AXHT CO LTD v. WING WO LUNG CO LTD AND OTHERS

CACV 28/2025, [2026] HKCA 1060

On appeal from [2024] HKCFI 3678

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 28 OF 2025

(ON APPEAL FROM HCA NO 2980 OF 2015)

________________________

________________________

________________________

J U D G M E N T

________________________

Hon Kwan VP (giving the Judgment of the Court):

1.  This is the appeal of the plaintiff AXHT Company Limited (“P”)  against that part of the judgment of Recorder Richard Khaw SC given in favour of the 10^th defendant Lam Choi Ming (“D10”)  on 20 December 2024 (“Judgment”)[1].

2.  P, a licensed money lender, brought this action against ten defendants due to a mortgage fraud perpetrated by the 2^nd defendant Soe Kin Fai (“D2”), as a result of which P advanced HK$25 million which was paid into a bank account (“DBS Account”)  opened by D2 purportedly in the name of the 1^st defendant Wing Wo Lung Company Limited (“D1”).  The funds in the DBS Account were transferred to various recipients including the 3^rd to 10^th defendants.  P sought to recover the funds on the bases of a proprietary claim and a claim in unjust enrichment[2].

3.  As between P and D10, the core issue is whether D10 is entitled to retain a sum of HK$945,000 he received from D2 (“D10 Sum”)  as a bona fide purchaser for value without notice, given that the D10 Sum was part of the deposit payment made by the D2 to D10 pursuant to a provisional sale and purchase agreement (“PSPA”).  The judge held that D10 has established this defence (“BFP Defence”)  and any beneficial interest of P in the D10 Sum has been extinguished.  He also held that D10 has made good the defence of change of position to the restitutionary claim, by committing to the PSPA and putting the D10 Properties (as defined below)  off the market.  He therefore dismissed P’s claims against D10 with costs.

Background

4.  The relevant background matters for present purpose may be stated as follows.

5.  The PSPA lies at the heart of D10’s BFP Defence and the defence of change of position.  D10 is a businessman involved in catering, food and drink, and operating guesthouses.  He was 65 years of age at the time of trial.  He received secondary education in Mainland China and does not know English.  The judge found his evidence credible in general[3].

6.  D10 was at all times the registered owner of a property in Kam Fong Mansion, Nos 10 to 20 Kam Fong Street, Kowloon and two properties in Mascot House, Nos 746 to 748 Nathan Road, Kowloon (collectively, “D10 Properties”).  In 2014 or 2015, he was introduced to D2 by a clansman Mr Zheng 鄭君豪 (“Zheng”). Zheng claimed he held a 10% share in a development project in Wu Kai Sha and a 49% share in six village houses in Cheung Chau (collectively, “Ownership Interests”), and that the total selling price for the Ownership Interests would be HK$30 million.  D2 and Zheng tried to persuade D10 to sell to D2 the D10 Properties, together with the Ownership Interests, at a total consideration of HK$60 million.

7.  An oral agreement was reached on the proposal for the sale of the D10 Properties and the Ownership Interests to D2 for HK$60 million.  By the oral agreement, it was agreed between the parties that:

(1)  an initial deposit of HK$1,044,300 (“Initial Deposit”)  was payable on 15 April 2015;

(2)  a further deposit of HK$4,955,700 (“Further Deposit”)  was payable on 29 June 2015; and

(3)  the balance of the consideration in the sum of HK$54 million (“Remainder”)  was payable on 29 September 2015.

8.  D10 also agreed with Zheng that after he received the consideration of HK$60 million, he would pay Zheng HK$30 million as value for the Ownership Interests.

9.  D2 paid D10 the Initial Deposit on 11 May 2015, partly by cash (HK$82,225.33)  and partly by a bank deposit (HK$962,074.67)[4].

10.  On 29 May 2015, D10, D2 and Zheng attended the office of a solicitors’ firm to sign the PSPA.  The PSPA was provided by D2 and is a home-made document in Chinese of one page not prepared by lawyers.  In the absence of any legal advice, D10, D2 and Zheng signed the PSPA, as the vendor, the purchaser and the witness respectively.

