Bonds Group Co Ltd v. Kwan Daniel and Others
Read the full judgment text of HCA 1861/2017 on BabelCite. This High Court CFI judgment was delivered on 18 September 2017.
1. The plaintiff’s claim arises out of a homemade Chinese “公司股權轉讓意向書” signed by the defendants as vendors and “寶聲集團或旗下之成員公司” [1] as purchaser in April and May 2017 (“Letter of Intent”) for the sale and purchase, at HK$245 million, of 70% [2] of the issued ordinary shares (“Shares”) in Discreet Limited (“Company”), which company holds Lot 496 in Demarcation District 399 (the street address of which is 368 Castle Peak Road, Ting Kau, Tsuen Wan, New Territories) on which the residential development
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HCA 1861/2017 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO 1861 OF 2017 __________________________
__________________________ Before: Hon Lisa Wong J in Chambers Date of Hearing: 8 September 2017 Date of Decision: 18 September 2017 ____________________ D E C I S I O N ____________________ Application and opposition 1.The plaintiff’s claim arises out of a homemade Chinese “公司股權轉讓意向書” signed by the defendants as vendors and “寶聲集團或旗下之成員公司”[1] as purchaser in April and May 2017 (“Letter of Intent”) for the sale and purchase, at HK$245 million, of 70%[2] of the issued ordinary shares (“Shares”) in Discreet Limited (“Company”), which company holds Lot 496 in Demarcation District 399 (the street address of which is 368 Castle Peak Road, Ting Kau, Tsuen Wan, New Territories) on which the residential development of 13 detached houses known as Grand Riviera (“Grand Riviera”) stands. 2.By the specially indorsed writ of summons issued on 8 August 2017, the plaintiff claims primarily for specific performance of the agreement that it says is contained in the Letter of Intent or damages in lieu of or in addition to specific performance. 3.Before the court is the plaintiff’s summons filed on 11 August 2017 for interlocutory injunctions to restrain the defendants from:
until trial or further order (“Application”). 4.The defendants oppose the Application on a number of grounds, one of which is that there is no serious issue to be tried on the plaintiff’s claim for specific performance. This ground, if accepted, would dispose of the Application because the said injunctions are sought to prevent the frustration of the plaintiff’s claim for specific performance of the Letter of Intent by the disposal of the Shares or Grand Riviera before trial. 5.One of the bases upon which the defendants say that there is no serious issue to be tried on the plaintiff’s claim for specific performance is that the plaintiff has already accepted the defendants’ repudiation of the Letter of Intent thereby terminating the same. 6.For the record, the defendants also resist the Application on these further or other grounds:
In light of my conclusions on the questions whether the Letter of Intent was terminated by the plaintiff’s acceptance of the defendants’ repudiation and, if so, whether the acceptance was vitiated by the defendants’ misrepresentation, it is not necessary for me, and I do not propose, to deal with these points. Relevant background Parties 7.The plaintiff, a company within the Bonds group of companies, engages in various businesses including real estate investment and development. Mr Anson Chan (“Mr Chan”) is the Chairman and CEO of the Bonds group of companies. Mr Ho Shek Tim (“Mr Ho”) is the plaintiff’s General Manager. 8.The Company is a property holding company and holds Grand Riviera. The 1st defendant (“Mr Kwan”) and the 2nd defendants (“Mrs Kwan”), husband and wife, are the only registered shareholders of the Company (with Mr Kwan holding the majority of the shares). Mr Kwan, Mrs Kwan and Mr Koon are the Company’s directors. 9.Despite being described in the Letter of Intent as an “equity holder” (“權益持有人”) of the Company, Mr Koon, a friend of Mr Kwan, is not a shareholder of the Company and has disclaimed having any present legal or beneficial interest in the Company’s shares. Both Mr Kwan and Mr Koon speak of an informal understanding between them that Mr Koon may in the future be allotted some shares (for his past contributions) but the timing of the allotment and the number of shares to be allotted to him is yet to be fixed. Letter of Intent and material terms thereof 10.Insofar as it is material for present purpose, the Letter of Intent contains the following terms:
Meeting & telephone conversation on 31.5.2017 11.On 31 May 2017, Mr Ho (the plaintiff’s General Manager) was summonsed to a meeting with Mr Kwan at the latter’s office. In the course of this meeting, Mr Ho telephoned Mr Chan and Mr Chan and Mr Kwan spoke on the phone. There is a dispute as to what was actually said at such meeting and telephone conversation. 12.The plaintiff’s initial account of the events on 31 May 2017 is set out firstly in paragraphs 12 and 13 of the Statement of Claim dated 8 August 2017 by which the plaintiff avers:
13.Such pleading is then elaborated upon by Mr Chan in paragraphs 20 to 22 of his 1st affirmation made on 10 August 2017 in support of the Application:
14.On the other hand, according to Mr Kwan, on 23 May 2017, he was informed by a Mr Anthony Man (“Mr Man”) of Kin Shing (Leung’s) General Contractors Limited (“Kin Shing”) which successfully tendered for the renovation work for Grand Riviera that due to their past experience on another renovation project, Kin Shing had serious doubts about the trustworthiness of the plaintiff and they would not agree to undertake the construction work in respect of Grand Riviera if the plaintiff should become the majority shareholder of the Company. After considering Mr Man’s comment and warning, Mr Kwan decided to pull out of the deal with the plaintiff. 15.Mr Kwan recalls the meeting with Mr Ho and the telephone conversation with Mr Chan on 31 May 2017 in paragraphs 35 and 36 of his affirmation made on 30 August 2017 in opposition to the Application:
16.Mr Chan replies by giving this changed account of the 31 May 2017 telephone conversation in paragraphs 18 to 25 of his 3rd affirmation dated 5 September 2017:
17.While on the events on 31 May 2017, apart from whether the plaintiff accepted the defendants’ repudiation of the Letter of Intent, there is also an issue as to whether Mr Kwan mentioned to either Mr Ho or Mr Chan what Kin Shing’s Mr Man had told him and that was the reason why he backed out. According to Mr Chan, Mr Kwan did not do so. Mr Chan says this in paragraph 15 of his 3rd affirmation:
18.Mr Benjamin Chain, counsel for the plaintiff, deploys such evidence by Mr Chan to support an argument that Mr Kwan’s alleged failure to give the plaintiff the true reason behind the defendants’ repudiation, if found, amounted to misrepresentation, the effect of which would be to rescind and vitiate the plaintiff’s acceptance, if found. Correspondence after 31 May 2017 19.The meeting and telephone conversation on 31 May 2017 was followed by 5 days of silence and inaction between the parties. The plaintiff made the first move on 5 June 2017 at 5:32 pm by sending to the defendants a letter signed by Mr Chan himself. The second and third paragraphs of that letter read as follows:
20.Just about half an hour later, the defendants sent to the plaintiff a letter containing this paragraph:
21.The plaintiff responded on 7 June 2017:
22.On 6 July 2017, the plaintiff provided to Mr Kwan some, and Mr Kwan asked the plaintiff if it had more, documents evidencing the costs and expenses incurred by the plaintiff in relation to the Letter of Intent. 23.On 11 July 2017, the plaintiff sent to the Company for the attention of Mr Kwan a letter the last 2 paragraphs of which read as follows:
24.This was followed up by Mr Chan by these WhatsApp exchanges with Mr Koon on the following day:
25.The plaintiff’s ultimatum was met by the response, inter alia, that the Letter of Intent was not a contract and could not be enforced because it did not “constitute a definitive contract but signifies a genuine interest in reaching the final agreement subject to due diligence, or fulfilment of certain conditions”. See the letter dated 18 July 2017 signed by Mr Kwan on the Company’s letterhead. 26.On 8 August 2017, the plaintiff issued the writ of summons in this action. 27.It is the defendants’ case that but for the intervention of the Application, the Company would have launched the sale of the Grand Riviera (which has been estimated to have an open market value of over HK$1,100,000,000) on 12 August 2017. 28.Having seen the defendants’ evidence, the plaintiff’s latest position is that it does not object to a sale of the Grand Riviera at not less than HK$1,100,000,000 and seeks the interlocutory injunctions applied for subject to any such possible sale. Meaning of “serious question to be tried” 29.Generally, the court does not grant an interlocutory injunction unless the plaintiff’s claim raises a serious question to be tried. See American Cyanamid Co v Ethicon [1975] AC 396 (HL), per Lord Diplock at 407G-H. What is required is that the plaintiff has “prospects of success, which in substance and reality, exist”. See Hong Kong Civil Procedure 2017, Volume 1, §29/1/10. Whether specific performance claim raises a serious issue to be tried Issues 30.The question arising on the evidence summarised in paragraphs 11 to 25 above is, first, whether the plaintiff accepted the defendants’ repudiation of the Letter of Intent in the telephone conversation between Mr Kwan and Mr Chan on 31 May 2017 or by the correspondence thereafter (“Acceptance Issue”). 