JIL INVESTMENTS LTD v. JESUS IS LORD CHURCH LTD

HCA 2689/2016

[2026] HKCFI 1119

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2689 OF 2016

________________________

BETWEEN

________________________

________________________

JUDGMENT

________________________

1.  Introduction

1.1  In these proceedings, the Plaintiff and the Defendant advance competing claims over the ownership of a property known as “The Cinema (referred to as “the Cinema Portion”) comprising the Cinema Auditorium with Foyer, Resting Room, Projection Room and Ancillary Offices and for the purpose of affixing Sign Boards, Bill Boards and Advertising Boards thereon the Exterior Walls of the Cinema Portion, Nam Cheong Commercial Building, No 239 Nam Cheong Street, Kowloon” (“Property” or “Premises”).

1.2  The Plaintiff is and was at all material times the registered owner of the Property. It is common ground that, on 14 December 2003, the parties entered into a Lease and Purchase Agreement (“LPA”), by which the Plaintiff (1) as landlord leased the Property (“Lease”) to the Defendant for a term of 12 years commencing on 15 December 2003 and expiring on 14 December 2015 (“Lease Term”) and (2) granted to the Defendant an option to purchase the Property (“Option”).

1.3  Ever since the commencement of the Lease Term, the Defendant has, despite the expiry of the term, remained in occupation of the Property for the purpose of operating a church attended predominantly by the Filipino community in Hong Kong. The Plaintiff commenced these proceedings in October 2016 to claim mesne profits and recover possession of the Property, on the bases that (1) the Lease Term had expired and (2) the Defendant had failed to exercise the Option in accordance with the terms of the LPA. The Plaintiff also seeks an order of the deregistration of the LPA and the statutory declaration of Attorney Virginia (defined below) at the Land Registry.

1.4  Conversely, it is the Defendant’s case that either (1) it had exercised the Option in accordance with the terms of the LPA (“D’s Primary Case”) or (2) if it did not, the contractual requirements governing the exercise of the Option were not strictly enforceable by reasons of promissory estoppel or collateral contract (“D’s Alternative Case”)[1]. The Defendant essentially counterclaims for a declaration that it is the owner of the Property, an order for the transfer of the Property free from encumbrances, and repayment of the security deposit paid under the LPA for the Lease (“Security Deposit”).

1.5  At the trial, I was ably assisted by Mr Jenkin Suen SC (leading Mr Tim Yu) for the Plaintiff and Mr Ambrose Ho SC (leading Mr Jacky Lam) for the Defendant. In the course of the trial, both counsel (sensibly) decided not to pursue certain arguments. I do not intend to exhaustively refer to those abandoned arguments, save only those which have a bearing on my assessment of credibility.

2.   Overview of the disputes

2.1  Clause 11 of the LPA provides as follows:

“In consideration of the grant and acceptance of the tenancy hereby created and subject to the Tenant [ie the Defendant] duly performing the 12 year term of this tenancy by paying the rent in full and punctually and observing the terms and conditions herein contained and subject conditional precedent upon the Tenant duly completing the 12 year term of the tenancy hereby created then only in such event that the Landlord [ie the Plaintiff] shall grant to the Tenant an option to purchase [ie the Option] the Premises at the price (''the Price") equivalent to HK$18,500,000.00 ("the Principal") together with interest on the principal of HK$16,500,000.00[2] at the rate equivalent to the Hong Kong Dollar Prime Rate quoted by the Hong Kong and Shanghai Banking Corporation Limited plus 0.5% per annum (''the Rate") calculate on monthly rest from the date of commencement of the Term until completion of the sale and purchase under this Option To Purchase less the total amount of rent paid under the 12 year term hereby created. Provided if the consideration arrived at in accordance with this formula results in a negative figure then the consideration of the Option To Purchase shall be HK$1.00.”

2.2  Clause 12 of the LPA (“Option Clause”) sets out the contractual requirements for the exercise of the Option. It provides as follows:

“The Option To Purchase as per this Agreement shall only be exercisable by the Tenant giving the Landlord one month's irrevocable written notice before expiry of the Term with completion of the sale of the Premises to the Tenant upon the expiry of such notice when the Price shall be fully paid to the Landlord.”

2.3  Despite suggestions to the contrary made in the Plaintiff’s opening, counsel for the Plaintiff sensibly accepted on the second day of the trial that the consideration for the Option calculated pursuant to LPA Clause 11 at the conclusion of the Lease Term was HK$1 (“Option Consideration”)[3]. As set out in the Annex to the Defendant’s Opening Submissions, the Defendant had over the Lease Term dutifully paid the rental payments, adjusted periodically to reflect the fluctuations in the prevailing interest rates, such that by the end of the Lease Term the formula resulted in a negative figure.

(i) D’s Primary Case

2.4  Under the Option Clause, the Option is exercisable by, inter alia, the Defendant giving a written notice (“Notice Requirement”). It is the Defendant’s case that the Notice Requirement was complied with, since written notices (“Written Notices”) were given to Mr Stephen Sy Chin Mong (“Sy Senior”), by then a former director of the Plaintiff, at a meeting on 20 October 2015 which less than two months from the expiry of the Lease Term (“20/10/15 Meeting”).

2.5  Whether the Written Notices were given by the Defendant to Sy Senior at the 20/10/15 Meeting is one of the main factual disputes (if not the main relevant factual dispute) between the parties at the trial. An important issue to the resolution of the foregoing factual dispute is whether the Plaintiff is permitted to challenge the authenticity of the Written Notices, there being no dispute that the Plaintiff did not serve a notice pursuant to RHC Order 27, rule 4 stating that the authenticity of the Written Notices was not admitted. Mr Suen in closing urged the court to exercise its discretion to release the Plaintiff from the deemed admission.

2.6  Even were the Written Notices given to Sy Senior at the 20/10/15 Meeting, there is an additional dispute as to whether Sy Senior had the authority to receive them. Sy Senior resigned as a director of the Plaintiff on 26 March 2024 and was declared bankrupt on 9 May 2014. It is the Plaintiff’s case that Sy Senior lacked authority to accept the Written Notices on behalf of the Plaintiff.

2.7  The other contractual requirement under the Option Clause is in respect of the payment of the Option Consideration. The dispute between counsel is predominantly one on the proper construction of LPA Clause 12, there being no dispute that the Option Consideration was only tendered by the Defendant in late March 2016:

(1) On behalf of the Plaintiff, Mr Suen submitted that, on a proper construction of the LPA, the Option Consideration was payable at the latest by the expiry of the Lease Term, namely by 14 December 2015;

(2) Conversely, Mr Ho contended that the Option Consideration was only payable at the same time as the Plaintiff’s transfer of the Property to the Defendant, and on the facts, the Plaintiff did not take any steps to prepare for or effect the transfer of the ownership of the Property to the Defendant.

(ii) D’s Alternative Case

2.8  As clarified by Mr Ho, D’s Alternative Case only arises if the Court agrees with the Plaintiff’s arguments on the construction of LPA, particularly in respect of the timing of the payment of the Option Consideration[4], ie by 14 December 2015[5]. In this scenario, the Defendant relies on promissory estoppel and collateral contract to contend that time was not of the essence with respect to the exercise of the Option, each line of the two contentions premised on the factual assertion that, at the time of the execution of the LPA in December 2003, Sy Senior had stated that (“Sy’s Dec 2003 Assurances”)[6] (1) the Defendant “should not worry” about LPA Clause 12 as it was “merely a formality” and (2) such matters of legal language should be left to Sy Senior’s lawyers to deal with in whom the Defendant should trust.

2.9  The Plaintiff says that D’s Alternative Case is untenable on the facts, as Sy’s Dec 2003 Assurances were not given. In any event, even were Sy’s Dec 2003 Assurances given:

(1) As regards the Defendant’s case on promissory estoppel, (a) the alleged assurances were not clear and unequivocal, (b) the Defendant did not act to its detriment and (c) the Defendant did not rely on the alleged assurances;

(2) As regards the Defendant’s case on collateral contract, (a) the alleged assurances were too vague and did not have the necessary certainty to ground the existence of a collateral contract, (b) the court should be vigilant against any attempt by the Defendant to invoke such defence to achieve what, in effect, would be the result of a rectification of the LPA, and (c) on the Defendant’s case, Clause 13 of the LPA[7] has the effect of importing an entire agreement clause contained the Provisional Agreement (as defined below) executed between the parties[8].

2.10  For the reasons stated below, I am of the view that the Defendant succeeds on D’s Primary Case. Whilst it is strictly unnecessary for me to deal with D’s Alternative Case, in case this matter goes further, I will set out below the necessary factual findings and provide my brief views on D’s Alternative Case. Had it been necessary, I would have found against the Defendant on D’s Alternative Case.

3.   The witnesses

3.1  On the Plaintiff’s side, Mr Syed M Ahmed (“Ahmed”), Sy Senior and Mr Sy Lai Yin Sunny (“Sunny”) were called to give evidence at the trial. The Defendant originally had eight witnesses. Eventually, only five of them were called, namely Mr Eduardo Cru Villanueva (“Brother Eddie”), Ms Virginia Salazar Jose (“Attorney Virginia”), Ms Maria Beatriz Curia Itong (“Maria”), Ms Cristeta Barlongo Carbonel (“Cristeta”) and Mr Rene Carmelo S Gonzalez (“Rene”). By agreement between the parties, Mr Efren N De La Cruz (“Attorney Efren”) did not testify at the trial and his witness statement was admitted into evidence.

3.2  There is no real dispute between counsel on the approach applicable to the court’s fact-finding exercise and assessment of credibility, namely the credibility of a witness should be assessed by reference to contemporaneous documentation where it exists, as well as inherent probabilities having regard to all the facts that are known. It is also important to bear in mind the internal consistency of the evidence of a witness, which is often tested by a comparison between the oral testimony of the witness on the one hand and his witness statement and pleadings on the other. In addition, the court is also entitled to take into account the amendments of the pleadings, in particular on the explanation given if there is a significant change of case: Esquire (Electronics) Ltd v Hong Kong and Shanghai Banking Corporation Ltd [2007] 3 HKLRD 439 §135, Hui Cheung Fai v Daiwa Development Ltd, HCA 1734/2009, 8 April 2014 §§77-82, and Au Yeung Pui Chun v Cheng Wing Sang [2021] HKCFI 463 §28-29.

3.3  As to the drawing of adverse inference, the principles are set out in Pacific Electric Wire & Cable Company Ltd v Texan Management Limited, CACV 91 of 2012, 17 September 2013 at §§106-107 which I will not repeat here. I am able to make the necessary factual findings without resorting to the drawing of adverse inferences.

3.4  I have evaluated the witnesses’ evidence and have come to the view that none of the witnesses is so reliable that I can accept his/her evidence in full.

3.5  Instead of setting out general comments here (save one aspect which I can deal with shortly), my reasons for coming to the foregoing conclusion will become apparent as I set out my analysis of the evidence below. That short aspect is this. Mr Suen in closing made a scathing attack against Attorney Virginia, as she regrettably remained in court during the cross-examination of Brother Eddie, despite being expressly told by the court and the Defendant’s legal representatives not to do so. Whilst unfortunate, I do not attach any or any significant weight to the incident. Apart from making the criticism, Mr Suen in closing did not point to any indicia that Attorney Virginia tailored her viva voce evidence to match that of Brother Eddie’s. As will be seen below, Attorney Virginia’s in fact gave evidence which undermined the cogency of Brother Eddie’s evidence.

3.6  In my fact-finding exercise, I need to bear in mind the caution that a witness may lie but that does not necessarily mean that the entirety of his/her evidence must be rejected. The witness may lie in an ill-considered attempt to bolster his/her case but the actual case may nevertheless remain good irrespective of the lie: Hu Lan v David Golden [2023] HKCFI 873 §36(5), but I of course need to also bear in mind where it is shown that a witness has been discredited over one or more matters to which he/she has testified, this fact is relevant to the assessment of his/her overall credibility: Hu Lan §36(6).

3.7  Where I have formed the view that none of the witnesses is so reliable that I can accept his/her evidence in full, the evidence on each contentious topic has to be assessed with care and with reference to the other evidence and overall probabilities: Au Yeung Pui Chun §27. The observation made in Au Yeung Pui Chun is particularly apposite in the present case. Mr Suen (understandably) focused on a number of aspects of the Defendant’s evidence which are subject to (fair) criticisms but I agree with Mr Ho that the evidence has to be assessed wholistically and the overall probabilities kept firmly in mind.

3.8  I should also point out that there are many allegations and cross-allegations directed at matters which I do not regard as having an important bearing on the relief pursued. I have carefully considered the submissions made by counsel and will focus on the core facts which I consider as being directly relevant to the resolution of the present disputes. As observed by Mimmie Chan J at Da Vinci (HK) Limited v Wong Chi Sun & Ors [2025] HKCFI 4140 §22, a judgment should not be a transcript or record of the evidence adduced, nor of the arguments made by the parties at the trial.

4.   The facts

4.1  The parties have helpfully provided a rather comprehensive Amended Agreed Chronology and an Agreed Dramatis Personae. In this section, I will set out the relevant facts largely chronologically, identifying the factual disputes and my findings thereon. Although the analysis is done chronologically, I have considered the evidence overall as a whole in reaching my findings.

(i) The Plaintiff and its related parties

4.2  The Plaintiff was incorporated on 28 March 2003 under its former name. On 22 September 2003, it was acquired by entities within what may loosely be described as the “Bel Trade Group”, namely Bel Trade Investment Holdings Limited (“Bel Trade”) and Sky Landmark Limited (“Sky Landmark”). The contemporaneous documents show that the letters sent by Bel Trade were printed on stationery with a “Bel Trade Group” logo and the correspondence with the Defendant originated from more than one entity within the Bel Trade Group. Whilst the shareholdings of the entities within the Bel Trade Group were not formally structured under a holding company, they were all related to the Sy family. Other entities within the Bel Trade Group included Noble Regal Limited (“Noble Regal”), Bel Trade Company Limited (“BTCL”) and Global Landmark Limited (“Global Landmark”)[9].

