Yau Simon Shik Man and Others v. Yau Shik Yin and Another
Read the full judgment text of HCA 330/2013 on BabelCite. This High Court CFI judgment was delivered on 27 July 2018.
1. This is the second hearing of the summons of 7 December 2017 (the “ Summons ”) taken out by the 1 st defendant (“ D1 ”) against the 1 st and 2 nd plaintiffs (“ P1 ” and “ P2 ”) for an order to enforce certain terms of an agreed Tomlin Order (the “ Tomlin Order ”) in relation to the sale of three properties set out as Items 14, 15 and 17 in the Revised Schedule attached thereto (the “ Revised Schedule ”). The Summons first came before me on 18 January 2018. For reasons set out in my Reasons
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HCA 330/2013 [2018] HKCFI 1733 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO 330 OF 2013 ______________
______________ Before: Deputy High Court Judge Keith Yeung SC in Chambers Date of Hearing: 17 May 2018 Date of Decision: 27 July 2018 ______________ D E C I S I O N ______________ The application 1.This is the second hearing of the summons of 7 December 2017 (the “Summons”) taken out by the 1st defendant (“D1”) against the 1st and 2nd plaintiffs (“P1” and “P2”) for an order to enforce certain terms of an agreed Tomlin Order (the “Tomlin Order”) in relation to the sale of three properties set out as Items 14, 15 and 17 in the Revised Schedule attached thereto (the “Revised Schedule”). The Summons first came before me on 18 January 2018. For reasons set out in my Reasons for Decisions given on that same day, I adjourned the Summons for full argument. I refer to that Reasons for Decision the contents of which I will not repeat. The parties, and facts leading to the Tomlin Order 2.The parties are all family members. The 3rd and 4th plaintiffs (“P3” and “P4”) are the parents. P1, P2, and D1 are brothers and sisters. D1 and the 2nd defendant (“D2”) are husband and wife. The parties have been locked in legal battles for several years. In the written submissions of Mr Patrick Chong, counsel for D1, their relationship is described as beyond salvage. Various legal actions have been commenced and vehemently pursued. They were originally in the nature of shareholder disputes. Subsequently, the parties attended mediation. An agreement was apparently reached. There was then a question as to whether that agreement was intended to be a legally binding one. The issue came before Harris J under HCCW 420/2012, HCCW 421/2012 and HCCW 422/2012. By his Decision on 15 July 2015 (the “Decision of Harris J”), His Lordship ruled that it was. 3.After that ruling by Harris J, the parties proceeded to finalize their settlement agreement. It was a drawn out process. It was not until 30 March 2016 when they filed a Consent Summons for the Tomlin Order with a schedule attached. On 22 April 2016, the Tomlin Order was approved. By another Consent Order dated 7 February 2017, the schedule attached to the Tomlin Order was amended, resulting in the Revised Schedule. The agreement now embodied in the Revised Schedule (the “Settlement Agreement”) is in effect one of a family arrangement whereby the shareholding in certain companies, funds in an account held with the Bank of China, and certain landed properties (collectively “Family Assets”) were divided amongst the parties. 4.However, it has not been all plain sailing afterwards. The parties on a number of occasions had to resort to legal proceedings to enforce some terms of the Tomlin Order. In August 2016, D1 took out an application against P3 to enforce Clause 2.III.5 of the Revised Schedule. Parties reached agreement afterwards. In early 2017, D1 and D2 made another application to enforce Clauses 2.I.1 and 2.IV.2. On 26 April 2017, they obtained judgment from Master S Lo against P1 and P2. 5.The present Summons is another of such proceedings. The Summons, and development since last hearing 6.By the Summons, D1 is seeking to enforce certain terms of the Revised Schedule concerning the sale of three properties (collectively the “Properties”) referred to separately as (1) the “Parc Palais Property” (Item 14 in the Revised Schedule), (2) the “Skylodge Property” (Item 15 in the Revised Schedule), and (3) the “Duplex” (Item 17 in the Revised Schedule). Between the time when the Summons was taken out and the hearing, the parties had reached agreement concerning the Duplex. The present application now concerns only the Parc Palais and Skylodge Properties. 7.The Summons originally sought a number of alternative orders, including an order for the sale of the Properties, appointment of receiver, a mandatory injunction and/or specific performance. I during the hearing on 18 January 2018 expressed concern as to whether some of the orders sought had the effect of varying (as opposed to enforcing) the Settlement Agreement embodied in the Revised Schedule. I invited submissions on whether, if they do, the Court has jurisdiction to do so—see Re Estate of Shum Kwok Hang (deceased) [2018] 1 HKLRD 434 and Community Care North East (a partnership) v Durham County Council [2012] 1 WLR 338. During the hearing on 17 May 2018, Mr Chong informed me that he would abandon most of the relief sought, and would proceed only with paragraphs 7(a), 8, 9 and 10 of the Summons. Those paragraphs, in so far as they relate to the Parc Palais and Skylodge Properties, read as follows:
Relevant terms of the Tomlin Order and the Revised Schedule 8.The Tomlin Order contains the usual liberty-to-apply clause, as follows:
9.The terms of the Revised Schedule are not the simplest of their kind. I reproduce below those that are relevant to the present application:
10.The following effects of the terms are not in dispute:
11.What the parties cannot agree on is exactly how a sale or transfer resulting from the exercise of the Option should be effected under the Settlement Agreement. At the centre of their dispute is (1) whether a formal sale and purchase agreement has to be executed and formally completed, and (2) whether the purchase prices concerned have to be physically paid over (the “Payment Approach”, as D1 in correspondence contended), or whether they can be accounted for by making adjustments to and set-offs of the parties’ entitlement to the final distribution of the Family Assets (the “Set-off Approach”, as P1 in correspondence contended). I will come back to these controversies below. The issues 12.The Tomlin Order is dated 22 April 2016. Despite the provisions of the Revised Schedule, the Parc Palais and Skylodge Properties have remained unsold. It is common ground that P1 and P2 have sought to exercise the Option. It is also common ground that when seeking to do so, they did not follow the valuation method set out in Clause 2.II.3(f). The issue which falls to be considered is whether P1 and/or P2 has been in breach of the Settlement Agreement so that, on the facts of this case, a decree of specific performance should be granted. The parties’ respective cases, and the submissions on their behalf 13.On behalf of D1, Mr Chong submitted that the Settlement Agreement had been breached in so far as the sale of the Parc Palais and Skylodge Properties were concerned. P1 and P2 had failed to exercise the Option under and in strict compliance with Clause 2.II.3(g). The valuation method stipulated in Clause 2.II.3(f) had not been followed. The two Properties had not been sold to any outsiders within 6 months from the Settlement Agreement. Clause 2.II.3(d) hence has been triggered, so that they have to be put up for auction. P1 and P2 have failed to deliver up vacant possession pursuant to Clause 2.II.3(c). D1 therefore seeks pursuant to Clause 2.V.2 specific performance of (a) Clause 2.II.3(d) for the auction of the two Properties, and (b) Clause 2.II.3(c) for P1 and P2 to deliver up vacant possession of the Skylodge and Parc Palais Properties. 14.Mr Ng for P1 and P2 accepted that when P1 and P2 were seeking to exercise the Option, the valuation method stipulated in Clause 2.II.3(f) was not followed. He submitted that that was because it was impracticable and infeasible to strictly comply with that Clause. That Clause required the parties to obtain valuations of the two Properties from five different entities “as of 17 January 2014”. By the time Harris J ruled on the binding nature of the agreement between the parties, that date had already passed. He submitted that the Option had however not been abandoned, that the parties had agreed not to follow the contractual valuation method, and that they had indeed agreed upon the prices at which the Option was to be exercised: HK$22.5 million for Skylodge and HK$28.5 million for Parc Palais. He submitted that P1 and P2 had therefore validly exercised the Option at those agreed prices. He further submitted that the contemporaneous correspondence between the parties supported this conclusion. As there had been no breach of the Settlement Agreement, he submitted that the Summons should be dismissed. 15.In reply, Mr Chong submitted that as the Option had gone, if the P1 and P2 wanted to take up the Properties, new agreements would have to be reached. He further submitted that no new agreements had been reached, as there had been no offer and acceptance, no meeting of the minds,and no consideration having been given by P1 and P2. He submitted that in any event, as P4 was not a party to any negotiation between P1, P2 and D1, not all parties had agreed on any new agreement. 16.The differences between Mr Ng and Mr Chong can immediately be seen. Mr Ng’s stance is that the Option, with the agreed variation of the method of valuation, continued to be open for P1 and P2 to exercise, which they did exercise. Mr Chong’s position is that the Option has gone. D1 is therefore entitled to demand from scratch any terms he likes independent of the Settlement Agreement. As those terms have never been agreed upon, no variation agreement has come into existence in place of the Option. The Properties would therefore have to be auctioned. The principle of strict performance 17.For an option to be effectively exercised, all conditions have to be strictly performed. Mr Chong cited The Interpretation of Contracts (6th ed) by Sir Kim Lewison, where the learned author explains at paragraph 16.14 that:
18.While the principle of strict performance appears non- controversial, it should be noted, as has been further explained at page 790 of Lewison, that:
19.Even in the absence of any more direct authority (at least none cited before me), I have little doubt, based on the notion of freedom of contract, that the terms and conditions upon which an option is to be exercised, which otherwise may have to be strictly performed, can be waived by the grantor of the option. 20.Indeed, the fourth “breach” explained at page 790 of Lewison supports the above proposition:
21.On the legal test to apply when deciding whether or not a binding agreement has arisen between the parties, I respectfully refer to and adopt the summary of the law set out at paragraphs 19 to 22 of the Decision of Harris J. In gist, the test is an objective one. The decisive issue is always the intention of the parties which must be objectively ascertained from the terms of the document when read in the light of the surrounding circumstances. The contemporaneous correspondence between the parties 22.I have been taken through the parties’ correspondence during the period between May 2016 and early 2018. I have considered them carefully. The following matters are in my view important. 23.The Tomlin Order is dated 22 April 2016. P1 and P2 had 6 months from that date to exercise the Option. 24.At that stage, even though the date of 17 January 2014 had already passed, retrospective valuation for the Properties as of 17 January 2014 could still have been obtained. 25.However, by letter dated 9 May 2016 from Howell & Co (“Howell”, then solicitors for D1) to Messrs Kwok, Ng & Chan (“KNC”, solicitors for P1, P2 and P3 (the mother)), it was suggested inter alia that:
26.Importantly, D1 in that letter did not mention the valuation method set out in Clause 2.II.3(f). He mentioned “at a price to be agreed by all parties”. 27.Mr Chong drew my attention to the fact that that letter was marked “Without Prejudice”, that it was “Subject to Contract”, and that the last paragraph clarified that “For the avoidance of doubt, nothing herein binding on our client until and unless formal agreement is signed by all the concerned parties.” That might be so. But the fact remains that the suggestion of transferring the Properties “at a price to be agreed by all parties” came from D1. 28.On 25 May 2016, KNC wrote back and said that “… our clients agree that” the Properties “be transferred … at a price to be agreed by the parties instead of a sale in the open market”. No specific prices were suggested at that stage. 29.On 10 June 2016, KNC suggested the prices of HK$24.64 million for the Parc Palais Property and HK$21.1 million for the Skylodge Property. 30.On 20 June 2016, KNC wrote further and said that:
31.Then after some further correspondence, Howell themselves on behalf of D1 counter-proposed some prices. They did so in a letter dated 22 July 2016. It was said therein that “Our client has conducted a search on the values of the subject properties on 6th July 2016 …”. Bank valuations as of that date were attached. The valuation method set out in Clause 2.II.3(f) (of seeking valuations from five entities as of 17 January 2014) was again not mentioned. 32.Ultimately, and after further (and a lot of) intervening correspondence, KNC wrote on 28 November 2016 that:
33.In reply Messrs K B Chau & Co (“KB Chau”, who had by then taken over from Howell and become the solicitors for D1 and D2) said in their letter dated 9 December 2016 that:
34.The parties’ subsequent disputes shifted to the exact mechanism in which a sale or transfer resulting from the exercise of the Option should be effected (see paragraph 11 above). As D1 himself put it at paragraph 7 of his latest affirmation of 1 February 2018 (though he has apparently got the identity of his then solicitors wrong):
35.In respect of those subsequent disputes, and in particular on the question as to whether the Payment Approach or Set-off Approach should be adopted, Mr Ng referred the Court to certain correspondence exchanged between the parties after the sales of two factory properties set out under Clause 2.III.1. For the purpose of working out how those proceeds and other Family Assets were to be distributed, KNC worked out a draft distribution table (the “Table”). It was attached to their letter of 11 December 2017 to KB Chau for the latter’s comment. That Table contemplated the use of the Set-off Approach in so far as the purchase prices of the Parc Palais and Skylodge Properties were concerned. No objection was raised by KB Chau in that regard. The only objections raised concerned the alleged absence of certain breakdowns, absence of supporting documents, etc. The absence of any in-principle objection in that regard is also clear from paragraph 10 of D1’s latest affirmation of 1 February 2018, where he said that:
Discussion 36.It is clear from the above that within days after the conclusion of the Settlement Agreement, the suggestion of transferring the Properties “at a price to be agreed by all parties” was raised. It was raised by D1. It was taken up by P1 and P2. Adherence to the valuation method set out in Clause 2.II.3(f) was waived. The parties had never returned to it. Despite that, the parties continued to regard the Option as extant. The parties’ main emphasis then shifted to the prices at which the Option was to be exercised. Ultimately P1, P2 and D1 (amongst other) reached agreement on the prices. The conclusion of that agreement is clearly borne out by an objective appraisal of the correspondence between the parties, and in particular the letter from KB Chau of 9 December 2016. The existence of that agreement has in fact also been confirmed by D1 on oath. 37.Having analyzed the law and the facts as I have above, I hold that the strict compliance of the valuation method set out in Clause 2.II.3(f) has been waived. P1, P2 and D1 have then reached agreement on the purchase prices. I accept Mr Ng’s submissions in this regard. 38.Mr Chong’s submissions that there was no offer and acceptance, no consideration, no meeting of minds, and absence of P4’s involvement were made on the premise that the Option had altogether gone, and that D1 could demand whatever fresh terms he liked. I reject the validity of that premise. I hold that the Option had all along (until exercise) remained extant subject only to the waiver concerning the valuation method. P1, P2 and D1 (amongst others) have reached agreement on the purchase prices, and P1 and P2 have validly exercised the Option. The balance of the Settlement Agreement continues to be valid and binding upon the parties in relation to the manner in which the resulting transfers should be conducted. There was no need for P1 or P2 to rely on a new agreement. I reject accordingly Mr Chong’s submissions. 39.In relation to how the resulting transfers should be conducted, the parties are not in agreement. I have explained the disputes above. However, that provides no basis for D1 to seek a decree of specific performance for the purpose of auctioning the Parc Palais and Skylodge Properties. As provided in the Revised Schedule, an auction should be conducted only if P1 and P2 chose not to exercise the Option and that the two Properties could not otherwise be sold as per Clauses 2.II.3(a). I have found that the Option has been validly exercised. There has been no breach in this regard by P1 or P2. On this basis, the present application ought to be refused. 40.Further, the suggestion of transferring the Properties “at a price to be agreed by all parties” came from D1. It was taken up by P1 and P2. The parties then conducted discussions on that basis. Given that conduct on the part of D1, it would in my view be inequitable for him to now seek specific performance on the basis that P1 and P2 have failed to adhere strictly to the contractual valuation method. On this basis also, I would in any event, in exercise of my discretion, refuse D1 the equitable relief of specific performance sought. 41.Having decided for the reasons expressed above that the application for a decree of specific performance ought to be refused, and tempting though it is to do so in the hope of assisting the parties to finally settle their disagreements, I have decided not to express any concluded view upon the other disputes between the parties on the interpretation of the Revised Schedule. In particular, I express no concluded view on whether the Payment Approach or the Set-off Approach should be applied. I note the correspondence between the parties exchanged after the sales of the two factory properties. I note the absence of any in-principle objection expressed by KB Chau in correspondence and D1 on affirmation. These are important and very weighty facts and factors to be taken into account. However, parties’ submissions have not been focused on that issue. I have not had any submissions on what differences the adoption of the two Approaches would bring about, and the relevance of such differences. I note further the non-committing stance Mr Chong took at paragraphs 38 and 39 of his written submissions, that:
42.The Court is requested to rule on the application before it. It is an application for specific performance. It is not an application for any declaratory relief on the meaning of any terms of the Settlement Agreement (if one can be made). It was not prepared and presented as such. The Court is cautious that it should not be, and should not be perceived to be, rewriting the Settlement Agreement for want of clarity. In the circumstances, I form the view that I should merely dismiss the application for the reasons explained above. Costs 43.I consider that this is an appropriate case to adopt the approach of costs to follow the event. I made an order nisi that the costs of and incidental to this application, including that of the adjourned hearing of 18 January 2018, should be paid by D1 to P1 and P2, to be taxed if not agreed.
Mr Ng Man Kin, of Kwok, Ng & Chan, for the 1st and 2nd plaintiffs Mr Patrick Chong, instructed by K B Chau & Co, for the 1st defendant Attendance of the 3rd and 4th plaintiffs were excused | ||||||||||||||||||||||||||||
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