YIU YAN CHE AND OTHERS v. YIU HO MING HERMES AND OTHERS

HCA630/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 630 OF 2008

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(HEARD TOGETHER)

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D E C I S I O N 

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Matters before the court

1. There are two matters before me :

(1) an appeal by the defendant in HCA821/2008, Mr Yiu Yan Che (“YYC”) against the order of Master Levy made on 2 March 2009 ordering, inter alia, that judgment be entered for the plaintiffs against YYC in the sum of HK$21,807,023.15 with interest and costs; and

(2) an application by the plaintiffs in HCA630/2008 for an order of specific performance against the defendants in terms of a Minutes of Order annexed to the plaintiffs’ summons dated 6 April 2009.

2. The plaintiffs in HCA821/2008 are the same as the defendants in HCA630/2008.  They are collectively referred to in this Decision as the “respondents”, and individually as the 1^st to 10^th respondent respectively.  The plaintiffs in HCA630/2008 are collectively referred to as the “applicants”, and individually as the 1^st to 5^th applicant respectively.  YYC is one of the applicants (i.e. the 1^st applicant) in the application for specific performance in HCA821/2008.  He is also the appellant in the appeal in HCA630/2008.

3. The applicants had applied for consolidation of the two actions before Master Levy.  However, as Master Levy was of the view that summary judgment should be entered in favour of the respondents, he made no order for consolidation.  He, however, ordered that the there be stay of execution of the judgment in HCA821/2008 pending trial of HCA630/2008.

Background

4. The 1^st to 9^th respondents are siblings.   YYC is a relative of them.

5. The applicants and the respondents used to have interests in a number of local and overseas companies.  These companies have been referred to in the evidence and the Deed of Settlement (referred to below) as the “Chung Tung Group of Companies”, and I shall adopt that terminology.  One of the companies in the Chung Tung Group of Companies is called Chung Tung Investment Limited.  That company has been referred to by the parties as the “Target Company” and I shall also adopt the same terminology in referring to it.

6. There were disputes between the applicants and the respondents in relation to, inter alia, the accounts of the Chung Tung Group of Companies (“Disputes”).  It is not necessary, for the purpose of these proceedings, to be concerned with the details of the Disputes.  Suffice to point out that in about March 2006, the 10^th respondent commenced proceedings in HCCW132/2006 (the “Winding Up Petition”) against YYC, the 5^th applicant and also the Target Company.  In the Winding Up Petition, the 10^th respondent sought an order for the winding up of the Target Company, and as an alternative, for remedies in lieu of winding up.

7. By a Deed of Settlement dated 26 March 2007 (the “Deed”), the applicants and the respondents agreed to settle their Disputes.  As part of the settlement, YCC (or his nominee) agreed to purchase from the defendants all the shares and interests they have in the Target Company.  In this connection, Clause 3 of the Deed, provides, inter alia, as follows :

“Subject to and conditional upon the dismissal of the Winding Up Petition and subject to covenants herein contained, [YYC] or its nominee agrees to purchase from the [respondents] and the [respondents] agree to sell, all the shares, interests, properties, assets and benefits that [respondents] have or may have jointly or severally, directly or indirectly, legal or beneficially, in the Chung Tung Group of companies and all properties, shares and interests of the Target Company…… to [YYC] or any other person designated by [YYC] at the following consideration….:-

(a) payment of the sum of HK$115 million at the time, in the terms and manners as set out in the 5^th Schedule hereof (which said sum is inclusive of the repayment of the loan due by the Target Company to [the 10^th respondent]);

(b)    transfer of the property set out in the 4^th Schedule hereof;

(c) performance of the acts and deeds set out in the 4^th Schedule hereof……”

8. Under paragraph 1 of the 5^th Schedule, the sum of HK$115 million referred to in Clause 3 of the Deed was to be paid by YYC through the Target Company in following manner :

(a)  HK$34.5 million to be paid on the date of execution of the Deed;

(b) HK$34.5 million to be paid within six months of the execution of the Deed, i.e. 26 September 2007;

(c) HK$23 million to be paid within nine months of the execution of the Deed, i.e. 26 December 2007; and

(d) HK$23 million on 26 March 2008.

