ST HILAIRE, PAUL JOSEPH v. YEUNG TSANG YING YING SOPHIA

HCA 496/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 496 OF 2008

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J U D G M E N T

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1.  This is a sale and purchase dispute.  The property in question is a residential flat situated at Caribbean Coast, Tung Chung, Lantau Island.  The plaintiff, a Cathay Pacific pilot, is the vendor.  The defendant, a business woman running her own company, is the purchaser.  As it happens at the time they contracted to sell and buy she was already in occupation under a tenancy agreement entered into with the plaintiff last year.

2.  In fact the plaintiff was already committed to a sale to another buyer called Lau Shing Hon.  But in that contract there was a right to rescind upon payment of liquidated damages.  The plaintiff chose that course; the amount of the liquidated damages was factored into the purchase price the defendant was required and agreed to pay.

3.  The parties entered into a provisional sale and purchase agreement on 28 January 2008.  The PSPA was in conventional terms; there was an initial deposit of $220,000 payable on the signing with a further deposit of $246,600 due on 31 January.  These combined to make up 10% of the purchase price.  A formal agreement for sale and purchase was due to be signed on 12 February, with completion timed for 17 April 2008.

4.  The initial deposit was paid, in circumstances I shall come to.  But the further deposit was not, or rather was not accepted.  The plaintiff says it was not tendered in terms of the PSPA and thus that the defendant was in repudiatory breach.  He accepted that repudiation, returned the unbanked further deposit and retained the initial deposit as forfeited.

5.  Then the plaintiff renegotiated with Mr Lau, the original purchaser, and signed a fresh agreement for sale to him.

6.  But the defendant does not accept that she was in breach and holds the plaintiff to their contract.  To protect her position she has registered the PSPA against the title.

7.  That step taken gave rise to this action.

8.  By writ of 26 March the plaintiff sues for a declaration that the PSPA has been validly terminated and for an order that the defendant vacate the registration and thereafter that she be restrained from registering it.

9.  The matter before me is a summons he has brought under O.86 r.1 RHC for summary judgment.  That is opposed by the defendant.

The PSPA

10.  At the defendant’s request the form of it was faxed to the parties by her solicitors, and they then filled in their names and other details and amended and added one or two clauses before signing it.  As well as providing for the amounts and due dates for payment of the two instalments of the deposit, clause 5 stated that the purchase price, which included the deposits, “shall be paid by way of cashier’s order(s) drawn on a licensed bank in Hong Kong or cheques issued by a solicitor firm”.

11.  Clause 9 stated:  “Time shall in every respect be of the essence of this Agreement.”

12.  Clause 12 stated:  “Should the purchaser fail to complete the purchase in the manner herein contained the deposit shall be forfeited to the vendor and the vendor shall then be at his absolute discretion entitled to sell the said premises to anyone he thinks fit.”

13.  Clause 17 was a new clause handwritten.  It read:  “the vendor may cancel this Agreement by refund of deposit without recourse from the purchaser if the vendor cannot rescind the previous sales by payment of not more than $220,000 being damages commission and other expenses.”

14.  That previous agreement was the original sale to Mr Lau.  The plaintiff says the amount of the initial deposit payable by the defendant was fixed to cover that which was due to Mr Lau as liquidated damages.

The Deposits

15.  The fate of this action, and in the first instance this summary judgment application, surrounds the parties’ agreement and conduct following their signing of the PSPA.

16.  It is not disputed that notwithstanding the manner and timing of payment of the initial deposit as agreed, the plaintiff accepted a cheque from the defendant drawn on her company’s account with HSBC.  It was agreed that there would be a short delay in presentation of it to allow the defendant to put the company in funds.  What is not now agreed is the length of that delay.  The plaintiff says it was until the next day, 29 January.  The defendant says it was not until the day after, 30 January. 

17.  That misunderstanding played havoc with the fate of the cheque, for when the plaintiff banked it on 29 January, it was returned for insufficient funds.  As it happens that was not crucial to the survival of the parties’ contractual relationship, though it may have advanced the plaintiff’s attitude and precipitated his decision to terminate the agreement, as I shall come to.

