LAM CHING YEE AND ANOTHER v. LAM MAN KWONG AND ANOTHER

Action No. 6211/1983

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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JUDGMENT

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1. In this action the plaintiff, who are husband and wife, claim rescission against the 1st and 2nd defendants of a contract for the sale of land in the New Territories. The 2nd defendant comes into this action out of an abundance of caution only because it was referred to in one of the documents. Although the plaintiffs are well on the way to obtaining Judgment by default against the 2nd defendant Miss Chung who appears for the plaintiff indicated at the beginning of this hearing that she intends to proceed only against the 1st defendant. Such procedural steps as are necessary to discontinue against the 2nd defendant she undertakes to have taken.

2. The land in question is Lots No. 714 and 725 of Demarcation District No. 130. What was agreed to be sold was a sixth undivided share of those two lots. The purchase price was HK$80,000.00

3. The contract was evidenced by a memorandum which also serves as a receipt. It is dated the 23rd January 1979 and it provided for completion by deed of assignment on the 29th April 1979. The plaintiffs provided the whole of the purchase price by two payments: one of $40,000 on 23rd January 1979 and the second on 27th April 1979 also of $40,000.

4. The defendant was a friend of the male plaintiff, Mr. Tong, and as Mr. Tong told me he trusted him. He should not have done so because I am sorry to have to say that the 1st defendant in this transaction was not to be trusted. The 1st defendant told the plaintiff that he himself was acquiring the land from the executors of the estate of which the land formed part for $480,000 and therefore that he was passing on a 6th share to the plaintiff at cost. The truth of the matter emerged when the 1st defendant was in the witness box. He had in fact only paid $150,000 for the land and he saw fit in the first place to disguise the reality of the situation by having a member of his household staff, appear as the purchaser from the executors at that price. No doubt he hoped to hide what he had paid for the land from the plaintiffs. He thought better of that course which in itself involved dangers with regard to the payment of Stamp Duty and eventually the transaction was recorded in the conveyance on sale to him by the executors at a purchase price of HK$480,000.00 I refrain from passing comment as to what the consequences of doing such thing might be, but the fact of the matter was, as he admitted, that the conveyance on sale did not show the real price. It was also the case, but for this I do not criticize the 1st defendant, that he was unable to give title to the land on the 29th April 1979 as required by the contract because, as I accept through no fault of his own, he was not able to acquire title himself until some date in July 1979.

5. Now I have no doubt that Mr. Tong paid the full purchase price for this land in advance of the date of completion in anticipation of completion taking place on 29th April. There could be no other reason for his paying the money when he did. In so far as the 1st defendant has told me that there was at an early stage of the negotiations an agreement that completion would be delayed until all approvals had been received for developing the land and the land had been developed I just do not believe him. In fact, as I said during the course of the hearing, on all occasions where the evidence of Mr. Tong and that of Mr. Lam, the defendant differs. I prefer the evidence of Mr. Tong. In view of Mr. Lam's conduct with regard to the negotiations and the part he played in fabricating a conveyance on sale from the executors to himself, I just cannot rely on any part of his evidence where it departs from that of Mr. Tong. Mr. Tong, I find, to be a gentleman of principle who made every endeavcur to tell me the truth so far as his recollection would serve him and, of course, I bear in mind that he was dealing with matters which go back a number of years, so it was not always easy for him to recall precisely the details of conversations or the dates on which they occurred. But I accept Mr. Tong entirely as a witness of truth and I was impressed with the manner in which he gave his evidence.

6. The completion did not take place even after July by which date the defendant had acquired title. It was delayed and I accept Mr. Tong that excuses were put forward by the defendant for completion not taking place. It was said in the first place that there were difficulties over probate, which was no doubt true, but later on after July whenever he was asked about it the defendant put off Mr. Tong by saying that the District Office had not given the necessary approvals and that it was more convenient for the conveyance to take place at a later date when everything had been settled and even when perhaps the development had taken place. Now, I do not say that Mr. Tong gave his agreement to a delayed completion date but that he did acquiesce in the suggestion to the extent that he did not press for completion I am afraid I do find. Mr. Tong behaved as a gentleman might in relation to a request from a friend who was unwilling that completion should take place. He believed what the defendant was saying to him and for that reason did not do what perhaps he ought to have done which was to consult solicitors and have them call for the title deeds. That is he did not do so until his suspicions became such as he felt it was necessary to consult solicitors which he did in April 1983. His solicitors then did that which I think if he had been less generous towards the defendant he might have done earlier. He attempted to call off the sale and to have his money back. The response was a letter of 27th April 1983 from the defendant's solicitors saying that the defendant was then and there ready to complete the sale and would do so promptly.

