TRILLION STAR (ASIA) LTD v. GAIN FORTUNE CORPORATION LTD

CAMP 95/2025, [2025] HKCA 795

On An Intended Appeal From [2025] HKDC 65 &

[2025] HKDC 763

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO 95 OF 2025

(ON AN INTENDED APPEAL FROM DCCJ NO 4722 OF 2023)

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J U D G M E N T

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Hon Chow JA (giving the Judgment of the Court):

INTRODUCTION

1.  This is the Defendant’s renewed application for leave to appeal against the order of Deputy District Judge Alfred Cheng dated 16 January 2025 (“the Order”) dismissing the Defendant’s appeal against the summary judgment given by Master Andrea Yu on 5 September 2024 in favour of the Plaintiff against the Defendant for the sum of HK$998,000 together with interest thereon and the costs of the action below.

2.  Having considered the papers before us, we are of the view that it is appropriate to deal with the Defendant’s application on paper without an oral hearing pursuant to Order 59, rule 2A(5)(a) of the Rules of the High Court, Cap 4A.

BACKGROUND FACTS

3.  The Plaintiff is a limited company carrying on the business of development, investment and management of landed properties in Hong Kong, and was desirous of acquiring (i) No 2, (ii) No 4, and (iii) Nos 6, 8, 10 and 12, Tit Hong Lane, Hong Kong (collectively the “Site”), for the purpose of a proposed redevelopment project.

4.  The Defendant is the registered owner of G/F, No 6 Tit Hong Lane, Hong Kong (“the Property”).

5.  According to the Plaintiff:

(1)  In around early 2023, it appointed Reputation (Shop) Agency Limited (“Reputation”) as its agent for the intended acquisition of, inter alia, the Property.

(2)  On 16 February 2023, Mr Kwong Mong (“Kwong”) of Reputation met Mr Yeung Shiu Cheng (“Yeung”) of the Defendant in a restaurant. On that occasion, Kwong passed a cheque of HK$1 million issued by Gavison Group Holdings Limited drawn in favour of the Defendant, an unsigned provisional agreement for the sale and purchase of the Property (“the Provisional Agreement”), and an undertaking in Chinese (“the Undertaking”) to Yeung.

(3)  At that meeting, Yeung took the cheque, and signed the Provisional Agreement and the Undertaking on the Defendant’s behalf. In the Undertaking, the Defendant acknowledged that –

(a)  it received HK$1 million from the Plaintiff as earnest money for the intended purchase of the Property; and

(b)  in the event that the Plaintiff should decide not to proceed with the purchase of the Property, the Defendant irrevocably undertook to, after deducting a sum of HK$2,000 from the earnest money as compensation, refund HK$998,000 to the Plaintiff within 10 days upon receipt of the Plaintiff’s written notice.

(4)  On 3 July 2023, Reputation wrote on behalf of the Plaintiff to inform the Defendant that the Plaintiff had decided not to proceed with the purchase of the Property, and requested the Defendant to refund the sum of HK$998,000 to the Plaintiff pursuant to the Undertaking.

(5)  The Defendant failed or refused to pay the Plaintiff the sum of HK$998,000 or any part hereof.

6.  On 26 October 2023, the Plaintiff commenced an action in the District Court (DCCJ 4722/2023) against the Defendant for recovery of the said sum of HK$998,000 on the ground of breach of the Undertaking on the Defendant’s part.

7.  The Defendant accepted that it received the sum of HK$1 million from the Plaintiff. It also accepted that a meeting between Kwong and Yeung took place on 16 February 2023. It argued, however, that the Plaintiff was not entitled to be refunded the sum of HK$998,000 in reliance upon the Undertaking on various grounds:

(1)  The Undertaking was invalid for want of consideration, or was supported by past consideration only.

(2)  Irrespective of the above, there was a concluded agreement between the Plaintiff and the Defendant when Yeung signed the Provisional Agreement in triplicate and returned them to Kwong on 16 February 2023. Further, the Defendant later obtained, in the course of the discovery process in the proceedings below, copies of the Provisional Agreement showing that the Plaintiff had also signed on it. The Undertaking lapsed in its effect upon the conclusion of the Provisional Agreement.

