CAMBERRA INVESTMENT LTD. v. CHAN WAI TAK

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J U D G M E N T

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Hunter, J.A. :

1. On 5th May 1988 Deputy Judge Sharwood dismissed the plaintiff's claim, as purchaser, for specific performance of a contract for the sale of land, and gave judgment for the defendant vendor on his counterclaim for a declaration that he was entitled to forfeit a deposit of HK$70,000 paid by the plaintiff. The Deputy Judge reached this conclusion with regret and by constraint of authority. The plaintiff now appeals.

2. The facts are these. The contract of sale and purchase entered into between the plaintiff and the defendant was dated 15th January 1987 and related to specified undivided shares in land which represented Flat B, 3/F, Tsui Man Court. The purchase price of HK$715,000 was payable as to HK$70,000 as deposit and in part payment of the purchase money upon signing of the agreement, and as to HK$645,000 upon completion. For present purposes the material terms of the contract were:

"3. The purchase shall be completed at the offices of Messrs Kwan & Kwan Solicitors on or before the date as set out in Part III of the Schedule hereto when the whole of the purchase money shall be fully paid and the Vendor and all other necessary parties (if any) will execute a proper assurance of the said premises to the Purchaser .....

11.    If the Purchaser shall fail to comply with any of the terms of this Agreement the deposit money paid hereunder shall be absolutely forfeited as liquidated damages (and not as penalty) to the Vendor who shall be at liberty if the Vendor sees fit without being obliged to tender an assignment to the Purchaser to rescind this Agreement .....

14. Time shall in every respect be of the essence of this Agreement.

Schedule - Part III

Date of Completion : On or before 28th February 1987".

The deposit was paid and Kwan & Kwan acted for both parties.

3. The judge conveniently summarised the next events as follows:-

"    The plaintiff as confirmor, then sold the flat to Madam Mak Kwat Ying on 16th February, 1987, for the identical amount, namely $715,000, and a deposit of $30,000 was paid to the plaintiff. The date of completion of that agreement was also 'on or before 29 February 1987'.

    Kwan & Kwan again acted for the plaintiff in this transaction, but Madam Mak instructed Yung, Yu, Yuen & Co, solicitors, to act on her bebalf.

    On the morning of 28 February 1997, Yung Yu, Yuen & Co on behalf of Madam Mak, raised a requisition on title in a letter to Kwan & Kwan. The letter is dated 28 February, and was received on the morning of that day.

    It had been anticipated that completion of both transactions would take place before I am on 28 February, at the offices of Kwan & Kwan, Madam Mak would pay her outstanding balance of 685,000 to Kwan & Kwan who would accept it on behalf of the plaintiff as second vendor, and then, as to $645,000, on behalf of the defendant as original vendor.

    Because the requisition on title could not be immediately complied with, Mr. Siu, a managing clerk at Wan & Kwan, (an unqualified solicitor, but with fifteen to sixteen years experience) and the person who was handling these transactions, found himself in difficulty."

4. The plaintiff could not raise the same requisition against the defendant. The time for this had passed. Mr. Siu sought to persuade Madam Mak solicitors to withdraw the requisition without success. No completion with Mrs Mak could therefore take place that day. By the time this was known most of that Saturday morning had gone by.

5. The vendor was warned on the telephone quite early in the morning, first by the plaintiff, and secondly by Mr Siu of the possibility of delay. He was anxious to stand upon his strict rights and if possible to forfeit the plaintiff's deposit. He became concerned whether Mr Siu would be sufficiently vigorous in defence of his position. He consulted an unidentified solicitor friend who drafted a  letter for him, which he handed to Mr Siu at 12.45 pm that morning.

6. The letter was in the following terms :

"                           Dated: 28 February 1987

To : Messrs Kwan and Kwan,

        Solicitors,

        Hong Kong.

Dear Sirs,

Re: Flat B on 3rd Floor, Tsui Man Court,

        No 76 Village Road, Hong Kong.

    I, the vendor of the above property, do hereby attend your office to deliver this letter as evidence that I am ready and prepared to complete the sale and purchase today and as the purchaser fails to complete the sale and purchase today, I hereby instruct you to act on my decision to forfeit the deposit paid by the purchaser, and to regard the Agreement for Sale and Purchase as repudiated  by the purchaser which repudiation I hereby accept. Kindly confirm your receipt of this letter by signing a copy of it and return to me." emphasis added)

7. Apparently based upon the advice he had received, the defendant was clearly of the view that completion had to take place before about I pm or not at all. He waited at the offices until about 1.25 pm when he left. At no time before leaving did he "execute a proper assurance .... to the purchaser" in escrow or at all.

8. The morning's developments had put the plaintiff acting by a Mr Ng in considerable difficulty. His expectation had been that Madam Mak would put up the actual funds needed for completion.  By the time the truth in relation to her had dawned, banks had closed and access to cash or its equiva1ent, cashier orders, was impossible. Mr Siu remained at office. Between about 2.30 pm and 3.00 pm Mr Ng handed him a cheque for HK$645,000 drawn in favour of the firm upon Citibank. Both gentlemen tried to contact the defendant but he could not be found. They eventually left the office at about 5.00 pm.

9. On the Saturday the plaintiff had no more than HK$445,000 in its Citibank account. Mr Ng's intention then was to transfer further movies to this account to cover the cheque. On Monday 2nd March he obtained two cashier orders expressed to be payable to Kwan & Kwan, the first from Citibank in the sum of HK$445,000 and the second from the Bank of Canton in the sum of HK$200,000. He handed these to Mr Siu in exchange for the cheque. Mr Siu then caused a letter to be delivered that afternoon to the defendant which referred to the events of Saturday and invited the defendant "to attend our office within 5 days so as to complete the transaction". The defendant did not attend and completion did not take place.

10. In these circumstances in my view the first and fundamental question is whether the defendant's letter of 28 February was a valid exercise of his right of rescission under clause 11 of the contract. It was his only attempt to exercise this right. Neither by any subsequent letter nor by his pleading did the defendant attempt or assert any other exercise. Both by his pleading and by his evidence in the court below the defendant had sought to justify this exercise as at about 1 pm. That this is the plain meaning and intent of the document appears form the emphasised words "hereby" I cannot therefore accept Mr Litton's late submission that the document was intended to take effect at midnight.

11. Mr Litton's primary submission was that this was a valid exercise of the right of rescission because upon the true construction of the Sale and Purchase Agreement time for completion on a Saturday expired at 1 pm, the time when Kwan & Kwan offices might be expected to close. This he submitted necessarily followed from the naming of Kwan & Kwan's offices as the place of completion. He invite the court to apply the test of necessity adumbrated by Lord Wilberforce in Liverpool orporation v Irwin [1977] AC 239, 254 and read:

12. "within the usual office hours of Kwan & Kwan" either into clause 3 or into Part III of the schedule.

13. Mr Woo for the appellant objects that there is no justification in law or in fact for restricting or rewriting the contract in that way. First he submits that the basic rule of law applies namely that the parties had until midnight on 28th February. Secondly he submits that upon the pleadings and the facts the point is not open to Mr Litton.

14. We have had the advantage, denied to the trial judge, of being referred to the decisions of both the House of Lords and the court of Appeal in Afovos Shipping Co SA v Pagnan [1983] 1 WLR 195 (HL), [1982] 1 WLR 848 (CA). With the substitution of a bank for a solicitor's office the circumstances of that case are strikingly similar. It concerned a right of forfeiture under a charter party. Charterer's obligation expressed in clause 5 of the Charter party was:

"5. Payment of said hire to be made in London, to the first National Bank of Chicago London EC3R 3DR for the credit of Anglicoussis Shipbuilding Group Ltd .... in cash in United States currency, sent monthly in advance ... otherwise failing punctual and regular payment of the hire ... the owner shall be at Liberty to withdraw the vessel from the service of the charterers".

