Iain Mackenzie Fidlin v. Fortune Fond Ltd
Read the full judgment text of DCCJ 6535/2002 on BabelCite. This District Court judgment was delivered on 2 June 2004.
1. On or about 29th August 2002, the Plaintiff ("P") (as tenant) and the Defendant ("D") (as landlord) entered into a Provisional Tenancy Agreement ("PTA") whereby P agreed to rent and D agreed to let Flat 6 on 2/F together with portion of roof immediately above and one car parking space, No.52 Stanley Village Road, Hong Kong ("Premises") at a monthly rent of HK$48,800.00.
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DCCJ006535/2002 DCCJ6535/2002 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION CIVIL ACTION NO. 6535 OF 2002 ____________
____________ Coram: Her Honour District Judge Marlene Ng in Court Dates of Hearing: 26, 27 and 30 January and 2 February 2004 Date of Handing Down Judgment: 2 June 2004 _______________ J U D G M E N T _______________ Introduction 1.On or about 29th August 2002, the Plaintiff ("P") (as tenant) and the Defendant ("D") (as landlord) entered into a Provisional Tenancy Agreement ("PTA") whereby P agreed to rent and D agreed to let Flat 6 on 2/F together with portion of roof immediately above and one car parking space, No.52 Stanley Village Road, Hong Kong ("Premises") at a monthly rent of HK$48,800.00. 2.The following are the express terms of PTA :
3.P claimed the following terms ("Terms") were implied in PTA by operation of law and/or to give business efficacy thereto :
4.P claimed that D wrongfully and in breach of PTA (in particular, Terms) failed to sign FTA on or before 10th September 2002 or at all and failed to refund Preliminary Deposit. P claimed under Clause 4 a total sum of HK$97,600.00 being refund of Preliminary Deposit together with a sum of HK$48,800.00 (equivalent to the amount of Preliminary Deposit) as compensation. Alternatively, P claimed for loss of Preliminary Deposit in the sum of HK$48,800.00 as damages for D's breach of PTA. 5.D denied any breach of PTA and instead claimed that P was in breach of PTA by failing/refusing to sign FTA and to pay balance of Security Deposit and Advanced Payment ("Sums") on or before 10th September 2002 or at all. By a letter dated 10th September 2002 ("10/9/02 Letter"), P through Jennifer Mok ("Mok") of Agent asked D for a two-week extension to 25th September 2002 ("Extension") for the execution of FTA ("Request"), to which D disagreed. As a result of P's aforesaid breaches and pursuant to Clause 3, D forfeited Preliminary Deposit. 6.Mr Chang, counsel for P, accepted that the time for performance of the obligations under PTA on 10th September 2002 was of the essence. He further confirmed that P would not contend that Clause 4 was a penalty clause. 7.At the beginning of trial, I granted leave to P to amend his Statement of Claim to plead inter alia Terms. Mr Chang in the course of his opening applied to re-amend the Amended Statement of Claim to include a further and alternative plea that (a) D did not insist on P signing FTA on 10th September 2002 and D thereafter failed to give notice to P to fix a reasonable time for signing FTA, and (b) D evinced an intention not to proceed with the signing of FTA by its letter to P dated 12th September 2002 ("12/9/02 Letter"). After hearing submissions from Mr Chang and Mr Chan, counsel for D, I granted leave for the further amendment sought but considered that D should be entitled to an adjournment of the trial (particularly in light of its election before receiving notice of the proposed amendment not to call Iris Leung ("Leung") of Agent to give evidence at the trial) to enable it to consider and gather the relevant evidence from Agent (if possible) to rebut P's new plea. However, both counsel eventually agreed that P would abandon the further amendments sought and both parties would proceed to trial on the existing pleadings. In any event, given my findings of fact below inter alia that P was not led to believe that the time stipulation for signing FTA was extended or not insisted upon and that Request and Concession (see below) were initiated by P and not by D, the proposed re-amendment of the pleadings becomes immaterial. 8.From the above, the case started off as a simple dispute as to who (if any) failed to complete the deal in the manner provided in PTA, or to put the matter simply, who repudiated PTA. However, both counsel's industrious labour resulted in not less than 34 legal authorities. But in the end this case is resolved on fundamental principles of contract. Witnesses 9.It is necessary to say a word about witnesses. Only P himself gave evidence. D's administration manager responsible for tenancy matters, Zee Ho Man Gilbert ("Zee"), gave evidence. P and Zee adopted their witness statements as part of their evidence-in-chief. The documents included in the trial bundle are agreed by the parties as to admissibility and authenticity. 10.When Zee was examined in chief on the 3rd day of trial, it was discovered that he had been referring to some notes (3 pages) since giving evidence that morning ("Notes") although he said he only made minor reference to them. Zee said he made Notes to record important communications with Mok/Leung between 29th August and 12th September 2002 in respect of the subject tenancy, including telephone conversations between 6th and 9th September 2002 on Amendments (see below). It was his usual practice, if he was in the office, to record particulars of his communications with agents/tenants on tenancy matters from the time of execution of the provisional tenancy agreements until delivery of possession of the relevant properties to the tenants. He would be unable to make such records if, say, he was in the street or driving. Zee admitted he would not have remembered the full details of the events in August/September 2002 by the time of trial had he not had Notes. He claimed Notes were accurate but he had not shown them to anyone, including his colleagues or D's legal representatives. Notes were also not produced in evidence. 11.Zee knew his witness statement should recount important matters but he said if there were omissions, it might be due to his carelessness rather than inaccuracies in the statement. Although Notes were already in existence by the time his witness statement was prepared, Zee did not tell or show D's solicitors Notes. They also did not ask for Notes although Zee mentioned his usual practice of making such records. D's solicitors only asked Zee if the contents of his witness statement were accurate. Zee considered his witness statement was fine as it contained the important matters, ie the results and not the course of the negotiations. He had no impression whether D's solicitors had advised him that his credibility might be affected by his selective description of events. 12.Zee gave detailed evidence at the trial on his communications with Mok/Leung to illustrate the to and fro negotiations (which were not easy) during discussions on Request. Mr Chang complained that on the 3rd day of trial, unlike the 2nd day when Zee first gave evidence, he recalled extensive details of various telephone conversations with Mok which did not appear in his witness statement. Mr Chan fairly accepted that Zee did give evidence on certain matters which were not in his witness statement and which were not put to P during cross-examination. In light of the developments, both counsel agreed to have P recalled to give evidence in rebuttal. Although it was at one stage suggested that there might be a need to locate Mok, Mr Chang after taking instructions confirmed that P would not ask for any adjournment to try to locate or call Mok as a witness. Both counsel agreed that the matter of Zee's reference to Notes was a matter to be considered in assessing the credibility and weight of his evidence. P's case 13.P formerly worked for Commerzbank AG ("CAG") in London with a year spent in Germany before he was seconded to Hong Kong under a contract which ended on 31st July 2002. He was invited to return to London but there was no available position that reflected his seniority. P took severance from CAG and planned to set up a corporate consultancy business as an interim measure. 14.P lived with his family for 5 years at an apartment in South Bay ("SB Apartment") rented by CAG from Kerry Properties Limited. He continued to stay there from August to October 2002 whilst on garden leave during severance negotiations. P and his wife started to look for a flat to rent in Stanley in early August 2002. They were contacted by Agent by a cold call and were subsequently introduced to Mok. Agent became P's agent but acted for D as well. P and his wife inspected Premises (which they liked very much) on 23rd August 2002. D (owner of Premises) offered to let Premises to P on the terms set out in an offer letter on Agent's letterhead ("24/8/02 Offer"), which offer was accepted by P when he countersigned the same on the same day. 15.After further negotiations, P and D entered into PTA and P paid Preliminary Deposit. P understood that PTA was binding on the parties. He ceased looking for other accommodation once he entered into negotiations for renting Premises and/or paid Preliminary Deposit. The commencement of the subject tenancy in October 2002 tied in with the end of P's occupation of SB Apartment. 