4.3  As set out in the Agreed Dramatis Personae (supplemented by the viva voce evidence):

(1) Sy Senior was (a) a director of the Plaintiff (2003-2014) and (b) the Chairman, the CEO and a director of Bel Trade (2004-2013). Prior to his resignations from his various directorships, he was the primary decision-maker and the central figure of the Bel Trade Group. Separately, he was the Chairman and CEO of Bel Global Resources Holdings Limited, a company formerly listed on the Hong Kong Stock Exchange. As stated earlier, he was declared bankrupt on 9 May 2014;

(2) Ahmed was employed by BTCL in 2000 as a business development manager and was the Vice President of Bel Trade from 2002 to 2005. He left the Bel Trade Group in 2005 to reunite with his family in Canada but rejoined in 2007;

(3) Sunny is Sy Senior’s son and he became a director of the Plaintiff on 15 May 2015 and remains in that position.

(ii) The Defendant and its related parties

4.4  In June 2000, the Defendant was incorporated in Hong Kong as a company limited by guarantee. Prior to entering into the LPA, the Plaintiff rented various premises as its worship centres in Hong Kong. The Defendant is the Hong Kong chapter of Jesus is Lord Church Worldwide (“JILCW”) based in the Philippines.

4.5  As set out in the Agreed Dramatis Personae (as supplemented by the viva voce evidence):

(1) Brother Eddie founded JILCW in 1978. He was a former director of the Defendant. He obtained a bachelor’s degree in commerce and completed (at least) the first year of his legal studies at the University of the Philippines. In addition to his position in JILCW, he was a seasoned politician in the Philippines and had vast commercial experience in running a broadcasting business there;

(2) Attorney Virginia was the former Head of Legal Division of the Executive Management Board of JILCW. She, together with Attorney Efren, gave advice to the Defendant during the negotiation stage of the LPA in 2003. She was also involved in advising the Defendant on the exercise of the Option in 2015 and the actions taken following the expiry of the Lease Term;

(3) Maria is and was at all material times a director of the Defendant. At the material time, she was responsible for the Defendant’s administrative duties and financial matters;

(4) Cristeta is and was at all material times a director of the Defendant. She has been the financial officer of the Defendant since 2000;

(5) Rene is the Business Development Director and the Executive Director of JILCW;

(6) Attorney Efren is a qualified lawyer in the Philippines and a member of JILCW. Although he does not have an official position within JILCW, he and Brother Eddie are close friends. As stated above, he and Attorney Virginia gave advice to the Defendant during the negotiation stage of the LPA in 2003.

(iii) Late 2002 to August 2003: Identification of the Property and initial discussions

4.6  Sometime in 2002, Sy Senior was introduced to Mr Gerry T Vallo (“Brother Gerry”) through a Filipino congressman in Hong Kong. Brother Gerry was at that time a ministerial pastor of the Defendant's church in Hong Kong. I was told by Sy Senior that his connection to the Philippines stemmed from the facts that many of his relatives were located in the Philippines and he used to have businesses there. Bel Trade in fact entered into a transaction (also a lease purchase agreement) with the Filipino Consulate in Hong Kong in respect of the latter’s acquisition of its premises in United Centre, Admiralty.

4.7  On 11 November 2002, Sy Senior had a meeting with Brother Gerry, Brother Eddie and his late wife (“Sister Dory”). At that time, given the growth in the size of its congregation, the Defendant was in need of a worship centre with larger capacity. As summarized in Bel Trade’s letter dated 12 November 2002, the meeting was to discuss the financial assistance to be offered by Bel Trade to the Defendant for the purpose of acquiring a property in Hong Kong (at that time identified to be a property also in United Centre, Admiralty):

“It was a pleasure meeting you again and meeting and getting to know [Brother Eddie] and [Sister Dory] yesterday. It is our privilege to be associated with you in your efforts to secure permanent premises for the Church in Hong Kong, preferably in Central. We note and commend your interest in the United Centre 6^th Floor premises…

United. Centre houses the Philippine Consulate and the offices of Philippine banks and remittance agencies making the premises very convenient for members of your congregation.

We would be more than happy to assist you in this endeavour. Property prices in Hong Kong currently appear to have bottomed out and interest rates are also at a historic low. It, therefore, makes sense to buy….

To facilitate your acquisition we would be pleased to provide a lease to own financing package with an affordable monthly lease payment. The monthly lease payment will be linked to the HK$ Prime rate. At the successful completion and expiry of the agreed lease term - generally 10 to 12 years with a maximum of 15 years - we will transfer the property to the Church for a nominal consideration.

Monthly payments for lease to own premises will obviously be higher than monthly rental payments. As you can well appreciate, monthly rental payments and lease to own payments are altogether two different things. Unlike the normal lease arrangement, at the end of the lease to own period the property will be yours and there would be no more monthly lease or rental payment to make. The Church, your Church, will have a solid financial asset in a prime location and in a prestigious building in Hong Kong…

You would note that [the] plan requires a modest capital investment on your part in the shape of an advance deposit. With this capital investment you will be able to take advantage of the lease to own plan offered which is based on the concept of utilizing some one else's ability to raise money and also takes advantage of the current lower cost of funds...

I would be willing to discuss with and explain to you and your committee

members our proposal at a date, time and place convenient to you.

Once again, thank you for giving us an opportunity to be of service.”

4.8  Thereafter, other properties were considered. For example, by a fax dated 22 January 2003 sent to Brother Gerry, Ahmed (on behalf of another entity called Bel Trade Holding and Investment Ltd) put forward a cinema located in Sham Shui Po for the Defendant’s consideration.

4.9  By February 2003, the Property was identified. As recapped in a fax sent by Sy Senior (on behalf of Bel Trade) to the Defendant (addressed to Brother Gerry and copied to Brother Eddie) on 25 February 2003, there were discussions between Sy Senior and Brother Gerry on (1) the anticipated purchase price of the Property in the sum of HK$18 million, (2) the costs associated with the purchase, (3) the different financing options, (4) the transfer of the property holding company at the end of the lease purchase period and (5) the assurance by Bel Trade in passing on proportionate savings if the Property was purchased at a price lower than HK$18 million.

4.10  Thereafter, until late August 2003, the parties were in discussion concerning the commercial terms. In particular, on 26 July 2003, Bel Trade proposed to the Defendant (addressed to Brother Eddie) certain terms for a lease purchase agreement and indicated that Bel Trade would proceed to purchase the Property upon agreement of the offered terms.

4.11  On 11 August 2003, JILCW responded to Bel Trade (“11/8/03 Letter”) confirming that it accepted inter alia the following terms: (1) the term of the lease would be 144 months and (2) the consideration would be HK$18.5 million.

4.12  The 11/8/03 Letter further counter-proposed the following terms: (1) interest rate of prime + 0.5% (as opposed to the offered rate of prime + 1 %), (2) two-month security deposit (as opposed to the offered term of 3 months) and (3) the initial deposit of HK$2 million would be payable in two equal instalments, the first upon the signing of the lease purchase agreement and the balance within 90 days from the first payment.

4.13  On 31 August 2003, Mr Bryan Chua (“Bryan”) of Bel Trade circulated a monthly payment schedule which later became the Second Schedule annexed to the LPA, indicating a monthly payment of HK$156,778.41.

(iv) September to early October 2003

4.14  On 15 September 2003, the Plaintiff and the Defendant entered into an agreement bearing the title “Provisional Agreement for Lease and Purchase” (“Provisional Agreement”). The Provisional Agreement expressly stated that it was based on the 11/8/03 Letter and attached the payment schedule circulated on 31 August 2003.

4.15  Although the Provisional Agreement was signed on 15 September 2003, it appears that a draft was circulated earlier. The Provisional Agreement specified the payment of an initial deposit of HK$2 million to be paid in two equal tranches, the first upon the signing of the agreement on or before 10 September 2003 and the second on or before the signing of the formal agreement on 10 November 2003. The first tranche of the initial deposit was eventually paid on 15 September 2003 (ie the date of the Provisional Agreement), not to the Plaintiff but to Bel Trade. This is because the Bel Trade Group only acquired the Plaintiff (under its former name) as a shelf company on 22 September 2003 after the execution of the Provisional Agreement and the Plaintiff’s name was changed to its current name of 30 September 2003.

4.16  Under both the 11/8/03 Letter and the Provisional Agreement, there was no mention of any requirement to exercise of an option for the Property to be transferred to the Defendant. Sy Senior accepted that there was no discussion between the parties prior to September 2003 on the need to exercise an option to effect the transfer of the Property.

4.17  There is a dispute whether the parties also executed another agreement bearing the title “Provisional Agreement for Lease with Option to Purchase” (“PA With Option”). It is the evidence of Ahmed and Sy Senior in their witness statements that, after the draft Provisional Agreement was circulated, the Plaintiff was told in early September 2003 that the Defendant had difficulty in paying the first deposit of HK$1 million by 10 September 2003. Therefore, on or about 12 September 2003, Bel Trade, concerned about the financial capability of the Defendant, proposed to the Defendant the PA With Option. After the Provisional Agreement was signed and the first tranche of the deposit paid, the Defendant thereafter again informed the Plaintiff that it had difficulty in meeting the second tranche. This allegedly led to a meeting with Brother Eddie in the Philippines in early October 2003 at which the PA With Option was revived.

4.18  The Defendant has specifically issued a notice under RHC Order 27, rule 4 to challenge the authenticity of the PA With Option.

4.19  I have no hesitation in rejecting the Plaintiff’s evidence on the PA With Option. First and foremost, the evidence given by Ahmed and Sy Senior in cross-examination was far from cogent. They were unable to give consistent evidence on the circumstances under which the PA With Option was purportedly signed by Brother Eddie, oscillating between Brother Eddie signing once (on 12 September 2003) or multiple times (signed again in October 2003) and at different locations (Hong Kong and the Philippines). Secondly, the reason for the Plaintiff proposing the PA With Option, namely that the Plaintiff had difficulty in paying the initial deposit is also inherently improbable. It is inherently improbable that the Defendant would have expressed on or around 10 September 2003 that it did not have the financial ability to meet the first tranche of the initial deposit, only to turn around days later (especially having purportedly signed the PA with Option) that it had the funds. Indeed, under Clause 2 of the PA With Option, the Defendant was required to pay the first tranche “forthwith”. It is therefore unclear how the signing of the PA With Option would alleviate the Defendant’s obligation to pay the first tranche of the initial deposit.

4.20  The PA With Option, if signed on 12 September 2003, had to resurrected by reason of the entire agreement clause[10] in the Provisional Agreement indisputably signed on 15 September 2003. The “revival” of the PA With Option in early October 2003 is also inherently improbable. Under the Provisional Agreement, the second tranche was not due until 10 November 2003. As submitted by Mr Ho, it is incredible that the Defendant had already communicated to the Plaintiff in early October 2003 that it had financial difficulty in meeting the further deposit due much later, such that Sy Senior would somehow fly to the Philippines to specifically discuss and make minor handwritten amendments on the PA with Option, without Brother Eddie consulting either Attorney Virginia or Attorney Efren on the document. This is notwithstanding the fact that Plaintiff was not even able to give a consistent or reliable recollection of what actually took place in early October 2003.

4.21  Mr Suen in closing did not seek to defend the PA With Option with enthusiasm. As Mr Suen put it in his closing submissions, the disagreement over the PA With Option is a peripheral issue, its apparent relevance being when the Option was first raised by the Plaintiff, the timing being relevant to the factual dispute on Sy’s Dec 2003 Assurances as it is the Defendant’s case that the Option was not discussed between the parties at an early stage. Were it otherwise, if the parties had discussed the Option already in September 2003, it is unlikely that Sy’s Dec 2003 Assurances were only given at the December 2003 Meeting as contended by the Defendant (and not at any other time). I agree with Mr Suen that the PA With Option is at best a peripheral issue, as there can be no doubt that the Defendant was made aware of the Option well before the execution of the LPA.

4.22  I find as a fact that between September and 28 October 2003 (see below), only the Provisional Agreement was discussed and agreed between the parties and there was no discussion between the parties on the Option. I also find that LPA Clause 13[11] contains a typographical error, in that the date stated therein should be 15 September 2003[12].

4.23  Pertinently, on 15 October 2003, Global Landmark entered an agreement with the former owner to purchase the Property at a consideration of HK$14.5 million, well below the purchase price of HK$18.5 million stated in the Provisional Agreement.

4.24  Further, on 18 October 2023, Sky Landmark, Noble Regal, Sy Senior, Brother Eddie and Sister Dory were appointed as directors of the Plaintiff.

(v) Late October to mid December 2003

4.25  On 28 October 2003, a draft “Agreement for Sub-Sale and Purchase” was circulated (“Draft LPA”). According to Attorney Virginia, she received the Draft LPA in October 2003 and she was tasked to review the Draft LPA. Sometime between November and early December 2003, Attorney Virginia delivered to Attorney Efren a copy of the draft LPA. Both Attorney Efren and Attorney Virginia made handwritten comments on the draft, including Attorney Efren’s handwritten comment “Take not [of this!]” against Clause 11, which was in materially the same terms as the Option Clause.

