Guo Jianjun and Another v. Dragon Fame Investment Ltd

HCMP 318/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 318 OF 2013

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J U D G M E N T

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1.This is a vendor and purchaser summons issued by the purchaser. The 1st plaintiff is the purchaser and the 2nd plaintiff his nominee. The defendant is the vendor.

The Agreement and these proceedings

2.The 1st plaintiff and the defendant entered into a Chinese Provisional Sale and Purchase Agreement dated 20 October 2011 (“the Agreement”) for the purchase of four office units in Shun Tak Centre, Central.  The purchase price is HK$219,360,719.  The 1st plaintiff paid the defendant 10% deposit at HK$21,936,071.90.  Completion should have taken place on 31 March 2012. 

3.When the parties made the Agreement, the four office units were not yet in existence.  There were then five office units. The five units were later repartitioned into the four units.  The repartitioning did not result in any change in the covered area save that an area in the common corridor that used to be covered by unit no. 3328 would be returned to common use by the withdrawal of one of the walls of this unit.  The repartitioning was done some time in February 2012 which was some three months after the making of the Agreement.

4.Completion of the Sale and Purchase did not take place because the plaintiffs were of the view that the defendant had not proved or showed a good title to the four units and was in repudiatory breach of the Agreement.  The defendant took a different view and forfeited the deposit.  The plaintiffs now seek the return of the deposit and damages.  The defendant counterclaims for the loss it suffered when it later sold the units to another purchaser at a lower price of HK$213,880,000.  Since the forfeited deposit exceeds the defendant’s loss, the defendant is only seeking the costs of these proceedings including those of the counterclaim.  

The relevant clauses

5.The argument between the parties is on whether the defendant had performed clauses four and five of the Agreement in relation to the repartitioning.  Clause 6 is a repetition of the later part of clause 5. These clauses and their certified English translations with minor amendments are as follows:

「4. 買方知悉及完全接受該物業單位3328的業主/佔用者現佔用公共走廊部份(見圖C斜線粉紅色部份)，賣方承諾會在物業成交日前，將現在佔用公共走廊還原，即是將3328現有之走廊間隔牆拆除，退入及還原如圖A的合法狀況，並向買方提供一份由認可人仕發出之証明書，証明修正部份並不違反任何建築條例或符合屋宇署批則。

5. 賣方清楚向買方展示兩張平面圖，分別標記為圖A及圖B。圖B實際上是附在Sub-Sub-Deed of Mutual Covenant Memorial No. 07050701480098內之附圖。賣方因利便出租及使用的安排，所以將圖B中顯示的Offices Nos. 3313, 3315, 3316, 3318及3328的5個單位，重新間隔為4個單位及命名為Offices Nos. 3315, 3316, 3318及3328，其現狀位置及間隔正如圖C中顯示的Offices Nos. 3315, 3316, 3318及3328。圖C則清楚顯示圖A及圖B重疊一起的情況，賣方同意就上述單位如圖A顯示現時的重新間隔，會在物業成交前簽立一份Deed Poll，將原有圖B的offices Nos. 3313, 3315, 3316, 3318 及3328正式改為如圖A的Offices Nos. 3315, 3316, 3318及3328，並向買方提供一份由認可人仕發出之認可人仕証明書証明該如圖A顯示的現時重新間隔的合方性並不違反任何建築條例。而買方必須同意，接受及滿意該証明書為上述單位如圖A顯示重新間隔的合法性及有效性的最終文件，而不得要求賣方提供其他文件（包括政府及／或管理處的批准書）或以此點向賣方提出任何業權上的質詢，提問或反對。

6. 買方同意就該物業現時的重新間隔（如圖A所顯示），是否符合屋宇署的規定及是否獲得管理公司的同意方面，不得向賣方提出任何業權上的質詢提問或反對。」

(Certified translations)

