DCCJ 3724/2008
IN THE DISTRICT COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
CIVIL ACTION NO 3724 OF 2008
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BETWEEN
KONG KING ONG ALEXANDER
Plaintiff
KAN HEUNG WING (By Counterclaim)
1st Plaintiff
YANG YOU MEI (By Counterclaim)
2nd Plaintiff
and
KAN HEUNG WING (By Original)
1stDefendant
YANG YOU MEI (By Original)
2nd Defendant
KONG KING ONG ALEXANDER
1st Defendant
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Before: Deputy District Judge Catrina Lam in Court
Date of Hearing: 5 September 2014
Date of Reasons for Decision: 15 September 2014
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REASONS FOR DECISION
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1. This is the hearing of the plaintiff’s application made by Summons dated 25 March 2014 to amend his Statement of Claim.
2. Prior to the hearing, the defendants through their solicitors indicted by letter dated 15 August 2014 that they object only to paragraphs 3(e), 12(2), 18A, 19, 20(2) & 21 of the proposed amended Statement of Claim. Ms Ebony Ling, counsel for the defendants, indicted both in her written Skeleton Submissions and orally at the hearing that the defendants also object to the proposed amendments in paragraphs 2(a) and (b) of the prayer for relief. The oral submissions at the hearing were therefore directed at these paragraphs only, there being no objection to the rest of the proposed amendments.
3. At the conclusion of the hearing, upon consideration of all the submissions and authorities from the parties, I allowed the proposed amendments save for paragraphs 19 and 21(1) and prayer (2) of the relief. I indicated that reasons were to be given later. This I now do.
Background
4. By a preliminary sale and purchase agreement dated 25 May 2008, the plaintiff agreed to purchase the Property from the defendants (“PSPA”) with the date of completion on or before 4 July 2008.
5. The plaintiff paid to the defendants HK$35,000 as initial deposit on the signing of the PSPA and HK$93,000 as further deposit on 6 June 2008 when the parties were supposed to sign a formal sale and purchase agreement. No formal sale and purchase agreement was, however, entered into between the parties.
6. Correspondences were exchanged between the defendants’ solicitors, Messrs STPoon & Wong (“ST Poon”), and the plaintiff’s solicitors, Messrs Wong & Poon (“W&P”) in relation to requisitions raised by the defendants.
7. The parties did not complete the sale and purchase transaction on or before the date of completion on 4 July 2008.
8. In short, the plaintiff’s case is that the defendants failed to answer the requisitions satisfactorily and have therefore failed to give and prove good title to the Property on or before the completion date. Such failure constituted a repudiatory breach of the PSPA, which repudiation was accepted by the plaintiff by W&P’s letter to ST Poon dated 16 July 2008 or the issue of the Writ or the service of the proposed Amended Statement of Claim.
9. I should add that, by a letter dated 21 August 2008 marked “Without Prejudice”, ST Poon, at W&P’s request, resent a Cancellation Agreement (in duplicate) signed by the defendants together with a cheque drawn by ST Poon in favour of the plaintiff in the sum of HK$128,000 (the “Cheque”) to W&P. It was expressly stated in this letter that the sum represented the initial and further deposits reimbursed to the plaintiff upon signing of the Cancellation Agreement and that, if the Cancellation Agreement cannot be signed by the plaintiff within the next 5 working days, it should be returned to S T Poon together with the Cheque.
10. The Cheque was presented and cleared on 25 August 2008. However, the plaintiff did not sign the Cancellation Agreement.
Applicable principles
11. I set out below some of the general principles for grant of leave to amend:-
(1) The guiding principle, enshrined in the opening words of O.20 r.8, is that the amendments ought to be made “for the purpose of determining the real question in controversy between the parties to any proceedings or of correcting any defect or error in any proceedings”;
(2) “…the object of the court is to decide the rights of the parties, not to punish them for mistakes they make in the conduct of their cases by deciding otherwise than in accordance with their rights”: per Bowen LJ in Cropper v Smith （1884）26 Ch D 700 at 710-711;
(3) “…as soon as it appears that the way in which a party has framed his case will not lead to a decision of the real matter in controversy, it is as much a matter of right on his part to have it corrected if it can be done without injustice, as anything else is a matter of right”: Cropper v Smith (supra);
(4) The court is entitled to have regard to the merits of the case in an application to amend if the merits are readily apparent and are so apparent without prolonged investigation into the merits; and
(5) An inconsistent or useless amendment, and any amendment raising a case which must fail, will not be allowed.
