Cheerup Ltd v. Wong Sad Fong

1992, No. A4461

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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BETWEEN

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Coram: Hon. Woo J. in Court

Dates of hearing: 25,26 and 27 November 1996

Date of handing down of judgment 29 November 1996

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JUDGMENT

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1. This action relates to a dispute between an intended vendor, the defendant, and an intended purchaser, the plaintiff. They entered into a provisional agreement dated 22 June 1992 ("the provisional agreement") for the sale and purchase of a property known as Flat 2F, 2rd Floor, No. 218, Sha Tsui Road, Tsuen Wan, New Territories ("the property"). Like many other cases that have gone through our courts in recent years, the provisional agreement was contained in a printed standard form provided by an estate agent, known as Sale & Purchase Co ("the estate agent"). Similarly, as in those other cases, the dispute arose because of the nature of the provisions contained in the standard form, which was apparently not prepared by lawyers.

THE ISSUE

2. The only issue agreed between the parties is the true and proper construction of the provisional agreement, and in particular clause (2) thereof, whether the vendor was entitled to back out of her agreement to sell the property, with little dispute as to facts. It was also counsel's agreement that there was no issue as to the time of payment made by the defendant pursuant to clause (2) being late. No witness was called and counsel agreed that the witness statements that had been filed were to be disregarded. Mr Mui, for the plaintiff, sought an amendment to the Statement of Claim at close to the end of his opening submissions, to raise the point about the time of payment not being in compliance with clause (2). For the reasons I gave on 26 November 1996, I disallowed the amendment and did not allow retraction from counsel's agreement. The only issue before me therefore remains:

What is the proper construction of the provisional agreement and in particular clause (2), in respect of whether the purchaser's right to seek specific performance of the provisional agreement has been excluded.

THE PROVISIONAL AGREEMENT

3. The provisional agreement is in Chinese. It looks like a table consisting of eight boxes enclosing various provisions. The provisions are printed with various particulars filled in with handwriting. I endeavour to describe it and set out all the relevant terms below, adding emphasis to the most material provisions by italics:

I.      The first box on the top contains three smaller boxes, the one on the left shows in handwriting the name of the plaintiff as the purchaser and what purports to be the identity card number of the plaintiff (which presumably is the identity card number of Mr Chung Chor Suen ("Mr Chung"), the representative of the plaintiff). In the box in the middle is printed the name of the estate agent, and in the right-hand box is written the name and identity card number of the defendant as the vendor. In the middle, traversing the top of the three boxes are the words in print "Provisional Sale and Purchase Agreement".

II.     In the second box, against the print "Address of the Property", the property is identified in writing.

III.   In the third box, the following words are in print: "Through our Company's introduction, the Vendor agrees to sell and the Purchaser, upon due inspection, agrees to purchase the abovementioned property. It is hereby agreed as follows:

IV.   The fourth box states the "Price of the Property". It appears that the price was first wrongly written and a character was added to make it read "HK$800,000"; and what appear to be the signatures or initials of Mr Chung and the defendant follow the added character.

V.    The fifth box consists of five items, and on the left hand side of the box, against and stretching along all the five items in perpendicular print are the characters: "Terms of Payment". The five items are as follows:

"[Item A] Deposit paid: HONG KONG DOLLARS TEN THOUSAND ONLY HK$(10,000.00) by cash. Vendor or her agent's acknowledgment of receipt (signed) Wong Sau Fong.

[Item B] Second instalment of the Deposit SEVENTY THOUSAND DOLLARS ONLY HK$(70,000.00) to be paid by banker's cashier order before the 29th day of June 1992 upon the Purchaser attends Tang, Liu / the Vendor attends Chu Kam Keung, Solicitors, for execution of the Formal Agreement for Sale and Purchase.

[Item C] Balance of Purchase Price: SEVEN HUNDRED AND TWENTY THOUSAND DOLLARS ONLY HK$(720,000.00) be paid before the 28th day of August 1992 upon completion and delivery of vacant possession ....

[Item D] The Purchaser shall pay our Company (which is the estate agent) EIGHT THOUSAND DOLLARS ONLY HK$(8,000.00) as service charge upon signing of the Formal Agreement for Sale and Purchase or ...

[Item E] Government stamp duty be borne by the Purchaser. Each party shall pay his own registration fee, legal costs. Nomination fee, developer's legal costs be borne by the Purchaser. Cancellation Agreement fees to be borne by the Vendor."

VI.   The sixth box states: "This property must be bought and sold." "Signature of the Purchaser" (signed) (apparently by Mr Chung). "Signature of the Vendor" (signed) Wong Sau Fong. The quoted statement consisting of seven Chinese characters are printed in a larger font than the characters in the fifth box and in the seventh box referred to below.

