GOOD FORM CO LTD v. CHEUNG WAI HAN

DCCJ 3816/2013

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 3816 OF 2013

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DECISION

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1. This is an application made by the plaintiff under Order 14A of the Rules of the District Court (“RDC”).

BACKGROUND

2. The plaintiff and the defendant were respectively the vendor and the purchaser of a shop located at Unit 129, 1^st Floor, Smiling Plaza, Nos. 155-169 Castle Peak Road and Nos 174-188 Un Chau Street, Kowloon (“the Property”).  They entered into a preliminary sale and purchase agreement on 30 January 2013 (“the Preliminary Agreement”) and a formal sale and purchase agreement on 8 February 2013 (“the Agreement”) in respect of the sale of the Property (“the Transaction”).

3. The purchase price of the Property, as agreed by the plaintiff and the defendant, was at HK$1,950,000.  The defendant, pursuant to the terms of the Preliminary Agreement and the Agreement, paid a total of HK$195,000 to the plaintiff by way of deposit (“the Deposit”).  It has also been agreed and expressly stated in the Agreement that the Transaction shall be completed on or before 5:00 pm on 28 June 2013 (“the Completion Date”).

4. The defendant did not complete the Transaction on the Completion Date.

5. After the deadline fixed for completion, ie at 5:00 pm on the Completion Date, the plaintiff’s then solicitors Messrs NK Tsang & Co (“NKT”) by way of a letter notified the defendant’s then solicitors Messrs Tam & Partners (“TP”) that, pursuant to Clause 19 of the Agreement, the Deposit had been forfeited.  The plaintiff also reserved the rights for claiming further loss and damage caused by the defendant’s failure in completing the Transaction in the same letter.

6. The defendant did not reply to the said letter.

7. On or about 23 August 2013, the plaintiff’s present solicitors, Messrs Patrick Mak & Tse (“PMT”) wrote to the defendant, inter alia, demanded her to make arrangement for completing the Transaction within 7 days from the said letter as well as to settle the loss and damage allegedly suffered by the plaintiff particularized in the said letter.

8. Again, the defendant has not replied to the letter or responded to the demand at all.

9. As a result, the plaintiff took out the present proceedings to recover the loss and damage allegedly caused by the defendant’s breach of the Agreement.

ISSUES IN DISPUTE

10. There is no dispute as to the existence and contents of both the Preliminary Agreement and the Agreement in this case.  The defendant has also admitted in the Defence that she had failed to complete the Transaction in accordance with the Agreement.

11. There is also no dispute that the plaintiff was entitled to forfeit the Deposit under the Agreement save it is contended for and on behalf of the defendant that, upon a genuine and true construction and interpretation of Clause 19 of the Agreement, in the event that the defendant failed to complete the Transaction and the plaintiff rescinded the Agreement as a result of the defendant’s failure to complete, the Deposit should be treated as liquidated damages to reflect the loss and damage suffered by the defendant.  Hence, the defendant alleges that the plaintiff does not have the right to claim any damages greater than the sum of HK$195,000, even if the actual loss may be greater than that sum.

12. In alternative to the above plea, the defendant contends that having forfeited the Deposit, the plaintiff would suffer no loss and/or any damages as the market value of the Property is well over HK$1,755,000.  The plaintiff contends that the alternative defence raised by the defendant only concerns with the quantum of damages that the plaintiff is entitled to recover in the event that liability on the part of the defendant can be established against her.

13. As transpired from the pleadings and the affirmations filed for the plaintiff’s application, it seems the dispute between the plaintiff and the defendant is purely a matter of construction of the Agreement, more specifically, on the meaning and legal effect of Clause 19 itself.  The plaintiff says that the issue in question therefore is one suitable for determination without a full trial.

14. Hence, pursuant to Order 14A of the RDC, the plaintiff applies to this court by way of a summons dated 21 November 2013 for resolving the difference over the meaning and legal effect of Clause 19 of the Agreement.

15. Clause 19 of the Agreement provides as follows:-

“If the Purchaser (other than the default of the Vendor) fail to complete the purchase in accordance with the terms and conditions herein contained the deposit shall be absolutely forfeited as and for liquidated damages (and not as a penalty) to the Vendor who may (without being obliged to tender an Assignment to the Purchaser) rescind the sale and either retain the Property the subject of this Agreement or any part or parts thereof or resell the same, either as a whole or in lots, and either by public auction or private contract, or partly by the one and partly by the other, and subject to such conditions and stipulations as to title or otherwise as the Vendor may think fit. Any deficiency arising from such resale and all reasonable expenses attending the same shall be made good and paid by the Purchaser as and for liquidated damages, and any increase in price realized by any such resale shall belong to the Vendor. This clause shall not preclude or be deemed to preclude the Vendor from taking other steps or remedies to enforce the Vendor’s rights under this Agreement or otherwise. On the exercise of the Vendor’s right of rescission hereunder the Vendor shall have the right, if this Agreement shall have been registered at the Land Registry, to register at the Land Registry an instrument signed by the Vendor alone to rescind the sale of the Property. This clause shall not prevent the Vendor recovering, in addition to liquidated damages, damages representing interest paid or lost by him by reason of the Purchaser’s failure.”

16. As stated in the summons, the plaintiff in this application requests this court to determine the following issues:-

“(1) The following question of construction may be determined, namely, whether Clause 19 of the Sale and Purchase agreement dated 8^th February 2013 (“Agreement”) entered into for the property (“the Property”) particularly described therein properly constructed is of the effect that upon the Defendant’s failure to perform Agreement in accordance with its terms and conditions and that the Plaintiff rescinded the Agreement, the sum of HK$195,000, which is equivalent to 10% of the purchase price, that the Defendant paid for the Property and forfeited by the Plaintiff shall be treated as liquidated damages and the total loss and damages suffered by the Plaintiff as a result of the Defendant’s failure and the Plaintiff is not entitled to claim any further loss and/or damages which is greater than the sum of HK$195,000 even if the same actually suffered is exceeding than the said sum;

(2)  If the answer to the said question (1) of the construction of Clause 19 of the Agreement be in the negative, that an interlocutory judgment be entered for the Plaintiff against the Defendant for the loss and damages claimed in paragraph 15 of the Statement of Claim together with interest thereon to be assessed and costs OR that if the said question (1) answered in the affirmative the Plaintiff’s action be dismissed with costs.”

LEGAL PRINCIPLES INVOLVED

Order 14A applications

17. Under Order 14A of the RDC, the court may upon the application of a party or of its own motion determine any question of law or construction of any document arising in any cause or matter at any stage of the proceedings where it appears to the court that (a) such question is suitable for determination without a full trial of the action; and (b) such determination will finally determine (subject only to any possible appeal) the entire cause or matter or any claim or issue therein. : See Order 14A, r 1.

18. It has been said that a question of construction is well capable of constituting an issue.  And if a question will finally determine whether an important issue is suitable for determination under Order 14A and where it is a dominant feature of the case, a court ought to proceed so to determine such issue: See Korso Finance Establishment Ltd v John Wedge, unreported, February 15, 1994, CA Transcript 94/387.   

19. The underlying policy of this Order, as Chan PJ has cited the then The Supreme Court Practice 1993 in Shell Hong Kong Ltd v Yeung Wai Man Kiu Yip Co Ltd & another (2003) 6 HKCFAR 222 at 229, is “to accelerate the final judicial disposal of an action at the interlocutory stage and thereby save the expense and the delay which would otherwise arise not only if the action were to proceed to undertake the necessary pre-trial steps to prepare for such trial.”

20. It has also been said that where the law is not settled but is in a state of development, it is normally inappropriate to decide novel questions on hypothetical facts.

21. Another principle under Order 14A is that the question of law or construction to be determined by the court under the Order should be stated and formulated in clear, careful and precise terms, so that there should be no obscurity, still less any ambiguity, about what is the question to be decided: see China Ping An Insurance (Hong Kong) Ltd v Tsang Fung Yin Josephine [2012] 2 HKLRD 674; approved by Godfrey JA in Dragages et Travaux Publics (HK) Ltd v American Home Assurance Co (unrep., CACV 295 of 1999; 10 December 1999).   Further, where there are conflicting allegations of facts, or issues of fact interwoven with the legal issues to be determined, it is said that such procedure is not appropriate: Shell Hong Kong Limited v Yeung Wai Man Kiu Yip Co Ltd, supra. 

22. It has been said in Rockwin Enterprises Ltd v Shui Yee Ltd [2003] 3 HKC 174 by Recorder Ma SC (as he then was) that where the court was not seized of all relevant facts, it would be an extremely rare case (if ever) in which the procedure under Order 14A would be adopted.   

23. Last but not the least, it has been said that Order 14A applications were to be approached with considerable care, particularly if a determination of the questions posted could not be shown to avoid the necessity for a trial.  In deciding whether to accede to the application the court is able to take an overall view of the matter to discern the context in which the questions arises, and to form a judgment on that basis.  Where the issue for determination is not merely one of a variety of issues for decision but lies at the very core of the plaintiff’s case, the court may exercise its discretion to determine the question posed in the application: see China United Holdings Ltd v Johnson Stokes & Master (a firm) [2004] 2 HKLRD 222 at 278-279.

On construction of documents

24. I agree with Mr Anthony Lo, counsel for the plaintiff, that it is trite law that the purpose of construing or interpreting a term or condition of a written agreement is to find out the common intention of the parties when they entered into the agreement. This principle on construction was echoed by Lord Hoffmann in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896. The learned judge stated therein that: “(I)nterpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.”[1]

25. In ascertaining the common intention of the parties, an objective approach must be adopted.  It is therefore not what one or other of the parties meant or understood by the words used but rather what a reasonable person in the position of the parties would have understood the words to mean.  Further, whenever construing the meaning and legal effect of any word(s) or phase(s) used in a document, the whole of the document in question must be considered and understood.  In dealing with construction and interpretation, the cardinal presumption is that the words of the agreement mean what the parties have in fact said.  It is therefore the words used in the document in question must be construed as they stand and it has long been accepted that the courts will not approach the task of construction with too nice a concentration upon individual words.[2]

DISCUSSION

The plaintiff’s submissions

26. The plaintiff submits that the surrounding circumstances under which the plaintiff and the defendant entered into the Agreement have made it clear what were their intentions and what they wanted to achieve by entering into the Agreement.  It submits that both the plaintiff and the defendant at the time of the entering into the Agreement fully appreciated that the market price of the Property could go either way after the Agreement had been signed.  It says that they must be fully aware that they might have to pay and could claim for the difference between the purchase price and market price in the event that the Transaction could not be completed for any reason.

27. The plaintiff further submits that as a matter of fact, the plaintiff and the defendant engaged in no direct or indirect dialogue (through the real estate agent) as to how the parties should be compensated if either of them refuses to complete the Transaction.  Such contingency was provided by the solicitors acting for the plaintiff and the defendant under the Agreement: (see Clauses 19 & 20).

28. On the strength of the plain and clear wordings of Clause 19 and the legal principles involved, it says that the defendant’s contention that the Deposit stands for the pre-estimated damages agreed by the parties for compensating whatever loss caused to the plaintiff by reason of the defendant’s breach of the Agreement clearly is unmeritorious and does not stand up to argument.

29. The plaintiff further relies on Clause 20 of the Agreement which states that, in the event of the plaintiff’s breach, the defendant is entitled to claim against the plaintiff for the return of the Deposit and further loss and/or damages.  The plaintiff submits that as both parties were legally represented when negotiating the terms of and in the execution of the Agreement, it flies in the face of common sense for the defendant to suggest that the right that she is entitled to under the Agreement in recovering loss and damage should and is better and above what the plaintiff has.

30. In connection with the contention of the meaning and legal effect of Clause 19, the plaintiff says that the defendant’s assertion that it has all along been her understanding that if she selected not to complete the Transaction, the Deposit paid by her was all that she had to pay for as compensation is simply not worth believing.

31. Thus, for the above reasons, the plaintiff submits that this is a suitable case for disposal under Order 14A. 

The defendant’s submissions

32. The defendant, on the other hand, submits that the plaintiff’s application under Order 14A has been misconceived, as the plaintiff has wrongly identified the issue and misapplied the law.

33. The defendant submits that the reasons for the present case not being an appropriate case for an Order 14A determination are as follows:-

(i)  The plaintiff was wrong in its interpretation and application of Clause 19 of the Agreement.  In any event, in the plaintiff’s skeleton submission, it failed to consider the relevant case law of Dawson v Enterprises Ltd v Talisteam Ltd [1994] 2 HKC 327 and Chung To Chinese Products Co Ltd v Pacific Well Realty Ltd [2004] HKCU 1214.  The issue of law is therefore not a crisp one.

