West River Development Ltd. v. Roseric Ltd. and Chan Lau and Wai (Third Party)

HCA009220/1992

1992 No. A9220

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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Coram: The Hon. Mr. Justice Barnett in Chambers

Date of hearing: 11 May 1993

Date of delivery of judgment: 28 May 1993

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J U D G M E N T

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1. This is an appeal from a master's decision. It arises out of an aborted agreement for the sale and purchase of land in which the Plaintiff was purchaser and the Defendant vendor. Pursuant to O.86 on 20th February 1993 a master ordered, inter alia, that:

1. The Defendant do repay the Plaintiff's deposit of $302,000.00.

2. Judgment be entered in favour of the Plaintiff for damages for repudiation of the agreement and

3. An assessment be made of the damages sustained by the Plaintiff.

2. It is against items 2 and 3 that the Defendant appeals, on the basis that this case does not constitute an exception to the rule in Bain v. Fothergill (1874) L.R. 7 H.L. 158, under which a disappointed purchaser of land is restricted to the return of his deposit, the costs of investigating title and other legitimate expenses.

3. The scene. On 13th February 1991 by provisional agreement the Defendant agreed to sell its property located at King Kwong Street to Au Wing- cheung (Mr. Au) at a price of $2,880.000.00 Completion was to be on 21st February. On 19th February, Mr. Au's solicitors wrote to the Defendant's solicitors by a letter, headed "subject to contract", which concluded that nothing should bind their client until the agreement for sale and purchase had been signed by both parties. The Defendant's solicitors replied the following day, saying they agreed that negotiation was still on going, that no agreement had been reached, that the Defendant withdrew from further negotiation, and that the transaction would be regarded as fallen through. The sum of $80,000.00 which had been paid by Mr. Au was refunded. Mr. Au's solicitors responded promptly the same day. They said that the provisional agreement was still valid and binding, and asked for a draft formal agreement to be sent without further delay. The next day, 21st February, Mr. Au's provisional agreement was registered at the Land Office. The dispute between the parties was not resolved. On 12th March, Mr. Au issued proceedings in this Court (the other action) in which he sought specific performance.

4. In the meantime on 20th February the Defendant, acting upon the advice of its solicitors to the effect that it was not bound by the provisional agreement with Mr. Au, agreed to sell the property to the Plaintiff for a price of $3,020,000.00, completion to take place on 18th April. A provisional agreement was signed.

5. On 19th March, that is one week after the other action had been commenced, the Plaintiff and Defendant signed a formal sale and purchase agreement. At about this time the Plaintiff was allowed to occupy the premises at a monthly rent of $25,000.00.

6. On 6th April, the Plaintiff's solicitors wrote to the Defendant's solicitors. They referred to the registration of Mr. Au's agreement, pointed out that the existence of that agreement had not been disclosed to the Plaintiff at the time that the Plaintiff entered into the provisional agreement with the Defendant, and stated that they considered this was a fraudulent misrepresentation on the part of the Defendant. They required the Defendant to cancel Mr. Au's agreement before completion, otherwise action would be taken to enforce the Plaintiff's right. The Defendant's solicitors replied on 11th April, outlining what had taken place between Mr. Au and the Defendant, and re-iterating that they considered Mr. Au's agreement to have fallen through. They denied fraudulent misrepresentation. They said that they had prepared a defence to the other action on the basis that Mr. Au had repudiated his agreement. They appeared to anticipate that the other action would be disposed of quickly and successfully.

7. On 11th May, the Plaintiff's solicitors wrote to say that the Plaintiff would agree to postpone the date of completion to 18th August 1991. This was on the basis that the Plaintiff would be allowed to occupy the property until the completion by way of irrevocable licence at a licence fee of $15,000.00 per month, that the Defendant should have Mr. Au's agreement cancelled and the Land Office entry vacated and that the Defendant should pay a sum of $350,000.00 as liquidated damages in the event that the Defendant failed to complete by 18th August. By letter dated 20th May, the Defendant's solicitors said they could not be certain when the other action would be disposed of and preferred that the date of completion should be by way of one month's prior written notice from the Defendant. The Defendant agreed to the licence save that the monthly sum should be $25,000.00. The Defendant also accepted that it would have to cancel Mr. Au's agreement. The Defendant did not accept the proposal in relation to liquidated damages.

