Kings Ley Tong v. Kiln Lung Investment Co Ltd

HCA002498/1972

IN THE SUPREME COURT OF HONG KONG

ORIGINAL JURISDICTION

ACTION NO. 2498 OF 1972

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Coram: Mr. Commissioner Yang

Date of Judgment: 17th November, 1973.

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JUDGMENT

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1. By a contract described as a Provisional Agreement the Plaintiff purchased from the Defendant Company a flat known as Flat D, Pak Yuen Garden Mansion, fifth floor, together with a car-parking space, at Tai Hang Lane, Tai Mang Road, Hong Kong (hereafter called the suit premises). In this action the Plaintiff claims specific performance of the Provisional Agreement and damages in lieu of or in addition to specific performance. The Defendant Company plead two grounds of defence, namely, that the Provisional Agreement had no effect as it was subject to written contract between the parties, and that even if the Provisional Agreement were a binding contract, the Defendant Company had rescinded it because of the Plaintiff's failure to pay or tender the purchase price in the manner stipulated. There is also a counterclaim which I shall deal with later.

2. The Provisional Agreement was dated the 9th June, 1970 and signed by the Plaintiff as purchaser and by an agent for the Defendant Company as vendor. The relevant portion of this document is as follows:-

"The purchase price is HK$152,000.00 all Ad Valorem Stamp Duty of 2% and all Solicitors charges are to be paid by the purchaser. The building will be completed in larch 1972 (calculated at five days). The sum of $3,000.00 is now paid as deposit and Official Receipt will be issued therefor. The balance in the sum of $149,000.00 is payable before the 15th June 1970 which payment is to be effected in the following manner, that is to say, to be paid to Yung Yu Yuen, Solicitors, at Queen's Road Central, Mar Yee Building, 8th floor, Hong Kong when a new Agreement for Sale and Purchase will be executed between the parties. If on the due date, the purchaser fails to pay the balance of amount due, the deposit plus all amounts paid will be forfeited. This Agreement and all receipts issued in respect of payments already made will be rendered ineffective. The company will have the right to dispose of the flat in question in whichever manner it sees fit.

3. On the 11th June 1970, solicitors acting for the Plaintiff wrote to the Defendant Company's solicitors in these terms:

"We act for Mr. Kingsley Tong the intended purchaser of the above premises and understand that you act for Kien Lung Investment Co. Ltd. the vendors. Our respective clients have been in negotiation for the sale and purchase of the said premises free from any incumbrances on the following terms subject to written contract having been entered into between parties."

4. Then followed the terms which were substantially the same as those set out in the Provisional Agreement. The letter ended with these words:-

"Please obtain instructions from your clients and let us have the draft Agreement for Sale & Purchase with floor plans for our approval on behalf of our client together with all title deeds of the premises for perusal."

5. Subsequent to this letter, the Plaintiff's solicitors wrote to the Defendant Company's solicitors on no less than eight occasions, i.e. on the 25th June, 7th July, 11th August, and 24th September 1970, and then on the 28th July, 2nd September and 27th September 1971, and again on the 19th April and 24th May 1972, each time asking for the draft Agreement. There was no reply to any of these letters. On the 2nd October 1972, the Plaintiff sued the Defendant Company. On the 27th November 1972, the Plaintiff's solicitors again wrote to the Defendant Company's solicitors the material part of which reads:-

"We are somewhat surprised when you informed us that your clients no longer intended to proceed as it appears that our client has been receiving correspondence concerning electrical installation, etc. together with a notice from the Building Management, a copy of which is enclosed informing him of the completion of the premises."

6. In the meantime, the Defendant Company had been sending notice regularly to the Plaintiff demanding payments of the instalments in accordance with the Provisional Agreement. It appears from the evidence that the first notice was the one dated the 26th November 1970. It reads:-

"TAKE NOTION that Pak Yuen Mansion of Tai Hang Road, I.L. No. 7905 has now been built to the ground floor level. According to the Agreement, you are required to pay the 2nd instalment between 26/11/70 and 3/12/70, payment to be made to Yung Yu Yuen, Solicitors."

The second notice was dated 1st March 1971, the third dated 8th April 1971. On the 16th April 1971 the Defendant Company wrote to the Plaintiff reminding him of his failure to pay the instalments and requesting immediate settlement of the demand note dated the 8th April 1971. This letter also contained a warning that failure to pay would result in interests being charged on the outstanding amount.

Then followed the fourth notice dated 30th April 1971. It is common ground that the only payment which the Plaintiff had made was the $3,000 deposit. The Plaintiff gives as his reason for not paying any of the instalments that he was advised by his solicitors not to pay until there was a reply to the requests made by his solicitors to the Defendant Company's solicitors. It will be noted that although the last paragraph of the letter of the 11th June 1971 asked for the submission of a draft Agreement for approval and also for all title deeds of the premises for perusal, the subsequent seven letters asked for only the draft Agreement. It would therefore appear that the Plaintiff attributes his failure to pay the instalments to the Defendant Company's failure to submit the draft Agreement asked for.

