LEE LAM WAI v. WAN SIU WAN CARRY

DCCJ 6897/2019

[2024] HKDC 855

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 6897 OF 2019

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BETWEEN

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DECISION

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A. Introduction

1.  The plaintiff filed this application by summons dated 30 November 2023, pursuant to Order 19 rule 7 of the Rules of the District Court, s 48A of the District Court Ordinance and the inherent jurisdiction of the court (the “Plaintiff Summons”). Essentially, the plaintiff seeks an order for the dissolution of the order made by HH Judge Kent Yee (the “learned Judge”) on 31 December 2020 (the “Order”)[1], and to put to an end to the Agreement for Sale and Purchase dated 5 August 2019 (the “Agreement”) by reason of the defendant’s non-compliance with the Order, along with other ancillary reliefs.

2.  On 23 February 2024, the plaintiff filed an affirmation in support of the Plaintiff’s Summons.

3.  On 4 March 2024, the return date of the Plaintiff’s Summons, DDJ Alan Ng granted the defendant leave to file and serve an affirmation in opposition on or before 25 March 2024. However, the defendant failed to file or serve any affirmation in opposition before 25 March 2024 or at all. Instead, on 25 March 2024, the defendant filed and served a “Further Particulars”, which clearly did not meet the requirements of an affirmation in opposition as specified by DDJ Alan Ng but apparently contained the defendant’s grounds of opposition to the Plaintiff’s Summons.

4.  On 3 April 2024, the plaintiff filed and served an affirmation in reply.

5.  To provide a more complete picture of the situation, on 10 May 2024, the defendant commenced proceedings against, among others, the plaintiff by issuing a writ with a general indorsement in DCCJ 2527/2024. The claims in the writ closely resemble the grounds contained in the defendant’s “Further Particulars” as mentioned above. On 13 May 2024, the defendant filed a summons seeking an order that this action be heard together with DCCJ 2527/2024. (the “Defendant’s Summons”) The Defendant’s Summons was returnable before this court at 2:30 pm on 14 May 2024.

6.  At the hearing at 2:30 pm on 14 May 2024, the plaintiff was represented by Counsel Mr Lee. The defendant appeared in person.

7.  This is my decision on both the Plaintiff’s Summons and the Defendant’s Summons.

B. Background facts

8.  The defendant is and was at all material times the registered owner of the property known as Flat C on 18^th Floor (including the balcony thereof), Tower 2B, Park Yoho Venezia, Phase 1B of Park Vista Development, No 18 Castle Peak Road Tam Mi, Yuen Long, New Territories, Hong Kong (the “Property”).

9.  By the Agreement, the defendant, as the vendor, agreed to sell, and the plaintiff, as the purchaser, agreed to purchase the Property for the consideration of $6,000,000, with completion scheduled on or before 3 October 2019 (the “Completion Date”).

10.  A part payment of $827,000 (the “Deposit”) had been duly paid by the plaintiff to the defendant before the signing of the Agreement and on 2 September 2019 with the balance of the purchase price of $5,173,000 to be paid on the Completion Date.

11.  Further, the Agreement contains the following relevant terms and conditions: -

(1) Vacant possession of the Property should be delivered by the defendant to the plaintiff on the Completion Date (see clause 12);

(2) The plaintiff should have the right to inspect the Property immediately prior to completion (see clause 26); and

(3) Time should in every aspect be of the essence of the Agreement (see clause 7).

12.  In accordance with the Agreement, the plaintiff’s mother Madam Li Chun Hung (“Madam Li”) on behalf of the plaintiff made an appointment with the defendant to inspect the Property on the Completion Date at 1:30 pm for the purpose of verifying its vacant possession. However, the defendant refused to allow the plaintiff and the plaintiff’s representative to inspect the Property on the Completion Date to verify its vacant possession.

13.  Thereafter, despite repeated requests by Madam Li and the plaintiff’s then solicitors, the defendant refused or neglected to allow the plaintiff (or his representative) to inspect the Property in order to verify its vacant possession.

14.  On 20 December 2019, the plaintiff commenced the present action against the defendant for, inter alia, specific performance of the Agreement.