(3)  As there was part performance of the Provisional Agreement, the parties’ bargain remained extant. Since the HK$1 million was part of the deposit for the purchase of the Property by the Plaintiff, there was no obligation on the Defendant’s part to repay the deposit to the Plaintiff.

(4)  The Defendant did not receive Reputation’s letter of 3 July 2023.

THE JUDGE’S DECISION

8.  As earlier mentioned, the Plaintiff obtained summary judgment of its claim against the Defendant from Master Andrea Yu on 5 September 2024. The Judge heard the Defendant’s appeal against the Master’s decision on 3 January 2025, and gave a written decision on 16 January 2025 (“the Decision”). He held that the Defendant had failed to raise any triable defence and dismissed the Defendant’s appeal. The Judge’s reasons are set out at §§11-15 of the Decision, which may be summarised as follows:

(1)  The Undertaking was supported by good consideration, in that in exchange for the Defendant’s promise to return the earnest money upon notice, the Plaintiff agreed that the Defendant could deduct HK$2,000 from the earnest money if it was indeed to be returned.

(2)  Since good consideration was shown on the face of the Undertaking, it was strictly irrelevant to consider the terms of the Provisional Agreement.

(3)  Even if the terms of the Provisional Agreement were to be taken into account, the Undertaking was still supported by consideration because (i) the Undertaking and the Provisional Agreement were signed by Yeung contemporaneously, and (ii) the Undertaking could be said to have varied the Provisional Agreement by allowing the Defendant to retain HK$2,000 out of the earnest money as compensation, notwithstanding the Plaintiff would have a right, under Clause 24 of the Provisional Agreement, to recover from the Defendant the earnest money in full in the event that the plot ratio allowed by the Government for the redevelopment of the Site was below 15.

(4)  The defence that the Undertaking was only supported by past consideration did not arise, as the present case was not that the Defendant was already entitled to keep the HK$1 million paid by the Plaintiff.

(5)  The Undertaking did not contain any conditions upon which it would lapse. Nor was there sufficient evidence put forward by the Defendant to support its interpretation that the Undertaking had lapsed in its effect upon the conclusion of the Provisional Agreement, even if one took into account the terms of the Provisional Agreement, in that Clause 24 clearly contemplated that the earnest money was not deemed to have been subsumed as part of the deposit for the purchase of the Property.

(6)  The Defendant’s denial of receiving the letter of 3 July 2023 from Reputation was a bare allegation unsupported by evidence. In any event, the commencement of the present action was sufficient notice to the Defendant for the return of the sum of HK$998,000 to the Plaintiff.

9.  Pausing here, we should mention that, at the hearing before the Judge, the Defendant also argued that the Undertaking was not properly executed by it in that the formalities requirement of s 127 of the Companies Ordinance, Cap 622, had not complied with. This argument was rejected by the Judge at §10 of the Decision. Since the Defendant has not raised this argument again in the present application, we do not propose to deal with it in this judgment.

10.  On 7 May 2025, the Judge made an order dismissing the Defendant’s application for leave to appeal against the Order.

THE PRESENT APPLICATION

11.  By a summons taken out on 21 May 2025 (“the Summons”) in the Court of Appeal, the Defendant seeks (i) an order to set aside the Judge’s order of 7 May 2025 refusing to grant leave to appeal, and (ii) leave to appeal against the Order. Following the approach in Tang Chai On v Tang Sing Ki [2016] 5 HKLRD 104, at §§3-8, we shall treat the present application as a renewed application for leave to appeal against the Order.

12.  In the draft Notice of Appeal attached to the Summons, the Defendant contends that the Judge, in finding that the Defendant had failed to raise any triable defence, committed errors of fact and law, and failed to take into account or proper account of various matters arising from the Plaintiff’s pleaded case and/or the evidence. The Defendant’s intended grounds of appeal are elaborated in the Written Statement of the Defendant lodged on 21 May 2025.

DISCUSSION

13.  The relevant principles for (i) granting leave to appeal, and (ii) granting leave to defend in a summary judgment application, are well established, and will not repeated here. In what follows, we shall consider the seven broad intended grounds of appeal raised in the Written Statement of the Defendant.