4.26  On 19 November 2003, Attorney Virginia wrote to Bryan. Amongst other things, she stated that she appreciated Sy Senior’s gesture of extending the payment date of the second tranche of the initial deposit to 15 December 2003 (under the Provisional Agreement it was due on 10 November 2003). As canvassed below, I accept Attorney Virginia’s evidence that the deferment of the payment of the second installment was not by reason of the PA With Option but due to the Defendant requiring proof of ownership of the Property.

4.27  By an email dated 12 December 2003 to Bryan, Attorney Virginia raised a number of comments on the Draft LPA. Significantly, there was no request for the deletion or amendment of Draft LPA Clause 11 (“12/12/03 Email”).

4.28  Attorney Virginia in her evidence made it plain that prior to the execution of the LPA on 14 December 2003, she had already alerted Brother Eddie of the existence of the Draft LPA Clause 11.

(vi) Meeting on 14 December 2003 and Sy’s Dec 2003 Assurances

4.29  The main dispute between the parties is whether Sy’s 2003 Dec Assurances were given by Sy Senior at the meeting on 14 December 2003 (“December 2003 Meeting”) at which the LPA was signed by the parties.

4.30  Although it is the Plaintiff’s pleaded case that the December 2003 Meeting did not take place, Sy Senior confirmed that it was an error. The December 2003 Meeting was held in Sy Senior’s office and attended at least by Ahmed, Sy Senior, Brother Eddie, Maria and Attorney Virginia. As observed by Mr Ho, the Plaintiff’s evidence is that Sy Senior and Ahmed were unable to recall precisely what happened at the December 2003 Meeting, but the general tenor of the Plaintiff’s evidence is that the December 2003 Meeting was a signing ceremony, a happy occasion at which there was no discussion of the LPA. Sy Senior was adamant that he did not give Sy’s Dec 2003 Assurances at the December 2003 Meeting.

4.31  I am unable to accept the Plaintiff’s evidence that the December 2003 Meeting was effectively only a signing ceremony. I accept the Defendant’s evidence that there were discussions at the December 2003 Meeting on the terms of the LPA. The contemporaneous documents show that the LPA contained terms which were not in the Draft LPA and not previously discussed, not even in the 12/12/03 Email sent two days earlier. Significantly, the LPA contains a new clause 8(b), which provides:

“Within 60 working days of the signing of this Agreement, the Landlord shall furnish to the Tenant a copy of the Title of the property being leased, showing that the Title is in the name of the Landlord.”

4.32  As a matter of record, the Property was only assigned by Global Landmark to the Plaintiff at the consideration of HK$18,500,000 on 27 February 2004, well after the commencement of the Lease Term. On the balance of probabilities, I find that the deferral of the payment of the second tranche of the initial deposit was not because of any alleged financial difficulty on the part of the Defendant, but because the Defendant was desirous of proof that the Property was in fact owned by the Plaintiff.

4.33  However, my rejection of the Plaintiff’s evidence as to what transpired at the December 2003 Meeting does not mean that I should therefore accept the Defendant’s evidence that Sy’s Dec 2003 Assurances were given, particularly when the burden of showing that they were given rests on the Defendant.

4.34  In this regard, it seems to me that significant weight should be attached to how the Defendant’s factual case has evolved over time.

4.35  As pointed out by Mr Suen, these proceedings were commenced in October 2016, almost 13 years after the December 2003 Meeting. The case previously pleaded by the Defendant was that unbeknownst to the Defendant, the Option was included as a requirement in the LPA and sought rectification of the LPA. Those pleaded allegations have been abandoned by subsequent amendments. Prior to their abandonment, the pleaded allegations of mistake and rectification were the positions adopted in Brother Eddie’s first witness statement filed in March 2022. It was only in October 2022 that the Defendant filed contrary statements (viz Brother Eddie’s supplemental witness statement and Attorney Virginia’s first witness statement) putting forward its case on Sy’s Dec 2003 Assurances.

4.36  It cannot be gainsaid that the Defendant’s previous case of mistake is factually inconsistent with and diametrically opposed to the current case premised on Sy’s Dec 2003 Assurances. Attorney Virginia accepted that she was involved in the preparation of the Defendant’s previous pleadings, and despite being told by her that the case on mistake was factually incorrect, Brother Eddie insisted and chose to advance the case on mistake in his first witness statement. Both Brother Eddie and Attorney Virginia blamed the Defendant’s former legal team.

4.37  I have considered Mr Ho’s valiant attempt in salvaging this part of the Defendant’s case. He pointed out that it is plain from the evidence adduced that Brother Eddie and Attorney Virginia held different views, and effectively invited me to accept the evidence given by Attorney Virginia and Brother Eddie in his supplemental witness statement, notwithstanding the contradictory case set out in Brother Eddie’s first witness statement. I have also considered Mr Ho’s submission that were I to reject the Plaintiff’s case that Brother Eddie had agreed to the PA With Option (as I have), the inherent probabilities are that Sy Senior would have given Sy’s Dec 2003 Assurances. He submitted that the inherent probabilities are that Brother Eddie would have questioned the Option Clause at the December 2003 Meeting and Sy Senior would have been anxious to close the deal as by then Global Landmark had already entered into a binding commitment to purchase the Property.

4.38  I am unable to accept Mr Ho’s submissions for the following reasons.

4.39  First, in addition to the principles applicable to the exercise of fact-finding cited above, Northampton BC v Cardoza [2019] BCC 582 §37 sets out the factors relevant to the evaluation of a witness’s evidence which include: evasive and argumentative answers, tangential speeches avoiding the question, blaming legal advisers for pleading, self-contradiction, internal inconsistency, shifting case, and new evidence. In my view, the foregoing factors apply here and adversely affect the cogency of the explanation proffered by Brother Eddie and Attorney Virginia for the change from the Defendant’s previous case of mistake to the current one premised on Sy’s Dec 2003 Assurances.

4.40  Secondly, and related to the above, Brother Eddie in his supplemental witness statement (at §§47-49) stated that having read Attorney Virginia’s witness statement, he agreed with her description of what transpired at the December 2003 Meeting. In Attorney Virginia’s witness statement (at §63), she claimed to be able to “vividly remember” Sy Senior giving Sy’s Dec 2003 Assurances. Attorney Virginia did not point to any documentary evidence which would have “refreshed” her memory on an event which happened almost 19 years ago.

4.41  Thirdly, as noted above, in the 12/12/03 Email, despite the fact that Attorney Efren had already commented on Draft LPA Clause 11, Attorney Virginia did not share with the Plaintiff in writing the Defendant’s concern in writing regarding the Option, especially when she was of the view that the Option Clause should be removed altogether. The comments set out in the 12/12/03 Email were not cosmetic in nature and reference was in fact made to the Option (at point 9 thereof), in that Draft LPA Clause 8 (delivery of possession of the Premises by the Defendant upon the expiry of the Lease Term) should be deleted as the Defendant had the Option to purchase the property. Contrary to expressing any concern over the Option, Attorney Virginia’s comment appears to acknowledge and accept the Option. I accept Mr Suen’s submission that Attorney Virginia was unable to offer any good reason why she would not mention the Defendant’s concern in writing at an earlier stage but simply decided to remind Brother Eddie to discuss the matter with Sy Senior at the December 2003 Meeting.

4.42  Fourthly, I do not agree with Mr Ho that the inherent probabilities are stacked in favour of the Defendant. It is also inherently probable that no concern was raised because the Defendant did not envisage any difficulties in complying with the Option Clause. On the Defendant’s own case, it was always envisaged that the Property would be paid for by the 144 payments, such that the Option Consideration would be nominal.

4.43  For the above reasons, I do not accept the Defendant’s evidence. I find as a fact that Sy Senior did not give Sy’s Dec 2003 Assurances at the December 2003 Meeting.

(vii) January 2004 to 2013

4.44  The events which transpired during this period are generally uncontroversial.

4.45  During this period (if not earlier), Brother Eddie and Sy Senior had developed a close friendship.

4.46  The LPA was not registered at the Land Registry.

4.47  The Plaintiff entered into two mortgages in respect of the Property and executed rental assignments, first in favour of Dah Sing Bank (discharged on 4 January 2006) and subsequently Wing Hang Bank.

4.48  The Defendant spent approximately HK$9.5 million in renovating the Property, engaging a contractor recommended by Bel Trade.

4.49  Significantly, on 3 May 2013, Maria had informed Mr Danny Ng (“Danny”) regarding the Defendant’s change of address from Wanchai (“Old Address”) to the Property. Danny was the supervisor of Bel Trade and responsible for issuing monthly receipts on behalf of Bel Trade and the Plaintiff.

(viii) 2014 to Mid 2015

4.50  There are a number of significant events during this period, including (1) Sy Senior’s resignation as director of the Plaintiff and his bankruptcy, (2) the alleged removal of Brother Eddie and Sister Dory as directors of the Plaintiff, (3) the Plaintiff mortgaging the Property to obtain a loan from Lei Shing Hong Credit Limited (“LSH”) and (4) the legal proceedings commenced by the Department of Foreign Affairs against Bel Trade in respect of the Filipino Consulate’s property in the United Centre (“Consulate Litigation”).

(a) Sy Senior’s resignation and bankruptcy

4.51  On 26 March 2014, a board meeting of the Plaintiff was purportedly held at Bel Trade’s office in Hong Kong approving Sy Senior’s resignation and the appointment of Ms Sy Wai Shan Sandy (“Sandy”) as director. The minute of that meeting records that (1) Sy Senior chaired the meeting, (2) Brother Eddie and Sister Dory attended the meeting and (3) Brother Eddie and Sister Dory signed the minute (“Impugned Minute”). Sandy is Sy Senior’s daughter.

4.52  As Sy Senior explained, his resignation as a director of the Plaintiff was in anticipation of his bankruptcy, which happened less than two months later on 9 May 2014.

4.53  In his first witness statement (at §78), Brother Eddie said that he “came to be aware that on or about 26 March 2014 that Sy Senior resigned as a director of the Plaintiff”. In his supplemental statement (at §§60-61), he corrected his evidence and stated that he in fact did not learn about Sy Senior’s resignation or had sight of the Impugned Minute until after the commencement of these proceedings.

4.54  The Defendant has issued a notice pursuant RHC Order 27, rule 4 to challenge the authenticity of the Impugned Minute.

4.55  The Plaintiff’s witnesses were unable to provide a satisfactory explanation as to how the Impugned Minute with the signatures of Brother Eddie and Sister Dory came into existence and Mr Suen in closing did not attempt to reconcile the contradictory evidence given by Sy Senior and Sunny.

4.56  I have no difficulty in finding against the authenticity of the Impugned Minute (insofar as it is alleged by the Plaintiff that Brother Eddie and Sister Doy had signed the Impugned Minute) for the following reasons.

(1) First, according to the documentary travel records, neither Brother Eddie nor Sister Dory was in Hong Kong on 26 March 2014. Contrary to what is recorded in the Impugned Minute, it was impossible for Brother Eddie or Sister Dory to have physically attended the meeting. In his supplemental witness statement, Sunny confirmed that “the relevant board minutes concerning the resignation of Mr Stephen Sy was in fact circulated amongst the directors for approval, instead of a face-to-face meeting on 26 March 2014 as inadvertently stated earlier”. However, no documentary evidence evidencing the alleged circulation has been adduced;

(2) Secondly, the evidence given by Sy Senior and Sunny on how the Impugned Minute was signed is contradictory. On the one hand, Sy Senior said that he did not know how the signatures came to be on the Impugned Minute. Sunny specifically filed his second supplemental witness statement to address the notice of non-admission, in which he did not set out any explanation of substance but simply observed that the signatures on the Impugned Minute were in blue ink and, according to him, difficult to fabricate. Sunny then said, for the first time in the witness box, that Sy Senior had brought the Impugned Minute to the Philippines to have the document signed which directly contradicted Sy Senior’s evidence.

4.57  The next question is, on the basis that neither Brother Eddie nor Sister Dory played any part in approving the resolution of Sy Senior’s resignation (as I have so found), whether the Defendant was otherwise made aware of Sy Senior’s resignation and bankruptcy.

4.58  On the evidence, the answer is plainly no. Sy Senior accepted that he never told Brother Eddie that he was no longer a director of the Plaintiff or that Brother Eddie should contact someone else as regards matters relating to the Plaintiff. Sandy’s appointment as director was short-lived. According to Sunny, Sandy was reluctant to be appointed and did not even familiarize herself with the Plaintiff’s affairs. She resigned on 15 May 2015, at the same time when Sunny was appointed. Sunny himself admitted that he had never met anyone from the Defendant.

4.59  Against the above evidence, Mr Suen in closing was driven to contend that the Defendant had acquired constructive knowledge through the public records (ie obtaining the relevant ND2A recording Sy Senior’s resignation from the Companies Registry or conducting a bankruptcy search). No reason was proffered by Mr Suen as to why such steps ought reasonably to have been taken. Additionally, Mr Suen relies on Danny’s email to Maria on 18 September 2014 requesting Brother Eddie and Sister Dory to sign certain minutes in which Sy Senior was not listed as a director. Mr Suen contended that it was clear from the draft minutes sent to Maria, Brother Eddie and Sister Dory that Sy Senior was no longer listed as a director. I am unable to accept Mr Suen’s submissions. The relevant minutes were entirely administrative (resolving auditor’s remuneration of HK$4,500). I accept the Defendant’s evidence that it would not have known from the draft minutes that Sy Senior was no longer a director. In any event, I note that the draft minutes were couched in terms of a physical board meeting and the resolution could have been passed by a majority present without exhaustive listing all the directors.

