WANG SHUAI v. ZHANG QIAOHUI

HCA 64/2019

[2023] HKCFI 2067

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 64 OF 2019

________________

_________________

________________

D E C I S I O N

________________

A.  INTRODUCTION

1.  This is the Defendant’s appeal (“Defendant’s Appeal”), by Notice of Appeal dated 18 May 2023, from the decision of Master Keith Lam dated 4 May 2023 by which the learned Master acceded to the Plaintiff’s summons dated 16 January 2023 for summary judgment (“O.14 Summons”), and entered final judgment against the Defendant in the principal sum of HKD11,800,000 plus interest and costs.

2.  An appeal from the master to the judge in chambers is dealt with by way of a rehearing of the application which led to the order under appeal, and the judge treats the matter as though it came before him for the first time. Fresh points may be raised before the judge which were not raised or taken before the master: see Hong Kong Civil Procedure 2023, §§58/1/2, 58/1/5.

B.  BACKGROUND

3.  In this action, which was commenced by Writ of Summons issued on 11 January 2019, the Plaintiff claims against the Defendant for the return of a deposit in the sum of HKD11,800,000 (“Deposit”) paid pursuant to a sale and purchase agreement dated 3 August 2018 (“SPA”).

4.  Pursuant to the SPA, the Plaintiff agreed to purchase, and the Defendant agreed to sell, the entire share capital of a company known as HK Arts & Cultural Interchange Centre Ltd (“Company”) for HKD118 million. The Defendant was the Company’s sole shareholder and director. The Company was and is at all material times the registered owner of 4 commercial units[1] and 2 car park spaces[2] on 118 Connaught Road West (“Properties”).

5.  The agreed completion date was 12 October 2018 (“Completion Date”). The Plaintiff paid the Deposit pursuant to Clause 4.1.1 of the SPA.

6.  Clause 2.1 of the SPA provides:

“2. CONDITIONS PRECEDENT

2.1 Completion and the obligations of the Purchaser under this Agreement shall be subject to and conditional upon:-

…

2.1.5 there having been no breach of the Warranties from the date of this Agreement up to and inclusive of the Completion Date;

2.1.6 all the Warranties remaining true and accurate in all respects as at Completion; …”

7.  “Warranties” is defined under Clause 1.1 to mean the representations, warranties, undertakings made or given by the Defendant to the Plaintiff as contained in Clause 7, Clause 8 and Schedule 2 of the SPA.

8.  The relevant “Warranties” which the Plaintiff claims to have been breached by the Defendant include those set out in Clause 8.2 and Clause 15.4 of Schedule 2:-

Clause 8.2:

“The Vendor hereby represent, warrant and confirm to the Purchaser that … (v) the Company has not entered into created and/or granted any leases, tenancy agreements … in relation to the Properties, or any part thereof; …”

Clause 15.4 of Schedule 2:

“No leases, tenancy agreements … have been entered into in relation to the Properties, or any part thereof.”

9.  Clauses 2.2, 2.4, 2.5 and 2.6 of the SPA further provide:

“2.2 The Purchaser may waive (in whole or in part) any of the Conditions Precedent referred to in Clause 2.1 above, such waiver shall be effective only if it is made in writing and notified to CWY.

…

2.4 The parties hereto are aware that Messrs Chan, Wong & Yip shall carry out the due diligence investigation for and on behalf of the Purchaser. If it is discovered during the due diligence investigation that there is any problem, the Vendor shall remedy the same as soon as possible before the Completion Date. For the purpose of this Clause the opinion of Messrs Chan, Wong & Yip as to whether they are satisfied with the results of such due diligence investigation is final and conclusive and binding on the parties hereto.

2.5 The Vendor shall use their best endeavours to procure and ensure that all the Conditions Precedent referred to in this Clause are fulfilled as early as practicable. The Vendor shall at all times hereafter keep the Purchaser fully informed in writing in respect of all matters in connection with the fulfilment of the said conditions. In the event that any of the Conditions Precedent is not fulfilled (or waived by the Purchaser) at least 7 Business Days before the Completion Date, the Purchaser shall be entitled to rescind this Agreement upon giving written notice with immediate effect to the Vendor without liability on the part of the Purchaser.