VII.  The seventh box contains eight terms. On the left hand side of the box against and along all the eight terms and printed perpendicularly along the margin, there are these characters: "The terms and conditions which our Company, the Vendor and the Purchaser shall observe." Only six of the eight terms in this box are relevant for our present purposes, and I set them out in verbatim:

(1) …

(2) If the Vendor or her agent resiles from the sale of the Property subsequent to the signing of this agreement, she should return twice the amount of the Deposit [Item A] to the Purchaser and immediately pay our Company's service charges of HK$8,000.00 [1 % of Purchase Price] and the Vendor should only then have the right to sell the property to other person(s).

(3) If the Purchaser defaults by not attending the above-mentioned solicitors firm to execute the formal agreement before the time stipulated in [Item B], then the Deposit in [Item A] shall be forfeited by the Vendor. The Vendor should have the right to sell the property to other persons.

(4) If anyone of the parties defaults, the defaulting party must immediately pay our Company's service charge in full (1 % of the Purchase Price) HK$8,000.00. If the Vendor and the Purchaser both agree to cancel this agreement, then such sum be shared by the parties equally. Otherwise, we may instruct solicitors to claim and the legal costs be borne by the defaulting party.

(5) The Vendor agrees that upon signing of the formal agreement for Sale and Purchase/Assignment, the Purchaser may add other person(s) in addition to itself, nominate other person(s) or a company(ies) to purchase the property. The Vendor shall not object.

(6) This Agreement is signed in triplicate. The Agreement will be binding if and only if the Vendor and the Purchaser or their respective agents sign on anyone of the copies ....

(7) …

(8) Our Company, the Vendor and the Purchaser understand the terms and conditions of this Agreement and "jointly declare" to comply with the terms of this Agreement.

VIII. The eighth box is stated to be "Remarks" on the left hand side, and nothing here is relevant to the issues in the present case.

Under and outside the boxes, at the foot of the document, what seems to be the signature of Mr Chung appears on top of the print "The Purchaser's or its agent's signature", the company chop of the estate agent appears in the middle under the print "Sale & Purchase Co", and the signature of the defendant appears over the print "The Vendor's or her agent's signature".

At the bottom of the whole document, there are the following characters with an asterisk at both ends: "In whatever circumstances, the signatories shall be responsible for any legal liabilities."

PROVISION TO EXCLUDE SPECIFIC PERFORMANCE

4. Regarding the legal effect of a provision to exclude specific performance, I think it suffices to cite the following passages approved in the judgment of Bokhary J in Lau Yuet Ming v. Yeung Wai Lun & Anr, infra at pp. 2-3:

"One remembers Sir Edward Fry's well-known statement at p. 65 of the 6th edition of his book, 'The Specific Performance of Contracts' that: --

‘The question always is, What is the contract? Is it that one certain act shall be done, with a sum annexed, whether by way of penalty or damages, to secure the performance of this very act? or is it that one of two things shall be done at the election of the party who has to perform the contract, namely, the performance of the act or the payment of the sum of money? If the former, the fact of the penal or other like sum being annexed will not prevent the Court's enforcing performance of the very act, and thus carrying into execution the intention of the parties; if the latter, the contract is satisfied by the payment of a sum of money, and there is no ground for proceeding against the party having the election to compel performance of the other alternative.’

That, subject to the law's development in regard to penalties, remains good law.

More recently, we have the following statement in 'Spry: The Principles of Equitable Remedies', 4th edition (1990) where this appears at pp. 73 to 74:-

'Often it is found that a contract contains a provision that if a particular event should occur damages, which are sometimes of an agreed or liquidated amount, are to be payable by the person in default. In such cases it is necessary to establish by the ordinary process of construction which of two positions the parties have intended should come about. It may, on the one hand, have been intended that the party in default should have an option either to perform the terms in question or else to pay an amount of money, and if so, specific performance of those terms will not be ordered contrary to his wishes, not so much because damages are a sufficient remedy, but because there is no absolute obligation at law to perform them. An intention of this kind is not often found; but if, for example, there is contained in a lease a provision requiring either a particular covenant to be performed or else recompense at a stated rate or of a stated amount to be paid, sometimes the proper construction is that alternative methods of performance have been provided for. ..."

5. For a provision being effective to exclude specific performance, its wording must be clear and unambiguous. This principle can be found in the many decisions on the subject cited below, for example, Kentex Investment Ltd v Hui Lap Ping Sam, infra at p. 4, Lee Tat Kwong v Choi Pui Kei Stephen, infra at 115B-C.

