TSUI CHI KEUNG AND ANOTHER v. HUI FU KWOK

HCA6812/1993

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 6812 OF 1993

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J U D G M E N T

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1. This is an application for specific performance and/or damages arising out of a number of agreements between the plaintiffs and the defendant in 1991.  The agreements stem from a sale and purchase agreement of shop premises in Kennedy Town of which the defendant was the owner and intended vendor and the plaintiffs were the intended purchasers.

Delay

2. Before elaborating further on the details of the original sale and purchase agreement and subsequent variations thereof I should, at the outset, note the remarkable fact that a straightforward conveyancing transaction in 1991 has come on for trial over 17 years later.  As will be seen the original agreement was varied and a number of subsequent agreements were entered into in 1992.  No agreement was ever completed.  The plaintiffs commenced proceedings in 1993.  Some early interlocutory hearings took the matter on into 1995.  Thereafter it seems that nothing, or virtually nothing, happened to progress the claim until 2007, some 12 years later.  In March 2007 the 1^st plaintiff explained the delay in an affirmation which was made for the purpose of resisting the defendant’s application to dismiss the claim for want of prosecution, an application which was later rejected.

3. A number of explanations were given which included changing solicitors, solicitors’ firms being wound up, being short of funds, spending long periods of time in the mainland on business, being unable to locate the defendant and the defendant becoming a litigant in person.  It is not part of this court’s task to decide whether or not the delay was inexcusable or inordinate.  However, regardless of where the rights and wrongs of the delay lie, it is an inescapable fact that the delay has been extremely long.

4. The defendant has been, for many years, unrepresented and was, for long periods, difficult to locate.  However the fact that he now is required to defend a case for specific performance of a conveyance of shop premises (his place of work at the material times) 17 years after the event is a factor which the court can and should weigh in the balance when deciding what is the proper and just way of resolving this dispute.

The agreements

5. Much in this case turns on contemporaneous documents.  To that extent, the passage of time does not present as great a problem as if much depended on personal recollections.  The following facts may be gleaned from documents.

(a)  By the first agreement the plaintiffs agreed to purchase the Kennedy Town shop premises for $2 million to be completed on 30 August 1991.

(b) The deposit paid was a total of $600,000 (paid in stages on divers dates).

(c) The transaction did not complete because the parties agreed on an alternative arrangement which was contained in two written agreements (in Chinese) both dated 26 September 1991, which have been referred to as “the Co-operation Agreement” and “the agreement to vary the Contract for Sale and Purchase”.  When discerning the true intentions of the parties they must be read together.

(d) In short, by the two Chinese agreements the plaintiffs agreed to purchase two-thirds of a “Ting” house (i.e. the ground and 1^st floor) which was one of a group of New Territories houses being constructed near Sai Kung in which the defendant had an interest.

(e)  Reduced to its simplest form the plaintiffs agreed to purchase part of the “Ting” house for an agreed sum provided the construction of the house was completed and provided the defendant obtained good title which he could convey to the plaintiffs.  At the time of these agreements in September 1991 the “Ting” house was under construction.  Accordingly the conveyance of the Kennedy Town shop was postponed by about 13 months to 25 September 1992.  (By later agreement it was further extended to 31 October 1992.)

(f)  Thus the intention of the parties was that the plaintiffs would buy the “Ting” house if it was built in time and if the defendant obtained title in time.  If he didn’t the purchase of the shop would proceed on terms as originally agreed on 25 September 1992.  Thus there was a clear deadline by which the defendant had to obtain title of the “Ting” house and ensure the completion of the construction, namely 25 September 1992.

(g) To this end the “Co-operation Agreement” contained the following clauses :

“Clause 1

If [the Defendant] can successfully acquire title in one of the Ting House (provisionally No. 545) he must transfer the title of Ground Floor and First Floor of that Ting House to [the Plaintiffs] and [the Defendant] shall have the title of top floor and roof.

Clause 2

[The Plaintiffs] shall pay Hong Kong Dollars totaling Seven Hundred Thousand to [the Defendant] as total consideration for purchase of the Ground Floor and First Floor of one of the Ting Houses.

Clause 3

The expenses of paying Government premium in one of the Ting Houses shall be borne in the ratio that [the Defendant] be responsible for one-third and [the Plaintiffs] be responsible for two-third.