31.Further, as mentioned in paragraphs 16 and 17 above, Mr Chain advances the proposition that even if the plaintiff is found to have accepted the defendants’ repudiation of the Letter of Intent, Mr Kwan is guilty of misrepresentation by failing to tell Mr Chan and Mr Ho that the defendants repudiated the Letter of Intent due to what Kin Shing said about its past dealings with the plaintiff and such misrepresentation would rescind and vitiate the plaintiff’s acceptance (“Misrepresentation Issue”). 32.For the sake of completeness, I should also record that in §10 of his skeleton submission dated 6 September 2017, Mr Chain seeks to raise an issue as to whether there was even a “wrongful repudiation” or a “renunciation” of the Letter of Intent by the defendants. In so contending, counsel seizes upon Mr Kwan’s words (in paragraph 35 of his affirmation as set out in paragraph 14 above) that he told Mr Ho and Mr Chan that he “wished to terminate the Letter of Intent” (Mr Chain’s emphasis), as opposed to, I suppose, telling them that he was terminating the Letter of Intent. 33.I am afraid I do not see, in this context, any or any meaningful difference between Mr Kwan saying that he wished to terminate, and that he was terminating, the Letter of Intent. 34.And Mr Kwan was understood by Mr Ho and Mr Chan to be terminating the Letter of Intent there and then. This is made clear by the second paragraph of the plaintiff’s letter dated 5 June 2017 signed by Mr Chan (quoted in paragraph 19 above). Moreover, as pointed out by Ms Tong, the plaintiff’s case, as pleaded in paragraph 12 of the statement of claim, is that on 31 May 2017, the 1st defendant informed the plaintiff that the defendants “would not proceed with the sale of their shares, which was a clear breach of the [Letter of Intent] and a wrongful repudiation thereof”. The plaintiff goes on to plead in paragraph 13 that the plaintiff was then “willing to accept the Defendants’ wrongful repudiation of the [Letter of Intent] on condition that the Defendants paid the sum of HK$2 million to the Plaintiff”. Such pleading is also consistent with paragraphs 21 and 22 of Mr Chan’s 1st Affirmation (see paragraph 13 above). 35.I discern no issue concerning whether the defendants repudiated the Letter of Intent. Acceptance Issue Applicable legal principles 36.Whether the plaintiff’s claim for specific performance raises a serious issue to be tried is to be determined by the application of the following well established principles of contract law:
37.Mr Chain accepts these principles but stresses that:
38.Counsel for the defendants, Ms Sara Tong, does not quarrel with either of these propositions. Whether acceptance on 31 May 2017? 39.As noted earlier, the parties disagree as to what was said in the meeting and the telephone conversation on 31 May 2017. 40.Mr Chain stresses time and again that the telephone conversation on 31 May 2017 was not an arranged discussion; that it was a short exchange lasting just a few minutes; that it was an exchange between 2 laymen and not lawyer to lawyer; that it was sprung upon Mr Chan who had no prior notice or inkling that the defendants wanted to back out of the Letter of Intent; that Mr Chan’s response was spontaneous; that such response would not have conveyed an election to Mr Kwan; that it would have made no commercial sense for Mr Chan to make any election in the absence of at least a promise by Mr Kwan to pay; and that the plaintiff’s subsequent express reservation of rights was entirely consistent with Mr Chan not having made any election. I note and take into consideration all these points. 41.However, that there should be no mini-trial on affidavits (of which I am reminded) does not mean that the court should turn a blind eye to the following evidence. 