CHEONG PIK SHAN v. LEE BUN AND ANOTHER

1992, No.A3113

IN THE SUPREME COURT OF HONG KONG.

HIGH COURT

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R E A S O N S  F O R  R U L I N G

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1. Mr and Mrs Lee, the defendants, live in a modest flat at Greenfield Garden, Tsing Yi Island. It is the first and only property they have ever owned

2. On the evening of 25th March 1991 an advertisement of the Wealth Property Agency arrived in their letter box. It invited them to contact that agency should they be interested in selling.

3. Mrs Lee telephoned the agency about 8:00 p.m. One Sandra Wong of the agency answered. She asked if she could bring a prospective buyer in about half an hour.

4. Sandra Wong and Mrs Cheong, the plaintiff, did arrive in about half an hour. Mrs Cheong looked over the flat and after negotiation offered the defendants $790,000 for it. Sandra Wong then took Mr Lee (D1) and the plaintiff back to the agency's office where the parties signed a preliminary agreement for sale and purchase for $790,000 (Agreed Bundle 1).

5. It was then around 10.00 p.m. the same evening and the entire transaction had encompassed less than two hours. Prior to the advertisement the Lees had not given much thought to selling. Mr Lee suffers from TB and a spinal problem and welcomed the opportunity of moving away from a nearby factory.

6. The next day, the 26th, the Lees looked at what was available on the market for a new home in their price range. Their pleasant surprise at the plaintiff's offer changed to dismay. They found they could not afford anything suitable as a replacement.

7. That evening they went back to the agency and said they wanted to cancel the sale. They were aware there was achause in the agreement that they had to refund double the deposit plus commission, but were willing to do so.

8. The deposit was $30,000, the commission $7,900, thus they would forfeit $37,900.

9. Needless to say this news was not well received at the agency. The Lees tendered three cheques to a Mr Tong who appeared to be the proprietor -

(a) $30,000 (the plaintiff's deposit cheque), unpresented;

(b) $30,000 (their own, for penalty for withdrawal);

(c) $7,900 (their own, for commission).

10. Mr Tong took the commission cheque but refused to accept the other two saying he had no authority to receive them.

11. The Lees made several calls to the agency over the next few days. They were naturally anxious to establish that they were relieved of any further obligation upon their paying and forfeiting $37,900.

12. They could get no reassurance. On the contrary they said that persons of the agency variously told them it would cost them $90,000 or 3 times the deposit to withdraw, then $150,000, that they would be sued, that the deal would have to proceed, and, whether they liked it or not, solicitors had been appointed to act for them on the transaction.

13. Mr and Mrs Lee had no solicitors at this point. But they stood their ground. On 2nd April they sent a firm but courteous letter by registered mail, again returning the plaintiff's deposit cheque for $30,000 and enclosing their own cheques to make up the forfeiture total of $37,900 (Bundle 9).

14. There was little conflict in the evidence. Where there was I prefer the version of the defendants. Although a little naive, they appeared to me to be a completely honest couple.

15. Of course Mr and Mrs Lee were not without blame for the situation. They were never misled about the price the plaintiff was offering for their flat and were free to accept or reject. I think they were a little overwhelmed by the sudden opportunity to make a small profit on their flat and to move somewhere more congenial for Mr Lee's weak bealth. They failed to appreciate how much all prices had risen. They acted a little impetuously but I accept them as honest witnesses.

16. I was unconvinced about the bona fides of the plaintiff, not so much by what she said as by what was left unsaid. She is a young housewife with no apparent independent means. Her evidence is that she wished, and still wishes now, to buy the flat for herself and her husband's own use. Her husband was not called to give evidence and never visited the flat. The plaintiff says her husband was familiar with the general type and layout of similar flats and the locality and left it all to her.

17. In 1992, after this writ was issued, she and her husband bought another flat, three times the price and twice the size of this one, and they still own that. She says they have since changed their mind about living in the Lees' flat, they would now make it available to her mother.

18. The plaintiff arrived at the Lees' flat that evening accompanied by two small children. She did not say why she had the children but her counsel suggests that paints a picture of domesticity, perhaps the children were also viewing the flat. I doubt it, Mrs Lee said they were only three or four years old. I think it more likely Mrs Cheong left home that evening immediately and hastily on hearing from Sandra Wong about the flat and that there was simply no one else to look after the children.

19. Above all there is what the plaintiff would have left unsaid. That is the fact that her husband works at the Wealth Property Agency. He did so in 1991 and does so now. Furthermore her husband's brother, one Raymond Tong, is the proprietor of that Agency.

20. Mrs Cheong may indeed have not known Sandra Wong of the agency who took her to the flat. Equally that may have been a device to distance herself from the agency and her husband's connection with it.

