Tang Wai-chee v. Aik San Realty Ltd

HCA003425/1978

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Coram: Mr. Commissioner Penlington in Court

Date of Judgment: 31 July 1979

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JUDGMENT

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1. In this action the plaintiff seeks an order for specific performance of a contract which she entered into with the defendant company on the 15th of May 1978 for the purchase of flat C, second floor, and car-park spaces 67, 67A and 70, 70A, of a block of flats being built by the defendant company known as Ewan Court. In the alternative she seeks a declaration that the sum of $119,190 which she paid in part payment of the purchase price should be returned to her.

2. At the hearing of the action the plaintiff's counsel, Mr. Faulkner, instructed by C.P. Lin & Co. informed me that, apart from seeking an adjournment of the action, his lay client had, that morning, withdrawn her instructions to her solicitors and himself. He gave no reasons for that action. He asked that the matter be adjourned sine die or restored to the running list to be heard after the vacation so as to enable the plaintiff to instruct new solicitors and counsel. He said his client had a history of ill-health and would not be able to argue the legal points at issue. Mr. Tang, for the defendant, opposed the application on the grounds that the defendant had not been able to deal with the flat for a year and, while its value might go up, it could well go down and it was unfair to his client company that there should be further delay. I accepted that argument and refused the plaintiff's application for an adjournment.

3. The matter then proceeded, the plaintiff appearing in person. I may say that while she was not able to argue the legal points involved in this matter, she did not show any sign of illness during the course of giving her evidence or making submissions and indeed I formed the impression that she was a shrewd and quick-witted woman who had had considerable experience in the hurly-burly of the volatile Hong Kong property market.

4. It was not in dispute that on the 15th May 1978 the plaintiff entered into an agreement with the defendant company for the purchase of flat C on the second floor of Ewan Court, Kennedy Road, Hong Kong, the agreement being prepared by the defendant company's solicitors. The block was still under construction. This agreement was itself in pursuance of another document called "instructions for sale" dated the 28th of April 1978 which the plaintiff had entered into with the defendant company through one of its salesmen, Mr. Tse. It states that the purchaser has paid a deposit of $3,000 and that the total purchase price of the flat is $794,600. It further provides that should the purchaser default in paying further instalments the vendor may charge interest on any sums owing or forfeit the deposit as liquidated damages and also that the defendant company can rescind the agreement at any time before a formal agreement is signed. It is therefore a rather one-sided document. The instructions for sale also states that a first instalment is to be paid to Messrs. Henry C.K. Tung and Company, the defendant company's solicitors, on or before the 3rd of May though it was not apparently in fact paid until the date of the formal agreement, namely the 15th May. I do not know the reason for this delay but it does not seem material. The amount payable in accordance with the instructions for sale on the signing of the agreement, namely $119,190, was paid by the plaintiff as provided and a receipt for that sum was endorsed at the end of the agreement and signed by the defendant company. It is there described as a deposit and incorporates the $3,000 already paid in April. The agreement also provides that a further instalment of $79,460 was to be paid within seven days of the occupation permit being issued.

5. The plaintiff said in evidence that in early July Mr. Tse, the salesman, spoke to her and told her that the occupation permit was ready and asked when would she complete the purchase. She said she would do so in about two weeks' time and asked him what was the dead-line, to which Tse said he did not know but it should be done as soon as possible or she would be charged interest. She said she then made inquiries about mortgage loans and approached the Hang Seng Bank. There was a typhoon at the end of July and when the storm had passed she rang Mr. Tse to see about completing the sale only to be told that she was too late. This was, according to her, on the 31st of July. The plaintiff said she had received no notices or letters of any sort from the defendant company or its solicitors in the meantime but she did receive a letter dated 31st of July which refers to a notice dated 6th of July. She said that she still was living at the address stated in the agreement, namely 30A, State II, Broadway, Mei Foo Sun Chuen, Kowloon, though she did sometimes go and stay with her sister for a few days and nobody would be in the flat during the day. In cross-examination however said her mother, her sister and her sister's children might be there. I was satisfied that she changed her evidence on this point when told that a postman had left a card at the address asking her to call and collect a registered letter and she said a child might have found the card and lost it. She said that on the 31st of July she was willing and able to complete the purchase. I suggested it might be of assistance if she was to bring to Court some evidence of that ability, such as a bank statement, but she later said all her records had been lost when she subsequently moved her address. She could not produce any letter or other document showing that the Hang Seng Bank was willing to lend her the balance of the purchase price on mortgage though the agreement of 15th May states that the vendor will itself lend the balance after all instalments have been paid and there was no need for her to delay for that reason.