11.  In the PSPA, D2 was named as the buyer and D10 as the seller.  It provided that “According to the terms of this contract, the seller agrees to sell and the buyer agrees to purchase the following properties and business transfer”.  The PSPA contained inter alia the following clauses:

(1)  Clause 1 set out the D10 Properties.

(2)  Clause 3 set out the “business transfer”, being the Ownership Interests[5].

(3)  Clause 4 set out the purchase price, being HK$60 million.

(4)  Clause 5 read as follows (in translation):

“A. Provisional deposit: The seller has received a provisional deposit of HK$1,044,300 from the buyer on April 15, 2015[6].

B. Formal contract: A formal sale and purchase agreement (in Chinese: 正式買賣合約)  must be signed on or before June 29, 2015 and the buyer must pay a deposit of HK$4,955,700***[7].

C.  Completion of the transaction: A formal sale and purchase agreement (in Chinese: 正式買賣合約)[8] must be signed on or before September 29, 2015, and the buyer must pay the remaining balance of the property and business transfer of HK$54,000,000***[9].”

12.  D2 told D10 he had to ‘borrow’ the D10 Properties to obtain a mortgage loan of HK$400,000 to pay the Further Deposit. D10 reluctantly agreed upon being threatened by D2 and Zheng that if he refused to proceed with the transaction, he would be sued for double the amount of the Initial Deposit and any damages suffered by D2.  D10 was induced by this fraudulent representation to sign three documents on 15 June 2015 for the purpose of the HK$400,000 loan without understanding their contents.  They were in fact powers of attorney in favour of D2 in relation to the D10 Properties.

13.  D2 did not settle the Further Deposit by the prescribed deadline of 29 June 2015 under clause 5B.  Upon D10’s demands, D2 represented he was short of cash and needed time to pay the Further Deposit.  Labouring under the impression that D2’s cash flow problem was temporary, D10 waited for him and only chased him for payment from time to time.

14.  Completion did not take place on 29 September 2015 as provided in clause 5C.

15.  In late October 2015, D2 handed over to D10 a cheque payable to D10’s company Lee Loi Holdings Development Limited (“Lee Loi”)  in the sum of HK$945,000 and told D10 he could only give D10 that much for the time being and would pay the outstanding balance very soon.  D10 attempted to deposit the cheque in Lee Loi’s account but was told by the bank staff this could not be done as the account had not been used for a long time.  The cheque was returned to D2.

16.  On 2 November 2015, D2 provided D10 with a cashier order of HK$945,000 (ie the D10 Sum).  This was deposited into a securities account of D10.  Prior to this, P and D1 (with D2 purportedly acting as D1’s sole director and shareholder)  had entered into two loan agreements dated 28 and 30 October 2015, under which P advanced two loans in the total sum of HK$25 million which was paid into the DBS Account opened by D2 purportedly in D1’s name.  The first instalments of P’s loans were not repaid when they fell due in late November 2015, and since then D2 has become incommunicado.

17.  D2’s fraud was revealed in December 2015 when D1’s solicitors wrote to P pointing out that D2 was unknown to D1 and that D2 had filed forged documents with the Companies Registry appointing himself as the director of D1.  P brought the present action (HCA 2980/2015)  on 16 December 2015.

18.  In early 2016, D10 discovered he had been defrauded by D2 and Zheng.  As a result of the powers of attorney that he signed, he was sued by another finance company in January 2016 for recovery of a purported loan of HK$4 million.  He also found out D2 had filed forged records of Lee Loi with the Companies Registry without his knowledge and consent.  He reported the matter to the police on 15 August 2016.

Relevant holdings in the Judgment

19.  The judge was satisfied on the evidence that D10 was enriched as recipient of the funds in the DBS Account and that such enrichment was at the expense of P as the funds came from the loan advanced by P to D2[10]. The D10 Sum, being property transferred as a result of D2’s fraud, was held on constructive trust for P from the moment the loan was disbursed to the DBS Account, so that such monies are recoverable and traceable in equity and P is entitled to follow the D10 Sum into the hands of D10.  However, P’s beneficial interest in the property would be extinguished if the recipient is a bona fide purchaser for value without notice[11].

