Hui Tze Ha (許紫霞), The Sole Executrix of the Estate of Lam Yim (林炎), Deceased v. Ho Yuet Lin

HCA 1420/2016

[2021] HKCFI 1901

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1420 OF 2016

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Before:  Deputy High Court Judge MK Liu in Court

Date of Trial:  21 & 24 June 2021

Date of Judgment:  30 June 2021

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JUDGMENT

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1.This case concerns a sale and purchase agreement dated 18/09/1992 (“the SPA”) signed by Madam Ho Yuet Lin (the defendant herein, “D”) as the vendor and the late Mr Lam Yim (“the Deceased”) as the purchaser. The subject matter of the SPA was a residential property in Kowloon (“the Property”). As per the SPA, (1) the purchase price was HK$1.2m; (2) at the time of the SPA, the Deceased paid a deposit of HK$1m to D; (3) the scheduled completion date was 27/8/1993. However, the sale and purchase as set out in the SPA has never been completed.

2.The Deceased passed away on 28/09/2001.  Madam Hui Tza Ha (“Madam Hui”) is the wife of the Deceased and the sole executrix of the Deceased’s estate.  Madam Hui on behalf of the Deceased’s estate (the plaintiff herein, “P”) commenced these proceedings against D on 30/03/2016. Initially, P claimed against D for (1) specific performance of the SPA; alternatively (2) return of the HK$1m paid by the Deceased to D.

3.On 21/09/2018, D took out a summons for an order striking out P’s claim. On 22/03/2019, Master Phoebe Man allowed D’s application in part and struck out P’s claim for specific performance.  No appeal has been lodged by either party against the master’s decision. Accordingly, the master’s decision is binding upon the parties.  This is not disputed.

4.As a result of the master’s decision, the real issue to be resolved in the trial is whether P is entitled to get back the HK$1m from D.

THE FACTS

5.The SPA was signed by the Deceased and D on or about 18/09/1992.  On the face of it, the SPA was prepared by the solicitors acting for D in the transaction, Messrs So and Company (“So & Co”).  The SPA contains the following clauses:

(1)  Clause 2:

“The purchase money shall be the sum stipulated and payable in the manner set out in the Schedule 6 hereto.”

(2)  Clause 3:

“The purchase shall be completed at the Offices of Vendor’s solicitors at [address] as they may direct on or before the date stipulated in the Schedule 7 hereto (“the Completion Date”) when the balance of the purchase money shall be duly paid and the Vendor and all other necessary parties (if any) shall execute a proper assignment in favour of the Purchaser or his nominee or nominees or sub-purchaser or sub-purchasers of the Property free from all incumbrances subject only as hereinafter appearing.”

(3)  Clause 21:

“Time shall in every respect be of the essence of this Agreement.”

(4)  Schedule 6:

“The purchase price shall be at [HK$1.2m] payable in the following manner:

(a) a sum of [HK$1m] being deposit has already been paid by the Purchaser to the Vendor directly before signing of this Agreement;

(b) the balance of the purchase price shall be paid to the Vendor on or before completion.” (Emphasis added)

(5)  Schedule 7:

“(Completion Date) On or before the 1700/5:00 pm 27^th of August 1993”

6.As recorded in the SPA, the SPA was interpreted to D by a clerk in So & Co, and D signed the SPA in the presence of the clerk.  The signatures of the clerk on the SPA were verified by a solicitor in So & Co.

7.Apart from signing the SPA, D has also put her signature under a receipt clause contained in the SPA. The receipt clause is as follows:

“RECEIVED before the day and year first above written of [ie 18/09/1992] and from the Purchaser the initial deposit for the sum of [HK$1m]”

8.No completion took place on or before the completion date stipulated in the SPA (“the Scheduled Completion Date”).  In fact, completion has never taken place.

9.On 10/07/2013, D commenced HCMP 1690/2013 (“the MP Proceedings”) against the Deceased for a declaration that the SPA is not registrable in the Land Registry, and for an order vacating the registration of the SPA.  The basis of the application is that, in essence, the SPA is a forged document.  See [13] below.

10.In the MP Proceedings, apart from filing and serving the originating summons and her affirmation in support of the originating summons, D did not take any further step to bring the proceedings forward.

11.Madam Hui said that she knew nothing about the SPA until she received the papers in the MP Proceedings.  Only after receiving the papers in the MP Proceedings, Madam Hui came to know the existence of the SPA, the fact that the Deceased had paid HK$1m under the SPA, and the fact that the SPA had not been completed.

12.On 30/03/2016, Madam Hui on behalf of the Deceased’ estate commenced these proceedings.

