Robert John Francis Brothers and Another v. New Rui International Co, Ltd

HCA 1215/2024

[2026] HKCFI 4651

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1215 OF 2024

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BETWEEN

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DECISION

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A. INTRODUCTION

1.This action concerns the sale and purchase of House B, No. 8 Fung Sau Road, Sai Kung (“the Property”). There is a closely related parallel action, HCA 654/2023 (“the Related Action”). In both actions, the Plaintiffs seek relief to affirm the sale of the Property to the Defendant and to be paid the remainder of the purchase price. If the Plaintiffs win, the Defendant will be left with the Property. As will be seen, this is a key problem for the present application by the 1^st Plaintiff[1] to preserve the Property pending trial (“the Injunction Summons”).

2.The Injunction Summons specifically seeks an order prohibiting all physical building, site or structural works up to and including demolition and interference with trees or vegetation (together “the Works”) at the Property.

3.As stated in the written submissions of the 1^st Plaintiff, who has acted in person in pursuing the Injunction Summons, the application is premised on the need “to prevent irreversible demolition, redevelopment, structural alteration, tree removal, or creation of third-party interests pending trial”.

4.The Defendant opposes the Injunction Summons on three main grounds:

(1) Damages are clearly an adequate remedy and that is a complete answer to the Injunction Summons, whereas there is serious doubt as to whether the 1^st Plaintiff is good for the money in his undertaking as to damages.

(2) The Plaintiffs cannot approbate and reprobate by disclaiming any proprietary interest in the Property while simultaneously seeking an order for the security of the Property in case their main position fails.

(3) The balance of convenience leans heavily against any restriction on the Works being carried out as and when required, in circumstances where remedial actions have been demanded by the Lands Department.

B. BACKGROUND

5.The factual and procedural background to the Injunction Summons is essentially undisputed. The following summary is largely adapted from the parties’ written submissions.

6.Pursuant to the terms of the sale and purchase agreement dated 23 June 2021 (“SPA”):

(1) The Plaintiffs sold and the Defendant purchased: (a) the entire shareholding of Fung Sau Property Limited (the Property’s registered owner, which I will generallly refer to here as the “Company”); and (b) a shareholders’ loan owed by the Company to the 1^st Plaintiff in the sum of approximately HK$13,572,084.00.

(2) The Defendant paid the Plaintiffs the balance of the consideration of HK$300 million (“Consideration”) after deducting the consideration for the shareholders’ loan.

7.By an ancillary escrow agreement dated 23 June 2021 (“Escrow Agreement”), the parties agreed that 10% of the Consideration (i.e. HK$30 million) would be held in escrow as retention money (“Escrow Money”) for release under certain contingencies. Per Clause 3.2(a)(ii)(B) of the SPA, the Escrow Money consists of:

(1) A sum of HK$20 million released to the sellers if the revised short term tenancy for the garden adjoining the Property is granted within 3 years from completion, or to the purchaser if not granted or there is conclusive evidence the government will not grant it (“STT Retention Money”); [2] and

(2) A sum of HK$10 million released to the sellers 18 months after completion if there are no unresolved legal proceedings or claims by the purchaser as to tax or warranty breaches (“Tax and Warranty Claim Retention Money”).

8.The parties’ dispute arose when the Lands Department issued a letter to the Company on 26 April 2022 (“LD Letter”). The LD Letter stated that:

(1) The general building plans for the Property had all been disapproved by the Lands Department;

(2) The Property was in breach of various Special Conditions of the New Grant; and

(3) The Company was required to “purge the existing breach by demolishing all the existing building(s) standing on the Lot”.

9.On 16 May 2022, the Plaintiffs’ then solicitors (Wong Poon) forwarded the LD Letter to the Defendant’s solicitors (Mayer Brown, now Johnson Stokes & Master). By then, some 9 months had elapsed since the completion date of 23 July 2021 (“Completion”).

10.The Defendant’s basic case is that it was induced into the transaction by the Plaintiffs’ misrepresentations as to the breaches of the government lease (“the Breaches”):

(1) At all material times up to the execution of the SPA and related documents, the Plaintiffs allegedly never disclosed to the Defendant or its representatives that the Property was constructed in breach of the government lease and was liable to be demolished.

(2) On the contrary, the Plaintiffs allegedly made representations to the effect that the Property complied with the government lease, including in particular an “Authorised Person’s Certificate of SLN & Associates Limited” dated 21 February 2017.

(3) It was, on the Defendant’s case, only after the LD Letter that the Plaintiffs disclosed to the Defendant the correspondence between SLN & Associates Limited and the Lands Department between 2008 and 2011, which clearly show that the proposed construction of the Property never received the approval of the Lands Department, and the Plaintiffs were fully aware of that.

