CHUNG YIK LING v. CHOI WAH TONG

DCCJ 2245/2020

[2021] HKDC 896

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 2245 OF 2020

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DECISION

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Background

1.  The plaintiff’s claim is premised on a written agreement dated 9 July 2013 entered into by the plaintiff and the defendant (“the 2013 Agreement”).

2.  The plaintiff filed her Statement of Claim on 22 June 2020.

3.  The 2013 Agreement provided:-

(a)  A new limited company named達新有限公司 shall be incorporated in accordance with the laws of Hong Kong (“the New Company”).

(b)  Both the plaintiff and the defendant shall be the founder members of the New Company with equal shareholdings of 50%.

(c)  The defendant shall sell Lot No 79 in DD387 Tsuen Wan (“the Land”) to the New Company at a value agreed between the plaintiff and the defendant (“the Agreed Value”) in return for the New Company to allot new shares to the defendant.

(d)  The plaintiff shall also subscribe the same numbers of new shares allotted to the defendant from the New Company for a consideration equivalent to the Agreed Value (“the Subscription Monies”).

(e)  After the incorporation of the New Company, the plaintiff shall advance HK$500,000 to the defendant as the caution money (“the Caution Money”) with the purpose to secure the performance of both the plaintiff and the defendant.

(f)    Within 1 month after the defendant receives the Caution Money, the defendant shall complete the sale and purchase of the Land with the New Company and New Company shall obtain the ownership of the Land.

(g)  Within 10 days after the New Company becomes the owner of the Land, the plaintiff shall pay the Subscription Monies to the New Company.

4.  It is the plaintiff’s case that she paid a sum of $500,000 (“the Subject Sum”) to the defendant as the Caution Money pursuant to the 2013 Agreement.

5.  The plaintiff further pleaded that on 12 July 2013, the plaintiff advanced the Caution Money to the defendant’s HSBC bank account with the following understandings:-

(a)  The Caution Money was advanced with specific purposes to secure the performance of the defendant to transfer the Land to the New Company as well as the subsequent performance of the plaintiff to inject the Subscription Monies to the New Company.

(b)  The Caution Money shall only be disposed of in strict compliance with the terms in the 2013 Agreement.

6.  By 12 August 2013, one month after the plaintiff paid the Caution Money:-

(a)  the New Company had not been incorporated;

(b)  the defendant was still the owner of the Land.

7.  The plaintiff pleaded that the defendant was in breach of the terms of the 2013 Agreement in failing to incorporate the New Company and to transfer the Land to the New Company.

8.  In light of the defendant’s continued non-performance, the plaintiff repudiated the 2013 Agreement and demanded the return of the Caution Money in 2015.  The defendant refused to return the same.

9.  The plaintiff claims against the defendant for, among other things:-

(a)  a declaration that the defendant holds the Caution Money on Quistclose trust and/or a resulting trust for the plaintiff;

(b)  an order that the defendant pays the plaintiff the Caution Money.

10.  The defendant filed his Defence on 15 September 2020.  In a nutshell, the defendant raised the following grounds of defence:-

(a)  The $500,000 is not the Caution Money under the 2013 Agreement (“the Not Caution Money Defence”).

(b)  The plaintiff was in breach of the 2013 Agreement for not progressing the Agreement in that she refused to set up the New Company and draft the shareholder agreement (“the Plaintiff’s Breach Defence”).

(c)  The plaintiff’s claim is time-barred under ss 4(1) & 20(2) of the Limitation Ordinance (Cap 347) or because of laches (“the Time Barred Defence”).

11.  In relation to “the Not Caution Money Defence”, the defendant avers that the 2013 Agreement is an agreement of intent (合作意向協議書), which outlined the skeleton plan of co-operation between the parties regarding the development of the Land.  The 2013 Agreement was executed under, inter alia, the following circumstances:-

(a)  In or about 2012 or 2013, a real estate consultant named Colliers International presented a development proposal of the Land (“the Proposal”) to the defendant.

(b)  Upon receiving the Proposal, the defendant started to look for partner(s) to jointly develop the Land and to invest into the Project.

(c)  In or about early 2013, the plaintiff approached the defendant expressing interest in co-operation with the defendant and investing into the Project.

