Aie Co Ltd v. Kay Kam Yu

IN THE COURT OF APPEAL

1995, No. 45
(Civil)

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Coram: Bokhary, Godfrey and Ching, JJ.A.

Dates of hearing: 17, 18, 23 and 24 October 1995

Date of handing down of judgment: 14 November 1995

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J U D G M E N T

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Bokhary, J.A.:

1. The first judgment will be given by Mr Justice Godfrey, JA.

Godfrey, J.A. :

Introduction

2. This is the vendor's appeal from an order of Findlay, J. made on 26 May 1995 in favour of the purchaser in a purchaser's action for specific performance. The contract of which the judge ordered specific performance was a formal agreement dated 1 November 1990 for the sale and purchase of Flat D, 3/F Nassau Street, Mei Foo Sun Chuen, Kowloon ("the flat"). The purchase price was $1,148,000. The agreement provided that completion was to take place at the office of J. Fang & Co., the vendor's solicitors, on or before 23 November 1990. Time was expressed to be of the essence of the agreement in every respect (including, accordingly, the time fixed for completion). But the transaction was not completed on 23 November 1990, the reason being that the purchaser's solicitors had taken two objections to the title which the vendor's solicitors were unwilling (or unable) to meet, and which the purchaser's solicitors were unwilling to waive. Subsequent negotiations, conducted between the solicitors, failed to resolve the dispute, and on 3 January 1991 the purchaser instituted the proceedings in which the judge made his order in the purchaser's favour. The judge made the following comment upon the solicitors' handling of the transaction :

"This is a sad case. The difficulties in the way of the completion of the transaction were by no means insurmountable. They were the sort of ordinary practical problems that arise in everyday conveyancing practice; very little wit or wisdom was required to deal with them. They should not have given rise to even a serious dispute, let alone an expensive three-day action in the High Court. The application of a modicum of common sense and practical concern to keep clients out of litigation should have led to the satisfactory completion of the transaction with little delay and expense to the clients."

3. I entirely agree with the judge. The correspondence between the parties' solicitors, which, unfortunately, I shall have to review, recalls to my mind the words of Danckwerts J. in Finkielkraut v. Monohan [1949] 2 All ER 234 at p.236 G :

"..... I cannot understand why the two solicitors could not have got together in a reasonable manner and settled the matter without further controversy and so save the expenses of these actions ....."

4. The failure to do this on the part of the solicitors acting in the transaction with which we are concerned, who fell out with each other, has led, not only to a three-day action but to a four-day appeal. Neither the vendor, nor the purchaser, is responsible for this disaster. It is indeed a sad reflection upon some members of the solicitors' profession that the court lists regularly feature cases like this, although such litigation is just what vendors and purchasers pay their solicitors to avoid.

The Facts

5. On 9 November 1982, the manager of the property of which the flat forms part registered a memorandum of outstanding service and management fees and other charges against the then owner. This memorandum indicated that the princely sum of $662 was outstanding and unpaid up to 6 November 1982, and that that sum was to be a charge upon the owner's interest in the flat.

6. On 11 October 1990, the then owner assigned the flat to the present vendor.

7. On 30 October 1990, Kao, Lee & Yip, solicitors acting for the purchaser under what was to become the agreement of 1 November 1990, asked J. Fang & Co., the vendor's solicitors, for a copy of the memorandum of 9 November 1982.

8. On 31 October 1990, the purchaser's solicitors wrote to the vendor's solicitors raising the following requisition :

"1. We note that the Memorandum of Outstanding Service and Management fees and other Charges dated 6th November 1982 is registered against the above property by Memorial No. 2334310. We shall be obliged if you would kindly confirm with us that the same shall be discharged on or before completion and your undertaking to let us have a Memorandum of Satisfaction in respect of the same together with the signed Memorial and registration fees within 21 days from the date of completion."

9. On 1 November 1990, when the agreement was concluded, this requisition remained unanswered, and the assignment of 11 October 1990 to the vendor remained unregistered at the Land Office, thus losing the priority it would have achieved over subsequent dispositions if it had been so registered.

10. On 15 November 1990, the purchaser's solicitors wrote to the vendor's solicitors referring, in paragraph (c), to the memorandum of outstanding service and management fees and other charges. They added this :

"We also note that the said Memorandum mentioned in paragraph (c) above registered against the above property has not yet been discharged. As the Vendor is obliged to assign the property free from all encumbrances, please therefore let us have your confirmation that the same shall be discharged or satisfied on or before completion.

We also discovered from a recent land search that the Assignment dated 11th October 1990 has, up to the date hereof, not been duly registered at the Land Office and the one month time limit have also elapsed, plus, losing the priority for registration. Our client is therefore exposed to the risk of other deeds or charges or conveyances having priority over the said Assignment. In the event of the intervention of any encumbrances uncontemplated by our client at the time of execution of the Assignment of the above property, as a result of which our client shall suffer any loss or damage, we shall hold your firm fully liable in respect thereof."

11. Also on 15 November 1990, the purchaser's solicitors wrote to the vendor's solicitors a second letter as follows :

"Further to our letter of today's date, we are instructed by our client to inform you that the sale and purchase of the above property shall have to be postponed to at least 30 days of the date of registration of the Assignment in favour of your client dated 11th October 1990."

12. On 16 November 1990, the vendor's solicitors replied as follows :

"We are instructed that our client shall not give her indemnity to your client for any loss or damage that may be suffered by your client as a result of our late registration of her Assignment dated 11th October 1990. Your client's proposal is mentioned in your second letter dated 15th November 1990 is not accepted.

If your client is not satisfied with this, please let us know so that we may refund the deposit money to your client."

13. On 17 November 1990, the purchaser's solicitors replied as follows :

"We refer to your letter dated 16 instant and are instructed by our client to inform you that they will not accept the refund of the deposit money paid under the Sale and Purchase Agreement.

Since your firm is still unable to confirm that the Assignment in favour of your client has been duly registered in the Land Office and your failing to reply to our requisitions as per our letter dated 15th November 1990, we are not satisfied with the title to the Vendor's property.

Our client's rights against yours under the Sale and Purchase Agreement are hereby expressly reserved."

14. On 20 November 1990, Lo & Lo, solicitors acting for the managers of the property, wrote to the vendor's solicitors informing them that the amount of outstanding service and management fees and other charges of the premises now amounted to $945; their costs they put at a total of $1,600, making a grand total of $2,545 to discharge this encumbrance.

15. On 22 November 1990, the purchaser's solicitors wrote to the vendor's solicitors as follows :

"Due to your inadvertent delay in registering the Assignment dated 11th October 1990, our client is exposed to the risk of unforeseeable third party claims or encumbrances having priority over the said Assignment. Therefore, we are still of the opinion that your client, the Vendor, is in no position to pass good title to our client. In the circumstances, please advise how your client is to complete the sale and purchase of the above property free from encumbrances on 23rd November 1990.

We suggest the following options :-

(a) to extend the date of completion to at least 30 days from the date of registration of the said Assignment, i.e. at least after 15th December 1990 when your firm can confirm that there are no encumbrances having priority over the said Assignment; or

(b) we shall complete on the scheduled date, i.e. 23rd November 1990, but the balance of purchase price shall be held by your firm as stakeholders until 15th December 1990.

If your client chooses neither (a) nor (b), please confirm how you propose to deal with the matter."

16. On 22 November 1990, the vendor's solicitors replied as follows :

"We refer to your letter dated 22nd November 1990 and are instructed to inform you that your proposals therein are not acceptable to our client.

Since, you have alleged that you were not satisfied with the title to our client's property herein, to which we totally agree [that was later said to have been meant to read "to which we totally disagree"] we are therefore instructed to inform you that our client intends to annul the sale of the property.

Please let us know whether you are prepared to draft the Cancellation Agreement."

17. On the same day, 22 November 1990, the purchaser's solicitors replied as follows :

"We refer to your letter of today's date and are instructed to inform you that our client will not accept your purported annulment to the sale of the property and he, our client, is not prepared to enter into any Cancellation Agreement with your client.

Our client is all ready to complete the sale and purchase of the property when your client is able to prove good title of the property."