20.  The judge found the PSPA was entered into by D10 bona fide without notice of the fraudulent scheme perpetrated by D2 on P[12].

21.  P’s contention that the PSPA is not a legally binding agreement was rejected[13].

22.  P contended that D2’s obligation of paying the Further Deposit of HK$4,955,700 pursuant to clause 5B was conditional upon a formal sale and purchase agreement being signed.  As no formal agreement was signed, the D10 Sum (HK$945,000)  was only paid as partial payment towards the consideration under the PSPA, in which case D10 has no right to forfeit the D10 Sum upon the termination of the PSPA[14]. The judge held D10 was entitled to retain and forfeit the D10 Sum for these reasons:

(1)  Where a sum of money is paid under a contract for the sale and purchase of land and the contract is not completed, the right of the payer to claim the return of the money depends on the construction of the terms of the contract. If the sum is called a “deposit” and if nothing is said expressly about the conditions governing it, it will be taken to be required as a security for the completion of the contract by the payer and will be forfeited to the other party if the payer fails to perform his side of the contract[15].

(2)  Clauses 5A and 5B expressly provided that the sums of HK$1,044,300 and HK$4,955,700 payable by D2 to D10 constituted “deposits” (namely, “臨時訂金” and “訂金” respectively).

(3)  Clause 5B does not contain any language which suggests that the obligation to pay the Further Deposit is conditional upon the signing of the formal agreement for sale and purchase.  This clause imposes two separate and distinct obligations, namely, (i)  signing a formal sale and purchase agreement; and (ii)  paying the Further Deposit of HK$4,955,700.  They are not expressed to be dependent upon each other, or otherwise subject to any qualification or conditions precedent.  This is different from the provisions in the cases cited by P[16] which expressly stipulated that a further deposit should be paid “upon signing” or “when signing” the formal agreement for sale and purchase[17]. 

(4)  The judge rejected P’s argument that the D10 Sum was not intended to be an earnest in exchange for D10 taking the D10 Properties off the market as he had already committed himself to complete the transaction.  Even if D10 had already put the D10 Properties off the market prior to entering the PSPA, D2’s payments of the Initial Deposit and the Further Deposit pursuant to the PSPA provided the quid pro quo for D10’s assumption of contractual obligations and responsibilities to do so while awaiting completion[18].

(5)  The judge found that D2, upon D10’s repeated chasers, paid the D10 Sum of HK$945,000 to D10 in November 2015 for the purpose of demonstrating, or leading D10 to believe, that D2 wished to proceed with the transaction and was still trying to get together the funds to complete the transaction very soon.  “As the prescribed timeframe under the PSPA for the signing of the formal agreement and for completion had then already passed, D2’s payment was clearly meant to be an earnest for keeping the transaction alive and on hold for a while longer, rather than merely as the partial payment towards the consideration under the PSPA.  The payment should be treated as partial discharge of the Further Deposit still due and owing by D2 under Clause 5B of the PSPA and liable to be forfeited.  There is no basis to suggest that such payment was intended by the parties to be refundable.”[19]

23.  The judge held D10 had provided valuable consideration to D2 for the D10 Sum.  At the time when this sum was paid, D2’s obligation to pay the Further Deposit pursuant to clause 5B remained due and owing.  D10’s partial discharge of D2’s obligation in this regard constituted sufficient consideration[20]. Further, prior to the termination of the PSPA, D10 did not sell the D10 Properties to a third party or seek an alternative purchaser but stood ready and willing to proceed with the transaction.  This also constituted valid and sufficient consideration[21].

24.  The judge also held in favour of D10 on the change of position defence in that he had committed to the PSPA and put the D10 Properties off the market.  The fact that the PSPA was executed prior to the receipt of the D10 Sum does not affect the analysis.  The change of position defence applies to anticipatory change of position, where D10, prior to receiving the enrichment, has changed his position in good faith in the expectation of receiving a future benefit[22].

