Link Brain Ltd. v. Fujian Finance Co. Ltd.

Case No.CACV 104/1989[1990] 2 HKLR 333[1990] 2 HKLR 353

Court

Court of Appeal

Date20 Feb 1990

JudgeCons, V.-P., Clough JA, Penlington JA

Case Document

100%Judiciary

CACV000104/1989

IN THE COURT OF APPEAL	Civil Appeal
	No. 104 of 1989

BETWEEN

LINK BRAIN LIMITED

Plaintiff/
Respondent

AND

FUJIAN FINANCE COMPANY LIMITED

Defendant/
Appellant

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Coram: Hon. Cons, V.-P., Clough & Penlington, JJ.A.

Date of hearing: 12 December 1989 & 8 January 1990

Date of handing down of reasons for judgment: 20 February 1990

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REASONS FOR JUDGMENT

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Clough, J.A.:

1. These are the reasons of the court for its order made on the 8th January 1990 dismissing with costs the appeal of the defendant, Fujian Finance Company Limited ("the vendor"), against the order of Mortimer J. made on the 30th May 1989 under Order 86 in favour of the plaintiff, Link Brain Limited ("the purchaser") for specific performance of a preliminary agreement dated the 23rd January 1989 and made between the vendor and the purchaser for the sale and purchase of rooms 2701, 2702 and 2703 in International Building, 139 Des Voeux Road, Central, Hong Kong ("the property"). As the purchaser had not yet approved the vendor's title, the order included the usual direction for an inquiry as to whether a good title could be made to the property. The learned judge made his order when allowing the purchaser's appeal against the order of Master Woolley dated the 11th May 1989 dismissing the purchaser's application for summary judgment under Order 86.

2. The preliminary agreement was in a very unusual form and evidently emanated from an estate agent. It described itself as a "PRELIMINARY AGREEMENT FOR SALE AND PURCHASE" and began by providing that the parties had agreed that the vendor would sell and the purchaser would purchase the property "subject to good title provided by the vendor" and subject to the terms and conditions following thereafter in the agreement. Clause 1 provided that vacant possession of rooms 2701 and 2702 would be given on completion but that room 2703 was sold subject to an existing tenancy which would expire on the 31st July 1989. Clause 2 contained provisions regarding a brick wall to be built by the vendor to separate room 2703 from room 2704. Clause 3 fixed the sale price at $8,414,000 and clause 4 provided for the payment of that price by the following instalments:

(a)	1 per cent ($84,140), payable to the vendor's solicitors when the agreement was signed;
(b)	14 per cent ($1,177,960), payable to the vendor's solicitors "upon signing the Sale and Purchase Agreement"; and
(c)	the balance ($7,151,900) of the sale price, payable "upon assignment".

3. Clause 5 dealt with legal costs.Clause 6 (which had been amended under circumstances which gave rise to no issue) in its amended form and clause 7 were in the following terms :

Signing of Documents

	(a)	Sale and Purchase Agreement to be signed within 7 days of the receipt of the Sale and Purchase Agreement by the purchaser's solicitors. All title deeds to be supplied to the Purchaser's solicitor as soon as is practically possible following the signing of this agreement.
	(b)	Assignment - completion on or before 21st February 1989.

Legally Binding Agreement

Subject to the terms and conditions contained in this agreement and clear title to be provided by the Vendor it is the intent of both Vendor and Purchaser that this agreement shall be legally binding so that the Vendor is bound to sell and tae Purchaser is bound to purchase the subject property.".

4. The seven day period proved to be inadequate for the parties to agree the terms of the Sale and Purchase Agreement. The preliminary agreement was actually signed and dated on the 24th January 1989. On that date the purchaser paid the first instalment ($84,140) of the sale price and the vendor's solicitors (Messrs Chan, Lau & Wai : "CLW") sent to the purchaser's solicitors (Deacons) a draft Agreement for Sale and Purchase together with the vendor's documents of title relating to the property. There were twelve documents in all, beginning with a 1962 assignment and including an assignment dated the 22nd April 1982. A copy of the tenancy agreement affecting rooms nos. 2703 and 2704 was not supplied to Deacons until the 27th January 1989. CLW's letter dated the 24th January 1989 accompanying the documents of title stipulated that they were sent to Deacons ".... subject to your firm's undertaking to hold the same to our order and to return the same to us on demand.".

5. The draft Agreement for Sale and Purchase appears to have been an adaptation of a standard form because a number of clauses had been deleted before the draft was sent to Deacons. Clause 12 of the draft provided that it was to supersede all previous agreements whether oral or in writing between the parties or their agents. For the purposes of this appeal it is only necessary to mention the following clauses. Clause 3 referred to an "initial deposit of HK$84,140.00"as having been paid by the purchaser to the vendor. The clause went on to provide that "a further deposit of HK$1,177,960.00" should be paid by the purchaser to the vendor on the signing of the Agreement for Sale and Purchase and that the balance ($7,151,900) of the purchase price should be paid on completion.

