LAI TAI MIU, ROVANA v. EVEREST TIMOTHY WODEHOUSE

HCMP 2224/2019

[2024] HKCFI 1432

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2224 OF 2019

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DECISION

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Introduction

1.  The plaintiff and the defendant are ex-partners and former cohabitees. They are tenants-in-common of the Property. In December 2019, the plaintiff commenced these proceedings seeking an order to sell the Property pursuant to the Partition Ordinance, Cap 352.

2.  Deputy High Court Judge William Wong S.C. by two separate orders dated 22 January 2021 (the “1^st Order”) and 3 September 2021 (the “2^nd Order”) respectively (collectively, the “Orders”) made an order for sale of the Property and provided the manner in which the Property ought to have been sold. The terms of the Orders which are of relevance to the present application are:

(1)  The Property be sold by public auction in open market within the next 2 months (from 3 September 2021), failing which, the Property be sold by private treaty with Mr Joe Cheng (“Joe Cheng”) of Midland Realty International Limited appointed as the exclusive estate agent for the purpose of the sale by private treaty;

(2)  By consent, the reserve price for the sale of the Property be set at HK$58,000,000.

3.  Despite of the Orders providing a mechanism on how the Property ought to be sold, the Property had not been sold as there had been no bid put in at the auction and no offer at or above the reserve price had been made for the sale by private treaty.

4.  After more than 2.5 years since the 2^nd Order, the Property still has not been sold and the plaintiff took out the present application to seek new directions for the sale of the Property.

5.  Mr Justin Ismail, counsel for the defendant, classifies this application to be a variation of the 2^nd Order, which should not be acceded to as the court does not have jurisdiction to alter the terms of the Orders so as to obtain a quick sale.

6.  Mr Peter K.M. Chung, counsel for the plaintiff, on the other hand submitted that under the express “liberty to apply” provision, or on the basis that there has been a change of circumstances, new directions for the sale of the Property should be given.

7.  After clarification at the hearing, Mr Ismail confirmed that he was not submitting that the court has no jurisdiction to vary the Orders, but rather, in the circumstances, there is no basis for the court to do so.

The defendant’s stance

8.  Heavy reliance was placed by Mr Ismail on the case of Kong Colin Chung Ping, the executor of the estate of Kong Wing Hong v. Kong Chun Ip[1]. In Kong Colin Chung Ping, the mechanism for the sale of the property in question was: a reserve price was set, if the property was not sold at that price, the reserve price would be reduced over time and the periodic price reduction would be repeated and continued until the Property was sold. Deputy High Court Judge Winne Tsui considered the objective intention of the parties when the reserve price was set and the mechanism that followed when the property is not sold. It was thus held that there was no intention between the parties that the Property be sold at market price as the price reduction mechanism would not take into account what the market price was. As the regime was workable and no working out was necessary.

9.  It is submitted by Mr Ismail that as parties had agreed on a minimum reserve price of HK$58 million and no deadline for the sale had been set, the intention of the parties was clearly that the Property should not be sold if the minimum reserve price is not met. The mechanism is still working well as Joe Cheng is still marketing the Property at HK$58 million throughout.

10.  I reject this submission. I am of the view that it cannot have been the intention of the parties (least not the plaintiff’s) that unless the Property is sold at or above HK$58 million, it should not be sold.

11.  The context behind the sale of the Property ought to be borne in mind: the parties had separated. The plaintiff had to go to court to obtain an order for sale under the Partition Ordinance after her relationship with the defendant ended. It is clear that the plaintiff wished to have this final matter between them to be dealt with and have closure. The defendant’s contention that the Orders should not be varied would lead to the absurd result that unless the Property can be sold at HK$58 million or above, the Property will not be sold and the plaintiff and the defendant might forever share a connection through the Property despite their relationship having come to an end. This could not have been the common intention of the parties.

12.  Kong Colin Chung Ping is clearly distinguishable on the facts as the property in question would most probably be sold as the price would eventually get to zero.

13.  In any event, there is also no conviction in the defendant’s stance that once the reserve price is set, it cannot be varied. In a letter from Haldanes, solicitors for the defendant, dated 6 October 2021, the defendant asked the plaintiff to agree to increase the reserve price in view of transactions having been completed at a higher amount around that time, failing which an application would be taken out to vary it.

The plaintiff’s stance

14.  Mr Chung submitted that due to the following, it is clear that the mechanism as provided in the Orders did not work and will not work:

(1)  Since the 2^nd Order was made, the property market has changed such that the reserve price of HK$58 million is no longer realistic. To insist on the old reserve price would mean that the Property would not be sold in the near future.

(2)  The fact that no time limit was provided for in the 1^st Order or the 2^nd Order means that the Property may not be sold if the reserve price is not met, for an indefinite period of time.

(3)  Joe Cheng as the sole joint agent had all along been acting as if he were the defendant’s agent rather than as a joint agent for both the plaintiff and the defendant.

15.  I agree with Mr Chung that there are ample bases for the plaintiff to complain about Joe Cheng:

(1)  Despite the plaintiff having made repeated requests, no agency agreement has been made available for the plaintiff’s information.

(2)  The full contact details of Joe Cheng had been withheld except for his mobile number.

(3)  Joe Cheng would provide extensive reports only to the defendant on his marketing efforts (as set out in the letter from Haldanes dated 7 March 2024), which was then passed on by the defendant to the plaintiff. The plaintiff thus could only receive such information that the defendant decided to release to her.

(4)  Repeated requests from the plaintiff for photos and advertising information of the Property were ignored by Joe Cheng for no legitimate reason. Haldanes also saw fit to impose conditions before releasing information (which she was entitled to in the first place) to the plaintiff: such as a confirmation from the plaintiff that she had not been contacting Centaline to advertise the Property for less than HK$50 million and an undertaking that she would not do so. The defendant claimed that this was because the plaintiff wanted to have the photos to market the Property separately, which was not allowed under the Orders. However, even if that were true, the defendant has no right to unilaterally take away the plaintiff’s right to information, when she remains a beneficial owner of the Property. If there are valid grounds for the defendant to complain about what the plaintiff does with the information, the defendant should seek recourse separately.

(5)  Complaints on Joe Cheng’s uncooperative attitude had repeatedly been expressed by the plaintiff’s solicitors to Haldanes and yet no improvement had been made.

16.  I am also of the view that the present mechanism as provided for in the 2^nd Order is unworkable for the following reasons:

(1)  With Joe Cheng siding with the defendant, it is understandable that the plaintiff cannot trust him to put in real efforts in the sale of the Property.

(2)  With the history between the plaintiff and the defendant, it would be unlikely that either of them would trust any agent that has been proposed by the other side.

(3)  The fact that there is no time limit set for the sale of the Property in the Orders is only acceptable if the Property could be and was sold within a reasonable time. If one takes an extreme example: if the price of the Property never reaches HK$58 million again and no offer is made, the defendant’s stance that the mechanism can never be altered would lead to the absurd result that the Property will never be sold. The case of Kong Colin Chung Ping is thus distinguishable. In Kong Colin Chung Ping, parties had devised a mechanism that the property would eventually be sold as the price kept being reduced as time went by and no offer was made, until the price is HK$0.

17.  I thus come to the conclusion that further directions need to be provided for the Property to be sold.

Mechanism For Sale

18.  Parties have made supplemental submissions on paper for the mechanism of sale. At the hearing, after discussions, parties have sensibly agreed to the following mechanism:

(1)  The Property be sold by private treaty at the reserve price of HK$53,000,000.

(2)  If the Property is not sold on or before 31 July 2024 at 11:59 p.m., the price of the Property will be adjusted downwards by 3% to HK$51,410,000.

(3)  This 3% downward adjustment mechanism will continue with a new adjusted price on the 1^st day of each calendar month until the Property is sold, or until this mechanism is varied, either as between the parties or by the court, whichever is earlier.