(d)  At that time, besides the plaintiff, 3-4 potential investors had also expressed interests of co-operation and investing into the Project.

(e)  During negotiations, the plaintiff proposed to set up a joint venture company (“the JV company”) to carry out the Project.

(f)    The plaintiff also suggested that she would invest HK$48 million into the JV company, or pay a sum of HK$24 million to the defendant as consideration for 50% shares of the Land.

(g)  The plaintiff repeatedly refused to go and/or to sign a formal agreement with the defendant.

(h)  To comfort the defendant, the plaintiff agreed to pay HK$500,000 to the defendant in exchange for the defendant agreeing to co-operate with the plaintiff.

(i)    In or about July 2013, the defendant went to the plaintiff’s Shenzhen office to collect a cheque of HK$500,000, and signed the 2013 Agreement.

12.  It is pleaded that there was no restriction as to the usage and/or application of the Subject Sum by the defendant and he would be free to dispose of the same.

13.  In relation to “the Plaintiff’s Breach Defence”, it pleaded that after the parties signed the 2013 Agreement, the defendant had repeatedly requested the plaintiff to provide the necessary document(s) and/or information and to incorporate the New Company with him.  The defendant also had repeatedly requested the plaintiff to draft the shareholders’ agreement outlining how the New Company shall be operated as well as the shareholders’ rights and obligations.

14.  Despite the defendant’s repeated requests, the plaintiff was still reluctant and/or refused to set up the New Company with the defendant and to draft the shareholders’ agreement with him.

15.  At all material times, the defendant was ready and willing to transfer the Land to the New Company.

16.  The defendant did not refund the $500,000 to the plaintiff as the defendant had honoured his obligation to co-operate with the plaintiff.  The implementation of the 2013 Agreement had been held up because of the refusal or reluctant on the part of the plaintiff to progress the 2013 Agreement as obliged.

17.  The defendant pleaded that if the defendant holds the Subject Sum or Caution Money as trustee for the plaintiff by way of a Quistclose trust and/or resulting trust, the specific purposes was failed or frustrated because of the faults of the plaintiff.  Therefore, the plaintiff is not entitled to the equitable relief claimed as the breach was procured by her.

18.  Lastly, it is contended that if the plaintiff’s claim against the defendant is time-barred because of laches and/or under section 4(1) and/or section 20(2) of the Limitation Ordinance, Cap 347.

The plaintiff’s case

19.  Mr Lau submitted that the plaintiff’s claim for the Caution Money is premised on Unjust Enrichment and Quistclose trust.

20.  The plaintiff’s affirmation in support of her application states that:-

(a)  The 2013 Agreement was dated 9 July 2013.

(b)  She paid the Subject Sum by way of cheque payable to the defendant on 12 July 2013 (“the Cheque”).

(c)  The acknowledgment of receipt of the Cheque was dated 12 July 2013.

(d)  The New Company has not been incorporated.

(e)  The defendant is still the owner of the Land.

(f)    The plaintiff communicated her decision to terminate the 2013 Agreement to the defendant and demanded the return of the Subject Sum by the defendant on an unknown date in 2015.

(g)  Until to-date, the defendant refused to return the Subject Sum.

21.  According to the plaintiff, she had made an “early advancement” of the Caution Money to the defendant before such obligation was triggered under the 2013 Agreement, as she had faith in the cooperation between the parties and was willing to demonstrate the trust she placed in the defendant.

22.  Mr Lau argued that the defendant’s assertion that the Subject Sum was advanced by the plaintiff as an expression of the seriousness of intention instead of the Caution Money under the 2013 Agreement does not make any commercial sense, as:-

(a)  The 2013 Agreement has already been concluded on 9 July 2013, there is no need for the plaintiff to pay an additional HK$500,000 to secure the defendant’s agreement not to find another investor.

(b)  This query equally applies even if one accepts the defendant’s claim that the receipt of the Cheque was on the same date of the 2013 Agreement.

(c)  The plaintiff was already required under 2013 Agreement to pay the defendant a sum of HK$500,000 when the New Company was incorporated.  There is no reason why the plaintiff need to pay an extra HK$500,000 to the defendant without any written proof.

