Leung Yuk Chuen v. Chan Fu Choi Joise

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J U D G M E N T

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Godfrey, J.

1. This is an appeal from an order of Barnett J. made on 4th June 1992 on a purchaser's summons for summary judgment, taken out under the provisions of 0.86 of the Rules of the Supreme Court, for specific performance of an agreement described as an agreement for the sale and purchase of land.

2. This agreement (which was in Chinese writing and which I shall call "the Chinese Agreement") was in the following terms (I set out the English translation) :-

"CONTRACT OF AGREEMENT OF SALE AND PURCHASE

Makers Chan Fu Choi (hereinafter called 'Party A') and Leung Yuk Chuen (hereinafter called 'Party B') And now the Party A agreed to sell the property of Flat D, 25th Floor, Block 3, Bayview Garden, Tsuen Wan, New Territories, Hong-Kong in the sum of HK$1,818,000.00 to the Party B and both parties agreed to the terms and conditions as follows :

1.    At the time of signing this agreement, Party B shall pay Party A in the sum of HK$25,000.00 being the initial deposit of this transaction.

2.    After signing this agreement, Party A shall deliver the title deeds and all relevant documents to the solicitors' firm for preparing the formalities of an Agreement for Sale and Purchase formalities, after notified by the solicitor, both parties shall attend the office of the solicitors firm to execute and sign formal agreement procedure. Party B shall pass through the solicitors firm to pay the Party A 10% of the purchase price after deducting the previous payment of HK$25,000.00 as initial deposit. That is HK$156,800.00 the formal deposit.

3.    The balance of purchase price of 90% of HK$1,636, 200.00 Party B shall pay Party A within 24 days' from the date of issuing occupation permit in respect of the said property in full and execute all relevant formality at the same time.

4.    After signing this Agreement, both parties shall sign a formal Sale and Purchase within 10 days, if Party B shall breach of the contract not to buy, Party A shall forfeit the deposit as compensation. If Party A breach of the contract not to sell, Party A shall pay Party B with a sum double to the amount of the deposit HK$50,000.00 as compensation to Party B of loss and damage.

5.    Party B agreed to pay in the sum of HK$12,169.67 to Party A's solicitor office on each of 17th day of every month. (From 17th July 1991 to the Date of completion.)"

3. This is not happy drafting but clause 4 must, I think, be at least capable of this construction; that if the vendor wished to break the contract then he should be entitled to do so on making a payment of double the purchaser's deposit (so that the purchaser would get back the initial deposit and the same amount again). If that is the correct construction, it surely follows, in my opinion, that the agreement was that all other remedies otherwise open to the purchaser by reason of the vendor's refusal to go on with the contract were to be excluded.

4. But the judge came to the conclusion that another construction was to be preferred; i.e., that the remedies open to the purchaser in the event of a refusal by the vendor to go on with the contract were not limited to a claim for a payment of double the amount of the deposit, but extended to all the other remedies, including specific performance, available to a disappointed purchaser whose vendor goes back on his contract.

5. Before us, counsel for the appellant accepted that the construction preferred by the judge was correct. It was impossible in these circumstances for us to entertain any argument to the contrary and indeed we heard no such argument. For the purposes of this appeal, therefore, we are bound (though in my judgment it is unfortunate that this should be so) to assume that, on the true construction of the Chinese Agreement, clause 4 did not preclude the purchaser from exercising his right to sue for specific performance in the event (which happened) of the vendor refusing to go on with the contract.

6. These being proceedings under 0.86 of the Rules of the Supreme Court, it was for the vendor to show some good ground of defence to the purchaser's claim for specific performance. If the vendor failed before the judge to show any such good ground, it follows that the judge was right to accede to that claim.

7. As to possible grounds of defence, I have already mentioned the point based on the true construction of clause 4. But before us counsel for the vendor, on instructions, refused to take the point. Other points which were canvassed in debate between the bench and the bar were similarly disclaimed and so are likewise not available. For example, it might have been possible to argue that the Chinese Agreement was not a concluded agreement for the sale and purchase of land, but was merely an agreement to enter into a formal sale and purchase agreement, the terms of which were as yet undetermined, so that for want of certainty of terms the Chinese Agreement was not an agreement of which specific performance could be ordered.