15.  Although the defendant filed a notice of intention to defend the plaintiff’s claim in the present action, she failed to file and serve her defence and counterclaim. Therefore, on 9 July 2020, the plaintiff took out an application for default judgment against the defendant. On 6 October 2020, the defendant issued a summons seeking leave to file and serve her defence and counterclaim out of time. The applications of the plaintiff and the defendant were heard by the learned Judge on 11 December 2020.

16.  By a decision dated 31 December 2020 (the “Decision”), the learned Judge dismissed the defendant’s application and entered judgment in favour of the plaintiff for specific performance of the Agreement (i.e. the Order). Pursuant to the Order, completion of the Agreement was to take place on 20 April 2021 at 17:00 (the “Mandatory Completion Date”).

17.  In paragraph 21 of the Decision, the learned Judge observed that: -

“In the circumstances, I can see no merit in the purported defence of [the defendant]. Her case is not even supported by her own documentary evidence. It is clear that [the plaintiff] did not pay the balance of the purchase money only because [the defendant] was denied inspection of the Property on the Completion Date and this amounts to a repudiatory breach.”

C. Dissolution of the Order and Damages in lieu of Specific Performance: Applicable legal principles

18.  The relevant principles regarding the nature of specific performance and dissolution of an order for specific performance can be summarized below (see Johnson v Agnew [1980] AC 367 at 393F-G, 394B-C, 398F-G, 399E and 399F-G per Lord Wilberforce): -

(1) If an order for specific performance is sought and is made, the contract remains in effect and is not merged in the judgment for specific performance;

(2) If the order for specific performance is not complied with, the innocent party may either apply to the court for enforcement of the order, or may apply to the court to dissolve the order and ask the court to put an end to the contract;

(3) A party who seeks (and gets) specific performance is merely electing for a course which may or may not lead to implementation of the contract ─ what he elects for is not eternal and unconditional affirmation, but a continuance of the contract under control of the court which control involves the power, in certain events, to terminate it;

(4) The innocent party should have been entitled, upon discharge of the contract, on grounds of normal and accepted principle, to damages appropriate for a breach of contract; and

(5) The court would not make an order dissolving the decree of specific performance and terminating the contract (with recovery of damages) if to do so would be unjust, in the circumstances then existing, to the other party.

19.  The above principles were consistently applied in Hong Kong: -

(1) In Xiamen Xinjingdi Group Co Ltd (廈門新景地集團有限公司) v Eton Properties Limited (裕景興業有限公司) [2020] 23 HKCFAR 348, Ribeiro PJ cited with approval (at §149) Lord Wilberforce’s judgment in Johnson v Agnew that “if the order for specific performance is not complied with by the purchaser, the vendor may either apply to the court for enforcement of the order, or may apply to the court to dissolve the order and ask the court to put an end to the contract”.

(2) In Stark Moly Ltd v Lam Fung [2015] 3 HKC 59, To J succinctly summarized the principles as follows (at §19): -

“… Though a plaintiff has elected specific performance, if the defendant refuses to perform despite the court order, the plaintiff could either apply to court for enforcement of the order, or may apply to court to dissolve the order and ask the court to put an end to the contract which the order has kept alive. By applying for an order for specific performance, the plaintiff has put it into the hands of the court on how the contract is to be performed. The court has become seised of the matter. Thus, despite non-compliance with the order, it is no longer open to the plaintiff to accept repudiation on the part of the defendant to put an end to the contract. To seek damages instead of enforcing the order for specific performance, the plaintiff has to come to court and seek the court’s order, first, to discharge the order for specific performance and, second, to put an end to the contract so that the plaintiff can claim damages. It is not for the plaintiff to accept any repudiation, but for the court to put the contract to an end where it is just to do so.”

D. Application of the legal principles to the facts of this case

20.  By applying to dissolve the Order and put an end to the Agreement, the plaintiff is essentially following one of the courses suggested by Lord Wilberforce in Johnson v Agnew.

D.1 The defendant did not comply with the Order or actively refused to perform despite the Order

21.  The plaintiff’s relies, among other things, on the following to demonstrate that the defendant did not comply with the Order or actively refused to perform despite the Order[2].

