Wellfit Investments Ltd. v. Poly Commence Ltd. and Another
Read the full judgment text of CACV 56/1996 on BabelCite. This Court of Appeal judgment was delivered on 14 November 1996.
1. I gratefully adopt the words with which Keith, J. (from whom this appeal is brought) introduced his own long and careful judgment in this case, handed down on 25 July 1995 :
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CACV000056/1996 IN THE COURT OF APPEAL 1996, No. 56 ----------------- HEADNOTE ----------------- When it is alleged, in relation to a contract for the sale and purchase of land, being a contract time for the performance of which is of the essence, that the purchaser's time for completion has been "extended" as a result of a telephone conversation between the vendor's solicitors and the purchaser's solicitors, the court will not hold the telephone conversation to have effected a variation of the contract (unless evidenced in writing signed by on behalf of the vendor), and will not hold the vendor otherwise bound (whether by waiver or estoppel) to the alleged "extension" in the absence of evidence of clear and unambiguous language having that consequence. Although the court may, in equity, preclude the vendor from rescinding the contract even in the absence of such evidence, it will do so only if the vendor has acted unconscionably. IN THE COURT OF APPEAL 1996, No. 56
---------------------- Coram : Hon. Nazareth, V.-P., Godfrey, J.A. and Leonard, J. Date of hearing : 5 November 1996 Date of handing down judgment : 14 November 1996 ---------------------- J U D G M E N T ---------------------- Godfrey, J.A. : Introduction 1. I gratefully adopt the words with which Keith, J. (from whom this appeal is brought) introduced his own long and careful judgment in this case, handed down on 25 July 1995 :
2. This "twist in the story", as the judge called it, is itself not uncommon. In the present case, having set out the "story", the judge concluded that the purchaser's time for completion had been so "extended"; that the purchaser had come up with the purchase money within the "extended" time; that accordingly the vendor's purported rescission of the contract before that "extended" time had expired was of no effect; and that the purchaser was entitled to specific performance of the contract. On 8 January 1996 he so ordered; the vendor now appeals. The facts 3. The material facts as found by the judge (so far as I need to rehearse them) may be stated as follows. 4. By an agreement dated 26 November 1990 and made between (1) Yorku Development Limited ("Yorku") and (2) Poly Commence Limited ("Poly"), Yorku agreed to sell to Poly a flat (with car parking spaces) known as Suite L, 1 Robinson Road, Mid-Levels ("the property") for HK$4,270,000. The sale was to be completed by 5.30 p.m. on 19 December 1990, at the offices of Yorku's solicitors, F. Zimmern & Co. 5. By an agreement dated 8 December 1990 and made between (1) Poly and (2) Wellfit Investments Limited ("Wellfit"), Poly agreed to sell the property to Wellfit for $4,750,000. This sale was to be completed by 3.00 p.m. on 19 December 1990; time was expressed to be of the essence. 6. The solicitors instructed by Poly in its purchase and sale of the property were Tai, Ho & Chan. They entrusted the conduct of the transactions to an assistant solicitor, Cecilia Cheng ("Cecilia"). The solicitors instructed by Wellfit in its purchase of the property were Kao, Lee & Yip. They entrusted the conduct of the transaction to a "consultant", Doris Ting ("Doris"). 7. Wellfit's purchase was being financed by the Hang Seng Bank, which had agreed to make the necessary funds available against a report letter from Wellfit's solicitors. Unfortunately, this letter went astray, and by 2.30 p.m. on 19 December 1990, Doris realised there was a possibility that the bank would not get the funds to her firm in sufficient time to enable completion of Wellfit's purchase to be effected by 3.00 p.m. She telephoned Cecilia. She told Cecilia that her firm was probably running late and might not be able to complete by 3.00 p.m. because it was still awaiting funds. She said she would send the necessary cheques over as soon as possible. Before she had the chance to ask Cecilia for a formal extension of time, Cecilia interrupted her, and told her that she should send the cheques over as soon as she could, as Poly still had to complete with Yorku. (Doris gave evidence that she told Cecilia that Cecilia's firm would have the cheques by 5.00 p.m., to which Cecilia made no response; but the judge rejected that evidence. He also rejected Cecilia's evidence that, after Doris told her that Doris's firm might not be able to get the cheques to Cecilia's firm by 3.00 p.m., Cecilia told her that she better had, as Cecilia's firm had to forward them to Yorku's solicitors before completion.) 