8. For another example, on the evidence before the judge and also relied on before us, events were mentioned which could give rise, in certain circumstances, to a successful defence of estoppel, by representation or by convention. I shall read the relevant passages of the evidence. In an affirmation of the vendor, affirmed on 22nd October 1991, it is stated as follows

"4.    On the day of the signing of the Chinese Agreement, i.e. 1st July 1991, I went together with Danny Au, the estate agent who dealt with the subject premises to a solicitor's firm (which name I forget). One Mr Wong of the said firm lent us the use of a room for the negotiation and signing of the provisional agreement. There I met through the introduction of Danny Au, the Plaintiff.

5.    Originally and before the meeting Danny Au informed me that the purchaser, i.e. the Plaintiff, would pay an initial deposit of $30,000.00. At the said meeting the Plaintiff said that he did not want to pay such an amount of initial deposit and suggested that he would pay only $25,000.00 as initial deposit. Danny Au then explained to the Plaintiff that in that case if I did not sell the subject premises to the Plaintiff after signing the agreement I would pay and the Plaintiff would receive $50,000.00 instead of $60,000.00 in discharge of my obligation. The Plaintiff acknowledged and accepted the said agreement.

6.    Before the signing of the Chinese agreement which was drafted by Danny Au, Danny Au read out and explained each and every clause written thereon to the Plaintiff and I. In explaining clause 4 he said that in the event that I did not wish to sell after the signing of the agreement I would have to pay double the initial deposit, i.e. $50,000.00 to the Plaintiff. The Plaintiff again acknowledged and accepted the said term.

7.    Throughout the meeting and the oral negotiation thereat the Plaintiff, Danny Au and I addressed our respective minds to the return of double initial deposit by me as my only obligation in the event that I decide not to sell after the signing of the agreement. In accepting the explanations of Danny Au set out in paragraphs 5 and 6 hereof the Plaintiff never raised the possibility of his insisting on buying the subject premises or other remedies."

(I omit paragraph 8, the content of which is, in my view, inadmissible.)

"9.    In the present case and at the said meeting the Plaintiff understood and agreed that in the event that I did not want to sell the subject premises I would only have to pay $50,000.00 to him which is in fact an alternative or substituted mode of performance of my obligation."

9. This evidence is of course inadmissible as an aid to construction; but, on this evidence, it might have been said that Danny Au, with the expressed or implied assent of the purchaser, had misrepresented the legal effect of the Chinese Agreement to the vendor. The general rule that if a person authorises or permits another to make a representation for the purpose of it being acted upon, and it is acted upon, that person cannot afterwards be heard to say that the representation is not true, applies in particular when the representation is as to the legal effect of a document : see De Tchihatchef v. The Salerni Coupling, Limited (19321 1 Ch 330, per Luxmoore J. at p.342.

10. Alternatively, it might have been said that an estoppel arose because both parties agreed to proceed on the common assumption that the only remedy open to the vendor and to the purchaser, in the event of the vendor deciding to call off the contract, would be a claim for payment of double the deposit. If parties to a contract, by their course of dealing, put a particular interpretation on the terms of it, on the faith of which each of them to the knowledge of the other acts and conducts their mutual affairs, they are bound by that interpretation just as much as if they had written it down as being a variation of the contract. There is no need to enquire whether that particular interpretation is correct or not, or whether they were mistaken or not, or whether they had in mind the original terms or not. Suffice it that they had by their course of dealing, put their own interpretation on their contract, in which case they cannot be allowed to go back on it : see Amalgamated Property Company v. Texas Bank [1982] 1 QB 84, per Lord Denning M.R., at p.121.

11. But neither of these estoppel points was taken before the judge and neither of them was taken before us. So it is impossible for this Court, whatever merit it may or may not think there may be in these arguments, to consider them further for the purpose of deciding whether or not the vendor has established a good ground of defence to this action.

12. I would mention now another possible defence, also mentioned by the judge, i.e. rectification. The judge below considered this briefly but pointed out that no attempt had., at any stage, been made to suggest that the Chinese Agreement ought to be rectified by the introduction of some term, or some words of clarification, which made it plain that the purchaser was to be restricted to a claim for double the deposit in the event that the vendor decided to call off the contract. Counsel for the vendor before us expressly disclaimed any intention of raising any such claim, and this Court is simply not entitled to consider it further.

13. So, although these various grounds of defence may have some merit (I do not say that they have, only that they may), they do not avail the vendor on this appeal. The only grounds which can avail the vendor on this appeal are the grounds advanced in the vendor's notice of appeal, and which were argued before us. Counsel for the vendor stated in express terms that no further or other ground of defence was to be relied on on behalf of the vendor other than those grounds.