6. The plaintiff said that in fact the reason for her delay in making the next payment was because she was ill during the whole of July and could not attend to her affairs. She did not however tell her sister about the purchase but a friend Li Shuk-wan was aware of it. She did not ask Li to look after her interests in the matter.

7. There are two medical chits from Dr. Peter Tong included in her bundle of documents. The first says she had an upper respiratory infection from the 19th to 21st of July, which does not support her evidence of being very ill during the whole of July, and the second refers to a period from August 19th which does not seem relevant at all. She also called a friend, Miss Yuen Shuk-may, to give evidence about her health at the time but she was very vague indeed, apart from saying that the plaintiff did go to various hospitals. From the evidence I was satisfied that the plaintiff's delay in completing the sale was not due to ill health.

8. The plaintiff denied that, unlike flat D on the 6th floor, which she bought in December 1971, she bought flat C for resale and was a speculator. She did however, admit that she advertised two of the car-park spaces for sale and "if required", would have also sold flat C. I was quite satisfied that the plaintiff did in fact buy flat C with the intention of re-selling it as soon as she could and, if at all possible, before she had to pay the final instalment, the stamp duty and legal costs.

9. The agreement dated 15th of May provided in clause 10 that time was in every respect to be of the essence of the contract and in clause 11 that upon failure of the purchaser to pay any instalment in full on the due date any money already paid should be forfeited to the vendor who could then resell the flat. Any deficiency would be to the purchaser's account but the vendor was entitled to keep any excess on re-sale. The clause however, also provided that 14 days before any such power could be exercised the vendor shall give notice to the purchaser calling on him to complete the sale. Evidence of the serving of such a notice was given by Miss Karen Kwok who is a clerk employed by the plaintiff's solicitors. She said she posted a letter to the plaintiff by registered post on the 7th of July 1978 and she produced the envelope. The letter was the original of the copy No. 6 in the plaintiff's list of documents. In it the defendant's solicitors call on the plaintiff to complete the purchase and give her 21 days from the date of the letter to do so. Mr. Yung Kee, a postman, was called and he said that in July he went to the address given in the letter, the same address where he had previously tried to deliver another letter addressed to the plaintiff, and when he pressed the bell somebody came to the door but did not open it. He told that person he had a letter for Madame Tang Wai Chee. He was then told that she had moved. He took the letter back, marked "moved, address unknown" and returned it to the sender. He said he could hear both male and female voices within the flat. The plaintiff agreed that she did receive an earlier registered letter from the defendant's solicitors, D.5, in relation to flat D, 6th floor which was in compliance with clause 11 of the agreement relating to that flat which is identical to clause 11 of the agreement now under consideration.

10. I accept the evidence of Mr. Yung Kee, the postman that that he attempted to deliver both the earlier letter from the company and the more important notice dated the 6th of July, to the plaintiff at her address, that there was nobody there on the first occasion when he left a card asking the plaintiff to call at the post office to collect a registered letter and that on the second occasion he was told that the plaintiff had moved. That notice was accordingly returned to the sender, the defendant's solicitors. The defendant must then have known that the plaintiff had not in fact received the notice of the 6th July. The question is whether it could nevertheless be said to have been served.

11. Clause 18 of the agreement states that any notice required to be served on a party shall be left at that party's address as given in the agreement but goes on to say that a notice sent by registered post "shall be deemed to be given at the time when in due course of post it would be delivered at the address to which it was sent."

