Chui Ying Fong and Another v. Leung Kon Shau
Read the full judgment text of CACV 3/1974 on BabelCite. This Court of Appeal judgment.
1. By a writ dated 28th July, 1973, the plaintiffs (respondents) in the present action sued for the return of a deposit of $30,000 paid by them to the defendant pursuant to the terms of a written agreement in Chinese dated the 19th January, 1973 relating to the sale and purchase of property described as "temporary factory including land". The full purchase price was stated to be $145,000 and a deposit of $30,000 was paid across upon the signing of the agreement. Originally a third person joined
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CACV000003/1974 IN THE SUPREME COURT OF HONG KONG (APPELLATE JURISDICTION) CIVIL APPEAL NO. 3 OF 1974 -----------------
----------------- Coram: Full Court (Huggins & McMullin, JJ.) Date of Judgment: 27th May, 1974. ----------------- JUDGMENT ----------------- McMullin, J.: 1. By a writ dated 28th July, 1973, the plaintiffs (respondents) in the present action sued for the return of a deposit of $30,000 paid by them to the defendant pursuant to the terms of a written agreement in Chinese dated the 19th January, 1973 relating to the sale and purchase of property described as "temporary factory including land". The full purchase price was stated to be $145,000 and a deposit of $30,000 was paid across upon the signing of the agreement. Originally a third person joined with the present plaintiffs as prospective purchaser but by a subsequent release of his interest in the transaction the present plaintiffs acquired his rights in respect thereof and nothing further need be said concerning his interests therein. There was a clause in the written agreements stipulating that the sale and purchase thereunder was to be completed within 10 days from the execution thereof and further that vacant possession of the premises was to be delivered within 30 days from the same date. The plaintiffs in their writ alleged that time was not made of the essence of the contract notwithstanding the above provisions but claimed further that, following upon certain alleged delays occasioned by the defendant, they themselves had expressly made time become of the essence of the agreement for sale and purchase by writing a letter to the defendant's solicitors dated the 9th April, 1973, calling upon the defendant to complete the sale of the premises on or before the 17th April, 1973. On the 18th April, 1973, the defendant's solicitors wrote to the plaintiffs' solicitors informing them that it was the defendant's view that the plaintiffs were already in breach of the Chinese agreement by their failure to execute a conveyance within the time stipulated in that agreement and stating that it was the defendant's intention not to hold himself bound by that agreement and not to sell the property to the plaintiffs. On the 26th April the solicitors for the plaintiffs informed the solicitors for the defendant by letter of that date that the plaintiffs were holding the defendant responsible for the failure to complete the sale and purchase transaction on or before the 17th April, 1973 and that they were regarding the said transaction as rescinded. By the same letter the defendant was required to return the deposit of $30,000 on or before the 30th April without prejudice to the plaintiffs' right to claim damages for loss arising from the alleged breach of agreement. 2. The defendant refused to return the deposit and upon the writ being issued an application was made erroneously under Order 14 and was, we understand, dismissed with costs although we have not upon the record of the proceedings before us any account of what actually occurred upon that occasion. The application for summary judgment was subsequently and properly preferred under Order 86 and upon reading the affidavits of both parties and upon argument by counsel on both sides Mr. Registrar Mayo, on the 4th December, 1973 gave the defendant leave to defend conditional upon his paying the amount of the deposit, i.e. $30,000 into court within 14 days from the date of that order. Two days later, on the 6th December, 1973, the defendant lodged a notice of appeal against the decision of the Registrar and the same was set down for hearing upon the 5th January, 1974. On the 28th December, the defendant having in the meantime failed to pay into court the sum of $30,000, Mr. Registrar Mayo (presumably upon the application of the solicitors for the plaintiffs) entered judgment by default against the defendant adjudging him liable to pay $30,000 together with interest thereon at 8 per cent from the 19th January, 1973 to the date of the order and further ordering that damages should be assessed. On the day prior to that judgment, i.e. the 27th December the defendant had further applied to Mr. Registrar Mayo for an order extending the time for payment in of the stipulated sum. That application was refused and when judgment was entered on the 28th, the defendant, on the following day, the 29th December, filed an appeal against the order refusing to extend time. This appeal, together with the appeal against the order giving conditional leave to defend was set down for hearing upon the 5th January, 1974. Upon that date the learned Chief Justice, hearing the matter in chambers, dismissed the appeal against the order giving conditional leave but it would appear that he made no order upon the appeal against the refusal of the Registrar to extend time for payment in and instead simply ordered that the execution of the judgment entered in default of payment in should be stayed for fourteen days in the first instance and further providing that if an appeal were lodged within that fourteen days the stay should continue until the hearing of the appeal or until further order. The notice of appeal before this court is therefore in error in describing the orders from which it is proposed to appeal in the following terms: -
