WAN MING SUN v. WONG HOI KWAN AND ANOTHER

CACV 72/2025, [2026] HKCA 91

On appeal from [2025] HKCFI 394

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 72 OF 2025

(ON APPEAL FROM HCMP NO 1408 OF 2023)

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BETWEEN

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J U D G M E N T

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Hon Kwan VP (giving the Judgment of the Court):

1.  This appeal is brought by the 1^st and 2^nd defendants against the judgment of Deputy High Court Judge Kent Yee on 21 January 2025 (“Judgment”)[1]. The 1^st defendant is the mother of the 2^nd defendant. They are two of the three shareholders and directors of Marco Gainer Limited (“MG”). MG is the sole registered owner of a flat, a car parking space, a roof area and a garden area in Shiu Fai Terrace Garden, Nos 3 and 4 Shiu Fai Terrace, Hong Kong (collectively “Properties”).

2.  By the Judgment, it was declared that: the defendants have repudiated the provisional agreement for sale and purchase dated 11 March 2023 (“PASP”) for the sale and purchase of the entire issued share capital of MG made between the defendants as vendor and the plaintiff as purchaser; the plaintiff has lawfully accepted the defendants’ repudiation and is entitled to the return of the deposit in the total sum of $7,777,600 (“Paid Deposits”) held by the defendants’ solicitors Messrs Jal N Karbhari & Co (“JNK”) as stakeholder; and the plaintiff is entitled to a lien on the entire issued share capital of MG for the Paid Deposits, the liquidated damages of $7,777,600 (“Liquidated Damages”), interest and costs. It was further ordered in the Judgment that: the Paid Deposits be returned to the plaintiff with interest; the defendants do pay the plaintiff the Liquidated Damages with interest; and the costs incurred by the plaintiff in his due diligence and/or title investigations under the PASP and the costs of the originating summons.

3.  Acting by JNK, the defendants filed a notice of appeal on 17 February 2025 seeking to set aside the Judgment and dismissal of the originating summons. JNK filed an amended notice of appeal on 9 May 2025 to correct a minor error. A joint checklist for this appeal was lodged by the parties on 30 May 2025 and the Registrar of Civil Appeals gave directions for the conduct of the appeal on 6 June 2025.

4.  On 23 June 2025, the 2^nd defendant was adjudged bankrupt. The Official Receiver (“OR”) is the trustee in bankruptcy of the property of the 2^nd defendant. Pursuant to section 58 of the Bankruptcy Ordinance, Cap 6, the property of the 2^nd defendant shall be vested in the OR as the trustee in bankruptcy on making of the bankruptcy order. Unless the OR gives consent to the 2^nd defendant or assigns the right of suit to him, the 2^nd defendant has no locus to present or proceed with this appeal. It is trite that consent will not be given unless the action is of merit and sufficient funds are available and the burden is on the bankrupt to satisfy the trustee of both matters[2].

5.  On 27 June 2025, a notice of hearing was issued for this appeal to be heard on 22 January 2026. The 2^nd defendant did not inform the OR of the appeal.

6.  The appeal bundle was served on the plaintiff on or about 10 November 2025.

7.  On 14 November 2025, the 1^st and 2^nd defendants filed separate notices to act in person in this appeal.

8.  The OR only came to know of the appeal from the plaintiff’s solicitors, Marie Tsang, Dustin Chan & Co (“MTDC”), on 30 December 2025, and was provided with a copy of the appeal bundle.

9.  The OR wrote to the 2^nd defendant on 5 January 2026 with a view to ascertaining the merits and funding in relation to the appeal and requested a reply on or before 12 January 2026. No response was received from the 2^nd defendant when the OR wrote to the court on 14 January 2026.

10.  Also on 5 January 2026, the court wrote to the parties and the OR noting that the 2^nd defendant’s right to bring the appeal is vested in the OR but the 1^st defendant’s right to pursue the appeal is unaffected. The court gave an extension of time to the 1^st defendant to lodge her skeleton submissions by 12 January 2026, and directed that in the absence of indication by the OR of his stance regarding the pursuit of the 2^nd defendant’s appeal by 19 January 2026, the 2^nd defendant’s appeal be brought up for dismissal on 22 January 2026.

