Hui Yin Yew v. Zeffiro Investments Ltd and Others
Read the full judgment text of HCA 4464/1988 on BabelCite. This High Court CFI judgment was delivered on 23 April 1991.
1. The plaintiff's case against the defendants, in law and in equity, was initially sought to be advanced on an alleged oral agreement reached on 17th April 1988. In the Re-Amended Statement of Claim and the Particulars delivered, this alleged oral agreement was said to be evidenced in writing by his estate agent's letter dated 20th April, dispatched to the 1st defendant and signed on its behalf by the 2nd defendant. That letter was a letter of offer, designated as such and made, for the first
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HCA004464/1988
IN THE SUPREME COURT OF HONG KONG HIGH COURT ------------------- BETWEEN
------------------- Coram: Hon. Liu, J. in Court Dates of hearing: 8 - 12, 15 - 18 April 1991 Date of delivery of judgment: 23 April 1991 ----------------- JUDGMENT ----------------- 1. The plaintiff's case against the defendants, in law and in equity, was initially sought to be advanced on an alleged oral agreement reached on 17th April 1988. In the Re-Amended Statement of Claim and the Particulars delivered, this alleged oral agreement was said to be evidenced in writing by his estate agent's letter dated 20th April, dispatched to the 1st defendant and signed on its behalf by the 2nd defendant. That letter was a letter of offer, designated as such and made, for the first time through the estate agent, to purchase the premises in suit. By its very language and terms, this Letter of Offer is of the nature of an agreement expressly made subject to contract and subject to a proposed tenancy agreement with a third party, Messrs. A.S. Watson Company Limited. Moreover, the pleaded facts and the agreed documents have impliedly made the parties' agreement in the Letter of Offer likewise subject to contract and the tenancy agreement. Anxiety was expressed as to whether reasonable prospects of success would not be, despite the contended issues, too unrealistic or remote for the plaintiff. Counsel for the plaintiff, Mr Hung's incongruous submissions on settled concepts and the application of these questionable notions to his liberal factual analysis have made these proceedings all the more trying. 2. The defendants elected to give or adduce no evidence. The evidence given by or on behalf of the plaintiff is therefore to be regarded as unchallenged. 3. This Court is conscious of its duty to try, at all times, to be receptive to counsel's submissions. Throughout the nine hearing days, the success or otherwise of my determined effort can be best judged by those in attendance before me. In the end, I need simply to state the facts and apply the ground principles to them. Issues canvassed by or on behalf of the plaintiff but not specifically dealt with are plainly insupportable and must be regarded as having been wholly rejected. It would not be profitable to examine the endless authorities cited in support of propositions founded on fundamental flaws. 4. I also find it unnecessary to deal with matters unproceeded with by reason of the plaintiff's concessions or on the defendants' own volition. 5. The plaintiff is a lecturer with the Hong Kong Polytechnic in its Mathematics Department. He owns over ten and almost twenty local properties for investment. He has had three properties on lease to Cathay Pacific Airways Limited and two to the Hong Kong Aircraft Engineering Company. Among his properties, some are located in Hong Lok Yuen. These are of different sizes but none with a garden as large as 5,200 sq.ft., comparable with that for the premises in suit which he claims he "loves". Negotiation for the sale and purchase of these premises was conducted on the clear understanding that they were to be continued to be enjoyed by the existing occupant, Mr Paton. The plaintiff was minded, therefore, to let out these suit premises, after their acquisition, for rent. Mr Paton's employer, Messrs. A.S. Watson Company Limited, was to become the tenant. The plaintiff was aware that companies would have their own leasing policy with their individual likes and dislikes. He assumed that as a Finance Director claiming to have control over the shops in the New Territories, Mr Paton should have some say in the leasing policy of A.S. Watson Company Limited, but the plaintiff was alive to the reality that Mr Paton could not secure from A.S. Watson just any leasing terms. He was little concerned with the identity of the tenant, or the terms of the tenancy provided that they were fair and reasonable. He merely wanted a responsible tenant good for rent. He welcomed vacant possession which would enhance the value of the premises. 