14.  “Para.11 – consideration” (§18 of the Written Statement of the Defendant): we shall first deal with the Defendant’s contention that the Undertaking was not supported by any consideration. Under this ground, the Defendant argues that the Judge erred in holding that the Undertaking was supported by consideration. He should have found at least an arguable case that the HK$1 million paid by the Plaintiff became part of the 1^st deposit and consideration payable under the Provisional Agreement. For the Undertaking to be valid, separate consideration must be given, and “such consideration cannot be given or extracted from the HK$1,000,000 which is exclusively consideration for the provisional agreement or at least arguably so”.

15.  This argument has no merit. When considering the issue of whether the Undertaking was supported by consideration, it is important to have regard to the factual background of the transaction between the Plaintiff and the Defendant. The Plaintiff was desirous of carrying out a redevelopment of the Site, and was in the process of acquiring, or negotiating for the acquisition of, sufficient undivided shares of the Site in order to qualify for an application under the Land (Compulsory Sale for Redevelopment) Ordinance, Cap 545. The Plaintiff was willing to pay a sizable sum to the Defendant as earnest money for its intended purchase of the Property, but wished to reserve the right to cancel the proposed transaction. There could be many reasons why the Plaintiff might not wish to proceed with the intended purchase of the Property after paying the earnest money to the Defendant. For example, the Plaintiff might not be able to acquire the prescribed statutory percentage of undivided shares, and the intended redevelopment project could not be carried through. Another possible reason would be that the Plaintiff was unable to obtain from the relevant Government authorities approval for what it considered to be an appropriate plot ratio for the proposed development to make the redevelopment project commercially viable or profitable. These possibilities were well understood by the parties, as reflected in Clauses 12 and 24 of the Provisional Agreement. There could be other reasons why the Plaintiff might not wish to proceed with the proposed redevelopment project. The Undertaking provided the Plaintiff with an easy way out of the proposed acquisition of the Property without the need to assign any particular reason for its decision, and enabled the Plaintiff to obtain a refund of the earnest money at a low cost. The Defendant’s promise to refund the earnest money was given in return for the Plaintiff’s payment of HK$1 million in the first place and the Plaintiff’s agreement that the Defendant could retain HK$2,000 as compensation in the event that the Plaintiff should decide not to proceed with the purchase of the Property. In this regard, it is wrong to look at the strict chronological sequence of whether the cheque was handed over prior to or after the signing of the Undertaking by the Defendant. Those acts were done contemporaneously, though not simultaneously, as part of one transaction. At the time when the Plaintiff paid the HK$1 million to the Defendant, the parties had not yet entered into any binding Provisional Agreement. The payment of HK$1 million was in the character of earnest money for the proposed purchase of the Property by the Plaintiff, and could not have been the 1^st deposit payable under the Provisional Agreement at that stage. Whether the earnest money later became part of the 1^st deposit under the Provisional Agreement is a matter which we shall discuss below. In our view, there can be no doubt that the Undertaking given by the Defendant was supported by consideration moving from the Plaintiff.

16.  “Para.11.2. – relevance/irrelevance of the provisional agreement” (§16 of the Written Statement of the Defendant): the Defendant argues that the Judge erred in concluding that it was strictly irrelevant to consider the terms of the Provisional Agreement when on the face of the Provisional Agreement, the earnest money was also consideration in support of the Provisional Agreement.

17.  This argument can be disposed of shortly. The Defendant’s complaint relates to §11.2 of the Decision, where the Judge stated that “[s]ince good consideration was shown on the face of the undertaking, it is strictly irrelevant to consider the terms of the provisional agreement”. It is important to appreciate that this statement was made by the Judge in the context of considering the Defendant’s argument that the Undertaking was not supported by consideration, an argument which we have already rejected. The fact that under Clause 2(a) of the Provisional Agreement, it was contemplated that the earnest money paid by the Plaintiff would be treated as part of the 1^st deposit payable by the Plaintiff when the parties entered into the Provisional Agreement (於買賣雙方簽署本合約之前，買方已付予賣方誠意金 港幣壹佰萬元正 (HK$1,000,000.00) (“誠意金”)；當買賣雙方簽署本合約之同時，誠意金即成為本合約於該物業買賣之第一次訂金的部分) has no relevance to the question of whether the Undertaking was or was not supported by consideration. We do not consider the Judge’s statement at §11.2 of the Decision, read in its proper context, to be erroneous.