7. Now I find that that which the defendant had been saying to Mr. Tong throughout this period as a reason for putting off completion was just not true. I can only guess at the defendant's motives in putting forward what was an untrue reason for delaying the sale or for wishing to have the sale delayed but I refrain from speculating in the course of this judgment. However, since it was the case that quite early on Mr. Lam, the 1st defendant, had conveyed 3/6 shares in the land to his partner and subsequently another 2/6 to a third person, it could not be right as he was saying to Mr. Tong that he thought that eventually the problems of conveyancing would be more conveniently and tidily accomplished if it was delayed until after all approvals had been received and the construction taken place. So I find that Mr. Lam was deceiving Mr. Tong with regard to the reasons for putting off completion. That is the background to this matter.

8. Now the practice in Hong Kong in the ordinary case is that where completion does not take place on the date provided for in the contract, the vendor or the purchaser, as the case may be, is entitled to call for completion within a specified period and failure to comply with that request may load to a successful claim for specific performance or recission. That never happened in this case but Miss Chung argues on the strength of Farrant v. Olver ⁽¹⁾, the report of which she is unable to produce but which is nevertheless referred to a Emmct on Title and in the decision of Goff J. in Accuba Limited v. Allied Shee Repairs ⁽²⁾ that even where time has not been made the essence of the contract by the service of such a notice if a purchaser or a vender for that matter has so persistently and for so long refused to perform the contract it is open to the innocent party to treat the contract as having been repudiated and at an end.

9. Well I have hesitated long and been much troubled by that submission because I think it is certainly not without merit. I do think it is open to the plaintiff to argue that by reason of his acquiescence in the delay having been achieved only on the strength, as I find, of lies it could be regarded as no acquiescence at all. Therefore on the authority of Farrant v. Olver ⁽¹⁾ it would be open to the court to give relief which would do no injustice in the circumstances of this case and I have been troubled as to whether or not I ought not to accept Miss Chung's submission. In the end, as I say, after some degree of hesitation I find myself unable to do so. I think on the facts of this case, which derive wholly from the evidence of Mr. Tong that out of good nature, Mr. Tong did acquiesce in these delays although the delays, I find, were due entirely to the fault of the defendant. I cannot find it a matter of fault in Mr. Tong that he did not insist, as he might have done, upon an earlier completion but he did accept the excuses which were being proffered and so did not do that which he might have done earlier until April 1983.

10. That does not leave the plaintiffs without remedy. It is conceded by Mr. Pirie that quite apart from any claims which may be available to the plaintiffs in the future in relation to the defendant having taken a secret profit, there must be a right in the plaintiffs to recover interest from the defendant on the purchase monies from the date when completion should have taken place, that is 29th April 1979, up to the date when the plaintiff made it known through his solicitors that he was prepared to complete the sale, that is 27th April 1983; and further it is conceded by Mr. Pirie that thereafter the plaintiffs are entitled to have their share of the rent and profits from the land which on the evidence and the only evidence before me is $200 a month from the 27th April 1983 up to the date when completion takes place.

11. I do not know what all that comes to. The outstanding question is at what rate ought interest to be awarded. Mr. Pirie would be content to agree 12%. I think the appropriate rate whether it comes to more or less than 12% is 1% over prime, and I use in support of that finding the decision in Wallerstoiner v. Moir (No. 2) ⁽³⁾. So I do award interest on the sum of $80,000 from the 29th April 1979 to the 27th April 1983 at 1% above the prime rate in operation, from time to time between those two dates and I also give judgment for a sum equal to $200 per month from the 27th April 1983 until such date as completion takes place. Those two figures together will represent a substantial sum. I refuse recission in the circumstances and for the reasons which I have given. There is a counterclaim for specific performance. Recission being refused, it will follow that completion should take place and I do order that completion takes place in pursuance of the contract within 28 days from today. If it is necessary for me to include in my judgment the money sums which follow from the orders which I have made, I give liberty to apply failing agreement.

12. The plaintiff will have costs on the claim. I make no order as to costs on the counterclaim.

(1) [1922] W.K. 47

(2) [1975] 1 W.L.R. 1559

(3) [1975] Q.B. 373