…

Clause 5

A sum of Hong Kong Currency Six Hundred Thousand Dollars payable by [the Plaintiffs] as the purchase price of the Ground Floor and the First Floor of one of the Ting Houses situate at Yuen Shue Au, Sai Kung shall be transferred from the deposit already paid (by [the Plaintiffs] to [the Defendant]) for [the Property].  The remaining One Hundred Thousand Dollars being the balance of the purchase price of Seven Hundred Thousand shall be paid by [the Plaintiffs] to [the Defendant] on or before the 5^th of October 1991 (i.e. [the Defendant] will on 15^th of October 1991 have received the full amount of the purchase price of the abovementioned Ground Floor and First Floor of the Ting House) …

Clause 6

If the cooperation by [the Defendant] and [the Plaintiffs] regarding the property at Yuen Shue Au, Sai Kung fails through, [the Defendant] and [the Plaintiffs] must then fulfill all the terms (contained) in the Agreement for Sale and Purchase of the Ground Floor, B Shop, No.7 Chester Court signed in the solicitors’ office.  Furthermore [the Defendant] shall return One Hundred Thousand Dollars to [the Plaintiffs] without interest (the deposit of Ground Floor, No.7B Chester Court shall be changed from Six Hundred Thousand Hong Kong Dollars to Seven Hundred Thousand Hong Kong Dollars).

Clause 7

The aforesaid cooperation by both parties shall be effective when the District Land Registry issued Letter of Satisfaction and the successful transfer of title to the Ting house.”

6. The agreement to postpone the completion date for the Kennedy Town shop to 25 September 1992 (and later to 31 October 1992) was the subject matter of the 2^nd Chinese agreement of the same date.

7. At the time of the agreed deadline, the defendant had not acquired title and the building had not been completed.  Neither part of Clause 7 had been fulfilled, namely the Letter of Satisfaction had not been issued and title could not be transferred because it had not been acquired.

The defendant’s complaint

8. The defendant’s defence and counterclaim relate to Clause 3 (above) in which it is said that the responsibility for paying the Government land premium shall be borne as to one-third by the defendant and two-thirds by the plaintiffs.  He says that he could not acquire title by 25 September because the plaintiff had not paid his share.

9. This complaint, in my judgment, is without merit for five reasons.

10. First, the amount of the premium was not known prior to the deadlines in September and October 1992.  At best there was an estimate.  The precise figure was not known until well into 1993.

11. Secondly, the defendant could not have acquired title until the exact amount had been paid.  This would have been well after the deadline.  It would be contrary to common sense and commercial sense to expect the plaintiffs to pay the full value of the property ($700,000 plus an estimate of the land premium) well before the defendant was able to acquire title.  It would have been reckless had he done so.

12. Thirdly, the “Cooperation Agreement” cannot be construed as placing an obligation on the plaintiffs to comply with Clause 3 before a deadline or indeed by any specified time.

13. Fourthly, in any event the defendant failed also to comply with the second part of Clause 7 because the Letter of Satisfaction from the Land Registry was not forthcoming until 16 November 1992.  This also failed to meet the deadline.

14. Fifthly, Clause 6 provides for what should happen if the “Cooperation Agreement” should fall through.  The plaintiffs had paid $600,000 as a deposit for the Kennedy Town shop.  It was agreed that they would pay another $100,000 and use the total sum of $700,000 as the deposit for the Ting house.  Clause 6 provides that the extra $100,000 be returned to the plaintiffs if the “Cooperation Agreement” falls through (and consequently the $600,000 reverts to being the deposit for Kennedy Town).  Clause 6 does not make any provision for the return of any land premium paid prior to 25 September.  The whole agreement therefore only contemplates an obligation on the plaintiffs to pay a deposit prior to 25 September and no more.

15. As the agreement for the Ting house had fallen through the plaintiffs were entitled to insist on completion of the Kennedy Town shop.  The defendant failed to complete and has kept the $600,000 deposit.  In these circumstances, the plaintiffs’ claim succeeds and it is unnecessary to address the defendant’s counterclaim which must fail.  Neither is it necessary to address the plaintiffs’ fall back submission (compelling and persuasive as it is) that even if they were required to pay the land premium before the deadline, that failure was not causative of any financial damage to the defendant.

Remedy

16. There are three potential remedies. 

17. The first is specific performance of the Kennedy Town shop.  I am sure that had there been a real and urgent need for the property, the plaintiffs would have managed to bring the matter to court earlier than 17 years after the agreement.  I decline to order specific performance.

18. The first alternative advanced by the plaintiffs is that the matter now be adjourned for a trial on assessment of damages.  At the present rate of progress this might take some time.  It would also require the not insignificant additional costs of valuation reports valuing the property at various dates for trial purposes.  The differences in value would not be the only issue.  Intervening rental values would also, no doubt, be disputed, as would the appropriate order for interest.

19. In my judgment, a third remedy meets the justice of this case.  The matter should be brought to as quick and as certain and as fair a conclusion as is reasonably possible. 

20. To this end the first sale and purchase agreement is rescinded and the defendant shall return to the plaintiffs the sum of $600,000 (the payment of which was not denied on the pleadings) together with interest from 29 July 1993 (the date of the Writ).  I propose to order a specific rate of interest at a modest level.  It shall be 5% per annum.  There shall be a costs order in the plaintiffs’ favour.  The costs order and the interest order shall be on a nisi basis.