22.  First, under paragraph 2(10) of the Order, the defendant must on the Mandatory Completion Date give to the plaintiff vacant possession of the Property. However, the defendant refused or failed to deliver vacant possession of the Property to the plaintiff on the Mandatory Completion Date, or at all. Furthermore, when the plaintiff inspected the Property on 18 April 2021, the Property was still occupied, full of household items and was not in a state whereby vacant possession could be delivered. Therefore, the defendant was plainly in breach of the Order.

23.  Second, on 15 March 2021, the defendant’s boyfriend, Mr Mohammad Aslam (“Mr Aslam”), who accompanied the defendant to various hearings and must have been aware of the present action, commenced proceedings against the defendant by issuing a writ and a statement of claim in DCCJ 1105/2021: -

(1) In the writ, Mr Aslam alleged that he was the sole beneficial owner of the Property and registered the writ against the Property in the Land Registry on 26 March 2021;

(2) This prompted the plaintiff to issue a summons dated 19 April 2021 seeking an extension of the Mandatory Completion Date to allow him to vacate the registration of the lis pendens and require the defendant to deliver vacant possession of the Property to him;

(3) In a statement filed in this action on April 2021, the defendant admitted the claim of Mr Aslam in DCCJ 1105/2021; and

(4) By an order dated 18 August 2021, DDJ Tracy Chan ordered inter alia that completion was to take place 60 days after the writ in DCCJ 1105/2021 was vacated.

24.  In my view, the commencement of the proceedings by Mr Aslam in DCCJ 1105/2021, with the corroboration or cooperation of the defendant, shows that the defendant did not comply the Order or actively refused to perform despite the Order.

25.  Third, on 9 August 2021, Mr Aslam commenced further proceedings against both the defendant and the plaintiff by issuing a writ and a statement of claim in DCCJ 3792/2021:-

(1) In the writ, Mr Aslam alleged that the plaintiff had knowledge of his beneficial interest in the Property and registered the writ in the Land Registry on 16 August 2021;

(2) The defendant failed to file any notice of intention to defend Mr Aslam’s claim in DCCJ 3792/2021; and

(3) Although the plaintiff has filed and served his defence and counterclaim, Mr Aslam did not proceed with the proceedings in DCCJ 3792/2021 (or in DCCJ 1105/2021).

26.  I am also of the view that the commencement of the proceedings by Mr Aslam in DCCJ 3792/2021, with the corroboration or cooperation of the defendant, shows that the defendant did not comply with the Order or actively refused to perform despite the Order.

27.  The above clearly demonstrates that the defendant did not comply with the Order or actively refused to perform despite the Order. Therefore, it is unnecessary for me to address the other matters relied on by the plaintiff.

D.2 The defendant’s grounds of opposition are totally without merits

28.  In my view, the defendant’s grounds of opposition are totally without merit.

29.  First, as mentioned above, the “Further Particulars” clearly did not meet the requirements of an affirmation in opposition as specified by DDJ Alan Ng. It was neither sworn nor affirmed. Therefore, the defendant has failed to comply with the Order made by DDJ Alan Ng on 4 March 2024.

30.  Second, the grounds raised by the defendant in the “Further Particulars” are wholly irrelevant, and without any merits: -

(1) The main issue raised by the defendant is that the purchase price of the Property was revised from $6.8 million to $6 million due to an alleged conspiracy involving the plaintiff, his mother, his sister and their then solicitors Messrs Norman MK Yeung & Co. This conspiracy, as claimed by the defendant, was intended to deceive her into signing the Agreement, resulting in a loss of more than $3 million;

(2) However, the defendant’s allegation is flatly contradicted by the undisputed fact that when entering into the Agreement, she was legally represented by Messrs Lee & Co, solicitors (“L&C”). The Agreement was explained to her by L&C and was signed by her in their presence. Furthermore, the defendant voluntarily accepted both the initial deposit and further deposit paid by the plaintiff. It is also noteworthy that the defendant did not raise this allegation back in 2020 when she sought leave to file her defence and counterclaim; and

(3) In these circumstances, the defendant’s conspiracy allegation is unbelievable or inherently improbable. Therefore, I have no hesitation in rejecting it.