9. YYC has made the following payments on the following dates :

(a)  HK$34.5 million on 26 March 2007;

(b) HK$12,692,976.85 on 26 September 2007 (“2^nd Instalment”);

(c) HK$23 million on 26 December 2007; and

(d) HK$23 million on 26 March 2008.

It can thus be seen that apart from the 2^nd Instalment, the other payments provided under paragraph 1 of the 5^th Schedule have already been fully paid. 

10. The respondents have also confirmed that “other acts and deeds set out in the 5^th Schedule have also been duly performed by [YYC]”.

11. As regards the 2^nd Instalment, YYC has only paid HK$12,692,976.85 (instead of the sum of HK$34.5 million) leaving the amount of HK$21,807,023.15 still unpaid.  This outstanding amount is the amount for which Master Levy ordered summary judgment against YYC.

12. YYC argues that he was prevented from making payment of the 2^nd Instalment by reason of the respondents’ conduct.  In particular, it is argued that the respondents are in wrongful breach of the Deed, and YCC is relieved from making payment of the sum of HK$21,807,023.15 by reason of the breach of the respondents.

13. To understand the basis of YYC’s argument, it is necessary to mention another company within the Chung Tung Group of Companies.  The company is a company incorporated in Thailand called Klang Krung Co. Limited (“Klang Krung”).  According to YYC, Klang Krung was set up for the purpose of purchasing a piece of land in Thailand for property development.  YYC was the director and shareholder of Klang Krung.  There were eight other shareholders, including five Thai residents, who were alleged to be the trustees of YYC holding shares in Klang Krung on YYC’s behalf.  The remaining three shareholders were the 1^st, 2^nd and 3^rd respondents.  YYC, the 1^st respondent, and one of the Thai shareholders, Mr Yiu Wang Kei, were the directors.  YCC claimed that he “solely made decisions in respect of [Klang Krung] and usually informed [the other directors] about his decisions”.

14. According to YYC, the land owned by Klang Krung was sold in 2004 and Klang Krung had no other business activities.  Klang Krung had a bank account with a bank in Thailand called Kasikornbank Public Co. Ltd (“Thai Bank”). 

15. Voluntary winding up of Klang Krung was commenced on about 17 October 2005.  At that time, Klang Krung had money on its account kept with the Thai Bank in the sum of about 80 million Baht.  It is not in dispute that YYC transferred the money then lying in the Thai Bank account to his own personal account, also kept with the Bank (“Personal Account”).  He explained that he did so upon the advice of his employee in Thailand, and “for the purpose of keeping the mobility of the money of [Klang Krung] for [Klang Krung]”.

16. On about 8 May 2007, YYC discovered that his Personal Account was frozen by the Thai Bank.  He was informed by the Thai Bank that the Personal Account was frozen because the 1^st respondent “on his own behalf and/or on behalf of one or more of the other [respondents] lodged a complaint through their Thai lawyers with the Royal Thai Police Force alleging that [YCC] was guilty of fraud and/or conversion by placing the money left in the account of [Klang Krung] to the Personal Account”.  According to YYC, this was the first time that he learnt of the freezing of his Personal Account.  That was more than a month after the execution of the Deed.  YYC states in his affirmation evidence that no charge has ever been laid against him by the Thai Police and he has not even been contacted or investigated by the Thai Police.  He claims that the complaint by the respondents was “misconceived and wrongful”.

17. Upon freezing of the Personal Account, the Thai Bank would not allow YYC to withdraw or transfer or make any payment from the Personal Account.

18. The complaint made by the 1^st respondent to the Thai Police, according to YCC, was made in about February 2006 when the Disputes between the parties were still extant.  After settlement was reached between the parties with the execution of the Deed, the respondents through their solicitors wrote (by a letter dated 1 August 2007) to the Thai Police to withdraw the complaint against YYC.  The respondents’ solicitors also wrote to the Thai Bank informing them of the withdrawal of the complaint to the Thai Police and requesting for the reactivation of the Personal Account.

