Elo Enterprises Ltd v. Chan Wing Chau Tso Ltd

Case No.HCMP 5/1975

Court

High Court CFI

Date20 Feb 1973

Judge—

Case Document

100%Judiciary

HCMP000005/1975

IN THE HIGH COURT OF JUSTICE

MISCELLANEOUS PROCEEDINGS

ACTION NO. 5 OF 1975

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BETWEEN
	ELO ENTERPRISES LIMITED	Plaintiff
	and
	CHAN WING CHAU TSO LIMITED	Defendant

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Coram: Li, J.

Date of Judgment: 4th November 1976 at 4.10 p.m..

Present:	R. Mills-Owens (Peter Mo & Co.) for plaintiff
	A. Zimmern and A.H. Sakhrani (Kwong, Lam and Chan) for defendant

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JUDGMENT

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1. On the 20th of February 1973 Elo Enterprises Limited (hereinafter referred to as the plaintiff) entered into a sales and purchase agreement with the defendant Chan Wing Chau Tso Limited (hereinafter referred to as the defendant) for the purchase of several lots of land in Ma Wan namely lots 150 to 158 and 188 to 203 (hereinafter referred to as the property). In a written agreement which is document No.18, several clauses are significant. I will read them in detail. Clause 3 of the agreement provides that:

"The purchase shall be completed at the office of Philip K.H. Wong & Co., Solicitors, in manner set out in Clause 12 hereof when the residue of the purchase money shall be fully paid and the Vendor and all other necessary parties will execute a proper assurance of the premises sold to the Purchaser as nominee or nominees or subpurchaser or subpurchasers free from incumbrances and the Purchaser or nominee or nominees or subpurchaser or subpurchasers shall be entitled from the date of completion to the rents and profits or possession of the premises all outgoings up to that date being cleared by the Vendor."

Clause 4 of the agreement provides that:

"If the purchaser shall make and insist on any objection or requisition either as to title conveyance or any matter appearing on the title deeds or particulars or conditions or otherwise which the Vendor shall be unable or (on the ground of difficulty delay or expense or on any other reasonable ground) unwilling to remove or comply with or if the title of the Vendor shall be defective the Vendor shall notwithstanding any previous negotiation or litigation be at liberty to annul the sale in which case the Purchaser shall be entitled to the return of the deposit but without interest costs or compensation."

Clause 5 of the agreement provides that:

"If from any cause (other than the default of the Vendor and except as provided by Clause 4) the sum of $4,299,424.28 balance of the purchase money shall not be fully paid on or before the manner set out in Clause 3 hereof the deposit of $477,713.80 shall be absolutely forfeited to the Vendor who may thereupon rescind the sale and resell the said premises either by public auction or private contract and any deficiency in price and all expenses attending such resale shall be borne by the Purchaser and in this respect time shall be of the essence of the contract."

Clause 12 of the agreement provides that:

"It is hereby further agreed and declared that Chan Sai Kee, one of the owners of the premises hereby agreed to be sold, has died and Chan Sau Kau is the proposed Administrator of the estates of the said Chan Sai Kee deceased. The said Chan Sau Kau has instructed Messrs. Philip K.H. Wong & Co., Solicitors to apply to the Supreme Court of Hong Kong for Letters of Administration of the estates of the said Chan Sai Kee deceased. Completion of the sale and purchase of the premises hereby agreed to be sold shall be completed within thirty days from the day of notice by the Vendor to the Purchaser to notify the Purchaser that such Letters of Administration has been obtained from the Supreme Court of Hong Kong."

2. The grant of Letters of Administration was obtained on the 18th of August 1973. However, for reasons which I shall refer to later, such obtaining of the grant was not notified to the plaintiff until the 18th of February 1974. On that day the solicitors for the defendant wrote to the solicitors for the plaintiff in these terms:

	"With reference to our previous correspondences we would like to inform you that Letters of Administration in respect of Chan Sai Kee, deceased has been granted to Mr. Chan Sau Kau. As solicitors and agents for Messrs. Chan Wing Chau Tso Ltd. we have this day given notice to Messrs. Elo Enterprises Limited to complete the Agreement for Sale and Purchase dated the 20th day of February 1973 in respect of the above Lots within thirty days from the 18th day of February 1974. A copy of the said letter is herewith enclosed for your reference.
	In the mean time we like to inform you that Chan Wing Chau Tso Limited as beneficial owner has assigned the said Agreement for Sale and Purchase and all the estate right title benefit thereto and the properties comprised therein to Messrs. Yip Yau and others. We enclose a copy of the relevant Assignment dated 22/10/1973 for your reference.
	We would suggest that both the said Chan Wing Chau Tso Ltd. and the said three assignees shall join the assignment as the First Confirmor and the Second Confirmor. We shall be obliged if you will kindly send us your draft assignment for our approval on behalf of our clients at your early convenience.
	For your perusal we enclose herewith the following documents:-

	1.	Letters of Administration Memorial No. 106233.
	2.	Certified True Copy of Vesting Order 1974 No. 11."

To this, the solicitors for the plaintiff, Peter Mo & Co., replied on the 26th of February 1974:

"We have before us a copy of the Letters of Administration, copy of an Assignment dated the 22nd October 1973 and a copy of an Order made by the Supreme Court on the 21st January 1974. Would you please let us have a full set of documents making up the title including those documents referred to in the Assignment and the Court Order. Will you also please let us know the reason for the delay between the date of granting the Letters of Administration and the notice informing the intending Purchaser thereof."

The explanation then followed on the 12th of March 1974 in which Philip Wong & Co. wrote to Messrs. Peter Mo & Co. saying:

"We thank you for your letter of the 26th day of February 1974. We send you herewith the following title deeds and documents in respect of the above Lots as requested for your perusal ....."

Then they listed the documents particularly the Agreements and Assignments and the Power of Attorney dated the 22nd of October 1973. The letter went on:

	"Please note that the Letters of Administration Memorial No. 106233 and the Vesting Order 1974 No. 11 sent to you under our cover letter of the 18th February 1974 are an original one and a certified true copy.
	As you would understand that the above Lots are now held by the registered owners under the Block Crown Lease.
	As provided in the Agreement for Sale and Purchase between our respective clients and registered by us under Memorial No. 105901 the day for completion of the transaction of the above Lots is within 30 days from the day of the notice and not from the day of the Grant of the Letters of Administration.
	We shall be obliged if you will kindly send us your draft Conveyance on Sale for our approval on behalf of our clients at your earliest convenience."

Messrs. Peter Mo was obviously not satisfied. The following letter was addressed to K.H. Wong & Co.:

"Thank you for your letter of the 12th instant. It is fully appreciated that completion for the transaction is within 30 days from the day of notice and not from the day of grant of Letters of Administration. However we would repeat as a requisition an explanation of the delay between the date of the granting of the Letters of Administration and the date of giving notice of such grant to the intending purchasers. You will no doubt appreciate that it is implied that such notice will be given within a reasonable time of the date of grant."

There was a reply from K.H. Wong & Co. but then on the 20th of March 1974 the plaintiffs' solicitors Peter Mo & Co. wrote to the defendants' solicitors in these terms:

	"Thank you for your letter of the 18th instant. Unfortunately you still have not answered our request for an explanation of the delay between the date of the granting of the Letters of Administration, i.e., 18th August 1973 and the date of giving notice thereof, namely, 25th February 1974.
	Your statements regarding Chan Hok Ming have been noted but as the property was already registered in his name this was an unnecessary exercise so far as the conveyancing is concerned. We cannot see anything on the title to suggest that the legal estate vested in Chan Sai Kee rather than Chan Hok Ming.
	What is more likely to be the answer to our question is that your clients were unable to complete the transaction within thirty days of the grant of Letters of Administration because of the dispute which was then before the court and so they delayed in giving notice.
	The fact is that while land prices continued to rise subsequent to entering into the Agreements for Sale and Purchase of the 20th February 1973 they had again fallen by the time of the issuance of the Letters of Administration and continued to fall until the present day. Accordingly our client is entitled to damages for this unwarranted and unjustified delay for the difference in value as at the time when the notice ought to have been given and the time when notice was in fact given. This difference is probably in the region of some fifty per cent.
	Perhaps we should mention that we have had to advise our client that although there was no time mentioned in the Agreement for Sale and Purchase for the giving of notice of the grant of Letters of Administration, nonetheless, you were required to give notice within a reasonable time and we have further advised our client that such reasonable time, in these circumstances, would most likely be some period not being less than seven days and not being more than one month. Failure to give notice within a reasonable time is an act upon which our client, inter alia, may claim damages.
	Would you kindly let us know whether your clients are prepared to pay damages in this particular case. If so then either the amount of the damages can be agreed or can be assessed by valuers or arbitration. If your clients do not agree to pay damages then we must advise our client on the other steps that it may take in this matter."

