LEE Gee Kee & OTHER v. CHONG Kai Tai & OTHER

IN THE COURT OF APPEAL

1995, No. 109

(Civil)

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J U D G M E N T

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Godfrey, J.A. :

Introduction

1. This is an appeal by the vendors from an order of H.H. Judge Pang, sitting as a Deputy Judge of the High Court, made on 17 March 1995, pursuant to the judge's deciding in favour of the purchasers an action for specific performance of an agreement, dated 6 July 1991, for the sale by the vendors to the purchasers of Flat G, 38/F, Block 2, Phase 3, Belvedere Garden, Tsuen Wan ("the flat") at a price of $1,870,000.

The Facts

2. On 10 January 1990, Ling Fung Development Ltd ("the developers") and others agreed to sell the flat to Wong Mui Chun and Chan Po Shan. On 7 March 1991, Wong Mui Chun and Chan Po Shan agreed to sell it on to Jiu Sze Man. On 10 April 1991, Jiu Sze Man agreed to sell it on to Lee Gee Kee and Hung Ming Ming (the vendors to whom I have already referred). On 28 June 1991 the developers' solicitors gave notice to the solicitors for the original purchasers requiring completion within 14 days of that date.

3. The agreement dated 6 July 1991 with which this litigation is concerned is the final agreement in the chain of purchases and sub-sales. It is a so-called "provisional agreement for sale and purchase" made in Chinese writing on a form produced by a broker called "Pak Shing Estate Agency". The vendors' solicitors were named as Boris Lui & Co. The agreement provided for an initial deposit of $50,000 to be paid upon its signing (and that sum was duly paid). It also provided that the purchaser "must pay the first payment at solicitors firm on or before 12 July 1991". The "first payment" was to be $137,000 and this too was duly paid. (Although when paid it was expressed to be paid to the vendors' solicitors as stakeholders, the sum was accepted and treated as having been duly paid, and any objection that there might have been to the designation of the vendors' solicitors as stakeholders, rather than as the vendors' agents, must be taken as having been waived, despite the vendors' attempts before the judge, and before us, to argue otherwise.) The agreement further provided that "the purchaser must pay the balance of the purchase price on or before 17 July 1991". (This "balance" amounted to $1,683,000.) The broker's form contained a number of terms under the heading "Terms of agreement for both parties". These terms, translated, were as follows:

"(1) The purchaser's solicitors' fee, the mortgage fee, stamp duty, agreement and the new assignment will be borne by the purchaser, the redemption fee, agreement fee and approving title fee will be borne by the seller.

(2) The name transfer fee for the 'flat to be built', new contract fee shall be borne by the purchaser, old contract shall be cancelled by the vendor, the purchaser shall also on ________ day of ________, 19__ attend _________ (office of) agent to the developer to deal with procedures for transfer of name and attend _________ solicitors firm to sign new contract.

(3) Before sign the assignment, the vendor shall pay up rates, property tax, management fee, water, electricity charges, gas and telephone charges to complete vacant possession.

(4) If the purchaser fails to perform this agreement, the initial deposit will be forfeited by the seller, and also entitled to re-sell the property in any way or for self-use, the purchaser cannot dispute.

(5) If the seller fails to perform this agreement, a double amount to the initial deposits must be paid to the purchaser as compensation, Hong Kong currency 100,000. The seller is entitled to re-sell the property in any way or for self-use, the purchaser cannot dispute.

(6) The initial deposit paid by the purchaser and will be confirmed when the owner acknowledge receipt of the same, otherwise it will be returned and there is no claim on each other.

(7) The seller cannot dispute to the purchaser whether the purchaser herself as an agent or attorney or nominate another person to purchase the property.

(8) If the transaction is completed in accordance with the aforesaid conditions, the purchaser will pay a sum of Hong Kong currency HK$10,000 to our company as the commission upon signing the sale and purchase/change of name's agreement.

(9) Both parties agreed that if any one fails to perform this agreement, the defaulting party must compensate to the other party in accordance with the aforesaid terms, in addition to pay to our company the sum of HK$18,700 as for the introduction service charge."

The contract was signed by the vendors and the purchasers and by a "witness of our company"; a reference, of course, to the broker. The terms nos. (2) and (3) set out above were deleted, other than the words "to complete vacant possession" in term (3), and the deletions were signed by the vendors and the purchasers.

4. On 8 July 1991, Lam, Lee and Lai, solicitors, with offices in Central, having been instructed to act for the purchasers, wrote to the vendors' solicitors, among other things asking for the draft agreement and the relevant title deeds and documents for approval.

5. On 11 July 1991, the vendors' solicitors, from their office in Yuen Long, sent these documents to the purchasers' solicitors.

