CHUNG KIN KWONG v. ACCUPOWER LTD

HCMP 26/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 26 OF 2015

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J U D G M E N T

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1.  This is the hearing of an originating summons taken out by the plaintiff for, among other things, declaratory reliefs against the defendant in relation to a written agreement between them dated 27 October 2010.

2.  The plaintiff is an indigenous villager of Wang Toi Shan Tsuen, Pat Heung, Yuen Long.  Pursuant to the Government’s Small House Policy, he applied for and was granted a piece of land for the development of a small village house in 1988, namely Lot No 3280 in Demarcation District 111, Yuen Long.  Since then, he has been and still is the registered owner of the land.

3.  The plaintiff did not have the means, however, to develop the land in 1988, and remained unable to do so.  In 2010, he was introduced by a friend, Mr Chan Ming, to his employer, one Mr Lo, as a person who might be interested in co-operating with him to develop the land.  At their meeting in August 2010, Mr Lo claimed to be able to finance the development of a village house on the land.  They discussed an arrangement for development on the basis that Mr Lo would, via his company, provide the funds for the development and construction, and the plaintiff would provide the land.  Upon completion of the development, the plaintiff would be entitled to the 2^nd (that is, the top) Floor and the Roof of the house, whereas Mr Lo would have the Ground and 1^st Floors.  The plaintiff was agreeable to the proposal and, accordingly, on 27 October 2010, accompanied by Mr Chan Ming and another friend Mr Lee, the plaintiff went to an office in Kowloon Bay and signed a development agreement with Accupower Limited, the defendant herein.  The defendant was named as the developer in the agreement.  The plaintiff understood the defendant to be Mr Lo’s company. 

4.  The development agreement provided as follows, I will read out the relevant clauses and the English translation will be inserted later when my judgment is typed up. 

Clause 1

“(b) 「“承建商”負責出資興建該座小型鄉村屋宇，建築完成後，“承建商”可分得地下及二樓，而“業主”可分得三樓連天台。」...

(c) “承建商”需支付所有建築費，政府行政費，補政府地價及其他雜費。”

(In English translation)

“(b) ‘The Contractor shall be responsible for providing funds for building the said small village house. Upon completion of construction, the Contractor is to be allocated the ground floor and 1^st floor, and the Owner is to be allocated the 2^nd floor together with the rooftop.’ ...

(c) The Contractor is required to pay all the construction fees, government administration fees, land premium and other miscellaneous fees and charges.”

Clause 2

“(b) 當“承建商”之代表律師審閱有關契約及確實完好後，“業主”需到指定律師行辦理授權手續，授權“承建商”處理所有有關興建該座鄉村屋宇所需的手續，包括向地政處申請開工紙、滿意紙或其他事宜，所需費用一概由“承建商”支付。

...

(f) 發展完成後，“業主”可分得該座鄉寸屋宇之三樓連天台及加建肆佰呎天台玻璃屋。

(g) “業主”無需支付政府地價。”

(In English translation)

“(b) After the solicitors for the Contractor have inspected the title documents concerned and given confirmation, the Owner is required to go through the authorization formalities at the designated law firm to authorize the Contractor to deal with all the procedures required for building the said village house, including applying to the Lands Department for the consent for the commencement of building works, certificate of compliance or other matters, and all fees required are to be paid by the Contractor.

...

(f) Upon completion of the development, the Owner is to be allocated the 2^nd floor of the said village house together with the rooftop plus an additionally built 400 sq ft rooftop glass house.

(g)  The Owner is not required to pay land premium to the government.”

Clause 3

“(b)  當獲得地政處簽發開工紙後之三個月內，動工興建該座鄉村屋宇，並於一年內完工。

(c)  該座鄉村屋宇的建築費，包括測量、地基、建築、渠務、水電等等之費用，全部由 “承建商” 負責，直至取得滿意紙為止。

(d)  當該座鄉村屋宇成功取得滿意紙後，“承建商”可獲得該座鄉村屋宇的地下及二樓，作為“承建商”應得的利益，而三樓連天台和加建肆佰呎天台玻璃屋則交吉予“業主”。

(e)  如需補政府地價，所有費用均由“承建商”負責。

(f)  在不影響“業主”之權益下，“承建商”有權引進其他人士參與發展“該地段”或將本協議書內之權益轉讓予他人。”

(In English translation)

“(b)  Within three months after the Lands Department has issued the consent for the commencement of building works, the construction of the said village house shall be commenced and be completed within one year.

(c)  The fees and charges required for the construction of the said village house, including charges for survey, foundation, construction, pipe and drainage, water and electricity, etc. are all to be borne by the Contractor up to the point when the certificate of compliance is obtained.

(d)  After the certificate of compliance for the said village house has been successfully obtained, the Contractor is to be allocated the ground floor and 1^st floor of the said village house as the Contractor’s entitlement, and the Owner shall be given vacant possession of the 2^nd floor together with the rooftop plus an additionally built 400 sq ft rooftop glass house.

(e)  If it is necessary to pay for land premium, all fees shall be borne by the Contractor.

(f)  Without causing prejudice to the Owner’s interests, the Contractor is entitled to introduce other person(s) to take part in the development of the Land Lot or transfer the interests in this agreement to other person(s).”

5.  On 4 January 2011, pursuant to Clause 2(b) of the agreement, the plaintiff went to a law firm and signed a power of attorney in favour of one Chow Chi Leung at a meeting arranged by Mr Lo.  A representative of a construction company called Landhood Development & Planning Company (“Landhood”), one Mr Cheung, was also present at that meeting.

