TSOI KA LEE ALEX and Another v. CHONG CHUN TING and Another

1996, M.P. No.2625

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

MISCELLANEOUS PROCEEDINGS

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J U D G M E N T

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1. This is an application by the Plaintiffs to vacate the registration of a Provisional Sales and Purchase Agreement dated 17 December 1995 of the premises known as Flat No.4, 27th Floor, Block A and Roof Top of Sunway Gardens, 989-991A King's Road, Hong Kong. The Plaintiffs are the vendors and the Defendants are the purchasers. In the same application the Plaintiffs are also seeking a declaration that they are entitled to rescind the Agreement and are relieved of all liabilities for the future performance of their obligations thereunder.

2. By the provisional agreement the Plaintiffs agreed to sell the property to the purchasers at a price of HK$1,888,000.00.

3. Clause 5 of the Agreement provides the following payment schedule :

"5.1 An initial deposit of HK$20,000 to be paid at the time of signing of the Provisional Agreement.

5.2 A further deposit of HK$168,800.00 to be paid to the Vendor's Solicitors upon signing of the formal Agreement for sale and purchase on or before 28 December 1995,

5.3 The balance of purchase price of HK$1,699,200.00 be paid upon completion on or before 29 February 1996."

4. Clause 15 further provides :

" Defaulting : It shall be defaulting of this agreement when the Vendor or the Purchaser fails to comply with the terms and conditions of this Agreement :-

15.1 In the default of the Purchaser, the deposit shall be forfeited to the Vendor and the Vendor shall then be entitled at his absolute discretion to sell the Premises to anyone or to use (it) for other purposes and the Vendor or the Purchaser shall not sue the other party for any liability and/or damages caused by the other party's default of this agreement and shall not claim for specific performance of the Provisional Agreement.

15.2 In the default of the Vendor, the Vendor shall return the initial deposit to the Purchaser forthwith together with such amount equivalent to the initial deposit as compensation in which event the parties shall not have any claims or damages whatsoever against the other party and shall not claim for specific performance of the Provisional Agreement."

5. On 21 December 1995, the 1st named Plaintiff Mr Tsoi informed Mr Chong of the Defendants that they have decided not to sell the property and that they would return the deposit and compensate them in accordance with the Agreement. On 23 December 1995, the Plaintiffs instructed their solicitors Messrs Ng and Lam to write to the Defendants to rescind the Agreement and enclosed a cheque of $40,000 as the agreed compensation under clause 15.2 of the Agreement. By a letter dated 28 Dcember 1995, the Defendants, through their solicitors Messrs Solomon Chong, refused to accept the Plaintiffs' rescission. Also enclosed in the same letter was a cheque for the sum of $168,000 as the Plaintiffs' further deposit for the transaction. Subsequent correspondence from the Defendants indicated that they would issue proceedings for specific performance of the Agreement. By 30 December 1995 they had registered the Provisional Agreement in the Land Office. No action had however been taken by the Defendants to enforce the same.

6. It is a well settled principle of law that the mere fact that a contract contains a clause for liquidated damages is not in itself a bar to an action for specific performance. In the present case, however, the parties went further to provide for the mutual exclusion of the equitable remedy in the clearest possible terms. In the event of the purchaser's default the deposit "sall" be forfeited to the vendor. If the vendor is in default, he "Sall" return the initial deposit "frthwith" together with an equivalent amount to the purchaser. I am convinced that clauses 15(1) and (2) reflect a genuine attempt by the parties to limit their liabilities under the contract in the event of a breach. The Plaintiffs had, quite properly, returned the deposit of $20,000 plus a sum equivalent to it, to the Defendants in the first available opportunity. Upon the Plaintiffs compensating the Defendants in the manner as stipulated in the Provisional Agreement, it is no longer open to the Defendants to sue for damages or for specific performance.

7. For the reasons given above, there is no likelihood that the terms of the Provisional Agreement would be enforced by the courts and the registration of it in the Land Office must therefore be vacated.

8. I further order that the costs of this application be to the Plaintiffs.