16.Agent forwarded a copy of draft FTA ("Draft") to P on/about 30th August 2002 for his review. Between 30th August and 6th September 2002, P showed PTA to and reviewed Draft with his solicitor and made various amendments ("Amendments"), some of which came from P's commercial experience. P consulted his solicitor on most Amendments (including those for Clause 9 of Draft ("Clause 9")) and wrote up Amendments in his solicitor's presence. P then forwarded his handwritten Amendments to Mok by fax under cover of his letter on 6th September 2002 ("6/9/02 Letter"). 17.Most Amendments related to the issue of reasonableness but no explanation for Amendments was provided to D. P believed that Amendments (highlighted in italics below) were reasonable, in keeping with market practice and protected both parties' interests :
18.On 7th September 2002, Mok faxed Draft to P with marked up Amendments and handwritten notations thereon which essentially rejected almost all Amendments except those in Clauses 4 and 6(b) of Draft ("Written Comments"). P understood Written Comments as follows :
19.Amendments for inclusion of the concept of "reasonableness" were important to P. D's wholesale rejection of such Amendments was unreasonable since, say, "reasonable costs" set no definite limits but only put them within reasonable brackets for the payee. In P's experience of negotiating numerous contracts, the word "reasonable" was always used by both parties. He was also given to believe by tenants and estate agents that such word was commonly used in Hong Kong. 20.For the other Amendments, D said he probably would not consider the inclusion of the words "all outgoings of a capital nature" in Clauses 5(b) and 6(b) as a deal breaker but he did not understand D's rejection when the purpose of the phrase was for clarification. P also would probably have given up Amendments to Clause 9, again not seeing it as a deal breaker. He accepted that the objection of "suppose to be 12 + 2 lease" was reflected in Rider 10 but said he did not believe that he was insisting on such Amendments. Further, P felt Amendments to Clause 7(c) were standard and would protect P's rights for the avoidance of doubt but would not hurt D. 21.P was not asked to explain and did not clarify the meaning of the 3 vertical lines he placed next to Clause 5(i) as it did not appear to be a major matter. Further, he did not seek clarification of the words "hard to define" from D but neither was he approached to provide clarification. P expected to be (but was not) given an opportunity to explain Amendments and for D to explain its objections to enable the documentation to be mutually agreed. 22.P had previously discussed with Mok about his setting up a new company ("Newco") and Mok had asked him for a brief description of his background. So he wrote and faxed 10/9/02 Letter to Agent enclosing a brief outline about Newco and took the opportunity to make Request for Extension by mutual agreement. P stated in the letter that he was genuine in his desire to negotiate FTA, having already provided Preliminary Deposit. 23.P said he did not put forward the setting up of Newco as a reason/condition for Request for Extension and further said Concession (see below) was sufficient to support Request. He did however in 11/9/02 Letter (see below) refer to Newco and negotiations with CAG as taking up his time. P's reason for Request all along was for negotiation of FTA in good faith with D. P agreed he had possibly mooted with Mok the possibility of procuring an assurance from a chairman of a listed company that P would rent Premises ("Assurance") but it was an esoteric option given that he had to seek approval for doing so. 24.As the terms of FTA had not yet been agreed by 10th September 2002, P and his wife met with Mok at SB Apartment to discuss ways of and terms/conditions for postponing the execution date of FTA ("1st Meeting"). P could not remember whether 1st Meeting was at Mok's or his request. P at first said they met Mok in the morning (although he was not sure), but when shown 10/9/02 Letter, he said 1st Meeting was probably a reaction to such letter. P could not recall whether they talked about Written Comments but said they would probably have done so as the documentation was the topic of discussion. However, he did not know whether Mok was empowered or qualified to discuss the terms of FTA and suggested that Mok's role appeared to be that of a messenger. P expected Mok to convey his comments to D. 25.P said Agent's approach (as Mok told him) all along was that if he did not sign FTA and pay Sums, Preliminary Deposit would be forfeited. In his witness statement, P said that at 1st Meeting he "offered certain oral concessions" in the hope of convincing D of his sincerity and good faith, and one of these concessions was P's hope to pay another month's rental as holding deposit to subsequently count towards Security Deposit, which P had also agreed could be increased to the equivalent of 3 months' rental ("Concession"). P said in evidence that, to the best of his recollection, Concession was the only concession he volunteered. Mok said she would pass on P's message to D. 26.At this point, P felt that things were slipping away but he wanted to rent Premises. D held a metaphorical gun to his head and Mok brought pressure to bear on him so he was bullied into making Concession. P had been reminded of the consequences of not signing FTA and paying Sums on the due date. He contended that as the documentation had not been agreed, the deadline for signing FTA should be extended. But had P not offered Concession, he would not have the further time to negotiate the terms of FTA. P was not prepared to sign Draft as he had not agreed to its wording. 27.To P's recollection (of which he was not sure at all), Mok did not telephone D at 1st Meeting to communicate Request and Concession. There were communications between P and Mok later on 10th September 2002 but P could not remember whether he spoke with Mok before receipt of the draft Side Letter (see below) from Agent. On 10th September 2002, Mok never mentioned D's Conditions (see below) for agreeing to Extension. If Mok suggested that there be no Amendments as part of Conditions (see below), P would have rejected it. 28.Mok brought the draft Side Letter to P at SB Apartment ("2nd Meeting"), so P said he probably saw Mok twice on 10th September 2002. P recalled Mok coming to SB Apartment many times but he could not remember all the visits and telephone conversations. The draft Side Letter dated 10th September 2002 stated that P and D agreed to postpone the date of signing FTA and P would pay a deposit on 11th September 2002. To P's recollection, he had not seen draft Side Letter before 2nd Meeting because he did not see the fax from Agent to him dated 10th September 2002 (shown to be transmitted at 3:05 pm that day) enclosing the draft Side Letter until 12th September 2002 (as seen from his initials and notation of "signed on 10th" on the fax). By such fax Agent reminded P that D had the right to forfeit Preliminary Deposit if P failed to sign FTA. P did agree to and signed the Side Letter ("Side Letter") on 10th September 2002. 29.P's understanding at the time when he signed Side Letter was that the signing of FTA was postponed but he was not sure to what date and on what terms other than it was expected that he would pay a further month's deposit. He had hoped and expected that it would be for two weeks but it was not confirmed at that time. As D's signature on Side Letter was pending, P said it made sense to say the agreement to postpone the signing of FTA would become definite when both parties signed Side Letter. P agreed that Side Letter did not set out the full details of Request and Concession but he did not ask Mok to state Extension clearly in Side Letter. P said there was considerable pressure on him to prevent loss of Preliminary Deposit or to sign Draft which terms he did not agree, so he could not be expected to think of everything in such circumstances. P did not see D's Conditions (see below) until 12th September 2002. 