Lam Wa Leung v. So Chung Shek

HCA003818/1982

Construction of a "lum see" agreement in writing for the sale and purchase of premises. Held to be clear and unambiguous and of immediate binding effect.

Allegation that the "lum see" agreement was conditional upon a third party's approval by virtue of a collateral oral agreement not proved.

Later telephone conversation between the parties held to amount to a mutual release of rights.

Where after the Court has adjourned to consider judgment, Counsel for one of the parties seeks leave to make a further submission, he should indicate his wish to make the application without apprising the Court of the substance of the submission itself.

BETWEEN

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Coram: Hon. Mantell J.

Date: 16th May, 1983.

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JUDGMENT

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1. I adjourned the hearing of this action on 5th May in order to consider my judgment and in the intervening period, solicitors for the plaintiff wrote to me apparently with the approval and on the advice of counsel indicating that it was counsel's intention to apply to me today for leave to make a further submission. In the event the application was made with my leave and I have given counsel for the defendant an opportunity of dealing with it. I raise the matter now in the course of my judgment not to embarrass anyone or to criticize anyone but simply so that it will be made known what I consider to be the correct procedure if a situation such as this arises. If the solicitors for the plaintiff and counsel for the plaintiff had done no more than I have indicated up to now then they would, in my view, have acted perfectly properly and it would have been a matter for my discretion as to whether or not I gave leave for a further submission to be made. But, no doubt, seeking to help me in advance, there was included in the letter an outline of the submission which was to be made. So it came about that whether or not I was disposed to hear it, the submission was brought to my attention at a time when I was already engaged in considering my judgment. That should not happen. I accept entirely that it was not done with the intention of taking an advantage over the other side but I hope that the practice which I have indicated as the proper one will be observed in future.

2. The plaintiff is the registered owner of approximately 10,000 sq.ft of floor space on the 3rd floor of the Fortune Factory Building in Lee Chung Street, Chaiwan. From those premises together with his son and co-director, he manages the business of Taisun Magnetics Limited which manufactures, as I understand it, components for the audio electrical industry. In mid August 1981, the plaintiff wished to move his business to the Quarry Bay area of Hong Kong for no other reason disclosed to me than to be near his home. He advertised the premises in Lee Chung Street. There were a number of telephone enquires and then on 20th August, there was a phone call from the defendant who expressed interest at the quoted price of HK$480 per square foot and arranged to come over to inspect that very same day. Later that day, he did arrive at the premises. He had with him a representative of the National Commercial Bank, a Mr. Kwok Shek Hoi. An inspection took place. There was a discussion in the office at which the plaintiff, his son, the defendant and Mr. Kwok were present and took part. In the end, the plaintiff and the defendant put their names to a document in Chinese which is at page 2 of the Agreed Bundle. The English translation is at page 1.

3. It is contended for the plaintiff that the document records the terms of a binding agreement between the plaintiff and the defendant for the sale of the premises to the defendant at a price of $3,284,400.00.

4. Two days after the meeting, the defendant telephoned the plaintiff to say that he did not intend to proceed with the purchase. There is a conflict on the evidence as to whether in the days following there was one telephone conversation between the plaintiff's son and the defendant or there were several. There is also conflict as to what was said. At all events, it is not contested that the plaintiff re-advertised the premises but was unsuccessful in selling to anyone else and on 16th March 1982, solicitors for the plaintiff wrote to the defendant in terms which anticipate the present action for specific performance or damages.

5. The defendant says that the so called written agreement is on its true construction only a tentative or conditional agreement. If that is not right, then it is the defendant's case that it is at least on its face unclear as to whether it was intended to have immediate binding effect and that parol is properly admitted to show that it was conditional only. Thirdly, if the document on its face discloses an unambiguous and immediately binding agreement of sale then it is subject to a collateral oral agreement between the parties that it was to be conditional on the defendant's father's approval. For the purpose of Mr. Cheung's submission it matters not whether there is said to be an overriding oral collateral agreement or that the agreement is partly written and partly oral or even that it would be inequitable to permit the plaintiff to rely on the written agreement. Next it is contended for the defendant that if it is concluded that the agreement was unconditional, there was a mutual release of obligations in the defendant's telephone conversation with the plaintiff and the plaintiff's son. Finally, Mr. Cheung says that if unsuccessful in every submission up to this point, the plaintiff ought to be denied the remedy of specific performance because of the six to seven months interval between the defendant's repudiation and the sending of the solicitors' letter.

