JOSEPH C.T. LEE & CO.(a firm) v. CHAN SUK CHING AND OTHERS

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JUDGMENT

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1. This is an appeal from the decision of a Master given on the 28th February, 1986 on an interpleader summons concerning the disposal of some money paid as deposit to the solicitors who were acting for all parties, pursuant to two sale and purchase agreements, both dated the 3rd September, 1985; one between CHAN Suk-thing (the vendor) and LAM Wah-sing (the purchaser) in respect of a flat (which is more particularly described therein), the other between the vendor and Mr LAM's wife, CHAN Mui-siu, in respect of two oar park spaces at the basement of the same premises.

2. The agreed purchase price for the flat was $630,000.00, for the two car park spaces $120,000.00; and was to be paid to the vendor in both instances in the manner set out in the two agreements, viz., an initial payment of $63,000.00 and $12,000.00 respectively by way of deposit and part payment on the signing of both agreements; the balance upon completion which was stipulated in both agreements as the 3rd October, 1985. Time was made of the essence in every respect in both agreements.

3. It was not disputed that on the 3rd September, Mr LAM paid a sum of $75,000.00 by cheque to the solicitors as deposit, which payment is evidenced by their receipt No. 6001 (P.26 of the agreed bundle) and is stated to be in the matter of "Flat A3 on 3F of Block A of Kingsland Villa, No. 19 Man Fuk Road, Kowloon".

4. The vendor having failed to produce the title deeds of the car park spaces by the completion date, the purchasers purported to repudiate both agreements, whereupon the solicitors took out the interpleader summons. The amount of the deposit in respect of the flat was ordered to be deposited in Court; that for the car park spaces was ordered to be returned to Mrs LAM. After hearing evidence from both sides the learned Master ordered the deposit for the flat to be returned to the purchaser.

5. The main point taken before me, as was before the learned Master, concerns the parol evidence rule, that is, whether the Master could have properly admitted extrinsic evidence in the construction of the agreement in relation to the flat which, it was submitted on behalf of the vendor, embodied all the terms and conditions which the parties had agreed.

6. The Master, who heard the disputed evidence with the consent of the parties before deciding on its admissibility, found it "incorrect in law to exclude the disputed evidence which is material to the relationship between the parties and to the true nature of transactions". He admitted that evidence, preferring the evidence of the solicitor to that of the vendor.

7. It is submitted strongly by Mr CHU (for the vendor) that this was wrong. He referred to the general rule which is stated in para. 802 of the current edition of Chitty On Contracts, the General Principles, which is that where parties have embodied their contract in a written document, verbal evidence is not allowed to be given so as to add to or subtract from, or in any manner to vary on qualify the written contract. It is accepted however that this rule is subject to numerous exceptions.

8. Mr CHU referred also to the learned treaties of Wedderburn "Collateral Contracts" (1959) C.L.J. 58 where the author states at P.62:

"What the parol evidence rule has bequeathed to the modern law is a presumption - namely, that a document which looks like a contract is to be treated as a whole contract. This presumption is 'very strong', but it is a presumption only, and it is open to either of the parties to allege that there was, in addition to what appears in the written agreement, an antecedent express stipulation not intended by the parties to be excluded, but intended to continue in force with the express written agreements. "

9. The learned Master had this presumption very much in mind when he considered this issue.

10. The first thing to do therefore is to consider whether this written agreement now before me is a complete contract between the parties. In so far as the true construction of a document is concerned it means, in the words of LORD GREENE M.R., in Hutton v. Watling (1948) Ch. 398, "no more than that the court puts upon it the true meaning, being the meaning which the other party to whom the document was handed or who is relying upon it, would put upon it as an ordinary intelligent person construing the words in a proper way in the light of the relevant circumstances. "

11. It follows, therefore, as Wedderburn says, that the strength of the presumption against the parol evidence will depend upon the exact nature of the written agreement and its surrounding circumstances.

12. Mr CHU argues that because the parties instructed a firm of solicitors to draft the agreement, besides wanting to have a professionally prepared document, they must have intended also to provide for any future disputes. That may be, but it in no way precludes either of the parties from challenging its ture nature. Thus the document will be scrutinised and construed to see whether, in the light of all the relevant circumstances, the parties are to be confined within the four corners of the document document in which they have chosen to enshrine their agreement.

13. The deposit was paid to the solicitors at the time of the signing of both agreements. This is contrary to Clause 2 and Part III of the instrument. Furthermore, at the end of the agreement is a receipt clause for $63,000.00 which the vendor has not signed. Also the receipt issued by the solicitors for the total deposit of $75,000.00 was stated to be in the matter of the flat. I am of the view that these ambiguities, which are patent in the instrument, would induce any reasonably intelligent person to ask and be told why they were manifest in the document. Mr CHU points to clause 18 which states:

"18(a)         This agreement contains the full agreement between the parties hereto.

 

     (b)        No warrants, negotiations, representations, and conditions express or implied have been given by either party to the other except those contained in this Agreement. "

14. It is argued that clause (a) effectively prohibits the introduction of, or attempts to introduce, any extrinsic evidence. Mr NG (for the purchaser) was of the view that it referred only to the extent of the agreement as opposed to the number of the agreements there might have been between the parties. 

