Tang Kwong Wing, Alan and Others v. Mr. Felix Lo Por Kit

HCA007400/1983

IN THE HIGH COURT OF JUSTICE

BETWEEN

Coram: Hon. Mantell, J.

Date: 15th September, 1983.

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JUDGMENT

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1. On 12th September 1983, I gave interlocutory judgment for the plaintiffs under Order 14 rule 3. I ordered that damages should be assessed by a Master and I gave directions as to the basis upon which such assessment should be made. I reserved my reasons which now follow.

2. The plaintiffs are the shareholders of a property holding company called Tagulla Investments Limited. The company's only asset is a piece of land in the New Territories. By an agreement dated 28th August 1981, the defendant agreed to buy the plaintiffs' shares for a total price of HK$15,000,000, and so, in effect, to acquire the company and its one asset. The defendant's intention was to develop the land by building two detached houses. He paid a deposit of HK$500,000. The balance was payable after completion. However, the sale and purchase of the shares was conditional upon the plaintiffs procuring from Secretary for New Territories an approval in principle for the erection of the two houses. The plaintiffs' case was that approval had been duly obtained and notice to complete duly given but that the defendant has failed to pay the balance of the agreed purchase price. In showing cause why judgment should not be entered and in seeking unconditional leave to defend, the defendant has maintained that there is a triable issue on the following matters:-

3. Although issues of fact between the parties did appear from the evidence, none was material and in any event in reaching my decision I assumed each such conflict to be resolved in favour of the defendant. Therefore, what I had to consider were matters of construction arising from uncontested or assumed facts and it was agreed by counsel for both sides following the decision of the English Court of Appeal in European Asian Bank AG v. Punjab and Sind Bank, ⁽¹⁾ that I should, if necessary, decide the case as presented to me in these proceedings on its merits. In the circumstances, it has not been necessary to consider how such a course might affect an unsuccessful plaintiff in the substantive action.

4. The relevant Clauses of the agreement are as follows:

5. Following the making of the agreement, negotiations were entered into between solicitors acting for the plaintiffs and the defendant and the Secretary for New Territories. That solicitors should act for both sides in a matter of this kind is almost always undesirable and in this case, it was particularly so. But no point is taken by the defendant that the solicitors in question showed bad faith nor has the fact in itself been put forward as any ground of defence. The correspondence led eventually to the Secretary for New Territories writing a letter to the solicitors dated 28th December 1981. The body of the letter reads as follows:-

Mr. Huggins submitted that the letter in itself satisfied the condition precedent to the agreement, in that it amounted to an approval in principle. He contends, I think rightly and Mr. Chan did not demur, that the words "cannot, at this stage, be considered as binding on Government" by virtue of Clause 16 do not subtract from its force. Mr. Chan says that it does not amount to approval in principle because in the first place it is expressed to be purely tentative and subject to a final expression of view from interested bodies and secondly, because it introduces a further condition of approval namely that the access road must be brought up to Building Regulation standards. I agree with the first contention but not the second. It seems to me that nothing is taken away from an expression of approval in principle by an insistence that Building Regulation standards be met. Correspondence with the Secretary for New Territories continued. On 25th February 1982, the solicitors involved wrote to the defendant purporting to give notice to extend the time for completion in accordance with Clause 16 of the agreement. In the same letter it was asserted that the correspondence up to that date had resulted in the obtaining of approval in principle and the letter was expressed to be a notice to complete under the agreement. If nothing else, that letter alone demonstrates the most unsatisfactory position in which the solicitors found themselves through acting for both sides. Mr. Chan argued that the letter was not a sufficient notice within the meaning of Clause 16 and was ineffective to extend the period for completion. The basis for that submission was that the notice set no time limit for the extension and being indeterminate was bad. Mr. Chan says that although Clause 16 does not itself set a limit for the length of any such extension, it must be read as meaning an extension for a reasonable time and in the circumstances of this case a reasonable extension would be no more than six months. I am inclined to accept his reading of Clause 16 but I do not think that in the result, the notice was bad. The notice itself must be read as meaning that the period for completion is to be extended for a reasonable time. In other words, the notice is not bad unless it purports to go outside the terms of Clause 16 which, in my judgment, it does not.

6. Following the letter to extend, there was further correspondence between the solicitors and the Secretary for New Territories. Eventually, the Secretary for New Territories wrote the crucial letter of 18th March 1982 which I find to have been within the period by which the time for completion had been extended. In essence, it gives approval on the basis of certain compromise suggestions put forward by the solicitors. Taken with the proceeding correspondence and in particular the letter of 28th December 1981, I find that it constitutes the approval in principle contemplated by the parties in their agreement. The fact that it continues to make compliance with the Building Regulations a condition of approval did not, in my judgment, affect its quality in March 1982 any more than in December 1981. It is common ground that after the receipt of that letter on the 23rd and 24th of March 1982, letters were sent by the solicitors to the defendant enclosing the letter of 18th March 1982 in the first instance and in the second giving notice to complete under the terms of the agreement. It is also common ground that apart from making further payments totalling HK$2,000,000 and issuing cheques for further sums which were dishonoured upon presentation, the defendant has failed to pay the balance of the purchase price of the shares or to complete the transaction. Nevertheless, Mr. Chan has submitted that even on a finding that the necessary approval in principle had been obtained in time, the agreement is not binding upon the parties. He argued that the cost of bringing the access road up to the required standard was a very substantial one and, therefore, that the question of who was to pay for it of fundamental importance to the parties. Further he contended that because the agreement was silent on the question, there was such a lacuna as to result in the agreement having no binding effect. He caimed support from the fact that in Clause 12, express provision was made for the cost of obtaining approval to be borne by the plaintiffs. In the ordinary way, the cost of bringing the access road up to the required standard and the cost of obtaining approval would he borne by a purchaser and it would be unnecessary for the agreement for sale to make any reference to the matter. The fact that the usual position was explicitly reversed with regard to the cost of obtaining approval did not, in my judgment, make it incumbent upon the parties to deal expressly with the question of the access road. In my judgment, there is no lacuna and the parties are bound by the agreement.

(1)     [1983] 2 All E.R. CA 508

Representation:

A. Huggins (J.S.M.) for Plaintiffs.

Warren Chan (Deacons) for Defendant.