2.6 Upon rescission of this Agreement by the Purchaser pursuant to Clause 2.5 above, all moneys paid by the Purchaser to the Vendor under this Agreement shall be returned to the Purchaser forthwith who shall also be entitled to recover from the Vendor damages (if any) which the Purchaser may sustain by reason of such failure on the part of the Vendor.”

10.  Clause 8 also contains the following provisions:

“8.1 The Vendor hereby represent, warrant and undertake to the Purchaser and its successors and assigns that each of the Warranties is true, complete and accurate in all respects and not misleading in any respect, and acknowledges that the Purchaser is entering into this Agreement in reliance on such Warranties and will continue to be so up to and including the time of Completion.

…

8.4 Each of the Warranties shall be interpreted as a separate and independent Warranty. The Vendor hereby agree that the Purchaser shall treat each of the Warranties as a condition of this Agreement.

8.5 No other information of which the Purchaser has knowledge (actual or constructive) and no investigation by or on behalf of the Purchaser shall prejudice any claim made by the Purchaser under the Warranties or under the indemnity contained in Clause 8.7 or operate to reduce any amount recoverable and it shall not be a defence to any claim against the Vendor that the Purchaser knew or ought to have known or had constructive knowledge of any information relating to the circumstances giving rise to such claim.”

11.  On about 24 August 2018 (after execution of the SPA), a site inspection of the Property took place (“Site Inspection”), which was attended by, inter alios, the Plaintiff, the Defendant’s representative (Mr Gary Chan), and the agent of Centaline (Mr Leslie Yip) who introduced the Plaintiff to the Properties.

12.  During the Site Inspection, vehicles were seen at car parking spaces nos. 221 and 222 of the Properties (collectively, “Car Parking Spaces”).

13.  In late September 2018, the Plaintiff discovered through a due diligence investigation that the Company had let the Parking Spaces under the following tenancy agreements (“Car Park Leases”):

(1)  CPS 221: Tenancy Agreement dated 3 October 2017, with lease term from 1 November 2017 to 31 October 2018.

(2)  CPS 222: Tenancy Agreement dated 12 April 2018, with lease term from 5 June 2018 to 4 June 2020.

14.  The existence of the Car Park Leases is not disputed by the Defendant.

15.  The Plaintiff took the position that:

(1)  The existence of these Car Park Leases meant that the Defendant had breached the warranties under the SPA, as set out in Clause 8.2 and Clause 15.4 of Schedule 2 (“Subject Warranties”); and

(2)  Thus, the Defendant could not have fulfilled the conditions precedent stipulated in Clauses 2.1.5 and 2.1.6 of the SPA, entitling it to rescind the SPA pursuant to Clause 2.5 thereof and return of the Deposit pursuant to Clause 2.6.

16.  Messrs Chan, Wong & Yip Solicitors (“CWY”) originally acted for both the Plaintiff and the Defendant in the transaction. In October 2018, the Plaintiff sought independent legal advice from Messrs Terry Yeung & Lai, Solicitors (“TYL”), his current solicitors. On 10 October 2018, TYL informed CWY that it had instructions to act for the Plaintiff in replacement of CWY for the transaction.

17.  By a letter dated 11 October 2018 from TYL to CWY, the Plaintiff purported to exercise his right to rescind the SPA pursuant to Clause 2.5 thereof and demanded the return of the Deposit on or before 12 October 2018 pursuant to Clause 2.6 thereof.

18.  The Defendant failed and/or refused to return the Deposit to the Plaintiff. By letter from CWY to TYL dated 14 January 2019, the Defendant’s solicitors contended that the Plaintiff had repudiated the SPA by failing and/or refusing to fulfill his completion obligations and purported to forfeit the Deposit.

19.  The Plaintiff commenced this action on 11 January 2019, claiming for the return of the Deposit plus interests and costs. The pleadings in this action have closed and the parties have exchanged witness statements.