8. By 3.00 p.m. on 19 December 1995 the necessary cheques had not arrived. At 3.24 p.m., Doris's firm, on behalf of Poly, sent a facsimile message to Cecilia's firm rescinding, or purporting to rescind, the contract between Poly and Wellfit. At 4.48 p.m. the cheques arrived, but their tender was rejected. At 5.30 p.m., Poly, having arranged alternative finance for its purchase from Yorku, completed that transaction. The issue 9. On these facts, the issue before the judge was whether or not Poly was justified in rescinding its contract with Wellfit at 3.24 p.m. on 19 December 1990, as it had purported to do. Since Wellfit had not come up with the purchase money by 3.00 p.m. (a time which was of the essence) Poly clearly was entitled to rescind the contract, unless there were special circumstances which precluded it from doing so. Were there any such special circumstances? Wellfit claimed that there were. It contended that the legal consequence of the conversation between Doris and Cecilia to which I have referred was that Wellfit's time for completion was "extended" from 3.00 p.m. to 5.00 p.m. The judge, having rejected Doris's evidence in this connection, could not and did not so find. But he did, nevertheless, find that Wellfit's time for completion "was extended from 3.00 p.m. to such time as would not prevent [Poly] from being able to complete [its agreement with Yorku] by 5.30 p.m.", a finding made in the absence of any evidence that Cecilia had actually so stated. He held that the receipt of the cheques by Cecilia's firm at 4.48 p.m. gave Poly sufficient time to complete that agreement had it not purported to rescind its agreement with Wellfit. He concluded that Poly's purported rescission of its agreement with Wellfit at 3.24 p.m. was of no effect, because "the extended time for completion of it had not yet expired." Was the judge right? 10. I have to say that, in my opinion, the judge's conclusion cannot be supported. 11. As it seems to me, it is necessary to focus on the legal consequences of the conversation between Doris and Cecilia. Did this effect a variation of the contract between Poly and Wellfit? If not, did the conversation operate as a waiver by Poly of its right under the contract to insist on performance by Wellfit by 3.00 p.m.? Or did Cecilia, by what she said (or did not say) in the course of the conversation, create an estoppel which precluded Poly from asserting that it was entitled to insist on performance by Wellfit by 3.00 p.m.? In the absence of any variation, or waiver, or estoppel, there would be no ground in law for challenging Poly's rescission of the contract. But what about equity? Even in the absence of any variation, waiver or estoppel, might not equity, having regard to the content of the conversation, view Poly's purported rescission of the contract at 3.24 p.m. as unconscionable, and therefore to be disallowed? All these possibilities fall to be considered. Any one of these, if established, might justify the judge's decision. But, if none of these is established, then the judge's decision cannot stand; and that is the conclusion to which, as I have said, I have come. I shall now deal in turn with these various possibilities, and attempt to explain why, in my judgment, none of these can avail Wellfit. Variation 12. The judge, in finding that the conversation between Doris and Cecilia resulted in Wellfit's time for completion being "extended" from 3.00 p.m. to such time (unspecified) as would not prevent Poly from being able to complete its agreement with Yorku by 5.30 p.m., must be taken as having held that Poly and Wellfit had agreed that the stipulation as to time contained in the contract between them was to be varied by substituting for 3.00 p.m. (time being of the essence) an unspecified time (still being of the essence) being such time as would not prevent Poly from being able to complete its contract with Yorku by 5.30 p.m. With great respect, that strikes me as bizarre. No sane vendor or purchaser would make any such agreement, with all its attendant uncertainties. Neither could know where he stood until it was too late to do anything about it. To ascribe to the conversation between Doris and Cecilia the consequence of having effected a variation in such uncertain terms of the contract between the parties seems to me to put a weight on that conversation which it cannot begin to bear. I would add in parenthesis that an agreement to "extend" the time for completion from 3.00 p.m. to a specified time (say, 5.00 p.m.) would have been workable and thus comprehensible; but the judge refused to find that this was the outcome of the conversation and Wellfit has not sought (in its respondent's notice) to challenge that refusal, so I need not consider this possibility further. I must also add that since the law requires contracts for the sale of land to be made in or evidenced by writing (see s.3 of the Conveyancing and Property Ordinance, Cap.219), any oral variation of the contract here would have been ineffective : see Goss v. Lord Nugent (1835) 5 B & Ad. 58. So the conversation cannot be held to have operated to vary the contract between the parties so as to extend Wellfit's time for completion, whether in the manner decided by the judge or at all. For these reasons, then, if the judge is to be taken as having decided that the conversation operated as a variation of the contract between the parties, I cannot go along with him. Waiver 13. This is at first sight a more promising possibility, although not in terms one considered by the judge. There is no doubt that a right to rescind, which is the right Poly purported to exercise here, can be lost by waiver. And I see no reason why a party having a right to rescind a contract should not waive that right conditionally, e.g. by agreeing that, although he may be entitled to rescind if performance is not tendered by 3.00 p.m. on the due date, he is prepared to hold his hand until 5.00 p.m. and rescind only if performance is not tendered by that latter time. But I would not be prepared to hold that a party had waived his right to rescind, to this or any other extent, unless he can be shown to have done so in clear and unambiguous terms. It would be ludicrous to conclude that words which were too vague or uncertain to create a contract or raise an estoppel would nevertheless be sufficient give rise to a claim of waiver. On this point, the difficulty in Wellfit's way is the same as one of the difficulties in its way on the variation point; that the effect of the conversation between Doris and Cecilia is much too unclear to support Wellfit's case. Estoppel 14. If Poly can be held to have led Wellfit to suppose that Poly's right under the contract to rescind in the event of non-performance by 3.00 p.m. was to be kept in suspense, or held in abeyance, its exercise of its right to rescind will not be upheld if Wellfit altered its position in reliance on Poly's attitude. But this is not as promising from Wellfit's point of view as might initially appear, first, because in this connection, too, the promise or assurance given by Poly to Wellfit will not do unless it was clear and unambiguous (which it plainly was not) and secondly, because Wellfit did nothing at all in reliance on it anyway; Wellfit's solicitors simply got on with getting the cheques to Poly's solicitors as soon as they could. The whole purpose of the requirement, in a case of estoppel (or waiver) that the promise or representation relied on must be clear and unambiguous is to prevent a party from losing his legal rights merely because he has granted some indulgence by failing to insist on strict performance of the contract. In the present case, the conversation between Doris and Cecilia does not come anywhere near establishing a clear and unambiguous promise or representation on the part of Poly that it would not rescind the contract if the cheques arrived before some certain time, nor even before some such unspecified time as would enable Poly to use them in order to complete with Yorku. Nor do the facts support the conclusion that Wellfit altered its position on the facts of any such representation or promise. So, in the end, estoppel is of no help to Wellfit, either. Equity 15. There may be cases in which, even in the absence of any promise or representation sufficiently clear and unambiguous to found a waiver or an estoppel, equity may step in to prevent a party from rescinding where it would be unconscionable for him to do so; cp. Legione v. Hately (1982) 152 CLR 407, also a case which turned on a conversation between the parties' solicitors. In that case the clerk in the vendor's solicitors' firm, when told on 9 August 1979 that the purchaser would be ready to complete (late) on 17 August, replied "I think that'll be all right but I'll have to get instructions." The vendor, on 14 August, called the contract off. By a majority of three to two the High Court of Australia took the view that these words were