ELSUN LTD v. CHIN MARGARET

CACV314/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 314 OF 2008

(ON APPEAL FROM DCCJ No. 361OF 2008)

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BETWEEN

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J U D G M E N T

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Hon Cheung JA :

Facts

1.  By a provisional agreement for sale and purchase dated 24 September 2007 (‘the agreement’) the plaintiff purchaser agreed to buy from the defendant vendor the property situated on the 1^st floor of Section A of Lot No. 610 in D.D. 216, Sai Kung, New Territories (‘the property’) for the sum of $1,920,000. The property is situated in a New Territories ‘Small House’.

2.  Under the agreement the plaintiff paid $100,000 as initial deposit. It was required to pay a further deposit of $92,000 on 8 October 2007 upon the signing of the formal agreement. The balance of the purchase price namely, $1,728,000 was to be paid on or before the completion date on 5 November 2007.

3.  As it turned out the formal agreement was not signed and the purchase was not completed on 5 November 2007. Instead the plaintiff’s solicitors namely, Gary Mak, Dennis Wong & Chang (‘Gary Mak’) by a letter dated 17 December 2007 gave notice to the defendant’s solicitors Raymond Chan, Kenneth Yuen and Co. (‘Raymond Chan’) that the completion was to take place on 24 December 2007. Raymond Chan and the defendant did not respond to this notice to complete. The plaintiff claimed that it was ready and willing to complete the sale by tendering the balance of the purchase price.

4.  The plaintiff then commenced the present action in the District Court seeking specific performance of the agreement and applied for summary judgment. Upon hearing the application H H Judge Simon Leung granted the relief in favour of the plaintiff. The defendant now appeals against the judgment.

The principle in summary judgment application

5.  In an application for summary judgment, the plaintiff has to show that there are no triable issues which would merit the trial of the action.

The vendor’s obligation

6.  It is well established by the authorities that a vendor is required to show good title before completion and to give or make good title on completion. As part of the vendor’s obligation to prove good title it has to answer requisitions on title.

The requisitions and subsequent events

7.  In this case Gary Mak raised requisitions on title after Raymond Chan delivered the title deeds of the property on 27 October 2007. The first of the requisitions dated 2 November 2007 consisted of questions concerning a certificate of exemption attached to the letter from the District Lands Office dated 6 December 1989. The certificate stated that it was granted on condition that the lot owner would comply with the terms and conditions contained in a letter dated 25 January 1988 governing the lot by the District Lands Officer, Sai Kung. Gary Mak required a copy of that letter. Another requisition was concerned with the discrepancy in the identity card number of the defendant recorded in the title documents.

8.  On 5 November 2007 Gary Mak wrote to Raymond Chan stating that it had not responded to the requisitions. It further stated that as the requisitions had not been answered the plaintiff was entitled to postpone the competition date to within seven working days after all the requisitions had been answered. On the same day Raymond Chan replied stating that it would undertake to provide a certified copy of the letter of 25 January 1988 within seven days after receipt from the Lands Department. In respect of the identification of the defendant, Raymond Chan sought to remove the doubt as to the identity in the title deeds by comparing the signatures in the documents.

9.  By a letter dated 6 November 2007 Gary Mak insisted that a copy of the letter of 25 January 1988 must be provided before completion.

10.  By another letter dated 6 November 2007 Raymond Chan again stated that rectification by way of initialling the correction of the defendant’s identity card number by the defendant in a previous assignment would be sufficient. The letter did not address Gary Mak’s demand for the copy letter.

11.  Gary Mak on the same date reminded Raymond Chan that it had not answered the requisition on the letter and further insisted on the rectification of the title documents.

12.  Thereafter by two letters dated 12 November 2007 and 20 November 2007 respectively Raymond Chan asked Gary Mak to return the title deeds for onward return to the mortgagee. However it was not stated in these letters that the defendant had considered that the agreement had come to an end.

13.  On 30 November 2007 Gary Mak again wrote to Raymond Chan reminding it that it had failed to answer the requisitions and asking for a reply as soon as possible.

14.  On 17 December 2007 Gary Mak issued the notice to complete the sale on or before 24 December 2007.

15.  By letters dated 22 and 27 December 2007 respectively Raymond Chan informed Gary Mak that it was waiting for instructions from the defendant but on 28 December 2007 it informed Gary Mak that it had ceased to act for the defendant.

16.  The plaintiff issued the present action on 24 January 2008.

Notice to complete

17.  The plaintiff was entitled to raise the requisitions which were not answered. It was not in breach when the transaction was not completed on 5 November 2009. It is also clear that the plaintiff was entitled to issue the notice to complete despite the fact that the sale was not completed on 5 November 2007. The principle is that once the guilty party has failed to perform on the due date, then the innocent party can serve the notice, requiring performance within a reasonable time; further non-compliance will result in repudiation (The Hong Kong Conveyancing, Law and Practice : Sihombing and Wilkinson, para. VI [153]).

