CHIU CHI LAI and ANOTHER v. WELL SPEED LIMITED

1997, M.P. No. 1947

IN THE HIGH COURT OF HONG KONG

COURT OF FIRST INSTANCE

MISCELLANOUS PROCEEDINGS

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J U D G M E N T

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Facts

1. By an Agreement dated 5^th May 1997 ("the Agreement") the Plaintiffs ("Purchasers") agreed to buy from the Defendant ("Vendor") the property known as Flat H, 10^th Floor, Block 12, Kenswood Court, Kingswood Villas.

2. Completion was to be held on 20^th May 1997 at 11.30 am. Clause 11 of the Agreement imposed an obligation on the Vendor to show and prove title. Clause 12 of the Agreement provided that requisition of title shall be delivered in writing by the Purchasers within seven working days after receipt of title deeds.

3. On 15^th May the Vendor's solicitors supplied title deeds to the Purchasers' solicitors. The Purchasers' solicitors by a letter dated 17^th May stated, among other things, "We have seven working days to peruse and approve the title deeds after receive the same from you. The date for completion will be extended after our written acceptance of your client's title to the above property."

4. On 19^th May 1997, by a letter dated 18^th May 1997, the Purchasers' solicitors raised requisitions on title. On 20^th May 1997 the Vendor's solicitors replied to the requisition and supplied a further title document to the Purchasers' solicitors. The Vendor said that the reply was sent by fax at 10.47 am. Later that day, the Vendor's solicitors wrote to the Purchasers' solicitors stating that the Purchasers had failed to complete and the deposit paid by the Purchasers was forfeited.

Vendor not entitled to forfeit the deposit

5. The first question to be asked is : "Was the Vendor entitled to forfeit the deposit?" The answer in my view must be "No". Under the Agreement the Purchasers had seven days to raise requisitions upon receipt of title deeds. They may, of course, choose to raise requisition earlier if they wanted to upon the receipt of the title deeds. The title deeds were delivered on 15th May and requisitions were raised on 19^th May. The reply from the Vendor came on 20^th May. The Purchasers argued that they must have seven days to consider the reply. I think all that can be said is that the Purchasers must be given a reasonable time to consider the Vendor's reply. This is in accordance with what Litton, J. A. said in Active Keen Industries Ltd. v. Fok Chi Keong [1994] 2 HKC 67 : -

"It follows that this obligation, falling on the vendor to properly answer requisitions and inquiries, if reasonably raised by the purchaser, must be discharged within a reasonable time, to enable the purchaser to satisfy himself on the matter, get his money ready and complete on the day fixed."

6. If the reply from the Vendor only came at 10.47 am on the date of completion, certainly the Purchasers could not be expected to respond before the deadline at 11.30 am.

7. Furthermore, Godfrey, J.A. in Yeung Sau-chuen, Sammy v. Chung Chun-ting and Cheung Sai-mui High Court MP No. 4080/1992 stated that : -

"The contract contained the standard provision in relation to the documents of title and requisitions thereon to the effect that requisitions had to be delivered within seven working days after the receipt of the title deeds by the Purchaser's solicitors. When not all the title deeds are delivered and there are others which are delivered later, if follows that in relation to those title deeds of which copies are delivered late the Purchaser's solicitors must have seven working days after their receipt to consider those documents."

8. In the present case, as further document of title was only delivered on 20^th May, the Purchasers must have another seven days to raise requisitions.

Obligation of the Purchasers

9. Mr Tse, Counsel for the Vendor, relied on Ng Chek-kok v. Kiu Wai-ming [1992] 1 HKLR where Clough J.A. at p.13 stated that : -

"In the absence of an express term to that effect, we can see no ground for construing the Sub-sale Agreement as being subject to an implied term that the purchaser's obligation under Clause 2 and Part IV of the Schedule to the Agreement to pay the balance of the purchase price on or before the 13^th February 1991 was to be conditional upon the vendor showing or making title on or before that date. The purchaser's obligation was required in unqualified terms to be performed on or before a specified date and time had been made of the essence of the Agreement."

10. It is clear from the facts of the case that, unlike the present application, the purchase money was required to be paid on a date earlier than the date of completion. In that case the obligation of the vendor to prove title could still be performed after the date of the payment of the purchase price. Hence what Clough J.A. said in the passage cited must be read in the context of that case. It is not meant to be a general proposition that if the vendor has not performed on the date of completion its primary obligation of proving and showing title, the purchaser is still required to tender the balance of the purchase price.

11. Again Hero Profit Enterprises Ltd. v. Kadesy Development Ltd. & Ors [1995] 3 HKC 193 is another example where a vendor's obligation to prove and show title had not arrived at the time when the purchaser was required to make payment of the purchase price which was to be paid by instalments. That case concerns a building under construction.

Vendor's obligation

12. Ng Chek-kok further stated that the vendor's obligation to show a good title by production of the title deeds must be done within a reasonable time. This obligation was not discharged by the Vendor by producing the title deeds on the date of completion. Furthermore, there were mortgage documents which were not produced on the date fixed for completion. It is not argued by the Vendor that these documents were not required to be produced, the only point taken is that these documents were lodged with the mortgagee bank.

Time ceased to be the essence

13. The Vendor also argued that paragraph 8 of the Purchasers' affirmation showed that they were not ready and willing to complete. This paragraph referred to the situation on 17^th May 1997 and was made in response to the late delivery of the title deeds which, in the circumstances, must be considered as being not made within a reasonable time. The period of completion was 15 days and it had taken the Vendor 10 days before the documents were supplied. The Vendor was selling as a confirmor, all the more he should ensure that he would be in a position to discharge his obligations towards the Purchasers. The further delay by the Vendor to provide all the documents at the time of completion clearly means that the Vendor could not have insisted on the date of completion. Time ceased to be the essence : see Wong Wai Chi Ann & Anor v. Cheung Kwok Fung Wilson & Ors [1996] 3 HKC 287 and Lord Energy Ltd v. Paul Chan & Ors High Court MP. No. 714 of 1991.

Conclusion

14. In the circumstances the Vendor clearly had failed to show good title and had repudiated the Agreement by forfeiting the deposit without giving the Purchasers an opportunity to raise further requisition. The Purchasers are therefore entitled to a declaration that the deposit of $320,000 was wrongly forfeited. I will further grant a declaration that good title had not been shown by the Vendor on 20^th May 1997. The Purchasers are not pursuing the claim for specific performance. In the circumstances, I will order that the damages, if any, sustained by the Purchasers are to be assessed by the Master.

[Submission on costs]

Costs

15. The Vendor was clearly in breach of the terms of the Agreement. It had behaved oppressively in forfeiting the deposit. Notwithstanding the clear authorities in this area of law, the Vendor still resisted the Purchasers' application right to the very end. The appropriate order for costs is that the Vendor is to pay the Purchasers the costs of the application, to be taxed on the common fund basis.