Siu Kai Ming v. Lau Sai Hing
Read the full judgment text of CACV 143/2013 on BabelCite. This Court of Appeal judgment was delivered on 20 March 2014.
1. I respectfully agree with the judgment of Poon J.
Cites 2 cases
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CACV 143/2013 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF APPEAL CIVIL APPEAL NO 143 OF 2013 (ON APPEAL FROM HCA NO 2131 OF 2008) _______________
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_______________ J U D G M E N T _______________ Hon Stock VP : 1.I respectfully agree with the judgment of Poon J. Hon Barma JA : 2.I agree with the judgment of Poon J. Hon Poon J : 3.This appeal concerns a small village house erected on the Remaining Portion of Lot No.78 in Demarcation District No.236, Sai Kung, New Territories (“the House” and “the Land” respectively). 4.By judgment dated 4 June 2013, Deputy High Court Judge Seagroatt ordered, among other things, the defendant to convey to the plaintiff the title to the 2nd floor and roof of the House (“the Property”) with consequential directions for conveyancing and to deliver vacant possession of the Property to the plaintiff. 5.The defendant now appeals against the learned Judge’s order and seeks various reliefs which essentially mandate the plaintiff to sell the Property to him with vacant possession for the sum of HK$2,440,000.00. 6.The background may be summarized as follows. BACKGROUND 7.The defendant is the registered owner of the Land. The plaintiff is a developer specializing in building small village houses. 8.For the purpose of building the House, which was to be financed by the plaintiff entirely, and the subsequent disposal of interest therein, the parties entered into 4 agreements in Chinese :
9.Under Clause 1 of the 1st June Agreement, after the construction of the House, the plaintiff shall be assigned the Property, the defendant the ground floor and the 1st floor. Further :
10.The 2nd June Agreement supplemented the 1st June Agreement in various aspects. Clause 2(5) dealt with the valuations by the three banks referred to in Clause 1 of the 1st June Agreement and further provided that if the defendant was not satisfied with the valuations, he was entitled to jointly appoint a valuer with the plaintiff to revalue the House. Significantly, Clause 2(5) went on to stipulate :
11.Like the 1st June Agreement, the 2006 Agreement dealt with the parties’ rights and obligations for the construction of the House. The provisions are in substance similar to those in the two June Agreements. What was in dispute however is Clause III.5, which provided :
The names of the three valuers were then stated. 12.The August Agreement did not add much to the 2006 Agreement or the substance of the parties’ transaction. It can be safely ignored for present purposes. 13.As the Judge had aptly summarized, the critical nature of the transaction between the parties was that the plaintiff would construct the House at his own cost, and the consideration for his so doing would be the granting of title to him of the Property.[1] 14.Construction of the House was completed in about August or September 2007. The Certificate of Compliance was issued by the District Lands Office, Sai Kung on 23 October 2007. 15.The Judge found that on 16 November 2007 the plaintiff’s wife notified the defendant’s mother as his agent that the Certificate of Compliance had been issued and that the defendant’s mother signed on the written notice of the same date in acknowledgment.[2] That written notice asked the defendant to reply within one month if he wished to “re‑purchase” the Property. 16.On 27 November 2007, the English version of the Certificate of Compliance was faxed to the defendant’s father. On the following day, the Chinese version was faxed to the defendant’s father. 17.The defendant then obtained valuations of the Property from the 3 valuers named in Clause III.5 of the 2006 Agreement on 6, 10 and 14 December 2007 respectively. The last valuation, prepared by Centaline, was the highest. It valued the Property at HK$2,440,000.00. 18.What happened next was that the defendant’s mother orally informed the plaintiff that he would buy back the Property at HK$2,440,000.00. The defendant’s and his mother’s evidence is that she so informed the plaintiff about 1 week before Christmas 2007. The plaintiff’s evidence is that it took place on 16 December 2007. The Judge did not make any finding on when the defendant’s wish was orally communicated to the plaintiff, observing that it was unclearly precisely when that took place. He however said it was more likely to be more than 30 days counting from 16 November 2007.[3] 19.Differences between the parties then arose as evidenced by the solicitors’ correspondence. 20.By a letter dated 9 April 2008, the plaintiff’s solicitors acknowledged that the defendant had “a right to buy back the Property in consideration of the highest valuation” pursuant to Clause III.5 of the 2006 Agreement. They went on to say that the parties had agreed to vary and modified the term in that they now agreed only to appoint one of the three named valuers to be do the valuation. They enclosed a draft letter for engaging the valuer for the defendant’s solicitors to consider. The defendant’s solicitors made no reply. 