TANG KWOK KAY v. KUNG PIK HA MARIA

IN THE HIGH COURT

1991, No. A3719

HEADNOTE

Sale and purchase agreement relating to house - Time of the essence - Date for completion passed - Vendor proposed new date for completion - Purchaser tendered balance of purchase price and executed deed of assignment on date proposed - Vendor in breach - Purchaser entitled to return of deposit and damages.

IN THE HIGH COURT

1991, No. A3719

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J U D G M E N T

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Litton, J.A.:

This case concerns the sale and purchase of a house near Yuen Long known as House No. 27, 1st Street, Section C, Fairview Park. By a Sale and Purchase Agreement dated 26 April 1991 the plaintiff agreed to buy and the defendant agreed to sell the house for $1.8m. Under the agreement $180,000 was paid as deposit and the balance of $1.62m was to be paid on completion. Time was made of the essence of the contract and completion was to take place on or before 5 May 1991 which was a Sunday. Upon completion, the vendor was required to execute an assignment of the property to the purchaser in accordance with the agreement. Possession was required to be given to the purchaser on the day fixed for completion. Clause 11 of the agreement states that any requisition or objection to title must be delivered to the vendor's solicitors in writing within seven working days after delivery of the title documents. Clause 19 provides as follows:

19. If the vendor shall for any cause (other than the default of the Purchaser) fail to complete the said sale in accordance with the terms hereof then the said deposit shall be returned forthwith to the Purchaser who shall also be entitled to recover from the Vendor such further damages (if any) over and above the said deposit as the Purchaser may sustain by reason of such failure on the part of the Vendor ......

2. The purchaser was able to arrange a mortgage loan by the Hongkong Bank in the sum of $1.05m at 10.75% interest per annum subject to fluctuation for the purchase of the property. By the 2 May 1991 the title documents had still not been delivered to the purchaser's solicitors Messrs Boris Lui & Co. (BL & Co) by the vendor's solicitors. On that day BL & Co wrote to the vendor's solicitors demanding delivery of the title documents and complaining of delay. Sunday 5 May, the day fixed for completion, came and went and on Monday, 6 May the vendor's solicitors sent the documents to BL & Co at their Central office. The transaction was at that time being handled at BL & Co's Yuen Long Office by a conveyancing clerk employed there Miss Anna Jim Lai Har. On that date she wrote a letter to the vendor's solicitors Messrs Oldham, Li & Nie (OLN) in these terms:

"6th May 1991

Dear Sirs,

Re : Subsection 18 of Section C of Lot

4665 in DD 104, Yuen Long

_________________________

We refer to the above property and are pleased to inform you that we have not yet received any title deeds and documents relating to the said property up to the present moment.

We are instructed to inform you that our client agrees to postpone the completion date until 7 working days after we receive all the relevant title deeds and documents (if no requisitions).

Kindly take your client's instructions and let us have your draft supplemental Agreement for our approval at your early convenience."

3. Pausing here to look at the legal position of the parties on 6 May 1991, it was as follows. (1) The respective parties were plainly intending to render performance under the contract and to keep it alive. (2) The day fixed for completion having passed without completion taking place the obligation falling on each of the parties concurrently was to complete within a reasonable time: see Camberra v. CHAN Wai-tak (1989)1 HKLR 568 at 574E. (3) The obligation to complete within a reasonable time would of course be displaced by any new contractual date for completion which the parties should happen to agree on.

4. BL & Co by their letter of 6 May 1991 proposed a supplemental agreement to be drafted by the vendor's solicitors to give effect to their new proposed date for completion, which was 7 days after they had received all the relevant title documents if there be no requisition. It is not clear to me what that last caveat concerning requisition meant, and how effect would have been given to the proposal to complete with such a caveat. But this is academic because the vendor's solicitors OLN did not reply to this letter.

5. On 7 May BL & Co again wrote and forwarded to the vendor's solicitors a draft assignment and asked how the cheques for the balance of the purchase price should be split up. OLN's reply on 8 May 1991 is in these terms.

"8th May 1991

Dear Sirs,

Re: House No. 27, 1st Street, Section

C, Fairview Park, Yuen Long, N.T.

________________________________

We refer to your letter of 7th instant and write to inform you that your draft assignment in respect of the above property is duly approved by us without amendments. Upon completion, you are requested to split up your cheque presenting balance of purchase price in the following manner:-

1. One cheque in our favour for the sum of HK$850.00;

2. One cheque in favour of Security Pacific Asian Bank Limited for the sum of HK$841,626.28;

3. One cheque in favour of the Vendor for the sum of
HK$777, 523.72.

Please note that the above requisition is only valid up to 10th May 1991, please also enquire from us again if your client complete the purchase of the above property later than 10th May 1991."

6. It is common ground between the parties that to a large extent this case turns upon the view I form of this letter. Let me pause then and see what is its effect. (1) It is in response to BL & Co's letter of 7 May, written in contemplation of completion, when BL & Co sent the draft assignment to OLN and asked how the cheques for payment of the balance of $1.62m should be split up: (2) In this letter of 8 May the vendor's solicitors said that the draft assignment had been approved without amendment. In other words, nothing more needed to be done before the vendor executes the assignment. (3) The vendor's solicitors proposed how the balance of the purchase price should be split up, one cheque being for the mortgagee bank, another for the vendor personally and a third in a small amount in favour of the vendor's solicitors. It would be fair to infer that the longer the delay in completion the more the mortgagee bank would be owed in interest and therefore the less the sum to be paid direct to the vendor personally. That probably explains why in that letter OLN stated "please note that the above requisition (meaning "request") is only valid up to 10th May 1991, please also enquire from us again if your client complete the purchase of the above property later than 10th May 1991". (4) The vendor was clearly proposing to complete the transaction on 10 May 1991.

7. In my judgment there can be no doubt that what the vendor was doing by her solicitors' letter was to offer to vary the agreement to the extent that the completion date of 5 May 1991 was to be substituted by 10 May 1991, otherwise the agreement was to remain in full force and effect. So long as this offer remained open the purchaser was entitled to accept it and render performance on his part to complete the transaction. Mr. Chain, counsel for the vendor, argues that the general rule of law is that prima facie a contractual obligation to complete a contract of sale and purchase of land is not one in which time is of the essence. To substantiate the point he referred me to Chancery Lane Developments Ltd. v. Wades Departmental Stores Ltd. (1986) 53 P. & C.R. 306 at 312. That as a general proposition is of course correct. But on the 8 May 1991 the parties were not setting out to enter into a contract of sale and purchase of the property. That had been done by their written agreement. The day for completion having passed, they were seeking to vary that agreement by arranging for a new date. All the other provisions of the agreement, the price, the sale of the furniture set out in the schedule, the machinery for implementation etc. remained intact. That was how the court construed the arrangement entered into by the parties in Chancery Lane Developments Ltd. (supra) which was the only case cited to me in argument.

8. Mr. Chain also argues that the vendor's solicitors could not by their letter of 8 May have been so foolish as to have committed their client to a one-sided "offer" to complete on 10 May, leaving it to the other side to tender the purchase price at any time on or before 10 May, but being at liberty at the same time not to do so if they so chose. I see nothing foolish in the proposal. If the vendor was intending to keep the bargain alive then prima facie a new day for completion had to be fixed. By the date of that letter, 8 May, the draft assignment tendered by BL & Co had been approved. This was not the case of a deal going off because the purchaser did not have the money available on the day fixed for completion. The vendor's solicitors were in fact late in delivering the title documents to BL & Co; so late that it was not until the day after the day fixed for completion that the documents were first delivered.

9. The purchaser's solicitors BL & Co acted thereafter with admirable speed. Subject to one simple request for information being satisfied - that is, copy of the Articles of Association current at the time of execution of a previous assignment and/or a certified copy of the Board resolution authorising the execution of that assignment - the purchaser was apparently ready to complete. So why would the vendor not wish to complete on her part as soon as possible? By letter dated 10 May 1991, received shortly after 12 noon on the same day, BL & Co sent over to the vendor's solicitors three cheques and one cashier order totalling $1.62m, the cheque for the mortgagee bank being in the amount as requested in the vendor's solicitors' letter of 6 May. The sum payable direct to the vendor was split into two - one a cheque drawn by BL & Co in the vendor's own name, the other being a cashier order in the vendor's solicitors OLN's name.

10. By an amendment to the Defence, sought in the course of the trial, exception has now been taken to the extra cheque by the vendor who in the amended Defence avers that the purchaser had failed to comply precisely with OLN's request for three cheques. I see no merit whatever in this point. Under clause 25 of the Sale and Purchase Agreement the vendor declared her solicitors her agent for the purpose of receiving all monies payable to herself, so a cashier order in favour of the solicitors clearly complied with the requirement of clauses 4 and 5 of the Agreement which, for the sake of completeness, I set out below.

"4. The sum of $1,620,000.00 Hong Kong Currency being the balance of the purchase money shall be paid by the Purchaser to the Vendor on completion.