23.  Mr Lau further argued that the basis for the transfer of the Subject Sum failed in 2015 because by that time:-

(a)  The New Company was not formed.

(b)  The Land was still owned by the defendant.

24.  Regardless of the nature of the Subject Sum advanced to the defendant, Mr Lau said it would be contrary to any commercial sense to suggest that right after the plaintiff had made the advancement, she started to avoid the defendant and decided not to continue with the project.

25.  The Defendant’s Affirmation states that the plaintiff expressed concern of the risk and return of the project.  It suggests that the plaintiff was active in acquiring more information regarding the cooperation and was pushing forward the 2013 Agreement.

26.  As such, “the Plaintiff’s Breach Defence” that it was the plaintiff’s fault or inaction that led to the holding up of the performance of the 2013 Agreement has no merits.  In any event, the 2013 Agreement does not expressly state who shall be responsible for the setting up the New Company and the drafting of the shareholder agreement.

27.  In relation to “the Time Barred Defence”, Mr Lau submitted that the plaintiff’s claim (the generally endorsed writ was issued on 22 May 2020) is not time-barred as:-

(a)  The plaintiff extended the time for the defendant to comply with the requirement to transfer the Land into the New Company by affirming the 2013 Agreement despite the defendant’s breach in August 2013.

(b)  The non-performance by the defendant to transfer the Land was a continuing breach.

(c)  The plaintiff rightfully terminated the 2013 Agreement by virtue of such non-performance in 2015.

(d)  The year of termination of the 2013 Agreement was confirmed by the defendant in the Defence and the Defendant’s Affirmation.

28.  Section 20 of the Limitation Ordinance (Cap 347) provided that:-

“(1) No period of limitation prescribed by this Ordinance shall apply to an action by a beneficiary under a trust, being an action –

(a) …

(b) to recover from the trustee trust property or the proceeds thereof in the possession of the trustee, or previously received by the trustee and converted to his use.

(2) Subject as aforesaid, an action by a beneficiary to recover trust property or in respect of any breach of trust, not being an action for which a period of limitation is prescribed by any other provision of this Ordinance shall not be brought after the expiration of 6 years from the date on which the right of action accrued.”

29.  It is a common ground that the 2013 Agreement is no longer subsisting.  The plaintiff is now relying upon the cause of action arising from the breach in 2015 but not the breach occurred in 2013, which had been affirmed by the plaintiff.  The plaintiff’s action is thus not time-barred.

30.  On laches, Mr Lau submitted that:-

(a)  It is trite law that the defence of laches can only bar equitable relief; (see Fisher v Brooker[2009] 1 WLR 1764 at para 64 & 79).

(b)  The Unjust Enrichment Claim is not found in equity but a claim in common law.

(c)  Therefore, the defence of laches cannot be raised in opposition to the unjust enrichment claim.

(d)  Further, much of the facts stated in the defendant’s Skeleton in this respect (eg the defendant has been deprived of the opportunity in realizing potential profit of the Project by developing the Land with other investors) was not pleaded in Defence nor in the defendant’s Affirmation and should not be allowed to stand.

31.  Mr Lau submits that once the court recognizes the existence of the Quistclose trust between the plaintiff and the defendant, s 20(1)(b) of the Limitation Ordinance applies and there would be no limitation defence available to the defendant.

The defendant’s case

32.  As noted above, the following grounds of Defence were raised in the Defence:-

(a)  The Subject Sum is not the Caution Money under the 2013 Agreement (“the Not Caution Money Defence”).

(b)  The plaintiff was in breach for not progressing the 2013 Agreement (“the Plaintiff’s Breach Defence”).

(c)  The plaintiff’s claim is time-barred under ss 4(1) & 20(2) of the Limitation Ordinance (Cap 347) or because of laches (“the Time Barred Defence”).

33.  The Affirmation of the defendant basically supports what is pleaded under the Defence:-

(a)  The plaintiff was and is a successful business woman with vast commercial and property investment experience in the Guangdong Province, Shenzhen and Hong Kong.  The defendant was and is the registered owner of some lands in the New Territories, including Lot 79 in DD387 (“the Land”) which is related to the dispute in this case.