42.Firstly, there are internal inconsistencies in the plaintiff’s own account of the 31 May 2017 telephone conversation, especially regarding the critical questions of whether Mr Chan accepted the defendants’ repudiation of the Letter of Intent (conditionally or otherwise) and whether Mr Kwan agreed to compensate the plaintiff or not. See paragraphs 13 and 15 above. The plaintiff now disavows paragraphs 21 and 22 of Mr Chan’s 1st affirmation and relies on paragraphs 19 to 25 of Mr Chan’s 3rd affirmation. The later version contradicts not only Mr Chan’s 1st affirmation but also the plaintiff’s letters dated 5 June and 11 July 2017 (see paragraphs 19 and 23 above), which clearly relay the message that Mr Kwan indicated that he was willing to pay the plaintiff monetary compensation as stipulated in clause 10b. The plaintiff has, however, not explained why Mr Chan said what he said in these letters or in paragraphs 21 and 22 of his 1st affirmation and why he retracts from such earlier evidence. In assessing whether the plaintiff’s claim for specific performance raises a serious issue to be tried, the court is entitled to have regard to the quality of the plaintiff’s evidence on such claim. The presence of the said unexplained incongruities in the plaintiff’s evidence on such a crucial aspect of the dispute is, to my mind, relevant to whether the plaintiff could in substance and reality succeed in its claim for specific performance. 43.Secondly and more importantly, in his letter dated 5 June 2017 for and on behalf of all the defendants to the plaintiff, Mr Kwan expressly asserted and put on the record that the parties agreed in the discussion on 31 May 2017 to the termination of the Letter of Intent subject to the defendants honouring of clause 10b thereof (see paragraph 20 above). The defendants made the point in the first sentence of this letter and in plain and direct terms. There was nothing ambiguous about what they were saying. There was no room for misunderstanding. It was the first point made by the defendants in that letter. It took up half of that very short one paragraph letter. The plaintiff could not have missed it. 44.Mr Chain deals with the defendants’ letter of 5 June 2017 by firstly questioning its timing, that is, it being sent half an hour after, though it was not on its face a response to, the plaintiff’s earlier letter of the same date and it being sent shortly after 6 pm (which was close to or after close of business). He notes that Mr Kwan has chosen not to inform the court whether he had read the plaintiff’s letter of 5 June 2017 when he wrote his letter of the same date. He asks “why [Mr Kwan], on the face of it, wrote such a letter on that day at that hour out of the blue”. 45.Mr Chain further describes this letter as being “self created and self-serving” and the agreement mentioned therein “bogus” and somehow inconsistent with the defendants’ case that Mr Chan elected to accept the defendants’ repudiation in the telephone conversation on 31 May 2017. 46.Mr Chain also draws my attention to clause 13a, which provides that “the Letter of Intent can only be terminated by mutual agreement”. 47.With respect, I think counsel misses the point. What strikes me as material, but not dealt with by Mr Chain, is that the plaintiff did not in any way take issue with the defendants’ claim of an agreed termination in its letter dated 7 June 2017 (see paragraph 21 above). And this letter was expressly a response by the plaintiff to the defendants’ letter of 5 June 2017. 48.I am unable to see anything suspicious about the defendants’ letter of 5 June 2017. To the contrary, it would make perfect sense if the Letter of Intent was terminated by Mr Chan’s acceptance of the defendants’ repudiation pursuant to clause 13b when he spoke to Mr Kwan on 31 May 2017, leaving only the amount of compensation payable by the defendants to the plaintiff under clause 10b to be worked out and agreed. One would not expect a layman to use legalistic phrases such as “repudiation”, “acceptance of repudiation” or “election to terminate”. However, I imagine a layman who is in repudiation of a contract would see the opposite party’s acceptance of the situation as an agreement to terminate the contract. 49.On this state of evidence, had it been necessary for me to do so, I would have held Mr Chan’s evidence of his telephone conversation with Mr Kwan on 31 May 2017 to be incredible. 50.However, it is not necessary for me to so find. I am prepared to proceed on the assumption that Mr Chan did not accept the defendants’ repudiation of the Letter of Intent in his telephone conversation with Mr Kwan on 31 May 2017 and that the Letter of Intent remained in subsistence as at the end of that exchange. On this note, I turn to the plaintiff’s letters after 31 May 2017. Whether acceptance after 31 May 2017? 