Newtech Rich Limited v. Chan Shuk Yin Ada and Another
Read the full judgment text of HCA 8726/1997 on BabelCite. This High Court CFI judgment was delivered on 2 July 1999.
1. I shall start with the facts in this case as there is no dispute between the parties on the facts.
Cited by 1 case
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HCA008726/1997 HCA8726/97 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO. 8726 OF 1997 ----------------------
----------------------- Coram : Suffiad J. in Court Dates of Hearing : 14 May 1999, 17 - 20 May 1999 Date of Judgment : 2 July 1999 ------------------------- J U D G M E N T ------------------------- 1. I shall start with the facts in this case as there is no dispute between the parties on the facts. The Facts 2. On 26th May 1997, the Defendants entered into a provisional contract with Kamos Limited, a property developer which was represented by its sales agent, Cheung Kong Real Estate Agency Limited, to purchase from the developer a property known as Flat J, 51st floor, Manhattan Heights, 28 New Praya, Kennedy Town, Hong Kong ("the Property") at the price of $5,240,000.00. 3. It was common knowledge that the development of Manhattan Heights was not expected to be completed until the end of 1999 or early 2000. The purchase of the Property by the Defendants was intended by them for short term investment. 4. Clause 7 of this provisional contract states :
5. Under the payment terms of this provisional contract, the Defendants were to pay :
6. It was also a term of this provisional contract that the Defendants must engage their own solicitors and shall within seven days deliver to the developer's solicitors a formal agreement for sale and purchase duly signed by the Defendants. 7. Upon the Defendants signing the provisional contract on 26th May 1997 at the office of Cheung Kong Real Estate Agency Limited, they were given a copy of the provisional contract together with a document titled "Manhattan Height - Memorandum for the Purchaser" ("the Memorandum"). Paragraphs 6 and 7 of the Memorandum states :
8. On the following day, i.e. 27th May 1997, Ms Ada Chan, the first named Defendant, gave instructions to Terry Siu, an estate agent with Ong's Properties Co. at that time to seek out potential purchasers for the Property. 9. On 28th May 1997, some time in the afternoon, Ada Chan faxed to Terry Siu a copy of the Memorandum at the request of Terry Siu so as to facilitate his finding purchasers for the Property. After receiving a copy of the Memorandum and having ascertained from paragraphs 6 and 7 thereof that it was possible to effect a change-of-name procedure, Terry Siu met Kenneth Chan and Ms Lily Siu in the early evening of 28th May 1999 both of whom showed interest in the Property. Terry Siu informed them that the Memorandum distributed by the developer expressly allowed for a change of name in favour of either a corporate or individual purchaser. 10. Kenneth Chan and Lily Siu then decided to make an offer to the Defendants through Terry Siu. That offer was put into writing by Terry Siu on one of the standard printed forms of Provisional Agreement for Sale and Purchase of Ong's Properties Co. upon the understanding that the Property was to be purchased in the name of a limited company, the name of which they did not know yet but would be supplied to Terry Siu as soon as possible. The other terms of the offer as put down onto the standard printed form which are relevant for present purpose are as follows :-
11. This printed form with the above terms either printed on it or handwritten in by Terry Siu was then signed by Kenneth Chan. At the same time Kenneth Chan issued a cheque for $500,000.00 being the initial deposit should this offer be acceptable to the Defendants. The name of the purchaser was for the moment left blank on this printed form. 12. Later that same evening, Terry Siu, armed with this printed form signed by Kenneth Chan and the cheque for $500,000.00 met the two Defendants at the office of Ada Chan. The terms contained in the printed form was made known to the Defendants by Terry Siu, including the fact that the purchaser's name had been left blank pending Terry Siu being advised of the name of the limited company to be used for the purchase. The Defendants decided to accept those terms. Both Defendants then signed on the printed form and the cheque for $500,000.00 was handed over to them by Terry Siu, receipt of which was acknowledged by the Defendants on the printed form (hereinafter referred to as "the Provisional Agreement"). 13. On the following day, Kenneth Chan and Lily Siu acquired the Plaintiff company (both of them becoming the directors thereof), being a shelf company, to be used as the purchaser for the Property. Terry Siu was then duly informed by them of the name of the Plaintiff company which was then written into the Provisional Agreement as the purchaser. At the same time the words "For and on behalf of Newtech Rich Limited" were written over the signature of Kenneth Chan on the Provisional Agreement by Terry Siu. A copy of the completed Provisional Agreement was then sent by Terry Siu to the Defendants who had no objection to the Plaintiff's name being inserted as the purchaser and the words written over Kenneth Chan's signature. 14. On 1st June 1997, the Defendants were informed that their entering into a formal agreement with the developer for the sale of the Property to them by the developer would have to be delayed. The date originally scheduled for entering into a formal agreement with the developer was 5th June 1997. Terry Siu was advised of this delay by the Defendants and at his suggestion, the Plaintiff and the Defendants agreed to postpone the date for the signing of the formal agreement between them from 10th June 1997 to 20th June 1997. The Provisional Agreement was accordingly amended. 15. On 7th June 1997, the Defendants signed a formal agreement for sale and purchase of the Property with the developer. Clause 10 of that formal agreement reads :-
