TIN SHI ENTERPRISE DEVELOPMENT LTD v. CITY TARGET LTD

HCA 180/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 180 OF 2015

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REASONS FOR DECISION

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1.  By its summons dated 26 February 2015 (“the summons”) the defendant applied for an order that:

(1) the action be dismissed on the ground that the plaintiff had not served the writ of summons after service of a notice to do so on the plaintiff.

(2) alternative to (1), certain paragraphs of the indorsement of claim be struck out as set out in the summons.

(3) the registration or pending registration of the sealed copy of the writ of summons in the Land Registry against the property situated at the address of Commercial Unit on 8^th Floor 726 Nathan Road, Kowloon, Hong Kong (“the property”) be vacated on the ground set out in the summons.

(4) the costs of the summons and occasioned by the registration and vacation of the lis pendens be to the defendant, to be taxed on an indemnity basis if not agreed.

2.  The summons was returnable before me on 21 April 2015.

3.  I was informed at the hearing that save for the question of costs, the parties were agreed as to the order to be made on the summons.

4.  By consent, I made an order that:

(1) the defendant do within 14 days of the order pay into court a sum of HK$6,600,000 as security for the plaintiff’s claim herein for refund of part payment of the purchase price and the said sum so paid into court shall only be released by the order of the court or with the consent of the parties herein;

(2) the registration of the sealed copy of the writ of summons in this action in the Land Registry under Memorial no 15012201800021 against the property be vacated;

(3) the defendant do have leave to file and serve its defence and counterclaim (if any) within 28 days from the date of the order;

(4) the plaintiff do have leave to file and serve its reply and defence to counterclaim (if any) within 28 days thereafter; and

(5) the parties be at liberty to apply for further direction for the sum paid into court and the future conduct of this action.

5.  The parties were unable to agree on the question of costs.

6.  After hearing submissions on the question of costs, I made an order that the costs of and occasioned by the summons, including the costs and expenses for vacating the said writ of summons be paid forthwith.  I declined to make an order for indemnity costs.

7.  I also ordered that the costs be summarily assessed.

8.  Having heard submissions on the summary assessment of costs, I summarily assessed the costs at HK$242,756 for the reasons given at the time and ordered that the said sum be paid by the plaintiff to the defendant forthwith.

9.  I indicated at the time that reasons in writing would be given for the order for costs that I made.  This I now do.

10.  The relevant background to this action is that by a sale and purchase agreement dated 17 January 2013 (“the agreement”) the plaintiff as purchaser agreed to purchase and the defendant as vendor agreed to sell the property at the price of HK$66,000,000 on the terms and conditions contained therein.

11.  Pursuant to the agreement, the plaintiff paid a sum of HK$6,600,000 as deposit (“the deposit”) and a further sum of HK$6,600,000 as part payment (“the part payment”) of the purchase price.

12.  By clause 5 of the agreement completion of the sale and purchase was to take place within 14 days after the plaintiff was notified in writing that the occupation permit had been issued and that the defendant was in a position to assign the property to the plaintiff.

13.  By a notice to complete dated 6 March 2014 the defendant made a demand on the plaintiff to complete the sale and purchase pursuant to clause 5 of the agreement on or before 24 March 2014.

14.  The plaintiff did not complete the sale and purchase as demanded by the defendant.

15.  By a letter dated 8 July 2014 the defendant notified the plaintiff that if the plaintiff did not complete the sale and purchase by paying the balance of the purchase price plus agreed interest within 21 days, the defendant might exercise its right to terminate the agreement.

16.  The plaintiff still did not complete.

17.  By a final warning letter dated 19 September 2014 the defendant notified the plaintiff that the plaintiff must complete the sale and purchase by paying the balance of the purchase price plus agreed interest on or before 25 September 2014.

18.  As the plaintiff failed to complete the sale and purchase within the time stipulated, the defendant served on the plaintiff a notice of termination of the agreement on 21 January 2015.

