D.H. Shuttlecocks Limited v. Keung Shiu Tang
Read the full judgment text of HCA 9539/1991 on BabelCite. This High Court CFI judgment.
1. The Plaintiff, ("the Purchaser"), by the present proceedings commenced by writ, seeks specific performance, or such other relief as is just, in respect of the following agreement in writing, made on 12th September, 1991, with the Defendant, ("the Vendor"), for the sale and purchase of the Third Floor of No.45 Granville Road, Kowloon, ("the Provisional Sale & Purchase Agreement") :-
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1991, No. A9539 _______________ H E A D N O T E _______________ PROPERTY LAW - CONVEYANCING - CONVEYANCING LAW AND PRACTICE - CONVEYANCING AND PROPERTY ORDINANCE, S.13, 35 AND PART II OF FIRST SCHEDULE - SO-CALLED "PROVISIONAL SALE & PURCHASE AGREEMENT" SIGNED BY BOTH PARTIES PROVIDING FOR "FORMAL AGREEMENT" - BINDING AGREEMENT - FAILURE TO AGREE TERMS OF "FORMAL AGREEMENT" - OPEN CONTRACT - POWER OF ATTORNEY - POWER OF ATTORNEY ORDINANCE, SECTION 5(2)(4) & (6) - CONTRACT SIGNED ON BEHALF OF VENDOR BY ATTORNEY - REQUISITIONS ON TITLE - WHETHER PURCHASER UNDER OPEN CONTRACT PRECLUDED FROM RAISING REQUISITIONS ON POWER OF ATTORNEY TO CONVEY - NON-REVOCATION OF POWER OF ATTORNEY - WHETHER TIME OF ESSENCE - PURPORTED FORFEITURE OF DEPOSIT - PARTY IN BREACH. 1991, No. A9539 IN THE SUPREME COURT OF HONG KONG HIGH COURT ___________
___________ Coram: Hon Rhind J. in Court, delivering a written judgment reserved pursuant to O.42 r.5B Dates of hearing: 8 and 9 November 1993 Date and time of judgment: 3 December 1993 at 2:15 pm _______________ J U D G M E N T _______________ 1. The Plaintiff, ("the Purchaser"), by the present proceedings commenced by writ, seeks specific performance, or such other relief as is just, in respect of the following agreement in writing, made on 12th September, 1991, with the Defendant, ("the Vendor"), for the sale and purchase of the Third Floor of No.45 Granville Road, Kowloon, ("the Provisional Sale & Purchase Agreement") :-
2. Memfus Wong Surveyors Limited, ("Memfus Wong"), are estate agents : they drew up the Provisional Sale and Purchase Agreement signed by the parties on 12th September, 1991. 3. F. Zimmern & Co., who were the Vendor's solicitors from the outset, duly received the $200,000 initial deposit from Memfus Wong. 4. Despite the inclusion of the word "Provisional" in the title of that document signed by the parties on 12th September 1991, there can be no doubt about its being a fully binding contract. Not only is there ample authority for a document in this form being binding (see e.g. Link Brain Ltd. v. Fujian Finance Co. Ltd. [1990]2 H.K.L.R. 353;Yui Yau Ping v. Fong Yee-lan [1992]2 H.K.L.R. 167; andChu Wing Ning v. Ngan Hing Cheung, H.C. Action No.A9409/1991, an unreported decision of Mr Robert Ribeiro, Q.C., sitting as a Deputy Judge.) but, also, both parties insist they are bound by it, even though they differ on how it should be interpreted. 5. It was not until 16th September, 1991 that Messrs Clayton Wong & Co., the solicitors who, by then, had been instructed by the Purchaser to act for it, wrote and faxed F. Zimmern & Co., asking for the draft formal Sale and Purchase Agreement, ("the Formal Agreement"), together with the title deeds. 6. In somewhat leisurely fashion, F. Zimmern & Co. waited a couple of days until 18th September 1991 before sending Messrs Clayton Wong & Co. the title deeds, (Agreed Bundle page 39), and, then, the following day, 19th September, sent the draft Formal Agreement as well. 7. In the light of events occurring subsequently, it is of interest to note that, in its letter of 18th September accompanying the title deeds, F. Zimmern & Co. wrote they were sent to Clayton Wong & Co. ".... on your undertaking to hold the same to our order and to return the same on demand. Please acknowledge receipt by signing and returning to us the duplicate of this letter to us." Although there was no explicit reference in the Provisional Sale & Purchase Agreement to the Purchaser's solicitor having to give any such undertaking, Messrs Clayton and Co. impliedly gave one, as requested, by signing and returning the duplicate to F. Zimmern & Co., without any fuss : (Agreed Bundle, page 41). Solicitors' undertakings of one sort or another are a commonplace of conveyancing, and play a useful role in the smooth and expeditious despatch of conveyancing business. 8. It is common ground that, as a matter of computation, the "5 working days after the date of receipt of the title deeds by the Purchaser's Solicitor" in Clause 2(ii) of the Provisional Sale & Purchase Agreement expired at midnight on 25th September. 9. At or about 3 p.m. on 25th September, F. Zimmern & Co. received from Clayton Wong & Co. two letters each marked "URGENT". The first read as follows :