30.Despite the offer of Concession, P did not effect payment of a further month's rental as deposit on 11th September 2002. P had a telephone conversation with Leung in the morning of 11th September 2002 as referred to in his fax of the same day but he could not remember the contents of that conversation other than some ringing bells on discussion of the term "reasonable". To P's recollection, he did not mention the payment of the further month's deposit during his telephone conversation with Leung as he would not make payment until he saw D's signature on Side Letter. He might possibly have discussed about Request but he did not remember. However, P had always been consistent in his approach and he found D's attitude somewhat inflexible and unreasonable. 31.P said it was not shown that on 10th or 11th September 2002 D had agreed to Side Letter. He did not recall taking any action to see if D had agreed to or signed Side Letter because the onus was not on him to do so. Rather, according to his commercial experience, it was D who should revert to him. P also had not ascertained the extended deadline for signing FTA because the purpose of Side Letter was to provide more time to negotiate the terms of FTA. 32.In his witness statement, P said he further negotiated with Leung/Mok indicating his desire to make Amendments. As clearly shown in his correspondence, P was prepared to enter into FTA subject to some reasonable amendments to the terms of Draft which he wanted to make. He had already paid Preliminary Deposit to indicate his sincerity. 33.Both land and mobile telecommunication problems exacerbated by the typhoon affecting Hong Kong at the time (signal no.8 hoisted at 1:40 pm on 11th September 2002 and lowered at 1:40 am on 12th September 2002 as shown in a letter from Hong Kong Observatory to P's solicitors dated 20th January 2004) meant that P was unable to contact his solicitor or enter into any further negotiations with D through Agent. The prevailing weather conditions could also serve to explain why Agent had difficulty contacting him as asserted by D in 12/9/02 Letter. 34.However, P was able to and did send a letter dated 11th September 2002 to Agent ("11/9/02 Letter"). P believed 11/9/02 Letter was sent to Agent by fax with a copy to his solicitor by e-mail but he could not remember the time when it was dispatched. P again stressed in 11/9/02 Letter that he was very interested in Premises and that he was not looking for any other apartments. He regretted that they were not able to complete the documentation that day but pointed out that there were telecommunications problems which were exacerbated by the typhoon no.8 signal being hoisted. P further stated that the circumstances were beyond anyone's control and he was unable to contact his lawyer. 35.P went on to say in 11/9/02 Letter that under previous advice from his lawyer, he was not prepared to sign FTA unless the term "reasonable" was inserted as previously indicated. P said he was disappointed with D's inflexible attitude and was not really happy "at being asked" (although P confirmed in evidence that he did not recall any specific demand from D) for an additional HK$48,800.00 to secure Extension given the significant enhancement he had already offered to secure that concession. It was said that the fact that D had Preliminary Deposit from P should be sufficient demonstration of his good faith and intent to close FTA. P stated in 11/9/02 Letter that he had explained to Mok that he was still negotiating his severance package with CAG and was in the process of establishing Newco, which put considerable strain on his time and other resources, and he did not wish to have further aggravation at that time. If D still had doubts and wished to put Premises back on the market, then P would expect immediate refund of Preliminary Deposit. 36.P said the purpose of Concession was to show P's good faith to bring D back to the negotiating table at a time when D appeared to be unwilling to extend the deadline for no apparent reason. P said that his only concern was (and he was not prepared to move on) the inclusion of the word "reasonable" in Draft but was willing to let other matters go. Yet when he was asked when he mentioned such willingness, he said he did so whilst giving evidence in court. But when P wrote 11/9/02 Letter, he did not expressly state that he would abandon other Amendments. 37.P said he was not under any financial strain as he was paid by CAG whilst on garden leave and had ￡20,000.00 on deposit. He also expected a significant cash sum on conclusion of his severance negotiations with CAG. To P's recollection, he did not receive any fax from Agent/D on 11th September 2002. Although P could not be contacted in the afternoon of 11th September 2002, he was contactable by land and mobile telephone or fax on 12th September 2002. 38.Leung wrote to P by fax on 12th September 2002 (with copies to Zee and P's solicitor) reminding him to pay Sums and warning him inter alia that failure to pay Sums could mean that D would forfeit Preliminary Deposit. P did not know when he received this fax as it did not contain his usual initials, so he could not recall what he did upon its receipt. P did not take any action on 12th September 2002 to ascertain whether D had agreed to Concession and Request although he did not recall the reason for not doing that. He felt the onus was on D to prove that it had agreed to Request and he had not seen evidence to that effect. It also explained why he did not pay the further month's deposit. 39.D's Zee sent 12/9/02 Letter to P on 12th September 2002 with copy to Leung. In that letter, D referred to the telephone conversation with Mok (P's agent) on 10th September 2002 whereby they mutually agreed on Extension provided that (a) there would be no further amendment of Draft, (b) Security Deposit would be revised to 3 months' rental (ie HK$146,400.00), and (c) P would have to pay a further 1 month's rental as Preliminary Deposit to D on 11th September 2002 and should P fail to sign FTA in respect of Premises, D shall have the right to forfeit Preliminary Deposit of 2 months' rental (ie HK$97,600.00) ("Conditions"). D also referred to his telephone conversations with Mok/Leung on 11th September 2002 when they informed him that P and his lawyer did not revert to them and they were also unable to contact P. D stated that owing to P's failure of the aforesaid commitments, D informed Leung that it had decided to forfeit Preliminary Deposit according to PTA and the deal had fallen through. 40.P first knew of Conditions when he received 12/9/02 Letter, on which he noted his objection and surprise. In respect of Condition (a), he wrote "not agreed ("reasonable")" because at that stage the parties had not yet reached agreement on whether to include the term "reasonable". P said at that stage he was in a state of mind to give up on the other Amendments but not the inclusion of the term "reasonable". 41.P said he was not party to the alleged agreement between D and Mok of 10th September 2002 which did not reflect the terms to which he was prepared to agree. P made clear to Mok at 1st Meeting that he would only pay a further month's deposit if it would be considered as part of the increased Security Deposit and not as supplemental Preliminary Deposit as suggested by D. Irrespective of whether Conditions (a) and (c) were misrepresentations by Mok or conditions imposed by D to suit its own purposes, they were not Concession offered by P. 42.P said that from 11th September 2002 up to when P received 12/9/02 Letter, he was not aware that D had agreed to Request. P was the only party who signed Side Letter and he had not seen D's signature thereto. P had no further contact with D after receipt of 12/9/02 Letter. P then contacted his solicitor. 43.P considered D had unreasonably insisted that he must sign Draft without a chance for him to make his Amendments and unreasonably failed to let Premises to him in breach of PTA. D was contractually obliged under Clause 4 to refund Preliminary Deposit and compensate P with a sum equivalent to Preliminary Deposit (totalling HK$97,600.00) with interest. P denied that he failed to complete the deal in the manner contained in PTA as provided in Clause 3 because at no time did P agree to sign FTA without it actually being agreed. 44.P did not immediately look for another property because he still hoped to return to the negotiating table to work out FTA. But eventually he had no alternative but to look for another property because there was time pressure on his ability to stay at SB Apartment. He felt disadvantaged in the pursuit of alternative accommodation by reason of the time constraint. P noted that Premises apparently remained unlet as at July 2003. D's case 45.D was a company mainly engaged in letting out properties and was/is the registered owner of Premises. D was the owner of 7 out of 9 units at Nos.52-54 Stanley Village Road, namely, 6 units at No.52 Stanley Village Road (including 4 units which were leased out, Premises and 1 unit on the market) and 3 units at No.54 Stanley Village Road (1 of which was still not leased out). 