19. Further, on about 6 September 2007, the 1^st respondent attended the Thai Police to withdraw the complaint.

20. Yet such notifications of the withdrawal of the complaint were not sufficient to persuade the Thai Bank to reactivate the Personal Account.  YYC alleged that in a meeting with the Thai Bank on about 9 September 2007, he was told that the Thai Bank would require the personal attendance of the 1^st, 2^nd and 3^rd respondents to sign a “Release and Indemnity document” in favour of the Thai Bank before it would re-activate the Personal Account.

21. I have perused the English translation of a document prepared by the Thai Bank, entitled “Settlement Contract”, which is said to be the document required to be executed by, inter alia, the 1^st, 2^nd and 3^rd respondents in favour of the Thai Bank before it would re-activate the Personal Account (the “Release and Indemnity”).  On the face of the document, it does not appear that the Thai Bank was expecting personal attendance by the 1^st, 2^nd and 3^rd respondents for the execution of the document.  Indeed, on its face the document was apparently prepared on the assumption that the 1^st, 2^nd and 3^rd respondents would execute the same by attorneys.

22. The document further provides that the signatories of the document (which would include the 1^st, 2^nd and 3^rd respondents) would “jointly compensate” the Thai Bank according to any resulting court order or ruling if, in allowing the funds in the Personal Account to be withdrawn by YYC, “damage is sought against the [Thai Bank] by any stakeholder”.

23. According to YYC, the 1^st respondent had agreed to attend a meeting with the Thai Bank (on his own behalf and as the representatives of the 2^nd and 3^rd respondents) on 3 March 2008 to sign the Release and Indemnity but had failed to turn up.  However, the 1^st respondent failed to attend the meeting in Thailand as scheduled.  Instead, a letter dated 2 March 2008 was sent to YYC’s home address in Hong Kong by the 1^st respondent.  That letter was signed by the 1^st respondent and addressed to the Thai Bank, and stated that the 1^st to 3^rd respondents, being former shareholders of Klang Krung, no longer had any interest in the money deposited in the Personal Account.  YYC claimed that he was informed by the Thai Bank that the 1^st respondent’s letter was unacceptable for the purpose of re-activating the Personal Account and that the Thai Bank insisted that the personal attendance of the 1^st, 2^nd and 3^rd respondents was required to execute the Release and Indemnity.  The Personal Account of YYC remained frozen.

24. As pointed out above, YYC had paid the sum of HK$12,692,976.85 towards payment of the 2^nd Instalment.  That amount was allegedly arrived at by deducting the money in the Personal Account, interest and expenses in the total sum of HK$20,974,609.11 (adopting an exchange rate between 4.05 and 4.17).  In the cover letter dated 25 September 2007 enclosing the cheque of HK$12,692,976.85, YYC’s solicitors stated that the sum of HK$20,974,609.11 that had been deducted by YYC would be made payable to the respondents “as soon as the bank in Thailand agrees to release the deposit to [YYC]”.

25. On 15 April 2008, the applicants commenced HCA630/2008 against the respondents for breach of the Deed and for an order of specific performance that the respondents execute or procure the execution of all the documents requested by the Thai Bank to reactivate the Personal Account.

26. About a month later, the respondents commenced HCA821/2008 against YYC claiming, inter alia, that YYC was in breach of the Deed by failing to make full payment of the 2^nd Instalment.  The respondents claimed payment of the outstanding amount of HK$21,807,023.15, with interest.  Alternatively, they seek an order of specific performance of paragraph 1(g) of the 5^th Schedule of the Deed.  Although I am not concerned with this alternative claim of the respondents, paragraph 1(g) of the 5^th Schedule is relevant to the matters before me and will be considered below.

27. As pointed out above, by an Order dated 2 March 2009, Master Levy ordered that judgment be entered (summarily) against YYC for the sum of HK$21,807,023.15, with interest.  YYC appealed against the Master’s order and the applicants applied for specific performance by a summons dated 6 April 2009.

The application for specific performance

28. According to the Minutes of Order annexed to the applicants’ summons for specific performance, the Order sought by the applicants would require the 1^st to 3^rd respondents and each of them to do the following acts :

“(i)    Execution of all such documents as required by [the Thai Bank] in order to release the money (together with the interest accrued thereron) deposited in the [Personal Account] (‘Thai Bank Required Documents’); and

(ii) Proceeding to Thailand to execute the Thai Bank Required Documents in the presence of the Thai Bank’s Thai lawyer or a bank officer or to execute in such manner as required by the Thai Bank.”

