Michael John Short And Another v Chan Fei Yin

CourtDistrict Court (Hong Kong)
Judgment Date30 September 2008
Citation[2008] 5 HKLRD 860
Judgement NumberDCCJ5023/2007
Subject MatterCivil Action
DCCJ005023/2007 MICHAEL JOHN SHORT AND ANOTHER v. CHAN FEI YIN

DCCJ 5023/2007

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 5023 OF 2007

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BETWEEN
MICHAEL JOHN SHORT 1st Plaintiff
CHAN MIU SHAN ANGEL 2nd Plaintiff
and
CHAN FEI YIN Defendant

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Coram: HH Judge Lok in Chambers

Date of Hearing: 1 August 2008

Date of handing down of Decision: 30 September 2008

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DECISION

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1. The Plaintiffs applied for summary judgment under O. 86 of the Rules of the District Court, Cap. 336 against the Defendant for the return of deposit in the sum of $350,000. For such application, Registrar Poon granted the Defendant unconditional leave to defend the Plaintiffs’ claim. This is the appeal against the Registrar’s order.

2. This case is about an aborted property transaction. By a preliminary agreement dated 9 October 2007 (“the Subject Agreement”), the Plaintiffs agreed to purchase from the Defendant the property known as House G18, Stage IV, Marina Cove, 380 Hiram’s Highway, Sai King (“the Property”) at a price of $11,600,000. An initial deposit of $350,000 was paid by the Plaintiffs upon the signing of the Subject Agreement.

3. Before the execution of the formal agreement, the Plaintiffs discovered that the Property had previously been owned by the Defendant and his ex-wife, Madam Chow Yik Fun Fanny (“Madam Chow”), as joint tenants. By an assignment dated 25 June 2005 (“the Assignment”), Madam Chow transferred her entire interest in the Property to the Defendant.

4. The complication of this case arises out of a term in the Assignment which provided that Madam Chow was to receive no consideration for the transfer. According to the Plaintiffs, transfer made in return for no consideration constitutes a defect in the Defendant’s title because it is liable to be set aside as a transaction at an undervalue pursuant to s. 49 of the Bankruptcy Ordinance, Cap. 6, if Madam Chow is adjudicated bankrupt upon the presentation of a bankruptcy petition on or before 24 June 2010. This defect, claims the Plaintiffs, was incapable of being cured before completion.

5. After adopting such stance, the Plaintiffs, by a letter dated 30 October 2007, rescinded the Subject Agreement and demanded the return of the initial deposit of $350,000. This was done without making any attempt to raise requisition against the title of the Property. By a letter dated the following day, the Defendant’s solicitors accepted the Plaintiffs’ purported repudiation of the Subject Agreement and forfeited the deposit. The Plaintiffs thereafter brought the present action against the Defendant to claim for various relief including the recovery of the deposit.

6. In reply to the Plaintiffs’ claim, the Defendant contends that the Assignment should be regarded as having been made in consideration of a compromise made in the matrimonial proceedings, FCMC No. 8078 of 2004, involving the Defendant and Madam Chow (“the Matrimonial Proceedings”). In fact, the Assignment was made pursuant to a consent order made by HH Judge Geiser in the Matrimonial Proceedings (“the Consent Order”), which provided that the Defendant had to make a lump-sum payment to Madam Chow. Further under the Consent Order, Madam Chow would be released from all the obligations and liabilities under the guarantees given to a bank in respect of the Property and two limited companies. As the transfer was made in consideration of these terms, the trustee in bankruptcy, says the Defendant, has no chance of setting aside the transfer as an undervalued transaction in the case that Madam Chow is adjudicated bankrupt upon the presentation of a bankruptcy petition within 5 years of the making of such transfer.

The Assignment and the Consent Order

7. The two key documents in the present case are therefore the Assignment and the Consent Order. For the purpose of this application, I need to set out the contents of these two documents in some details.

8. The relevant part of the Assignment is listed out as follows:

“WHEREAS:-

1. The Assignor [Madam Chow] and the Assignee [the Defendant] were prior to the Order hereinafter recited husband and wife.

2. On the 28th day of July 2004 the Assignor presented a Petition in Divorce being Matrimonial Cause No. 8078 of 2004 (hereinafter called “the said Divorce Action”) in the District Court of the Hong Kong Special Administrative Region against the Assignee praying (inter alia) for the dissolution of the marriage between the Assignor and the Assignee.

3. By a Consent Summons dated the 17the day of August 2004 and made between the Assignor of the one part and the Assignee of the other part the Assignor and the Assignee agreed to an Order being made by the Court for the dissolution of the said marriage on the terms and conditions therein mentioned subject to the approval thereof by the said court.

4. It is a term of the said Agreement that the Assignor shall assign to the Assignee the...

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