Wong Man Kit Raymond v. Chan Nam Fan
Read the full judgment text of HCMP 4391/1997 on BabelCite. This High Court CFI judgment was delivered on 18 May 1998.
1. This is a Vendor and Purchaser Summons, issued by the Plaintiff in originating form on 16th December 1997, wherein the Plaintiff requests declarations, an order for the refund of a deposit, and an order that the Defendant do pay to the Plaintiff certain consequential sums of money. In addition to opposing the Plaintiff's application, the Defendant also has a counterclaim in damages which, by interlocutory Order of Madam Justice Yuen of 5th March 1998, is to stand on the terms outlined in spec
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HCMP004391/1997 HCMP 4391/97 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE MISCELLANEOUS PROCEEDINGS NO.4391 OF 1997 ---------------
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--------------- Coram : The Hon Mr Justice Stone in Court Date of Hearing : 15 May 1998 Date of Delivery of Judgment : 18 May 1998 ____________________ J U D G M E N T ____________________ 1. This is a Vendor and Purchaser Summons, issued by the Plaintiff in originating form on 16th December 1997, wherein the Plaintiff requests declarations, an order for the refund of a deposit, and an order that the Defendant do pay to the Plaintiff certain consequential sums of money. In addition to opposing the Plaintiff's application, the Defendant also has a counterclaim in damages which, by interlocutory Order of Madam Justice Yuen of 5th March 1998, is to stand on the terms outlined in specific paragraphs within two affirmations which have been filed on the Defendant's behalf. 2. With the agreement of Counsel, consideration of the Defendant's counterclaim, should it arise consequent upon this judgment, is to be deferred pending agreement thereon, or further consideration by this Court upon the narrow issue arising. For the present, however, this is essentially the judgment on liability upon the divers issues raised by the Plaintiff's Originating Summons. 3. Before turning to those issues, I should, I think, briefly set out the factual matrix against which these arguments are presented. The Facts 4. The basic facts are in short compass and are essentially uncontroversial; certainly the argument before me did not disclose any factual conflict requiring resolution by the Court. In outline, the story is as follows. 5. The Plaintiff herein was the prospective purchaser of the Defendant's property at Flat B, 19th Floor, 86 Broadway, Mei Foo Sun Chuen. He viewed the property with his wife on 8th June 1997, and liked what he saw. And what he saw, and what he was made clearly aware of on that date, was the conversion into a bathroom of one of the small balconies of that flat. 6. In any event, under a Formal Sale and Purchase Agreement dated 24th June 1997, the Plaintiff agreed to buy and the Defendant agreed to sell the flat at the price of HK$5,388,000. A deposit of HK$538,000 - a sum now claimed by both parties - was duly paid, and completion was to be on 3rd November 1997. 7. Thereafter matters proceeded relatively smoothly, at least before the gyrations of the Hong Kong property market began to bite. Under cover of a letter dated 24th June 1997, received by the Purchaser's then solicitors on 26th June 1997, the title deeds and the documents of the property were delivered by the solicitors then acting for the Vendor; amongst these documents was an Assignment dated 28th July 1973, to which was annexed a plan showing clearly that that which was obviously now a bathroom originally had been a balcony. 8. But to continue with the story. Clause 10(a) of the Formal Sale and Purchase Agreement read as follows :-
9. It is the effect of this clause which forms the basis of one of the principal arguments in this case. In any event, the time for raising any such requisition(s) expired on 9th July 1997, and by a letter dated 5th July 1997 various requisitions in fact were raised by the Plaintiff Purchaser. In turn, these requisitions were answered by the Defendant's then solicitors by letter dated 20th August 1997; no issue in these proceedings arises thereon. 10. It was shortly after this, however, that the genesis of the present case began. The property market started to drop significantly in October 1997, and by a letter dated 1st November 1997, a mere two days prior to completion, the Plaintiff's then solicitors, Messrs Ng, Lie, Lai and Chan first raised a complaint about the conversion of the balcony into a bathroom. This letter is one of several that have assumed prominence in these proceedings, and for convenience I set it out in full hereunder :-
11. In addition, the enclosed copy letter of the architect read, in material part, as follows :-
12. By a further letter of the same date, 1st November 1997, the Plaintiff's solicitors submitted copies of the draft Assignment and draft Undertaking Letter "without prejudice to our earlier letter to you dated 1st November 1997 and our requisitions remained to be satisfactorily answered", and thereafter by letter dated 3rd November 1997 (the designated completion date), Messrs Gallant Ho responded to the letter reproduced above in the following terms :-