THE DECISIONS ON AKIN PROVISIONS

6. Mr Li, for the defendant, very helpfully produced a schedule of cases decided by our courts in recent years, where provisional agreements making provisions similar or dissimilar to those I have to deal with in the present case regarding the purchaser's right to seek specific performance were discussed. One hopes the cases are exhaustive on the subject. It is useful to set them out and in chronological order relative to the dates of judgment for ease of future reference. The decision in each of the authorities depended mainly on the true and proper construction of the particular provisions concerned. I have also put in italics the provisions which were held by the courts to have the effect of excluding the purchaser's right to seek specific performance; those cases without italics are where the courts held that the relevant clauses did not exclude that right.

(1) Kong Fong Heng v Luk Po Ling (HCA 3192/86, 6 June 1990, Deputy Judge Suttill, unreported), where the relevant clause 4 can be found at page 12 which reads: “ Obligation of both the vendor and the purchaser: should the purchaser fail to observe or comply with any of the terms and conditions of the agreement, the deposit so paid shall be absolutely forfeited to the vendor who may rescind the sale and re-sell the property in any way without purchaser’s consent; if the vendor is in breach of the agreement, the vendor shall pay to the purchaser double of the deposit money now pay (sic.) by the purchaser to the vendor.” The learned judge held, at page 12, that the clause was one relating to damages expressed in financial terms and it would not and could not exclude the equitable remedy of specific performance.

(2) Lee Tat Kwong v Choi Pui Kei [1991] 2 HKC 109, 30 July 1991, 111D-F, where the relevant clause 11 provided as follows: “If the purchaser does not within the stipulated time go to the solicitors’ office to deal with the procedure, the vendor is entitled to forfeit the provisional deposit, and further has the right to resell the property or retain it for his own use. If the vendor in breach of contract failed, within the stipulated time, to go to the solicitors’ office to deal with the procedures, the vendor shall compensate the purchaser by twice the amount of the provisional deposit in the total sum of HK$40,000 and the purchaser is not entitled to dispute that. If the vendor in breach of contract failed immediately to compensate (the purchaser) by the amount of the deposit,the purchaser shall be entitled to take legal action to enforce the purchase by specific performance, and also to claim for any loss consequential thereupon.” Godfrey J held at 113H thus: “… if the vendors, having failed not only to complete the contract in accordance with its tenor by conveying the property to the purchaser, also fail to compensate the purchaser, then the purchaser is to be entitled to take legal action to enforce the purchase by specific performance. But otherwise, as I read cl 11, the purchaser is not entitled to do so.”

(3) Tsang Siu Lan v Lau Kowk Wo (HCA 4050/91,27 November 1991, Mayo J, unreported) where the plaintiff vendor was apparently applying for summary judgment to seek, inter alia, a declaration that she was entitled to rescind a provisional agreement with a term, at page 2 of the judgment, as follows: "If the vendor should resile from the transaction as scheduled, the vendor shall compensate the purchaser's loss at double the deposit, i.e., $40,000.00. At the same time, the vendor shall pay to ... service charges at 1% of the property price. Thereafter, this provisional agreement shall also be of no effect." The learned judge held at page 5 that "the agreement would no longer be effectual once the payment was made."

(4) Wong Lai-fun v Lee Ha [1992] 1 HKLR 125, CA, 24 January 1992 where the relevant clause 7 at 127(15) reads as follows: "7. Should the Vendor after receiving the initial deposit paid hereunder fail to complete the sale in the manner herein contained the Vendor shall immediately compensate the Purchaser with a sum equivalent to the amount of the initial deposit and the Purchaser shall not take any further action to claim for damages or to enforce specific performance." The Court of Appeal held at 133(25) that "it is not open to the purchaser to take any action to claim damages or enforce specific performance."

(5) Kentex Investment Ltd v Hui Lap Ping Sam (HCMP 3447/91, 7 February 1992, Godfrey J, unreported), where the relevant clause (3) was set out at page 3 as follows: "(3) Should the Vendor be in breach of this Agreement after receiving the initial deposit, the Vendor shall be only liable to repay the said initial deposit to the Purchaser together with an additional sum equivalent to the said initial deposit as liquidated damages. In this event, the Vendor shall also pay to our Company (i.e., the estate agent) a sum of $16,550 as Vendor and Purchaser service charges. The Vendor shall reserve the right to deal with the suit property. In any event, the Purchaser shall not proceed with any claim." The learned judge held at page 6 that clause (3) "does in my judgment, clearly give the vendor the option, despite being in breach of contract, to confine the purchaser in that event to the one remedy for which the contract provides, namely, a claim for his deposit back with an additional sum equivalent to it as compensation. The matter is put, I think beyond doubt by the final sentences of clause III : 'The Vendor shall reserve the right to deal with the suit property. In any event, the purchaser shall not proceed with any claims.' Obviously, this does not preclude the purchaser from claiming the compensation and the initial deposit. But it does, in my judgment, preclude the purchaser from any other claims; including any claim for specific performance."