15. Confining myself to the written agreement, it is manifest that the patent ambiguities arising from the contravention of a term of that agreement disclose in my opinion the existence of other factors or circumstances leading to that situation at the time it was signed, which clearly concealed the true nature of the agreement. In the circumstances, any reasonably intelligent person would have looked at the surrounding circumstances to ascertain its true nature. On this basis, the learned Master was right in law to admit the extrinsic evidence.

16. That evidence indicated clearly that it was the declared intention of the vendor to sell, as much it was of the purchaser to buy, the flat and the two car park spaces as "one package for one price". The vendor was able to produce the title deeds of the flat but not of the two car park spaces which she undertook to make available the following day which she did not do. The solicitor confirmed the consensus reached between the parties which maybe paraphrased thus : (i) the sale of the flat and the two car park spaces be split up into two sale and purchase agreements with a view to saving on the stamp duty; (ii) both agreements were interdependent and (iii) conditional upon the production of the title deeds of the two car park spaces by the completion date when the deposit would be paid over to the vendor, and until those title deeds were produced there was to be no binding contract between the parties.

17. That was the evidence which the learned Master accepted. On the issue of there being no binding contract in the circumstances stated above, Mr CHU attempted valiantly and with ingenuity, if I may say so, to distinguish the case of Pym v. Campbell (1856) 6 E & B 370, upon which Mr NG relied, on facts. The facts may differ; it is the general principle enunicated which is important and it was stated by Erle, J., as follows:

"The distinction in point of law is that evidence to vary the terms of an agreement in writing is not admissible, but evidence to show that there is no agreement at all is admissible. "

18. Just as the evidence given in that case was overwhelming (per Lord Campbell, C.J.), so it was in my opinion in this case which proved not only that the two written agreements were interdependent as the learned Master found, but were subject to, apart from the stipulated term as to the completion date in both, the collateral agreement in the nature of a condition precedent, on the fulfilment of which the formation of a binding contract of sale was made to depend.

19. But Mr CHU argues that even so, parol evidence of that collateral agreement is not admissible since it is a term of a contract required by law to be in writing. He relies on para. 38-12 of Phipson on Evidence where the case of Bailey v. Woolstone (1907) 42 L.J. 457 (CA) is cited in support. The citation in para. 38-12 continues, "...... but where it is on an independent matter, this does not apply" and the case of Angell v. Duke, L.R. 10 Q.B. 174 is mentioned in support. Besides this latter case, Mr NG relies on s.3 of the Conveyancing and Property Ordinance (Cap. 219). It is trite to say that the requirements of that Ordinance are directed to the creation of an enforceable contract and an oral agreement to abrogate a written contract for the sale of land is effective; and so it is with an oral agreement imposing a condition precedent of the kind as was in this case.

20. Mr CHU was at pains to try to persuade me that the oral agreement concerning the interdependence of the two written agreements contradicted the terms of clause 18(b). He cited no less than seven authorities in support starting with Angell v. Duke (supra), Henderson v. Arthur (1907) 1 K.B. 10, Bank of Montreal v. Hawrish, (1969) 2 D.L.R. 600 and some later Canadian authorities on the same point. Mr NG argued that this submission overlooked the distinction mentioned in pym v. Campbell (supra) and he further relies on Webster v. Higgin (1948) 2 All E.R. 127. I need not set out the facts of this last case. Suffice it to say that there the wording of a clause in a hire purchase agreement, somewhat similar to Clause 18(b), for a car was held not to be sufficiently clear to abrogate a separate collateral agreement constituted by an offer of a guarantee and the signing of the hire purchase agreement by the purchaser. The wording was in the present tense, unlike clause 18(b) which is in the perfect tense. Nevertheless what is important in the enforcement of a contract is the intention of the parties. LORD GREENE M.R. said at P.129:

 

"We, therefore, have this curious position, analysing the words again: 'If you, the purchaser, will sign this contract which contains an exclusion of every agreement, I will guarantee the car. " Of course, that is nonsense, but the parties often make nonsensical arrangements. If the contract meant that, we should be bound to give it that meaning, but, whether or not it has that effect must, in my opinion, be a pure question of construction of the agreement."

Here the parties had agreed to a condition precedent and the solicitor had explained to the parties that there was to be no binding contract until that condition was fulfilled by the vendor. The parties having accepted that and put their hands to the agreement on that basis could not, in my view, have intended to be bound by the terms of Clause 18 until that condition precedent was fulfilled by the vendor. Furthermore, I think that there is merit in Mr NG's submission praying in aid the contra proferentum rule. The vendor herself being in breach in failing to produce the title deeds of the two car park spaces cannot now seek to rely on clause 18; to permit her to do so would be unconscionable and unjust.

21. It only remains for me to refer briefly to Mr CHU's remaining submissions. These relate to the alleged illegality of the agreement to save on the stamp duty by splitting up the transaction into two and the issue of waiver. With regard to the former, like the learned Master, I am of the opinion that there was no evidence to support the submission. Moreover, I take the view which was canvassed by Mr NG that it was in the nature of tax avoidance rather than tax evasion. On waiver, I accept that there was nothing in the form of a promise or forbearance to prove any waiver of the term regarding the completion date.

22. The upshot of this discussion is that this appeal must fail. It is dismissed with costs.