6. The Chinese characters which head the document read if romanized "Lum See Hip Yee".  It is agreed the "Hip Yee" stands for agreement. "Lum See" is officially translated as "temporary". An alternative translation could be "provisional". Now although the word "provisional" is sometimes in English usage given the meaning "tentative" or "conditional", in conjunction with the word agreement, it more usually means an agreement which is to subsist until the happening of a later event, for example, its replacement by an agreement drawn in formal terms as in Branca v. Cobarro.⁽¹⁾ I was also referred to a decision of Mr. Justice Macdougall. That is the case of Lam Mean Soon v. Luk Full Enterprises Limited,⁽²⁾ where he had to construe an agreement which in its English version spoke of a provisional order and in translation of the Chinese version of the order being of a temporary nature. He construed the word "provisional" as not meaning "tentative" or "conditional" but the context of that case was, no doubt, very different to the present. In this case, it is conceded that apart from the words "Lum See" themselves there is nothing which could lead to the conclusion that this agreement on its face was intended to have other than immediate binding effect. It is also conceded to be a sufficient memorandum in writing of an agreement which is required to be so evidenced.

7. When I asked the defendant what he understood by the words "Lum See", he said that he understood them to mean "temporary" or "intended to be for a short period of time". Later on, he said that the word "Lum" has the connotation of shortness in Chinese and "See" has the connotation of time. In my judgment, the document on its face is not to be construed as a tentative or conditional agreement nor is it capable of being construed as such. There being no ambiguity parol is not admissible to explain the intention of the parties which appears clearly from the agreement itself as being to enter into contractual relations of temporary duration but immediate binding effect.

8. I turn now to the question of the oral collateral agreement which it is submitted exists and operates in the defendant's favour.  Mr. Mok concedes for the plaintiff that the proposition of law succinctly stated by the learned editor of the 10th edition of Cheshire and Fifoot e at page 108 is sound.

"There is no reason why oral evidence should not be offered to show that, while on its face the document purports to record a valid and immediately enforceable contract, it had been previously agreed to suspend its operation until the occurrence of some event, such as the approval of a third party, and that this event had not yet taken place. The effect of such evidence is not to 'add to, vary or contradict the terms of a written contract, but to make it clear that no contract has vet become effective."

9. The rationale of the proposition has not always been expressed in precisely the same way.   Sometimes it is said that it is a oral collateral agreement,⁽³⁾ sometimes a warranty overriding the written agreement. Sometimes it is said that it gives rise to a contract which has both written and oral terms.  Be that as it may, it is clear in my judgment and it is not contested by Mr. Mok that if the parties really intended the written agreement only to become binding upon the defendant's father giving his approval and that was understood between them at the time they signed the written agreement, the plaintiff's claim to enforce the contract or for damages for its breach must be defeated. But the presumption that the parties intended the consequences plainly stated in the written document :stands until overturned by other evidence. The burden rests upon the defendant.

