CHUNG LAI PING ISABETHLA AND ANOTHER v. WIN UNITED DEVELOPMENT LTD.

DCCJ 2416/2002

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 2416 OF 2002

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REASONS FOR DECISION

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1. This is an application for summary judgment under O. 86 of the Rules of the District Court, Cap. 336. However, as the Writ is not indorsed with one of the claims mentioned in O. 86, there is an issue as to whether the present application technically falls within the said order. In any event, the Defendant has no objection for the present application to be proceeded under O. 14, and so I treat this application as one under O. 86, or alternatively under O. 14.

2. In the hearing on 1 November 2002, I granted judgment in favour of the Plaintiffs for interlocutory judgment for damages to be assessed, and I now give my reasons for such decision.

3. By an agreement for sale and purchase dated 9 October 2001 made between the Plaintiffs as the vendors and the Defendant as the purchaser ("the Agreement"), the Plaintiffs agreed to sell and the Defendant agreed to purchase the property known as the Remaining Portion of Lot No. 2015 in Demarcation District No. 83 together with the messuages, erections and buildings thereon ("the Property") at a price of HK$2,600,000.00. According to the Agreement, the completion date was 11 March 2002 and time shall be of the essence.

4. Two supplemental agreements were made subsequently dated 9 October 2001 and 7 March 2002 respectively. Under the terms of the second supplemental agreement ("the Second Supplemental Agreement"), the completion date was postponed to before 5 p.m. on 8 April 2002. Further, both supplemental agreements provide that the terms of the Agreement shall remain in full force and time shall continue to be of the essence of the transaction. In accordance with the terms of the agreements between the parties, the Defendant also paid deposits in the total sum of $520,000, being 20% of the purchase price, to the Plaintiffs.

5. The Defendant failed to pay the balance of the purchase price on or before 5:00 pm on 8 April 2002. Consequentially, the Plaintiffs' solicitors sent a letter to the Defendant accepting the Defendant's wrongful repudiation. In order to mitigate their loss, the Plaintiffs resold the Property to a third party on the following day on 9 April 2002 at a price of HK$1,500,000.00. As a result, the Plaintiffs brought the present action against the Defendant claiming for the following loss:

(i)	loss in purchase price ($2,600,000 - $1,500,000)	$1,100,000
(ii)	plus solicitors fee for conveyancing matter	$13,000
(iii)	less deposits forfeited	$520,000
	Total:	$593,000

6. It is common ground that the transaction would be conducted on the basis that the Government Lease and the Certificate of Exemption were missing as part of the title deeds. However, the Defendant claims that the Plaintiffs have, in breach of a warranty of the Agreement or contrary to a representation made by the Plaintiffs prior to the making of the Agreement, failed to offer any assistance to the Defendant to obtain the missing documents from the District Lands Office. After the Defendant had had the opportunity to pursue a copy of the Government Lease, the Defendant, on 28 March 2002, raised requisition as to whether the structures on the Property were illegal. As the Plaintiffs had failed to answer the said requisition, the Defendant claims that it was entitled not to complete the sale on the scheduled date. Further, the Defendant alleges that the Plaintiffs or their agents had, prior to the making of the Agreement, made a representation to the Defendant that there would be no problem with the title of the Property, in particular, there was no illegal structure erected thereon. As such representation was not true, the Defendant was entitled to have the Agreement be set aside.

7. In my judgment, such defence is not arguable in view of the provisions in the Agreement and the Second Supplemental Agreement. Clause 34 of the Agreement provides as follows:

"This Agreement sets out the full agreement between the parties. No warranties or representations express or implied are or have been made or given by the Vendor or by any person on his behalf relating to the Property and if any warranty or representation express or implied has been made the same is withdrawn or deemed to have been withdrawn immediately before the parties entered into this Agreement unless made in writing and expressed to survive this Agreement."

Further, Clause 3 of the Second Supplemental Agreement reads as follows:

"In order to avoid any doubt, it is hereby declared and confirmed by the Purchaser that the Vendor has duly discharged all the Vendor's obligations and duties whatsoever under the Principal Agreement including but not limited to the obligation and duty to show, prove and give a good title to the Property and the obligation and duty to assist the Purchaser in making application to redevelop the Property save and except clauses 1, 3, 4, 5, 6, 9, 15, 21, 22, 26, 30 and paragraph (1) of Schedule 12 of the Principal Agreement."

