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DCCJ 2780/2014
IN THE DISTRICT COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
CIVIL ACTION NO 2780 OF 2014
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| BETWEEN |
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KUIT SAMUEL Y |
Plaintiff |
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and |
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KUIT SHU YIP BERNARD |
1st Defendant |
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| Before: Deputy District Judge Liu Man Kin in Chambers (open to public) |
| Date of Hearing: 4 February 2016 |
| Date of Decision: 16 February 2016 |
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DECISION
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INTRODUCTION
1. By a summons taken out on 30 June 2015 under Order 14 rule 1 (“the Summons”), the plaintiff applies for summary judgment against the 1st defendant. For reasons which I will explain later in this judgment, the terms of the order sought in the Summons have bearing on this application, and hence those terms are quoted in full below:-
“(1) a declaration that the 1st defendant has unlawfully cancelled the assignment respecting Section B of Lot No 4884 in Demarcation District No 116 (“the Subject Land”) and failed to complete the sale thereof in accordance with its terms and covenants;
(2) an order for specific performance of the conveyance and transfer of title of the Subject Land by the 1st defendant to the plaintiff;
(3) (1) the 1st defendant be directed to execute, within 14 days from the date of an order to be made herein, an assignment prepared by the plaintiff’s solicitors for the purpose of carrying out the order as per paragraph 2 above when each party shall bear and pay their own costs and expenses in relation thereto;
(2) should the 1st defendant fail to comply with the directions as per paragraph 3(1) above, the plaintiff be at liberty to make application to request the Registrar of District Court to execute the relevant assignment on the 1st defendant’s behalf and he 1st defendant shall indemnify the plaintiff for the costs of and occasioned by applying to the court for such purpose;
(4) alternatively, an order for interlocutory judgment in favour of the plaintiff against the 1st defendant on liability with damages to be assessed in lieu of specific performance;
(5) costs of this action.”
2. As the plaintiff is seeking specific performance of an agreement for the sale and purchase of the Subject Land, the Summons in fact should be taken out under Order 86 and not under Order 14. See Order 14 rule 1(3). Notwithstanding this irregularity, I proceed to consider the Summons on merits.
3. The plaintiff and the 1st defendant are son and father. They are indigenous villagers of Yuen Long.
THE PLAINTIFF’S CASE
4. The plaintiff’s case is that the father has agreed to sell the Subject Land to him to enable him to make an application to the Government for erection of a small house under the Small House Policy.
5. Since the plaintiff is seeking specific performance of an agreement for the sale and purchase of the Subject Land, it is important to see what is the agreement according to the plaintiff’s case.
6. The agreement pleaded in the Statement of Claim (“Agreement No 1”) is this:-
“6. The plaintiff and the 1st defendant had since orally agreed amongst themselves that the 1st defendant was to sell or convey a plot of land registered in the Land Registry as Section B of Lot No 4884 in Demarcation District No 116 in Yuen Long, New Territories, Hong Kong (“the Subject Land”) at the price of HK$400,000.00 in order that the plaintiff could obtain title thereto for the purpose of enabling him to make application to the Land Department for erection of a small house under the said Small House Policy.
7. It was one of the agreement between the plaintiff and the 1st defendant that the 1st defendant shall be responsible solely for payment of all legal costs and disbursements in connection with completing sale and purchase of the Subject Land.”
7. The agreement pleaded in the Reply is a different one (“Agreement No 2”):-
“7. (1) As to paragraph 8, the plaintiff avers that it was the agreement between the plaintiff and the 1st defendant that the plaintiff was to pay to him a tital sum of HK$700,000.00 for erection of small house on the Subject Land by the plaintiff payment of which was to be made in the following manner:-
(a) upon payment by the plaintiff to the 1st defendant the sum of HK$400,000.00 wherein the Purchase Price was included therein:-
(i) the 1st defendant was to transfer title of the Subject Land to the plaintiff; and
(ii) to assist the plaintiff to lodge application with the Yuen Long District Lands Office for erection of small house on the Subject Land;
(b) the balance of HK$300,000.00 was to be paid by the plaintiff to the 1st defendant over a period of 10 years from the date of transfer of title of the Subject Land to him.