8. In July, there was further discussion between the parties. On or about 17th July, it was agreed that completion be postponed to a date one month after the Defendant had given written notice confirming that it had obtained judgment in its favour in the other action, but that completion should in no circumstances be later than 30th September 1992.

9. On 22nd August in the other action, Mr. Au obtained judgment in his favour from a master.

10. On 27th August, the Plaintiff's solicitors wrote to the Defendant's solicitors, confirming the agreement to the revised completion date which had been reached between the parties.

11. On 4th December, Kaplan J. allowed the Defendant's appeal against the decision of the master. On 17th July 1992, the Court of appeal allowed Mr. Au's appeal against the decision of Kaplan J. On 20th October, the Defendant was refused leave to appeal to the Privy Council. Thereafter the Defendant abandoned any thought of pursuing the matter further, and accepted that it would have to complete the transaction with Mr. Au.

12. On 29th December 1992, the Plaintiff commenced these proceedings and by its statement of claim accepted the Defendant's repudiation of the agreement between them, completion not having taken place by 30th September 1992. The Plaintiff sues upon the formal sale and purchase agreement dated 19th March 1991 as "varied" in relation to completion. On 20th February, as I have said, the Plaintiff obtained judgment for, inter alia, damages to be assessed.

13. The general rule for contract damages is to put a plaintiff in the same position as if the contract had been performed, in other words, a plaintiff is entitled to the benefit of his bargain. Upon this general rule, however, has been engrafted an exception, namely that where a seller of land fails to complete the contract through a defect of title, damages for loss of bargain are not, in the absence of fraud, recoverable. That is the rule in Bain v. Fothergill (the Rule). In that case, the vendor had taken an assignment of a mining lease. The lease should not have been assigned without the licence of the lessors who were ready to consent to the assignment to the vendor provided he would execute a duplicate of the agreement containing the stipulation. The vendor delayed in executing the duplicate and in the meantime entered a contract to sell to the purchaser. Subsequently, the lessors refused to assent to the transfer to the purchaser so that the vendor was unable to perform his contract. At page 207, Lord Chelmsford said:

"Upon a review of all the decisions on the subject, I think that the case of Hopkins v. Grazebrook 6 B. & C. 31 ought not any longer to be regarded as an authority. Entertaining this opinion, I can have no doubt that the judgment of the Court of Exchequer in the present case is right, whether it falls within the rule as established by Flureau v. Thornhill 2 W. B1. 1078, or is to be considered as involving circumstances which have been regarded as removing cases from the influence of that rule; because I think the rule as to the limits within which damages may be recovered upon the breach of a contract for the sale of a real estate must be taken to be without exception. If a person enters into a contract for the sale of a real estate knowing that he has no title to it, nor any means of acquiring it, the purchaser cannot recover damages beyond the expenses he has incurred by an action for the breach of the contract; he can only obtain other damages by an action for deceit.

It is only necessary to add that, in my opinion, if there were any exceptional cases from the rule in Flureau v. Thornhill 2 W. B1. 1078, the present case would not fall within any of them, but is within the rule itself. The Respondents, when they entered into the contract for the sale of Miss Walter's Royalty, had an equitable title to the mine which they might have perfected by obtaining the lessors' consent to the assignment to them. This consent had not been obtained at the time the contract was entered into, and the fact was not communicated to the intended purchaser. The reason for this non- communication is stated in the case to be, that "either it did not cross the mind of the Respondent Fothergill, or, if it did occur to him he forbore to mention it, feeling sure that no difficulty would arise with respect to such consent, and that it was therefore a matter of no importance." There is no reason to think that the Respondents were not acting throughout under a bona fide belief that the lessors' consent might be obtained at any time upon application. They were prevented performing their contract, not from any fraud or wilful act on their part, but by an unexpected defect in their title which it was beyond their power to cure.

