LAU SUI HING v. SUARD PATRICIA CATHY

DCMP 92/2024

[2024] HKDC 2028

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO 92 OF 2024

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JUDGMENT

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I.  INTRODUCTION

1.  This is the originating summons issued on 5 January 2024 by the plaintiff as purchaser against the defendant as vendor under a provisional sale and purchase agreement dated 9 August 2023 (the “Agreement”) in respect of Flat D, 3/F, Pak Lok Building, Nos 322-326A Nathan Road, Kowloon (the “Property”).

2.  In the originating summons, the plaintiff seeks the following relief:-

“1. A declaration that the requisitions raised by the Plaintiff in the letter dated 13 September 2023 followed up by further requisitions raised in the letter dated 7 November 2023 both issued by Messrs. Cheung and Choy, and further followed up by two letters dated 30 November 2023 and 13 December 2023 both issued by Messrs. Yick and Chan, in respect of the title of the Property has not been satisfactorily and sufficiently answered by the Defendant.

2. A declaration that good title to the Property has not been proved, shown and has not been given by the Defendant at or before 6:00pm on 20 December 2023.

3. A declaration that the Plaintiff was entitled to treat the Agreement as repudiated by the Defendant or was entitled to terminate the Agreement by reason of the Defendant’s breach on 20 December 2023.

4. The Defendant do return to the Plaintiff the deposits in the sum of HK$299,800.00.

5. The Defendant do pay the Plaintiff damages in the sum of HK$299,800.00 pursuant to Clause 7 of the Agreement.

6. The Defendant do reimburse the Plaintiff the stamp duty in the sum of HK$100.00 pursuant to Clause 7 of the Agreement.

7. Interests on the sums under paragraph 4 to 6 in the above at such rate and for such period pursuant to Sections 49 and/or 50 of the District Court Ordinance, Cap 336.

8. An equitable lien on the Property for the payment of the sums under paragraphs 4 to 7 in the above.

9. Further and/or other relief…

10. Costs.”

For convenience, I shall refer to the above relief as “Relief No 1”, “Relief No 2” until “Relief No 10” respectively.

3.  In the plaintiff’s supporting affidavit, only two requisitions in the letters mentioned in Relief No 1 are specified, namely, (1) requisition no 3 (“Requisition No 3”) concerning the deed of gift dated 10 September 2013 (the “Deed of Gift”) and (2) requisition no 5 (“Requisition No 5”) concerning the statutory declaration dated 21 July 2023 (the “Statutory Declaration”) made by one Gary Sham concerning missing title deeds, Gary Sham being a solicitor until the Law Society struck him off the Roll of Solicitors effective from 21 June 2022 for misconduct involving improper withdrawal of money from client accounts. Thus, the declaration in Relief No 1 should be understood to be limited to these two requisitions only.

II.  BACKGROUND NOT IN DISPUTE

4.  The background is not in dispute.

5.  On 9 August 2023, the parties signed the Agreement for the price of HK$2,998,000.00. The Agreement is a provisional agreement.

6.  Clause 2 of the Agreement provides:-

(1)  The “initial deposit”, payable on the date of the Agreement, was HK$90,000;

(2)  The “further deposit”, to be paid on 22 August 2023, was HK$209,800; and

(3)  The completion date shall be 8 November 2023.

7.  The parties did not set out any date for executing a formal agreement. In other words, the parties agreed that there would be no formal agreement but would proceed to the completion directly. As a matter of fact, there was none.

8.  Clause 6 of the Agreement provides that:-

“Should the Purchaser fail to complete the Purchase in the manner herein contained, all the deposit paid pursuant to Clause 2 hereof shall be forfeited to the Vendor.”

9.  Clause 7 of the Agreement provides that:-

“Should the Vendor after receiving the initial deposit paid hereunder fail to complete the sale in the manner herein contained, the Vendor shall immediately compensate the Purchaser with a refund of the initial deposit together with a sum equivalent to the amount of the initial deposit as liquidated damages and the reimbursement/payment (as the case may be) of stamp duty of the said Premises and the Purchaser shall not take nay further action to claim for damages or to enforce specific performance.” (emphasis added)

10.  Pausing here, I note that there is inconsistency between the English version and the Chinese version of Clause 7. In the Chinese version, the deposit is described simply as “所付之訂金”, but not the Chinese interpretation “臨時訂金” used in Clause 2 for “initial deposit”. By virtue of Clause 15, the Agreement “should be interpreted in its English version in case of ambiguities”.