(6) Chan Chun Ming Colman & Anr v Chung Lik Keung & Anr (HCA 4025/91, 17 June 1992, Barnett J, unreported) where the relevant clause 6 was set out at page 3, as follows: "Should the Vendor fail or refuse to sign the Formal Agreement in the manner herein contained the Vendor shall refund to the Purchaser the initial deposit paid and at the same time immediately compensate the Purchaser with a sum equivalent to the amount of the initial deposit as liquidated damages in full and final settlement of the claims of the Purchaser." It was held at page 7 by the learned judge that "In my judgment, the parties' rights are extinguished only upon the vendor both failing to sign the Formal Agreement and upon payment of the required sums by him. Until he has done both, clause 6 has not effectively been invoked and consequently is not effective to extinguish the other remedies open to the parties."

(7) Tung Kiu Ying v Chan Mei Yuet (HCA 2682/91, 25 June 1992, Barnett J, unreported), where the relevant clauses can be found at pages 2 and 3, and they read: "(2) Should the vendor be in breach of this Agreement after receiving the said deposit, the Vendor shall be liable to repay the said initial deposit to the Purchaser together with an additional sum equivalent to the said initial deposit as liquidated damages. In this event, the Vendor shall also pay to our Company (i.e., the broker) a sum of HK$___ as handling charges. (3) Should the Purchaser be in breach of this Agreement after paying the said initial deposit, the said initial deposit shall be absolutely forfeited by the Vendor and the Purchaser shall at the same time pay to our Company a sum of HK$___ as handing charges." The learned judge concluded at page 12 that "clause 2 falls far short of what I regard as a plain and unambiguous escape or cancellation clause."

(8) Wong Shiu Hung v Kwok Sing Leung & Anr [1992] 2 HKC 369, 13 July 1992, Keith J, where the relevant clauses were set out at 372E-F: "(3) Should the vendor be in breach of this agreement after receiving the initial deposit, the vendor shall be liable to repay the said initial deposit to the purchaser, together with an additional sum equivalent to the said deposit as liquidated damages. In this event, the vendor shall also pay to the estate agents a sum of HK$6,150 as service charge. In addition, cl 4 provided that if the plaintiff was in breach of the provisional agreement after paying the initial deposit of $10,000, the deposit would be absolutely forfeited, the defendants would be entitled to resell the flat without the plaintiff's consent and the plaintiff would be required to pay the estate agents' charges of $61,50." The learned judge held at 376H that clause 3 did not prevent the purchaser from seeking specific performance.

(9) Wong Oi Chau v Mak Ka Nung (HCA 4989/91,21 July 1992, Deputy Judge Jennings, unreported), where the relevant terms at page 2 read: "5. If the Purchaser does not carry out the conditions of this agreement ... The Vendor apart from forfeiting the deposit shall be entitled to resell the said property in any manner or keep for his own use. The purchaser shall not object ... 6. If the Vendor after receiving the initial deposit breaches the agreement in not selling or not performing this sale and purchase agreement, the Vendor shall immediately pay compensation equal to double the amount of deposit together with the Company's agency fee ... If the Vendor does not immediately pay compensation of the deposit, then the legal costs incurred by the purchaser in claiming compensation shall be borne by the Vendor." The learned judge held at page 5 as follows: "I find that clause 6 of the agreement does not constitute a plain and unambiguous cancellation clause, and that the defendant is not entitled under the sale and purchase agreement to pay the sum stipulated in clause 6 thereof instead of completing the sale.”

(10) Lau Yuet Ming v Yeung Wai Lun & Anr (HCA 4014/91, 4 September 1992, Bokhary J, unreported), where the provisions of the relevant clause 3 as set out at page 2 were, mutatis mutandis, identical to those of the clause (3) in Case No. (8) above, and the learned judge held at page 5 that the clause did not destroy the right of the purchaser to specific performance.