46.Zee had over 10 years' experience in and was solely responsible for handling all D's tenancy matters. Zee accompanied P and his wife to inspect and re-inspect Premises as arranged by Agent and he also negotiated the terms of the tenancy. During inspection of Premises, P mentioned he had worked for a bank but there were no negotiations between Zee and P then. Agent would not give P's details to D. In fact Agent was a dual agent for P and D and one of its roles was to pass communications between the parties. 47.D required time to carry out works at its expense at Premises pursuant to Rider 9. Zee knew little about P when PTA was signed, so he asked Mok to ascertain whether P was self-employed and to obtain background information on P's company. P received such information on 10th September 2002 by 10/9/02 Letter through Agent. 48.D had its own commonly used FTA form (ie Draft) which it would ask the tenants of its rental properties to adopt as FTA. D had 10 properties on lease at that time and at the height of the market, it might have 20. On 30th August 2002, Zee sent Draft to Agent for P's approval. In his witness statement, Zee said he received Amendments on or about 7th September 2002. He immediately considered them and informed Mok those D would accept and those D would reject. In his evidence, Zee also mentioned 6th and 8th September 2002 respectively as the dates when he informed Mok D's views on Amendments. D's views on Amendments as advised by Zee to Mok were :
49.Zee had not seen and did not write Written Comments, but Amendments and Written Comments appeared to be written by two persons. Where parties reached agreement on the terms of FTA, generally it was the landlord who would prepare the engrossment FTA. If the amendments were not major, they could be marked on the agreement and initialled by the parties. The agent would first bring the engrossment FTA to the tenant for signature and at the same time collect the deposit or advance rental payment as provided in PTA. Then the agent would deliver FTA (and cheque) to the landlord for his signature. Quite often the parties would sign FTA separately. In this case, there was as yet no consensus as to how the engrossment FTA should be prepared as it depended on the extent of the ultimate changes. In any event, Agent had a clean copy of Draft. 50.D did not receive any further views from P/his solicitor from 6th to 10th September 2002 on Zee's comments on Amendments, which meant that P still insisted on Amendments. D was waiting for P's response between 7th and 9th September 2002. Between 7th and 11th September 2002, Zee had several telephone conversations with Mok who told him that she could not locate P and that P did not respond to her messages for him. When she was able to contact P, P asked her to liaise with his solicitor. But P's solicitor was also very busy and seldom replied to her. Mok told Zee that at one time P's solicitor returned call saying he was on the way to the airport for a business trip, so they could not discuss Amendments. 51.Yet in his witness statement, Zee said that on or about 8th September 2002, Mok informed him that she had negotiated with P numerous times but P still insisted on incorporating Amendments in Draft. Further, when Zee was challenged in cross-examination that he relied on Notes to say that P/his solicitor did not respond to Written Comments between 7th and 9th September 2002, he said he had numerous telephone conversations with Mok and at the end there was no change to P's stance of insisting on Amendments. 52.Zee went on to say in his witness statement that he then informed Mok that all disputed Amendments whether suggested by P or D should not be incorporated, that FTA should be governed by PTA and that P's unreasonable insistence on his Amendments to Draft might render the signing of FTA impossible. Zee explained in evidence that, depending on circumstances, such impossibility might not necessarily come to pass. Zee further informed Mok that D was always ready to sign FTA (ie a version that was acceptable to D) on 10th September 2002. 53.On 9th September 2002, Zee repeatedly chased Agent to follow up on P's Amendments and reminded Agent that P had to pay Sums on or before 10th September 2002. Zee said if no agreement could be reached on FTA by 10th September 2002 but P paid Sums and P did not adamantly insist on all of Amendments, D would consider further discussions with P on the terms of FTA since the rental property market at that time was inactive and D wished to have P as tenant of Premises. But his understanding was that P still insisted on Amendments. Zee pointed out that payment of Sums and the signing of FTA were two distinct matters, so that even if FTA was not signed on 10th September 2002, Sums should be paid as provided in PTA. 54.On 10th September 2002 at around 12:00 noon, Zee received a telephone call from Mok who said P sent 10/9/02 Letter to Agent setting out Request. Zee understood Request was for deferral of both execution of FTA and payment of Sums. Zee immediately asked for a copy of 10/9/02 Letter and the reason for Request. Mok said P had to set up Newco, so he did not have time to take care of FTA. She further said that P could offer Assurance as a condition for Extension. Zee told Mok D would not accept Assurance because it would be difficult to enforce. 55.Zee said 25th September 2002 was not the agreed date under PTA for signing FTA. The Request for Extension would upset D's work schedule for renovation of Premises under Rider 9 as D would have 14 days less to carry out the works, which in turn meant that the works would have to expedited, possibly at increased cost. 56.Zee received 10/9/02 Letter from Mok by fax on 10th September 2002 at around or after 12:00 noon but he could not remember the precise time. He said 10/9/02 Letter did not mention P's new formation of Newco but referred to some progress of incorporation. It also mentioned that Request was made notwithstanding the outstanding documentation questions. The annexure to 10/9/02 Letter set out Newco's background. 57.Later Mok reverted to Zee saying that P was willing to pay a further month's deposit on 11th September 2002, so that the Security Deposit would be increased from the equivalent to 2 to 3 months' rental. Zee then informed Mok that D would agree to Extension subject to P's immediate agreement to Conditions. D was unwilling to grant Request without Conditions (which were not unreasonable), but it would not force P, who initiated Request, to accept Conditions. Mok said she would inform P and obtain confirmation that upon compliance of Conditions, there would be Extension. Mok did not reply to Zee by telephone until about 7:00 pm (Zee had already left the office) when she told Zee that P had agreed to Conditions and that she would shortly fax a confirmation letter to him. On that basis, Zee also confirmed that D had no further changes to make to Draft. 58.Zee returned to the office at about 9:00 am on 11th September 2002 and saw that Agent had sent a fax to him at about 7:28 pm on 10th September 2002 enclosing Side Letter duly signed by P stating that he agreed to postpone the signing of FTA and to pay deposit on 11th September 2002. Zee felt Side Letter could have been better worded by expressly stating details of Conditions and Extension. Zee said he contacted Mok that morning to ask her to state Conditions more clearly in Side Letter when she went to collect the further month's deposit from P that day. 59.When Zee contacted Mok at about 1:00 pm that day, Mok said P/his solicitor had not replied by telephone even though she had left messages for P to return call. Zee also contacted Leung at about 1:00 pm and got the same reply. Then there was the typhoon. At about 2:00 pm, Zee contacted Mok/Leung who said there was still no reply from P. Zee said in his witness statement that when Mok/Leung told him that neither P nor his solicitor could be contacted on 11th September 2002, he immediately said if P failed to pay further deposit, Conditions would lapse and D's right to receive Sums and sign FTA on 10th September 2002 were reinstated. Zee further reserved D's rights. 60.Due to the typhoon, Zee went off work but told Mok/Leung that if P or his solicitor gave any reply, they were to contact him immediately. But throughout 11th September 2002, no one contacted Zee either by land or mobile telephone. He said that irrespective of the typhoon, both P and D should contact Agent to confirm the situation in respect of the above matters. 