VY YAN HONG v. JAMCO DEVELOPMENT LTD.

HCMP 1796/98

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS

NO.1796 OF 1998

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JUDGMENT

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1. This is a very unusual case. On the face of it, the proceedings are in the form of a Vendor and Purchaser summons between the Plaintiff ("Mr Vy") as purchaser and the Defendant ("Jamco") as vendor of a property pursuant to a Provisional Sale and Purchase Agreement dated 11 February 1998. The Originating Summons is based on an allegation that Jamco has failed to answer requisitions, and seeks the return of a deposit of $100,000 paid by Mr Vy to Jamco and compensation under the Agreement of the same amount.

2. However I was persuaded, after hearing argument from both sides, that I should permit cross-examination of the deponents to see if Jamco could establish a case that there was, subsequent to the said Agreement, an oral agreement whereby Mr Vy agreed to purchase the property, no longer from Jamco, but from a company called Symbol Rule Ltd. ("Symbol Rule ") which was the registered owner of the property.

3. Jamco's case is that this oral agreement was repudiated by Mr Vy when he refused to purchase the property from Symbol Rule, and Jamco claims that accordingly it forfeited Mr Vy's deposit on behalf of Symbol Rule, even though Symbol Rule could not have enforced the oral agreement against Mr Vy (cf Monnickendam v Leanse (1923) TLR 445).

Facts - Ownership of property and Charging Order on the property

4. The matter arises in this way. The Plaintiff was the tenant of the property in question, from which he ran, as sole proprietor, a business called Kenneth Hong Kong Aquamarine Product.

5. The property was acquired by Symbol Rule in 1991. On 9 April 1997, a Charging Order nisi against the property was obtained by the Commissioner of Inland Revenue pursuant to a District Court judgment against Symbol Rule. It was not registered however until 25 September 1997, some 5 months later.

Provisional Chinese Agreement between Symbol Rule and Jamco - July 1997

6. Meanwhile, on 18 July 1997, there was apparently a Provisional Chinese Agreement whereby Symbol Rule agreed to sell the property to Jamco, a company which has a common director and shareholder with Symbol Rule in the person of Mr Suen Tze Wo ("Mr Suen").

7. I say there was "apparently" such an agreement because it has not been exhibited, even though Jamco as a party ought to have a copy, or at least would have access to a copy. The Court has not been told what the terms of this Provisional Chinese Agreement were, and it has not been told why there was no Formal Agreement for Sale and Purchase or Assignment.

8. This Provisional Chinese Agreement was delivered to the Land Registry for registration on 11 August 1997. However, the document appears on the register only as a "Deed Pending Registration".

9. According to the Affirmation of Mr Suen on behalf of Jamco, that was because of a typographical error in the address of the property. However, no explanation has been given as to why, if that was the only problem, why the typographical error was not rectified between August 1997 and February 1998, when the events of this case took place.

10. On the day following the delivery of the Provisional Chinese Agreement for registration, Symbol Rule informed the tenant (i.e. Mr Vy) that the property had been sold to Jamco and that rent would be collected by an estate agency called Sha Lung.

11. As for the Charging Order, it became absolute on 20 October 1997 and the copy of the Charging Order absolute was registered on 18 November 1997.

Provisional Agreement between Jamco and Mr Vy - 11/2/1998

12. In February 1998, Mr Vy through the introduction of Sha Lung entered into the purchase of the property. The Provisional Agreement named "Kenneth Hong Kong Aquamarine Product (Mr. Vy Yan Hong)" as Purchaser, and named Jamco as Vendor.

There are a number of things to note about this Provisional Agreement -

(1) the capacity of Jamco was stated as "Owner" and the word "Confirmor" was struck out;

(2) a deposit of $100,000 having been paid by Mr Vy, it was agreed that the Formal Agreement for Sale and Purchase was to be executed on or before 21 February 1997, when a further deposit of $300,000 was to be paid. Completion was to be on or before 31 March 1997;

(3) Jamco's solicitors were named as CK Tse & Kan ("T&K");

(4) under the clause entitled "Title and Encumbrances", it was agreed that no third party has any interest in the property. The property was to be sold to the purchaser free from encumbrances unless otherwise declared. None was declared.