This appeal

25.  On P’s behalf, Mr Edward Tang[23] took two main points on appeal.

26.  Firstly, he contended that the judge was wrong to hold that clause 5B imposed a separate and distinct obligation on D2 to pay the Further Deposit when no formal agreement for sale and purchase was signed. On a reasonable and commercially sensible construction of clause 5B, D2’s obligation to pay HK$4,955,700 did not arise unless and until the parties have signed a formal agreement.  As no formal agreement was signed and D2 was not obliged to pay the Further Deposit, D10 was not entitled to retain and forfeit the D10 Sum made in part payment of the Further Deposit[24]. 

27.  Secondly, as an alternative to his first contention, he argued that even if clause 5B were to be construed as imposing an independent obligation to pay the Further Deposit without signing a formal agreement, the judge wrongly characterised the Further Deposit as an “earnest” (such that it is forfeitable)  instead of a mere partial payment towards the consideration[25].

28.  We will consider his submissions in the order set out above.

If the obligations to pay the Further Deposit and sign the formal agreement were linked or independent

29.  Mr Tang’s arguments ran as follows:

(1)  On a proper construction of clause 5B, it is clear that the obligation of D2 to pay the Further Deposit was dependent upon the signing of a formal agreement for sale and purchase.  This was explained by Litton JA (as he then was)  in Health Link Investment Ltd v Pacific Hawk Investment Ltd at 253I to 254G and 255D:

“A crucial finding made by the judge is this: the payment of the 20% deposit amounting to $88.4 million and the signing of the formal sale and purchase agreement were intended to be simultaneous events. … This is hardly surprising, having regard to the language of clause 4[26]. There are many cases in the books where, after a preliminary agreement relating to the purchase of real property has been entered into, the obligations to pay the full deposit and the obligation to sign the formal agreement were held to be linked: see, for instance, Link Brain Limited v Fujian Finance [1990] 2 HKLR 353 at 364E[27].

The $88.4m here is a considerable sum and the purchaser could hardly have been expected to pay without having the protection of a formal sale and purchase agreement … And, as Mr Edward Chan QC [counsel for the purchaser] submits in argument: the matter can be examined in reverse. Assume that, ahead of the deadline, the purchaser had required the formal sale and purchase agreement to be signed, say on 30 June, surely the vendor in turn would have said: ‘All right, but if we sign today, please pay the $88.4m today’; the vendor would not have been content to wait until 7 July to receive their money, having executed the formal sale and purchase agreement on 30 June. And assume that difficulties should have arisen concerning the precise terms of the formal agreement, was the purchaser to pay nevertheless?

… The court must assume that it is dealing with reasonable contracting parties, each willing to see the transaction through to a successful conclusion in accordance with their contract. One starts with the proposition here that for cogent reasons the obligations of payment and signing were to be simultaneous. That is what the parties had agreed. The parties can, of course, by their subsequent conduct sever the link between the two events; the requirement to pay the further deposit can if they so wish be divorced from the signing of the formal agreement, making these events independent of each other. And if, by their subsequent consensual acts, that is in fact what they did, the court must of course give effect to it, odd though that might be in the result. But is that what they did?

… What appears to me obvious is this: accepting, as is the common case, that the obligations to pay and to sign the formal agreement were to be simultaneously discharged, it must follow that once the signing was to be postponed, the payment would also be postponed, unless the parties had clearly agreed otherwise.”

(2)  Reading clause 5B holistically, it is clear that the parties had intended the payment of the HK$4,955,700 to be linked to the signing of the formal agreement.  The reference to the payment was immediately after and in the same sentence as the reference to the signing of the formal agreement.  The two obligations were intended to be performed simultaneously on or before 29 June 2015.

(3)  The primary object of clause 5B was to impose a deadline for the parties to enter into the formal agreement.  This is consistent with the opening words of the clause, namely, “正式合約” (formal contract).  A deadline of 29 June 2015 was imposed.  Insofar as the payment of the Further Deposit was concerned, the deadline was linked to the date of the signing of the formal agreement, not to the target date of 29 June 2015.  As stated by the Court of Appeal in Yiu Yau-ping v Fong Yee-lan [1992] 2 HKLR 167 at 175:

“… it seems to us that on any reasonable reading of Clause 2(b)  of the Provisional Agreement, its clear intention is that $132,000 ‘shall be paid on the signing of [the] formal agreement’ with the 28^th March 1991 as the target date. It is consistent with that intention that payment is linked rather more directly to the signing of the formal agreement rather than the target date mentioned.”