(ii)   In any event, the defendant submits that she is not liable for the plaintiff’s claim as the plaintiff had elected to retain the Property, such that provision under Clause 19 relating to the plaintiff’s choice to retain the Property and the deposits being treated as liquidated damages became operative, there is no right for the plaintiff to claim further loss and damage: (see Chung To Chinese Products Co Ltd v Pacific Well Realty Ltd).

(iii)  Lastly, the defendant disputes the plaintiff’s case that it suffered actual loss and damage over and beyond the Deposit of HK$195,000.  The defendant submits that it is wrong for the plaintiff to consider the actual loss and damage suffered by them does not impact on the defendant’s liability.  The defendant further submits that even if the court does not accept the defendant’s argument that the Deposit should be treated as liquidated damages, and ruled that the Deposit is true deposit that demonstrates the defendant’s commitment to performance, if the plaintiff’s actual loss and damage is less than HK$195,000, after the defendant takes credit of the HK$195,000 deposits being forfeited by the defendant as sum to be deducted from the compensation payable to the plaintiff’s, there would no “deficiency” suffered by the plaintiff as defined under Clause 19 of the Agreement.  As such, there would be no basis for the plaintiff to claim against the defendant.  Therefore, the factual issue of what was the actual loss suffered by the plaintiff is a triable issue.

34. For the above reasons, the defendant submits that the plaintiff’s Order 14A summons should be dismissed.

THE COURT’S FINDING

(i) Proper Interpretation of Clause 19

35. It is not disputed that Clause 19 of the Agreement is almost identical to Condition 10 contained in Part A of the second schedule of the Conveyancing and Property Ordinance, Cap 219 (“Condition 10”).

36. In Dawson Enterprises Limited v Talistream Limited [1994] 2 HKC 327, at first glance, Barnett J seemed to have accepted the defendant counsel’s submission that Condition 10 “is a confusing condition” by stating that:-

“With some force, Mr Cheung submitted that this is a confusing condition. It purports to entitle to a vendor to forfeit money on the basis that it presents liquidated damages and is not a penalty. Therefore, it would appear to constitute a genuine pre-estimate of any loss likely to be incurred. The condition, however, goes on to provide for the vendor to be able to recover in respect of items, some of which at least would necessarily have been taken into account in trying to estimate any loss arising from the purchaser’s failure to complete. The vendor, therefore, is both having its cake and eating it or put another way, the deposit represents a windfall for or unjust enrichment of the vendor.”

   (see p 336 H--I & p 337A)

37. However, by citing CJ Rossiter’s work on Penalties and Forfeiture, the learned judge went on to state the following at p 337:-

“It will be seen that, like a penalty clause, a deposit can be regarded as operating in terrorem. Yet the courts do not seem to regard this as a reason why its forfeiture should not be upheld. Nor does the amount of the deposit necessarily bear any relation to the loss that a breach of contract might cause to the party not in breach: the 10% deposit on the sale of land is a arbitrary amount and can be retained by the vendor on the purchaser’s breach even if he suffers no loss – indeed, even if he makes a profit on a resale and, because the market price of houses is rising, it was forseeable when the original contract was made that he would do so. Since the forfeiture of a deposit does not prevent the vendor from suing for damages (giving credit for the amount forfeited) if he suffers further loss, he appears thus to get the best of both worlds. Yet, subject to equity’s power to grant relief, to which we return below, it has been said that an order for the forfeiture of the deposit is ‘one which is to be made ex debito justitiae …… I do not see how the court can hesitate for a moment in giving the plaintiff what he asks. John Barker & Co Ltd v Littman [1941] Ch 405, 412.”

38. He came to accept that the “confusion and difficulties” have been laid to rest by the Privy Council’s then recent decision in Workers Trust and Merchant Bank Ltd v Dojap Investments Ltd [1993] AC 573 which held that the customary 10% deposit can be treated as “earnest money” and not as penalty.  

39. At p 340, Barnett J made the following criticism of Condition 10:-

“By condition 10 the parties have, in my view, agreed to treat the deposit as a provision for liquidated damages.  Or, at least, there has been an attempt, deprecated by Lord Bvrowne-Wilkinson, to avoid problems which were apprehended might arise in relation to a mere deposit by “labeling” it as liquidated damages.  That being so, the sum paid must represent a genuine pre-estimate of loss.  There is understandably no evidence whatsoever on this point.  The parties simply adopted the conventional 10% of the purchase price, neither they nor their legal advisors (again understandably) having given any thought to the distinction between a deposit and a provision for liquidated damages, and the need in the latter case to try and pre-estimate the loss consequent upon breach of contract.

