LAU HING CHAK KATHERINE formerly known as LAU, KATHERINE TIN KI AND ANOTHER v. GRACEFUL CHINA DEVELOPMENT LTD

HCA 900/2021

[2026] HKCFI 884

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 900 OF 2021

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J U D G M E N T

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A.  INTRODUCTION

1.  The Plaintiffs paid a total of HK$25,930,000 (“the Sum”) to the Defendant in return for vacant possession of 2 houses, with a 10% balance unpaid. Two houses had been built. However, the Defendant failed to deliver them to the Plaintiffs. The Plaintiffs thus seek to recover the money paid and/or damages against the Defendant.

2.  The Defendant admits receiving the Sum from the Plaintiffs. However, it was and is not the land owner. It claims that it had only sold “development rights” to the Plaintiffs, but had not promised to build the houses or to deliver them to the Plaintiffs.

3.  This dispute concerns proper construction of 2 sets of agreements over 2 pieces of land, entered into in 2014 and 2017 between the 1^st Plaintiff (on behalf of the 2^nd) and the Defendant.

4.  The Defendant had appeared by a director (without having obtained leave from a Master) at the pre-trial review. I am satisfied that it had notice of this trial, which thus proceeded in the absence of the Defendant.

5.  The 1^st Plaintiff was absent at the trial due to an urgent matter. Only the 2^nd Plaintiff gave evidence, which was unchallenged.

6.  Although the defendant is absent, a plaintiff still has an obligation to fairly present its case and identify points of factual or legal note which may be of benefit to the defendant. The plaintiff should not pursue claims that are not sustainable and should identify to the court points which a defendant had taken before it decided to play no further part in the action. The plaintiff should also consider and bring to the Court’s attention points which had not been taken by the defendants but which might well have been had they decided to defend the proceedings. See Pacific Rainbow International Inc v Shenzhen Wolverine Technology Ltd & ors [2023] 4 HKC 322, §5, Au-Yeung J.

B.  FACTS

B1．  The parties

7.  The 1^st Plaintiff is the daughter of the 2^nd Plaintiff who signed all the subject agreements on behalf of her mother. Any reference below to the 1^st Plaintiff signing an agreement should be viewed in this light.

8.  The Defendant is a company incorporated in Hong Kong. At all material times, (i) Madam Lok Sau King (“Madam Lok”) was the sole shareholder and director of the Defendant; (ii) Mr Chan Kwong Hing (“Mr Chan”) was the company secretary of the Defendant; and (iii) Mr Chan was also the sole shareholder and director of one William Consultancy Engineering Limited (“William Consultancy”).

9.  Through the introduction of her banker, the 2^nd Plaintiff came to know a partner of “land development projects” in the New Territories. She eventually expressed interest in purchasing 3 village houses, including 2 to be built on the 2 subject pieces of land – Section G and Section H of Lot No. 211 in DD216, Sai Kung, New Territories (“Section G” and “Section H”, respectively, and “the Lands” collectively).

10.  Agreements were signed by the 1^st Plaintiff and the Defendant in 2014 and 2017, respectively, concerning each of Section G and Section H. Due to the passage of time, the Plaintiffs are unable to produce the Agreements relating to Section H but claim that the terms were the same as those for Section G save as to Section reference. The Defendant does not dispute the existence of the Agreements but would not admit the terms thereof. I can only set out the terms of the Agreements relating to Section G in the remaining parts of Section B of this judgment.

B2.  Two 2014 Agreements and Two Construction Agreements

11.  An agreement in Chinese, dated 9 October 2014 and titled “轉讓土地發展權益及股票擔保協議” was signed by the 1^st Plaintiff and the Defendant in respect of Section G (“the 2014 Section G Agreement”)[1]. There was another party called Chou who is irrelevant to the present proceedings. The material terms of this Agreement are as follows:

(1)  Clause 1 provided that the Defendant owned the land development rights of Section G and agreed to transfer the same to the 1^st Plaintiff.

(2)  Clause 2 stated the total consideration of HK$13,000,000 for the purchase of the Defendant’s development rights.

