WONG PAK WING AND ANOTHER v. PEI MUN LING ANNY

DCCJ 252/2015

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 252 OF 2015

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JUDGMENT

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1.  The plaintiffs (“the Purchasers”) took out a summons on 30 July 2015 pursuant to Order 14, rule 1 of the Rules of the District Court (“the Order 14 Summons”) to apply for summary judgment against the defendant (“the Vendor”), and for an order dismissing the Vendor’s counterclaim.

2.  An application under Order 14 of the Rules of the District Court is for judgment on the plaintiff’s claim as pleaded in the statement of claim.  To apply for an order dismissing the defendant’s counterclaim without a trial is not covered by Order 14 – it is an application for striking out the Vendor’s counterclaim, which is covered by Order 18, rule 19.

3.  Notwithstanding this irregularity in the Order 14 Summons, I am prepared to hear and determine the Purchasers’ application as per the Order 14 Summons on merits.

4.  Counsel for the Vendor, Mr Albert Cheung, invites me to make a final determination on liability in the “Wrongful Registration Claim” (details of which will be set out later in this judgment) made by the Vendor in her counterclaim and give consequential directions.  In other words, Mr Cheung is making an application for summary judgment on liability in the Wrongful Registration Claim.  Counsel for the Purchasers, Mr Eric Yao, does not object that the said application be heard and determined together with the Order 14 Summons.  I therefore will consider and determine the liability in the Wrongful Registration Claim in this judgment.

Background

5.  This case concerns a property known as Flat 1, 10^th Floor, Block C, Yan Shing Court, No 15 Wah Ming Road, Fanling, New Territories (“the Property”).

6.  The Property was purchased by the Vendor from the Hong Kong Housing Authority (“HKHA”) under the Home Ownership Scheme (“HOS”).  By an assignment dated 18 October 1993 (“the 1993 Assignment”), the Property was conveyed to the Vendor by HKHA.

7.  Clause 3 of the 1993 Assignment is as follows:-

“This Assignment is subject to the terms covenants and conditions (hereinafter called “the said terms covenants and conditions”) contained in the Schedule to the Housing Ordinance (Cap.283) and any amendments thereto.”

8.  Under the HOS, the HKHA sells domestic units (“HOS Units”) to eligible people with discounts.  An owner of a HOS Unit can only resell the HOS unit to other eligible people, or to other people after payment of a premium equal to the updated value of the discount given on the original purchase.

9.  Paragraph 4(b) of the Schedule to the Housing Ordinance (“Para 4(b) of the Schedule”) concerns resale of a HOS Unit by the first owner to a person after payment of the requisite premium, while paragraph 4(c) of the same schedule (“Para 4(c) of the Schedule”) concerns the resale of a HOS Unit by the first owner to an eligible person.  Para 4(b) and Para 4(c) of the Schedule are as follows:-

“Notwithstanding that the purchaser has not paid the premium mentioned in paragraph 1 of this Schedule, he may, in relation to the land-

…………

(b) where-

(i) before the expiry of 5 years from the date of the first assignment of the land-

(A) from the Authority to any purchaser; or

(B) to any purchaser nominated by the Authority,
whichever is the earlier, the purchaser has offered to assign the land to the Authority and the Authority or its nominee (other than a prescribed nominee) has declined to accept such an assignment; or

(ii) 5 years has elapsed since the date of the first assignment of the land-

(A) from the Authority to any purchaser; or

(B) to any purchaser nominated by the Authority,
whichever is the earlier,

enter into an agreement for sale and purchase of the land providing it is a condition of such agreement that the premium as assessed by the Director be paid to the Authority prior to assignment and within 28 days of the date of the agreement or within such period as may be otherwise stipulated by the Director;

(c) where 2 years has elapsed since the date of the first assignment of the land-

(i) from the Authority to any purchaser; or

(ii) to any purchaser nominated by the Authority,

whichever is the earlier, enter into any provisional agreement for sale and purchase, agreement for sale and purchase, or assignment, provided that-

(A) the person entering into the provisional agreement for sale and purchase as the purchaser is certified by the Authority as a person eligible to buy relevant land;

(B) the person entering into the agreement for sale and purchase, and the assignment, as the purchaser is a person nominated for the purposes of this subparagraph by the Authority to buy particular relevant land; and

(C) the following-

(I) provisional agreement for sale and purchase;

(II) agreement for sale and purchase; and

(III)assignment,

are each on such terms as are authorized in writing by the Authority and are each made subject to the terms, covenants and conditions mentioned in this Schedule.”