The case falls precisely within the terms of the rule as stated in Flureau v. Thornhill 2 W. B1. 1978; and therefore, in my opinion, the judgment appealed from is right and ought to be affirmed."

14. At page 210, Lord Hatherley said:

"The foundation of the rule has been already more clearly expressed by my noble and learned friend who has preceded me in saying that, having regard to the very nature of this transaction in the dealings of mankind in the purchase and sale of real estates, it is recognised on all hands that the purchaser knows on his part that there must be some degree of uncertainty as to whether, with all the complications of our law, a good title can be effectively made by his vendor; and taking the property with that knowledge, he is not to be held entitled to recover any loss on the bargain he may have made, if in effect it should turn out that the vendor is incapable of completing his contract in consequence of his defective title. All that he is entitled to is the expense he may have been put to in investigating that matter. He has a right also to take the estate and complete the purchase with that defective title if he thinks proper so to do, but he is held to have bargained with the vendor upon the footing that he (the vendee) shall not be entitled, under all circumstances, to have that contract completed, and therefore he is not put in a position under such a contract to make a re-sale before the matter has been fully investigated, and before it is ascertained whether or not the title of his vendor is a good one.

A contract for a sale of real estate is very different indeed from a contract for a sale of a chattel, where the vendor must know what his right to the chattel is, or at all events is taken to know what his right to the chattel is. And, farther, in the case of chattels, we well know, as regards the larger part of those contracts at least, that the chattels are purchased with a view to re-sale, and therefore the whole transaction between the two parties is upon the footing and upon the faith, that all the expense or loss that may be incurred, whether it be by the vendee being put to the expense of making any inquiry upon the subject, or whether it be by a loss of profit which he might have obtained if the chattel had been delivered to him, is within the contemplation of both parties, and that is therefore assumed to be the actual contract which the vendor wished to enter into."

15. The Rule, however, is not absolute. Macgregor on Damages 15th edition para. 885 onwards, set out 4 exceptions. First, fraud. This, of course, was anticipated by Lord Chelmsford in his speech. The vendor may be sued in tort for deceit. In the present case, although there was an allegation of fraudulent misrepresentation by the Plaintiff's solicitors at an early stage, that has not been pursued.

16. Second, bad faith where the vendor fails to take necessary steps to obtain consent or removal of a third party in order to perfect title. There is no suggestion of any bad faith of this nature in the present case.

17. Third, bad faith by deliberate loss of ability to convey to the purchaser and fourth, voluntary loss of ability to convey to the purchaser in the absence of fraud or bad faith. It is in the latter situation that the problems arise in this case.

18. In Ray and another v. Druce (1985) 1 C.H. 437, the defendant in 1976 conveyed plots of land to his son and grandson. Because of the ineptness of the conveyances, the plots were difficult to identify. In 1982, the defendant granted the plaintiffs an option to purchase a plot on his retained property. In 1983, the plaintiffs intending to exercise their option were told that the son and grandson claimed part of the land comprised in the option and the defendant confirmed that the land belonged to him. The plaintiffs exercised their option but the defendant could not complete because uncertainties as to which land was conveyed in 1976 prevented him from showing a satisfactory title. Judge John Finlay Q.C. sitting as a High Court Judge held that the Rule applied. At page 442, the Judge said:

"Then in Goffin v. Houlder (1920) 90 L.J. Ch. 488 a different set of circumstances arose, where the vendor, having granted an option to the plaintiff to purchase property, then agreed to sell the property to another, thus disabling herself from being able to carry out the contract with the plaintiff which arose when he exercised the option, and Eve J. said, at p.490:

"It is true that the defendant cannot convey, and she cannot convey because she has no longer any title to the property; but her inability is not caused by any inherent defect or infirmity of title which she cannot overcome and for which she is not responsible, but is due to the fact that, having concluded a contract for sale to Mr. Brice, she continued thereafter to offer the same property for sale to the plaintiff. The defendant by her own act had put it out of her power to carry out the offer when the plaintiff accepted it, and I see no grounds for applying the principle underlying Bain v. Fothergill, L.R. 7 H.L. 158 to circumstances such as exist here. In my opinion, the defendant is liable to compensate the plaintiff for the damages she has sustained consequent on the defendant's voluntarily creating a state of circumstances in which she is unable to give the plaintiff that which she offered to give her."

There, then, was a case where the inability of the vendor to make a good title had been brought about by her own act in disposing of the property while her offer - I think I referred to it as an option, and it is indeed so mentioned in the report, but it appears simply to have been an offer which was never withdrawn - while her offer to the plaintiff remained outstanding and which upon acceptance by her gave rise to a second contract.

In Grindell v. Bass [1920] 2 Ch. 487, Russell J. on not dissimilar facts, reached a different conclusion. There, the defence to an action for specific performance of a contract to sell a house was that the defendant vendor had already contracted to sell to another. The plaintiff then added that other as a defendant, and the case was mainly concerned with whether or not the added defendant, a Mr. Earle, was sufficiently answered by the original defendant pleading the Statute of Frauds, and it was held that as the defence in the original action, signed by counsel on behalf of the defendant, constituted a memorandum, he was not answered by the Statute of Frauds, and the consequence was that the plaintiff had a good claim in damages against the original defendant. But Russell J., giving judgment on 30 July 1920, eight days after the decision of Eve J. in Goffin v. Houlder, although he had heard the case on the 14 and 15 July, the week before the Goffin v. Houlder decision on 22 July, said, at p. 494:

"This is a case, putting it at its highest against Mrs. Bass" - that is the original defendant - " of a person contracting to sell real estate knowing that she had no title to it or means of acquiring it. It is directly within the language of Lord Chelmsford in Bain v. Fothergill, L.R. 7 H.L. 158, 207. The purchaser cannot recover damages beyond the expenses he has incurred by an action for breach of contract.""

19. After discussing 2 Commonwealth cases to which I shall refer, the Judge continued at page 445:

"That formulation of the principle is that which I prefer. I have to make a choice between the one judgment and the other, as both reach different conclusions. I take the decision of Eve J. to be the one which binds me. The decision of Russell J. in the almost contemporaneous case of Grindell v. Bass [1920] 2 Ch. 487, where he was mainly concerned with quite a different point, is not that which I find a persuasive authority. I ask whether that formulation of the principle by Eve J. can apply to the present case, and in my judgment it does not. This does not appear to me to be a case where the vendor voluntarily created the circumstances which in 1983 had given rise to his failure to make good title to the plaintiffs, and their consequent issue of the writ in these proceedings. What he did in 1976 was, as I find on the material before me, in no way the voluntary creation of such circumstances. It is true that the plans to the conveyances executed on 20 September 1976 manifestly leave a great deal to be desired, but to go from there to equating this kind of case with the sort of circumstances dealt with in the two Commonwealth cases and in Goffin v. Houlder and Grindell v. Bass for that matter, where a vendor sells the same land to two different people more or less at the same time, there being an interval of only a week or two between one transaction and another, is, I think, to give a quite false categorisation to the circumstances of this matter.

Furthermore, not only do I consider that this is not a case where the vendor has created circumstances giving rise to the difficulties of making title, because I think that these are occasioned by the claims made at a very late juncture, it appears, by the son and grandson, but furthermore it appears to be of significance that the purchasers exercised their option well knowing that this was a real difficulty."

