(b), can be said to be so unfair, unreasonable, inequitable, ambiguous, and/or without business efficacy as alleged by the defendants, so that the alleged implied term must necessarily be implied.

31.  The present Agreements were commercial contracts. The express term of Clause 10 was clear enough that the plaintiff was purchasing the not less than 90% of the equal and undivided shares of each building at 63-79 Fung Tak Road, Kowloon, i.e. the Requisite Undivided Shares. The Property was part of the plaintiff's acquisition scheme. In my judgment, the court should be slow to find that Clause 10(b) was unfair, unreasonable or inequitable, simply because Clause 10(b) gives the plaintiff a better right. The Agreements must be viewed as a whole. In the Agreements, some clauses give the plaintiff a better right and some give the defendants a better right. The fact that one clause gives a contracting party a better right does not necessarily mean that such clause is unfair, unreasonable or inequitable. For examples, Clause 13 of the Agreements gives the defendants a substantial amount of money in terms of millions to compensate the loss of their enjoyment of the renovation of the Property and/or relocation expenses. It does not mean that Clause 13 is also unfair, unreasonable or inequitable. If the peculiar factual matrix of the present case is viewed as a whole, there is business efficacy in Clause 10(b). The plaintiff might wish to try their best endeavour to secure the acquisition of the Requisite Undivided Shares up to the completion date. One may wonder but for the existence of Clause 10(b), whether the plaintiff would still agree to acquire the defendants' shares of the Property as per the rest of the terms of the Agreements in the first place. Likewise, but for Clause 13 of the Agreements, it is also questionable as to whether the defendants would still be willing to enter into the Agreements as per the rest of the terms of the Agreements. Referring to the dicta of Lord Hoffman in Jumbo King Ltd case (as cited above), the court is not privy to the negotiation of the agreement – evidence of such negotiations is inadmissible – and has no way of knowing whether a clause which appears to have an onerous effect was a quid pro quo for some other concession. Hence, the court should not second guess the subjective meaning of the contracting parties, nor should the court bring in the alleged implied term with a view to equalize the unequal right in a particular clause of an agreement.

32.  In conclusion, I find that the alleged implied term contradicts the express term of Clause 10(b) of the Agreements. The alleged implied term, if accepted, will do much violence to the express term of Clause 10(b). Secondly, the Agreements can work effectively without the alleged implied term. Clause 10 is not unfair, unreasonable or inequitable. It is wholly unnecessary and unfair to the plaintiff to bring in the alleged implied term.

(E)  Election Argument

33.  By their counsel's submission, the defendants described the date of 30 July 2019 as "the deadline", "the milestone date" and "the crucial date" for the plaintiff to elect whether to continue the Agreement under Clause 10(a) or to give up the purchase under Clause 10(b). The defendants also submitted that it could not be said to be fair or reasonable interpretation of Clause 10 that the defendants should be "left hanging" without knowing whether the Agreements would be continued or not until the completion date on 28 April 2020. Hence, the defendants' Election Argument rests on the basis that 30 July 2019 (alternatively reasonable time after 30 July 2019) was the deadline for the plaintiff to make an election as to whether or not the Agreements should be continued or terminated. To a certain extent, the defendants' argument hereinabove hinges on the success of their Implied Term Argument which I have rejected.

34.  The defendants submitted that if 30 July 2020 was the deadline, the milestone date or the crucial date, then the conducts of the plaintiff after the deadline on 30 July 2020 (alternatively within reasonable time after 30 July 2020) had constituted an election, waiver or estoppel that the plaintiff had already elected to exercise its contractual right under Clause 10(a). In the premises, the defendants submitted, the plaintiff should be precluded from exercising its contractual right under Clause 10(b) anymore.

35.  The defendants further argued that if the plaintiff's interpretation of Clause 10 was correct, i.e. the plaintiff was entitled to serve the Termination Notice on or before the completion date, then it would have been superfluous to set a "deadline" on 30 July 2019 when the plaintiff could decide whether to continue the Agreements or terminate the Agreements up to the completion date.