13. I have again chosen to set this document out in full because of the emphasis attached to it in argument by Mr Chain, on behalf of the Plaintiff, who described it as "a key letter". 14. By letter of the same date, 3rd November 1997, the Defendant's solicitors returned the draft Assignment and Letter of Undertaking, with amendments, together with precise instructions as to mode of payment, and thereafter there were further exchanges between the solicitors on the subject of the converted balcony, with the Vendor's solicitors, on 5th November 1997, two days after the stipulated completion date, writing to the Plaintiff's solicitors a letter containing the following paragraph :-
15. A response to this was requested within two days, but the letter was met with silence until 13th November 1997, when the Plaintiff's solicitors wrote as follows :-
16. This letter, therefore, set the stage for the present application, and it is to the issues arising thereon that I now turn. The Issues 17. I have had the advantage of wide-ranging argument from Counsel for both parties, but at the end of the day the main points, I think, can conveniently be boiled down to considerations arising under the broad heads of time and waiver. I recognise that this classification may be a trifle too broad brush, and where necessary I will deal with the ancillary arguments raised in their context. Time 18. The starting point under this head, and certainly the most significant issue in this case, revolves around Clause 10(a), the terms of which I have earlier set out in full. 19. Mr Chain, for the Plaintiff Purchaser, recognises as he must that the requisition letter of 1st November 1997 was very significantly out of time, but boldly asserts that since the issue ventilated in the letter of 1st November 1997 goes to "root of title" that such issue can be raised at any stage, notwithstanding prior knowledge thereof or the discoverability of the problem by due diligence. To some extent, argument always suffers from descriptive condensation, but that, at bottom, was the bald proposition. 20. For his part, Mr Chan, for the Defendant Vendor, observed that the period of seven working days after delivery and receipt of the title deeds, on 26th June 1997, provided the contractual period for the raising of requisitions, that this period had expired on 9th July 1997, that requisitions had indeed been raised within that period, and that it was not open to the Vendor, almost four months later, and but two days prior to completion, to raise such a 'requisition'. Pursuant to the provisions of Clause 10(a), there was a contractual waiver of any objection and a deemed acceptance of the Vendor's title; moreover, while he was about it, he did not accept that the Vendor's letter of 1st November was indeed a 'requisition' in the true sense, in that it was not a requisition properly raised so as to put the Vendor under a duty under the contract to answer the same, citing in this regard the judgment of Bokhary JA (as he then was) in Chan Chik Sum v. Great Pearl Industries Ltd [1997] 1 HKC 27 at 33, to the effect that :-
21. Mr Chain contends that there is nothing in this latter point, and if the Purchaser's solicitors letter is not a requisition, then he is at a loss to know what it is. After taking due account of the ability of Counsel to be perpetually surprised at adverse propositions, in truth I do not think this is Mr Chan's best point. In my judgment he has bigger fish to fry, and for present purposes, therefore, I will proceed on the basis that the letter of 1st November 1997 does indeed constitute a requisition. 22. This being so, I turn to the 'root of title' argument which, according to Mr Chain's proposition, appears to me to have a similar effect to that of fraud in effectively "unravelling all". Mr Chain suggests that all leading texts, of which Emmet on Title is but an example, endorse the proposition as cited in Emmet, at paragraph 5.080, to the effect that :-
23. In response, Mr Chan had the advantage of and prayed in aid the Court of Appeal decision in Hillier Development Ltd v. Tread East Ltd [1993] 1 HKC 285, and in particular in the context of this argument, the following extract from the leading judgment of Penlington JA, at 293C-I :-
24. The decisions considered in the foregoing passage reflect those decisions which are quoted by the learned editors of Emmet, op.cit., in the extract set out above, and it seems to me, with respect, that the views expressed in the leading judgment of Penlington JA reflect the correct legal position; in principle time clearly should not begin to run adversely against the Purchaser absent knowledge, whether actual or discoverable by due diligence, as to the alleged defect in title of which complaint is made. 25. In this regard, Mr Chan points out that on the evidence not only was the fact of the balcony/bathroom conversion specifically pointed out to the Purchaser upon his initial visit to the property - in the words of the Defendant :