13.Until the beginning of the trial, the primary case of D at all times was non est factum.  Details of the non est factum allegation are as follows:

(1)  In or about September 1992, D’s business partner, Mr Chan Pak Leung (“Chan”), borrowed HK$1m from the Deceased. The Deceased requested Chan to sign a loan agreement at a solicitors’ firm with a third-party as a witness.  The Deceased requested D to act as the witness to the signing of the loan agreement.

(2)  Later, Chan brought D to So & Co. D made clear that she would not be a personal guarantor of Chan, and she insisted that she would not sell or mortgage her property or assets.  A staff member of So & Co assured and induced her that, by signing on a blank paper, the Deceased would not be able to claim any interest in her property or assets and she would only be acting as a witness to the loan agreement between the Deceased and Chan.  D relied on the above representation of that staff member and signed on a piece of blank paper.

(3)  The blank paper was included in a set of English documents, which D did not understand and the staff member did not explain to her.

(4)  D has never signed any agreement to sell the Property to the Deceased. D has never had any discussion with the Deceased about any sale of the Property.  D has no intention at any material times to sell the Property which she has been residing in.

(5)  D relied on the doctrine of non est factum and said that the SPA was void.

(6)  D also denied that she had received HK$1m from the Deceased.  It was Chan, instead of D, who borrowed HK$1m from the Deceased.

14.There can be no doubt that the non est factum allegation is a very serious allegation made by D against So & Co.  In essence, D was alleging that a law firm had made a forged document to perpetrate a fraud on her.  At the beginning of the trial, I asked Mr Jeffrey Tam for D whether notice of the non est factum allegation had been given to the law firm.  Mr Tam replied and said that the law firm no longer existed.  I then asked Mr Tam whether D had taken any step to try to find out who were the partners of that law firm at the time of the SPA, for example, approaching the Law Society to try to find out the answer with the assistance from the Law Society.  Mr Tam told me that D had done nothing to try to find out who were the partners of the law firm in 1992.

15.D has never tried to find out who were the partners of the law firm in 1992 and has never given notice of the non est factum allegation to those partners.  Those partners have not been given an opportunity to respond to the very serious allegation made by D against the law firm.  I asked Mr Tam to consider whether it would be fair for D to put forward the non est factum allegation in these circumstances.  I refer counsel to what has been said by G Lam J (as he then was) recently in Chinachem Charitable Foundation Ltd v Chan Wai Tong Christopher and Ors[1](footnotes omitted):

“22.  Where fraud or serious dishonest conduct is being alleged, it is especially important to examine the foundation of the pleading.  It is the well‑established approach of the courts that such pleas are to be scrutinised with care.  As Cotton LJ said in Lawrance v Lord Norreys (1888) 39 Ch D 213, the court may find a case based on fraud vexatious and dismiss it on that basis “when there is good reason for concluding that the allegations which prevented the statement of claim from being demurrable are made without substantial ground, and arise only from the imagination of the person who instructs counsel to draw the statement of claim” (p 231), or when it is an “improbable story about the fraud alleged to have been committed … brought forward without any reasonable grounds” (p 233).  Bowen LJ said in the same case that the court would expect the pleader to show “some ground for the faith that was in him, to satisfy them that the case of fraud was not a simple creation of his own imagination” (p 235).  Their decision was upheld on appeal by the House of Lords ((1890) 15 App Cas 210), in which Lord Herschell said the evidence confirmed that “the case has not a solid basis capable of proof, but that the story told in the pleadings is a myth” (p 220), and Lord Watson said “the statement of claim presents to my mind a tissue of improbabilities which ought not to be sent to proof” (p 222).  In Lin Zhen Man trading as Yet Chong Electric Co v Topfine Machinery Co Ltd (CACV 122/2004, 29 November 2005) at §25, the Court of Appeal said:

“ Litigants also have to understand that the court will require very strict proof before allegations of a serious nature are accepted. Because of that all solicitors and counsel recognize that before putting forward these serious allegations, they must have sufficient evidence so as to advance the related contentions before the court. This responsibility applies not only to submissions. Without sufficient evidence, solicitors and counsel should not raise allegations of fraud, deception or those of equally serious nature in pleadings or other court documents. There are authorities showing the court might in exercise of its inherent power strike out such unfounded pleadings if a litigant raised such serious allegations without sufficient evidence in support, because the court would not tolerate a litigant directing unreasonable insults at the other party in the name of litigation, thereby abusing the legal process (see Tam Chi Kok Gabriel v Fok Eugina, HCA 1859/1992, 12 June 2003; ‘The Gagich’ HCAJ 361 of 1995, 7 January 1997; C S Low Investment Ltd v Freshfields [1991] 1 HKLR 12 at 23A-D).”