20.  The Plaintiff’s O.14 Summons was issued on 16 January 2023.

C.  LEGAL PRINCIPLES

21.  The approach of the Court in summary judgment applications is well-established, and summarized by the Plaintiff as follows (which the Defendant does not dispute):

(1)  The Order 14 machinery works on the basis that if the plaintiff’s application is properly constituted, it is prima facie entitled to judgment unless the defendant shows cause to the contrary.

(2)  The mere assertion in an affidavit of a given situation by the defendant does not, ipso facto, ground leave to defend.

(3)  The burden is on the defendant to show a real or bona fide defence or a triable issue by condescending upon particulars. The defendant must satisfy the Court that her evidence is believable and that on the basis of such evidence, there is a fair or reasonable probability of the defendant having a real or bona fide defence.

(4)  In assessing the credibility of the defendant’s factual case, the Court will not embark upon a mini-trial on affidavit evidence. However, if having regard to inherent plausibility, inconsistency with contemporaneous documents and other compelling evidence, the defence is not credible, the Court must say so.

(5)  If the defendant’s evidence is incredible in any material respect, it cannot be said that there is a fair or reasonable probability that the defendant has a real or bona fide defence.

See: Guanghua SS Holdings Limited v Lim Yew Cheng [2022] HKCFI 1052, §13 (per Ng J); Bhagwandas Kewaleram Murjani v Bank of India [1990] 1 HKLR 586 (CA), 589G-590H (per Hunter JA).

22.  The Defendant further emphasizes the following principles set out in Alpha Financial Press Ltd v AMTD Group Co Ltd [2022] HKCFI 1084, §§28-32 (which the Plaintiff does not dispute):

“28. While the burden lies on the Defendants to show a triable issue or a bona fide defence, a defendant’s failure to adduce positive factual evidence does not necessarily constitute a ground for summary judgment to be granted if the plaintiff’s pleaded case is fundamentally unsuitable for summary judgment from the outset. In explaining the risks of placing excessive attention on the quality of the defence, Cheung JA in Ju Yan Di Emperory Genesisy v Yau Wai Han [2015] 1 HKLRD 822 said:

‘14. It is well established that the burden on the defendant in a summary judgment application is to show that he has a credible defence and he must condescend to give particulars of his defence. However, this does not mean that once the plaintiff invokes the application and irrespective of the strength of his case, the defendant bears all the burden of showing that there are triable issues in the case. This is because the starting point in a summary judgment application is that it should only be invoked when there is no defence to the claim. This means that the plaintiff must in the first place demonstrate that the defendant has indeed no defence. This requirement is further recognised in the procedural rules which mandate the plaintiff to state his belief in the verifying affidavit that there is no defence to the claim. This requirement must be kept in proper perspective when assessment is made of the strength of the application, otherwise there is a danger that the attention will be focused solely on what the defendant has said without consideration at the same time of the basic premise of the plaintiff’s claim or its inherent strength and weakness …’ ”

29. Hence, the plaintiff is required to first show that it is a suitable case for summary judgment. Only then will the burden shift to the defendant in showing that judgment should not be granted in the plaintiff’s favour because of an issue or question that ought to be tried, or because there are other reasons why there ought to be a trial: Ng Hung Ngan v Yeung Fook Mui [2014] HKLRD 805 at §§4, 10; Ju Yan Di Emperory Genesisy at §§14-17; Medishine Investment Ltd v Chiu Hon Ching [2021] HKCFI 2900 at §22(3); Hong Kong Civil Procedure 2022 at §14/4/1.

30. If the plaintiff’s own case casts doubts on whether summary judgment should be granted, the proper course is to grant leave to defend: Billion Silver Development Ltd v All Wide Investments Ltd [2000] 2 HKC 262 (CA) at 268C-270G; Medishine Investment Ltd at §22(2).

31. Moreover, summary judgment will be granted on the merits of the plaintiff’s pleaded case. The statement of claim must therefore be complete and good in itself, and any defect or omission cannot be corrected by way of a supplemental affirmation. No new assertions of fact relating to the cause of action can be raised in the affirmation: Medishine Investment Ltd at §§22(1); Lai Yuen Wah v Hoi Kwong Printing Co Ltd & Ors [2003] 1 HKC 447 at 452A-C.