Condition 10 constitutes a trap for the unwary.  It should as soon as possible, be amended so as to provide for the forfeiture of a genuine deposit and separately for liquidated damages.  In the meantime, it seems to me to be necessary for conveyancers to avoid incorporating this condition into any contract for the sale of land.”

40. Despite those criticisms and eventhough he considers the relevant clause of the contract was confusing, it is important to note that Barnett J seems to have accepted that the parties can treat the deposit as a provision for liquidated damages or at least to label it as such.

41. In Chung To Chinese Products Co Ltd v Pacific Well Realty Ltd, HCA 9756 of 1998, unreported, (14 October 2004; DHCJ Mayo), the parties adopted a clause in a form similar to Condition 10.

42. Deputy High Court Judge Mayo (as he then was) accepted counsel’s submission that a fair construction of such clause allow the plaintiff (the vendor) to have two choices open to it:-

“The first was to retain the property. In this event the deposit would be forfeited and the moneys would be treated as liquidated damages to compensate the Plaintiff for any damage it may suffer.

The second choice was to resell the property and recover the deficiency in price together with all attendant expenses as liquidated damages.”

(see §§ 36-37 of the judgment)

43. In Chung To, there was a long lapse of time (5 years) for the plaintiff vendor to sell the property after it rescinded the agreement.  The court concluded that the circumstances of the case was that from the outset, the intention of the plaintiff was to retain the premises.  Such that the deposits was to be treated as liquidated damages which would compensate the plaintiff in full for any loss they may suffer (see §§ 47-48 of the judgment).

44. The defendant submits that Chung To is authority to suggest an alternative interpretation of Condition 10 (which is similar to Clause 19) with two options open to the vendor as stated by Deputy Judge Mayo (as he then was), which the defendant says is the interpretation adopted by Barnett J in Dawson.

45. I beg to differ from the submissions made by Ms Karen Cheung, counsel for the defendant, for the following reasons.

46. In Broad Money Development Limited v Industrial Engineers Limited, CACV 101 of 1999, unreported (24 September 1999; Godfrey, Rogers & Keith JJA), the Court of Appeal was asked to construe the meaning of a similar term contained in the sale and purchase agreement of a property as in our instant case.  Godfrey JA, in his usual robust and no non-sense style, had this to say at p 7 of the judgment:-

“There has been some argument before us as the meaning of the expression in Clause 8 “as and for liquidated damages”. I think the effect of this is that the vendor is entitled to say “I have resold the property and the deficiency in price is X dollars. The expenses of the resale amount to Y dollars. I am therefore entitled without further inquiry or assessment to recover by way of damages a liquidated sum of X + Y dollars from the purchaser.” I do not think myself that the expression has any more significant meaning than that. It is expressly provided by Clause 8(b) that it “shall not preclude or be deemed to preclude the Vendor from taking other steps or remedies to enforce the Vendor’s rights” nor “to prevent the Vendor from recovering, in addition to liquidated damages, damages representing interest paid or lost by him by reason of the Purchaser’s failure.

……

I do not think the reference to “liquidated damages”, and the reference to “interest”, between them, in some way, exclude the right to claim any of the other items, if those items formed part of “the actual loss” of the vendor.”

47. Broad Money was decided by the Court of Appeal after the then High Court’s decision in Dawson.  Thus, it is my view that if there was anything unclear about the effects of the 10% deposit and the meaning of the term “liquidated damages” in such context, the Court of Appeal has made it beyond any shadow of doubt in Broad Money .

48. Broad Money was affirmed shortly in another Court of Appeal decision in Teng Fuh Company Limited v Keen Lloyd (Holdings) Limited, CACV 193 of 1999, unreported (5 November 1999; Leong JA; Stock J & Cheung J).  In construing a similar clause in a sale and purchase agreement of a property, Cheung J (as he then was) in giving the judgment of the court, commented that “(A)lthough the clause contains the words “liquidated damages”, they do not seem to serve any useful purpose at all”.  The learned judge then cited the above passage of Godfrey JA in Broad Money and stated that while a fixed sum would usually appear in a liquidated damages clause or a penalty clause, there was no fixed sum as such in that case (as in most property transaction cases in Hong Kong).  He went on to rule that this clause has merely set out the items of damages that the plaintiff may recover at the determination of the agreement.  The court also cited Godfrey JA’s view as stated in Broad Money on this and seemed to have accepted his view that the reference to liquidated damages did not exclude the right to claim for other items if those items formed part of the actual loss of the vendor.  