(b)  The plaintiff and the defendant have the same hometown as「廣東省梅州市豐順縣」(“Fengshun County, Meizhou City, Guangdong Province”).  They acquainted with each other in 2011 when establishing the「豐順同鄉聯誼總會」(Hong Kong Fengshun Association).

(c)  In or about the second half of 2012, Colliers International (“Colliers”) submitted a proposal (“Proposal”) with two plans to develop the Land and the related lands to the defendant.

(d)  At the material time there were three to four potential investors interested in cooperating with the defendant in pursuing a project (“the Project”) to develop the Land based on the Proposal.

(e)  In early 2013 while visiting the lands of the defendant, the plaintiff expressed interest in developing the Land with the defendant.

(f)  The plaintiff and the defendant then reached an agreement on the framework terms for cooperation in developing the Land (“Co-operation Agreement”).

(g)  As the plaintiff did not implement the Co-operation Agreement with the defendant in the subsequent months, the defendant told the plaintiff that unless the plaintiff agreed to pay a deposit in exchange for the defendant’s continuation with the Cooperation Agreement, the defendant would abandon the cooperation with the plaintiff and cooperate with other investors to develop the Project.

(h)  Eventually, the parties signed the「合作意向协议书」(“the 2013 Agreement”) and the plaintiff paid a sum of HK$500,000 (“the Subject Sum”) in cheque to the defendant in July 2013.

(i)  Despite signing the 2013 Agreement and payment of the Subject Sum, other steps in the 2013 Agreement have not been proceeded with by the parties.

34.  Mr So pointed out that the receipt of the Cheque dated 12 July 2013 (“the Receipt”) of the Subject Sum clearly stated that it was「訂金」(“Deposit”) for the 2013 Agreement, not「保證金」(“Caution Money”) as contended by the plaintiff.

35.  The 2013 Agreement is silent as to how the Subject Sum should be applied and thus the plaintiff cannot rely on Quistclose trust or resulting trust.

36.  In short, Mr So’s argument is that the purpose and the nature of the Subject Sum is a factual dispute which should be determined at trial.  The defendant’s case is not incapable of belief and should not be rejected outright summarily.

37.  As to the “Plaintiff’s Breach Defence”, Mr So submitted that although the 2013 Agreement is silent as to which party should take the initiative to form the New Company, the Agreement itself was provided by the plaintiff (which is not denied by the plaintiff), the plaintiff has breached her duty to co-operate with the defendant in setting up the New Company (the “Implied Term and Duty to Co-operate Defence”).

38.  In any event it is a factual dispute as to whether the plaintiff (and the defendant) were ready and willing to perform the 2013 Agreement.

39.  In relation to “the Time Barred Defence”, Mr So argued that although the plaintiff based her case on Quistclose Trust and/or Resulting Trust, the underlying cause was the breach of contract by the defendant’s failure to perform his obligation under the 2013 Agreement (to establish the New Company and transfer the Land to the New Company).  

40.  The breach as contended by the plaintiff should be one month after payment of the Subject Sum (ie sometime in August 2013), which has become statute barred by the time the plaintiff issued the writ on 22 May 2020.

41.  Mr So argued that the plaintiff chose to affirm the 2013 Agreement and only accepted the repudiation until 2015 is merely a matter of election on the types of remedies and does not affect when time starts to run.

Order 14: The Principles

42.  The principles as contained in the following paragraphs in the Hong Kong Civil Procedure 2021 Vol 1 are well established:-

“14/4/1:

The underlying policy of the summary procedure is to prevent a defendant from delaying the plaintiff from obtaining judgment in a case in which the defendant clearly has no defence to the plaintiff ’s claim: Man Earn Ltd v. Wing Ting Fong [1996] 1 H.K.C. 225. …… it is for the defendant to show that there is a triable issue or an arguable defence if he is to be allowed his day in court. To deny him his day in court, if he shows a triable issue or an arguable defence, is indeed a fearful injustice. On the other hand, if he has no defence and he obtains leave to defend, equally, there is injustice to the plaintiff” (Manciple Ltd v. Chan On Man [1995] 3 H.K.C.459 at 466, per Mortimer J.A.).