11.  Clause 16 of the Agreement provides that:-

“雙方知悉此物業之原有樓契已遺失，賣方在成交時將會提供完整之宣誓補契。”

12.  There is no dispute that the defendant as vendor had to show and give good title, subject to the qualification by Clause 16 of the Agreement.

13.  There is also no dispute that the plaintiff paid the initial deposit and the further deposit, totaling HK$299,800, being 10% of the price of the Property.

14.  Two requisitions were raised among others. Requisition No 3 concerns the Deed of Gift. The gist of this requisition is captured in the plaintiff’s solicitors letter dated 13 September 2023:-

“The Deed of Gift […] appeared to have been executed by the Donor, ARL LUC, in France before a notary public or a lawyer… As France is and was at all material times a member of the Hague Convention, the Deed of Gift which […] appeared to have been notarially attested should be affixed with an apostille issued by the appropriate authority in France, which was however no so provided and affixed with the Deed of Gift. Please let us know by what steps you would suggest your client is going to cure this title defect.”

15.  The other requisition, Requisition No 5, concerns the Statutory Declaration of eight paragraphs purportedly to explain the missing titles, pursuant to Clause 16 of the Agreement. Gary Sham, the maker of the Statutory Declaration, stated:-

“1. I was the Principal Solicitor of Messrs. Day & Chan, Solicitors, now a ceased firm (“the Firm”).

2. In or about August 2013, the Firm received the bundle of title deeds and documents in respect of the Property (“the said title deeds and documents”) from ARL LUC for the purpose of preparing a Deed of Gift… The said title deeds and documents were thereafter kept in the office of the Firm.

3. On 10^th September 2013, the Deed of Gift was executed by ARL LUC as Donor and SUARD PATRICIA, CATHY as Donee…

4. After the completion of the registration of the said Deed of Gift and all the legal formalities, my staff kept the said […] title deeds and documents together [with] the said Deed of Gift in the office of the Firm pending for collection [by] the said SUARD PATRICIA, CATHY.

5. On 31^st December 2017, the Firm was closed and all the files and all the bundle of title deeds and documents were then moved to be kept in my storage.

6. Recently, I was requested by SUARD PATRICIA, CATHY asking for collection of the said title deeds and documents and the said Deed of Gift.

7. Upon checking my storage and the relevant files, I note that the said title deeds and documents and the said Deed of Gift cannot be found.

8. I have made exhaustive searches for the said title deeds and documents and the said Deed of Gift from the files concerned and also other files but we have failed to find and trace the same and I verily believe that the said title deeds and documents and the Deed of Gift has been lost or mislaid and can no longer be found.”

16.  The defendant’s solicitors denied that there were any title problems in the two requisitions.

17.  By letter dated 20 December 2023, the plaintiff’s solicitors stated that the defendant had failed to complete the sale. The plaintiff’s solicitors also demanded a full refund of the l deposit “as well as damages to be paid pursuant to clause 7 of the [Agreement]”, “to be made in full by noon of 22 December 2023, failing which we have standing instructions to initiate proceedings against [the defendant] without any delay.”

18.  As at 27 December 2023, the defendant’s solicitors still insisted, in writing, that the Deed of Gift and the Statutory Declaration presented no title problem.

19.  The plaintiff issued the originating summons on 5 January 2024 and served a sealed copy of it on 10 January 2024, as well as on 12 January 2024 when the defendant received the copy by registered post.

20.  By letter dated 19 January 2024, the defendant’s solicitors sent the plaintiff’s solicitors a cheque in favour of the plaintiff in the sum of HK$299,800 (the “Cheque”) “being refund of the deposits previously paid by [the plaintiff]”. Further, “in respect of the stamp duty, [the defendant’s solicitors] propose that [the parties] enter into a termination agreement…”. Nothing was stated about the defendant’s position on the originating summons she had already received.

21.  On the same day (19 January 2024), the plaintiff’s solicitors wrote to the defendant’s solicitors that the plaintiff would not accept the Cheque unless the defendant’s position on the originating summons would be made clear.

22.  On 22 January 2024, the defendant’s solicitors wrote to put on record that the plaintiff had refused to accept the refund of the deposit, but still did not state the defendant’s position on the originating summons.