“4. ThePurchaserisawareofandfully acceptsthatthepublic corridoris currentlyoccupied bythe owner/occupierof OfficeNo. 3328ofthe Property(seetheportioncolouredinpink withdiagonallinesinPlan C). TheVendorundertakesthatthepresentlyoccupiedpubliccorridor shall berestored toitsoriginalstatebefore thecompletiondate, that istosay,theexistingpartitionwallatthecorridorofOffice No. 3328 shallberemoved soastoretreatandreinstatetoitslegal conditionas showninPlan A,and the Vendor shall providethePurchaserwitha certificateissued byanAuthorizedPersontoprovethattheadjusted part doesnotconstituteabreachofanybuilding ordinancesand complies withthebuildingplanapprovedbytheBuildings Department.

5. TheVendorhasclearlyshowntothePurchasertwofloorplansmarkedasPlan AandPlanBrespectively. PlanBisinfactattachedto theSub-Sub-DeedofMutualCovenantMemorialNo. 07050701480098. Tofacilitatelettingoutandusage,theVendorhad re-divided thefiveOffices Nos. 3313,3315, 3316,3318and3328as shown inPlanBintofourofficeunitsandre-named asOfficesNos. 3315, 3316, 3318 and3328 whichcurrentcondition, location and partitioning areasshown inPlanC asOffices Nos. 3315,3316, 3318 and3328. PlanCclearly shows theoverlapping partsofPlanAand PlanB. Concerning there-partitioningoftheabove-mentionedoffice unitsasshowninPlanA,theVendoragreestosignaDeedPollprior to completionto formallychange the originalOfficesNos 3313, 3315, 3316, 3318and3328 asshowninPlanB intoOfficesNos. 3315, 3316, 3318and 3328 as showninPlanA. The Vendoralso agrees to provide the Purchaserwith a certificateissued by an Authorized Persontoprovethatthelegalityof the current re-partitioning as shown in Plan A and that the same does not constituteabreachofanybuilding ordinances. ThePurchaser shall agree,accept and be satisfied that such certificate shall be the final documenton the legalityand validityof thecurrentre-partitioning of the abovementioned office unitsasshown inPlan A,andshall neither require theVendortoprovide anyadditional documents (including letters of approval issued by the Government and/or management office)norraiseanyrequisitions, queriesorobjections astotitleon thispoint.

6. ThePurchaseragreesthatitshallnotraiseanyrequisitions,queriesor.  objections asto title against the Vendorinrelation to whether the currentre-partitioningoftheProperty(asshowninPlanA)conforms totherequirements oftheBuildings Departmentorconsenthasbeen obtainedfromthemanagementcompany. . ”

Events leading to delivery of clause 5 certificate and forfeiture of deposit

6.On 1 November 2011, the solicitors for the defendant furnished the solicitors for the 1st plaintiff a draft deed poll with plan and a table dated 25 October 2011 bearing the name but not the signature of an authorised person Mr Wai Hing Wah.  The deed poll after execution was to be furnished by the defendant to the 1st plaintiff pursuant to clause 5.

7.The 1st plaintiff’s solicitors replied on 3 November.  They made no comment on the draft deed poll but instead asked for various certificates and approval documents issued by different government departments to prove the legality of the repartitioning works.

8.The defendant’s solicitors replied on 8 November and referred to clauses 5 and 6.  They said that the 1st plaintiff was not entitled to ask for the various certificates and approval documents or to raise requisitions on the repartitioning and alteration works.  They thus took the view that the defendant’s agreement to supply the deed poll and the certificate by an authorised person under clause 5 had exempted the defendant from the obligation to answer requisitions on the legality of the repartitioning.

9.The 1st plaintiff’s solicitors did not respond to this letter.  They expressed no contrary or different view.  The 1st plaintiff then nominated the 2nd plaintiff on 19 January 2012 to complete the purchase.  

10.The defendant’s solicitors delivered the title deeds and documents on 16 February.  The plaintiffs’ solicitors raised requisitions on them on 24 February 2012 but not mentioned the repartitioning.  The defendant’s solicitors answered the requisitions on 7 March.