49. In Wan Moon Ling Wandy v Sino Gain Investment Limited MP 3248 of 1996, unreported, (21 March 1997; Le Pichon J (as she then was)), similar arguments arose out of a sale and purchase of a property which incorporated Condition 10 into the agreement. Counsel for the plaintiff purchaser submitted that only a genuine deposit is forfeitable where a purchaser defaults and it was submitted that the HK$100,000 paid in that case was in truth an earnest money and not a deposit.  The plaintiff relied principally on the decision of Dawson, supra. Reference was also made to the Law Society’s Circular 295/94 (PA) issued on 26 September 1994 urging caution in incorporating Condition 10 as a term of the contract following the decision of Dawson in which Condition 10 was described as “a trap for the unwary”.

50. However, as apparent from the judgment, Dawson is no longer good law even by the time when the learned judge heard the case as the same issues were raised and decided by Cheung J (as he then was) in Cheer King Investment Ltd v Rich Glory Investment Ltd [1995] 1 HKC 663 and Union Eagle Ltd v Golden Achievement Ltd [1995] 2 HKC 225.  Union Eagle subsequently went on appeal to the Court of Appeal ([1996] 1 HKC 349) and then to the Privy Council (Privy Council Appeal No 15 of 1996).  Both the Court of Appeal (by a majority) and the Privy Council upheld Cheung J’s (as he then was) decision that in respect of the 10% deposit in the forfeiture clause, that remains forfeitable even if there is no evidence to show that it is a genuine pre-estimate of loss, thus distinguishing Dawson.  The forfeiture clauses in both Cheer King and Union Eagle, like our present case here, was modelled on Condition 10 and contained the phrase “as and for liquidated damages” (and not as a penalty).  The learned judge based his decision on the Privy Council’s decision on Workers Trust, supra; China Pride Investments Ltd v Silver Pole Ltd [1994] 2 HKC 341 at 358F and Ng Chek Kok v Kin Wai Ming [1992] 1 HKLR 5 at 16-17.

51. Given the above analysis, I think the law in this area has been well settled.  I therefore do not accept Ms Cheung’s submission that the law in this case is not a crisp one at all.

52. Based on the above authorities, in my view, therefore, the plaintiff’s interpretation of Clause 19 is correct, namely, that in the event of the defendant’s failure in performing the Agreement, the sum of HK$195,000 (which is equivalent to 10% of the purchase price) paid by the defendant by way of deposit can be forfeited by the plaintiff as liquidated damages and the plaintiff is further entitled to claim the difference in price and any other items of loss as stated by Godfrey JA in Broad Money.

(ii) whether the plaintiff had elected to retain the Property?

53. Part of the defendant’s attack on the plaintiff’s case is that the plaintiff had chosen to retain the Property and hence it is only entitled to the remedy of treating the Deposit as liquidated damages, with no right to claim any further loss and damage.  In her written submission, Ms Cheung stated that plaintiff has adduced no evidence to suggest that it had sold the Property. 

54. In the letter dated 23 August 2013 from PMT, its present solicitors, the plaintiff indicated that it was able to secure a purchaser to sell the Property at HK$1,200,000 at that time only.  The defendant submits that it was apparent that the plaintiff elected not to proceed with that transaction as the plaintiff had not pleaded that in the statement of claim and the Property was still being retained by the plaintiff.  By relying on the case of Chung To where the vendor had chosen to retain the Property after 5 years from the date of the sale and purchase agreement, no further claim can be made.

55. As it turned out, the defendant is wrong about this.  In an affirmation filed by the partner of PMT on 19 February 2014, which was the day before the hearing, it has been disclosed that the Property in fact had been sold at HK$1,220,000 to a third party on 4 December 2013 under a sale and purchase agreement and the completion of the sale took place on 20 January 2014.  A copy of the land search from the Land Registry has been exhibited to the affirmation to verify the above fact.

56. Despite the late filing of the piece of evidence, I have allowed the affirmation, together with the land search record, to become part of the evidence in the case at the hearing as it merely disclosed a public record for which the defendant or her solicitors could have equal access.  I do not see how she could be prejudiced as a result. 