23.  On 25 January 2024, the defendant’s solicitors sent a draft cancellation agreement, which in essence provided that the refund of the deposit was all the defendant would pay to the plaintiff in cancelling the Agreement.

24.  In the affirmation filed on her behalf on 20 March 2024, the defendant confirms that she concedes to Reliefs No 1, 2, 3, 4 and 6. As regards Relief No 7, her position is that the interest should run only until 19 January 2024 (the day when the defendant’s solicitors sent the Cheque to the plaintiff’s solicitors), and she opposes Relief No 5.

25.  By the plaintiff’s written submissions, the plaintiff agrees that the pre-judgment interest in Relief No 7 should run up to 19 January 2024, and that the plaintiff does not pursue Relief No 8.

26.  Thus, the only contested relief before me is Relief No 5.

27.  Further, since Reliefs No 1, 2, and 3 are declaratory relief, before I would grant the same, I should be satisfied that such relief should be granted, even though the defendant confirmed at the hearing the defendant’s position that she had failed to answer the Requisitions adequately and satisfactorily.

III.  ISSUES

28.  Therefore, the issues for my determination are:-

(1)  Whether Requisitions No 3 and 5 were validly raised, and if so, adequately and satisfactorily answered; and

(2)  Whether the plaintiff is liable to pay the liquidated damages in the sum of HK$299,800 pursuant to Clause 7 of the Agreement.

IV.  WHETHER REQUISITIONS NO 3 AND 5 WERE VALIDLY RAISED, AND IF SO, ADEQUATELY AND SATISFACTORILY ANSWERED

29.  I am satisfied that for reason stated in the plaintiff’s letter dated 13 September 2023 as quoted in §14 above, there should be apostille to the Deed of Gift, and thus Requisition No 3, going to title, was validly raised. Effectively, the defendant simply insisted that there was no need for apostille. So, the defendant failed to answer the requisition at all.

30.  As regards Requisition No 5, despite Clause 16 of the Agreement, the parties agreed that a proper statutory declaration to explain the missing title would still be required. Applying Zhang Xueshuai v Lai Chan Wing [2015] 2 HKLRD 246, this Statutory Declaration, made by a person no longer a solicitor (struck off for misconduct) and lacking in particulars as to the loss (there being not even a list of the title deeds allegedly received by him), does not dispel the real risk as to title. I am satisfied that this requisition also goes to title and was also validly raised. I am also satisfied that the defendant failed to answer the requisition at all.

31.  I therefore grant Reliefs No 1 – 3.

V.  WHETHER THE PLAINTIFF IS LIABLE TO PAY THE LIQUIDATED DAMAGES PURSUANT TO CLAUSE 7 OF THE AGREEMENT

32.  There is, rightly in my view, no suggestion that the liquidated damages in Clause 7 are penalties.

33.  The defendant’s submission is that the liquidated damages in Clause 7 should only be in the sum of the initial deposit being HK$90,000 only, but not all the paid deposits totaling HK$299,800 as claimed by the plaintiff. The reason is that for the liquidated damages, Clause 7 mentions only the sum equivalent to the “initial deposit” without mentioning the further deposit.

34.  The legal principles concerning contractual construction are trite. Contractual construction is not a game with words, but is a unitary exercise involving iterative process to construe the contractual terms purposively and contextually, in order to objectively ascertain the parties’ intention. While the Court would use reality check to see whether a certain way to construe a contract would result in absurdity (and thus it would be more improbable that the parties had such intention), if the Court comes to the view that the parties did have such intention in the contract, the Court would still have to give effect to such intention, albeit the absurdity it may result in, but would not rewrite the contract to make it more sensible.

35.  Here, first, the juxtaposition between Clause 6 and Clause 7 objectively shows that the parties were well aware of the difference between “initial deposit” and “all the deposit”. There is no difficulty for the parties to use “all the deposit” in Clause 7, right after Clause 6, if they would like to refer to the same thing.

36.  I bear in mind that the Agreement is a pro forma agreement used by the estate agent. But absent non est factum, misrepresentation or any other vitiating ground, the parties are taken to have understood the text of the agreement, pro forma or not.