12. In T.O Supplies (London) Ltd. v. Jerry Creighton Ltd.⁽¹⁾ a writ was sent by registered post to the defendant company, the plaintiffs there relying on Section 437 of the Companies Act, 1948. That section simply says that a document may be served on a company by leaving it at or sending it by post to the registered office of the company. The letter was in fact not delivered and was eventually returned but in the meantime the plaintiff entered judgment by default. Some days afterwards the writ was received back from the Post Office but execution was allowed to proceed. It was held that the judgment was regular. That case was not referred to in A/S Cathrineholm v. Norequipment Trading Ltd.⁽²⁾ but the Court of Appeal there came to the same decision, overruling Thomas Bishop Ltd. v. Helmville Ltd.⁽³⁾ The position, then, is clear as regards a writ which is sent by post and not returned until after judgment has been entered by default. The court has power to subsequently set aside the judgment if satisfied that the writ was not in fact served but the entry of judgment is proper and cannot be set aside ex debito justitiae but only under Order 13.

13. Here however, the facts are somewhat different in that the letter must have been returned before the time limit for payment had expired. In Rex v. Westminster Unions Assessment Committee ex parte Woodward and Sons⁽⁴⁾ a statutory notice was sent by post but never delivered. Section 65 of the Valuation (Metropolis) Act 1869 provided that such notices may be served by post and shall be deemed to have been served when they would be received in the ordinary course of post. That provision is almost identical with clause 11 of the agreement here. It was held in that case that the words "shall be deemed to have been served and received" meant that good service was affected even when in fact the notice was never so received. Viscount Reading at page 838, however, says "In this opinion I am fortified by the whole scheme of the Act. It is most important for the local government of the country that assessments should be made by a properly constituted committee whose duties and obligations should be defined by statute. We are not dealing with reciprocal rights and duties of individuals." That seems to indicate that the Chief Justice might have held otherwise in a case not involving a public statutory body. However he goes on to say at page 839 "If it should happen that a notice is not received the hardship, if any, must be borne by the individual. It is no greater than that which by the common law falls on one of two negotiating parties who have agreed to receive communications through the post. If a letter is posted its contents are taken to have been received, though in fact it has not reached the addressee." That dicta, though obita, seems to cover the question I have to decide.

14. There are several cases where the courts have considered the question of service by post of such documents as notices of intended prosecution for road traffic offences. See Hosien v. Goodall⁽⁵⁾, Moody v. Godstone Rural District Council⁽⁶⁾ and R. v. Appeal Committee of County of London Quarter Sessions⁽⁷⁾. In all those cases, however, the persons sending a document by post were relying in part on section 26 of the Interpretation Act 1889 which is the same as section 9 of the corresponding Hong Kong Ordinance. While this provision does "deem" a notice to be served in the course of post if such a method is authorized, it contains the vital words "until the contrary is proved". If therefore there is evidence that the notice was in fact not received it is not deemed to be served. Clause 11 of the agreement has no such words. The parties to the agreement must be taken to have considered its provisions and agreed that clause 18 should govern the question of the sending of notices and I consider that, notwithstanding that this is a matter between individuals, I should follow the rule in R. v. Westminster Unions Assessment Committee⁽⁴⁾ already referred to. In doing so I am in turn fortified by the circumstances of this case. This was the second flat in the same building which the plaintiff had bought and she must have been well aware of the provisions of the form of agreement. She had already received a notice concerning flat D which is identical to the notice of the 6th of July and on her own evidence she knew in early July that an occupation permit had been granted and the next instalment was due. She said she was told by Mr. Tse that if she did not pay up she would be charged interest but nothing was said about cancelling the contract. I do not believe her evidence on that point and I accept what Mr. Tse said i.e. that he told the plaintiff on the 23rd of June that the occupation permit was issued and that a few days before the final day for payment he told her that she must complete or her deposit would be forfeited. I am satisfied that the plaintiff was well aware of her obligations and chose to delay in the hope she would re-sell the flat at a profit and avoid further payment, as she had done with flat D. The occupation permit was produced by the defendant and is dated the 23rd of June.

