TAO QIN v. HO WAI LEUNG

cacv 195/2006

in the high court of the

hong kong special administrative region

court of appeal

civil appeal no. 195 of 2006

(on appeal from HCA NO. 1336 of 2005)

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J U D G M E N T

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Hon Rogers VP:

1.  This was an appeal from a judgment of Deputy High Court Judge Muttrie given on 4 May 2006.  The matter before the judge was an application under Order 14A of the Rules of the High Court.  The application was made by the defendant who had been sued by the plaintiff for a declaration that the defendant had failed to prove title to property that was the subject of a sale and purchase agreement between the two parties and, secondly, the plaintiff was seeking a decree of specific performance of that contract.  The judge held that the plaintiff had wrongfully repudiated the sale and purchase agreement by failing and/or neglecting to complete the purchase and that the defendant was entitled to forfeit the deposit which had been paid in the sum of $355,100.  At the conclusion of the hearing of this appeal judgment was reserved which we now give.

Background

2.  In December 2003 the defendant had entered into what has been termed a Principal Agreement with the MTR Corporation Ltd (“MTRC”) for the purchase of a flat in a new development called Residence Oasis in Tseung Kwan O.  At the time that the Principal Agreement was entered into the flat was uncompleted.  It was thus subject to what has been termed the consent scheme whereby the Director of Lands permits the developer to enter into an agreement for the sale of the property prior to the completion.  There are a number of safeguards which are enforced in relation to such consent arrangements; in particular the developer is required to provide a standard form sale and purchase agreement and Deed of Mutual Covenant which are exhibited to a statutory declaration which is registered with the Land Registry.  It is important to note that under the Principal Agreement the defendant was obliged to complete the purchase within 14 days of the date of notification by the vendor that it was in a position validly to assign the property to the defendant.  Completion was to take place either before 4:30 p.m. on a weekday or 12 noon on a Saturday.

3.  On 10 December 2004 the plaintiff and the defendant entered into a formal agreement for the sale and purchase of the property which was defined as:

“ALL THOSE its 70 equal undivided 490,110th parts or shares of and in ALL THAT piece or parcel of land known and registered in the Sai Kung New Territories Land Registry as TSEUNG KWAN O TOWN LOT NO. 24 And of and in the development comprising 6 residential tower blocks, commercial accommodation and carparking spaces now being constructed or to be constructed on the land in accordance with the building plans and intended to be known as “RESIDENCE OASIS (蔚藍灣畔)” (“the Development”) TOGETHER with the sole and exclusive right and privilege to hold use and occupy and enjoy ALL THAT FLAT A on FIFTH FLOOR of TOWER 3 of the Development, 15 Pui Shing Road, Tseung Kwan O, Sai Kung, New Territories, Hong Kong which for the purposes of identification is shown on the Floor Plan attached to the Principal Agreement and there on coloured Pink and marked “G”.”

4.  Completion was to take place under this agreement within 14 days of the date of notification by the head vendor to the defendant that the head vendor was in a position validly to assign the property and the defendant was required to give the plaintiff notice of receipt of such notice within 2 working days.  Completion was to take place not later than 2 p.m. on a weekday and 11 a.m. on a Saturday.

5.  Although it does not directly affect the issues in this case it may be noted that the plaintiff entered into a further sub sale agreement on 21 March 2005 agreeing to sell the property for $3,910,000.

6.  By letter dated 14 April 2005, which was received by the plaintiff’s solicitors on the following day, the defendant’s solicitors sent copies of various documents relating to title including, in particular, the Principal Agreement and a copy of the statutory declaration which exhibited the standard form agreement and the draft Deed of Mutual Covenant.  Two matters may be observed in this respect.  In the first place there was no plan attached to the Deed of Mutual Covenant but, secondly, it was clearly apparent that there would be a Deed of Mutual Covenant which would be in similar form to that which was exhibited to the statutory declaration.

7.  The next event was on 11 May 2005 whereby a letter from the defendant’s solicitors, which was likewise received on the following day, informed the plaintiff’s solicitors that the developer had given notice of completion and completion was to take place on or before 27 May 2005.  On 19 May 2005 the defendant’s solicitors wrote to the plaintiff’s solicitors giving notice as to how the split cheques should be drawn.  The following day on 20 May 2005 the defendant’s solicitors wrote enclosing copies of what were said to be further title deeds as well as a pro forma assignment and draft form of undertaking which the defendant’s solicitors would give on completion.  That undertaking included an undertaking to provide within 14 days of their receipt from the Land Registry certified copies of the Certificate of Compliance, the Deed of Mutual Covenant, the Assignment of Common Areas and the Power of Attorney issued by the MTRC for execution of those documents.

8.  The title deeds referred to in the letters were not extensive but included a copy of the letter of approval of the Deed of Mutual Covenant from the Lands Department.  That letter specified that the Deed of Mutual Covenant had been approved in the form of what was said in the letter to be an amended draft which was returned with that letter and that none of the terms of the Deed should be altered or varied without the consent and written approval of the Director of Lands.  The letter also refers to the assignment of the undivided share as in the Common Areas, the Common Areas being defined in the Deed of Mutual Covenant.

