EUROPEAN ASIA (HONG KONG) INVESTMENT LTD v. WONG SHUN ON ANTHONY

HCA2431/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2431 OF 2008

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J U D G M E N T

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1.  This is an application under Order 14A of the Rules of the High Court for construction of the meaning and effect of the provisions as to time of performance in a formal sale and purchase agreement as might have been altered by a letter issued by the solicitors for the purchasers to the intended personal representative of the deceased vendor. 

Background

2.  The plaintiff and the defendant’s father, Wong Yick-wan (“Wong”), entered into a formal sale and purchase agreement dated 26 November 2007 (“the Agreement”) for the plaintiff to purchase from Wong a luxurious flat in Kowloon.  The price was at HK$25,680,000 and a 10% deposit had been paid by the plaintiff to Wong.  Completion was supposed to take place on 28 January 2008.  Clause 7 of the Agreement provided that time shall in every respect be of the essence of the Agreement.

3.  Unfortunately, Wong passed away on 29 December 2007.  He died intestate.  There is no dispute that despite Wong’s death, the Agreement is still binding on his estate (see Emmet on Title, 19th edition, paragraph 6.026).  But the authority of his former solicitors to represent him in the transaction ceased immediately upon his death (see Yonge v Toynbee [1910] 1 KB 215).

4.  On 8 January 2008, the plaintiff’s solicitors, upon learning of the death of Wong, wrote to Wong’s former solicitors as follows:

    “We regret to learn that the Vendor having passed away and having consulted with our Client, we are instructed to inform your Client’s Personal Representative through your goodself that the Purchaser is prepared to grant a period of Six Months for your Client to apply for Letters of Administration or Probate as the case may be and upon expiration of the said period and if deemed necessary our Client will entertain a further extension to enable your Client’s Personal Representative to obtain legal authority to assign the property to our Client per the terms of the Sale and Purchase Agreement dated 26 November 2007.”

5.  On 9 January 2008, Wong’s former solicitors replied as follows:

“Please be informed that we have not yet received any instructions regarding the application to Court for the grant of Probate/Letters of Administration of the estate of Wong Yick-wan, deceased.

However, we shall keep you informed where circumstances shall change.”

6.  There was then no further development until 8 October 2008 when the plaintiff’s solicitors wrote to Wong’s former solicitors, alleging the repudiation of the Agreement by Wong’s estate and seeking the return of the deposit.  The letter said:

“Reference to your letters dated 7^th and 9^th January 2008 regarding the Sale and Purchase Agreement dated 26 November 2007, we deeply regret that your client the Vendor had not been able to proceed to Completion on 28^th January 2008 (the date fixed for Completion).  Due to no agreement has been reached by the Purchaser with the Personal Representative of the deceased Vendor, the Vendor is deemed to have repudiated the S & P Agreement.  The Purchaser our client now exercises his rights under the said Agreement as the aggrieved party to demand through you for the return of all the deposits paid in the total sum of $2,568,000.

Kindly cause to be remitted to us on behalf of our client the said deposit within 7 days from the date hereof.”

7.  The defendant as the expectant administrator of Wong’s estate replied by a letter of his solicitors dated 12 November 2008.  The letter said that the plaintiff had by the letter of its solicitors dated 8 January 2008 waived the time clause in relation to the completion date or, alternatively, elected to affirm the Agreement despite the failure of Wong’s estate to complete it on 28 January 2008.

8.  The plaintiff’s solicitors replied to the defendant’s solicitors on 19 November 2008 and said that the letter of 8 January 2008 was the plaintiff’s invitation to treat to grant 6 months to the personal representative of Wong’s estate to apply for letters of administration.  The invitation was not accepted and the plaintiff was entitled to treat the contract to have been repudiated by Wong’s estate.

9.  The plaintiff on 27 November 2008 issued the writ of summons herein against the personal representative of the estate of Wong, seeking the return of the deposit. 

10.  The letter of administration of Wong’s estate was granted to the defendant on 31 December 2008, and the plaintiff’s solicitors were notified of the same on 9 January 2009.  Since the defendant took the view that the Agreement was still binding save that time for completion was no longer of the essence, his solicitors on his behalf as the administrator of Wong’s estate gave notice to the plaintiff’s solicitors on 23 January 2009 to complete the Agreement within 60 days thereof.