(3) The plaintiff further avers as the 1st defendant has admitted in his Defence that he has accepted payment of HK$400,000.00 when the 1st defendant shall be obliged under the aforesaid agreement to transfer title of the Subject Land to the plaintiff.
3. As to paragraph 4, the plaintiff repeats paragraph 6 of his Statement of Claim. The plaintiff further avers that:-
(2) it was the 1st defendant who proposed to the plaintiff, who agreed to the relevant proposal, upon reliance being placed on the 1st defendant by reason of him being natural and lawful father of the plaintiff, that:-
(b) the relevant transaction was to take place by way of a sale and purchase when the consideration was to be marked as HK$500,000.00 (“the Purchase Price”) the sum of which was proposed by the 1st defendant.”
8. In the plaintiff’s 1st affirmation, the plaintiff said:-
“7(2) The 1st defendant told me that he had a piece of land in Yuen Long when he could convey it to me and thereafter assist me to make application to the Land Department for erection of a small house thereon. He also told me that he was conversant with the relevant procedures. In return, I was to pay him a total of HK$700,000.00
(8) (1) Having further discussed with the 1st defendant, I told him that I did not have sufficient financial resources to make full payment of HK$700,000.00 in one go. It was the verbal agreement that I was to pay him HK$400,000.00 and after that the 1st defendant would:-
(a) convey the piece of land in Yuen Land to me; and
(b) to assist me to lodge application with the Yuen Long District Lands Office for erection of small house on the said land.
(2) The balance of HK$300,000.00 was to be paid by me to the 1st defendant over a maximum period of 10 years from the date of transfer of title of the land to me.”
9. So the plaintiff’s evidence supports Agreement No 2 but not Agreement No 1.
10. The plaintiff does not specify at what time Agreement No 1 or Agreement No 2 was made.
11. The plaintiff in his 1st affirmation said that after entering into the agreement, he paid HK$400,000 to the 1st defendant in or around early 2013.
12. On or around 6 August 2013, he and the 1st defendant went to the office of the 2nd defendant, who was the solicitor introduced by the 1st defendant. The 2nd Defendant is acting for both the plaintiff and the 1st defendant in this transaction. In the solicitor’s office, the parties signed a memorandum of agreement for sale (“the Memorandum”), an assignment (“the Assignment”) and a Chinese letter to the 2nd defendant’s firm (“the Chinese Letter”).
13. The Memorandum is undated. As per the Memorandum, the agreed consideration for the sale and purchaser of the Subject Land between the 1st defendant as vendor and the plaintiff as purchaser is HK$50,000. The plaintiff says that he has not given any instruction to the 2nd defendant to put down HK$50,000 as the agreed consideration in the Memorandum. As he has already paid HK$400,000 to the 1st defendant which is more than HK$50,000, he has not raised any objection to the figure put down on the Memorandum. In the Memorandum, the “Completion Date” is left blank.
14. The Assignment is undated. As per the Assignment, the consideration for the 1st defendant assigning the Subject Land to the plaintiff is HK$50,000.
15. The Chinese Letter is undated, in which the plaintiff and the 1st defendant told the 2nd defendant’s firm the following:-
“有關上述物業之買賣價／訂金等即共港幣HK$50,000.00、雜項開支（包括差餉、地租、管理費、其他雜項開支及有關該物業的一切按金）及其他一切應收及應付的款項，我倆雙方已經在外核算及當面交收妥當，無需 貴行辦理，而關於該款項及雜項開支核算款項後若有一切糾紛。亦與 貴行無涉。”
16. During the hearing, Mr. Peter Yu, Counsel for the plaintiff, submits that the Memorandum and/or the Chinese Letter constitutes or records an agreement for sale and purchase of the Subject Land between the plaintiff and the 1st defendant (“Agreement No 3”).
17. In his 1st affirmation, the plaintiff said:-
“11. Before I left the office of the 2nd defendant, I did ask him about when the legal formality would be completed and when I could get the said Assignment. The 2nd defendant told me that it would be completed in about a month’s time from the date of signing and execution of the said Memorandum and the said Assignment.”
18. About one month after 6 August 2013, the plaintiff started to chase the 2nd defendant for the conveyancing documents. At a time before 21 November 2013, the 2nd defendant told the 1st defendant that the transaction had been cancelled. The 1st defendant requested for the return of the Assignment. On or around 21 November 2013, the 2nd defendant returned the Assignment to the 1st defendant, with the word “CANCELLED” marked on each page.