(11) Wong Pui Ching v Wu Mei Fong & Ors (HCA 3343/91, 30 November 1992, Deputy Judge Jones, unreported), where at pages 15-16, the relevant provisions were set out thus: "4. Should the purchaser fail to complete the purchase in the manner herein contained the deposit shall be forfeited to the vendor and the vendor shall then be entitled at his absolute discretion to sell the said premises to anyone he thinks fit. 5. Should the vendor after receiving the initial deposit paid hereunder fail to complete the sale in the manner herein contained the vendor shall immediately compensate the purchaser with a sum equivalent to the amount of the initial deposit as liquidated damages together with the refund of the initial deposit." While the learned judge observed at page 16 that lack of mutuality was not fatal to a construction clearly intended on the wording, he held at page 19 that "1 cannot find, neither from the words nor from the whole agreement including the handwritten addendum, that the parties intended to give the vendor an option to pay and rescind."

(12) Ma Li Sba v Tsang Sui Siu (HCA 2362/92, 18 December 1992, Wong J, unreported), where the relevant clause 3 was, mutatis mutandis, identical to the clause 3 in both Case No. (8) and Case No. (10) above. The learned judge held at page 11, that no “clear words exist to take away the purchaser's right to specific performance.”

(13) Wong Lai Ha v Chung Sau Wah& Ors [1994] 2 HKC 646,25 March 1993, where the relevant clauses were set out at 648G-I, as follows: "4(ii) If the seller fails to perform this contract after it has been signed or breaks his promise halfway, or does not go to the abovementioned designated solicitor's office to sign the formal purchase and sale contract on the abovementioned designated date, then apart from refunding the first instalment of the deposit without interest, he shall compensate the purchaser with an amount equivalent to the first instalment of the deposit.. 8. Remarks: It is clearly stipulated that the purchaser must buy and the seller must sell the abovementioned property. If there is a breach of promise, then compensation will be claimed according to law ..." Deputy Judge W Wong held at 652A that "the said agreement did not exclude claims for damages on the said premises. Further cl 8 provided that 'compensation will be claimed according to law'. In my judgment cl 4(ii) did not bar the plaintiff from seeking specific performance."

(14) Wong Hiu Ping v ChanYee Man & Anr (HCA 6082/91, 25 March 1993, Deputy Judge Evans, unreported), where the relevant clauses were set out at pages 2 and 3: "2. Should the Vendor be in breach of this agreement after receiving the said initial deposit the Vendor shall be liable to repay the said initial deposit to the Purchaser together with an additional sum equivalent to the said initial deposit as compensation. In this event, the Vendor shall also pay to our company a sum of HK$24,800.00 as handling charges. 3. Should the Purchaser be in breach of this agreement after paying the said deposit, the said initial deposit shall be absolutely forfeited by the Vendor and the Purchaser shall at the same time pay to our company a sum of HK$24,800.00 as handling charges." The learned judge made an order for specific performance after concluding at page 13 that "A clearly expressed exclusion of a liability is required and that does not exist in this case."

(15) Man Sun Finance (International) Corp v. Lee Ming Ching Stephen [1993] 1 HKC 113, 2 April 1993, CA, where at 115 the relevant clauses in a provisional agreement were stated: "1. The vendor and the purchaser shall complete the formal agreement for sale and purchase in respect on the above premises at the offices of M/s___ on or before 3 April 1992. ... 7. If the purchaser fails to observe the above condition when due, all deposits or part payment of purchase money already paid shall be forfeited by the vendor. The vendor shall have the absolute right to resell the above premises to any person without notice. 8. In the event the vendor is unable or unwilling (for whatever reasons) to enter into formal agreement for sale and purchase with the purchaser and all deposits already paid shall be double refunded to the purchaser without interest, otherwise the. purchaser reserves the right to buy the premises." It was held by the Court of Appeal that because the vendor tendered the double deposit to the purchaser on 22 June 1992 instead of on 3 April 1992, the time prescribed for completing the formal sale and purchaser agreement, the purchaser was entitled to specific performance (see 119A, per Litton JA; 122A-B, per Sears J; and 126C per Godfrey J). The learned judges observed, obiter, that but for the time element, the vendor would have the right to resile from the provisional agreement (see 118I, 121I-122A and 126C).

(16) The Thompsett Ming Ltd v Triumph Field Ltd (HCA 1826/92, 2 April 1993, Deputy Judge Yeung, unreported), where the learned judge set out the relevant provisions at pages 4 to 5 as follows: "(4) Should the purchaser fail to complete the purchase in the manner herein contained the deposit shall be forfeited to the vendor and the vendor shall then be entitled at his absolute discretion to sell the said premises to anyone he thinks fit. (5) Should the vendor after receiving the initial deposit paid hereunder fail to complete the sale in the manner herein contained the vendor shall immediately compensate the purchaser with a sum equivalent to the amount of the initial deposit as liquidated damages together with the refund of the initial deposit. The learned judge said at page 16: "Having considered Clause 5 in conjunction with the other clauses, in particular Clause 4, the Court is satisfied that it is neither effective nor clear to enable the Defendant to escape from the remedy of specific performance by the payment of the liquidated damages and the refund of the deposit."

