RICH LUCKY PROPERTIES DEVELOPMENT LTD v. SIU PING SIU AND ANOTHER

HCA 618/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 618 OF 2011

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D E C I S I O N

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1.  This is an appeal against the order for summary judgment entered against the defendants on the plaintiff’s claim for specific performance of an agreement made on 22 December 2010 for the sale and purchase of the land registered as Sections A and B of Lot 513 in Demarcation District No 102 (“the Lots”) in the New Territories.

2.  The plaintiff claims that under the Sale and Purchase Agreement, the Lots were agreed to be sold by the defendants to the plaintiff for the stated price of  $1 million, that a deposit of  $300,000 had been paid, and that completion of the sale and purchase was to take place on 21 January 2011, but the defendants refused to proceed with the assignment of the Lots and to deliver vacant possession to the plaintiff.

3.  By way of defence, the defendants claim that apart from the Sale and Purchase Agreement, the parties had at the same time entered into a Joint Venture Agreement, under which the parties agreed jointly to develop the Lots.  The defendants were to provide the Lots, whereas the plaintiff, a limited company, was to sub‑divide the Lots, procure indigenous villagers in the New Territories to apply for permission from the government to build small houses or ‘ding houses’ on the Lots, and then to construct 6 small houses on the Lots, 3 of which were to be assigned to the defendants.

4.  The defendants claim that the plaintiff or his officers or agents had represented to them that it would take several years before the necessary consent could be obtained from the government and for construction to commence, and that the defendants would not have to deliver up vacant possession of the Lots to the plaintiff in the interim.

5.  The defendants further claim that the Joint Venture Agreement might be contrary to the government’s small house policy, in which case they would be exposed to risks of the Joint Venture Agreement not being enforced.  They claim that they had been misled by the plaintiff into entering the Sale and Purchase Agreement and the Joint Venture Agreement.

6.  The plaintiff denies that any representation, or misrepresentation, had been made, but it does not deny that there was a Joint Venture Agreement made between the plaintiff and the defendants, nor does the plaintiff deny the terms of the Joint Venture Agreement. The plaintiff claims that the Sale and Purchase Agreement was separate from the Joint Venture Agreement, and that the former clearly provided for vacant possession to be delivered by the defendants to the plaintiff upon completion.

7.  Clause 3 of the Joint Venture Agreement, which is not disputed, provides that within 14 days of the date of the Joint Venture Agreement, the defendants were to sign the formal documents to transfer the Lots to the plaintiff.  However, clause 3 goes on to state the parties’ declaration that the sale and purchase involved in the said transfer was for a stated price only, and that the plaintiff as purchaser was not required to make any real payment of the price to the defendant as vendors.

8.  Clause 3 further states that the plaintiff was to pay  $1 million to the defendants as security to guarantee the plaintiffs’ performance under the Joint Venture Agreement, and that the  $1 million was to be returned to the plaintiff when the defendants received the 3 small houses which they were to acquire under the Joint Venture Agreement.

9.  I agree with counsel for the defendants that in view of the provisions of clause 3 of the Joint Venture Agreement and the declaration made by the parties, it is difficult for the plaintiff to claim that it is entitled, summarily, to an order from the court to enforce the sale of the Lots under a transaction which the parties have in effect declared to be a virtual sham.  I note also that clause 10 of the Joint Venture Agreement refers to the construction cost of each small house being  $1.2 million, which supports the fact the  $1 million referred to in the Sale and Purchase Agreement is not a genuine price for the sale and purchase of the Lots.

10.  At this stage of the proceedings, it is neither appropriate nor necessary for the court to decide whether the Sale and Purchase Agreement or the Joint Venture Agreement are enforceable contracts.  However, I am satisfied that the evidence so far filed shows that the legality and enforceability of these agreements are issues and a reason for trial.  Many of the remarks made in the judgment of the Court of Appeal in Billion Silver Development Limited v All Wide Investments Limited[1999] HKEC 798 and in EGA GmbH v Oskar [1984] 128 SJ 417 are applicable to this case.  It is impossible to tell now where the truth lies and how much, if any, of the activity of both plaintiffs and defendants is tainted with illegality.  Where there are features of both claim and defence, so far explained, which are disturbing because they bear the appearance of falsity, disreputable business dealings or claims which may be tainted with illegality, then summary judgment is not appropriate and unconditional leave to defend should be given.

11.  The issues raised in the affirmations filed in this case should be resolved at trial before the court can be satisfied that the remedy of specific performance can be rightly and properly granted to the plaintiff under the Sale and Purchase Agreement relied upon.

12.  I agree that this is not an appropriate case for summary judgment, and will allow the appeal and dismiss the order 86 summons with costs, with certificate for counsel.

[Submissions on Costs]

13.  The costs will include the costs of the hearing below, with certificate for counsel.