Forda Investors Ltd v. U.O.B. Finance (HK) Ltd and Another

HCMP000783/1977

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

MISCELLANEOUS PROCEEDINGS NO. 783 OF 1977

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Coram: Cons, J.

Date of Judgment: 23rd May, 1978.

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JUDGMENT

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1. I gave my decision in this matter immediately at the conclusion of the hearing before me. I have been asked to reduce that decision to writing and I do so now accordingly.

2. This is an application under the Partition Ordinance, Cap. 352. It concerns the Advance Building, which is a multi-storied building in Des Voeux Road Central, the result of a redevelopment scheme undertaken by the plaintiff and another company by the name of Tian Teck Investment Holdings Co. Ltd. During the course of the redevelopment Tian Teck sold its interest to the 1st defendant. The 2nd defendant, who is the Attorney General, has been joined by reason of section 3(3) of the Ordinance. He is interested only in a very small amount of Crown rent due and has taken no active part in the proceedings. The building is subject to a mortgage but I am told that the mortgagee concurs in the application.

3. On the 12th April 1976 the plaintiff and Tian Deck entered into what has been referred to for convenience as the "Chinese Agreement". It provides for the apportioning of most of the floors of the building between them. It does not include the basement, ground or mezzanine floors, nor the 21st floor with its roof above. This agreement was "ratified" on the 30th June 1977, when it was signed by Tian Teck, the plaintiff and the 1st defendant.

4. The first question that I have to decide is whether the Chinese Agreement is a valid agreement from the legal point of view. If so, then in my opinion, the court should give effect to it in these proceedings. In that case I would only be concerned with five floors. It is suggested that even the parties themselves could not and did not at any stage consider the agreement to be binding. The argument is based on the inclusion in the agreement of the words "for their exclusive use" and involved a lengthy discussion of their legal implication. With respect I do not think that this was so. The parties are not lawyers and I have little doubt that they saw no difficulties inherent in the words that they had used. It would be only later, when lawyers were consulted, that their shortcomings would have been revealed. Be that as it may, those shortcomings are real and in my view decisive. The Chinese Agreement is simply not sufficiently specific. It leaves too many matters unresolved. That is apparent when one studies the draft Deed of Mutual Covenant which was prepared by solicitors to give effect to the agreement. In particular more than one matter of financial import remains to be agreed. In my judgment the agreement is one of those illusory contracts referred to by Lord Wright in Scammell v. Ouston⁽¹⁾. It is an agreement to make an agreement. As such it is not enforceable.

5. It is suggested then that the court will make that second agreement for the parties. That cannot be. The court will in some instances complete gaps left by parties in an agreement already made. But it will not make for the parties an agreement which for one reason or another the parties do not make for themselves. In the event I am required to deal with the whole building.

6. It is obvious in the present circumstances that a partition of the building would not be beneficial to the parties. I propose, therefore, to make an order of sale. The second question is how the building should be sold. The 1st defendant wishes it to be sold as one whole building, the plaintiff prefers to sell floor by floor; in each case the sale would be subject to existing lettings and tenancies.

7. The reports of all surveyors indicate that sale floor by floor would be more profitable financially. Some point to the difficulties that might follow in the future. However these would not affect either of the parties before me as such. A more immediate defect is that an effective floor by floor sale might take up to as long as eighteen months. However, the plaintiff has taken care of that by undertaking to take up immediately any floor left unsold at the first auction and to do so at a price calculated to produce a gross return for the building as a whole comfortably in excess of the value suggested by the 1st defendant's undertaking.

8. On the other hand I have to consider two practical matters. The first is that before there could be a sale floor by floor some arrangement would have to be made for the subsequent management and administration of the building. I am told that it is usually done in Hong Kong by means of a Deed of Mutual Covenant prepared in advance by the seller. It is clear that in the present circumstances the parties are unlikely to agree upon the terms of such a deed. The final responsibility will therefore fall upon this court. That would present no difficulty if the document were purely legal in its character. The court has its own knowledge and experience and can, if necessary, instruct counsel independently. But a deed of this kind requires more than legal judgment. It requires a considerable amount of business judgment and a court has no way, even if it were so minded, to supplement that defect. Secondly, although it seems too simple to be true, the sale of the building as a whole ought to satisfy both parties. Each will have liberty to bid at the auction; if the plaintiff has confidence in its convictions it may purchase the building as a whole and subsequently resell floor by floor. In addition the extra profit will be its alone.

9. In all the circumstances I am of the opinion that the building should be sold as a whole.

(The proceedings were then adjourned for counsel to submit an agreed draft order or for further argument as to its most suitable form.)

Representation:

Robert Wei (P.H. Sin & Co.) for the plaintiff.

Henry Litton, Q.C. and Denis Chang (Deacons) for 1st defendant.

Miss Ho-Shing, Crown Counsel, for 2nd defendant.

(1) 1941A.C. 251 at 268