(4)  The contact person designated by the plaintiff is Ms Chong Shuk Yu of Messrs. H.L. Wong & Co; the contact person for the defendant is Mr Rattigan of Messrs. Haldanes. If either party receives an offer and is ready to enter into a preliminary sale and purchase agreement, he or she should confirm with the other side before executing such preliminary sale and purchase agreement. The other side should confirm if they have received any or better offer within one hour thereof.

Costs

19.  The plaintiff is substantially successful on the application to vary the Orders. There will be a costs order nisi that the costs of the application and the hearing on 19 April 2024 be to the plaintiff, with certificate for counsel, except that there will be no order as to costs on the submissions and hearing on the price adjustment mechanism, as neither party is wholly successful. Such costs to be summarily assessed if not agreed. The plaintiff do lodge and serve her statement of costs within 7 days hereof. The defendant do lodge and serve his list of objections, if any, within 7 days thereafter. Summary assessment of the costs will be carried out on paper.

Order

20.  The mechanism as provided by the orders dated 22 January 2021 and 3 September 2021 by Deputy High Court Judge William Wong S.C. be varied as follows:

(1)  The Property be sold by private treaty at the reserve price of HK$53,000,000.

(2)  If the Property is not sold on or before 31 July 2024 at 11:59 p.m., the price of the Property will be adjusted downwards by 3% to HK$51,410,000.

(3)  This price adjustment mechanism will continue with a new price on the 1^st day of each calendar month until the Property is sold, or until this mechanism is varied, either as between the parties or by the court, whichever is earlier.

(4)  The contact person designated by the plaintiff is Ms Chong Shuk Yu of Messrs. H.L. Wong & Co; the contact person for the defendant is Mr Rattigan of Messrs. Haldanes. If either party receives an offer and is ready to enter into a preliminary sale and purchase agreement, he or she should confirm with the other side before executing such preliminary sale and purchase agreement. The other party should confirm if they have received any or better offer within one hour thereof.

(5)  Liberty to apply.

21.  Costs of the application and the hearing on 19 April 2024 be to the plaintiff, with certificate for counsel, except that there is no order as to costs on the submissions and hearing on the price adjustment mechanism.

22.  I thank counsel for their assistance.

Mr Peter K.M. Chung, instructed by H.L. Wong & Co, for the plaintiff

Mr Justin Ismail, instructed by Haldanes, for the defendant

HCMP 2224/2019

[2021] HKCFI 206

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2224 OF 2019

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BETWEEN

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JUDGMENT

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APPLICATION

1.  The Plaintiff, Ms Lai Tai Miu, Rovana, by an originating summons dated 2 December 2019 (the “Originating Summons”), seeks, inter alia, the following relief:

“(1) A declaration that the Mediated Settlement Agreement has been terminated and that the Plaintiff is, since 3^rd June 2019 the latest, no longer bound by any terms of the said Agreement, as a result of the Defendant’s repudiation;

(2) An order that the Defendant do pay the Plaintiff damages for repudiation of the Mediated Settlement Agreement to be assessed;

(3) An order that the Property be sold, pursuant to section 6 of the Partition Ordinance, Cap.352, in a manner to be prescribed by the Court.”

MATERIAL FACTS

2.  The material facts in this case are not complicated or disputed. The Plaintiff and the Defendant were ex-partners and former cohabitees. They were also tenants in common of a real property known as Apartment 22, 2^nd Floor, Block A, Fontana Gardens, 21-23 Ka Ning Path, Causeway Bay, Hong Kong and ancillary car parking space (the “Property”). The Property is their most valuable asset.