11.The Related Action started on 28 April 2023. On this front:

(1) The Plaintiffs initially sought summary judgment in that action by summons dated 1 May 2023, seeking release of the Tax and Warranty Claim Retention Money.

(2) The Defendant’s defence is one of rescission. By filing the Defence and Counterclaim on 6 July 2023, the Defendant allegedly rescinded the SPA and the Escrow Agreement by reason of the Plaintiffs’ misrepresentations to the Defendant.

(3) While the Plaintiffs obtained summary judgment on their claim under the Related Action on 27 November 2023, the Defendant successfully appealed. By order dated 20 July 2025 in CACV 433/2023, the Court of Appeal granted the Defendant unconditional leave to defend in the Related Action. The Court of Appeal has since handed down its Reasons for Judgment in CACV 433/2023 dated 27 May 2026.

(4) By a supplemental order dated 10 April 2025, the Court of Appeal further directed the Plaintiffs to pay the Tax and Warranty Claim Retention Money (together with accrued interest) into court, and to repay to the Defendant costs of HK$1.2 million that had been awarded to the Plaintiffs at first instance. According to the Defendant, the Plaintiffs have so far failed to comply with either limb of the order.

(5) Separately, by summons dated 2 November 2023, the Plaintiffs also took out an application in the Related Action (“Preservation Application”) for an order that, inter alia, the Defendant cause the Company to sign and execute a draft authorisation letter to authorise the 1^st Plaintiff to liaise with District Lands Office (Sai Kung) (“DLO/SK”) in order to address the grant of the revised short term tenancy and resolve the Breaches.

(6) At the hearing on 12 March 2024, Cheng J ordered the disposal of the Preservation Application by consent. The authorisation letter was replaced by a range of undertakings. In particular:

“1. The Plaintiffs undertake that the 1^st Plaintiff shall: –

(1) promptly inform the Defendant in writing of the progress of his liaison with the DLO/SK carried out pursuant to this Order made by the Court in writing; and

(2) answer all the Defendant’s reasonable enquiries in writing.

4. The Plaintiffs undertake (without any admission of liability to do so) to carry out the necessary negotiations with the DLO/SK with such professional assistance as is required, at their own expense, including the payment of whatever additional premium may eventually be demanded by the DLO/SK, in order to resolve the alleged non-compliance with the lease conditions raised by DLO/SK in their letter of 26 April 2022.

5. The 1^st Plaintiff undertakes to promptly inform the Defendant of progress and to answer all of the Defendant’s enquiries in writing. The 1^st Plaintiff also undertakes that all reasonable input from the Defendant will be taken into account and the Defendant be consulted on the terms of any proposed resolution of the various issues raised and then be invited to approve them.

7. The Plaintiffs and the Defendant each undertake to agree within four weeks to appoint a single professional experienced in dealing with New Territories lease conditions matters to work directly with the DLO/SK to deal with the alleged breach of the lease conditions. They agree that such appointee will report directly to the parties for instructions and the fees of the appointee shall be paid by the Plaintiffs.”

(7) Despite paragraphs 1 and 4 to 5 of the above undertakings, the Defendant says that it has yet to receive any updates from the 1^st Plaintiff on the negotiations with the DLO/SK for the revised short-term tenancy and resolving the Breaches.

12.The Plaintiffs commenced the present second action on 21 June 2024, and by summons dated 24 July 2024 sought summary judgment for the release of the STT Retention Money.

13.The Plaintiffs’ application for summary judgment failed. By an Order of Master S P Yip dated 19 November 2024, the Defendant was granted unconditional leave to defend.

14.The Plaintiffs’ appeal against the decision of Master S P Yip was withdrawn pursuant to leave granted in the Order of Deputy High Court Judge Le Pichon dated 17 February 2025.

15.On 15 January 2026, the STT Retention Money was paid with interest into Court pursuant to the Order of Master Dick Ho dated 13 January 2026.

16.The Defendant filed its Defence and Counterclaim in this action on 13 June 2025. The Defendant again advances a case of misrepresentation and seeks, among other relief, rescission of the SPA and the Escrow Agreement, damages for misrepresentation, and damages for breach of the SPA in the alternative.

17.The Injunction Summons followed on 16 February 2026. On 27 February 2026, DHCJ Grace Chow gave directions for the filing of evidence in relation to the application without granting any ‘interim interim’ relief.

C. PRINCIPLES ON PRESERVATION ORDERS

18.There is no dispute on the key principles on preservation orders under Order 29, rule 2 of the Rules of High Court, including the following (see generally Hong Kong Civil Procedure 2026, Volume 1, at §29/8/7):

(1) The Court may issue a preservation order regarding property that is genuinely in dispute in the proceedings.

(2) The Court’s discretionary power under Order 29, rule 2, extends to every case where something ought to be done for the security of the property pending trial. Part of this inquiry will involve considering the extent to which damages would not be an adequate remedy.