(4)  Under cross-examination, it was agreed to by D10 that all the while he did not take any steps to prepare or engage solicitors to prepare a formal agreement for execution because he had not received the full payment of 10 per cent of the deposit and he kept pressing D2 to pay the Further Deposit until D2 had settled the full 10 per cent deposit for the formal agreement[28].

(5)  The judge distinguished the present case from the cases of Wise Think Global Ltd v Finance Worldwide Ltd, Health Link Investment Ltd v Pacific Hawk Investment Ltd and Tse Ping Shun David & Anr v Lai Ho Man Shan Grace & Anr by highlighting the absence of the words “upon signing” or “when signing” in clause 5B.  This is misguided as he lost sight of the clear wording of clause 5B, which plainly provided that the signing of the formal agreement and the payment of the Further Deposit should take place simultaneously.

(6)  The only reported decision in which the court held that the payment of the further deposit and the signing of the formal agreement were separate and distinct obligations is See To Keung v Sunny Way Ltd [2009] 5 HKLRD 300.  The relevant clause in that case provided: “Upon signing the Formal Agreement for Sale and Purchase or before, that is [on] 8 November 2004, further payment of deposit in the sum of HK$2,480,000.” (emphasis supplied)[29]  The Court of Appeal held that on the proper construction of the Chinese agreement, the further deposit must be paid on 8 November 2004, whether that was the date on which the formal agreement was signed, or before that document was signed.  The obligation of the purchaser was thus to pay the further deposit of HK$2,480,000 on 8 November 2004 irrespective of whether a formal sale and purchase agreement was signed on that date[30].  Clause 5B of the PSPA is different from that provision.

30.  The point under debate turns on the interpretation of the contract.  Mr Tang and Mr Howard Wong for D10 referred us to a number of authorities on contractual interpretation[31].  We have noted the principles and they will not be repeated.

31.  In construing the PSPA, it is pertinent to note the context, background and oddities as found by the judge:

(1)  This is not a typical commercial transaction where two parties negotiate professionally at arm’s length.  D10 and Zheng had meals regularly ever since they met in the clansman association in 2014.  D10 is not a sophisticated person, notwithstanding he had experience in business and property transactions.  The PSPA is not a meticulous commercial deal reached by commercial parties at arm’s length.  The oddities in the PSPA should be understood against the backdrop of the relationship between D10 and Zheng who introduced D2 to D10[32].

(2)  The PSPA was preceded by an oral agreement in which D10, D2 and Zheng agreed terms for the sale of the D10 Properties and the Ownership Interests at the total consideration of HK$60 million.  They agreed terms on the amounts of the Initial Deposit, the Further Deposit and the Remainder and the dates by which these amounts were payable[33]. Other than the Remainder which was stated to be payable on completion, it did not appear that mention was made whether the payment of the Initial Deposit or the Further Deposit was to be linked to any other obligation under the agreement or to be performed simultaneously with any other obligation.

(3)  The PSPA was home-made and obviously not well drafted.  Some of the aspects do not appear natural or sophisticated.  It contained a number of oddities:

(i)  The words “簽署正式買賣合約” (sign formal sale and purchase agreement)  appeared in clause 5B relating to payment of the Further Deposit and in clause 5C relating to payment of the remaining balance.  To give meaning to these words in clause 5C, they were construed as referring to documents which would need to be executed upon completion, such as assignments[34].

(ii)  Clause 5A stated erroneously that the seller has received a provisional deposit of HK$1,044,300 on 15 April 2015 when the payment was actually made on 11 May 2015.  The parties did not bother to ensure that the correct date was reflected in the PSPA[35].

(iii)  The bottom of the PSPA recorded that a sum of HK$962,074.67 was received by D10 as Initial Deposit by an HSBC cheque, but did not mention the cash portion of HK$82,225.33 received by D10 on 11 May 2015[36].

