Chinachem Investment Co Ltd v. Wong Lai-ying and Others

CACV000005/1978

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Coram: Briggs, C.J., Huggins & Pickering, JJ.A.

Date of Judgment: 4 August, 1978.

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JUDGMENT

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1. The appellant in each of the two appeals is the developer and owner of a building known as University Heights situated at 12 Babington Path, Hong Kong. In Civil Appeal No.4 of 1978 there are two respondents and in Civil Appeal No.5 of 1978 there are 24 respondents. Each respondent is a purchaser of one or more flats in the said building.

2. On December 3rd, 1977 judgment was entered in favour of the respondents for a declaration that the agreements of purchase and sale of the flats made between the individual respondents and the appellant had not been frustrated. Various other orders were made and, in particular, the court ordered specific performance of the contracts of sale which are the subject matter of Civil Appeal No. 5 of 1978.

3. The respondents contend that the contracts in both appeals have been frustrated. And, of course, if they are right the orders for specific performance cannot stand.

4. The contracts of sale are all in similar terms so far as the material provisions are concerned. They were all entered into on different dates in 1970 and 1971. The two respondents in Civil Appeal No.4 of 1978 have paid the whole contract price. The respondents in Civil Appeal No.5 of 1978 have each paid a down payment or a deposit to the appellant. All the sums paid by the respondents in both appeals have been paid into court.

5. The building was to consist of two tower blocks and the appellant obtained the consent of the Building Authority to commence work on November 17th, 1971. At the time of the signing of the contracts the building was in its early stages. By June 1972 the foundation of one block had been completed and the foundation of the second block had been half completed.

6. On June 18th, 1972 part of the hillside above the site of University Heights slipped down the hill taking with it a block of flats of thirteen storeys called Kotewall Court. The debris from this building together with many hundreds of tons of earth landed on the appellant's site obliterating the building works already completed. The landslide was of major proportions and 67 persons were killed.

7. The authorities realised that the whole area was unsafe and the appellants were barred from the site while urgent rescue work was undertaken. At this stage, the appellants did not know if they would ever be allowed to return to the site.

8. On November 3rd, 1972, the Building Authority informed the appellants that building on the site would be possible but that certain very stringent conditions would be imposed before a permit to build was issued.

9. They pointed out that the whole project of the appellants must be looked at afresh. The disaster had caused Government to revise the policy for buildings in the Mid-levels and their requirements for safety would be very much more onerous in the future.

10. A very thorough investigation of the site would be necessary and no consent to continue to build would be granted until details of the work to be done to stabilize the site had been submitted and considered by the Authority.

11. The Building Authority pointed out to the appellants that the consent to commence building previously given had lapsed by operation of section 20 of the Buildings Ordinance. It would, therefore, have been illegal for the appellants to have continued to complete the building. However, they were allowed to enter the site and do clearance and demolition work.

12. Clearance of the site was then commenced and a thorough investigation was undertaken so as to comply with the new requirements of Government.

13. The site was an awkward one and it was not cleared until May 25th, 1973. Extensive soil tests were made commencing in August 1973. These lasted for a whole year so that differing weather conditions according to the seasons could be studied.

14. As a result of the investigation, it was decided that the present foundations of the building or part of them were insufficiently strong. And permission was granted to the appellants to undertake remedial work in the summer of 1975. Finally, the renewed consent to resume the building work was granted in November 1976.

15. As I have said the original consent had been given in November 1971. The building was scheduled under the contract to take eighteen months to build but a clause in the contracts (to which I shall refer later in this judgment) allowed an extension of 365 days. So the consent to resume work was given a very long time after the latest possible date for completion under the contracts.

16. At the trial it was conceded that due to the landslide and the date of the renewal of the consent it was not possible for the appellant to complete the building before October 1st, 1976 or reasonably practicable for them to do so before the end of 1976.