insufficient to raise an estoppel; but it was recognised that in exceptional circumstances the court might grant specific performance of a contract for the sale of land to a purchaser notwithstanding his breach of an essential condition. As Mason and Deane JJ considered, whether such exceptional circumstances existed in a given case would hinge on the existence of unconscionable conduct on the part of the vendor. In our case, I would have been prepared to find for Wellfit on this ground had I felt able to stigmatise Poly's conduct as unconscionable. But I am not able to do so. Poly was itself bound to complete with Yorku by 5.30 p.m. If its sale to Wellfit did not go through it had to raise finance elsewhere to complete its purchase. Its decision to do so, and to call off its contract with Wellfit at 3.24 p.m., when it still had no idea of when Wellfit would come up with its purchase money, was not in the least unconscionable; on the contrary, it was, as I see it, perfectly reasonable. Poly was under no obligation, equitable or otherwise, to risk sacrificing its own interests in order to protect Wellfit. So this last possibility does not, on the facts of the present case, assist Wellfit either. The result 16. For the reasons I have endeavoured to state, I would allow this appeal and dismiss Wellfit's action, making provision for Poly's costs in the manner to be indicated in the judgment of Nazareth, V.P. 17. There are, however, two additional matters I should mention. 18. First, Wellfit has sought to support the judge's decision on the ground that Poly was itself in fundamental breach of its contract with Wellfit when it purported to rescind the contract, and so could not have validly rescinded it. The alleged breach is that Poly, being an intermediate vendor, could not, at 3.24 p.m., before it completed with Yorku at 5.30 p.m., have given a good title, or vacant possession of the property, to Wellfit. This is technically correct but entirely irrelevant; for Wellfit as a sub-purchaser from Poly knew all the facts and was well aware from the start of Poly's status as an intermediate vendor in need of Wellfit's money in order to complete with Yorku, and was quite content to proceed on that basis. There is therefore no substance at all in this point. The judge did not reach a conclusion on it, considering it unnecessary to do, so in view of his finding that Wellfit's time for performance had been "extended" as a result of the conversation between Doris and Cecilia. We do have to decide it. For my part, I have no hesitation in rejecting it. 19. Secondly, Poly sought in this appeal to challenge some of the judge's primary findings of fact (which I have summarised above) relating to the conversation between Doris and Cecilia. Since I am in favour of Poly as to the legal consequences, or rather lack of them, of that conversation on the facts found by the judge, I have not thought it necessary to consider in this judgment what the consequences of findings of fact even more favourable to Poly might have been. It is in my judgment sufficient for present purposes if we take the facts as found by the judge, without investigating them more fully. 20. There is nothing further I would wish to add. Leonard, J. : 21. For the reasons given by Godfrey, J.A. I agree that this appeal should be allowed. The words which, according to the judge's findings of facts, were spoken had no legal effect upon the contract. The deadline of 3 p.m. having passed, with no word from Wellfit's solicitors as to when the cheques might be forthcoming, Poly could not risk waiting any longer before taking steps to ensure that it would be able to complete its purchase at 5.30 p.m. In rescinding and hastily making alternative financial arrangements it did not act at all unreasonably. 22. It is clear in the present case that the parties intended all along that the handing over of the cheques was to take place before Poly would be in a position to acquire and pass on the title and to give vacant possession. Both parties having proceeded on that basis it would be unconscionable to allow Wellfit's technical argument to prevail. Nazareth, V.-P.: 23. I also agree. 24. The appeal is accordingly allowed and Wellfit's action dismissed. There will be an order nisi that the appellant, Poly, is to have its costs of the appeal and below, to be taxed if not agreed and to be paid by the respondent, Wellfit.
Representation: Miss Maria Yuen & Miss Lisa Wong (M/s. Vincent T.K. Cheung, Yap & Co.) for Appellant/1st Defendant Mr. Denis Chang, Q.C. & Mr. Alfred Chan (M/s. Herbert Smith) for Respondent/Plaintiff |