GIULIA RENTON also known as GIULIA GRILLO v. DIM(HK) LTD AND ANOTHER

HCA 1565/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 1565 OF 2012

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J U D G M E N T

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1.  In 2006 the plaintiff, Ms Giulia Renton, paid a deposit of Euro 148,000 to an Italian developer (“Vivaldi”) for the purchase of a new apartment in a new development near Venice in Italy. The original completion date was to be 31 December 2007. At all material times the 2^nd defendant in this action, Mr Enrico Rondinelli, was the chief executive officer and chairman of the board of Vivaldi. It was he who introduced the property to the plaintiff.

2.  Unfortunately, the development did not proceed smoothly and over the next 5 years or so, the proposed completion date was delayed and rescheduled a number of times.  Also, offers of discount to the purchase price were made and free alternative accommodation pending completion was also made.  During those years a number of the purchasers of other apartments in the development had their deposits returned to them and did not continue with their purchases. 

3.  The original sale and purchase agreement was subject to Italian law.  However in 2010 the plaintiff and the defendants entered into a written agreement (“the 2010 agreement”) in Hong Kong, which, for the time being, kept the plaintiff as a purchaser and also clarified her position with regard to future developments. 

4.  In these proceedings the plaintiff has sued the defendants for, inter alia, the return of her Euro 148,000 deposit.  On 3 January 2013 she issued an order 14 summons which was granted by Master de Souza on 5 September 2013. This is an appeal by the defendants against that Order. 

THE 2010 AGREEMENT

5.  The issues in this appeal arise solely from the 2010 agreement.  It is a short document, in letter form, and can be conveniently set out in full.  The key paragraphs are (2) and (3).  It is dated 16 December 2010. 

“1. Upon Vivaldi Srl providing satisfactory evidence that it has the necessary building licenses to carry out the works contemplated by the S&P and transferring marketable title to the Property free of encumbrances to you, you agree to extend the time for completing all of the works required by the S&P until 30 April 2012. The title deed shall be executed in accordance with paragraph 7 of the S&P at a mutually agreed date no later than 30 June 2011 and the necessary amendments to the S&P giving effect to the transfer of the Property before the works are completed shall be signed at the same time. It is further agreed that the total price of the Property (including VAT) shall be reduced by 5% to three hundred and ninety thousand four hundred and fifty Euros (€390,450) so that the amount payable on completion of the works shall be two hundred and forty-two thousand four hundred and fifty Euros (€242,450).

2. If (a) Vivaldi is unable to obtain the required building licenses or does not transfer title to the Property to you by 30 June 2011, or (b) the works required under the S&P are not satisfactorily completed by 30 April 2012 or (c) the S&P is terminated at any time by reason of the Vendor’s default or inability to carry out the works, I and my company, DIM (HK), jointly and severally, shall be liable to pay you the sum of €148,000 plus interest at the rate of 5% per annum from 3 March 2006 until the date of payment in return for your conveying all of your rights to the Property (including your rights under the S&P) to DIM (HK). Within 30 days after receiving your written notice, DIM (HK) or I shall provide you with the documentation required to convey your interest in the Property and assign your rights under the S&P to DIM (HK) and will pay you the amount specified above in cash. You shall have no liability for any transfer costs associated with the exercise of this right, all of which shall be borne by me or DIM (HK) Limited.

3. The notice exercising your right under paragraph 2 shall be effective if it is given within two years from the date of this letter and is addressed to me as follows:

Enrico Rondinelli

DIM (HK) LTD

18/Fl Vita Tower Unit ‘A’

29, Wong Chuk Hang Road, Aberdeen

Hong Kong”

6.  Pursuant to paragraph 3 of the agreement the plaintiff issued a notice to the defendants dated 18 April 2012.  It reads as follows:

“Furnished Apartment C6-1 and Garden, Marina di Portegrandi

In your letter dated 16 December 2010 concerning the contract under which Vivaldi Srl agreed to sell me the above-referenced property in the Venice Lagoon fully furnished to a high standard, you agreed to repay my deposit of €148,000, plus interest at 5% per annum from 3 March 2006, if Vivaldi failed to complete the sale by the end of this month. Under the Vivaldi contract, completion was originally required to occur by the end of 2007.