10.  Sale of second-hand HOS units to other eligible people is governed by the “HOS Secondary Market Scheme” run by HKHA. Under the “HOS Secondary Market Scheme”,

(a) both the purchaser and the vendor need to apply to the HKHA for the requisite documents of proof, including a “Certificate of Availability for Sale” in respect of the vendor, and a “Certificate of Eligibility to Purchase” in respect of the purchaser;

(b) the purchaser and the vendor are required to produce to each other or to the estate agent valid documents of proof, including a valid “Certificate of Availability for Sale” on the part of the vendor and a valid “Certificate of Eligibility to Purchase” on the part of the purchaser, before the execution of the provisional agreement for sale and purchase.  Otherwise there will be a violation of the Housing Ordinance.

(c) The provisional agreement for sale and purchase must be in the prescribed form specified by the HKHA; and

(d) any agreement for sale and purchase made in violation of the Housing Ordinance shall be void.

11.  In respect of the Property, the HKHA issued a “Certificate of Availability for Sale” dated 12 April 2000 to the Vendor, thereby enabling the Vendor, if she so wished, to put the Property up for sale in the HOS Secondary Market under Para 4(c) of the Schedule.

12.  There is another housing scheme run by another organization.  In the late 1980s, the Hong Kong Housing Society (“HKHS”) started to develop residential units for sale at concessionary prices to qualified persons subject to application eligibility and re-sale restrictions similar to those in the HOS Scheme.  The housing scheme run by HKHS is called Flat-For-Sale Scheme (“FFSS”).

13.  In about 1997, HKHS introduced its FFSS Secondary Market Scheme to enable owners of FFSS Units to sell their units to eligible persons.

14.  In about 2013, the Government extended the HOS Secondary Market Scheme and the FFSS Secondary Market Scheme to eligible White Form applicants to allow them to purchase either a HOS unit or a FFSS unit in the secondary market without the need to pay the premium at the time of purchase (“the 2013 Extension Scheme”).

15.  Under the 2013 Extension Scheme, a successful White Form applicant can purchase either a HOS Unit in the HOS Secondary Market, or a FFSS Unit in the FFSS Secondary Market.  In other words, he has to elect between HOS Secondary Market and FFSS Secondary Market. 

16.  A successful White Form applicant may apply to the HKHA or the HKHS, in accordance with the type of the unit he intends to purchase, for a Certificate of Eligibility to Purchase for the HOS Secondary Market (“HOS Purchase Certificate”), or a Certificate of Eligibility to Purchase for the FFSS Secondary Market (“FFSS Purchase Certificate”).

17.  To state the obvious, one must get a HOS Purchase Certificate (not a FFSS Purchase Certificate) to purchase a HOS Unit in the HOS Secondary Market.  Similarly, one must get a FFSS Purchase Certificate (not a HOS Purchase Certificate) to purchase a FFSS Unit in the FFSS Secondary Market.

The Purchasers’ case

18.  In early 2013, the Purchasers made an application as White Form applicants under the 2013 Extension Scheme.  Their application was successful.

19.  In or about February 2014, they applied for a FFSS Purchase Certificate, and obtained the certificate (“the FFSS Purchase Certificate”) from HKHS in September 2014.

20.  On 29 October 2014, they signed a provisional sale and purchase agreement (“the PSPA”) with the Vendor and an estate agent, in which the Purchasers agreed to purchase the Property from the Vendor at HK$2,450,000.  The Purchasers paid a deposit of HK$100,000 to the Vendor.