(iv)  For the handwritten clause 9 about D2’s proposed use of the D10 Properties to obtain a mortgage loan, the figure of HK$400,000 was not recorded in the PSPA[37].

32.  The overriding objective in this construction exercise is to give effect to what a reasonable person would have understood the parties to mean, having regard to the words they used, the agreement as a whole, the background against which the agreement was concluded and the practical objects it was intended to achieve.  Notwithstanding the cogent and desirable reasons for making the payment of the Further Deposit and the signing of the formal agreement simultaneous obligations to be discharged simultaneously, it is necessary to consider whether effect could be given to the language used by the parties so as to achieve the cogent and desirable objectives.

33.  In all the cases cited to this court, with the exception of See To Keung v Sunny Way Ltd, the relevant clause expressly provided that payment of the deposit or further deposit is “upon signing” of the formal agreement or “at the time when” the formal agreement is signed.  There is no ambiguity about the provision in all those cases.  The PSPA was home-made, not even a standard form provisional agreement used by an estate agent.  As stated, there are obvious errors and oddities about this document which was not prepared with care.  There is no express provision in clause 5B stipulating that the obligation to pay the Further Deposit is dependent on the signing of a formal agreement.  The words “正式合約” (formal contract)  at the beginning of clause 5B could be read as denoting a stage in the transaction, that a formal agreement was to be signed, rather than indicating that payment of the Further Deposit is conditional on the signing of the formal agreement.

34.  It seems to us that clause 5B is closer to the provision in See To Keung v Sunny Way Ltd than the other authorities cited.  We see no reason why the court should not give effect to the language used in this poorly drafted document, even though the consequence may appear hard for one side or the other.

35.  But even if we were wrong in our construction of clause 5B, there is a further ground on which the holding that the payment of the D10 Sum was not conditional on the signing of a formal agreement may be upheld.

36.  As stated in Health Link Investment Ltd v Pacific Hawk Investment Ltd at 254G:

“The parties can, of course, by their subsequent conduct sever the link between the two events; the requirement to pay the further deposit can if they so wish be divorced from the signing of the formal agreement, making these events independent of each other. And if, by their subsequent consensual acts, that is in fact what they did, the court must of course give effect to it, odd though that might be in the result.”

37.  In this instance, the D10 Sum was paid on 2 November 2015, well past the stipulated date for signing the formal agreement (29 June 2015)  and the scheduled completion date (29 September 2015).  The signing of a formal agreement for sale and purchase was overtaken by events. There is no question of signing any such agreement given that the transaction had passed the scheduled completion date.  Even if the payment of the Further Deposit were dependent on the signing of a formal sale and purchase agreement, by the subsequent consensual acts of the parties on 2 November 2015 (D2 making the D10 Payment which was accepted by D10), they had severed the link between the two.  The effect was as explained by the judge at §125:

“… D2, upon D10’s repeated chasers, paid the D10 Sum of HK$945,000 to D10 in November 2015 for the purpose of demonstrating, or leading D10 to believe, that he wished to proceed with the transaction and was still trying to get together the funds to complete the transaction very soon. As the prescribed timeframe under the PSPA for the signing of the formal agreement and for completion had then already passed, D2’s payment was clearly meant to be an earnest for keeping the transaction alive and on hold for a while longer, rather than merely as the partial payment towards the consideration under the PSPA. The payment should be treated as partial discharge of the Further Deposit still due and owing by D2 under Clause 5B of the PSPA and liable to be forfeited. There is no basis to suggest that such payment was intended by the parties to be refundable.”

38.  There is no reason why the court should not give effect to the subsequent consensual acts of the parties.

39.  We therefore reject Mr Tang’s submissions on his first main ground.

If the Further Deposit was an earnest or a mere partial payment towards the consideration

40.  In the event the PSPA is to be construed as giving rise to an independent obligation for D2 to pay the Further Deposit without signing a formal agreement, P contended that the Further Deposit is not forfeitable as it was not paid as an “earnest” but should be treated as partial payment towards the consideration.

