TIN SHUI WAI DEVELOPMENT LTD v. CHENG HOI CHU

HCA 3595/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 3595 OF 2003

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J U D G M E N T

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1.  The defendant had agreed with the plaintiff to purchase a flat which was part of an overall development the plaintiff was in the course of building.  She paid some money on account but when the balance was called for she refused or otherwise did not pay and the deal went off.  The plaintiff resold the flat but at a lower price.  By this action it sues to recover the shortfall.  The defence as pleaded is that the plaintiff was in breach of an implied term of their contract; alternatively, that she was misled into entering into the contract; in any event she was under no obligation to complete.  She denies any liability to the plaintiff and counterclaim for a declaration that the contract has been terminated and for damages.

2.  By this application the plaintiff seeks to have the defence and counterclaim struck off under Order 18 rule 19 RHC and the court’s inherent jurisdiction, and for judgment to be entered in its favour with damages to be assessed.

History

3.  In 1985 the Government of Hong Kong granted to the plaintiff tracts of land in the New Territories to enable it to develop residential complexes.  One of these, known as TSWTL No. 6, came to be developed under the name Maywood Court.

4.  In terms of the Conditions of Grant the plaintiff was prohibited from assigning or parting with possession of any part of the development until the Conditions of Grant had been complied with.  But by a further provision the plaintiff was entitled to enter into agreements to sell off part as undivided shares upon obtaining the consent of the Registrar-General (Land Officer).

5.  In March 1997 the plaintiff was given the requisite permission to sell by agreement the residential units and car parking spaces in the development that was to become Maywood Court.  The development came to be promoted; brochures were printed.  The upshot was that the plaintiff and defendant contracted for the sale and purchase of one of the flats to be built under an agreement for sale and purchase dated April 1997.

6.  The Agreement as I shall call it followed a standard form devised by the Government and Law Society of Hong Kong for the sales and purchases of residences in developments not completed at the time of contract, and was in common form with those entered into for other sales and purchases in the development.  The purchase price was HK$3.784 million.  Of this a downpayment was due to be paid in stages; by 1 November 1997 this had been duly paid and on time.  The balance purchase price of HK$2,648,800 fell due to be paid on completion, being “within 14 days of the purchaser being notified in writing that the vendor is in a position validly to assign the property to the purchaser”.

7.  The plaintiff as developer was contractually committed to complete the development by 31 December 1997, but subject to extensions of time that might be granted by the designated Authorized Person (clause 4 (1)(c)).  If however the plaintiff had failed to complete by 31 December 1997 or a duly authorized extension, the defendant had the right to rescind the Agreement.  But if she did not do so within 28 days of the contractual deadline she was deemed to have elected to wait for completion of the development; clauses 4 (4)(a) and (b).

8.  If the development was not complete within 6 months of 31 December 1997 or such extended date as may be granted by the Authorized Person the defendant had a further option to rescind or wait for completion of the development; clause 4 (4)(c).

9.  Clause 5 was pertinent to the matter of completion.  By its terms the plaintiff was to notify the defendant: “that he is in a position validly to assign the property within 1 month of the issue of the Certificate of Compliance or the Director of Lands’ Consent to Assign, whichever shall first happen.”

10.  On 22 December 1997 the Authorized Person certified the development have been completed.  The following day the solicitors for the plaintiff applied to the Director of Lands for the Consent to Assign, sought under clause 5.

11.  As from 31 December 1997 the defendant had the opportunity to rescind, but took no steps.  That option expired on 28 January 1998.

12.  On 4 June 1998 the plaintiff gave an undertaking to the Government for the completion of certain works in the development and provided a bank bond in support.  This triggered the next event.

13.  On 17 June 1998, the Director of Lands gave his Consent to Assign the units in the development, including that purchased by the defendant.  The defendant was then given 14 days after 30 June 1998 to complete, but took no steps.  She was given a further 21 days after 28 July 1998 to complete, with notice that any further default would entitle the plaintiff to terminate the agreement and take such action necessary to recover any loss.

14.  Still the defendant did nothing.  Thereafter the plaintiff terminated the agreement and resold the property.  But by this time there had been a significant collapse in Hong Kong’s housing market.  There was a loss notwithstanding the credit of the downpayment made by the defendant.  The writ and statement of claim were filed in September 2003.