13. There was the usual clause dealing with failure to perform which provided for forfeiture of the deposit upon the purchaser's failure and for compensation of double the deposit upon the vendor's failure.

Alleged Oral Agreement between Symbol Rule and Mr Vy -

14. Subsequently, however, Jamco and Symbol Rule alleged that the Provisional Agreement between Jamco and Mr Vy was substituted by an oral agreement for an Amended Provisional Agreement between Symbol Rule and Mr Vy. Under this alleged Amended Provisional Agreement, Mr Vy was to pay the further deposit of $300,000 to Symbol Rule by 24 February 1998. Mr Vy never did so and refused to have any dealings with Symbol Rule. Accordingly, Jamco claims that it was entitled to forfeit the initial deposit of $100,000 on behalf of Symbol Rule.

15. The alleged Amended Provisional Agreement was signed by Mr Suen on behalf of Symbol Rule but was not signed by Mr Vy. Mr Vy denies that he had ever met Mr Suen until after the present court proceedings commenced, and he says there was never any oral agreement to purchase the property from Symbol Rule in place of Jamco. Accordingly, he was entitled to treat Jamco's allegation that there was substituted for the original Provisional Agreement an amended Provisional Agreement with Symbol Rule as the new vendor as a repudiation of the Agreement by Jamco, which he accepted.

Findings

16. I have read the Affirmations and heard the oral evidence of Mr Suen and Mr Vy, who were both cross-examined.

17. It is clear to me from a consideration of all the evidence including the oral evidence of the deponents and the contemporaneous documentary evidence that no such oral agreement ever took place. The evidence of Mr Suen was inconsistent in a number of respects.

Venue of alleged oral agreement

18. Mr Suen alleges in his Affirmation, amongst other things, that he "had a discussion with Mr Vy at the Property Agent on or about 19 February 1998".

19. However, it was put to Mr Vy in cross-examination by Jamco's counsel that a face-to-face discussion took place at Mr Vy's seafood stall in Lei Yue Mun on that day. Mr Vy's response was that his seafood stall at Lei Yue Mun did not open until April, and that that was indeed the venue of a discussion between Mr Suen and himself, but only after proceedings had begun.

20. Mr Suen's third version appeared in his oral evidence, when he said that he had only one discussion with Mr Vy on 19 February, and that was at the property in question. Faced with the evidence that the seafood stall at Lei Yue Mun was not open in February 1998, he claimed there had been a misunderstanding by his legal advisers, and tried to minimize the inconsistency by saying that the property was within Lye Yuen Mun anyway.

21. I find that evidence to be completely lacking in credibility. It was important to Mr Suen to effect the sale of the property, whether by Symbol Rule or by Jamco. That would be seen by the lengths to which these companies went to try to effect a sale, e.g. making a Cancellation Agreement, then offering to cancel the Cancellation Agreement, making Joint Resolutions to try to effect the sale, etc. One would have thought that when Mr Vy through his solicitors denied any oral agreement on 21 February 1998, the venue where the alleged oral agreement took place would have left a clear imprint in Mr Suen's mind.

Undertaking to discharge Charging Order

22. Further, in his Affirmation Mr Suen says that on 19 February 1998, he discussed with Mr Vy an undertaking to be given by Symbol Rule whereby Symbol Rule would seek a Discharge Order to vacate the Charging Order. According to Mr Suen's Affirmation, Mr Vy "appreciated" the proposed undertaking to be given by Symbol Rule.

23. In Schedule 14 to the draft Formal Sale and Purchase Agreement which was sent by T&K to Mr Vy's solicitors on 20 February 1998, the undertaking was in the following terms:-

"The Vendor hereby undertakes that the Vendor shall at least 3 days before completion produce to the Purchaser a Discharge Order to vacate the Charging Order Memorial Nos. 7275939 and 7338980 of the Property to the intent that the Property shall be sold to the Purchaser free from incumbrances, failing which the parties hereto agreed that the completion date to be postponed to within 14 days from the date the Vendor has obtained the said Discharge Order".

24. However no such term was added to the alleged Amended Provisional Agreement. In Mr Suen's oral evidence, he made no reference to any such undertaking at all. Indeed he asserted in cross-examination that all the terms that were agreed were put into the alleged Amended Provisional Agreement. He said if there had been any further terms agreed, those terms would have been put down. No explanation was given for his allegation in his Affirmation.