6. On 12 July 1991, the purchasers' solicitors returned the draft agreement, having made some amendments to it, including a provision for completion of the transaction on 19 July 1991. They asked for an engrossment for signature by the purchasers, but no such engrossment was ever provided, the vendors having declined to sign the agreement as amended.

7. Also on 12 July 1991, the sum of $137,000 to which I have already referred was sent by the purchasers' solicitors to the vendors' solicitors, under the cover of a letter which, among other things, said this:

"Please note that the date of completion mentioned in the above Provisional Agreement for Sale and Purchase, i.e. 17th July 1991 is approaching, we would request at least 7 working days to peruse all the title deeds and documents and should be grateful if you would let us know whether your client would like to postpone the completion date."

 

8. This was not agreed.

9. On 15 July 1991, the purchasers' solicitors wrote again to the vendors' solicitors raising a number of requisitions and asking, without prejudice, for a proforma assignment. One requisition called for the assignment to be executed by Jiu Sze Man personally and as attorney for the original purchasers.

10. On 16 July 1991 (by a letter received by the purchasers' solicitors on 17 July 1991) the vendors' solicitors responded to the letter of 15 July 1991 in a manner which satisfied the purchasers' solicitors; among other things the vendors' solicitors undertook to procure Jiu Sze Man to execute the assignment on completion in the manner requested.

11. On 17 July 1991 (the date on which, it will be remembered, it had been provided, in the agreement of 6 July 1991, that "the purchaser must pay the balance of the purchase price"), there took place a telephone conversation between a clerk of the vendors' solicitors (Miss Lam) at their Yuen Long office and a clerk of the purchasers' solicitors (Miss Chow) at their offices in Central. According to an affirmation made by Miss Lam :-

"I phoned Miss Chow to say that a cheque for the lump sum of HK$1,683,000.00 drawn by the purchaser's solicitors could be sent to our firm on or before 4:00 p.m. of the 17th July 1991. I also requested Miss Chow to let our firm have the draft Assignment for our approval. After the conversation, a letter confirming the same was sent to the purchaser's solicitors. During the conversation, Miss Chow had replied that the purchaser's solicitors was unable to send the balance of the purchase price on the 17th day of July 1991."

12. The letter to which Miss Lam refers in this affirmation is a letter, sent by facsimile and by hand, which reads as follows :-

"We refer to the telephone conversation between your Miss Chow and our Miss Lam this morning.

According to the Chinese Provisional Agreement for Sale and Purchase dated 6th July 1991, the completion of the sale and purchase of the above property will be taken place on today. Therefore, we shall be obliged if you will let us have your draft Assignment for our approval and let us have your cheque for the sum of HK$1,683,000.00 on or before 4:00 p.m. today.

Your attention in this matter is highly appreciated."

13. The facsimile of this letter was received by the purchasers' solicitors at 3:31 p.m. on 17 July 1991. The purchasers' solicitors responded the same day as follows :-

"We refer to our letter to you dated 15th July 1991 and your reply letter dated 16th July 1991 which we received at about 11:00 a.m. on 17th July 1991.

We also refer to the numerous telephone conversation between your Miss Lam and our Miss Chow in which your Miss Lam threatened us that if our client could not send the balance of purchase price of our clients' purchase of the above property to your office in Yuen Long before 4:00 p.m., your client would forfeit all deposit paid by our client before and would treat the provisional Agreement for Sale and Purchase dated 6.7.1991 as repudiated by our client.

We consider that such attitude taking by your client is very unreasonable on the following grounds :-

1. In our letter dated 15.7.1991, we have raised certain requisitions of your client's title to the above property and not until about 11:00 a.m. this morning, you have given us a satisfactorily reply, which leaves us no time to prepare completion.

2. At 3:31 p.m., you have faxed to us a letter to us requesting for a draft Assignment for your approval and for a sum of HK$1,683,000.00 on or before 4:00 p.m. today. We consider that your requests are very unreasonable without giving us time to prepare the draft Assignment and to obtain a mortgage loan from our client's proposed mortgagee. We would like to confirm that we have received mortgage instructions as early as on 12th July 1991 to prepare a mortgage whereby the lender will finance our client to purchase the above property.

3. The Provisional Agreement for Sale and Purchase dated 6.7.1991 does not make time is of the essence of the contract.

4. In all circumstances, we consider that our client is entitled to have a reasonable time to complete their purchase of the above property.

Our Mr. Lam has tried to contact your Miss Lam by telephone twice but could not get in touch with her. Neither does your Miss Lam give a return call to our Mr. Lam even our Mr. Lam has left a message to her.