29. An Order is also sought against the 1^st to 10^th respondents to cause or procure the 1^st to 3^rd respondents to do the acts mentioned in (i) and (ii) above.

30. In the alternative to the Orders mentioned in the preceding paragraph, the applicants seek a declaration that the 1^st to 5^th applicants be released from making further payment to the respondents under the Deed unless and until “the [respondents] have caused or procured execution of the Thai Bank Required Documents by the 1^st, 2^nd and 3^rd [respondents] and that YYC is able to operate his [Personal Account] inclusive of withdrawal of money therefrom”.

31. Hence, if this Court is to grant the Order as sought by the applicants, the Order would require the 1^st to 3^rd respondents (and the rest of the respondents to cause or procure them to do so) to travel to Thailand to execute all documents as may be required by the Thai Bank for re-activating the Personal Account.  That would include the Release and Indemnity mentioned above.

32. It is well settled that the making of an order of specific performance in the discretion of the Court.  Mr Russell Coleman SC, representing the applicants, submits that a court of equity is not debarred from interceding merely because the acts that are sought to be performed take place overseas.  Mr Brian Wong, representing the respondents, has not demurred against that proposition.  I accept this submission of Mr Coleman.  As pointed out by the learned editors of Spry, Equitable Remedies (7^th ed.), p.36 :

“….. a court of equity will not consider itself to be debarred from interceding, if it is otherwise appropriate to do so, merely because it appears that the property to which the claims of the plaintiff relate is situate abroad or that the acts that he seeks to have performed or enjoined, as the case may be, will, if they take place at all, take place outside the jurisdiction.  Doubtless the situs of the property and the place of performance of material acts are of importance when the court comes to exercise its discretion and must hence take account of such matters as hardship and difficulties in enforcing due performance.  But it is one thing to say that the court may refuse to intercede, as a matter of discretion, and quite another thing to suggest that the power to intercede does not exist.”

33. I would not consider that compelling the 1^st to 3^rd respondents to personally travel to Thailand to execute documents would in itself impose such hardship or difficulties on them as would make it inappropriate for me to exercise my discretion to make an order for specific performance — if such an order is otherwise appropriate.  As pointed out above, it does not appear that the draft form of the Release and Indemnity would require the personal attendance of the 1^st to 3^rd respondents, as the same appears to contemplate execution by an attorney duly authorised by the 1^st to 3^rd respondents.  If I were minded to grant an order for specific performance, it would not be difficult for me to fashion the terms of the order in such a way as to remove the requirement of personal attendance unless personal execution is required or insisted upon by the Thai Bank.  Accordingly, I do not consider that the requirement of personal attendance in itself imposes any difficulties or impediment on the exercise of my discretion.

34. The question remains whether it is appropriate for me to make the order for specific performance sought at this stage.  In this connection, I bear in mind the fact that the application is a summary application made pursuant to the provisions under Order 86, rule 1 of the Rules of High Court.  It is well-settled that summary judgment under Order 86 should be given only if “it is a plain case and ought not therefore to be tried”:  see, Au Wing Cheung v Roseric Limited [1992] 1 HKC 149, Chow Yim Woon v Lam Yung Ming [2000] 3 HKLRD 373 and the editors’ notes in paragraph 86/4/1 of Hong Kong Civil Procedure 2009, where it is pointed out that while the scope of application of Order 86 and Order 14 are different, the legal principles applicable to an application for summary judgment under both Orders are the same (see, Super Town Investments Ltd v Ives Developments Ltd & others(unreported), HCA86 of 2006).  As Roger JA (as he then was) observed in Ng Lung Sang Anita v Lam Yuk Lan [1999] 4 HKC 106 at 111 :

“ Those advising clients ought to be very cautious before commencing O86 and O14 proceedings.  They are there only for clear and obvious cases.  The old adage that if you have to sit down, it is not a case for O14 is equally applicable today as it was when it was first coined.”