37.  I should also mention that Ms Melinda Chiang, counsel for the plaintiff, cited to me Chan Yuen Ka Crystal v Chu Cheong Kit Raymond, HCA 1459/2009, 14 October 2009, where Rogers VP, interpreting a clause in that case similar to Clause 7 here found that the “initial deposit” meant “all the deposit paid”. In that case, in coming to this finding, his Lordship considered the Chinese version of the clause, which, similar to the present case, also used “all the deposit paid”. However, as fairly accepted by Ms Chiang, there was no such clause in that case as Clause 15 here, which provides that in case of ambiguities, the Agreement should be interpreted in its English version. Therefore, that case does not assist me here.

38.  Second, if “initial deposit” in Clause 7 is taken to mean only the initial deposit but not all the deposit, absurdity may result. In the present case, if the defendant would be required only to refund the initial deposit of HK$90,000 and pay the liquidated damages of HK$90,000, thus totaling HK$180,000, then this would mean that the defendant would still be able to keep the remaining HK$119,800, and by Clause 7, the plaintiff would not be able to claim any further damages and specific performance. This would be a significant incentive for the defendant not to complete the sale after receiving the further deposit. This would be an absurd result.

39.  The absurdity is alleviated when considering the matter together with Clause 9a of the Agreement, which provides that:-

“If in any case, either the Vendor or the Purchaser fails to complete the sale or purchaser in the manner herein contained, the defaulting party shall compensate the Agent HK$29,980 as agreed damages.”

40.  But still, the defendant would be able to keep the remaining HK$89,820.

41.  This absurdity tends against reading “initial deposit” literally, and for expanding this phrase to cover “all the deposit paid”. But as mentioned above, if the parties’ intention ascertained objectively is that this does mean “initial deposit”, the Court should still give effect to the parties’ intention.

42.  Third, the defendant herself offered to refund all the deposit paid, but not the initial deposit only, and the defendant herself conceded to Relief No 4 in her opposing affirmation. However, conduct subsequent is inadmissible to aid contractual construction, and I do not see that the present situation falls into any exceptions to this rule: see Chitty on Contracts (35^th ed) Vol 1 §16-061. So, the defendant’s offer to refund all the deposit paid is irrelevant here.

43.  Having considered the above, I do not think it is right simply to rely on the absurdity to read Clause 7 against its text, especially when Clause 6 is read together to form the juxtaposition mentioned above. In the circumstances, I conclude that the sum of the liquidated damages under Clause 7 should be the sum of the initial deposit only (that is, HK$90,000 here), but not all the deposit paid, and the defendant is liable to pay this amount as liquidated damages.

44.  By my finding above on the parties’ intention in Clause 7, the defendant was liable to refund the initial deposit but not the further deposit. Thus, in terms of the amount, the defendant would be liable to pay the plaintiff a total sum of HK$180,000 only, smaller than the total deposits of HK$299,800 in Relief No 4. However, Ms Virginia Leung, counsel for the defendant, confirmed during the hearing that she would not demand the return of the excess over the HK$180,000, which she regards as ex gratia payment to the plaintiff.

45.  In the circumstances, in respect of Reliefs No 4 and 5, I shall grant an order that the defendant do pay the plaintiff a total sum of HK$299,800.00. The order shall not specify whether, and if so, which part of, the sum is the initial deposit and damages, given that as mentioned above, the defendant agrees to pay this sum with Ms Leung’s confirmation that any excess would be ex gratia payment the defendant would not claim back.

VI.  CONCLUSION

46.  In the circumstances, I make the following order:

(1)  An order in terms of Reliefs No 1, 2 and 3;

(2)  An order that the defendant do pay the plaintiff HK$299,800.00;

(3)  An order that the defendant do reimburse the plaintiff the stamp duty in the sum of HK$100.00 pursuant to Clause 7 of the Agreement;

(4)  Pre-judgment interest shall accrue on the sums in (2) and (3) above at 1% above the HSBC prime rate from the date of the originating summons until today; and

(5)  Post-judgment interest shall accrue on the sums above (including the pre-judgment interest) from today until payment of the sums.

47.  Having heard counsel’s submissions on costs, I order that (1) the defendant do pay 85% of the costs of the originating summons to the plaintiff forthwith; and (2) there be no order as to costs of the remaining 15%. I shall summarily assess the costs at HK$116,000 in the whole costs and 85% shall be HK$98,600.