Anyway, we are now preparing the draft Assignment and shall send to you for your approval as soon as we can.

If your client chooses to take an unreasonable attitude to terminate the Provisional Agreement for Sale and Purchase, we are instructed to take all legal steps to enforce our clients' rights under the Provisional Agreement for Sale and Purchase."

14. Later on 17 July 1991, the purchasers' solicitors did as they had said they would do; they sent the draft assignment to the vendors' solicitors. They asked for its approval by the developers and the intermediate purchasers, all of whom were of course necessary parties to the assignment, and for specific instructions as to how they should split their cheques covering the balance of the purchase price. But no such assignment was ever executed by any of those parties; indeed despite the vendors' solicitors' undertaking in this connection, Jiu Sze Man had not attended their office on 17 July 1991.

15. On 18 July 1991, the vendors' solicitors responded as follows :-

"We refer to our letter to you dated 17th July 1991 and up to this moment you still fail to send to us the balance of purchase price for the sum of HK$1,683,000.00.

According to the Chinese Provisional Agreement for Sale and Purchase dated 6th July 1991 made between our respective clients completion of the sale and purchase ought to take place on 17th July 1991. Your client has wrongly repudiated the said Agreement which repudiation is accepted by our client. In the circumstance, our client hereby forfeit the initial deposit paid by your client to ours under the said Agreement and reserve all their rights in the above matter.

In the meantime, we enclose herewith a cheque for the sum of HK$137,000.00 drawn in your favour being the further deposit and shall be obliged if you will return all the title deeds and documents to us on or before 4:00 p.m. today."

16. Subsequent attempts by the purchasers' solicitors to persuade the vendors' solicitors to complete the transaction were unsuccessful. The battle lines were drawn. The letter of 18 July 1991 from the vendors' solicitors to the purchasers' solicitors treated the transaction as having been repudiated by the purchasers, and accepted, or purported to accept, that repudiation. The purchasers, rejecting this, instituted their action for specific performance on 29 July 1991.

17. On 28 August 1991, the vendors themselves took an assignment of the flat from the developers, which they registered on 16 August 1991. At the date of the trial the vendors were (and are now) able to give good title to the flat and the purchasers were (and are now) willing to accept that title and to pay to the vendors the balance of the purchase money.

The judgment

18. On these facts the judge held that time was not of the essence of the agreement between the parties; that by imposing a deadline for payment, at Yuen Long, of the balance of the purchase price, i.e. 4:00 p.m. on 17 July 1991, the vendors "had introduced an unreasonable term into the agreement"; that the vendors' letter of 18 July 1991 was "an anticipatory breach of the agreement"; that the purchasers' remedy of specific performance was not excluded by the agreement; and that an order for specific performance ought to be made.

The vendors' case on the appeal

19. The vendors say that time was of the essence of the agreement between the parties; that the failure of the purchasers to pay the vendors the balance of the purchase price on 17 July 1991 constituted a repudiation of the agreement which the vendors were entitled to and did accept; and that in any event the agreement excluded the purchasers from the remedy of specific performance.

The purchasers' case on the appeal

20. The purchasers say that time was not of the essence of the agreement between the parties; that the vendors were not in a position to complete the transaction on 17 July 1991; that accordingly the vendors were not entitled to insist on receiving the balance of the purchase money on 17 July 1991, whether by 4:00 p.m. or at all; that the purchasers did not repudiate the agreement by failing to pay the balance of the purchase price on 17 July 1991; that the vendors were not entitled to call off the transaction, as they did on 18 July 1991; that the agreement contains nothing which now operates to exclude the purchasers' right to claim specific performance; and that in all the circumstances the judge was right to order specific performance in favour of the purchasers.

The issues

21. The issues which this court is called upon to resolve may be stated as follows:

(1) Was time of the essence of the agreement?

(2) If so, have the purchasers repudiated the agreement?

(3) If not, can the vendors nevertheless resist an order for specific performance?

Was time of the essence of the agreement?