35. With these principles in mind, I now turn to consider the terms of the Deed.

36. Mr Coleman has drawn my attention to Clauses 2 and 3 of the Deed, and also the 4^th Schedule.  Clause 2 of the Deed provides :

“The parties hereto covenant with each other that they (and each of them) would cause, procure and effect the acts and deeds set out in the 4^th Schedule hereof which are to be done and performed by the party or parties specified upon terms as therein specified.”

37. I have already mentioned Clause 3 in paragraph 7 above.  It will be recalled that the Clause provides, inter alia, that the agreement to the sale and purchase of the shares, interests, properties and benefits of the respondents in the Chung Tung Group of Companies and the properties, shares and interests the Target Company is expressly “subject to covenants herein contained”.

38. Clause 5 of the 4^th Schedule is material.  That Clause provides as follows :

“  Group B (i.e. the respondents) doth severally and collectively cause, procure and effect any document in respect of all or any of their interests, rights, entitlements and claims of and in the proceeds of sale and realisation of the properties and assets of [Klang Krung], a company incorporated in Thailand and for such purpose, to execute all necessary documents to ensure that the same be achieved and effected whenever reasonably required of them by Party 1 (i.e. YYC).”

39. Mr Coleman submits that Clause 5 of the 4^th Schedule imposes upon the respondents, including in particular the 1^st to 3^rd respondents, an obligation to execute the Thai Bank Required Documents.

40. However, what Clause 5 provides on its face is that the respondents do cause, procure and effect any document “in respect of all or any of their interests, rights, entitlements and claims of and in the proceeds of sale of the properties and assets of Klang Krung”.  It does not provide — in any event not expressly — for an obligation on the part of the respondents to assist YYC in respect of money in YYC’s Personal Account.  Mr Coleman submits that the money in the Personal Account was money originally derived from the proceeds of sale of the landed properties of Klang Krung, and was trust money beneficially belonging to Klang Krung.  That might well be the position before the execution of the Deed.  By the Deed, the properties and assets of the Chung Tung Group of Companies (which would include the proceeds of sale derived from the sale of the landed properties of Klang Krung, being the money that had been transferred from Klang Krung’s own bank account to the Personal Account of YYC) have been sold to YYC.  It is at least arguable (and I put it no higher) that any trust that might previously have attached to the money in the Personal Account have, after the execution of the Deed, been terminated — indeed the 1^st respondent has, on behalf of himself and the 2^nd and 3^rd respondents, stated in the letter dated 2 March 2008 that they have no interest whatsoever in the money standing in the Personal Account.  If the trust has already been removed, and the money standing in the Personal Account is the personal money of YYC, it is difficult to see on what basis could it be claimed that the respondents have any continuing contractual obligation to do anything or to assist the 1^st applicant to reactivate the Personal Account for the purpose of releasing his personal funds from the Personal Account.   If the Thai Bank is wrongful or unreasonable in refusing to release the personal funds of the 1^st applicant, it is up to the 1^st applicant to take whatever actions as may be necessary in Thailand to enforce his right against the Thai Bank.

41. In any event, even if the money in the Personal Account is arguably money beneficially belonging to Klang Krung (as Mr Coleman submits), it is not clear to me why an obligation to “cause, procure and effect” any document in respect of the respondent’s interests, rights, etc. in the proceeds of sale of Klang Krung’s properties would give rise to an obligation to execute the Thai Bank Required Documents.

42. Mr Coleman submits that properly construed, the obligation under Clause 5 would include an obligation by the respondents to give up their interests, rights, etc. over the proceeds of sale of Klang Krung’s properties.  He submits that the Release and Indemnity is such a document, as the respondents would be required under the document to agree, inter alia, to grant the Thai Bank “their consent to allow [the 1^st applicant] to withdraw the fund” in the Personal Account.  Giving such consent to allow the 1^st applicant to withdraw the money is tantamount to giving up their interest, rights, etc. over the money.

43. Merely looking at Clause 5 itself, it is not clear to me that the Clause calls for the construction contended by Mr Coleman.  By its terms the Clause does not mention anything about the giving up of the respondents’ interests for any purpose, or in any specified situation.  The Clause, in my view, is ambiguous in its terms.  If there had been evidence before me of the factual matrix surrounding the making of the agreement contained in Clause 5, of if there had been evidence that cast light on the commercial objective behind Clause 5, it might well be that this Court could be satisfied on such evidence that even at this summary stage, Clause 5 should be construed in the way contended for by Mr Coleman.   The problem is that there is no such evidence at all at this stage.  Mr Coleman has not been able to point to any evidence that may cast light on the commercial purpose behind Clause 5.