6. Clause 4 of the draft provided that completion of the purchase should take place on or before the 21st February 1989 and clause 6 provided that time should be of the essence of the Agreement. Clause 8 provided that the title should commence with a specified Crown Lease granted in 1918 and the assignment dated the 22nd April 1982 referred to above. Clause 10 proposed to incorporate Part A of the Second Schedule to the Conveyancing and Property Ordinance (Cap. 219) except clauses 2 (Insurance) and 7 (Requisitions) of that Schedule. Clause 18 provided that if the purchaser should be separately represented when the Agreement was signed the purchaser ".... shall on signing of this Agreement be deemed to have accepted the title of the Vendor.".

7. We interpose that whereas the preliminary agreement provided in terms that the vendor was to give a "good title" to the purchaser and did not expressly or impliedly exclude the provisions of section 13 (1) (a) (ii) of the Conveyancing and Property Ordinance (which entitled the purchaser to require proof of title to the property commencing with the 1962 assignment), the combined effect of clauses 8, 10 and 18 of the draft submitted to Deacons by CLW was that the vendor was proposing to show title by reference to a root commencing with the 1982 assignment and that, upon signing the proposed Agreement for Sale and Purchase, the purchaser was not to be permitted to make any requisitions on title but was to be deemed to have accepted the purchaser's title.

8. Not surprisingly, Deacons did not accept these proposals on behalf of the purchaser. On the 28th January 1989 they returned CLW's draft with amendments and they followed this with a further proposed amendment on the 30th January 1989. The amendments required by Deacons included the deletion of clause 8 and the substitution for clause 18 of a clause (re-numbered 17) which would have given the purchaser the right to requisition on the vendor's title (1) until "on or before" three days before the completion date (the 21st February 1989) or (2) within 21 days after the delivery of the title deeds to Deacons, whichever was the earlier date. This would have produced the result that the 1962 assignment would have been treated as the root of title (as required under the original agreement) and the purchaser would have been entitled to requisition on the vendor's title during the stipulated period.

9. There were other amendments proposed by Deacons concerning other aspects of the transaction, but it was common ground below and on appeal that neither party was to be held to be under any liability in respect of the delay occasioned by the resultant discussion of those matters between the solicitors of both sides.

10. On the 30th January 1989 there were several indecisive exchanges by letter between the solicitors concerning title and other issues and the last letter to Deacons from CLW on that date indicated that if the purchaser persisted in demanding a warranty as to the area of the property the vendor would consider withdrawing from the sale.

11. On the 31st January 1989, when the Sale and Purchase Agreement was due to be signed pursuant to clause 6 of the preliminary agreement, the purchaser made an unsuccessful attempt to tender a cheque for $1,177,960 to CLW on behalf of the vendor. An employee of the purchaser was sent to CLW's office with a cheque for that sum drawn in favour of CLW and a letter dated the 31st January 1989 from Deacons to CLW. For reasons which are not now material the employee was unable to hand over the cheque to the relevant partner in CLW's office. However it is clear from the terms of the accompanying letter (a copy of which was also sent by Deacons to CLW enclosing a pnotostat copy of the cheque) that whilst Deacons proposed that the purchaser was ready and willing to enter into the formal Agreement and pay the sum of $1,177,960 pursuant to the preliminary agreement, the cheque was nevertheless tendered to CLW on the basis that it would only be released to them " .... upon our receipt from you of the formal Agreement for Sale and Purchase (which shall be on reasonable and acceptable terms made pursuant to the Provisional Agreement) and on the condition that we shall be afforded reasonable time for approval of the same.''

12. The terms of the formal Sale and Purchase Agreement were never agreed and no such Agreement was ever signed. Exchanges of letters continued between the solicitors on the 31st January. In one of their letters on that date CLW informed Deacons that, as the parties could not agree to all the terms and conditions of the formal Sale and Purchase Agreement, CLW had been instructed by the vendor that the vendor had no alternative but to withdraw from the sale. Deacons were asked to confirm whether the purchaser was agreeable to this course and informed that upon such confirmation CLW would ask the vendor to refund the initial payment made by the purchaser.

13. This was by no means the end of the matter. On the 1st February CLW sent a letter to Deacons contending that the purchaser was being unreasonable about various matters including the question of the vendor's title and that in view of this the purchaser was ".... in fact asking our client to withdraw from the sale which our client is quite happy to do so." However, on the same day CLW sent their revised draft Sale and Purchase Agreement to Deacons who were informed in CLW's accompanying letter that :

"We are instructed by our client to inform you that unless we receive the said Agreement for Sale and Purchase duly executed by your client together with the cheque for the sum of $1,177,960 being the balance of deposit money payable thereon before 12.00 p.m. on the 2nd February 1989 otherwise (sic) you can return all the relevant title deeds and documents relating to the above properties as soon as possible."