6. The suit premises belong beneficially to Mr Paton, the 2nd defendant, but held in the name of his company, the 1st defendant. The suit premises had been left in the hands of the estate agent, Ricacorp Properties Limited, for over a year. Mr Liu was a staff of the estate agent working under its supervisor, Mr Barry Law. On 17th April 1988, Mr Liu accompanied the plaintiff to view the suit premises. The plaintiff was given a guided tour by Mr Paton. The plaintiff had been briefed that the property must be leased back as Mr Paton's residence. After inspection, the price was agreed to be $2.85M subject to such a lease-back at the rental of $28,500 per month exclusive of rates and management fees but inclusive of maintenance of the swimming pool. In passing, a subsisting general maintenance fee of $650 per month was mentioned. The plaintiff made it quite clear that he was to buy the property only if he could secure mortgage finance up to 85% of the purchase price and only "as soon as (the estate agent) could confirm that the premises could be mortgaged up to 85%, (he) would pay (a) deposit of $50,000". The lease-back was to Messrs. A.S. Watson Company Limited, the employer of Mr Paton. The plaintiff himself expected A.S. Watson would readily enter into a tenancy agreement because of Mr Paton's position and his claim that he had control over all the New Territories shops. Moreover, the proposed rental was said to be within the housing allowance of Mr Paton's from A.S. Watson. 7. Mr Liu explained that at the meeting of 17th April Mr Paton expressed the wish that it should be the owner's responsibility to maintain the swimming pool. According to Mr Liu, "Mr Paton said that he could make the arrangement (with A.S. Watson for the preparation of the tenancy agreement) and he did not think that there would be much of a problem." The meeting took about half an hour. The plaintiff conceded that more terms would have to be negotiated and added in the formal Agreement for Sale and Purchase and the approved Tenancy Agreement. Mr Liu described the concluded negotiation in these terms : "So eventually, the basic and preliminary matters had been agreed upon between both parties i.e. in relation to the purchase price and the term of the lease." (Emphases mine) 8. Mr Barry Law, the former superior of Mr Liu testified that he did not regard the premises in question as of a particularly good design or unique. He told the court that there are properties in Hong Lok Yuen of similar design with even a bigger garden and a swimming pool. No evidence was led as to whether these are or are likely to be on the market. He described the suit premises as being merely of a standard design, though with a relatively bigger garden. 9. The plaintiff was adamant that a deal was finally struck upon his payment of the deposit which was, in the events that followed, paid apparently without the estate agent's confirmation of the 85% mortgage finance. As the plaintiff has never sought to recover the deposit from Mr Paton or his company, it was claimed that he should be taken as having given notice of his secured mortgage finance. The plaintiff sought to rely also on the fact that Mr Paton never expressly warned him that he was not going to sell the house without any tenancy agreement approved by A.S. Watson. But was that not implicit, particularly in the circumstances of this case? To him, it was a good bargin. He believes that the defendants did not honour their promise "because the price of the premises had been rocketing". 10. After the meeting of 17th April, the plaintiff caused to be written his estate agent's letter of 20th April to Zeffiro Investments Ltd., the 1st defendant. The letter was accompanied with the plaintiff's personalised cheque for Zeffiro in the sum of $50,000. That letter is in the following terms
11. By a letter dated 26th April, solicitors for the plaintiff wrote to solicitors for Zeffiro in these terms :
12. On the next day, 27th April, solicitors for Zeffiro sent over to the plaintiff's solicitors, a draft Agreement for Sale and Purchase and a draft Tenancy Agreement with A.S. Watson, the proposed tenant. These drafts arrived at noon on 28th April. The plaintiff's application for mortgage finance was found by Wa Pei Finance Company Ltd. to be in order, but its written confirmation of financing came only in a letter dated 30th April. The plaintiff explained that due to his working schedule he only managed to visit his solicitors on Saturday, 30th April. As far as he is concerned, it was not put as a case of having to wait for formal confirmation from Wa Pei. He was told that he was an acceptable applicant and thus had been virtually assured of mortgage financing. Strictly speaking, that cannot be correct. On the same day, 30th April, Wa Pei confirmed with solicitors for the plaintiff in identical terms. That letter appears at pages 89 and 90 of the Agreed Bundle of documents. The plaintiff was sent to his present solicitors who.were on the approved list of Wa Pei. This written confirmation to the plaintiff's solicitors bears a chop of "Subject to Contract". Evidently, mortgage and other legal documents would have to be signed or executed as required in the written confirmation of 30th April, and these documents would have to be completed by 30th July. The sale did not go through, and there is no evidence that the mortgage finance' arrangement has been fully implemented. There was, however, a cashier cheque for. $235,000 which was probably backed by Wa Pei. 13. When the plaintiff went to his solicitors on the draft Agreement for Sale and Purchase and draft Tenancy Agreement, he took with him a cashier order for $235,000. The plaintiff's solicitors amended the draft