Wong Kam Lan v. Well Win Investment Limited
Read the full judgment text of HCA 8883/1993 on BabelCite. This High Court CFI judgment was delivered on 22 August 1995.
1. The Plaintiff in this action seeks a declaration that a Provisional Agreement for the sale of Inland Lot No. 2949, Flat C, 1/F ("the flat") and a carpark at Well View Villa, 17 Tung Shan Terrace, is "null and void or unenforceable" alternatively a declaration that the Provisional Agreement dated the 8th July 1993 has been rescinded by the Plaintiff upon repudiation by the Defendant. The Plaintiff also seeks an order for the repayment of a total of $398,000 paid to the Defendant's solicitors.
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HCA008883/1993 1993 No. A8883 IN THE SUPREME COURT OF HONG KONG HIGH COURT ____________
____________ Coram: The Hon. Mr. Justice Leonard in Court Dates of hearing: 3, 4, 5, 8, 9 and 10 May 1995 Date of handing down judgment: 22 August 1995 _______________ J U D G M E N T _______________ 1. The Plaintiff in this action seeks a declaration that a Provisional Agreement for the sale of Inland Lot No. 2949, Flat C, 1/F ("the flat") and a carpark at Well View Villa, 17 Tung Shan Terrace, is "null and void or unenforceable" alternatively a declaration that the Provisional Agreement dated the 8th July 1993 has been rescinded by the Plaintiff upon repudiation by the Defendant. The Plaintiff also seeks an order for the repayment of a total of $398,000 paid to the Defendant's solicitors. Of that sum, $200,000 was paid as a temporary deposit upon the signing of the Provisional Agreement. The balance of $198,000 was sent to the Defendant's solicitors on terms that they should hold the money as stakeholders pending the signing of a formal agreement. That sum of $198,000 has now been paid into court in pursuance of an order made in connection with interpleader proceedings. 2. There are additional claims for interest, the costs of the action and the Plaintiff's costs of investigating the title. There is an alternative claim for a declaration that the Plaintiff is entitled to a lien upon the flat for the whole of the $398,000, interest and costs. 3. The Defendant's case is that the Provisional Agreement was binding on both parties and that it was wrongfully repudiated by the Plaintiff, so that the Defendant is entitled to forfeit the whole of the $398,000 which according to the Defendant was paid as deposit money. It is contended by the Defendant that the Plaintiff was not entitled to require the Defendant's solicitors to hold the money as stakeholders. The Defendant seeks a declaration to the effect that the Plaintiff wrongfully repudiated the contract and that it is entitled to forfeit the deposit. It also claims damages for breach of contract, with interest and costs. The Provisional Agreement 4. On the 8th July 1993 at the offices of Messrs Tsang & Chan ("T&C") then acting as solicitors for the Defendant, the Plaintiff signed a Provisional Agreement to purchase from the Defendant the flat and a carpark described as carpark No. 8. The Plaintiff was not given a copy of the Provisional Agreement signed by the Defendant. 5. The Provisional Agreement, after naming the Plaintiff as purchaser and describing the property as "17 Tung Shan Terrace, Well View Villa, Flat C, 1/F and Car Parking Space No. 8" shows the purchase price as $3,980,000. Under "Terms of Payment" there is provision for a "Temporary Deposit" of $200,000. That was paid by the Plaintiff upon the signing of the Provisional Agreement. Then there is provision for "Balance Deposit HK$198,000 on or before 15th day of July, 1993". That sum was paid by the Plaintiff through her solicitors, Messrs Simon Ho & Co. ("SH") to T&C but it was made clear in a covering letter that T&C were to hold the money as stakeholders. 6. The remaining relevant terms and conditions were as follows:
7. A draft formal Sale and Purchase Agreement ("the first draft") was sent by T&C to SH on the 22nd July 1993, a week after, according to the Provisional Agreement, it was to be signed. Neither party, as it turned out, ever signed a formal agreement. It is clear from the conduct of the parties that the time limit for the signing of the formal agreement was waived. The Validity and Enforceability of the Provisional Agreement 8. It is common ground that no copy of the Provisional Agreement signed by the Defendant was delivered to the Plaintiff until after negotiations had broken down and litigation had commenced. There is a dispute as to why signed copies were not exchanged. It is the Plaintiff's contention that the omission by the Defendant was deliberate and evinces an intention not to be bound by the Provisional Agreement. Miss Lam for the Plaintiff submits that in the absence of exchange there is no binding agreement. She agrees, however, that the parties proceeded as if it were binding and that a copy signed by the Defendant was delivered when it was called for. 9. It is suggested by Miss Lam that the Defendant did not exchange agreements because it was trying to foist a different car parking space on the Plaintiff. 10. It is clear from the correspondence which is in evidence that both parties proceeded on the basis that there was a binding Provisional Agreement. They varied its terms in the correspondence, which correspondence is sufficient evidence of the existence of the agreement. 11. If a Provisional Agreement contemplates a future formal agreement and the formal agreement does not come into existence, the Provisional Agreement remains operative and is a binding contract. See Yiu Yau Ping v. Fong Yee-lan [1992] 2 HKLR 167, following Chan Yock Kwong v. Wong Hee Mao [1962] HKLR 480 and Branca v. Cobarro [1947] 1 KB 854. I am satisfied that the Provisional Agreement, as varied by correspondence, was valid and binding upon the parties. Variations by correspondence of the terms of the Provisional Agreement 12. There was a considerable correspondence between the solicitors for the parties concerning the proposed formal agreement but at this stage I will deal only with the correspondence which evidences some variation of the terms of the Provisional Agreement. 13. By letter dated 5th August 1993, T&C indicated the Defendant's agreement to pay its own costs relating to the sale, except for the architect's fees for certain plans and except for certified copies of title deeds and documents. 14. By letter dated 8th September 1993, T&C confirmed that they had no objection to postponing the date for completion of the sale and purchase until the 30th September 1993. By that time, both parties were referring to carpark no. 3 instead of carpark no. 8. A plan enclosed with the letter from T&C of the 8th September indicated carpark 3, as did a faxed reply dated 15th September 1993 from SH the Plaintiff's solicitors. 15. On the 25th September 1993, T&C wrote pointing out that the agreed date for signing the formal agreement had long passed. They also gave notice that " completion has to take place on 30th September 1993 as scheduled, to which time is hereby made the essence". Where time is of the essence and the parties agree to an extension to a new date, time remains of the essence. 16. Up to the 29th September 1993 the correspondence refers to carpark no. 3, but on that day T&C wrote two letters referring to carpark space no. 4, and sent a plan showing carpark space no. 4, not 3 as previously. 17. By the 30th September, the day set for completion, T&C were referring to carpark 3 again, as were SH. I am satisfied that the references to no. 4 resulted from clerical errors and the parties had agreed that the carpark to be sold was no. 3. 18. The parties failed to agree upon the terms of a formal agreement. Negotiations broke down and completion did not take place on the 30th September. Each party blames the other. The Previous Deed of Covenant (DMC) 19. On the 31st July 1992, at a time when the Defendant, Well Win Limited, owned the whole building and the flats were empty, it assigned a flat known as flat C/2/F together with a carpark no. 6 to one Madam Chau. 20. The sale to Madam Chau was made subject to a Deed of Mutual Covenant ("the previous DMC") which was executed on the date of the assignment to her. 21. The previous DMC was made between:
22. Madam Chau did not execute personally the assignment and the previous DMC. It was executed by one Chau Fung King purportedly under a Power of Attorney. 23. On the 13th of December 1992 Madam Chau sold Flat C/2/F back to the Defendant which, as a result, became again the owner of the whole building. 24. There was no mention of the previous DMC in the Provisional Agreement. A memorial of it was on the register and in due course, the Plaintiff's solicitors became aware of its existence. A copy of the previous DMC registered by Memorial No. 5423779 was sent with other copies of deeds and documents of title to SH on the 4th August 1993. 25. On the 15th September 1993, SH wrote a letter containing the following:
26. On the 20th September, SH by letter of that date followed up with a request for certified plans and they said:
27. The reply came in a letter from T&C dated the 25th September 1993 as follows:
28. With the letter they enclosed a draft new DMC for approval and a pro-forma assignment, asking for a draft assignment to be sent for approval. They denied that there was any need for the Statutory Declaration requested. 29. SH replied on the 27th September saying that the Statutory Declaration was required (among other reasons) because it would prove the extinguishment of the Deed of Mutual Covenant Memorial No. 5423779. 30. T&C declined, at that time, to deal with the outstanding requisitions, maintaining that title was deemed accepted since the Plaintiff had already been given vacant possession. It is common ground that the Plaintiff had taken possession in August. SH, however, said on the 29th September that requisitions had not been waived and, since requisitions had not been satisfactorily dealt with they asked for the return of the initial and further deposit. On the same day, T&C wrote asking for a draft assignment and saying that they still awaited plans from the architect. On the 30th they wrote to say that they were advised by counsel that there would be no need to execute a new Deed of Mutual Covenant because the original one was valid and subsisting. They enclosed a fresh engrossment of a formal Sale and Purchase Agreement signed by the Defendant and said:
31. In fact, in the fresh engrossment, Clause 20 remained unaltered. That clause contemplated the execution of a new DMC. That, I am satisfied, was simply another example of the gross carelessness exhibited throughout by those preparing papers in T&C's office. The fresh engrossment was not, as the letter suggested, executed by the Defendant. There was a fresh clause reserving a certain portion of the common parts for the use of the Defendant although the clause was not mentioned in correspondence. There were no plans attached. 32. Clause 20 could not be reconciled with Part II of the second schedule which referred only to the original DMC. T&C also enclosed a copy of counsel's opinion to the effect that the previous DMC was valid and subsisting. They offered a statutory declaration by a solicitor's clerk confirming the date of execution of the power of Attorney and they indicated that a Confirmatory Deed would be obtained from Madam Chau as soon as she returned to Hong Kong, she being then absent abroad. They asserted that the plans were for identification only and would not affect the title. 33. The last paragraph of the letter was in the following terms:
34. SH replied shortly afterwards on the same day, saying that they had only received the replies to requisitions and fresh draft Sale and Purchase Agreement at about 3 p.m. They had insufficient time to consider the reply and their client was prejudiced in that there was a new draft agreement saying that the property was subject to the existing Deed of Mutual Covenant. 35. They considered it unreasonable and oppressive to be allowed less than half a day to approve the draft agreement, consider the replies and to consider counsel's opinion and obtain the necessary funds. 36. SH said that under the "open contract rules" completion must take place within a reasonable time and the conduct of T&C was a breach of those rules, so that the Plaintiff was entitled to cancel the transaction. They asked for the return of the deposit. 37. That communication was received at about 16:15 hours and T&C replied, stating that the Provisional Agreement was a binding contract and repeating that the Plaintiff was deemed to have waived objections to the title. 38. Finally they said:
39. Though it was very late in the day, the Defendant's solicitors had given a sufficient answer, in my judgment, to the requisition concerning the date of the Power of Attorney. 40. There was no need for a statutory declaration to show that the Defendant had again become the sole owner of the building when the first flat was resold to him. That was obvious from the register. The matter could only be significant if it was necessary to show that the previous DMC had ceased to exist. 41. The Provisional Agreement, which I hold to be a binding contract, is silent on the question of Deeds of Mutual Covenant. Both parties clearly thought that they were going to deal with that matter in the formal agreement into which they both expected to enter. Until the day before the due date for completion, both sides believed that the original Deed of Mutual Covenant was dead and that they needed to enter into another. Then the Defendant decided on counsel's advice that the old deed still lived, so that a fresh deed was unnecessary. There was no contractual obligation to enter into a fresh deed. 42. The Plaintiff was not prepared to accept an ultimatum requiring her to complete in circumstances where the terms of a formal agreement had not been settled, plans had not been supplied for annexation to the transfer and her solicitors had been presented at the eleventh hour with a volte face about the DMC and felt that there was inadequate time to consider the late answers to requisitions and to the copy of counsel's opinion. The Plaintiff's case is that she was not bound by the Provisional Agreement to complete the purchase. In their opening letter headed "Subject to Contract" dated 15th July 1993, to T&C, SH referred to the Provisional Agreement, asked for a draft agreement for sale and purchase and then said :
43. In sending the further deposit with its subject to contract letter dated the 15th July 1993, SH stated that it was to be held by T&C as stakeholders, not to be released until
44. In their letter dated 29th September 1993 SH said (in connection with the argument about waiver of requisitions)
45. That was not true: certain terms were contained in the binding Provisional Agreement. It was in that letter that they asked for the initial and further deposit to be returned. Nevertheless, on 30th September they were talking about the "open contract rules" and were evidently proceeding (correctly in my view) on the basis that there was a subsisting valid contract, which was affirmed, for the sale of the property. 46. Arguments have been addressed to this court on behalf of the Plaintiff in support of the proposition that there was no binding contract. There has been discussion as to whether the Provisional Agreement signed by the Plaintiff was preceded by an oral agreement and whether the failure to deliver a copy of the written Provisional Agreement signed by the Defendant was fatal to the Defendant's case. Having considered the evidence and the arguments, I need say no more than that it is plain from the written Provisional Agreement, read together with the open correspondence, that a valid contract existed, identifying the property, the parties, the price and the date for completion, time being of the essence. The time limit of 7 days for signing the formal agreement and paying the balance of deposit was waived by conduct. 