YEUNG KAM KUEN AND OTHERS v. LIOU JE IANG AND ANOTHER

HCMP 1609/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1609 OF 2011

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BETWEEN

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D E C I S I O N

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Introduction

1.  This is the call-over hearing of the originating summons.  The action arose out of the sale and purchase of a residential flat at Wan Chai Road (“the suit property”).  The plaintiffs were the purchasers and the defendants the vendors.  The plaintiffs are seeking summary judgment to be entered; the defendants contend the matter should be resolved at trial.

Background

2.  The contracting parties entered into a formal sale and purchase agreement dated 6 May 2011.  The suit property was to be sold for $4 million.  Completion deadline was scheduled to fall on 22 July 2011.  There were contractual provisions concerning requisitions on title and time being made of essence commonly found in formal sale and purchase agreements in Hong Kong.

3.  The parties agree that the $400,000 deposit had been paid.  They also agree that the completion date was “brought forward” to 22 June 2011.  However, they differ as to whether this amounted to a variation of the provisional and formal sale and purchase agreements, or merely an understanding that both parties wished to expedite the transaction.

4.  Requisitions were raised as a result of the plaintiffs becoming aware of legal proceedings brought by a Mr Wong in the High Court and District Court.  Mr Wong claimed in short that he was the true beneficial owner of the suit property.  This claim has been denied by the defendants.

Requisitions on title

5.  The legal proceedings of Mr Wong were:-

(a)  HCA 4324/2003;

(b)  HCA 861/2011; and

(c)  DCCJ 198/2007.

6.  When the plaintiffs raised requisitions on title as a result of being made aware of some of the above proceedings, the defendants replied in essence that Mr Wong’s claims were unfounded.

7.  Despite the defendants’ reply, the fact remains some of the proceedings were then pending (in fact, the plaintiffs were named as co-defendants in one of them).

8.  In a passage (or similar judicial pronouncements) well known to conveyancers, it was said in Nottingham Patent Brick and Tile Co Ltd v Butler (1886) 16 QB 778, 787:-

“A title depending upon evidence of matters of fact is a title which is capable of being disputed in a court of law, … where the rectitude of the title depends upon facts which very probably will be disputed, and are certainly capable of being disputed, a Court of Equity will not, as I understand, enforce the contract.”

9.  At the time for raising requisitions on title, the facts of the present case constitute no exception to the above principle: to put it mildly, some of these proceedings have given rise to quite some uncertainties surrounding the defendants’ title.

10.  The defendants argued during the hearing the plaintiffs were bona fide purchasers without notice of Mr Wong’s claims when they entered into the agreement to purchase the suit property and hence should be able to obtain title to the suit property free from those claims.

11.  Irrespective of whether this arguments is correct, it was not part of the answers given during the time for answering requisitions on title, and thus cannot be raised now in defence of this issue.

Whether the agreement was varied

12.  As stated above, the plaintiffs’ case is that the completion deadline stipulated in both the provisional and formal sale and purchase agreements has been varied; completion was to be take place on or before 22 June 2011 (instead of 22 July 2011).

13.  The defendants disagree and contend, on the other hand, that the parties merely wished to expedite the conveyance.  The contractual deadline for completion remained 22 July 2011.

14.  The salient facts were as follows.

15.  The provisional sale and purchase agreement named 22 July 2011 as the completion deadline; so did the formal agreement.  The so-called “varied” completion date was referred to in the solicitors’ letter in the following context.

16.  The letter dated 6 May 2011 from the plaintiffs’ solicitors says:-

“… we now send you the [formal] Agreement for Sale and Purchase (in duplicate) duly signed by [the plaintiffs] and attested by us for [the defendants’] signature …

Please return us a counterpart of the said Agreement duly signed by [the defendants] and attested within next three (3) days for our handling.

Our respectively clients agreed to bring up the completion date to 22^nd June 2011, kindly take [the defendants’] instruction ...”

The defendants’ former solicitors replied on 9 May 2011:-

“… we are instructed to inform you that [the defendants have] no objection to bring forward the completion to 22^nd June 2011.”

17.  It is trite that whether the facts have given rise to a variation of contract is a question of mixed law and fact, and that the test for determining the issue is objective.

18.  For this reason, the defendants’ “admission” in the affirmation filed on their behalf to the effect that the completion date was agreed to be 22 June 2011 is not conclusive.

19.  The following factual context is important.  Although the contracting parties have agreed to bring forward the completion date before the engrossed formal sale and purchase agreement was sent to the defendants (by way of the letter referred to in para 16 above), the “new” completion date (not expressed in the said letter as a completion deadline) was not incorporated into the engrossed document as the new deadline (which still named the “original” completion deadline).  Instead, it (the “new” completion date) was mentioned only in the solicitors’ correspondence.  Further, it was respectively described as a “bringing up” of the completion date or “bringing forward” of the completion (which is an event).

20.  The true legal effect of such factual context (that is, whether there was a contractual variation) is an issue which is more appropriate to be dealt with after trial (see, for example, the observations in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896, 912-3), rather than summarily at a call-over hearing.

Annulment of the sale and breach of contract

21.  Two points arise out of the preceding heading.

22.  The first point is related to clause 16(2) of the formal sale and purchase agreement, the relevant parts of which read:-

“If [the plaintiffs] shall make and insist on any objection or requisition either as to title or any matter appearing on the title deeds or otherwise which [the defendants] shall be unable or (on the grounds of difficulty, delay or expenses or on any other reasonable ground) unwilling to remove or comply with, or if the title of [the defendants] shall be defective, [the defendants] shall … be at liberty on giving to [the plaintiffs] … not less than seven working days’ notice in writing to annul the sale in which case … the sale and purchase shall … be annulled and [the plaintiffs] shall be in that event entitled to the return of the deposit in full forthwith … ” (emphasis supplied).

23.  Since 21 June 2011, the defendants have in several letters offered (among other things) to “cancel the present sale and purchase of [the suit property] … ”.  The offers were rejected by the plaintiffs.

24.  Whether the “offer” to cancel amounted to an annulment (or, depending on the actual completion deadline (and/or other matters), a purported annulment) of the sale is an issue more suited for trial.

25.  Assuming it did, because the “offer” was first made on 21 June 2011, whether it was made within the time permitted by the contract would depend on whether the completion deadline fell on 22 June or 22 July (and/or other things).

26.  The second point arising from whether the completion deadline was 22 June 2011 or 22 July 2011 is this.  On 23 June 2011, the plaintiffs indicated in effect they would seek a double refund (by way of liquidated damages) of the deposit paid; alternatively, they would purchase another residential flat instead.  The indication could reasonably be construed as an indication to terminate the conveyance (or, depending on the actual completion deadline, a wrongful indication to do so).

27.  If in fact the completion deadline should fall on 22 July 2011, the wrongful indication may constitute a repudiatory breach on the part of the plaintiffs.

28.  Similarly, the second point is properly also a triable issue.  In coming to this conclusion, I have already considered Eternal Crown Development Ltd v Great Wide Investment Ltd, HCA 2550/2007 (5 December 2008) (especially paras 17 to 21, 30 to 44, 66, 67 and 73 thereof).  The decision in that case concerned facts which were different, and therefore cannot advance the plaintiffs’ application in the present case.

Conclusion

29.  Accordingly, I agree with the defendants it is inappropriate to enter summary judgment with damages to be assessed.

30.  Because the matter is fit for trial, I will give the directions necessary for such purpose (over which no further point has been raised by the parties).

Costs order

31.  The parties agree that the costs should be in the cause of this action.