Hero Profit Enterprises Ltd v. Kadesy Development Ltd and Others

Case No.HCMP 790/1995

Court

High Court CFI

Date—

Judge—

Case Document

100%Judiciary

HCMP000790/1995

M.P. 790/95

IN THE SUPREME COURT OF HONG KONG
HIGH COURT
MISCELLANEOUS PROCEEDINGS

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	IN THE MATTER OF an Agreement for Sale and Purchase ("the Agreement") dated 3rd June 1994, and made between Kadesy Development Limited, Cheer Unity Development Limited, Cheuk Tat Development Limited, Cheer Signal Investment Limited. on the one part, and Hero Profit Enterprises Limited on the other part for the sale of property known as ALL THOSE 405 equal undivided 10,010th parts or shares of and in Marine Lot No. 502, Marine Lot No. 503, Marine Lot No. 504, Section A of Marine Lot No. 505, the Remaining Portion of Marine Lot No. 505, Marine Lot No. 506, Inland Lot No. 3138 and Inland Lot No. 3184 and of and in the Building under construction thereon and intended to be known as King Kong Commercial Centre ("the Building") together with the exclusive right and privilege to hold use occupy and enjoy All That Office on the 23rd Floor of the Building ("the Property")
	and
	IN THE MATTER OF Section 12 of the Conveyancing and Property Ordinance Cap. 219, Laws of Hong Kong

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BETWEEN
	HERO PROFIT ENTERPRISES LIMITED	Plaintiff
	and
	KADESY DEVELOPMENT LIMITED	Defendants
	CHEER UNITY DEVELOPMENT LIMITED
	CHEUK TAT DEVELOPMENT LIMITED
	CHEER SIGNAL INVESTMENT LIMITED

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Coram: The Hon. Mr. Justice Waung in Court

Date of Hearing: 29th June 1995

Date of Handing Down of Reasons for Judgment: 10th July 1995

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REASONS FOR JUDGMENT

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1. By a Sale and Purchase Agreement dated 3rd June 1994 ("the Agreement"), the premises on the 23rd Floor ("the Property") of the yet to be constructed building to be known as King Kong Commercial Centre ("the Building") was agreed to be sold by the Defendants as Vendor to the Plaintiff as Purchaser for the price of $69 million. The Property is to be part of a building to be constructed. Under Clause 3.1.3 of the Agreement, the Vendor has an obligation to complete the Building on or before the 31st day of October 1995. Under Clause 4.1 of the Agreement completion of the purchase was to take place:-

(1)	within 14 days of the Purchaser being notified in writing that an Occupation Permit had been issued and;
(2)	within 14 days of the Purchaser being notified in writing that the Vendor is in a position to validly assign the Property to the Purchaser.

By Clause 15, time was made in every respect of the essence of the Agreement. By First Schedule Part 3 of the Agreement, the Purchaser was required to make the 4th Part Payment in the sum of $2,761,728.00 on the 6th of February 1995. By Clause 16 of the Agreement, upon failure to make payment in accordance with Part 3, the Vendor is given the right to serve a notice on the Purchaser to make good the payment default and the right 21 days after such notice to terminate the Agreement.

2. The chronology of what then happened is briefly as follows:-

19th December 1994	Vendor delivered title deeds to the Purchaser.
6th February 1995	Purchaser failed to pay the 4th part payment instalment of the Purchase Price in the sum of $2,761,728
3rd March 1995	Vendor requested Purchaser to make good its default of non payment within 21 days
3rd March 1995	Purchaser raised 19 pages of requisitions and asked for answers within 7 days
10th March 1995	Vendor answered requisitions
14th March 1995	Purchaser asserted that requisitions had not been sufficiently answered and asked for reply within 3 days
16th March 1995	Vendor provided additional comments
17th March 1995	Vendor informed Purchaser that any Vendor and Purchaser Summons would be premature
23rd March 1995	Vendor and Purchaser Summons issued by the Purchaser without supporting Affidavit
	Purchaser asserted other requisitions still outstanding
24th March 1995	Vendor asked which requisition was outstanding and reiterated that the VP Summons was premature and reminded the Purchaser that time to make default had expired
27th March 1995	Vendor terminated the Agreement on the basis of non payment of the 6th February 1995 instalment.
10th April 1995	Vendor asked Purchaser for Affidavit in support of the VP Summons
12th April 1995	Affidavit of Horace Ting in support of the VP Summons
21st April 1995	Vendor answered the requisitions without prejudice to termination by the Vendor on ground of non payment
11th May 1995	Vendor resold the Property at $54 million
12th May 1995	Affidavit of Hodgson in opposition to the VP Summons Purchaser's reply to the requisition answers
31st May 1995	Issue of Occupation Permit

3. At the hearing before me, Mr. Warren Chan, Q.C. for the Defendant took a preliminary point by raising two issues, namely:-

	(1)	The Originating Summons issued was premature because at the time of the issue of the Originating Summons on 23rd March 1995, the time for the Vendor to answer requisitions had not expired.
	(2)	The Agreement was in any event determined by the Defendant on the ground of non payment of instalment and therefore it is no longer necessary for the Court to determine whether the requisitions raised by the Purchaser was valid.