20. The Judge then went on to quote the passage from Lord Hatherley's speech which I have already set out.

21. Miss Wong, for the Defendant, said that both of the reasons given by Judge Finlay apply in the present case. She particularly emphasized the second reason, pointing out that the Plaintiff knew about Mr. Au's contract and the difficulties posed by it. She conceded that there is a dispute as to whether or not the Plaintiff was told about Mr. Au at the time the Plaintiff entered the provisional agreement on 20th February. She pointed out, however, that the Defendant's allegation that the Plaintiff knew about Mr. Au by 19th March, the date of the agreement upon which the Plaintiff bases its claim, has not been denied. Further, the Plaintiff's solicitors must have discovered that Mr. Au had registered his agreement on 21st February. Even if such knowledge is not established, she argued that at the very least there must be a trial to determine the extent, if any, of the Plaintiffs' knowledge of Mr. Au in order to allow the Court properly to decide whether the Rule applies.

22. In A.S.A. Constructions Pty. Limited v. Iwanov and Others. Hayllar v. Iwanov and Others (1975) 1 N.S.W.L.R. 512, the Iwanovs first sold their land to A.S.A. on 15th May 1972 and then on 1st June 1972 to Mr. Hayllar. Both purchasers sued for specific performance. The first succeeded. The second successfully obtained damages for loss of bargain. At page 516 Needham J. said:

"I do not accept the submission that the rule in Bain v. Fothergill (1874) L.R. 7 H.L. 158 applies here. The reason why Iwanov cannot perform the contract with Hayllar is that they, apparently recklessly, entered into two separate engagements to sell the one property and that Hayllar's contract was second in priority. I do not think the rule, based upon the vendor's inability, without his own fault, to show a good title, applies to a case where he is the author of his own misfortunes."

23. Miss Wong pointed out that the second purchaser was not aware of the first purchaser when he entered his contract.

24. In A.V.G. Management Science Ltd. v. Barwell Developments Ltd. 92 D.L.R. (3) 289, the facts were substantially similar to the present case. The vendor agreed to sell its land on 21st November 1973. On 28th November, the vendor believed the purchaser had not complied with a condition of the agreement and mistakenly concluded that the agreement had fallen through. On the same day, it accepted another offer to purchase the land. At page 296 Laskin, C.J., who delivered the judgment of the Court said:

"There is here no case merely of a vendor who, knowing he has no title (as, where he himself has merely a contract of purchase), purports to sell to another. The vendors here, somewhat greedy as McKenzie, J., found, had title and then proceeded, in effect, to agree to sell the same property twice. I do not say that there was fraud or a want of good faith (save possibly in respect of Jordan) but, in my view, it is enough to oust the limiting rule in Bain v. Fothergill if the vendor, having title, has either voluntarily disabled himself from being able to convey or has risked and lost his ability to do so by what were in effect concurrent dealings with two different purchasers."

25. Miss Wong sought to distinguish this case. She said quite correctly that the 2nd purchaser was not aware of the 1st purchaser. She also pointed out that in Ray v. Druce, Judge Finlay, when referring to this case, picked up the "concurrent dealings". Miss Wong said that 'concurrent' is not applicable to the present case. With that submission, I must disagree. The Defendants' dealings with Mr. Au and the Plaintiff were most plainly concurrent.

26. For the Plaintiff, Mr. Chan submitted that I should follow the decision in A.V.G. which is almost on all fours. As far as knowledge on the part of the Plaintiff is concerned, he submitted that the Plaintiff was aware only that there had been an agreement with Mr. Au but had been told it was not effective. The Plaintiff had no idea that Mr. Au was pursuing the other action. The Plaintiff's awareness was therefore qualified.

27. Mr. Chan said that the Judge in Ray v. Druce did not disapprove of the two Commonwealth cases, but simply found that the principle extracted from Goffin v. Houlder did not apply to the circumstances. He argued that the decision in Goffin was favourable to the Plaintiff and should be followed while the decision in Grindell v. Bass is explicable on the basis that the decision in Goffin was not cited. He said that the Judge appreciated that the decision in A.S.A. had the same rationale as that in Goffin.