18. On 23 November 1990, the vendor's solicitors replied as follows :

"Our telephone conversations at about 4:00 p.m. to-day with regard to your letter of 22nd November 1990 refers. Whilst it is nice to know only one outstanding matter affecting title remains and is contained in paragraph 2 of your letter, neither (a) nor (b) proved acceptable to our client.

In fact since our conversation we've taken our client's instructions and regret to inform you that our client does not share your views with regard to what you propounded in paragraph 2 of your said letter and remains adamant that completion should take place as scheduled and has provided in the Sale and Purchase Agreement dated 1st November 1990. Exceptionally however, our client is prepared to extend the day and time of completion to 1:00 p.m. on Saturday, 24th November 1990, failing which our client shall exercise all her rights against your client as provided for in the said Sale and Purchase Agreement."

19. On the same day, 23 November 1990, the purchaser's solicitors replied as follows :

"From the previous correspondence between our respective firms, we have repeatedly expressed the opinion that your client is not in a position to pass good title to our client. Your purported extension of time to complete by 1:00 p.m. on 24th November 1990 is totally unrealistic and is hereby rejected.

Since the beginning of this month, we have written to you on numerous occassions to urge you to present the Assignment in favour of your client to the Land Office for registration. However, your firm did not take heed of our request. We consider this to fall short of the standard of conduct expected of a solicitor and may report the matter to the Law Society. Furthermore, as your failure to register the Assignment in time could well constitute professional negligence, giving rise to a conflict of interest situation, should you continue to represent your client in the matter. In view of this, we would urge you to consider ceasing to act for your client.

In any event, we reinterate that all our client's rights against yours under the Agreement for Sale and Purchase are hereby expressly reserved."

20. Subsequent attempts on the telephone on 24 November 1994 to resolve the dispute were unsuccessful.

21. On 26 November 1990, Mr. J. Fang wrote a hand-written letter to the purchaser's solicitors in the following terms :

"We refer to your letter of 23/11/90.

You might well rave and rant. You might well threaten and intimidate. You might well insult and abuse. If you wrote hogwash we shall have no option but to treat it as such and to tell you that it was unworthy of a firm of your great repute and standings. Despite your obvious attempts to do so, you shall not defeat me or our client by forcing your dictates on us.

We reiterate - we have shown a good title on behalf of our client and must insist your client complete. The original completion date was 23/11/90 (5 p.m.); the duly extended date was 24/11/90 (1 p.m.). You on behalf of your client wilfully chose not to complete. Whilst we maintain our client's rights due to your client's failure to complete, we shall take into consideration your letter of 26/11/90. Since you wanted to put the conversation on record, here's our version of the gist of it [Mr. Fang then sets out the gist of the conversation].

Let it not be said that we do not hold Mr. E. Kao in the highest esteem and to give him full face - we have persuaded and obtained our client's consent to postpone the completion date once again to 5:30 p.m. to-day (26/11/90). The only condition is that your client will agree to pay daily interest on the balance of purchase price due to our client from 23/11/90 until day of completion. Our client's various rights are hereby reserved. No other postponement shall be contemplated or granted."

22. On 27 November 1990, the purchaser's solicitors wrote to the vendor's solicitors as follows :

"We refer to your hand-written letter of 26th November 1990. For the avoidance of doubt, we wish to set out the sequence of events as follows :

1. On 1 November 1990, (as per the telephone conversation between our Mr. Ma and your Ms. Wong) we urged you to register the Assignment dated 11th October 1990 in favour of your client, but no positive reply was given.

2. On 7th November 1990, (as per the telephone conversation between our Mr. Ma and your Ms. Wong) we asked you to confirm that the said Assignment had been duly stamped and registered. Again, the reply was in the negative.

3. As per our letters to you both dated 15th November 1990 (30 days after the date of the said Assignment) we remarked that since the said Assignment has not yet been registered in the Land Office within the statutory period, thus losing its priority for registration, we suggested to you that the date of completion should be postponed to at least 30 days in order that the Property may be assigned to our client with good title and free from all encumbrances.

4. Your proposal to refund the deposit money to our client was rejected by us on 17th November 1990.

5. On 22nd November 1990, due to your inexplicable delay in registering the said Assignment, we suggested the following two options:

a) to extend the date of completion; or

b) to complete but your firm should stakehold the balance of purchase price pending expiration of the period of 30 days from the date of registration of the said Assignment.

However. our said proposal was rejected by you.

6. In your letter of 22nd November 1990, you in fact agreed with our view that your client is not in a position to pass good title to our client and you purport to annul the sale of the Property but that was rejected by us immediately.

We are astonished to learn that you now insist to complete the sale and purchase, alleging that you have shown good title. You also intend to claim interests on your client's behalf. In any event, we reiterate that your client have not yet shown good title on the following grounds:

a) late registration of the said Assignment; and

b) Memorandum Memorial No. 2334310 which, up to the date hereof, has not been discharged or satisfied.

In respect of your comments made on the second paragraph of your said letter, we regret to find the offensive languages directed at our firm and our senior partner. You may wish to know that it is an established etiquette for solicitors that they 'should not resort to writing offensive letters to other members of the profession' [and authority is quoted]. This is so no matter bitter the feeling your client or your firm may have. It is also expected of a solicitor that a solicitor must at all times maintain his personal integrity and observe the requirements of good manners and courtesy towards other members of the profession. He must not behave in a manner which is acrimonious or offensive or otherwise inconsistent with his position as a solicitor. Such principle also applies to correspondence in writing.

Your various allegations of 'rave and rant', 'threaten and intimidate', 'insult and abuse', and etc. against our firm are totally unjustified, offensive and unnecessary. That is particularly true after considering all correspondence between our respective firms and the fact that our firm have been acting reasonably and in good faith throughout, always with a view to resolving the matter in a reasonable manner, although it was clear that the present situation was not brought about by our client or ourselves. The use of the aforesaid offensive languages by a solicitor obviously falls short of the standard mentioned in the preceding paragraph.

It also appears in your said letter that the telephone conversation between your Mr. Fang and our Mr. E. Kao may have been taped. If the solicitor considers necessary to make a tape of a telephone conversation, he should inform the other party of his intention to record the call before switching on the recording machine. We therefore ask you to confirm in writing whether the subject telephone conversation was in fact so taped.

We also reiterate the third paragraph of our letter to you on 23rd November 1990 and wish to put you on notice that your firm's conduct in general in the subject incident will be referred to the Law Society for its investigation and consideration, as no reasonable explanation has been given for the delay in registering the said Assignment.

In the light of the above, there is no doubt that your client has failed to show a good title to the Property and was not able to pass good title to our client on the completion date. In all material times, our client has been and is still willing able and ready to complete the subject sale and purchase. That being the case, we expressly reserve all our client's rights herein against yours for losses and damages suffered by our client by reason of your client's breach herein. Our client's right to insist on specific performance under the Sale and Purchase Agreement is also reserved.

However, as indicated in our letter to you on 22nd November 1990, our client is prepared to complete the purchase of the Property with good title on the expiration of 30 days of the date of registration of the said Assignment to the intent that the Property shall be assigned to our client free from encumbrances and with good title, but not otherwise. He is of course not prepared to pay any interest as the delay is not caused by him but by the failure of your client to show good title at the time of the original completion date. Could you therefore confirm as soon as possible in writing whether this proposal is acceptable to our client.

We also note that the further deposit of HK$94,800.00 is now held by your firm as stakeholders. You are in no circumstances to release this deposit to your client, until the matter is resolved to the satisfaction of our client."

23. On 6 December 1990, the vendor's solicitors replied as follows :

"Re. your letters of 26/27 Nov 1990. No proposal with a view to 'a viable solution' having come from you thus far, we shall put forward ours without irrelevancies.

1. The problem : you contend we have not shown a good title on date of completion and try to impose a condition; we contend we have shown a good title and refused to be bound by further conditions.

2. Re. paragraph 6 of your letter of 27/11/90 -

Re. our letter to you on 22/11/90 -

it should read 'to which we totally disagree'. Our apology for this slip of the tongue or pen. If your contention that we've not shown a good title is based on this 'slip' please let me know at once.