Agreement for Sale and Purchase to include warranties as to known illegality and unsoundness of the structures. As for the draft Tenancy Agreement, extensive proposed amendments were made to the provisions for occupation and subletting as well as periodical and structural maintenance of the swimming pool. These proposed amendments were substantial, particularly the proposed ceiling of $1,300 a month for the total maintenance of the swimming pool, both periodically and structurally. A two-month rental deposit was also suggested for the optional further two-year extended term. The day after the plaintiff's visit was 1st April, a Sunday. These amendments were completed on Monday, 2nd May. On the same day, the plaintiff's solicitors again requested for the title deeds, the dispatch of which was promised by the solicitors for the defendants. On Tuesday, 3rd may, the solicitors for the plaintiff further amended the draft Agreement for Sale and Purchase to allow some 14 days for perusal and acceptance of title. The drafts containing all these amendments were thereupon sent to solicitor's acting for the defendants and A.S. Watson reaching them at noon on the 3rd. Soon after the dispatch of the amended drafts, solicitors for the plaintiff communicated with solicitors for the defendants and were told that the amendments were under consideration. The title deeds reached the solicitors for the plaintiff at 2:25 p.m. in the afternoon on the 3rd May. In a letter to the solicitors for the plaintiff dated 7th May, solicitors for the defendants stated on instructions that the matter was not to proceed. The $50,000 initial payment was returned and the title deeds were sought to be retrieved with a remainder that the same had been sent under an undertaking of the plaintiff's solicitors to hold them to the order of the 1st defendant's solicitors, "returnable on demand". By a reply dated 10th May, solicitors for the plaintiff maintained that the plaintiff's offer to the 1st defendant through his estate agent was accepted "in clear terms an 20th April 1988" upon its receipt of the $50,000 initial deposit. The $50,000 cheque was returned with a threat to sue for specific performance unless comments were received on the proposed amendments to the drafts which had been sent over within 5 days thereafter. The plaintiff duly caused the said Letter of Offer dated 20th April together with his own letter to the estate agent dated 19th April to be registered in the District Land Office against the suit premises. 14. It is on and on the basis of the alleged binding contract for sale and purchase that the plaintiff seeks specific performance, damages and other relief against the 1st defendant and damages against the 2nd defendant. The 1st defendant counterclaims for an order vacating the registration of these two letters in the District Land Office by Memorial Nos. 281866 and 281867 respectively. 15. On 21st April, solicitors for the defendants were instructed by the 1st defendant to prepare conveyancing documents and a tenancy agreement to A.S. Watson on the title deeds then held by the Standard Chatered Finance Ltd. as mortgagee. Immediately on 22nd April, solicitors for the 1st defendant requested the title deeds and other documents from Standard Chatered Finance Ltd. for a proposed redemption of the said mortgage. Title deeds were sent over to the solicitors for the 1st defendant on Friday but the same did not reach solicitors for the plaintiff until 2:25 p.m. on Tuesday, the 3rd May. 16. On the available documents, there is no sign of any unreasonable of culpable delay. Mr Ng, solicitor-in-charge on behalf of the plaintiff for the proposed sale and purchase finally conceded that despite the lack of mention of time being of the essence, the agreement was subject to, inter alia, a condition that the Agreement for Sale and Purchase should be signed on or before 3rd May. As for the draft Tenancy Agreement from A.S. Watson, Mr Ng agreed that "it was a must it had to be agreed". The plaintiff only came to the offices of his solicitors some two days later after the dispatch of the drafts, but Mr 14g explained that there was nothing unusual except for the fact that he was "a bit tight for time". It was appreciated by Mr Ng that as the plaintiff's solicitors had to consult the plaintiff, solicitors for the defendants and A.S. Watson had similarly to take instructions. Mr Ng acknowledged that solicitors were expected to liase and that some terms were not negotiable. However, he was never told what these terms were. It was conceded that it was unreasonable for the plaintiff to propose a $1,300 limit for regular and structural maintenance of the swimming pool. Mr Ng would also expect solicitors for the defendants and A.S. Watson to return to him with a counter-proposed option to terminate or a break clause as regards his amendments relating to prohibition against subletting, assignment, etc. I set out below Mr Ng's evidence on the role of solicitors for the defendants and A.S. Watson in the preparation of documentation for the proposed sale and purchase.
He also agreed that if the drafts had been sent over earlier, solicitors for the defendants and A.S. Watson would have had more time for consideration.