14. CLW's revised draft included some of Deacon's amendments to the earlier draft and rejected others. In particular, in the revised draft CLW had restored their original clause 8 making their root of title (apart from the Crown Lease) the 1982 assignment. CLW had also restored their original clause l8 declaring that on signing the Agreement the purchaser should be deemed to have accepted the title of the vendor, i.e. the purchaser's requisition clause (numbered 17 by Deacons) had also been rejected.

15. In their first letter dated the 2nd February Deacons reacted to CLW's revised draft by commenting that it did ".... not contain reasonable terms made pursuant to the Preliminary Agreement for Sale and Purchase and in particular, purports to force our clients to accept the vendor's title upon the signing of the agreement". After taking the purchaser's instructions Deacons sent a second letter to CLW accompanied by CLW's revised draft as amended by Deacons. That letter concluded by giving notice to CLW that unless Deacons received on or before 12.00 noon on the 3rd February the engrossment of the Agreement for Sale and Purchase ".... on such terms as approved by us for our client's execution, our client will take such action as they may be advised without further notice". The letter concluded with the following:

"Our client hereby also reserves all its right under the Preliminary Agreement.... made between our respective clients."

16. Included in the amendments made by Deacons to CLW's draft was the deletion of clauses 8 and 18. For clause 18 Deacons substituted the above mentioned clause (formerly numbered 17 by Deacons) entitling the purchaser to requisition on the vendor's title after execution of the Sale and Purchase Agreement.

17. Both Deacon's letters dated the 2nd February received a reply from CLW on the same day in two separate letters. In reply to the comment in Deacons' first letter about CLW's revised draft CLW observed that it seemed that Deacons had not accepted the vendor's title, and that if that was Deacon's position they could not advise the purchaser to proceed with the transaction. This was followed by a demand for the return of all the documents of title to CLW".... immediately after 12.00 noon today and upon receipt of those title deeds and documents, we will arrange for our client to refund the 1% deposit back to your client." Deacons complied, as they were obliged by their undertaking to do, with CLW's demand for the return of the documents of title.

18. CLW's reply to Deacons' second letter dated the 2nd February after the opening acknowledgment was in the following terms:

	"As regards your further amendment to the Sale and Purchase Agreement, we have the following observations:-
	1.	Deletion of Clause 8:-
		Under Section 13(1)(a) of the Conveyancing and Property Ordinance, it is provided that unless a contrary intention is expressed, your client the purchaser is only entitled to require our client to prove title extending up to 15 years before the entering into of the Agreement. Our clause 8 is drafted along this line. Your deletion of clause 8 seems to impose on our client a more onerous obligations (sic) than that which is imposed on our client by the law.
	2.	Deletion of Clause 18: -
		The provisional sale and purchase agreement ("the provisional agreement") is silent on the manner in which the title to the above property is to be proved. We do not deny that as a result, it is an implied term that our client has to show good title to the above property. However, we think that you would properly agree with us that it is also an implied term that any requisition as to title has to be raised within a reasonable time after receipt of the title deeds. You would recall that we delivered the title deeds to your firm on the 24th January 1989 and more than 10 days have now elapsed. We therefore consider that you have had reasonble time to peruse the title deeds and if your firm still have not raised any requisition to the title, it is only reasonable for us to insert the clause that your client would be deemed to have accepted the title of the above property upon the signing of the Agreement.

	Based on the above observations, we come to the conclusion that your further amendments are totally unreasonable and exceptionally harsh on our client.
	In view of the fact that our respective clients cannot come to an agreement on the terms to be inserted in the formal sale and purchase agreement, we can only come to the inescapable conclusion that the transaction contemplated by the provisional agreement cannot be proceeded. Accordingly, our client hereby exercises the right to withdraw from the sale.
	As we have now received all the title deeds and documents in respect of the above property, we will arrange our client to refund the 1% deposit back to your client."

19. In their reply to this letter made in their third letter dated the 2nd February Deacons contested the conclusion arrived at in the penultimate paragraph of CLW's letter set out above, and concluded:

"Our client's position herein is sufficiently clear as evidenced in our previous correspondence. In any event, as mentioned in our letter to you earlier today, our client hereby expressly reserves all its right under the Provisional Agreement."

20. On the 3rd February CLW sent the purchaser, through Deacons, the vendor's cheque for $84,140 to refund the 1 per cent initial payment made by the purchaser under tire preliminary agreement. The accompanying letter from CLW concluded as follows:

"The said cheque is sent to your firm subject to your confirmation that upon your receipt of the cheque on behalf of your client the Agreement will be cancelled and neither your client nor ours will have any claim recourse against each and the other them (sic) in respect of the agreement."

21. On the 10th February Deacons acknowledged CLW's letter and the cheque in the following manner:

"As mentioned in our previous correspondence, our client is at all times willing to purchase the above property and has reserved all its rights under the Preliminary Agreement for Sale and Purchase dated 23rd January 1989. The 1% deposit paid under the Agreement shall be accepted and held by us upon such understanding and our acceptance of the same shall not in any way prejudice our client's rights thereunder."

22. On the 24th February, after the completion date (21st February 1989) for the.preliminary agreement had passed, CLW concluded the relevant correspondence between the solicitors for the parties with a letter to Deacons in which they acknowledged Deacons' letter dated the 10th February and said:

	" We would reiterate what we said in our letter to you dated the 3rd of February 1989 that the refund of the 1% deposit was made on the basis that the Provisional Agreement dated the 23rd of January 1989 ("the Agreement") was cancelled for the reason that our respective clients could not agree to the terms of the formal agreement.
	Since the refund of the deposit was made and accepted and the 21st of February 1989 being the date scheduled for completion under the Agreement had passed, we see no merit in your assertion that the Agreement is still binding."

23. Three days later, on the 27th February 1989, the purchaser issued a writ indorsed with a statement of claim seeking an order for specific performance of the preliminary agreement as primary relief. The purchaser's summons for summary judgment under Order 86 was issued on the 9th March 1989. The substance of the evidence relied upon by the purchaser in support of his application was contained in the affidavit of Mr. Chu Yu Leung, the purchaser's investment manager, which verified the statement of claim by reference to the correspondence and matters which we have outlined above, and asserted that there was no defence to the claim.

24. The vendor relied, so far as is now material, on the affirmation evidence of its solicitor, Mr. Chan Sze Hung, to satisfy the court that there were triable issues. Although the purchaser had complied with the requirements for an application under Order 86 the evidence of Mr. Chan included the contention that the purchaser's application should be dismissed and that the action should be stayed pending the outcome of the vendor and purchaser's summons which the vendor proposed to issue under section 12 of the Conveyancing and Property Ordinance. The material parts of Mr. Chan's evidence were of a forensic character and have been effectively superseded, where they have not been adopted, by the arguments of counsel below and on appeal.

25. We mention, however, that Mr. Chan was adamant in his affirmation that the 1982 assignment was the proper root of the purchaser's title to the property for the purposes of section 13 of the Conveyancing and Property Ordinance. He also contended that it was the usual conveyancing practice of Hong Kong solicitors to require the purchaser to raise requisitions on the vendor's title within seven days of delivery of the title deeds and, in default, the purchaser was deemed to have accepted the vendor's title. He said, as he had done in his last letter on the 2nd February, that since, in the present case, Deacons had had the vendor's title deeds for ten days, between the 24th January and the 2nd February 1989, they had had more than enough time to raise requisitions. Accordingly, he contended, the vendor had been entitled to insert clause 18 in its draft Sale and Purchase Agreement. He further relied on these matters if the court were disposed to hold that it was an implied term of the preliminary agreement that the purchaser's requisitions should be raised within a reasonable time.

26. When the matter came before the judge on appeal from the master neither party contended that time was of the essence of the preliminary agreement. The judge accepted the purchaser's contention that the preliminary agreement was still binding under the circumstances, that it contained all the necessary terms and that if, as had happened, the formal Sale and Purchase Agreement could not be agreed, such terms as were necessary for the implementation of the preliminary agreement would be implied by the law.

27. He regarded section 13 of the Conveyancing Ordinance as governing the proof of title by the vendor and held that it was an implied term of the preliminary agreement that the purchaser's requisitions must be raised within a reasonable time. The judge made no decision as to whether or not seven days was a reasonable time for raising the requisitions because he found that by the time the vendor resiled from the contract there had been no acceptance of the vendor's root of title by the purchaser. Furthermore he held that the vendor had misunderstood the requirements of the law regarding the root of title which it claimed it was entitled to give the purchaser under section 13 of the Conveyancing and Property Ordinance. On this aspect of the case the judge concluded:

" With considerable respect I reject the rguments advanced. The question of reasonable time for the presentation of requisitions had never arisen by the time the original agreement was rejected by the vendor. There had been no acceptance of the root of title by the time the contract was rejected. That seems to me to be a matter that was, if not agreed, implied by law. (There was a misunderstanding by the vendor as to the law in this regard and I note that the submission on this by Miss Kwan for the purchasers was not answered by Miss Yu). So, there was no question of requisitions being presented because the matter never arose. The parties were at all times until the 2nd February trying to implement the original agreement by making a formal agreement. It was only then that the parties were left with the original agreement to be performed. In my judgment there is no arguable case which the defendants can present on the reasonable time for presentation of requisitions point."

28. The judge was satisfied that non-payment by the purchaser of sums payable under the preliminary agreement did not provide the basis for any triable issue and he concluded it could not be suggested that, on the 31st January 1989 (when the purchaser attempted to tender a cheque for $1,177,960 or at any other time, the purchaser had not been willing to perform the preliminary agreement. When dealing with the question of payment he pointed out that on the 31st January the parties were not agreed as to the terms of any formal agreement and he added:

" Indeed at that time the purchaser was insisting upon its rights under the original agreement. The parties were therefore either still in negotiation or if negotiations had failed they had to fall back on tile original agreement."

