Read the full judgment text of HCA 31/2008 on BabelCite. This Court of First Instance judgment was delivered on 30 September 2009 before Deputy High Court Judge Au (Thomas Au).
Land law – sale and purchase of flat – provisional sale and purchase agreement – purchaser initially signs in own name intending to substitute an unnamed limited company as purchaser – whether vendor consented to subsequent substitution – whether purchaser's identity was a material consideration – whether agent had authority to bind unnamed principal – ratification by principal – applicability of Keighley, Maxsted & Co v Durant to disclosed but unnamed principal – entire agreement clause – effect on extrinsic evidence of agency – repudiatory breach – measure of damages for loss of bargain – purchaser's equitable lien extending to damages for loss of profits – waiver of right to forfeit deposit. The Plaintiffs (Mr Lee and Well Port Corporation Limited) entered into a provisional agreement with the Defendants (Mr Yan and Ms Chan) to purchase Flat 15B, 15 Homantin Hill for HK$28.5 million. Mr Lee had told the estate agent Ms Sze before signing that he would use a limited company to buy the property; the address of the purchaser was left blank on the signed agreement. The court found that Ms Sze had informed Mr Yan before he signed and that Mr Yan had consented to the substitution of Mr Lee's name by a limited company when its name became available. The court rejected the Defendants' contention that Mr Lee's wealth was a material consideration. The court further held that, although Mr Lee had no actual authority to bind Well Port on 7 December 2007 (Well Port not yet in existence), Well Port validly ratified the agreement by written resolution on 12 December 2007, distinguishing Keighley, Maxsted & Co v Durant on the ground that the Defendants knew they were contracting through Mr Lee with an unnamed principal. The entire agreement clause did not bar extrinsic evidence to establish the agency. The court held that the Defendants were in breach by refusing to complete and that the substitution was not a repudiatory breach. Damages for loss of bargain were assessed at HK$3,800,000 (the agreed difference between market value at completion, HK$32,300,000, and the contract price, HK$28,500,000). The court further held, following Whitbread & Co Ltd v Watt and Super Keen Investment Ltd v Global Time Investments Ltd, that the equitable lien of an innocent purchaser extends beyond the deposit to cover damages for loss of bargain, and granted a declaration of equitable lien over Flat 15B for HK$3,800,000 and the costs of the action. In the alternative, the Defendants were held to have waived any right to forfeit the initial deposit by repeatedly seeking to return the deposit cheque. The Defendants' counterclaim was dismissed, with costs to the Plaintiffs.
Legal issues: Whether Mr Yan consented before signing to the subsequent substitution of Mr Lee by a limited company as purchaser · Whether Mr Lee's identity/wealth was a material consideration for Mr Yan · Whether Mr Lee had authority to bind Well Port (actual or by ratification) · Effect of entire agreement clause on extrinsic evidence of agency · Whether substitution of Mr Lee by Well Port was a repudiatory breach · Measure and quantum of damages for loss of bargain · Whether the Plaintiffs are entitled to an equitable lien for damages · Whether the Plaintiffs are entitled to indemnity for stamp duty and estate agent's commission · Whether the Defendants waived the right to forfeit the initial deposit
Outcome: Judgment for the Plaintiffs; the Defendants were held to be in breach of the provisional agreement; the Defendants' counterclaim was dismissed.
Cited by 3 cases · Cites 2 cases