Woodhall Co Ltd v. Chinese Estates Ltd

Case No.HCMP 176/1975

Court

High Court CFI

Date—

Judge—

Case Document

100%Judiciary

HCMP000176/1975

IN THE SUPREME COURT OF HONG KONG

(ORIGINAL JURISDICTION)

MISCELLANEOUS PROCEEDINGS NO. 176 OF 1975

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IN THE MATTER OF an Agreement for Sale and Purchase of Inland Lot No. 2317 China Building dated the 21st June, 1974

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BETWEEN
	WOODHALL COMPANY LIMITED	Plaintiff
	and
	CHINESE ESTATES LIMITED	Defendant

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Coram: Huggins, J.

Date of Judgment: 19th September 1975.

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JUDGMENT

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1. The parties come before me for the construction of an Agreement of sale and purchase. The point in issue is a very short one and at first sight seems deceptively simple. I am indebted to counsel for the Plaintiff for a note of the material facts and a written outline of his argument, which have been of inestimable assistance.

2. The question which I have to answer relates to the date for payment of interest which, in the circumstances which have arisen, the vendor is obliged to pay to the purchaser. The Agreement provided for the payment of a deposit of 6/14ths of the purchase price by four instalments: 2/14ths were to be paid on the signing of the Agreement, namely 21st June 1974, 1/14th on 31st December 1974, 1/14th on 30th June 1975 and 2/14ths on 30th June 1976. The balance of 8/14ths was to be paid on completion of the sale and purchase, "namely on or before the 31st day of December 1976". However the Agreement made provision for an earlier date of completion at the option of the purchaser and also permitted the purchaser to make payment of one or more of the five instalments just indicated before the dates prescribed, subject to the giving of notice of intention so to do. The purchaser did in fact give notice requiring the vendor to complete on 7th May 1975.

3. It is now necessary to set out in full the three clauses of the Agreement upon which the arguments have been based. These are:

"	4. The Purchaser shall be entitled at any time before the said 31st day of December, 1976 to give to the Vendor or its Solicitors 28 days' notice in writing requiring the Vendor to complete as aforesaid and completion as aforesaid and the payment of the balance of any part of the deposit outstanding and of the said sum of HK$91,952,000.00 shall take place upon expiration of the said notice (in which respect time shall be of the essence of the contract).
	5. If the Purchaser shall pay any one or more of the instalments of the deposit or the said sum of HK$91,952,000.00 set out in the said First Schedule before the due date or dates fixed for the payment of such instalment or instalments or such sum of HK$91,952,000.00 as specified in the said First Schedule and shall have before such payment given to the Vendor or its said Solicitors 28 days' previous notice in writing of its intention so to do, the Vendor shall pay to the Purchaser interest on such instalment or instalments or such sum of HK$91,952,000.00 calculated at the rate of 9% per annum from the date or dates of actual payment or payments or the date of the expiration of such notice or notices whichever is the later to the due date or dates as aforesaid.
	6. Possession will be retained and rents received and all outgoings discharged by the Vendor up to but exclusive of the actual day of completion and as from and inclusive of that day possession and rents will be taken and all outgoings discharged by the Purchaser and all current rents and outgoings shall if necessary be apportioned between the Vendor and Purchaser and paid on completion."

(The sum of $91,952,000. referred to in these clauses was the instalment of 8/14ths of the purchase price payable upon completion.) It is common ground that there is some overlap between Clauses 4 and 5 in that if a notice were served under Clause 4 interest became payable under Clause 5 although no further notice under Clause 5 itself had been served.

4. The difficulty arises because Clause 5 does not expressly state the date upon which interest is to be payable: it merely indicates the manner in which the interest is to be calculated. The plaintiff purchaser claims that the interest became payable on the date of completion, i.e. 7th May 1975, while the defendant vendor contends that payment need not be made until the dates named in the Agreement for the payment of each instalment.