4. In support of his two issues of preliminary point, Mr. Chan put forward 6 propositions of law which are applicable to this case:-

1.	The Vendor's obligations to answer requisitions should be discharged within a reasonable time to enable the purchaser to satisfy himself on the matter, get his money ready and complete on the date fixed. This obligation would not have been discharged by disclosure on the day fixed for completion. Active Keen Industries Ltd. v Fok Chi-keong (1994) 1 HKLR 396.
2.	The ascertainment of that reasonable time for Vendor's obligations to answer requisitions must depend on the circumstances. Ng Chek-kok v Kin Wai-ming (1992) 1 HKLR 5.
3.	Where proof of title is insufficient, but the title is not necessarily defective, the Purchaser is bound in the ordinary way to give the Vendor a proper opportunity of establishing the title. A-Mayson Development Co. Ltd. v Butterfit Ltd. (1992) 2 HK Cases 533.
4.	There can be circumstances in which a Purchaser may become entitled to call off the contract without waiting for the completion date. For example, if he discovers a fundamental defect in the title in respect of which the Vendor neither would or could do anything more, in the time available, to get over it. A-Mayson Development Co. Ltd. v Butterfit Ltd. (1992) 2 HK Cases 533.
5.	Where there is an express term of the agreement that within 7 days after the requisitions have been delivered to the vendor the answer shall be delivered to the purchaser and after the expiry of this 7 day period, the purchaser took out a summons, the Court of Appeal held that the summons was not premature because "at the time when he took out the summons" the purchaser was entitled to the declaration sought as to requisition. Lion Will Investment Ltd. v Triple Will Ltd. unreported Judgment of Court of Appeal in CA No. 200 of 1992.
6.	In the absence of an express term, there is no ground for construing an agreement as being subject to an implied term that the obligation to pay the balance of the purchase price is conditional upon the vendor showing or making good title. The purchaser's obligation is in unqualified terms and time has been made of the essence of the agreement. Ng Chek-kok v Kiu Wai-ming (1992) 1 HKLR 5.

5. These 6 Propositions of Mr. Chan were expressly agreed to be correct by Mr. Alan Leong for the Plaintiff who quite properly even in the course of the submissions of Mr. Chan informed the Court that these Propositions were all accepted to be correct.

6. The importance of these Propositions is that this is a case where the time for answering requisitions had not expired when the Plaintiff issued the present application. The evidence shows that both parties knew that completion was going to be many months away and there was no evidence that in March 1995 the Plaintiff believed or asserted that completion was going to be imminent.

7. The essence of Mr. Chan's case is that the Court should only entertain the Summons whether requisitions have been sufficiently answered when either an answer had been given and the time for answering requisition had expired or that the time for answering requisitions had not yet expired but the vendor informed the purchaser that he was not going to improve the answer or to anything further. At the time of the issue of this Summons, on any view, it cannot be argued that time for answering requisitions had expired or that there was an incurable defect of title. The Vendor had not told the Purchaser that he could not or would not do anything before completion and it cannot be doubted that there were still many months before completion. The evidence in fact shows that the Vendor expressed every willingness to do anything it could to give proof if only it knew what were the specific queries raised by the Purchaser. The argument of Mr. Chan on the first issue is that the Court should not in these circumstances entertain the Originating Summons as it was premature.

8. On the second point, the case of the Defendant is that it was common ground that the Agreement had been discharged by reason of Purchaser's default in making the February payment. This being so and in the light of the concession by Mr. Leong, there was no contract left. In any event this had nothing to do with title. In the circumstances. it would be a waste of time to go into the question as to whether the answers given were sufficient.

9. These submissions of Mr. Chan are logical, powerful and unanswerable and in fact there was practically no answer from Mr. Leong. In a submission which took no more than 3 minutes and touching only on the first issue. Mr. Leong sought to say his case is more like A-Mayson. It was then pointed out to Mr. Leong by the Court that in A-Mayson, because of the 6 days left before completion, the purchaser terminated the contract on the ground of bad title, but this did not happen here and there was no termination by the Plaintiff. Mr. Leong had no answer to this and said he had nothing further to advance. The case of the Plaintiff collapsed and Mr. Chan was accordingly not called upon.

10. This is yet another chapter in the still unfolding story of the recent collapse of the property market in Hong Kong. It is clear in this case that the Purchaser had let the 6th February 1995 slip by without making the required payment. This is at a time when it had not even raised any requisition. On 3rd March 1995 when being pressed for payment and upon being served the notice to make good the default, the Purchaser served the unusually elaborate 19 page requisitions, perhaps in the hope that an escape could be found with these requisitions. The ridiculously short 7 day time limit to answer the requisitions, when construction work was still going on and a completion date was nowhere in sight, could only reinforce the inference that the Plaintiff was looking for a way out.

11. The only way out however had to be paid for, if the Plaintiff wanted to remain a player in the game so to speak. The Plaintiff had to pay the 4th instalment. This it did not do and after the 21 day notice period had elapsed, the Vendor as it was quite entitled to do terminated the Agreement. There was therefore nothing left for the Plaintiff or for the Court. The second issue of Mr. Chan is really wholly unanswerable and Mr. Leong, very sensibly did not even make an attempt to do so. I have no doubt that the Vendor was entitled to terminate the Agreement and in the circumstances, accepting wholly as I do the submissions of the Defendant, it is right and proper that I dismiss the Originating Summons with costs.

	(William Waung)
	Judge of the High Court

Representation:

Mr. Alan Leong instructed by Messrs Vivien Chan & Co. for the Plaintiff

Mr. Warren Chan, Q.C. and Miss Alice Mok instructed by Messrs Livasiri & Co. for the Defendants.