29. In the following passage at the end of his judgment the judge rejected the vendor's contentions that the purchaser had been in breach of its obligation to tender payment of the balance of the purchase price on the date for completion and that the parties had shown by their conduct that they agreed that neither of them should be bound by the original agreement:

" I turn to the question whether it was necessary for the purchaser to tender the cheque on the original date for completion. Once the deposit had been returned the matter, it seems to me, had crystallized. The purchaser was insisting upon its rights under the contract of the 23rd January. The vendor was insisting that the contract was at an end. In the light of those positions it would be extraordinary, if in order to pursue its rights, the purchaser had to tender money on the original date for completion when at that time there had been no proof of title and the vendor was saying that the sale was at an end. There is nothing in the evidence before me that would indicate that the purchaser agreed to the original agreement being at an end. The purchaser showed, in my judgment, that it was pursuing its remedies. After the 21st February one finds the letter of the 24th February in which the vendor is maintaining its position and thereafter the purchaser pursued its rights with considerable expedition by issuing a writ.

In my judgment the vendor took up a false position which cannot be sustained. The vendor does not have any arguable defence to these proceedings. It would be a very strange situation if in the circumstances of this case the original and binding agreement could be torn up by either party at will by simply refusing to agree to any terms in the formal sale and purchase agreement. It would make the original agreement not worth the paper on which it was written because it would be open to either party to avoid any obligations under it. In my judgment, that is not the law nor the position in this case."

30. On the vendor's appeal Mr. Chain (who did not appear below) has accepted the judge's conclusion that the vendor took up a false and unsustainable position by attempting to withdraw from the preliminary agreement. We understood this concession to extend no further than accepting that the preliminary agreement itself constituted an open contract for the sale of the property and that the vendor was mistaken in asserting that (1) failure by the parties to agree the terms of the formal Sale and Purchase Agreement resulted in the discharge of the preliminary agreement and (2) the 1982 assignment was a good root of title under the preliminary agreement.

31. Mr. Chain advanced arguments in support of grounds of appeal which he classified in two groups by reference to (1) the purchaser's contention that it was at all material times up to the 21st February 1989 ready and willing to complete the sale and purchase and (2) the construction of the preliminary agreement.

32. We find it convenient to deal first with the arguments advanced on the construction of the preliminary agreement. Departing from the stance adopted by counsel for the vendor below, Mr. Chain contended that because clause 6(b) of the preliminary agreement provided for "completion on or before 21st February 1989" time was thereby made of the essence. On this point he cited a passage in Professor Farrand's Contract and Conveyance (4th edition) at p.182 referring to conflicting dicta on the effect of conditions providing for completion to take place "on or before" a specified date. Although experienced leading counsel did not argue that this formula made time of the essence in Raineri v. Miles [1981] A.C. 1050 ( H.L.) we accept that this is an arguable and triable issue.

33. Accordingly it is not necessary to deal with Mr. Chain's alternative argument that time was made of the essence of the preliminary agreement in the course of the negotiation of the terms of the formal Sale and Purchase Agreement during which the parties agreed draft clauses making time of the essence of that Agreement. However, for reasons to be given below, we did not consider that the raising of this issue could be of any material advantage to the vendor in the circumstances of this case.

34. Having raised a triable issue as to whether time was of the essence for the purposes of the preliminary agreement, Mr. Chain went on to contend that the purchaser's obligation to pay 14 per cent of the purchase price under clause 4(b) of the preliminary agreement was a fundamental term of that agreement which was not dependent upon the signing of the formal Sale and Purchase Agreement but was a concurrent obligation.

35. This is not an argument which is capable of being developed to any appreciable extent after it has been asserted. It is none the worse for that, because it raises a question of interpretation which is very much one of first impression. We were unable to accept it, or to accept that it raised a triable issue, or that the case of Damon Compania Naviera S.A. v. Hapag-Lloyd International S.A. [1985] 1 WLR 435 was even remotely relevant.

36. Clause 4(b) requires that the relevant payment be made by the purchaser "upon signing the Sale and Purchase Agreement". It seemed to us that this language was clear and unambiguous and could only mean that no payment could be required under this clause unless and until the Sale and Purchase Agreement had been signed. Clause 6 (a) requires the Sale and Purchase Agreement to be signed within seven days of the receipt of the Agreement by the purchaser's Solicitors; but we could see no reason why clause 4(b) Should therefore be construed as providing for the making of the relevant payment on the 31st January 1989 whether or not the Sale and Purchase Agreement had been signed.