11.The plaintiffs’ solicitors raised further requisitions on 16 March which were again not on the repartitioning.  These requisitions were answered on 20 March.

12.On 29 March, the day before completion, the plaintiffs’ solicitors raised further requisitions.  They were also not on the repartitioning.  The defendant’s solicitors answered them on the same day and complained that they were repetitions.  The defendant’s solicitors also reminded the plaintiffs to complete the sale and purchase on the next day.

13.The draft assignment was agreed and the defendant’s solicitors gave the split cheque instructions on 29 March.

14.However, the defendant’s solicitors did not deliver to the plaintiffs’ solicitors the certificate by an authorised person under clause 4 of the Agreement to confirm the withdrawal of the trespass of the common corridor.  This clause 4 certificate should have been delivered before the day of completion on 29 March.  Mr Chan, leading counsel for the plaintiffs however conceded that the plaintiffs had waived this time limit as they did not complain about the non-delivery but continued to raise requisitions on 30 March on the deed poll which had been registered at the Land Registry but not provided to them.  

15.The letter by which the plaintiffs’ solicitors raised requisitions on 30 March reached the defendant’s solicitors at 2:30 pm on 30 March.  By this letter, the plaintiffs’ solicitors also asked the defendant’s solicitors to provide the clause 5 certificate to be made by an authorised person.  They complained that the defendant’s solicitors had failed to answer the requisitions on the approved building plans or to produce the documents under the Agreement and hence the defendant had failed to prove a good title to the office units.

16.The defendant’s solicitors sent the clause 5 certificate on the same day, but the letter only reached the office of the plaintiffs’ solicitors at 6:07 pm.  The certificate was purportedly signed by Mr Wai Hing Wah as authorised person and dated 27 February 2012.

17.It stated:

“I, WAI HING WAH, Authorized Person … hereby certify that:

1. The subdivision of the captioned premises (as shown on the attached plan) complied with the present Buildings Ordinance & Regulation.

2. The partitioning and the partition walls of the units as shown on the attached plan do not constitute any structural alteration and can be carried out without the application to or to obtain approval from the Building Authority under the provision of section 41(3) of the Buildings Ordinance (Cap. 123).  Such partitioning does not contravene the current Fire Services Regulation.”

18.The defendant also offered to extend the completion date by seven working days to 12 April 2012.

19.The plaintiffs’ solicitors responded by a letter of the same day which reached the defendant’s solicitors at 6:47 pm.  They said, among other things, that the defendant’s solicitors only produced the clause 5 certificate at 6:07 pm on that day.  They also said that the defendant’s solicitors had failed to answer the requisitions fully and satisfactorily and failed to discharge the defendant’s duty to show and prove a good title to the office units.  They also reserved all the plaintiffs’ rights and remedies.

20.On 2 April, the plaintiffs’ solicitors on behalf of the plaintiffs purportedly accepted the defendant’s repudiation of the Agreement and asked for the return of the deposit.

21.The defendant’s solicitors replied on the same day and said that under the Agreement the defendant was only obliged to produce the clause 5 certificate before completion.  They reminded the plaintiffs that the defendant had extended the completion date to 12 April.

22.Completion did not take place and the defendant forfeited the deposit.

Midnight rule applied

23.The parties agree that time is of the essence for the completion of the Agreement.  Since no particular hour was specified for completion in the Agreement, the parties agree that the midnight rule applied and the deadline for completion was midnight of 30 March (see Camberra Investment Ltd v Chan Wai Tak [1989] 1 HKLR 568.

No unilateral extension of completion date

24.Though the defendant had offered to extend the date of completion to 12 April, Mr Chan submitted that the defendant was not entitled to unilaterally postpone the completion date (see Lee Gee Kee & Anor v Chong Kai Tai & Anor [1996] 1 HKC 105 at 113 and 120).  I agree with Mr Chan that when time for completion is of the essence, it is not up to the vendor or the purchaser to unilaterally postpone it.

