Chan Pak Woo and Another v. Hang Hing Construction Co Ltd
Read the full judgment text of HCA 2469/1981 on BabelCite. This High Court CFI judgment.
1. These are consolidated actions in which the Plaintiffs seek orders that certain agreements for the sale and purchase of parts of a factory building are valid and subsisting and that the Defendant was not entitled to exercise an alleged right of cancellation. The Plaintiffs further seek a direction that the Defendant forthwith prepare and execute formal agreements for sale and purchase of the properties as envisaged in the original agreements.
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HCA002469/1981 Contract - Purchase of part of factory building - Estoppel by waiver - Defendant cannot be estopped from pleading clear term of agreement - right to rescind even after lapse of time remains in absence of express agreement - clear term agreed by parties not to be cast aside because of unjust consequence.
IN THE SUPREME COURT OF HONG KONG HIGH COURT -----------------
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IN THE SUPREME COURT OF HONG KONG HIGH COURT -----------------
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IN THE SUPREME COURT OF HONG KONG HIGH COURT -----------------
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IN THE SUPREME COURT OF HONG KONG HIGH COURT -----------------
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IN THE SUPREME COURT OF HONG KONG HIGH COURT -----------------
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IN THE SUPREME COURT OF HONG KONG HIGH COURT -----------------
----------------- Coram: Penlington, J. Date of Judgment: 22nd October, 1981. ----------------- JUDGMENT ----------------- 1. These are consolidated actions in which the Plaintiffs seek orders that certain agreements for the sale and purchase of parts of a factory building are valid and subsisting and that the Defendant was not entitled to exercise an alleged right of cancellation. The Plaintiffs further seek a direction that the Defendant forthwith prepare and execute formal agreements for sale and purchase of the properties as envisaged in the original agreements. 2. The facts of the matters were agreed in the form of a statement made by Mr. Tsang Mok-kai, Managing Director of the Plaintiff in H.C. Action 2464. Mr. Tsang said that on the 20th July 1978 he discussed with the Managing Director of the Defendant Company the purchase of some floors (9th to 12th) and the roof of a factory building which the Defendant proposed to erect at Hung To Road the funds being needed for construction costs. There was some bargaining but finally agreement was reached at a price of $160 per square foot for the floors and roof, a total of 30,000 square feet. It was also agreed that the 7th floor would be reserved for Mr. Fok Chung, the Plaintiff in H.C. 2465, and the 8th floor for the other Plaintiffs in H.C. 2467, 2468, 2469 and 2470, each to have one quarter unit of the floor. 3. On the following day, the 21st July 1978, he went back to the Defendant's office with Mr. Fok Chung, the Plaintiff in Action 2465, and two documents (the "Chinese agreements") were signed. It was also orally agreed that the other Plaintiffs should come to the Defendant's offices on the 5th of August to sign their agreements. 4. On the 5th August all the Plaintiffs went to the Defendant's office. The Plaintiffs in H.C. 2467, 2468, 2469 and 2470, who were each buying a quarter of the 7th floor, then signed their contracts (the "Chinese agreements") and all the Plaintiffs paid a deposit of 10% of the respective purchase prices. 5. The Chinese agreement with Mr. Tsang in H.C. 2464 reads as follows:
The other Chinese agreements are in the same form. 6. There were no further dealings between the parties until the 7th November 1979 when Mr. Tsang had another discussion with the Defendant's Managing Director and agreement was reached for the sale and purchase of the 6th floor of the building at $260 per square foot. A deposit of $100,000 was paid immediately and another Chinese agreement was signed. A further deposit of $87,500 was paid on the 26th November by Mr. Tsang to the Defendant as provided for in that agreement. 7. In January 1981 Mr. Tsang inspected the building and saw that the foundations were almost completed. He then wrote to the Defendant asking if the second instalments were due and, if so, to whom they should be paid. He received no reply to that letter and so instructed his solicitors to write to the Defendant tendering the next instalments on the building. This they did on the 12th January 1981. The Defendant's solicitors replied returning both those payments and the initial deposits. They stated that the Defendant was exercising its rights under Clause 2 of the conditions contained in the Chinese agreements. 8. The Plaintiffs claim that there were implied terms in the Chinese agreements. The first was that the Defendant was to inform the Plaintiffs of the name and address of their solicitors by the 5th of August 1978 or within a reasonable time. The second term to be implied was that the Defendant's right to cancel the contract was to be exercised by the 5th August 1978 or alternatively within a reasonable time. They claim that as the Defendant was in breach of these implied terms it could not cancel the contracts in January 1981, and that the Chinese agreements still subsisted. They further seek an order that the Defendant instruct its solicitors to prepare formal agreements for sale and purchase incorporating the Chinese agreements and the Defendant be ordered to execute those documents. 