51.I refer to paragraphs 19, 21, 23 and 24 above which set out the plaintiff’s letters and WhatsApp message to the defendants after 31 May 2017, by which the plaintiff cited and relied on clauses 10b and 13b of the Letter of Intent and demanded for compensation as per clause 10b. 52.In support of her submission that the plaintiffs thereby communicated to the defendants its acceptance of the defendants’ repudiation of the Letter of Intent, Ms Tong has taken me to Hansun Investment Ltd v Sincere Union Development Ltd [2008] 4 HKLRD 442, per Deputy High Court Judge Gill at [48]-[55]; So Siu Yung v Chan Tsan Tak, HCMP 1516/2011, unreported, 13 February 2012, per Deputy High Court Judge Burrell at [30]-[35] per DHCJ Burrell); and Zheng Chulin v Wo Kee Hong Kong Industrial Limited [2012] 4 HKC 522 (CA), per Kwan JA at [21]-[23]. These were all cases in which a request for the return of the deposit by a purchaser of land was held to constitute an act of unequivocal acceptance of the vendor’s repudiation, and preclude a subsequent claim for specific performance of the agreement for sale and purchase.[3] 53.Mr Chain distinguishes these 3 authorities on the basis that the purchasers therein all claimed for the return of the deposits and that in none of them did the purchaser claim just damages. 54.I do not agree. The return of a deposit paid under an agreement for sale and purchase is the “antithesis of keeping the contract to purchase alive” (in DHCJ Gill’s words in Hansun Investment Ltd v Sincere Union Development Ltd, supra, at [49]) because if the contract had been kept alive and eventually enforced against the vendor by a decree of specific performance, the vendor would have been entitled to retain such monies as part of the purchase price. 55.By parity of reasoning, a demand or claim for the payment of damages to compensate the purchaser for costs and expenses that would have been wasted only in the event of a non-completion of the agreement is likewise inconsistent with the subsistence of the agreement. This is so because if the contract had been kept alive and eventually enforced against the vendor by a decree of specific performance, the purchaser would have had to bear such sums as his costs of the transaction and could not have looked to the vendor for reimbursement of the same. In this regard, I note that the Court of Appeal held a claim for damages for the agency fee and legal costs incurred by a purchaser of land to be plainly inconsistent with the subsistence of the contract. See Kwan JA at [22] in Zheng Chulin v Wo Kee Hong Kong Industrial Limited, supra. 56.I agree with Ms Tong’s submission on the effect of the plaintiff’s letters to the defendants after 31 May 2017. 57.The second and third paragraphs of the plaintiff’s letter dated 5 June 2017 to the defendants (see paragraph 19 above), read objectively, clearly and unequivocally conveyed to the defendants that the plaintiff accepted the defendants’ repudiation of the Letter of Intent and was treating the Letter of Intent as at an end. 58.More particularly, the plaintiff demanded the defendants to pay it HK$2 million. Such demand was made expressly pursuant to clauses 10b and 13b of the Letter of Intent (set out in paragraphs 10(2) and (3) above). The former permits a party to terminate the Letter of Intent upon breach of the same by the other party. The latter provides for the compensation of the plaintiff in the event of the defendants’ breach. Although it does not specify the kind of breach that triggers the defendants’ liability to compensate the plaintiff in accordance with the formula therein provided, on proper analysis, it is clear to me that clause 10b could be invoked by the plaintiff only upon the defendants’ refusal to proceed with the sale under the Letter of Intent. The compensation payable by the defendants is based upon, and fixed with reference, to the costs and expenses incurred by the plaintiff in connection with the Letter of Intent after its execution (subject to a HK$2 million cap). The plaintiff should be so compensated only if such costs and expenses would be wasted. And they would be wasted only if the parties would not proceed with the transaction under the Letter of Intent. 