11.  On 9 January 2026, the 1^st defendant applied for legal aid. A memorandum giving notification of her application was filed by the Director of Legal Aid on 12 January 2026. Under section 15(4) of the Legal Aid Ordinance, Cap 91, following the filing of the memorandum by the Director, unless otherwise directed by the court, all proceedings in the appeal shall be stayed. Under regulation 7A of the Legal Aid Regulations, Cap 91A, the prescribed period during which proceedings are stayed is 42 days.

12.  On 13 January 2026, the court gave further directions to the parties that at the hearing on 22 January 2026, the court will consider whether to lift the stay of proceedings of the 1^st defendant due to her application for legal aid and for that purpose the plaintiff is to lodge submissions by 16 January 2026 and the 1^st defendant by 20 January 2026.

13.  By his letter to the court dated 14 January 2026, the OR stated that having considered all available materials at hand, he would not give consent to the 2^nd defendant to proceed with the appeal and has no intention to participate and shall leave it to the 1^st defendant to substantiate her case and justify the reliefs sought before the Court of Appeal on 22 January 2026.

14.  The plaintiff has lodged submissions seeking to lift the statutory stay of proceedings of the 1^st defendant’s appeal and addressing the merits of the grounds of appeal in the amended notice of appeal.

15.  The 1^st defendant has not lodged any submissions to oppose the lifting of the stay. She appeared at the hearing on 22 January 2026 and we allowed her to make oral submissions to oppose the lifting of the stay and on the merits of her appeal.

16.  As the 2^nd defendant has no locus to pursue this appeal and the OR has refused to give consent to proceed, we dismissed his appeal at the outset of the hearing. We order him to pay the plaintiff’s costs of this appeal.

17.  The purpose of the statutory stay is to enable the Director of Legal Aid to properly assess and process the legal aid application. To do justice between the parties, the court has a wide discretion and can take into account a wide range of matters whether to lift the statutory stay including deliberate and unaccounted for delay in seeking legal aid and the apparent lack of merits of the legal proceedings.

18.  We decided to exercise the discretion to lift the statutory stay for the 1^st defendant’s appeal. The notice of appeal was filed in February 2025. The 1^st defendant was or should be aware in June 2025 that her appeal would be heard on 22 January 2026. There is no explanation why her notice to act in person was filed only in mid-November 2025. Even if she were to apply for legal aid as late as mid-November 2025, the statutory stay of 42 days would not have affected the hearing date of 22 January 2026. She explained to the court that she waited until 9 January 2026 to apply for legal aid as she wanted to try to handle the appeal herself after she filed the notice to act in person in November 2025. It was only in January 2026 that she realised eventually she cannot do so by her own efforts and she then applied for legal aid.

19.  We do not accept her explanation, which does not appear credible. We agree with the plaintiff she has clearly delayed to 9 January 2026 just two weeks before the hearing in applying for legal aid, and there is no valid reason for her dilatoriness. The plaintiff would suffer prejudice if the hearing date is vacated.

20.  Furthermore, having considered the grounds of appeal and the submissions of Mr Kelvin Liu for the plaintiff, it does not appear to us that the 1^st defendant’s appeal is of merit.

21.  The judge found in favour of the plaintiff that the defendants had repudiated the PASP in that the defendants failed to provide all the documents relating to MG for the plaintiff to carry out due diligence investigation in compliance with clause 5 of the PASP, despite the request of MTDC to JNK by letters dated 31 March 2023 and 26 April 2023. Under clause 5, the documents should have been provided within 14 days from the date of the PASP, ie by 25 March 2023. The plaintiff accepted the defendants’ repudiation by MTDC’s letter dated 8 May 2023.

