IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
ACTION NO. 314 OF 2008
Before : Hon Poon J in Chambers
Date of Hearing : 10 February 2009
Date of Reasons for Decision : 16 February 2009
Reasons for Decision
1. On 10 February 2009, I dismissed the defendants’ appeal against the Registrar’s order dated 16 October 2008 entering summaryjudgment against them for possession of the suit property and RMB3,258,986.30 with interest.
2. These are my reasons.
3. The plaintiff and the defendants through a company of theirs owned 85% and 15% shares in a Mainland company called Kunming NamfattDianchi Development Co. Ltd (“the JV Company”). The JV Company desired to develop a piece of land in Kunming.
4. On 11 September 2006, the plaintiff and the 1st named defendant entered into an agreement (“the Agreement”) in Chinese. The Agreement provided that :
5. Pursuant to Clause 7 of the Agreement, the defendants executed a legal charge on 11 September 2006 charging the suit property infavour of the plaintiff.
6. On 25 September 2006, the plaintiff advanced a sum of HK$2,941,176 (equivalent to RMB3,000,000 at the then prevailing exchange rate)to the 1st named defendant.
7. The plaintiff subsequently complained that the 1st named defendant had failed to discharge her obligations under the Agreement and demanded the defendants to repay the said sum ofRMB3,000,000. When they failed to do so, it commenced the present action.
The 1st named defendant’s breach
8. For present purposes, it is only necessary to consider whether the 1st defendant had failed to discharge her obligations under Clause 2 of the Agreement. If yes, there is no defence to the plaintiff’sclaim. Nor will there be any basis for the defendants’ counterclaim.
9. Under Clause 2, the 1st defendant had to ensure that the user of the land offered for sale by the land authority in Kunming was for “商业旅游40 年，文化体育50年，住宅70 年”. However, when the land authority placed the land for auction, the user was for “生态旅游40 年” :see the notices dated 11 June and 3 July 2007 (“the Notices”). That was significantly different from the user stipulated inClause 2. Prima facie, the 1st defendant had failed to discharge her obligations under Clause 2.
10. The defendants alleged, through the submission of their counsel, Mr Wong, that by conduct the parties had varied Clause 2 to theextent that the 1st defendant was only obliged to ensure that the user would be for “生态旅游40 年”. They relied principally on a letter issuedby the JV Company to the 1st named defendant dated 9 July 2007 (“the Letter”). In the Letter, the JV Company referred to the notice dated 11 June 2007 issuedby the land authority, indicated its intention to auction for the land and made 3 proposals for the 1st defendant to follow up. Mr Wong argued that by instructing the 1st defendant to continue liaising with the land authority after the Notices had been issued, the plaintiff must have agreed to acceptthe user laid down by the authority for the auction, thereby agreeing to vary the obligations the 1st named defendant had to perform under Clause 2. I disagree.
11. The alleged variation does not make any commercial sense. At the time of the Agreement in September 2006, the land authority hadyet to stipulate what the user of the land would be. Plainly, the users as set out in Clause 2 of the Agreement were what the plaintiffwanted to obtain, which explained why it was willing to pay the 1st named defendant a bonus of up to RMB6,000,000 if she were able to procure the land authority to lay down the users accordingly. When the land authority issued the Notices in June and July 2007, the 1st named defendant had failed to deliver what she had promised. Her default occurred there and then. On the evidence before me, Ifail to see any reason why the plaintiff would still agree to vary the 1st defendant’s obligations under Clause 2 as contended, which would effectively allow her to keep the bonus despite her default.
12. The Letter, heavily relied on by the defendants, does not take their case any further. On a fair reading, the Letter concerned theacquisition of the land by the JV Company. It made no reference, expressed or implied, to the 1st named defendant’s obligations under Clause 2 of the Agreement or the Agreement at all, which is plainly a separate agreement enteredbetween the plaintiff and her. The mere fact that the JV Company or even the plaintiff was still interested in acquiring the landafter the Notices were issued, as demonstrated by the Letter, does not mean that the plaintiff had agreed to vary the 1st defendant’s obligations under Clause 2.
13. In my view, there is no defence to the plaintiff’s claim based on the breach of Clause 2.
14. For the above reasons, the Registrar was plainly correct when she entered summary judgment against the defendants. Accordingly,I dismissed the appeal with costs.
Mr Victor Dawes, instructed by Messrs Tony Kan & Co., for the Plaintiff (Respondent)
Mr Joeson Wong, instructed by Messrs Kenneth C.C. Man & Co., for the Defendants (Appellants)