18.  But in support of the defendant’s version of the timing is the receipt she says the plaintiff gave her when on 28 January she handed over the cheque.  Handwritten, presumably by her, it reads:

“This cheque is being the downpayment for the purchase of the property at Tung Chung under the provisional agreement for sale and purchase signed on the 28^th Jan. 2008 (clause no.1 – no.17) to be paid on 30^th Jan. 2008 after cancellation.  Cheque received by

(Signed)
Jan. 28/2008”

The plaintiff accepts that it is his signature and he penned the date also.  But he does not remember reading the wording preceding it and does not accept that the document is authentic.

19.  There is a further, much more crucial dispute about payment of the further deposit. 

20.  The plaintiff’s version of events is that there was no agreement to depart from the terms of the PSPA; that the further deposit was to be paid on or before 31 January by way of cashier’s order or a solicitor’s cheque.  The defendant however deposed that the terms they arrived at post the signing of the PSPA was that all payments could be made by personal cheques and that included the further deposit.

Events of 29-31 January

21.  The plaintiff banked the cheque for the initial deposit on 29 January and paid off Mr Lau, thus cancelling that prior agreement.  Then on 30 January, rostered to fly to Bali, he left Hong Kong early that morning.  Returning late the same evening he learnt from his wife that the initial deposit cheque had bounced.

22.  Pausing here, it can be seen from the bank statement of the defendant’s company that there was a deposit in cash made on 30 January sufficient to cover the amount of the initial deposit, so that had the banking of it been deferred a day, it would have been met.

23.  There was a late evening telephone call between the parties on 30 January.  That much is not disputed.  What is is the content.

24.  The defendant’s version is that she told the plaintiff she could remedy the problem of the bounced cheque the following day by crediting the amount of the initial deposit directly into his bank account.  He responded that he wanted on the next day a cashier’s order for the full deposit.  She replied that she could not arrange that in time and that it had already been agreed that the further deposit could be by personal cheque delivered the following day, being the due date 31 January.  His response to that was that he would telephone her on that day.

25.  The plaintiff’s version is that he was very upset when he learned of the fate of the initial deposit cheque and told the defendant that she had to pay the entire 10% deposit by cashier’s order direct to his solicitors (whose name and address the defendant knew) by the following morning.  She agreed.  He deposed: 

“I recall it was a short call as I was rather fed up with the defendant’s conduct.  I never agreed to accept any personal cheque of the defendant, which would have been absurd in the circumstances.  Nor did I tell the defendant that I would phone her the next day.”

26.  The following day the plaintiff telephoned his solicitors that there should be forthcoming a cashier’s order of $466,600 and to let him know when it arrived.

27.  Against that material dispute of facts, events unfolded on 31 January.

28.  The defendant attended at her branch of the HSBC and paid an amount to match the initial deposit directly into the plaintiff’s bank account.  They were as she said “good funds”, cleared then and there.  That much is plain from the plaintiff’s bank statement. 

29.  Subsequently through his counsel Mr Chiu at the hearing before me the plaintiff acknowledged that if as he alleged there had been breach of the PSPA concerning the initial deposit, that breach had been made good that morning. 

30.  Then the defendant paid into her company’s account a cheque to cover the further deposit that was due that day.  That much is also clear from the company’s bank statement.

31.  Not having heard from the plaintiff as expected, the defendant then telephoned several times to no avail.  Finally, at 7:30 p.m., she arrived at the reception area to his home in Sutton Court, Harbour City, with a cheque drawn on her company’s account for $246,600 to honour the deadline.  She was told by reception that the plaintiff was out, and if she had anything for him, she could leave it with reception upon their promise to give it to the plaintiff upon his return; so she did.

32.  The plaintiff for his part said he did not hear from his solicitors to the effect that the cashier’s order had arrived, and he did not receive the cheque left at reception until the following day, 1 February.  He also came to learn that he was in funds for the initial deposit.

33.  But by then he had had enough.  He deposed:

“However, by that time I had completely lost confidence in the defendant and I wrote her a letter accepting her repudiation …”

34.  Thus it was that the plaintiff was holding the defendant to the strict terms of the PSPA, she having not, with time of the essence, delivered a cashier’s order or solicitor’s cheque for $246,600 on or by 31 January 2008.