44. What is clear on the evidence before me is that Clause 5 could not have been agreed with the present situation in mind.  YYC’s evidence is that at the time of the making of the Deed, he was not even aware of the freezing of the Personal Account and accordingly it is not his case that Clause 5 was agreed to cater for the present situation, or to accommodate his need to re-activate the Personal Account.  YYC only became aware of the freezing of the Personal Account more than a month after the execution of the Deed.  If Clause 5 was not designed to specifically deal with the present situation, what was the commercial purpose behind Clause 5?  At this stage there is simply no evidence that can answer that question clearly. In fact, so far as I can see, the only other place in the Deed where Klang Krung is mentioned is in the 1^st Schedule of the Deed, which sheds no light at all on the matter.  I am unable to say, on the evidence before me, that this is a plain case where I can hold that Mr Coleman’s construction must be correct.

45. That, of course, is not to say that at trial, when evidence of the factual matrix surrounding Clause 5 is available, Mr Coleman may not be able to persuade the Court that Clause 5 should be construed in the way he contends.   But he is not able to persuade me at this stage that this is such a plain case for summary judgment, and for specific performance to be ordered without a trial.  Put in another way, I am satisfied that whether Clause 5 imposes an obligation on the part of the respondents, including in particular the 1^st to 3^rd respondents, to execute the Thai Bank Required Documents, is an issue which ought to go to trial.

46. Moreover, even if Mr Coleman’s construction is found to be correct, there is the further question whether the 1^st to 3^rd respondents are obliged to execute documents which require them to give their personal indemnity to the Thai Bank for any damage arising from the withdrawal of funds by the 1^st applicant from the Personal Account.  Mr Coleman has submitted, in my view rightly, that given that Klang Krung was a solvent company, and the fact that the other shareholders are nominees or trustees of YYC, the chance of the 1^st to 3^rd respondents being required to answer their personal indemnity is small.  That may be so.  However, in my judgment, that itself is not a sufficient reason for the making of an order to compel the 1^st to 3^rd respondents to execute documents that require them to give their personal indemnity to the Thai Bank.  It is not sufficient for an order of specific performance to be made merely because of the remoteness of hardship.  The Court does not go about ordering people to perform acts merely because doing such acts should cause little harm to them, or that the risk of harm is slight or remote.  The Court must be satisfied that a party is contractually obliged to do a certain act before he may be (not must be) ordered to perform that act.  I am not satisfied, at this stage anyway, that it is plain that Clause 5 of the 4^th Schedule imposes upon an obligation on the part of the 1^st to 3^rd respondents to execute documents that requires them to give personal indemnity for the liability of a third party.

47. For reasons mentioned above, I am not satisfied that this is a case for summary judgment under Order 86, rule 1 and I refuse to make the order for specific performance sought by the applicants.

The appeal against the Order of Master Levy

48. The judgment ordered to be entered against YYC is a summary judgment.  The principles of Order 14 are well-known.  If there are triable issues which ought to be investigated at trial, unconditional leave to defend ought to be given to YYC and the appeal should be allowed.

49. Mr Coleman submits that it is at least arguable that the respondents are in wrongful breach of the Deed by failing or refusing to execute the Thai Bank Required Documents.  He argues that by failing or refusing to execute the Thai Bank Required Documents, the 1^st to 3^rd respondents are in wrongful breach of Clause 5 of the 4^th Schedule.  Although I am not satisfied at this stage that specific performance should be summarily ordered against the respondents, it does not mean that Mr Coleman’s contentions regarding that Clause are unarguable or that he cannot possibly succeed at trial.  As pointed out above, it is possible that at trial, when the evidence of the factual matrix is available, Mr Coleman may be able to persuade the Court that he is right in his contentions.  I am therefore prepared to proceed, for the purpose of this appeal, that the respondents were arguably in breach of the Deed by failing to execute the Thai Bank Required Documents (“alleged breach”).

