TRILLION STAR (ASIA) LTD v. GAIN FORTUNE CORPORATION LTD

DCCJ 4722/2023

[2025] HKDC 763

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 4722 OF 2023

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DECISION

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1.  The defendant now seeks leave to appeal against my Decision dated 16 January 2025 ([2025] HKDC 65), by which I confirmed the decision of a Master in granting summary judgment in favour of the plaintiff for HK$998,000.00.

2.  It is trite that the defendant shall be granted leave to appeal against my Decision if its intended appeal is reasonably arguable; or there are some reasons to grant leave to appeal in the interest of justice. Reasonable prospect in an intended appeal means the merits are more than fanciful, but there is no need to show that it will probably succeed: SMSE v KL [2009] 4 HKLRD 125.

3.  This is my decision on the defendant’s application for leave, after considering the respective written submissions filed by the parties.

The defendant’s grounds of appeal

4.  As I understand it, the defendant’s case can be set out as follows:-

4.1.  The HK$1 million the plaintiff paid the defendant in exchange for the defendant’s undertaking was earnest money to induce the defendant to enter into the provisional agreement.

4.2.  After the defendant signing the undertaking on 16 February 2023, the parties entered into the provisional agreement. This was evidenced by the plaintiff showing the defendant that it also signed on the provisional agreement.

4.3.  The undertaking and the earnest money achieved their purpose. According to the terms of the provisional agreement, the HK$1 million was deemed to be part of the deposit the plaintiff had to pay the defendant.

4.4.  Hence, the plaintiff cannot ask for the return of the HK$998,000 (HK$1 million less HK$2,000 as compensation, as per the terms of the undertaking) based on the undertaking.

5.  The defendant reasons that, because I allegedly erred in holding that its case was not reasonably arguable, I erred in concluding that:-

5.1.  The undertaking was supported by good consideration (Decision §11.1);

5.2.  It was strictly irrelevant to consider the terms of the provisional agreement (Decision §11.2);

5.3.  In any event, even if one considered the terms of the provisional agreement, the undertaking would still be supported by good consideration (Decision §11.3);

5.4.  The undertaking did not lapse in its effect, even assuming the provisional agreement came into effect subsequently (Decision §§13-14);

5.5.  The HK$1 million earnest money did not subsume as part of the deposit under the provisional agreement (Decision §14.2); and

5.6.  Generally, the defendant has not raised any triable defence (Decision §16).

6.  The 6 alleged errors set out in §5 above are the 6 matters complained of in the draft Notice of Appeal to say that the Decision erred in fact and in law.

7.  In my decision, in order for the defendant to demonstrate that it has any reasonable prospect in its intended appeal, it must first show that its submissions on the validity of the undertaking (as summarized in §4 above) is reasonably arguable.

8.  Mr Kelvin Liu, counsel for the defendant, submits that the undertaking could not have been valid once the provisional agreement was signed by both parties.

9.  I did not accept such submissions in the Decision; nor do I find the defendant demonstrating any error in my reasoning:-

9.1.  Mr Liu has not submitted why I erred in holding that, on the face of the undertaking, it did not say it would lapse upon the signing of the provisional agreement;

9.2.  With respect, I do not agree with the premises underlining Mr Liu’s submissions that the undertaking and the provisional agreement could not have been valid contemporaneously. I have not been shown any legal authority to that effect. Insofar as the defendant argues that the terms of the provisional agreement showed that the undertaking would no longer be valid after the provisional agreement came into force, I already rejected such argument in §14 of the Decision. The defendant simply repeats the submissions I already considered at the hearing.

9.3.  Mr Liu submits that the undertaking was in conflict with the provisional agreement. I agree with Ms Pauline Leung, counsel for the plaintiff, that this all the more confirms that the provisional agreement and the undertaking could have been valid at the same time[1].

