Chan Po Chiu, David v. Lee Pit Tat

HCA012098/1982

BETWEEN

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Coram: Hon. LIU J.

Date: 17th February 1983

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JUDGMENT

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1. The dispute here involves a sum of $40,000. Because of the smallness of the claim, it has generated not inconsiderable anxiety in the sense that the plaintiff, at least, would not likely be able to proceed further if a decision adverse to him were to be made. Having said that, I must really remind myself that I should be guided by legal principles without regard to any sympathetic considerations which one party or the other to this action may possibly deserve.

2. By an Agreement for Sale and Purchase in the Chinese language dated the 22nd of November 1981 made between the defendant as vendor and the plaintiff as purchaser, the plaintiff agreed to buy and the defendant agreed to sell certain premises in a building to be erected by the defendant on Lot. No. 695 in D.D. 36 in Tai Po for $140,000, on a deposit of $40,000 to be paid by the plaintiff to the defendant upon the signing of the agreement.

3. The premises in the building to be erected never materialized as the proposed building was not constructed by the defendant.

4. The allegation from the defendant was that there was an orally agreed cancellation of the Agreement for Sale and Purchase, coupled with an oral agreement on the part of the plaintiff to acquire different premises from the defendant on Lot. No. 508 in D.D. 36 for the purchase price of $220,000 on a like deposit of $40,000. It was alleged by the defendant that the purchase price for the new premises was subsequently reduced, but nothing turns on that aspect of the case.

5. The defendant claimed that on the agreed date for the signing of the new Agreement for Sale and Purchase, the plaintiff failed to honour his obligation. By virtue of such alleged non-performance of that obligation on the part of the plaintiff, the defendant claimed to have forfeited his $40,000 deposit allegedly transferred from the cancelled Agreement for Sale and Purchase to and for the benefit of the new oral agreement.

6. The defendant deposed to the fact that a cheque in the sum of $30,000 intended to be given to another purchaser was collected by the plaintiff and subsequently presented by the plaintiff for his own account. The plaintiff made some play, through his solicitor, of the date and the alleged circumstances of and relating to this particular cheque. The amount on the cheque was $30,000 and the deposit in question was $40,000. Whilst the date and some of the alleged circumstances tend to corroborate the plaintiff's version the amount of $30,000 instead of $40,000 on the check does, to a degree, tell against him. I can derive no real assistance from the cheque and the matters referred to by solicitor for the plaintiff in these proceedings.

7. As far as the plaintiff is concerned, there was no agreed cancellation; it was wrongful repudiation on the part of the defendant to build the proposed building including the premises to be sold on Lot. No. 695 in D.D. 36 and as a result of which the plaintiff claims against the defendant for the return of the deposit together with interest and costs. Before the learned Master, judgment was granted against the defendant as claimed and from that decision of the learned Master, the defendant appeals.

8. It is common ground, on the force of Monnickendam v. Leanse a case reported as early as 1923 in the Times Law Report 39 at page 445, that an agreement for the sale of land not evidenced in writing as required by our local equivalent to section 4 of the Statute of frauds [Section 5 of the Law Amendment and Reform (Consolidation) ordinance Cap. 23] is a valid, though unenforceable, contract and that a deposit paid under such valid though unenforceable contract is liable to be forfeited for breach.

9. The defendant claimed that the initial $40,000 deposit had duly been transferred to and for the benefit of the new oral agreement. Counsel sought to make much capital of paragraphs 8 and 16 of the defendant's affirmation filed herein on the 28th January 1983. In particular, counsel relied heavily on the words "payable forthwith" in paragraph 8. It was contended that the matters as stated were such that a clear allegation had thereby been raised to the effect that the initial deposit had duly been transferred to and for the benefit of the second oral agreement for the sale and purchase of another premises. There is certainly room for improvement in these two paragraphs of the defendant's affirmation, but having read them and re-read them, it is evident that there is much substance in counsel's contention that sufficient references had been made in those two paragraphs to support the alleged transfer of the initial deposit to the new agreement.

10. Solicitor for the plaintiff argued that the evidence before the court fell short of establishing any transfer of the deposit to and for the benefit of the new oral agreement for sale and purchase. I was referred to section 6 of the Law Amendment and Reform (Consolidation) Ordinance of which subsection 1 paragraph (c) expressly requires any disposition of an equitable interest to be evidenced in writing. It was submitted that since under the first Agreement for Sale and Purchase an equitable estate had been transferred by the defendant to the plaintiff, the alleged oral rescission or cancellation was tantamount to a disposition of such an equitable interest by way of termination, in effect, re-vesting the equitable estate in the premises agreed to be sold in the defendant. Such, so ran the submission of solicitor for the plaintiff, was not evidenced in writing, and the alleged oral cancellation could not effectively terminate the first Agreement for Sale and Purchase.

11. The same thread of reasoning should run through this limb of argument advanced on behalf of the plaintiff as it does with the basic proposition earlier conceded by the plaintiff that an agreement required by law to be in writing is merely unenforceable and not invalid. That being the position, suffice it for me to refer to a certain passage in paragraph 1374 of Chitty on Contracts, Volume 1, General Principle 24th edition:

"Even if the original contract is one which is required by law to be evidenced by writing as in the case of those contracts within the Statute of Frauds 1677 or the Law of Property Act 1925, an oral agreement is sufficient to effect a discharge. Nevertheless, the new agreement may itself be unenforceable unless so evidenced."

12. It is plain or at least strongly arguable that the alleged oral agreement to cancel the first Agreement for Sale and Purchase, though unenforceable on its own, had the effect of terminating the first Agreement for Sale and Purchase. Whether or not there was such an agreement on the part of the plaintiff for cancelling and/or signing a second Agreement for Sale and Purchase and for paying the $40,000 deposit by way of transfer from the original deposit is obviously a fit matter to be adjudicated and determined at the trial. As to whether in fact there was any transfer of the $40,000 deposit under the first Agreement for Sale and Purchase to and for the benefit of the second oral agreement, it will also be a proper matter to be investigated at the trial of this action. So is the plaintiff's own allegation of the defendant's wrongful repudiation of the initial Agreement for Sale and Purchase. That being the position, I am driven to the conclusion that there are triable issues in this case between the parties to this action. It follows that the appeal against the decision of the Master should be allowed and the judgment granted by the learned Master be accordingly set aside.

13. Solicitor for the plaintiff invited the court to impose a condition for granting leave to defend by ordering the defendant to bring into court the amount in dispute i.e. $40,000. But as I have said, the circumstances and the cheque itself have given me no real guidance as to which version is to be given more prominence and there are no matters disclosed before me today for granting conditional leave on recognized principles. In the circumstances, unconditional leave to defend must be granted to the defendant, and I would now give the usual directions.

Representation:

Mr. Bretherton (Messrs. Simmons & Simmons)for the Plaintiff/Respondent

Mr. A. Hung (Messrs. Wong, Hui & Souza) for the Defendant/Appellant