32. Lastly, summary judgment should be refused where there is a dispute as to the terms of an oral contract being sued on unless the plaintiff demonstrates that (1) it is entitled to judgment even on the defendant’s case, or (2) the defendant’s case is neither truthful nor credible: Li Chuen Kwai v Po Lam Construction Development Ltd (unrep., HCA 2376/2013, 24 September 2014) at §14; Hong Kong Civil Procedure 2022 at §14/4/22.”

D.  DISCUSSION

23.  The Plaintiff’s position as to its entitlement to rescind the SPA and to demand the return of the Deposit has been summarized in paragraph 15 above.

24.  The Defendant raises the following defences which she contends raises triable issues:

(1)  Based on the proper construction of the SPA (in particular Clauses 2.4 and 2.5), all breaches of the conditions precedent under Clause 2.1 (including any breaches of Clauses 2.1.5 and 2.1.6) are “remediable”, by either (i) the Defendant procuring compliance not less than 7 business days before the Completion Date; or (ii) the Plaintiff waiving the breach. The Defendant’s case is that since the Car Park Leases were terminated prior to 7 business days before the Completion Date, there was no breach of Clauses 2.1.5 and 2.1.6.

(2)  The Subject Warranties are “inconsistent” with Clauses 2.1, 2.4 and 2.5 of the SPA, and that the latter should prevail.

(3)  The parties agreed to use CWY as the “referee” to conduct due diligence and determine whether title to the Property was good; absent any opinion from CWY, no one could tell whether there was “any problem” (referred to in Clause 2.4) to be remedied. Without pleading reliance on any opinion from CWY, the Plaintiff’s claim for return of the Deposit could not get off the ground.

(4)  Clause (c) of Schedule 4 provides: “At completion…...(c) the [Defendant] shall deliver the Properties subject to the Tenancy Agreement but otherwise free from all Encumbrances; …”. The Defendant argues that the Court should infer that “Tenancy Agreement” (which is not a defined term in the SPA) refers to the Car Park Leases, and that she is entitled to rely on this provision as an alternative case.

25.  In addition, the Defendant contends that summary judgment should not be granted as there has been delay on the part of the Plaintiff in taking out the O.14 Summons.

26.  Mr Benny Lo (counsel for the Plaintiff [3]) raised a procedural objection that one of the two affirmations filed by the Defendant to oppose the O.14 Summons was made by her former solicitor Cheng Kin Yat, exhibiting an unsigned and undated draft affirmation of the Defendant (“D’s Draft Affirmation”). Mr Lo submitted that D’s Draft Affirmation should not be admitted into evidence or that the Court should give it no weight even if admitted. At the hearing, the parties were content with the Court considering D’s Draft Affirmation on a de bene esse basis. For the reasons below, the outcome of the Defendant’s Appeal will not turn on the contents of D’s Draft Affirmation.

D1.  Whether breach of the Subject Warranties are “remediable”

27.  I am of the view that the Defendant’s purported construction of the SPA (in particular, Clause 2.5 thereof), that all breaches of the conditions precedent under Clause 2.1 may be “remedied” by the Defendant by procuring compliance not less than 7 business days before the Completion Date is misplaced. This is plainly not the case at least insofar as a breach of Clause 2.1.5 is concerned, being the condition which the Plaintiff claims was breached by the Defendant.

28.  First, there can be no dispute that all the Warranties under Clause 8 and Schedule 2 of the SPA were given at the time the SPA was entered into. Pursuant to Clause 8.1, the Defendant specifically acknowledged that the Plaintiff was “entering into this Agreement in reliance on such Warranties and will continue to be so up to and including the time of Completion”.

29.  Clause 2.1 provides that completion and the obligations of the Plaintiff under the SPA shall be subject to and conditional upon various matters, including, specifically in relation to the Warranties:

(1)  Under Clause 2.1.5: there having been no breach of the Warranties“ from the date of this Agreement up to and inclusive of the Completion Date”.

(2)  Under Clause 2.1.6: all the Warranties remaining true and accurate in all respects as at Completion.