61.On 12th September 2002, Zee stayed in contact with Leung until about 12:00 noon but there was no reply from P/his solicitor. Leung confirmed to him that throughout 11th September 2002 until around 12:00 noon on 12th September 2002, P did not contact her although P had her mobile telephone number. Mok/Leung also had not received any fax from P. Since there was no reply from P/his solicitor by 12:00 noon that day, Zee decided to forfeit Preliminary Deposit. Zee received a copy fax from Leung to P at about 12:12 pm reminding P of payment of Sums and that D had the right to forfeit Preliminary Deposit. D then issued 12/9/02 Letter to P with copy to Leung stating P's breach of PTA and informing P that D had forfeited Preliminary Deposit. 62.On 13th September 2002, Zee instructed D's solicitors to issue a formal letter to P stating P's breaches of PTA in failing/refusing to sign FTA and to pay Sums on or before 10th September 2002, and informing him that D had exercised its right to forfeit Preliminary Deposit on 12th September 2002 whereupon PTA was terminated. Zee said that D was at all material times ready, willing and able to let Premises to P. D was entitled to forfeit Preliminary Deposit pursuant to P's breaches and Clause 3. 63.After the deal with P fell through, Premises remained vacant for about a year during which time rental fell substantially. Zee said that D in fact did not want to lose P as a tenant, and had hoped to continue to negotiate with P whether before or after P moved into Premises even though FTA could not be signed. D only successfully let out Premises on 1st September 2003 and by then, rental had fallen substantially. Assessment of the evidence 64.Both counsel in their final submissions made detailed submissions on the credibility or otherwise of P and Zee. I have carefully considered the evidence as well as counsel's submissions and found that most of their evidence does not directly conflict. Most of their communications were made through Mok/Leung, so I have also considered and weighed the possibility of "mis-communication" by Mok/Leung. In this respect, I have borne in mind the fact that Mok/Leung were not called as witnesses and I should not speculate on what they might say on the subject. 65.Mr Chan criticised P for being evasive in answering questions selectively and saying that he had no recollection on a large swathe of crucial matters. On the other hand, Mr Chang submitted that Zee's evidence should be rejected altogether or alternatively treated with the highest degree of circumspection as (a) parts of his evidence were not in his witness statement and only came to light whilst he gave evidence, and (b) other parts of his evidence were tainted by his reference to Notes whilst giving evidence. 66.In my view, both P and Zee are generally honest although there are certain aspects of their evidence that I do not accept. I do find it odd that P failed to recollect the substantive contents of some of his conversations with Mok/Leung and some of his actions during the few key days from 6th to 12th September 2002. I note that P is a man well versed in commercial negotiations and contractual deals. Even on his own case, he found the matter slipping away after he saw Written Comments, something which should have excited his concern. Further, given his personal and financial interest in the matter, I find some of his vagueness and assertions self-serving and unreliable. 67.I see no reason to discard Zee's evidence in its entirety. He gave evidence in a straightforward manner. Apart from the time he had Notes before him (which I shall discuss below) and apart from specific matters which I shall deal with below, I see no reason to doubt the general cogency of Zee's evidence. On careful consideration of Zee's evidence, I do not accept Mr Chang's suggestion that Zee subsequently created Notes as a blatant afterthought because he well knew that Mok would not be called as a witness to rebut his evidence. On the balance of probabilities, I do not consider Zee dishonest. However, he did refer to Notes whilst giving some parts of his evidence although he said it was to a minor degree. In my view, as a result of Zee's reliance on Notes (and he said he could not have remembered some of the details by the time of trial if he did not have Notes) and the impossibility of assessing the contents or veracity of Notes (since they were not produced in evidence), I find certain aspects of Zee's evidence unreliable ("Unreliability Reason"). 68.I make the following findings of fact on the balance of probabilities after consideration of the evidence and submissions (save and except the details of Amendments and D's stance on the same which will be dealt with below separately) :
Implied terms 69.Mr Chang submitted that the guiding principle on whether Terms ought to be implied in PTA could be found in Kensland Realty Ltd v Whale View Investment Ltd & anor [2001] 4 HKCFAR 381, 392 which cited BP Refinery (Westernpoint) Pty Ltd v Shire of Hastings (1978) ALJR 20, 26 on the conditions for implying a term in a contract :
70.Mr Chang submitted that since PTA did not provide for any obligation in relation to the execution of FTA apart from the date of execution and Clauses 3 and 4, Terms were necessary to give effect to PTA. It was suggested that Terms were also for business efficacy as it was common in the business arena to have mutual co-operation during negotiations for working out contractual terms (The Moorcock (1889) 14 PD 64, 68) and that the court should readily imply a term of co-operation to ensure performance of both parties' bargain (Mackay v Dick & anor (1881) 6 App Cas 251 as affirmed in Evans v SMG Television & ors [2003] 3 All ER (D) 348 (Jun) (unreported, 26th June 2003, Lexis transcript)). Lord Blackburn in Mackay's case (supra at p.263) said :
Mr Chang also referred to Lightman J's judgment in Evans' case (supra at para.192) where he said that "there are a large number of relationships in which the law conventionally implies particular types of term. In particular in contracts which require cooperation between the contracting parties in order to ensure performance of their obligations and the enjoyment of their rights, the law is quick to imply a cooperation term ......" However, I note that in the same paragraph Lightman J went on to say that "the duty of cooperation is determined not by what is reasonable but by the obligations imposed by the contract itself ......" (emphasis added) This is echoed in Chitty on Contracts (28th ed 1999) para.13-011 at p.649. 71.I accept that under PTA both P and D have an implied duty to co-operate to ensure the performance of their bargain ("Implied Term"). However, I do not accede to Mr Chang's interpretation of that duty. In his written submissions, he submitted inter alia that :
72.In respect of paragraph 71(1) above, I agree that neither P nor D should sit back and do nothing about FTA but it is not an applicable scenario in this case. In the present case, D tendered Draft for P's consideration, P responded with Amendments and D reverted with comments on Amendments which P received indirectly through Agent as Written Comments. It is certainly not a case where P or D did nothing about FTA. In respect of paragraph 71(2) above, other than Mr Chang's submissions on the reasonableness of Amendments and D's alleged wholesale rejection thereof (which I will consider below), I find that neither P nor D refused to consider the other party's proposal. P consulted his solicitor and formed his views on Draft in form of Amendments. Zee also considered and reverted to Agent on each and every Amendment that was put forward. Agent also put forward Written Comments to D. It is certainly not a case of outright refusal to consider the other party's proposal. 73.I also do not accept Mr Chang's contentions in paragraphs 71(3) and (4) above. He submitted that the duty of co-operation at least implied that both parties "would not act unreasonably in the negotiation of the final terms of [FTA]". However, this is different from the pleaded 1st Term (which provides inter alia for taking "necessary" steps to ensure performance of PTA) and from the authorities (including Mackay's case (supra), Evans' case (supra) and Chitty on Contracts (supra) above). As explained in Chitty on Contracts (supra), the duty to co-operate "is to be determined, not by what is reasonable, but by the obligations imposed ...... upon each party to the agreement, and by the surrounding circumstances". As will be seen in my analysis below, I find that the concept of reasonableness as propounded by P has no room in the present case. It also does not ipso facto follow that both parties taking all necessary steps will inevitably result in agreement on the terms of FTA. Where the parties cannot agree on the terms of FTA and there is no repudiatory conduct, the law permits either party to enforce PTA as an open contract. But more of that below. 