19. The 1st defendant has not informed the 2nd defendant of the cancellation of the Assignment nor the reason therefor.
THE 1st DEFENDANT’S CASE
20. The 1st defendant says that there is an oral sale and purchase agreement concerning (a) the Subject Land between him as vendor and the plaintiff as purchaser; and (b) provision of assistance by the 1st defendant to the plaintiff in the process of applying to the Government for permission to erect a small house on the Subject Land. The agreed consideration for this package is HK$700,000.
21. The 1st defendant said in paragraph 6(d) of his affirmation that the payment timetable is as follows:-
(a) HK$400,000 to be paid after signing the relevant documents to effect an assignment of the Subject Land at the 2nd defendant’s office;
(b) HK$100,000 to be paid one month from the date of visiting the 2nd defendant’s office;
(c) HK$100,000 to be paid three months from the date of visiting the 2nd defendant’s office;
(d) HK$100,000 to be paid within 1 year from the date of visiting the 2nd defendant’s office.
22. The 1st defendant admits that the plaintiff has paid HK$400,000 to him.
23. The 1st defendant also agrees that on or around 6 August 2013, the plaintiff and him signed the Memorandum, the Assignment and the Chinese Letter in the 2nd defendant’s office. However, those documents were signed in escrow, as the 1st defendant would have to leave Hong Kong to return to his home in the United States in about one week’s time at that moment. Although the documents were signed, they would not take effect until full payment of the agreed consideration by the plaintiff.
24. The 1st defendant pleaded the following in his Defence:-
“11. Paragraph 12 is denied. The 1st defendant avers that the 1st defendant, after returning to United States of America, on or about 17 September 2013 telephoned the 2nd defendant and gave the 2nd defendant instructions no to proceed with the Sale because the plaintiff had yet to pay the full consideration for the Subject Land to the 1st defendant. On or about 8 October 2013, the 1st defendant again telephoned the 2nd defendant and instructed the 2nd defendant that because the plaintiff had still not paid the full consideration for the Subject Land to the 1st defendant, the 1st defendant decided not to sell the Subject Land to the plaintiff.”
ANALYSIS
25. There are several problems in the plaintiff’s case.
1st Problem - Specific performance of which agreement
26. As set out in the beginning of this judgment, Agreement No 1 (the one pleaded in the Statement of Claim) and Agreement No 2 (the one pleaded in the Reply) are 2 different agreements.
27. If the plaintiff is seeking specific performance of Agreement No 1, the evidence filed by the plaintiff does not support Agreement No 1. In fact, the evidence filed by the plaintiff contradicts Agreement No 1.
28. If the plaintiff is seeking specific performance of Agreement No 2, that agreement is not pleaded in the Statement of Claim. While there can be an application for summary judgment under Order 86 without having a statement of claim (see Hong Kong Civil Procedure 2016, Volume 1, para 86/1/2), if a plaintiff chooses to file a statement of claim before making the application for summary judgment, the plaintiff can only get judgment on the basis of the cause(s) of action pleaded in his statement of claim.
29. The cause of action pleaded in the Statement of Claim is the 1st defendant’s breach of Agreement No 1 by refusing to complete the same. The plaintiff cannot get summary judgment for specific performance of Agreement No 2 based upon the Statement of Claim, for Agreement No 2 has never been pleaded in the Statement of Claim.
30. No doubt the plaintiff has pleaded Agreement No 2 in the Reply. However, there is equally no doubt that a plaintiff cannot put forward a new cause of action in his reply. See Hong Kong Civil Procedure 2016, Volume 1, para.18/3/2:-
“…… a plaintiff must not put forward in his reply a new cause of action which is not raised either in the writ or the statement of claim. If the plaintiff, after seeing the defence, finds it necessary to rely on a cause of action which has not been raised in the writ or statement of claim, normally the proper way is to amend the writ and the statement of claim.”
31. See also Magic Score Limited v. The Hong Kong and Shanghai Banking Corporation Limited and Another (HCA 11077/1994 23 June 2006), Lam J (as he then was):-
“20. Thus, it is not appropriate to raise in the reply a new cause of action (see Hong Kong Civil Procedure 2006 Paragraph 18/3/2). A plaintiff who wishes to pursue an additional or alternative cause of action should do so by amending the statement of claim.