16. On or about 13th June 1997, the developer had a change of policy whereby it no longer accepted a change of the purchaser's name if the new purchaser was a limited company. The 2nd named Defendant got wind of this change of policy by the developer and through Terry Siu, Kenneth Chan and Lily Siu of the Plaintiff was made aware of the situation. 17. On 20th June 1997, Kenneth Chan and Lily Siu of the Plaintiff together with the Defendants as well as Terry Siu all attended the office of the developer in an attempt to carry through the sale by getting the developer to accept a change of purchaser's name to that of the Plaintiff in respect of the Property. Quite obviously they were met with the steadfast refusal by the developer as a result of the developer's change of policy. 18. Between 13th June and 20th June there had already been some discussions between the parties conducted through Terry Siu as a result of becoming aware of the developer's change of policy. Nothing came of these discussions. On 20th June, at the developer's office, after the developer's refusal to change the name of the purchaser to that of the Plaintiff, the Defendants suggested to the Plaintiff to carry on the sale by way of confirmor sale. The Plaintiff on the other hand did not agree to do so. Thereafter the matter was put in the hands of the parties' respective solicitors. 19. By a letter of 20th June 1997, the Plaintiff's solicitors wrote to the Defendants' solicitors alleging breach of the Provisional Agreement in that the Defendants failed to procure the cancellation of the agreement between the developer and the Defendants and/or the entering into an agreement by the developer to sell the Property to the Plaintiff. The Plaintiff asked for the return of the $500,000 deposit. 20. By letter of 21st June 1997, the Defendants' solicitors wrote to the Plaintiff's solicitors stating that the Defendants were at all times ready and willing to transfer the Property to the Plaintiff pursuant to the Provisional Agreement even as confirmor. 21. By a further letter of 25th June 1997, the Defendants' solicitors wrote to the Plaintiff's solicitors stating that since the Plaintiff has evinced an intention no longer to be bound by the Provisional Agreement and has repudiated the same, the Defendants accept that repudiation, forfeit the deposit and hold the Plaintiff responsible for all the loss and damages. 22. On 31st December 1997, the Property was re-sold by the Defendants to a third party for $5.28 million. The Plaintiff's Case 23. The Plaintiff's case was pleaded on the basis that the agreement between the parties was partly in writing as contained in the Provisional Agreement and partly orally. Mr Lai who appears for the Plaintiff informed me at the start of the trial that he is content to take the stance that the agreement between the parties is contained within the four corners of the Provisional Agreement. 24. The Plaintiff's case was also pleaded on the footing that firstly the Defendants were in breach of contract and alternatively the contract between the parties was frustrated as a result of the developer's change of policy in refusing to accept a change of name from that of the Defendants to the Plaintiff in respect of the Property. 25. Having heard Mr Lai, it seems that the main thrust of the Plaintiff's case is really that the contract was frustrated and it is asking for the return of the $500,000.00 deposit by reason of such frustration. 26. The case for the Plaintiff was put on the footing that the Provisional Agreement is an agreement for the sale and purchase of the said Property to be effected by the change of name method with the consent of the developer (more properly termed novation) which was understood by both parties to this action to be possible when they entered into the agreement. Subsequently there was a change of policy and this method of effecting the sale was no longer available. Mr Lai submits that on a proper construction of the Provisional Agreement it is not possible to read into it any other method of effecting the sale and purchase because of the words "in the manner herein contained" which appears in both Clauses 6 and 7 of the Provisional Agreement. For this reason Mr Lai says the Defendants cannot insist on a confirmor sale between the parties. A further reason for that is that the terms of a confirmor sale was never agreed between the parties as it had never been in the parties' contemplation to embark on a confirmor sale in respect of the Property. The Defendants' Case 27. The Defendants do not dispute that when the Provisional Agreement was entered into between the parties, what was contemplated by them was that there would be a change of name of the purchaser with the consent of the developer after the Defendants had entered into a formal Sale and Purchase Agreement with the developer. In that event the Plaintiff would be substituted in place of the Defendants as the direct purchaser of the Property vis-à-vis the developer. 28. However, the Defendants' case is that when this contemplated method fell through because of the change of policy of the developer, the agreement between them was not frustrated because that change of name was only the preferred method of effecting the sale. It was not the only method of doing so. It was still open to the parties to effect such sale by way of a confirmor sale and that the Defendants were at all times ready and willing to carry through the agreement by way of confirmor sale. Since it was the Plaintiff who refused, therefore the Plaintiff was in breach of the Provisional Agreement. 29. The Defendants rely heavily on the case of Chu Kit Yuk v Country Wide Industrial Ltd. [1995] 1 HKC 363 where, based on facts not unlike the present case, the Court of Appeal in dismissing the vendor's appeal but allowing the appeal of the first purchaser for specific performance, held that once it was accepted that the forms (provisional agreements for sale and purchase) constituted contracts for the sale and purchase of the vendor's interest in the land, then, unless the contract was to be construed as providing that the only way in which the transaction could be effected was by novation, the first purchaser must be entitled to succeed. 