Chui Ying Fong and Another v. Leung Kon (or Kin or Kuen) Shau

HCA002161/1973

IN THE SUPREME COURT OF HONG KONG

(ORIGINAL JURISDICTION)

ACTION NO. 2161 OF 1973

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Coram: Pickering, J.

Date of Judgment: 31st January, 1975.

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JUDGMENT

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1. By a written agreement in the Chinese language dated 19th January 1973 made between the defendant of the one part and the plaintiffs together with a certain Lee Kwan Tai, of the other part, the defendant agreed to sell and the plaintiffs and Lee Kwan Tai agreed to buy Lot No. 2278 in Demarcation District No. 130 situate at Shun Fung Wai, Castle Peak, New Territories at a price of $145,000. It is unnecessary to say more about Mr. Lee Kwan Tai than that, at a subsequent date, he transferred his interest in the contract to the plaintiffs, the other two proposed purchasers, and that the plaintiffs gave notice of this transfer to the defendant.

2. The certified translation of the relevant part of the Agreement for Sale and Purchase is in the following terms:

3. The deposit of $30,000 was paid to the defendant upon the signing of the agreement.

4. At that time the plaintiffs informed the defendant that their solicitors were Messrs. Gunston & Chow and asked if the defendant would use the same solicitors to which the defendant replied that he might well use other solicitors. Nothing further transpired until, on 31st January 1973, a letter was received by Gunston & Chow from Messrs. Chan & Ho, Solicitors, saying that Chan & Ho acted for the vendor, the defendant herein, and enclosing a copy of the documents of title for the use of the plaintiffs' solicitors in drawing up the assignment of the property. It will be observed that whereas the Agreement provided for completion within ten days, this letter of 31st January 1973 was not written until twelve days after the date of the Agreement. The reply to this letter, which was dated 20th February 1973, informed Messrs. Chan & Ho that the plaintiffs intended to enter into a formal agreement for sale and purchase in respect of the property and asked for comments upon that suggestion.

5. No answer was received to that letter and it transpires from affidavits filed in the court in interlocutory proceedings and from the defendant's evidence, that as early as 10th February 1973 he had decided to repudiate the written agreement with the plaintiffs though he did not inform his own solicitors of this fact when, on or about the 22nd February, he visited their offices at their invitation in order to be informed of the contents of Gunston & Chow's letter dated the 20th February. In the witness-box the defendant testified that he sold the property to somebody else at a price of $200,000. The agreed photostat copy of the contract in respect of that sale shows the contract to have been entered into on 23rd February 1973.

6. The plaintiffs now claim repayment of the $30,000 paid as deposit together with interest thereon and also damages in the sum of $55,000 being the difference between their agreed purchase price of $145,000 and the sum of $200,000 at which the defendant sold the property to another purchaser.

7. It is contended on behalf of the defendant that time was of the essence of the contract and that completion not having been effected within ten days of the signing of the Agreement for Sale and Purchase, the defendant was entitled to repudiate the contract and forfeit the deposit. In the alternative it is said that by their letter of 20th February 1973, addressed to the defendant's solicitors, the plaintiffs' solicitors, in intimating that the plaintiffs wished to enter into a formal contract, had themselves repudiated the original agreement. This latter argument can be disposed of very simply. In the first place I am not disposed to agree that a decision to have the terms of an informal agreement for purchase and sale put into formal language amounts to an abandonment of the informal agreement which, as it seems to me, would have remained in force until it was substituted by the more formal document for the original Agreement was not expressed to be "subject to contract". If however that be incorrect and the true state of affairs be that by the letter of 20th February 1973 the plaintiffs were purporting to repudiate the original agreement for purchase and sale and have it substituted by a more formal document, the position is no different because both in his affidavits and in evidence the defendant said that he had himself taken the decision to repudiate some ten days previously, on 10th February. Thus the plaintiffs could not, on 20th February repudiate an agreement which had already been repudiated by the defendant. That it had been so repudiated by the defendant is implicit not only in his affidavits and his evidence but also in the fact that the contract for sale to the eventual purchaser was dated 23rd February 1973 - only three days after the date of Gunston & Chow's letter; and it is axiomatic that some negotiation must have preceded the signing of the contract.

8. As to whether or not time was of the essence of the contract, there was ...(illegible) ambiguity in the defendant's stance upon this point. Mr. Chow, for the defendant, argued that upon its true construction the clause as to completion within ten days meant that the balance of the purchase price after payment of the deposit should be made within ten days of the agreement, or alternatively within ten days after the plaintiffs had been notified of the identity of the defendant's solicitors and that completion of the sale should be made within "such" a ten-day-period. Thus the argument for the defendant displays uncertainty as to the exact period of time which it is alleged was to be of the essence.