10. Enclosed with that first letter was the draft Formal Agreement, as amended by Clayton Wong & Co. 11. On the view I take of the case, it is only necessary to consider in detail one of the amendments proposed by Clayton Wong & Co. to the draft Formal Agreement. As Part IX of the First Schedule to the draft Formal Agreement, F. Zimmern & Co. had included the following :-
12. On the occasion of sending back the draft Formal Agreement to F. Zimmern & Co. with the first letter of 25th September 1991, Clayton Wong & Co. had amended Part IX by deleting the whole of (a), (b), (c) and (d), and, against "Special Stipulations", had inserted the word, "Nil". (See Agreed Bundle, page 55). 13. Suffice it to say at this point - I will elaborate later - the Vendor who, by the Provisional Sale and Purchase Agreement, had contracted to sell "... subject to good title ..." was not within his rights in trying to impose those "Special Stipulations" on the Purchaser in the draft Formal Agreement. 14. I will now set out the content of the second letter Clayton Wong & Co. sent F. Zimmern & Co. at the same time as the first letter :
15. Accompanying that second letter was a cheque for $400,000 drawn on Clayton Wong & Co.'s Client Account with the Hong Kong Central Branch of Banque Nationale de Paris in favour of F. Zimmern & Co. 16. Yet a third letter was received by F. Zimmern & Co. from Clayton Wong & Co. that afternoon. This one, which arrived a few minutes before 4 p.m., was as follows :-
17. It is not clear the precise time when, but, certainly after receiving Clayton Wong & Co.'s second letter that day, F. Zimmern & Co. faxed the following riposte to Clayton Wong & Co. :
18. The stance taken by F. Zimmern & Co. in that letter could not be justified under the terms of the Provisional Sale & Purchase Agreement, by which both sides acknowledged they were bound. 19. The time for payment by the Purchaser of the further deposit of $400,000 under Clause 2(ii) of the Provisional Sale & Purchase Agreement had not yet arrived when F. Zimmern & Co. sent its first letter on the afternoon on 25th September, and, in fact, never arrived, since the Vendor at no stage signed a Formal Agreement. Without the Vendor's signature there could be no Formal Agreement : there would only be a worthless piece of paper on which happened to be typed, "Formal Agreement". 20. If the Vendor's solicitors chose not to give the undertaking requested, that was their own affair, but it in no way relieved the Vendor of his obligation to sign a Formal Agreement as a prerequisite for the further deposit of $400,000 becoming payable by the Purchaser. 21. At page 174, between letters E and F, of the Link Brain case, the Court of Appeal observed in relation to the clause there in issue, requiring that a payment be made "upon signing the Sale and Purchase Agreement", that the clause "... could only mean what it said ...," with the result that the seller in that case was in no position to insist upon payment because he had not signed the Sale and Purchase Agreement on which he sought to rely. 22. Needless to say, the construction of any written agreement depends upon the particular words used, and the particular factual matrix. That said, I can discern no material difference in the contract with which I am concerned, and that in Link Brain, which would justify my holding the words in Clause 2(ii) of the Provisional Sale & Purchase Agreement : "A further deposit of $400,000 payable on the signing" (of the Formal Agreement), mean other than what they say. 23. True, the third paragraph of Clause 6, headed "Remarks" of the Provisional Sale & Purchase Agreement reads as follows :-