59.Mr Chain disputes the characterisation of the plaintiff’s letter of 5 June 2017 as a communication of the plaintiff’s acceptance of the defendants’ repudiation of the Letter of Intent. He relies on the plaintiff’s (1) imposition of a deadline upon the defendants for compliance with the demand for compensation and (2) express reservation of rights at the end of the third paragraph of that letter. He likens the plaintiff’s letter of 5 June 2017 to the letter written by employee in response to his employer’s repudiation of his contract of employment in Norwest Holst Group Administration Ltd v Harrison [1985] ICR 668 (CA). There is nothing to stop the innocent party, while he was deliberating whether to affirm or terminate the contract, from making to the repudiating party an offer (as in Norwest Holst Group Administration Ltd v Harrison) to let it off the hook upon certain terms which, if accepted, would give rise to a second contract the effect of which is to discharge the first (repudiated) contract. According to Mr Chain, this is what the plaintiff was doing by its letter of 5 June 2017. 60.I have difficulty with Mr Chain’s argument. 61.I cannot read from the letter in question any express or implied offer along the line suggested by counsel. As I see it, such letter simply conveyed the plaintiff’s demand for compensation under clause 10b that would not have been payable by the defendants had the Letter of Intent not been terminated under clause 13b. 62.Norwest Holst Group Administration Ltd v Harrison was very much a decision on its facts and is clearly distinguishable. 63.Briefly, the employer in that case repudiated the employee’s contract of employment by informing him that he would from 1 July 1982 no longer be employed as a director, to which position the employee was contractually entitled. In response, the employee sent to the employer a letter headed “without prejudice”, stating that he regarded the employer’s letter as terminating his contract of employment as from 30 June 1982; that he would be pleased to receive 12 months’ salary and benefits in lieu of notice and that the employer should contact him if further discussion would assist an amicable resolution of the matter. Seven days later the employee was told that the employer was no longer intending to remove his directorship from him. The question arose as to whether the employer could withdraw the threatened breach. This, in turn, depended on whether the employee had already terminated his contract of employment by accepting the employer’s breach thereof by his said letter. In answering this question in the negative, the English Court of Appeal was much influenced by the fact that the employee’s letter was headed “without prejudice” and concluded with an invitation for further discussion that would assist an amicable resolution of the matter: per Cumming-Bruce LJ at 679D-680D; Neill LJ at 682D-F; and -Sir Denys Buckley at 683D-E. 64.Neither of these features is present in the plaintiff’s letter of 5 June 2017. In response to my observation that the plaintiff’s 5 June 2017 letter was not marked “without prejudice”, Mr Chain says that the plaintiff should be regarded as making an open offer. I think counsel misses the point, noted by the court in Norwest Holst Group Administration Ltd v Harrison, that a “without prejudice” communication is by nature qualified whereas an open one is not. In this connection, Cumming-Bruce LJ said at 679E-F:
The other 2 members of the court made similar observations in the passages quoted above. 65.Nor can I attach to the deadline for payment the significance attributed to it by Mr Chain. One would expect any demand of the kind to be coupled by a time for compliance. 66.As for the “reservation of right”, it does not per se indicate an intention to keep the agreement alive. What could be, and was being, reserved were rights that were still available at the time of stating the reservation. Read in context, the right being reserved by the plaintiff is that to claim damages in accordance with clause 10b of the Letter of Intent. See Hansun Investment Ltd, supra, at [51] and So Siu Yung, supra, at [34]. 67.To conclude, I can find no serious issue to be tried that the plaintiff accepted the defendants’ repudiation of the Letter of Intent at the latest by its letter of 5 June 2017. Indeed, the whole course of correspondence between the parties since 5 June 2017 clearly and unequivocally demonstrate that the parties regarded the Letter of Intent as having been terminated, and the only issue in dispute is the quantification of the compensation payable by the defendants to the plaintiff under clause 10b. Misrepresentation Issue 68.I am unable, and I do not propose, to resolve on affidavits whether Mr Kwan did or did not inform the plaintiff that the defendants wanted to withdraw from the Letter of Intent because of what they learnt from Kin Shing. 69.The matter that I can and will address is, assuming that Mr Kwan did not do so, whether such omission amounts to a misrepresentation that can be relied upon by the plaintiff to vitiate its acceptance of the defendants’ repudiation of the Letter of Intent. 