3. If your position remains the same despite (2) supra, insisting on completion and on your terms, we propose :-

a) Viable Solution I

i) Complete to-day (since your client insists on completion in any case and is ready and willing to do at any time).

ii) We will agree (under protest) to your demand to hold the balance of purchase price as stakeholders until 15/12/90.

iii) We still contend we've shown a good title on the date of completion (as extended) and that your refusal to complete entitled our client to forfeit the deposit and rescind to the Sale and Purchase Agreement and to his other rights under the same S and P Agreement. We shall reserve the right to go for declaration to this effect under s.12 Conveyancing and Property Ordinance.

b) Viable Solution II

Don't complete until everything is settled by a s.12 Vendor and Purchaser Summons.

We urge you to accept Solution I as all your demands have been met and since your client insists on completion (or specific performance), it does have the merit of mitigation of loss performed in advance for all parties concerned.

To sum up, for the avoidance of doubt,

1) Complete to-day; 2) We reserve all our client's rights as if no completion have taken place; and 3) Go for a s.12 Declaration and shall abide by the Court's guidance/decision."

On 7 December 1990, the purchaser's solicitors replied as follows :

"We refer to your hand-written letter of today's date [sic] and are instructed to inform you that our client will accept 'solution I' which is modified as follows:-

a) The Property shall remain the same state and condition as when it was at first shown to our client (your client shall therefore allow our client to enter and inspect the Property at a mutually convenient time prior to completion);

b) Completion shall take place on or before 5:00 p.m., 10th December 1990;

c) The balance of purchase price payable by our client on the said date shall be held on a joint stakeholder's account under the joint names of our respective firms;

d) The said balance of purchase price should only be released to the Vendor on 16th December 1990 (i.e. 30 days after the due registration of your client's Assignment) on condition that :-

(i) there is/are no encumbrance(s) having priority of the said Assignment; and

(ii) the Discharge of Memorandum Memorial No. 2334310 has been duly registered in the Land Office or your firm shall give us an undertaking to let us have the said Discharge together with its memorial thereof and your cheque for its registration fee within 21 days from the date of completion.

In the meantime but subject to the aforesaid, we enclose our draft Assignment (in duplicate) for your approval on behalf of your client. Please also inform us how the cheques payable on completion should be drawn."

24. On 11 December 1990, the purchaser's solicitors asked for a reply to their last letter.

25. On 15 December 1990, the purchaser's solicitors wrote again to the vendor's solicitors as follows :

"We refer to our letters dated 7th December and 11th December 1990 respectively. We now discover from an update land search that the Assignment Memorial No. 4606286 has now been duly registered at the Land Office without any encumbrance having priority over the same. In the circumstances, we are instructed to inform you that our client is ready to complete by 1:00 p.m. today, 15th December 1990.

Please therefore let us have the following:-

(a) Our draft Assignment, as approved by you on behalf of your client; and

(b) Statement as to how the cheques payable on completion should be drawn.

Due to the lapse of time, please also arrange with your client a mutually convenient time to enable our client to inspect the Property prior to completion."

26. On 17 December 1990, the charge for service and management fees, etc. was satisfied (although the discharge was not registered until 27 February 1991, after the purchaser had commenced its proceedings).

27. On 18 December 1990, having apparently received no reply to the letter of 15 December 1990, the purchaser's solicitors wrote to the vendor's solicitors as follows :

"We refer to our letter dated 15th December 1990 and are instructed to inform you that unless we hear from you within 3 days from the date hereof, i.e. on or before 21st December 1990, we shall take it that your client does not intend to complete the sale and purchase of the property. In which event, we shall take such action as our client may deem necessary."

28. On 20 December 1990, the vendor's solicitors wrote to the purchaser's solicitors as follows :

"Your letter of 18/12/90 is at hand together with a fax identical in all respects but hearing the sent date 17/15/90. We suspect this is only a mix-up, a slip so to speak on your part and nothing untoward is intended. In the premises, we take the effective date to be 18/12/90 as must be assumed to be intended by you.

In the mean time, without prejudice to any rights of our client, vested or contingent, against your client for breach of contract or otherwise and especially not waiving any such rights, your client is permitted to make an appointment through us to view the flat. Please contact our John Fang (Secretary Miss Kathy Lam) to-day stating a few alternate time(s) and we'll make the necessary arrangements. Whenever this condition re. physical state of the flat is satisfied, please indicate that it is so in writing.