See: Hong Kong Civil Procedure 2014 (Vol 1), §§ 20/8/6, 20/8/24
The disputed amendments
12. Broadly speaking, the disputed amendments go toward adding two new reliefs in the prayer, namely:-
(1) Damages, being the difference between the current market value of the Property, and HK$1,280,000, the purchase price of the Property under the PSPA (ie paragraphs 18A and 21(a), and paragraph (2)(a) in the prayer for relief) (the “Damages Claim”);
(2) Compensation in the sum of HK$128,000, being a sum equivalent to the total sum of the initial and further deposits paid (ie paragraphs 3(e), 19 and 21(b), and paragraph (2)(b) in the prayer for relief) (the “Double Deposit Claim”).
13. I will deal with each of these in turn.
The damages claim
14. Ms Ling’s objection to the Damages Claim is premised on the basis that the plaintiff is now seeking damages in lieu of specific performance, which she says is inconsistent with the plaintiff’s case (as pleaded in paragraph 18 of the Statement of Claim and paragraphs 18(1), 19 and 19A of the proposed Amended Statement of Claim) that he has expressly accepted the defendants’ alleged repudiation of the PSPA.
15. I do not read the proposed amendments this way. There is no express pleading that the plaintiff is seeking damages in lieu of specific performance. Paragraph 18A of the proposed Amended Statement of Claim, read in context as a whole, simply asserts that specific performance would have been available to the plaintiff by reason of the defendants’ breach of the PSPA but, by reason of the matters set out thereto, is no longer possible. Paragraph 18A thus explains why the plaintiff elected to accept the defendants’ alleged repudiation of the PSPA and is now pursuing the Damages Claim.
16. In the circumstances, I allow paragraph 18A and the consequential amendments in paragraph 21(a) of the proposed amendments, as well as paragraph (2)(a) of the prayer for relief.
The double deposit claim
17. Ms Ling submits that the plea in paragraphs 3(e), 19 and 21(b), and paragraph (2)(b) in the prayer for relief, that the plaintiff is entitled to twice the amount of the total deposits paid is plainly unsustainable and must fail.
18. Mr Roy Lau, counsel for the plaintiff (who was not responsible for the proposed amendments he is now seeking to defend), has, quite properly, proposed further amendments to paragraph 3(e) in his Skeleton Submissions. As a result, the proposed amendments to this paragraph are no longer in contention.
19. Paragraph 19 of the proposed Amended Statement of Claim reads as follows:-
“Further or in the alternative, to Paragraph 18 hereinabove, by reason of the matters pleaded in sub-paragraph paragraphs 18 and 3(e) hereinabove and upon a true and proper construction of Clause 7(3) of the Preliminary Agreement as pleaded in paragraph 3(e) hereinabove , the Defendants is are liable to return to the Plaintiff the initial deposit in the sum of HK$35,000.00 and the further deposit in the sum of HK$93,000.00 deposits in the sum of totalling HK$128,000.00 and to compensate the compensation the Plaintiff in the sum of HK$128,000.00 35,000.00 together with interest thereon to the Plaintiff as a result of the Defendant’s Defendants’ repudiation of the Preliminary Agreement, which repudiation was and is accepted by the Plaintiff .”
20. Clauses 7(2) and 7(3) of the PSPA expressly state that:-
“Clause 7(2): “買方悔約，訂金由賣方沒收。賣方並有權將上述物業再行出售，買方不得追究。”
Clause 7(3): “賣方悔約，須即時無息雙倍賠償訂金與買方即HK$70,000，買賣雙方各不追究。”
21. As seen from paragraph 19 of the proposed Amended Statement of Claim, the plaintiff’s case is that on a proper construction of Clause 7(3) of the PSPA, having regard to the matters pleaded in the proposed Amended Statement of Claim, in the event the defendants breach the PSPA, the defendants are liable to immediately pay a sum equivalent to twice the amount of the total deposits paid (i.e. HK$128,000) with interest thereon.
22. Ms Ling submits that Clause 7(3) means what it says, namely, that in the event the defendants breach the PSPA, the plaintiff is only entitled to compensation in the amount of HK$70,000, ie twice the amount of the initial deposit, without interest. This, Ms Ling says, is consistent with Clause 3(1) of the PSPA, which provides that the initial deposit (訂金) is in the amount of HK$35,000.
23. The PSPA is in a form typically used by estate agents in Hong Kong. Clauses 7(2) and 7(3) are part of the printed terms of a proforma provisional agreement. Together, these clauses are often referred to as “escape clauses” the effect of which is, in certain circumstances, to enable the parties respectively to resile from the transaction by “buying his way out”.