22. As I read the agreement, it seems to me that the parties must be taken to have intended the completion of the transaction to take place on 17 July 1991, the date nominated for payment by the purchasers of the balance of the purchase price. Clearly, the purchasers' solicitors thought so: see their letter of 12 July 1991 ("Please note that the date of completion mentioned in the above provisional agreement for sale and purchase, i.e. 17 July 1991 is approaching ....."). Clearly, the vendors' solicitors thought so too : see their letter of 17 July 1991 ("According to the Chinese provisional agreement for sale and purchase dated 6 July 1991, the completion of the sale and purchase of the above property will be taken place on today .....") Completion means the final settlement of the business; and "it is a fundamental principle that the payment of the purchase money and the delivery of the conveyance are to be performed interchangeably": see Palmer v. Lark [1945] Ch. 182 per Vaisey, J. at pp. 194, 195; and see also Canberra Investment Ltd. v. Chan Wai-tak [1989] 1 HKLR 568 per Hunter, J.A. at p.574 : "The duty of the defendant to tender an executed assignment and that of the plaintiff to tender the balance of the purchase price were concurrent conditions. Neither performed; neither tendered; neither triggered the corresponding obligation of the other." In my judgment, the parties must be taken to have intended that the final settlement of the business in this way would take place on 17 July 1991 and that, in this connection, time was to be of the essence. The local market for residential units in uncompleted or newly completed multi-storey developments is a highly volatile market, in which speculators as well as end-users play an important part. I would hold that it was of the essence of the agreement that the whole transaction was to be completed on 17 July 1991, although it would be an unusual case in which, were this England or Wales, the court would take a similar view in relation to the sale and purchase of a residential flat. The nature of the market for flats in uncompleted or newly completed residential developments in Hong Kong is, in my judgment, a relevant and indeed determinative circumstance in this case (and, I would add, in other cases like it). I have no doubt that parties to a contract such as the one we have to consider here invariably intend that, so far as any date for completion is concerned, time is to be of the essence, so that, if (for example) the purchaser simply fails to come up with the purchase money on that date, he is to be taken to have repudiated the contract. It follows in such a case that, on the next day, the vendor is entitled to treat the purchaser's failure as such a repudiation; to forfeit the purchaser's deposit; and to call off the whole transaction.

23. But few cases are so simple. Often (as here) the purchaser will contend that it was the vendor whose conduct frustrated completion on the date fixed for completion; that the vendor caused, or at any rate contributed to the cause, of the non-completion; and that it was for this reason that the transaction was not completed on the date fixed for completion. If that is proved to be so, then it will be the vendor who repudiates the contract when he purports to forfeit the purchasers' deposit and call off the transaction. Often, too, it will appear that neither party was in fact ready to complete on the date fixed for completion. If so, neither party can rely on the failure of the other party to perform his part of the contract as a repudiation of the contract. When that happens, time will cease to be the essence of the date fixed for completion, as Hunter, J.A. pointed out in the case last cited (loc. cit.). For example, a purchaser who cannot come up with the money on the date fixed for completion cannot insist on the vendor delivering to him an executed assignment of the property on that date; that is obvious enough. It is equally obvious, as it seems to me (although in Hong Kong it is sometimes overlooked) that a vendor who is not ready to complete, for example because he cannot deliver a proper assignment of the property to the purchaser on the date fixed for completion, cannot insist on payment of the purchase money by the purchaser on that date (unless of course there is something in the agreement between the vendor and the purchaser which, contrary to the "fundamental principle" referred to by Vaisey, J. (see above), does not make completion of the transaction on the part of one party dependent on the completion of the transaction on the part of the other party at the same time: cp. Yeung Kwok-leung v. Lam Cheuk-lai [1991] 2 HKLR 557). And where both parties are simultaneously in breach, for example because the vendor cannot give a good title to the property and deliver a proper assignment to the purchaser and the purchaser cannot come up with the purchase money, I would hold that neither party is entitled to treat the other party's failure as a repudiation of the contract.

24. It will be apparent, from what I have said so far, that although I am of the opinion that time was of the essence of the date fixed for completion of the agreement here, it was of the essence for both sides, and that it by no means follows from the facts of the present case that the failure of the purchaser to come up with the purchase money on that date necessarily entitled the vendors to call off the transaction.

Did the purchasers repudiate the agreement?

25. In my judgment, they did not. It is, as it seems to me, clear on the evidence, taken as a whole, that the vendors were quite unable, on 17 July 1991, to deliver a duly executed assignment of the flat to the purchasers, to which I have no doubt the purchasers were entitled before handing over the balance of the purchase money. Both parties' solicitors may well have proceeded on the assumption that an undertaking from the vendors' solicitors (the usual "Hong Kong style" completion) would do instead, but of course the agreement of 6 July 1991 did not so provide. I would not be prepared to hold, in the absence of clear provision in the contract to the contrary, that any purchaser is bound, contrary to the "fundamental principle", to hand over the balance of the purchase money without receiving a duly executed assignment in exchange. There is nothing here to take the case out of the principle that completion is the final settlement of the business on both sides, not on one side only. Since the purchaser was not obliged to hand over the purchase money at any time on 17 July 1991, the vendors being unable on that day to deliver a proper assignment to the purchasers in exchange for it, the purchasers did not, as I would hold, repudiate the contract by failing to come up with the money.