24. On the view I take, any failure by the Purchaser to sign a Formal Agreement will only attract the operation of that paragraph in circumstances where the Vendor has himself signed the Formal Agreement, for, without the Vendor's signature, no Formal Agreement comes into existence. 25. More needs to be said about the third paragraph of the first letter dated 25th September 1991 from the Vendor's to the Purchaser's solicitor. That paragraph reads :
26. That paragraph, in my view, by itself amounts to an anticipatory breach of the Provisional Sale & Purchase Agreement by the Vendor. For reasons I have already stated, the request by the Purchaser's solicitors for an undertaking from the Vendor's solicitors, in the circumstances existing at the time it was made, afforded no ground entitling the Vendor to treat the Provisional Sale and Purchase Agreement as repudiated. 27. Nor was the Vendor's solicitor any more justified in threatening that, unless the Purchaser signed the Formal Agreement that very same day, the Vendor would treat the Provisional Sale & Purchase Agreement as repudiated. 28. While making much of the supposed mote in the eye of the Purchaser failing to sign the Formal Agreement, F. Zimmern & Co. chose to ignore the beam in the eye of their own client who never got around to signing any Formal Agreement. 29. If both sides failed to sign any Formal Agreement, the only consequence would be the Provisional Sale and Purchase Agreement remaining in force. In that case, instead of the Purchaser having to pay the Vendor a further deposit of $400,000, the Purchaser would then have to pay the Vendor that same sum, plus the balance of the purchase money, on completion. 30. Even assuming that time had been of the essence under the Provisional Sale & Purchase Agreement - and I do not think it was - the Vendor was in no position to complain as at 25th September 1991 about non- performance on the part of the Purchaser through failing to sign the Formal Agreement, since the draft Formal Agreement tendered to the Purchaser's solicitor at all material times failed in at least one essential respect to conform with the requirements of the Provisional Sale & Purchase Agreement, namely, the insistence by the Vendor's solicitors, already referred to, that the draft Formal Agreement had to include the following Special Stipulations :
31. The Provisional Sale & Purchase Agreement had been signed on behalf of the Vendor, Keung Shiu Tang, by Keung Wai Ming, "Signing as Attorney for the Vendor" (see Agreed Bundle, p36), so the Purchaser presumably knew that Keung Wai Ming was purporting to sign the Provisional Sale & Purchase Agreement on behalf of the Vendor under a Power of Attorney. There was, however, nothing in the Provisional Sale & Purchase Agreement fixing the Purchaser with any particular knowledge of the terms of any Power of Attorney, nor limiting the Purchaser's entitlement to raise requisitions on it. 32. One of the documents of title furnished by the Vendor's solicitors to the Purchaser's solicitors on 18th September 1991 was a certified copy of a General Power of Attorney conferred by the Vendor, Keung Shui Tang, on Ms. Keung Wai Ming, the signatory of the Provisional Sale and Purchase Agreement. The terms of that Power of Attorney are as follows :
33. There is no dispute that, by virtue of the Power of Attorney Ordinance, Cap.31, the Power of Attorney in the present case operated to confer on Ms. Keung Wai Ming authority to do on behalf of the Vendor anything which can be lawfully done by an attorney. 34. If the Purchaser's solicitors had allowed the Special Stipulations in Part IX to become part of the Formal Agreement, the consequences could have been highly prejudicial to the Purchaser in the event of the revocation of the Power of Attorney on account of the Vendor's becoming bankrupt, suffering mental incapacity or dying during the interval between the signing of the Formal Agreement and the Completion Date. Suppose that knowledge of such a catastrophe came to the Purchaser's attention during that interval before completion : the Purchaser could then find itself in the unenviable position of being forced to complete without being entitled to object that the Power of Attorney was no longer valid and subsisting. Because of such knowledge, the Purchaser would forego the protection of s.5(2) of the Powers of Attorney Ordinance in respect of claims brought against it by the estate of the deceased, bankrupt or mentally incapable Vendor, as the case might be. S.5(2) is as follows :
