A.V.C. PROPERTY DEVELOPMENT CO LTD v. JOYFUL GRACE TRADING LTD AND ANOTHER

A.V.C. PROPERTY DEVELOPMENT CO LTD v. JOYFUL GRACE TRADING LTD AND ANOTHER

Plaintiff failed to prove that the 2nd defendant consented to the post‑Guarantee variation that increased the guarantor's liability; the variation therefore altered the underlying transaction to the guarantor's prejudice and the guarantor could not be held liable for the increased obligation. Consequently the plaintiff's claims against the 2nd defendant are dismissed; additionally, the contractual interest provision was held to be a penalty and unenforceable if relied upon, but dismissal was founded principally on lack of proven consent and deficient pleading/evidence.

Citation
A.V.C. PROPERTY DEVELOPMENT CO LTD v. JOYFUL GRACE TRADING LTD AND ANOTHER
Parties
Plaintiff (landlord): A.V.C. Property Development Company Limited; 1st Defendant (tenant): Joyful Grace Trading Limited; 2nd Defendant (guarantor): Lion Legend Holdings Limited
Court
Court of First Instance
Jurisdiction
Hong Kong
Judgment Date
30 September 2016
Case Number
HCA529/2013
Procedural Posture
Contract / Landlord and Tenant / Guarantee / Trial Judgment (court of First Instance, Judgment Delivered)
Outcome
All claims by the plaintiff against the 2nd defendant dismissed; order nisi that the 2nd defendant's costs be taxed and paid by the plaintiff under Order 42 r 5B(6).
Legal Topics
Variation of Contract, Guarantor Liability, Pleading Requirements, Trial Bundle Compliance, Liquidated Damages Vs Penalty, Admissibility of Witness Statements, Abuse of Process, Costs
Source Language
EN
Contract Property Civil Procedure Evidence Guarantee Law Variation of Contract Guarantor Liability Pleading Requirements +5 more

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Parties

A.V.C. Property Development Company Limited

Plaintiff (landlord)

Joyful Grace Trading Limited

1st Defendant (tenant)

Lion Legend Holdings Limited

2nd Defendant (guarantor)

Procedural Posture

Contract / Landlord and Tenant / Guarantee / Trial Judgment (court of First Instance, Judgment Delivered)

Legal Issues

  1. 1 Whether the 2nd defendant (guarantor) is bound by post‑guarantee alterations to the tenancy agreement
  2. 2 Whether the plaintiff proved consent by the guarantor to the variation that increased guarantor liability
  3. 3 Whether the contractual interest clause constituted liquidated damages or an unenforceable penalty

Ratio Decidendi

Plaintiff failed to prove that the 2nd defendant consented to the post‑Guarantee variation that increased the guarantor's liability; the variation therefore altered the underlying transaction to the guarantor's prejudice and the guarantor could not be held liable for the increased obligation. Consequently the plaintiff's claims against the 2nd defendant are dismissed; additionally, the contractual interest provision was held to be a penalty and unenforceable if relied upon, but dismissal was founded principally on lack of proven consent and deficient pleading/evidence.

Court Disposition

All claims by the plaintiff against the 2nd defendant dismissed; order nisi that the 2nd defendant's costs be taxed and paid by the plaintiff under Order 42 r 5B(6).

Orders

  • Dismissal of all plaintiff's claims against Lion Legend Holdings Limited (2nd Defendant)
  • Order nisi under Order 42, rule 5B(6) of the Rules of the High Court (Cap 4A) that the 2nd Defendant's costs be taxed and paid by the Plaintiff