74.Mr Chang drew an analogy with the situation of giving "good title" under a contract for the sale and purchase of land by referring to Mexon Holdings Ltd v Silver Bay International Ltd (2000) 3 HKCFAR 109, 117 where Litton NPJ said that the court would adopt the stand-point of "a willing purchaser and a willing vendor, both possessed of reasonably robust commonsense, both intending to see the transaction through to completion in terms of their own bargain" (emphasis added). Hence, it was argued that both parties had to co-operate with each other for PTA to be workable and for Premises to be successfully rented out. I am, however, doubtful whether Mexon Holdings Ltd's case (supra) is relevant to the issue at hand, namely, to determine under what circumstances Terms can be implied into PTA. In Mexon Holdings Ltd's case (supra), the vendor's express obligation under the agreement was to show a good title to the property and there was no question of any implied term. The issue in that case was the meaning of "good title" and Litton NPJ's aforesaid comment was given in that context. 75.I see no justification for implying 2nd Term into PTA. Chitty on Contracts (supra at para.13-012 at pp.649-650) states as follows :
In the present case, the execution of FTA on 10th September 2002 is neither an existing state of circumstances nor a condition precedent. In my view, Implied Term is sufficient in the light of the provisions in PTA and the surrounding circumstances. However, in any event, given my conclusions below on Amendments, there is no breach of 2nd Term by D even if the same can be implied in PTA. Role of Agent 76.From the above findings of fact, it is clear that there have been "mis-communications" between P and D in that P's stance was differently conveyed by Agent to D and vice versa. An issue then arises as to the capacity and role of Agent in passing communications between the parties. I have particularly invited counsel to address this issue in their final submissions. 77.Clearly, Agent was a dual agent for P and D in respect of the subject tenancy. Mr Chan submitted that the court should look at the intention of the parties. He argued that as Agent was a dual agent, Agent should be treated as such for both parties in relation to its role in passing communications between the parties. Mr Chang submitted that at most Agent was a mere messenger or conduit of communications between the parties. Its duty was to kept its principals (ie both P and D) informed about matters which were of concern to them. Mr Chang said that Agent and Mok/Leung had no actual, ostensible or apparent authority to negotiate the terms of FTA or to enter into any agreement on behalf of P/D. 78.Neither counsel cited any legal authority on this issue. Deputy High Court Judge S Kwan (as she then was) succinctly summarised the position in Yili Concepts (HKG) Limited v Lee Wai Chuen & anor HCA12911/1997 (unreported, 29th September 2000) when she said as follows :
In Cheng Kwok-fai v Mok Yiu-wah, Peter & anor [1990] 2 HKLR 440, in respect of a provisional agreement for the sale and purchase of land, Godfrey JA said at p.445 that :
It was held on the facts of that case that the agent did not have actual or ostensible authority of the vendor to supply the purchaser with a sketch of the property from the agent's own records. In doing this, the agent was acting on behalf of the purchaser and not the vendor. 79.For the purpose of the present case, I am prepared to assume and accept Mr Chang's contentions that legally speaking, Agent is merely a messenger in passing communications between the parties although I have found that Agent/Mok sometimes went further by purportedly making offers to or agreements with a party on behalf of the other party. Repudiation 80.As Agent is only a messenger without authority to enter into any binding agreement, there is no basis, without D's signature to Side Letter and/or D's agreement to Request for Extension, for P to assume/conclude that D accepted Request or Concession on 10th, 11th or even 12th September 2002. The unaccepted offer of Request/Concession is not binding on the parties. I have found that P knew that Request/Concession had not yet been accepted and that he knew that PTA and the obligations therein (ie including the signing of FTA and payment of Sums on 10th September 2002) were still binding on him. There is therefore no estoppel in P's favour (at least from P's perspective) by reason of inactivity or silence by D. It also flies in the face of fundamental contractual principles to say that an unaccepted offer to vary contractual time stipulation by postponement forthwith extends time in favour of the offeror when it is and to the knowledge of the offeror still pending acceptance by the offeree. I will deal with the issue of Amendments below. Suffice to say here that (a) I reject P's arguments that D's rejection of most Amendments is a repudiatory breach of PTA and/or Implied Term, and (b) I find (at the very least) P's insistence and/or non-withdrawal of Amendments in relation to Clause 9 and failure to pay Sums repudiatory. 81.The parties agree and it is the law that time is of the essence for the performance of obligations under PTA (see Wong Wai Chi Ann & anor v Cheung Kwok Fung Wilson & ors [1996] 3 HKC 287). By refusing to pay Sums and/or refusing to sign FTA consequent on insistence/non-withdrawal of Amendments in relation to Clause 9 on the stipulated date (see analysis below), P was in repudiatory breach of fundamental provisions of PTA, which breach was liable to be accepted by D. 82.I further find that the provisions in PTA to pay Sums on 10th September 2002 and to sign FTA on the same day are disjunctive. Mr Chang submitted that the obligation to pay Sums must be part and parcel of the signing of FTA and P could not be faulted for failing to effect payment when the terms of FTA were yet to be agreed. He cited no legal authority in support of his contention. In Choi Siok Pin & anor v Lui Bing Bing Betty [1994] 3 HKC 675, the provisional agreement for the sale and purchase of land provided that both purchaser and vendor should attend their respective solicitors to sign a formal agreement for sale and purchase on or before 10th January 1994. It further provided that a deposit of HK$135,000.00 be payable to the vendor's solicitors on or before 10th January 1994. Similar to the present case, there was no provision in the provisional agreement tying the payment of the further deposit to the signing of the formal agreement. In that case at pp.681-682, Cheung J (as he then was) drew a distinction between such provision from other provisional agreements which provide for the payment of the further deposit to be made upon signing of the formal agreement on a certain date. The learned judge went on to say at p.682 that :
Although Zee said he understood by Request P asked for a deferral of the requirements for both signing FTA and payment of Sums, Request is but an unaccepted offer to vary existing contractual terms and is not part of the binding provisions of PTA. I therefore find that P by either failing to sign FTA consequent on (at the very least) insisting on or not withdrawing Amendments in relation to Clause 9 (see analysis below) or to pay Sums or both on 10th or even up to 12th September 2002 amounts to a repudiation of PTA. 83.The next issue is whether such repudiation has been accepted or properly accepted. D claimed that such repudiation was accepted by 12/9/02 Letter and forfeiture of Preliminary Deposit and, presumably, at the latest by the letter from its solicitors dated 13th September 2002, which P received. I have found that Mok failed to inform P of Conditions but told Zee P had accepted Conditions, so P's non-payment of the further month's deposit on 11th and 12th September 2002 led D to conclude that Conditions for Extension lapsed. For different reasons, both P and D were of the view or knew that there was no effective extension of time, and to both of them the obligations under PTA remained binding. Hence D issued 12/9/02 Letter and forfeited Preliminary Deposit. Mr Chang submitted that D was unreasonable in imposing Conditions (including the condition prohibiting any Amendments) and he went so far to say that even when P offered Concession, D should have acceded to Request unconditionally. As explained below, I am not concerned with the reasonableness or otherwise of D's conduct but with whether it had repudiated PTA or failed to complete the deal in the manner set out in PTA. It is clear from the aforesaid analysis that P never knew of Conditions before 12/9/02 Letter and as Agent was a mere messenger, there is in fact no binding agreement between P and D on Conditions. So, even more so than Concession, Conditions had no legal effect and could not support any estoppel argument. 