19.  On the plaintiff’s case the agreement was terminated on 21 January 2015.

20.  On the same day, 21 January 2015, the plaintiff issued the writ of summons in this action.

21.  By the indorsement of claim the plaintiff claimed for a declaration that the defendant was in repudiatory breach of its agreement to extend time for completion of the sale and purchase, that the letter of termination dated 21 January 2015 was null and void and of no effect and that the purported determination of the agreement and forfeiture of deposit was wrongful.

22.  The plaintiff also sought a declaration that the agreement was still subsisting.  He further sought an order for specific performance of the agreement.  Despite the declaration sought and the order for specific performance, the plaintiff also sought the inconsistent relief of an order for repayment of the deposit and the part payment totalling HK$13,200,000.

23.  The plaintiff also sought a declaration that he was entitled to a lien on the property for the deposit and the part payment and the costs and expenses in relation to the purchase of the property.

24.  Damages were claimed in the alternative.

25.  Despite issuing the writ of summons and registering the same at the Land Registry on 22 January 2015, the plaintiff took no steps at that time to serve the writ on the defendant.

26.  The summons was issued on 26 February 2015.  Prior to issuing the summons the defendant’s solicitors had corresponded with the plaintiff’s solicitors on the matter.

27.  By a letter dated 3 February 2015 from DLA Piper Hong Kong (“DLA”) to Chan, Tang and Kwok (“CTK”) notice was given to the plaintiff under Order 12, rule 8A(1), Rules of the High Court for the plaintiff to serve the writ or to discontinue the action within 14 days.  The plaintiff failed to comply.

28.  By letter dated 12 February 2015 from DLA to CTK, DLA informed CTK that, inter alia, the defendant was prepared to pay into court the sum of HK$6,600,000 being the part payment as security for the plaintiff’s claim for the return of the part payment which sum should only be released by order of the court or with the consent of the parties.  On that basis, a demand was made on the plaintiff to vacate the registration of the writ of summons in the Land Registry against the property.

29.  There was no substantive reply from CTK to that letter from DLA apart from a holding letter dated 23 February 2015.

30.  This led to a letter dated 23 February 2015 from DLA to CTK which stated, inter alia, that unless written notification that the writ of summons has been vacated from the Land Registry is received by DLA by noon on 25 February 2015 an application would be made to the court.  DLA did not receive the written notification asked for.  The summons was issued on 26 February 2015.

31.  On 25 February 2015 CTK wrote to DLA saying that they were still taking instructions from the plaintiff.

32.  It was only on 14 April 2015, shortly before the hearing of the summons on 21 April 2015, CTK by their letter of that date sent to DLA the plaintiff’s proposals for the disposal of the summons.  The writ was also amended and the statement of claim was filed on 14 April 2015.

33.  By 14 April 2015 Mr Anson Wong SC had already been briefed to attend the hearing of the summons on behalf of the defendant.

34.  By the time of the hearing on 21 April 2015 the parties had agreed the terms of the order, save for the question of costs.

35.  It seems to me that the costs of the hearing before me could have been avoided if the plaintiff had responded much earlier with his proposals and the amendments to the indorsement of claim.

36.  By the amendments the plaintiff no longer seeks a declaration that the agreement is still subsisting.  He no longer seeks an order for specific performance of the agreement.  Instead, by the statement of claim it is the plaintiff’s case that the defendant granted the plaintiff an extension of time to complete the purchase of the property as pleaded therein.  It is also his case that the defendant agreed to grant him a loan to complete the purchase and that by sending the letter of termination dated 21 January 2015, it was the defendant who was in repudiatory breach of the agreement.

37.  It is also the plaintiff’s case that at the date of the writ the plaintiff was entitled to seek specific performance of the agreement but that by the amendments to the writ and the statement of claim he has waived his right to claim specific performance of the agreement but nevertheless claims damages.

38.  I see no reason why the defendant should be deprived of its costs of the summons and the hearing before me.  It seems to me that the hearing could have been avoided and costs would have been saved had the plaintiff responded much earlier.  It was only on 14 April 2015 after counsel for the defendant had already been briefed for the hearing that the plaintiff attempted to resolve the outstanding summons with the defendant.