9. In its defence the Defendant admits the execution of the Chinese agreements and receipt of the deposits but says that those agreements gave it a clear unilateral right to cancel them at any time up to the signing of formal agreements to be prepared by its solicitors. These formal agreements were never signed and they were therefore entitled to cancel the Chinese agreements and return the deposits, which they have done. 10. There the matter stood until the trial when the Plaintiffs filed a Reply, the Defendant not objecting, although commenting on its lateness. The Reply says that by accepting the deposits without signing the formal agreements the Defendant is estopped or has waived its right to cancel the Chinese agreements. At the hearing of the matter Leading Counsel for the Defendant said that he was not in fact relying on the allegation of implied conditions but did rely on estoppel and waiver. Although it seems to have been abandoned I feel I should deal briefly with the question of implied terms. 11. What the Court was asked to imply seems to be firstly not necessary to give business efficacy to the contract nor are they terms which if an officious bystander asked if they were conditions of the agreement both parties would, at the time, have said "Yes, of course. That is obvious". They are also, in my view, terms which are contrary to express terms of the written agreement. Luxor v. Cooper (1). I am therefore satisfied the Plaintiff must fail on that part of its claim. 12. I then turn to the question of estoppel and waiver and it was agreed by Counsel for the Plaintiff that he relied on waiver in this case as constituting an estoppel. Although there were consolidated actions, the agreements sought to be enforced fall into three groups. There are, however, some common facts with each, in particular Clause 2. All the Chinese agreements being on the Defendant's printed form. 13. The first and second contracts were entered into between Tsang's Investment Co. Ltd. and Mr. Fok Chung with the Defendant on the 21st July 1978. These agreements clearly contemplate that a further formal agreement will be signed at the Defendant's solicitors' office on the 5th August. It calls for initial 10% deposits to be paid on that day. 14. On the 5th of August the initial deposits were so paid but the meeting was in the Defendant's own office, not in its solicitors, and no formal agreement was tendered. No such agreement was in fact ever apparently prepared and nothing more transpired in relation to those agreements until Mr. Tsang, seeing that the foundation work was almost finished, inquired about paying the second instalment in January 1981. 15. The agreements clearly contemplate that they are temporary in nature and will be superseded by a proper legally drawn document, but that a deposit shall be paid which will be refunded if the vendors choose to cancel the agreement in the meantime. Here, however, the two events i.e. signing the formal agreement and paying the deposit, were to be simultaneous. It is not the Plaintiffs' case that this meant that the parties had agreed that there was not to be such a formal contract but only that by accepting the deposits on the 5th August it had waived its rights under Clause 2. I cannot see how that can. Clause 2 clearly contemplates that an initial deposit shall be paid, which it was, but there should be a right to cancel notwithstanding it specifically refers to the deposit being refunded. That right remains until the signing of the formal agreement which was not so signed before the right was in fact exercised. 16. To succeed on this point it seems to me that the Plaintiffs must be able to show that at the time the deposits were handed over on the 5th August the Defendant, by accepting them, induced the Plaintiff to believe that it was waiving its rights under Clause 2 and that, it was in reliance on such waiver that the Plaintiffs so acted and that such action was to their detriment. There is simply no evidence at all to support that proposition. The only evidence here is the agreed statement of Mr. Tsang. There is nothing at all in that to suggest that the question of Clause 2 being waived was even considered. Nor do I see how it can be said that, as the formal agreement was never signed, it was waived at some unspecified time after that. Waiver must be done deliberately and by an intentional act. Earl of Darnley v. Proprietors etc of London Chatham and Dover Railway(2). Doe d Nash v. Birch(3) cited in Craine v. Colonial Mutual Fire Insurance Co. Ltd.(4). There is no evidence of either of those requirements here after the 5th August. 17. The only basis on which the Plaintiffs can succeed in relation to the first two contracts is if I was to accept that the payment of the deposit on the 5th August in itself acted as a waiver of the Defendant's rights under Clause 2. It is the Plaintiffs' case that the acceptance of the deposit on the 5th August without signing the formal agreement was totally contrary to the terms of the Chinese agreements. If the Defendant wished to retain the benefit of Clause 2 it was under a duty to so inform the Plaintiffs and as it did not do so must be taken to have waived the clause. 