41.  Mr Tang relied on these statements of Ribeiro PJ in Polyset Ltd v Panhandat Ltd at §69:

“The focus of a deposit’s operation is on the period elapsing between its payment and completion of the contract’s performance. In entering into the contract, the vendor agrees to take his property off the market and to commit himself to the purchaser on the latter’s promise that the acquisition will duly be completed and the vendor duly paid at the completion date. The forfeitable deposit is tendered to encourage the vendor to make the necessary commercial act of faith. It is, as the authorities show, an ‘earnest’, that is, a thing of value given to signify serious intent on the purchaser’s part. It is also the quid pro quo for the vendor depriving himself of the ability to deal commercially with the property, and so of making any potentially greater profits, while awaiting completion. Unlike the vendor, the purchaser is able to profit by re-selling the property during this period, in reliance on the contract. If, at the end of the period, completion does take place, the purpose of the deposit is spent and it becomes absorbed as part of the purchase monies. If, on the other hand, completion does not occur as promised, the deposit’s forfeiture follows, whether or not the vendor has suffered any loss in consequence.”

42.  He submitted that whether a deposit is paid as an “earnest” or a partial payment of the consideration depends on the purpose for which the sum is paid.  If it was paid in exchange for the vendor’s commitment to take the subject property off the market pending completion, it is treated as a forfeitable deposit.  In this instance, it has been D10’s own case all along that upon D2’s payment of the Initial Deposit pursuant to the PSPA, D10 had already taken the D10 Properties off the market and was bound to proceed to completion by the PSPA’s stipulated completion date.  The Initial Deposit provided the quid pro quo for the period elapsing between its payment and completion of the PSPA’s performance.

43.  As for the Further Deposit, by the time of its scheduled payment on or before 29 June 2015, D10 had already committed himself to complete the transaction by the stipulated completion date.  Mr Tang argued that no further quid pro quo was required to encourage D10 to make the “necessary commercial act of faith”, as D10 had already done so by his execution of the PSPA and D2 had paid the Initial Deposit.  There was no need for D2 to pay a further “earnest” to keep an already binding agreement alive.  This is consistent with D10’s evidence in cross-examination where he confirmed upon receiving the Initial Deposit, he was fully committed to proceeding to completion on the terms of the PSPA, despite D2’s failure to pay any part of the Further Deposit by 29 June 2015 or to complete the transaction by 29 September 2015[38]. Mr Tang further submitted the fact that the D10 Sum was paid long after the stipulated date of completion strongly suggests it was paid as partial payment of the consideration, as no “earnest” was required when D10 elected to wait for D2 without stipulating a deadline for completion[39].

44.  Mr Tang also took a pleading point that the finding that the D10 Sum was “clearly meant to be an earnest for keeping the transaction alive and on hold for a while longer, rather than merely as the partial payment towards the consideration under the PSPA” (at §125)  was not pleaded in the defence of D10.

45.  We do not agree with Mr Tang.

46.  The fact that the judge’s finding in §125 did not feature in the pleading of D10 is not material.  There is no requirement to plead a consequence or inference of law, so long as the material facts supporting the legal consequence or inference are pleaded.  We consider the material facts are adequately pleaded in D10’s defence at §§12(e)  to (l).

47.  Mr Tang’s argument was a rehash of the submissions raised unsuccessfully before the judge.  We agree with the judge’s reasons which have been summarised earlier.  The authorities do not support a proposition that a payment would amount to a deposit only if the purchaser puts the property off the market after receipt of the payment.  On an objective and realistic analysis, as the scheduled completion date had already passed in early November 2015 with no payment of the Further Deposit and the remaining purchase price and D10 could have elected to terminate the transaction, the payment of the D10 Sum on 2 November 2015 was clearly meant to be an “earnest” for keeping the transaction alive for a while longer and provided the quid pro quo for D10’s assumption of contractual obligations while awaiting completion.  There is no merit in Mr Tang’s submission that the D10 Sum was intended merely as partial payment towards the consideration in those circumstances.

48.  We reject the second main ground of P as well.

Conclusion

49.  We dismiss P’s appeal.  Having heard submissions on costs, we order P to pay D10’s costs of this appeal.