The reply to this letter from K.H. Wong & Co. was in the manner of a counter-offer. It is dated the 9th of May 1974 and reads:

	"With respect, we have given you the main reasons why the notice of completion was not given immediately after the grant of the Letters of Administration. Counsel has advised that on looking at the whole of the case, it is unlikely that our client has been late or unreasonable in giving notice of completion. It seems clear that until your letter dated 26th February 1974, your client did not consider that there had been unreasonable delay because they did not press for the expedition of the grant of Letters of Administration. Further, the Agreement for Sale and Purchase provides that if completion does not take place within 24 months, your client has the option to rescind the Agreement. The parties have intended that the latest time for completion would be 24 months. However, our client has done its part and gave your client notice to complete within just about 12 months from the date of the Agreement. The O.J. Action does not prevent the transaction from being completed earlier. The dispute was already settled in August, 1973, Time was taken in executing the respective settlement agreements and assignment after which the Action was formally withdrawn in October, 1973. The subsequent months were taken up in the application to the Court for the Vesting Order which Counsel has advised that it was proper so to do. Without such a Vesting Order, Mr. Chan Hok Ming could only assign his beneficial interest and not his legal interest.
	Nothwithstanding the point as to whether notice was given within a reasonable time, Counsel has advised that in any event since your client the Purchaser did not exercise, or purport to exercise, its right to repudiate the contract, your client was under an obligation to complete and to pay the balance of purchase price on 20th March, 1974. By reason of your client's failure so to complete our client has become entitled to rescind and re-sell. Notwithstanding what we have stated above, entirely without prejudice and with a view to settling and completing the assignments as expeditiously as possible, we are instructed by Chan Wing Chau Tso Limited and the three assignees to inform you which we hereby do, that they are prepared to consider a firm offer from your client to settle this dispute provided:

	(1)	it is reasonable and
	(2)	it is communicated to us within 7 days from the date hereof and that if accepted, the assignment shall be completed within 14 days from the date hereof.

You are requested to let us have your reply forthwith. It is clearly understood that if no firm offer is received within the next 7 days our clients will enforce their rights under the agreement for sale and purchase to forfeit the deposits and to take such other steps as they may be advised without further notice."

There was a long lapse of silence in the correspondence apart from an acknowledgement of this letter by Peter Mo & Co. until the 21st of December 1974 when Peter Mo & Co. wrote again to K.H. Wong & Co. in these terms:

"It was a term of the agreement for sale and purchase of the above premises that completion would take place within 30 days from the day of notice by the Vendor to the Purchaser to notify the Purchaser that Letters of Administration had been obtained from the Supreme Court of Hong Kong in respect of the estate of Chan Sai Kee. As an unreasonable period of time passed between the granting of such Letters of Administration and the Vendor notifying the Purchaser of the same our clients are entitled to rescind the agreement for sale and purchase and accordingly on the instructions of our clients we hereby give notice to your clients through yourselves that the agreement for the purchase of the above premises is hereby rescinded. Accordingly you are required to refund the deposit held by you as stakeholders. Furthermore we are to demand interest on the amount of the deposit from the time when the Letters of Administration were granted until the notice by you of the issuance of such Letters at the rates which banks charged their customers for leans on real estate during such period."

3. The reason for the delay as it is known now is that the defendant was not in fact the legal owner of the property at the time. The legal interests were then vested in four persons by the name of CHAN Pui-tak, CHAN Sai-kee, CHAN Yip-kee and CHAN Hok-ming. CHAN Sai-kee was the trustee for CHAN Hok-ming who was then a minor. CHAN Sai-kee died in 1966 and Letters of Administration had not been obtained at the time of the sale and purchase agreement. These four persons I shall refer to as "villagers".