10. On this issue, there is. a stark conflict. Both the plaintiff and his son insist that the defendant purported to negotiate in his own right. There was no question of the bargain once struck being subject to any condition let alone the approval of the defendant's father. Mention was made of the defendant's father but only in the context of money being remitted. The defendant says that throughout he made it plain that he was his father's agent and that he could not himself enter into a binding agreement or that he could do so only with his father's approval. He said that the purpose of the two days moratorium was not for the purpose of. getting funds together. It was, he said, for the purpose of getting his father's approval. In his version, he is supported by his banker, Mr. Kwok. Now despite the contradiction of the defendant's version provided by the document, there are reasons which make it plausible. The evidence of Mr. Kwok may be attacked, in that he only really recalled the circumstance as he frankly said after being reminded of them by the defendant himself but he is the nearest to an independent witness that we have in this action, certainly on this issue. Also I have to ask myself whether a sensible business man advised by his banker would unnecessarily commit himself to such a large purchase before completing his financial arrangements. The one reason why he might do so was provided by the defendant who told me that the plaintiff put pressure on him by saying that that was another purchaser waiting in the wings. If that was said it was not true, but is the sort of thing which might persuade a prospective purchaser to commit himself. But whereas of the two versions I lean towards the defendant's, I am not able to say that I am satisfied on a balance of probabilities that it is the true one. The burden has not been discharged and the written agreement prevails.

11. The defendant says that there were only two telephone conversations after the 20th August, one with the plaintiff himself on the 22nd, the other with his son some days afterwards. He says that he told the plaintiff in the first conversation and the son in the second that he was not going to buy or that more accurately that his father was not going to buy. He says that in the first of the two telephone conversations, the plaintiff said, in effect, "in view of that I have to sell to someone else". The son in the second of the two conversations according to the defendant wondered whether a little later on it might be possible for the sale and purchase to proceed. But when told that it would not be, the son said that he must sell to someone else.

12. The defendant's case is that those conversations amount to a mutual release of the parties rights and obligations under the written agreement which I have already found to be, up to this time at all events, an enforceable one. Before coming to whether the words themselves would amount to a release, I must first decide whether or not they were said: because it is not contended that anything else was said capable of amounting to a release. And although it has been submitted that the mere passage of time between the defendant's repudiation of the contract at the end of August and the writing of the solicitors' letter on 16th March 1982, might in itself amount to an implied release, I hold that the failure by itself to pursue a legal remedy is not so capable of being regarded, certainly not on the facts as I understand them in this case.

13. The plaintiff says that being's poor conversationalist he said pretty well nothing when told by the defendant that the deal was off. Certainly he does not claim that he said anything to suggest that he was holding the defendant to the bargain. The son says that there were several phone calls extending over several days or even weeks and that in the course of those several telephone conversations, he made it absolutely plain that he was not releasing the defendant. The plaintiff himself seemed to be unaware of the fact that there had been a number of phone calls. When he gave his evidence, he certainly appeared to be under the impression that having asked his son to speak to the defendant, there was a telephone conversation and one only. On the son's version, there must have been conversations after 26th August by which time the matter had been referred to solicitors and instructions had been given, according to the son, for legal proceedings or legal action to be commenced. The son was not specific and he gave me to understand, and I accept, that he did not know at that time whether what was involved was the commencement of an action or perhaps only the sending of a letter.

14. The first matter I have to decide is whether or not there was just the one conversation between the defendant and the plaintiff's son or several and I conclude that there was only the one, which means that I reject the evidence of the plaintiff's son on that and I do not think that that evidence could have been given in error. it seems to me unlikely that the plaintiff's son could be mistaken as to whether there was just the one conversation or several. Now, I must be careful not to be over much influenced by that finding of fact when I come to decide as I must, what it was that was said in the one telephone conversation; but I do accept the defendant's account. I am sure it is quite impossible for him, after this interval of time, to remember precisely the words which were used though I have already referred to my note of his evidence of what was said. I conclude partly that the defendant's version is the more reliable simply on my assessment of the competing witnesses in the witness box but not on that alone. The fact that for a period of six or seven months after the telephone conversation, no letter was sent is consistent with the conversation which the defendant recalls and in my judgment inconsistent with the version put forward by the plaintiff's son. The plaintiff's son told me that throughout the period when the telephone conversations were taking place and then throughout the months that followed, he was repeatedly giving instructions to his solicitor to do something about this breach of contract and they did nothing. There was an opportunity for the plaintiff's solicitor to be called to say whether that was right, or at any rate, the application to call him could have been made. That never was done in the event. I think it inherently, unlikely that a firm, of solicitors would receive instructions repeatedly to the effect that the plaintiff wanted to pursue, his legal remedy without doing something about it and it is inconceivable, I think, that given the situation spoken to by the plaintiff's son that the plaintiff's solicitor would not have sent a letter at the time of these telephone conversations or soon afterwards preserving the position, even though it may have been thought tactically desirable to try to sell the property to someone else. There was absolutely no reason why the plaintiff through solicitors should not write saying "Well, we are going to try to sell the property to someone else but do not think for one minute that you are being released from your bargain." That was not done. So, I am satisfied on the balance of probabilities that the defendant's version is the right one. The burden, of course, does rest upon the defendant. I remind myself of that because the contract of release is asserted by him and it is for him to satisfy me to the degree I have stated that the words were said.

