FULL ASSET ENTERPRISES LTD v. CHOI PAK LING

DCCJ2572/2014

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 2572 OF 2014

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DECISION

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1. This is the plaintiff’s application for summary judgment for vacant possession and menses profits at the rate of HK$4,700 of a flat which had been sold to the plaintiff pursuant to an order of the Lands Tribunal under the Land (Compulsory Sale for Redevelopment) Ordinance (“Cap 545”).

The plaintiff’s case

2. The defendant was the registered owner of a flat situated at Flat C5, 6^th Floor, Kut Cheong Mansion, No 8 Nation Street (“the Premises”) standing on Section D of Inland Lot No 3536 and Remaining Portion of Inland Lot No 5099 (“the Lot”) which was subject to an order for sale under Cap 545.

3. In Land Compulsory Sale Main Application No 13000 of 2012 (“the LT Proceedings”), the Lands Tribunal made the standard order for sale in respect of the Lot under section 4 of Cap 545 on 14 March 2014.  It was ordered that:-

(1) All the undivided shares in the Lot be sold by way of public auction for the purposes of redevelopment of the Lot.

(2) Mr Ma Ho Fai and Ms Tsang May Ping be appointed as trustees (“the Trustees”) to discharge the duties imposed on trustees under Cap 545 in relation to the Lot.

(3) The reserve price for the public auction shall be set at HK$157,000,000.

4. At an auction held on 5 May 2014, the plaintiff successfully bided for the Lot at the price of HK$157,000,000.  Accordingly:-

(1) On 5 May 2014, the Trustees entered into a memorandum of agreement for all owners of the Lot, including the defendant, as vendor with the plaintiff as purchaser for the Lot.

(2) On 6 June 2014, the Trustees executed an assignment for all the owners of the Lot, including the defendant, as vendor in favour of the plaintiff as purchaser.

5. The defendant has refused to give possession of the Premises to the plaintiff.

The defendant’s case

6. The defendant’s purported defence is as follows:-

(1) There is no dispute that the plaintiff had entered into (a) a binding provisional agreement (“the PSP”) with the defendant with a license agreement annexed and (b) a supplemental agreement at a total price of HK$5,060,000 on 14 January 2014 for sale of the Premises. The completion of the sale and purchase was to take place on 17 February 2014. One of the terms of the agreement is “本合約簽署後即成為必買必賣合約”. A formal agreement for sale and purchase was signed on 16 January 2014 (“the SP”).

(2) A total of HK$392,000 by way of deposit had been paid by the plaintiff to the defendant.

(3) There is no dispute that eventually the sale and purchase fell through.

(4) The defendant was represented throughout by Messrs Lui & Law (“LL”).  The plaintiff was represented by Mayer Brown JSM (“MBJSM”).  From the correspondence between MBJSM and LL (in particular those between 10 March 2014 and 22 April 2014) that it was the defendant who had failed to complete this sale and purchase.  LL stated to MBSJM they could not obtain instructions from the defendant to complete.

(5) The defendant says that it was not true.  LL simply never contacted him since 16 January 2014 and never asked for additional sum of HK$200,000 being moving fee（搬遷費）.

(6) The defendant’s allegation is that KM Fung of LL not only acted for the defendant and also was an agent of the plaintiff.  There was conflict of interest.

(7) The defendant alleges that the assignment dated 6 June 2014 of the defendant’s premises to the plaintiff was a property transfer done by the plaintiff in bad faith to defraud the defendant of his entitlement to the agreed price HK$5,060,000.

(8) The defendant relies on the following facts to support his allegation:-

(i) The trial of the LT Proceedings was heard on 22 and 23 January 2014.

(ii) Sale and purchase of the defendant’s Premises pursuant to the PSP and SP was supposed to be completed on 10 March 2014.  The plaintiff sent cheques of the balance of the purchase price to LL together with the assignment of the Premises and a letter of undertaking.

(iii) Judgment in the LT Proceedings was handed down on 14 March 2014.

(iv) The sale and purchase of the Premises was allegedly terminated by the plaintiff on 27 March 2014.  LL alleged that at the time of completion of sale and purchase the defendant demanded for an additional sum of HK$200,000 being moving fee.

(v) The Premises together with other units of Kut Cheong Mansion were auctioned and a memorandum of agreement was allegedly signed by the Trustees in favour of the plaintiff as the purchaser on 5 May 2014.

(vi) An assignment of the defendant’s Premises together with other units of Kut Cheong Mansion was executed by the Trustees in favour of the plaintiff as the purchaser on 6 June 2014.

(vii) The plaintiff was aware that she would be able to save about HK$2,356,303 if the sale and purchase of the defendant’s Premises to the plaintiff pursuant to the PSP, supplemental agreement and SP at the total price of HK$5,060,000 fell through.

(viii) LL issued letter dated 13 February 2014 to MBJSM alleging that they were instructed to seek MBJSM’s consent to postpone the date of completion.  In fact, the defendant could not get in touch with KM Fung of LL and had never received any request for instruction from LL after 16 January 2014.

(ix) LL knew well that if judgment in the LT Proceedings was granted in the plaintiff’s favour, the defendant would only be apportioned compensation of about HK$2,700,000 out of the sale proceeds of the Lot.

(x) LL intentionally hides the aforesaid information from the defendant.  The defendant could not get in touch with KM Fung of LL after receiving the further deposit in the sum of HK$292,000 on 16 January 2014.  It was not until 2 September 2014 when LL disclosed their correspondence with MBJSM in that the defendant knew that LL had allegedly issued a letter (in Chinese) dated 18 March 2014 to the defendant.

(xi) It is all along the defendant’s intention to complete the sale and purchase of the said agreement.

(xii) On 2 September 2014, a representative, Cheung Ah See (張亞施) of the plaintiff had engaged in misconduct in calling the defendant to invite the defendant to discuss settlement and threatened him that he would lose in the case.

Issues

7. Whether the defendant has any right to remain in the Premises.

8. Whether the menses profits at the rate of HK$4,700 per month is a market rent or not.

Applicable legal principles

9. The principles are well-settled and set out in details in Hong Kong Civil Procedure 2015, paragraphs 14/4/3 – 11 and 16.

10. In short, the defendant bears the burden to show that he has bona fide defence or there is triable issue in this case.  And for such purpose, the court does not simply take the defendant’s allegation on their face value but need to satisfy itself whether such allegations are reasonably capable of belief in the light of the evidence before it. If there is no triable issue or question, or that for some other reasons, there ought to be a trial, summary judgment will be given in the plaintiff’s favour.

11. The defendant’s affidavit must “condescend upon particulars” and should, as far as possible, deal specifically with the plaintiff’s claim and affidavit, and state clearly and concisely what the defence is, and what facts are relied on to support: Hong Kong Civil Procedure 2015paragraphs14/4/4.

Non- dispute facts

12. There is no dispute that the PSP and the supplemental agreement at a total price of HK$5,060,000 were entered between the plaintiff and the defendant on 14 January 2014. The completion date originally was fixed on 17 February 2014. The formal agreement was signed 2 days later and a total of HK$392,000 by way of deposit had been paid by the plaintiff to defendant.

13. LL represented the defendant to deal with this transaction.

14. There were much correspondence between LL and MBJSM in particular those between 10 March 2014 and 22 April2014. Eventually, the said sale and purchase fell through.

15. The Trustees under the LT Proceedings were appointed by the Land Tribunal as trustees on behalf of all majority and minority owners including the defendant of the Lot to act in accordance with the standard order for sale and purchase. All the LT Proceedings and the compulsory sale were done in a proper way and no fraud element had ever been involved.

16. After the compulsory sale, the defendant would only be apportioned compensation of about HK$2,700,000 out of the sale proceeds of the Lot.

Discussion

(1) Right to remain in the Premises

17. The defendant’s solicitors try to establish that the defendant has a good defence and at least there are two triable issues herein. Firstly, whether the plaintiff is purchasing the defendant’s premises in good faith in the assignment dated 6 June 2014; secondly, whether LL is in breach of solicitors’ fiduciary duty.

18. The plaintiff mainly relies on sections 7 and 8 of Cap 545.

19. Under section 7(1)(b)(i) of Cap 545, once the order and schedule 3 were registered (which they were on 28 March 2014), then “notwithstanding any other law, there shall be virtue of this section vest in the trustees the power to assign all the estate, right and interest in the lot held by the majority owner and the minority owner (including the defendant) of the lot” for, among other things, the purposes of the compulsory sale.

20. Section 7(5)(b) of Cap 545 makes clear that “where the trustees exercise the power vested under subsection (1) (i) to assign all the estate, right and interest in the lot, then for all purposes the assignment shall be as valid and effectual as if it had been made by the majority owner and minority owner of the lot.”

21. Section 8(1) (a) of Cap 545 further provides that “where the lot the subject of an order for sale is sold …… (a) immediately upon the purchaser of the lot becoming the owner of the lot all the rights of any prior owner …… in or over the lot or any part thereof shall absolutely cease except to the extent, if any, specified in the order.”  There is no such specification in the present case.

22. It is not in dispute that the Lands Tribunal has made the standard order for sale under section 4 of Cap 545.  No complaints against the compliance of this order have ever been raised by any parties.

23. The Trustees obviously assigned all title to the entire Lot to the plaintiff pursuant to the assignment.

24. The order of the Lands Tribunal obviously binds the defendant, who is a party in LDCS 13000/2012.

25. If there is any monetary claim the defendant can make against the plaintiff, that is a matter for separate proceedings, and it would not amount to a defence to the plaintiff’s possession claim.

26. Regarding to the plaintiff’s grievance against LL and the plaintiff prior to the sale in the LT Proceedings, even they are true, it would not amount to a defence to the plaintiff’s possession claim. It will be separate proceedings against them for remedy. The defendant can take out action against LL because of breach of fiducially duties. Furthermore, if the plaintiff at that time was really acting in bad faith or conspired with LL to defraud the defendant in order to fall through the SP, the defendant’s right to claim damages against both LL and the plaintiff would not be extinguished even an order to deliver vacant possession is made herein in favour of the plaintiff.

27. There is no triable issue herein in relation to the vacant possession.

28. It is not necessary for the court to come to a conclusion on whether the plaintiff was acting in bad faith in dealing with the agreement for present purposes, but from the correspondence between LL and MBJSM, it is quite obvious  that the fallen through issue of the agreement is very unlikely at the plaintiff’s fault.  LL sent various letters to MBJSM requesting to postpone the completion date in order to produce title deeds and answer the requisitions raised by MBJSM. The allegations that defendant could not get in touch with KM Fung of LL and had never received any request for instruction from LL  after 16 January 2014 are  hard to believe. The PSP and SP clearly state the completion date was fixed on 17 February 2014. The defendant was aware of it. There is no reason when defendant could not contact KM Fung, he did not go to LL office for enquiry on or before 27 February 2014. The defendant did nothing in 4 months time is illogical and against common sense.  

29. Even LL might have breached the fiducially duty, but in any event, it is plain that the plaintiff has no viable money claim against the defendant. There is (and there can be) no suggestion that the plaintiff had actual or constructive notice of the various wrongs of LL.

30. What Cheung Ah See said to the defendant over the phone on 2 September 2014, in any event, cannot amount to some sort of evidence to support the defendant’s allegation that the plaintiff was acting in bad faith. Cheung simply told defendant he would lose the present case.

31. It is abundantly plain that the defendant’s case against the plaintiff is unbelievable.

32. Whether LL’s allegationthat at the time of completion of the agreement, the defendant demanded for an additional sum of HKS200.000 being moving fee is true or not is a matter between LL and the defendant. In any event, the defendant’s right to claim against LL will not be extinguished by any order herein.

(2) Menses profits

33. The plaintiff has not adduced any expert evidence in relation to the menses profits issue. The defendant objects to pay menses profits at the rate of HK$4,700.  I foresee there must be a triable issue in this regard.

34. Having learnt that the defendant would dispute the rate of the menses profits, the plaintiff asked for summary judgment in relation to the vacant possession only and would leave the menses profits issue for trial.Hence, I do not need to deal with this issue herein.

Decision

35. There is no ground in this case for the defendant not to deliver vacant possession of the Premises to the plaintiff.

36. The plaintiff requests the defendant to move out within 14 days after the date hereof, while the defendant asked for 3 months time.  The defendant’s solicitors inform me the defendant is old and living with his family member(s) at the Premises, but the plaintiff’s solicitors point out that the defendant should have no financial problem as the proceeds of the sale under the LT Proceedings are ready for him to collect.

Costs

37. Most of the time for today hearing is related to the vacant possession issue,and only partial judgment is in favour of the plaintiff, I do not think that full costs of this application should be to the plaintiff. One-third costs to be deducted are appropriate.

Order

38. I make an order in terms of paragraph (1) of the summons dated 29 July 2014.

39. The order made under paragraph (1) of the summons will take effect 1 month from the date hereof.

40. The defendant do pay two-thirds costs of this application to the plaintiff with certificate for counsel, to be taxedif not agreed. The order nisi will become absolute after 14 days.