14/4/8:

When the Judge is satisfied not only that there is no defence but no fairly arguable point to be argued on behalf of the defendant it is his duty to give judgment for the plaintiff. ……once the court concludes that there is no triable issue or question or that for some other reason there ought to be a trial, it will ordinarily give judgment for the plaintiff. …… Where the application is in respect of the whole or part of one of several claims included in the writ, judgment may be given for that claim or part, leaving the residue to be tried. In such event, it may be convenient for directions to be given as to such residue.

14/4/9:

He has to satisfy the court that he has a “real or bona fide defence” or “a fair probability or reasonable grounds that a bona fide defence exists” (see Toy Major Trading Co. Ltd v. Plastic Toys Ltd [2007] 3 H.K.L.R.D. 345 at [12], per Ma C.J.H.C.). If he makes an allegation, it must be credible or believable in the light of the evidence placed before the court. As Bokhary J.A. said in Re Safe Rich Industries Ltd (unrep., CACV 81/1994, November 3, 1994, [1994] H.K.L.Y. 183): “The test at the summary stage is indeed as simple as whether the defendant’s assertions are believable. But it must be recognized—because failure to recognize it would create a debt-dodger’s charter—that whether the defendant’s assertions are believable is a question to be answered not by taking those assertions in isolation but rather by taking them in the context of so much of the background as [is] either undisputed or beyond reasonable dispute. …… Unless it is obvious that the defence put forward by the defendant is “frivolous and practically moonshine, O.14 ought not to be applied”: Codd v. Delap (1905) 92 L.T. 510 at 511, per Lord Lindley. “Order 14 is for clear cases; that is, cases in which there is no serious material factual dispute and, if a legal issue, then no more than a crisp legal question as well decided summarily as otherwise.... The procedure is entirely inappropriate where the plaintiff’s entitlement to recover any sum is the subject of any serious dispute, whether of law or fact. …… Where the point at issue is at heart a short one the court will recognize the fact and act accordingly no matter how bulky its outer garments : Crown House Engineering v. Amec Projects Ltd (1990) 6 Const. L.J. 141 at 154, per Bingham L.J.

14/4/11

Leave to defend should be given where the defendant raises any substantial question of act which ought to be tried (Saw v. Hakim (1889) 5 TLR 72); or there is a fair dispute to be tried as to the meaning of the document on which the claim is based (Bowes v. Caustic Soda etc Synd (1893) 9 TLR 328; Lindsay v.  Martin (1889) 5 TLR 322; Ironclad etc Co. v. Gardner (1892) 4 TLR18.”

(emphasis added)

43.  More recently, Deputy High Court Judge Jin Pao SC in Treasure Chain (HK) Holdings Ltd v Treasure House Venture Ltd, HCA 1789/2018 & HCA1790/2018 has succinctly summarized the position as follows:-

“The Relevant Legal Principles

42.  The applicable legal principles on a summary judgment application are not in dispute. In essence, a summary judgment application is not a platform for a mini-trial on the affidavit evidence. It is incumbent upon a defendant to raise a viable defence or triable issue, and in doing so, to condescend on particulars. The issue is not whether the defendant is to be believed, but whether the assertions are believable tested against contemporaneous documents and conduct: Mohan Selvaraj v Grace Ka Man O’Brien [2020] HKCA 698 at §16 per Lam VP.

43.  Although the burden is on the defendant to raise an arguable defence, it is also necessary to consider whether the plaintiff has put forward a case which merits summary judgment in the first place. If there are genuine weaknesses exposed in the plaintiff’s case, these may detract from the right to obtain summary judgment under RHC Order 14.

44.  This was highlighted by Ribeiro J in Billion Silver Development Ltd v All Wide Investments Ltd [2000] 2 HKC 262 at 268C-D:

“The importance of there being doubts or suspicion as to the validity of the plaintiff’s case is that such doubts detract from the plaintiff’s right to summary judgment. It was not to the point to dismiss them on the basis that they did not improve the quality of the defence and ‘raise it’ beyond the category of ‘shadowy’. If possibly genuine weaknesses were exposed in the plaintiff’s case, this casts doubt on the plaintiff’s right to invoke the summary procedure in the first place.” ”

(emphasis added)

44.  I shall respectfully adopt the above principles.

Discussion

45.  As pointed out by Mr Lau, a substantial part of the defendant’s case as framed by Mr So at the hearing/in his written submissions is not pleaded in the Defence nor supported by the Defendant’s Affirmation, which include (but not limited to):-

(a)  “Implied Term and Duty to Co-operate Defence”: under the 2013 Agreement there is an implied duty to co-operate and the plaintiff has assumed contractual responsibility to take proactive steps to form the New Company which she has failed to do so.