7. It is not disputed that Occupation Permit for the suit premises was issued on the 15th August 1972 but the Defendant Company did not give the Plaintiff the necessary keys to the suit premises nor did the Plaintiff asked for them.

8. By a telephone conversation between the Plaintiff and a responsible officer of the Defendant Company, the Plaintiff was informed that as he did not appear to have a genuine intention to go through with the purchase, the suit premises had been sold to a third party. The Plaintiff was further informed that owing to the friendly relationship between the parties, his deposit would not be forfeited. Whilst the Plaintiff maintains that this telephone conversation took place in October 1971, the Defendant Company's position is that it took place in May 1971. In my view May 1971 was probably the correct date. No demands for instalments dated after the 30th April 1971 have been produced before me. The Plaintiff says in evidence that there were further demands after the 30th April 1971 but he has misplaced them. I think the Plaintiff's recollection is probably wrong. I find as a fact that the Defendant Company by that telephone conversation in May 1971 rescinded the contract because of the Plaintiff's failure to pay any of the instalments.

9. On the authority of Chan Yock Kwong v. Wong Hee Mao (1962) HKLR 430, it is clear that the Provisional Agreement was a binding contract. The Plaintiff says in evidence, "The phraseology of this letter was my solicitors'. I left it to them to write the necessary letter." Its effect was in no way affected by the wording adopted by the Plaintiff's solicitors in their letter of the 11th June 1970 to the Defendant Company's solicitors. In Law v. Jones (1973) 2 WLR 914, at 1002, Buckley L.J. says that where a principal has entered into a binding contract, neither he nor his solicitor can thereafter deprive it of its binding effect by unilaterally treating the transaction as "subject to contract". Indeed the Defendant Company's director Mr. Hui says in evidence that the Defendant Company considered themselves bound by the Provisional Agreement. This intention was confirmed by their regularly sending the demand notes to the Plaintiff for instalment payments. For these reasons, the first limb of the defence fails.

10. The second limb of the defence is that the Plaintiff is not entitled to specific performance as the Defendant Company have rescinded the contract. Quite apart from recession, the Defendant Company are relying also on an equitable principle: he who seeks specific performance must come with clean hands. The Plaintiff says that his failure to pay was caused by the Defendant Company's failure to furnish him with the draft Agreement first asked for by the letter of 11th June, 1970. I am afraid I cannot agree with the Plaintiff's argument. The Plaintiff says he felt that it was unsafe for him to pay before a formal agreement had been completed. If that be his view, then his attitude must have been that he did not consider the Provisional Agreement a binding contract. As the Provisional Agreement was in fact a binding contract and was treated and acted on as such by both parties, the Plaintiff had a clear duty to perform all the terms therein. True, the Defendant Company and/or their solicitors were remiss in ignoring the Plaintiff's requests for a draft Agreement, but the Plaintiff (acting on the advice of his solicitors) was equally remiss in ignoring all the demands for instalment payments. The real point of the matter however is that the Plaintiff's duty to pay was quite unconnected with and independent of the Defendant Company's delivery of the draft Agreement. In my judgment the Plaintiff is not entitled to specific performance, (A) because the Defendant Company have rescinded the contract as was within their rights in the circumstances and (B) also because the Plaintiff has not come to this Court with clean hands.

11. I should mention in passing that the principle of mutuality has not been argued by the parties, I therefore do not deem it necessary to consider the point: See Cheshire and Fifoot on Contract, 7th ed., p. 567; Dominion Coal Company v. Dominion Iron and Steel Company (1909) A.C. 293.

12. I now come to the counterclaim. The Plaintiff has caused the writ of summons of this action to be registered as lis pendens against the flat in question. On the 5th October 1971 the Defendant Company agreed to sell to one K.Y.K. Co. Ltd. the suit premises for $152,000 payable within seven days of the issue of the Occupation Permit. By their counterclaim, the Defendant Company seek, inter alia, an order that the lis pendens be vacated from the Land Office Registry and also an inquiry into damages or alternatively damages to be assessed by the Registrar.

13. On the evidence of a chartered surveyor called by the Plaintiff, which has not been challenged, the current market value of the suit premises is about $320,000. It has not been shown in evidence or by defence counsel's submission in what way and to what extent the Defendant Company have suffered damage. In the circumstances of the case any award of damages other than a very nominal sum is not justified.

14. Plaintiff's claim is dismissed. On the counterclaim, I make the order asked for and award $100 as damages. Costs to the Defendant Company.

Representation:

Asome (Wilkinson & Grist) for Plaintiff.

Wong (Yung, Yu & Yuen) for Defendant.

Effect of "provisional agreement" - specific performance - failure on plaintiff's part to perform terms of contract.