5.(a) In respect of each payment of purchase price or any part thereof required to be made hereunder, the party making such payment ("the Payer") shall deliver to the party to whom such payment is to be made ("the Payee") on the date on which such payment is required to be made hereunder a cashier order issued by a licensed bank in Hong Kong or a Solicitors' cheque in favour of the Payee for the relevant amount, if the Payee of his solicitor shall require the Payer to do so by giving the Payer or his solicitors not less than 48 hours notice in writing.

(b) Where the purchase price or any part thereof is required to be applied by the Payee to discharge an existing mortgage, charge or encumbrance, or to pay any person (s) who will be a party to the assignment on completion of the sale and purchase herein, the Payee or the Payee's solicitors shall be entitled, by giving the Payer or the Payer's solicitors not less than 48 hours prior notice in writing, to require the payer to split such payment and deliver to the Payee's solicitors one or more cashier order (s) or one or more Solicitors' cheque(s) issued in favour of the person(s) or party(ies) entitled to such payment(s) and a separate cashier order or a separate Solicitors' cheque in favour of the Payee for the balance. The provisions of Clause (a) above shall apply to such cashier order or to such Solicitors' cheque.

(c) A Payer shall not be deemed to have discharged the obligation to make payment hereunder unless in making such payment the Payer also complies with the provisions of this Clause."

11. There is an issue between the parties as to whether, in sending the cheques and cashier order over to OLN together with their letter of 10 May 1991, BL& Co had also sent the deed of assignment executed by the purchaser. The defendant alleges that no deed of assignment was sent. As to this the evidence is all one way. The plaintiff called as one of his witnesses Miss Fanny Choy Yuk Ngor who testified that she had prepared the documents at BL & Co's Central office on the morning of 10 May. She had herself typed the first page of the accompanying letter dated 10 May (pages 2 and 3 were in standard form and were produced by the computer) which referred specifically to "the enclosed assignment". Having checked everything Miss Choy had put the documents including the executed assignment into an envelope which she then sealed. She clipped two copies of the letter on to the front of the envelope addressed to the vendor's solicitors so that the messenger delivering the envelope could take out one copy and hand it to the receptionist; the other copy would be handed to the recipient to have the receipt chop put on it and then returned to BL & Co. This was accordingly done. In the copy of the document before me (page 74 of the agreed bundle) there is the "received" chop and date "10 May 12:08 p.m". Miss Choy's assistant Miss Lui Wai Man testified that she took the envelope and delivered it to the messenger and he then delivered it to OLN. There is no doubt in my mind that the sequence of events was as described by these two witnesses and I accept their testimony.

12. In my judgment there is no possibility of any slip or error on the part of the purchaser's solicitors. Unquestionably the executed assignment was delivered on 10 May together with the cheques and a cashier order and received in the offices of OLN shortly after 12 noon that day. No witness have been called on behalf of the defendant and it would not be fruitful to speculate as to what happened in the vendor's camp that day. The vendor avers in her pleadings that a Miss Lui employed by OLN telephoned Miss Jim some time after lunch and told Miss Jim that no deed of assignment was enclosed with the letter, but no attempt has been made to substantiate this averment by evidence. Miss Jim in her testimony said no such phone call was ever received. Her denial in court is totally convincing. If there had been such a phone call, she would unquestionably have attempted to locate the purchaser and would probably have succeeded through the estate agents. The position could easily have been rectified that day. I find as a fact that no phone call as alleged by the defendant was ever made.

13. As regards the plaintiff himself, Mr. Tang Kwok Kay, he gave evidence, which I accept, to this effect: On 10 May, after attending the solicitors' office in the morning, and having made arrangements for payment and having executed the assignment, he drove to Fairview Park with two persons from the estate agents' office. They went to the house with a view to taking possession that day. The vendor was there and allowed them into the house. There was some discussion or dispute about a mirror in one of the bathrooms - not one of the items in the schedule to the agreement - which the purchaser wanted left behind. This was eventually resolved. The purchaser told the vendor that all payments had been made, the assignment executed and he wanted the keys to be handed over. The vendor said that she still had a few personal items to be removed and asked the vendor to return later that day for the keys. She said that he (the purchaser) should try again at 4.00 p.m. She said that once she had removed her belongings she would phone the estate agents' office. So the purchaser left and waited at the estate agents' office until about 4.00 p.m. No phone call came. The purchaser returned home. He was living in Fairview Park and kept in touch with the estate agents.

14. As the afternoon progressed the purchaser became anxious and visited the house several times. He rang the door bell but there was no answer. As the evening came and there was still no response whatever from the vendor he became worried about the money he had paid. Eventually a fax was sent from the Yuen Long branch of BL & Co to OLN on the night of 10 May at about 9.00 p.m. to this effect.

"Dear Sirs,

Re : Subsection 18 of Section C of Lot 4665

in DD 104, Yuen Long, New Territories

_____________________________________

We refer to our letter this morning sending the balance of purchase price payable on completion of the sale and purchase of the above property today.

We regret that up to the moment of writing this letter (i.e. 9.00 p.m.) our client is unable to obtain vacant possession of the above property from your client.

Upon 3 several occasions with prior appointments our client called at the subject property at 1.00 p.m., 4.00p.m. and 7.00p.m. this afternoon, your client repeatedly/refused failed to vacate the possession of the property and handover the keys to our client.

In the circumstances, you are in breach of the undertaking imposed on you in our said letter to deliver the keys to us or our client forthwith upon receipt of the balance of purchase price.

As your client has wrongfully repudiated the Agreement for sale and purchase between our respective clients and you have in breach of the undertaking as aforesaid, we are instructed that you are required to return forthwith all cheques sent under the covering of our said letter together with all deposits paid by our client to yours.

Lastly, our client reserve all his rights to claim from your client any loss and damages which our client may sustain as a result of your client's default as aforesaid."

15. The next day OLN sent to BL & Co by hand a letter as follows:

"11th May 1991

Dear Sirs,

Re: Subsection 18, Section C,

Lot No. 4665 in D.D. 104

________________________

We refer to your letter of 10th instant and regret to inform you that we cannot locate the Assignment under your said covering letter.

We hereby return all the cheques being balance of purchase price for your safe custody.

Please note that subject to our client's instructions, if we have not received from you the Assignment together with the balance of purchase price on or before 5:00 p.m. on 13th May 1991, our client will no alternative but to determine the Agreement for sale and purchase entered by our respective clients.

We hereby reserve our right to claim against your clients as a result of your client in breach of the said Agreement for sale and purchase.

Kindly acknowledge receipt."

16. On the basis of my findings concerning the despatch of the deed of assignment and cheques, the terms of this letter from OLN must have seemed extraordinary to the purchaser and his legal advisers. The position as they saw it on 11 May must have been as follows. (1) The vendor had reneged on her undertaking to give the keys to the purchaser and had seemingly made herself unavailable. (2) The purchaser had rendered full performance under the agreement and as required by the vendor's solicitors' letter of 8 May. (3) OLN's assertion that they could not "locate the assignment" was extraordinary. If that were truly the position one would have expected an instant reaction the day before, with a fax perhaps to put the matter on record. Faced with this situation the purchaser concluded, as he said in the witness box, that the vendor was "not sincere" and decided to accept her repudiation and require repayment of the deposit rather than to have further truck with the vendor.

17. In my judgment the purchaser was perfectly entitled to take the stance he did. By BL & Co's letter of 10 May and tendering performance as requested by the vendor in OLN's letter of 8 May the purchaser was accepting the proposed date for completion. Time remained of the essence. The vendor's obligation under clause 15 was to give possession of the house to the purchaser that day and to execute a "proper assurance conveyance or assignment to the purchaser" in accordance with clause 7. This she failed to do. The vendor being in breach, the purchaser was entitled under clause 19 to recover the deposit, and such damages as he may have suffered.

18. As to the damages, I am satisfied that the purchaser had paid $10,000 as commission to the estate agent which in the circumstances plainly had been payment in vain.

19. As to the further claim in the sum of $5,901.69 the position is this. The mortgage loan had been drawn-down from the Hongkong Bank in anticipation of completion and eventually the amount was returned by BL & Co under cover of a letter of 18 May 1991 in which they enclosed a cheque to the bank for that sum being "the additional interest calculated up to 20 May 1991".

20. In an ideal world, arguably, the purchaser or BL & Co could have acted more speedily and returned the money to the bank sooner. But there was in fact continuing correspondence after 11 May and some latitude must be given to the purchaser. In my judgment the steps taken by the purchaser were reasonable; the additional interest was unquestionably on account of the vendor's default; he has not failed in his duty to mitigate. In my judgment he is also entitled to claim by way of damages the sum of $5,901.69.

21. There will therefore be judgment for the plaintiff in the sum $180,000 together with the respective sums of $10,000 and $5901.69 being the damages claimed.

22. In closing I wish to commend counsel on both sides who have apparently been instructed only at a very late stage, this case being on the running list, and have discharged their functions with ability for which I am grateful. I will now hear counsel on the question of costs. There will also be an award of interest on the deposit of $180,000 as from the 11th May 1991 at 9.5 per cent. I make an order for costs in favour of the plaintiff in these proceedings.