30. By their counterclaim, the Defendants are seeking to forfeit the $500,000.00 initial deposit of the Plaintiff and alternatively claiming for damages for breach of contract. Construction of the Provisional Agreement 31. In deciding the dispute between the parties, it falls upon me to consider the proper construction of the Provisional Agreement entered into between them and the terms therein contained to ascertain from it the proper intention of the parties. It is to be viewed objectively, not a subjective inquiry into the actual presumed intentions of the parties. I therefore take into consideration all the circumstances and facts existing and known to the parties at the time the contract was entered into by them. Needless to say I will also consider the written agreement itself and the actual terms contained therein. However, I attach no weight whatsoever to the oral evidence of the parties or their agents as to what were their intentions in entering the Provisional Agreement. 32. Firstly it is common ground between the parties that the Provisional Agreement constitute an agreement for the sale and purchase of land. 33. Secondly it is common ground between them that the Property would not be completed before the end of 1999 or early 2000 and the Occupation Permit would not be issued before such completion of the building. 34. Thirdly it was known to all the parties or believed by them initially, including Terry Siu, that this sub-sale by the Defendants to the Plaintiff could be effected by way of novation on what has been called the "change of name method" in their evidence. This they were led to believe, and quite rightly so, by what was stated in the Purchaser's Memorandum distributed by the developer, and that this could be done after the formal agreement was entered into between the Defendants and the developer. 35. Fourthly looking at the written terms as contained in the Provisional Agreement, each and every one of the terms agreed between the parties were directed at the sale being effected through the change of name method or novation. That this is so is highlighted by the fact that the parties agreed to a postponement of the completion date from 10th June to 20th June 1997 when the date for the signing of the formal agreement between the developer and the Defendants had to be delayed. The only possible reason for this is that all concerned well knew that the change of name of the purchaser or novation method could only be carried out after the formal agreement between the developer and the Defendants had been entered into. 36. Fifthly, not one of the terms contained in the Provisional Agreement indicate that the sub sale is to be or even possibly be effected by way of confirmor sale. Indeed the completion date being fixed for 10th June then postponed to 20th June 1997 militates against a confirmor sale since an assignment of the Property could not possibly be put through until the building is completed - which would not be until late 1999 or early 2000. 37. Sixthly, I take into consideration that Clauses 6 and 7 of the Provisional Agreement both employ the words "in the manner herein contained". The presence of these words in these two clauses leads me to the conclusion that the novation method was the only method intended by the parties to carry out their agreement for sale and purchase. 38. As has been pointed out above, the Defendants relied greatly on the decision of the Court of Appeal in Chu Kit Yuk v. Country Wide Industrial Ltd. That decision turned on the proper construction of the contract in that case as can be seen from the words of Godfrey J.A. when he said at p.369 :
and at p.370 :
39. Although in our present case, the facts are not unlike those in Chu Kit Yuk's case, the distinguishing feature here must be the presence of the words "in the manner herein contained" in Clauses 6 and 7 of the Provisional Agreement. 40. In the circumstances and for the reasons given above, the proper construction of the Provisional Agreement entered into between the parties here is that the parties intended a sale and purchase of the Defendants' interests in the Property and that the novation method was the only method intended by the parties to effect the sale and purchase. Frustration 41. I accept from the evidence before me that up to 20th June 1997 when the parties attended the office of the developer, both Plaintiff and Defendants were ready, indeed eager, to persuade the developer to agree to a novation such that the Plaintiff's name could be substituted for the Defendants' names as purchaser of the Property from the developer. The only thing which prevented this from being carried through was the refusal of the developer to agree to such a novation by reason of its internal change of policy. 42. Since the agreement between the parties could not be performed without the developer's agreement to novate and more importantly the Provisional Agreement is completely silent and makes no provision whatsoever in the event of the developer not agreeing to a novation, there cannot, to my mind, be a clearer case of frustration than the present case. 43. Accordingly I find that the Provisional Agreement was frustrated for the above reasons. To that extent there will be judgment for the Plaintiff with an order that the Defendants do return the initial deposit of $500,000.00 to the Plaintiff. 44. It follows that the Defendants' counterclaim is dismissed. Costs 45. I propose to make a costs order nisi that costs of the Plaintiff's claim as well as the costs of the Defendants' counterclaim be to the Plaintiff, such costs to be taxed if not agreed.
Representation: Mr Thomas Lai, inst'd by M/s Tang, Lai & Leung, for the Plaintiff Mr Samuel Chan, inst'd by M/s Baker & McKenzie, for the Defendants |
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