18.  “Para.11.3. – variation of the provisional agreement” (§17 of the Written Statement of the Defendant): the Defendant argues that the Judge erred in holding that the Undertaking had varied the Provisional Agreement, notwithstanding that variation of the Provisional Agreement was not pleaded or argued by the Plaintiff.

19.  There is nothing in this argument. The Plaintiff’s claim was based on the Defendant’s breach of the Undertaking alone. On the face of the Undertaking, the Plaintiff was entitled to require the Defendant to refund the earnest money by simply making a demand. There was nothing in the Undertaking which tied its operation to the performance or failure of performance of the Provisional Agreement. In the written notice given by Reputation on behalf of the Plaintiff to the Defendant dated 3 July 2023 demanding for the repayment of HK$998,000, it was stated that the Plaintiff decided to terminate/abandon (終止/放棄) the purchase of the Property because (i) the Buildings Department and other relevant Government departments had confirmed that the permissible plot ratio for the proposed redevelopment of the Site would be less than 15, and (ii) the Plaintiff had failed to acquire sufficient undivided shares of the Site as prescribed by Cap 545. The Plaintiff’s demand was for the refund of the earnest money less HK$2,000 as compensation pursuant to the Undertaking, and not for the refund of any deposit paid under the Provisional Agreement. The Plaintiff did not need to plead, or rely on, any variation of the Provisional Agreement in support of its claim. In our view, the issue of variation is a red-herring. In any event, it should be noted that the Judge’s discussion concerning variation of the Provisional Agreement was in the context of his consideration of the Defendant’s argument that the Undertaking was not supported by any consideration[1]. As earlier mentioned, we consider this argument to be wholly unmeritorious, regardless of whether the Judge was correct to come to the view that there was a variation of the Provisional Agreement by the Undertaking.

20.  The next 2 arguments raised by the Defendant can be dealt with together.

(1)  “Paras.12-13 – Lapse” (§§19-20 of the Written Statement of the Defendant): the Defendant argues that the Judge erred in failing to consider that the Defendant’s interpretation of the Undertaking that its effect had lapsed upon the conclusion of the Provisional Agreement was at least arguable in view of the conflict between the Undertaking and the Provisional Agreement as to the nature of HK$1 million paid by the Plaintiff and the specified scenarios permitting the cancellation of the intended purchase of the Property.

(2)  “Para.14.2. – Construction of the provisional agreement particularly Clause 24” (§21 of the Written Statement of the Defendant): the Defendant argues that the Judge erred in construing Clause 24 of the Provisional Agreement to the effect that the earnest money was not considered as part of the deposit for purchasing the Property, in that the Judge failed to take into account or proper account of the express wording of Clause 2(a) of the Provisional Agreement and the conduct of the parties who treated the earnest money as part of the deposit for the purchase of the Property.

21.  These arguments raise the question of whether it was intended by the Plaintiff and the Defendant that, after the conclusion of the Provisional Agreement, the Plaintiff would still be entitled to call off the proposed acquisition of the Property from the Defendant at any time and for any reason, and recover the HK$1 million (less the modest sum of HK$2,000) which had become part of the 1^st deposit paid to the Defendant under the Provisional Agreement. The answer to this question depends on the true construction of the Undertaking, which states as follows:

“本公司盛祥有限公司是該物業業主, 現同意及確認在未與貴公司簽訂有關該物業買賣合約之前所收到貴公司誠意金HK$1,000,000.00元正, 若貴公司因任何理由不進行該物業買賣，本公司不可撤銷地承諾於收到貴公司及/或 … 名成(店舖)代理有限公司(REPUTATION (SHOP) AGENCY LIMITED) … 之書面通知至十天內, 本公司將所收取的誠意金於扣除HK$2,000.00作為補償後之餘額 HK$998,000.00元正退還予貴公司 …”.

22.  We consider that for the purpose of a summary judgment application, taking into account the context and purpose of the Undertaking and its language, it is reasonably arguable that upon its true construction, the Undertaking was intended to have effect only for the period up to the signing or conclusion of the Provisional Agreement for the sale and purchase of the Property. Once the Provisional Agreement became a binding contract, the earnest money paid by the Plaintiff to the Defendant would become part of the 1^st deposit as provided for in Clause 2(a) thereof, and the Plaintiff’s right to cancel the purchase and obtain a refund of deposit would be governed by the terms of the Provisional Agreement, in particular Clauses 12 and 24 thereof.