21.  The Purchasers said that at the time of making of the PSPA, they were unaware of the fact that the Property was a HOS Unit salable in the HOS Secondary Market Scheme, in respect of which they were not entitled to purchase by using the FFSS Purchase Certificate.

22.  The Purchasers subsequently discovered this mistake after seeking legal advice.

23.  The Purchasers claim that the PSPA is contrary to Para 4(c) of the Schedule.  By the operation of s 17B of the Housing Ordinance, the PSPA is void and of no effect.  Further or alternatively, at the time of making of the PSPA, the Purchasers and the Vendor each mistakenly believed that the PSPA was a valid and enforceable agreement, but this belief was a fundamental mistaken belief.  The Purchasers claim that the Vendor should return the deposit of HK$100,000 together with interest in these circumstances.

24.  The Purchasers registered the Writ of Summons herein (“the Writ”) against the Property in the Land Registry as a lis pendens on 21 January 2015 (“the Registration”).  The Registration was vacated on 6 May 2015 upon the condition that the Vendor would pay HK$200,000 into Court, and the Vendor paid the HK$200,000 into court on 13 May 2015.  The Vendor paid the money into court without admission of any liability.

The Vendor’s case

25.  Before the Purchasers taking out their Order 14 Summons, the Vendor has filed her Defence and Counterclaim on 3 July 2015.

26.  In her Defence, the Vendor denied the allegation that PSPA was void.  The Vendor pleaded, inter alia, that the Purchasers had actual or implied knowledge of the fact that the Vendor was selling the Property under the HOS Secondary Market Scheme.

27.  The Vendor counterclaims that the Purchasers have repudiated the PSPA, and the Vendor has validly terminated the PSPA and is entitled to forfeit the deposit of HK$100,000.

28.  The Vendor also counterclaims that the Registration is wrongful, and she has suffered loss and damage as a result of the wrongful registration.  This is the Wrongful Registration Claim mentioned in paragraph 4 above.

The Principles

29.  The principles concerning Order 14 applications have recently been summarized by DHCJ Wilson Chan in Li Chuen Kwai v Po Lam Construction Development Limited (HCA 2376/2013, Date of Judgment: 24 September 2014) at paragraphs 11 to 14.

PSPA Void?

30.  The parties differ on whether the PSPA is void by the operation of s 17B of the Housing Ordinance.

31.  S 17B of the Housing Ordinance provides:-

“(1) Where-

(a) (i) land in an estate is sold under section 17A; or

(ii) land in respect of which the Authority is authorized to nominate purchasers is sold and the person selling the land acts without the written permission of the Authority; and

(b) the person to whom the land is sold purports to mortgage or otherwise charge the land or to assign or otherwise alienate it; and

(c) that person acts in breach of-

(i) any term or condition of the agreement for sale and purchase or any covenant in the deed of assignment relating to the land; or

(ii) in the case of such a mortgage or other charge, any term authorized under paragraph 4(a) of the Schedule as regards the mortgage or other charge,

the purported mortgage, other charge, assignment or other alienation, together with any agreement so to mortgage, charge, assign or otherwise alienate, shall be void.”

32.  The PSPA contains the following clauses:-

Clause 3

“該物業成交手續必須於2015年1月14日或之前完成。除第17項所述明外，該物業是以免除所有負擔或債項之情況下售予買方。”

“Completion shall take place on or before 2015-1-14 and the Property is to be sold to the Purchaser subject to Clause 17 hereof but otherwise free from incumbrance.”

Clause 17

“買家須承擔根據房屋條例第283章附表第1段內所述該物業所應繳付補價的責任。 ……”

“The Purchaser acknowledges that he is purchasing the Property subject to the liability for payment of premium as set out in paragraph 1 of the Schedule to the Housing Ordinance Cap.283. ……”

Clause 20

“買賣雙方聲稱他們在香港房屋委員會第二市場計劃出售及購買該物業，並承認此合約受房屋條例第283章附表內所述的條款、 契約及條件及其任何修訂所規限。”

“It is declared by the Vendor and the Purchaser that they are selling and purchasing the Property under the HOS Secondary Market Scheme of the Hong Kong Housing Authority and acknowledge that this Agreement is subject to the terms, covenants and conditions mentioned in the Schedule to the Housing Ordinance (Cap.283) and any amendments thereto.”