(3) Unlike an application for a Mareva injunction, no risk of dissipation needs to be demonstrated.

(4) On the merits of the claim, the party seeking the preservation order only needs to show that there is a serious issue to be tried on the normal American Cyanamid principles. An inquiry into the relative merits of rival claims is unnecessary.

19.Regarding (1) above, an essential distinction between an Order 29, rule 2 preservation order and a Mareva injunction is that the Order 29 rule 2 jurisdiction is rooted in the existence of a proprietary claim, while for Mareva relief the Court may restrict disposal or even dealing with the defendant’s assets over which the plaintiff asserts no proprietary claim: see Samtani v Samtani [2012] 4 HKLRD 872 (Queeny Au-Yeung J) at §76. In Republic of Haiti v Duvalier [1990] 1 QB 202, Staughton LJ explained the nature and significance of the distinction in these terms (at pp.213-214)

“[T]he true distinction lies between a proprietary claim on the one hand, and a claim which seeks only a money judgment on the other. A proprietary claim is one by which the plaintiff seeks the return of chattels or land which are his property, or claims that a specified debt is owed by a third party to him and not to the defendant. Thus far there is no difficulty. A plaintiff who seeks to enforce a claim of that kind will more readily be afforded interim remedies, in order to preserve the asset which he is seeking to recover, than one who merely seeks a judgment for debt or damages.” (my emphasis)

20.Those observations broadly align with the position as regards (2) above, on the need to consider the adequacy or otherwise of damages. It is undisputed that if damages are plainly adequate as a remedy, the Court will normally refuse a preservation order: Samtani v Samtani (above) at §79, applying Feng Loy-Chuen v Lim Yiong-Lin [1977] HKLR 471. That is because, if the successful plaintiff would be properly compensated by general monetary damages after trial, it will be very hard if not impossible to show the necessity of preserving specific property in the interim.

21.There may of course be cases where the adequacy of damages cannot be plainly or fully shown. In such cases, the proper approach is to give appropriate weight to the extent to which damages are likely (or unlikely) to be adequate, without treating that aspect as conclusive. This accords with Staughton LJ’s nuanced approach in Republic of Haiti v Duvalier (above) p.214, where a plaintiff seeking to enforce a proprietary claim, rather than one “who merely seeks a judgment for debt or damages”, will “more readily” be afforded interim remedies for preservation purposes – a matter of degree.

22.As the essential purpose of Order 29, rule 2 is “to secure a just and proper trial of the issues” (see Tang J as he then was in Laguna Properties Ltd v New Trend Investment Ltd HCA 19128/1998, unrep. 13 May 2004 at §9), the Court’s ultimate task is to decide whether a preservation order is necessary in all the circumstances to meet that objective.

D. PRESERVATION ORDER UNWARRANTED

23.Having considered the circumstances and submissions in this case, a preservation order is in my view unwarranted.

24.A distinct feature of this case is that the Plaintiffs do not actually want the Property, but seek instead to complete the SPA and receive the STT Retention Money. As Staughton LJ explained in Republic of Haiti v Duvalier (above), interim remedies to preserve specific property normally serve to protect the enforcement of a proprietary claim, rather than to protect the interests of a claimant merely seeking a judgment for a debt or damages. As Mr Sik noted, however, the Plaintiffs have “no unique interest in the Property other than its market value. This is not a case where a party seeks to preserve a unique property or a piece of irreplacable chattel”.

25.The 1^st Plaintiff’s claim that irreparable harm would be caused absent a preservation order, because “restoration will become impossible or be severely prejudiced”, is unsupported on the facts and evidence. The 1^st Plaintiff has moreover failed to establish how the Works would damage the the Property or its value. It is indeed unlikely that the Defendant would act to damage the value of the Property, given both the possibility that the Plaintiffs may succeed in their claim (leaving the Defendant with the Property) and the prospect of rescission becoming impossible because the Plaintiffs cannot refund.

26.In sum, damages would clearly be an adequate remedy in the present case. This itself suffices to defeat the Injunction Application. It cannot be said that a preservation order is necessary to ensure a just and proper trial of the issues.

27.The overall conclusion against the need for preservation is further fortified by two other factors.

28.First, the Defendant has made clear at the hearing through counsel, and I accept, that it has no present intention of carrying out any building or structural works in relation to the Property before trial. This further weakens any claim that an interim prohibitory order is needed.

29.Second, it is at the same time evident that the proposed preservation order, if granted, may impede compliance with the demands of the DLO in relation to the apparent breaches of the government lease. Those demands include a requirement to demolish House B. While it does not appear that the DLO is demanding immediate demolition, it seems to me from the evidence that the position may well change so that action will be required. In that scenario, I do not see how it would be beneficial to either side for the Property to be caught between opposing demands – those of the DLO for immediate demolition, and those of the proposed preservation order, prohibiting demolition – particularly when, as noted, damages are ultimately likely to be an adequate remedy.