84.In light of the above, the ground(s) for accepting repudiation and for establishing a failure to complete the deal in the manner set out in PTA as set out in the letter from D's solicitors to P dated 13th September 2002 and in D's pleadings are correct. The issue is whether D is now precluded from relying on its acceptance of P's repudiation because of the reference to the purported agreement in respect of Conditions in 12/9/02 Letter. "The general rule is well established that, if a party refuses to perform a contract, giving therefore a wrong or inadequate reason or no reason at all, he may justify his refusal if there were at the time facts in existence which would have provided a good reason, even if he did not know of them at the time of his refusal" (Chitty on Contracts (supra at para.25-013 at pp.1229-1230). On my findings of fact, Conditions never exercised P's mind prior to his receipt of 12/9/02 Letter, and even as at 12th September 2002, he would not sign FTA without Amendments and would not pay Sums or the further month's deposit without having sight of D's signature to Side Letter. In any event I also note that Chitty on Contracts in the same paragraph went on to say that there does not appear to be any separate principle which would preclude a party from setting up a different ground simply because it would be unfair or unjust to allow him to do so. 85.On the other hand, Mr Chang argued that instead it was D who was in repudiatory breach of PTA because (a) it unreasonably failed to extend the deadline for signing FTA and (b) it imposed Conditions which included a requirement that there be no further Amendments. However, neither (a) nor (b) was pleaded. 86.Further, as regards (a), both parties agreed that the time for performance of the obligations under PTA was of the essence. Unless the parties agree to Extension, such obligations stand and are not varied. Further, it is neither expressly nor implicitly necessary for PTA to require either or both parties to extend the deadline because if no agreement can be reached on terms of FTA, either party is entitled to enforce PTA as an open contract. But again, more of that below. 87.As regards (b), as explained above, Conditions not having been communicated to P are ineffective and did not exercise P at all. Further, even if Conditions were communicated to P and are by themselves repudiatory, it does not follow that D should be precluded from accepting P's repudiatory breach(es). Until D's repudiatory breach has been accepted (and P only first attempted to do so on the ground of failure to agree FTA and not for the imposition of Conditions in his solicitors' letter of 18th September 2002), the primary obligations of both parties remain unaffected and hence either P or D is entitled to accept the other party's breach (which D did by 12/9/02 Letter and forfeiture of Preliminary Deposit and/or its solicitors' letter of 13th September 2002) (see Chitty on Contracts (supra at paras.25-014 - 25-015 at pp.1230-1231) and State Trading Corporation of India Ltd v M Golodetz Ltd (now Transcontinental Affiliates Ltd) [1989] 2 Lloyd's Rep 277, 286, a case cited by Mr Chan). 88.Mr Chang then argued that D acted unreasonably in failing to ascertain P's position at least on 12th September 2002 first before "pulling the rug" by 12/9/02 Letter when P could not be contacted on 11th September 2002 due to the typhoon problem. I have found as a fact that Zee kept in contact with Agent for the morning of 11th September 2002 (when P should be contactable) and for the whole morning of 12th September 2002 and he only issued 12/9/02 Letter after there was no response from P and after he received copy fax from Agent to P of the same day. No matter that the tenancy was due to commence only by the end of October 2002 and D might still have adequate time to carry out renovation works under Rider 9, they are not sufficient reasons to prohibit D's acceptance of P's repudiation. I see no absolute requirement, as suggested by Mr Chang, in face of P's repudiation for D to go the extra mile by exploring the possibility of P's willingness to bear the added costs or waive D's performance of its duties under Rider 9 and to continue negotiations with P to save the tenancy from falling through. 89.In the circumstances and in light of my analysis on P's arguments on Amendments below, I find P is in repudiation of his obligations in PTA, which repudiation was accepted by D. Reasonableness of Amendments 90.Mr Chang submitted that an objective assessment by the court of the reasonableness of Amendments played an important part in the finding of fault. P's primary contention was that all Amendments were reasonable especially in light of P's proposal to include the word "reasonable" in some clauses of Draft. As corollary to that proposition, Mr Chang argued that D's wholesale rejection of Amendments (as clearly reflected in D's imposition of Conditions including the requirement that no further amendment be made to Draft) was necessarily unreasonable and a repudiatory breach of Implied Term. Mr Chang submitted that the court should not be concerned with the subjective mens rea of the parties at the material time, yet he said the court might see fit to take into consideration both parties' explanation/rationale to see if such explanation offered another objective dimension/perspective to Amendments, and the rejection thereof. He noted that neither P nor D communicated their reasoning for the inclusion/rejection of Draft/Amendments to the other. 91.In my view, P's contentions are premised on a wrong footing and contrary to fundamental principles of contract. It is trite that a contract must be the parties' bargain and the court cannot write, amend or re-write the contract for the parties. The court cannot imply a term into a contract on the ground that it is reasonable nor can the court place itself in the position of the parties with all their respective negotiation strengths/weaknesses to work out the terms for each given set of contractual parties and circumstances. It is a wholly different scenario where the parties have actually come to an agreement and the court is called upon to determine whether terms can be implied into the bargain as made or to interpret the meaning of express or implied terms. 92.Here, PTA provided for the signing of FTA and as at the signing of PTA, the terms of FTA have yet to be negotiated between the parties. The starting point is that PTA is a contract that stands on its own and is specifically enforceable at the suit of either party as an open contract. Although it provides for the signing of FTA, neither side is entitled to demand that the other party enter into it. Godfrey J in Man Sun Finance (International) Corp v Lee Ming Chung Stephen [1993] 1 HKC 113, 124 said as follows :
(see also D H Shuttlecocks Ltd v Keung Shiu Tang [1993] 2 HKC 600 which was overruled on another point). 93.As neither P nor D can insist on entering into FTA, if there is no agreement on terms of FTA and if there is no repudiatory conduct by either party, PTA can simply be enforced as an open contract. This illustrates (and as will be seen below) that failure to come to terms on FTA does not necessarily equate to repudiatory conduct. In the context of the parties' negotiations, there may well be a spectrum of (rather than a single position on) terms/amendments that is not unreasonable or repudiatory. The true issue is whether D in proposing/maintaining its position on Draft and its comments on Amendments and P in proposing/maintaining its position on Amendments amount to evincing an intention to repudiate PTA, and not whether one party is proposing reasonable or unreasonable (so long as it is not repudiatory) terms for FTA. 94.Mr Chang relied strongly on Chu Wing Ning v Ngan Hing Cheung & anor HCA No.A9409/1991, Deputy Judge Ribeiro QC (as he then was) (unreported, 6th November 1992). In that case, the purchaser and the vendor entered into a provisional sale and purchase agreement in respect of a property. The purchaser's solicitors forwarded a draft formal agreement to the vendor's solicitors. On the day when the formal agreement was to be signed, the purchaser's solicitors discovered the registration against the property of another sale and purchase agreement to a third party. The purchaser's solicitors tendered the relevant deposit by asking the vendor's solicitors to stakehold the same pending their review of the agreement in favour of the third party. The purchaser insisted on a cancellation agreement being signed and registered before proceeding, and amended the draft formal agreement accordingly. The vendor refused and claimed that the purchaser was in breach by failing to sign the formal agreement. The vendor then forfeited the deposit and treated the provisional agreement as discharged. 95.The learned judge said that "...... the governing principle must be that each party is entitled to have inserted in the formal agreement all the terms which the Provisional Agreement expressly or by necessary implication contains - but no others (unless by mutual consent) ......". He went further to say as follows :
