WONG WAI MING v. LAM SHING YUEN, CHARLES

1991 No. A7161

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

-----------------------

-----------------------

J U D G M E N T

----------------------

Introduction

1. By a Summons dated 18th December 1991, the Plaintiff sought an order that the Defendant's Defence and Counterclaim be struck out and that judgment be entered for the Plaintiff for the relief claimed in the Amended Statement of Claim. Master Cannon gave leave, on 14th April 1992, for the Summons to be amended to reflect the fact that the Defence and Counterclaim had been amended, and on the same day she dismissed the Amended Summons. The Plaintiff appealed against the order dismissing the Amended Summons, though he did not contend that judgment should be entered for the relief claimed in the Amended Statement of Claim. I heard that appeal on 30th April 1992. 1 dismissed the appeal, but said that I would hand down my reasons for doing so at a later date.

The Pleadings

2. The Plaintiff's pleaded case is that by a provisional agreement in writing dated 16th August 1991 ("the agreement"), the Defendant agreed to sell to the Plaintiff a flat in Tai Hang Road, Hong Kong. Clause 2 of the agreement provided that

(a)    an initial deposit of $150,000 was to be paid by the Plaintiff to the Defendant on the signing of the agreement, and

(b)    subject to the condition that the sum could only be released to the Defendant once the Plaintiff's solicitors (i) had received confirmation from the Defendant's solicitors that the sum necessary to redeem the existing mortgage on the flat did not exceed the balance of the purchase price payable on completion, and (ii) had approved the Defendant's title deeds to the flat.

The Defendant's solicitors' response was to stipulate that unless they received written confirmation by noon on 17th September 1991 that the sum could be released to the Defendant, the cheque would be returned to the Plaintiff. In the event, on 17th September 1991, the parties agreed that the sum could be released to^-the Defendant, but despite that the Defendant, by a letter dated 17th September 1991, wrongfully purported to rescind the agreement and to forfeit the initial deposit. The Plaintiff claims various declarations, specific performance of the agreement and damages.

3. By his Amended Defence, the Defendant asserted that neither the Plaintiff nor his solicitors confirmed in writing before noon on 17th September 1991 that the sum of $300,000 would be released to the Defendant, and he denied the agreement alleged to have been made on that date. 'The paragraphs in the Amended Defence to which the Amended Summons relates are paras. 8-12 inclusive, and the last sentence in para. 14, in which the Defendant asserted that

(a)    the Plaintiff's failure to pay the balance of the deposit by 16th September 1991 amounted to a repudiatory breach of the agreement, entitling the Defendant to rescind the agreement, to forfeit the initial deposit and to sell the flat to anyone he thought fit, and

(b)    the Plaintiff's breach activitated clause 12 of the agreement (which provided that payment of the balance of the deposit was to be a pre-condition to the validity of the agreement) and meant that the agreement had never taken effect.

The Amended Summons also relates to the whole of the Amended Counterclaim, in which the Defendant counterclaimed various declarations and damages for what was alleged to be the Plaintiff's breach of the agreement.

The Attack on the Amended Defence

Mr. Chiu for the Plaintiff argued as follows:

(i)    The Amended Defence did not allege that the Plaintiff refused to pay the balance of the deposit. It merely alleged that, in breach of clause 2, payment had not been made on or before 16th September 1991.

(ii)    The Plaintiff's breach of clause 2 did not amount to a repudiatory breach of the agreement:

(iii)    The Amended Defence did not plead that time was of the essence of the agreement, nor did it plead the circumstances giving rise to such an allegation. All the terms of an agreement which are to be relied upon must be specifically pleaded, and the practice where it is going to be alleged that an agreement is subject to a term that time was of the essence of the agreement is to plead that specifically: see the precedents in Bullen & Leake & Jacob's "Precedents of Pleading", 13th ed., Form 567, p.866, and Atkin, op. cit., Forms 8-10, pp.341-347.

4. I cannot accept this argument. The argument proceeds on the premise that the Defendant's pleaded case is that the Plaintiff had merely delayed the payment of the balance of the deposit. That premise is incorrect. The Defendant's pleaded case is that the payment of the balance of the deposit (a) was not a payment to the Defendant at all, and (b) was in any event a conditional payment. It was not a payment to the Defendant at all, because it was paid to the Defendant's solicitors as stakeholders, and the payment to them in that capacity was not a payment to them as the Defendant's agents. It was a conditional payment because the sum of $300,000 could only be released to the Defendant if the conditions set out in the Plaintiff's solicitors' letter of 16th September 1991 were complied with. Accordingly, the Defendant's pleaded case, on its true analysis, is that the Plaintiff's failure to pay the balance of the deposit on or before lath September 1991 (a) unconditionally and (b) to the Defendant was a repudiatory breach, even if time was not of the essence of the agreement. Such a defence cannot be said to be not a reasonable defence, nor can it be said to be scandalous, frivolous or vexatious.