4. There is a further difficulty involved in this matter. Prior to the sale of the property by the villagers to the defendant on the 20th of February 1973 the villagers had sold the same to one YIP Yau and one David CHAN on the 17th of January 1973. As a result there was a writ issued and a lis pendens involving the claim of priority between the defendant YIP Yau and the villagers as legal owners. These matters were not settled until some time in October 1973.

5. Apart from that, as a result of the death of CHAN Sai-kee who was the trustee for CHAN Hok-ming died in testate. Even when CHAN Sau-Kau obtained the Letters of Administration, as a personal representative of the CHAN Sai-kee he was not then in a position to be a trustee for CHAN Hok-ming. These matters had to be regularized until January 1974. Perhaps that was the reason why the notice of having obtained the grant of Letters of Administration was not given by the defendants until the 18th of February 1974.

6. The gravamen of the case is that the notice dated the 18th of February was not given within a reasonable time. It is readily conceded that the time for obtaining the grant of Letters of Administration was not set out expressly and not made essence of the contract between the plaintiff and the defendant. However, the plaintiff's case is that if time was not of essence of the contract, then such notice should be given within a reasonable time. Alternatively the plaintiff contends that the defendant even in February and March of 1974 had never had a good title to the property to convey to the plaintiff.

7. The defence case is that despite the delay in giving a notice, the plaintiff never rescinded the contract until the 21st of December, a date well after the 30 days period elapsed after the giving of notice of having obtained the Letters of Administration. In reply and in defence to the plaintiff's alternative contention the defendant alleges that by January 1974, the defendant was able willing and ready to convey a perfectly good title.

8. It will be of interest to observe that having regard to the provisions in the agreements of sale and purchase dated the 20th of February 1973 between the plaintiff and the defendant, although time for completion after notification to the plaintiff of the grant of Letters of Administration was made of essence of the contract, yet the time for giving such notice of having obtained Letters of Administration was never essence of the contract. The plaintiff contends that if time to give such notice is not made as essence of the contract, notice must be given within a reasonable time. In this connection, I like to refer to the headnote of the case in Stickney and Keeble in 1915, Appeal Cases, page 386 which reads:

"Where in a contract for the sale of land the time fixed for completion is not made of the essence of the contract, but the vendor has been quilty of unnecessary delay, the purchaser may serve upon the verdor a notice limiting a time at the expiration of which he will treat the contract as at an end, and in determining the reasonableness of the time so limited the Court will consider not merely what remains to be done at the date of the notice, but all the circumstances of the case, including the previous delay of the vendor and the attitude of the purchaser in relation thereto."

When deciding what is a reasonable time, I have to have regard not only the conduct of the defendant but also the conduct of the plaintiff as well. It is of interest also to observe that up to June 1973 no less than three letters were written by the plaintiff's solicitors to the defendant's solicitors asking for the position as to the Letters of Administration without an answer. Then both parties were silent. Mr. CHONG Shui-kit of the plaintiff said that in October 1973, he went to see his own solicitors specially about the question as to why there was still no notice given about the Letters of Administration. He was given a noncommittal answer by his own solicitors and he left the matter at that. No further action was taken.

9. The sale and purchase agreement of the 20th of February 1973 appeared to be fairly one-sided. Bearing in mind that both parties were then represented by separate solicitors, there was no question any unconscionable bargains struck or any advantage taken by one party over the other. Suffice it to say that both parties were properly advised and they struck the bargain and entered into the sale and purchase agreement as such that while there was no time limit set for the defendant to give notice of the Letters of Administration which would decide definitely the time for completion time for completion was made of essence after notice was given. It is for the parties to look out to provide for their own protection. That, the plaintiff purchaser had failed to do.