33.  Mr. Yao submits:-

(a) Since the Purchasers have never had a HOS Purchase Certificate, condition (A) in Para 4(c) of the Schedule has not been fulfilled.  Accordingly, the transaction as per the PSPA is not in accordance with Para 4(c) of the Schedule.

(b) The Property is an estate sold by the HKHA to the Vendor under section 17A of the Housing Ordinance.  By entering into the PSPA, the Vendor purported to assign or otherwise alienate the Property.  Since the transaction as per the PSPA is not in accordance with Para 4(c) of the Schedule, by entering into the PSPA, the Vendor has acted in breach of Clause 3 of the 1993 Assignment.  The PSPA is “an agreement so to … assign or otherwise alienate”.  Accordingly, by the operation of s 17B(1) of the Housing Ordinance, the PSPA shall be void.

(c) The effect of s 17B(1) of the Housing Ordinance is to render the PSPA null and void at its inception.  See Chan Chi Hung v Tse Ying Piu & Another [1996] 4 HKC 763, at 770E.

(d) The transaction as set out in the PSPA can in no way be completed pursuant to Para 4(b) of the Schedule, for the Para 4(b) of the Schedule has not been incorporated into the PSPA.   Mr. Yao relies upon Chan Wai Hung and Another v Ng Chor Fong trading as Gamway Property Agency and Another (HCSA 38/2006, Date of Judgment: 30 May 2007) in support of this point.

(e) The transaction as set out in the PSPA is not contemplated to be a transaction under Para 4(b) of the Schedule.  Clause 20 of the PSPA expressly mentions the HOS Secondary Market Scheme, which is a scheme concerning transactions under Para 4(c) of the Schedule.  While Clause 20 of the PSPA mentions that the PSPA is subject to the terms, covenants and conditions mentioned in the Schedule to the Housing Ordinance, reading in context, that clause only incorporates Para 4(c), and not Para 4(b) of the Schedule into the PSPA.

(f) Further, although Clause 17 of the PSPA mentions that the Purchasers are purchasing the Property subject to the liability for payment of premium, reading that clause together with Clause 3 of the PSPA, the true meaning of Clause 17 is clear.  Clause 17 only means that the Purchasers are purchasing the Property with an incumbrance, and that incumbrance is the liability to pay premium if the Purchasers sell the Property in further to someone else.  That does not mean the Purchasers have to pay the premium in the transaction as per the PSPA.

34.  Mr. Cheung submits:-

(a) One must not overlook Para 4(b) of the Schedule.  Even if the Purchasers do not have the HOS Purchase Certificate, the PSPA is still valid because the transaction therein can be a transaction within Para 4(b) of the Schedule.

(b) While it may be the case that the parties contemplated an alienation of the Property pursuant to Para 4(c) of the Schedule, the PSPA in fact also provides for alienation pursuant to Para 4(b) of the Schedule.  The presence of the mechanism for an alienation pursuant to Para 4(b) of the Schedule excludes any possibility that the PSPA may contravene s 17B of the Housing Ordinance.

(c) Mr. Cheung contends that Para 4(b) of the Schedule has been incorporated into the PSPA by Clause 20 of that agreement.

(d) On the true construction of the PSPA, if the Purchasers are not persons certified by the HKHA as persons eligible to buy the Property, the Purchasers still have to complete the transaction by paying the premium in accordance with Para 1 of the Schedule.  Mr Cheung says that the Purchasers have the obligation to pay the premium under Clause 17 of the PSPA in these circumstances.

(e) Accordingly, the PSPA is not void.

35.  I have given due consideration to the submissions put forward by both Counsel.  I am of the view that Mr. Yao’s submissions are persuasive, but I cannot say that Mr Cheung’s arguments are unarguable.