28. Miss Wong contended that the Rule is still good. She said that there is no case where it has not been applied where a purchaser has been shown to be aware of the possible difficulties over the title. Further she said there is no English authority where the Rule has not been applied, when the action has been by the 2nd purchaser. She pointed out that in Goffin, the 1st purchaser was suing. She said that the decision in Grindell is reconcilable because there the 2nd purchaser had brought the action.

29. I assume for the purpose of this appeal that the Plaintiff was fully aware of Mr. Au and in particular that he had commenced the other action. I am satisfied, however, that such knowledge is of no assistance to the Defendant. In my view, the crucial factor underlying the various decisions to which I have referred and which have been mentioned was the conduct of the vendor. Where the vendor's conduct has been to sell his property twice within a short period, for whatever reason, it has been determinative of the issue. The only exception appears to have been Grindell v. Bass in which Russell J. without any real argument applied the Rule. The question of the 2nd purchaser's knowledge was a factor only in Ray v. Druce, the knowledge there being of a real difficulty before the exercise of an option.

30. In the present case, when the plaintiff signed the provisional agreement on 20 February, it was assured that the contract with Mr. Au had fallen through and posed no problems. Subsequently, as Miss Wong put it, the Defendant was bullish about the outcome of the other action. It seems to me that on 20 February the Plaintiff was perfectly entitled to accept that it was entering into a straightforward sale and purchase transaction. By the time it became apparent that there might be difficulties, the provisional agreement was already a binding agreement between the parties which the Plaintiff was entitled to expect to be performed. I cannot see that any fault or blame can be attributed to the plaintiff in entering the formal agreement on 19 March, notwithstanding it knew of the other action. Although the formal agreement is now the source of the plaintiff's claim, it is effectively no more than one of the events comprising the whole unhappy scene.

31. The fault and blame lies entirely with the Defendant who, like so many vendors in a rising market, took advantage of what was perceived as a loophole in an existing agreement in order to sell its property at a higher price to another purchaser. The Courts, as we know, have become littered with cases arising out of just such a situation, in which usually the 1st purchaser seeks specific performance. I am wholly persuaded that it is proper for me to follow the decision of the Canadian Court in A.V.G.

32. I would go further. The Rule is based upon the complications and uncertainties of conveyancing in 19th century England. Hong Kong, however, has had a system of land registration since 1844. The same problems and complications do not arise. That is to say, although problems of title arise from time to time, as the Courts well know, they do not arise to the same degree or for the sort of reasons that obtained in England in the last century. Unlike the purchaser contemplated by Lord Hatherley, the Hong Kong purchaser does not generally entertain thoughts about the uncertainty of the vendor making good title. Rather, he often expects to deal with the real estate as a chattel and quickly dispose of it for profit.

33. The Rule also has an effect which, I assume, was never contemplated a century ago. The Rule, if implemented to the full, is a positive incentive to a vendor in a rising market in a state where property is freely and frequently transferred to break his contract and obtain a better price if he knows that, at worst, he will simply have to refund the deposit of the 2nd purchaser and pay the relatively modest costs of investigating title. Such a vendor should know that the risk he runs is of paying for the 2nd purchaser's loss of bargain, a loss which in the present case is estimated to be in the region of $5,000,000.00.

34. In my view, therefore, the Rule has no place in modern Hong Kong and should no longer be followed.

35. Indeed, I am doubtful whether the Rule should ever have been followed in Hong Kong - assuming it has been. Its importation into Hong Kong law would have been by way of s.3(1) of the Application of English Law Ordinance, Cap. 88. For the reason I have just set out, I do not think the Rule to have been "applicable to the circumstances of Hong Kong or its inhabitants" - s. 3(1)(a), Cap. 88.