9. It is clear from the terms of the agreement itself that there was no express provision therein as to time being of the essence of the contract and for the argument as to time to succeed, the defendant would have to show that it was apparent to the plaintiffs from the surrounding circumstances of the contract that time was indeed of the essence. This he endeavoured to do by evidence to the effect that he had made it clear to the plaintiffs in the three-hour-discussions leading to the signing of the Agreement for Sale and Purchase, that he was in urgent need of money since the property was mortgaged and the bank was pressing him to repay the mortgage moneys and threatening to exercise its powers of sale if he did not do this promptly. A witness called by the defendant, who was present during the negotiations, likewise testified that the defendant's precarious financial position and the reason therefor were made clear to the plaintiffs. The plaintiffs were rigorously cross-examined upon this feature of the negotiations and I found their reiterated denials of any such disclosure of financial stringency on the part of the defendant, convincing. I accept their denials of being informed by the defendant of his urgent need for money as a result of the attitude of the bank and I reject the testimony to the contrary by the defendant and his witness. Quite apart from my assessment of the demeanour and credibility of these four witnesses, the revelation by the defendant in the course of the negotiations for sale, that he was desperately in need of money would have constituted extremely bad bargaining tactics.

10. But even were it otherwise, that is to say, were I to accept that the defendant did disclose his urgent need for money and that this disclosure had been the basis for the clause requiring completion within the very short period of ten days, so that time was indeed of the essence of the contract, that would make no difference whatsoever to the success or failure of the plaintiffs' claim. The whole basis, according to the defendant, for his decision to repudiate the contract with the plaintiffs and to sell to somebody else was that time had been of the essence and that completion had not been in fact effected within the stipulated ten days. But whose fault was that? Certainly not that of the plaintiffs. They had disclosed to the defendant the name of their solicitors and suggested that the defendant might like to use the same solicitors, to which he had replied that he might well use another firm. This in fact he did and Mr. Chan of Chan & Ho, Solicitors, gave evidence that he received instructions from the defendant regarding the proposed sale saying that the defendant came to see him after 19th January 1973, upon a date which he could not remember but that he could remember that the time for completion was by then very short. Following his being instructed by the defendant, Mr. Chan only wrote to Gunston & Chow, the plaintiffs' solicitors, on 31st January 1973, some two days after the expiration of the ten-day-period; that is to say, the plaintiffs' solicitors were not even aware of the identity of the defendant's solicitors until the stipulated period for completion had expired. In those circumstances even if, which I do not accept, time had been of the essence of the contract, the responsibility for the failure to complete within the stipulated time lay with the defendant and/or his solicitors. The defendant, having failed to complete within the time stipulated, and having sold the property to a third party at a price greatly in excess of that at which he had contracted to sell to the plaintiffs, cannot in those circumstances, now be allowed to forfeit the plaintiffs' deposit and there must be judgment for the plaintiffs in regard to that sum of $30,000.

11. I would add, in parentheses, that since this judgment was reduced to writing, in what was intended to be its final form, I have observed that the same point was decided in the same way only last week in the Chancery Division in England. In Schindler v. Pigault⁽¹⁾ Megarry, J. ordered the return of a deposit on a sale of land, although the purchaser had failed to complete on the date specified on a valid notice to complete, on the basis that the purchaser, who was relying on a sub-sale to finance his transaction, had been prevented from completing on the due date owing to the default of the vendor's agents in failing to afford access to the subpurchaser to view his premises, until the day after that fixed for completion.

12. Should the defendant be allowed to profit from his breach of the contract with the plaintiffs and his sale to a third party? The plaintiffs claim, in addition to the return of their deposit, damages in respect of their lost bargain and to these they are entitled (see Smith v. Hamilton⁽²⁾). As to the extent of the damages I held in Chan Yat v. Fung Keung Rubber Manufactory Ltd.⁽³⁾ that where there is a breach of an agreement to lease, the true basis of assessment of damages is the difference between the contractual rent and that which can be obtained in the open market. Similar considerations must apply to breach of an agreement for sale and the measure of the damages in the present case is the difference between the $145,000 at which the defendant contracted to sell to the plaintiffs and the market value of the property, and prima facie evidence of the market value is the price at which the defendant very quickly sold the property after his repudiation, that is $200,000. This measuring stick was used in the cases of Godwin v. Francis⁽⁴⁾ Goffin v. Houlder⁽⁵⁾ and Ridley v. de Geerts⁽⁶⁾. The defendant has adduced no evidence to the effect that the market value was any less than the $200,000 at which he promptly sold the property.

13. The plaintiffs are entitled to judgment for the return of their deposit in the sum of $30,000 together with interest at the rate of 8% per annum from 19th January 1973 to date and also judgment for damages in the sum of $55,000 with interest thereon at the same rate from 1st April 1973 (the sale to the third party having been completed at the end of March of that year) to today. They are also entitled to the costs of this action.

14. The sum of $30,000 having been paid into Court, as a condition of leave to defend, it is ordered that that sum be paid out to the plaintiffs' solicitors.

Representation:

D. Murphy (Gunston & Chau) for Plaintiffs

J. Chau (H.H. Lau & Co.) for Defendant.

(1) The Times 22nd January 1975 p.7.

(2) 1951 Ch. D. 174

(3) 1967 H.K.L.R. 364

(4) 1870 L.R. 5 C.P. 295

(5) 1921 90 L.J. C.H. 488

(6) 1945 2 All E.R. 654.