Wong Lai Fan v. Lee Ha
Read the full judgment text of HCMP 1024/1991 on BabelCite. This High Court CFI judgment was delivered on 8 October 1991.
1. The plaintiff was the vendor of the suit premises by virtue of a Provisional Agreement dated the 13th March 1991 and the defendant was the purchaser.
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HCMP001024/1991 HEADNOTE Provisional Contract for the sale & purchase of property - Effect of an Agreement between the parties to provide for financial compensation in the event of either of the parties thereto failing to fulfill their contractual obligations - Held - If the clause is drafted in a suitable manner such an Agreement can be upheld.
IN THE SUPREME COURT OF HONG KONG HIGH COURT MISCELLANEOUS PROCEEDINGS ___________
___________ BETWEEN
___________ Coram: The Hon. Mr. Justice Mayo in Chambers Date of Hearing: 25 September 1991 Date of Handing down of Judgment: 8 October 1991 ___________ JUDGMENT ___________ 1. The plaintiff was the vendor of the suit premises by virtue of a Provisional Agreement dated the 13th March 1991 and the defendant was the purchaser. 2. By this originating summons the vendor is seeking a declaration that she has effectively rescinded the said Provisional Agreement and that its registration at the Land Office by the purchaser should be vacated. 3. There would not appear to be much in dispute on the facts of the case. The parties take issue on the construction of the said Provisional Agreement and its legal effect. 4. Two cases have recently come before the courts where similar agreements were considered and opposite conclusions were reached by the two judges seized of the cases. I will be dealing with these cases in some detail later in this judgment. 5. Mr. E. Chan appeared for the vendor. With respect I am in agreement with his submission that there are four clauses in the Provisional Agreement which are important for the purposes by this case. They are clauses 1, 2, 6 & 7. For the sake of convenience I reproduce these.
6. It will be noted that the Agreement is not in the form of the type often adopted by potential vendors and purchasers of being "subject to contract". The scheme envisaged is that both parties are permitted to withdraw from their contractual obligations if the payments referred to are made. It is contemplated that if the arrangement is proceeded with a formal sale and purchase agreement is to be entered into on or before the 3rd April 1991 with the target completion dated being set for 22nd April. 7. It is common ground that the vendor endeavoured to withdraw from the sale. Her solicitors wrote a letter in these terms on the 4th April.
8. The purchaser's solicitors replied to this letter in the same day as follows. "Our Ref.: LF/59582/L/91 4th April 1991
10. In my view the first question which has to be posed is whether it was indeed the intention of the parties to extinguish their common law rights and equitable remedies. I have no doubt that if a correct formula of drafting is adopted this can be achieved. Abdul Cader Abdeen v. Abdul Careem Mohamed Thaheer [1958] AC 116, a Privy Council case, is clear authority for this. 11. The next question to ask is whether clauses 6 & 7 do achieve this. Deputy Judge Leong considered identical clauses in Fong Yee Lan v. Yiu Yan Ping unreported being action number 3299 of 1991. He came to the conclusion that the clauses did not extinguish these rights. His reasoning was along these lines at p. 8 of his judgment.
12. With the greatest respect to the learned judge, I do not think that this reasoning can withstand logical analysis. 13. It is not possible to discern the "main purpose" of the provisional agreement without having regard to the full terms of the document. There is certainly more to the document than an agreement for the sale and purchase of the property. 14. I would also accept the submission made by Mr. Chan that little purpose is served by attempting to glean the motives of the vendor in deciding not to continue with the sale of the property. The fact of the matter is that she did fail to enter into the formal sale & purchase contract and it matters not whether this was due to "refusal", "neglect" or "default" as referred to earlier in the judgment. 15. The central issue is whether the relevant wording of the clauses is such as to extinguish the parties' common law rights and equitable remedies. I do not think that this issue is directly addressed in the judgment. 16. Godfrey, J. had to consider a similar type of clause in Lee Tat Kwong v. Choi Pui Kei, unreported being case no. 2338 of 1991.
17. The learned judge did consider whether the clause had the effect of excluding the operation of specific performance. He said this on p. 4 of his judgment.
18. I accept that the test is as propounded in Fry. 19. Adopting the criteria to the present case it is clear to me that there was mutuality in the operation of the clauses and clearly an attempt was being made by the parties to provide for a financial solution to the problems which would be encountered if either of the parties opted not to enter into the formal sale and purchase agreement. 20. Godfrey, J. came to the conclusion that the clause which was before him was in sufficiently clear terms to confer upon the vendors an option to decide whether or not to go ahead with the contract and if not to pay the moneys referred to in clause 11. 21. In my opinion, the effect of clauses 6 & 7 is very similar to the clause which was considered by Godfrey, J. and I can see no good reason for coming to a different conclusion to the one he did. 22. The next question which arises is whether on the wording of the clauses the vendor can insist upon the purchaser accepting the compensation which was tendered by the vendor's solicitors to the purchaser's solicitors on the 3th April. 23. Mr. Litton, who was representing the purchaser submitted that clause 7 as drafted only provided for the vendor to make a financial offer to the purchaser if she decided not to proceed and that it was in no way incumbent upon the purchaser to accept this offer if he did not wish to do so. It was open to him to decline the offer and insist upon specific performance. He went on to argue that if the agreement was as contended by the vendor it would be necessary to read into clause 7 words such as
24. I do not accept the validity of this contention. This is a highly artificial argument. If the clause is read and construed in a manner that does not do violence to its overall effect it is clear to me that what the parties contemplated was that the payment of the moneys would absolve the party paying it from further action, such as an action for specific performance or damages. In other words the purchaser had to accept the payment in full discharge of the vendor's obligations under the agreement. 25. The final matter I will consider is Mr. Litton's submission that on the facts of this case the vendor had failed to "immediately compensate" the purchaser as she was required to do under clause 7. I regret that I do not see any merit in this submission. The cheque was sent on the next day after the expiration of the time allowed for entering into the formal sale & purchase contract and no objection was taken by the purchaser's solicitors on this ground when they rejected the vendor's payment on the same day. In the surrounding circumstances, the payment was tendered as soon as practicably possible. 26. For the reasons I have given I propose granting to the vendor the relief she seeks in the originating summons. 27. Subject to the order for costs made by Bokhary, J. I order that the vendor is to have her costs and there will be a certificate for two counsel. 28. I have been informed that it is a fairly common practice to incorporate clauses of the nature above described in provisional contracts. It is accordingly a matter of some public interest that my judgment should be made public. I have been informed by the parties that they have no objection to this being done and I order that this judgment can be made available to the public.
Representation: Mr. Edward Chan, Q.C. & Mr. Alan Leong (Charles Yeung Clement Lam & Co.) for the Plaintiff. Mr. Henry Litton, Q.C. & Mr. K.L. Liu (T.L. Ip & Co.) for the Defendant. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||