11.  The plaintiff’s solicitors replied on 2 February 2009 saying that the plaintiff would pursue this action. 

12.  By an order of Master Lung, the defendant was made the defendant in this action.  The plaintiff then issued a summons under Order 14 for summary judgment.  The defendant in turn issued a summons under Order 14A.  The parties eventually agreed to proceed under Order 14A for the determination of the following questions:

(a)  On the true construction of the Sale and Purchase Agreement dated 26^th November 2007 (“the Agreement”) entered into between Wong Yick Wan (since deceased, hereinafter called “the Deceased”) as vendor and the Plaintiff as purchaser of the property (“the Property”) described in paragraph 1 of the Statement of Claim; on the true construction of the letter dated 8^th January 2008 (“the Postponement Letter”) from the solicitors of the plaintiff to Leonard K. L. Heung & Co., the former solicitors of the Deceased, and on the basis that it is common ground between the parties that the terms of the Postponement letter have never been agreed to between the plaintiff and the defendant, whether:

(i)  time was of the essence of the Agreement in respect of the date on 28^th July 2008, being the Plaintiff’s postponed date for completion of the Agreement set out in the Postponement letter?

(ii)  if the answer to the above is in the affirmative, whether the Plaintiff was entitled by its solicitors’ letter dated 8^th October 2008 to Leonard K. L. Heung & Co., the former solicitors of the Deceased, to rescind the Agreement on the ground of non-completion of the Agreement on 28^th January 2008 and to seek repayment of the deposit?

(b) If the Plaintiff was not in law entitled by its solicitors’ letter dated 8^th October 2008 to Leonard K. L. Heung & Co., the former solicitors of the Deceased, to rescind the Agreement and to seek repayment of the deposit, whether the Plaintiff was obliged to proceed to complete the sale and purchase of the Property under the Agreement as notified by the Defendant’s solicitors’ letter dated 23^rd January 2008 within a period of 60 days from the date of the said letter?

(c)  Was the Plaintiff in repudiatory breach of the Agreement so as to entitle the Defendant to accept the same and forfeit the deposit? 

13.  The most important question is the effect of the letter by the plaintiff’s solicitors dated 8 January 2008 that informed the expectant personal representative of Wong that the plaintiff was prepared to grant a period of 6 months for the issuance of the grant of probate or letters of administration to take place.  It further said that upon expiration of the 6 months and if deemed necessary, it would entertain a further extension to enable the expectant personal representative to obtain legal authority to assign the property to the plaintiff per the terms of the Agreement.

14.  This letter demonstrated the plaintiff’s understanding that it would take some time for the expectant personal representative to obtain probate or letters of administration.  The plaintiff did not expect completion to take place on the original completion date of 28 January 2008.  For this reason, the plaintiff also did nothing to complete the Agreement on that day.  The question is whether the letter of 8 January 2008 had postponed the completion date to 28 July 2008 and, save this change, the time for completion remained of the essence.

15.  The defendant did not think that there was any definite postponement of completion as he said that none had been agreed.  There was also no one to represent Wong’s estate to agree to any postponement.  The defendant submitted that the plaintiff had by the letter advised the expectant administrator that time for completion on 28 January 2008 was no longer of the essence of the Agreement. 

16.  The defendant further submitted that the plaintiff had by the letter indicated to be expectant personal representative of its willingness to wait for six months or more for the grant of probate or letters of administration so that the property could be assigned to the plaintiff by someone with authority.  The defendant said that the letter made clear, unambiguous and unequivocal statements to those intended to be affected by it that completion after 28 January 2008 would be accepted (see Wellfit Investments Limited v Poly Commence Limited & Another [1997] 2 HKC 236 at 241D).  It therefore waived the time-of-the-essence requirement for completion on 28 January 2008.

17.  The defendant further relied on the plaintiff’s inaction on 28 January 2008 and thereafter until 8 October 2008 as confirmation of the waiver. 

18.  The defendant further submitted that if the plaintiff should have insisted on completion on 28 January 2008, the next of kin of Wong could have requested the Official Administrator to apply under sections 16, 18 and 19 of the Probate and Administration Ordinance, Cap. 10 (“PAO") for a limited grant of administration to complete the Agreement.

19.  The plaintiff disagreed with the defendant.  It referred to Halsbury’s Laws of England, 4th edition, volume 9(1), para 936 which says: 

“936.    Effect of agreed extensions

Where time is of the essence of a contract, the parties may agree to vary the time provision, in which case the variation will be binding.  Alternatively, the party having the benefit of the time provision may waive the right to insist on performance by the stipulated time and allow an extension, in which case his act does not operate as an entire waiver of the essential condition as to time but merely has the effect of substituting the extended time for that originally fixed.”

20.  In this case, there was, however, never any agreement between the parties to vary the time provision.  Prior to 31 December 2008, no one could have or had indeed entered into any agreement on behalf of Wong’s estate with the plaintiff to extend the completion date.

21.  I am of the view that the plaintiff had by the letter of 8 January 2008 waived the right to insist on performance on 28 January 2008, but the plaintiff argued that it had only extended the completion date to 28 July 2008 and had not waived the essential condition of time.  The defendant, however, argued that the plaintiff had committed to an entire waiver of the essential condition as to time for completion rather than extend the completion date to 28 July 2008. 

22.  The plaintiff relied on Nichimen Corporation v Gatoil Overseas Inc. [1987] 2 Lloyds LR 46 at 49: col. 1 to 50: col. 2, 53: col. 2, 56: col. 1 and 57: col. 2.  This is a case of sale of crude oil where the buyer had to open a letter of credit by a specified date.  The buyers defaulted.  It was an argument of whether the time for the buyers to open the letter of credit had been waived and was at large.  Kerr LJ said at 50:2:

“First, all that the sellers did in relation to the letter of credit after Apr. 17 was to give to the buyers a number of fixed extensions of time by way of indulgence.  The sellers never waived their right, subject only to these fixed extensions, to continue to treat the time for opening the letter of credit as of the essence.  They never did anything whereby they impliedly agreed or represented that the buyers’ time for opening the letter of credit had become at large… On that aspect, it is common ground that the principle is illustrated by the decision of this Court in Buckland v Farmer & Moody [1979] 1 WLR 221, but it is unnecessary to refer to the facts.  The Court accepted that if time was originally of the essence, then fixed extensions are mere indulgences to the extent that they are granted and have no other effect…  The Court accepted and applied the statement of Mr. Justice Goulding in Luck v White (1973) 26 P.C.R. 89 where he said:

Indeed the mere extension of the period to a new fixed date would on the authorities have preserved the position that time was of the essence without fresh stipulation to that effect. 

Since this is accepted in principle and since the sellers never did anything other than to extend the buyers’ time for opening the letter of credit by a number of fixed periods with which the buyers did not comply, no question of reasonableness or of any material waiver arises in this case.”

23.  Sir John Megaw also said at 57:2:

“I am unable to see by what process of logic a party to a contract can be said to waive his right to exercise a remedy when he expressly states, in the documents containing the alleged waiver that he reserves his right to exercise that remedy if the party in breach does not fulfil his contractual obligation within a stated time.”

24.  The facts here are different from those in Nichimen.  The letter of 8 January 2008 did not just say that the time for completion was extended for 6 months.  It said that the plaintiff was prepared to grant 6 months for the expectant personal representative to apply for grant of probate or letters of administration.  So the extension proposed was for the specific purpose of obtaining the grant. 

25.  The letter went on to say that if the grant could not be obtained within 6 months, it would entertain a further extension.  This of course presupposed that the expectant personal representative would act with reasonable diligence in applying for the grant.  It is different from Nichimen where the extensions of time were fixed and without prejudice to the sellers’ rights to the essential condition of time.  I therefore do not think Nichimen can assist the plaintiff.

26.  The plaintiff further referred to the case of Cheung Ching Ping Stephen v Allcom Limited HCA2208/2008 where the purchaser took some 10 weeks to wait and see and was held not to have made any waiver, but there was indeed no clear, unambiguous and unequivocal statement by the purchaser that he would waive the essential condition of completion date.  The purchaser did nothing unambiguous which would constitute a waiver.

27.  The plaintiff further referred to Everwin Inc. Limited v MTR Corporation Limited HCA884/2008.  That was a case where the purchaser had defaulted.  It was given time to remedy the breach, but there were only specific extensions and no general waiver.  It was more akin to the Nichimen scenario though the vendor in that case accepted the repudiation some 21 months after the initial default by the purchaser to complete.

28.  I now consider whether the letter of 8 January 2008 amounted to a waiver by estoppel on the part of the plaintiff.  I refer to Chitty on Contracts, 30th edition, paragraphs 20-040, 20-042 and 20-044:

“20-040  Waiver or forbearance

Where one party voluntarily accedes to a request by the other that he should forbear to insist on the mode of performance fixed by the contract, the court may hold that he has waived his right to require that the contract be performed in this respect according to its original tenor.  Waiver (in the sense of ‘waiver by estoppel’ rather than ‘waiver by election’) may also be held to have occurred if, without any request, one party represents to the other that he will forbear to enforce or rely on a term of the contract to be performed or observed by the other party, and the other party acts in reliance on that representation.