50. The real problem for Mr Coleman is that even if it is arguable that the respondents are in breach of the Deed,that does not per se relieve YYC from his payment obligations under the Deed, in particular his payment obligation in respect of the 2^nd Instalment.  If the respondents are in breach, YYC has the option of treating the agreement as coming to an end (if the breach is a breach of a condition or essential term of the contract) or he may keep the contract alive, in which case he must continue to perform his obligations under the contract.  In the present case, there is no question of YYC calling off the contract (as contained in the Deed) on the ground of the respondents’ alleged breach.  Prima facie, he must continue to perform his obligations under the Deed, including the payment obligations provided thereunder.  A contract that is kept alive by an innocent party remains alive for the benefit of both parties: see, White & Carter (Councils) Ltd v McGregor[1962] AC 413, 444 and Fercometal SARL v MSC Mediterranean Shipping Co. SA[1989] 1 AC 788, 805.

51. Mr Coleman relies on the “prevention principle” as explained by the Court of Final Appeal in the case of Kensland Realty Limited v Whale View Investment Limited (2001) 4 HKCFAR 381, which encapsulates the maxim that one cannot take advantage of his own wrong.  In his written skeleton, Mr Coleman argues that the prevention principle would have the effect of preventing the respondents from asserting their right to receive the 2^nd Instalment, to the extent that YCC was prevented by the alleged breach from using the money in the Personal Account to make payment or part payment of the 2^nd Instalment.  He argues that the respondents “ought to have known that it was necessary for YYC to resort, amongst other things, to the money in the [Personal Account] to fulfil his payment obligation under the Deed.

52. As explained by the Court of Final Appeal, for the prevention principle to apply, there must be a causal connection between the “wrong” or breach of the party and the right or benefit that he is asserting.  As put by Ribeiro PJ in the Kenslandcase (p.413, para.95) :

“It is necessary to show that the contractual rights or benefits which the party in question is seeking to assert or claim arise as a direct consequence of that party’s prior breach.”

53. In the context of the present case, it must be shown that there is a causal connection between the respondents’ alleged breach and their right to be fully paid the 2^nd Instalment.  In other words, it must be shown that YCC’s failure to make full payment of the 2^nd Instalment is a direct consequence of the respondents’ alleged breach.

54. Mr Coleman invites me to look at the totality of the agreement and reminds me that Clause 3 of the Deed provides, inter alia, that the agreement to the sale and purchase of the properties, shares and interests of the Target Company is expressly subject to the covenants therein contained.   I do not see how this could help Mr Coleman.  That the agreement to the sale and purchase is subject to the covenants contained in the Deed does not mean that the covenants are conditional to each other, in the sense that the breach of any covenant by one party would contractually relieve the other party from his obligations under the other covenants.  In my view, all that it means is that the agreement to the sale and purchase is made upon the terms of the covenants.  It may well be that these covenants, subject to which the agreement is made, are the conditions of the agreement so that upon the breach of any of them the innocent party is entitled to treat the breach as a repudiation and put the agreement to an end.  But if the innocent party elects to keep the contract alive, I do not think that Clause 3 has the effect of entitling him to say that his obligations to perform the contract are either relieved or suspended while the contract is kept alive.

55. Looking at the totality of the agreement as contained in the Deed, there is nothing to show that the payment obligations of YYC are conditional upon the performance or due performance of the other covenants.  There is also nothing to suggest that the respondents’ failure or refusal to execute the Thai Bank Required Documents had in any way prevented, obstructed or otherwise made it impossible for YYC to make full payment of the 2^nd Instalment.  There is in my judgment no causal connection at all between the alleged breach and the respondents’ right to receive full payment of the 2^nd Instalment (and YYC’s obligation to pay it).  If YYC is convinced that by failing to execute the Thai Bank Required Documents, the respondents have repudiated the Deed, the choice rests with him to elect to accept the repudiation and call off the contract.  What he cannot do is to keep the contract alive for his own benefit only and refuses to perform his own part of the agreement.