36.  Both Mr Yao and Mr Cheung agree that it would only be possible to complete the transaction pursuant to Para 4(b) of the Schedule if that paragraph has been incorporated into the PSPA.  The crux of the matter is whether it is arguable that Clause 20 of the PSPA has the effect of incorporating Para 4(b) of the Schedule into the PSPA.

37.  In Chan Wai Hung, both the vendor and the purchaser declared in the contract that they were aware that the property was subject to the restrictions on alienation under the Housing Ordinance.  However, the timetable for the payment of premium by the purchaser provided in the contract was not in accordance with the timeframe set out in Para 4(b) of the Schedule.  For this reason, Poon J (as he then was) concluded in paragraph 26 of the judgment that although the parties were aware of the alienation restriction, they had neither acted in full compliance with the premium condition nor incorporated the condition into the contract.  The contract was therefore void.

38.  However, in this case, I do not see any provision in the PSPA which would suggest that it is impossible to complete the transaction in accordance with Para 4(b) of Schedule.  On the question of whether Para 4(b) of the Schedule has been incorporated into the PSPA by Clause 20 of the agreement, while Mr Yao’s submission is persuasive, I cannot say that the contrary view contended by Mr Cheung is unarguable.

39.  As to Mr Cheung’s suggestion that by the operation of Clause 17 of the PSPA, the Purchasers have to pay the premium if the transaction has to be completed under Para 4(b) of the Schedule, I am of the view that it is an arguable point.

40.  For these reasons, I hold that the Vendor has demonstrated an arguable case on the validity of the PSPA.  In these circumstances, I have to refuse the Purchasers’ application for summary judgment.

If PSPA is void, any unjust enrichment?

41.  Even if I am wrong on the validity of the PSPA, I would still refuse the Purchasers’ application for summary judgment on the ground that the Purchasers have failed to plead and to demonstrate any unjust enrichment.

42.  For the sake of arguments, assuming the PSPA is void, the Purchasers would still need a basis to claim for the return of the HK$100,000.  The basis cannot be the PSPA, for in this scenario the PSPA is null and void at its inception.

43.  The basis for claiming back money paid under a void contract is restitution.  As said in Chitty on Contracts (31^st Edition) at para.1-100:-

“A void contract is strictly a contradiction in terms, because if an agreement is truly void it is not a contract; but the term is a useful one and well understood by lawyers. Properly speaking, a void contract should produce no legal effects whatsoever. Neither party should be able to sue the other on the contract. If goods have been delivered, they or their value should be recoverable by an action in tort, because the property will not pass. If money has been paid, it should be recovered by an action in restitution, because the money was not due.” (Emphasis added)

44.  In Shanghai Tongji Science and Technology Industrial Company Limited v Casil Clearing Limited (2004) 7 HKCFAR 79, Ribeiro PJ said (other members of the Court of Final Appeal concurred):-

“66. The common law cause of action asserted by the plaintiff for money had and received where consideration has totally failed is now generally regarded as a species of claim for restitution based upon principles of unjust enrichment ……

67. A useful framework for approaching such claims which was adopted by both parties involves asking four questions:-

(a) Was the defendant enriched?

(b) Was the enrichment at the plaintiff’s expense?

(c) Was the enrichment unjust?

(d) Are any of the defences applicable?”

45.  The Purchasers have not pleaded restitution in their Statement of Claim.  In particular, there is no plea as to why it would be unjust if the Vendor is allowed to forfeit the deposit of HK$100,000.

46.  In Big Island Construction (HK) Limited v Wu Yi Development Company Limited and Another (FACV 1/2015, Date of Judgment: 24 June 2015), the Court of Final Appeal reaffirmed Shanghai Tongji.  Tang PJ said (other members of the Court concurred):-

“68. The question which is relevant to the present appeal is “(c) was the enrichment unjust?”  As Lord Hope of Craighead explained in Kleinwort:-

“The approach of the common law is to look for an unjust factor, something which makes it unjust to allow the payee to retain the benefit … It is the mistake by the payer which, as in the case of failure of consideration and compulsion, renders the enrichment of the payee unjust. The common law accepts that the payee is enriched when the sum was not due to be paid to him, but it requires the payer to show that this was unjust.”” (Emphasis added)

47.  Thus, in order to successfully make out a restitution claim, the Purchasers have to plead and to show that the enrichment was unjust (“the unjust element”).  The burden is on the Purchasers.

