Plus Lucky Ltd. v. Chin Yuk Lun Francis and Another
Read the full judgment text of CACV 2167/2001 on BabelCite. This Court of Appeal judgment was delivered on 11 March 2002.
1. This is an appeal from a judgment of Deputy High Court Judge Woolley who dismissed a claim made by the plaintiff for the return of a deposit and incidental expenses it paid when purchasing a property on the Redhill peninsula on Hong Kong Island. He also allowed the defendants' counterclaim for their loss occasioned by the plaintiff's breach of contract. After taking into account the deposit money held by the defendants he awarded them damages of $4,345,855.42. Although the plaintiff's solicit
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CACV002167/2001 CACV 2167/2001 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF APPEAL CIVIL APPEAL NO. 2167 OF 2001 (ON APPEAL FROM HCA 4645 OF 1998) ______________
______________ Coram: Hon Mayo VP, Cheung JA and Sakhrani J in Court Dates of Hearing: 26 & 27 February 2002 Date of Judgment: 11 March 2002 _______________ J U D G M E N T _______________ Hon Mayo VP and Sakhrani J: 1.This is an appeal from a judgment of Deputy High Court Judge Woolley who dismissed a claim made by the plaintiff for the return of a deposit and incidental expenses it paid when purchasing a property on the Redhill peninsula on Hong Kong Island. He also allowed the defendants' counterclaim for their loss occasioned by the plaintiff's breach of contract. After taking into account the deposit money held by the defendants he awarded them damages of $4,345,855.42. Although the plaintiff's solicitors and two directors of the company attended at the defendants' solicitors ostensibly to complete the purchase it was never in fact completed. 2.Hence this litigation. 3.To obtain an adequate understanding of this appeal it is necessary to consider in some detail the background circumstances. 4.The parties entered into a sale and purchase agreement on 4 October 1997. The purchase price was $15.1 million. A deposit of $2,265,000.00 was paid to the vendor's solicitors and it was provided that completion should take place before 5.00 p.m. on 20 March 1998. 5.It is common ground that very shortly following the sale and purchase agreement being entered into there was a dramatic decline in the property market. 6.There was evidence before the Judge that by the time the property was resold in June 1988 after completion should have taken place the consideration was only $8.8 million. 7.On the face of it the plaintiff had a considerable incentive not to complete the purchase. 8.The Judge heard evidence from Mr Kwan and Mr Tong directors of the plaintiff to the effect that they were happy to complete the purchase notwithstanding the significant fall in the value of the property. According to an estate agency Midland Realty the value of the property as at the time completion was scheduled to be undertaken was somewhere in the region of $12 million. 9.There were other consequences flowing from the decreased value of the property. It had been intended that mortgage facilities should be obtained from bankers to enable the plaintiff to complete the purchase. 10.Due to the decrease in the value of the property no bank was prepared to advance sufficient moneys to enable the plaintiff to purchase the property at the price stipulated in the sale and purchase agreement. 11.The Judge found that the plaintiff was not seized of significant assets. It accordingly had to resort to less orthodox sources to finance the purchase. There was evidence that an agreement had been concluded with an associate company of the plaintiff Wide Profit Finance Ltd to provide $12,835,000.00 for the balance payable on completion for a term of three years and interest of 30% per annum was to be payable thereon. 12.It will be appreciated that the amount of interest payable far exceeded the rent which was being paid by the tenant of the property of $40,000.00 per month. 13.In these circumstances it was hardly surprising that the Judge was not prepared to accept the evidence of Mr Kwan and Mr Tong that they wished to complete the transaction. 14.On 16 March 1998 the solicitors acting for the plaintiff served notice upon the solicitors acting for the defendants that they required the completion to be a formal completion and therefore not to be undertaken in the usual manner in accordance with undertakings being given. 15.There was evidence that it is most unusual for solicitors to require this. 16.The Judge drew an inference from this that the reason why the plaintiff required this was that it was hoped that some difficulty or pretext might arise which would absolve them from the necessity of completing the purchase and thus enable them to recover the deposit which had been paid. 17.This finding was of some importance as the probable motives of the relevant interested parties who attended at the completion may indeed shed some light upon whether the plaintiff was genuinely intending to complete the purchase or whether it was simply endeavouring to find itself some pretext or excuse to enable it to escape from its contractual obligation. 