3.  On 21 December 2018, the parties entered into a mediated settlement agreement (the “Mediated Settlement Agreement”). Clause 5 of the Mediated Settled Agreement provides:

“After mediation and in consideration of a full and final settlement of all issues of the division of their joint assets and financial matters, the parties have reached an agreement in the following terms and conditions:

5.Rovana and Timothy own the property known as Apartment 22, 2/F, Block A, Fontana Gardens, 21-23 Ka Ning Path, Causeway Bay, Hong Kong together with carpark space (“Fontana Garden”) as joint tenant. Rovana agrees to transfer all her legal and beneficial interests in Fontana Garden to Timothy in consideration of HK$21,000,000 to be paid to Rovana on or before 28 February 2019 and Timothy shall be solely responsible to repay and/or discharge the existing mortgage on the date of the transfer so that Rovana will be free from any further liability or payment of any mortgage and/or charge whatsoever on Fontana Garden. For the avoidance of doubt, the parties further agree that Timothy shall be solely responsible for the payment of stamp duty payable for the aforesaid transfer save and except that each party shall bear their own respective legal costs and expenses for the said transfer.”

4.  There is no dispute that the Defendant failed to pay the HK$21 million to the Plaintiff by 28 February 2019.

5.  The Plaintiff then served a final notice to the Defendant on 17 May 2019 to request him to pay the sum of HK$21 million by 31 May 2019, or that she would treat the Mediated Settlement Agreement as repudiated. The letter dated 17 May 2017 are in clear terms:

“2. Under clause 5 of the Settlement Agreement, your client is required to pay our client HK$21,000,000 on or before 28 February 2019 as consideration for our client to transfer all her legal and beneficial interest in the property in Fontana Garden to your client. In breach of the Settlement Agreement, up to the date of this letter, your client is still unable to fulfill his payment obligation under clause 5 of the Settlement Agreement, while our client has always been able, ready and willing to transfer all her legal and beneficial interest in the said Property in accordance with the clause.

3. Your client’s delay is unacceptable. On behalf of our client, we put your client on notice that he is required to pay our client the consideration of HK$21,000,000 in accordance with clause 5 of the Settlement Agreement on or before 31 May 2019. Payment by your client by 31 May 2019 is of the essence. If payment of the said sum is not made to our client by 31 May 2019, our client will deem the Settlement Agreement as having been repudiated by your client’s delay. Our client will treat the Settlement Agreement as having come to an end and will reserve her right to claim damages and other reliefs.”

6.  On the above undisputed facts, the Plaintiff claims that the Mediated Settlement Agreement was terminated by the Defendant’s repudiation and as such she, qua beneficial owner of the Property prays for an order for sale under section 6 of the Partition Ordinance, Cap.352 (“the Ordinance”)

ANALYSIS

7.  Mr Ismail for the Defendant does not dispute any of the facts as stated above, but he submitted that as the Mediated Settlement Agreement is marked “Without Prejudice”, it is privileged from production and hence inadmissible. He submitted that it is wrong for the Plaintiff to disclose the Mediated Settlement Agreement which is marked “without prejudice” as it presents a fundamental department from the parties’ express wish that their affairs were to be kept secret from the courts, and the “without prejudice” label on the Mediated Settlement Agreement signed by both parties is reflective of such an intention. It was further submitted that the “without prejudice” label having been attached, the courts should be slow, by reason of the parties’ agreement, to hold that such “without prejudice” status has been lost except in clear and unequivocal circumstances.

8.  I have no hesitation in rejecting the above submissions. It is trite law that there are numerous occasions on which, despite evidence of without prejudice negotiations, the without prejudice rule does not prevent the admission into evidence of what one or both of the parties said or wrote. In Unilever Plc v The Procter & Gamble Co. [2000] 1 WLR 2436 at 2444D, Robert Walker LJ (as he then was) said:

“(1) As Hoffmann L.J. noted in Muller’s case, when the issue is whether without prejudice communications have resulted in a concluded compromise agreement, those communications are admissible. Tomlin v Standard Telephones and Cables Ltd [1969] 1 W.L.R. 1378 is an example.”

9.  Further, section 2 of the Mediation Ordinance, Cap.620 provides that:

“mediation communication means –

(a) anything said or done;

(b) any documents prepared; or

(c) any information provided,

for the purpose or in the course of mediation, but does not include an agreement to mediate or a mediated settlement agreement.” (Emphasis added.)

