Diamond Jubilee Investment Ltd v. Chan Yiu Chung Sidney
Read the full judgment text of CACV 228/2009 on BabelCite. This Court of Appeal judgment was delivered on 6 January 2010.
1. The Defendant appealed against an order of HH Judge Yung made on 8 July 2009 whereby summary judgment was ordered against him in the amount of $203,582.69 together with interest (on the sum of $156,408 at the rate of 8.25% per annum from 27 November 2008 - the date of the Writ - to 8 July 2009, thereafter at judgment rate) and costs. Leave to appeal was granted on 23 September 2009.
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CACV 228/2009 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF APPEAL CIVIL APPEAL NO. 228 OF 2009 (ON APPEAL FROM DCCJ NO. 5370 OF 2008) ----------------------
---------------------- Before : Hon Ma CJHC, Le Pichon JA & Stone J in Court Date of Hearing : 6 January 2010 Date of Judgment : 6 January 2010 Date of Handing Down Reasons for Judgment : 19 January 2010 ---------------------------------------- REASONS FOR JUDGMENT -------------------------------------- Hon Ma CJHC : 1.The Defendant appealed against an order of HH Judge Yung made on 8 July 2009 whereby summary judgment was ordered against him in the amount of $203,582.69 together with interest (on the sum of $156,408 at the rate of 8.25% per annum from 27 November 2008 - the date of the Writ - to 8 July 2009, thereafter at judgment rate) and costs. Leave to appeal was granted on 23 September 2009. 2.After hearing submissions from counsel, we allowed the appeal in part and made the following orders : -
3.We also indicated that the reasons for our judgment would be handed down; this we now do. Facts 4.The present case involves the sale and purchase of a flat. By a Sale and Purchase Agreement dated 28 November 2006 (“the Agreement”), the Plaintiff (as Vendor) sold to the Defendant (as Purchaser) the property known as Flat A, 10th Floor, Tower 6 in the development named “Sausalito”, Yuk Tai Street in Shatin (“the Property”). At the time of sale, the development had still to be completed (the Occupation Permit was not issued until 18 November 2007). 5.Under the Agreement, the purchase price was $4,840,000 payable as follows : -
6.Relevant for present purposes are also the following clauses in the Agreement : -
7.The initial deposit was paid by the Defendant upon the signing of the Agreement, but he failed to pay the second installment due on 26 February 2007 (or indeed any other installments). 8.By a letter dated 13 March 2007 from the Plaintiff’s solicitors, notice was given to the Defendant pursuant to Clause 16(1) of the Agreement to pay the said sum of $242,000 which had become due, within 21 days together with interest thereon (as stipulated by Clause 3(5)). All rights and remedies were reserved in the event the default persisted. 9.In breach of the Agreement, the said sum was not paid on due date or at all. Clearly then, the Defendant was in repudiatory breach of the Agreement. 10.However, it was not until some 8 months later, by a letter dated 7 November 2007, again from the Plaintiff’s solicitors to the Defendant, that the repudiation was accepted and the Agreement was determined under Clause 16(1). 11.On 23 November 2007, a provisional Sale and Purchase Agreement was entered into between the Plaintiff and a third party buyer whereby the Property was re-sold for the price of $4,454,000. This price was arrived at after the application of various discounts to the published price of $4,940,000 for the Property. The evidence before us indicated that a brochure was produced by the Plaintiff advertising for sale a number of flats in the Sausalito development, including the Property. The said advertised price of $4,940,000 in fact represented an increase of $100,000 on the purchase price payable under the Agreement. The discounts that were also advertised in the brochure comprised a 2% promotional discount as well as a 8% discount for early payment. The price of $4,454,000 under the resale reflected these discounts. The buyer in the resale was introduced by estate agents, who were paid a commission of $89,080. The resale price being less than the purchase price under the Agreement, the Plaintiff claimed the shortfall under Clause 16(3) of the Agreement ($386,000), together with the expenses of the resale ($3,500 legal costs and $8,908 being the Conveyancing costs). Credit was given for the $242,000 that had been paid as deposit under the Agreement. The total claim under Clause 16(3) was accordingly $156,408. Other claims were also made, to which I shall now turn. The claim and the proceedings below 12.The Plaintiff issued the Writ in the present action on 27 November 2008. The Statement of Claim endorsed on the Writ claimed the said sum of $156,408 being the sum due under Clause 16(3) of the Agreement. Two other monetary claims were made : -