8. Obviously, Clause 34 is an "entire-contract" clause, and so the Defendant is not entitled to rely on any representations which has not been included in part of the written agreements between the parties. Further, even if some of the warranties alleged by the Defendant form part of the agreements, the Defendant expressly acknowledged in the Second Supplemental Agreement that the Plaintiffs had discharged all the contractual obligations and duties. Indeed, the acknowledgment given by the Defendant is clear and unconditional. It covers the vendor's obligations and duties under the Agreement, including the obligation and duty to show, prove and give a good title of the Property and the duty to assist the Defendant to make application for the redevelopment of the Property. There are some provisos included in the clause, but none of the complaints relied upon by the Defendant falls within one of the provisos. In such circumstances, the Defendant is estopped from making the aforesaid complaints in the present case.

9. Mr. Leung for the Defendant argues that a purchaser can only waive his right to raise requisitions if he is fully aware of the risks and the legal consequences involved. However, the waiver or acknowledgment in the present case is unequivocal. Indeed, the Defendant was free to raise any requisitions relating to the title any time after the making of the Agreement, and it was only with such opportunity open to the Defendant that it made the aforesaid unconditional waiver. According to the Defendant, the Government Lease was not available at the time of the making of the Second Supplemental Agreement, and so there were certainly grave risks if the Defendant was not allowed to raise any further requisitions relating to the title of the Property. Yet, with the benefit of legal representation and with their eyes wide open, the Defendant signed the unconditional waiver in the Second Supplemental Agreement. In such circumstances, the Defendant was bound by the terms of the waiver and it was estopped to raise any further requisitions to the title. Hence, there is no triable issue in the present case and summary judgment should be granted in favour of the Plaintiffs.

10. The Plaintiffs ask for final judgment to be entered against the Defendant. Under Clause 25(3) of the Agreement, in the case of the default on the part of the Defendant to complete the sale, the Plaintiffs are entitled to resell the Property and claim any deficiency in price as liquidated damages against the Defendant. This clause allows the Plaintiffs to resell the Property by whatever means as they deem fit, and the Plaintiffs can apparently recover any deficiency in price even if they do not mitigate their loss. This clause may arguably be a penalty clause, and so Mr. Barlow for the Plaintiffs rightly does not rely on this clause to maintain a claim for liquidated damages. Yet, Mr. Barlow submits, the Defendant has not raised an arguable defence relating to the quantum of the claim, and so the court should grant final judgment against the Defendant.

11. In my judgment, the court should only grant interlocutory judgment at this stage. As the amount of the Plaintiffs' loss requires investigation beyond mere calculation, the Plaintiffs' claim is definitely a claim for unliquidated damages, and so the court should not grant final judgment against the Defendant. Further, the sub-sale was made only one day after the scheduled completion date, and the resale price was 42% lower than the original contract price. In such circumstances, one would certainly query whether the Plaintiffs had discharged the duty to mitigate their loss and whether the resale price was the true market value of the Property at the time of the repudiation. Hence, the Defendant should be allowed to challenge the quantum of the Plaintiffs' claim at the hearing of assessment of damages.

12. As part of the defence, the Defendant tries to argue that the amount of deposits, being 20% of the purchase price, exceed the conventional sum of 10% generally allowable by the court as forfeitable deposit. Under such circumstances, Mr. Leung submits, the deposits are only part-payments, and even if the Defendant has wrongfully repudiated the Agreement, the Plaintiffs are not allowed to forfeit the same. However, this argument alone does not entitle the Defendant to have unconditional leave to defend. The Defendant can still pursue a counterclaim, and such counterclaim can be heard at the same time together with the hearing of assessment. Assuming that the Defendant's said argument succeeds, and the quantum of the Plaintiffs' loss is less than the amount of the 20% deposits, the judge hearing the assessment can then award nominal damages in favour of the Plaintiffs, and grant judgment in favour of the Defendant on the counterclaim for the difference. Even Mr. Leung does not object, in the case of a finding of wrongful repudiation on the part of the Defendant, to the proceedings be conducted in such manner.

13. Based on the aforesaid, I granted interlocutory judgment in favour of the Plaintiffs and gave directions for the filing of the counterclaim. So far as the issue of costs is concerned, since there is doubt as to whether the Plaintiffs are able to obtain substantial damages against the Defendant, the court should reserve on the question of costs until the assessment (see Hong Kong Civil Procedure 2002, vol. 1, para. 14/7/11). I therefore so ordered.

14. Finally, I must express my gratitude to both counsel for their able submission and the assistance that they have provided to this court.