Since Vivaldi will not be able to complete the sale of the property by the end of this month, I am giving you and DIM (HK) Ltd the required notice referred to in paragraph 2 of your letter.  According to the terms of your letter, you and DIM (HK) are both liable to repay my deposit with interest within 30 days after you receive this notice.  As soon as I receive the full amount owing, I shall assign all of my rights under the Vivaldi contract to DIM (HK) as provided for in your letter.”

7.  There is no dispute that:

(i) The notice was within time and properly delivered and in fact received.

(ii) The defendants have not refunded the deposit to the plaintiff.

(iii) The defendants did not “within 30 days” or at all provide the plaintiff with the documentation required to convey her interest in the property and assign her rights under the S&P to DIM (HK).

8.  I agree with the plaintiff’s counsel, Mr Justin Cheung, that the crux of the plaintiff’s case comes down to this simple statement.  She could not convey “all her rights to the property” to the defendants because the defendants failed to provide her with any “documentation required” to do so, within the 30 day period or at all.  Had they done so she was ready, willing and able to comply with her part of paragraph 2 of the 2010 agreement, which she made clear in the second paragraph of her notice dated 18 April 2012.  As this was indeed the crux of the matter the court, at the hearing of the appeal, inquired of Mr Paul Leung, counsel for the defendants, if there was any explanation why the defendants had failed to provide such documentation within 30 days.  Mr Leung observed that there was no evidence from the defendant on this matter.

ORDER 14 PROCEEDINGS

9.  I am satisfied that this is plainly a suitable case for Order 14 proceedings.  All formal preliminaries required by the rules have been complied with and the plaintiff has undoubtedly established a prima facie case.  It is therefore for the court to now determine if there is an arguable bona fide defence or whether triable issues have been raised by the defence. 

10.  I shall now refer briefly to the various defences raised in this appeal.  As will be seen I do not regard them as constituting a bona fide defence or a triable issue supported by credible evidence and accordingly, in my judgment, the master correctly entered judgment for the plaintiff in the amount claimed. 

DEFENCES

11.  In his written submission Mr Leung makes a number of points.  At the hearing he very properly focused on his key arguments.  I shall do the same. 

(a) Premature Notice

12.  The notice was dated 18 April 2012 and yet paragraph 2(b) of the agreement states that “If the works … are not completed by 30 April 2012.”  It is thus submitted that the notice was premature, therefore invalid. 

13.  This argument is premised on the notion that the notice was given under paragraph 2(b) of the notice.  It was not.  The notice makes no reference to paragraph 2(b).  Paragraph 2(b) refers to “works”; the notice refers to the “sale” being unable to take place within time.  The notice does not have to specify any particular ground provided it complies with paragraph 3, which it does.  Moreover, the defendant was, at the material time, also in breach of paragraph 2(a).  Mr Leung submitted that the plaintiff must have waived that breach because of the passage of time since 30 June 2011. Such a submission is without merit. 

14.  In any event, even if the plaintiff was relying specifically on 2(b), which she was not, and even if there was a further 14 days to go before the deadline, it cannot be said that the notice would have been invalid for all time from 18 April.  It would have been effective from 1 May 2013 had this breach still existed on that day.  Mr Leung, in argument sought to compare the situation with a “put option” in share transactions.  With respect, bearing in mind that this case concerns a plaintiff who had been waiting 7 years for a flat to be built, I do not regard the analogy as a helpful one. 

