SUN CHUNG KING v. CHEUNG YAT MING AND ANOTHER

1991, No. A8823

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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J U D G M E N T

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1. The Plaintiff's claim is for specific performance of a provisional Sales and Purchase Agreement ("the agreement") entered into between the Plaintiff and the Defendants on 23/8/91 when the Defendants agreed to sell and the Plaintiff agreed to purchase the premises known as Block A6A together with Car Park of No. 1 Arnold Gardens, Tan Kwai Tsuen, Hung Shui Kiu.

2. The terms of the agreement were as follows:

(1) Total purchase price is Hong Kong Dollars One Million Two Hundred Ninety Five Thousand Only.

(2) 10% of the purchase price being formal deposit be paid before 10th September 1991, otherwise (the purchase sum) will be considered as being given up.

(3) Date of completion is on or before 3rd January 1992. (4) This sale and purchase includes the sofa, the cabinet (three in total) dining table with chairs and two sets of air- conditioners inside the house.

(5) If the vendor repudiates the agreement, double the deposit will be returned.

The Defence raised two issues namely:

(1) the return of amount equivalent to double the deposit stipulated at Clause 5 of the provisional agreement is the only remedy open to the Plaintiff should the Defendants be in breach of the agreement.

(2) The Plaintiff had accepted the Defendants' offer of the return of double deposit and is estopped from suing for specific performance.

3. The agreement was a home made agreement. Originally the Plaintiff with her husband went through an estate agent to view the suit premises. The next day they returned to view the premises without the estate agent and agreed to purchase the said premises. At the suggestion of the Plaintiff's husband they reached the agreement after some discussion. The Plaintiff's name was put in as purchaser according to the Plaintiff's husband to show "respect" for his wife and eventually the property would be in their joint names should the deal come through. According to the Defendants it was the Plaintiff's husband's idea to avoid paying a commission to the estate agent as he was registered with the estate agent. The Defendants did not have to pay commission to the estate agent as they were the vendors.- This is not an issue which I have to decide but it is a factor which I take into consideration when assessing the credibility of the witnesses.

4. Mr. Yu Yuk Fai, the Plaintiff's husband gave evidence. He was the one who did all the negotiations. The Plaintiff's name was put on the agreement only to show respect for her. The parties are ad idem as to how Clause 5 of the agreement came to be in its place and what their intentions were at the time when they agreed on Clause 5.

5. According to Mr. Yu Clause 5 was put in at the suggestion of his brother who said that if the purchaser did not proceed with the sale then the deposit would be forfeited, to be fair to the vendor, the vendor should have such a clause put in the agreement. Hence Clause 5 was drafted and added in.

6. Under cross-examination Mr. Yu agreed Clause 5 meant if for whatever reason the vendors could not or did not proceed with the sale they would return the deposit plus $20,000. He agreed that his understanding of Clause 5 at the time of the agreement was that should the Defendants withdraw from the agreement his only right is to get $40,000. When asked how that clause could protect him, he said that that was not a small amount and it was put there to bind the parties. When asked whether when the vendors paid him double it was the end of the contract and he said it should be so. Defence Counsel then asked whether that was what he understood Clause 5 to be and he answered that that was in the agreement. He was asked whether what was agreed was recorded in the agreement and the answer was yes. He agreed that he knew the Defendants could withdraw from the agreement before 10th September 1991 upon payment of $40,000.

7. According to the 1st Defendant Mr. Yu's brother suggested the addition of Clause 5. Yu's brother said it was unfair if the agreement only mentioned about the forfeiture of deposit by vendors. The agreement should include what purchaser could do if vendor defaulted. Clause 5 was to cover the situation should he be in breach of the contract. In that event he would have to pay the double deposit. As far as he understood he needed to pay only the double deposit and that would be the end of the matter. He asked Mr. Yu if he were to pay double deposit did he have to do anything else because there was no middle man and Mr. Yu told him that according to custom and practice if he were to pay double deposit it would be the end of the matter, the same as if he (Mr. Yu) gave up the deposit should he be in default.

8. On the evidence it is clear that the parties intended that should the vendors be in default before the payment of the 10% deposit on 10th September 1991 a payment of $40,000 by the vendors would be the end of the matter.

9. Clause 5 on the face did not say whether the payment of double deposit is the only remedy. Is the return double deposit the only remedy? The agreement is silent on this part. In order look at the intention of the parties, oral evidence has to be considered to see what is the intention of the parties at the time of the agreement.

10. In the present case there is no doubt that the intention of the parties was that the return of double deposit was the only remedy open should the vendors default.

11. Plaintiff's Counsel argued that the agreement was agreed upon by the parties who were laymen hence they had not considered the right to specific performance and any discussion leading to the insertion of Clause 5 was made "in ignorance of such right".

12. With respect I do not agree. Both parties had in no uncertain terms say that when they agreed on Clause 5 return of the double deposit was the only remedy open to the Plaintiff should the Defendants fail to conclude the deal. That was the agreement they have reached. Ignorance of the law at the time of the agreement is not something which the Plaintiff can now rely on to insist on specific performance.

13. It is the intention of the parties at the time of the agreement that I have to consider. If they agreed that was the only remedy, it means that they have excluded other remedies or rights.

14. For reason above I find that the parties agreed that the return of double deposit was the only remedy open and hence it is not open to the Plaintiff how to claim for specific performance.

15. When the Defendants informed Mr. Yu of their intention not to proceed with the sale, Mr. Yu said that he needed to talk to his wife and contact the Defendants later. He then went to his solicitors. The 1st Defendant on the other hand said that when he informed Mr. Yu of his intention not to proceed with the sale and return the double deposit he sounded unhappy and said he had no alternative. He did not say he had to discuss with his wife.

16. On balance I prefer the evidence of the 1st Defendant on this point because at that time he knew that was the only remedy open to him. I have no doubt that he wanted to complete therefore he sounded unhappy. Since that was the only remedy open there was no alternative but to accept the rescission of the contract by the Defendants. There was nothing which he could discuss with his wife except to tell her of the decision of the Defendants. I find therefore that the Plaintiff had accepted the withdrawal of the sale of the said premises and for this reason the Plaintiff is barred from claiming specific performance.

17. For reasons above the Plaintiff's claim is dismissed with an order nisi that the Defendants are to have their costs.

18. If I erred in law and fact on the above two issues and that the Plaintiff has a right to sue for specific performance, from the evidence I am satisfied that the Plaintiff had been prepared and willing and still is ready and willing to purchase the said premises and the Plaintiff is entitled to specific performance of the said agreement.

19. Defence Counsel had already indicated that he will not proceed with the counterclaim in view of the increase in the price of properties. In fact no evidence had been adduced to support his counterclaim. For that reason the counterclaim is dismissed with an order nisi that there be no order as to costs save and except the Plaintiff's costs for filing the Defence to counterclaim.