26. I have had the advantage of reading in draft the judgment to be delivered by Ching J.A. taking the opposite view, on the grounds, as I understand (1) that there was no evidence that the vendors were not in a position to complete on 17 July 1991; and (2) that, in any event, although, under the agreement of 6 July 1991, 17 July 1991 was the date on which the purchasers were bound to pay the balance of the purchase money, it was not the date on which the vendors were obliged to complete the transaction.

27. I find myself obliged to part company with Ching J.A. on both these matters.

28. As to (1), the vendors could not have been in a position to complete on 17 July 1991 unless they were on that date able to deliver to the purchasers a duly executed assignment of the property. But the evidence, and answers to interrogatories on the point raised on behalf of the purchasers, established that the vendors' solicitors had not arranged for Jiu Sze Man, the "second confirmor" to attend at their offices to execute the assignment, as he would have had to do. Miss Lam, the vendors' solicitors clerk, was asked in cross-examination about the letter of 16 July 1991 referred to above. It was put to her that she had not arranged for Jiu Sze Man to attend at the completion, and she replied "Right" : see the transcript of evidence at p.117 line O. It was put to her that there could be no completion at 4.00 p.m. that day; she said "I will promise them that they will be done later." : see p.118 line H. I am forced to the conclusion that the vendors' solicitors were no more ready to complete this transaction on 17 July 1991 than were the purchasers' solicitors. Any other conclusion would be quite unreal. Certainly, there was no evidence that the vendors' solicitors were at any time on 17 July 1991 in possession of a duly executed assignment of the property, and it is plain that they were not; it was only on that very day that they received the draft of the assignment.

29. As to (2), I agree with Ching J.A. that it is not without precedent for parties to agree that a purchaser must pay his money in advance of completion (i.e., in advance of his receipt from the vendor of a duly executed assignment of the property). Indeed, formal sale and purchase agreements often so provide. This is the situation envisaged in Ng Chek-kwok v. Kiu Wai-ming [1992] 1 HKLR 5 (cited by Ching J.A.) when "the ordinary incidents of completion have been separated under the contract between the parties ....." (see per Clough J.A., giving the judgment of the court, at p.14 line 45). But in the absence of any agreement between the parties for "separating the ordinary incidents of completion" it seems to me to follow inevitably that the correct inference as to the parties' intentions to collect from the terms of their agreement is that the transaction is to be completed in the "ordinary" way, without any "separation" of the incidents of completion. To imply into their agreement a term to the effect that the purchaser who has paid his purchase money is to be left to the mercy of the vendor as to when the "completion" is to take place, which is what would have to be implied in the absence of the provisions commonly found in formal sale and purchase agreements under which the vendor gives specific undertakings in this connection, seems to me to be quite unwarranted. Such provisions are inserted into such agreements because they are necessary to displace what would otherwise be implied by law, i.e. that, in the ordinary way, there is no "separation of the incidents of completion".

Are the purchasers entitled to specific performance?

30. In my judgment, they are. Although the agreement contained the familiar provision providing in certain circumstances for the return by the vendors to the purchasers of an amount equal to double the purchasers' deposits, the right to do so is not a right which the vendors ever claimed to exercise. They purported to forfeit the purchasers' deposit altogether and to call off the transaction. Had they elected, instead, to pay to the purchasers the "double amount to the initial deposits" mentioned in the agreement, the case might have been very different. But the vendors, having elected (without sufficient justification) to treat the contract as at an end, cannot be allowed now to resile from that election.

Conclusion

31. Although, as I have said, I would for my part hold that time was of the essence of the date fixed for completion here, I am quite satisfied that, in all the circumstances to which I have referred, the vendors were not entitled, on 18 July 1991, to call off the transaction as they had purported to do and that the purchasers were entitled to a decree of specific performance at the trial. So, although for somewhat different reasons, I would uphold the decision of the judge to that effect and would dismiss this appeal.

Ching, J.A. :

32. The Plaintiffs agreed to purchase and the Defendants agreed to sell a flat in Belvedere Garden, Tsuen Wan. The Plaintiffs obtained an order for specific performance against which the Defendants now appeal. I have no doubt that the appeal should be allowed.

33. The agreement between the parties was reduced into writing in the Chinese language dated 6th July, 1991, called a provisional agreement. It was a printed document to which details were supplied and from which deletions were made. One of the deletions was of the whole of clause (2). That clause did not find its way into the certified translation but if it is relevant or admissible it can be seen from the original that it provided for the provisional agreement to be superseded by a formal one to be drawn up by solicitors and for a completion date to be fixed. The parties were content that their respective rights and duties should be governed entirely by the terms of the provisional agreement together with such others that might be legitimately implied.