The stringency of that clause was mitigated by "annti-technicality clause" which required owners to give 48 hours notice of their intention to withdraw. This clause was construed to mean that notice could be given only after default under clause 5.

15. The material rental instalment fell due on 14th June l979. By reason of a banking error the sum was misdirected. At 1640 hours op the 14th June owners purported to give 48 hours notice under clause 3l. This notice was given well after the bank closed its doors, at 3 pm, and after the time when, save in highly exceptional circumstances, any telex transfer would be received and tested at the recipient bank. The bank evidence was that unless somebody happened to be in the bank after 5 pm the matter would not have been dealt with at all, and that post hours credits would normally have been attributed not to that day but to the next working day.

16. The issue accordingly was whether charterers were in default at 1640 hours or only immediately after midnight.

17. Upon this Lord Hailsham said :

"One need only ask the question in the simpler form, 'what is the latest point of time on June 14 1979 which would have constituted punctual payment of the instalment?' To this question I believe that, in principle, only one answer is possible, namely at midnight on the last day available to them for the due and punctual payment of the hire ie June 14. I take it to be a general principle of law not requiring authority that where a person under an obligation to do a particular act has to do it on or before a particular date he has the whole of that day to perform his duty. No doubt as the hours pass it becomes less and less probable that he would be able to do it. That is the risk he runs. But he is not actually in default until the time arrives".

Then later

"The question is not when the charterer would cease to be likely to pay in time but when, to quote 'clause 5 'punctual payment' would have failed. In my opinion this moment must relate to a particular hour, and is not dependant on the modalities of the recipient bank. It is the hour of midnight to which the general rule applies".

18. Mr Woo for the appellant invites us to apply this general rule of law, which may reflect the corresponding principle that the law generally has no regard to part of the day. He compared the position of the bank in Afovos with that of Kwan & Kwan. Payment in Afovos was not a simple unilateral act. It required the cooperation of the receiving banker in testing and acknowledging the transfer and thereafter in complying with the instructions as to the account to be credited. Despite this there was no default when the bank closed its doors, or when payment became impossible; only at midnight. When the parties used the phrase "on or before 28 February" without qualification they were, it was argued, simply adopting and applying the general rule. Default occurred not when the solicitor's office closed, as the respondent urged, but only at midnight.

19. Mr Litton for the respondent acknowledged that if the words in the schedule stood alone it might be difficult to argue that a day meant anything other than a day. But he relied first upon the mutuality of the obligations in clause 3, and more particularly upon the words "at the offices of Messrs Kwan & Kwan". The limitation of place necessarily introduced a limitation of time as well. He painted an alarming picture of vendors and purchasers knocking on the doors of solicitor's offices at anything between 00.01 am and 23.59 pm if the midnight rule was applied. This would compel solicitors to keep their offices open during all the available hours. To avoid this absurd result it was "necessary" to read into clause 3 or the Schedule words of limitation such as "during normal working hours".

20. I cannot agree that the application of the midnight rule would lead to any such extravagant consequences to Hong Kong solicitors, any more that it has done to bankers since the decision in Afovos. A solicitor is under no sort of obligation to keep his office open beyond the hours of his own choosing. If his services are necessary to completion of a contract then as Kerr LJ said in Afovos [1982] 1 WLR 858, :-

"Where performance requires the cooperation of another party, the obligee cannot complain if the other party is unavailable at a time of day which is unreasonable in the circumstances".

The same applies a fortiori to a solicitor. The choice is the solicitor's. If he chooses to act and complete a contract at a time later than his usual office closing time he can do so. But in the absence of some express stipulation I can see no "necessity" in Lord Wilberforce's language to imply a qualification that after any particular hour he has either to stop work or to date the transaction the day following. It would be the more bizarre in this case where the parties generally were unaware of Kwan & Kwan's usual working hours, and where both the solcitors representative and one party were content to work well into Saturday afternoon. If, as was suggested in argument, this view gives rise to any alarm and despondency in the Law Society, the remedy is simple. This is to follow the apparent UK example, and limit the dates and times for completion specifically in the contract. The removal of clause 14 might also be considered.