10.  Since it is my decision that the defendant cannot demonstrate that I erred in finding that the undertaking had a separate and independent existence from the provisional agreement, I similarly reject the rest of the defendant’s arguments as not reasonably arguable:-

10.1.  I reject the defendant’s submissions that the undertaking was at most supported by past consideration. Mr Liu seems to argue that, since the HK$1 million the plaintiff paid was deemed by Clause 2(a) of the provisional agreement as (partially) fulfilling the plaintiff’s obligation to pay deposit, it could not have acted as the consideration supporting the undertaking. With respect, I cannot see why the HK$1 million the plaintiff paid the defendant could not act as both earnest money and part deposit at the same time, in the absence of express wordings to the contrary. The parties were at liberty to dispense with the actual payment of deposit under the provisional agreement, on the basis that the plaintiff already paid HK$1 million as earnest money pursuant to a different legal obligation. But, without more, this could not mean that the original legal basis for the plaintiff’s HK$1 million was extinguished.

10.2.  Clause 12 or Clause 24 of the provisional agreement[2] provided for the situations under which the plaintiff could ask for the return of the HK$1 million under the agreement itself. In the absence of clear wordings to the contrary, they could not have eliminated the plaintiff’s right to ask for the return of the HK$998,000 as per the undertaking.

10.3.  Ultimately, the plaintiff’s claim rests on the undertaking alone. The defendant does not raise any counterclaim for breach of the provisional agreement. Hence, it does not concern this court as to whether the defendant did have any ground to retain or demand from the defendant HK$1 million, or any part of it, as per the terms of the provisional agreement.

10.4.  In passing, I note that the defendant takes issue with what I said in §11.3 of the Decision. That was said in the context of assuming the factual context in favour of the defendant. It cannot be taken out in isolation to suggest that the plaintiff’s case is contradictory with respect to the validity and/or status of the provisional agreement.

11.  Overall speaking, I do not see why leave to appeal ought to be granted in favour of the defendant.

Conclusion

12.  The defendant’s application for leave to appeal is dismissed with costs to the plaintiff, together with a certificate for counsel. The plaintiff has not submitted a statement of costs for summary assessment; in absence of such a statement, I summarily assess the plaintiff’s costs at HK$50,000.

13.  The above costs order is nisi. Any application for variation should be made by letter within 14 days of this Decision, and shall be dealt with on paper.

14.  I thank Ms Leung and Mr Liu for their helpful assistance.

Ms Pauline Leung, instructed by Chow, Griffiths & Chan, for the plaintiff

Mr Kelvin K H Liu, instructed by Marie Tsang, Dustin Chan & Co, for the defendant

DCCJ 4722/2023

[2025] HKDC 65

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 4722 OF 2023

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BETWEEN

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DECISION

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1.  The defendant appeals against the Decision given by a Master on 5 September 2024, by which she entered summary judgment against the defendant for HK$998,000.00, with interest at HSBC prime rate plus 1% from the date of the writ up to the date of the decision, and at judgment rate thereafter. The defendant argues that unconditional leave to defend should be granted.

Background

2.  The defendant is the owner of Ground Floor, No.6 Tit Hong Lane, Hong Kong (“the Property”).

3.  It is the plaintiff’s case that:

3.1. In early 2023, it intended to acquire land, of which the Property formed part, for redevelopment purpose;

3.2. It appointed Reputation (Shop) Agency Limited (“Reputation”) as its agent for the acquisition;

3.3. On 16 February 2023, Mr Kwong Mong of Reputation met Mr Yeung Shiu Cheng of the defendant in a restaurant. On that occasion, Mr Kwong passed a cheque of HK$1 million issued by Gavison Group Holdings Limited in favour of the defendant, and an unsigned provisional sale and purchase agreement in relation to the Property to Mr Yeung;

3.4. At that meeting, Mr Yeung took the cheque, signed the provisional agreement and an undertaking in Chinese on the defendant’s behalf. The defendant acknowledged in the undertaking that:

3.4.1. It received HK$1 million from the plaintiff as earnest money for purchasing the Property;

3.4.2. If the plaintiff decided not to proceed with the purchase of the Property, the defendant irrevocably undertook to, after deducting a sum of HK$2,000.00 from the earnest money as compensation, refund HK$998,000.00 to the plaintiff within 10 days upon receipt of the plaintiff’s written notice[1].

3.5. On 3 July 2023, Reputation wrote to inform the defendant that the plaintiff decided not to proceed with the purchase of the Property. This letter requested the defendant to refund HK$998,000.00 to the plaintiff as per the terms of the undertaking.