34. In a section headed "Payment methods" it was provided that a sum called the initial deposit "will be paid upon signing of this provisional Sale and Purchase Agreement". There were to be two further payments for which, omitting the amounts, the section provided in the following words:-

"The Purchaser must pay the first payment at Solicitors firm on 12th July 1991.

The Purchaser must pay the balance of the purchase price on 17th July 1991."

The initial deposit and the first payment were paid on time. The balance was not. The requirement as to the time for the payment of the first payment and of the balance is expressed in the imperative "must" in contradistinction to the requirement for the payment of the initial deposit. It is an accurate translation of the word in the Chinese original which is emphatic.

35. I must respectfully but firmly disagree with the Judge below and find that time for the payment of the first payment and of the balance was of the essence. That must be so on the clear wording of the provisional agreement but I am fortified by a consideration of what is common knowledge as to sales and purchases of flats such as that in question, especially when building works have not been completed. There is an enormous amount of speculation in the sale and purchase of flats of this type, probably undreamed of in other jurisdictions. When a new development is put on the market people queue up, sometimes overnight, for flats. Some of them have neither the ability nor the intention to complete the purchase. They queue up simply so that they can sell their places in the queue to those who come later for many tens of thousands of dollars. Others sign a provisional agreement and put down a deposit knowing that they do not have and will not be able to obtain the finance to make subsequent payments, perhaps even the first of them. Those who buy from them may be in a similar position and it is not uncommon for there to be four or five sub-purchasers before there is an assignment, usually at or about the time of the completion of the building. For these reasons it is important to each of the vendors that payment should be made on time. In the present case the building was uncompleted at the time of the provisional agreement which bears not only an insertion identifying the building but in which there has also been inserted the words "(Transaction for Belvedere Garden, Tsuen Wan an Uncompleted Building)". Numerous previous sub-sales and sub-purchases were on the Land Register.

36. The Plaintiffs were therefore obliged to pay the balance of the purchase price on 17th July, 1991. In Hong Kong under what is commonly known as the midnight rule that means that they had until midnight that day to pay. They claim that they were ready and able to do so. They needed finance and they had applied to a bank for a loan. The bank agreed to supply it but the loan was in fact never taken. That could have been done by the money being credited to the account of the Plaintiffs or their solicitors or by the bank providing a cashier's cheque or the like. There was evidence that the taking of the loan could have been effected within minutes by way of a telephone call. The fact remains that that was not done. Counsel for the Plaintiffs asserted before us that the Plaintiffs' solicitors could have written a cheque for the balance on 17th July, 1991, knowing that funds would have been available to meet it shortly after the commencement of banking hours the next day. That was directly contrary to the evidence which was not read to us. Mr. Ambrose Lam, a partner in the firm acting for the Plaintiffs and who was in charge of the transaction, gave evidence that he would never do so. In his witness statement the 1st Plaintiff said that he had obtained a cashier's cheque. In the Court below when Counsel for the Defendants attempted to cross-examine the 1st Plaintiff on his ability to pay on 17th July, 1991, he was stopped by Counsel for the Plaintiffs who said that there was no need to challenge that ability for it was accepted that the plaintiffs were unable to pay. In my view the Plaintiffs were clearly in breach.

37. There was a suggestion in the pleadings that the Plaintiffs had been given an extension of time in a telephone conversation on 17th July, 1991, between two conveyancing clerks, Miss Chow of the Plaintiffs' solicitors and Miss Lam of the Defendants' solicitors. Miss Chow did not give evidence. There was correspondence on the matter but the letters were agreed only as to authenticity and Mr. Ambrose Lam had no personal knowledge of the facts alleged in them. Miss Lam denied the allegation in her evidence in chief and she was never cross-examined upon it. Indeed she had drafted a letter dated 17th July, 1991, which was faxed to the Plaintiffs' solicitors and which was received by them at 3.31 p.m. that day by which the Plaintiffs were asked for payment by cheque and for a draft assignment by 4.00 p.m. the same day.

38. The Plaintiffs relied upon that letter to say that the Defendants had made it impossible for them to pay on that day. The letter was as follows :-

"We refer to the telephone conversation between your Miss Chow and our Miss Lam this morning.

According to the Chinese Provisional Agreement dated 6 July 1991, the completion of the sale and purchase of the above property will be taken place on today. Therefore, we should be obliged if you will let us have your draft assignment for an approval and let us have your cheque for the sum of HK$1,683,000 on or before 4 p.m. today.

Your attention in this matter is highly appreciated."

The offices of the Plaintiffs' solicitors were in the Central district while those of the Defendants' solicitors were in Tsuen Wan and it was argued that it was physically impossible for the Plaintiffs to comply. There was no reason, however, why the cheque and the assignment could not have been delivered by midnight.