17. It was also conceded at the trial that the 1 andslide was "an unforeseeable natural disaster". To summarise the case of the appellants, they say that as a result of that disaster they were first excluded from the site totally for five months. Secondly, the building permit lapsed making it illegal for them to continue with the work. They had to stop. Thirdly, they say that there was a long and uncertain period of delay. This was due to investigatory work necessitated by the new requirements of Government and it cannot be considered to be a limited period of delay. It was a period which at the time was incalculable. And, in fact, it lasted for 3 ½ years. Part of this period was due to the fact that certain remediable works on the site had to be done, a lengthy investigation as to the feasibility to build had to be undertaken and the design of the building had to be refashioned - none of this was envisaged by the original contract. Fourthly, they had already spent some two million dollars on the foundation of the building. Almost all, if not all of this was lost as different foundations were required to be constructed. It appears that though the superstructure of the building is much the same as the original design this is not true of the foundations, which were wholly different from what was considered appropriate before the landslide occurred and at the time of the signing of the contract. And they were very much more expensive. Underpinning work was necessary. And the spread-footing foundations in one of the two blocks of flats had to be replaced by caissons. In addition, it was necessary to provide caissons to support Kotewall Road, the road running alongside the site. The trial judge found as a fact that the appellants had to undertake a great deal more work than was originally considered sufficient. In view of all this, the appellants say, that not only was there delay but they were put in a position of uncertainty: they did not know when they would be allowed to continue building, nor what type of building they would be allowed to build: they could not tell whether any flats built on that site would be saleable, even if they were allowed to build. They were completely in the dark as to the cost of any building and the length of time it would take to complete. All this, they say, flows from the unforeseeable natural disaster of the landslide.

18. The contracts of purchase and sale were in the form that the vendor, the appellants, were to build a block of flats on their own land and when it was complete to sell a flat or flats in that building to the purchaser. This is a very common form of contract in Hong Kong. The agreements (and I am now referring to the agreements, the subject matter of Civil Appeal No. 5) contained provision for payment by instalments. Upon the signing of the agreement a deposit was to be paid to the appellants: further instalments (called 'deposits') were to be paid at regular intervals which were made dependent upon the stage at which the building had reached. The final balance of the purchase price was to be paid to the vendor, the appellants, "within seven days upon the purchaser being notified by the vendor in writing that the occupation permit in respect of the said building has been issued by the Building Authority."

19. Though the contracts were signed long before the building was to be completed the date of the conveyance was to be in accordance with the above words which are taken from the Schedule to the contracts. These contracts were essentially contracts for the purchase of a flat which was to be built by the appellants on their own land. They were executory contracts, to grant a lease, contingent upon the appellants building the block of flats and obtaining a building permit and, subsequently, an occupation permit. The actual conveyance could be described as a formality, though, of course, a necessary formality.

20. Other terms of the contract which it is necessary to consider are the following:-

Following the landslide the appellants did not attempt to exercise their right to rescind the agreements under clause 22.

21. In August 1975, before the consent of the Building Authority to resume construction had been given, the respondents in Appeal No. 5 made enquiries as to the operation of clause 3(3) of the agreement which is quoted above; and the respondents in Civil Appeal No. 4 likewise enquired about interest payable under clause 3(2) also quoted above. The appellants replied that they considered that all the contracts had been discharged by reason of frustration and the amount of money which had been paid to the appellants was returned to each individual respondent.

22. The respondents in Civil Appeal No. 4 accepted the return of their money but claimed and still claim interest under clause 3(2) of the contract. The respondents in Civil Appeal No. 5 refused to accept the moneys. So the appellants paid these sums into court. These appellants also claim interest on such sums under the provisions of clause 3(3) of the contract.

23. Frustration is a doctrine of the common law. It arises where it appears from the nature of the contract and from the surrounding circumstances that the parties have contracted on the basis that a certain state of things shall continue, but through no fault of either party, an event occurs which makes performance of the contract impossible or only possible in a very different manner from what was contemplated when the contract was entered into. In the present case, the event which the appellants say frustrated the contract was the landslide. And this was found by the trial judge to be "a frustrating event".

24. It is necessary for the court to look at the matter at the time of the occurrence of the frustrating event and not with hindsight or long afterwards. It must pay regard to the probabilities as known to the parties at the time that the landslide occurred. The question is: What was the position at that time? Though, of course, the subsequent history of events may be of assistance in determining the matter.