The first part of that recital should obviously refer to the appeal from the order of the Chief Justice dismissing the appeal from the order of the Registrar granting conditional leave and as to the second part of the same recital the reference is clearly to the appeal from the order of the Registrar refusing to extend time for payment in. However, since the learned Chief Justice made no order upon that appeal we informed counsel that we would deal in the first instance with the substantive question of whether or not unconditional leave should have been granted and if we held against the defendant (appellant) on that point we would then hear counsel further on the question of any suggested additional extension of time for payment in. 3. Counsel for the defendant(appellant) upon the hearing of this appeal advanced, in effect, two substantial points. Firstly, he said that the learned Registrar had wrongly exercised his discretion in ordering conditional leave to defend rather than granting unconditional leave since, in counsel's submission, there was displayed in the affidavits before the Registrar ample matter to raise a triable issue between the parties. Secondly, he relied upon the fact that there was not in the joint affidavit of the plaintiffs, filed in support of the application for summary judgment, any express averment that the plaintiffs were, at all relevant times, ready willing and able to perform the contract. 4. As to the first of these contentions it was the defendant's case, if I understand Mr. Lee rightly, that although there was not express stipulation by the parties in the original agreement that time would be of the essence of the contract yet because a time for completion ten days after the signing of the contract was fixed and a time for delivery of vacant possession thirty days from the date of signing of the contract, these express terms coupled with the fact that, as the defendant averred in his undated replying affidavit of November, that he had informed the plaintiffs that the property was heavily charged in favour of the Far East Bank and that the bank was pressin him for repayment, time became of the essence of the contract when, upon the 31st January, 1973, their solicitors wrote to the solicitors for the plaintiffs in the following terms:
The defendant does not contend that the limiting of ten days for completion on the agreement nor yet the provision for thirty days for delivery of vacant possession of themselves made time of the essence but rather that, in view of the financial difficulties of the defendant (made known to the plaintiffs), and in view of the terms in the agreement, and of the terms of the letter above quoted, a date ten days later than the date of that letter (i.e. the 10th February, 1973) had been established as the date of completion and had become an essential term of the contract. Each side laid the blame upon the other for the fact that their bargain had failed. Each ascribed that failure to the failure of the other to move to completion within a stipulated reasonable time when called upon to do so. For the defendant what was alleged was that the plaintiffs, being charged with the duty of preparing the conveyance and submitting it to the defendant for signature, had failed to do so. The plaintiffs' allegation was, initially at least a little bit more difficult to understand. They did not dispute that the duty of preparing the conveyance lay upon them. Mr. Murphy tells us that the reason why this was not done within the stipulated ten days or shortly thereafter was firstly, because, as the plaintiffs state in their first affidavit, there was at the outset some talk of a single solicitor acting for both parties in the preparation of the conveyance and it was only upon receipt of the letter dated 31st January from Messrs. Chan and Ho that they were apprised of the fact that the defendant had engaged his own solicitor. Secondly, because of the fact that, as that letter shows, the necessary documents for preparation of the conveyance between the parties had not yet been submitted to them. It is said by the plaintiffs in their affidavit that after receiving that letter they caused a search to be made of the District Office, Yuen Long, to ascertain the state of the title. No doubt, they thus ascertained that the land was indeed charged with repayment to the Far East Bank by way of a mortgage and a charging order amounting in total to $137,000 odd, a sum not far short of the total purchase price of the property. Mr. Murphy, with considerable candour, conceded that it may well have been this fact which accounted for the plaintiffs not having prepared and submitted the conveyance for sale and for the fact that, instead of so doing, they caused a letter to be written by their solicitors on the 20th February which is in the following terms:
5. Counsel suggested that it was because of this discovery that the solicitors for the plaintiffs became exercised about the nature of the whole transaction and the informality of the initial contract document. Be that as it may, it certainly seems strange that they should have sought to impose the necessity upon the other party of signing yet another agreement. If it was thought necessary to improve the terms originally agreed there seems to be no good reason why that should not have been done in the preparation of the formal documents of conveyance. On its own, the terms of this letter might certainly lend some colour to the suggestion that the plaintiffs were temporizing. 6. There was no immediate response to this letter. On the 13th March the solicitors for the plaintiffs wrote to the defendant's solicitors in the following terms:
7. When no reply was received even to this letter the plaintiffs' solicitors wrote a further letter on the 9th April both to the defendant's solicitors and to the defendant himself requiring him to complete the sale and purchase transaction and enclosing a formal notice to that effect which runs as follows:
8. At that date, therefore, the parties had reached what might be termed a stand-off and were each apparently looking to the other to take positive steps to implement the terms of the original agreement. There was, at that date, obviously something anomalous in the positions of both of them. On the one hand, the plaintiffs, having at the outset (that is following upon the receipt of the letter of the 31st January) made no demur to the suggestion that it was for them to prepare the conveyance and notwithstanding the original stipulation that the transaction should be completed within the days, had done nothing whatsoever for three weeks and then had informed the defendant of their intention to enter into a formal agreement for sale and purchase as though it had been mutually agreed between the parties that the initial agreement was a matter of no consequence or binding force. On the other hand, the defendant, having by his own delays at the outset put it beyond the power of the other party to comply with the period of ten days limited in the written agreement, and notwithstanding his allegation that he had made clear to the plaintiffs his own difficulties relating to the bank, made no representations, either himself or through his solicitors, written or oral, fixing a fresh date for completion and requiring compliance with that time limit as an essential element of the contract. The letter of the 31st January (exhibit LKS 3) had merely said that the sale should be completed within ten days from the 19th January, a date which was already past at the date of that letter. Even if he had made it clear that it was a matter of urgency that the sale should be completed that letter could not, in my view, amount to a direction that time was to be of the essence of the contract and I cannot accept the defendant's suggestion that it was clearly to be inferred from the terms of that letter that the time for completion was to be ten days from the date thereof. In view of the wording of that letter the allegation in paragraph 15 of the defendant's affidavit that upon the 30th January he requested TSOI Yung-kan to complete the sale and purchase within the following ten days can scarcely be regarded as anything but an invention and I have no doubt that it was thus that the learned Registrar regarded it. It is to my mind not conceivable that a contracting party, pressed by severe financial difficulties and anxious to make a stipulated time an essential term of the existing contract, should, upon the very day following his alleged verbal representations to that effect, cause to be written a letter in the terms of Exhibit LKS 3. Furthermore, not only did the defendant fail to make time of the essence of the contract by clear words but, in addition, his total silence following upon the evident shift in the plaintiffs' stance (as shown in their letters of the 20th February, 13th March and 9th April set out above) is inexplicable in the light of what he now alleges to have been the situation at that time. When eventually he did reply some nine days after the receipt of the letter of the 9th April, the letter which was then sent, while it quite properly commented on the change in the plaintiffs' position, did not suggest what is now suggested viz.: that the letter of the 31st January had established a time limit of ten days from that date for completion as a term compliance with which was to be essential to the due performance of the contract. Instead, what is alleged is that the plaintiffs are in breach of the original agreement "by failing to complete the sale and purchase in the contract time, or within a reasonable time after the time fixed for completion by the Chinese Agreement." (See letter of the 18th April, 1973, Ex. 'L' to the joint affirmation of the plaintiffs). This silence of the defendant in face of the plaintiffs' repeated and, in the context of his present allegation, surprising calls upon him to complete the contract is all the more surprising when one considers what is said by him at paragraph 18 of his affidavit which is in the following terms:
The plaintiffs deny that the defendant ever so informed them and maintain that the first they knew of his intention to rescind the agreement was upon the receipt of the solicitors' letter from Messrs. Chan and Ho dated 18th April, 1973. Although the solicitors in that letter appear to allege that their client, (the defendant), had informed them of the intention to rescind it is obvious from the manner in which paragraph 18 is worded that the defendant was not prepared to affirm that he had done so. 9. What it amounts to, therefore, is that after the 9th or 10th of February he had, upon his own showing, decided that he would not proceed with the agreement for sale and yet did nothing either by himself or by his solicitors to bring this change of intention to the notice of the opposite party until the 18th April and despite the several letters received during that period from the plaintiffs' solicitors calling upon him to complete. In view of all this it is not surprising that the learned Registrar regarded his story with extreme suspicion. Although the wording of paragraphs 11 to 13 of the defendant's affidavit appears to allege that time was made of the essence of the contract by the terms of the Chinese Agreement itself, that has never been maintained either by his solicitors in correspendence or by Mr. Lee on his behalf in court. By their letter of the 18th April Messrs. Chan and he do suggest that it was a term of the contract either that the sale shall be completed within the ten days stipulated or within a reasonable time thereafter. However, this was not maintaind by counsel and for good reason. The defendant avers in paragraphs 13 and 14 of his affidavit that between the 19th January and the 31st January he made repeated requests that the time limited in the contract for completion should be observed but in view of the fact that the vendors own conveyance was not transmitted to the plaintiffs until the 31st January with the request that they should complete the transaction by preparing the conveyance between the parties, it would seem that the learned Registrar very properly preferred the plaintiffs' story that between the 19th and the 30th the only question between the parties was whether one solicitor would act for both of them in the matter. That indeed seems to be far the most likely way to account for the writing of the letter of the 31st of January and it would therefore seem that the defendant by his own conduct made it evident to the plaintiffs that the initial period of ten days fixed in the agreement was not going to be insisted upon as an essential term. That being the case, if the defendant wished to make time of the essence, it was necessary for him to have so stipulated in clear words once the initial ten days had passed. Mr. Lee, on behalf of the defendant, did not argue either that the ten day period was the essential interval limited for compliance nor even that that period was to be determined by reference to what was a reasonable time after that period but he took a third attitude towards the matter and maintained that the essential time limit was a period of ten days from the writing of the letter of the 31st. 10. In my view the learned Registrar quite rightly rejected all the propositions advanced from the defendant's side as to the making of time the essence of the contract. 11. I think Mr. Lee is right when he says that there is no advantage to be gained in the circumstances of the present case by considering the provisions of section 11 of the Law Amendment and Reform (Consolidation) Ordinance, Cap. 23. That merely embodies the provisions of section 25(7) of the Judicature Act of 1873 and in general terms provides that stipulations as to time in contracts which, before the Act would not have been deemed to be or have become of the essence of the contract shall be construed in the same way as they would have been construed in the Courts of Equity before the passing of that Act. Although we are told this section was canvassed in the court below, it does not seem to me that its terms touch closely upon the matter in hand. Like counsel, I find the rule which is sometimes stated by saying that in equity time is not of the essence of the contract to be admirably explained by Lord Cairns, L.J., in Tilley v. Thomas(1) when the learned judge says:
12. In this case as in Tilley v. Thomas(1) it is clear that there is nothing in the express stipulations between the parties to make time of the essence of the contract nor is there in my view anything in the nature of the property from which completion of the contract by any fixed date or within any given period of time must necessarily be inferred. I think Mr. Murphy is right when he says that to make out his case in relation to time the defendant in this case is tied to the "surrounding circumstances" of the case generally, nor do I think Mr. Lee seriously disputed that it was this third proposition of Lord Justice Turner which he would seek to apply in the present case. As I understand Mr. Lee he would say that by virtue of the original time limit fixed in the Chinese Agreement coupled with the provision for thirty days for vacant possession, coupled with the evidence upon affidavit that the defendant had described his circumstances to the plaintiffs, the defendant had raised a triable issue which might be described by saying that from the outset time was of importance in the arrangements between the parties and that a time limit of an essential character had been introduced by the letter of the 31st January which established a certain date for completion. In view of the background circumstances generally as I have described them above and in particular as they appear from the averments of the defendant himself and from the statements and letters of his legal advisers that contention was, to say the least of it, dubious. 