21. The plaintiff called neither her husband, nor Raymond Tong, nor Sandra Wong to explain any of this. Raymond Tong and not Sandra Wong was the person who attended the Lees when they returned on the 26th and dealt with them thereafter.

22. There are other matters indicative of the agency's intense and inappropriate interest in the transaction. A letter from the defendants' solicitors to the plaintiff surprisingly turns up at the agency bearing the agency's chop (Bundle 13), instead of at the plaintiff's solicitors as one would expect. Although this letter is addressed to the plaintiff personally she did not seem to recognise it. She says her husband must have dealt with it.

23. The plaintiff gives her own address on the writ as an address where she has never resided. It is an address of her "husband's friend", she says, which was selected because the mail at her own address might be insecure.

24. I am sceptical about the plaintiff's claim to be a genuine buyer for her family's use. I suspect she was an agent for her husband or even the agency itself and the intent was speculative. That in itself does not disentitle the plaintiff to relief. It does however affect my view as to credibility.

25. The relevant paragraphs of the Sale and Purchase Agreement, as translated, are -

"(6) If the Vendor, after signing for receipt of the Initial Deposit, is in default by failing to sell or to perform this Sale and Purchase Agreement, the Vendor shall immediately compensate (the Purchaser) with a sum equivalent to double the amount of the (Initial) Deposit together with this company's Service and Introduction Fee, totalling HK$67,900.00. If the Vendor does not pay the compensation forthwith, all legal costs for the recovery of the compensation shall be borne by the Vendor.

(8) Subsequent to the signing of this Agreement, (if any party defaults), the defaulting party shall forthwith pay Wealth Property Agency Co. its Service and Introduction Fee. If both parties by consent agree to cancel this Agreement, then the Introduction Fee shall be borne by them in equal shares in default of which the defaulting party shall indemnify all legnal costs and any other expenses in recovering the said Introduction Fee.

(Deposit Receipt) This is to acknowledge receipt of HK$30,000,00 delivered by Wealth Property Agency Co. on behalf of the Vendor being Initial Deposit for the sale of the above Property and (in pursuant to) the agreement to complete the transaction by delivering vacant possession on the above terms and conditions. If I (the Vendor) fail to attend solicitors' office at the specified date to sign the Sale and Purchase Agreement or if I cancel the sale of the above Property, I (the Vendor) shall pay a compensation double the amount of the Deposit and am willing to pay for the loss of Services and Introduction Fee your company may suffer."

26. D1 says he was particularly interested in paragraph 6 and whether this gave him a right to withdraw upon payment of compensation. He asked Sandra Wong about it in the presence of the plaintiff at the agency before all three signed the agreement. Sandra assured him he had such a right, i.e. to withdraw from the agreement upon payment.

27. Sandra was not called as a witness. The plaintiff agreed only that the paragraph was read over but claimed there was no particular discussion about it. I accept D1's evidence that there was particular reference to his right to withdraw under this paragraph.

28. It is to be noted that the default provision in paragraph (6) is repeated albeit in slightly different language in the "Deposit Receipt" which is incorporated within the agreement in prominent letters at the foot of the front page adjacent to the parties' signatures. There it is referred to as the vendor's "cancellation".

29. The effect of this type of clause in a sale and purchase agreement was considered by the Court of Appeal recently in the case of LEE Ming Ching, Stephen v. MAN Sun (Civil Appeal No.203/1993). That case turned on its particular facts but in considering the law the Court of Appeal accepted the proposition that such a provision could be used by either party as an option to withdraw. Provided the provision is clear, provided the party seeking to withdraw complies strictly with his obligations, either party may exercise the option.

30. In the present case, the vendors' obligation was to "immediately compensate ...... forthwith". This the vendors did, or attempted to do, within 24 hours of signing the agreement. They were thwarted by the agent's refusal to accept but continued to tender the compensation over the next few days. Finally they despatched it by registered post, still within a few days. They acted throughout in a timely fashion.

31. They could do no more. They had no means of communicating with the plaintiff other than through the agent who was expressly declared to be the agent for both parties (Para. 9 of the Agrecment). Their action in my view effectively deprived the plaintiff of any right to specific performance.

32. The plaintiff's claim therefore fails.

33. The defendants are entitled to the declaration sought in para. (2)(a) and the order sought in para. (3) of their Counterclaim.

34. The other claims of the defendants are academic with these findings. [There was doubt on the evidence just what the plaintiff or the agent has done with the two cheques totalling $37,900. For the avoidance of doubt, if those cheques are uncashed, or uncashable because they are too old, the defendants must make them good].

35. The defendants are entitled to their costs. There is liberty to the parties to apply.