39. It was argued that the letter was in repudiatory breach of the provisional agreement so that the Plaintiffs were released from their obligation as to the time for payment. The letter was neither repudiatory nor a breach. It did not, as asserted, seek to impose a new term, namely that payment was to be by 4.00 p.m. rather than midnight. It simply stated that a cheque was acceptable and, whether as a condition of that concession or not, asked that it be delivered by 4.00 p.m. It did not threaten any consequences if the request should be refused.

40. It was then argued before us that completion was to be simultaneous with payment of the balance and that in any event the Defendants were not in a position to complete on 17th July, 1991. Attention was drawn to clause (3) of the provisional agreement which, so far as it was not deleted, provided :-

"Transaction by vacant possession before signing the Assignment."

Whatever this may mean it is difficult to see how this assists the Plaintiffs. The words in the Chinese language for "vacant possession" are perfectly well understood. They mean that when the assignment is made there must be no sitting tenant or other occupant.

41. In paragraph 6 of their Amended Reply the Plaintiffs put forward their assertion that the Defendants themselves were unable to complete on 17th July, 1991, in the following terms :-

"Further or in the further alternative, the Plaintiffs aver that the Defendants were not able, ready and willing to complete the sale and purchase on the 17th July, 1991 by the delivery of vacant possession of the premises contracted for in the Agreement for sale and purchase, in that the Defendants were not in possession the release letter from the Head Vendor enabling the Plaintiffs as the ultimate purchasers to enter into the premises."

The particularisation of the Defendants' inability "to complete" is not otherwise than that they did not have the "release letter". That is not a reference to the occupation permit which, it can be seen from the Land Register, was issued on 10th June, 1991, and registered on 1st July, 1991. What the pleading appears to refer to is a document which it is alleged the developer would give to a purchaser notifying him that he may take physical possession of the flat. In evidence the 1st Plaintiff said he wanted the document as proof that the flat was the Defendants' to sell. How that document goes to title I am quite unable to see.

42. Notwithstanding that that was the sole pleading on the point of inability on the part of the Defendants, it was argued before us that the Defendants were unable to complete on 17th July, 1991, because none of the previous vendors would have attended at the offices of the Defendants' solicitors or would have stayed until midnight. Having regard to the pleadings it is not surprising that neither side called evidence or was cross-examined on this point. The point was and is simply not open to the Plaintiffs on the pleadings. There was no evidence to show that the Defendants were not in a position to complete on 17th July, 1991.

43. In any event both points depend upon the implication of a term that completion was to be simultaneous with the payment of the balance. I accept that, in vacuo, it may seem to be common sense that a purchaser should not have to pay his money in advance of completion. It is not without precedent, however, that parties have agreed that this should be so. If authority be needed see Yeung Kwok-leung v. Lam Cheuk-lai (1991) 2 HKLR 557 and Ng Chek-kok v. Kiu Wai-ming (1992) 1 HKLR 5 especially at page 14. In the present case, time was of the essence for payment but no time was fixed for completion. In the circumstances obtaining in Hong Kong and in this particular case I do not find it possible to imply that payment and completion were to be simultaneous. None of the correspondence, including the letter of 17th July, 1991, nor the evidence was admissible to construe the provisional agreement or to imply that term.

44. I therefore find that the Plaintiffs but not the Defendants were in breach of the provisional agreement. I would allow this appeal with an order nisi that costs should be to the Defendants.

Litton, V.P. :

45. I have had the advantage of reading in draft the judgments of my brethren Godfrey JA and Ching JA.

Was time of the essence?

46. The main point urged by counsel for the plaintiffs in the court below was that time was not of the essence of the agreement. This was accepted by the deputy judge and formed the main plank of his judgment. If the point be right it followed that the plaintiffs' failure to tender the balance of the purchase price amounting to $1,683,000 on 17 July 1991 did not constitute a breach of contract on their part. My brethren are agreed that the judge erred in this regard and that, on a proper construction of the agreement, the plaintiffs were given no latitude as to time: The balance must be paid by not later than 17 July 1991. I agree with them on this point.

47. It is clear on the evidence that the plaintiffs did not have the money available on that day. They had not put their solicitors in fund nor had they made arrangements with the bank for a cashier's order. They were plainly in breach.

The remaining issues

48. The fact that the plaintiffs were in breach does not, of course, end the matter. The next question then arises: Were both parties in breach? Godfrey JA concludes that they were, but Ching JA differs from him. We in this court can derive no assistance from the deputy judge on this point because he made no findings relevant to the point at all. We must therefore approach the matter afresh, as best we can on the evidence before us. This is not an entirely satisfactory way of proceeding. But the alternative of sending the case back to the High Court for re-trial is even less satisfactory.