- but also that the plan of the relevant apartment was annexed to the Assignment, which was amongst the documents of title delivered to the Purchaser's solicitors on 24th June 1997, wherein it was clear that a balcony formed the original configuration. Ergo, said Mr Chan, if the point had indeed been a live issue at the time, it was certainly discoverable by due diligence, and could not be raised now. And in any event, whilst he conceded that this was a matter which could validly have called for a requisition at the appropriate time, it was not conceded that this was a matter going to root of title. 26. I do not intend in this judgment to investigate the proposition that this deviation from plan would raise enforceability problems from the Building Authority such as to constitute a blot on title. Suffice it to say that on the assumption that it does, I do not accept that a clear and obvious matter which goes to the root of the Vendor's title can, in effect, be clasped to the Purchaser's breast for opportunistic use in any subsequent emergency - and in this context, perhaps, there can be no greater emergency in the eyes of the Hong Kong speculator than the fall of the property market subsequent to purchase. It follows, therefore, that in my judgment a problem going to root of title does not, as Mr Chain contended, serve in itself to render the provisions of Clause 10(a) otiose. To the contrary. In my view the time limit in Clause 10(a) fails to bite only in those circumstances where the problem with title could not have been discovered within the relevant contractual period for the raising of requisitions. 27. Which, of course, was patently not the situation here. In the instant case the issue as to the balcony conversion was raised at the eleventh hour for a plainly collateral economic purpose. Indeed, with his customary realism, Mr Chain does not demur from the proposition that essentially this is a 'market claim', and whilst I remind myself that motive is irrelevant to the enforcement of legal right, such enforceable right must indeed be seen to exist. In the present case, it is clear beyond peradventure that the conversion of the balcony posed no difficulty at the time of inspection, nor at the time of the validly raised requisitions; accordingly, in all the circumstances, I think there is no doubt that there was a deemed acceptance of title and that the point was waived, which is precisely the type of situation which was adverted to by Nazareth JA in Hillier Development, op.cit., at 296 B-C :-
28. It follows from the foregoing that I reject unequivocally Mr Chain's contention that if a matter goes to root of title, all else, in effect, falls away, and that the point can be kept in reserve to provide an unmeritorious "bail out" for a purchaser seeking to avoid what has turned out to be a bad bargain. In this regard, I am in respectful argument with the views expressed by the Court of Appeal in Hillier, op.cit., and in this circumstance, I perceive no need to further consider the spirited debate between Counsel as to whether the observations of Penlington JA in that case were in fact obiter. 29. Since I am against Mr Chain on this primary issue, there is, I think, no necessity to go on to consider in detail Mr Chan's further point (which he took on the assumed basis that he was wrong on everything else) to the effect that in raising the issue of reinstatement (within the final sentence of the third paragraph of the Plaintiff Purchaser's letter of 1st November) a mere two days prior to the contractual completion date of 3rd November, it was no longer open to the Purchaser to insist upon a response thereto by 3rd November. As a matter of fact, two days later, on 3rd November (the specified contractual completion date) the Vendor's solicitors indeed did respond, somewhat equivocally in my view, as follows :-
only to follow up, two days later, on 5th November 1997, with :-
30. I confess that I was not entirely sure as to the true thrust of this argument, which on reflection was not developed as fully as it might have been, and after some interchange between Bench and Bar, Mr Chan contented himself with the proposition that the effect of the Plaintiff's 'offer', within their letter of 1st November, was to preclude rescission on 13th November before the Vendor had had a reasonable time in which to respond to such reinstatement 'offer'. 