48.  In the Statement of Claim, the Purchasers have not pleaded a restitution claim, and in particular there is no plea in relation to the unjust element, ie the Vendor would be unjustly enriched if they are allowed to forfeit the HK$100,000.  This deficiency alone would defeat the Purchasers’ application for summary judgment.  It is well established that summary judgment, if it is to be given, is to be given on the pleaded case.

49.  On the unjust element, the Purchasers have further problems.

50.  Firstly, at the beginning of the PSPA, the Purchasers describe themselves as “Holder of Certificate of Eligibility to Purchase”.  Reading this together with Clause 20 of the PSPA (in which the HOS Secondary Market Scheme is mentioned), the Purchasers in fact describe themselves as holders of a HOS Purchase Certificate, which can be counted as a misrepresentation to the Vendor.  I ask Mr Yao whether the court can take this into account in considering the unjust element.  Mr Yao does not suggest that the court cannot do so. 

51.  Secondly, the Vendor in her Defence specifically pleaded that the Purchasers had actual or implied knowledge of the fact that the Vendor was selling the Property under the HOS Secondary Market Scheme (“the Knowledge Point”).

52.  In my judgment, this plea is prima facie supported by Clause 20 of the PSPA.  The Knowledge Point is a triable issue.  Whether the Purchasers knew that the Property was a HOS Unit and was being sold under the HOS Secondary Market Scheme may have a material impact on the unjust element.

53.  In Goff & Jones, The Law of Unjust Enrichment (8^th Edition), para 35-13:-

“Where the claimant has paid money to the defendant under an illegal contract, but the illegality is unknown to the claimant because of some mistake, he can recover his money in an action for unjunct enrichment, if he has not got what he bargained for. Thus, in Oom v Bruce (1810) 12 East 224, the plaintiff as agent for a Russian subject abroad, purported to insure with the defendant goods on board the ship Elbe, at and from St. Petersburg to London, and paid a premium under the policy. Unknown to the plaintiff, Russia had commenced hostilities against Great Britain shortly before the insurance was effected, and the policy was therefore illegal. The Court of King’s Bench held that the plaintiff was entitled to recover the premium. Lord Ellenborough held that premiums paid on an illegal policy cannot be recovered:

“if the party making the insurance knows it to be illegal at the time; but here the plaintiffs had no knowledge of the commencement of hostilities by Russia, when they effected this insurance; and therefore, no fault is imputable to them for entering into the contract; and there is no reason why they should not recover back the premiums which they have paid for an insurance from which, without any fault imputable to themselves, they could never have derived any benefit.”” (Emphasis added)

54.  Mr Yao submits that the authority above only applies to an illegal contract and does not apply to a void contract.  Mr Yao submits that if the PSPA is void, the Purchasers would be entitled to get back the HK$100,000 irrespective of whether the Knowledge Point contended by the Vendor is true or not, for there is total failure of consideration in support of the HK$100,000.

55.  With respect, I unable to accept these submissions.  First, I have not been referred to any authority suggesting that the authority cited in paragraph 53 above only applies to an illegal contract and does not apply to a void contract.  Second, even if there is total failure of consideration, the Purchasers have to show the unjust element in order to get back the HK$100,000 by a restitution claim.  The Knowledge Point, if true, may impact upon the unjust element.  Third, as discussed below, even if the PSPA is void, the failure of consideration may not be total.

56.  Thirdly, assuming that the Purchasers did not know that the Property was a HOS Unit before signing the PSPA and they just mistakenly believed that they were entitled to buy the Property by using the FFSS Purchase Certificate in their hands, the court may still come to the conclusion that allowing the Vendor to forfeit the deposit of HK$100,000 would not be unjust.