The Legal Principles

35.  The law on the topic of applications for summary judgment brought under Order 86 is for all intents and purposes the same as that for the more common applications under Order 14.  There is no controversy about this, but it behoves me to remind myself of the words Godfrey JA in the case of Man Earn Limited v Wing Ting Fong [1996] 1 HKC 225, as a salutary reminder of matters to be borne in mind.  From page 227, he said:

“Since the policy which underlies the summary procedure is to prevent the defendant from delaying the plaintiff from obtaining judgment in a case in which the defendant has clearly no defence to the plaintiff’s claim, the procedure should be invoked only where this condition is satisfied.  Practitioners, and sometimes judges, are in danger of losing sight of this:

“People do not seem to understand that the effect of O 14 is that, upon the allegation of the one side or the other, a man is not permitted to defend himself in court; that his rights are not to be litigated at all.  There are some things too plain for argument; and where there were pleas put in simply for the purpose of delay, which only added to the expense, and where it was not in aid of justice that such things should continue, O 14 was intended to put an end to that state of things, and to prevent sham defences from defeating the rights of parties by delay and at the same time causing great loss to the plaintiffs who are endeavouring to enforce their rights.  But when in such a case as this, O 14 is applied, there are a great many things to be said.  I do not propose to enter into the merits of the case or the comprehension of it, which is necessary to some extent in order to deal with the merits.  That question would have to be dealt with when the case is tried.  But I am bound to say that it startles me to think that in a case of this sort an order should be made, the effect of which is that the defendant is not to be heard to make his defence.

See Jacobs v Booth’s Distillery Co (1901) 85 LT 262, per Lord Halsbury LC.

Unless it is obvious that the defence put forward by the defendant is ‘frivolous and practically moonshine, O 14 ought not to be applied’ : see Codd v Delap (1905) 92 LT 510, per Lord Lindley at 511.

For those who may believe that these sentiments are outdated, a salutary reminder is provided in Crown House Engineering v Amec Projects Ltd (1990) 6 Const LJ 141, where at 154, Bingham LJ says this:

… Order 14 is for clear cases; that is, cases in which there is no serious material factual dispute and, if a legal issue, then no more than a crisp legal question as well decided summarily as otherwise. … The procedure is entirely inappropriate where the plaintiff’s entitlement to recover any sum is the subject to any serious dispute, whether of law or fact.  This is not to say … that a defendant with no or no more than a partial defence can cheat a plaintiff of his just deserts by producing hefty affidavits and voluminous exhibits to create an illusion of complexity where none exists.  Where the point at issue is at heart a short one the court will recognize the fact and act accordingly no matter how bulky its outer garments. But it does mean that where there are substantial issues of genuine complexity the parties should prepare for trial … rather than dissipate their energy and resources on deceptively attractive short-cuts.”

I would express the hope that those practitioners, of whom there are too many, who appear to be prepared to advise every client with what seems to be a good case to invoke this extraordinary procedure, without reflecting on the fact that, if the attempt fails, the result will be to keep the plaintiff out of the judgment to which he may well be entitled for far longer than would have been the case if they had concentrated, instead, on bringing the matter to trial, will in future think twice before giving such advice.”

What is of further assistance is the short subsidiary judgment in the same case given by Litton VP, as the approach to be taken by the judge dealing with the application.  He stated from page 229:

“Litton VP: I agree that this appeal should be dismissed, for the reasons given by Godfrey JA.  I am, like him, concerned with the manner in which the procedure under O 86 r 1 was used in the court below.

The judge, in his endeavour to deal with every point of defence raised and to give full reasons for his decision, had, in my view, strayed beyond the scope of O 86 r 1.

The reason for dismissing the plaintiff’s application for summary judgment was simply because the case did not come within O 86 r 1.  In other words, the plaintiff had failed to satisfy the court that the defendant had no defence to the action.  This meant, of course, that the matter must proceed to trial.

The defendant is, in these circumstances, entitled to set up all the defences available to him legitimately to resist the plaintiff’s claim: untrammelled by the judge’s preliminary observations on the strength or weakness of his case.