37. Having concluded that clause 4(b) could only mean what it said we were likewise unable to accept, as raising a triable issue, Mr. Chain's further argument that it was an implied term of the preliminary agreement that even if the obligation to make the payment was dependent upon the signing of the Sale and Purchase Agreement, if, as happened, no such Agreement were signed through no fault of the parties, the purchaser's obligation to make the payment arose. It seemed to us that the proper implied term to read into the preliminary agreement was that in the events which occurred the relevant payment, which was part of the purchase price, must have become payable as part of the balance of the purchase price on completion of the preliminary agreement.

38. Accordingly we concluded that on this part of the vendor's argument the question whether time was of the essence could not lead to any triable issue. We add that, as Miss Kwan argued, in any event CLW had by their letter dated the 1st February 1989 extended the time for making the relevant payment to the 2nd February 1989 and it was on the latter date that the vendor by CLW withdrew from the sale, retrieved their documents of title and indicated that the initial payment of the purchase price would be returned to the purchaser, as it was on the following day. It would have been futile for the purchaser to tender the 14 per cent payment after the events of the 2nd February.

39. Before leaving this part of the vendor's case we mention that Mr. Chain did not advance any argument in support of grounds 2 and 3 in the vendor's grounds of appeal which related to matters concerning both the signing of the Sale and Purchase Agreement and the purchaser's obligation to make the payment of 14 per cent of the purchase price.

40. In the other part of his argument which Mr. Chain described as relating to the purchaser's alleged readiness and willingness to complete the transaction we considered that, on final analysis, he was really relying on matters concerned with alleged acceptance by the purchaser of the vendor's repudiation of the preliminary agreement and with alleged breaches ay the purchaser of the express and implied terms of that agreement.

41. Thus Mr. Chain contended, rightly, that the vendor's repudiation of the preliminary agreement on the 2nd February 1989 and its return to Deacons on the next day of the one per cent initial payment made by the purchaser thereunder was only an anticipatory breach of the preliminary agreement. In this connection Mr. Chain contended that the failure of the purchaser to bring immediate proceedings for specific performance and its acceptance of the return of the one per cent payment were wholly inconsistent with any intention of the purchaser to keep the preliminary agreement alive.

42. Mr. Chain further argued, in effect, that the purchaser had been in breach of its obligations under the preliminary agreement because it had taken no steps at all towards completion between the 3rd and the 21st February 1989, save for Deacons' letter dated the 10th February 1989 accepting the return of the one per cent payment and reserving the purchaser's rights under the preliminary agreement. The argument continued that the purchaser had failed to raise requisitions on the vendor's title and had failed to tender a draft assignment and the balance of the purchase price on the 21st February 1989.

43. Mr. Chain's application to add an additional ground of appeal to enable the vendor to contend that there was no or no sufficient evidence that the purchaser was financially capable of completing the sale was refused.

44. It is well settled and trite law that when one party wrongfully repudiates his contractual obligations this does not automatically put an end to the contract. The innocent party may elect to accept the wrongful repudiation as determining the contract and sue for damages or he may ignore or reject the attempt to determine the contract and affirm its continued existence: see Fercometal v. Mediterranean Shipping Co. [1989] 1 A.C. 778 (H.L.) per Lord Ackner at p.799 C-D.

45. If, in the case of a contract to be performed in the future, there is anticipatory repudiation by one party of his obligations under the contract, then, as Cockburn C.J. observed in Frost v. Knight L.R. 7Ex.111 at pp.112-113 in a passage cited with approval by Lord Ackner in Fercometal at p.799 E-G:

" The promisee, if he pleases, may treat the notice of intention as inoperative, and await the time when the contract is to be executed, and then hold the other party responsible for all the consequences of non-performance: but in that case he keeps the contract alive for the benefit of the other party as well as his own; he remains subject to all his own obligations and liabilities under it, and enables the other party not only to complete the contract, if so advised, notwithstanding his previous repudiation of it, but also to take advantage of any supervening circumstance which would justify him in declining to complete it. On the other hand, the promisee may, if he thinks proper, treat the repudiation of the other party as a wrongful putting an end to the contract, and may at once bring his action as on a breach of it; and in such action he will be entitled to such damages as would have arisen from the non-performance of the contract at the appointed time, subject, however, to abatement in respect of any circumstances which may have afforded him the means of mitigating his loss."

46. The effect of the innocent party opting to treat the repudiation as inoperative and the contract as being alive thus keeps it alive for the benefit of both parties and obliges the innocent party to perform all his obligations under the contract and does not excuse him from performance or preclude due performance by the repudiating party. The position was recently summarised thus by Lord Ackner in Fercometal at p.805D.

" When A wrongfully repudiates his contractual obligations in anticipation of the time for their performance, he presents the innocent party B with two choices. He may either affirm the contract by treating it as still in force or he may treat it as finally and conclusively discharged. There is no third choice, as a sort of via media, to affirm the contract and yet to be absolved from tendering further performance unless and until A gives reasonable notice that he is once again able and willing to perform. Such a choice would negate the contract being kept alive for the benefit of both parties and would deny the party who unsuccessfully sought to rescind, the right to take advantage of any supervening circumstance which would justify him in declining to complete."