31. I am by no means convinced that the Plaintiff's solicitors letter in fact amounts to an unequivocal 'offer' as such - I find paragraph 3 of the Plaintiff's letter of 1st November difficult, and judging by their letter of 5th November which is expressed in the form of a question rather than an acceptance, so did the Defendant's solicitors - and Mr Chain asserts that, absent agreement between the parties, the mutual rights and obligations under the contract crystallised, for better or worse, on 3rd November, the stipulated completion date. 32. Although, in light of my other findings, it is not necessary to decide this point, I tend to the view, looking at the sequence of correspondence in the round, that there may have been an implied waiver of the 3rd November 1997 contractual completion date (I note that the parties' solicitors exchanged a total of five letters on 3rd November), although the point was not specifically argued upon this basis. On balance, however, and in so far as it be relevant, I am not inclined to accept Mr Chan's alternative proposition that the effect of the Plaintiff's solicitors' letter of 1st November raising the issue of reinstatement was such as to itself preclude the Plaintiff from purporting to rescind on 13th November 1997, and for present purposes I am content to decide the issue of the validity of such purported rescission upon another basis. Waiver 33. I turn, finally, to consider Mr Chain's alternative 'bull' point, namely, that even if he was wrong on the 'root of title' issue, nevertheless a reasonable reading of the Vendor's solicitors letter of 3rd November in responding to the Purchaser's solicitors raising of the balcony/bathroom conversion, was sufficient to conclude that this constituted a waiver by the Vendor of the Clause 10(a) time limit. In this regard, Mr Chain further prayed in aid Emmet on Title, op.cit., at paragraph 5.080 :-
34. To this argument, Mr Chan responded by pointing out that upon Mr Chain's own version of events, there was only one requisition, and that having accepted that paragraph 1 of the Defendant's solicitors' reply of 3rd November did not constitute a waiver, it was hardly open to him now to seek to argue that the remaining paragraphs 2 and 3 of that same letter did in fact amount to such a waiver. The Vendor had clearly reserved its rights under Clause 10(a) in paragraph 1 of the reply, said Mr Chan, and on any reasonable view it could not be said in the same breath that the Defendant was waiving its rights under Clause 10(a) when there was no more than an elaboration of its position in the succeeding two paragraphs. It followed, therefore, that there was no waiver, and in this context he prayed in aid the observations of Penlington JA in Hillier, op.cit., at 293B-C :-
35. The latter dictum was, of course, solely referable to the facts of that case, and it seems to me that whether or not this Defendant's reply constitutes a waiver of its accrued rights is a matter solely to be determined by this Court upon the particular facts of this case. As such it seems to me to be essentially a matter of black or white; in this particular factual matrix, did this response of the Vendor's solicitors serve to waive accrued rights? 36. In my judgment, the answer to this question is "No, it did not." And having come to that conclusion, I do not think that the matter is capable of greater elaboration. So I am against Mr Chain on this point also. Decision 37. It follows from the foregoing judgment that, in my view, the Plaintiff is not entitled to the relief sought by its Originating Summons, which I order do stand dismissed. I further make an order nisi that the costs of and occasioned by the Plaintiff's application be to the Defendant, to be taxed if not agreed. 38. This, however, leaves outstanding the Defendant's counterclaim (over and above the forfeited deposit of HK$538,800) which, by Order of Madam Justice Yuen, is referable to the matters set out in paragraph 13 of the Defendant's affirmation filed on 17th February and paragraph 23 of the affirmation of Kitty Tsui Lai Ching, filed on 17th February 1998. 39. As indicated at the outset, this element of the case has been stood over by agreement for determination, if necessary, after delivery of this judgment. If and in so far as may be necessary, I will hear the parties further on this issue, at a date and time to be arranged (and, if required, upon the issue of costs also). I note in passing in the context of the Defendant's counterclaim that in his concluding remarks, Mr Chain was prepared to concede (I think) that the hypothetical measure of damage which the Defendant could validly claim was that as between the contractual sale price and the market price as at the date of breach, but that he drew a firm line at extending the loss to encompass the actual resale price, contending that such would be a misplaced as a matter of law. In my judgment, this concession was correct as a matter of general principle, and Counsel was right to make it. However, should the Defendant (or indeed the Plaintiff) wish to be heard further on the point, about which I have not, of course, made up my mind, he must have that opportunity, particularly in that I understand that there may be particular contractual provisions upon which I have not yet been addressed. 40. It remains only to thank both Counsel for their considerable assistance.
Representation: Mr Benjamin Chain, inst'd by M/s Laurence Pang & Co., for the Plaintiff Mr C.H. Chan, inst'd by M/s J.Chan, Yip, So & Partners (as from April 1998 known as J.Chan & Lai), for the Defendant |