18. I do not see how the Plaintiffs can take that position while at the same time saying that although it was not signed on the 5th August, the parties still understood that there would be a formal agreement. If there was to be such an agreement, but for some reason it was not executed on the 5th August, payment of the deposit is not contrary to Clause 2. 19. Leading Counsel for the Plaintiffs has argued most forcefully that it is totally inequitable that the Defendants, having taken the Plaintiff's deposits and used them to finance the foundations, should now lose the benefit of the payment they have made. He cited and relied on the equitable principles set out in Inwards v. Baker(5). There it was held that where a person expends money on land in the expectation, induced or encouraged by the owner of the land that he would be able to remain in occupation, equity would prevent his being ejected. Here there is no clear evidence that the Plaintiff's money was in fact spent on the land but even assuming it was the circumstances are wholly different. In Inwards v. Baker(5) there was no contract between the owner of the land and the person making the expenditure. Here there is a contract, conceded to be enforceable, and that contract contains a clause which is perfectly clear as to its meaning. I am unable to see how equity requires the Court to intervene and decide that a clause in that contract should in effect be deleted because otherwise the result is unjust. The Plaintiffs had a perfectly good remedy in that at any time they could have demanded that a formal contract be prepared and executed. They did not do so and relied on the integrity of the Defendant, a trust which proved to be misplaced, but the legal remedy was there. It is a situation much removed from the principles of Inwards v. Baker(5) and the line of authorities which follow it such as Crabb v. Arun District Council(6) and Pascoe v. Turner(7). 20. The case for the Plaintiffs is, in my view, even weaker when one turns to consider the contracts prepared and signed on the 5th August, which are the majority. There the documents containing Clause 2 were dated and executed on the same day the deposits were paid and I find it impossible to see how it can be argued that the condition was waived as soon as it came into being. What was apparently mutually waived was that the formal agreements should be signed on that day but it is the case for both the Plaintiffs and the Defendant that those agreements were to be signed sometime after that date. 21. The final Chinese agreement was one signed on the seventh of November 1979, by which one of the Plaintiffs, Tsang's Investment Co. Ltd. agreed to purchase the 6th floor of the building at the considerably higher price of $260 per square foot. This contract does not, however, contain the words "to be paid upon signing of agreement at solicitors' firm". beside the amount of the initial deposit as do the other Chinese agreements. It does, however, contain the same printed Clause 2 as the other contracts giving the Defendant the right to cancel "before the execution of the agreement in the Solicitors' firm". When I asked him if he thought that made any difference, Counsel for the Plaintiffs did not, however, attach any significance to that difference and it was still its case that the parties intended that a formal agreement should be executed even though it was not mentioned in the body of the document. That being so it seems to me that the same arguments apply to that contract as to the others. The Defendant had the right to cancel at any time before that formal agreement was executed and has done so. 22. This matter was argued by Leading Counsel for the Plaintiffs on the basis that the Court should, in its equitable jurisdiction, do justice between the parties and that the Defendant was taking a totally unfair advantage of a clause contained in its own printed form. He suggested that, the demand for real estate in Hong Kong being what it is, the parties were not equal and in effect the Plaintiffs had no option but to accept this very one-sided and unfair exemption clause. Having used the Plaintiff's money the Defendant should be ordered to fulfill its obligations. 23. These are attractive arguments. However I do not consider that the parties here were in any way unequal. They were all businessmen and the Plaintiffs could have declined to purchase on the conditions set out in the form, or having done so could have protected themselves. All Courts will endeavour to reach decisions which the ordinary man in the street would regard as being just but no Court can fly in the face of a clear agreement between the parties to a contract except in clearly defined circumstances. 24. In L'Estrange v. Grancob(8), Scruttor L.J. said at P.403:
That case was on a question of whether a party was aware of a clause, which is not alleged here but the principle remains. 25. Here there was clearly no fraud and I am satisfied there was no misrepresentation such as would found an estoppel against the Defendant as it was the case in Inwards v. Baker(5). The parties are bound by their agreement, whether it was a wise one or not. All the claims must therefore fail. 26. The Defendant is entitled to its costs in each case and there will be certificate for two Counsel.
Representation: Brook Bernachi, Q.C. with Wesley Wong and Miss Theresa Trieu (C.P. Tsang & Co.) for the Plaintiffs. Martin Lee, Q.C. with Warren Chan (John Ku & Co.) for Defendant. (1) 1941 A.C. 108 (2) 1867 L.R. 2 H.L. 43 (3) 1836 1 M. and W. 402 (4) 1920 28 C.L.R. 305 (5) 1965 2 Q.B. 29 (6) 1976 1 Ch. 179 (7) 1979 1 W.L.R. 431 (8) 1934 2 K.B. 394 |