35. A further consequence could be the inability of the Purchaser to pass a good title to anyone other than a "purchaser" within the meaning of sub- sections (4) and (6) of s.5 of the Powers of Attorney Ordinances :
36. Simply because the Purchaser knew that the Vendor signed the Provisional Agreement through his attorney in no way curtails the Purchaser's entitlement to as good a title as if the Vendor himself had signed. 37. Nothing in the Provisional Sales & Purchase Agreement limits the title the Vendor is required to show : there is explicit provision it has to be a, "good title". 38. There is no scope for disputing that the Provisional Sale & Purchase Agreement is in the nature of an "open contract", attracting the operation of the Conveyancing and Property Ordinance, Cap.219, and also the general law, to imply usual terms where the contract is silent. 39. The combined operation of s.13 and s.35, together with Part II of the First Schedule, of the Conveyancing and Property Ordinance bring about the result that the Vendor is required to prove the validity and non-revocation of the Power of Attorney, in the usual way, as an essential link in the title. There is no basis in law to justify the Vendor's attempt by the "Special Stipulations" to deny the Purchaser the right to raise objections or requisitions concerning the validity and non-revocation of the Power of Attorney. 40. Insistence by the Vendor's solicitor on the inclusion of their "Special Stipulations" in the draft Formal Agreement put their client in breach of the conditions implied by the Conveyancing and Property Ordinance in the Provisional Sale & Purchase Agreement to show a good title. 41. So long as the Vendor remained in breach of the Provisional Sale & Purchase Agreement by wrongfully insisting upon the "Special Stipulations", the Vendor was in no position to complain about any failure on the Purchaser's part to sign any Formal Agreement and pay the further deposit of $400,000. 42. In response to the first letter from the Vendor's solicitors on 25th September 1991, the Purchaser's solicitors sent their fourth to the Vendor's solicitors that day, the content being as follows :
43. That letter in no way sought to rescind the Provisional Sale & Purchase Agreement by which the parties were bound. Reasonably, as I see it, the Purchaser's solicitors wanted to continue negotiating with the Vendor's solicitors to see if a Formal Agreement could be agreed, but, meanwhile, affirmed the existing Provisional Sale & Purchase Agreement. 44. Back came the faxed second letter from the Vendor's solicitors that day, setting out details of why the Vendor's solicitors thought nine amendments proposed by the Purchaser's solicitors to the draft Formal Agreement were unacceptable. On the view I take, it is unnecessary to set out all nine of the ways in which the Vendor's solicitors found the amendments unacceptable. It is enough to mention one of them, the "Special Stipulations", which the Vendor's solicitors insisted must be kept intact. 45. The sting lay in the penultimate paragraph of that letter :
46. This was another unilateral attempt on behalf of the Vendor's solicitors to repudiate the Provisional Sale & Purchase Agreement and forfeit the initial deposit of $200,000. 47. As the Vendor's solicitors correctly noted in the final paragraph of that letter :
48. The third letter from the Vendor's to the Purchaser's solicitors that same day enclosed "... our engrossment of the Formal Agreement for Sale and Purchase in duplicate for your handling." That engrossment was the Vendor's solicitors' version of the Formal Agreement, disregarding all nine proposed amendments which the Vendor's solicitors, in their second letter that day, had declared to be unacceptable. Featuring in the engrossment were the "Special Stipulations," (Agreed Bundle, pages 91 and 92). 49. Then came the Vendor's solicitors' fourth and last letter for the day :
50. By repeating the comminations in the last paragraph of their first letter of the day and the penultimate paragraph of their second, the Vendor's solicitors purported to treat the Purchaser as in breach of the Provisional Sale & Purchase Agreement, whereas the reality was the fault lay with the Vendor. 51. Midnight on the evening of 25th September 1991 found the Vendor's solicitor still dutifully at her desk in case the Purchaser's solicitors turned up to hand over (1) the Vendor's solicitors' version of the Formal Agreement signed by the Purchaser, and (2) $400,000 by way of further deposit, with no strings attached such as requiring the Vendor to have signed, too. 52. On 26th September 1991, the Vendor's solicitors wrote to the Purchaser's,