(17) Wong Wai Ping v Nio Daniel (HCA 4258/93, 9 February 1994, Rhind J, unreported), where the relevant clauses, set out at page 3, provided as follows: "3. Should the Purchaser fail to perform his Agreement within the prescribed time, the Vendor has a right to forfeit the deposit paid together with a right to re-sell the Property to other person. 4. Should the Vendor fail to perform this Agreement within the prescribed time, then (the Vendor) should return (the Purchaser) the initial deposit in doubt as confirmed compensation, i.e., HK$__." The learned judge concluded at page 8 that "There is, my judgment, nothing in Term 4, either express or implied, capable of conferring the right of escape the Defendant (i.e., the vendor) seeks."

(18) Cheung Chu Chung v Chan Moon Tim & Anr (HCA 6337/92, 18 February 1994, Jones J, unreported) where the relevant clauses were set out at page 3, as follows: "4. Should the Purchaser fail to complete the purchase in the manner herein contained the deposit shall be forfeited to the Vendor and the Vendor shall then be entitled at his absolute discretion to sell the said premises to anyone he thinks fit. 5. Should the Vendor after receiving the initial deposit paid hereunder fail to complete the sale in the manner herein contained the Vendor shall immediately compensate the Purchaser with a sum equivalent to the amount of the initial deposit as liquidated damages together with the refund of the initial deposit." The learned judge held at page 4Q that "the equitable remedy of specific performance can be granted if appropriate."

7. I have listed the line of decisions on the same topic so as to see how our courts have construed similar provisions in the provisional agreements that had been put before them and what was considered to be clear and unambiguous for taking away the purchaser's right to seek specific performance and what was considered to amount by reasonable inference to have that effect. The provisions, which were held to have the effect of excluding specific performance, have been emphasised by me in italics in the cases cited above.

8. It is instructive to note that in Man Sun Finance, Case (15), that the provision that "In the event the vendor is unable or unwilling (for whatever reasons) to enter into formal agreement for sale and purchase with the purchaser and all deposits already paid shall be double refunded to the purchaser without interest, otherwise the purchaser reserves the right to buy the premises" was sufficient for the Court of Appeal to come to the view, albeit obiter, that it was effective to exclude specific performance.

9. It is not necessary for any particular form of words to be used to exclude the purchaser's right to seek specific performance. What is required is a clear intention as can be derived from the terms used in the agreement.

CONSTRUCTION OF THE PROVISIONAL AGREEMENT

10. There are quite a number of provisions in the provisional agreement on which reliance can be placed in arriving at the clear intention of the parties.

The Prominence of the Statement "This property must be bought and sold"

11. Mr Mui heavily relied on the facts that the seven characters in the sixth box which states "this property must be bought and sold" are in larger characters than those used for the items in the third, fifth and seventh boxes, and that in particular, the plaintiff and the defendant signed after these seven characters. He submitted that by the emphasis evidenced by the larger size of the seven characters, their positioning being in the near-middle of the document, and that the parties were required to sign against them and did sign against them, it was demonstrated that the clear intention of the parties was that the plaintiff must buy and the defendant must sell the property.

12. However, the same sized fonts, if not bigger, were used for the characters "Name, Identity Card Number" and "Address" in the first box, "Address of the Property" in the second box, "Price of the Property" in the fourth box, and "Terms of Payment" in the fifth box. I am of the view that this is but a matter of format of the document, and without more, being read in the context of the appearance of the whole document, does not give the effect that Mr Mui contended.

13. Mr Mui' s argument about the clear wording of "this property must be bought and sold" must, in my opinion, be viewed in the context of other provisions in which other imperatives are used. For instance, in the third box, "the Vendor agrees to sell and the Purchaser ... agrees to purchase", and in the fifth box "the Purchaser shall pay" in [Item D] and "Each party shall pay" in [Item E]. In the seventh box, there are words such as "the Vendor should only then have the right to sell the property to other persons" in clause (2), "The Vendor should have the right to sell the property to other persons" in clause (3), "The Agreement will be binding" in clause (6), "jointly declare to comply with the terms of this Agreement" in clause (8), and "The terms and conditions which our Company, the Vendor and the Purchaser shall observe" on the left hand side against and encompassing all the eight clauses in this seventh box. There is also the print that "the signatories shall be responsible for any legal liabilities" at the bottom of the form. If prominence or overbearing prominence is given to "this property must be bought and sold" as contended by Mr Mui, the court should not, in all fairness and by the same token, ignore the imperatives used in the seventh box, namely, "The terms and conditions which ... the Vendor and the Purchaser shall observe" which obviously applies to the most relevant clause (2), the reference to "The Agreement will be binding" in the clause (6), and the "joint declaration" to comply with the terms of the agreement referred to in the clause (8).