31.  Third, I accept the submission of Mr Lee that by raising the grounds in the “Further Particulars”, the defendant is in effect seeking to set aside the Order and to reopen her case, which is clearly impermissible: -

(1) The defendant has not taken out any application to set aside the Order, which remains binding on her; and

(2) Moreover, the defendant had in fact contested the plaintiff’s application for default judgment and sought leave to file and serve her defence and counterclaim back in 2020 but failed. The Defendant’s application for leave to appeal was also dismissed by the learned Judge on 11 May 2021. It is not open to the defendant to challenge the Order three years after the same have been entered against her.

32.  I further hold that to grant an order to dissolve the Order and to put an end to the Agreement would not be unjust, in the circumstances existing, to the defendant.

33.  I therefore make an order to dissolve the Order and to put an end to the Agreement. As I have made the order as specified herein, the Defendant’s Summons must be dismissed.

E. The other reliefs claimed by the plaintiff

34.  Apart from seeking an order to dissolve the Order and to put an end to the Agreement, the plaintiff also seeks the following reliefs, which I will consider in turn.

E.1 Damages

35.  As Lord Wilberforce observed in Johnson v Agnew, the innocent party should have been entitled, upon discharge of the contract, on grounds of normal and accepted principle, to damages appropriate for a breach of contract.

36.  In Hong Kong, pursuant to section 48A of District Court Ordinance (Cap 336), the District Court has jurisdiction to “award damages … in substitution for … specific performance where it has jurisdiction to entertain an application for … specific performance”.

37.  Therefore, the plaintiff is entitled to damages in lieu of specific performance.

E.2 Return of deposit

38.  An innocent purchaser is always entitled to the return of deposit when the vendor wrongly calls off the contract: see Kwok Chung Hon & Anor v Lo On Wa [1997] HKLRD 980 at 982E-F per Godfrey JA.

39.  Therefore, the plaintiff is entitled to the return of the deposit.

E.3 Equitable purchaser’s lien

40.  By reason of the payment of deposit, a purchaser acquires an equitable purchaser’s lien over a property. As soon as a purchaser has paid any part of the purchase price pursuant to a binding sale and purchase agreement for property, the purchaser has an equitable lien on the property to the extent of the purchase money he paid, even in the absence of a conveyance to him of the property: Chitty on Contracts, Hong Kong Specific Contracts, 7^th Ed (2022), Vol 1 at §22-270.

41.  A purchaser’s lien would not be limited to the deposit paid but may cover “damages, interest and costs”: Smart Max Enterprise Ltd v Speedy Way Ltd [2011] 1 HKLRD 796 at §40 per Andrew Cheung J (as the Chief Justice then was). Further, a purchaser’s lien may cover “interest paid on the unpaid balance of the purchase money, the purchaser’s costs of investigating title properly incurred by the purchaser, the costs of a claim for specific performance, the costs of an application to the court in respect of any requisitions or objections, or any claim for compensation, or any other question arising out of or connected with the contract”: Lee Fu Wing v Yan Po Ting Paul [2009] 5 HKLRD 513 at §§125-129 per DHCJ Thomas Au (as he then was).

42.  Therefore, the plaintiff is entitled to a lien on the Property for the sum of $827,000 and all damages, interest and costs found payable by the defendant to the plaintiff herein.

F. Conclusion

43.  For the above reasons I allow the application and made the following orders: -

(1) The Order be dissolved and the Agreement be put to an end by reason of the defendant’s non-compliance with the Order;

(2) Interlocutory judgment be entered against the defendant for damages in lieu of specific performance to be assessed;

(3) The defendant do forthwith return to the plaintiff the sum of $827,000 being the deposit and part payment of purchase price paid by the plaintiff under the Agreement;

(4) A declaration that the plaintiff is entitled to a lien on the Property for the sum of $827,000 and all damages, interest and costs found payable by the defendant to the plaintiff herein; and

(5) Interests on the sum of $827,000 and damages when so assessed at judgment rate from the Completion Date of the Agreement (i.e. 3 October 2019) until payment.

44.  I also make an order nisi that the costs of and incidental to the Plaintiff’s Summons and the Defendant’s Summons be paid by the defendant to the plaintiff forthwith, to be taxed if not agreed, with certificate of counsel.

45.  Last but not least, I thank Mr Lee for the assistance he has rendered to this court.