SIU KAI MING v. LAU SAI HING

HCA 2131/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.2131 OF 2008

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REASONS FOR DECISION

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1.  This is the plaintiff’s application for summary judgment under Order 14 of the Rules of the High Court.

The factual background

2.  For this application, I shall state the brief background as follows. 

3.  By an Agreement and two supplemental agreements (collectively “the agreements”) between the plaintiff and the defendant, the plaintiff agreed to develop on a piece of land at the Remaining Portion of Lot 78 in Demarcation District 236, Sai Kung, New Territories, of which the defendant is the registered owner, a 3- storey house (“the House”) at the plaintiff’s own expense.  Upon completion of the House and the issuance of the certificate of compliance by the District Lands Office, the defendant should retain the ground floor and the first floor and assign title and possession of the second floor and the roof (“the property”) to the plaintiff, subject to the defendant’s pre-emptive right or option upon notice to the plaintiff, which notice should be given upon issuance of the certificate of compliance by the District Lands Office within one month.  As to the price of the property, there is a mechanism for its determination as provided in the agreements.  There are disputes as to the date of receipt of the notice and whether the defendant had exercised his right of the option within time and the way the price of the property should be valued, for which the plaintiff agrees that they can only be resolved by trial.  But the plaintiff says that he does not have to rely upon the resolution of these disputes.  The plaintiff says that, for this application, he can rely only upon the defendant’s abandonment of his pre-emptive right or option, which took place in the following sequence of events.

4.  The certificate of compliance was issued on 23 October 2007.  On 16 November 2007, the plaintiff’s wife gave written notice to the defendant through the defendant’s mother.  [S/C 9-10][1]. Acting for the defendant, the defendant’s mother had, at the end of December 2007, made a phone call to the plaintiff saying that the defendant or his wife had prepared the valuation reports for the property and had purported to exercise his pre-emptive right to purchase the property at the price of HK2.44 million, which price the plaintiff refused to accept.  [S/C 12] Following this, there were disputes over the valuation of the property.  On 8 August 2008, the plaintiff, through his solicitors, demanded the defendant to assign the property to him and for damages.  On 9 September 2008, the defendant by letter asked the plaintiff to sell the property to him at HK$2.44 million.  The plaintiff did not reply.  On 11 October 2008, the defendant, through his solicitors, notified the plaintiff’s solicitors that the defendant withdrew his endeavour to exercise his right to purchase the property.  [S/C 18-20] The plaintiff now says that because of this letter, the defendant had abandoned his pre-emptive right or option or had breached the agreements, for which he now seeks summary judgment against the defendant.

Discussion

5.  As mentioned above, the discussion today will focus on the issue of abandonment only.

6.  The 3 letters referred to in paragraph 4 have been exhibited in Bundle B at pages 79, 84 and 87 respectively.

7.  In opposition to the plaintiff’s case, the defendant has, in the Re-Re-Amended Defence and Counterclaim at paragraph 34, pleaded that the defendant had exercised his pre-emptive right or option on or about 28 November 2007 or 2 December 2007 whereupon at law a binding contract between the plaintiff and the defendant for the sale and purchase of the property had been in existence.  Mr. Hung, counsel for the defendant, has now referred to the judgment of Hoffmann J.  in Spiro v. Glencrown Properties Ltd.  [1991] Ch.  537 at 543C, the learned Judge said: “… The granting of the option imposes no obligation on the purchaser and an obligation on the vendor which is contingent on the exercise of the option.  When the option is exercised, vendor and purchaser come under obligations to perform as if they had concluded an ordinary contract of sale.” I have noted that Mr. Mak, counsel for the plaintiff, does not dispute this legal principle.  It was further pleaded that the letter of withdrawal of the defendant’s endeavour to exercise his right to purchase did not affect the binding agreement already in existence.  However, whether this letter can amount to an anticipatory breach of the contract is not within today’s discussion as both counsel have not touched on this issue in their written submissions.  I do not intend to go further on this issue myself.  It has to be dealt with by the trial judge.

8.  The plaintiff has made no specific reply to the defendant’s assertion on the legal position of the parties after the defendant had exercised his option in the Amended Reply. [Bundle A-53][2] I can see that the plaintiff had already denied the defendant’s right to exercise his option because he was already out of time, which may be the reason for the non-response to the legal position ex hypothesi.  Today, Mr. Mak is trying to argue that the exercise of the pre-emptive right or option is different from entering into a contract.  But he accepts the legal proposition in Spiro that a contract containing such a pre-emptive right or option is, in fact, a conditional contract and upon fulfillment of the conditions therein, there will be an ordinary binding contract between the parties.