4.60  A further question is how Sy Senior conducted himself notwithstanding his resignation and bankruptcy. As pointed out by Mr Ho, even the Plaintiff’s own evidence, especially Ahmed’s, makes it clear that Sy Senior was still very much involved as the boss within the Bel Trade Group whom Ahmed was reporting to at least up to 2021. Sy Senior himself accepted that he was involved in the Consulate Litigation which according to Ahmed was only resolved at the end of 2014 or early 2015. On Sy Senior’s own evidence, even after his resignation as the Plaintiff’s director and his bankruptcy, he discussed with Brother Eddie about a business opportunity in growing durian in the Philippines and a proposal for training domestic helpers and nurses in the Philippines for the Hong Kong market. As submitted by Mr Ho, in the circumstances of Sy Senior’s continual discussions of business with Brother Eddie, Brother Eddie would have little suspicion that Sy Senior has retired from doing business for Bel Trade Group or that Sy Senior was made bankrupt.

4.61  For the above reasons, I find against the authenticity of the Impugned Minute. I further find that (1) prior to the commencement of these proceedings, the Defendant (especially Brother Eddie) did not have actual knowledge of Sy Senior’s resignation as a director of the Plaintiff or his bankruptcy, (2) there was no attempt on the Plaintiff’s part to bring the same to the Defendant’s notice and (c) there were no factual circumstances (and Mr Suen did not suggest any) to invoke the application of constructive notice (and as a corollary there were no factual circumstances which would have given rise to a duty on the part of the Defendant to inquire into Sy Senior’s resignation or bankruptcy from the public records).

(b) Removal of Brother Eddie and Sister Dory/Loan from LSH

4.62  On 26 February 2015, the legal charge and rental assignment in favour of Wing Hang Bank were released and discharged. The Property became unencumbered.

4.63  Prior to Sunny being appointed as a director on 15 May 2015, he (on behalf of the Plaintiff) had already approached LSH to obtain a loan. LSH issued a letter dated 7 May 2015 to the Plaintiff (for Sunny’s attention), by which LSH granted to the Plaintiff a general credit facility in the sum of HK$30,000,000 (“LSH Loan”) for a term of one year.

4.64  After Sunny’s appointment as a director of the Plaintiff on 15 May 2015, the Plaintiff issued a notice for an EGM to be held on 17 June 2015 to vote on the resolution to remove Brother Eddie and Sister Dory as directors of the Plaintiff. The notice was sent to the Old Address, and it is Brother Eddie’s evidence that he and Sister Dory never received the EGM notice.

4.65  I am not required to decide whether the EGM was validly held. Instead, the following matters are pertinent, the relevant context being that the LSH Loan obtained at a time which was only months away from the end of the Lease Term:

(1) Sunny accepted that the removal of Brother Eddie and Sister Dory was to minimize any potential obstacles in the Plaintiff’s usage of the LSH Loan;

(2) As noted above, the LPA was not registered at the Lands Registry. Sunny gave evidence, a bare assertion without any documentary support, that LSH was made aware of the LPA. The hard fact is that after disputes had arisen, the position taken by LSH is that LSH was at all material times a bona fide purchaser for value and was not aware of the LPA;

(3) As early as in May 2015, Sunny was already aware of the need for a backup facility in anticipation of the Defendant redeeming the Premises by the end of the year. For that purpose, Sunny himself personally entered into a loan agreement (valid from July 2015 to January 2016) with Genuine Idea Investments Limited (“Genuine Idea”), a Samoan company, on 20 July 2015 for the sum of HK$32,000,000 (“Genuine Idea Loan”);

(4) As accepted by Sunny, the Plaintiff has adduced no documentary evidence on the financial ability of Genuine Idea to advance the loan of HK$32,000,000;

(5) On 4 June 2015, the Plaintiff executed a legal charge and an assignment of rental in respect of the Premises in favour of LSH for all monies owed under general credit facilities granted by LSH to the Plaintiff;

(6) The borrowing costs under the Genuine Idea Loan (24% per annum) were much higher than those under the LSH Loan (Prime + 4% per annum);

(7) The LSH Loan was drawn down on a number of occasions, respectively on 4 June (HK$10 million), 29 June (HK$10 million), 15 October (HK$4 million), 2 December 2015 (HK4.5 million) and 25 January 2016 (HK$1.5 million);

(8) The last two drawdowns of the LSH took place shortly before and after the end of the Lease Term;

(9) Sunny was unable to give a coherent account for the usage of the loan proceeds from the LSH Loan;

(10) As shown in the loan documentation, the term of the LSH Loan was extended from one year to a term loan maturing on 4 June 2024 (and subsequently further extended);

(11) Sunny accepted that the Plaintiff is now unable to repay the LSH Loan such that the Plaintiff is unable to transfer the Property (should the Defendant prevail in the present proceedings) to the Defendant free from encumbrances.

4.66  Despite Sunny’s evidence to the contrary (which is again no more than a bare allegation), I find as a fact that the Defendant was not made aware of the LSH Loan, despite the fact that it was granted before Brother Eddie and Sister Dory were removed as directors of the Plaintiff.

4.67  It is true that the Defendant has not challenged the authenticity of the loan documents relating to the Genuine Idea Loan. However, on the evidence, I am far from being satisfied that Genuine Idea was in fact able to advance the loan of HK$32,000,000.

(c) The Consulate Litigation

4.68  As reported in a news article dated 20 July 2015, the Department of Foreign Affairs in Manila issued a writ in the High Court on 2 June 2015 against Bel Trade, demanding Bel Trade to forthwith transfer and assign the property in United Centre.

4.69  The relevance of this event is that, according to the Defendant’s evidence, it provided the impetus to serve the Written Notices to Sy Senior at the 20/10/15 Meeting.

(ix) The 20/10/15 Meeting

4.70  I now come to the core factual dispute between the parties, namely whether the Defendant took steps to exercise the Option by serving the Written Notices. Two competing case theories were advanced in closing.

4.71  On behalf of the Defendant, Mr Ho submitted that the overwhelming probability was that the Written Notices were given to Sy Senior at the 20/10/15 Meeting. The Defendant had over the Lease Term faithfully paid to the Plaintiff the monthly payments under the LPA for the ultimate goal of acquiring ownership of the Property. Given that the Option Consideration payable was only HK$1, there was no good commercial or factual reason why the Defendant would not carry out the necessary (administrative) steps to protect its own interests to obtain the title to the Property. The fact that the Option Consideration was only tendered in late March 2016, Mr Ho submitted, can only be explained by the pleaded representations made by Sy Senior at the 20/10/15 Meeting (“October 2015 Representations”), namely: (1) Sy Senior and/or the Plaintiff needed more time to execute the completion of sale because of financial problems, (2) his chief of staff had "swindled him" of large sums of money but that he did not want to go into the details of his predicament and (3) since it was only October 2015 and the end of the Lease Term was in December 2015, he could use the remaining time to fix the financial situation before complying with the LPA ie assigning and transferring the legal title to the Premises to the Defendant.

4.72  Conversely, on behalf of the Plaintiff, Mr Suen emphasized that the present case should not be about sympathy but whether the Defendant had done its part under the LPA to exercise the Option validly. Whilst the Plaintiff accepts that the 20/10/15 Meeting took place, the Plaintiff’s pleaded case is that the Written Notices were not served on Sy Senior at the meeting. He submitted that, on the evidence, by the Defendant’s own inadvertence (or reason beyond the Plaintiff’s knowledge), the Defendant “sleepwalked” past the contractual requirements for the proper exercise of the Option, in that it failed to comply with the Notice Requirement before 14 December 2015 (ie the end of the Lease Term) and only followed up with the Plaintiff about the Option in January 2016, by which time it was too late to take any remedial action to exercise the Option (“Sleepwalk Theory”).

4.73  It bears (re)emphasis that where, as is plain from the earlier parts of this judgment, I have formed the view that none of the witnesses is so reliable that I can accept his/her evidence in full, the evidence on each contentious topic has to be assessed with care and with reference to the other evidence and overall probabilities. As a general observation, it is fair to say that the Plaintiff’s evidence on the exercise of the Option is evasive whilst there are inconsistencies in various aspects of the Defendant’s evidence and a lack of documentary evidence to support how and when the Written Notices were prepared by Attorney Virginia and signed by Brother Eddie and Sister Dory.

4.74  There are two Written Notices in identical terms, one signed by Brother Eddie and the other by Sister Dory. They are in the following terms:

“20 October 2015 JIL INVESTMENTS LIMITED Unit 901-905 9th Floor China Insurance Group Building 141 Des Voeux Road Central Hong Kong Business Registration No. 3396879 ATTENTION: Mr Stephen Sy Chairman   Syed M. Ahmed Vice President   RE: Lease Purchase Agreement Exercise of Option Gentlemen: Pursuant to the provisions of our Lease--Purchase Agreement, which is expiring on 14 December 2015, we would like to inform you that the Jesus Is Lord Church Limited, which I represent, will be exercising the option to purchase the property subject matter of our said Agreement. We shall be forwarding the payment for the purchase. Yours Truly, For Jesus Is Lord Church Limited: [Signed respectively by Brother Eddie and Sister Dory as the case may be]”

(a) The parties’ arguments on RHC Order 27, rule 4

4.75  An important issue to the resolution of the factual dispute is whether the Plaintiff is permitted to challenge the authenticity of the Written Notices, there being no dispute that the Plaintiff did not serve a notice of non-admission to challenge the authenticity of the Written Notices was not admitted.

4.76  RHC Order, 27 rule 4 provides:

“(1) Subject to paragraph (2) and without prejudice to the right of a party to object to the admission in evidence of any document, a party on whom a list of documents is served in pursuance of any provision of Order 24 shall, unless the Court otherwise orders, be deemed to admit –

(d) that any document described in the list as an original document is such a document and was printed, written, signed or executed as it purports respectively to have been, and

(e) that any document described therein as a copy is a true copy.

This paragraph does not apply to a document the authenticity of which the party has denied in his pleading.

(2) If before the expiration of 21 days after inspection of the documents specified in a list of documents or after the time limited for inspection of those documents expires, whichever is the later, the party on whom the list is served serves on the party whose list it is a notice stating, in relation to any document specified therein, that he does not admit the authenticity of that document and requires it to be proved at the trial, he shall not be deemed to make any admission in relation to that document under paragraph (1).”

4.77  As set out at Note 27/4/1 of Hong Kong Civil Procedure 2026:

“a party served with such a list or affidavit is deemed to admit that (if it is described as an original document) it is genuine and (if described as a copy) is a true copy (But Wai Sum v But Wai Keung [2021] HKCFI 3708). This does not apply, however (a) if the court otherwise orders, or (b) that person has denied the authenticity in his pleading, or (c) within the time specified in O.27 r.4(2) he serves a notice of non-admission. In relation to (b), there is a difference between “non-admission” and “denial” in a pleading in relation to authenticity: Hu Lan v David Golden [2024] 1 HKLRD 1252, [2024] HKCA 108, [34]–[35]. As to the court’s discretion under (a) to release a party who has not served a notice of non-admission, the threshold is identical to that for relief from sanction: Hu Lan v David Golden (at [38]).” (emphasis added)

4.78  Mr Suen referred to Hu Lan v David Golden [2024] 1 HKLRD 1252 (“Hu Lan (CA)”):

“[34] The next question is whether this non-admission in the pleading should be treated as a denial for the purpose of the exception in Order 27 rule 4(1). I am inclined to agree with Mr Dawes that the distinction between a denial and non-admission should not be blurred for this purpose. I do not think one can read too much into §24 of Yuen Minghwa Francois, as the judge would appear to have done in §§50 to 51 of the Judgment. Mr Pao sought to support the judge arguing that that case is authority for the proposition the court should look to substance rather than form. In that case, the previous court orders and the ruling of the trial judge had the effect of releasing the party who did not serve the notice from the deemed admission. It does not assist Mr Pao’s argument. A deemed admission would arise in this instance flowing from the absence of notice in Order 27 rule 4(1).

[35] Hence, notwithstanding the pleading of non-admission in the defence, the effect of Order 27 rule 4(1) is that a notice is required to be served under the rules if, after inspection of the document on discovery, the defendant is still minded to challenge the authenticity of a document and requires the document to be proved at the trial. That is the same effect as under CPR rule 32.19, which does not have a provision equivalent to the exception in the last paragraph of Order 27 rule 4(1). The only difference is that under our rules, a denial is treated differently from a non-admission, as a party is required to state his reasons for the denial and his own version of events if it differs from the claimant’s, making it less likely that upon discovery the authenticity of a document in issue would not be disputed.

[36] The courts in Hong Kong as well as in the UK nevertheless retain a discretion to release a party who has not served a notice of non-admission under the rules from the deemed admission. As stated by Anthony Chan J in Gotland Enterprises Ltd v Kwok Chi Yau (No 2) at §§12 and 15:

“12. Further, the court retains a discretion to release the party who is deemed to have admitted the authenticity of any document from that admission. This may be particularly relevant in cases like the present where the plaintiff is not in a position to say that the Records are not genuine. The court would not adjudicate any action on the basis of false evidence. If it emerged at any stage of proceedings that any document is not genuine, the court can be expected to do what is just, which includes making an appropriate order under O. 27 r. 4(1).”

“15. The proper approach should be one where the parties should accept that the documents disclosed by the other side are genuine unless there is sound reason to believe otherwise, in which case a notice to dispute authenticity should be filed. Should it turn out subsequently that the faith placed upon the genuineness of any document is undeserved, it can be expected that the court will set its face against any impropriety and will not hesitate to relieve the party which has been misled from the admission.”