10.  The Mediated Settlement Agreement is obviously meant to be enforced and was intended to be binding on the parties. I agree with Mr Chung for the Plaintiff that the intention must be the Mediated Settlement Agreement can be adduced in a court for enforcement otherwise there is no purpose of executing a binding settlement agreement.

11.  Secondly, Mr Ismail for the Defendant referred to paragraph 14 of the Plaintiff’s affirmation which states:

“14. Under the Mediated Settlement Agreement, the Defendant’s payment of HK$21,000,000…to me on or before 28^th February 2019 was the condition precedent to my transfer of all my legal and beneficial interests in the Property to the Defendant.”

12.  Mr Ismail’s submission is that by characterising the Defendant’s obligation as a “condition precedent”, the Plaintiff accepts that she was under an immediate unilateral binding obligation to transfer her legal and beneficial interests in the Property to the Defendant subject to his payment of HK$21,000,000. Pending the fulfillment of such a condition, however, no bilateral contract binding on both parties can come into existence. I must say that I fail to understand the Defendant’s argument. The Court looks at Clause 5 of the binding Mediated Settlement Agreement and construes it objectively. It does not matter how the Plaintiff understands it. I reject Mr Ismail’s submission that the Mediated Settlement Agreement is in suspense and incapable of binding the parties inter se.

13.  Finally, Mr Ismail for the Defendant submitted that although the Defendant is in breach, he has not repudiated the Mediated Settlement Agreement because first, time is not stated to be of essence and secondly, the Defendant remains willing to pay the HK$21,000,000 to the Plaintiff though he is not in a position to do so unless the Property is sold.

14.  Mr Ismail for the Defendant referred this Court to the case of Valilas v Januzaj [2015] 1 All ER (Comm) 1047 where Arden LJ (as she then was) at §59 said:

“59. The common law adopts open-textured expressions for the principle used to identify the cases in which one contracting party (‘the victim’) can claim that the actions of the other contracting party justify the termination of the contract. I will use the formulation that asks whether the victim has been deprived of substantially the whole of the benefit of the contract. The expression ‘going to the root of the contract’ conveys the same point: the failure must be compared with the whole of the consideration of the contract and not just a part of it. There are other similar expressions. I do not myself criticise the vagueness of these expressions of the principle since I do not consider that any satisfactory fixed rule could be formulated in this field.”

15.  Mr Ismail, thus, submitted that the Defendant’s breach did not deprive the Plaintiff of “substantially the whole of the benefit” of the Mediated Settlement Agreement by any stretch of imagination. The sole effect of the breach is that the Plaintiff is short of HK$21,000,000. It does not change the fact that she still has interests in the Property. I have no hesitation to reject such submission as well. It is tantamount to say that an innocent party of a breach of a contract for sale of goods has suffered no loss or has not been deprived of substantially the whole of the benefit of the contract simply because he or she has not yet parted with the goods or the purchase price.

16.  Mr Ismail for the Defendant also argued that as the Defendant is still willing to perform his part of the Mediated Settlement Agreement, there is no repudiatory breach as the Plaintiff’s loss can be compensated by interest. I reject this submission as well. There must be an implied term that the sum of HK$21,000,000 must, at least, be paid within reasonable time. The Defendant has failed to pay on 28 February 2019. At the date of hearing which is the end of 2020, the Defendant is still not in a position to make any payment. In fact, Mr Ismail confirmed to this Court that the Defendant is not in a financial position to rent a service apartment if he were ordered to move out of the Property. In the circumstances, the hard fact is that both the principal sum of HK$21,000,000 and any interest are not paid for a very substantial long period of time. On any analysis, this must be a repudiatory breach of the Mediated Settlement Agreement.

17.  Mr Ismail for the Defendant also submitted that the Defendant in entering into the Mediated Settlement Agreement has foregone a significant number of claims against the Plaintiff on a without prejudice basis. I am of the view that that is irrelevant. It does not affect the fact that the Defendant has committed a repudiatory breach of the Mediated Settlement Agreement to which the Plaintiff has duly accepted.