30.  Clauses 2.1.5 and 2.1.6 are two separate conditions for completion. The undisputed existence of the Car Park Leases at the time the SPA was entered into clearly means that (i) the Subject Warranties under Clause 8.2 and Clause 15.4 of Schedule 2 of the SPA had been breached by the Defendant; and (ii) the condition under Clause 2.1.5 was not fulfilled. The Plaintiff therefore had no obligation to complete the SPA.

31.  Mr Kenneth Chan (counsel for the Defendant[4]) argues that Clause 2.1.5 only refers to “new breaches” from the date of the SPA, and does not relate to breaches before the date of the SPA, and thus cannot apply to the breaches arising from the Car Park Leases (which were entered into before the date of the SPA). I cannot agree with Mr Chan’s submissions. Whilst the Car Park Leases were entered into before the date of the SPA, they undisputedly continued to be in existence as at the time of the SPA and thereafter, and hence constitute breaches of the Subject Warranties and consequently Clause 2.1.5.

32.  Second, as to the effect of Clause 2.5, the opening sentence provides that the Defendant shall use its best endeavors to “procure and ensure all the Conditions Precedent referred to in [Clause 2] are fulfilled as early as practicable”. In the present case, given the undisputed existence of the Car Park Leases, the only manner in which the Defendant could procure the satisfaction of the condition in Clause 2.1.5 was to obtain a waiver from the Plaintiff under Clause 2.2. There is no proper basis for Mr Chan to ask the Court to infer from this sentence that the parties generally intended that all conditions precedent in Clause 2.1 can be remedied before completion.

33.  In any case, Clause 2.5 must be read as a whole. The last sentence of Clause 2.5 further provides for the manner and timing in which the conditions under Clause 2.1 must be fulfilled, failing which the Plaintiff would be entitled to rescind the SPA by giving written notice.

34.  The last sentence of Clause 2.5 clearly contemplates two ways in which the conditions precedent under Clause 2.1 can be fulfilled: (i) compliance with the condition by the Defendant; or (ii) waiver by the Plaintiff of any non-compliance. Contrary to the Defendant’s submission, no self-help “remedial” mechanism can be read into such clause, to enable the Defendant himself to remedy any breaches thereof.

35.  Whereas some of the conditions in Clause 2.1 require fulfillment on or before completion (e.g. Clauses 2.1.3, 2.1.8), the condition under Clause 2.1.5 clearly requires compliance from the date of the SPA up to and inclusive of the Completion Date.

36.  Therefore, reading Clause 2.1 with Clause 2.5, the proper construction of Clause 2.5 should be as follows:

(1)  For the conditions in Clause 2.1 which require fulfillment on or before completion, the Defendant is required to either (i) fulfill such conditions at least 7 Business Days before the Completion Date; or (ii) procure a waiver of the condition from the Plaintiff at least 7 Business Days before the Completion Date, failing which the Plaintiff shall be entitled to rescind the SPA.

(2)  For Clause 2.1.5 which specifically requires compliance from the date of the SPA up to and inclusive of the Completion Date, if there has been any breach or non-compliance by the Defendant, she is required to procure a waiver of the condition from the Plaintiff at least 7 Business Days before the Completion Date, failing which the Plaintiff shall be entitled to rescind the SPA.

37.  Adopting the Defendant’s purported construction of Clause 2.5, namely, that any breach of Clause 2.1.5 can be remedied by the Defendant at least 7 Business Days before the Completion Date, would be to ignore the clear and express requirements of Clause 2.1.5 itself.

38.  Third, contrary to Mr Chan’s submission, Clause 2.4 also cannot be construed to mean that a breach of Clause 2.1.5 concerning breaches of Warranties can be “remedied” by the Defendant. Clause 2.4 contemplates that “due diligence investigation” would be carried out by CWY after the entering into of the SPA, and provides that if it is discovered during such due diligence investigation that there is “any problem”, the Defendant shall remedy the same as soon as possible before the Completion Date.

(1)  As pointed out by Mr Lo, when Clause 2.4 is read together with the condition precedent at Clause 2.1.7, which requires “satisfactory completion of due diligence review by the Purchaser on the business, financial, legal and other aspects of the Company before Completion and satisfied with the results thereof;”, it is clear that Clause 2.4 complements Clause 2.1.7, in providing for the parties’ agreement for CWY to carry out the due diligence on the business, financial, legal and other aspects of the Company, and if there may be any problem with such aspects, the Defendant shall remedy the same before completion.