14. The positioning of the statement in the near-middle of the document by itself, in my view, does not mean that greater force must be attached to it for the purpose of interpretation. Moreover, I think the signatures of the purchaser and the vendor being placed along the statement in the same box could be caused by the fact that this sixth box and anything above contained the agreement between the purchaser and vendor which required their signatures, whereas the boxes below contained the terms agreed amongst three parties, including the estate agent. That was the reason why, as I see it, that the bottom of the document was signed by three parties instead of merely two. I am afraid that looking at the document as a whole I cannot agree with Mr Mui on his submissions relating to the prominence of the statement.

The Effect of Clause (2)

15. The last provision of clause (2) of the terms and conditions which the estate agent, the vendor and the purchaser agreed that they should observe is crucial. It provides that only upon the return of twice the amount of the deposit of $10,000, i.e., $20,000, to the purchaser and immediate payment of the estate agent's service charges of $8,000 that the vendor should only then have the right to sell the property to other persons. It shows very clearly that if the vendor performs the obligations under the earlier portion of clause (2), this last provision will become operative. The operation of this last provision conflicts with the purchaser being allowed to seek specific performance, for if the purchaser is allowed to seek specific performance, the vendor will not and cannot have the right to sell the property to other persons. In my judgment this last provision necessarily excludes the purchaser's right to seek specific performance from the court. If one looks at clause (3) which provides for the event of the purchaser's default, the same wording as in clause (2), save the words "only then", is repeated, thus: "The Vendor's should have the right to sell the property to other persons." This reinforces my view of the effect of the last provision in clause (2). Clause (2) therefore presented to the defendant an option which it was for her to exercise at her discretion to back out of the provisional agreement. This option was agreed to by the plaintiff as part and parcel of the provisional agreement which was binding by virtue of, if nothing else, clause (6) once the parties signed, and the plaintiff had by clause (8) declared to comply with the terms of the provisional agreement which included clause (2). Clause (2) is a provision to provide an option to the vendor to cancel the agreement, and not a device to secure the sale of the property.

The Main Object of the Provisional Agreement

16. Mr Mui argued that the statement in the seventh box with the plaintiff's and the defendant's signatures affixed after it made their intention abundantly clear that the plaintiff must buy and the defendant must sell the property. It followed, so the argument went, that if I construed that clause (2) had the effect of excluding specific performance, clause (2) was inconsistent with the main object of the provisional agreement, and must be rejected. He relied on passages in The Interpretation of Contracts by Kim Lewison (1989), at para. 8.09, summarised as follows:

"Words and even whole clauses may be rejected if they are inconsistent with the main object of the contract, as ascertained from a reading of it as a whole."

Mr Mui conveniently forgot the decision of the Court of Appeal in Wong Lai fan v Lee Ha, supra, Case No. (4), where the point on main purpose of contract in Fong Yee-lan v Yiu Yau-ping (HCA 3299/91, unreported) was rejected. At 132 (20-25), Nazareth JA, delivering the judgment of the Court, had this to say:

"Turning that to that judgment (i.e., Fong Yee-lan's judgment), Mayo, J. was obviously right in his observation that the main purpose of the provisional agreement is unclear. Before us, both the execution of the formal agreement, and the ultimate sale and purchase have been touched upon. We do not think it necessary or indeed proper in the circumstances, particularly in the absence of direct submissions, to express any opinion upon that question. It is sufficient to say that even if the answer were certain, it could not alter the clearly expressed intention of clause 7."

17. When reminded that the long line of cases in Mr Li' s schedule of cases where each dealt with the proper construction of the provisions of a provisional agreement were decided without taking into account the main purpose approach, Mr Mui conceded that they were not wrongly decided.