53. Whatever the Vendor's solicitors might have thought the position to have been, the Vendor was not, in my judgment, entitled, in the events which had occurred, to walk away from the contract embodied in the Provisional Sale & Purchase Agreement, pocketing the $200,000 initial deposit as he went. 54. At no time had the Purchaser evinced any intention not to be bound by the Provisional Sale & Purchase Agreement, and, in reply to the Vendor's solicitors' letter of 26th September, the Purchaser's solicitors, on behalf of their client, refused to accept the Vendor's purported repudiation of the Provisional Sale & Purchase Agreement. 55. From the Vendor's solicitors' letter of 27th September, 1991 one sees the Vendor's solicitors treating the whole matter as closed with the forfeiting of the Purchaser's initial deposit, and announcing, "... we do not see any need for any further correspondence in the matter." 56. That view was not shared by the Vendor's solicitors who, on their client's behalf, persevered with trying to get the Vendor to perform the Provisional Sale & Purchase Agreement, but in vain. Hence, the present proceedings. 57. It still remains for me to explain why I do not think that time was of the essence in relation to the payment of a further deposit of $400,000. Generally, time is not of the essence under conveyancing contracts, and I fail to detect anything special about the circumstances of the Provisional Sale and Purchase Agreement in the present case to take it outside the general rule. 58. The "5 working days after the date of receipt of the title deeds by the Purchaser's solicitor", referred to in paragraph 2(ii) of the Provisional Sale and Purchase Agreement as the time for paying a further deposit of $400,000 was no more than a target date, rather than a condition. Failure to meet that target date would not by itself bring the contract embodied in the Provisional Sale and Purchase Agreement to an end. Given the relatively short period of five working days for settling the terms of the Formal Agreement, as well as for the raising and answering of requisitions on the title, I do not think it would have been within the contemplation of the parties on signing the Provisional Sale & Purchase Agreement that, the failure by the Vendor to sign the Formal Agreement on or before 25th September notwithstanding, the Vendor would, nonetheless, be entitled to forfeit the initial deposit because the Purchaser had not paid the Vendor a further deposit of $400,000 by that date. Mutatis mutandis, everything said by Nazareth J.A. in Yiu Yau Ping v. Fong Yee Lan [1992]2 H.K.L.R., 167, 175, lines 12 to 35, in relation to the contract he was there considering applies with equal force to the Provisional Sale & Purchase Agreement in the present case. 59. In my judgment the Vendor, through his solicitors, wrongfully attempted to rescind the Provisional Sale and Purchase Agreement, and must now accept the legal consequences. 60. I now enter interlocutory judgment in the Purchaser's favour, but, on a date to be fixed, would like to be addressed on remedies, unless the parties can reach agreement on that. 61. This being a written Judgment reserved pursuant to O.42, r.5B, I make a 14 day order nisi in the Purchaser's favour for costs. 62. The topic of costs prompts one final thought. 63. In the light of such decisions as Link Brain, Yiu Yau Ping, Chu Wing Ning and now the present one, it well behoves conveyancing solicitors to urge caution on any seller tempted by the prospect of getting something for nothing in the form of a deposit forfeited on the basis of an alleged departure by a buyer from a conveyancing time-table. Except in indubitably clear cases, the biter needs alerting to the considerable risk of finishing up the bitten in the form of having to pay both his own and his opponent's litigation costs.
Representation: Mr Walter Lau (inst'd by M/s L.H. Kwan & Co.) for the Plaintiff Mr Alfred Fung (inst'd by M/s Lo, Wong & Tsui) for the Defendant |