47. However the non-performance by the innocent party of a particular obligation under the contract may be excusable in circumstances where such non-performance can otherwise be lawfully justified. Thus Lord Ackner observed in the following dictum in Fercometal at p.805G - 806A:

" Of course, it is always open to A, who has refused to accept B's repudiation of the contract, and thereby kept the contract alive, to contend that in relation to a particular right or obligation under the contract, B is estopped from contending that he, B, is entitled to exercise that right or that he, A, has remained bound by that obligation. If B represents to A that he no longer intends to exercise that right or requires that obligation to be fulfilled by A and A acts upon that representation, then clearly B cannot be heard thereafter to say that he is entitled to exercise that right or that A is in breach of contract by not fulfilling that obligation. If, in relation to this option to cancel, the owners had been able to establish that the charterers had represented that they no longer required the vessel to arrive on time because they had already fixed the Leo Tornado and in reliance upon that representation, the owners had given notice of readiness only after the cancellation date, then the characters would have been estopped from contending they were entitled to cancel the charterparty."

48. Similar principles apply where a party seeks the equitable remedy of specific performance. He must satisfy the court that he has performed or been ready and willing to perform all terms and conditions of the contract then to be performed by him and also that he is ready and willing to perform all terms and conditions thereafter to be performed by him: see Fry on Specific Performance, 6th edition at p.435 paragraph 922; Australian Hardwoods Pty. Ltd. v. Commissioner for Railways [1961] 1 WLR 425 (P.C.) per Lord Radcliffe at pp.432-3; Shell, 28th edition at p.592.

49. However, the requirement of performance or the tendering of performance is tempered by not being extended by equity to terms of which the defendant has prevented or waived the performance or the non-performance of which has resulted from the neglect or default of the defendant: see Fry at p.436, paragraph 923 (vii) and p.442, paragraphs 940 and 941; and see the passage in Snell cited above citing the decision of Walton J. in Davis v. Spalding (1974)231 E.G. 373 for the proposition that " .... it is not incumbent on a plaintiff to show that he was in a position to complete (e.g. if he is the purchaser, by having the price available) during the period from repudiation by the defendant to the date of the order for specific performance."

50. Considered in the light of these authorities and those cited below we were not persuaded that any of the arguments advanced by Mr. Chain in the second part of his submissions raised any triable issues. The failure of the purchaser to bring proceedings for specific performance before the date for completion (the 21st February 1989) cannot per se signify that the purchaser did not intend to keep the preliminary agreement alive or that it accepted the repudiation of that agreement by the vendor. Mr. Chain's reliance on Hasham v. Zenab [1960] A.C. 316 (P.C.) was, with respect, misplaced. That case is authority for the proposition that declaratory and other forms of specific performance relief are available to a party to a contract for the sale of land before the date for completion of the contract. There is no authority to support the proposition that acceptance of repudiation and of the determination of the contract is to be inferred merely because a party, who has expressly affirmed the contract, waits until six days after the completion date before bringing proceedings for specific performance.

51. As to the acceptance by the purchaser of the repayment of its initial one per cent payment, it may well be that the purchaser was not entitled to retain the repayment except upon the terms upon which it was tendered in CLW's letter dated the 3rd February 1989 and that it should more correctly have been returned. However, we were satisfied that, by Deacons' letter dated the 10th February 1989, the purchasers could not have made it more clear that they affirmed the preliminary agreement (as they had done several times before) and were willing to purchase the property in accordance with the terms of that agreement.

52. It was, in our opinion, implicit from the terms of that letter that the purchaser was only accepting the repayment on the basis that it was willing and able to perform its obligations under the preliminary agreement when given the opportunity to do so, including paying the purchase price on the date for completion and re-paying the initial one per cent payment if the vendor signified its willingness to accept that payment as one per cent of the purchase price. In our opinion it was unrealistic in all the circumstances for the vendor to suggest, by CLW's letter dated the 24th February, that the acceptance of the re-payment made on the 3rd February could be relied on to show that the purchaser had agreed that the contract had been determined. The case of Macnaughton v. Stone [1950] 1 DLR 330 cited by Mr. Chain did not seem to us to be in point. In that case the purchaser was held to have elected to treat the contract as at an end because when the vendor repudiated the contract the purchaser immediately asked for the return of the deposit. The facts in the present case were clearly distinguishable.

53. A contract for the sale of land involves interdependent obligations of the parties. Its completion in Hong Kong by the execution of an assignment of the property is the culmination of a series of acts by each of the parties. Ordinarily, as in the present case, the vendor has to furnish his documents of title to the purchaser who is entitled to raise requisitions on the title, by reference inter alia to the root of title to which the purchaser is contractually entitled. When the vendor's title and evidence thereof has been accepted or deemed, under the express or implied terms of the contract, to have been accepted by the purchaser he is obliged to submit a draft assignment and finally to tender an engrossed assignment for execution and the balance of the purchase price on the date for completion.