70.This question takes up one sentence in Mr Chain’s skeleton submission: “Last but not least, the Plaintiff’s alleged election, if any, was or was arguably induced by the 1st Defendant’s misrepresentation, see paragraph 15 of [Mr Chan]’s 3rd affirmation.” I think it is fair to say that Mr Chain has not taken this statement much further at the hearing. 71.What Mr Chain is advancing is, as far as I understand the law of contract, a novel proposition. He admits that he has no authority for it. 72.Although this is an application by the plaintiff for interlocutory injunctions in respect of which the court need only be satisfied that there is a serious issue to be tried on the merits, in face of a novel legal proposition unsupported by authority, the least that the court would expect from the party making the point are (1) a reason for the proposition that is sound in principle and/or policy and (2) an analysis of the scope, or elements or requirements for the operation, of the proposition. 73.First, on the former, the only point that Mr Chain can make is that the acceptance of a repudiation of contract is an act of election and as a matter of principle an election must be informed. If Mr Chain were right, there would have to be a legal requirement that the party in repudiation of a contract should disclose to the aggrieved party the reason or true reason why he repudiates before the latter accepts the repudiation. I am not aware of any such requirement.[4] 74.Second, in response to Ms Tong and the court’s questions as to what is required to constitute a misrepresentation that vitiates an acceptance of a repudiation of a contract and whether it is the same as a misrepresentation that renders the contract induced thereby liable to rescission, Mr Chain simply says, “let us assume that it is the same”! I am afraid, despite the low merit burden on the plaintiff, I cannot hold the existence of this new legal principle a serious issue to be tried on the basis of such an assumption, at least not without good reasons, which I have not been given. In any event, as pointed out by Ms Tong, Mr Chain has not shown how these assumed elements can be found in the plaintiff’s evidence. 75.I do not find the Misrepresentation Issue a serious issue to be tried. Conclusion on “serious issue to be tried” 76.For the abovementioned reasons, the Letter of Intent was terminated at the latest by the plaintiff’s acceptance of the defendants’ repudiation by letter dated 5 June 2017 so that there is no longer any subsisting agreement on which the plaintiff can found a claim for specific performance and the plaintiff is left with a claim in damages. Orders 87.I dismiss the Application and release the defendants from the undertakings given by them to the court on 18 August 2017. 88.I also make an order nisi that the plaintiff should pay the defendants their costs of the Application, to be taxed on a party and party basis if not agreed, with certificate for counsel.
Mr Benjamin Chain, instructed by So, Lung & Associates for the plaintiff Ms Sara Tong, instructed by Huen & Partners, for the defendants [1] A reason why the defendants do not regard the Letter of Intent as binding (see paragraph 6(1)(a) below) is that the identity of the purchaser is left open. However, nothing turns on this for present purpose. [2] Which translates into 4,130,000 out of 5,900,000 issued ordinary shares. [3] Mr Tong also refers to Waung J’s decision in Sam Woo Civil Contractors Ltd v Ho Kwok Poon, HCA 714/2004, unreported, 26 June 2004, a case not involving a claim for return of deposit, to support her submission that a claim for damages resulting from the termination of the agreement would amount to acceptance of repudiation thereby excluding a decree of specific performance. However, I note that the statement of claim in that case actually pleaded that there was a repudiation by the defendants and that the plaintiff accepted the repudiation and sued for damages resulting from the termination of the agreement by reason of the defendant’s repudiation. See [7]. [4] When there has been a repudiation of contract, the only requirement towards an informed election is that the party making the election must be aware of the facts which gave rise to the existence of his right and possibly also his legal right of affirming or rescinding the contract. See Large Land Investments Ltd v Cheung Siu Kwai [2003] 1 HKLRD 313 (CA). | ||||||||||||||||||||||
Cases cited in this judgment
Further hearings and rulings under HCA 1861/2017