In Choy Bing Wing v Chief Executive of HKSAR & others [2006] 1 HKLRD 666 at §9, Johnson Lam J said:

“The Writ contained very serious allegations which should not be advanced without cogent evidence supporting the same. It is well established that the court will not allow allegations of such nature to be made without proper evidence and if they were made irresponsibly, it will exercise its inherent jurisdiction to strike out the same”.

Needless to say, this power is to be exercised with the greatest care, lest the plaintiff be wrongly deprived of his right to a trial, but it is also proper to have regard to the requirements of fairness to the defendant for, as Deputy Judge Carlson said in Global Bridge Assets Ltd & others v Sun Hung Kai Securities Ltd (HCA 317/2008, 12 May 2011) at §43, the underlying notion is that no one should have an allegation of fraud levelled against him in a pleading unless it can be backed up by credible material. 

23.  All this should be familiar to pleaders from the Bar, for its Code of Conduct prohibits barristers from alleging fraud unless he has clear instructions to do so and he has before him “reasonably credible material which, as it stands, establishes a prima facie case of fraud” (paragraph 10.23 of the current edition): see Tam Chi Kok Gabriel v Fok Eugina (HCA 1859/1992, 12 June 2003) at §§83‑85 per Deputy Judge A Cheung; Hui Yin Sang & another v Tsoi Ping Kwan & another [2010] 1 HKC 585 at §15 per Au J; Kerry Francis Moore v Jennex Corporation Ltd & others (HCMP 2109/2015, 3 November 2016) at §§30‑40 per Deputy Judge Kwok SC.  I should add that the statement of claim here was not signed by counsel.

24.  No lower standards are expected of solicitors when they sign pleadings, as they did in the present case.  In C S Low Investment Ltd & others v Freshfields (a firm) [1991] 1 HKLR 12, 23A‑D, Fuad VP, referring to an allegation in a pleading that a solicitors firm had taken secret fees and profits, said:

‘It became perfectly clear during argument that these very serious allegations against a well‑known firm of solicitors were totally without foundation. Quite apart from their duty to their client, taking a secret profit might be a criminal offence and will certainly amount to professional misconduct. Had counsel settled the pleading he would have been obliged to sign it; here counsel did not and so it was signed by the plaintiffs’ solicitors (O.18, r.6(5)). The notes in paragraphs 18/6/1 of the White Book cite from the judgment of a case decided well over 100 years ago where it was said that the signature of counsel ‘to which the court [pays] the greatest possible respect, is to that extent a voucher that the case is not a mere fiction.’ I hope it will not be thought impertinent if I ask whether solicitors signing a pleading would wish to be judged by any lesser standard of responsibility. It was an appalling error of judgment in the circumstances of the case to include paragraph 10 in the statement of claim. Solicitors must not allow themselves to be the instrument of their clients to settle a pleading containing groundless allegations of that sort.’”

16.I gave time to Mr Tam to consider his position and to take instructions.  After a while, Mr Tam told me that D abandoned the non est factum allegation.  That means D admitted that she did sign the SPA, including the receipt clause therein.

17.Mr Tam then told me that notwithstanding the abandonment of the non est factum allegation, D still denied that she had received the HK$1m from the Deceased.  I asked Mr Tam that after abandoning the non est factum allegation, on what recognized legal basis D could say that she was not bound by the SPA signed by her, in which the receipt of the HK$1m had been clearly acknowledged.  I referred counsel to Ming Shiu Chung & Others v Ming Shiu Sum & Others^[2], in which Ribeiro PJ said

“84. … Reliance is universally placed on signatures appended to documents by persons of full age and understanding as signifying the signatory’s assent or adherence to what that document states. Where such a person has signed a document which purports to have legal effect, the law has never regarded it as enough to show that he signed without knowing its contents for the document to be disavowed. It is an everyday occurrence that people sign documents without reading the small (or even the large) print and therefore sign without actually knowing the terms (or all the terms) of the document signed. But they are held to the documents which they have chosen to sign unless there is shown to be a recognized legal basis for concluding that their apparent consent has been in some way vitiated or that reliance on that document by some other person falls into some category of unconscionable conduct justifying relief in equity.” (Emphasis added)

18.Having considered the Court of Final Appeal’s decision in Ming Shiu Chung, Mr Tam conceded and did not maintain the denial of the receipt of the HK$1m.

19.In view of the aforesaid development at the beginning of the trial, the parties have decided not to call any witness to give evidence.  The undeniable facts would be that the Deceased and D did sign the SPA on or about 18/09/1992, and that D had received the HK$1m from the Deceased before the signing of the SPA.