25. In the case of Bank Line, Limited v. Arthur Capel and Company⁽¹⁾, Lord Sumner said (at page 454):-

"The question must be considered at the trial as it had to be considered by the parties, when they came to know of the cause and the probabilities of the delay and had to decide what to do."

26. Lord Sumner in Hirji Mulji v. Cheong Yue Steamship Company Limited⁽²⁾, a Privy Council case, said at Page 509:-

"What the parties say and do is only evidence, and not necessarily weighty evidence, of the view to be taken of the event by informed and experienced minds."

This statement of the law was adopted by Lord Wright in Denny, Mott & Dickson Ltd. v. James B. Fraser & Co. Ltd.⁽³⁾ at page 276 where he has this to say:-

"......... when frustration occurs, it is automatic, and that its legal effect depends not on the intention of the parties or even on their knowledge as to the event, but on its occurrence in such circumstances as to show it to be inconsistent with the further prosecution of the adventure. I mention these two aspects of the principle here because they are important for the decision of the present case. The event is something which happens in the world of fact, and has to be found as a fact by the judge. Its effect on the contract depends on the meaning of the contract, which is matter of law. Whether there is frustration or not in any case depends on the view taken of the event and of its relation to the express contract by 'informed and experienced minds.'"

27. In the present case the parties obviously contracted on the basis that the land on which the blocks of flats were to be erected would remain continually available. And that a building permit would remain in force so that it would not be illegal to build. These points are obvious from the terms of the contract itself.

28. Clause 12 of the contracts makes time of the essence of the contract "in every respect" and the parties expected to be able to complete the purchase in a reasonable time, at most within 2 ½ years, from the issue of the building permit and did not contemplate the very long period of delay which has occurred.

29. At the time of the landslide the parties could not know how soon the appellants would be allowed to re-enter the site, how long the delay would be and whether they would be granted a new building permit, nor if one was granted, when it would be approved. The position of the parties was clouded in uncertainty. There are also two other points which must be taken into account. By reason of the landslide the appellant has been put to enormous extra expense and the monies of the respondents which were in the appellant's hands were tied up on an idle site.

30. The trial judge held that the landslide was a frustrating event and I see no reason to disagree with that finding.

31. The trial judge, though he made this finding, held that the doctrine of frustration did not apply in view of the provisions of clause 22 of the contract which I have quoted above. In his own words:-

"I am of the opinion that since there are clear provisions for the rescission of agreements in the event of unforeseen circumstances the principle of frustration does not apply."

32. Counsel for the appellants argued that the true rule is that where there is a frustrating event, the contract automatically comes to an end by operation of law "unless it is quite plain" from the contract that the parties have agreed to be bound by the new circumstances. The question to be answered is: Have the parties excluded the common law doctrine of frustration by the terms of their contract? Lord Haldane, in the Bank Line Case⁽¹⁾, stated the principle thus:-

"What is clear is that where people enter into a contract which is dependent for the possibility of its performance on the continued availability of the subject-matter, and that availability comes to an unforeseen end by reason of circumstances over which its owner had no control, the owner is not bound unless it is quite plain that he has contracted to be so."

33. If the parties have specifically contracted to be bound by the new circumstances there will be no room for the doctrine of frustration to apply. However, the intention to be so bound must be clearly expressed.

34. As I have said, in reaching his conclusion that the doctrine of frustration does not apply in this case, the trial judge relied on the terms of clause 22 of the contract. This gives an option to the vendor to rescind the contracts and to return the purchase money already paid. In the words of the clause this option arises when "any unforeseen circumstances beyond the vendor's control whereby the vendor becomes unable to sell" (the flats) occur. And it was common ground that the landslide was "an unforeseeable natural disaster". The question is whether the words of clause 22 of the contracts clearly and plainly show that the parties contracted to exclude the doctrine of frustration. Counsel for the appellants argued that they did not.