In the court below, what the judge did, in effect, was to have conducted a ‘mini-trial’ on affidavit evidence and, on the basis of such evidence, he made certain ‘findings’.  Such ‘findings’, by their very nature, have no standing.  It would be unfortunate if, as a result of those ‘findings’, the plaintiff should be encouraged to embark upon more interlocutory skirmishes, seeking to strike out some of the paragraphs in the defence under O 18 r 19(1) of the Rules of the Supreme Court, relying upon the observations of the judge.  Such a proceeding would, in my view, be unwarranted.

In my judgment, all that the judge was called upon to do — and all that he should have done — was to have stated in a few words why he concluded that the plaintiff had failed to satisfy him that the defendant had no defence.  Any observations beyond that were unnecessary and otiose.

I would dismiss the appeal and make an order nisi that the plaintiff pays the costs of the appeal.”

The Plaintiff’s Case

36.  The first proposition raised by Mr Chiu for the plaintiff is that it is clear and obvious why he waived strict compliance with the defendant concerning the manner of payment of the initial deposit.  The parties were together filling out and signing the PSPA.  Hardly surprisingly, the defendant did not have a cashier’s order, because until the signing there was no commitment to pay anything.  But she did have her company’s cheque book.  So he accepted a cheque drawn on its account.

37.  But there was simply no need to provide for an extension of that waiver to the remainder of the consideration.  There was no reason for him to compromise the security afforded by a cashier’s order or solicitor’s cheque.  Furthermore, his version of events was that the defendant had promised on the evening of 30 January to come up with the full deposit by cashier’s order the next day.

38.  It is, he submitted, plain and obvious that the defendant drummed up her account to hide the fact that neither she nor her company were in funds to buy a cashier’s order in time to meet the deadline.  Had she been so she could and no doubt would have paid the whole 10% deposit by depositing it into the plaintiff’s account “in good funds” on the due date instead of just the amount to cover the initial deposit.

39.  So, her version of events does not amount to a defence because it is incredible.

40.  His second proposition is that even if capable of belief it is bad in law.

41.  Even if it was agreed that she should pay the further deposit by ordinary cheque, she did not do so on or by 31 January.  Delivery to the plaintiff by leaving the cheque with reception was not proper delivery.  There is no evidence to suggest reception was the authorized agent of the plaintiff in the collection of the cheque.

Waiver

42.  The defence position put up by Mr Leung was to refute the proposition that the defendant’s version of events is not credible and that the competing accounts should be ventilated at trial.

43.  Further, against any suggestion (and there was a suggestion) that the defendant might not be able to invoke the concept of waiver to support her claim that the parties had agreed to the less formal approach to payment of the deposit, I was referred to excerpts from Chitty on Contracts, 29^th edition on the point.

44.  I reproduce excerpts under the sub-heading waiver:

“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.	22-040
Form of waiver.  A waiver may be oral or written or inferred from conduct even though the provision waived is found in a contract required to be made in or evidenced by writing.  It has been noted that any variation of a contract required to be made in or evidenced by writing must itself be made in or evidenced by writing.  If it is merely oral, it is of no effect.  An oral forbearance or concession made by one party to the other does not require to be so evidenced, even if made at the latter’s request.  Thus, what is ineffective as a variation may possibly have effect as a waiver …	22-041
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.	22-042
…
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 estoppel’, 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.”	22-044

Decision

45.  My view is that there are triable issues and that this is not a case for summary judgment.

46.  The defendant’s claim of waiver in respect of the second instalment of the deposit (accepted as applicable as to the first instalment) is not inherently incredible.  Whether there was waiver will depend upon which version of the conversations held on 28 and 30 January are found to be true.  That demands a trial for justice to be done.

47.  The defendant’s entitlement to invoke the concept of waiver needs also to be examined and considered.

48.  The argument that delivery to reception at Sutton Court was not delivery in time to the plaintiff is also for consideration.  It may be accepted.  But following argument it might be rejected, as being a technical point and against the justice of the case, or it may come to be established that the plaintiff made a point of declining to take delivery in time.

49.  In the circumstances, I order that the defendant shall have unconditional leave to defend.  There shall be liberty to apply for directions.

50.  Costs are nisi.  Including those reserved they shall be in the cause of the action.