Did the clause 5 certificate exempt the defendant’s obligation to answer requisitions on repatriating?

25.The terms of clause 5 provides that the defendant should provide an authorised person’s certificate that proves the legality of the “current repartitioning (of four units)” and that the repartitioning does not infringe any building regulation.  It also provides that the purchaser had to agree, accept and be satisfied that the certificate should be the final document on the legality and validity of the repartitioning.

26.Mr Chan submitted that the defendant’s obligation to answer requisitions on the repartitioning could only be waived/exempted upon the defendant’s production of the clause 5 certificate made in terms of clause 5.  Mr Lam, senior counsel, for the defendant however submitted that clause 5 had exempted the defendant’s obligation to answer requisitions on the repartitioning and the defendant was only obliged to provide the clause 5 certificate given in terms of clause 5.

27.The provision in clause 5 that exempted the defendant’s obligation to answer requisitions is not dependent on the provision governing the delivery certificate.  Its effect does not depend on the delivery of the certificate.  In other words, the defendant’s obligation to answer requisitions on the legality of the repartitioning had been replaced by its obligation to provide the authorised person’s certificate in terms of by clause 5.  If the defendant should fail to deliver this certificate to the plaintiffs, it would be in breach of this obligation and not the obligation to answer requisitions on the legality of the repartitioning.  I am therefore in agreement with Mr Lam on this point.

Reasonable time before completion for delivery of clause 5 certificate?

28.The next question is whether the defendant should have delivered the clause 5 certificate within a reasonable time before completion.  Mr Chan for the plaintiffs submitted that the defendant should have done so.  Mr Lam for the defendant disagreed.  He referred to the expression of “prior to completion” (成交前) (which governs both the signing of the deed poll and the delivery of the certificate) and submitted that the certificate could have been delivered just before completion or immediately before midnight of 30 March.  He further submitted that there was no necessity to imply a term for the certificate to be provided within a reasonable time before completion.

29.Mr Lam also submitted that the plaintiffs could have made the time for delivery of the certificate of essence by serving a notice requiring earlier delivery.  He relied on British Holdings Plc v Quadrex Inc [1989] 1 QB 842 at 857E-F.  He also referred to fact that the plaintiffs only gave notice on 30 March at 2:30 pm for delivery of the certificate.

30.I would say that it is only when time is not of the essence for performing a contractual obligation that a party can serve a reasonable notice to make time of the essence for its performance.  If a time for performance has already been fixed and is of the essence, then the time as fixed can only be altered by agreement of the parties to the contract and not merely by notice of one of the parties.

31.Regarding the letter from the plaintiff’s solicitors which reached the defendant’s solicitors at 2:30 pm on 30 March, I do not think it was a notice served under the Agreement requiring delivery of the certificate. I also do not see any need for such notice to be served by the plaintiffs.  Firstly, the obligation to provide the certificate was stipulated in clause 5.  Its performance was not conditional upon any request or notice by the plaintiff.  Secondly, when the plaintiffs’ solicitors raised requisitions on the repartitioning on 3 November 2011, the defendant’s solicitors referred to clauses 5 and 6 and said that the clauses were clear that the plaintiffs were contractually not entitled to raise the requisitions.  The clear implication was that the defendant would in due course provide the certificate.  Hence, the plaintiffs did not respond and waited.  The letter of the plaintiffs’ solicitors that reached the defendant’s solicitors at 2:30 pm on 30 March was only a reminder that the certificate was outstanding. 

32.It is clear that the clause 5 certificate had replaced the defendant’s obligation to answer requisition on the repartitioning. It was to assure the plaintiffs that the repartitioning was done lawfully and would cause no taint on the title.  The certificate is thus a document of title and important.  Given its importance as a document of title, I agree with Mr Chan that both parties must have understood and intended that it should have been delivered to the plaintiffs within a reasonable time before completion so that their solicitors could consider whether it could have satisfied the requirements in clause 5.  I agree with Mr Chan on this point.