35. The appellants rely also on a passage in the judgment of Lord Denning in "The Eugenia"⁽⁴⁾, at page 239:-

36. In Metropolitan Water Board v. Dick, Kerr and Company, Limited⁽⁵⁾ a firm of contractors contracted with a water board to construct a reservoir. The work was to take six years. The year was 1914. The contract contained a proviso that if "by reason of any difficulties, impediments, obstructions, oppositions, doubts, disputes or differences whatsoever and howsoever occasioned" the contractors should, in the opinion of the engineer, have been unduly delayed or impeded in the completion of the contract, the engineer could grant an extension of time for completion. In 1916, as a war time measure the Ministry of Munitions ordered the work on the reservoir to cease. The contractors claimed that the contract had been frustrated by the order of the Minister and it was so held by the House of Lords.

37. In commenting on the effect of the very wide words of the proviso, Lord Dunedin said (at p.130):-

38. It cannot be said that the words of clause 22 of the contracts in the present case are any the less wide than the words of the proviso in the Metropolitan Water Board Case⁽⁵⁾.

39. But I think there is a more important point, clause 22 gives an option to the appellants to cancel the contract. It has no application to the respondents. I do not see how this clause affects the application of the doctrine of frustration which operates as a benefit to or to the detriment of both parties.

40. The fact that there are provisions in a contract giving one party the option to terminate his obligations under the contract in certain circumstances does not in itself exclude the applicability of the doctrine of frustration.

41. This was the ratio decidendi of the Bank Line Case⁽¹⁾. In that case there was a charterparty in which there were special provisions allowing the charterers to cancel the charter upon the vessel being commandeered by the Government during the period of the charter. The ship was requisitioned. It was held that the special clauses did not exclude the application of the principle of frustration and that the requisition had resulted in the frustration of the charterparty.

42. It does not matter which party is given the right to cancel of course. In order to exclude the doctrine of frustration that intention must be apparent in the contract itself. It must be shown that that was the parties' intention.

43. In the present contract, I can find nothing which shows that intention. Certainly clause 22 does not express such an intention. It merely gives an option to the appellant, as I have already said, to avoid their contractual obligations, though admittedly in very wide circumstances.

44. The respondents argued that this was not a case for the application of the doctrine of frustration. They relied on Davis Contractors Ltd. v. Fareham U.D.C.⁽⁶⁾. This case arose out of a building contract. The contractors agreed to build 78 houses for the Council for a fixed sum in a fixed time. There was a proviso that the contract was subject to there being adequate supplies of labour. Through no fault of the parties there was not an adequate supply of labour and the work took 22 months and cost very much more than the price contracted for. The court held:-

"That the contract had not been frustrated. The fact that, without the fault of either party, there had been an unexpected turn of events, which rendered the contract more onerous than had been contemplated, was not a ground for relieving the contractors of the obligation which they had undertaken and allowing them to recover on the basis of a quantum meruit."

45. In my view, this case is easily distinguishable from the present case on its facts. All that happened in that case was that the contractors miscalculated and the result was that there was delay and the work was more expensive. Both the elements are present in the present case it is true, but in the Davis Contractors Case⁽⁶⁾ there was no element of unforeseeability, illegality or uncertainty. And the contract the contractors actually had to undertake under the contract was the very contract they performed.

46. It follows that, in my view, the trial judge was wrong. I do not think that clause 22 of the contracts operates so as to exclude the doctrine of frustration. In my view, on the facts of this case, which I have set out earlier in this judgment, these contracts were frustrated by the landslide.

47. Counsel for the respondents argued that the contracts are not building contracts, they are contracts which convey an interest in land, and indeed, that they are predominately so. The building element in the contract has not displaced what was referred to as the "estate element". And the doctrine of frustration of contract has no application to such contracts though it is possible that it may apply to a lease.

48. There is no doubt that the contracts contemplated the sale of land. But they are far more than that. The conveyance is a formality though a necessary one. The purchaser wants a flat not an undivided share in a fraction of the land. There cannot be a sale at all until the flats have been built. At the time of the frustrating event, the purchaser had no estate in the land nor would they have until the flats had been completed. From their terms, the contracts, in my view, are clearly building contracts. This is always the case when, as here, the vendor and builder plans to build a housing estate and sells before building the houses.