15. I did consider the question of the form of the notice of 6th July. It sets out very clearly the relevant provision of the agreement but then instead of simply saying that the plaintiff had 14 days from the date of service of the notice to pay as is set out in the agreements, it gives her 21 days from the date of the notice. However, as the notice was was dispatched on the 7th of July I am satisfied that the plaintiff was given, if anything, more leeway that she was strictly entitled to and the form of the notice is sufficient. The notes to order 65/5 of the Supreme Court Practice state that if sent by first class mail service will be taken to have been effected the day after posting. On that basis the notice would be deemed to be served on the 8th of July and the 14 days allowed in clause 11 would expire on the 23rd. Under the terms of the notice it expired on the 27th. The plaintiff, according to her own evidence, took no action until the 31st.

16. The only other matter which did puzzle me was the reference in the letter of 25th August from the plaintiff's solicitors (No. 11 in the plaintiff's bundle) which refers to a request being made by them on the 24th of July from a copy of the notice. This would seem to indicate that the plaintiff had approached her solicitors on or before that date and therefore possibly before the time limit had expired. I think, however, that on the evidence that date must be an error and was meant to be the 24th of August.

17. I am therefore satisfied that after the 27th of July the defendant was entitled to consider the contract was void and pursuant to clause 11 they are entitled to re-sell the flat and retain the proceeds. The plaintiff's claim for specific performance fails and the defendant company is entitled to the declaration sought in paragraph 2 of its counter-claim.

18. The second question is whether the plaintiff is entitled to receive back the money she has paid.

19. The law is well established that if a money is paid as a deposit in order to secure the performance of a contract of sale, on default by the purchaser the vendor is entitled to retain that deposit, Howe v. Smith⁽⁸⁾, but moneys paid in part settlement of the purchase price are not to be so treated. Where money is paid both in part-payment and as a deposit, which is frequent, it is a question of fact in each case. In this case the money was paid before the occupation permit was available and the parties did not know when the contract would be completed. The money clearly was paid both as a deposit and in part-payment. It is described in the receipt at the end of the agreement as being a deposit and in the agreement itself as an instalment.

20. While it is a substantial deposit it must be looked at in the light of the Hong Kong real estate market where rises and falls in values are rapid and substantial as is shown clearly by the two agreements produced in this case for the purchase of the two identical flats. I am satisfied that, although it was also a part-payment, the money paid by the plaintiff was a deposit paid "in terrorem" to secure her performance of her contractual obligations and on default in such performance the defendant company was entitled to forfeit it, time having been made of the essence. This was what the parties had agreed to and the court should be reluctant to interfere with that clear agreement Universal Corporation v. Five Ways Properties Ltd.⁽⁹⁾

21. I did consider whether the initial payment of $3,000 made to the defendant company on signing the "instructions for sale" was the only deposit. That sum was incorporated into the $119,190 referred to in the agreement of the 15th May and it would be wholly unrealistic to believe that either of the parties intended that a deposit of $3,000 was sufficient to secure performance of a contract for nearly $800,000. I am satisfied that on signing the formal agreement both vendor and purchaser considered the payment of $119,190, including the $3,000 already paid, was a deposit to secure the completion of the sale, to be forfeited if the purchaser defaulted.

22. The defendant company is therefore entitled to retain the sum of $119,190 paid by the plaintiff as a deposit. The defendant is entitled to costs on the claim and counter-claim, to be taxed.

Representation:

Plaintiff in person.

Robert Tang (Henry C.K. Tung & Co.) for Defendant.

(1) 1952 1 K.B. 42.

(2) 1972 2 W.L.R. 1242.

(3) 1972 2 W.L.R. 149.

(4) 1917 1 K.B. 832.

(5) 1962 1 All E.R. 30.

(6) 1966 2 All E.R. 696

(7) 1956 1 Q.B. 682.

(8) 1884 27 Ch. 89.

(9) 1978 3 All E.R. 1131.