ADVANCE PACIFIC INVESTMENTS LTD v. ZEN CHUNG HEI HAYLEY AND OTHERS

DCCJ 5975/2005

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 5975 of 2005

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RULING ON JURISDICTION

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1. The Plaintiff claims against the 1^st Defendant for a declaration that it has rescinded a sale and purchase agreement in respect of a property known as flat B, 37^th Floor and Roof B, Dawning Height, 80 Staunton Street, Hong Kong (“the Property”), together with other related relief including return of deposit and damages for misrepresentation. It claims against the 2^nd and 3^rd Defendants for damages for breach of their duty as agents to the Plaintiff.

2. The full quantification of the Plaintiff’s claim was not set out in the Amended Statement of Claim.

3. The Plaintiff’s solicitors filed written Opening Submissions dated 14.11.2008. In the Plaintiff’s written Opening Submissions, the Plaintiff quantified its claim as being $3,332,175.00 together with costs. Attached to the written Opening Submissions is a Schedule of Claim which lists the individual heads of claim. I do not intend to list out all the heads of claim. For the purposes of this ruling, the claims for damages make up slightly over $2 Million. When the Plaintiff’s solicitor opened the case, the total claim was revised downward by $500,000.00, to bring the Plaintiff’s claim to $2,832,175.00.

4. Counsel for the Defendants took issue with the quantification of the claim. They sought a ruling as to whether this Court had jurisdiction to hear and determine the Plaintiff’s claim in the light of such quantification.

5. This is my ruling, having heard the Solicitor for the Plaintiff and Counsel for the Defendants.

Background

6. I will summarize what I understand to be the background facts of the case from my reading of the pleadings and witness statements. This is not intended to be comprehensive, but only so that the background to this Ruling can be understood. At the present stage, these are only allegations and this summary should not be taken as any finding of fact.

7. The Plaintiff contracted with the 1^st Defendant to purchase the Property. During negotiations for the purchase of the Property, the Plaintiff employed the services of the 2^nd and 3^rd Defendants.

8. The Plaintiff’s case is that at the viewing of the Property and subsequent thereto, the 1^st Defendant’s agent by words and/or conduct made a representation that (part of) the roof of the Building which was being sold was of the same area as the flat. This representation was repeated/reinforced subsequently.

9. The alleged representation was untrue in that the area of the roof of the Building which the 1^st Defendant had title to convey comprised only approximately 15% of the area of the flat.

10. Upon discovery that the area of the roof of the Building which the 1^st Defendant had title to convey was only 15% of the area of the flat, the Plaintiff declined to complete. The 1^st Defendant considered this to be repudiation and forfeited the deposit.

11. The Plaintiff subsequently commenced the present action against the 1^st Defendant. The Writ of Summons was registered in the Land Registry as a  lis pendens.  

12. Subsequently, the Plaintiff joined the 2^nd and 3^rd Defendants alleging that they were in breach of their duties to the Plaintiff in tort, contract or pursuant to the provisions of the Estate Agents Ordinance.

Jurisdiction

13. Mr. Finley, solicitor for the Plaintiff, submits that this Court has jurisdiction to hear and determine the claim. He bases his submission on Section 37 of the District Court Ordinance, which provides :

(1) Subject to the maximum limits in amount or value set out in subsection (2), the Court has the jurisdiction of the Court of first instance to hear and determine the following proceedings –

     ...

(c) proceedings for the foreclosure or redemption of a mortgage or for enforcing a charge or lien;

(d) proceedings for the specific performance, or for the rectification, rescission or delivery up or cancellation of an agreement for the sale, purchase or lease of property;

...

(2) The maximum limits in amount or value referred to in subsection (1) for –

...

(c) in the case of subsection 1(c), the amount owing under the mortgage, charge or lien;

(d) in the case of subsection 1(d), for an agreement for sale or purchase, the purchase money or, for an agreement for lease, the value of the property;

...

  are –

  ...

(iii)   $3,000,000, where the proceedings wholly involve or wholly relate to land;

(iv)   $3,000,000, where the proceedings partly involve or partly relate to land and the part that does not so involve or does not so relate does not exceed $1,000,000 in amount or value.