(2)  In any event, it is plain that this provision cannot relate to the condition at Clause 2.1.5, which expressly requires compliance from the date of the SPA up to and inclusive of the Completion Date. The Defendant’s purported construction of Clause 2.4 again wholly ignores the clear and express requirements of Clause 2.1.5 itself.

(3)  My view as aforesaid is also supported by Clause 8.5 of the SPA, which expressly provides that “no investigation by or on behalf of the Purchaser shall prejudice any claim made by the Purchaser under the Warranties”. This clearly shows that any due diligence investigation carried out by CWY cannot affect any claim by the Plaintiff for breach of Warranties.

39.  Fourth, even if the Defendant’s breach of the Subject Warranties is “remediable”, the only evidence that the Car Park Leases were terminated at least 7 business days before the Completion Date is a bare assertion in D’s Draft Affirmation that such leases were terminated on or about 30 September 2018, with no supporting documentary evidence.

40.  If there was indeed early termination of the Car Park Leases, one would expect there to be some written communication and/or written termination notice to the tenants concerned. In relation to an earlier lease of Car Park Nos. 222 for the period 3 November 2016 to 2 November 2017, there was a written termination notice “退租書” signed by the Company and the tenant in respect of the early termination of such lease on 2 June 2017. However, as regards the alleged early termination of the Car Park Leases on or about 30 September 2018, the Defendant is unable to provide any written communication, notices, or other documentary evidence to evidence such termination, nor any particulars as to how such alleged termination was communicated to the tenants concerned.

41.  Further, even in the letter from CWY to TYL dated 12 October 2018 (“CWY’s Oct 2018 Letter”), in which the Defendant denied having committed any breach of the Subject Warranties, there was no mention whatsoever of the Car Park Leases having been terminated on or about 30 September 2018. Rather, it was stated that vacant possession of the Car Park Spaces would be delivered to the Purchaser on completion.

42.  I therefore do not consider that the Defendant’s bare assertion that the Car Park Leases were terminated on or about 30 September 2018 to be credible. The Defendant has failed to raise a triable issue by condescending upon particulars.

D2.  Alleged “inconsistency” between the Subject Warranties and Clauses 2.1, 2.4 and 2.5

43.  As regards Mr Chan’s submissions that the Subject Warranties are “inconsistent” with Clauses 2.1, 2.4 and 2.5 and that the latter should prevail, I do not consider there to be any such inconsistency.

44.  First, it is plain that by the Subject Warranties, the Defendant represented and warranted that at the time of the SPA there was no letting of the Properties by the Defendant. Clause 2.1.5 is entirely consistent with, and complements the Subject Warranties in making it a condition for completion that the Subject Warranties shall not have been breached from the date of the SPA up to and inclusive of the Completion Date.

45.  There is also no inconsistency between the Subject Warranties and Clauses 2.4 and 2.5. As explained in paragraphs 32 to 38 above, Clause 2.4 does not apply to breaches of the Subject Warranties or Clause 2.1.5 (which require compliance from the date of the SPA), and the effect of Clause 2.5 on a breach of Clause 2.1.5 by the Defendant is that she shall procure a waiver of such breach from the Plaintiff at least 7 Business Days before the Completion Date, failing which the Plaintiff shall be entitled to rescind the SPA.

46.  Second, contrary to Mr Chan’s submissions, there is nothing uncommercial for the Plaintiff to be entitled to rescind the SPA if it is discovered that the Subject Warranties are untrue and/or inaccurate, especially when the Defendant expressly acknowledged that the Plaintiff entered into the SPA in reliance upon the same and would continue to be so up to and including the time of completion (see Clause 8.1 of the SPA).

47.  Mr Chan further submits that in a conveyancing transaction, the vendor is only required to convey a good title to the property at the time of completion; and that the Subject Warranties “would in effect move the showing and giving good title to when the [SPA] was signed”. I cannot agree with Mr Chan’s submission. The Plaintiff’s claim in this action is based on the Defendant’s breaches of express contractual warranties entitling him to rescind the transaction; it is not concerned with a failure to show or give good title. Mr Chan has wrongly conflated the two.