49. In a striking phrase, counsel for the appellant said that the conveyance in such a case is the 'tail of the dog'. Until that point is reached there is no estate at all. The contract to grant a lease is executory and contingent until the building has been erected.

50. In the respondents' Notice a second matter was raised, that since the contracts in the words of the trial judge legislated for acts of God and unforeseen circumstances, the doctrine of frustration was thereby excluded. I do not agree with that interpretation of the contracts for the reasons given above.

51. I would allow this appeal with costs here and below. It follows that since the contracts have been frustrated the other orders made by the trial judge must be set aside and judgment entered for the appellants on the counterclaim for a declaration that the contracts have been frustrated and that the respondents, and each of them, are not entitled to interest as claimed or at all.

Representation:

Wilmer, Q.C., Miller, Q.C. & C.Y. Lee (F. Zimmern & Co.) for appellant.

D. Chang & A. Li (Hwang & Co.) for respondents.

(1) (1919) A.C. 435.

(2) (1926) A.C. 497.

(3) (1944) A.C. 265.

(4) (1964) 2 Q.B. 227.

(5) (1918) A.C. 119.

(6) (1956) A.C. 696. 

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Coram: Briggs, C.J., Huggins and Pickering, JJ.A.

Date of Judgment: 4th August 1978.

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JUDGMENT

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Huggins, J.A.:

I am of the same opinion.

2. I think it is convenient to deal first with the contention raised by the Respondents' Notice that this contract could not be frustrated because it was a contract for the sale and purchase of land and the landslide was clearly not an event which rendered impossible the transfer of the Vendor's interest to the Purchasers. That these were far more than simple contracts for the sale of land is apparent from the words of Clause 1: it related not only to

"all those eleven equal undivided 1,613th parts or shares of and in all that piece or parcel of ground .... registered in the Land Office as Inland Lot No.3171 ...."

but also to the like shares in

"the messuages erections and buildings now in the course of being erected thereon ... together with the sole and exclusive right to hold use occupy and enjoy all that apartment .... of the said [building] which said building the vendor agrees to complete in manner hereinafter mentioned".

Our law does not recognize the possibility of the ownership of a flat separate from an interest in the land which supports it and the parties therefore adopted the usual conveyancing technique of annexing the flat to an undivided share in the site. It would be unrealistic to assume that, because the undivided shares in the site were a necessary adjunct to the sales of the flats, they constituted the substantial subject matter of the contracts. What the purchasers wanted were flats to live in and this was well known to the Vendor. Unless the Vendor had agreed to build the flats it is inconceivable that these Purchasers would have contracted to buy undivided shares in the site. Clause 22, which formed the basis of the learned judge's conclusion, itself contemplates a situation where the Vendor "becomes unable to sell the said undivided shares and apartment" (the emphasis is mine). Clause 3(2) entitled the Purchasers to rescind upon the Vendor's failure to finish the building within an ascertainable time, thus showing that the building was a fundamental part of the contract. The substance of these agreements was the sale and purchase of flats and it is no answer to the argument that the agreements have been frustrated that a contract for the sale of an estate in land cannot be frustrated, at least unless some cataclysmic event causes the land to sink beneath the sea. It is true that this was not "a building contract" in the sense in which that phrase is normally employed: it was, in substance, a contract for the sale of something to be built. I am prepared to accept for the purposes of this case that an agreement for a lease cannot be frustrated (Cricklewood Property and Investment Trust Ltd. v Leighton's Investment Trust Ltd. 1945 A.C. 221) but I see no reason why a contract of the general type in question here should not. Just as in Denny, Mott and Dickson v James B. Fraser & Co. Ltd. 1944 A.C. 265 the main object of the agreement was trading, although there was also provision for the purchase or letting of the timber yard, so here the main object of the agreement was provision of a residence.