3.6. However, the defendant has been refusing to pay the plaintiff any part of the HK$998,000.00 to date.

4.  The defendant accepts that it received HK$1 million from the plaintiff. It also agrees that the meeting between Mr Kwong and Mr Yeung did take place on 16 February 2023. However, it argues that the plaintiff is not entitled to seek the refund of HK$1 million by relying on the undertaking. It argues that:

4.1. The undertaking itself is invalid for want of consideration, or it is supported by past consideration;

4.2. Irrespective of the above, there was a concluded agreement between the plaintiff and the defendant when Mr Yeung signed the provisional agreement in triplicate and returned them to Mr Kwong on 16 February 2023. Further, the defendant was later sent copies of the provisional agreement showing that the plaintiff also signed on it. On the conclusion of the provisional agreement, the undertaking lapsed in its effect;

4.3. As there was part performance of the provisional agreement, the parties’ bargain remain extant. Since the HK$1 million was part of the deposit for purchasing the Property, any obligation to repay the deposit (if any at all) has not arisen;

4.4. The defendant did not receive Reputation’s letter of 3 July 2023. In any event, since the undertaking lapsed in its effect, the defendant is not obliged to refund HK$998,000.00.

This appeal

5.  It is trite that I am not bound by the reasons given by the learned Master, although I can give weight to them as I think proper. Indeed, the parties have not even included the learned Master’s reasons in the hearing bundle.

6.  The principles in relation to the grant of a summary judgment are celebrated. I see no reasons to repeat them here. It suffices to state that I have considered the principles recited by the parties in their respective written submissions; I detect no serious dispute between them.

7.  Mr Kelvin Liu, counsel for the defendant, submits that the plaintiff has not even begun to show that it is entitled to summary judgment based on the undertaking. I understand his submissions are two-fold:

7.1. The undertaking was not properly executed by the defendant; and

7.2. It was not supported by any valid consideration.

8.  First, Mr Liu relies on section 127 of the Companies Ordinance (Cap.622), and submits that the undertaking was not properly executed by the defendant. Since the defendant has 2 directors (Mr Yeung and another corporate director) at all times, Mr Liu submits that the defendant could only validly execute the undertaking as a written document as per section 127(3)(b):

“(3) A company may also execute a document –

…

(b) in the case of a company with 2 or more directors, by having it signed on the company’s behalf by –

(i) the 2 directors or any 2 of the directors; or

(ii) any of the directors and the company secretary of the company.”

9.  Mr Liu further submits that the ambit of section 127 has not been exhaustively considered in previous cases. This also serves as a reason why the defendant should be given unconditional leave to defend the plaintiff’s claim.

10.  I am not convinced by the defendant’s arguments on the defective execution of the undertaking. My reasons are as follows:

10.1. Section 127 is a provision regulating the execution of documents by a company when it does not have a common seal, or when it decides not to use the common seal when it has one. When a company satisfies the requirements therein, the document is treated to have the same effect as if the common seal is used;

10.2. Therefore, even if the term “document” under section 127 may be wide enough to cover the undertaking (as a written contract) in the present case, I do not agree with the defendant that section 127 restricts the ways in which the defendant may enter into a binding contract;

10.3. Mr Liu refers me to the commentaries in Volume 1 of Paul Kwan, Hong Kong Corporate Law. I note that, in [1001] of the commentaries, it is reasoned that:

“A document is ‘signed’ by a company if it is signed by a duly authorized agent or officer of the company in that person’s own name, acting within the scope of his or her authority and on behalf of the company in its course of business: UBAF Ltd v European American Banking Corp [1984] QB 713.”

10.4. The above commentary is separate and distinct from the discussion of the effect of section 127. I am of the view that section 127 could not have been intended as an exhaustive code on the formality of contracts for corporate entities;

10.5. In the present case, Mr Yeung signed on the undertaking with the defendant’s rubber stamp stating it was the authorized signature. In my decision, Mr Yeung was given the ostensible authority to bind the defendant to the undertaking as a contract. Section 127 simply does not apply. I do not think the present case is a proper venue to hear arguments on the ambit of section 127.