20-042  Effect on party forbearing

The party who forbears will be bound by the waiver and cannot set up the original terms of the agreement.  If, by words or conduct, he has agreed or led the other party to believe that he will accept performance at a later date than or in a different manner from that provided in the contract, he will not be able to refuse that performance when tendered.  However, in cases of postponement of performance, if the period of postponement is specified in the waiver, then if time was originally of the essence, it will remain so in respect of the new date.  If the period of postponement is not specified in the waiver, the party forbearing is entitled upon reasonable notice to impose a new time limit which may then become of the essence of the contract.

20-044  Consideration for waiver.

A waiver is also distinguishable from a variation of a contract in that there is no consideration for the forbearance moving from the party to whom it is given.  It may therefore be more satisfactory to regard this form of waiver, that is “waiver by estoppels”, as analogous to, or even identical with, equitable forbearance or promissory estoppel.  Although consideration need not be proved, certain other requirements must be satisfied for such an estoppel to be effective: first, it must be clear and unequivocal; secondly, the other party must have altered his position in reliance on it, or at least acted on it.”

29.  Regarding the question of whether the defendant had acted on the representation in the letter, there is the undisputed evidence that the defendant had exercised reasonable diligence in applying for the letters of administration.  He had also made no attempt to seek the assistance of the Official Administrator to apply for a limited grant under section 16 of the PAO to complete the Agreement.  That was a more expensive way to complete as the Official Administrator would charge a commission for the proceeds received.  The defendant had also not applied for a limited grant under section 36 of the PAO which would have required security to be given. 

30.  No doubt the defendant gave no acknowledgement of the waiver to the plaintiff, but the plaintiff also did not seek his acknowledgement and was contented just to wait.  The plaintiff also did not take any issue of whether the defendant had acted on the waiver.

31.  Having considered the terms of the letter carefully, I agree with the defendant that this letter just waived the essential condition of time for completion and did not extend the time for completion to 28 July 2008.  I therefore answer Question (a)(i) in the negative, namely, that time was not of the essence for completion of the Agreement on 28 July 2008.  I also reiterate that the plaintiff had not by this letter clearly postponed the completion to 28 July 2008.  What it offered was a postponement of 6 months or, if necessary, a longer period for the application for the grant.

32.  Following my answer to Question (a)(i), I would further hold that the plaintiff was not entitled by its letter of 8 October 2008 to rescind the Agreement and seek repayment of the deposit.  The reason being that it had given the waiver which was acted upon by the defendant.  It was thus bound by the waiver and had to wait for the issuance of the grant of letters of administration.

33.  I would not want to conclude on whether the plaintiff could have imposed a fresh time limit ahead of the grant as this was not argued by the parties though I am inclined to think that it could do so by giving no less than 20 days’ notice to the expectant personal representative as that was the period between the letter of 8 January 2008 and the original completion date of 28 January 2008.  My answer to Question (a)(ii) is therefore in the negative as well.

34.  Regarding Question (b), if the Agreement had not been rescinded, it was of course still binding and effective.  The defendant on 23 January 2009 gave the plaintiff notice to complete the Agreement in 60 days.  I think this is a reasonable period of notice, bearing in mind that the original completion date on 28 January 2008 was 63 days after the Agreement date of 26 November 2007.  There is also no evidence to suggest that this period of 60 days was in any way unreasonable or insufficient.  The plaintiff was therefore obliged to complete the Agreement on 24 March 2009.  The answer to Question (b) is therefore yes.

35.  Since the plaintiff had failed to complete the Agreement on or before 24 March 2009, it had therefore repudiated the Agreement and the defendant had accepted the same together with the forfeiture of the deposit.  My answer to Question (c) is also yes.

36.  In the light of these answers, I therefore dismiss the plaintiff’s claim.  I also enter judgment for the counterclaim by declaring that the defendant is entitled to forfeit the 10% deposit in HK$2,256,000 paid by the plaintiff pursuant to the Agreement and that the defendant is at liberty to sell the property free from the plaintiff’s claim herein.  I also order damages of the defendant to be assessed and paid by the plaintiff.  I further order the plaintiff to vacate forthwith at its own costs the registration of the Agreement against the property at the Land Registry.  I also make an order nisi that the plaintiff do pay the defendant the costs of this action, including the counterclaim.