[37] I agree with Mr Dawes that the judge did not appear to have considered the exercise of this power, but do not agree with him that the Court of Appeal has no jurisdiction to release the defendant from his deemed admission.” (emphasis added)

4.79  Mr Suen submitted that it has always been the Plaintiff’s case that the Written Notices were never given to the Plaintiff. Whilst the Plaintiff has not formally served a notice of non-admission in respect of them, the court should exercise its discretion to release the Plaintiff from the deemed admission (insofar as the Defendant says they were prepared contemporaneously), particularly as the Defendant would not be prejudiced as it has dealt with such factual issues in the witness statement. He further submitted that the Plaintiff could not have pleaded a positive case to the authenticity of the Written Notices and the Defendant could hardly have expected the Plaintiff to admit the authenticity of the Written Notices, given Sy Senior’s evidence that he never saw the Written Notices.

4.80  I am unable to accept Mr Suen’s submissions for the following reasons.

(1) Mr Suen’s reliance on the professed inability on the Plaintiff’s part to plead a positive case to the authenticity of the Written Notices is misplaced. That professed inability is relevant to the proviso in RHC Order 27, rule 4(1), namely that the deemed admission does not apply to a document the authenticity of which the party has denied in his pleading. In contrast, the purpose of RHC Order 27, rule 4(2) is to require a party to prove the authenticity of a document at trial in the circumstance when the other party simply does not admit the authenticity of the document. The professed inability to plead a positive case does not excuse the Plaintiff’s obligation to issue a notice under RHC Order 27, rule 4(2): Hu Lan (CA) §§34-35. As a matter of pleadings, the Plaintiff’s pleaded case on the Written Notices contends that (1) Sy Senior did not receive the Written Notices at any time, (2) the Plaintiff did not receive the Written Notice by registered post at the Plaintiff’s registered post at its registered address (one of the permitted modes of service under the LPA), (3) the Plaintiff was not informed of the Defendant’s purported exercise of the Option by its alleged personal service of the Written Notice on Sy Senior, (4) even if such personal service did occur, this was not a permissible method of service nor was it effected within the requisite time. As submitted by Mr Ho, none of the foregoing scenarios even hint at a challenge to the authenticity of the Written Notices or that they were never prepared and/or signed on 20 October 2015 as stated;

(2) It is therefore the case that the Plaintiff was required to serve a notice of non-admission. The question is whether the court should exercise its discretion to release the Plaintiff from the deemed admission;

(3) On the issue of discretion, the threshold in releasing a party from a deemed admission for failure to serve a notice of non-admission is the threshold for relief from sanction. As has been emphasized at Hu Lan (CA) §§38, 39 and 44, the exercise of this power is subject to the underlying objective namely, that the court should always recognize that the primary aim in exercising the powers of the court is to secure the just resolution of disputes in accordance with the substantive rights of the parties. The relevant circumstances include (a) whether the Defendant was aware from the pleadings and witness statements of the Plaintiff that the authenticity of the Written Notices was put in issue and (b) whether prejudice or unfairness would be caused to the Defendant were the Plaintiff released from the deemed admission;

(4) In Hu Lan (CA), in exercising its discretion to release the defendant from the deemed admission, the Court of Appeal found, in the circumstances of that case, there was no doubt from the pleadings, witness statements and affirmation of the plaintiff that she was fully aware from an early stage that the authenticity of the document in question was put in issue and had conducted her case accordingly with that expectation. The Court of Appeal at §39 found that the plaintiff in that case could hardly have expected the defendant to admit the authenticity of the document in question (a loan agreement), given that its contents were wholly contrary to the defendant’s pleaded case that a certain sum was given to him as a gift;

(5) I am unable to reach the same conclusion in the circumstances of the present case. I have already summarized the Plaintiff’s pleaded case above. The authenticity of the Written Notices is not contrary to the Plaintiff’s pleaded case which, as noted above, is concerned with whether the Written Notices were served on Sy Senior, whether Sy Senior had the authority to receive them, and whether the personal service on Sy Senior was permissible under the LPA and generally whether the Plaintiff had notice of the Defendant’s exercise of the Option within the stipulated time. Given the centrality of the issue of authenticity placed in closing by Mr Suen, the authenticity of the Written notices was not even challenged in the Plaintiff’s written opening, and was not one of the issues explicitly identified in the Agreed List of Issues;

(6) In addition to the matters identified above which militate against exercising my discretion in favour of the Plaintiff, I also accept Mr Ho's submissions that significant prejudice is caused to the Defendant. Had a notice of non-admission was given earlier, the Defendant could have taken further steps as deemed appropriate (such as adducing further evidence): Gotland Enterprises Ltd v Kwok Chi Yau (No 2) [2013] 3 HKLRD 490 §8. At the very least, as I read the Defendant’s witness statements, the preparation of the Written Notices was addressed as a matter of background. Had the issue been squarely raised, it is not beyond peradventure that more attention and focus might have been placed to address the challenge. In the event, as will be seen below, Mr Suen in closing sought to take advantage of the inconsistencies in the evidence given by the Defendant’s witnesses in the witness box;

(7) In my view, Mr Suen cannot derive assistance from his reliance on Hu Lan (CA) §41, at which reference was made to Eco3 Capital v Ludsin Overseas Limited [2013] EWCA Civ 413 where the English Court of Appeal held it was too late for the affected defendant to rely on the deeming provision in the closing speech, when he had known from the claimant’s opening that the claimant did not accept the accuracy of the date of a document and failed to object to the cross-examination on the issue. I say this for two reasons. First, as noted above, the issue was not even raised in the Plaintiff’s opening or the Agreed List of Issues and, as I thought it was quite unfair, it was in the course of the trial that I raised with Mr Suen whether the Plaintiff was permitted to challenge the authenticity of the Written Notices. I must confess I was not aware that there was a need for me to rule on the scope of the evidence-taking (and neither counsel had submitted that I was required to and Hu Lan (CA) was only referred to by counsel in closing). However, in my view, there can be no doubt that the authenticity issue remained a live issue and there cannot be any suggestion on the Plaintiff’s part that there was any waiver or acquiescence on the part of the Defendant. In any event, as pointed out by Mr Ho, Eco3 has been doubted by a later English Court of Appeal case, namely Lamya Nageh v David Game College Ltd & Anor [2013] EWCA Civ 1340:

"Mr. Gorton drew our attention to the judgment of this court in Eco 3 Capital Ltd v Ludsin Overseas Ltd [2013] EWCA Civ 413 and submitted that by allowing the issues surrounding the creation of the document to be fought out at trial Ms. Nageh had waived any right to rely on rule 32.19. However, I am unable to accept that argument, any more than I could accept any suggestion that Ms. Nageh had acquiesced in the defendants' challenge to the authenticity of the document…"

(8) Importantly, the unfairness is immediately apparent. As noted above, the Defendant, where it challenged the authenticity of certain documents, had squarely raised the point by properly issuing the relevant notice of non-admission. In the circumstances described at subparagraphs (5) and (6) above, and in the absence of the Plaintiff doing likewise, it lies ill in the mouth of the Plaintiff to contend only in closing that the Defendant must have been fully aware that the authenticity of the Written Notices was put in issue. Indeed, no explanation has been proffered by Mr Suen as to why a notice of non-admission was not issued.

4.81  For the above reasons, I decline to exercise my discretion to release the Plaintiff from its deemed admission of the authenticity of the Written Notices.

(b) The Written Notices

4.82  In case I am wrong on my determination on the RHC Order 27, rule 4 issue, I set out my findings on the evidence.

4.83  The evidence of Brother Eddie, Maria, Cristeta and Attorney Virginia may be summarized as follows:

(1) In mid-2015, Maria and Cristeta both became aware of the Consulate Litigation. Such news alarmed Maria and Cristeta, as they were concerned that after the end of the LPA, Sy Senior might also not honour his obligations to the Defendant;

(2) Maria then looked at the LPA more closely between June and October 2015, and asked Attorney Virginia in October 2015 to review the same. She spoke to Attorney Virginia about the news regarding the Consulate Litigation as well;

(3) There were inconsistencies in the Defendant’s evidence as to how Attorney Virginia learnt about the 20/10/15 Meeting. When cross-examined, Brother Eddie said that he told Attorney Virginia about the meeting, whereas both Maria and Attorney Virginia, despite some initial inconsistencies, eventually both gave evidence that it was Maria who told Attorney Virginia about the meeting;

(4) Whilst it is the Defendant’s consistent case that it was Attorney Virginia who prepared the Written Notices, there is an inconsistency as to how much time she had to prepare them. Attorney Virginia confirmed in the witness box that she had a few weeks to prepare the Written Notices, but Brother Eddie in the witness box said that he asked her to prepare the Written Notices urgently, after he told her about the 20/10/15 Meeting a few days before.

4.84  In addition to the inconsistencies identified above, Mr Suen further relies on a host of matters to attack the cogency of the Defendant’s evidence, the more salient ones are set out below.

4.85  First, on the documentary evidence, Sy Senior by email dated 17 October 2015 (Saturday) informed Brother Eddie that he was in Manila to join a wedding party on the next day and asked to catch up with him. On 18 October 2015 (Sunday), Brother Eddie replied Sy Senior that they could meet the following evening (Monday) at JILCW’s new office in Ortigas Centre. On 19 October 2015, Sy Senior informed Brother Eddie that he could not meet for dinner and suggested lunch on Tuesday. Later the same day, Brother Eddie then confirmed to meet at lunchtime on Tuesday (ie the 20/10/15 Meeting). Mr Suen submitted that given the short notice at which the 20/10/15 Meeting was organized, it was doubtful that Brother Eddie did immediately inform Attorney Virginia (or Maria who then informed Attorney Virginia) who then had to prepare the Written Notices at extreme short notice, given that the Lease Term was still some time down the road.

4.86  Secondly, the above point is a fortiori since, on the documentary evidence, it was only on 18 November 2015 that Maria emailed a copy of the LPA to Attorney Virginia.

4.87  Thirdly, Mr Suen attacked Attorney Virginia’s evidence on the logistics of the preparation and signing of the Written Notices, pointing out the discrepancies in the number of copies made in relation to the version respectively signed by Sister Dory (2 copies) and Brother Eddie (5 copies).

4.88  Fourthly, Mr Suen pointed out that the Defendant has adduced no documentary evidence as to how the Written Notices were prepared. He pointed out where it is Attorney Virginia’s evidence that she had emailed the (unsigned) Written Notices to Brother Eddie, the said email has not been adduced into evidence.

4.89  Fifthly, it was inherently improbable that Maria took no part in the preparation of the Written Notices given that Maria was the Defendant’s director handling matters relating to the LPA such as payments.

4.90  Sixthly, if, as alleged by the Defendant (see further below), Sy Senior was reluctant to keep the Written Notices at the 20/10/15 Meeting, there was no reason for the Defendant did not follow up by emailing the Written Notices to Sy Senior to put things beyond doubt, in which case a paper trail of the service of the Written Notices would have been created.

4.91  Seventhly, as confirmed by Maria, the Defendant’s office in Hong Kong did not even receive a copy of the signed Written Notices (whether by fax, email or post) and she had not seen the signed Written Notices at the material time.

4.92  For all the above (and other more peripheral) reasons, Mr Suen invited the court to find that the Written Notices were not prepared contemporaneously (ie as stated in the Written Notices on or before 20 October 2015).

4.93  I am not persuaded by Mr Suen for the following reasons.

4.94  Whilst I acknowledge that Mr Suen was able to “score” a number of points in cross-examination in terms of inconsistencies in the details, the Defendant’s overall evidence on the Written Notices has remained consistent. Unlike the Defendant’s change of case relating to the belated formulation of Sy’s Dec 2003 Assurances, the case on the Written Notices was pleaded even in the original defence and maintained in the witness statements.

4.95  I do not regard the inconsistencies in the details have the effect of outweighing the overall probabilities. The effect of the Plaintiff’s evidence, if believed, is that not only did the Defendant not comply with the Notice Requirement by serving the Written Notices, the Sleepwalk Theory necessarily entails a factual finding that the Defendant never contacted the Plaintiff at all regarding the transfer of the Premises before the end of the Lease Term. I am unable to accept that the Sleepwalk Theory is inherently probable.

4.96  On the balance of probabilities, the Consulate Litigation, which was reported in the news, would have come to the notice of the Defendant. The subject matter of the Consulate Litigation was not merely a commercial dispute, but was concerned with the office premises of the Filipino Consulate which affected the entire Filipino community in Hong Kong. Once it came to the Defendant’s attention that Bel Trade was sued for failing to transfer the relevant property to the Filipino Consulate, it is unreal to suggest that the Defendant was not alarmed, given that the Lease Term was to expire in the near future and it had faithfully complied with its payment obligations under the LPA for more than 11 years. As will be detailed below, the Defendant was plainly aware that the Lease Term was expiring.