21. This is not simply a technical rule. A defendant to an action is entitled to know from the writ and statement of claim what are the precise limits of claims he is faced with. He should focus on the same and then put forward his case in his defence and prepare for the evidence accordingly. He should be able to conduct the litigation and arrange his affairs on the basis that all the relief and remedies claimed against him have been set out in the statement of claim, subject to any amendments that might be made to that document. He could, for example, consider whether to make any payment into court or any offer for settlement based on this. He could also decide what is the proportionate time and costs that he should spend on the litigation by reference to those claims. A reply (or any subsequent pleadings) is not the right place for new claims to be put forward as it does not contain any prayers and a defendant does not have any automatic right to file any pleadings subsequent to reply (see Order 18 rule 4). It would also be confusing for new claims to be buried amongst other positive allegations made in genuine reply to a defence.”
32. Although Mr Yu suggests that the agreement between the parties can be Agreement No 3, Mr Yu fairly accepts that Agreement No 3 has never been pleaded in the plaintiff’s pleadings. Further, the evidence filed by the plaintiff shows that the real agreement is Agreement No 2 and not Agreement No 3. The plaintiff simply cannot get specific performance of an agreement which is not the agreement pleaded in his Statement of Claim and not the agreement supported by his evidence.
2nd Problem - Essential terms missing
33. In order to have specific performance of an agreement, the agreement must be a concluded agreement, i.e. the parties have already reached an agreement on all the essential terms.
34. As pointed out by the Court of Final Appeal in Kwan Siu Man v. Yaacov Ozer (1997-98) 1 HKCFAR 343, the completion date is an essential term of a contract for sale and purchase of land in Hong Kong – per Litton PJ at 355C-D:-
“as is common knowledge in Hong Kong, the property market is highly volatile. Whatever might have been the position in England in the last century - when the concept of an "open contract" was first developed in a climate of a stable pound sterling and no inflation - in the Hong Kong of today, the date of completion is an essential term of any contract for the sale and purchase of land: To the extent that in the case of a provisional agreement in the common form in use here, time for completion would normally be treated as of the essence of the agreement, even though no express provision to that effect is in the agreement: see Wong Wai Chi v. Cheung Kwok Fung [1996] 3 HKC 287.” (Emphasis added)
35. In Agreement No 1, there is no completion date. One cannot see any agreed date for the payment of HK$400,000 by the plaintiff, and any agreed date for the tendering of the conveyance by the 1st defendant. Agreement No 1 cannot be a concluded agreement.
36. In Agreement No 2, there is no agreed due date for the payment of the initial HK$400,000. Further, there is no agreed timetable for the payment of the balance of HK$300,000 over the 10 years time – by how many instalments and the due date of each instalment in those 10 years, all these are not known. The payment dates must be essential terms. Without having an agreement on these essential terms, Agreement No 2 cannot be a concluded agreement.
37. In Agreement No 3, the completion date is left blank. Agreement No 3 also cannot be a concluded agreement.
38. Without having a concluded agreement, there is nothing which can be specifically performed.
3rd Problem – no clear evidence showing an enforceable agreement
39. In respect of Agreement No 1 and Agreement No 2 raised by the plaintiff in the Statement of Claim and in the Reply respectively, there is no clear evidence showing that these agreements are enforceable agreements.
40. Conveyancing and Property Ordinance (Cap.219), s 3 provides:-
“(1) …… no action shall be brought upon any contract for the sale or other disposition of land unless the agreement upon which such action is brought, or some memorandum or note thereof, is in writing and signed by the party to be charged or by some other person lawfully authorized by him for that purpose.
(2) This section applies to contract or other dispositions whenever made and does not affect the law relating to part performance or sales by the court.”
41. According to the plaintiff’s case, both Agreement No 1 and Agreement No 2 are oral agreements. They would not be enforceable unless the same have been reduced in writing, or supported by part performance.
42. Mr Yu tries to rely upon the Memorandum. However, the agreement therein is clearly Agreement No 3, not Agreement No 1 or Agreement No 2.