9.  On 26 May 2005 the plaintiff’s solicitors wrote to the defendant’s solicitors saying that since the relevant title deeds had only been sent on 21 May, the plaintiff was entitled to a reasonable time

“being at least 7 working days in which to peruse the documents and prepare for completion.  This will end on the 30 May 2005.

We are therefore instructed to give you notice that our client is entitled to and intend to complete on 30 May 2005.

Please confirm by return that your client is ready and able to do so and we shall send you our draft Assignment and Undertaking letter for your approval accordingly.

Meanwhile, by way of raising requisition of title

1.   Please let us have a copy of the duly executed Deed of Mutual Covenant and Management Agreement for up arose all.

2.   A Copy of the duly executed Assignment of Common Areas to prove compliance with paragraph (c) of the Deed of Mutual Covenant Approval Letter dated the seventh of March 2005.”

10.  Not only was that letter sent by fax on 26 May 2005 but it was not faxed to the defendant’s solicitors until 7:23 p.m.  The following morning the defendant’s solicitors wrote back to the plaintiff’s solicitors in a letter which was faxed at about 10:42 refuting the suggestion that the plaintiff was entitled to 7 days in which to consider the documents which had been provided and stating that the requisitions were out of time.  The letter carried on, on a without prejudice basis, refuting the suggestion that the copy of the Deed of Mutual Covenant and the Assignment of Common Areas needed to be provided but, in any event, the defendant’s solicitors also provided, on a without prejudice basis, copies of those documents.

11.  The time for completion of the agreement between the plaintiff and the defendant expired at 2 p.m. that day, 27 May 2005 but it was not until 7:52 p.m. that the plaintiff’s solicitors sent two letters.  The first was expressed to be without prejudice to the contention that the defendant’s solicitors still had to reply to the outstanding requisitions but enclosed a draft assignment and draft undertaking for approval by the defendant’s solicitors.  On that draft the date for completion was still left blank but there is no dispute between the parties that the plaintiff’s solicitors were maintaining that completion should take place on Monday 30 May 2005.  It was not until the following morning that the defendant’s solicitors wrote accepting the plaintiff’s repudiation of the contract and claiming to forfeit the deposit.  On Monday 30 May 2005 the plaintiff’s solicitors sent the completed form of that letter containing the undertakings requested and enclosing cheques which had been drawn as per the requested amounts but upon an account of another firm of solicitors.  As recorded in the judgment below the defendant’s solicitors completed the purchase of the flat with the MTRC on Monday 30 May and not as previously required on 27 May.

12.  The curious situation thus arose that both parties were apparently relying on their strict legal rights although they had no need to do so.  For the plaintiff it is suggested that she had adequate funds with which to complete the purchase on 27 May without recourse to the sub-purchaser’s funds.  Whether or not that was so without further borrowing from the bank is not relevant.  What perhaps, might also be observed in relation to the stand taken on behalf of the plaintiff was that no further objection was taken as to title.  In relation to the stand taken on behalf of the defendant it was likewise, it would seem, purely a stand taken on what was perceived to be the contractual rights.  The defendant itself only completed the purchase of the flat at the time when the plaintiff would have been happy to do so.  It is unnecessary to consider the motives behind the parties’ actions nor is it a case where it can be said that the merits or sympathies would lie with one party or another.

13.  The judge came to the conclusion, and there was no dispute as to the fact that the plaintiff would indeed have been entitled to copies of the Deed of Mutual Covenant and the Assignment of Common Areas, that the requisitions had been necessary and proper.  He held however, that in the circumstances of the case the requisitions had not been raised within a reasonable time or sufficiently far in advance of the scheduled completion date.  That was a decision to which he came having regard to the various factors in the case and in particular to the short time for completion once notice had been given by the MTRC.  In this respect I see no grounds upon which this court should disagree with the judge on his conclusion of fact but would go further and say that I would agree with it.  No doubt, the defendant’s solicitors could have provided the documents earlier than 20 May 2005 but, given their nature, and given the plaintiff’s prior knowledge as to the various documents that would be relevant to the purchase of the property, in particular, the Deed of Mutual Covenant and the Assignment of Common Areas, perusal of those documents should not have created any difficulty and had the plaintiff’s solicitors indeed needed to consider the details of those documents, they could have been requested very much sooner after receipt of the letter of 20 May.

14.  The judge went on to hold that the defendant had sufficiently and satisfactorily answered the requisitions given the time available to do so.  The major complaint in respect of this was that there were no plans attached to the Deed of Mutual Covenant and that the copies of the Power of Attorney had not been provided.

15.  Whereas, it would, in normal circumstances, be incumbent on the person providing a copy of a document to include plans which form part of that document, given the circumstances of the case and in particular that the Deed of Mutual Covenant had to follow closely the draft Deed exhibited to the statutory declaration the failure to include the plans with a copy of that document sent by fax at 10:42 in the morning was not fatal, particularly given the fact that there was no further request from the plaintiff’s solicitors who were content not to complain of the failure but to rely upon their assessment of their client’s rights to delay completion until 30 May.

16.  In those circumstances I consider that the judge was entirely justified in holding that the defendant was entitled to accept the plaintiff’s repudiation.  I would therefore dismiss this appeal with an order nisi of costs in favour of the defendant.

Hon Le Pichon JA:

17.  I agree.

Hon Barma J:

18.  I agree.