ANALYSIS

20.Based upon the facts in this case, I am of the view that P is entitled to get back the HK$1m from D by relying upon unjust enrichment.

When the SPA was terminated?

21.A breach of an agreement (even a repudiatory breach such as failure to complete) would not automatically bring the agreement to an end. The innocent party must accept the repudiation before the agreement is terminated and the contracting parties are discharged from further performance of the agreement.[3]

22.Unless there are contractual provisions to the contrary, an innocent party had no duty to bring a contract to an end by accepting a repudiatory breach either within a reasonable time or at all.[4]

23.At one time, I am of the view that perhaps the SPA has never been terminated because both the Deceased and D may be regarded as having failed to perform their respective obligations under the SPA on or before the Scheduled Completion Date.  The principle in my mind is the one said by the Court of Appeal in Camberra Investment Ltd v Chan Wai Tak[5], which was endorsed by the Privy Council in Chong Kai Tai Ringo v Lee Gee Kee[6]. In Chong Kai Tai Ringo, the Privy Council said at 470:

“In relation to the third question their Lordships consider it to be clear that as the obligations of both parties were concurrent and as the vendors were unable to deliver an executed assignment to the purchasers on 17 July, they were not entitled to claim that the purchasers had repudiated the contract by failing to pay the balance of the purchase money on that date. In those circumstances time ceased to be of the essence of the contract and the parties had a reasonable time in which to complete. The position was well stated by Hunter JA in Camberra Investment Ltd v Chan Wai Tak [1989] 1 HKLR 568, 574:

‘I regard the point as fundamental and very relevant as revealing both parties to have been at fault. Their obligations under clause 3 were mutual. The duty of the defendant to tender an executed assignment and that of the plaintiff to tender the balance of the purchase price were concurrent conditions. Neither performed: neither tendered: neither triggered the corresponding obligation of the other. The defendant neither executed nor tendered an assignment before 1 pm and thereafter was denying his obligation so to act and preventing his solicitor from taking any step to that end. The plaintiff tried to tender and failed. The cheque constituted at most conditional payment and not the “full” payment required. An effective tender required cash or its equivalent, neither of which was available that Saturday afternoon.

In my judgment this contract remained uncompleted at midnight on 28 February by the fault of both parties. It did not then terminate as was at one time suggested. It remained on foot with the substitution of a reasonable time for the failed express condition.’”

24.However, the scenario mentioned by me in [23] above have not been canvassed by the parties in the pleadings, and no evidence relating to this scenario has been adduced.  In these circumstances, it would not be appropriate for me to decide this case by adopting this scenario.

25.In Chao Keh Lung v Don Xia[7], the Court of Appeal has set out the principles concerning termination of a contract by acceptance of a repudiatory breach.  In that case, Cheung JA said:

“41. Lord Steyn in Vitol S.A. v. Norelf Ltd. [1996] AC 800 stated the following principles on acceptance:

‘(1) Where a party has repudiated a contract the aggrieved party has an election to accept the repudiation or to affirm the contract: Fercometal S.A.R.L. v. Mediterranean Shipping Co. S.A. [1989] AC 788. (2) An act of acceptance of a repudiation requires no particular form: a communication does not have to be couched in the language of acceptance. It is sufficient that the communication or conduct clearly and unequivocally conveys to the repudiating party that that aggrieved party is treating the contract as at an end.’ (emphasis added)

42. In Vitol S.A., Lord Steyn was concerned with the question of whether a failure to perform a contractual obligation by the aggrieved party could, as a matter of law, be ever capable of constituting an unequivocal acceptance by him of the repudiating party’s repudiatory breach of the contract. He stated that, as a matter of law, it could be the case. He stated that:

‘… in the … field of repudiation, a failure to perform may sometimes be given a colour by special circumstances and may only be explicable to a reasonable person in the position of the repudiating party as an election to accept the repudiation.’

The special circumstances obviously had to be determined by the particular contractual relationship and the particular facts of the case.

43. The principles in Vitol S.A. were accepted by this Court in Kar Ho Development Co. Ltd. v Axis Investment Ltd. [2001] 1 HKC 86 where it was held that the conduct relied on as constituting the acceptance of the repudiation must not merely unequivocally convey to the repudiating party that the aggrieved party is treating the contract as at an end, but must also unequivocally convey to the repudiating party that the aggrieved party is treating the contract as at an end because of the repudiating party’s repudiatory breach of the contract.

44. This Court held in that case, which was a striking out application, that the purchaser’s failure to pay for the purchase price of the contract when called upon do so could not be regarded as an unequivocal acceptance of the seller’s repudiatory breach to complete the building on time for a number of reasons: The purchaser might not have been able to raise the balance of the purchase price.  Or it might have wanted to pull out of the purchase because of a decline in the property market, and the flat was no longer worth what it had agreed to pay for it.  Without being told what the reason for the failure to complete was, there was no way that the vendor would inevitably have realized that the purchaser was pulling out of the purchase because of the vendor’s failure to complete the buildings.”

26.Ms Sabrina Ho (together with Ms Tinny Chan) submitted that the SPA was terminated by D by the following:

(1)  serving the defence and counterclaim on P on 19/10/2016;

(2)  alternatively, by commencing the MP Proceedings.

27.As to when the SPA was terminated, Mr Tam has put forward different versions in his submissions.  However, in his oral final submissions, Mr Tam finally said that the true position would be this: D was the one in breach of the SPA by failing to tender an assignment to the Deceased on the Scheduled Completion Date, and total failure of consideration occurred on that date.  In Mr Tam’s submissions, the SPA was terminated on the Scheduled Completion Date by the refusal of the Deceased to pay the balance of the purchase price, and the cause of action of unjust enrichment also arose at that time.  Accordingly, when P commenced these proceedings on 30/03/2016, the claim has already been time-barred.

28.With respect, there are flaws in Mr Tam’s submissions and I am unable to accept those submissions.

(1)  In [5] of the Re-Re-Re-Amended Defence, it is pleaded that “D avers that the Deceased unilaterally and consciously caused the failure of the completion of [the SPA] by his inaction and failure to pay the remaining balance of the consideration at the sum of HK$200,000 before the completion date …”  In other words, according to D’s pleaded case, the Deceased is the repudiatory party and D is the innocent party.  The final position adopted by Mr Tam in his oral final submissions is completely contradicted by D’s pleading and cannot be a point open to D.

(2)  For the sake of discussion, even if we put aside the pleadings, the SPA would not be terminated until there was a clear and unequivocal acceptance by the innocent party.  Even if Mr Tam can say that D is the one in repudiatory breach of the SPA, the non-payment of the balance of the purchase price by the Deceased on the Scheduled Completion Date cannot be construed as clear and unequivocal acceptance of D’s repudiatory breach. There could be more than one reasons for the non-payment of the balance on the Scheduled Completion Date.  Non-payment could also be due to the inability of the Deceased to pay.

29.I agree with Ms Ho that the SPA was terminated at the time when D served her defence and counterclaim on P, ie on 19/10/2016.

(1)  In [19] of the counterclaim dated 17/10/2016, D pleaded:

“…… [D] avers that by reason of the failure of the Deceased and/or the Plaintiff to complete the purchase of the Property on or before [the Scheduled Completion Date], [D] is entitled to forfeit the deposit of [HK$1m] or such other sum the Honourable Court thinks fit and appropriate and to terminate the [SPA].”

(2)  In the same counterclaim, D claimed for a declaration that she is entitled to forfeit the HK$1m or such other sum the court thinks fit, and a declaration that the SPA be vacated from the Land Registry.

(3)  Notwithstanding the subsequent amendments to D’s pleadings, the aforesaid pleas remain in D’s counterclaim.

(4)  Mr Tam has tried to argue that notwithstanding those pleas, the SPA has not been terminated until the court accepts D’s forfeiture claim.  With respect, I do not agree.  By putting forward those pleas, I am of the view that D has clearly and unequivocally treated that the SPA has come to an end.  By serving the counterclaim on P on 19/10/2016, D has communicated her acceptance to P.

(5)  By finding that the SPA was terminated on 19/10/2016 by reason of the matters pleaded by D in her counterclaim, I am making a finding based upon the matters pleaded by D.  In my view, there is nothing unfair to D in making this finding.[8]

30.As to the alternative scenario put forward by Ms Ho, ie the SPA was terminated by D by commencing the MP Proceedings, I am of the view that this scenario has not been covered by the pleadings of either party.  That being the case, it would not be appropriate for me to further consider this scenario.

31.To sum up, I find that the SPA was terminated on 19/10/2016.

Deposit or advance payment?

32.I would now consider whether the HK$1m paid by the Deceased to D under the SPA is a true deposit or should be regarded as an advance payment.  The law in this area has been authoritatively stated by Ribeiro PJ (Bokhary PJ and Chan PJ, and Lord Millett NPJ concurring) in Polyset Ltd v Panhandat Ltd[9]:

“90. In the light of the foregoing authorities, the proper approach to unusually large deposits may be stated as follows.

(a) Where (in the absence of fraud or vitiating factors other than excessiveness) the amount of an agreed deposit matches or is less than the conventional amount, its forfeiture will not attract judicial scrutiny, whether or not the innocent party has suffered any loss as a result of the other party’s breach.

(b) Where the deposit exceeds the conventional amount, that is, 10% in Hong Kong, forfeiture is only permitted if the party seeking to forfeit can show that exceptional circumstances justify the higher amount.

(c) Such exceptional circumstances must relate to a true deposit’s purpose as an earnest of performance and as compensation for the vendor’s withdrawal of his asset from the property market pending completion, providing an objective justification for the higher sum.

(d) If such justification is not forthcoming, the courts will not recognize the amount as a true deposit but will treat it as an advance payment towards what was payable under the contract and recoverable as such, subject to the innocent party’s entitlement to deduct damages for any actual loss suffered as a result of the other party’s breach.”

33.The purchase price stipulated in the SPA is HK$1.2m.  The deposit paid by the Deceased is HK$1m, which would be over 83% of the purchase price.  No objective justification has been put forward to justify this sum being a true deposit.  In my judgment, it is plain and obvious that the HK$1m is not a true deposit, but is an advance payment made by the Deceased.  In the circumstances, the Deceased’s estate is entitled to recover the HK$1m from D.  D has not put forward any evidence to show that she has suffered any actual loss as a result of the Deceased’s non-completion of the contract.  Accordingly, the Deceased’s estate would be entitled to recover the HK$1m from D without any deduction.

34.As explained by Ribeiro PJ in Polyset, an advance payment can be recovered by a restitutionary claim.  His lordship said:

“60. The general recoverability of advance payments has also been explained on the basis that the payer acquires a restitutionary claim upon a total failure of consideration where the contract is terminated before the other party has performed any part of the contractual duties in respect of which payment was made: Stocznia Gdanska SA v Latvian Shipping Co [1998] 1 WLR 574, 588.”

When the cause of action of unjust enrichment arose?

35.For the purpose of establishing unjust enrichment, the relevant questions are as follows^[10]:

(1)  Was the defendant enriched?

(2)  Was the enrichment at the plaintiff’s expense?

(3)  Was the enrichment unjust?

(4)  Are any of the defences applicable?

36.A cause of action by reason of unjust enrichment would only arise when the answers to the elements identified in the first three questions are present.  There is no dispute that by reason of the payment of HK$1m by the Deceased to D, D was enriched at the expense of the Deceased.

37.Counsel are in agreement that the unjust element would only appear at the time when the contract was terminated.  That must be correct.  Where a contract is still subsisting, it cannot be said that the party having received the payment under the contract has been unjustly enriched.  As said by Recorder Eugene Fung SC recently in Credit One Finance Limited v Yeung Kwok Chi and Others^[11]:

“37. It is a principle in the law of unjust enrichment that restitutionary remedies cannot be awarded where their effect would be to subvert what the parties have agreed in a valid contract: see e.g. G Virgo, The Principles of the Law of Restitution (3^rd ed, 2015) (“Virgo”) pp 133-134. Therefore, for example, where a benefit is transferred to the defendant pursuant to a contractual obligation, the continued existence of the contract will usually defeat the restitutionary claim. As Millett LJ said in Portman Building Society v Hamlyn Taylor Neck (a firm) [1998] 4 All ER 202 at 208d-e:

‘The continuing validity of the transaction under which the money was paid to the firm is, in my judgment, fatal to the society’s claim. The obligation to make restitution must flow from the ineffectiveness of the transaction under which the money was paid and not from a mistake or misrepresentation which induced it. It is fundamental that, where money is paid under a legally effective transaction, neither misrepresentation nor mistake vitiates consent or gives rise by itself to an obligation to make restitution.’

Similarly, in Shanghai Tongji Science & Technology Industrial Co Ltd v Casil Clearing Ltd (2004) 7 HKCFAR 79, Ribeiro PJ at §92 said:

‘While a contract continues to subsist between the parties, one party who makes a payment to the other party in accordance with his obligations under that contract cannot be allowed to mount a claim in restitution for the return of that sum since such a claim would be inconsistent with what the parties had agreed. It is in this sense that the contract would be “undermined” or, as Professor Birks puts it, that the restitutionary claim would “subvert bargains” (Birks, An Introduction to the Law of Restitution (1989 Rev ed.) p.47).’” (Emphasis added)

38.See also Dimskal Shipping Co SA v International Transport Workers Federation (The Evia Luck) (No 2)^[12], in which Lord Goff said:

“It was common ground between the parties before your Lordships that the money in respect of which the owners claimed restitution was paid to the I.T.F. under a contract, albeit a contract which the owners claim to have been voidable by them, and indeed to have been avoided by them, on the ground of duress. It follows that, before the owners could establish any right to recover the money, they had first to avoid the relevant contract. Until this was done, the money in question was paid under a binding contract and so was irrecoverable in restitution……” (Emphasis added)

39.As a result of my finding set out in [29] and [31] above, the SPA was only terminated on 19/10/2016.  Accordingly, the cause of action based upon unjust enrichment arose on 19/10/2016 but not at any earlier time.