43. Mr Yu submits that the payment of HK$400,000 itself is part performance. However, as said by the Court of Final Appeal in World Food Fair Ltd v Hong Kong Island Development Ltd (2006) 9 HKCFAR 735, payment itself does not necessarily constitute an act done in performance of a concluded agreement, it can also be an act done in anticipation of a concluded agreement. In that case, Ribeiro PJ said:-
“27. In my view, there is a circularity inherent in the Court of Appeal’s approach. In regarding payment of the deposit and the giving of possession for fitting out works as “performance” which decisively proved the existence of a concluded contract, the Court of Appeal implicitly assumes that there existed a concluded contract of which such acts constituted “performance”, which “performance” is then relied on to prove the existence of that very contract.
28. Such acts are no doubt consistent with the existence of a concluded contract but they do not prove its existence. They are no less consistent with being acts done in anticipation of a legally binding agreement which the parties confidently expected to enter into but which never materialised – which is what the Judge found was the position in the present case.
29. It is not uncommon for parties in the course of negotiations which are still incomplete or subject to contract to pay deposits or to allow builders access to the premises. Such acts are no doubt done with a view to commercial advantage but they involve the risk that the other party may decide to withdraw from the deal without any contract coming into being. Many examples of such conduct can be found, for instance, in textbooks on the law of restitution regarding claims for recovery of expenses incurred or in respect of benefits conferred where anticipated contracts do not materialise.”
44. I take the view that the plaintiff and the 1st defendant may have not yet reached a concluded agreement, and the payment of the HK$400,000 may well be an act done in anticipation of a concluded agreement.
45. There is no clear evidence showing that Agreement No 1 or Agreement No 2 is an enforceable agreement.
4th problem – no delivery of assignment
46. Mr Yu submits that regardless of whether there is any enforceable sale and purchase agreement between the parties, the 1st defendant in fact has already assigned the Subject Land to the plaintiff by executing the Assignment.
47. The issue here is whether the Assignment has been delivered by the 1st defendant to the plaintiff.
48. In Bibby Financial Services Ltd v Magson [2011] EWHC 2495 (QB) at [335], per Judge Richard Seymour QC:-
“The critical thing is that the person who has signed the deed must have separately indicated that he intends to be bound by the deed. Mere signature is not enough. Nor is it enough that what looks like a deed has been given to the person who appears to be the beneficiary of it – the issue is not whether the document has been physically handed over to the beneficiary, but whether the person whose deed it is supposed to be intended to be bound by it.”
49. In this regard, paragraph 11 of the plaintiff’s 1st Affirmation (which is drafted by the plaintiff’s solicitors) is important. In that paragraph, the plaintiff said that after leaving the 2nd defendant’s office, he asked the 2nd defendant when the legal formality would be completed and when he could get the Assignment. The 2nd defendant told him that it would be completed in about a month. This paragraph suggests notwithstanding the signing of the Assignment by the 1st defendant in the 2nd defendant’s office, the transaction has not yet been completed.
50. Further, in paragraph 3 of the Summons, the plaintiff seeks an order to compel the 1st defendant to execute an assignment to effect the specific performance as claimed in paragraph 2 of the Summons. If the plaintiff really takes the stance that the Assignment is a deed signed, sealed and delivered by the 1st defendant, the plaintiff would be home and dry by getting the declaration claimed in the first half of paragraph 1 ie a declaration to the effect that the cancellation of the Assignment is unlawful. The second half of paragraph 1, as well as paragraphs 2 and 3 of the Summons would be unnecessary.
51. However, the plaintiff is seeking an order in terms of paragraphs 1, 2 and 3 of the Summons. An order in these terms would only be necessary if:-
(a) The Assignment is a deed executed in escrow, and the plaintiff would want to have a declaration in terms of the first half of paragraph 1 of the Summons to declare that the cancellation of that deed in escrow is unlawful.
(b) As there has not yet been a deed signed, sealed and delivered by the 1st defendant effecting the transfer of the Subject Land to the plaintiff, the second half of paragraph 1, and paragraphs 2 and 3 of the Summons are necessary.
52. Even before looking at the evidence filed by the 1st defendant, I am not satisfied that the Assignment has been delivered by the 1st defendant to the plaintiff.