21.The plaintiff’s solicitors then followed up on the matter by a letter dated 8 August 2007. After referring to the history of the transaction, the plaintiff’s solicitors asked the defendant to buy the Property at HK$3,200,000.00 otherwise there should be a partition of the title and assignment of the Property to the plaintiff. 22.The defendant’s solicitors wrote back on 9 September 2008 and gave notice to the plaintiff that “[the defendant] now endeavours to exercise his lawful right of pre-emption of purchase of [the Property at the valuation price of HK$2,440,000.00]”. The plaintiff did not make any reply. 23.Then significantly, by another letter dated 11 October 2008, the defendant’s solicitors informed the plaintiffs’ solicitors that “[the defendant] hereby irrevocably withdraws his endeavour to exercise his right under the contract to purchase [the Property] at HK$2,440,000.00.” 24.By a letter dated 22 October 2008, the plaintiff’s solicitors demanded the defendant to transfer the Property to the plaintiff, failing which proceedings would be commenced. 25.In the end, the plaintiff commenced HCA2131/2008 on 28 October 2008. PROCEEDINGS BELOW 26.The plaintiff basically sought an order of specific performance compelling the defendant to assign to him the Property with vacant possession. The defendant denied liability and counterclaimed, effectively, for an order that the plaintiff do sell the Property to him at HK$2,440,000.00. As said, the Judge found in favour of the plaintiff. 27.The Judge first found that under the 1st and 2nd June Agreement, the defendant had a pre-emptive right to purchase the Property.[4] Clause III.5 of the 2006 Agreement was a novation agreement but it did not alter the substance of the defendant’s pre-emptive right.[5] The defendant must exercise the right by giving the notice in writing, a term that the Judge found to have been implied in the 2006 Agreement.[6] So his mother’s oral communication of the defendant’s wish to buy the Property was not a valid exercise of the pre-emptive right. In any event, the right was not exercised within time as stipulated under Clause III.5.[7] 28.Turning to the letter of 9 September 2008 from the defendant’s solicitors, the Judge described it as an unilateral attempt to resurrect the pre-emptive right.[8] The solicitors’ another letter of 11 October 2008 was, in the Judge’s view, an unequivocal statement that the defendant abandoned any attempt to exercise his pre-emptive right.[9] MAIN ISSUES 29.For present purposes, the following main issues are identified. 30.First, what was the effect of the 2006 Agreement vis-à-vis the 1st and 2nd June Agreements? 31.Second, on a proper construction, did Clause III.5 of the 2006 Agreement give the defendant a pre-emptive right or an option to purchase the Property? 32.Third, if that was an option, was the oral communication by the mother of the defendant’s wish to purchase the Property a proper exercise of the option? 33.Fourth, if that was a valid exercise of the option to purchase the Property, how was the parties’ position affected by the solicitors’ letters of 11 and 22 October 2008? Issue 1 – effect of the 2006 Agreement 34.As noted, the Judge found in effect that the 2006 Agreement was a novation agreement. Properly understood in context, what the Judge meant was that the 2006 Agreement was a replacement agreement, replacing the 1st and 2nd June Agreements. After some initial reluctance, Mr Mak, for the plaintiff, accepted that that was the effect of the 2006 Agreement. He did not pursue his initial argument that the 2006 Agreement was just a variation of the 1st and 2nd June Agreements. Issue 2 – preemptive right or option 35.To recap, Clause III.5 of the 2006 Agreement provided :
The defendant’s case is that Clause III.5 conferred upon him an option to purchase the Property to be exercised in the manner as provided. 36.Mr Mak first took a pleading point. He argued that the defendant had not pleaded that Clause III.5 was an option in his pleadings. With respect, this point is entirely misconceived. The defendant did, in substance, plead the point in his pleadings, although he used the term “pre‑emptive right”. Further, as apparent from the Judge’s judgment, the case as argued before him was predicated on the very issue whether Clause III.5 was an option or a pre-emptive right. It is too late to take this pleading point on appeal. 37.Turning to the substantive question on construction, Mr Mak argued that Clause III.5 should be considered together with Clause 1 of the 1st June Agreement and Clause 2(5) of the 2nd June Agreement. Under those provisions, the defendant only had a pre-emptive right to purchase the Property. The parties must have intended the same under Clause III.5 of the 2006 Agreement. 38.In Jumbo King Ltd v Faithful Properties Ltd & Others (1999) 2 HKCFAR 279, Lord Hoffmann NPJ said at p296 :