56. There is a further difficulty in Mr Coleman’s arguments.  His argument on Clause 5 of the 4^th Schedule is premised upon the contention that the money in the Personal Account is money beneficially belonging to Klang Krung.  It is upon the premise that the money in question is Klang Krung’s money (and not YYC’s personal money) that Mr Coleman found his submission on the alleged breach.  As pointed out above, if the money is already YYC’s personal money it would be difficult to see on what basis at all could YYC claim that the respondents have the obligation to assist him to obtain release of his own money from the Thai Bank.

57. Now, proceeding on the basis that it is arguable that the money in the Personal Account is Klang Krung’s money, I do not think that Mr Coleman can at same time maintain that YYC was entitled to use the money in the Personal Account to make payment of the 2^nd Instalment.  It is in this connection that Clause 1(g) of the 5^th Schedule of the Deed becomes relevant.  That sub-clause provides, inter alia, as follows :

“1.    Subject to Paragraph 1(e) hereinbelow, the sum of $115 million referred to in Clause 3 of the Deed…. shall be paid by [YYC] through the Target Company as follows:-

…

(g)    should, for whatever cause, [YYC] be unable to make the payment (or part thereof) …. including any outstanding instalment payments…. on time, YYC is entitled to cause and procure any of the real and/or personal properties/assets owned and/or registered in the name of any of the Chung Tung Group of companies in settlement of such payment in lieu of payment in cash provided that their (or any of their) values shall be taken as those having been assessed by the valuation of the Bank of China (Hong Kong) Limited in September 2005.  Provided further that YYC shall provide a list of properties/assets owned and/or registered in the name of any of the Chung Tung Group of Companies…. from which [the respondents] shall have an option to choose in settlement of such payment (or part thereof) with the value closest to the amount of payment….”

58. It is plain from above-mentioned sub-Clause that the intention of the parties was that YYC would have to make payment from his own personal resources and not to resort to properties or assets owned or registered in the name of the Chung Tung Group of Companies to make payment.  If the money in the Personal Account was Klang Krung’s money, YYC would not be entitled to use the same for payment of the 2^nd Instalment unless he invokes and follows the contractual mechanism stipulated in Clause 1(g) of the 5^th Schedule.  That sub-Clause provides for the specific situation whereby, subject to the mechanism therein provided, YYC may resort to the properties owned by the Chung Tung Group of Companies as an alternative means of settling payment.  If YYC had the unfettered right to apply properties belonging to the Chung Tung Group of Companies to make payment in the first place, the whole of Clause 1(g) would have been superfluous.  Accordingly, if the money in the Personal Account is indeed Klang Krung’s money (as Mr Coleman contends), YYC would have no right to use the same to make payment unless and until he has successfully invoked the mechanism stipulated under Clause 1(g) of the 5^th Schedule.

59. It is not necessary for me to deal with the arguments made by counsel on whether YYC could have invoked Clause 1(g) in the present case (Mr Wong has submitted that the money in the Personal Account, being cash, could not be included in the list of properties to be provided by YYC, and Mr Coleman has made an opposing submission).  Suffice to say that YYC has never sought to rely on the contractual mechanism provided in the said sub-Clause and no list of properties has ever been provided by YYC to the respondents, let alone within the time stipulated thereunder.  Accordingly, YYC is not entitled to take advantage of the contractual mechanism under Clause 1(g).  It is YYC’s case that he simply has the right to suspend or be relieved from making full payment of the 2^nd Instalment by reason of the alleged breach.  I cannot agree that he has any such right.

60. For reasons mentioned above, I am of the view that there is no possible legal basis for YYC’s claim that he is relieved from making full payment of the 2^nd Instalment until after the respondents have executed the Thai Bank Required Documents.  YYC has no arguable defence to the respondents’ claim for the outstanding amount under the 2^nd Instalment.  In my judgment, Master Levy is correct in entering summary judgment against YYC.  The appeal is dismissed.

61. There is no cross appeal against Master Levy’s Order for stay of execution and Mr Wong has not made any submission in that regard.  The stay of execution ordered by Master Levy will therefore remain effective.

62. I will make an order nisi that the applicants shall pay to the respondents the costs of the application for specific performance in HCA630/2008, such costs to be payable in any event.  YYC to pay to the respondents the costs of the appeal against the Order of Master Levy in HCA821/2008.  All costs to be taxed if not agreed.