5. In any event, even if the Defendant's pleaded case was merely that the Plaintiff had delayed in the payment of the balance of the purchase price, the Defendant's failure to plead specifically that time was of the essence of the agreement is not, in my view, fatal to the Amended Defence. That is because the Defendant does not have to go as far as asserting that the agreement to a subject to aterm, express or implied, that time was of the essence. In order to resist the claim for specific performance, all that the Defendant needs to show is that the grant of specific performance would be, to use the words of Earl Loreburn in Stickney y. Keeble at p.400, "essentially unfair". Indeed, Lord Atkinson at p.401 said:

"There is no occult or elusive mystery hidden in the phrase, 'in equity time is not of the essence of the contract.' It merely expresses in a condensed form the doctrine that if a Court of Equity, looking not at the letter but at the substance of a contract to purchase land, sees that (there was no] intention disclosed that the time limited for completion, or for any Step towards completion, is to be strictly adhered to, that Court will relieve against breaches through mere lapse of time touching these matters when that can be done without substantial injustice: Roberts v. Berry (1853) 3 D.M.& G. 284".

Similar views were expressed by Lord Cairns in Tilley v. Thomas (1867) L.R. 3 Ch. 61 at p.67.

6. The Defendant has pleaded in his Amended Defence those facts on which he relies to support his assertion that there was an intention that the time by which the balance of the deposit had to be paid was to be strictly adhered to:

(i)     In para. 2, it was pleaded that the agreement was a "provisional" agreement, i.e. that it was to provide for the parties' :rights and obligations until a formal agreement for the sale and purchase of the flat had been signed.

(ii)    In para. 2, it was pleaded that clause 8 of the agreement provided for the Defendant's remedy in the event of the Plaintiff failing to complete the purchase of the flat "in the manner therein contained".

(iii)    In para. 5 (a), it was pleaded that clause 2 of the agreement provided for the payment of the balance of the deposit "on or before" 16^th suggest that 1991 was dicta of September 1991. Those words payment after 16th September not a permissible option: see the Lord Fraser of Tullybelton in Raineri v: Miles [1981] A.C. 1050 at p.1089 B-C.

Whether those facts, and such others as can be extracted from the Amended Defence, are sufficient so as to make it unjust for specific performance to be granted is, of course, a matter for debate at trial, but I cannot say that this defence is not a reasonable one, or that it is scandalous, frivolous or vexatious.

7. Mr. Merry for the Defendant accepted that if the Defendant's case was that the agreement was subject to a term that time was of the essence, that had to be specifically pleaded. That is entirely consistent with Mr. Chiu's submission, which Mr. Merry rightly accepts, that all the material terms of an agreement (including one that time was of the essence) must be specifically pleaded, and which is confirmed by the pleading precedents relied upon by Mr. Chiu. The stance which Mr. Merry has taken prevents the Defendant - unless the Amended Defence is re-amended - from arguing at the trial of the action that the agreement was subject to a term that time was of the essence, though for the reasons I have given Mr. Merry does not have to.go that far in order to defeat the claim for specific performance of the agreement.

The Attack on the Amended Counterclaim

8. Mr. Chiu contends that since the Plaintiff's breach of clause 2 of the agreement did not amount repudiatory breach of the agreement, the Amended Counterclaim must fail. I reject that argument. For the reasons I have given, the Defendant's pleadedcase is that the Plaintiff's failure to pay the balance of th deposit was a repudiatory breach. In any event, even, even if it was not, the Plaintiff's breach entitled the Defendant to claim such damages as he can provehe has suffered by the delay: see the last sentence of the passage in Atkin, op. cit., set out above and note 5 on p.324.

9. Mr. Chiu also contends that the particular loss and damage pleaded by the Defendant, namely, the loss sustained by reason of his inability to invest the balance of the deposit in a particular currency and bond fund, is not claimable in the absence of a pleaded assertion that the Plaintiff knew of the Defendant's intention. I reject that contention as well. The question whether such loss was within the Plaintiff's reasonable contemplation as a not unlikely result of his breach of clause 2 is a matter for evidence at trial. Even if I struck out the Particulars, it would still be open to the Defendant at trial to give evidence of the loss he sustained, and it would be for the Court to determine on that evidence whether the loss was too remote.

10. Accordingly, I cannot say that the Amended Counterclaim does not disclose a reasonable cause of action, or that it is scandalous, frivolous or vexatious.

Conclusion

11. For these reasons, I dismissed the Plaintiff's appeal. I make an order nisi that the plaintiff pays to the Defendant his costs of the appeal, agreed, with certificate for counsel. I am not prepared to order that those costs be taxed and paid forthwith.