Darton Ltd. v. Hong Kong Island Development Ltd.
Read the full judgment text of DCCJ 15672/2000 on BabelCite. This District Court judgment was delivered on 28 December 2000.
2. The facts of the case are not in dispute. On 6th April 2000, the Defendant made an offer to the Plaintiff in writing ("the Letter") in the following terms :-
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DCCJ015672/2000 DCCJ15672/2000 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION CIVIL ACTION NO. 15672 OF 2000 -----------------------
---------------------- Coram: H.H. Judge Li in Chambers Date of Hearing: 13 December 2000 Date of Handing Down Judgment: 28 December 2000 _________________ Judgment _________________ This is an application by the Plaintiff under Order 14A that :-
2.The facts of the case are not in dispute. On 6th April 2000, the Defendant made an offer to the Plaintiff in writing ("the Letter") in the following terms :-
Unless we are in receipt of your acceptance confirmation and deposit cheque on or before the 13th April 2000, our offer shall lapse automatically." 3.The Letter was countersigned by the Plaintiff on 11th April 2000 and returned on the same day with a cheque for $302,118 made payable to the Defendant. However, the Plaintiff did not proceed to execute the tenancy agreement. On 4th May 2000, the Plaintiff through its solicitors informed the Defendant that it did not intend to enter into the tenancy agreement the subject of the Letter. By letters dated 4th May, 31st May and 27th June 2000, solicitors for the Plaintiff demanded repayment by the Defendant of the deposit. The Defendant refused. 4.It is common ground that before the negotiations leading to Letter, the Plaintiff was already the tenant under the Defendant of the premises 1510-1512, AIA Tower and it was mutually understood that by taking up 1508-1509, AIA Tower the Plaintiff would expand its offices in AIA Tower by combining the two adjoining premises. But, for whatever reason, the Plaintiff decided not to proceed with the expansion and hence the letting of 1508-1509 AIA Tower was aborted. 5.The Order 14A summons is self-explanatory. It accords with the statement of Claim :-
AND THE PLAINTIFF'S CLAIMS :-
6.During the hearing before me, Mr. Chan for the Plaintiff confirmed that the cause of action relied upon by the Plaintiff is money had and received. Moreover, in response to my query regarding the meaning and effect of the expression "subject to contract and availability" in the Letter, Mr. Chan further confirmed that, for the purposes of this Order 14A summons only, the court should disregard the words "and availability" in that expression. Thus, the court is only concerned with a simpler "subject to contract" document. 7.According to the Defence, and the position taken by Mr. Sarony SC for the Defendant,
8.In support of his client's cause, Mr. Chan relied on Chillingworth v. Esche [1924] 1 Ch. 97 and Yu Tai Hing Land Agency Ltd. v. Leung Wing Yin [1986] HKC574. In both cases, a deposit was paid under a subject to contract document and the courts held that the deposit must be refunded upon failure to enter into formal contract. 9.Mr. Sarony SC for the Defendant mounted a two prong attack on the Plaintiff's claim. First, dicta in Yu Tai Hing Land Agency Ltd. indicates that actual forbearance by the landlord to lease premises to other prospective tenants coupled with implied request from the tenant to the landlord to so forbear is good consideration. That this is the law is accepted by Mr. Chan. Mr. Chan also conceded that there was indeed forbearance. Mr. Sarony SC, therefore, contended that the court must draw the inevitable inference that the Plaintiff had impliedly requested forbearance. Otherwise, why would the Plaintiff, which was dealing at arms length with the Defendant, pay a substantial deposit knowing that the deposit would be irrecoverable? 10.With regard to the claim based on money had and received, Mr. Sarony SC suggested that the present case is to be distinguished from Chillingworth in which the subject to contract document was silent on when and how the deposit should be returned or retained by the vendor. The present case may also be distinguished from Yu Tai Hing Land Agency Ltd. where the "subject to contract" expression applied to the deposit forfeiture provision. In the present case, the forfeiture of deposit provision (absent in the Chillingworth case) is specifically stated to be unconditional and not subject to contract. Since the provision was agreed upon by commercial parties dealing at arms length, it ought to be respected and upheld by the Court. 11.Mr. Sarony SC made reference to several passages in the judgments in Chillingworth. In particular, Pollock MR at pp 107-108 said:-