4.97  Mr Suen emphasized that the contemporaneous documents only show internal discussions between Maria and Attorney Virginia which took place after the 20/10/15 Meeting. As a matter of timing, Mr Suen is correct. But I do not believe his criticisms are valid in that the Sleepwalk Theory is thereby supported:

(1) By way of example, on 3 November 2016, Danny (on behalf of the Plaintiff) issued a debit note to the Defendant in respect of the payment under the LPA for November 2015. It was expressly stated in the debit note that the payment, in compliance with the terms of the LPA, was due on 15 November 2015. On 12 November 2015, Danny sent a phone message to Maria requesting the Defendant to issue a cheque for the November 2015 payment. Maria replied on the same day to inform Danny that the November 2015 payment was the last payment under the LPA and the Lease Term “will be finished” to which Danny confirmed. The documentary evidence shows that Maria sent the relevant cheque by post on 13 November 2015 but somehow it was lost in the mail. Eventually, Danny suggested to Maria to meet in person on 17 November 2015 to collect the replacement cheque. According to the receipt issued, the Plaintiff received the November 2015 payment on 19 November 2015;

(2) What is important is that, on 18 November 2015, Maria sent an email to Attorney Virginia (a) informing her that the Plaintiff received the cheque for the November 2015 payment under the LPA on that day, (b) pointing out the Option and the Option Consideration of HK$1, (c) attaching the LPA for Attorney Virginia’s perusal and (d) requesting Attorney Virginia to issue a letter from the legal department informing Sy Senior and the Plaintiff that there would be a ceremonial turnover and Brother Eddie would like to invite them to a “glorious ceremony of turnover [of the Property]”;

(3) Mr Suen relied heavily on the above. He reasoned that as Maria only provided the LPA to Attorney Virginia on 18 November 2015, it was impossible for Attorney Virginia to have prepared the Written Notices before the 20/10/15 Meeting;

(4) I do not agree with Mr Suen. On the balance of probabilities, I accept the Defendant’s evidence given in the witness box that Attorney Virginia already had a copy of the LPA. She was one of the attendees at the December 2003 Meeting and was responsible for the negotiation of the terms of the Draft LPA. It is inherently likely that Attorney Virginia, as the Head of the Legal Department, would have in her possession a copy of the signed LPA. There may be many reasons why Maria decided to send the LPA again on 18 November 2015 such as to save Attorney Virginia the trouble of retrieving the document;

(5) In any event, the contents of the Written Notices are entirely consistent with Attorney Virginia drafting the same in the Philippines based on the LPA. They were not issued under the Defendant’s letterhead and the address of the Plaintiff was the one stated in the LOA, not the Plaintiff’s then current address;

(6) Mr Suen next relied on the Viber phone messages exchanged between Maria and Attorney Virginia on 28 December 2015, by which Maria stated that she had told Brother Eddie that Attorney Virginia was reviewing the LPA and Maria asked whether the Defendant needed to pay the HK$1 Option Consideration or whether there were other documents needed for the transfer of the Property. Attorney Virginia replied that a “deed of absolute sale” was required from the Plaintiff;

(7) Mr Suen submitted that the above shows a “parallel universe” in that, contrary to the Defendant’s evidence that steps were taken, Attorney Virginia simply sat on the matter between 18 November and 28 December 2015 (with a holding reply sent by Attorney Virginia on 9 December 2015);

(8) I do not agree with Mr Suen. In my view, the evidence canvassed above is entirely consistent (or at the very least not inconsistent) with the Written Notices having been prepared contemporaneously and given to Sy Senior at the 20/10/15 Meeting. It is plain that the Option Clause contains two aspects, namely the Notice Requirement and the eventual transfer of the Property. The first was neither legally nor factually complicated but the latter was, especially when it involved Hong Kong conveyancing matters. Read fairly, the exchanges between Maria and Attorney Virginia show that, by November 2015, the Defendant’s attention was focused on the latter matter;

(9) It needs to be borne in mind that on 18 November 2015, there was nothing to prevent Maria as a director to carry out the administrative step to issue a notice to comply with the Notice Requirement. Maria also confirmed at the trial that she knew that a notice had to be served. According to Maria, she confirmed that she had learnt in the last week of October 2015 that the Written Notices had already been served at the 20/10/15 Meeting.

4.98  Thirdly, and related to the above, I need to put the Plaintiff’s evidence on the scale. The above “inconsistencies” have to be weighed against the evasiveness of the Plaintiffs evidence. It was not until his viva voce evidence that Sy Senior accepted that he attended the 20/10/15 Meeting. His evidence was that at the meeting, nothing about the imminent expiry of the Lease Term was discussed, and by then it was none of his business. I find this to be an entirely implausible scenario, especially given (1) the existence of the Consulate Litigation, (2) Sy Senior’s own evidence that he never told Brother Eddie about his resignation as a director of the Plaintiff and (3) Sy Senior’s own evidence that he did discuss other business opportunities with Brother Eddie.

4.99  For the above reasons, whether by reason of my determination on the RHC Order 24, rule 7 issue or by reason of the above analysis of the evidence, I find that the Written Notices were prepared and executed as stated in the documents.

(c) What transpired at the 20/10/15 Meeting

4.100  Mr Suen relied on a number of the matters to question whether the Written Notices were served on Sy Senior at the 20/10/15 Meeting, the more salient ones are as follows[13]:

(1) There was no reason why the Defendant could not have sent the Written Notices by registered post to the Plaintiff’s registered office (whether on its own or as additional measure) by reason of Clause 7(f) of the LPA, which provides a deeming provision that any notice required to be served under the LPA “shall be sufficiently served on the Landlord if delivered to him by registered post at its registered office”;

(2) After the Written Notices were purportedly served on Sy Senior at the 20/10/15 Meeting, there was no mention of that fact thereafter, whether in the Defendant’s internal correspondence, the deed of absolute sale in March 2016, or the initial exchanges between solicitors;

(3) The Defendant did not follow up with the Plaintiff until after the expiry of the Lease Term.

4.101  Given my findings on the authenticity of the Written Notices, I accept Mr Ho's submission that the overwhelming probability is that they were served on Sy Senior. In relation to the matters relied on by Mr Suen:

(1) Contrary to the position taken in the Plaintiff’s pleaded case, Mr Suen accepted that Clause 7(f) only sets out a deeming provision and is not a mandatory requirement for the serving of notices under the LPA. Whilst I accept that the course suggested by Mr Suen is a prudent course, one needs to bear in mind that, as found above, Brother Eddie and Sy Senior by then had developed a close friendship. This is plain from the wording of the emails sent by Sy Senior to Brother Eddie in October 2015 where he signed off with “Love, Kumpedre Stephen”. In this context, it is understandable that the parties did not deal with each other with a degree of formality or that Brother Eddie viewed it necessary to create a paper trail;

(2) I also do not regard the complaints that there was no further mention of the service of the Written Notices have the effect of outweighing the other evidence in assessing the inherent probabilities. These are matters of details and the failure to mention a matter does not factually contradict that matter.

4.102  I find, as a matter of fact, that the Written Notices were served on Sy Senior’s at the 20/10/15 Meeting. It is also inherently probable that the October 2015 Representations were made by Sy Senior, as contended by Brother Eddie:

(1) As found above, the Property was unencumbered as at 26 February 2015 following the release and discharge of the legal charge and rental assignment in favour of Wing Hang Bank;

(2) In May 2015, the Plaintiff obtained the LSH Loan;

(3) Although Sunny initially attempted to say that the proceeds from the LSH Loan were for his own new businesses, he was ultimately unable to give a coherent account for the usage of the loan proceeds;

(4) The objective evidence is that the LSH Loan had been substantially drawn down by October 2015 and, as a matter of fact, only days before the 20/10/15 Meeting, a sum of HK$4 million was drawn down;

(5) Sy Senior accepted that the Property was a significant asset in the Bel Trade Group;

(6) The LSH Loan was surreptitiously obtained without the knowledge of Brother Eddie and Sister Dory;

(7) Against the above background, it is entirely plausible, and I so find, that Sy Senior, upon being presented the Written Notices, would have represented to Brother Eddie that the Plaintiff needed more time to transfer the Property because of the then financial difficulties.

4.103  I further accept Brother Eddie’s evidence that, upon Sy Senior making the October 2015 Representations, by reason of his close friendship with Sy Senior, he decided not to press the transfer of the Property at the expiry of the Lease Term and he so told Sy Senior. I also accept Bother Eddie’s evidence that Sy Senior initially asked to return the Written Notices but Sy Senior eventually kept them.

4.104  Indeed, the Plaintiff’s (in)action at the material time was entirely consistent with the above matters. Following the expiry of the Lease Term, and on the Plaintiff’s case the Option had not been exercised, Sunny contemporaneously did not cause the Plaintiff to return the Security Deposit to the Defendant, did not cause the Plaintiff to ask the Defendant to vacate the Premises and did not ask for payment from the Defendant for its continued occupation of the Property. The Plaintiff’s (in)action is particularly inexplicable, because it is Sunny’s evidence that he took the view at the latest in December 2015 that the Defendant could no longer exercise the Option. It was only on 29 September 2016 that the Plaintiff’s solicitors issued a letter to the Defendant’s solicitors demanding the Defendant to vacate the Property, but that was only after the Defendant made searching enquiries on the legitimacy of the removal of Brother Eddie and Sister Dory as directors of the Plaintiff and the legitimacy of the LSH Loan.

4.105  Additionally, I accept Mr Ho’s submissions that, as a matter of inherent probabilities, the making of October 2015 Representations is the only believable explanation for the lack of urgency demonstrated by the Defendant from October 2015 onwards until it ran out of patience after a meeting in early March 2016, whereupon the Option Consideration was tendered in late March 2016.

(x) Events after the 20/10/15 Meeting

4.106  According to the travel records, Brother Eddie was in Hong Kong between (1) 31 October to 4 November 2015 and (2) 19 to 22 December 2015. There is no evidence from the Defendant that it contacted the Plaintiff to take steps in exercising the Option.

4.107  I have already set out above the salient documentary evidence on the exchanges between Maria and Attorney Virginia between the final payment under the LPA in mid-November 2015 and Attorney Virginia’s advice given on 28 December 2015 that a “deed of absolute sale” was required from the Plaintiff.

4.108  The documentary evidence shows that Maria prepared a letter dated 14 December 2015 (“December 2015 Letter”) and she and Cristeta signed a cheque also dated 14 December 2015 in the sum of HK$1 for payment of the Option Consideration (“Cheque”). It is common ground between the parties that the December 2015 Letter and the Cheque were only sent to the Plaintiff at the end of March 2016 and received by the Plaintiff on 1 April 2016. It is the Defendant’s evidence that the December 2015 Letter and the Cheque were prepared on or about 14 December 2015. The December 2015 Letter stated as follows:

“Enclosed herewith the cheque #504697 representing as Purchase Cost at end Lease Agreement as per Lease and Purchase Agreement #11 page 10 & 11.”

4.109  Although the Plaintiff did not issue a notice of non-admission challenging the authenticity of the December 2015 Letter and the Cheque, it did make an application for specific discovery for the Defendant’s cheque books. What is revealed is that the Cheque (numbered 504697) was the 7^th cheque in the relevant cheque book and the preceding 6 cheques were all dated 26 February 2016, and therefore, the inherent probability is that the Cheque was prepared on or after 26 February 2016. Both Maria and Cristeta filed additional witness statements to deal with issue. In these circumstances, I exercise my discretion to release the Plaintiff from the deemed admission.

4.110  Having considered the evidence of Maria and Cristeta, I am not satisfied that the December 2015 Letter was prepared by Maria and the Cheque signed by Maria and Cristeta on or before 14 December 2015. As I understand Mr Ho, he did not enthusiastically vouch for Maria and Cristeta’s evidence but submitted that, in view of the common ground that the December 2015 Letter and Cheque were only tendered in late March 2016, the issue of whether they were prepared on or before 14 December 2015 was a peripheral issue and a red herring. Mr Suen unsurprisingly disagreed. He submitted that this lent support that the Written Notices were similarly not prepared contemporaneously.

4.111  I do not agree with Mr Suen. Even if the December 2015 Letter and the Cheque were prepared on or after 26 February 2016, it is entirely consistent with the Defendant’s overall evidence, as elaborated further below.

4.112  The next documentary evidence in time is an email dated 6 January 2016 from Maria to Danny in the following terms:

“I received instruction from our Bishop Eddie to communicate to Mr. Sy regarding [the Property].

We want to have appointment with Mr. Sy. May we ask the dale and his available time.”

4.113  Danny replied on the same day:

“I regret to tell you that Mr, Sy has taken. an eyes surgery recently and cannot see things clearly at this moment. He will confirm me the date and available me the date and available time after his recovery.”

4.114  Three points are immediately of note. First, the timing of Maria’s email is entirely consistent with the October 2015 Representations, namely Sy Senior had told Brother Eddie that he required more time to transfer the Property because of financial problems. As there was no feedback from the Plaintiff and December 2015 had passed, Brother Eddie then asked Maria to and Maira did follow up with the Plaintiff in respect of the transfer of the Property. Secondly, where it is the Plaintiff’s case that Sy Senior took no part in the affairs of the Bel Trade Group after his resignations as director and bankruptcy, Danny did not direct Maria to the person in charge, namely Sunny. Thirdly, given it was Sunny’s position that he formed the view at the latest in December 2015 that the Defendant was no longer entitled to exercise the Option, Danny did not inform Maria that the Defendant should vacate the Premises.

4.115  After waiting for about a week, on 13 January 2016, Maria sent another email to Danny in the following terms:

“Thank you for your e-mail. We would like to follow-up the execution of the transfer of ownership of the property from [the Plaintiff to the Defendant].”

4.116  There was no response from the Plaintiff. In the meantime, on 25 January 2016, the LSH Loan was further drawn down and the facility limit of HK$30 million was reached.

4.117  As there was no response, Maria sent another email to Danny on 17 February 2016 in the following terns:

“This is a second follow-up regarding the execution of the transfer of the property from [the Plaintiff to the Defendant].

Moreover, we want to follow the rental deposit that will be refunded to [the Defendant] after the completion of the leasing agreement.”

4.118  There was no immediate response from Danny. On 26 February 2016, Maria sent a Whatsapp message to Danny chasing for a response. Danny told Maria that she “may call Mr Ahmed at [phone number] to ask the details”. This coincides with what is the likely timing of the preparation of the Cheque (see above). On the balance of probabilities. The December 2015 Letter and the Cheque were prepared after Danny’s Whatsapp message to Maria.