57.  Mr Cheung submits that whether a purchaser has a HOS Purchase Certificate is matter solely within the purchaser’s knowledge.  A vendor can only rely upon the contractual provisions to protect his interests.  In this case, what the Purchasers are trying to achieve is to walk away from the PSPA by relying on their own mistake, notwithstanding the clear contractual provisions in the PSPA.  This cannot be right.

58.  I agree that these are forceful submissions.  At trial, the court may conclude that in these circumstances, it would not be unjust to allow the Vendor to forfeit the HK$100,000.

59.  Fourthly, even if the PSPA is void, that does not necessarily mean there has been total failure of consideration.

60.  The Vendor and the Purchasers signed the PSPA on 29 October 2014, and the Purchasers paid the deposit of HK$100,000 to the Vendor at the same time.  The Vendor pleaded that by failing to sign the formal sale and purchase agreement and to pay the further deposit on or before 18 November 2014, the Purchasers have committed a repudiation and the Vendor has terminated the PSPA by accepting this repudiation.

61.  After receiving the HK$100,000 on 29 October 2014, the Vendor took the Property off the market and reserved it for the Purchasers until at least 18 November 2014.  In these circumstances, whether the Purchasers can get back the HK$100,000 is doubtful.  See Chitty on Contracts (31^st Edition) at para 29-079:-

“But restitution of money paid in respect of a void contract can only be recovered by reference to failure of consideration where the failure is total. So, where a deposit was paid in respect of a contract which was void for failure to comply with statutory formalities, the claimant was unable to recover it because he had obtained the benefit for which the payment was made, namely that the defendant had taken the property off the market.”

The learned authors cited Sharma v Simposh Ltd [2011] EWCA Civ 1383 in support of this passage.

The Wrongful Registration Claim

62.  Mr Cheung applies for summary judgment on liability in the Wrongful Registration Claim.  With no objection from Mr Yao, I will make a determination on this application.

63.  Mr Yao refers me to the principle set out in Coote on Mortgages (9^th Edition) at p 1379:-

“If a purchaser advance all or any part of the money to the vendor, and the contract is broken off, an implied contract arises, by which the purchaser has a lien on the land …… If the purchase goes off through the fault of the purchaser, of course he has no lien for what he has paid.” (Emphasis added)

64.  Mr Yao submits that in accordance with this principle, if the Purchasers are right on their claim, the Purchasers would have a lien on the Property.  Accordingly, before the final resolution of the Purchasers’ claim, it cannot be said that the Registration is wrongful.

65.  Mr Cheung refers me to the Court of Appeal’s decision in Fung Kan Wai & Another v Leung Shui Fat & Others [1999] 4 HKC 70, in which the Court of Appeal cited the following English decisions with approval”

(a) Calgary and Edmonton Land Co. Ltd. v. Dobinson [1974] 1 CH 102 at 107G:

"What is registrable as a pending land action is an action or proceeding which claims some proprietary right in the land, and not an action merely claiming that the owner should be restrained from exercising his powers of disposition." (Emphasis added)

(b) Whitbread & Co. Ltd. v. Watt [1902] 1 Ch 835 at 915:

"The lien is created by the contract under which the money is paid as part of the purchase-money, and on the faith that the contract will be carried out, and not by the default of the vendor. The default give rise to the necessity for enforcing the lien, but the lien arises from the contract ... the purchaser has a lien, both when the contract goes off for want of title and when the contract is rescinded under a condition enabling the purchaser to rescind. If the purchaser himself makes default the case is entirely different. If the purchaser makes default in such a way as to deprive himself of any debt at all, he cannot have a lien for that which does not exist." (Emphasis added)

66.  Mr Cheung submits that (a) the Purchasers have not pleaded any lien in the Statement of Claim; (b) there cannot be a lien for the deposit of HK$100,000 which has been forfeited as a result of the Purchasers’ default; and (c) any lien must arise from the contract, but in accordance with the Purchasers’ case, the PSPA is void and there is no contract.