15.  The words of the 2010 agreement are clear and unambiguous.  Within 30 days following the notice the defendants had to both provide the documents and refund the deposit.  There was no obligation on the plaintiff to request the documents.  There was no obligation on the plaintiff to seek alternative methods of acquiring such documents as may be necessary in the event of the defendants’ failure.  The obligation was on the defendants to provide documents and pay the money.  There is no requirement as to the order in which things must happen, provided they are done within 30 days.  The plaintiff, clearly and in writing, acknowledged her commitment and obligation in her notice by saying “As soon as I receive the full amount owing, I shall assign all of my rights under the Vivaldi contract to DIM (HK) as provided for in your letter.”

(b) “Assignor” must be the party to execute the documents?

16.  Under this submission the defence complain that the plaintiff as the assignor is, in effect, demanding that the defendants execute the assignment on her behalf, contrary to basic principles.  In the light of the clear meaning and intention of the agreement this submission is plainly without merit.  

(c) Implied term

17.  Mr Leung submits that “it must have been implied in the 2010 agreement that the plaintiff would have valuable rights to convey namely her rights in the property including her rights under the S&P agreement.”

18.  In my judgment this submission fails.  Again, the agreement is clear; it says “rights to the property etc.”  It does not elaborate on exactly what those rights should be and it is not possible to define them later by way of an implied term.

19.  This complaint only arises because Vivaldi went into liquidation in June 2012.  At the time of the notice however, Vivaldi was solvent, the plaintiff’s “rights” existed and were capable of transfer, subject to the defendant complying with its obligations under the 2010 agreement.  No act by the plaintiff caused or contributed to Vivaldi’s liquidation.  Thus there can be no basis upon which a term should be implied into the agreement to her disadvantage.

(d) Failure to register the S&P agreement in Italy

20.  The defendants further complain that the plaintiff failed to register the S&P at the Italian Land Registry.  They say that a consequence of this failure is that, due to Vivaldi’s liquidation, the plaintiff’s rights under the agreement are no longer capable of being transferred to the 1^st defendant as Vivaldi’s receiver has invalidated it due to lack of registration.  The fact that there may be a dispute between the parties as to the correct application of Italian law to the present situation has no relevance in this Order 14 appeal.

21.  The simple fact is that the plaintiff was never under any obligation, either by the S&P or by the 2010 agreement, to register the agreement in Italy.  The documents speak for themselves.  In any event, the defendants were in breach of the 2010 agreement well before Vivaldi’s liquidation. 

(e) Mistake and/or Misrepresentation

22.  In his written submission Mr Leung advanced the submission that the defendant only signed the 2010 agreement on the assumption that the plaintiff would, in due course, have rights in the property to convey.  It was suggested that the defendant signed the 2010 agreement in the mistaken belief that the plaintiff had represented that she would have rights to convey at the future material time. 

23.  This submission was not elaborated on orally but neither was it abandoned.  I agree with Mr Cheung that it has no merit.  No particulars of the alleged representation have been made.  I do not consider it to be a credible defence.  At the time of the agreement the plaintiff did have rights which were capable of being transferred.  The future loss of those rights was wholly unforeseeable at the time. 

24.  Finally, the plaintiff relies on the prevention principle summarised in Kensland Realty Ltd v Whale View Investment Limited & Anor [2002] 1 HKC 243 as follows:

“… it seems clear, based on the underlying principle that a person is not permitted to take advantage of his own wrong, that a contractual party who is in breach of an obligation owed to the other party, will be prevented from asserting rights or claiming benefits which arise in consequence of his breach…

In deciding how the prevention principle is to be given effect in any particular case, it is necessary to identify with some precision, the relevant breach, the factual consequences flowing from such breach and what, if any, advantage the contract-breaker seeks to take on the basis of such consequences.  The principle aims specifically to deny the contract-breaker those particular advantages.”

25.  In the present case the breach was the defendant’s failure to provide documentation.  It is fanciful, in my judgment, to argue that the breach which caused the dispute was the plaintiff’s failure to convey her rights. It was the defendant who was the contract breaker.  He should not be placed in a more advantageous position as a result.

26.  This appeal is dismissed with costs nisi to the plaintiff.  The order of Master de Souza dated 12 September 2013 shall stand.