47. So far as the parking spaces are concerned, I accept the uncontradicted evidence of the witnesses called for the defence that the Plaintiff and the representative of the Defendant agreed upon space no. 3 and identified it on the ground. When the plan showing space no. 3 was supplied, there was no question raised about it. References to space no. 4 in correspondence and in one plan resulted from a clerical error. It is clear that the Plaintiff was not misled. The reason for the change from 8 to 3 was that the space originally contemplated was one which the authorities would not permit to be designated as a parking space. 48. The Plaintiff undoubtedly took possession of the flat, in August, in anticipation of completion. That reinforces my view that there was a binding and enforceable contract. 49. The fact of taking possession is not conclusive evidence of acceptance of title. Having regard to what transpired after the taking of possession, I am not prepare hold that in the circumstances of the present case, the Plaintiff is to be deemed to have accepted title and waived requisitions by taking possession. The Validity of the Previous DMC 50. There has been much argument on this point. It has been contended on behalf of the Plaintiff that by virtue of the principle of unity of Seisin the original deed was defunct. See In re Tiltwood, Sussex, Barrett v. Bond [1978] 1 Ch 269; Re Victoria Recreation Ground, Portslade's Application (1979) P&CR 119. See also Texaco Antilles Ltd. v. Kernochan [1973] AC 609, PC. 51. The deed was not defunct because there was another party involved, namely the mortgagee bank, whose solicitor quickly pointed that out to T&C when approached at a late stage. Counsel's opinion was correct. The Plaintiff contends that in any event the restrictive covenants must have gone and, in those circumstances, a purchaser taking subject to the Deed would be at a disadvantage. As to whether the restrictive covenants had gone, Mr. Mumford has put forward an interesting and attractive argument to suggest that they had not. It is a point which it is not necessary for me to decide since, in any event, the rest of the Deed was valid and subsisting. 52. The Plaintiff says that the Defendant repudiated the Provisional Agreement, so that she was entitled to accept the repudiation and treat the contract as rescinded. It is submitted that the agreed basis of sale was that a new DMC was to be executed. In support of that submission, reference was made to the draft formal agreement. But the drafts were dealt with on a subject to contract basis and their terms were never agreed. The Plaintiff cannot pray them in aid. 53. Reliance is also placed by the Plaintiff on the Defendant's original assertion that the original DMC was no longer valid but answers as to the validity of the Deed of Mutual Covenant were expressions of opinion on a question of law which the Plaintiffs were, at least in theory, just as qualified to answer as the Defendant's solicitors. 54. The fact that both parties thought that it would be desirable to agree upon the terms of a new Deed of Mutual Covenant and execute it is not sufficient to support a contention that they had entered into a binding agreement so to do. This case is another illustration of the dangers of entering into binding Provisional Agreement. 55. In mid-afternoon on the day fixed for completion, the Defendant was demanding that the Plaintiff execute an engrossment of a final agreement which contained mutually contradictory provisions concerning the Deed of Mutual Covenant. The description of the property to be sold referred to plans and not by way of identification only, notwithstanding what the Defendant's solicitors said in correspondence. Flat C was said to be "as shown on the 1st-3rd Floor Plan annexed hereto and coloured pink thereon" and the garage was "as shown on the Ground Floor Plan annexed hereto and coloured pink thereon". 56. The garage had been described variously in correspondence from the Defendant's solicitors as nos. 8, 4 and 3 and plans had been supplied showing it as 3 and 4 respectively. The Defendant was reserving the right to attach plans to the assignment after it had been executed by the Plaintiff. Having regard to the clerical incompetence shown by the Defendant's solicitors during the negotiations, there is no knowing what space might have been shown on the plan as being sold if it had been left to the Defendant's solicitors to attach it later. Parking spaces are not readily identifiable like buildings: plans are important in that regard. 57. Worst of all, through a mutual misunderstanding, the situation regarding the DMC had changed at the last minute and the Plaintiff's solicitors needed time to consider. They had been led by the attitude of the Defendant to believe that the original DMC was invalid. 58. The draft formal agreement provided that completion was to be at 5 pm and the Defendant's solicitors were saying that they expected it to be executed before completion. That was, in all the circumstances, quite unrealistic. The time for completion according to the Provisional Agreement was not specified so that the Plaintiff would have had until midnight but the expression of an expectation of execution of the formal agreement was taken by the Plaintiff's solicitors as a demand for completion at 5 p.m. It is true that the word used in the letter of 30th September was 'expect' but the letter read as a whole appears to be making a demand. 59. The Plaintiff contends that the Defendant could not insist on selling subject to the existing Deed of Mutual Covenant because there was no term to that effect in the Provisional Agreement. I hold, however, that it is a necessary implication in this Provisional Agreement for the sale of a flat in a block of flats in Hong Kong that the sale is subject to and with the benefit of any valid and subsisting Deed of Mutual Covenant. 60. The Plaintiff relies on the decision in DH Shuttlecocks Ltd. v. Keung Shiu Tang C.A. No. 5 of 1994 where at p. 6 of the judgment Godfrey J.A., giving the judgment of the court, said:
61. However, the judgment went on as follows:
Those cases are :
62. It is plain from those cases that in order to establish repudiation it must be shown that the party accused of repudiation made quite plain his own intention not to perform the contract. 63. I am unable on the evidence, both documentary and oral, to infer from the conduct of the Defendant an intention to repudiate the contract. The Defendant was being unrealistic in demanding completion in effect by 5 p.m. on the 30th because it was not practicable to do so when the final plans, which were agreed to be for identification only, were not available; the draft formal sale and purchase agreement was in a mess and the purchaser needed a reasonable time to consider the sudden new stance of the Defendant in relation to the question of a DMC. However, the Defendant was certainly making it plain that it had every intention of completing in accordance with the Provisional Agreement. 64. In the circumstances, bearing in mind the parties' mutual duty of co-operation, the Plaintiff was entitled to call for a reasonable extension of the time for completion so that the mess might be sorted out. I am satisfied by the evidence of the Defendant's solicitors that, if asked, they would have agreed to an extension of time. 65. Instead of asking for an extension of time, as a party who wanted to complete the purchase might have been expected to do, the Plaintiff by her solicitors chose to treat the Defendant's conduct as repudiation. The Defendant was trying to put pressure upon the Plaintiff because it suspected that the Plaintiff had no intention of completing the purchase due to lack of finance and was looking for a way out. The extension of the completion date had been granted at the Plaintiff's request, the ground advanced for that request being that funds had not been arranged for. The Defence were unable to put to the Plaintiff the allegation that she could not raise the money for the purchase because, unusually in this type of case, she chose not to give evidence. However, her solicitor told the court that he had no idea what arrangements, if any, the Plaintiff had made to finance the purchase. 66. As to the allegation that the Defendant failed to show a good title, the Defendant did, though at a late stage, come up with sufficient answers to the questions raised and, in my judgment, it should have been apparent at once that they were sufficient. 67. This is not a case where a vendor purports to treat a purchaser's delay in completing as a repudiation in circumstances where the delay was caused by the vendor's conduct. Here the purchaser chose to indicate that she was not going to complete and the vendor accepted her repudiation. Whilst it is true that a failure to give replies to requisitions within a reasonable time or the giving of unsatisfactory replies may constitute grounds for rescission, I do not find, in the light of the facts of this particular case, that the Defendant's conduct evinced an intention not to be bound by the contract. The lateness of reply stemmed from a mutual misunderstanding between solicitors concerning the DMC. 68. The stumbling block was the question whether or not the DMC subsisted. 69. As I have said, in that regard the Plaintiff was entitled to ask for and to receive an extension of time to consider the new situation but chose not to ask. Instead she chose wrongly to rescind the Provisional Agreement by purporting to accept the alleged repudiation by the Defendant. Her various claims must therefore fail and on her claims there will be judgment for the Defendant. 70. I now turn to the Defendant's counterclaim. Since the Plaintiff wrongfully rescinded the Provisional Agreement, the Defendant is entitled to a declaration that it is entitled to forfeit the sum paid as a deposit, i.e. the "Temporary Deposit" of $200,000. There will be a declaration that by reason of wrongful repudiation of the agreement by the Plaintiff, the Defendant is relieved of all liability for the performance of its obligations thereunder. 71. As to the $198,000 sent later, it was sent on terms, which were accepted by default, that it was to be held by the Defendant's solicitors as stakeholders. It is not in the Defendant's possession and cannot be forfeited. The money has been paid into court pursuant to an order in interpleader proceedings. 72. There will be judgment for the Defendant for damages for breach of contract, to be assessed. There will be an order nisi for interest thereon from the date of the issue of the writ until judgment at 10% per annum. 73. There will be an order nisi for the Defendant's costs of the proceedings to be taxed, if not agreed, and paid by the Plaintiff. 74. There will be liberty to apply.
Representation: Ms. Cissy Lam, inst'd by Joseph P.W. Tang, Solicitors, for Plaintiff Mr. E.C. Mumford, QC & Mr. C.Y. Li, inst'd by Norman M.K. Yeung & Co. for Defendant |