(3)  Payments were to be made by 3 instalments to the Defendant or its nominee: HK$1,300,000 on 1 July 2014; HK$10,400,000 on 10 October 2014; and HK$1,300,000 within 2 weeks of the issue of the Certificate of Compliance.

(4)  The date of delivery of the house was to be 3 months before or after 31 December 2014, ie latest by 31 March 2015. A handwritten clause expressly stated that “the whole internal block and external completed structure” (“bare-shell house”) should be delivered to the 1^st Plaintiff for internal renovation[2].

(5)  Clause 9.1 provided that the 1^st Plaintiff may request the transfer of title to Section G at any time after full payment was made, whereupon the Defendant must unconditionally cooperate to complete the transfer [3].

12.  The second agreement, titled “發展土地工程協議”, was also dated 9 October 2014. It was entered into between the 1^st Plaintiff and William Consultancy whereby the latter undertook construction works on Section G (“the Section G Construction Agreement”). Clause 2 provided that, upon obtaining the Certificate of Compliance for Section G, William Consultancy shall be deemed to have fully discharged its obligations under the 2014 Section G Construction Agreement, and the 1^st Plaintiff shall not pursue any claims against William Consultancy.

13.  There is no dispute that, between 1 July 2014 and 18 June 2015, the Defendant had received the Sum in respect of the Lands. She did not deliver the bare-shell houses on the Lands on the due date.

B3.  Two 2017 Agreements

14.  By a Chinese Agreement dated 7 April 2017, signed by the 1^st Plaintiff and the Defendant and with a title “轉讓土地發展權益協議” (“the 2017 Section G Agreement”):

(1)  Clause 1 (after reciting that the Defendant owned the right to develop Section G) provided that the Defendant “now” agreed to transfer the land to the 1^st Plaintiff.

(2)  Clause 2 provided for the same consideration of HK$13,000,000 as purchase price for the land and 3 instalment payments as under the 2014 Agreements, save that the third instalment of HK$1,300,000 was to be paid within 2 weeks of completion of construction. The date of delivery of the house shall be 3 months before or after 7 April 2017, ie latest by 6 July 2017.

15.  A similar agreement was signed in respect of Section H (“the 2017 Section H Agreement”).

16.  The Defendant had failed to deliver the 2 bare-shell houses or the Lands on the due date of 6 July 2017.

17.  Four years later, by a letter dated 3 June 2021, the Plaintiffs’ solicitors, Anthony Chiang & Partners (“ACP”) (i) demanded the Defendant to deliver the Lands and the bare-shell houses to the Plaintiffs; (ii) gave notice to rescind the two 2014 Agreements and the two 2017 Agreements; and (iii) demanded for return of the Sum. The Defendant has to date failed to comply with the demands.

18.  The 2 houses built on the Lands are currently occupied by others. According to the land search records, no Certificates of Compliance have been obtained. No changes in ownership of Section G or Section H has been effected at any time since the 2014 Agreements.

19.  The Plaintiffs issued the writ on 10 June 2021. At the trial, the Plaintiffs only seek the return of the Sum, relying on breach of contract, money had and received, unjust enrichment and restitution.

20.  The Defendant does not deny entering into the two 2014 Agreements and the two 2017 Agreements. However, its case is that it was not the owner of the Lands. It was merely assigning the right to develop Section G or H (which the Defendant had) to the Plaintiffs. That right arose by an oral licence given to the Defendant by the land owner. The construction on the Lands was undertaken by William Consultancy. Specifically, the Defendant made no guarantee that the 2 houses could be lawfully built and occupied. The Plaintiffs did exercise the right to develop the Lands with the houses built. The Defendant was not in breach. As such, the Sum constituted valid consideration and there was no unjust enrichment.

21.  The Defendant also denies:

(1)  that the 1^st Plaintiff was the agent of the 2^nd Plaintiff or

(2)  that William Consultancy was the agent of the Defendant.

C.  ISSUES

22.  The issues are:

(1)  What were the terms of the 2014 and 2017 Agreements?

(2)  Whether the Defendant was only obliged to transfer the right to develop the Lands to the 1^st Plaintiff under the 2014 Agreements?

(3)  Whether the Defendant was only obliged to transfer the right to develop the Lands to the 1^st Plaintiff under the 2017 Agreements?

(4)  Whether there is any defence to the breaches?

(5)  Whether there was unjust enrichment to the Defendant?

(6)  What relief should be granted to the Plaintiffs?

D.  LEGAL PRINCIPLES

23.  As a starting point, the ordinary and natural meaning of the words of the contract is considered: Eminent Investments (Asia Pacific) Ltd v DIO Corp [2020] 23 HKCFAR 487 at §43.

24.  In the more complicated cases where there are conflicting interpretations, one should consider the context of the case by taking into account the purpose of the contract and of the provision, the facts and circumstances known or assumed by the parties at the time that the contract was executed, the quality of the drafting of the instrument, and commercial common sense: Eminent Investments at §§43-44.

25.  Nonetheless, the natural language of the provision remains an important factor: Eminent Investments at §45(e).

“… commercial common sense and surrounding circumstances should not be used to undervalue the importance of the language of the provision which is to be construed, and the mere fact that a contractual arrangement, if interpreted according to its natural language, has worked out badly for one of the parties, is not a reason for departing from the natural language”.

E.  WHAT WERE THE TERMS OF THE 2014 and 2017 AGREEMENTS?

26.  All the Agreements appeared to have been prepared without involving solicitors. Although the Defendant could not say whether the contents of the 2014 and 2017 Agreements for Section H were identical to those for Section G, it has not pleaded contrary or other terms.

27.  The 2 houses that were eventually constructed were adjoining. They stood on what appeared to be one piece of land without a land boundary between Section G and Section H. The Defendant has never denied that the houses as now appearing in the photos in the trial bundle formed the subject matter of the 2014 and 2017 Agreements. There was no reason why the 1^st Plaintiff would like to enter into 2014 Agreements on the same dates to build houses on adjoining Sections with different terms. When the Defendant failed to deliver both houses in 2014, there was no reason why the 1^st Plaintiff should enter into the 2017 Agreements on the same dates with different terms.

28.  In view of paragraphs 27 and 28, I draw the inference that there were 2014 and 2017 Agreements in respect of Section H and their terms were the same as those of Section G’s. The following analyses will thus apply to both Section G and Section H.

F.  WHETHER THE DEFENDANT WAS ONLY OBLIGED TO TRANSFER THE RIGHT TO DEVELOP TO THE 1^ST PLAINTIFF UNDER THE 2014 AGREEMENTS?

29.  On a proper construction of the 2014 Agreements, it was plain that:

(1)  By virtue of Clauses 1 and 2, the Defendant was to transfer only the development rights but not the beneficial ownership in Section G or Section H.

(2)  There was no mention as to who was to apply for the Certificate of Compliance. However, read with the William Consultancy Agreement, it was William Consultancy, not the Defendant, who had the obligation to do so.

(3)  There was no mention as to who had the land title. However, there was an obligation on the Defendant to “cooperate” when the title was to be transferred to the 1^st Plaintiff.

(4)  Although payment of the last instalment was pegged to the date of issue of the Certificate of Compliance, the duty to deliver the 2 bare-shell houses was not.

30.  In view of the clear wording of the contract clauses, I hold that the Defendant was not only obliged to transfer the development rights, but also to deliver the 2 bare-shell houses (even without title) to the 1^st Plaintiff. She breached the latter obligation.

G.  WHETHER THE DEFENDANT WAS ONLY OBLIGED TO TRANSFER THE RIGHT TO DEVELOP TO THE 1^ST PLAINTIFF UNDER THE 2017 AGREEMENTS?

31.  The Plaintiffs plead that the 2017 Agreements were in substitution of or to vary the 2014 Agreements, to extend the time for the Defendant to deliver vacant possession. I do not agree entirely. The 2017 Agreements contained terms materially different to the 2014 Agreements:

(1)  Clause 1 obliged the Defendant to transfer the Land, not just the houses, at Section G or Section H to the 1^st Plaintiff.

(2)  Clause 2 provided for the same consideration and payment by instalments as in the 2014 Agreements, save that the 3^rd instalment of HK$1,300,000 was to be paid within 2 weeks of completion of the construction.

(3)  Clause 3 extended the date for delivery of the houses to a specified date, ie within 3 months of 7 April 2017.

32.  The 2014 Agreements and 2017 Agreements should be read together. Clause 9.1 of the 2014 Agreements already anticipated a transfer of title after full payment when the Defendant had to unconditionally cooperate. The 2017 Agreements was to achieve just that.

33.  On a proper construction of the 2017 Agreement, it was plain that the obligation of the Defendant was to deliver the bare-shell houses and the title to the Lands to the 1^st Plaintiff. It was not the Defendant’s case that the 1^st Plaintiff had to pay additional consideration on top of what she had paid under the 2014 Agreements. Variation to the 2014 Agreements was regarding date of delivery of the bare-shell houses and payment date of the last instalment.

34.  Given the current occupancy and title, the Defendant is plainly unable to comply with her contractual obligations and was in breach of Clauses 1 and 2 of the 2017 Agreements.

H.  WHETHER THERE IS ANY DEFENCE TO THE BREACHES?

35.  Firstly, the fact that the Defendant was not the owner at the time of the 2014 or 2017 Agreements was irrelevant. The Defendant was to acquire the necessary title from the respective registered owner (as in the case of a confirmor) to fulfil its clear contractual obligations to the 1^st Plaintiff by the stipulated date for transfer of title to the Lands.

36.  Secondly, the fact that it was William Consultancy who had the obligation to build the houses was irrelevant. Even if the Defendant was not contractually obliged to build themselves, it was obliged to deliver the 2 bare-shell houses to the 1^st Plaintiff.

37.  Mr Chong, counsel for the Plaintiffs, submits that William Consultancy was the agent of the Defendant. He premises his arguments on the close relationship of William Consultancy to the Defendant:

(1)  The common figure, Mr Chan, who holds office and is the sole shareholder of both companies;

(2)  The common residential address of Mr Chan and Madam Lok, which was also the registered office of the Defendant and William Consultancy.

38.  With respect, there was nothing pointing to an agency relationship. The William Consultancy Agreement stated that it was the 1^st Plaintiff who had appointed William Consultancy to undertake development works on the Lands. William Consultancy was plainly contracting in its own right.

39.  In summary, none of the defences are meritorious. The causes of action in breach of contract are established.

I.  WHETHER THERE WAS UNJUST ENRICHMENT TO THE DEFENDANT?

40.  I only deal with this issue for the sake of completeness. As the 1^st Plaintiff had utilized the development rights, it was strictly speaking, not a case of total failure of consideration. However, one must look at the matter realistically and commercially. The ultimate goal, as evidenced by the 2017 Agreements, was to have the houses and the Lands transferred to the 1^st Plaintiff with the proper legal title. The Defendant was enriched by the Sum at the expense of the Plaintiffs. It was unjust as the 1^st Plaintiff never received even the bare-shell houses without title. None of the defences can be established. Unjust enrichment is established.

J.  RELIEFS

41.  For breach of contract or unjust enrichment, the 1^st Plaintiff is entitled to damages. There is no proof of other loss apart from the sum claimed.

42.  The 1^st Plaintiff has always made clear in her pleadings that she was an agent for her mother in signing all the Agreements on her mother’s behalf. The documentary evidence clearly showed that it was the 2^nd Plaintiff who had paid the Sum in her own name or through companies controlled by her. I accept the Plaintiffs’ unchallenged case on agency.

43.  In the premises, there should be judgment to the 2^nd Plaintiff only, such that:

(1)  The Defendant shall pay the sum of HK$25,930,000 to the 2^nd Plaintiff;

(2)  There shall be interest on the judgment sum at the rate of P+1%[4] from the date of the writ (10 June 2021) to the date of judgment and thereafter at judgment rate until payment.

44.  On a nisi basis, costs (including costs reserved) should follow the event and be to the Plaintiffs, to be borne by the Defendant. The Plaintiffs shall file and serve a costs statement by 2 March 2026. The Defendant shall file and serve grounds of objection by 23 March 2026. There shall be summary assessment of costs of the action on paper without the need for an attendance.

45.  I thank Mr Chong for his assistance.

Mr Patrick Chong, instructed by Robertsons, for the 1^st and 2^nd Plaintiffs

The Defendant was not represented and did not appear