D3.  Alleged need for CWY’s opinion before rescission

48.  Mr Chan further submits (relying on the provisions in Clauses 2.4, 7.1-7.3 of the SPA) that (i) the parties agreed to use CWY as the “referee” to conduct due diligence and to determine whether the title to the Property was good; (ii) hence the Plaintiff could only rescind the SPA under Clause 2.5 if the Defendant fails to remedy the defects identified “by the opinion of CWY”; and (iii) as no opinion was provided by CWY that any conditions in Clause 2.1 had not been fulfilled by reason of the Car Park Leases, the Plaintiff has no right to rescission, and his claim herein could not even get off the ground.

49.  I cannot agree with Mr Chan’s submission. Clause 2.5 does not provide that the Plaintiff’s right to rescission is conditional upon an opinion having been obtained from CWY. Contrary to Mr Chan’s contentions, the references in Clauses 2.4 and 7.1-7.3 to the involvement of CWY in the due diligence investigation prior to completion, and in approving the title of the Property, cannot somehow be read to mean that the Plaintiff’s right under Clause 2.5 to rescind the SPA by reason of breaches of the Subject Warranties require a prior opinion of CWY. For the reasons set out in paragraph 38 above, Clause 2.4 does not apply to breaches of the Subject Warranties or Clause 2.1.5 at all. The same applies to Clauses 7.1-7.3.

D4.  Whether “Tenancy Agreement” in Clause (c) of Schedule 4 refers to the Car Park Leases?

50.  In Mr Chan’s written skeleton submissions, he advanced a further submission that the Defendant has an alternative case, that the Court may draw an inference that “Tenancy Agreement” in Schedule 4 to the SPA, Part A (Vendor’s Obligations), Clause (c) (“Clause (c)”) must mean the Car Park Leases (although such term is not defined in the SPA itself) because: (i) there is no evidence from either party that there was any other tenancy agreement; and (ii) the Defendant in D’s Draft Affirmation refers to having mentioned the Car Park Leases to Mr Chan of CWY.

51.  Such contention is clearly without basis and is rejected.

52.  First, in this action, the Defendant has never put forward a case that the Subject Warranties have not been breached as the Defendant’s obligation at completion is to “… deliver the Properties subject to the Tenancy Agreement” as stated in Clause (c):

(1)  Such a case has never been pleaded in the Defence filed by the Defendant herein. It is trite that where a defendant has already filed a Defence, it cannot, in opposition to a summary judgment application, rely on a case not pleaded in the Defence: see Hong Kong Topkey Limited v. Wintac (Hong Kong) Limited [2023] HKCFI 1711, §§14-16, applying the decision of the Court of Appeal in Kaefer AG v. Winfield Marine Services Co Ltd [2022] HKCA 807, §§30-32.

(2)  In any event, such a case is also inconsistent with the express plea by the Defendant at paragraph 15.2 of the Defence that the Car Park Leases were terminated on or about 30 September 2018. As provided in Order 18 rule 12A of the Rules of the High Court (Cap 4A), a party may in a pleading make an allegation of fact which is inconsistent with another allegation of fact in the same pleading only if: (a) the party has reasonable grounds for doing so; and (b) the allegations are made in the alternative. The Defendant has not provided any reasonable grounds for relying on inconsistent factual alternatives.

(3)  There is also no credible evidence that the Plaintiff agreed to purchase and the Defendant agreed to sell the Properties subject to the Car Park Leases.

(4)  Even in CWY’s Oct 2018 Letter, CWY stated on behalf of the Defendant that “vacant possession of the subject Car Park Spaces would be delivered to the Purchaser upon completion”, clearly indicating that the Defendant did not agree to sell the Properties subject to the Car Park Leases.

53.  Second, in any case, Clause (c) relates to the Defendant’s obligation at completion. In the present case, the Plaintiff’s case is that one of the conditions for completion (i.e. Clause 2.1.5) was not satisfied, and thus the Plaintiff had no obligation to proceed to complete the transaction in any event.