Since the purchaser in that case insisted on a term to be introduced to the sale and purchase agreement which gave effect to a non-existent term in the provisional agreement, the purchaser's conduct amounted to a repudiation of the provisional agreement. 96.Mr Chang submitted that by parity of reasoning, D's insistence on rejecting almost all P's reasonable Amendments evinced D's intention not to enforce PTA and as such constituted wrongful repudiation. However, this is not what the judgment said. The learned judge said that repudiation may arise upon insistence of terms extraneous to the provisional agreement, not upon refusal of reasonable amendments to a draft provisional agreement or even insistence on unreasonable terms (unless they are extraneous to PTA so as to evince an intention to repudiate). 97.A succinct summary of what amounts to repudiation can be found in the judgment of the court by Stock JA in Lau Chun Ming v Ma Koon Sik CACV705/2001 (unreported, 4th October 2001) :
Although neither party cited this case, the above passage merely stated established principles. Quite obviously, repudiation turns on whether the conduct amounts to evincing an intention not to be bound by the contract and not on whether a proposed term was simply reasonable or not. 98.It is also clear from the learned judge's judgment in Chu Wing Ning's case (supra) that each of P and D (not just P) is entitled to have inserted in FTA all the terms which PTA expressly or by necessary implication contains. This is supported by Keung Shiu Tang v D H Shuttlecocks Ltd [1994] 1 HKC 286 where Godfrey JA in giving the unanimous judgment of the Court of Appeal said at p.291 that :
99.Keung Shiu Tang's case (supra) and the trilogy of cases referred to in the judgment of Godfrey JA therein were subsequently endorsed and applied in Wong Kwai On & ors v Leung Wing Cheong [1999] 2 HKLRD 779 and Ma Yuk Lin & anor v Wong Kiu Ngor CACV223/1998 (unreported, 25th March 1999). Neither case was cited by the parties, but they do not establish any new law. Indeed, Wong Kwai On's case (supra) also applied the principles in Chu Wing Ning's case (supra). 100.These cases all support the common sense proposition that by a reference to FTA in PTA, the parties envisaged they would whether by themselves or by their respective solicitors draw up a more detailed document than PTA incorporating the terms they had agreed but also other terms dealing with the tenancy of Premises, matters which are not provided in PTA and which could only be resolved by negotiation between P and D. In expressing the terms of PTA and negotiating the additional terms, it is open to P and also to D to put forward their views on such terms and on how such terms should be expressed. Neither a party has a right to dictate the terms of FTA. Provided both parties expressed their views as aforesaid as part of the negotiation process and not demand or maintain a proposed term or amendment which is so patently unreasonable as to amount to evincing an intention not to be bound, either party's request or refusal for amendment is not an act of repudiation (see also Wong Kwai On's case (supra at pp.795-796)). The limitation is this : unless and until both parties agreed, neither side can unilaterally impose terms or conditions more onerous than (or inconsistent with) the terms set out in PTA (see D H Shuttlecocks Ltd's case (supra) and ITEC Food Ltd v Gleeville Co Ltd [2001] 1 HKLRD 850, a case not cited by the parties but which dealt with a provisional tenancy agreement). Therefore there will be situations where parties genuinely seek to negotiate and agree terms of FTA and neither side is to be blamed for not being able to reach agreement. In such circumstances, the law comes to assistance by allowing either or both parties to enforce PTA as an open contract. 101.The inherent difficulties in Mr Chang's arguments are also illustrated by the uncertain stance P adopted as to whether the court should adopt an objective or subjective or hybrid approach to this matter. Quite clearly, in determining whether there is repudiation of contract, the court is concerned to see whether it may be inferred from a party's conduct as to lead a reasonable person to conclude that he does not intend to fulfill his part of the contract (see paragraph 97 above). But unless there is any intention to over-reach (eg by misrepresentation, duress or undue influence etc), there is essentially nothing objective in contractual negotiations. Parties are free to put forward the terms which they wish to be incorporated and bring their respective negotiation strengths and weaknesses into the equation. The cardinal principle of contract law that the court should not write the agreement for the parties stems from the impossible task of assessing the subjective considerations and rationale by the parties during the negotiation process. 102.In recognising the need to look into the parties' uncommunicated explanation/rationale for putting forward their proposed terms (as suggested by Mr Chang), which cannot be described as an objective exercise, P must have acknowledged that in the present context an objective assessment is inherently unworkable. Indeed, Mr Chang asked the court to consider matters private to P, such as P's sincerity by not looking elsewhere for other properties and by actively seeking advice from his solicitors, P's lack of financial constraints and P's alleged willingness to abandon Amendments other than the inclusion of the concept of "reasonableness" (which I do not accept), and matters private to D, such as D's practice of not allowing amendments to Draft in other cases. I do not agree with the approach suggested. 103.I now consider Mr Chang's arguments in the light of the law stated above. In his written final submissions, Mr Chang discussed each of Amendments. Save for P's Amendments to Clause 9, I accept that P genuinely put forward Amendments as part of the negotiation process. I also find that D has satisfied Implied Term in approaching the negotiation process genuinely by tendering Draft for P's consideration and reverting with comments on Amendments. I further find that the fact D refused to entertain most Amendments did not mean it did not approach the negotiations genuinely, as will be apparent from the analysis below. The issue is not whether Amendments are reasonable but whether D's rejection of Amendments (other than those in respect of Clauses 4 and 6(b) of Draft) is unreasonable to the extent of evincing an intention not to be bound by PTA. I propose to deal with Amendments as follows :
104.Looking at D's stance in respect of the totality of Amendments, I cannot say that D had no genuine desire to proceed with the deal. Disagreement and counter-proposals in the course of negotiations do not necessarily breed repudiation. Mr Chang criticised D for failing to give reasons for rejection of Amendments. But if it were a criticism (which I disagree), it is a criticism that should be directed at both parties for P also did not communicate his reasons for Amendments and for continued insistence on or non-withdrawal of Amendments. 105.P's contentions have generally focused on whether Amendments were reasonable. However, the material issue is whether D's stance was unreasonable to the extent of being repudiatory. It does not follow and Mr Chang has cited no legal authority to support the suggestion that a refusal of a reasonable stance adopted by one party over the terms of a draft FTA ipso facto led to the conclusion that the other side is unreasonable. I am satisfied that D has complied with Implied Term by its conduct and had 2nd Term been applicable (which I disagree), it has complied with the same too. Conclusion 106.In the circumstances, P's claim is dismissed. There is no reason why costs should not follow event. I therefore grant an order nisi that P should pay D's costs of the action (including all costs reserved, if any) to be taxed if not agreed with certificate for counsel.
Representation: Mr Jonathan Chang instructed by Messrs Tanner De Witt for the Plaintiff. Mr Daniel Chan instructed by Messrs Lau, Chan & Ko for the Defendant. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cases cited in this judgment