WU WAI SAN, JANET v. CHU CHEONG KIT, RAYMOND t/a RAYMOND CHU & CO

DCCJ 2672/2008

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 2672 OF 2008

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D E C I S I O N

1.  Wu, the Plaintiff, agreed to purchase a residential property at Homantin, Kowloon in 2008 at the price in excess of HK$10 million.  Chu, the Defendant, was the solicitor acting for her in the deal.  For alleged failure to complete by the contractual deadline on the part of Chu on behalf of Wu, the vendor forfeited Wu’s deposit.  The vendor and Wu eventually settled their dispute and the deal managed to proceed to completion at a later date.  Wu commenced this action against Chu for breach of contract and negligence in causing her pecuniary loss.

Background

2.  The sale and purchase agreement between the vendor and Wu dated 11 March 2008 provided that completion should take place on or before the date and time as set out in the 6^th Schedule.  There the completion date and business hours were defined as “the 2^nd day of June 2008 within the Business Hours between 9:30 am and 5:00 pm”.  Time was of the essence.

3.  By subsequent agreement evidenced by letters between the solicitors dated 13 and 14 May 2008, completion was advanced to 21 May 2008.

4.  On 21 May 2008, Chu’s representative delivered the completion docket enclosing Wu’s payment for the balance of the purchase price to the office of the vendor’s solicitors.  On the basis that the completion docket arrived at 5:06 pm, the vendor treated Wu as being in breach of the sale and purchase agreement.  The vendor sought to forfeit the deposit that Wu had previously paid in the total sum of HK$988,000.

5.  After negotiation and by a written settlement agreement dated 28 May 2008, the vendor and Wu agreed to proceed to complete the sale and purchase, this time on 4 June 2008.  For that, Wu also agreed to pay the vendor a sum of HK$180,000 on top of the balance of purchase price payable.

6.  Wu now claims against Chu for damages in the sum of HK$180,000 together with the additional legal costs in the sum of HK$1,500 and additional interest payment for mortgage arrangement in the sum of HK$683.15.

The application

7.  Pleadings were closed and Wu applied for summary determination of this case. Pursuant to O.14A of the Rules of the District Court, Wu formulated the following question of law for determination:

“whether upon the true construction of the following documents, namely (i) the Agreement dated 11^th March 2008 between the Plaintiff and Golden Rich Realty Limited (“the Vendor”) and (ii) the letters dated 13^th May 2008 and 14^th May 2008 between the Defendant and Messrs. Katherine Y. W. Or & Co. (solicitors for the Vendor), the proper time for completion of the sale and purchase of the property known as Flat C, 6/F, Block 2, King’s Park Villa, No.1 King’s Park Rise, Homantin, Kowloon together with car parking space C55 at level 3 (“the Property”) was to be within the hours of 9:30 a.m. and 5:00 p.m. (defined as “Business Hours” therein) on 21 May 2008; and therefore, by reason of the Defendant’s (and/or his agent’s) failure to arrive at the Vendor’s solicitor’s office on or before the time for completion of the transaction and his failure to duly complete the said transaction for and on behalf of the Plaintiff, for final Judgment against the Defendant in this action for the amount claimed in the Amended Statement of Claim with interest thereon, and costs of this action to be taxed and paid by the Defendant.”

8.  Alternatively, Wu asked for judgment under O.14 on the basis that Chu has no defence.

9.  In her submissions, Miss Lam made clear that Wu’s primary position was to seek summary judgment under O.14.

10.  Insofar as O.14 is concerned, the court will consider whether the Defence raises any arguable issues that should be tried or that the case ought to proceed to trial for any other reason.  However the court is not supposed to embark on a mini trial on affidavits.  See Hong Kong Civil Procedure 2009, Vol.1 at 14/4/2 – 14/4/10.

11.  For O.14A to be applicable, the question of law or construction should be one that is suitable for determination summarily; and that it would finally determine the entire cause or matter or any issue or claim therein: see Hong Kong Civil Procedure 2009, Vol.1 at 14A/2/2 – 14A/2/4.

Discussion

12.  Agreed time for completion is meant to be and must be strictly adhered to: see Union Eagle Ltd v Golden Achievement Ltd [1997] 1 HKC 173; Ocean Force Enterprises Limited & Anor v Grand Fully Holdings Limited & Anor, HCA 3571/1997 (14 April 1999); Leung Ching Fai Jacky v Tang Ka Fai, HCA 2313/2004 (1 February 2006).

13.  There should be no real dispute as to the duty of Chu as the conveyancing solicitor.  Chu owed Wu the duty to exercise due care and skill to be expected of a reasonably competent conveyancing solicitor: see Midland Bank Trust Co Ltd v Hett Stubbs and Kemp [1979] Ch 384 at 402.  This included the duty not to miss a conveyancing deadline: see Leung Ching Fai Jacky (above) at para.7.

14.  The major dispute is whether Chu was in breach of such duty.  Central to the question of whether Chu was in breach of such duty are the following issues:

(1)  whether completion on 21 May 2008 should take place between 9:30 am and 5:00 pm; and

(2)  if yes, whether Chu’s representative failed to deliver the completion docket by 5:00 pm on that day.

Issue (1)

15.  Issue (1) above was argued as questions of construction of contractual documents and law.  Miss Lam submitted that any reasonable party looking at the terms of the sale and purchase agreement and the subsequent correspondence evidencing the parties’ agreement to advance the completion date would consider that all the terms of the agreement unchanged would remain in force including the definition of “the business hours” in the 6^th Schedule.

16.  Mr Li for Chu submitted that the “midnight rule” applied in the present case.  He argued that the time for completion was part and parcel of the complete date.  Once the date was varied, so would the time.  In the absence of specific reference to the time for completion in the agreement on the new completion date, Wu should have had up to the midnight of the new completion date to complete.  He relied on Camberra Investment Ltd v Chan Wai Tak [1989] 1 HKLR 568.  He submitted that this is at least arguable.

17.  I can understand that in a case where there was no expressly agreed time for completion on the completion date, there may be basis for applying the “midnight rule” by way of implication.  This was also the scenario in Camberra.  There the court remarked that the contracting parties always had the liberty to make such express provision so as to remove any perceived absurdity arising out of the application of the “midnight rule”: see 573C-H.  There was in fact express provision as to the time of day for completion in the sale and purchase agreement in the present case.  I am not convinced that by agreeing to advance the completion date, the time for completion was also varied for any intent and purpose.

18.  Miss Lam submitted that Chu in fact recognised the time for completion on the new completion date to be within the business hours as defined in the sale and purchase agreement.  She referred to two other letters from Chu on the day before completion.  By one of these letters, Chu informed the mortgagee bank of the time for completion being at or before 5:00 pm on 21 May 2008.  By the other letter, Chu confirmed that the completion was scheduled to take place at or before 4:00 pm and requested for funds no later than 3:00 pm on that day.

19.  Mr Li for Chu submitted that these letters came into existence after the sale and purchase agreement and the solicitors’ correspondence evidencing the parties’ agreement to vary the completion date.  Therefore they are inadmissible as aid to construing the contractual terms.  I do not agree.  In my view, these letters reflect Chu’s knowledge or understanding of the time for completion on the completion day and are admissible as evidence of that.

20.  As a matter of construction of the relevant documents and that of law, I am not convinced by the argument on behalf of Chu that the time for completion on 21 May 2008 could be any time of the day other than the business hours as originally agreed.

Issue (2)

21.  Issue (2) is really a question of fact.  In his first letter of reply to the vendor’s solicitors after the latter communicated their position in respect of the alleged failure to complete on time on the part of Wu, Chu put on record, among other things, that his representative insisted that he arrived at the office of the vendor’s solicitors before 5:00 pm and that his arrival was delayed by the incorrect description of the address of the vendor’s solicitors which was not the room number as per the firm’s letterhead.

22.  In the settlement agreement subsequently reached between Wu and the vendor, the parties recited that there was a dispute about the time for completion between the parties.  They also recited the vendor’s allegation that Wu had been in breach by failing to complete the purchase on or before 5:00 pm on the completion date and that the vendor purported to exercise the right to rescind the agreement and to forfeit the deposit.  The parties were said to have reached the settlement agreement to settle such disputes.

23.  It was expressly provided in the settlement agreement (para.1 of the substantive terms) that Wu’s agreement to pay the extra sum of HK$180,000 to the vendor did not constitute any admission of obligations or liabilities on her part in respect of their disputes.