5. The parties are ad idem as to the general approach to the construction of a document: I have to ascertain the intention of the parties from a consideration of the document as a whole. It should also be mentioned that counsel have not argued that interest might be payable on any intervening date or dates between the date of completion and the dates prescribed by the contract for the payment of the instalments. Mr. Litton relies heavily upon the nature of "the completion" of the sale and purchase. He relies upon the words of Turner, V-C. in Lewis v. South Wales Railway Company (1852) 10 Hare 113, 119 (cited by Stable, J. in Killner v. France 1946 2 All E.R. 83, 86):

"The question is what is the meaning of the words 'until the completion of the purchase'. Those words may, no doubt, import and generally perhaps would be construed to refer to, the complete conveyance of the estate and final settlement of the business".

His argument involves that "the business" included all the dealings covered by the terms of the Agreement of sale and purchase and that it was the manifest intention of the parties here to make a final settlement of accounts immediately on completion of the conveyance. As evidence of that intention he relies upon Clause 6, which provided for an apportionment (where necessary) of all current rents and outgoings, and to Clause 7, under which there was to be an apportionment of insurance premium should the insurers consent to the transfer of the benefit of the existing policy to the purchaser. Mr. Litton disclaims the stand taken by the Plaintiff's solicitors in correspondence before action, when they inferred that the purchaser was entitled to deduct from that part of the purchase price payable upon completion the interest payable under Clause 5: he accepts that payment of the purchase price had to be made in full, although he submits that the interest became payable immediately upon payment of the purchase price.

6. Mr. Swaine, for the defendant vendor, rests the weight of his argument on the use of the word "interest". He contends that what the purchaser is seeking to do is to claim not interest but a discount of the purchase price. He argues that by definition interest accrues de die in diem, so that the amount claimable by the purchaser cannot be payable in advance, and that not only would a lawyer use the word "interest" in its technical meaning of

"The return or compensation for the use or retention by one person of a sum of money belonging to or owed to another". (27 Halsbury's Laws of England 3rd. Ed. p.7 para. 6),

but that the ordinary businessmen would not use the word "interest" if he meant "discount". It is true that where, as here, the option conferred by Clause 4 has been exercised (as distinct from a case where the purchaser merely paid an instalment before the due date) the purchase price became the vendor's and the purchaser ceased to owe any money to the vendor, but he contends that it is still appropriate to refer to the sum payable by the vendor under Clause 5 as "interest" since it was money which originally was owed by the purchaser. Mr. Litton replies that not only is that a misuse of the word "interest" but that, even if this money interest, that still leaves in doubt the date on which payment was to be made.

7. Some attempt was made to argue the case on the grounds of what was "fair", but I do not think either side can draw comfort from such an argument: without knowing the reasons for drafting the Agreement in the manner in which it was drafted I cannot say which interpretation is more likely to achieve the object aimed at and, therefore, to be fair. In particular we do not know what considerations led the parties to agree the rate of 9% per annum. I have to seek the intention of the parties from the words which they have used. I think Mr. Swaine is right when he says that the case must be very much one of first impression. I confess that when I first read this Agreement I thought the case for the Plaintiff was unarguable, but Mr. Litton has argued it with great force and persuasiveness. Nevertheless I still think that the intention of the parties was that the payment by the vendor should be in the nature of interest. If it had been intended to be a discount, which, as I have said, Mr. Litton does not now suggest, I think the parties would have expressed themselves very differently, as did the parties in In re Land Securities Co., ex parte Farguhar 1896 2 Ch. 320. Even if the intention had been that for which Mr. Litton contends I do not think the parties would have used the word "interest", and although the use here made of that word may fairly be open to some criticism, I think it indicates that payment was not to be made by the vendor until the dates prescribed in the agreement for the payment of the instalments of the purchase price.

8. I therefore answer questions 1 and 2 in the Originating Summons "No" and question 3 "Yes".

19th September 1975.

Representation: