WONG WUI v. YIN SHIU HEE PETER

CACV 812/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 812 OF 2000

(ON APPEAL FROM HCA NO. 9042 OF 1998)

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J U D G M E N T

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Keith JA (giving the first judgment at the invitation of Mayo V-P):

1. The Defendant ("the vendor") agreed to sell a flat in Kwai Chung to the Plaintiff ("the purchaser"). Clause 31 of the sale and purchase agreement ("the agreement") required the vendor to allow the purchaser to inspect the flat once before completion. The purchaser claimed that the vendor had failed to permit such an inspection, and in due course he sued the vendor for damages. The action was tried in the Court of First Instance, and Deputy Judge Muttrie found for the purchaser and awarded him damages. The vendor now appeals to the Court of Appeal.

2. The judge found as a fact that the vendor had only been prepared to permit the purchaser to inspect the flat if the purchaser paid the vendor an additional $50,000.00. In those circumstances, the vendor had failed to permit the purchaser unconditionally to inspect the flat prior to completion, and he had for that reason been in repudiatory breach of clause 31 of the agreement. There is no appeal against that finding.

3. The purchaser then had to decide whether to affirm the agreement or treat it as determined. The judge found that the purchaser had elected to affirm the agreement. Not only did his solicitors in their letter of 27 April 1998 (which was after the date fixed for completion) say that the purchaser would be instituting legal proceedings for specific performance, but when the writ was issued, it contained a claim for specific performance. It is true that it also claimed damages in lieu of specific performance "in the event [of] specific performance not [being] possible", but the fact remains that by claiming specific performance the purchaser had elected to affirm the agreement. There is no cross-appeal from the judge's finding to that effect. Accordingly, the critical question is whether that election had been revocable. The judge found that it had been revocable, that the purchaser had in fact revoked it, and that the purchaser had been entitled to claim damages in lieu of specific performance. That is the finding which is challenged on this appeal.

4. The revocability of a decision to affirm a contract for the sale of property was recently considered by Jonathan Sumption QC sitting as a Deputy High Court Judge in Safehaven Investments Inc. v. Springbok Ltd. (1996) 71 P. & C. R. 59. At p. 68, he said:

"If the 'innocent' party to a repudiated contract elects to bring it to an end, there is no difficulty in treating his decision as irrevocable. The contract is destroyed and cannot be re-created. If, however, the innocent party's decision is to affirm the contract, the position is less clear cut. In Johnson v. Agnew, the House of Lords had to consider this question in a case in which the innocent party had obtained a decree of specific performance from the court. The House approached the matter on the footing that the legal significance of the decree was that obtaining it was an affirmation, albeit a particularly emphatic one. Yet they declined to treat the innocent party's decision to affirm as irrevocable so as to prevent him from bringing the contract to an end when the repudiating party persisted in his failure to perform. Lord Wilberforce said:

'Election, though the subject of much learning and refinement, is in the end a doctrine based on simple considerations of common sense and equity. It is easy to see that a party who has chosen to put an end to a contract by accepting the other party's repudiation cannot afterwards seek specific performance. This is simply because the contract has gone - what is dead is dead. But it is no more difficult to agree that a party who has chosen to seek specific performance may quite well thereafter, if specific performance fails to be realised, say, "Very well then, the contract should be regarded as terminated". It is quite consistent with the decision provisionally to keep alive to say "Well this is no use - let us now end the contract's life". A vendor who seeks (and gets) specific performance is merely electing for a course which may or may not lead to implementation of the contract - what he elects for is not eternal and unconditional affirmation, but a continuance of the contract under control of the court which control involves the power, in certain events, to terminate it ... The fact is that the election argument proves too much. If it were correct it would deny the vendor not just the right to damage but the right to "rescind" the contract, but there is no doubt that this right exists. ...'

It does not follow from this analysis that the innocent party may in all cases change his mind after affirming the contract. If, for example, after he had affirmed it, the repudiating party's conduct suggested that he proposed to perform after all, then that party's previous repudiation is spent. It had no further legal significance. If, on the other hand, the repudiating party persists in his refusal to perform, the innocent party may later treat the contract as being at an end. The correct analysis in this case is not that the innocent party is terminating on account of the original repudiation and going back on his election to affirm. It is that he is treating the contract as being at an end on account of the continuing repudiation reflected in the other party's behaviour after the affirmation." (Emphasis supplied)

I agree with that analysis of the law.

5. Reverting to the present case, the vendor's failure to permit the purchaser to inspect the flat was, in my view, a continuing repudiation of the agreement. It is true that the purchaser's solicitors did not, after the initial election to affirm the agreement, once again request the vendor to permit the purchaser to inspect the flat. But as the judge said, "once there was a claim for specific performance, it was for the [vendor] to remedy the breach by offering the inspection that had been sought all along". That was especially so in view of the condition which the vendor had in the past attached to the purchaser's right to inspect the flat. In view of his original attitude, it was for the vendor to inform the purchaser that he could after all inspect the flat without having to pay an additional sum. Thus, the purchaser's affirmation of the agreement was revocable, and the purchaser was entitled to accept the vendor's repudiation of the agreement prior to being permitted to inspect the flat. That is what the purchaser did by filing an affirmation on 7 September 1998 electing to pursue a claim for damages in lieu of specific performance. For these reasons, I would dismiss the appeal.

Stock JA:

6. I agree with the judgment of Keith JA and have nothing to add.

Mayo V-P:

7. I also agree with Keith JA.

8. There does not appear to be any dispute on the law. The contention which is being advanced by the Defendant that the Plaintiff failed to comply with the contract after 27 April 1998 is entirely unrealistic.

9. The Defendant had made it perfectly clear that he was not prepared to permit the Plaintiff to inspect the premises. This was a continuing breach of the contract.

10. In these circumstances, the Plaintiff was fully entitled to elect to claim damages when he did.

11. I agree that this appeal should be dismissed and it is accordingly dismissed.