The defendant’s arguments that the certificate was delivered in time

33.On the question of whether the certificate, which reached the plaintiffs’ solicitors at 6:07 pm on 30 March, was delivered within a reasonable time before completion, it has been decided that what is reasonable depends on the circumstances of the case and it may sometimes be hours rather than days (see Summit Link Ltd v Sunlink Group (HK) Co Ltd [2000] 2 HKLRD 724 at 730A – 732G).

34.Mr Lam said the burden was on the plaintiffs to show that the 5 hours 53 minutes before midnight of 30 March was not a reasonable time for the plaintiffs’ solicitors to consider the clause 5 certificate. He further said that it was irrelevant that the certificate was received by the plaintiffs’ solicitors after office hours as the office of the plaintiffs’ solicitors was still open to receive the certificate at 6:07 pm and a reply letter reserving the plaintiffs’ right was faxed out by the plaintiffs’ solicitors at 18:47 hours.

35.Mr Lam also submitted that the sense of despatch of the parties in conducting themselves in the context of the agreement should be taken into account.  He cited Delay in the Performance of Contractual Obligations by Stannard (2007) paras 1. 28 to 1. 29 in support:

“1. 28 The conduct of the parties, and in particular their attitude to the contract, may be of great importance in deciding whether performance has taken place within a reasonable time. Both the attitude of the promisor and that of the promisee can be relevant here. Thus a promisor who has made the utmost effort to perform will be more likely to be held to have performed within a reasonable time than one who has shown a total indifference to his or her obligations under the contract …

1. 29  The attitude of the promisee is also important in this connection; in particular, a promisee who has constantly been pressing for performance is more likely to be able to convince the court that the promisor has not performed within a reasonable time than one who has not shown any concern about the matter.  …”

36.Regarding the checking of the identity of the authorised person Mr Wai, Mr Lam said that the Buildings Department had a register of authorised persons kept on the internet and the plaintiffs’ solicitors could have checked it out to verify whether Mr Wai was an authorised person.  However, the copy of the register printed by Mr Lam from the internet on 15 May 2014 only showed the authorised persons as at 13 May and not on any earlier or later date.

37.Mr Lam further submitted that if the plaintiffs’ solicitors were concerned about whether Mr Wai was an authorised person, they would have checked it out when they were given on 1 November 2011 the draft deed poll together with a table of allocation of shares dated 25 October and bearing the name of Mr Wai.  They should have verified Mr Wai’s identity there and then. If they had done so, there would have been no need to check it again on 30 March.  Hence, Mr Lam submitted that the plaintiffs had no concern of whether Mr Wai was an authorised person.

38.Mr Lam further submitted that if the plaintiffs’ solicitors should have desired to check whether the certificate was genuine, they could have made use of the phone and fax number and the email address of Mr Wai printed on the certificate and to do so immediately upon receipt of the certificate at 6:07 pm.

39.Mr Lam also said that the certificate was a one page document containing two paragraphs and it was easy to determine if it had met the requirements of clause 5.

40.He also submitted that the plaintiff’s solicitors had not asked for the certificate until 2:30 pm on 30 March.  If they were concerned about the certificate, they would have asked for it earlier.  Furthermore, when they received the certificate at 6:07 pm on that day, they did not complain that they did not have sufficient time to consider it or the grounds thereof.  They also did not ask for more time to consider it and failed to respond to the defendant’s offer of postponement of completion to 12 April.

41.He also submitted that if the plaintiffs were willing purchasers, theirs solicitors would have informed the defendant’s solicitors their difficulties and how much more time they needed.  However, there was no evidence as to what their solicitors had done after having received the certificate or whether they had taken any step to verify it.

42.Regarding arrangement of finance, Mr Lam also submitted that the plaintiffs had not given any evidence of what financial arrangement they had planned or made to complete the purchase.  It is not known if the plaintiffs in fact had sufficient funds to complete.  There was also no indication that the financial arrangement would depend on the provision of the certificate.  If the certificate was indeed required for putting through the financial arrangement, it was unthinkable that the plaintiffs’ solicitors would only have asked for it at 2:30 pm on 30 March.  Hence, Mr Lam submitted that the conduct of the plaintiffs’ solicitors was incompatible with that of a party having a genuine and serious complaint that it had been deprived of a reasonable time to consider the certificate.

43.For these reasons, Mr Lam submitted that the defendant had not breached its obligation to provide the clause 5 certificate within a reasonable time before completion.

Analyses of and decision on the defendant’s arguments

44.Regarding the register of authorized persons on the internet, I agree with Mr Chan that it was of no use in checking it on 30 March 2012 after office hours.  The evidence suggests that a check on the internet conducted would only reveal a list of authorised persons that was valid and effective a few days earlier.  There is nothing to suggest that a check on 30 March outside office hours could confirm that Mr Wai was an authorised person as at 27 February.  There is also no suggestion by anyone that the Buildings Department was still open for enquiry at or after 6:07 pm. on 30 March.  There was then no way to have independent confirmation that Mr Wai was an authorised person on 27 February 2012.

45.Furthermore, I do not see why the plaintiffs’ solicitors should have to conduct such investigation or to contact Mr Wai to verify the contents and signature of the certificate after office hours.  There is no reason why the defendant should have the liberty to delay the delivery of the certificate to after office hours and oblige the plaintiffs’ solicitors to sacrifice their own time to verify the certificate when they should have gone home to their families.  Completion at midnight would also not oblige them to stay in the office after office hours until midnight.  The fact that they were still working in the office does not mean that the defendant could oblige them to do so.  I also do not see why Mr Wai Hing Wah should be obliged to entertain urgent enquiries on the certificate after office hours.  

46.I also say that even if the plaintiffs’ solicitors should have failed to conduct any check on Mr Wai when presented earlier with a draft unsigned table bearing Mr Wai’s name and dated 25 February 2012, that is no excuse for depriving them a reasonable time and opportunity to verify the clause 5 certificate before completion.

47.I also do not think that the defendant can argue that because the letter of the plaintiffs’ solicitors only came at 2:30 pm on 30 March, the plaintiffs therefore cannot complain about the lateness of the delivery of the certificate.  It is not the kind of situation as happened in Kensland Realty Ltd v Whale View Investment Ltd [2002] 1 HKLRD 87 where the vendor was late in giving the split cheque instructions and the “prevention principle” prevented it from relying on the time provision in the contract to terminate the contract or forfeit the deposit (see paras 12-139 to 12-140, Chitty on Contracts, Hong Kong Specific Contracts, 3^rd edn).  In the present case, the plaintiffs were not obliged to remind the defendant to deliver the certificate.  The defendant here was obliged to make delivery without prompting.  Furthermore, the reply of its solicitors dated 8 November clearly implied that it would in due course furnish this certificate.  In these circumstances, I see no basis for it to argue that it could be dilatory on the matter as the plaintiffs had been dilatory as well.

48.I also note that the certificate was dated 27 February 2012.  But the defendant’s solicitors failed to send out the certificate immediately upon the receipt of the letter at 2:30 pm.  They only sent it to the plaintiffs’ solicitors at 6:07 pm.  It would have taken no more than 20 minutes to walk from the office of the defendant’s solicitors to the office of the plaintiffs’ solicitors as they are both in Central.

49.I am therefore of the view that the certificate should have been provided to the plaintiffs’ solicitors within a reasonable time before the end of the office hours 30 March.  The reasonable time should be long enough to afford the plaintiffs’ solicitors a reasonable opportunity to conduct the checks which are reasonably necessary and to do so in the normal course of business.  The time should not be so short that the solicitors would have to stretch all their available resources to the extreme so as to accomplish the tasks.