If you concur that litigation is to be avoided like the plague while our client's rights are protected within legal and common sense constraints, do propose any viable solution that comes your way over the weekend. We'll do the same. Or if you prefer, as we do, have a friendly chat, off the record so to speak, face to face or on the phone." [There is a postscript to this letter which I need not read.]

29. On 21 December 1990, the purchaser's solicitors wrote to the vendor's solicitors as follows :

"We refer to your letter of even date and are instructed to inform you that our client has duly inspected the Property and is now ready to complete the sale and purchase and if possible by 1:00 p.m. tomorrow, i.e. 22nd December 1990.

Please therefore let us have by return the followings :

(1) Our draft Assignment, as approved by you on behalf of your client; and

(2) Statements as to how the cheques payable on completion should be drawn."

30. On 22 December 1990, the purchaser's solicitors wrote to the vendor's solicitors again, as follows :

"We refer to the telephone conversation between your Mr. J. Fang and our Miss T. Tse this morning and wish to say that we were astonished by your Mr. Fang's uncooperative manner.

In view of your letter to us dated 21st December 1990 and coupled with the fact that you/your client allowed us to inspect the Property, we were led to genuinely believe that you were finally taking a sensible approach towards settling the matter. With the view to expedite the matter, our client promptly, in response to your offer to inspect the Property, inspected the Property and we duly communicated to you on the same date our client's sincere offer to complete the purchase today.

Despite the apparently friendly tone of your said letter, you ignored our client's offer to complete and refused to answer the repeated calls by our Miss Tse earlier this morning. Then came your Mr. Fang's call at about noon in which your Mr. Fang took on the task of rebuking our Miss Tse, but you still had not given any positive reply or indication whether you approved our draft Assignment and how cheques should be drawn on completion.

Our client was in our office this morning from about 11:00 a.m. waiting for completion of the sale and purchase, having funds ready in hand. Our client had to wait for more than an hour and had no choice but to leave in disappointment.

Up to now, we cannot comprehend what proposal you have in mind and we are at a loss how to deal with you/your client. Please let us have your client's instructions in writing as to how you/your client propose to deal with the matter."

31. On 28 December 1990, the purchaser's solicitors wrote again to the vendor's solicitors as follows :

"We are instructed to, and do hereby, require you to confirm within 2 days from the date of this letter whether your client will unconditionally complete the captioned transaction by 5:00 p.m. of 2nd January 1991. If your reply is in the affirmative, you shall let us have your approved assignment to the Property and instructions as to how cheques should be drawn before noon of 2nd January. If your answer is otherwise, our client shall take any necessary action including institution of legal proceedings without giving you further notice.

We reiterate that our client is ready and willing to complete the purchase of the Property."

32. On 31 December 1990, the vendor's solicitors replied to the purchaser's solicitors as follows :

"1/ To answer your letter of 28/12/90 : No - our client will not unconditionally complete the captioned transaction at the time you specified or at all - No obligation to do as demanded by you

2/ For the avoidance of doubt, we are instructed to repeat our position :-

i) Our client has shown a good title on the date of completion (23/11/90 and as extended)

ii) We reject your contention that our client did not show a good title on 23/11/90 (as extended) to 26/11/90

iii) Your client's failure to complete on 23/11/90 (as extended) entitled our client to exercise her rights under the S & P Agreement and they included (but not limited to) the following rights :-

a) Forfeiture of the deposit paid under the said S & P Agreement

b) Recission from the said S & P Agreement

c) Resale of the subject premises captioned.

3/ Our client does exercise her such rights enumerated under 2(iii)a and 2(iii)b supra and will exercise her right of resale in due course

4/ We would make the following comments with reference to your letter of 22/12/90.

i) We don't appear to have a copy of our letter to you dated 21/12/90 - grateful if you could supply us with a copy

ii) Your letter of 22/12/90 appeared to have totally ignored our letter Of 20/12/90 to you (incidentally could this be the one you mistakenly called our letter of 21/12/90?) If you did read it carefully & respected us enough to try to answer some of the points we raised, you might be surprised at your Miss Tse's manners rather than be astonished at our Mr. Fang's 'unoperative manner' - we mean no disrespect but we really don't know what is meant by the above in quotes and would be grateful if you could elucidate.