9.  It is on these factual bases the plaintiff has now applied to this Court for a summary judgment.

10.  Mr. Hung relies upon the plaintiff’s delay in his O.14 application as the reason that this court should dismiss his application without further considering the merits of the application.  He refers to HKCP[3] 2012 14/2/2, in which it refers to a case Resona Bank Ltd v. Lam Sie and Others HCA 11870/1999[4].  The application for summary judgment was taken out in February 2000 and the application was heard on 5 November 2004, for which the court held that there was a long delay.  Having considered the reasons for the delay, Tang J.  held that the defendants had no credible defence and he entered judgment in favour of the plaintiff despite the delay.  See paragraphs 19 and 22 respectively.  It is therefore clear that delay alone is not the determining factor for dismissal of the present application.  Apart from this technical point, Mr. Hung has also raised other points on the merits, which I shall discuss below.

11.  The law is quite clear that the burden is on the defendant to show triable issues.  However, if there is possible weakness found in the plaintiff’s case, this would cast doubt in the plaintiff’s right to summary judgment and unconditional leave should be given to the defendant to defend.  See Billion Silver Development Limited v. All Wide Investments Limited [2000] 2 HKC 262 at 268D per Ribeiro J.

12.  This application will come across a number of impediments such as follows:

a.  Mr. Mak has agreed in his written submissions at paragraph 4, in which he says: “The terms of the pre-emptive right are highly controversial and for the purpose of this application the plaintiff will not dispute there was an arguable case on this specific aspect.”;

b.  This arguable aspect is relevant for determination of the validity of the defendant’s mother’s phone call for the exercise of the defendant’s option to purchase.  On this issue, Mr. Mak has argued at paragraph 16 of his written submission that “there could not be a valid exercise of the pre-emptive right on the face of pleading: (a) no allegation is made that the defendant’s mother was acting for the defendant on both 28 November and 2 December 2007 occasions…” However, in paragraph 12 of the Re-Re-Amended Statement of Claim, the plaintiff has pleaded that the defendant’s mother was acting for the defendant.  Upon clarification by this court, Mr. Mak says that he only challenges the mother’s authority on 28 November 2007 and 2 December 2007.  He accepts that the pleadings have referred to the mother acting for the defendant at the end of December 2007.  Mr. Hung finds this objectionable and he submits that this issue has to go to trial.

c.  If the mother or the defendant had exercised the option, which is, of course, subject to dispute by the plaintiff and must be a question of fact for the trial, Mr. Mak’s legal argument on the issue of “waiver”, referring to Kammins Ballroom Co. Ltd v.  Zenith Investments (Torquay) Ltd [1971] AC 850 may have difficulty in its application vis-à-vis the decision of Spiro v.  Glencrown Properties Ltd. [1991] Ch. 537, in which Hoffmann J. held that the legal position between the plaintiff and defendant should be that there had been a binding contract of sales and purchase between them.  The question remains “Will the defendant be entitled to withdraw his option, which he has already exercised in the first place?”  Mr. Mak submits that this is possible.  But there is no authority to support his argument today.  I have reservation to accept this argument as one party is not allowed to withdraw his acceptance of the offer once a binding contract has been formed between the parties.  The Court will decide the legal issue in Order 14 proceedings only if the relevant facts are not in dispute and only if the legal issues are clear and simple, not for difficult question of law.  See HKCP 2012 at 14/4/12.

d.  The plaintiff has pleaded for damages suffered by the plaintiff in compensation to Fancy Spread Ltd, the company that had entered into the memorandum with the plaintiff to purchase the property for HK3.2 million and the transaction was called off because of the defendant’s refusal of transferring the legal title of the property to the plaintiff.  The defendant has pleaded that the plaintiff had no authority to enter into the memorandum with Fancy Spread Ltd and the defendant is not liable for the plaintiff’s loss. I do not think it is possible to make summary judgment on this issue in this application too.

Conclusion

13.  I am not satisfied that the plaintiff has been able to clear the above problems for me today.  As such, I refuse the plaintiff’s application for a summary judgment.  The matter should go to trial as soon as possible unless the parties are able to come to a settlement through mediation between themselves, which their legal advisors will, no doubt, give them appropriate advice. 

14.  On the question of the appropriate order to be made, which will also affect the costs, the main issue is whether the plaintiff has had knowledge of the defendant’s defences before taking out this application.  If the plaintiff has known the defences, nevertheless takes out this application, his application should be dismissed and he must bear the costs of his application.  Of course, the Court has the discretion to grant leave to the defendant to defend, for which, the usual order for costs should be in the cause.  Having considered the plaintiff’s case and the defences in this application, I come to a view that the defendant has already disclosed all his defences in the Defence and Counterclaim and the plaintiff has also pleaded to them.  The latest amendment of the Defence was on 30 April 2012.  The plaintiff, however, still proceeds with the application.  There is no reason for the plaintiff to pursue this application at the 11^th hour before trial.  The plaintiff’s application should, in my view, be dismissed.  Therefore, the costs should be awarded to the defendant, summarily assessed at $95,000.00 (as agreed) to be paid by the plaintiff within 21 days from the date hereof.

15.  Also, by consent, the time for the plaintiff to file and serve the Re-Amended Reply and Defence to the defendant’s Re-Re-Amended Counterclaim be extended for 14 days from the date hereof.