17. The plaintiff explained that he "expected Watson would enter into a tenancy agreement with (him) because Mr Paton was asking (him) whether (he) would like to have a standard tenancy agreement or a tenancy agreement prepared by a solicitors firm". Mr Ng "expected Baker and McKenzie to return to (him) giving their comments and finalise that matter that afternoon" "either by telephone or by fax or by face to face discussion". 18. Mr Ng was under instructions that except for title the plaintiff would not be insisting on any of the amendments he had made, but he had not conveyed the attitude of the plaintiff to Baker and McKenzie. 19. Mr Ng himself found time a little tight. He was not complaining of any delay. He regarded Baker and McKenzie as having conducted themselves as usual in the normal course of business of a firm of solicitors in the preparation of the conveyancing documents. He expected Baker and McKenzie to liase with him in the afternoon of the 3rd May but he commented: "what I expected - my expectation was made according to my experience - in reality, anything can come out on the other side like in this case, giving no reason for not replying and no comment on our amendments. So what I expected is one thing. Reality is another thing." 20. I have had the opportunity of observing the reaction of Mr Ng in the course of his evidence and the way in which the above and other answers were given. I conclude: Mr Ng was stating, in effect, that in hindsight matters could have been expedited but that the deal simply lapsed without fault on the part of any of the parties. 21. The short question is whether the plaintiff and the defendants or, for that matter, even the plaintiff himself as an offerer intended to be bound on merely the terms in the Letter of Offer dated 20th April without a formal contract and without an approved tenancy agreement. The letter of 20th April contained only "basic terms and conditions of the offer". A swimming pool was involved. No one would sensibly allow himself to be caught by the then negotiated terms without a formal contract properly drawn up on legal advice. The plaintiff is a seasoned buyer in our property market. As a matter of fact, reference was specifically made to an "official" agreement for sale and purchase. I shall return to the prescribed need for signing an "official agreement for sale and purchase". 22. One of the basic conditions was condition 6 : "The property will be sold subject to proposed tenancy agreement". It is true that the monthly rental exclusive of rates and management fee was agreed. The same was agreed to be exclusive of the maintenance of the swimming pool. That is less than precise. The term of three years was also agreed; so was the date of its commencement. There was an agreed option of renewal for a further term of two years on quantifiable monthly rental. The manner in which such an option was to be exercised was also specified. The tenant was named. In the letter dated 26th April to Messrs. Baker and McKenzie, solicitors of the plaintiff were themselves cautious enough to stipulate that the tenancy agreement should "have (their) client's approval before signing". In the same letter, the plaintiff's solicitors reasserted their right to approve the draft Agreement for Sale and Purchase and the draft Tenancy Agreement. The plaintiff and the 2nd defendant negotiated for the sale and purchase of the suit premises on the clear understanding that there was to be a lease-back to the employer of the 2nd defendant. The employer was known to be a limited company which was expected to have its policy and preferences in matters of tenancy for the occupation of its staff. The whole negotiation was contingent upon tenancy terms being approved by A.S. Watson. The Letter of Offer was made specifically "subject to the proposed tenancy agreement" as a basic condition, condition 6. The proposed tenancy agreement was not envisaged to be signed between the new owner and A.S. Watson before the assignment. But the terms of the proposed tenancy agreement must be approved and agreed before finalising the purchase. The plaintiff would not have allowed himself to enter into any agreement for sale and purchase without knowing the terms of the tenancy agreement acceptable to A.S. Watson. His solicitor, Mr Ng, would have advised him not to do so. Both the plaintiff and his solicitor could not entertain any doubt that Mr Paton would not have had his company sign any agreement for sale and purchase without an approved tenancy agreement from A.S., Watson. Thus, aside from the reference to "official" agreement for sale and purchase, the framework of the Letter of offer of 20th April allied the signing of the Agreement for Sale and Purchase with a prior approved Tenancy Agreement. Without an approved Tenancy Agreement, there would be no signing of the Agreement for Sale and Purchase. The very fact that the sale was subject to the "proposed tenancy agreement" made the offer as accepted, by necessary implication, also subject to the "official agreement for sale and purchase" i.e. subject to formal contract. 23. The use of the word "official" envisaged` the preparation by legal advisers of a formal contract. A basic condition was for a down payment of $235,000 to be paid "upon signing of official agreement for sale and purchase on or before 3rd May 1988". The inelegant language did not have the effect of eroding the significance of a mutual need for an "official" document, though obliquely expressed. The Letter of Offer dated 20th April was indeed subject to contract. The parties did not evidently intend to enter into a binding contract until an official agreement for sale and purchase had been drawn up by their solicitors. 