54. In the present case Mr. Chain argued, in effect, that the purchaser should have taken the initiative between the 3rd and the 21st February. He relied on the fact that the purchaser had had the documents of title (of which he claimed it would have made copies) between the 24th January and the 2nd February. It must therefore, he contended, echoing Mr. Chan the vendor's solicitor, have had ample time to consider the vendor's documents of title and there was no reason why it should not have raised requisitions and thereby put the vendor in the position where it could decide whether or not to maintain its repudiation of the preliminary agreement or perform it.

55. We considered the judge's decision on this issue to be right. The transaction was very unusual. The parties' solicitors were preoccupied between the 24th January and the 2nd February 1989 with the terms of the formal Sale and Purchase Agreement required to be signed by the 31st January 1989. One of the numerous difficulties that arose was the root of title to be given by the vendor under Sale and Purchase Agreement. Under the preliminary agreement the purchaser was undoubtedly entitled to the 1962 Assignment as the root of title. There was every reason why Deacons should not yield on this important point. However, the vendor persisted in requiring the purchaser to accept the 1982 assignment as the root of title. It was common ground on the appeal that the vendor was wrong in law on this point.

56. As the judge pointed out, it was only on the 2nd February 1989 when the parties failed to reach agreement on the terms of the formal Sale and Purchase Agreement, and the vendor had repudiated the contract and recovered the documents of title, that the question arose regarding requisitions under the terms to be implied under the preliminary agreement. As there was by then complete deadlock between the parties' solicitors as to what root of title the purchaser was entitled to, we agreed with the judge that, in any event, it was unreasonable to suggest that the purchaser, assuming that it had retained copies of the documents of title, should raise requisitions to see if the vendor would change its mind about its insistence on the 1982 assignment as the root of title. In our judgment the judge was right to conclude, in effect, that until the vendor had agreed to give the purchaser a root of title commencing with the 1962 assignment, to which it was entitled under the preliminary agreement, there could be no contractual duty upon the purchaser to raise requisitions. Furthermore, bearing in mind the intransigent attitude adopted by the vendor through CLW regarding the root of title issue, it would have been futile to requisition on the basis of the 1962 root of title even if the purchaser had made copies of the documents of title.

57. It seemed to us that, a fortiori in the circumstances of this case, once it was held that the purchaser had not become obliged to raise requisitions at any material time under the preliminary agreement, it must follow that the purchaser's obligation to tender an assignment and the balance of the purchase price had not arisen by the date for completion and that the practical result of the vendor's refusal to give the purchaser its rightful root of title under the preliminary agreement was the domino effect that the vendor's conduct had prevented the purchaser from performing or, alternatively induced it not to perform its obligations under a contract which it had clearly affirmed.

58. Mr. Chain relied on Stephens v. De Medina (1843) 4 Q.B. 422 in support of his argument that the purchaser had been in breach of its obligation to submit an assignment and the balance of the purchase price to the vendor on the 21st February 1989. We did not derive assistance from that case which was concerned with the sale of company shares and did not involve any question of title. We accepted that if a good title had been accepted or deemed to have been accepted in the present case Stephens v. Medina would have been in point: c.f. Williams on Vendor and Purchaser, Vol. 2 p.994. However the vendor's persistent refusal to give the purchaser the 1962 assignment as the root of title in breach of the preliminary agreement was, in our opinion, the fatal distinguishing factor.

59. Mr. Chain advanced an argument, albeit somewhat faintly, in conjunction with his argument that under the preliminary agreement time was of the essence, to the effect that the unaccepted anticipatory breach by the vendor could not give the purchaser a right to "unilaterally suspend" the contract until such time as it saw fit, which, he contended, was what they now attempted to do by these proceedings. With respect we could see no substance in this argument because the cause of the delay in completion in this case was due to the vendor's repudiation of and failure to perform its obligations under the preliminary agreement to the prejudice of the purchaser who was being kept out of possession after the completion date.

60. Moreover the position in this case is no different in principle from the common situation in English conveyancing practice where (time being usually not made of the essence under the contract) the innocent party, who wants specific performance of the contract, in a case of non-performance by the completion date, first makes time of the essence and then, when non-performance continues, sues the repudiating party for specific performance with damages for any loss arising from delay in performance: see the dictum of Lord Wilberforce in Johnson v. Agnew [1980] AC 367 (H.L.) at p.392 E-G.

61. Accordingly being of the opinion that the decision of Mortimer J. was right on the arguments before him and that none of the arguments advanced on appeal raised any triable issue we dismissed the vendor's appeal with costs.

(D. Cons)	(P.G. Clough)	(R.G. Penlington)
Vice President	Justice of Appeal	Justice of Appeal

Representation:

Miss Susan Kwan (M/s. Deacons) for Plaintiff/Respondent

Mr. Benjamin Chain (M/s. Chan, Lau & Wai) for Defendant/Appellant

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