14. I therefore turn to the grounds of defence urged upon this Court by the vendor. These are in substance two.

15. First, it is said, the agreement between the vendor and the purchaser can, on the evidence, be seen to be, not an agreement contained wholly within the terms of the Chinese Agreement, but an agreement arrived at partly orally and partly in writing. The oral part of this agreement, it is said, was an agreement which has this effect: that the purchaser is to be precluded from his remedy in specific performance provided that the vendor pays to the purchaser double the deposit in the event of the vendor calling off the contract. The trouble with that is that on the construction of the Chinese Agreement which the vendor has accepted, the purchaser has just such a right, that is to say, he is entitled to proceed for a decree of specific performance, and is not limited to his claim for double the deposit.

16. Now, it seems to me absolutely impossible to establish one single agreement, made partly orally and partly in writing, when the alleged terms of the oral part of the agreement conflict with the terms of the written part of the agreement. Once a construction of the written agreement is accepted excluding that which is said to be the content of the terms of the oral agreement, it seems to me the Court has no alternative but to reject this argument. You cannot make an agreement partly orally and partly in writing with the oral terms repugnant to the written terms.

17. The second point urged on us by counsel for the vendor was that the evidence should be read as disclosing a collateral agreement, whereby the purchaser undertook, in effect, not to exercise any of the remedies otherwise open to him under the Chinese Agreement, but to content himself with the remedy of receiving back from the vendor double the deposit in the event of the vendor's calling off the contract.

18. Again, this seems to me to be impossible to sustain. First, evidence to support an agreement of this kind must be clear and unequivocal and in my judgment, the evidence which was led here fails to get over the threshold. It is of course plain that the vendor is not called on at this stage to prove her case as if this were the trial of the action, but it is equally plain that the vendor must establish sufficient to show that there is some reasonable prospect of then establishing the alleged collateral agreement. Like the judge, I am of the view that the evidence led by the vendor is wholly insufficient to get the vendor over this threshold. It seems to me that the evidence which I have read cannot be said to warrant any conclusion, even a tentative conclusion, that. the parties entered into such a collateral agreement.

19. This case is quite different from cases such as City of Westminster Properties (1934) Ltd. v. Mudd [1959] Ch 129. In that case, the parties had clearly entered into an agreement on the faith of an express promise made by one to the other that a particular provision of that agreement would not be enforced. In such a case, of course, a collateral agreement is established; and the party giving the promise would not be able to insist on the terms of the main agreement in the teeth of that collateral agreement. I am afraid that I find nothing whatever in the present case to come anywhere near satisfying me that the vendor has got her case for a collateral agreement off the ground. If I had thought that the vendor had got that case off the ground, I would, for my part, certainly have be inclined to let the whole matter be thrashed out at the trial. But in the absence of evidence sufficient to get the vendor over the threshold, that would seem to me to be quite a wrong course to take.

20. For the reasons I have endeavoured to state, I would dismiss this appeal. I say so with considerable reluctance, but since the appeal was argued only on two specific grounds both which I have felt bound to reject, there is no alternative open to us, as it seems to me, but to take the course I have suggested.

Sir Derek Cons, V.-P.

21. I agree with my Lord that the appeal must be dismissed.

22. Quite apart from the question of whether the evidence of the vendor would be admissible as parol evidence varying or contradicting a written agreement, as I read her affirmation it seems to me to go nowhere near establishing an oral agreement between herself and the purchaser, whether part of or collateral to the written agreement, or as an overriding warranty. At most, the affirmation indicates what the parties understood the written agreement to mean.- That understanding might have paved the way for other defences. I put it no higher than that because we have heard no argument thereon by reason of the fact that the vendor's counsel has, on instructions, expressly declined to ground her appeal upon anything other than the particular defences envisaged by the Notice of Appeal, all of which depend upon the establishment of an oral agreement or promise of some kind and, therefore, inevitably fail.

Liu J.

23. I agree with the judgments that have been delivered and the conclusion reached. There is only one observation that I wish to make. At the time when what has been described as the Chinese Agreement was formulated and signed, the alleged terms, orally agreed, and those in clause 4 were and were envisaged to have the same effect. It stands to reason that the alleged oral terms must have been superseded by and merged with those in clause 4 and that it would not be open to the appellant to take any point on such alleged oral terms.