4.119  According to the travel records of Sy Senior, he was in the Philippines on 1 March 2016. As shown in the email from Maria to one Ms Maritess Reyes dated 1 March 2016, Maria requested Maritess to print out a copy of the LPA as Brother Eddie and Rene were meeting Sy Senior (“March 2016 Meeting”). It is Sy Senior’s evidence that he did not recall attending the March 2016 Meeting. Conversely, it is the Defendant’s evidence that, at the meeting, Sy Senior refused to sign a “deed of absolute sale” (“March 2016 Deed”) for the transfer of the Property. I accept the Defendant’s evidence.

4.120  On 31 March 2016, the Defendant posted the December 2015 Letter and the Cheque to the Plaintiff.

4.121  Pausing here, it is plain from the above chronology that after the last payment by the Defendant under the LPA on 19 November 2015, the Plaintiff did absolutely nothing to put itself in the position to transfer the Property to the Defendant. The Plaintiff was fully aware that the Defendant had performed the payment obligations under the LPA, having paid in excess of HK$23 million over 144 payments. On Sunny’s own evidence, he never contacted anyone from the Defendant, but conducted himself solely on the basis that a written notice was not served by registered post at the Plaintiff’s registered office. When the Defendant made the last payment on 19 November 2015, he did not utilize the Genuine Idea Loan to pay off the LSH Loan (obtained surreptitiously without the Defendant’s knowledge) then already drawn down (by then HK24 million of the HK$30 million limit), but having formed the view that as there was no written notice by registered post, he continued to draw down the LSH Loan on 2 December 2015 and 25 January 2016. All of the Plaintiff’s actions are sought to be justified by its factual case that the Written Notices were not served on Sy Senior at the 20/10/15 Meeting which I have found against.

4.122  I should specifically mention that I do not believe Sunny’s evidence he had the ability to repay the LSH Loan after the draw downs. I have already observed that no evidence has been adduced on Genuine Idea’s ability to advance HK432,000,000 to Sunny. Moreover, the Genuine Idea Loan was secured by a corporate guarantor, namely Multi-Millionaire Investments Limited with the same registered office address of the Plaintiff. There is no evidence to show that the guarantor is an entity of financial substance.

4.123  Returning to the chronology, on 24 June 2016, the Defendant registered the LPA at the Lands Registry. As noted above, from July 2016 onwards there were exchanges between the solicitors of LSH and the Plaintiff[14] and the former solicitors on the legitimacy of the LSH Loan and the removal of Brother Eddie and Sister Dory as directors of the Plaintiff. Attorney Virginia’s statutory declaration was registered at the Lands Registry on 11 August 2016. It was only on 29 September 2016 that the Plaintiff demanded the Defendant to deliver vacant possession of the Property.

5.   Analysis of D’s Primary Case

5.1  I now proceed to analyze D’s Primary Case. Based on the above factual findings, two questions arise as to whether the Defendant had validly exercised the Option: (1) whether the service of the Written Notices on Sy Senior at the 20/10/15 Meeting complied with the Notice Requirement and (2) whether the tender of the Cheque in late March 2016 complied with LPA Clause 12. The first question revolves around whether (as contended by the Plaintiff) Sy Senior by reason of his resignation as director and bankruptcy he no longer had authority to represent the Plaintiff.

(i) Authority of Sy Senior

5.2  Mr Ho relied on the following legal propositions on Sy Senior’s continued apparent authority to act on behalf of the Plaintiff notwithstanding his resignation as director and bankruptcy.

5.3  First, he referred to Bowstead and Reynolds on Agency, 23^rd Ed §§10-031 and 10-32:

“Where a principal, by words or conduct, represents or permits it to be represented that an agent is authorised to act on the principal's behalf, the principal is bound by the acts of the agent, notwithstanding the termination of authority (unless perhaps by the death or insolvency of the principal) to the same extent as would have been the case if the authority had not been terminated, when it was reasonable for the third party to deal with the agent on the faith of any such representation, without notice of the termination of authority…

It is certainly clear that a third party does not need to point to fresh evidence of a holding out occurring at or after the time that the agent's authority was terminated; such an argument has been expressly rejected. In many circumstances, it will be reasonable for the third party to assume that an express representation as to an agent's authority, or an agent's usual authority, continues unless and until the principal takes steps to notify the third party that the authority has been terminated…

Apparent authority ends when it is no longer reasonable for the third party with whom the agent deals to believe that the agent continues to act with actual authority…” (emphasis added)

5.4  Secondly, he cited SEB Trygg Liv Holding AB v Manches and Ors [2006] 1 WLR 2276:

“[31] Recognition that ostensible authority operates as a form of estoppel goes back at least as far as the speech of Lord Selborne LC in Scarf v Jardine (1882) 7 App Cas 345. That was a partnership case, but the House accepted that in their dealings with third parties the partners acted as agents for each other, and could be liable by way of estoppel for acts of a former partner. In the commentary to article 123 Bowstead & Reynolds on Agency suggests that the operation of the doctrine of ostensible authority in cases of termination of authority has not been fully worked out, because most of the cases refer to the extent of the authority rather than to its duration. However, Scarf v Jardine, cited by Bowstead & Reynolds, was a termination case, as was Willis Faber & Co Ltd v Joyce (1911) 104 LT 576, equally cited by Bowstead & Reynolds and shown to us by Mr Strauss. Once the underlying principle of estoppel is established, there is no logical reason why, subject of course to the facts of each particular case, the doctrine should not operate in cases falling into each category.

[32] As to the facts of this case, Bowstead & Reynolds on Agency points out that ostensible authority covers two types of case: where the agent has been permitted to assume a particular position that carries a usual authority; and where a specific representation is made as to the agent's authority. If either type of conduct on the part of the principal gives rise to an estoppel, that is because of the understanding that it creates in the mind of the third party representee. An alteration on the principal's part of the relationship between himself and the agent cannot, once the estoppel has been created, alter or withdraw the representation if the alteration of the relationship is not communicated to the representee. That renders incorrect the argument advanced by AMB that on Professor Hauptmann's retirement as a director his ostensible authority necessarily came to an end, and could only be revived by a further step, active or passive, by the principal. The Rockland case [1980] 2 SCR 2 is at least authority for the proposition, to which it is limited by Bowstead & Reynolds, that a representation of usual authority by the act of appointing to a position will normally continue until the deprivation of the position is known to the third party representee. But in any event the present case is more one of specific representation than of usual authority. The evidence, such as it is, suggests that Professor Hauptmann's status in the eyes of Mr Merrifield and through him of Manches did not spring, or at least did not principally spring, from his position as a director; indeed a good deal of energy was expended earlier in the case, though not before us, in seeking to demonstrate that Professor Hauptmann's position as a director did not confer authority to give instructions in litigation. Rather, Professor Hauptmann's authority sprang from representations by Old Aachener Re, albeit conveyed, with the authority of Old Aachener Re, by Professor Hauptmann, that Professor Hauptmann had been entrusted with the business. It was that representation that conferred ostensible authority on Professor Hauptmann to act on behalf of Old Aachener Re. That representation could not be avoided by AMB without Mr Merrifield being told by Old Aachener Re or on its authority that Professor Hauptmann's authority had been withdrawn…”(emphasis added)

5.5  I do not understand Mr Suen to have disagreed with the propositions underlined above.

5.6  In the earlier part of this judgment, I have already found that Sy Senior was the central figure and the primary decision maker in the Bel Trade Group before his resignation as director and bankruptcy, and notwithstanding his resignation and bankruptcy: (1) internally, staff such as Ahmed continued to report to Sy Senior, (2) externally, Sy Senior continued to discuss matters relating to business with Brother Eddie.

5.7  I have also (1) specifically found that, on Sy Senior’s own evidence, he never told Brother Eddie about the resignation and (2) accepted Brother Eddie’s evidence (despite the change in evidence) that Brother Eddie did not know about Sy Senior’s resignation as director and bankruptcy until after the commencement of these proceedings.

5.8  There is no suggestion by the Plaintiff that the receipt of the Written Notices was a transaction to which the scope of apparent authority is not applicable. Given the analysis thus far, it is entirely unsurprising that Mr Suen was driven to rely heavily on constructive notice. In my view, the Plaintiff can derive no assistance from this argument. I have earlier found that there were no factual circumstances to invoke the application of constructive notice (and as a corollary there were no factual circumstances which would give rise to a duty on the part of the Defendant to inquire into Sy Senior’s resignation or bankruptcy from the public records).

5.9  I refer to LT v RV [2026] HKCFI 1280. The issues of constructive notice and duty to inquire as to agent’s authority are discussed by reference to PT Asuransi Tugu Indonesia TBK v Citibank NA (2023) 26 HKCFAR 1:

“[97] In fact, Lord Sumption NPJ clarified the question of what constitutes notice and when there is a duty to inquire, at paragraph 16 of his judgment in PT Asuransi, as follows:

“The critical question, whether one looks at a bank’s duty of care or at the law relating to ostensible authority, is what constitutes sufficient notice of a want of actual authority, so as to require a bank to make inquiries before paying out in accordance with its mandate. The basic rule is stated in Bowstead & Reynolds on Agency, 22nd ed. (2021), at article 73:

“No act done by an agent in excess of actual authority is binding on the principal with respect to persons having notice that in doing the act the agent may be exceeding the agent’s authority.”

The editors’ comment, at para. 8-048, as follows:

“The problem is to know what constitutes notice, and when there is a duty to inquire. It is often said that neither constructive nor presumed notice apply in commercial transactions. This certainly excludes the full doctrine of constructive notice of equitable interests in land, whereby a person is expected to take the initiative and make inquiries, being deemed to have notice of property interests which would have come to that person’s knowledge if such inquiries and inspections had been made as ought reasonably to have been made. But there can be no doubt that in many situations where it is relevant to know whether one person has knowledge of facts, including those raising the doctrine of apparent authority, the court may infer from the circumstances that the person concerned must have known of the facts in question or at least ought to have been suspicious to the extent that further inquiries would have been appropriate in the context.

It seems that the proper approach in commercial cases is to apply the objective interpretation which one person is entitled to put on another’s words and conduct in the light of the facts known to the former.

…

Many things might be sufficient to put an outsider on inquiry as to an agent’s authority. The third party’s knowledge that the agent has a substantial conflict of interest in respect of the transaction is one of the more common examples, but a plain lack of benefit for the principal or commercial purpose on the face of the transaction, and unusual aspects of the transaction are another.” (Emphasis added)

This statement of principle reflects long-standing authority. Both the general proposition and the editors’ comments in similar terms in the previous edition were endorsed by the Privy Council, after reviewing the authorities, in East Asia Co Ltd v PT Satria Tirtatama Energindo [2020] 2 All ER 294, at [70]-[94].”

[98] As highlighted by Mr Clark, Lord Sumption also clarified, at paragraph 20 of his judgment, any confusion between the terms “unreasonable reliance” and “irrationality”:

“A certain amount of confusion has arisen from the fact that in East Asia, at [83]-[92], the Privy Council, following the editors of Bowstead & Reynolds, considered that the “orthodox view” had been challenged by this court in Thanakharn Kasikorn Thai Chamkat (Mahachon) v Akai Holdings Ltd (No 2) (2010) 13 HKCFAR 479, where the leading judgment was given by Lord Neuberger NPJ, with whom the rest of the court agreed. The Privy Council, at [75], stated the test as being whether the third party could “reasonably” rely on the apparent authority of the agent given what it knew. The challenge was said to consist in Lord Neuberger’s preference for the word “irrationality”. I respectfully suggest that the supposed conflict stems from a misunderstanding of the reasoning in Akai Holdings. Although the two judgments offer different analyses of some of the authorities, there is in my view no difference between the law stated by this court in Akai Holdings and by the Privy Council in East Asia. It is necessary to distinguish between (i) the general principle governing ostensible authority and a bank’s duty of care, and (ii) its application to a particular case. The orthodox view has always been that what a third party is entitled to rely on may differ according to the commercial context and the exigencies of business. The facts in Akai Holdings were that the bank had lent a large sum to company S, over which a Mr Ting had management control. Company S defaulted on the loan. Mr Ting purportedly authorised what was called the “Switch Transaction”, by which liability for the loan was transferred to an unrelated company, C, of which he was the executive chairman. It was conceded that the transaction was beyond Mr Ting’s actual authority. No one doubted that if the bank was dishonest, or if (which amounted to the same thing) it was reckless or turned a blind eye to the apparent impropriety of the transaction, it could not rely on Mr Ting’s ostensible authority. But both courts below had rejected the allegation against the bank’s integrity and this Court declined to interfere with their concurrent findings on that point. The question was therefore what lesser degree of knowledge would suffice to defeat ostensible authority. The alternatives were “irrationality” and “unreasonableness”. Lord Neuberger preferred to call it a test of irrationality, although he regarded both as objective tests and doubted whether there would in practice be much difference between them: see [50]. It is, however, clear that his analysis was not intended to qualify the general principle, as expressed in the “orthodox view”. It was directed only to its application in a commercial context such as banking. In his view a test of irrationality better reflected the exigencies of business which would normally be decisive in a commercial transaction. The bank’s belief in Mr Ting’s ostensible authority was “irrational” because the Switch Transaction on its face involved the gratuitous assumption by company C of a large liability to its obvious disadvantage, but to the advantage of company S and the bank itself. Some variant of this situation is normally the factual background when a bank is held to have no authority to act on an authorised signatory’s direction. To say that it must be “irrational” and not just “unreasonable” to proceed without inquiry simply served to emphasise that inquiry was not called for by a general duty to inquire into the customer’s transactions. It was necessitated by remarkable facts actually known to the bank which, unless explained, pointed to impropriety on the part of the agent. The bank must be shown to have proceeded with the transfer notwithstanding that without further inquiry it had no reason to regard it as a proper use of the signatory’s authority under the mandate.”