36.  The date of 30 July 2019 is expressly mentioned in Clause 10(1) but not in Clause 10(b). For the purpose of argument, assuming that the plaintiff was able to enter into binding sale and purchase agreements to acquire the Requisite Undivided Shares with all of the respective owners of the properties at 63-79 Fung Tak Road before 30 July 2019, then the plaintiff could not invoke its contractual right under Clause 10(a) and (b) on the ground of the event specified in Clause 10(1). The event specified in Clause 10(1) is not engaged. Hence, there is a reason for a date to be fixed in Clause 10(1). Hence, the date of 30 July 2019 is not superfluous as alleged by the defendants if the plaintiff's interpretation is correct.

37.  Mr. Chain, counsel for the plaintiff, rightly submitted that the defendants' argument that 30 July 2020 was the deadline for the plaintiff to make an election between exercising its contractual right under Clause 10(a) and (b) was an attempt to re-write Clause 10(b) by deleting the words "on or before completion date" from Clause 10(b). Mr Chain also rightly pointed out that the events specified in Clause 10(1) and Clause 10(2) are independent events by reason of the conjunctive "or", as opposed to "but".

38.  I do not agree that the date of 30 July 2019 is the deadline, the milestone date or the crucial date as alleged by the defendants.

39.  I find that the date of 30 July 2019 is not the deadline for the plaintiff to exercise its contractual right under Clause 10(b) of the Agreements which expressly allows the plaintiff to serve the Termination Notice on or before the completion date in the event specified by Clause 10(1), i.e. in the event that the plaintiff was unable to enter into binding agreements with the respective owners of the Property To Be Acquired on or before 30 July 2019 for purchasing the Requisite Undivided Shares. The defendants' argument is directly contradicted by the express term of Clause 10(b) of the Agreements.

40.  The defendants relied on the following facts in support of their argument that the plaintiff had already elected to perform the Agreements under Clause 10(a) on or after 30 July 2019 and the plaintiff was thus precluded from exercising its contractual right under Clause 10(b):-

(a)  on 30 July 2019, further deposits were paid by the plaintiff to the defendants pursuant to the Agreements;

(b)  on 30 July 2019, the defendant signed authorization letters to authorize the plaintiff to act for them to apply for approval of building plans;

(c)  on 31 July 2019, each of the defendant executed an irrevocable power of attorney in favour of the plaintiff;

(d)  on 30 March 2020 and 1 April 2020, the plaintiff's solicitors wrote to the defendants' solicitors and raised requisitions on title of the Property and asked the defendants' solicitors to provide a draft apportionment account and receipts of government rent, rates and management fee (if any);

(e)  on 2 April 2020, the defendants' solicitors answered the plaintiff's requisitions and requested for a draft assignment.

It should be noted that the conduct stated in sub-paragraph (e) above is the defendants' conduct and not the plaintiff's conduct.

41.  Mr Lin also referred the court to the affirmation and the exhibits filed in these applications. He submitted that the stamp duty in respect of the Agreements was paid by the plaintiff on 2 August 2019. According to Clause 9 of the Agreements, stamp duty was payable by the plaintiff. The defendants said that this was a further act to show that the plaintiff had elected to perform the Agreements under Clause 10(a).

42.  The defendants submitted that once the plaintiff had made an election between Clause 10(a) and Clause 10(b) of the Agreements on or within reasonable time after 30 July 2019, the plaintiff is precluded from going back. The defendants relied on Zee Margaret v Wong Tseng Hon [2022] HKCA 242. In Zee Margaret case, the plaintiff entered into a cooperation agreement with the defendant. According to clause 5 of their cooperation agreement, the defendant guaranteed that in the event Shenzhen Jin Ding Feng failed to sell 100% shares of Shenzhen Yusheng within 6 months from 17 April 2008, the plaintiff shall have the right to issue a written notice to the defendant requesting the defendant to acquire the 50% shares of Shenzhen Jin Ding Feng. However, according to clause 6 of their cooperation agreement, without prejudice to the rights of the plaintiff, the plaintiff might choose to continue to hold the 50% shares of Shenzhen Jin Din Feng until Shenzhen Jin Ding Feng successfully sold all shares of Shenzhen Yusheng, and at that time requested the defendant to immediately procure the re-purchase of the 50% shares of Shenzhen Jin Ding Feng held by the plaintiff. In addition, the plaintiff would receive other entitlements under clause 6 of their cooperation agreement. In early October 2008, the defendant informed the plaintiff that the shares in Yusheng could not be sold before 17 October 2008 (i.e. the expiry of the 6-month period). The parties entered into a supplemental agreement on 8 October 2008 which gave the plaintiff new entitlements which did not exist in the cooperation agreement. The supplemental agreement was not honoured by the defendant. The plaintiff purported to re-assert her original rights and entitlements under clause 6 of the cooperation agreement. The Court of Appeal held that the rights under clause 5 and clause 6 of the cooperation agreement were in the alternative, and that the supplemental agreement had varied clause 6 of the cooperation agreement. As a result, the plaintiff could not re-assert her original right under clause 6.