40.There is no dispute that the applicable limitation period to P’s unjust enrichment claim is 6 years.[13]

41.Since the cause of action based upon unjust enrichment arose on 19/10/2016, ie after the commencement of these proceedings by P on 30/03/2016, P’s claim based upon unjust enrichment is not time-barred.

42.In my judgment, D has not put forward any defence which has been substantiated by evidence in response to the unjust enrichment claim.  The only remaining question is whether P can succeed by relying upon a post-writ cause of action.

The Eshelby defence

43.Traditionally, an amendment takes effect from the date of the original document which it amends.[14]  As such, it was considered that without the defendant’s consent, a plaintiff could not amend his writ by adding a cause of action which has accrued to him since the issue of the writ (ie the Eshelby rule)[15].

44.However, since the Civil Justice Reform in 2009, a much more flexible approach has been adopted towards pleading of post-writ matters, which is reflected in the following:

(1)  The Rules of the High Court now provide the following:

(a)  Order 18 rule 9 provides that a party may in any pleading plead any matter which has arisen at any time, whether before or since the issue of the writ.

(b)  Order 20 rule 5(1) provides that the court may at any stage of the proceedings allow the plaintiff to amend his writ, or any party to amend his pleadings, on such terms as to costs or otherwise as may be just and in such manner (if any) as it may direct.

(c)  Order 20 rule 5(5) further provides that an amendment may be allowed notwithstanding that the effect of the amendment will be to add or substitute a new cause of action if the new cause of action arises out of the same facts or substantially the same facts as a cause of action in respect of which relief has already been claimed in the action by the party applying for leave to make the amendment.

(2)  In Chan Mei Lin v Lee Hong[16], Chu JA said:

“25 .… We would additionally observe that the court’s discretion under Order 20 rule 5(1) is a wide one. The decision in Eshelby does not create an inflexible rule and the case has to be considered together with the discussions in subsequent decisions of the English Court of Appeal: see, for example, Vax Appliances Limited v. Hoover Plc [1990] RPC 656 at 661, and Hendry v. Chartsearch Ltd [1998] EWCA Civ 1276, at §§19-23; see also the discussions in Wing Siu Co Ltd v. Goldquest International Ltd [2003] 2 HKC 64 at §§9-18.” (Emphasis added)

(3)  Recently, in Qianhai Xinhuakang Financial Holdings (Shenzhen) Ltd v Chen Jiarong[17], after reviewing the authorities, Lok J said:

“61.& In fact, there are many reasons to favour the more flexible approach as laid down in Chan Mei Lin.  First, it should have been the legislative intent of the new O 18 r 9 to give more flexibility to the court to deal with post-writ matters in pleadings.  The express wording in the rule allows a party to “plead any matter, whether before or since the issue of the writ”.  Second, the modern approach to litigation emphasises case management and efficient disposal of cases.  If there is no prejudice to the counter-party such as depriving him of defence like limitation, provided that there is close connection between the original claim and the post-writ claim, there is no reason why the court should insist the party to commence a new cause of action to deal with the post-writ claim.”

45.I would exercise my discretion in favour of P by allowing P to rely upon her post-writ unjust enrichment claim. Reasons are as follows:

(1)  P’s unjust enrichment has been put forward in P’s pleadings.  The unjust enrichment claim is an issue in the agreed list of issues submitted to the court before the commencement of the trial.  D has never objected to the unjust enrichment claim based on the Eshelby rule until in D’s Opening.  In these circumstances, I am of the view that before the commencement of the trial, D has agreed that the merits of the unjust enrichment claim should be resolved in these proceedings.

(2)  D is unable to point out any prejudice to her if P is allowed to rely upon the unjust enrichment claim in these proceedings. The claim has been clearly put forward by P in P’s pleadings, and D has ample opportunities to deal with this claim in substance in these proceedings.

(3)  It would be against effective case management and practical justice if the court refuses to allow the unjust enrichment claim merely because of the Eshelby rule.  If such a ruling is made, this would simply force P to commence a fresh action before 19/10/2022 (ie within 6 years from the service of the D’s original counterclaim) to seek repayment of the HK$1m based on unjust enrichment. That would lead to unnecessary wastage of the parties’ and the court’s resources.