[99] The explanation is amply clear. The usage of different terms does not alter the essence of the test or analysis, on the basis of what facts the third party actually knew and whether that knowledge reasonably called for further inquiry.” (emphasis added)

5.10  As observed earlier in this judgment, Mr Suen in his closing submissions simply invoked the application of constructive notice, without identifying any factual circumstances to support the contention that there were matters known to Brother Eddie which ought to have put the Defendant on inquiry.

5.11  For the above reasons, I find that Sy Senior had the apparent authority to receive the Written Notices at the 20/10/15 Meeting.

(ii) The parties’ obligations under the LPA

5.12  I have already set out the terms of LPA Clauses 11 and 12 above. There is no real disagreement between counsel that the principles applicable to construction of contractual terms are those set out in Eminent Investments (Asia Pacific) Ltd v DIO Corp (2020) 23 HKCFAR 487 §§42-46.

5.13  In relation to the Notice Requirement, I have already found that (1) the Written Notices were served on Sy Senior at the 20/10/15 Meeting, (2) Sy Senior was clothed with apparent authority to receive the Written Notices and (3) where LPA Clause 7(f) is only a deeming provision, it does not, as contended in the Plaintiff’s pleaded case, prevent personal service of the Written Notices.

5.14  The remaining issue is whether the service on 20 October 2015 is permissible under the LPA.

5.15  Mr Suen initially argued that any written notice under LPA Clause 12 could only be given after the Defendant had complied with conditions laid down in LPA Clause 11, namely the due performance of the Lease Term “by paying the rent in full and punctually and observing the terms and conditions herein contained and subject conditional precedent upon the Tenant duly completing the 12 year term of the tenancy”. He reasoned that under LPA Clause 11, the Option would only be granted after the foregoing conditions were satisfied. Therefore the Written Notices, served at the 20/10/15 Meeting prior to the last payment, were premature.

5.16  I think in fairness, Mr Suen no longer pursued the above argument in closing. The position set out at his reply written closing submissions §6 aligned with the position advocated by Mr Ho, namely that the Defendant could give written notice before full compliance with the conditions set out at LPA Clause11, but the written notice would not take effect until all the obligations were met. In my view, the foregoing is a correct position. There is nothing in the language of the LPA which would prevent the giving of a written notice before the compliance of the conditions set out in LPA Clause 11. The only requirement, as set out at LPA Clause 12 is that written notice should be given before the expiry the Lease Term.

5.17  I am therefore satisfied that the Notice Requirement had been complied with.

5.18  The next question is, after the Notice Requirement had been complied with, what were the rest of the obligations imposed upon the parties by LPA Clause 12. Mr Suen initially contended that, in effect, all of the obligations were at first instance upon the Defendant. He argued that, on a proper construction, “completion of the sale of the Premises” had to take place upon the expiry of the Lease Term and the Option Consideration had to be paid by the Defendant by the end of the Lease Term, namely 14 December 2015, and it was only upon the payment of the Option Consideration that the Plaintiff was obliged to transfer the Premises to the Defendant. He argued that completion had to take place at the expiry of the Lease Term, as otherwise there would be a lacuna, in that there would be a period for which the LPA made provision for rental payment. He therefore submitted that the tender of the Option Consideration in late March 2016 was out of time and the Option had lapsed.

5.19  I am unable to accept Mr Suen’s submissions.

5.20  First, in relation to the timing of the completion of the transfer of the Property, Mr Suen’s argument that it should take place at or before the expiry of the Lease Term is an affront to the language of LPA Clause 12, which provides expressly that the completion of the transfer would take place upon the expiry of the notice, not upon the expiry of the Lease Term.

5.21  In any event, as has been pointed out by Mr Ho, Griffith v Pelton [1958] 1 Ch 205 at pages 229 to 230 is an authority for the proposition that there is no inconsistency between a condition to pay rent up to the end of the term and the expiry of an option notice at a later date:

“Mr. Newsom raised a subsidiary contention to the effect that the notice of March 22, 1956, purporting to exercise the option was bad because on the true construction of the option provision the six months' notice required for its exercise must, in order to be effective, expire with or before the expiration of the term. He relied on the condition requiring payment of all rent up to the expiration of the notice as showing that the provision contemplates that rent should be accruing down to the date of such expiration, which could only be so if the lease was still on foot. We can attach no weight to this point. There is nothing in this condition as to rent which can as a matter of language be regarded as inconsistent with a notice expiring after the end of the term, as in that case the condition would be literally complied with by payment of all rent due down to the end of the term. It is true that there would then be a hiatus in the shape of the period from the expiration of the lease down to the expiration of the notice during which no rent would be in terms reserved. But the parties appear, very sensibly, to have acted on the footing of an implied obligation on the lessee to continue to pay rent during this period, as it seems that rent since March 25, 1956, has in fact been paid and accepted.” (emphasis added)

5.22  Secondly, I do not accept Mr Suen’s submission that the obligations were all at first instance imposed upon the Defendant, in that the Defendant had to first pay the Option Consideration at or before the expiry of the Written Notices before the Plaintiff came under the obligation to transfer the Property. In all fairness, the argument that all obligations were at first instance on the Defendant was not an argument that Mr Suen pressed in oral closing after considering the arguments and authorities advanced by Mr Ho. In this regard, I accept whether the grantee of an option decides to exercise the option is in that limited sense unilateral, since it is a decision only the grantee can make. However, for the reasons set out below, I agree with Mr Ho entirely that (1) there are obligations imposed upon the grantor even before the exercise of an option and (2) once an option is exercised, new joint obligations arise.

5.23  The position advocated by Mr Ho is neatly encapsulated at Spiro 543C-E (similar observations on the arising of joint obligations are set out in Mountford v Scott [1975] 1Ch 258 at 264D-H):

“… 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…” (emphasis added)

5.24  As to the nature of the obligations imposed on a promisor before the exercise of an option, United Dominions Trust (Commercial) Ltd v Eagle Aviation Ltd [1968] 1 WLR 74 observes at 83D-G that the promisor is under an obligation to refrain from putting it out of his power to perform his undertaking in the future:

“Under contracts which are only unilateral - which I have elsewhere described as " if " contracts - one party, whom I will call "the promisor," undertakes to do or to refrain from doing something on his part if another party, "the promisee," does or refrains from doing something, but the promisee does not himself undertake to do or to refrain from doing that thing. The commonest contracts of this kind in English law are options for good consideration to buy or to sell or to grant or take a lease, competitions for prizes, and such contracts as that discussed in Carlill v. Carbolic Smoke Ball Co. A unilateral contract does not give rise to any immediate obligation on the part of either party to do or to refrain from doing anything except possibly an obligation on the part of the promisor to refrain from putting it out of his power to perform his undertaking in the future. This apart, a unilateral contract may never give rise to any obligation on the part of the promisor; it will only do so upon the occurrence of the event specified in the contract, viz., the doing (or refraining from doing) by the promisee of a particular thing. But it never gives rise to any obligation upon the promise to bring about the event by doing or refraining from doing that particular thing.” (emphasis added)

5.25  In terms of the nature of the joint obligations which arose after the exercise of the Option, I accept Mr Ho’s submissions that, in the present case, an apt analogy may be drawn with conveyancing transactions. First, as Spiro observes. the vendor and the purchaser come under obligations to perform as if they had concluded an ordinary contract of sale. Secondly, consistent with the indisputable context of the LPA, namely it was always envisaged that the Defendant’s sole intention was to acquire the Property utilizing the financing provided by the Plaintiff (or Bel Trade Group), the express wording of LPA Clauses 11 and 12 makes reference to the Option Consideration being calculated by a contractual formula to make sure the “Price” of the Property (ie HK$18,500,000 less the initial deposit of HK$2,000,000 plus the financing costs on HK$16,500,000) was paid by the 144 payments (and any shortfall determined by the contractual formula). It therefore seems to me that, once the Option was exercised, the parties’ obligations are those of a seller and a purchaser under a conveyancing transaction. As such, as established by the Privy Council in Chong Kai Tai Ringo v Lee [1997] HKLRD 461 at 466J to 467B, where the vendor cannot deliver an executed assignment by the day of completion, time ceases to be the essence of the contract and the parties have a reasonable time in which to complete:

“Therefore three questions arise for the consideration of this Board. First, were the obligations of the parties concurrent so that payment by the purchasers and delivery of the assignment by the vendors were to be simultaneous? Secondly, were the vendors unable to complete by delivery of the assignment before midnight (pursuant to the Hong Kong “midnight rule”) on 17 July 1991? Thirdly, if the vendors were unable to make delivery of the assignment before midnight on 17 July, were they thereby debarred from claiming that the purchasers had repudiated the contract by non-payment on that date?

There is clear authority that the obligation of the purchaser to pay and the obligation of the vendor to complete by giving an executed assignment are to be carried out simultaneously unless there is an express or implied term to the contrary.” (emphasis added)

5.26  Further on at 470A, the Privy Council observed:

“In relation to the third question their Lordships consider it to be clear that as the obligations of both parties were concurrent and as the vendors were unable to deliver an executed assignment to the purchasers on 17 July, they were not entitled to claim that the purchasers had repudiated the contract by failing to pay the balance of the purchase money on that date. In those circumstances time ceased to be of the essence of the contract and the parties had a reasonable time in which to complete.” (emphasis added)

5.27  Applying the above principles to the present case, I have no hesitation in finding that the Defendant’s tender of the Cheque as payment of the Option Consideration in late March 2016 was compliant with the LPA.

5.28  In the present case, as the last rental payment was received on 19 November 2015 (there being no argument advanced by counsel that because it was not paid by 15 November 2015 therefore it was a late payment and failed to satisfy the condition imposed under LPA Clause 11), the Written Notices would have come into effect on 19 November 2015 and the one-month period would have expired on 18 December 2015. As I have found above:

(1) As at 18 December 2015, the Plaintiff was unable to deliver an executed assignment of the Property. Quite to the contrary, both before and after 18 December 2015, the Plaintiff continued to draw down the LSH Loan. Under the terms of the relevant legal charge executed in favour of LSH (Clause 7.01(xviii)), the Plaintiff covenanted and undertook it would not assign, or otherwise dispose of the Property during the continuance of the legal charge;

(2) As noted above, I do not accept Sunny’s evidence that he could repay the debt owed to LSH as at 18 December 2015;

(3) Even if Sunny could, nothing was done by the Plaintiff to have an executed assignment in place by 18 December 2015;

(4) As such, the Plaintiff was plainly in breach of its obligation to refrain from putting it out of his power to perform his undertaking in the future;

(5) The foregoing matters explain (a) why no one from the Plaintiff contacted the Defendant in December 2015, (b) as shown by the contemporaneous documents, the Defendant had difficulties in arranging a meeting with Sy Senior in January 2016 and (c) why Sy Senior’s refused to sign the March 2016 Deed.

5.29  In the light of the foregoing, the Defendant was not obliged to pay the Option Consideration on 18 December 2015. Indeed, even after the Defendant tendered the Option Consideration in late March 2016 by the Cheque, the Plaintiff has refused to transfer the Property.

5.30  For all the above reasons, I find that the Option was validly exercised.

6.   Brief analysis of D’s Alternative Case

6.1  As I have found that Sy’s Dec 2003 Assurances were not given by Sy Senior at the December 2003 Meeting, the Defendant has failed to establish the underlying factual premise for D’s Alternative Case. That spells the end to the Defendant’s case on collateral contract, as it is the Defendant’s pleaded case that the collateral contract was formed at around the same time as the execution of the LPA.

6.2  As regards the Defendant’s case on estoppel, even if Sy’s December 2003 Assurances were given, it is plain from the above factual findings that the Defendant did not rely on them and did not act to its detriment. The Defendant gave the Written Notices, and on the advice of Attorney Virginia, decided (and as it turned out correctly as a matter of legal analysis) that the payment of the Option Consideration should await a “deed of absolute sale” from the Plaintiff.

6.3  Therefore, had it been necessary, I would have found against D’s Alternative Case.

7.   Relief

7.1  In view of the Plaintiff’s inability to transfer the Property given its indebtedness to LSH, counsel agreed that should I find for the Defendant, I should allow the Plaintiff some time to liaise with LSH on the possibility of the transfer of the Property before the relief is finalized. In the meantime, I should simply indicate the parameters of the relief and leave it to the parties to apply under a liberty to apply provision to finalize the relief.

7.2  As I have found that the Option was validly exercised, it follows that the Plaintiff’s claim should be dismissed. Since the Defendant had also performed its obligations under the Lease, the Defendant is entitled to the following relief in principle:

(1) There is no dispute that the Defendant is entitled to a declaration that the Plaintiff is holding the legal title to the Premises on trust for the Defendant;

(2) The Plaintiff should return the Security Deposit to the Defendant (in the total sum of HK$332,591.94);

(3) An order that the Plaintiff do transfer and sign the legal title and ownership of the Premises to the Defendant absolutely and free from all encumbrances;

(4) Should the transfer of the Premises free from all encumbrances be impossible, the Defendant is entitled to either (a) a transfer of the Premises with existing encumbrances (along with an order that the Plaintiff do indemnify the Defendant for any monetary sums spent by the Defendant to discharge the encumbrances) or (b) if even (a) is not possible, equitable compensation or damages;

(5) The Defendant is also entitled to interest but as counsel have not addressed this specific aspect, the details on the rate and period (and on which sum(s) will have to be finalized).

7.3  The parties are to jointly propose directions within 7 days hereof the directions for the finalization of the relief.

7.4  In the meantime, there is no reason why I should not make a costs order nisi that the Plaintiff is to pay to the Defendant the costs of the action and the counterclaim (including any costs reserved) with a certificate for two counsel, to be taxed if not agreed.