50.The plaintiffs’ solicitors also did not have to explain their difficulties to justify that the defendant had indeed been guilty of delay.  This leads to the corollary that if the plaintiffs’ solicitors should have desired to conduct more checks than reasonably necessary, that would still not lengthen the reasonable time to cater for the additional checks.  For example even if the plaintiffs’ solicitors would like to have a week to engage their own authorised person to inspect the repartitioning and verify the correctness of Mr Wai’s certificate, that would still not lengthen the reasonable time by a week as such checking is not contemplated by clause 5.  Clause 5 requires the plaintiffs to accept Mr Wai’s certificate as the final document on legality and validity of the repartitioning.

51.Regarding the argument that the plaintiffs’ solicitors did not complain about the lateness of delivery or that they did not have sufficient time to check the certificate, it is also without merit.  The existence of such complaint is just one of the non-decisive matters to consider whether the defendant was late and that is a matter for objective assessment.  Furthermore, the plaintiffs’ solicitors by their letter which reached the defendant’s solicitors on 30 March at 6:47 p.m. did complain about the late arrival of the certificate and reserved all the plaintiffs’ rights.

52.I also say that if the plaintiffs would have wanted to complete the transaction despite the late arrival of the certificate, they could of course accept the defendant’s offer of postponement to complete.  But they could not be forced to accept it.  If the plaintiffs should consider it is in their interest to get out of the contract on the ground of delay, they are entitled to do so (see para 12-140 of Chitty on Contracts, Hong Kong Specific Contracts, 3^rd edn).

53.Regarding the arrangement of finance, Mr Chan also rightly rely on paras 70 and 71 of Kensland Realty:

“70. The contract is one for the sale and purchase of property in Hong Kong. In assessing what constitutes a reasonable period for present purposes, the court takes into account all matters relevant to completing such a contract which both parties are, or may objectively be taken to be, aware of at the time of making the contract. The time which the vendor must allow is the time reasonably required by the purchaser to perform its obligations in relation to such completion, in the ordinary course of business.

71. Thus, while there may be rare possible exceptions, one may assume generally that purchasers will rely on mortgage finance from a bank or some other financial institution and will need the assistance of solicitors in respect of title and the other legalities of the transaction.  A vendor would need to have good reason to approach the transaction making any other assumption.  It follows that an objective consideration of the steps a purchaser is likely to have to take in completing the contract must include any necessary dealings with its bankers and solicitors. ”

Intention not to perform contract irrelevant

54.Mr Lam also argued that even if the defendant was late in furnishing the certificate, it had not evinced any intention not to perform the contract.  Indeed, its offer to postpone the completion date demonstrated that it had every intention to complete the transaction.  Hence, Mr Lam submitted that despite the delay, the defendant had not repudiated the contract.  He also cited D H Shuttecocks Ltd v Keung Shiu Tang, CACV 5/1994, 13 May 1994 at pp 6-7 for support.  However, that was on alleged anticipatory breach where intention to perform was relevant.  In the present case, the issue is actual breach and not anticipatory breach.  Mr Chan also rightly relies on Union Eagle Ltd v Golden Achievement Ltd [1997] HKLRD 366 at 369F-I where the Privy Council said:

“Mr Lyndon-Stanford submitted that when performance was tendered at 5:10 pm the contract was still on foot. Although failure to perform in time was a repudiatory breach, the vendor had not yet accepted the repudiation and rescinded. Meanwhile, the contract remained alive for the benefit of both parties. At 5:10 pm the purchaser was still entitled to complete the contract by performance and had tendered to do so. Failure to accept his tender was a repudiatory breach by the vendor.