(b)  “Defence of Change of Position”: the defendant has committed himself to co-operate with the plaintiff and suffered detriment by losing the freedom to co-operate with other investors.

(c)  “Defence of Laches”: the defendant has been deprived of the opportunity in realizing potential profits by developing the Land with other investors.

(“New Grounds of Defence”)

46.  Mr Lau refers to Classic Star Investments Limitd v China Land Holdings International Limited & Ors.[2019] HKCFI 141 in which Madam Recorder Winnie Tam SC stated:-

“43.  It is pertinent to point out at the outset that this defence was never raised in pleadings or evidence filed, but only in skeleton argument filed by counsel for the defendants prior to the hearing before this court.  This was not a point raised for argument before Master M Wong either.  As no draft pleading has been presented before the court, the defence remains totally unparticularised.

44.  As such, this argument can fairly be treated as an afterthought.  I shall approach this newly raised and unpleaded defence with circumspection, bearing in mind that the facts relied on that purport to support this defence were at all material time within the knowledge of the defendants and deployed in the defence: see AVC Property Development Company Limited v Joyful Grace Tradings Limited & Anor HCA 529/2013, 21/2014 (unrep) per DHCJ M Ng (at §75).

47.  On the lack of pleading and particularization, the defendants replied with an undertaking to provide proper pleadings once leave to defence is given.  However, the lack of particularization is itself an issue.  As stated at the outset, it is a cardinal principle that a party resisting summary judgment application has the responsibility of condescending to particulars in its alleged defences.  The complete lack of particularization puts the court in an impossible position in trying to assess the merits of the defence, if it has been necessary to do so in the absence of other reasons to reject the defence case.  I would have rejected this defence as an arguable defence on this ground alone.”

(emphasis added)

47.  I agree with the above principles despite the very different factual backgrounds between the present case and Classic Star.

48.  Mr So sought to argue that the “Implied Term and Duty to Co-operate Defence” that the plaintiff has assumed contractual responsibility to take proactive steps is actually pleaded under the Defence (and raised in the Defendant’s Affirmation”) when the background of how the parties came together for the project to develop the Land was detailed.

49.  Mr So also submitted that the court should readily imply a term of co-operation to ensure performance of both parties’ bargain.  He relied on Mackay v Dick & Anor (1881) 6 AC 251 at p 263 where Lord Blackburn said:-

“          I think I may safely say, as a matter of general rule, that where in a written contract it appears that both parties have agreed that something shall be done, which cannot effectually be done unless both concur in doing it, the construction is that each agrees to do all that is necessary to be done on his part for the carrying out of that thing, though there may be no express words to that effect. What is the part of each must depend on the circumstances”

50.  However, the mere reference to a “co-operation” between the parties in relation to the project of developing the Land can hardly imply a term to the extent that the plaintiff has to take proactive step to form the New Company (and to draft the shareholder agreement).

51.  As to other New Grounds of Defence, Mr So did not point to any specific parts of the Defence or the Defendant’s Affirmation in support.

52.  Following the analysis in Classic Stars, I rejected the New Grounds of Defence.

53.  I shall only deal with the following grounds of Defence which are pleaded in the Defence and supported by the Defendant’s Affirmation:-

(a)  The Not Caution Money Defence;

(b)  The Plaintiff’s Breach Defence; and

(c)  The Time Barred Defence.

The Not Caution Money Defence

54.  Mr Lau submitted that the plaintiff paid the Subject Sum as a “Caution Money in advance” and it was paid after the 2013 Agreement was entered into (as evidenced by the date of the Cheque and the date of the Receipt).  And when the New Company was not formed and the defendant did not transfer the Land, the Subject Sum should be returned to the plaintiff either on the ground of Unjust Enrichment or Quistclose / resulting trust.