18. Further, a number of the provisions in the provisional agreement contradict the alleged main object that the plaintiff must buy and the defendant must sell the property. [Item E], which is an earlier provision than the sixth box, provides for payment of cancellation agreement fees by the vendor; clause (2) allows the vendor to resile; clause (3) provides for the event of the purchaser's default; and clause (4) provides for the event of a party's default as well as a mutually agreed cancellation. All these provisions demonstrate that the parties must have envisaged an agreed cancellation of the provisional agreement or one of the parties resiling from it or defaulting in performance of its obligations. Clause (5) enables the purchaser to nominate another person to buy the property, which appears to be contrary to the alleged main object that the purchaser, i.e., the plaintiff itself, must buy. I am of the view that there was no main object as such, save that the parties intended to enter into the provisional agreement for the sale and purchase of the property with all its terms that were binding upon them.

19. Maybe, the statement "this property must be bought and sold" was included in the document for the purpose of reinforcing the idea the provisional agreement was binding upon the signatories, despite its being provisional in nature. But that is as far as it can go. The statement cannot be taken as being the main object and having any effect overriding the other provisions of the provisional agreement.

Repugnant and Inconsistent Provisions

20. Mr Mui also sought to argue that the statement "this property must be sold and bought" must be given effect to by excluding the operation of other terms of the provisional agreement which were repugnant to or inconsistent with it. He contended that any such other provisions were void and must be excluded. He referred me to The Interpretation of Contracts, para. 8.08 which states:

"If a clause in a contract is followed by a later clause which destroys the effect of the first clause, the later clause is to be rejected as repugnant and the earlier clause prevails. If, however, the later clause can be read as qualifying rather than destroying the effect of the earlier clause, then the two are to be read together, and effect given to both."

21. Mr Li directed my attention to Chitty on Contracts, 27th Ed., Vol. 1, para. 12-066 on the same topic, where it is stated:

"Where the different parts of an instrument are inconsistent, effect must be given to that part which is calculated to carry into effect the real intention of the parties as gathered from the instrument as a whole, and that part which would defeat it must be rejected. The old rule was, in such a case, that the earlier clause was to be received and the later rejected; but this rule was a mere rule of thumb, totally unscientific, and out of keeping with the modem construction of documents. To be inconsistent a term must contradict another term or be in conflict with it, such that effect cannot fairly be given to both clauses. A term may also be rejected if it is repugnant to the intention of the parties as it appears from the document. However, an effort should be made to give effect to every clause in the agreement and not to reject a clause unless it is manifestly inconsistent with or repugnant to the rest of the agreement."

22. I accept the reasoning and the law stated in Chitty.

23. Upon the proper construction of the provisional agreement as a whole, I do not find the last provision in clause (b) being inconsistent with, let alone repugnant to, and far less destroying the effect of, the statement that "this property must be bought and sold". The last provision in clause (b) has the effect of excluding the purchaser's right to seek specific performance, but it is for modification of the purchaser's right to buy the property given rise by the agreement. The right of the parties to cancel the provisional agreement if they so see fit, as provided for in clause (4) and [Item E], is an even greater departure from the alleged intention that "the property must be bought and sold". All these provisions can at the same time be given effect to as part and parcel of an overall agreement between the parties. There is no reason for the court to reject any one of them.

24. Looking at the provisional agreement as a whole, whereby the parties agreed to sell and purchase the property, it is clear that the parties intended to carry out the transaction and each of the terms and conditions in it as was binding upon them. Clause (2) cannot be construed as having less effect or force than the statement "the property must be bought and sold". This statement is, in my view, no different from the provision that the vendor agreed to sell and the purchaser agreed to purchase the property. Clause (2) was as much part of the agreement of the parties and no less binding, as expressly stated by clause (6) in the same box that "The Agreement will be binding" if the parties signed on one of the triplicate copies, and the parties had by clause (8) ''jointly declared" to comply with the terms of the agreement.

CONCLUSIONS

25. In the circumstances, I reject all the arguments advanced by Mr Mui. I hold that clause (2) is sufficiently clear and unambiguous as to the intention of the parties that an option to back out of the provisional agreement was afforded to the defendant. The defendant had complied with clause (2) and effectively rescinded the provisional agreement.

26. I dismiss the plaintiff's claim and make an order nisi that the defendant do have the costs of this action. I make a further order that the defendant's own costs be taxed in accordance with the Legal Aid scheme. I also give the parties liberty to apply relating to the double amount of the deposit paid by the defendant to the plaintiff and her payment of the handling charges to the estate agent, should any dispute in respect thereof arise in the future. Such payments were made by her with cheques in the exercise of her rights under clause (2) of the provisional agreement, but they were refused. The cheques representing the payments must have become invalid after the passage of such a long time.

Mr Louie K K Mui, instructed by Messrs Gilbert Tang & Co, for the plaintiff.

Mr C Y Li, instructed by Messrs Gallant Y T Ho & Co, for the defendant.