6.  Shortly afterwards, the plaintiff was informed that Mr Chow had died, and on Mr Lo’s request, he went to two law firms respectively to cancel the first power of attorney and to sign a second power of attorney in favour of one Chan Woon Yin on 14 February 2011.  Mr Lo told the plaintiff that Chan Woon Yin was a director of his company who was in charge of contractor matters.  Mr Cheung was present at the signing of this power of attorney among several people, as was one Mr Tang, who turned out (unknown to the plaintiff at the time) to be a representative of a money-lender called Fine State Finance Limited (“Fine State”).  The plaintiff said he was told that the documents he signed would authorise Landhood to apply for the Government’s consent for the commencement of building works, and to apply for a certificate of compliance subsequently on his behalf.

7.  It appears that the late Mr Chow had signed a construction agreement with respect to the land in question, purportedly in the capacity of the registered owner, with Landhood on 15 January 2011 for the sum of HK$1.3 million.  Mr Chan Woon Yin signed a similar agreement on 14 February 2011 for the sum of HK$1.2 million.  The plaintiff accepted that the first construction agreement signed by Mr Chow had been superseded by the second signed by Mr Chan Woon Yin.

8.  From March 2011 onwards construction work began.  By April 2012, construction of the village house was completed by Landhood.

9.  The plaintiff said that, to his surprise, in September 2012, he received a demand from Fine State for repayment of five loans.  Indeed, on 26 September 2012, Fine State issued a writ in HCA 1784/2012 against the plaintiff as the 1^st defendant and Chan Woon Yin as the 2^nd defendant, suing for recovery of HK$1.3 million together with interest under five loan agreements signed by Chan Woon Yin on behalf of the plaintiff on the strength of the power of attorney of February 2011.  The plaintiff duly made a report to the police on suspicion that he had been the victim of fraud. 

10.  I have called for the file in HCA 1784/2012, and it was stated in the affirmations filed therein on behalf of Fine State that it was not aware of the development agreement between the plaintiff and the defendant in these proceedings at the time when it lent money under the five loan agreements, and that it had simply, pursuant to the loan agreements, advanced funds directly to Landhood for the construction of the house. 

11.  On the plaintiff’s case, what seems to have happened is that the defendant had, using the power of attorney, purported to borrow money in the plaintiff’s name for the construction of the house, and engaged builders to construct the house which has been completed and inhabitable for several years. 

12.  It is perhaps a little surprising that neither the defendant nor Mr Lo has come forward to make any claim for any interest in the Ground and 1^st Floors of the house, which, one would have thought, could be worth substantially in excess of the amounts owed to Fine State.

13.  Anyhow, on the materials before me, it seems plainly contrary to the intention of the parties, as evidenced in the agreement, that the defendant should borrow money in the plaintiff’s name for the construction of the house, leaving the plaintiff exposed to an action by the lender (regardless of the outcome of that action).  The whole point of the agreement was that the plaintiff should not have to worry about financing the construction of the house.  In these circumstances I am satisfied that there had been repudiation of the agreement by the defendant, accepted by the plaintiff at the latest by the issuance of these proceedings. 

14.  These proceedings have been served on the defendant at its address as stated in the agreement and an advertisement has also been published on English and Chinese newspapers.  Neither Mr Lo nor the defendant or any representative of it has contacted the plaintiff or appeared in these proceedings.  The evidence placed by the plaintiff before this court has not been challenged.  In the circumstances I am satisfied that it would be just to grant a declaration along the lines of paragraph 1 of the amended originating summons, as follows:

“A declaration that the Development Agreement in Chinese (合作發展協議書) dated 27 October 2010 entered into between the plaintiff, Chung Kin Kwong and the Defendant, Accupower Limited (“the Development Agreement”) for the development and construction of a 3-storey village villa (“the Villa”) on a vacant land lot known as DD111 Lot No 3280 and located at Wong Toi Shan, Pat Heung, Yuen Long, New Territories (“the land lot 3280”) was wrongfully repudiated by the Defendant in that the Defendant had failed to make payment of all the building costs and expenditure (including tax, Government fees, land premium payments and sundry expenses) for the building and construction of the Villa on the Land Lot 3280 as required by clause 1(b) and 3(c) of the Development Agreement, and had instead procured five loans in the total sum of HK$1,300,000 to be borrowed under the name of the Plaintiff and applied for the development and construction of the Villa.”

15.  I should mention that, as recognised by Mr Chan, who has appeared on behalf of the plaintiff, this declaration is a limited one.  In particular, he accepted that, in accordance with established principles, the termination of an agreement by repudiation and acceptance does not affect the accrued primary rights and obligations between the parties.  As Dixon J said in McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457, 476-477: 

“When a party to a simple contract, upon a breach by the other contracting party of a condition of the contract, elects to treat the contract as no longer binding upon him, the contract is not rescinded as from the beginning. Both parties are discharged from further performance of the contract, but rights are not divested or discharged which have already been unconditionally acquired. Rights and obligations which arise from the partial execution of the contract and causes of action have accrued from its breach alike continue unaffected.”

This statement of the law has been approved by the House of Lords in the UK in Johnson v Agnew [1980] AC 367 at 396, per Lord Wilberforce, Colonial Bank v European Grain and Shipping Limited [1989] AC 1056, 1098-1099, per Lord Brandon, and Hurst v Bryk [2002] 1 AC 185, 193, per Lord Millett. 

16.  Accordingly, the declaration that is being granted here does not extend to the title to or beneficial ownership of the house or any part of it.  Nor does it, of course, affect the position of Fine State as lender, who is not a party to this action.