36. I am fortified in this view by the judgment in A.V.G. where Laskin C.J. went on to deal with the Rule in some detail. At page 299, he said:

"Not only this Court but other Courts in Canada were formerly under the same stricture, and any call for a denial of the rule would be a call for legislative intervention. In Stephens v. Bannan et al. (1913), 14 D.L.R. 333 at pp.343-4, 6 Alta. L.R. 418, at p.431, 5 W.W.R. 201, Beck, J., in the Supreme Court of Alberta en banc said that "the English rule as to damages in the case of breach of contract for the sale of land should be applied in this jurisdiction notwithstanding that we have here the Torrens system of land titles". On the other hand, in O'Neil v. Drinkle (1908), 8 W.L.R. 937, 1 S.L.R. 402, a Saskatchewan case, Lamont, J. (who later became a member of this Court), took a bolder approach, as follows (at p.944):

In this province, however, the reasons for the adoption of this exception to the common law rule as to damages do not exist. Instead of the complicated law as to the title of real estate which they have in England, we have a very simple system of land transfer, under which a person having a certificate of title holds an indefeasible title to his land, which is not subject to those uncertainties and defects which led to the establishment of the exception as laid down in Flureau v. Thornill, and as was said by Cockburn, C.J., in Engel v. Fitch, L.R. 3 Q.B. 314: "The limit of the exception is to be found in the reason on which it is based; the reason ceasing, the rule should also cease."

Therefore, I am of opinion that the conditions being entirely different here, and the reasons which led to the establishment of the exception being entirely absent, there is no reason why a different principle should be adopted in assessing damages for breach of contract for the sale of land than that adopted for the breach of other contracts.

He did not, however, have to press this because he was satisfied on the facts that the rule did not apply.

I have no hesitation in saying, at a distance of seventy years from O'Neil v. Drinkle, that I fully agree with what Lamont, J., there said about the rule in Bain v. Fothergill."

37. After discussing land titles and registration, the Judge concluded:

"In view of the foregoing, it would be my opinion, if it was necessary, in order to decide this case, to come to a conclusion on the matter, that the rule in Bain v. Fothergill should no longer be followed in respect of land transactions in those Provinces which have a Torrens system of title registration or a near similar system."

38. Finally, he said:

"Despite the differences between the Torrens system and kindred systems (as in British Columbia and Ontario) and deed registry systems, I do not see why a line should be drawn between them to rule out Bain v. Fothergill in respect of the former and not in respect of the latter. The existence of public registers upon which transfers of interests must be recorded to be protected could be considered as ousting the rationale on which the rule in Bain v. Fothergill was founded. I need not, however, pursue this matter further in the present case."

39. For the sake of completeness, I should add that the Rule has now been abolished in England by the Law of Property (Miscellaneous Provisions) Act 1989. The Act does not apply to Hong Kong. By virtue of s.3(2) of Cap. 88, the Rule would remain unaffected in Hong Kong.

40. As a 2nd string to her bow, Miss Wong argued that there need to be investigated at trial the circumstances surrounding the contract and the subsequent dealings between the parties in order to ascertain their intention and the proper construction of the contract. She said that three possibilities might arise. First, that under the revised arrangements for completion the successful outcome of the other action in favour of the Defendant became a condition precedent to the completion of the contract. I have no hesitation in rejecting that suggestion. Such a condition would have to be in writing. There is nothing in the written material which I have seen to suggest that there was anything more than a postponement of completion.

41. Second, that the contract became impossible to fulfill or that performance was frustrated. I say no more than that I am unable to perceive how the doctrine applies to the facts of the present case.

42. Third, that the parties were mutually mistaken that the Defendant could convey a good title. In my judgment, however, the only mistake was a mistake on the part of the Defendant as to the effect of the contract with Mr. Au. That was a mistake of law. That does not help the Defendant.

43. In the circumstances, I dismiss this appeal with costs.

Representation:

Mr. L. Chan inst'd by William Sin & So for Plaintiff.

Miss P. Wong, inst'd by C.Y. Kwan & Co. for Defendant.

Miss Au of J.S.M. for 3rd party (watching brief).