11.  Secondly, based on the following reasons, I disagree with Mr Liu that the undertaking was not supported by consideration:

11.1. It seems to me obvious that the undertaking was supported by good consideration. In exchange of the defendant’s promise to return the earnest money upon notice, the plaintiff agreed that the defendant could deduct HK$2,000.00 from the earnest money if it was indeed to be returned. There can be no suggestion that the consideration given by the plaintiff was not valid because it was insubstantial;

11.2. Since good consideration was shown on the face of the undertaking, it is strictly irrelevant to consider the terms of the provisional agreement;

11.3. In any event, I do not agree that consideration is lacking even when one does consider the terms of the provisional agreement. The undertaking and the provisional agreement were signed by Mr Yeung contemporaneously. Even if one takes into consideration clause 24 of the provisional agreement, which gives the plaintiff a right to be repaid the earnest money within 10 days if the government only allows redevelopment at a plot ratio of less than 15[2], the undertaking can be said to have varied the provisional agreement by allowing the defendant to retain HK$2,000.00 out of the earnest money as compensation. I do not accept Mr Liu’s submissions that there was only past consideration, as the undertaking does not concern the defendant’s entitlement of the HK$1 million paid by the plaintiff to begin with.

12.  Next, the defendant argues that there is a triable issue as to whether it is obliged to return HK$998,000.00 to the plaintiff, as the undertaking, properly interpreted, lapsed when the parties concluded a contract as per the provisional agreement.

13.  I agree with Ms Pauline Leung, counsel for the plaintiff that, on the face of it, the undertaking does not contain any term stating that its effect would lapse upon certain conditions. Therefore, insofar as the defendant asserts that the undertaking has lapsed in its effect, it must put forward sufficient evidence to show that the interpretation it prefers is at least arguable.

14.  Based on the following reasons, the defendant fails to show that its interpretation of the undertaking is at least arguable:

14.1. Taking the defence to the highest, it is argued that the undertaking lapsed because clause 2(a) of the provisional agreement treated the earnest money as part of the 1^st deposit upon the parties signing it. So, the defendant’s logic goes, the earnest money subsumed under the provisional agreement;

14.2. Setting aside the argument whether the defendant is entitled to rely on the provisional agreement because it has not been stamped, and whether the condition under clause 24 has been met, that clause clearly contemplates that the earnest money is not deemed to have subsumed as part of the deposit under the provisional agreement. I do not think the defendant’s interpretation can be right when the provisional agreement is considered as a whole;

14.3. The defendant has not put forward other evidence to support its interpretation. On the contrary, the plaintiff pointed to an earlier undertaking signed by the defendant, by which it promised the return of HK$150,000.00 it then received as earnest money in relation to an earlier agreement it entered with the plaintiff concerning the sale of the Property. The defendant does not dispute the fact that it returned without protest HK$150,000.00 to the plaintiff, when the latter decided to terminate the earlier agreement. In my decision, this reinforces the plaintiff’s argument that the defendant’s interpretation is untenable.

15.  As to the defendant’s allegation that it did not receive Reputation’s letter of 3 July 2023, I again agree with Ms Leung that the defendant’s allegation remains a bare one despite the plaintiff’s reliance of Mr Kwong’s WhatsApp record. If the defendant had any valid ground to doubt the plaintiff’s case that the letter was at least sent through WhatsApp messaging, it could well have put forward Mr Yeung’s WhatsApp record to contradict the plaintiff. In absence of documentary evidence in corroboration, I refuse to accept the defendant’s allegation as believable. In any event, I am of the view that the commencement of the present case must operate as sufficient notice for the defendant to return HK$998,000.00 to the plaintiff within 10 days.

16.  The learned Master rightly concluded that the defendant has not raised any triable defence; nor has it shown any reason why the present case should go on to trial. The plaintiff is entitled to summary judgment as sought.

Conclusion

17.  The defendant’s appeal is dismissed with costs to the plaintiff, together with a certificate for counsel. I summarily assess the plaintiff’s costs at HK$97,000.00.

18.  The above costs order is nisi. Any application for variation should be made by letter within 14 days of this Decision, and shall be dealt with on paper.

19.  I thank Ms Leung and Mr Liu for their helpful assistance.

Ms Pauline Leung, instructed by Chow, Griffiths & Chan, for the plaintiff

Mr Kelvin K H Liu, instructed by Marie Tsang, Dustin Chan & Co, for the defendant