22.  In the amended notice of appeal, the defendants sought to argue that the judge was wrong in holding that they could not rely on waiver and affirmation of the PASP on these grounds:

(1) The judge failed to determine whether by raising requisitions in MTDC’s letter to JNK dated 12 April 2023, this has constituted waiver. He failed to determine whether the plaintiff has exercised an election to affirm the PASP by the said letter of 12 April 2023.

(2) The judge ought to have held that by the said letter of 12 April 2023, the plaintiff clearly treated that the PASP as being alive and that the time for delivery of the documents of MG under clauses 5 and 20 (which made time in every respect of the essence of the agreement) no longer remained of the essence.

(3) The judge failed to take into account or proper account that: (a) the plaintiff had a choice as of 26 March 2023 whether to accept the defendants’ repudiation; (b) by raising requisitions in the said letter of 12 April 2023, the plaintiff has clearly abandoned his right to terminate the PASP; (c) by MTDC’s letter to JNK dated 26 April 2023, the plaintiff did not make clear he would terminate the PASP if the defendants failed to deliver the MG documents before the prescribed deadline; (d) it would be unfair or unconscionable for the plaintiff not to grant a reasonable period of time prior to 9 May 2023 for the defendants to deliver the MG documents.

23.  None of the above grounds are of merit.

24.  The judge did not fail to make a determination on waiver. Having considered the relevant evidence and correspondence, he found against the defendants and held that they cannot rely on waiver. The judge is clearly right. The letter of 12 April 2023 raising requisitions on the title deeds and documents of the Properties (provided by JNK to MTDC on 3 April 2023) was not a sufficiently unequivocal act to enable an inference be drawn that the plaintiff intended to go on with the contract regardless of the defendants’ failure to provide the documents relating to MG (which the defendants never indicated that they would provide), or that the plaintiff would not exercise his right to treat the PASP as repudiated. As the judge has reasoned, the MG documents were indispensable to the plaintiff carrying out due diligence and completion was agreed to be dependent on whether the plaintiff was satisfied with the result of his due diligence exercise[3].

25.  The mere fact that the innocent party has called on the party in breach to perform his contractual obligations will not generally, of itself, amount to an act of affirmation. The defendants’ reliance on the letters of MTDC to JNK dated 12 and 26 April 2023 is misplaced. As the judge rightly held, the injured party is not bound to accept a repudiation once a breach is committed by the other party. He is entitled to consider his position and keep his options open, though not for too long[4].

26.  There is nothing in the evidence to support the argument that the plaintiff had treated time as no longer of the essence to the agreement. The obligation under clause 5 to deliver all documents relating to MG within 14 days from the date of the PASP is a condition of the agreement, as rightly held by the judge[5]. Failure to comply with a condition will entitle the other party to terminate further performance. There is no basis for the contention that it would be unfair or unconscionable for the plaintiff not to grant the defendants a reasonable period of time to provide the MG documents.

27.  In her oral submissions, the 1^st defendant claimed that at the time the PASP was signed, in the presence of the 2^nd defendant and the estate agent, she had informed the plaintiff that she would not be able to provide to the plaintiff the audited accounts of MG for seven years within 14 days of the agreement. She alleged that 14 days is insufficient for MG to prepare audited accounts for seven years, that the plaintiff dragged her into trouble and she is the victim of the whole case. She asserted that it is unreasonable she should have to repay any money to the plaintiff as the transaction was not completed. These allegations are not in the affirmation of the 2^nd defendant filed on 27 October 2023, which was prepared by JNK and made by the 2^nd defendant with her authority. The 1^st defendant did not file any affirmation of her own.

28.  These matters are not part of the evidence in the court below and were not considered by the judge. There is no valid basis for this new evidence to be considered on appeal.

29.  For the above reasons, we lifted the statutory stay of the 1^st defendant’s appeal and dismiss her appeal as it has no merits. We have heard the 1^st defendant’s submissions on costs. There is no reason to depart from the general rule that costs should follow the event. We order the 1^st defendant to pay the plaintiff’s costs of this appeal.