When Clause III.5 is so construed, it does not bear the meaning as contended by Mr Mak. 39.It is important to bear in mind that initially under the 1st and 2nd June Agreements the defendant only had a pre-emptive right to purchase the Property. However, as noted by the Judge, it was necessary for the parties to enter into the 2006 Agreement, a new agreement to replace the two June Agreements, because the defendant’s parents were not happy with Clause 1 of the 1st June Agreement and Clause 2(5) of the 2nd June Agreement.[10] Then after further negotiations,[11] the plaintiff drafted and presented the 2006 Agreement to the defendant for signature.[12] The evidence shows that at the time the plaintiff had the benefit of legal advice. The clear language used in Clause III.5 is markedly different from the corresponding provisions in the two June Agreements. The change must have been deliberate to reflect the change in the parties’ intention. The pre-emptive right was now replaced by an option to be exercised in the manner as stipulated. Issue 3 – whether the mother’s oral communication was a valid exercise of the option 40.Issue 3 concerns the manner in which the defendant’s option to purchase the Property was exercised. There are three sub-issues. 41.First, must the notice of the exercise of the option be given in writing? 42.Clause III.5 did not specify that the notice must be in writing. So on its face, either written or oral notice would suffice. 43.However, the Judge, after referring to the previous provisions in the 1st and 2nd June Agreements which contained written notification, noted that it was just an oversight of the parties in failing to specify that the notice was to be in writing and that was not a deliberate change in procedure. He also referred to commons sense and practice adopted by the parties in relation to other procedures and said that it would require a written notice.[13] 44.With respect, I fail to see how a term requiring written notice can be implied into Clause III.5. Bearing in mind that the 2006 Agreement was a new replacement agreement, the non-specification of the mode of notice was indicative of the parties’ intention. Written notice, as mandated by the 1st and 2nd June Agreements, was no longer required. Either written or oral notice would suffice. 45.The second sub-issue relates to the time within which the defendant must exercise the option. 46.At first glance, it is a matter of construction of Clause III.5. However, whatever the construction might be, the plaintiff had by conduct extended the time for one month from 16 November 2007 when on the same date, his wife asked the defendant’s mother to tell them if he wished to buy the Property within one month. The same request was also recorded in the written notification signed by the defendant’s mother on the same occasion. 47.The third and final sub-issue is whether the oral communication by the defendant’s mother was made within one month from 16 November 2007. 48.Now, the time of the one month’s extension began to run on 17 November 2007 and expired on 16 December 2007 : see Chitty on Contracts, 31st Edition, Vol 1, para 21-025. Although the Judge did not make any express finding, it is the plaintiff’s own evidence that the defendant’s mother told him on 16 December 2008 that the defendant would buy the Property. In other words, even on the plaintiff’s own case, the oral notice was given within time, albeit on the last day of the extension. 49.It follows from the above analysis that the oral communication by the defendant’s mother of his wish to buy the Property on 16 December 2007 was a valid exercise of the option under Clause III.5. 50.Had the matter ended there, the defendant would have been entitled to judgment. For once an option is validly exercised, the parties come under obligations to perform as if they had concluded an ordinary contract of sale : Spiro v Glencrown Properties Ltd [1990] Ch 537, per Hoffmann J (as he then was) at p543D. This brings me to Issue 4. Issue 4 – effect of the letters of 11 and 22 October 2008 51.As said, the parties were embroiled with disputes which cumulated in the letters of 11 and 22 October 2008. 52.By the letter of 11 October 2008, the defendant unequivocally abandoned his right to buy the Property. Legally speaking, as rightly submitted by Mr Hung, for the defendant, it meant that the defendant was acting in repudiatory breach of the new agreement that the parties had entered into upon his exercise of the option on 16 December 2008. 53.By the letter of 22 October 2008, the plaintiff’s solicitors demanded the defendant to transfer the Property to the plaintiff, thereby holding the parties to the original bargain under the 2006 Agreement. Legally speaking, the defendant’s repudiation was accepted by the plaintiff. The plaintiff’s obligations had been discharged by the defendant’s repudiation of the new agreement. What follows is that the plaintiff was entitled to be assigned the Property under the 2006 Agreement. CONCLUSION 54.Although I differ from the Judge’s reasoning, for the reasons stated above, I would uphold his order. 55.I would accordingly dismiss the defendant’s appeal with costs, to be taxed if not agreed. Hon Stock VP : 56.Accordingly the appeal is dismissed with an order nisi that the costs of the appeal be to the plaintiff to be taxed if not agreed and an order nisi that there be no order as to the costs of the respondent’s notice.
Mr Andy Hung, instructed by Messrs Damien Shea & Co, for the defendant (appellant) Mr Andrew Mak and Ms Carol Wong, instructed by Adrian Yeung & Cheng, for the plaintiff (respondent) [1] §13 of the Judgment. [2] §51 of the Judgment. [3] §69 of the Judgment. [4] §§20 – 22 of the Judgment. [5] §§47, 63 – 67 of the Judgment. [6] §63 of the Judgment. [7] §§65 and 93 of the Judgment. [8] §81 of the Judgment. [9] §83 of the Judgment. [10] §45 of the Judgment. [11] Ibid. [12] §47 of the Judgment. [13] §63 of the Judgment. Please refer to FACV8/2014 for the relevant appeal(s) to the Court of Final Appeal. | ||||||||||||||||||
Cases cited in this judgment
Further hearings and rulings under CACV 143/2013