43.  Mr Chain submitted that the plaintiff was permitted by the express term of Clause 10(b) of the Agreements to see if it could eventually secure the purchase of the Requisite Undivided Shares up to the completion date. Hence, before the plaintiff served the Termination Notice under clause 10(b), the plaintiff could proceed at its own costs. Hence, the plaintiff did not agree that 30 July 2019 or within reasonable time thereafter was the deadline for the plaintiff to exercise her right under Clause 10(b) as contended by the defendants. Regarding the parties' conducts as identified in paragraphs 40 and 41 of this Decision, Mr Chain submitted that the plaintiff was entitled to proceed, as the Agreements were still subsisting at that time, up to the time the plaintiff decided to issue the Termination Notice. This is the plaintiff's contractual right under Clause 10(b).

44.  In reply, the defendants sought to rely on the doctrine of contra proferentem. The only evidence in this case is that the Estate Agent is also the estate agent in handling the purchase of other properties at 63 to 73 Fung Tak Street for the plaintiff and the respective owners. There is no evidence that the Estate Agent is the sole or exclusive agent for the plaintiff. Furthermore, there is no evidence that the Estate Agent was authorized by the plaintiff to draft the Agreements for the plaintiff. In fact, according to the preamble of the Agreements, it is stated that both parties agreed to engage the Estate Agent as their agent. Hence, I find that contra proferentem rule is not open to the defendants in this case. In any event, there is no ambiguity in Clause 10 for to the contra proferentem rule to be invoked.

45.  I agree with the submission of Mr Chain that the plaintiff is entitled to rely on Clause 10(b) of the Agreements. In Zee Margaret case (above), 17 October 2008 was the agreed deadline for Shenzhen Yu Din Feng to sell all of the shares of Shenzhen Yusheng. If the plaintiff did not exercise her right under clause 5 of the cooperation agreement, it would be taken that her right under clause 5 had forgone and she was only entitled to exercise her right under clause 6 of the cooperation agreement. However, Clause 10 of the Agreements in the present case is drafted differently. The Agreements do not contain any words which say that 30 July 2019 is the deadline for the plaintiff to issue the Termination Notice under Clause 10(b). In the event of Clause 10(1), Clause 10 permits the plaintiff to continue the Agreements until the plaintiff exercises her right to serve the Termination Notice pursuant to Clause 10(b) on or before the completion date.

46.  In light of the above analysis, until the plaintiff exercised its right to serve the Termination Notice under Clause 10(b) on or before the completion date, the Agreements were still binding on the parties. Hence, the plaintiff had to perform its contractual obligations by making payment of further deposits. Otherwise, the plaintiff would be in breach of the Agreements. At the same time, the plaintiff enjoyed its contractual right under the Agreements, including the right to serve the Termination Notice on or before the completion date. Therefore, the plaintiff's conduct as mentioned in paragraphs 40 and 41 of this Decision, cannot be regarded as an election of its right under Clause 10(a).

47.  In any event, I am unable to find that the plaintiff's abovementioned conducts can be regarded as a clear and unequivocal representation which constitute a waiver or estoppel of its rights under Clause 10(b) of the Agreements.

48.  In addition, it should also be noted that 30 July 2019 is also the date for payment of the further deposits under the Agreements. For argument purpose, if 30 July 2019 is really the intended deadline for the plaintiff to make an election between continuation of the Agreements or termination the Agreements as put forward by the defendants, then the plaintiff would be put in a very disadvantageous position. It is because when the plaintiff finds out that it is unable to enter into binding agreements for purchasing the Requisite Undivided Shares on 30 July 2019, the plaintiff has to make a definite decision between continuation of the Agreements or termination of the Agreement by notice within the same day on 30 July 2019. According to the defendants' contention, if the plaintiff did not issue the Termination Notice on 30 July 2019, so long as the plaintiff paid the further deposit on 30 July 2019, the plaintiff's conduct would be treated as a waiver or estoppel of its right under Clause 10(b). The issue is whether this is something that the parties really intended when they entered into the Agreements. I do not believe that this is what the parties really intended and agreed when Clause 10(b) is properly construed. Otherwise, the parties could have declined to include or simply deleted the term "on or before the completion date" from Clause 10(b) at the time they signed the Agreements.

49.  Furthermore, the defendants' alternative case for their Election Argument is that the plaintiff has to elect between Clause 10(a) and Clause 10(b) within reasonable time after 30 July 2019. Again, this alternative argument contradicts the express term of Clause 10(b) of the Agreements.

50.  For the above reasons, I do not accept the defendants' contention that 30 July 2019 is the deadline, the milestone date or the crucial date for the plaintiff to make an election between Clause 10(a) and Clause 10(b). Consequently, the plaintiff's alleged conducts on and after 30 July 2019, as identified in paragraphs 40 and 41 of this Decision above, cannot be regarded as an affirmation of the continuation of the Agreements under Clause 10(a) or a waiver or estoppel of the right under Clause 10(b).

(F)  Orders

51.  In conclusion, I find that Clause 10(a) and Clause 10(b) must be read together. In the event of Clause 10(1), the time that the plaintiff had to make an election between continuation of the Agreements or termination of the Agreements is on or before the completion date, i.e. 28 April 2020. The Agreements are binding until they are terminated or discharged. Before the Agreements are terminated or discharged, the plaintiff has to perform its contractual obligation under the Agreements, including payment of further deposits. If the plaintiff does not issue any Termination Notice under Clause 10(b) on or before the completion date, then the plaintiff is taken to have elected to continue the Agreement under Clause 10(a). But, in the present case, the plaintiff has duly issued the Termination Notice before the completion date pursuant to Clause 10(b). Hence, the defendants have to return all of the deposits within 7 working days according to the express term of Clause 10(b) of the Agreements.

52.  In light of the conclusion above, in respect of issue (i) as formulated by the plaintiff in its O.14A Summons, the answer is (i)(b), i.e. on proper construction of the Agreements, in the event the plaintiff has not acquired 90% undivided shares of each building at Nos.63-79 Fung Tak Road by 30 July 2019, the plaintiff was required to make an election whether to proceed with the purchases on or before 28 April 2020.

53.  In respect of issue (ii) as formulated by the plaintiff in its O.14 Summons, the defendants have no defence to the plaintiff's case, whether under their Election argument, argument of waiver or estoppel.

54.  As a result, final judgment should be entered against the 1^st and 2^nd defendants, and the 3^rd and 4^th defendants as per the plaintiff's claim in the Consolidated Statement of Claim; and the Consolidated Counterclaims of defendants be dismissed.

55.  The Plaintiff is entitled to a lien on the Property for the repayment of HK$1,000,000 as against the 1^st and 2^nd defendants; a lien on the Property for the repayment of HK$2,000,000 as against the 3^rd and 4^th defendants.

56.  Alternatively, by reasons of the conclusion reached above, the defendants have no defence to the plaintiff's claim or there are no triable issues in this consolidated action. In the premises, summary judgment should be entered in favour of the plaintiff against the 1^st and 2^nd defendants, and 3^rd and 4^th defendants as per the plaintiff's claim in the Consolidated Statement of Claim. Further or in the alternative, the Consolidated Counterclaim of the defendants be struck out under Order 18 rule 19(1)(a) of the Rules of the District Court (Cap.336H) of the court's own motion, alternatively under Order 18 rule 19(1)(b) and (d) of the Rules of the District Court (Cap. 336H) on the grounds that they are frivolous and vexatious or otherwise an abuse of the Court's process if it were allowed to proceed.

Costs

57.  Costs should follow the event. There be a costs order nisi that the costs of the actions and/or consolidated action, including the costs of and occasioned by the present applications, be to the plaintiff, to be taxed if not agreed, with certificate for counsel. This costs order nisi shall become absolute within 14 days from the date of this decision.

Interest

58.  The plaintiff is entitled to interest of the deposits of HK$1,000,000 and HK$2,000,000 against the 1^st and 2^nd defendants and the 3^rd and 4^th defendants respectively at 1% above the prime rate from 28 April 2020 until the date hereof, and thereafter at judgment rate.

59.  I thank counsel for their helpful assistance.