55.  Mr So argued that it was a “Deposit” (as evidenced by what was written on the Receipt) and thus the defendant is entitled to keep it because the plaintiff had failed her part of the bargain (while the defendant was ready and willing to transfer the Land to the New Company).

56.  The 2013 Agreement is titled “合作意向协议书” and contains the following terms:-

“﹝3﹞ 在公司注册设立登记后，主要目的为甲方认缴投入公司该地段及相邻地块的房屋建设开发，为实现甲方认缴投入公司该地段的承诺，乙方同意在公司设立后，乙方向甲方账户支付50万元港币的保证金，以保证甲方将甲方认缴投入公司的该地段属于公司土地业权后，乙方依据上述评估价值以等额港币现金投入公司。

﹝4﹞ 在甲方收到乙方支付的保证金50万元一个月内，甲方将认缴投入公司的该地段签订必买必卖合约该地段的业权转让予公司。乙方按认缴投资公司的注册资本金比例，在甲方对该地段业权转予公司十个工作日内，乙方向公司账户支付认缴投入资金。

﹝7﹞ 如公司设立后，甲方未依约将认缴公司该地段的业权转让予公司名下，甲方将向乙方承担违约金50万元港币，乙方无须投入认缴资金。

﹝8﹞ 如甲方依约将该地段的业权转让给公司后，乙方未能按约定向公司投入相应的认缴资本金，乙方向甲方承担违约金50万元港币，乙方还须向公司投入认缴注册资本金。”

57.  Clause 3 provides that the plaintiff shall pay the defendant the Caution Money after the New Company was incorporated to ensure the defendant’s transfer of the Land to the New Company.

58.  Clause 4 provides that within one month after the defendant received the Caution Money, he shall transfer the Land to the New Company, and the plaintiff shall inject Subscription Monies into the New Company within 10 days thereafter.

59.  Clause 7 and 8 provide for liquidated damages in the sum of $500,000 payable by one party to the other in case of breach of their respective obligation under the 2013 Agreement:-

(a)  If the defendant failed to transfer the Land to the New Company, he shall pay the plaintiff $500,000.

(b)  For the plaintiff, she shall pay the damages in the same amount to the defendant if she failed to inject the Subscription Monies into the New Company after the defendant transferred the Land to the New Company.

60.  However, upon reading the entire 2013 Agreement:-

(a)  there is no provision as to whom shall be responsible for the incorporation of the New Company;

(b)  there is no provision as to  when it shall be incorporated;

(c)  there is no provision as to how the Caution Money shall be applied after the New Company was incorporated;

(d)  there is no provision as to how to deal with the Caution Money in case the New Company was not incorporated.

61.   The court cannot at the present stage be satisfied that the Subject Sum was the “Caution Money” as it was not paid in accordance with the provisions of the 2013 Agreement in that the New Company has not been formed.

62.  I cannot say that the defendant’s assertion of “Deposit” is unbelievable when tested against the contemporaneous documents, especially the wordings of the Receipt.

63.  The purpose of the Subject Sum is a factual dispute and is a triable issue.

64.  Even if the court can be satisfied that the Subject Sum was the “Caution Money” (or “Caution Money in advance” as put by Mr Lau), there is still the issue as to how the said sum shall be dealt with if no New Company was incorporated in accordance with the 2013 Agreement.

65.  It is a triable issue which cannot determined by affirmation evidence at this stage.

Conclusion

66.  I am satisfied that the defendant has raised a bona fide defence under the “Not Caution Money Defence”.

67.  It is therefore not necessary for me to deal with “the Plaintiff’s Breach Defence” and “the Time Barred Defence”.

68.  For the sake of completeness, the question of whether it was the plaintiff’s (or the defendant’s) breach which rendered the 2013 Agreement being held up is also a triable issue.  And this will in turn determine the viability of “the Plaintiff’s Breach Defence” and “the Time Barred Defence”.

69.  In the circumstances, it is not a case suitable for summary judgment.

70.  I will make the following order:-

(a)  Unconditional leave to defend be granted to the defendant;

(b)  Costs of the Summons, with certificate of Counsel, be costs in the cause, to be taxed if not agreed.

71.  The above costs order shall become absolute unless parties apply to court in writing within 14 days from the day of this Decision.