Leading counsel pointed out that in the case before me, the Defendant has "by appropriate words, made provision for [forfeiture of the deposit] in the document", hence the provision should be upheld as the Master the Rolls presumed. 12.Mr. Chan drew my attention to the facts in Chillingworth and Yu Tai Hing Land Agency Ltd. In those two cases, land or premises were to be acquired for expansion of adjoining property already held by the party who paid the deposit. Yet neither the English Court of Appeal nor our Court of Appeal was prepared to find an implied request for forbearance. Reliance was also placed on Chitty on Contracts, 28th Edition, para 13-009:-
Thus I should be slow to find an implied request on the part of the Plaintiff that would perfect the consideration. 13.I have to accept that in the instant case there was clear agreement for forfeiture. This distinguishes the instant case from Chillingworth and Yu Tai Hing Land Agency Ltd. On this basis, I can and do in the circumstances find an implied request for forbearance as a matter of necessity to give business efficacy to the arrangement between the parties. However, the Defendant has not pleaded "implied request" in its Defence. The "implied request" arose only during Mr. Sarony's submissions. I wonder if this is a technical weakness in the Defendant's case on the present state of the pleadings. 14.On the other hand, at the end of the day, the question of consideration is a matter of defence. The crucial question, rather, is whether the Plaintiff can rely on "money had and received" and substantiate that cause of action. Even when the Defendant fails to show consideration in support of the agreement for forfeiture, the Plaintiff must show viable cause for recovery of the deposit. 15.From the little I know, I believe a party is entitled to recover money had and received if, for instances, there was payment by mistake or unjust enrichment. I am not aware of any authority wherein money conscientiously and unconditionally paid over has been held to be recoverable even though the payee may not demand payment. Suppose Party A makes a cash gift to Party B, it is trite law that, once the gift money has been paid over to Party B, Party A cannot subsequently demand refund even though Party B furnished no consideration for the gift. I am not suggesting that the payment of deposit by the Plaintiff can be likened to a gift. The example of gift serves only to illustrate that a party who has parted with his money does not per se have the right to recover it on the ground of money had and received. And I believe a party who has parted with his money with the clear understanding that the other party has unconditional right to use the money has to demonstrate that he has retained at least an equitable interest in the money before he is entitled to demand repayment. 16.In Chillingworth, Pollock MR observed at p. 107 that,
17.In the present case, I believe the Defendant has discharged the onus of showing a right to retain the deposit. The Defendant relies on a forfeiture provision which is not subject to contract. Mr. Chan concedes that the provision constitutes an agreement between the parties. It is idle to contend that the agreement is not enforceable for lack of consideration because the Defendant is not seeking to enforce the agreement. The money is already placed in the hands of the Defendant by the Plaintiff which is a fact that, according to Pollock MR, places the Plaintiff in difficulty. The Plaintiff has given up use of the money. The Plaintiff has to show why equity should come to its assistance. Since Chillingworth and Yu Tai Hing Land Agency Ltd. are clearly distinguishable from and of no assistance in the instant case, the Plaintiff in effect has made a bare assertion only that it is entitled to recover the deposit as money had and received. 18.In the premises, I am driven to the conclusion that the Plaintiff has not made good its case. I am not sure if I can at this stage strike out the action but the Order 14A summons must be dismissed with costs to be taxed if not agreed. This simplistic judgment does not fully reflect the respective nimble and delicate case counsel for each side had to canvass, there is certificate for two counsel for the Defendant.
Representation: Mr. Louis Chan instructed by M/S Yeung Law & Co. for Plaintiff. Mr. Sarony S.C. leading Mr. Gordon Wong instructed by M/S Preston Gates & Ellis for Defendant. |