39.  As to whether the costs should be ordered to be paid forthwith or in any event, I was satisfied that an order for payment of costs forthwith should be made.  The summons is a self‑contained interlocutory application.

40.  Since the Civil Justice Reform parties should be discouraged from unnecessarily maintaining or resisting interlocutory applications by the court making immediate orders for payment of costs (Hui Yin Sang and another v Tsoi Ping Kwan and another, HCA 392/2008, 14 July 2009, at paras 17 to 19, Midland Business Management Ltd v Lo Man Kui (No 2) [2011] 2 HKLRD 667, at para 9 and Wing Fai Construction Co Ltd v Yip Kwong Robert (No 2) (2012) 15 HKCFAR 454, at paras 4 to 9).

41.  Mr Alexsander Wong, for the plaintiff, submitted that the defendant should not get an order for all the costs of the summons but only for one‑third of the same as the plaintiff should have served the writ before the summons was issued.  I disagree.

42.  Apart from seeking an order that the action be dismissed as the writ had not been served, there was an alternative order sought that certain paragraphs in the indorsement of claim be struck out.  The claim for specific performance of the agreement was clearly inconsistent with the claim for repayment of the deposit and the part payment.  The amendments were made only on 14 April 2015. 

43.  There was also the application in the summons for an order that the registration of the writ of summons in the Land Registry be vacated.  It was important that this be dealt with expeditiously.  On the plaintiff’s case the agreement was terminated on 21 January 2015.  By clause 16(3) of the agreement the defendant was entitled to resell the property and claim any deficiency in price on the resale and expenses as liquidated damages against the plaintiff provided that the plaintiff should not be called upon to bear such deficiency or expenses unless the property was resold within six months of the determination of the agreement.  It seems to me that with the registration of the writ in the Land Registry the chances of the defendant successfully reselling the property within the six months’ period would have been slim.

44.  The defendant was entitled to instruct counsel for the hearing of the summons and as I have said, Mr Anson Wong received his brief before 14 April 2015.

45.  Having considered counsel’s submissions, I was satisfied that an order be made to award the whole of the costs of the summons and the hearing before me to the defendant.

46.  Mr Anson Wong submitted that an order for indemnity costs should be made in favour of the defendant. I disagree.

47.  The principles are well settled.  These are not in dispute.

48.  An award of indemnity costs is not confined to a situation where a case has been brought with ulterior motive or for an improper purpose or where there is some deception or underhand conduct on the part of the losing party.  Any proceedings instituted or prosecuted in such circumstances as to constitute an affront to the court could properly be the subject of an award of indemnity costs.

49.  The courts have emphasized the undesirability of attempting to define the circumstances in which orders for indemnity costs are to be made.  The discretion is not to be fettered or circumscribed beyond the requirement that taxation on an indemnity basis must be appropriate (Town Planning Board v Society for Protection of the Harbour (No 2) (2004) 7 HKCFAR 114, at para 17).

50.  I have considered counsel’s submissions as to why it is said that there should be an order for indemnity costs.  However, in my view it is not appropriate to order the plaintiff to pay costs to the defendant on an indemnity basis.

51.  On the plaintiff’s case, it was the defendant and not the plaintiff who was in breach of the agreement.  This is a matter that cannot be resolved at this stage.  I would also observe that on the defendant’s case, the agreement was terminated on 21 January 2015 and the deposit was forfeited.  Even on the defendant’s case the part payment was not forfeited.  However, the defendant held onto the part payment as a set off against its claim for damages against the plaintiff. The defendant’s case is that on a resale of the property the deficiency in price will be more than the part payment of HK$6,600,000.  That may or may not be the case and the matter will be resolved at trial.  By the consent order that I have made the part payment will be paid into court by the defendant as security for the plaintiff’s claim for refund of the part payment.

52.  I accept that the costs of the hearing could have been avoided if the plaintiff had responded earlier and that is why I have ordered the plaintiff to pay the defendant the costs of the application.  But in my view it is not appropriate to order the plaintiff to pay indemnity costs.

53.  For those reasons I made the order for costs as set out above.