57. In my judgment, this piece of evidence clearly shows that the plaintiff had not retained the Property but had sold it at a substantially reduced amount than the one agreed with the defendant under the Agreement.  Thus, the defendant’s argument based on Chung To that it had chosen to retain the Property and suffered no actual loss in my view must fail.  

(iii) Whether the plaintiff had suffered loss and damage over and beyond the Deposit of HK$195,000?

58. The defendant has, in her affirmation filed on 3 January 2014 in defending the present application, inter alia, disclosed a valuation report by a chartered surveyor dated 30 December 2013 valuing the Property at HK$1,760,000. 

59. The report was commissioned by the defendant and was disclosed without leave of the court or notice to the other side.

60. At the hearing of the summons, upon the application by the plaintiff, I have disallowed the defendant from relying on the contents of the valuation report on the basis that the report had been obtained without leave of the court and without following the usual etiquette in filing of expert evidence specified under §20 of Practice Direction -- 5.2 for ‘Case Management’.  Although I appreciate the fact that we are not concerning adducing expert evidence at a trial here, in my view, the same protocol specified under the Practice Direction must be followed in an interlocutory application, particularly one under Order 14 or Order 14A where, if an applicant succeeds, will have the effect of summarily dispose of the matter at hand. 

61. In this case, the parties had jointly applied to the Registrar for directions as to the filing of evidence and fixing of date for the hearing.  Nothing was mentioned by the defendant that she was going to commission her own surveyor expert to prepare a valuation report at the time.  Hence, nothing was stated in Registrar Lui’s Order dated 28 November 2013 regarding the filing of expert evidence.  In my view, under the current CJR regime, unilateral filing of expert evidence without leave of the court and without following the pre-action protocol must not only be discouraged but must be frowned upon.  Hence, I disallowed the defendant from referring to the same during the hearing.

62. Even if I had allowed the defendant to refer to that piece of evidence, the most it could show is that a surveyor has valued the Property at a certain sum.  No doubt, if proper protocol was followed and directions to obtain expert evidence were given by the court, the plaintiff would have been able to find an expert to say something quite different.  All these in my view would only go to the issue of quantum, which, in an ordinary case, of course is a matter for a master to assess, with proper directions to be given by the court as to the filing of expert evidence on both sides.

63. Given the fact that the plaintiff had sold the Property at HK$1,220,000 to a third party on 4 December 2013 (as shown by the Land Registry’s record on a land search conducted on 18 February 2014), I think it lies ill in the mouth of the defendant to say that the actual loss suffered by the plaintiff was less than HK$195,000.  However, as said, this is ultimately a question of quantum suffered by the plaintiff as a result of breach on the part of the defendant and has nothing to do with the construction of Clause 19 presently sought by the plaintiff under the terms of the summons.  Thus, I have no difficulty in dismissing the defendant’s submission under this limb also.   

CONCLUSION

64. In conclusion, I am of the view that Clause 19 of the Agreement has the effect that, upon the defendant’s failure to perform the Agreement in accordance with the terms and conditions of the Agreement and the plaintiff rescinding the same, the plaintiff is entitled not only to forfeit the 10% Deposit at HK$195,000 as liquidated damages, it is also entitled to claim further loss and damage actually suffered by it in addition to the deposit forfeited. 

65. In the aforesaid premises, in my judgment, the plaintiff has successfully established its case under the Order 14A summons. I shall therefore enter interlocutory judgment against the defendant accordingly, with damages to be assessed before a master. 

66. Costs should follow the event.  I shall make a costs order nisi that the defendant shall pay the costs of the plaintiff in the present application, with certificate for counsel, such costs should be summarily assessed.  I shall hereby direct the plaintiff to file a written statement of costs with the court within the next 7 days, with copy of the same to be served on the defendant, for my consideration. The defendant shall, within 7 days after receipt of the written statement of costs from the plaintiff, to file a statement of objection, stating clearly of each and single item of costs that she disputes.  If no agreement on costs can be reached or the matter cannot be disposed of on paper, I shall direct a short hearing before me where only solicitors need to attend in order to deal with the matter.  Unless there is any application to vary the above costs order within 14 days after filing of the defendant’s statement of objection, the costs order nisi will become absolute.

67. Finally, I would like to express my gratitude for the helpful assistance rendered by counsel on both sides.