15. The next question, however, is whether or not those words in the circumstances of this case do amount to a release. I have no doubt that they are capable of so doing. The mere fact that the party to an agreement which is being mutually dispensed with does not spell out in terms that that is what is happening is not, of course, fatal. It is quite clear that the defendant himself used the words which for his part were capable of forming one side of a contract of release because he indicated in the plainest terms that he was not proceeding with the contract, and, of course, by implication that he was releasing the plaintiff from his side of the bargain.  The words attributed to the plaintiff's son who, on any view, was the agent of his father, are "Well I must sell to someone else," without qualification. Mr. Mok contends that the fact that there was no qualification means that it was not being said that there was a release.  But I do not so construe those words in the context of this case bearing in mind that there then followed an interval of several months in which on the face of it nothing happened. What I have to look to is the intention of the parties at the time. Now, it may be said why would the plaintiff or the plaintiff's son be prepared in the circumstances to release the other contracting party bearing in mind that as we all know the property market was about to take a slide. But the fact of the matter is on the evidence that at that time, August 1981, that was not really apparent. It so happens that with the benefit of hindsight, one can approximately date the start of the recent decline in property values from about then; but it would not be obvious at that time. Nor would the plaintiff think that he had achieved a particularly good bargain in that he had been brought down from his asking price of $480 a square foot to something just over $420 a square foot. Also, if it was said that at the first meeting on the 20th that there was another buyer waiting in the wings, although not true, it would be very natural for the plaintiff and his son to say they would sell to someone else when told that the real purchaser was not proceeding.

16. So, I am satisfied on the balance of probabilities that in using the words which I find were used, the plaintiff's son was at that time intending to release the other party from the bargain and consequently, I do find that in a telephone conversation at about the end of August 1981, there was a mutual release of rights and obligations under the contract. Arid it was only later, I believe, when the plaintiff and his son came to realise that the market was slipping away and that they were in difficulties in selling to someone else that the attempt was made by the letter of 16th March 1982 to resurrect what had been formerly, in my judgment, a binding contract. In my judgment, therefore, the plaintiff's claim fails. It is not really necessary for me to consider what would have been the appropriate remedy had it succeeded. It may not help anyone and it may be not only unnecessary but quite irrelevant toy judgment but I will say that had my decision been otherwise, notwithstanding the authority which was cited to me of Lazard Brothers & Co. Ltd. v. Fairfield Properties Co. (Mayfair) Ltd.,⁽⁴⁾ and the judgment of the Vice Chancellor in that case, I would have concluded that specific performance would not lie in the circumstances of this case. But I think that I would have acceded to the submission which was made most recently to me by Mr. Mok as to fixing the date at which the property ought to be valued for the purpose of assessing damages.

(1)   [1947] 1 K.B. Court of Appeal p.854

(2)   [1980] H.K.L.R. p.480

(3)    City & Westminster Properties v. Mudd (1959) Ch. 129

(4)    The Solicitors' Journal 1977 Vol.121 p.793

NOT RECORDED BUT APPEARING FROM CLERK'S NOTES:-

Judgement for Defendant with costs

Representation:

Mr. Y.C. Mok (J.S.M.) for Plaintiff

Mr. K. John Cheung (S.Y. Chu & Co.) for Defendant