Reliefs in P’s Claim

46.For the reasons above, in my judgment, P is entitled to recover the HK$1m from D by reason of unjust enrichment.  I would allow the unjust enrichment claim and order D to repay the HK$1m to P forthwith, with interest at 1% above the best lending rate of HSBC from 19/10/2016[18] to the date of this judgment, and at the judgment rate thereafter until full payment.

47.P has also advanced a trust claim.  Ms Ho has agreed that if I find in favour of P on unjust enrichment, it would not be necessary for me to go into the trust claim.  By reason of my conclusion set out in the above, I would not discuss the trust claim in this judgment.

Reliefs in D’s Counterclaim

48.In D’s counterclaim, D is claiming for reliefs relating to:

(1)  forfeiting the HK$1m (“the Forfeiture Claim”); and

(2)  vacating the registration of the SPA at the Land Registry (“the Vacating Registration Claim”).

49.I have held that P is entitled to recover the HK$1m from D.  Accordingly, the Forfeiture Claim must be dismissed.

50.As to the Vacating Registration Claim, since the SPA has been terminated on 19/10/2016, this claim should be allowed.  This court has inherent jurisdiction to make an order vacating the registration of the SPA at the Land Registry.[19] I would so order.

Costs of these proceedings

51.Costs should follow the event.  P has succeeded on all the issues, save and except the Vacating Registration Claim.  In my view, the time spent on the Vacating Registration Claim is minimal.  P should be entitled to have 99% of the costs of these proceedings, including all costs reserved (if any).

52.Ms Ho did not seek a certificate for 2 counsel but sought indemnity costs.  Ms Ho submitted that at all times until the opening stage of this trial, D was maintaining her non est factum allegation.  D only abandoned this allegation at the beginning of trial and accepted that in fact she was bound by the SPA and she received the HK$1m.  The non est factum allegation previously put forward by D is therefore completely untrue, and much time and costs have been spent by P to meet this untrue allegation.  The practice of trying to put forward a case by relying upon dishonest and unfounded allegations should not be condoned by the court, and should be visited upon by indemnity costs.  Ms Ho referred me to Monat Investment Ltd v All Person(s) in Occupation of Part of the Remaining Portion of Lot No 591 in Mui Wo DD 4 No 16 Ma Po Tsuen, Mui Wo, Lantau Island[20], in which DHCJ To said (footnotes omitted):

“11. Honesty is the corner stone of our judicial system. People come to court to seek justice on the basis of their sworn evidence of what they allege is the truth. Dishonesty must be condemned ……

12. [counsel] referred me to the case of Grant David Vincent Williams v Jefferies Hong Kong Ltd in which the court cited with approval the principle found in Bank of Baroda v Panessar that “if a person conducted himself on a wholly false basis, the true state of affairs being within that person’s knowledge, or at least capable of ascertainment if properly investigated, and the proceedings were thereby significantly prolonged and the costs commensurately increased the court was entitled to order that the person so adversely affected by that conduct should receive its costs on an indemnity basis.” That principle applies to indemnity costs. A fortiori, it also applies to liability for costs where a party deliberately pleads and attempts to prove a false case, even though he turns out to be successful. The court should not countenance such dishonesty, otherwise it would encourage litigants to try their luck. ……”

53.I agree and accept these submissions.  In my view, indemnity costs are justified in this case.  I am aware that D is on legal aid.  However, this does not mean that indemnity costs cannot be ordered against D.  I repeat what I have said in Tsang Chung Ming v Caritas-Hong Kong[21]:

“61. …… As everyone is equal before the law, in considering whether a paying party should be ordered to pay costs on an indemnity basis, the court would and should apply the same principles, no matter the paying party is a legally-aided person or not. A legally aided person would not have any privilege nor suffer any prejudice on the question of whether indemnity costs should be ordered against him or her.”

54.Counsel have agreed that costs should be taxed in accordance with the High Court Scale.  I would order that 99% of the costs of these proceedings (including all costs reserved, if any) be paid by D to P, to be taxed in accordance with the High Court Scale on indemnity basis if not agreed.  D’s own costs be taxed in accordance with the Legal Aid Regulations. 

Disposition

55.I dispose of P’s claim and D’s counterclaim in the way as set out in the above.  I also make the costs order as set out in [54] above.

56.Lastly, it remains for me to thank counsel for the helpful assistance rendered to the court.

Ms Sabrina Ho and Ms Tinny Chan, instructed by Wellington Legal, for the plaintiff

Mr Jeffrey Tam, instructed by Christine M Koo & Ip, Solicitors & Notaries LLP, assigned by Director of Legal Aid, for the defendant