Plaintiff’s failure in raising a prima facie sustainable case
53. In an application for summary judgment, a plaintiff must raise a prima facie sustainable case in the first place. After that, unless the defendant can show cause against the application to the satisfaction of the court, summary judgment would be given. See Hong Kong Civil Procedure 2016, Volume 1, paragraph 14/4/1.
54. In other words, in order to succeed in an application for summary judgment, a plaintiff has to make his own house in order in the first place.
55. For the reasons above, in my judgment, the plaintiff’s own house is not in order. The plaintiff has failed to raise a prima facie sustainable case in the first place. Accordingly, the plaintiff cannot succeed in this application.
Problems in the 1st Defendant’s case
56. I have not overlooked the problems in the 1st Defendant’s case. There are 2 problems.
57. The 1st problem is on the question of the payment timetable, paragraph 11 of the Defence and paragraph 6(d) of the 1st defendant’s affirmation contradicts each other.
58. The plaintiff and the 1st defendant visited the 2nd defendant’s office on or around 6 August 2013.
59. The 1st defendant pleaded in paragraph 11 of his Defence that the plaintiff had not paid the “full consideration” by 17 September 2013, and the plaintiff had still not paid the “full consideration” by 8 October 2013. Due to the non-payment, the 1st defendant decided not to sell the Subject Land to the plaintiff. So according to this plea, the plaintiff would be obliged to pay the all the remaining balance, ie the HK$300,000, at a time before 17 September 2013.
60. However, according to the payment timetable set out in paragraph 6(d) of the 1st defendant’s affirmation, the plaintiff is only required to pay HK$100,000 within one month after the visit to the 2nd defendant’s office. The remaining HK$200,000 would not yet be due for payment either on 17 September 2013 or 8 October 2013.
61. Mr Kay K W Chan, Counsel for the 1st defendant, submits that the term “full consideration” in paragraph 11 of the Defence is not correct. However, so far the 1st defendant has not amended his Defence.
62. The 2nd problem is at what time the Subject Land would be transferred to the plaintiff.
63. In his affirmation, the defendant said in paragraph 6(b):-
“6(b) I would only transfer the title of the Subject Land to the plaintiff upon the settlement of third instalment of Full Consideration by the plaintiff which was scheduled to be within three months of the visit to the office of the 2nd defendant.” (Emphasis added)
64. In his affirmation, the 1st defendant said at paragraph 7:-
“7. Therefore, paragraph 8 of the P’s Affirmation is untrue. I wish to add that what is alleged by the plaintiff in paragraph 8 of his Affirmation is against common sense because even though the plaintiff and I are of a father and son relationship, I would still want to secure the payment of the balance of HK$300,000.00 and the most viable way of protecting myself would be not to transfer the title of the Subject Land to the plaintiff until I was paid the Full Consideration. I would have never agreed to be paid for the balance of HK$300,000.00 over a period of 10 years and after the title of the Subject Land had already been transferred to the plaintiff, for which my interests would be least protected.” (Emphasis added)
65. Clearly, as to when the Subject Land would be transferred to the plaintiff, the version in paragraph 6(b) of the 1st defendant’s affirmation is different from the version in paragraph 7 of the same affirmation.
66. However, since the plaintiff has failed to raise a prima facie sustainable case in the first place, notwithstanding these problems in the 1st defendant’s case, the plaintiff would not be entitled to have the summary judgment sought in the Summons.
Disposal of the Summons
67. Since my conclusion is that the plaintiff has not raised a prima facie sustainable case in the first place, the proper disposal of the Summons is the dismissal of the same. The plaintiff should not take out an application for summary judgment before making his own house in order.
68. I have heard the parties’ submissions on costs. In my judgment, the proper costs order in these circumstances is costs to the 1st defendant forthwith.
CONCLUSION
69. For the reasons above, I make the following order:-
(a) the Summons be dismissed;
(b) costs of the Summons be paid by the plaintiff to the 1st defendant forthwith, with a certificate for Counsel, to be taxed if not agreed.
70. It remains for me to thank Counsel for the valuable assistance provided.
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( Liu Man Kin ) |
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Deputy District Judge |
Mr Peter Yu, instructed by Y H Yeung and Associates, for the plaintiff
Mr Kay K W Chan, instructed by S W Tai & Co, for the 1st defendant
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