YIP SIU TIN v. MOK TO TO and Another

1996, No. A14752

IN THE HIGH COURT OF HONG KONG

COURT OF FIRST INSTANCE

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J U D G M E N T

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The Background

1. The plaintiff, as vendor, and the defendants, as purchasers, entered into a written agreement of sale of some landed property on 19 November 1996. The completion date was 7 December 1996.

2. The agreement contained a clause that provided that -

(a) Requisitions and objections (if any) in respect of the title or description of the Property or otherwise arising out of the Agreement shall be delivered in writing to the Vendor's solicitors within seven (7) working days after receipt of the title deeds and documents by the Purchaser's Solicitors ("the said period") in which respect time shall be of the essence of this Agreement.

(b) If the Purchaser shall make and insist on any objection or requisition which the Vendor shall be unable or unwilling (on the grounds of difficulty delay or expense or any other reasonable grounds) to remove or comply with the parties hereto may (notwithstanding any intermediate attempt to remove or satisfy or comply with the same or intermediate dispute or negotiation or litigation in respect thereof) by giving not less than seven (7) working days notice in writing to the other party or his solicitors to annul the sale in which case unless the objection or requisition shall have been in the meantime withdrawn the sale shall at the expiration of the notice be annulled and the Parties hereto shall at their own costs enter into and cause to be registered at the Land Registry an Agreement for cancellation . . ."

3. On 5 December 1996, the plaintiff did give notice to annul the sale. On 6 December, the plaintiff issued another notice, saying that this one superseded the earlier one.

4. On 6 December 1996, the defendants' solicitors wrote insisting on the requisitions. The completion date passed with either party tendering their obligations due on completion. On 9 December 1996, the defendants' solicitors wrote again insisting on the obligations. On 11 December 1996, the plaintiff's solicitors wrote explaining why the notice was issued. On 14 December 1996, the defendants' solicitors wrote purporting to extend the date for completion until certain requisitions were satisfied. On 17 December 1996, the plaintiff's solicitors returned the deposit and tendered a cancellation agreement. On 19 December 1996, the defendants' solicitors returned the cheque and the agreement.

5. On 27 December 1996, the plaintiff issued a writ of summons claiming, as far as now relevant, a declaration that the sale agreement was annulled, an order that the defendants enter into a cancellation agreement and costs.

6. On 7 January 1997, the defendants filed a defence and a counterclaim in which they claim return of the deposit, damages and interest.

The Issues

7. This case was presented and argued with commendable brevity by both counsel. Only two issues were left for my consideration -

(a) Whether or not the notice of annulment issued by the plaintiff was out of time; and

(b) Whether or not the purported annulment was arbitrary and unreasonable.

Out of Time?

8. Here, essentially, Mr Ling's argument is that the second notice of annulment issued on 6 December 1996 - one day before the date for completion - was too late. It is said that the defendants had seven days in which to withdraw the requisitions, but the completion date intervened. Mr Ling suggests that clause 14(b) should be read as implying that the notice of annulment may only be given so that the seven days' notice expires before the completion date. I do not accept this.

9. The provision regarding the completion date operates independently of the provision regarding the giving of a notice of annulment. The defendants were at liberty to tender performance on the completion date, and, if the plaintiff had failed to complete, the defendants had their remedies. The defendants chose not to insist on the completion date, it passed without either party tendering performance, and it became, for the purposes of determining the rights of the parties in this case, an irrelevance

10. There is no basis on which it can be said that the qualification suggested by Mr Ling should be read into the clause. Certainly, in this case, there is no room for believing that the parties contemplated that the notice should be given at least seven days before the completion date. The two requisitions of importance in this case are those relating to certain approved plans that the defendants were insisting upon seeing and evidence showing that two signatories on documents were the same person. On 3 December 1996, the plaintiff's solicitors told the defendants' solicitors that it would take 4 to 6 weeks to obtain the plans so the plaintiff was unable to deliver these before completion. But the defendants' solicitors replied on 5 December 1996, insisting that these plans were produced for perusal before completion. I do not know how the defendants' solicitors expected the plaintiff's solicitors to do this. Plainly, they did not really expect this because the completion came and went without either party tendering their obligations. It may be that the defendants could have argued that the plaintiff's intimation that the plans would not be supplied before completion was a repudiation of the agreement. But they did not treat it as such. On the contrary, they affirmed the agreement thus keeping it alive for the benefit of the plaintiff as well as that of the defendants. That being the case, the plaintiff was entitled to give notice of annulment, and the defendants had the option of withdrawing the requisitions or accepting the notice. They chose to insist on the requisitions. It was suggested to me that the defendants had, in effect, withdrawn the requisitions, but a perusal of the letter from the defendants' solicitors dated 14 December 1996 shows that this is not so. The defendants still wanted to be satisfied regarding the two troublesome requisitions I have mentioned, and said that they would extend the completion date for this purpose.

11. Accordingly, I reject the contention that the notice of annulment was out of time.

Was the Annulment Unreasonable or Arbitrary?

12. On 3 December 1996, the plaintiff warned the defendants that it would 4 to 6 weeks to obtain the approved plans insisted upon by the defendants. Nevertheless, the defendants insisted upon having them before completion. The plaintiff did not wish to incur the expense or delay in complying with this requisition, so he decided to give notice to annul. I see nothing unreasonable, arbitrary or capricious in this decision. If anything, I am more inclined to see unreasonableness in the attitude taken up by the defendants. The plaintiff's solicitors made serious attempts to satisfy the defendants regarding the requisitions; there was nothing high-handed or capricious in the plaintiff's attitude. I can find no reason why the plaintiff should be deprived of its contractual right by reason of his conduct.

The Result

13. In the result, I find that the plaintiff's notice of annulment was valid and the sale has been cancelled. The plaintiff is entitled to a declaration to this effect, and I grant this. The plaintiff is also entitled to require that the defendants enter into a cancellation agreement, and I order that they do so within 7 days of such agreement and the return of the deposit being tendered to them. The defendants' counterclaim is dismissed.

The Costs

14. The question of costs was not argued, but I can see no obvious reason why costs should not follow the event. I make an order nisi that the defendants pay the plaintiff's costs on the claim and counterclaim.