The Court of Appeal in Ho Wai Kwong v Ho Kam Chui [2025] HKCA 174 has clarified several important principles on termination, rescission, and contractual and restitutionary remedies for breach of contract.

In 2013, a mother transferred a property held in her sole name to herself and her second daughter as joint tenants for HK$8 million. The daughter never paid the agreed sum. The mother later sought to recover the unpaid amount or the property, but no resolution was reached. After the mother’s death in 2016, her son, as executor of the mother’s Estate, claimed that the daughter held the half-share on trust for the Estate. The daughter argued that the transfer was a gift or that the Mother never rescinded the contract for her failure to pay and she can keep the half-share by now paying the price.

Lok J found that the transaction was a sale and the daughter had repudiated it and the mother had accepted the repudiation, entitling the Estate to recover the half-share.

On appeal, the Court of Appeal upheld the Judge’s finding that the transaction was a sale and purchase. Giving the Judgment of the Court, Godfrey Lam JA clarified the remedies available for breach of contract in the several ways, holding that:

1. Termination of a contract by acceptance of a wrongful repudiation releases the innocent party from performing his remaining obligations under the contract. It operates prospectively and does not unwind what has been executed under the contract. Termination of a contract does not operate as a rescission ab initio and cannot denude transfers of property made under the contract during its currency.

2. As the mother had fully performed her obligation by assigning the property to herself and the daughter as joint tenants, she acquired an immediately enforceable right to sue for the purchase price as a debt.

3. Following the Court of Final Appeal decision in Shanghai Tongji and other apex court decisions, restitutionary remedies were unavailable because the Mother’s right to the debt had already accrued before termination, which left no scope for restitutionary claim based on failure of consideration. Otherwise, this would subvert the contractual arrangement.

4. The terms “rescinded” and “rescission” are commonly used to refer to the cancellation of a contract with retrospective effect such as where the intention to enter into the transaction was vitiated from the start by fraud, mistake, undue influence etc. The Estate did not plead any cause of action that would give rise to rescission.

The full judgment can be viewed here.