24. If that is not decisive enough, the postscript expressly required the validity of the offer to be subject to the plaintiff being able to raise 85% mortgage finance from Wa Pei before 3rd may 1988 "otherwise said initial deposit HK$50,000 will be refunded to the purchaser without interest". The plaintiff could not have been prepared to commit himself without the intended 85% mortgage finance. That was known to all. Such mortgage finance was not formalised until 30th April. It was on 30th April that the plaintiff went up to see his solicitors with the cashier order of $235,000. It is debatable whether the written confirmation of 30th April granting the mortgage finance was, as stated on the face of it, "Subject to Contract". It is inconceivable that the plaintiff would have had himself committed before 30th April. For one thing, it was unsafe to do so without Wa Pei's written confirmation. The plaintiff might not have been able to procure the $235,000 cashier order, but there is no evidence. However, on probabilities the plaintiff's solicitors would not have proceeded with the mortgage without Wa Pei's written instructions. Furthermore, the postscript in the said Letter of Offer nominated Wa Pei as the source for his mortgate finance. The plaintiff had never notified the defendants of such mortgage finance on' or before 3rd May 1988 as stipulated in the postscript. Hence, the Letter of Offer dated 20th April has no validity. 25. The signing of an official agreement for sale and purchase, the approval of the tenancy agreement to A.S. Watson and notification to the vendor of the plaintiff having secured mortgage finance on or before 3rd May were all conditions precedent to the formation of a binding contract. The offer was, expressly or by implication, made subject to these conditions precedents which were not matters that would necessarily come about or be resolved as of course after the said Letter of Offer. There was clearly no concluded bargin. The parties had not completed the process of reaching agreement. The Letter of Offer of 20th April did not settle everything that was essential to be settled and it left many aspects open to negotiation, involving the concurrence of a third party, A.S. Watson. From the common documents, there is nothing to infer an intention to be bound immediately. As can be seen from these documents, crucial terms were left, to say the least, uncertain and further agreement on them was in the contemplation of the parties. The viva voce evidence affirms this situation. The plaintiff and his solicitor, Mr Ng, conceded that material terms would have to be discussed and added. The agreement in April was incomplete. There was no binding contract. 26. There has been no signing of any Official Agreement for Sale and Purchase. There is no evidence that approval has at any time been given to the draft Tenancy Agreement. We now know that the defendants had never been duly notified of the granting of the 85% mortgage finance. 27. It would be futile to struggle with the extraordinary submissions made on behalf of the plaintiff. On the said Letter of Offer, counsel for the plaintiff went so far as to suggest that the word "valid" in its postscript was "an unfortunate use of word to create ambignity" and that "subject to proposed tenancy agreement" in its condition 6 meant "subject to a tenancy agreement on the stated terms, in standard form with modifications in respect to occupancy to be entered into by A.S. Watson and the plaintiff (not including subletting)". I derive no assistance from such peculiar interpretation. Suffice it for me to say that if indeed there existed any conditional or provisional agreement, there is no evidence that the defendants have not used their best endeavours to process the conveyancing documentation nor is there any evidence that any of the defendants prevented A.S. Watson from approving the terms in the proposed tenancy agreement. These obligations to use best endeavours and not to frustrate the approval of the tenancy terms are pleaded against the defendants and these defendants are independently alleged to have been in breach .The defendants carry no onus to disprove these accusations. The plaintiff has adduced no or no sufficient evidence to substantiate these alleged breaches against the defendants. 28. On apparently misconceived concepts in the law of contract, numerous authorities were cited, drawing inevitably a corresponding response from Mr Graham, counsel for the defendants. But I need not labour on any of these authorities. None of the common documents nor any evidence led in this case would justify a departure from the fundamental concepts. I do not wish to be unnecessarily involved in the numerous cases so cited. I have given these matters my concerned consideration and I have not been able to detect any arguable issues that could be regarded as even remotely favourable to the plaintiff. The plaintiff's action therefore fails and the 1st defendant succeeds in the prayer it now pursues in its counterclaim. 29. This action should not have been brought and should not have been prosecuted on such a wide front of wholly insupportable contentions. Subject to what counsel have to say, to reflect the displeasure of this Court I would order costs of the entire proceedings against the plaintiff in favour of both defendants on a common fund basis.
Representation: Mr Andy Hung (M/s. Ng & Yung) for Plaintiff. Mr Peter Graham (M/s. Baker & McKenzie) for 1st & 2nd defendants | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||