18.The Judge analysed the evidence of the witnesses who gave evidence of what transpired in the afternoon of 20 March 1998 at the defendants' solicitors offices. 19.To put no too fine a point upon it the Judge much preferred the evidence of the defendants' witnesses to those of the plaintiff. 20.He found as a fact that none of the plaintiff's witnesses including Ms Ma the plaintiff's solicitor ever produced or tendered any original cashier orders for the purchase moneys payable. He also held that Mr Siu, a clerk with the defendants' solicitors, did offer the completion documents relating to the sale to Ms Ma for inspection but that she did not seem to be interested in them. This did not include the executed assignment which is dealt with below. The mortgagee's solicitor was prepared to tender the mortgage redemption documents on receipt of a cashier order. 21.The conclusion reached by the Judge was that the defendants were ready and willing to complete the transaction. 22.By the same token he was satisfied that Mr Tong and Ms Ma had deliberately contrived to delay the completion so as to enable them to claim that the defendants had not complied with their contractual obligations by 5.00 p.m. 23.After 5.00 p.m. while the completion meeting was still proceeding Ms Ma demanded that the defendants who were in another room in the office should physically attend in the conference room where the completion was taking place. Mr Tang of the defendants' solicitors pointed out that this was not necessary as the defendants had already executed the assignment of the property in escrow. This would be delivered to Ms Ma when she proffered the cashier orders for the purchase price and the moneys required to discharge the mortgage secured on the property. 24.When Ms Ma pressed the matter Mr Tang said that he would bring the defendants into the conference room as requested. 25.At this stage Ms Ma informed the meeting that it was now 5.15 p.m. and that being the case she was advising her clients that the defendants were in breach of the sale and purchase agreement and that she and her clients were leaving without completion having been finalized. 26.Sir John Swaine who represented the plaintiff informed the court that he was not seeking to reverse any findings of fact which had been made by the Judge. What he was seeking to do was to demonstrate that upon the findings of the Judge the appeal should be allowed. 27.Sir John placed heavy reliance upon the case of Edward Wong Finance Co. Ltd. v Johnson, Stokes & Master (1984) 1 AC 296 in support of the proposition that there must be mutuality on a completion. Put another way it was not open to a party to demand that the other party should perform its obligations under the contract before doing so itself. 28.In the context of the present case he argued that while it was true that the Judge had found that Ms Ma had never produced any of the original cashier orders and had placed reliance upon photostat copies the defendants' solicitors should not have made the demand they had without at the same time tendering to Ms Ma a duly executed assignment of the property together with any other relevant title deeds. 29.It was submitted that the defendants had founded their defence on a false premise. 30.They had proceeded upon the basis that clause 5 of the sale and purchase agreement should be interpreted literally without regard to the legal principles propounded in Edward Wong Finance. The relevant clause in the agreement in that case was similar to clause 5. 31.Clause 5 reads:
32.We have no doubt that Sir John's analysis of the law as set out above is correct. 33.It will then be necessary to consider whether the plaintiff can succeed on this appeal. 34.Mr Pirie for the defendants submitted that there are two stages in a completion. 35.The first is that the parties introduced themselves and an opportunity is then afforded for the respective solicitors to check the other sides' documents. 36.In the case of the vendor the solicitor needs to satisfy himself or herself that the cashier order or orders to be used for the purchase are regularly issued and are in order. He argued that producing photostat copies did not comply with this requirement. 37.He accepted that it was incumbent upon a vendor to have available and if required to do so to produce a duly executed assignment by the vendor for checking together with satisfactory evidence that any incumbrance there may be on the title was either already discharged or was being discharged. 38.In this connection it needs to be added that a Ms Lo the solicitor who represented the outstanding mortgagee of the property was also in attendance. She also had objected to photocopies of the cashier orders being produced but she had gone on to say that if the originals of the cashier orders were tendered she was prepared to give Ms Ma in exchange the duly executed documentation relating to the release of the mortgage. 39.There was evidence which was accepted by the Judge that Ms Ma had been informed that she could inspect the completion documents with the exception of the duly executed assignment which was in another office and that on the tendering of the cashier orders the duly executed assignment would be given to her. There was also evidence that Ms Ma did not appear to be in any way interested in the defendants' documents. 40.What she did not do was to ask for any of the defendants' documents to be produced to her. 41.We accept the validity of the submission made by Mr Pirie that there is more to a completion than simply a simultaneous exchange of documents and that in effect there is a two-stage process. 42.The first stage is the opportunity of the parties to inspect each other's documentation. It is only after this has been done that the second stage is reached when both parties are required simultaneously to exchange the money for the title deeds. 43.In the present case only the first stage had been reached. Ms Ma had refused to proffer the original cashier orders. 44.In our view it is totally unrealistic to say that the defendants were required to produce the duly executed assignment for inspection notwithstanding the fact that Ms Ma never asked to see it. It can be added that it was not entirely surprising that Ms Ma had not insisted upon its production. She had drafted the document and submitted it to the defendants' solicitors. All that remained outstanding in relation to the document was that she had not seen the defendants' signatures and attestation. Mr Tang had informed Ms Ma that his clients had duly executed the document. 45.It would appear to have been likely that at this early stage the plaintiff was already in breach of the terms of the sale and purchase agreement. 46.Authority for this can be found from the case of Twinkle Step Investment Ltd v Smart International Industrial Ltd (1999) 2 HKCFAR 255 where the refusal by a vendor to allow a purchaser to inspect the premises prior to completion was taken by the court to be conduct that justified the purchaser in not completing the purchase. 47.The Judge found on the evidence which was before him that the plaintiff and its solicitor Ms Ma had never had the intention of completing the purchase. 48.There was ample evidence to support this finding. Mr Tong of the plaintiff company had only arrived with the cashier orders at 4.47 p.m. on the afternoon in question. 49.After arrival Ms Ma had asked Ms Lo a number of questions relating to the discharge of the mortgage. These issues had previously been the subject of correspondence which had been exchanged between the parties. 50.When eventually Ms Ma had advised Mr Tong that the release documentation was in order he had become highly emotional and started a heated argument with her. So heated had this argument been that the parties in the defendants' camp had seen fit to withdraw from the conference room for a period of 7 or 8 minutes while Mr Tong and Ms Ma composed themselves. 51.The Judge accepted the evidence that both Ms Lo and Mr Tang had informed Ms Ma that when the original cashier orders were tendered she would receive in exchange the duly executed assignment and other title deeds. 52.We do not think that Ms Ma was justified in stating at 5.15 p.m. that as completion had not taken place she and her client were leaving as the defendants had failed to comply with their contractual obligations. 53.As stated earlier there is more to a completion than simply the exchange of money for title deeds. Completion includes the earlier process of examining documentation. 54.This process was still proceeding at 5.15 p.m. Certainly the defendants and their solicitors had not in any way indicated their refusal to comply with any legal obligations imposed upon them. 55.It was only when it became clear to Ms Ma that the defendants were indeed in a position to complete the matter that she without giving any warning or notice declared that it was 5.15 p.m. and as completion had not taken place she and her clients were leaving. 56.When addressing us Sir John expressed the opinion that the Judge had been unfair in criticizing Ms Ma's conduct. This was a serious matter for a young solicitor. 57.With respect we disagree. We share the view of the Judge that Ms Ma's conduct was deplorable. There was ample evidence for the Judge's findings. She is an officer of the court. It was highly reprehensible for her to lend herself to a scheme to attempt to defeat the rightful claims of the defendants. Had she not conducted herself in the way she did this litigation might well have been avoided. 58.We are of the view that this appeal should be dismissed and an order nisi should be made for the defendants to have their costs. Hon. Cheung JA: Formal completion 59.This being a formal completion, according to Edward Wong Finance Co. Ltd. v. Johnson Stokes & Master (a firm) [1984] 1 A.C. 296, there has to be simultaneous payment of the purchase money by the purchaser and delivery of the executed assignment by the vendors. This was how the Privy Council construed the relevant clause of the agreement in that case. The clause, after providing for the sale of the property free from encumbrances, read:
Clause 5 of the Agreement of 4 October 1997 provides that :
60.It is in similar terms to the clause in Edward Wong. Payment and tender of assignment 61.In this case, Mr. Pirie, counsel for the vendors, had rather inaccurately described how the completion should take place, namely, after the purchaser had paid the purchase price, the vendors would then provide the executed assignment. This is contrary to the mode stated in Edward Wong and because of this view, so much unnecessary arguments were generated in the hearing below and in this court on whether the vendors had fulfilled their own obligation of tendering the executed assignment at the same time of the payment of the price. 62.If only it can be realised that payment does not merely involve the purchaser physically handing over the money (in the form of cash, cheque or cashier order) but also the vendors checking the money that was being handed over, then one can see immediately that, until such time as the vendors have checked the money, there is no payment by the purchaser. Viewed in this light, the handing over of the assignment is at the same time of the time of payment and not after the money had been paid. In my view this is how Edward Wong and Twinkle Step Investment Ltd. v. Smart International Ltd. (1999) 2 HKCFAR 255 are to be read together. In the later case, the late Ching P.J. stated this:
Vendors not at fault 63.Despite this inaccuracy, the evidence in this case revealed that the vendors' solicitor had repeatedly asked the purchaser's solicitor to produce the original cashier orders for checking and after checking, the assignment, which had already been executed by the vendors, would be handed over. This is totally consistent with the formal completion procedure stated in Edward Wong. The vendors were not in breach of their obligations at all. Purchaser at fault 64.In my view, if the purchaser was minded to complete the transaction by 5 pm, its solicitor would not have turned up only at 4.20 pm and the purchaser would not have turned up with the cashier orders only at 4.47 pm. This totally ignored the commercial reality that it may take time for the parties to complete the transaction. This lateness can only be explained by one reason : the purchaser was hoping that the vendors would not be able to complete before the 5 pm deadline because of the extremely short time that was available. 65.What was most disturbing about this case is that the purchaser's solicitor, even at this late stage, insisted in producing the photocopy of the cashier orders. Clearly as the clock was ticking away, she should have produced the original cashier orders to the vendors' solicitor for checking if the intention was to complete the transaction. This was not done. The finding by the judge is that the original cashier orders were never produced. 66.This was the position up to the time when the purchaser's solicitor called off the completion at 5.15 pm and left on the ground that the vendors had failed to complete. She was wrong. By not producing the original cashier orders, the purchaser was not in a position to show that it was ready and willing to complete the transaction. The purchaser was in breach. 67.The purchaser cannot rely on the vendors solicitor's earlier request for a photocopy of the cashier orders. The request was made in the context of the mortgagee requiring a copy of the cashier order payable to it for "verification purpose" and "preferably at least three hours before completion time." This would not excuse the purchaser for not producing the original cashier orders at the meeting. Even though Mr. Poon and Mr. Siu of the vendors' solicitors were prepared to look at the photocopies of the cashier orders for verification, there is no escape from the stark fact that the purchaser and its solicitor had never said to the vendors that "Here are the original cashier orders, let's complete the transaction." 68.Because of the impasse, the 5 pm deadline lapsed but the discussion continued until 5.15 pm. This happened because the vendors' solicitor was trying to accommodate the purchaser and its solicitor. The purchaser's solicitor could not then terminate the transaction without giving the vendors a chance to complete, particularly when the solicitor was about to bring the vendors to the meeting room at the request of the purchaser. Conclusion 69.I also agree that the appeal should be dismissed. Hon Mayo VP: 70.This being the case the appeal is dismissed and we make an order nisi that the defendants will have their costs.
Representation: Sir John Swaine SC and Mr Tim Kwok, instructed by Messrs Kenneth C.C. Man & Co., for the Plaintiff. Mr Nicholas Pirie, instructed by Messrs Lo & Lo, for the Defendants. |
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