25. This is significant. If the parties had orally agreed that completion might have to be postponed to an unknown future date, this must have been in the forefront of Mr Suen's mind, and he would have added it to the alleged Amended Provisional Agreement and remembered it in his oral evidence. If it was not agreed, there is no explanation why the undertaking was included in the draft Agreement. In my view, this inconsistency in Mr Suen's evidence points clearly to the conclusion that there never was any oral agreement.

Alleged Amended Provisional Agreement signed by one party only

26. The Provisional Agreement was made in triplicate - one was kept by Jamco, one by Mr Vy and one by the Property Agent.

27. Mr Suen says that he went to Mr Vy's shop on 19 February 1998 to discuss the Provisional Agreement and the oral agreement with Mr Vy was made. But he made no written record of the oral agreement because he did not have the Provisional Agreement with him.

28. I cannot accept that evidence. Mr Suen was a businessman. He went to see Mr Vy specifically about the Provisional Agreement and to discuss possible changes to it. No credible explanation is given as to why he did not bring along Jamco's copy of the Provisional Agreement. Nor as to why, when the oral agreement was reached, he did not ask Mr Vy to take out his copy so that the parties could immediately record their new terms and sign it. Nor as to why he did not ask the Property Agent to bring along or just fax their copy to Mr Vy's shop so that that could be done.

29. All this points in my view to the conclusion that no such oral agreement had taken place. I should add as a matter of completeness (although it is not of any importance) that there is another unexplained aspect in Jamco's case. In its letter dated 20 February 1998, T&K enclosed a draft Formal Sale and Purchase Agreement to be signed between Symbol Rule and Mr Vy, in which the date of the preceding Provisional Agreement was said to be 21 February, yet it purported in its cover letter to hold Mr Vy to his duties under the Provisional Agreement of 11 February.

30. Of course the reference to 21 February might just have been a typographical error - but there is no evidence of this. Alternatively, it might show that the idea of a new agreement between Mr Vy and Symbol Rule was nothing but a proposal by Jamco/Symbol Rule, which would also explain the need to postpone the date of the Formal Sale and Purchase Agreement to 24 February 1998 and the lack of any previous reference to the draft undertaking.

Mr Vy's evidence consistent

31. Mr Vy's evidence was consistent throughout, not only with his Affirmation, but also with the contemporaneous correspondence from his solicitors. His case that there was no oral agreement is supported by the fact that on 21 February 1998, he sent the further deposit of $300,000 in favour of Jamco to T&K for stakeholding.

32. I should add that there is nothing in Jamco's point that Mr Vy was prepared to agree to the Amended Provisional Agreement because he wanted more time to find a mortgagee, and for that reason, changed the name of the purchaser in the Provisional Agreement to his personal name. Mr Vy was the sole proprietor anyway, so any acquisition would have been by him in any event.

Conclusion

33. In conclusion, I find that when on 23 and 24 February 1998, Mr Vy received a copy of the Cancellation Agreement between Symbol Rule and Jamco (so that Jamco no longer had any interest in the property), and his cheque for the further deposit of $300,000 payable to Jamco pursuant to the original Provisional Agreement was returned, he was entitled to treat that as Jamco's evincing of its intention not to complete the sale in accordance with the Provisional Agreement.

34. He had through his solicitors raised on many occasions between 17 February and 25 February 1998 the issue of Jamco's title to the property and how Jamco was going to pass title to him. What he got by way of answer was an allegation of a new oral agreement which in my judgment was baseless.

35. I find therefore that he was entitled to determine the Agreement on 25 February 1998 and to compensation as agreed in Cl. 7(2) of the Provisional Agreement.

Order

36. I grant an order in terms of paragraphs 1, 2 and 3 of the Originating Summons. As for interest, I would order that it be paid at the commercial rate of prime + 1% from the date of issue of the Originating Summons to date of judgment, and at judgment rate from date of judgment to date of payment.

37. I also order that the Defendant pay the Plaintiff's costs of investigating title and I make an order nisi that the Defendant pays the Plaintiff's costs of these proceedings.