5/ In 'the telephone conversation' of 22/12/90 that so annoyed your Miss Tse, your Miss Tse expressed the opinion that there is not a chance in 100 that she could be wrong in law or fact in stating we did not show a good title in stating on behalf of our client on date of completion (23/11/90) and therefore she was justified in doing what she insisted us do. We of course refuted her views and refused to do her bidding. You might be surprised to hear we are/were duty bound to protect the rights of our client too. No rebuking intended.

6/ Up to now, the only evidence of any viable solution avowed/enunciated by you consisted of further intransigence - when we tried to find a viable solution and proposed acceding to your original requests (J. FANG & CO as stakeholders for balance of purchase price until 15/12/90) you changed these inexplicably to J FANG & CO & KAO LEE & YIP as joint stakeholders; money to be released on 16/12/90 (surely you are having a joke at our expense - the 16th being a SUNDAY) PLUS physical inspection of the premises concerned. In the circumstances could we or our client be blamed for being slightly vexed or just feeling a little bit insulted? So we are lawyers, please don't forget lawyers and clients are also human beings.

7/ So, to sum up, we don't want litigation but must protect our client's rights inter alia as stated in paragraph 2(iii)a, b & c. We will advise our client to complete (as an act of mitigation of loss for our respective clients) if you can/will give an indemnity with regard to any loss/damages suffered by our client in case we end up in court and obtained a favourable declaration from the Court on having shown a good title to the premises on the relevant date(s).

8/ We must also insist you assist us in evaluating/avoiding litigation by enlightening us as to how you come to the inescapable conclusion that a) we failed to show a good title on 23/11/90 on behalf of our client & b) why you must insist on the steps you took (eg. no other ways?)

9/ If you request it (we dare not presume to teach your firm or Miss Tse any law) we shall, upon receiving your reply to Q.8 above supply our humble views as to why Miss Tse might be wrong to assume that she could not be wrong in her opinions.

10/ Resale value - we are instructed that reliable valuation puts the current market value of the flat at between $1.20 - $1.24 million dollars. Please obtain your own quick valuation.

11/ Miss Tse remarked she did not know what losses our client could have suffered - Well, inter alia, Forfeiture of Deposit + Gain in Resalefor a start, if the finding be that your client's failure to complete on relevant date gave our client all the contractual rights under the S & P Agreement.

12/ As we stated, we will complete, on terms equitable to our client.

Please revert soonest."

33. On 3 January 1990, the vendor's solicitors wrote again to the purchaser's solicitors, as follows :

"We refer to our comprehensive letter dated the last day of 1990 & would appreciate your reply soonest.

May we extend to your greeting of the new year : peace on earth and good will towards all men."

34. On 3 January 1991, the purchaser's writ was issued. Further acrimonious correspondence followed; but, fortunately, I need not refer to it.

The purchaser's case

35. On these facts the purchaser, who has always wanted to complete the transaction and acquire the flat, claims to be entitled to specific performance of the agreement.

The vendor's case

36. The vendor contends it is now too late for that. She says that, on 23 November 1990 (and on the next day until 1:00 p.m.) she stood ready, willing and able to make a good title to the flat; that the purchaser, by refusing to accept the title then offered, repudiated the agreement; and that the purchaser cannot, having repudiated the agreement, claim specific performance of it. And even if the title then offered was not a good title, says the vendor, the purchaser can only claim damages, not specific performance; if the purchaser wanted the flat, then, says the vendor, time being of the essence of the agreement, the purchaser had to accept whatever title the vendor could offer on the date fixed for completion, or lose the flat altogether.

The issues

37. The first issue, then, is whether the vendor did, on the date fixed for completion, offer a good title to the purchaser. If she did, the purchaser, by refusing to accept it, clearly repudiated the contract, and the second issue arises, i.e. whether the vendor accepted that repudiation, putting an end to the contract, or, instead, affirmed that contract, keeping it alive for the benefit of both parties and thus keeping alive the purchaser's right subsequently to change its mind and accept the title (as it did, or purported to do, by its solicitors' letter of 15 December 1990). If the vendor did not offer a good title on the date fixed for completion the third issue arises, i.e. whether the purchaser lost its right to specific performance by insisting, on the date fixed for completion, on being offered a good title, so that its only remedy for the vendor's breach of contract in failing, on the date fixed for completion, to offer a good title is its remedy in damages (for what, having regard to the rule in Bain v. Fothergill (1873) LR 7 HL 158, that remedy is worth.)