67.  I agree with Mr Cheung.  I have also drawn the parties’ attention to a recent decision by To J. in LY Group Development Ltd v East Canton Ltd [2015] 4 HKLRD 84, in which the learned judge said at paragraph 61:-

“… the essential ingredients of a lis pendens are that it must be an action affecting land in the sense that it is one which asserts a claim of right, or a claim to charge some specific property or some proprietary right in land. An action may not be registered as a lis pendens simply because the defendant owns landed property.” (Emphasis added)

68.  I fully accept the principle mentioned by Mr Yao.  However, with respect, the problem in Mr. Yao’s submission is that if the Purchasers are right in their contention, the PSPA is void from its inception and there has never been a contract, so the Purchasers cannot say that any contract has been broken off.  If the Purchasers are not right, the PSPA is valid but it has been terminated due to the Purchasers’ default.  In this scenario, the Purchasers would not be entitled to have a lien on the Property.  Accordingly, in any way, the Purchasers would not be entitled to have a lien on the Property.  For this reason, the Registration must be wrongful.

69.  I have to add that the absence of any claim for a lien on the Property in the Statement of Claim is not a small matter.  Without claiming a right or an interest in the Property, the Purchasers are not entitled to register the Writ against the Property as a lis pendens.  See Calgary and Edmonton, and LY Group Development Ltd.  The Purchasers are only making a monetary claim against the Vendor in this action.  This is another reason showing that the Registration is wrongful.

70.  For these reasons, I would enter judgment on liability against the Purchasers in the Wrongful Registration Claim, with a direction that damages are to be assessed.

71.  The Vendor has paid HK$200,000 into court in exchange for the vacation of the Registration.  Since I have held that the Registration is wrongful, I would order the HK$200,000 together with interest accrued thereon (if any) to be paid out to the Vendor forthwith.

Costs

72.  I have heard the parties’ submissions on costs.

73.  I would exercise my discretion to order the Purchasers to pay the Vendor the costs of the Order 14 Summons forthwith.

(a) Rules of the District Court, Order 14, rule 7(1) provides:

“If the plaintiff makes an application under rule 1 where the case is not within this Order or if it appears to the Court that the plaintiff knew that the defendant relied on a contention which would entitle him to unconditional leave to defend, then, without prejudice to Order 62 and in particular to rule 4(1) thereof, the Court may dismiss the application with costs and may require the costs to be paid by him forthwith.”

(b) A plaintiff may apply for summary judgment pursuant to Order 14, rule 1(1) “on the ground that that defendant has no defence to a claim included in the writ”.  As held above, the Purchasers have not pleaded a restitution claim in the Statement of Claim, in particular, there is no plea in relation to the “unjust” element.  As a result, the Purchasers in fact do not have a case within Order 14.

(c) Further, before the Purchasers taking out the Order 14 Summons, the Vendor has already filed her Defence and Counterclaim, in which the Vendor has put forward the contentions that the PSPA is not void, and the Purchasers knew that the Property was sold under the HOS Secondary Market Scheme at the time of the PSPA.  The Purchasers must know these contentions before taking out the Order 14 Summons.  These contentions are arguable issues having the effect of defeating the Purchasers’ application for summary judgment.

(d) I am satisfied that this case falls within Order 14, rule 7(1).  I therefore conclude that the Purchasers’ application for summary judgment should be dismissed with costs to be paid forthwith by them.

74.  As to the costs of the Wrongful Registration Claim, costs should follow the event.  I would order the Purchasers to pay these costs to the Vendor forthwith.

Conclusion

75.  For the reasons above,

(a) I dismiss the Order 14 Summons and order that costs of that summons be paid by the Purchasers to the Vendor forthwith (with a certificate for counsel), to be taxed if not agreed.

(b) I allow the Wrongful Registration Claim and enter judgment on liability against the Purchasers on this claim.  Damages are to be assessed.  I further direct that the HK$200,000 now in court and the interest accrued thereon (if any) be paid out to the Vendor forthwith. Costs of the Wrongful Registration Claim be paid by the Purchasers to the Vendor forthwith (with a certificate for counsel), to be taxed if not agreed.

68.  Lastly, it remains for me to thank both counsel for the helpful assistance rendered to this court.