The Pleaded Defence

Misrepresentations

15.  The defendant pleaded that on or about 30 March 1997 a salesman of the plaintiff misrepresented to her that she could expect possession of her flat in early 1998, on the strength of which she signed the Agreement.  She further pleaded that in January 1998 she was told by a member of the plaintiff’s staff that delivery would be on time and she should not worry about it.  And when she made enquiry of the plaintiff’s solicitors at about the same time she got a similar response.  As a result of these misrepresentations she took no steps to rescind the Agreement.

16.  It is pleaded further or in the alternative that the representations upon which the defendant relied were made fraudulently.

Implied Term

17.  The defendant further pleaded that to enable her to exercise her rights of rescission provided by clause 4 of the Agreement there had to be implied in the Agreement a term requiring the plaintiff to answer her questions or requisitions concerning whether the development had been completed in accordance with clause 4 (1)(c) on or by 31 December 1997.  The plaintiff had breached that implied term by failing to answer her questions concerning whether the development had been completed by 31 December 1997.

The Law

18.  The power to strike out any pleading is afforded by Order 18 rule 19 RHC which requires the court to be satisfied that it:

(a)	discloses no reasonable cause of action or defence; or
(b)	is scandalous or vexatious; or
(c)	may prejudice embarrass or delay the fair trial of the action; or
(d)	is otherwise an abuse of the process of the court.

19.  It is a discretion that should be exercised only in plain and obvious cases.  The claim (or defence) must be obviously unsustainable, the pleading unarguably bad, and it must be impossible, not improbable for the claim (or defence) to succeed before it may be struck out; see the White Book 18/19/4, and Byjoy Limited v Thorogood Estates Limited [1985] 2 HKC.

20.  A representation which is a misrepresentation is actionable only if it is a statement of fact.  A statement of opinion is not a misrepresentation; see Chitty on Contracts, twenty-ninth edition 6 – 004.  The exception is where it can be established that the person who expressed the opinion did not hold it, or could not honestly have held it, in which case it may be regarded as a statement of fact; Chitty 6 – 005, 6 – 006.

21.  A representation to be actionable has to be made before the contract was entered into or, since the passage into law of the Misrepresentation Ordinance Cap 284, was so made and then became a term of the contract; Chitty 6 – 002.

22.  Fraud, if it be pleaded, must be so with the utmost particularity; ADS v Wheelock Marden [1994] 2 HKC 264, Bokhary JA at p 270.

23.  Whether an implied term can be read into a contract must depend on the circumstances; but it can only be so to give efficacy to the contract; see Reigate v Union Manufacturing Co. [1918] KB 592.

24.  It follows that if a contract is workable without addition of the implied term then it should not be added.

Determination

25.  The representation that the defendant alleges led her to sign the Agreement was, as to the timing of a future event, a statement of opinion.  As to whether it was honestly made, there is no fact pleaded to support an allegation that it was not.  There is no fact pleaded to support the allegation of fraud.  That plea is unsustainable.

26.  For the same reasons the pleas of misrepresentation made in early 1998 are also bad.  There is the further factor that they were made, if at all, after the defendant had committed to the Agreement.

27.  As to the existence of an implied term and the alleged breach of it; that falls over at the first hurdle.  The Agreement as couched was as I find quite workable without the incorporation of an implied term.  It was in a form that had been drafted using the combined efforts, resources and experience of the Law Society and Government.  It was utilized by the plaintiff in the sales of all the residences in the developments of which the defendant was a part.  This plea is unsustainable also.  Although it hardly matters the particulars of the defence do not disclose an arguable case of breach of such a term, if it were implied.

28.  Because of these determinations there is no further sustainable plea in the defence and counterclaim.  The plaintiff was in a position and ready to complete; the defendant was in breach by failing to complete; such default was explicable by the drastic fall in the property market.  But she has failed to demonstrate a reasonable defence.

29.  The result is that under Order 18 rule 9 (1)(a) RHC I strike out the Defence and Counterclaim and enter judgment for the plaintiff with damages to be assessed.

30.  Costs, nisi, are to the plaintiff.