24.  Upon the close of pleadings in the present action, Wu’s solicitors filed the following list of issues in dispute between the parties pursuant to the court’s direction:

“1.  Whether the Defendant was in breach of contract and/or was negligent in carrying out his duties as a solicitor when acting for the Plaintiff in a sale and purchase transaction of a property known as ……

2.  In particular, whether the Defendant and/or employees of his firm were late in tendering the balance of purchase price for the Property at the offices of the Vendor’s solicitors on 21 May 2008 (after the agreed deadline for completion of the sale and purchase of the Property, i.e., on or before 5 p.m., 21^st May 2008), thereby rendering it impossible for completion to proceed; and consequently, whether the Defendant had negligently carried out his duties as a solicitor, and should therefore be liable to the Plaintiff (in contract and/or in tort) for any loss and damage suffered by the Plaintiff.

3.  Whether the Plaintiff is entitled to claim relief from the Defendant for compensation in the sum of HK$180,000.00 being the amount agreed to be paid by the Plaintiff to the Vendor to their subsequent dealings together with other expenses incidental thereto.” (emphasis added)

25.  In other words, it was acknowledged on behalf of Wu that whether the representative of Chu was late in tendering the completion docket including the payment of the balance of purchase price at the office of the vendor’s solicitors is a live issue.

26.  Unlike the case where the claim for professional negligence is filed where how the conveyancing transaction failed and whose responsibility it was for the failure is either indisputable or adjudicated upon by the court, the dispute between Wu and the vendor was settled without prejudice to Wu’s position, as expressly provided in the settlement agreement.

27.  Faced with the dispute with the vendor, Wu might stand to lose the deposit.  Between them, Wu might not be expected to take the risk of litigation and therefore it might be reasonable for her to come to terms with the vendor.

28.  However, between Wu and Chu, it is her burden to establish breach of duty on the part of Chu.  She still has to prove the primary fact that Chu’s representative was late on the completion day.  It was only that which caused her to lose the deposit.

29.  Of course, Wu could show for the purpose of this application that Chu’s case is incredible.  This was indeed Miss Lam’s contention.  Miss Lam, understandably, relied on the time chop placed by the vendor’s solicitors on the completion docket received from Chu’s representative on the completion day which recorded the time of 5:06 pm.

30.  But Mr Li referred to Ocean Force Enterprises Limited v Chuan Sau Wan, HCA 3571/1997 where the solicitor was said to be 3 minutes later than the completion deadline.  The learned Deputy Judge accepted (at pp.10-11) that notwithstanding the apparent record of 5:03 pm by reference to the time chop on the completion docket, he could be no more precise than finding that completion was tendered around 5:00 pm.

31.  In my view, the alleged 6-minute difference was a sufficiently narrow margin for the parties’ respective timing and allegations to be fully investigated.

32.  In this respect, Miss Lam categorised Chu’s allegation as bare assertion, in the absence of evidence from the representative who delivered the completion docket.  I notice from the court file that the parties have filed their witness statements for trial prior to the present application.  There is yet to be a statement from this representative of Chu who delivered the completion docket to the office of the vendor’s solicitors at the time.

33.  Nevertheless, as this is an O.14 application, Chu is entitled to rely on hearsay evidence where the source of such information was identified.  The point is that in view of the materials before this court, Chu’s allegation about the arrival time of his representative at the office of the vendor’s solicitors cannot be ruled out as a recent fabrication.  I am not prepared to rule out the defence.

34.  The point of law formulated for the purpose of the O.14A application was premised on the fact that Chu’s representative was late for completion on the completion day.  The dispute in this very respect upsets that premise.  Further, the court retains a residual discretion whether or not to embark on a determination of a question under O.14A.  See Rockwin Enterprises Ltd v Shui Yee Ltd &Ors [2003] 3 HKC 174.  I come to the conclusion that I should not do so.

Order

35.  My view as to the contractual deadline for completion on the completion date is against Chu.  As to whether Chu has failed to meet that deadline, his evidence remains as at today a matter of hearsay against what the time chop on the completion docket primarily suggests.

36.  Chu also raised various other issues.  I agree with Miss Lam that they are nothing but red herring.  For the purpose of the O.14 application, I consider these other issues to be relatively insignificant.

37.  Considering all the circumstances, I am not minded to dismiss the summons with costs to Chu as Mr Li suggested.  Nor am I minded to impose condition for leave to defend as Miss Lam suggested. There will effectively be unconditional leave to defend.  Costs of and occasioned by this application shall be in the cause with certificate for counsel.