49. There are, in essence, two issues to be resolved:

(i) Did the agreement, upon its proper construction, require the defendant to deliver to the plaintiffs an executed assignment of the flat on 17 July 1991?

(ii) Was the defendant in a position to do so on 17 July 1991?

What did the agreement provide?

50. This case illustrates, once again, the danger of parties entering into "provisional" sale and purchase agreements without proper legal advice. The obligations falling on the plaintiffs as purchasers are clear enough: They had to pay the balance of the purchase price on 17 July 1991. The agreement is however silent as regards the time for the defendant to discharge his obligations as vendor, to deliver the executed conveyance to the purchasers. Must the court conclude, by necessary implication, that the contractual intention was that the defendant should deliver to the plaintiffs an executed assignment simultaneously with the payment of the balance of the purchase price?

51. The only express provision dealing with completion is clause (3) which (in translation) simply says:

"(3) Transaction by vacant possession before signing the Assignment".

52. There is nothing in the agreement making the vendor's solicitors stake-holders for the parties, thus giving to the purchasers a measure of protection that until the conveyance is executed by the vendor the balance of the purchase money would not be released. If the obligations of payment on the one hand and execution of the conveyance on the other were not simultaneous, what it means is that the only protection the purchasers had, once the money was paid, was an action against the vendor for recovery of the money, if completion should fail to take place. Could this have been intended?

53. It must be borne in mind that the transaction took place in a very heated market. It was the sale and purchase of a flat in an uncompleted building. The purchasers were not buying the flat direct from the developers. There were a number of intermediate sales, before the agreement of 6 July 1991 giving rise to the present litigation was signed. Until the final purchasers down the line - the plaintiffs in this case - had paid the purchase price, the purchasers up the line could well have had difficulties in completing the transaction in turn. Plainly, to have required all the successive vendors to be ready to execute the conveyance on the same day would not have been easy. A reasonable purchaser might well have been prepared in these circumstances to accept that completion should take place a few days after the balance of the purchase price was paid - even though he might, for those few days, have been in a rather vulnerable position.

54. I have therefore reached the conclusion that, to give business efficacy to the contract, it was not necessary to imply a condition that the obligations of the purchasers and vendor on completion must be simultaneous. The purchasers, after having paid the balance of the purchase-price on 17 July 1991 could have served notice appointing a time for the delivery of the executed conveyance, thereby making time of the essence of the agreement for the vendor as well. Although I have reached this conclusion by construing the agreement, it is not without significance that the purchasers never contended that the vendor was obliged to complete on 17 July. Their case always was that time was not of the essence of the agreement: an acceptance of the conclusion I have reached, in effect, that the vendors were not bound to complete on 17 July.

Were the defendants in a position to complete on 17 July 1991?

55. As to whether the defendant as vendor was in a position to complete on 17 July 1991, the question is in my view academic; moreover the judge made no findings of fact on the point. The reason why the judge made no such finding is significant: It was not the plaintiffs' case that the defendant was not ready willing and able to complete on 17 July. Apart from the pleadings to which Ching JA has referred in his judgment, we have before us, as part of the appeal bundles, the written opening made by counsel for the plaintiffs. From that it is clear that the main thrust of the plaintiffs' case was that time was not of the essence of the agreement. The plaintiffs had a subsidiary case, to the effect that the plaintiffs were "prevented" from paying the balance of the purchase price by the unreasonable conduct of the defendant's solicitors in introducing 4pm as the "cut-off" time for payment. This was said by counsel to have been a "repudiatory breach" on the defendant's part. It was simply never part of the plaintiffs' case that the defendant could not have delivered an executed assignment of the property to the plaintiffs on 17 July 1991 had the plaintiffs so insisted. As to whether the defendant had imposed a new time limit - 4pm on 17 July for the payment of the balance - I would respectfully adopt Ching JA's analysis of the evidence. In my judgment no "cut-off" as such was imposed.

56. As to whether the defendant was ready willing and able to complete on 17 July, the matter not having been explored evidentially in the court below, it would not be right for this court to make a finding on the point. Further, as this court, by a majority, has found that the defendant was under no contractual obligation to tender an executed conveyance on 17 July 1991, the point has become academic.

Conclusion

57. It must follow from what I have said above that in my view the plaintiffs were not entitled to the equitable remedy of specific performance.

58. The result is that, by a majority, this appeal must be allowed and the judgment of the deputy judge dated 17 March 1995 must be set aside. We make an order nisi that the costs of the appeal and in the court below be paid by the plaintiffs to the defendants.