13. The Registrar did not, however, refuse leave to defend. He gave leave but upon terms of payment in. The principles upon which conditions may be imposed upon the grant of leave to defend in actions of this kind are well established and it is needless to refer to the cases in that regard. If one were to consider no more than those circumstances which have already been discussed it would appear to me that the learned Registrar and after him the learned Chief Justice dealing with the matter in Chambers upon appeal from the Registrar, were both amply justified in forming the view that the case proposed by the defendant was sufficiently dubious to require that conditions should be fixed. 14. There remains, however, so far as this part of the argument is concerned, the question whether there was in the case presented by the plaintiffs upon the affidavits anything so questionable in itself as to make it inequitable to impose conditions and such as to require that the parties be left to the trial of the issues, each side having clouded its own contentions by its own conduct. In this regard a convenient test is suggested by the words of Bowen, L.J. in Howe v. Smith(2) where at page 99, dealing with the plaintiff's claim to the return of a deposit under a contract for the sale and purchase of a house, which contract had broken down, he says: -
15. Although I confess I have been exercised greatly in mind over the curious behaviour of the plaintiffs in suggesting that a new agreement for purchase and sale should be entered into I do not believe, to put the matter at its highest against them, that it could be said that the learned Registrar or the learned Chief Justice ought to have found that their conduct might amount to evidence that they had receded from their bargain. The worst that might be said is that they had, no doubt with some justification in view of the financial state of the defendant, although with dubious propriety, sought to render their bargain more secure by proposing a renewal of the terms in more formal and perhaps more stringent language. If anyone had receded from the bargain, clearly, upon what was before the Registrar, it was the defendant. Without having issued any warning to the plaintiffs, even in the most guarded terms, he had after the 10th February, as he himself admits, decided not to sell the property to the plaintiffs. Yet neither this decision nor the reasons for it were brought to the attention of the plaintiffs until long after they had pressed him to renew the terms of the original agreement. 16. As to the defendant's second main contention (that there was no allegation in the plaintiffs' joint affirmation that they were ready, willing and able at all material times to complete the sale) there is no doubt that their affirmation is deficient in that respect. Mr. Lee quite rightly says that if the plaintiffs were not ready and able at least by the 17th April (the date they themselves fixed as the closing date for completion of the bargain) to fulfil their part of the contract they would have no right either to the return of the deposit or to damages for breach. There being no proof on oath or affirmation that they were so ready he asks us to say that this is conclusive against the order made by the Registrar in the first instance. Speaking for myself I regard this objection as being entirely too technical in nature to be valid in the circumstances of the present case. The verifying joint affidavit of the plaintiffs is basically sound in that it sets out the facts upon which the claim is based and, secondly, the deponents belief there is no defence to that claim. These are the two fundamental requirements of any affidavit filed in support of an application either under Order 14 or under Order 86. Paragraph 11 of the endorsement to the writ specifically states that the plaintiffs were at all material times ready, willing and able to complete the purchase of the premises. Paragraphs 8 and 9 of the verifying joint affirmation refer to the letters written on the 13th March, 1973 and the 9th April, 1973 in which an intention to complete the sale is expressed. It would be to attend too closely to the formal niceties of the requirements relating to such affidavits to say, in the context of these circumstances, that the plaintiffs were not thereby also affirming their ability and willingness to complete. For these reasons I would dismiss the appeal. Representation: (1) 3 Ch. 1867-68 61 at page 67. (2) 27 Ch. D. 89. IN THE SUPREME COURT OF HONG KONG (APPELLATE JURISDICTION) CIVIL APPEAL NO. 3 OF 1974 (On appeal from O.J.2161/73) -----------------
----------------- Coram: Huggins & McMullin, JJ. Date of Judgment: 27th May 1974. ----------------- JUDGMENT ----------------- Huggins, J.: 17. I also would dismiss the appeal. 18. Some confusion was caused upon the hearing of the appeal because the affidavits relating to the abortive application under 0.14 were included in the papers before us, having, we are told, wrongly but without objection been produced in chambers in connection with the application under 0.86. They contained, of course, substantially the same allegations as the later affidavits, but they were not identical. Care should be taken to avoid including such irrelevant papers. 27th May 1974 Representation: |