30.As a preservation order is for these reasons clearly unwarranted, there is no need for me to decide whether the 1^st Plaintiff’s application may separately be refused due to his alleged wrongful approbation and reprobation in seeking a preservation order to preserve his interest in the Property in the event he loses the Action, which Mr Sik decries as improperly seeking “to maximise the security for Ps regardless of the outcome of trial, to D’s detriment”.

E. SUMMONS TO EXPUNGE

31.The 1^st Plaintiff issued a summons on 13 May 2026 (“the Expunge Summons”) returnable at this hearing to expunge the 2^nd affirmation of Xu Hang (“Xu 2^nd”) filed in support of the Defendant’s opposition to the Injunction Summons.

32.The Expunge Summons contends that Xu 2^nd failed to comply with various alleged procedural requirements. There is no suggestion that the alleged omissions and deficiencies in this regard are jurisdictional or otherwise fundamental in nature. The matter is now essentially academic, save perhaps as to costs, since the context of Xu 2^nd has had no real bearing on my refusal of the Injunction Summons in any event.

33.In any event, I agree with Mr Sik’s submission that the 1^st Plaintiff’s complaints are unsupported both legally and evidentially, and that no prejudice has been caused to the 1^st Plaintiff regardless.

E. POST-HEARING DEVELOPMENTS

34.On 17 August 2026, when this Decision was nearly completed, the 1^st Plaintiff wrote a letter drawing the Court’s attention to what he described as “a material development”, said to “give rise to a concern that significant physical works affecting the property may now be imminent” (“the 17 August Letter”).

35.According to the 17 August Letter, the 1^st Plaintiff had inspected the Property from the road the day prior, and noticed “[s]ubstantial construction machinery, including an excavator” on the site of the adjoining house (No.8A Fung Sau Road). The 17 August Letter also suggested that “part of the upper structure of the shared entrance gateway [between the properties at Nos.8B and No.8A]” had been removed, “apparently to facilitate access by large machinery”. Three photographs taken during the inspection are attached to the 17 August Letter.

36.While the 17 August Letter fairly states that “[The 1^st Plaintiff does] not suggest that the photographs themselves establish that demolition of No.8B has commenced”, the letter goes on to state that the matters observed “appear to demonstrate that circumstances on the ground have materially changed since the hearing and give rise to the concern that significant physical works affecting the property may now be imminent”.

37.The 17 August Letter closes by (1) inviting the Defendant “to confirm whether any demolition, structural alteration or other substantial building works affecting No.8B are now intended, or have been authorised, instructed, contracted for or commenced”; and (2) inviting the Court, if it “considers that the parties should provide further evidence or submissions concerning these developments”, to make further directions.

38.As directed by the Court, the Defendant responded to the 17 August Letter via a letter from its solicitors dated 21 August 2026 (“the 21 August Letter”). In summary, the Defendant’s position is that:

(1) Having failed to obtain any ‘interim interim’ relief pending substantive determination of the Injunction Summons, the 1^st Plaintiff has no basis for complaining of any steps that the Defendant intends to take at the moment.

(2) The 1^st Plaintiff has not formally sought to adduce new evidence before the Court, and any evidenced adduced via the 17 August Letter is bound to be incomplete.

(3) Without prejudice to the above, the works observed in the 17 August Letter are essentially for the removal of certain unauthorised buildings works (“UBWs”) at the Property. In support of this, the Defendant has included with the 21 August Letter various notices and other communications with the Buildings Department which are said to relate to the UBWs.

(4) The removal works referred to “do not involve, and the Defendant has no intention to authorise, instruct, contract for or commence, any demolition, structural alteration, or other substantial building works affecting the Property”.

39.I do not agree with the suggestion that, because no ‘interim interim’ relief is in place, any steps recently taken or presently intended by the Defendant as regards the Property must be irrelevant in deciding whether a preservation order is now justified. However, having taken into account parties’ latest factual positions and submissions on a de bene esse basis, I do not consider that it is necessary or proportionate to reopen matters with a full round of further evidence and submissions. In particular, the latest developments do not change the position on the adequacy of damages in this case.

40.In sum, taking into account the latest developments and submissions, a preservation order remains clearly unwarranted.

G. DISPOSITION

41.For the above reasons, the Injunction Summons and Expunge Summons are dismissed, with costs to the Defendant to be summarily assessment if not agreed.

42.Absent agreement on costs within three weeks of this Decision, the Defendant is to file and serve a statement of costs within one week thereafter, with any statement of objections to be filed within one week of filing and service of the statement of costs.

1^st Plaintiff, acting in person

Mr Sik Chee Ching, instructed by Johnson Stokes & Master, for the Defendant