3. Although the ultimate issue in each case must be whether the particular event has frustrated the particular contract, I am content to approach the matter initially in two stages. However, I prefer not to use the expression "a frustrating event" with reference to an event which does not frustrate a contract (for to do so seems to me to be courting confusion) and therefore I define the two stages thus:

4. First I make two general comments. It was said by Lord Denning in The Eugenia 1964 2 Q.B. 226, 239:

"It has frequently been said that the doctrine of frustration only applies when the new situation is 'unforeseen' or 'unexpected' or 'uncontemplated,' as if that were an essential feature. But it is not so. The only thing that is essential is that the parties should have made no provision for it in their contract. The only relevance of it being 'unforeseen' is this: If the parties did not foresee anything of the kind happening, you can readily infer they have made no provision for it: whereas, if they did foresee it, you would expect them to make provision for it."

Here the landslide was accepted on all sides to have been unforeseen. Secondly, although I refer to the concept of "justice" it must be recognized that

"it is not hardship or inconvenience or material loss itself which calls the principle of frustration into play. There must be as well such a change in the significance of the obligation that the thing undertaken would, if performed, be a different thing from that contracted for." (Davis Contractors Ltd. v Fareham Urban District Council 1956 A.C. 696, 729).

5. Again it is convenient before turning to the Appellant's main submissions to deal with a contention raised by the Respondents' Notice, namely that the landslide was an event covered by Clause 3 of the agreement. Clause 3 expressly refers to "Acts of God" and "any other cause beyond the control of the Vendor", both expressions which prima facie might appear to describe the unforeseen disaster which occurred here. One must, however, read the clause as a whole and see whether it is quite plain that the parties had in mind such overwhelming events as would otherwise frustrate the contract. Wide as the words of para. (4) are I do not think the parties were, in effect, agreeing that nothing which might conceivably occur should frustrate this contract. The clause was concerned with the date for the finishing of the building and with the possibility that that date might be postponed. It is, of course, argued that in the event this building can and will be completed, but it does not follow that every delay, however long, is necessarily within the terms of the clause. When construing the words of a contract one is concerned to ascertain what was the intention of the parties. Clause 3(3) allows the Purchasers, if they do not rescind under para. (2), to wait until the building is finished and provides "in that event" for the payment of interest. On the assumption that the Purchasers do not have to wait until the building is finished before such interest becomes payable, this indicates that frustration of the contracts was a contemplated possibility, otherwise interest would be payable ad aeternum if building became impossible. Then the very fact that a maximum extention of 365 days in the aggregate might be granted by the architect in respect of delays caused by the specified events suggests that the parties had in mind delays which might reasonably be expected to result in "a limited interruption": see Fibrcsa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd. 1943 A.C. 32, 40. In every case it must be very much a matter of general impression whether the event is one of a kind intended by the parties to be covered by the contract, but I have no doubt that the judge was right to decide that Clause 3 was not intended to cover such an event as this landslide.

6. Clause 22 was also drafted in very wide terms and provided that "should any unforeseen circumstances beyond the vendor's control arise whereby the Vendor becomes unable to sell ..." the Vendor should be at liberty to rescind. The learned judge was persuaded that

7. It remains to decide whether the landslide was of such a nature that the continued performance of the contract would require one or both of the parties to do something so radically different from what was originally contemplated that it would be unjust to hold the parties still bound. Had he not concluded that it was an event which had been fully provided for by the terms of the contract, I think it is clear that the learned trial judge would have held that it was. With that I would agree. This was no minor landslip confined to the site of the building itself. It must have been immediately apparent that further operations not only on that site but on all sites in the Mid-levels might be delayed indefinitely and might even be impossible, either physically or by virtue of Government intervention. As Mr. Brian Boys said, even five months later it was not known whether a building on the site could be allowed to exceed three storeys, although I read his evidence as indicating that by then there was no doubt building of some kind would eventually be allowed, provided that extensive tests were first carried out. Had the position appeared similarly in June 1972 it would still have been uncertain whether an agreement to sell, for example, a flat on the 6th floor could be performed within the life time of its would-be purchaser. It is not every delay the duration of which at the outset is uncertain that will frustrate a contract: Braemount Steam Ship Co. v Weir & Co. (1910) 15 Com. Cas. 101. What is required is an interruption which appears likely to be

"so long as to destroy the identity of the work or service, when resumed, with the work or service when interrupted": per Lord Dunedin in Metropolitan Water Board v Dick Kerr & Co. Ltd. 1918 A.C. 119, 128.

