Ksdy International Co Ltd and Another v. Honway (China) Ltd

HCA 4514/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 4514 OF 2002

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BETWEEN

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Before: Deputy High Court Judge Muttrie in Chambers

Date of Hearing: 9 June 2006

Date of Judgment: 20 June 2006

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J U D G M E N T

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1.In this matter, I gave judgment on 23 March 2006 in favour of the plaintiffs for specific performance of an agreement for sale and purchase of property, as well as for damages for loss of rent and loss of use.  I directed the parties to parties to liaise with a view to agreeing an order incorporating all the necessary and proper steps to achieve the completion of the sale and purchase pursuant to the Agreement, taking into account the nomination of the 1^st plaintiff, and gave them liberty to apply if they could not agree on the form of the order.  The parties came back before me for directions as to the form of the order.  At the same time, the defendant, having lodged an appeal, applied for stay of execution pending the appeal.

Stay pending appeal

2.There is no dispute on the principles.  Ma J set them out extensively in Star Play Development Limited v Bess Fashion Management Company Limited, unreported, HCA No.4726 of 2001, and I need not repeat them here.

3.The defendant does not, apparently, say that it has strong grounds of appeal, but rather that it has arguable grounds, and that in the absence of an order for stay, the appeal would be rendered nugatory.  The plaintiffs’ position is that there are no arguable grounds of appeal, so the stay should not be allowed in any event; but if there are arguable grounds, the absence of an order for stay would not render the appeal nugatory.

Grounds of appeal

4.The defendant refers to two of the grounds of appeal which it says are points of substance.  The first is whether clause 7, which provided for payment of a liquidated amount, barred specific performance.  Reliance is placed on the appeal to the Privy Council from the Supreme Court of Ceylon, in Abdul Cader Abdeen v Abdul Careem Mohamed Thaheer and Others [1958] AC 116, PC.  The second point is that delay in the completion of purchase on the day fixed for completion is not of the essence of the contract either at law or in equity.  Reliance is placed on the English case of Graham v Pitkin [1962] 2 All ER 235.

5.At the trial, I heard argument on and considered both points at length, and I cannot now see that, had these cases been cited to me, I would have arrived at any different conclusion.

6.I do not understand how Abdul Cader Abdeen assists.  It was decided under Roman Dutch law, and it dealt with the question of whether the contract excluded the prima facie right under that law of a party to a contract to demand specific performance.  In the instant case the question was whether there should be strict compliance.  Clause 7 gave the defendant vendor the option, on failure to complete the sale according to the Agreement, to repay a double deposit.  I found that, the completion date and an extended completion date having passed, the option lapsed.

7.As to time being of the essence, I found, by reference to various decided cases, that in this case time for completion was necessarily of the essence, after considering the principles set out by Godfrey J in Man Sun Finance (International) Corp. v Lee Ming Ching Stephen [1993] 1 HKC 113, CA.

8.I doubt that there are any arguable grounds of appeal here.  If there are no arguable grounds, that is sufficient for me to refuse the stay.  In case there are such grounds, I will proceed to consider the next question.

If there is no stay, will that render the appeal nugatory?

9.It is argued for the defendant that if there is no stay, the parties will have to complete, and the plaintiffs, or one of them, will get the property free of encumbrance.  The new owner can sell on, or put in a tenant; and the buyer or the tenant will have a good title, which cannot be overcome if the defendant succeeds on the appeal.  There is also stamp duty; it will amount to over $100,000.  Even if, on succeeding, the defendant can get the property back, it will still have to pay the stamp duty.  It is also argued, on damages, that the plaintiffs may not be good for repaying them; the 1^st plaintiff is a $2 company and the 2^nd plaintiff has paid up capital of $100,000.  It is also said that the property is now worth $7.5 million.

10.So far as the value is concerned, there is simply no real evidence of it.  The figure is what someone has told the defendant, but there is no expert evidence of it and no evidence, indeed, as to who gave the opinion.  So it must be disregarded.

11.As to the title, it seems to me that if the defendant registers the appeal as a lis pendens, it is unlikely that anyone will buy the property.  Whether someone would take a tenancy under those circumstances is perhaps less clear.  But the property is leased at the moment, and although it appears that the tenant is not paying, and the defendant is not insisting on payment of the rent, the plaintiffs have obtained a valuation report to the effect that the loss of use from date when completion should have been to date of report, $1.239 million.  So if the defendant were to get the property back with a sitting tenant it would not be worse off than it is now.

12.As to damages, the financial reports have been produced and it appears that the plaintiffs are viable companies with good turnover, and in the case of the 2^nd defendant, substantial assets.  There is no reason to suppose that they could not repay, if the defendant succeeded on the appeal.

13.It is also to be noted that the plaintiffs have asked that rent be held on trust for them meantime, and that has gone unheeded.  This rather casts doubt on the defendant’s bona fides.  If the defendant wants to ensure that it can be put back to its original position if it succeeds on the appeal, it should also be prepared to provide for the damages it will have to pay if the plaintiffs succeed.

14.For these reasons the application for stay is refused, with costs (nisi) to the plaintiffs to be taxed if not agreed.  There will be an order for directions in terms of the plaintiffs’ draft. 

Mr C K Ng, of Messrs Dibb Lupton Alsop, for the 1^st and 2^nd Plaintiffs

Mr Jeremy Cheung, instructed by Messrs Louis K Y Pau & Co., for the Defendant

Defendant's application for a stay of execution pending appeal dismissed. Please refer to CACV190/2006 dated 13 July 2006