23.  The question which next arises is whether, on the materials before the court, the Defendant has shown a triable case that the Provisional Agreement had become a binding contract of the parties. The signing of the Provisional Agreement by the Defendant and its return to the Plaintiff through Reputation may be regarded as an offer by the Defendant to make a contract. However, the mere fact that at some point in time the Plaintiff also signed the Provisional Agreement could not amount to an acceptance of the offer unless the acceptance was communicated to the Defendant. The Defendant’s case is that it only received a copy of the Provisional Agreement signed by the Plaintiff during the discovery process. The production of the signed copy of the Provisional Agreement by the Plaintiff to the Defendant in the course of discovery could not, in our view, be regarded as communication of the Plaintiff’s acceptance of the Defendant’s offer. This is not, however, the end of the matter. The Plaintiff accepts that, as a matter of fact, the dates for the payment of the balance of the 1^st deposit (HK$690,000) and the further deposit (HK$1,690,000) under Clause 2(b) and (c) of the Provisional Agreement were postponed to 3 July 2023 and 3 August 2023 respectively by the mutual consent of the parties[2]. Whether this fact indicates an acknowledgement by the Plaintiff, or showed, that the Provisional Agreement had become a binding contract is an issue which merits further consideration. The consequence of the failure of the parties to stamp the Provisional Agreement is also a matter which should be further ventilated in the appeal. Overall, we consider that the defence that the effect of the Undertaking had come to an end upon the conclusion of the Provisional Agreement is sufficiently arguable for leave to appeal being granted against the Order. That being so, it would not be appropriate for us to further consider the merit of this ground of defence in the present judgment.

24.  “Para.14.3. – Evidence of previous transaction” (§§22-23 of the Written Statement of the Defendant): the Defendant argues that the Judge erred in considering evidence produced by the Plaintiff in relation to the Defendant’s return of a sum of HK$150,000 pursuant to an undertaking given by the Defendant in a similar transaction in around 2022[3]. The Judge referred to the Defendant’s previous conduct in the context of his consideration of the Defendant’s contention that, properly construed, the effect of the Undertaking lapsed upon the conclusion of the Provisional Agreement. We have reservation on whether the Judge ought to have taken into account such previous conduct on the part of the Defendant when construing the Undertaking, notwithstanding the wide ambit of what can properly be regarded as the relevant factual matrix surrounding the making of the Undertaking. Nevertheless, we do not see that any error of the Judge on this matter would have any material impact on the outcome of the case.

25.  “Part Performance” (§24 of the Written Statement of the Defendant): lastly, the Defendant relies on the doctrine of part performance. The doctrine of part performance is applicable to the situation where a party seeks to avoid the application of the statutory rule that an agreement for the sale or other disposition of land is unenforceable 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 under s 3(1) of the Conveyancing and Property Ordinance, Cap 219. In this action, the Defendant is not seeking to enforce any agreement for the sale or other disposition of land, and is not faced with any argument that such agreement is not enforceable because the aforesaid formalities requirement has not been satisfied. The doctrine of part performance is irrelevant to the present case.

DISPOSITION

26.  Leave to appeal is granted in respect of the grounds raised at sub-paragraphs (4) and (5) on page 3 and sub-paragraphs (1) and (2) on pages 6 and 7 of the Defendant’s draft Notice of Appeal attached to the Summons filed on 21 May 2025. The Defendant shall, within 14 days, file and serve a proper notice of appeal limited to the aforesaid grounds, with such modifications or additions as may be necessary having regard to the discussion in the present judgment. In view of the fact that the Defendant has succeeded in obtaining leave to appeal on only some of the grounds raised in the draft Notice of Appeal, we make an order that the Defendant shall pay 50% of the costs of the Plaintiff in relation to the present application for leave to appeal, with the balance 50% of the costs being in the cause of the appeal. We have considered the Plaintiff’s statement of costs lodged on 4 June 2025, and summarily assess 50% of the Plaintiff’s costs in the sum of HK$26,000. The above costs order (including the assessment of costs) is an order nisi, which shall become absolute unless an application is made to vary the same within 14 days from the date of this judgment.