Law on Forfeiture of Deposits in Conveyancing Transaction Reviewed

In Simply Power Limited v Billy Chua [2023] HKCFI 944, a judgment handed down on 14 April 2023, the Hon Mr Justice Peter Ng ordered the return of a 20% deposit by the vendor to the purchaser after the termination of a sale and purchase agreement in respect of land.

The Court held that the law on forfeiture of deposits should not be confused with the law governing liquidated damages clauses and the doctrine of penalties, and reaffirmed the approach laid down by the Court of Final Appeal in Polyset Ltd v Pandandat Ltd (2002) 5 HKCFAR 234 in determining whether a vendor is entitled to forfeit a deposit.

Ronny Tong SC, instructed by Hoosenally & Neo, acted for the Plaintiff (by original action) and the 1^st Defendant (by counterclaim); Wong Yan-Lung SC and Mike Lui, instructed by Tony Kan & Co, acted for the 1^st, 4^th and 5^th Defendants (by original action) and the 2^nd, 4^th and 5^th Defendants (by counterclaim); Victor Dawes SC and Jonathan Ng, instructed by Nixon Peabody CWL, acted for the 3^rd Defendant (by original action) and the Plaintiff (by counterclaim).

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