In that case there was something more than a delay of uncertain duration, for the direction to comply with the instructions of the Director of Factory Construction as to the plant and labour on which the contractor was depending for the performance of his part of the contract was an added factor. More assistance is, therefore, to be obtained from Bank Line Ltd. v Arthur Capel & Co. supra, where delay was the sole result of the event which happened. The date for delivery of the vessel under the charterparty for twelve months was "not before 1st April 1915" and there was an option for the charterers to cancel the contract if delivery had not been made by 30th April 1915. On 11th May, the vessel not having been delivered and the charterers not having exercised their option, an order of requisition was made. On 17th August the government indicated that it would release the vessel so that she might be sold, provided that a replacement was supplied, and she was in fact released on 2nd September. The House of Lords held that the charterparty had been frustrated.

Lord Finlay, L.C., said at p. 442:

"A charter for twelve months from April is clearly very different from a charter for twelve months from September".

Lord Sumner observed at p. 458 that

"Delay even of considerable length and of wholly uncertain duration is an incident of maritime adventure, which is clearly within the contemplation of the parties, such as delay caused by ice or neaping, so much so as to be often the subject of express provision".

Nevertheless he, too, thought that delay resulting from requisition frustrated a charterparty for twelve months, for the requisitioning

"destroyed the identity of the chartered service and made the charter as a matter of business a totally different thing. It hung up the performance for a time, which was totally indefinite and probably long. The return of the ship depended on considerations beyond the ken or control of either party".

Hirji Mulji v Cheong Yue Steam Ship Co. Ltd. 1926 A.C. 497 merely shows that

"Whatever the consequences of the frustration may be upon the conduct of the parties, its legal effect does not depend on their intention or their opinions, or even knowledge, as to the event, which has brought this about, but on its occurrence in such circumstances as show it to be inconsistent with further prosecution of the adventure" (p. 509).

In that case "the parties were very sanguine", as the Purchasers (and possibly the Vendor also) may have been here. Nevertheless, applying the test approved by Lord Sumner, I am satisfied that the landslide made the contract between the parties as a matter of business a totally different thing from that which they had contemplated.

8. I would allow the appeal.

4th August 1978.

Representation:

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Coram: Briggs, C.J., Huggins and Pickering, JJ.A.

Date of Judgment: 4th August, 1978.

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JUDGMENT

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Pickering, J.A.:

I am in agreement with the conclusion reached by the learned Chief Justice and desire to add only one further consideration which leads me to agree that these Agreements were frustrated.

2. Immediately following the landslide the appellants, despite some encouraging circulars which they issued, could not have known when they would be permitted to enter on the site again, if ever. Nor, whether if permitted re-entry, what type of building they would be permitted to erect, if any. It was entirely possible that they would never gain access to the site or that if permitted access, they would not receive permission to build anything like the number or type of flats which they had contracted to build and to sell to the respondents. Yet had they been so debarred and had the respondents chosen not to rescind their Agreements, the appellants would have been liable under Clause 3 of the Agreements, to pay to each respondent interest at the rate of one per cent per month upon the purchase price or deposit paid - and that in perpetuity. For my part I cannot conceive that, in the words of Lord Haldane in Bank Line Ltd. v. Arthur Capel & Co.⁽¹⁾, it is "quite plain" that the appellants had contracted for so bizarre a result.

3. For the reasons given by my Lord Chief Justice, and for this additional reason, I too would allow this appeal with costs here and below.

Representation:

Wilmer, Q.C., Miller, Q.C. and C.Y. Lee (F. Zimmern & Co.) for Appellant.

D. Chang and A. Li (Hwang & Co.) for Respondents.

(1) 1919 A.C. 435 at 445.