54.  Third, even if “Tenancy Agreement” can be inferred to mean the Car Park Leases as contended by the Defendant, Clause (c) cannot be read as to modify the effect of the Subject Warranties, and the consequence of breaches thereof, as set out in Clause 2.5. As explained in paragraphs 32 to 36 above, it is possible for the Plaintiff to waive any such breaches of the Subject Warranties and Clause 2.1.5, such that the existence of the Car Park Leases would not preclude completion. If this should occur, delivery of the Properties would then be subject to tenancy agreements. But there is no waiver in the present case.

55.  At the hearing and during oral submissions, Mr Chan submitted that despite the Defendant not pleading reliance on Clause (c) as part of her defence, the Court should nonetheless refuse to grant summary judgment because the Plaintiff had not drawn the Court’s attention to such clause, which casts doubt on the Plaintiff’s case and makes it unsuitable for summary judgment. I cannot agree with such submission. It is neither the pleaded case of the Plaintiff nor the pleaded case of the Defendant that the Properties were sold subject to the Car Park Leases. For the reasons stated in paragraphs 52 to 54 above, I do not consider that Clause (c) casts doubt on the Plaintiff’s pleaded case at all which is based on breaches of the Subject Warranties and consequently Clause 2.1.5, entitling him to rescind the transaction under Clause 2.5 and a return of the Deposit under Clause 2.6.

56.  For completeness, insofar as Mr Chan makes any additional pleading point that the Statement of Claim does not plead any full cause of action, I reject such submission. Paragraphs 9 to 22 of the Statement of Claim clearly pleads all the relevant material facts and provisions of the SPA relied upon entitling the Plaintiff to the reliefs sought in this action.

D5.  Alleged Delay

57.  Lastly, Mr Chan relies on an alleged delay on the part of the Plaintiff to resist summary judgment, in that the present action was commenced by the Plaintiff in January 2019, but the O.14 Summons was only taken out on 16 January 2023. Mr Chan contends that there is a delay of about 3 years, which is a ground for the Court to refuse summary judgment.

58.  I cannot agree with Mr Chan’s submission.

59.  As pointed out by Mr Lo for the Plaintiff, there is no principle that a plaintiff is not entitled to seek summary judgment merely as a result of delay if the application is otherwise justified.

60.  In Morison, Son & Jones (Hong Kong) Ltd v Yiu Wing Construction Co. Ltd [1989] 1 HKLR 432, 437J to 438B, the Court of Appeal held as follows:

“[…] In the light of the modern English practice as indicated by that case we do not consider that the concluding observation in McLardy v Slateum [(1890) 24 QBD 505] should be regarded as requiring summary judgment to be denied by reason only that delay is not satisfactorily explained. Order 14 provides a procedure for summary judgment where the court is satisfied that there is no defence to the claim. Although the rules clearly contemplate that ordinarily an application for summary judgment will be made before a defence has been filed, they impose no time limit and it is not for the court to take it upon itself to impose one indirectly as a matter of practice.

There may also be circumstances where the delay is material to and adversely affects the substance and merits of the application. However each case must depend on its own facts and the court should approach each application on the footing that if the plaintiff has satisfied it that notwithstanding the delay there is no defence to his claim, he is entitled to summary judgment, albeit subject to questions of costs on account of delay, unless there are special circumstances which make summary judgment unjustifiable.”

61.  Applying the aforesaid principles and approach in Morison, I do not consider that the time lapse between the commencement of this action and the O.14 Summons should preclude the Court from granting summary judgment in this case, by reason that the Defendant’s purported defences based on the interpretation of the SPA are simply not arguable and raise no triable issues. Although the parties have incurred time and costs in preparing witness statements in this action, it would be contrary to the underlying objectives of the CJR to require the parties (and the Court) to expend further time/costs to take this action to trial, when the Defendant has not shown any bona fide defence to the Plaintiff’s claim.

62.  The Defendant has also not shown any special circumstances which make summary judgment unjustifiable, by reason of any alleged delay.

E.  DISPOSITION

63.  For the reasons above, I dismiss the Defendant’s Appeal, with costs to the Plaintiff, and certificate for two counsel.