This argument attracted Godfrey JA but their Lordships think it is quite untenable.  It is true that until there has been acceptance of a repudiatory breach, the contract remains in existence and the party in breach may tender performance.  Thus a party whose conduct has amounted to an anticipatory breach may, before it has been accepted as such, repent and perform the contract according to its terms.  But he is not entitled unilaterally to tender performance according to some other terms.  Once 5:00 pm had passed, performance of the contract by the purchaser was no longer possible. The vendor could be required to accept late performance only on the grounds of some form of waiver or estoppels. ”

55.In the premises, I find that the defendant has repudiated the Agreement by failing to deliver the clause 5 certificate to the plaintiffs within a reasonable time before completion.

Did the clause 5 certificate delivered satisfy the requirements of clause 5?

56.Apart from delay in delivering the certificate, Mr Chan also took the point that the certificate as delivered was not in compliance with the requirements of clause 5.  Clause 5 required the certificate to certify that the repartitioning as shown in Plan A annexed to the Agreement did not constitute any breach of any building regulation.  The parties agree that the repartitioning was only done in February 2012 some three months after the making of the Agreement.  Hence, Mr Chan submitted that clause 5 must have required the authorised person to state in the certificate that the repartitioning as done was as per Plan A and was not in breach of any building regulation.  However, the certificate by Mr Wai as delivered does not indicate that Mr Wai had inspected the repartitioning or confirm that the repartitioning was done as shown in Plan A and was lawful. 

57.I take a different view.  I think para 1 of the certificate does convey the meaning that the repartitioning or sub-division of the units was as shown in the plan attached thereto (Plan A) and complied with the Buildings Ordinance and Regulations.  Para 2 also makes it clear that the partitioning and partition walls (as built) were as shown on the attached plan (Plan A).  Though the drafting of the certificate can be improved in the way as suggested by Mr Chan, I do not agree that its current form does not fulfil the requirements of clause 5.  To read the certificate to merely mean that the partitioning as shown in Plan A was lawful but not to mean that it was a reference to the actual partitioning on the ground (as contended by Mr Chan) will make the certificate useless.  I do not think the certificate should be read and understood in that way.

Did the defendant fail to deliver the clause 4 certificate?

58.The last point taken by Mr Chan is that the defendant had not furnished any certificate under clause 4 to confirm the retreat of the wall of unit 3328 from the common corridor.  Mr Lam submitted that the clause 5 certificate as delivered also fulfilled the requirement of clause 4.

59.Though the time limit of 29 March for the defendant to produce the clause 4 certificate had been waived by the plaintiffs, the defendant’s obligation to produce the same remained and the defendant should have discharged it at or before the completion time.  However, no one mentioned about this certificate in the correspondence or the affirmations filed in these proceedings.  It was only raised at about a week before the hearing in the plaintiffs’ written submissions.  The plaintiffs alleged that the defendant had also failed to comply with clause 4.

60.Since I have taken the view that the clause 5 certificate as delivered had certified the legality of the repartitioning on the ground, I agree with Mr Lam that this certificate also fulfilled the requirement of clause 4 and there was no breach of clause 4 by the defendant. 

Order

61.Since I have held that the defendant has breached clause 5 in failing the deliver the clause 5 certificate in time, I would allow the plaintiffs’ application.  I declare that the defendant has repudiated the Agreement which repudiation has been accepted by the plaintiffs.

62.I further order that the defendant do return the deposit of HK$21,936,071.90 to the 1st plaintiff.  There is no evidence of any damages suffered by the plaintiffs save the waste of the conveyancing costs which is understood.  I therefore order the defendant to pay the 1st plaintiff the plaintiffs’ costs of conveyancing to be assessed with interest on such costs at judgment rate from the date of the originating summons.  I also dismiss the counterclaim.

63.Finally, I make a costs order nisi that the defendant do pay the plaintiffs’ the costs of these proceedings.

Mr Edward Chan, SC and Mr Lee Yee Hung, instructed by King & Wood Mallesons, for the 1st and 2nd plaintiffs

Mr Paul Lam, SC, instructed by Alfred Lam, Keung & Ko, for the defendant