10. After the agreement was signed, there was a long lapse of time before the plaintiff took any interest as to when the Letters of Administration would be obtained. If the plaintiff was really serious and it wanted to know or it did not want any further delay, a search in the appropriate registry would reveal when the Letters of Administration had been granted. It would be open to the plaintiff to ask again through its solicitors after they found out the time of the grant to write to the defendant's solicitors saying in so many words that, "We know as of fact that the Letters of Administration had been granted on the 18th of August 1973 and that no notice so far had been given to us". There and then the plaintiff can demand for a formal notice of the grant from the defendant. If the defendant fails to give such a notice, then the plaintiff may well have a good reason to say that the notice is not given within a reasonable time which will enable them to rescind the contract. For these reasons I have my doubt whether such notice as given on the 18th of February 1974 was given with unreasonable delay. For the defendant the later it gave the notice of the grant the better because it could then have cleared its own house and be in a position to convey a good title when they give notice. However, Clause 12 of the agreement provides that the parties have 24 months to enable the defendant to give notice of the grant. It is not part of the defence that notice of the grant had been given within a reasonable time. Learned counsel for the defence was quite happy to contend that even if the notice had been given out of reasonable time, there was no rescission on the part of the plaintiff until well after the time for completion had elapsed and after the defendant had stepped in and forfeited the deposit. I have to consider the reason why the plaintiff refused to complete. The reason given, according to the correspondence, is that the defendant failed to give the true reason for the delay. On his evidence Mr. Chong has made it abundantly clear that because of this delay, he suspected that there might be something wrong with the defendant's title or as to the permitted use of the property. He said that in the meanwhile the plaintiff found out that there was a piece of land right in the middle of the property which was not subject matter of this sale and purchase agreement and that it would be a clot or a block to the plaintiff's development plan. The plaintiff would never have completed anyway. In this respect, if that was the true reasons, the only answer is that maxim "caveat emptor". The only reason was whether the delay in giving the notice entitled the plaintiff to rescind; and, if it did whether the plaintiff rescinded in time. I have read the correspondence. It is abundantly clear that on the 20th of March 1974 when the last day for completion was reached, all the plaintiff purchaser's solicitors wrote was that they claim for damages in a region of 50 per cent of the purchase price. Then they asked for negotiation. The defendants' solicitors on the 9th of May asserted the right of forfeiture, then without prejudice asked them to make an offer, a firm offer of a reasonable price. There was, apart from an acknowledgement, no answer to this letter whatsoever until the 21st of December 1974. By that time the defendant's solicitors had already stepped in to claim the deposit and treat the deposit as forfeited.

11. Having regard to the whole matter, I find as a fact that time was not made an essence of the contract for giving notice of having obtained the grant of Letters of Administration. As to whether the date of 18th of February was a reasonable time within which to give such notice, I say that having regard to the overall circumstances and the conduct of both parties, a delay of the six months is not unreasonable. Even if it is unreasonable, the plaintiff had not taken advantage of his position so as to rescind the contract forthwith. On the contrary, the plaintiff invited an offer to settle for damages. Such offer was taken up without prejudice and to which the plaintiff failed to respond and allowed the matter to lapse. The reason why I say the notice was given within a reasonable time is that the defendant was allowed and given the opportunity to proscrastinate solely because of the conduct of the plaintiff. It is not entirely the fault of the defendant. I also find as a fact that on the 20th of March 1974 a day well after the time for completion has elapsed, the plaintiff never exercised his right to rescind. In fact he kept the contract alive by making offers and failed to pursue the matter. The letter by the defendant's solicitors dated the 9th of May 1974 made it quite clear that the counter-offer was without prejudice and that within seven days from that date they would enforce their right to forfeit the deposit. No step was taken by the plaintiff to do anything about it until the defendant had taken steps to forfeit the deposit.

12. A lot of authorities have been cited in support of various propositions. However having considered these authorities, I don't feel that it is necessary to refer to them one by one. On the facts of the case, I have come to the conclusion that the defendant had taken steps in time to claim his deposit and was entitled to forfeit the deposit. In the circumstances judgment should be given to the defendant for the deposit.

13. Costs including the adjournment in the previous proceedings must be given to the defendant. There shall be a stay of seven days before payment out of the deposit paid into Court. I think that is not going to harm anybody. Obviously the plaintiff would like to consider their position whether they are appealing against this decision.

Representation:

R. Mills-Owens (Peter Mo & Co.) for plaintiff

A. Zimmern and A.H. Sakhrani (Kwong, Lam and Chan) for defendant