24. Ex facie, clauses 7(2) and 7(3) appear to be mirror image clauses to create similar rights in both the vendors and the purchaser in case of their non-performance of the PSPA.
25. Clause 7(2) provides that if the purchaser breaches the PSPA, the vendors forfeit the deposit. Clause 7(3), on the other hand, provides that if the vendors breach the PSPA, they must immediately pay compensation to the purchaser in a sum equivalent to the deposit (訂金), without interest. However, there follows immediately in clause 7(3) the express handwritten words “即 HK$70,000” (that is HK$70,000). As such, there can be no room for argument that the words “訂金” (deposit) should somehow be construed to mean “the total amount of the deposits paid” (ie HK$128,000), as the plaintiff now contends. The plaintiff’s construction flies in the face of the wording contained in Clause 7(3) and completely ignores the words “即 HK$70,000” (that is HK$70,000) and “無息” (without interest).
26. In the circumstances, I am unable to accept the plaintiff’s construction. My view is further fortified by the well established principle that escape clauses of this nature have to be construed strictly: Lee Yuet Ming v Yeung Wai Lun & Anor , HCA 4014/91, unrep, 4 August 1992 at p 2 and Trivest Investment Ltd v Fako Properties Ltd , HCA 2945/1994, unrep, 1 August 1994 at p6.
27. The plaintiff has not pleaded rectification of clause 7(3) of the PSPA. As such, I cannot see how the plaintiff can succeed in the Double Deposit Claim. This claim, as currently formulated, is in my judgment unarguable.
28. For these reasons, I disallow paragraph 19 and the consequential amendments in paragraph 21(2) of the proposed amendments, as well as paragraph (2)(b) of the prayer for relief.
The remaining disputed amendments
29. As to paragraphs 12(2) and 20(2) of the proposed Amended Statement of Claim, Ms Ling objects to them on the basis that they contain legal arguments and/or useless or immaterial facts.
30. Mr Lau has proposed further amendments to paragraph 12(2)(v) and no longer insists upon paragraphs 12(2)(vi) and (vii). As I pointed out at the hearing, although the remaining sub-paragraphs in paragraph 12(2) contain legal arguments, the plaintiff is simply seeking to explain its case as to why the answers to the requisitions raised as contained in ST Poon’s letter dated 2 July 2008 were unsatisfactory and inadequate or otherwise wrong as a matter of law. While the proposed amendments in this paragraph fall far short of being model pleadings, I do not consider them to be so bad or useless or irrelevant that they should be disallowed.
31. As to paragraph 20(2), the proposed amendments contained therein are lacking in particularity and does not inform the defendants of the case that it is supposed to meet. However, bearing in mind that the proceedings are still at an early stage, the fact that the plaintiff can (and would be well advised to) provide voluntary particulars, as well as the fact that it remains open to the defendants to seek further particulars and press for any consequential discovery, I allow this amendment.
Orders
32. In the circumstances, I would allow the plaintiff’s application save for paragraphs 19 and 21(2) of the proposed Amended Statement of Claim and paragraph (2)(b)of the prayer for relief and order that:-
(1) The plaintiff do have
(2) The 1st and 2nd defendants (By Original Action) do have leave to file and serve their Amended Defence and Counterclaim (if any) within 28 days thereafter.
(3) The plaintiff (By Original Action) do have leave to file and serve his Amended Reply and Defence to Counterclaim and Re-Amended Third Party Notice (if any) within 28 days thereafter.
(4) The Third Party (By Original Action) do have leave to file and serve their Re-Amended Defence (if any) within 28 days thereafter.
Costs
33. As the plaintiff has only been partially successful at today’s hearing, I order that:-
(1) The costs of and occasioned by the plaintiff’s application and amendment be borne by the plaintiff in any event, such costs to be taxed if not agreed;
(2) Half of the costs of today’s hearing, with Certificate for Counsel,0 be borne by the 1st and 2nd defendants, such costs to be taxed if not agreed.
(3) The defendants’ costs to be taxed in accordance with Legal Aid Regulations, with Certificate for Counsel.
( Catrina Lam )
Mr Roy Lau instructed by Jackson Ho & Co, for the plaintiff (by Original Action) and the 1st defendant (by Counterclaim)
Miss Ebony Ling instructed by Boase, Cohen & Collins for the 1st and 2nd defendants (by Original Action) and the 1st and 2nd plaintiffs (by Counterclaim)