14. Mr. Finley says that the lis pendens is a charge or a lien, thereby bringing him within the provisions of s. 37(1)(c) and 37(2) (c) (iii). Further or alternatively, he says that as the Plaintiff’s claim includes a claim for a declaration that the Plaintiff has validly rescinded the sale and purchase agreements or alternatively rescission of them, this brings the Plaintiff within the provisions of s. 37(1)(d) and 37(2) (d) (iii).

15. Mr. Finley submits that otherwise, s. 37(2)(d)(iii) would be superfluous and there would be no purpose served by it.

16. My attention was also drawn to the provisions of s. 19 of the Interpretation and General Clauses Ordinance, which provides that an ordinance should receive such fair, large and liberal construction and interpretation as will best ensure the attainment of the object of the ordinance according to its true intent, meaning and spirit.

17. Counsel for the Defendants, Mr. Lai for the 1^st Defendant and Mr. Wong for the 2^nd and 3^rd Defendants both maintained the position that a lis pendens does not create a charge or a lien. They further took the position that this claim for damages was an action founded on contract, quasi-contract or tort. Accordingly, this Court had no jurisdiction where the amount of the Plaintiff’s claim exceeded $1,000,000.[1] It was the Defendants’ submissions that the claim for rescission stood apart from the claim for damages, and that they should be considered separately. In the circumstances, the situation was governed by s. 37(2)(d)(iv), so that the proceedings partly involve land (the rescission claim) and partly does not involve or relate to land (the damages claim).

18. The Defendants also draw an analogy with the case HSBC v. Hui Lai Kai & Ors, DCMP 2460 of 2000, where Acting Registrar Au Yeung (as she then was), held that a claimant in a mortgage action sues for monies due under the mortgage, he is enforcing the personal contract for the payment of a debt, and therefore s. 32 of the District Court Ordinance applies, whereas s. 37 does not, and so cannot confer jurisdiction on the Court.

Discussion

19. I am of the view that the lis pendens does not create a charge or a lien. The effect of a lis pendens is simply to inform the whole world (or at least a potential purchaser) that the property in question is subject to a prior interest and to preserve the claimant’s position as against any subsequent bona fide purchaser. Mr. Finley could produce no authority to support his proposition.

20. In relation to the claim for damages, I am of the view that it needs to be considered separately from the claim for rescission, and s. 37(2)(d)(iv) applies. The rescission claim can therefore be up to $3,000,000. Damages would be a claim that does not involve land or relate to land and would be subject to the maximum limit of $1,000,000.

21. The words “ involve or relate to land” in the present context must mean that the claim is directly connected with the land, that it must seek relief in relation to the land itself. This  can be seen if we look at the wording of s. 37(2)(d) itself, which restricts itself purely to agreements for sale and purchase or for lease, and the maximum limits are referable solely to the property, and not any damage claim.

22. The present proceedings therefore partly relates land (the rescission claim) and, save perhaps for the claim for return of deposit, the other monetary parts of the claim do not relate to land. There may be an argument that the return of the deposit is directly related to land or its value. However, this was not argued before me, and even if it were, it would not affect the outcome of this ruling.

23. Such a construction would not make s. 37(2)(d) (iii) superfluous. There may well be situations where rescission is not accompanied by any claim for damages, or any claim for damages beyond the maximum limit of $1,000,000.

24. If it were otherwise, and Mr. Finley’s submissions were correct, the District Court could theoretically have unlimited jurisdiction in damages so long as the claim in some way related to land. For example, if the property market increased within the limitation period  by 100% or more, the likely damages (subject to any arguments regarding mitigation) could well exceed $3,000,000. I am of the view that the intention of the legislature cannot have been to provide the District Court with the power to award damages in excess of $1,000,000 or even $3,000,000 in cases related to land, when the general scheme of the jurisdictional limit is $1,000,000. This is all the more so when the Long Title to the Ordinance is “to establish a court, having limited civil and criminal jurisdiction...” (Emphasis added)

25. In the circumstances, I rule that this Court does not have jurisdiction to hear or determine the Plaintiff’s claim as formulated.

  ^[1]S. 32(1) of the District Court Ordinance