21. I also accept Mr Woo's submission that the point is not open to Mr Litton upon the pleadings and conduct of the trial below. The deference contatined no plea, as I think it should have, of an implied term, nor, in deference to the argument this morning any plea of custom, nor any plea which put in issue the relevance, of solicitor's usual hours of business generally or in relation to Kwan & Kwan. No evidence was therefore directed to the point by either side. The only evidence that emerged was casual, namely that on the Saturday in question the account staff left at 1 pm. We do not know whether this was the Saturday norm or not; what the weekday normal hours were; and whether or not either party bad knowledge of these matters.

22. For these reasons I therefore conclude that time for completion did not expire at about l pm on 28 February and that the defendant's purported notice of rescission was premature and ineffective.

23. The judge did not find it necessary to make any finding on this point. He regard it as irrelevant because as he put it:

    "The fact is that the plaintiff did not complete on 28 February".

I disagree. I regard the point as fundamental and very relevant as revealing both patties to have been at fault. Their obligations under clause 3 were mutual. The duty of the defendant to tender an executed assignment and that of the plaintiff to tender to the balance of the purchase price were concurrent conditions. Neither performed : neither tendered : neither triggered the corresponding obligation of the other. The defendant neither executed nor tendered an assignment before 1 pm and thereafter was denying his obligation so to act and preventing his solicitor from taking any step to that end. The plaintiff tried to tender and failed. The cheque constituted at most conditional payment and not the full payment required. An effective tender required cash or its equivalent, neither of which was available that Saturday afternoon.

24. In my judgment this contract remained uncompleted at midnight on 28 February by the fault of both parties. It did not then terminate as was at one time suggested. It remained on foot with the substitution of a reasonable time for the failed express condition. In Mehmet v Benson [1965] 113 CLR 195, 314 Windeyer J used in relation to a purchaser words which I think here apply to both parties. He said:

"But if, notwithstanding earlier breaches, the contract remained on foot, then it seems to me a plaintiff is not necessarily barred from having a decree for specific performance if those breaches, not having resulted in a valid rescission, can be made good by the payment of interest"

25. The time for completion suggested by the plaintiff in the letter of 2nd March is not alleged to have been and was not unreasonable. The solicitors were then in funds. The defendant did not then have and clearly did not advance any further or valid ground for rescission. He cannot therefore excuse his failure to complete.

26. In my judgment therefore the plaintiff is entitled to the primary relief claimed namely a decree of specific performance. For my part therefore I would allow this appeal, set aside the judgment in the court below, and would wish to hear counsel further upon the proper form of relief.

Silke, V.-P.:

27. I have had the opportunity of reading in draft the judgment of my Lord Hunter J.A. and I am in agreement with its conclusion, the reasoning therefor and the order he proposes.

Penlington J.A.:

28. I have had the advantage of reading in draft the judgment of Hunter J.A. and I agree with it. This is yet another case which illustrates the dangers which can arise where one firm of solicitors acts for both vendor and purchaser in a conveyance.

29. Here Mr Siu was in an impossible position on the Saturday morning if he was to protect the interest of both parties but clearly if the vendor did wish to enforce his rights to the full an executed conveyance should have been tendered to the purchaser. The vendor certainly was not entitled to walk out of Kwan and Kwan's office at 1.25 pm and unilaterally declare that the contract was rescinded. The contract called for the simultaneous tendering of the purchase price in cash or cashier's order in exchange for the conveyance. The vendor had not complied with his part of the bargain before he left, Kwan and Kwan's offices still being open at that time. He was not entitled to rescind the contract at that stage.

30. I would also allow this appeal.