DISPOSITION

18.  For all the reasons stated above, I make the following declaration and orders:

(1) A declaration that the Mediated Settlement Agreement has been terminated and that the Plaintiff is, since 3^rd June 2019, no longer bound by any terms of the said Agreement, as a result of the Defendant’s repudiation.

(2) An order that the Defendant do pay the Plaintiff damages for repudiation of the Mediated Settlement Agreement, the quantum of which is to be assessed. 

19.  Further, as both parties agreed that in any event, the Property should be sold. By consent of the parties, I further make the following orders:

(1) The property known as 2^nd Floor and One Car Parking Space, No.22 Fontana Gardens, Hong Kong (the “Property”) be sold within the next 6 months by private treaty with no less than a reserve price, failing which, by a public auction in open market with a reserve price;

(2) In default of agreement within the next 2 months, the reserve price be fixed by the Court;

(3) The Defendant do within 3 months from the date of this order deliver vacant possession and the title deeds and documents relating to the Property to the Plaintiff’s solicitors for the purpose of the sale of the Property. The Defendant be at liberty to request and agree with the purchase for further time to stay in the Property, provided that such request of the Defendant would not adversely affect the sale, the price, or the sale process;

(4) The conduct of the sale be committed to an independent law firm of solicitors to be jointly appointed by the Plaintiff and the Defendant by agreement within one month. The firm of solicitors have the duty, authority and/or power to accept offer at or above the reserve price, unless otherwise instructed by the Plaintiff and the Defendant jointly;

(5) The Plaintiff and the Defendant do conduct any acts and execute any documents as necessary for the sale and/or auction of the Property;

(6) Any party to these proceedings including their servants, agents, nominees or companies in which they or either of them have an interest be at liberty to buy in the sale or bid at the auction;

(7) The principal or the managing partner of the firm of solicitors jointly appointed by the Plaintiff and the Defendant for the sale of the Property be appointed as the trustee (the “Trustee”) under section 7 of the Partition Ordinance in respect of the proceeds of the sale of the Property;

(8) In default of agreement, the remunerations of the auctioneer and of the Trustee and of the Plaintiff’s solicitors in respect of the sale be fixed by the Court;

(9) The net proceeds of the sale be applied in the following priorities:

(a) In payment of all government rent, taxes, rates and other outgoings due and affecting the Property;

(b) In payment of all auctioneer’s fee and estate agent’s commission in connection with the sale not exceeding 1% of the sale price of the Property;

(c) In payment of all other proper conveyancing costs, charges and other expenses incurred in connection with the said sale, including solicitors’ costs and disbursements;

(d) In payment of the remunerations and disbursements of the Trustee;

(e) In satisfaction of the loans taken out by the Defendant secured by encumbrances or mortgages over the Property, if any, and the costs for the release of such encumbrances or mortgages.

(10) After the application of the proceeds of the sale in accordance with paragraph 9 above, the Plaintiff be entitled to share the remaining net proceeds of the sale as follows:

(a) 50% of the proceeds of the sale after deduction of the payments stated in the paragraph (9)(a) to (d) above (excluding paragraph (9)(e));

(b) The costs of the present proceedings payable to the Plaintiff;

(c) Damages for repudiation payable by the Defendant to the Plaintiff in the present proceedings as agreed, failing which, as assessed by the Court; and

(d) All costs and expenses that may be incurred by the Plaintiff in taking enforcement for recovery of possession of the Property, if necessary.

(11) The Defendant be entitled to the remaining net proceeds of the sale, if any, after payments referred to in paragraphs (9) and (10) above.

(12) There be liberty to apply.

20.  I will also make an order that the Defendant do pay the costs of and occasioned by the Plaintiff in these proceedings to the Plaintiff forthwith, to be taxed on a party to party basis, if not agreed.

21.  Finally, I thank Mr Chung for the Plaintiff and Mr Ismail for the Defendant for their assistance.

Mr Peter KM Chung, instructed by C. Y. Lam & Co, for the Plaintiff

Mr Justin Ismail, instructed by Haldanes, for the Defendant