18.  The defendant was in breach by not completing on the extended date. Instead of treating the agreement to have come to an end and sued for damages the plaintiff sought specific performance of the agreement. It was entitled to do so.

19.  It had further showed that it was ready and willing to complete the sale by tendering the balance of the purchase price to the defendant.

Right to terminate agreement

20.  The only triable issue raised by the defendant was that she was entitled to terminate the agreement by virtue of clause 18 of the agreement. While the rest of the terms of the agreement were preprinted and were in both the English and Chinese languages, Clause 18 was handwritten in Chinese and it stated that 「如樓契不完整，買賣相方有權取消合約交易」. The translation is that ‘The buying and selling parties have the right to cancel the agreement if the title deeds are not complete’. The term 「相方」is most probably a misnomer for「雙方」.

21.  The Judge construed the clause as meaning that the termination required the consent of both parties. Certainly the term「相方」lent support to the Judge’s view. However, even assuming in the defendant’s favour that the clause could be exercised unilaterally, it is clear that she had not at any time informed the plaintiff that she was terminating the agreement pursuant to clause 18. She referred to a document dated 9 November 2007 addressed by her to her mortgagee. The terms of the letter are

「華人財務

致關小姐：

買賣成交取消通知
1/FL., LOT 610 in DD216 SAI KUNG

本人特此信通知貴行，要求貴行將樓契取回續供，同時給通知 Raymond Chan & Kenneth Yuen Co. Simone Wong 及劉小姐通知買家律師樓交還樓契於貴行。

C.C. Copy Raymond Chan & Kenneth Yuen Co.
MARGARET CHIN 9 NOV 07  5.30 at the office
of 華人財務行。

C.C. Copy 於貴行供款部總經理。  」

22.  Although it is not clear from the evidence whether Raymond Chan had received this letter, certainly on 12 November 2007 Raymond Chan informed Gary Mak that,

‘ We have received urgent instructions from our client to demand for your return of all the title deeds and documents sent to you before forthwith for our onward return to the existing mortgagee bank.

Therefore return all the title deeds sent to you before forthwith.’

23.  However, even in this letter there was no indication that the agreement had been terminated by the defendant pursuant to clause 18.

24.  If a vendor cannot answer a requisition on title, he generally has a right under the agreement to rescind the transaction before completion : see Au Wai Ming and another v. Kam Tze Ming Alfred CACV 278/2008 per Yuen JA. However, in this case it is apparent that the defendant had never exercised such a right. On the contrary, her solicitors were offering suggestions to remedy the defects in title (albeit inadequately).

Other issues

25.  The defendant further argued that she was ‘trapped’ by the conduct of her estate agent and the plaintiff. She referred to the oral assurance given by the estate agent to her that the sale would be completed punctually and that she would be entitled to terminate the agreement if the sale was not completed on 5 November 2007. However, this matter would not assist her because the task of the Court is to construe the terms of the written agreement and decide what she had actually done in this case. In any event, Clause 12 of the agreement provided that

‘ This agreement supersedes all prior negotiations, representation, understanding and agreements of the parties hereto.’

26.  The defendant further referred to the fact that the plaintiff had also purchased other two flats in the building in which the property was situated. The agreement for the ground floor was dated 26 October 2007 and the purchase price was $2,900,000; completion took place on 30 November 2007. The agreement for the second floor was dated 8 October 2007 and the purchase price was for the sum of $3 million; the completion date was 26 November 2007. The defendant claimed that as the plaintiff had also acquired these two other flats therefore it must have been satisfied with the title of the property.

27.  In my view this would not assist the defendant because the scheduled completion of the agreement was 5 November 2007 and this was much earlier than the completion dates of the two other flats. In any event the issue before the Judge was whether the defendant had complied with the plaintiff’s request to complete the sale on 24 December 2007, by then the question of title was no longer in issue.

Conclusion

28.  In my view the defendant had failed to show that there was any triable issue which would prevent summary judgment from being obtained against her. Accordingly the Judge’s decision to order specific performance of the agreement in favour of the plaintiff is correct and the defendant’s appeal is accordingly dismissed.

Costs

29.  The plaintiff is entitled to the costs of the appeal which will include the costs of the hearing on 7 July 2009 before Tang VP and Yeung JA. That hearing was adjourned because the defendant claimed that the appeal bundle was incomplete and that the plaintiff’s solicitors had wrongly removed one of her affirmations from the bundle. The claim was mistaken.

Hon Yuen JA :

30.  I agree.