13.Following the service of the Defence, the Plaintiff applied to the District Court for summary judgment. On 8 July 2009, HH Judge Yung granted summary judgment on the terms set out in paragraph 1 above. This did not include the alternative claim referred to in paragraph 12(2) above. 14.Following leave granted by this Court, the Notice of Appeal was served on 29 September 2009. The Grounds of Appeal (and the Skeleton Arguments of counsel) related solely to the award of $156,408; the award of $47,174.69 was not specifically challenged (this latter aspect is relevant to the question of costs as will shortly become clear). The issues in the appeal 15.Condensing the arguments of Ms Vickie Ling (for the Defendant) and Mr Jat Sew Tong, SC, with him Mr Wilson Leung (for the Plaintiff), I have found it useful to identify six issues which have to be resolved in this appeal (with the exception of Issue 5, all the others are questions of law) : -
16.Essentially, two points were advanced by Ms Ling in support of the Defendant’s contention that leave to defend ought to be given : -
17.It is within these two broad submissions that the first five issues arise; the sixth issue is an independent one. 18.Before dealing with each issue, I ought first make the following observations : -
Issue 1 19.Nothing in the Agreement provides for any particular time or period for the termination of the contract following a breach. I would add that it would be highly unusual for a contract for the sale of land to contain such provisions. 20.In the absence of contractual provisions to the contrary, the general rule is that there is no duty on an innocent party to accept a repudiatory breach, either within a reasonable time or at all. No question of reasonableness or mitigation arises. Quite simply, when a repudiatory breach occurs, the innocent party either can affirm the contract or accept the repudiation thereby bringing it to an end. I would add here that the principle in Johnson v Agnew [1980] AC 367 whereby in a sale of land an innocent party even can wait until trial before making an election whether to claim damages for breach or claim specific performance (thereby affirming the contract), is a classic illustration of the existing common law position. Issue 2 21.Clause 16(3) is clearly a liquidated damages clause. There was a faint hint in Ms Ling’s submissions that perhaps it might be a penalty clause but there was nothing in this point. Issue 3 22.Where a valid liquidated damages clause exists, no question of mitigation of damages arises : see McGregor on Damages (18th edition) at paragraph 13-021 (referring to Abrahams v Performing Rights Society [1995] ICR 1028). Issue 4 23.Although no duty to mitigate arises as far as a liquidated damages clause is concerned, in the present context involving a resale, it must, I think, necessarily be implicit that any resale must be effected in good faith and at arm’s length. For all practical purposes, this was the nub of the present appeal. I am prepared even to go so far as to say (for the purposes of the present appeal) that the duty is also not to act unreasonably in the circumstances (although it has to be said that this facet was not extensively canvassed in the course of counsel’s submissions). Whether for present purposes the above points constitute implied terms or whether they arise from a true construction of Clause 16(3) of the Agreement, is immaterial; the short point is that the evidence before us failed to demonstrate that this resale was not a good faith/arm’s length transaction. Issue 5 24.Ultimately, this point became the Defendant’s principal argument in the appeal. Ms Ling pointed to the fact that the resale was for a price that was some $850,000 less than what was (according to the said valuation report) the market price of the Property as at 23 November 2007. She also pointed to some queries as to various dates when payments took place under the resale. 25.In my view, these submissions come nowhere near raising sufficient grounds to enable this court to give leave to defend : -
26.Ms Ling was finally driven to submit that it would be unfair to grant summary judgment when even discovery (much less the trial) had not taken place. This amounts to no more than a ‘Micawberian hope’ that something may turn up eventually in the Defendant’s favour, a point never by itself enough to avoid summary judgment : see Hong Kong Civil Procedure 2010 Vol.1 at paragraph 14/4/3. Issue 6 27.The computation of interest under Clause 3(5) of the Agreement was based on the installment amounts that were due thereunder : see paragraph 12(1) above. However, that clause bites only when late payment of the installments due are eventually actually made (the words “the date of actual payment” confirm this). The clause therefore can have no application where, as in the present case, the installment payments simply were not made and instead, a claim is made for a liquidated sum under Clause 16(3). 28.The appeal was therefore allowed to this very limited extent. Interest was only appropriate for the said sum of $156,408 (at 1% per annum above prime rate from the date of the Writ to the date of judgment). As this point was not one that was actually raised by the Defendant at all until the court alluded to it, this did not affect the incidence of costs; the Plaintiff still had had to come to Court to resist the appeal. Hon Le Pichon JA : 29.I agree with the reasons given by Ma CJHC. Hon Stone J : 30.I agree with the judgment of the Chief Judge.
Mr Jat Sew Tong, SC & Mr Wilson Leung, instructed by Messrs Chu & Lau for the Plaintiff Ms Vickie Ling, instructed by Messrs Huen & Partners for the Defendant |
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