The first issue - did the vendor offer the purchaser a good title on 23 November 1990?

38. In my judgment, she did not. The purchaser's objection to the title based on the existence of the charge for management fees, etc., which remained unanswered on 23 November 1990, entitled the purchaser to refuse to complete until the objection was met, either by the discharge of the encumbrance or by the tender of an undertaking to procure its discharge. So the refusal of the purchaser to complete on 23 November 1990 was justified. At the date of the commencement of its proceedings the purchaser remained entitled, as it remained entitled at the trial, to the remedy of specific performance.

39. The purchaser's other objection, based on the non-registration, or late registration, of the assignment to the vendor was in my judgment not justified. The purchaser had no grounds at all for concern that some interest or encumbrance affecting the flat had been created by the vendor, or any predecessor in title of the vendor, which would take priority, because of the non-registration or late registration of the assignment to the vendor, over the assignment to the purchaser. If there had been any evidence of the creation of any such interest or encumbrance, then the question of priorities would have been relevant and indeed important; but there was no such evidence, and the objection was, in my judgment, completely misconceived. A fear that the vendor's title may be defective, not based on any evidence to that effect, is not a valid objection to the title.

The second issue - did the vendor accept the purchaser's repudiation of the contract and bring the contract to an end?

40. Since the first issue falls to be decided in favour of the purchaser, the purchaser did not repudiate the contract by refusing to accept the title offered on 23 November 1995. The second issue, therefore, does not arise.

The third issue - did the purchaser lose its right to the remedy of specific performance by refusing to accept the title offered on 23 November 1990?

41. In my judgment, it did not. The argument for the vendor, as I understood it, was that, since time was of the essence of the agreement, the purchaser had to perform its own part of the contract on 23 November 1990 by paying the vendor the purchase money on that date, irrespective of the vendor's willingness or ability to perform her own obligation to offer a good title; performance by the purchaser after 23 November 1990 would not and indeed could not be performance in accordance with the contract. This argument was unsupported by any authority; is wrong in principle; and must be rejected. In the absence of express provision to the contrary in the contract, the performance by the vendor and the purchaser of their respective obligations on the date of completion is a bilateral process. At completion the vendor is obliged to make title and deliver a proper assignment of the property to the purchaser and the purchaser is obliged to tender the purchase money to the vendor. There is no justification in principle or authority for the suggestion that, because time is made of the essence of the agreement, the vendor is entitled to be paid the purchase money on the date fixed for completion when the vendor himself is unable or unwilling to make title to the property in accordance with the contract.

Conclusion

42. I would therefore hold that the purchaser, at the date of the trial, had not lost its right to specific performance of the agreement and that the judge was entitled to make an order for specific performance in its favour; and I would dismiss this appeal.

Costs

43. As to costs, I would be minded to order that all these be paid by J. Fang & Co., the vendor's former solicitors, who, in my provisional view of the matter, were exclusively responsible for all this ruinous litigation. J. Fang & Co. should be notified accordingly, and invited to show cause why such an order should not be made.

Ching, J.A. :

44. I agree.

Bokhary, J.A. :

45. I also agree that this appeal must be dismissed; and it is dismissed accordingly.

46. Costs will be dealt with on a date to be fixed. My mind is open on the question of costs. But since we may, after hearing all concerned, make an order as to costs against Messrs J. Fang & Co. under Order 62, rule 8, they will of course be given a reasonable opportunity to appear before us and show cause why no such order should be made. Accordingly, they will be notified that we may make an order as to costs against them. They will be so notified before the fixing of the date for dealing with costs; and they may make representations as to the date to be so fixed.

47. Finally, I am sure that I speak not only for myself but also for the other members of the Court when I say that each counsel has presented submissions which reflect a very high degree indeed of industry and ability.

Representation:

Mr. Chan Chi Hung (M/s. Chan & Kong) for Appellant/Defendant

Mr. Stewart K.M. Wong (M/s. Chung & Kwan) for Respondent/Plaintiff