FAR EAST DRUG (BVI) CO LTD v. FIRST PACIFIC CO LTD

CACV 166/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 166 OF 2004

(ON APPEAL FROM HCCL NO. 41 OF 2003)

____________________________

____________________________

-----------------------

J U D G M E N T

-----------------------

Hon Woo VP :

Introduction

1. This is an appeal from the judgment of Stone J dated 17 May 2004 in which he decided an issue under Order 14A, rule 1 of the RHC, Cap 4A, declaring that the plaintiff had brought its claim in time in accordance with Clause 8(D) of the Share Sale and Purchase Agreement dated 6 December 2001 made between the parties (“the Agreement”). 

2. As a brief background, the plaintiff’s claim in this action is for the defendant’s breaches of warranties set out in Clause 7 of the Agreement and Schedule 2 thereto.  The alleged breaches regard overdue taxation and employees’ social security contribution that the defendant had not settled.

3. Clause 8 of the Agreement provides as follows:

“Claims against the Vendor [the defendant] in respect of any breach of the Warranties [under Clause 7 and Schedule 2] shall be wholly barred and unenforceable unless written particulars thereof (giving the facts and circumstances of the specific matter or claim in respect of which such claim is made) shall have been given to the Vendor before the date which falls 18 months after the date of this Agreement and such claim shall be treated as withdrawn unless proceedings in respect thereof have been commenced and served on the Vendor before the date which falls 21 calendar months after the date of this Agreement.” (Emphasis added)

4. It is common ground that the date of the Agreement was 6 December 2001.  It is also common ground that written particulars of the plaintiff’s claim for breaches of warranties were given by the plaintiff on 6 June 2003.  There can be no dispute that the writ herein was issued and served on the defendant in August 2003, satisfying the second time-limit (for proceedings to be commenced) prescribed in Clause 8(D), if the written particulars given by the plaintiff had been given within the time allowed by Clause 8(D).

The defendant’s arguments

5. On behalf of the defendant, Mr Roger Beresford relies heavily on the “corresponding date” rule that will lead to the result that 6 June 2003 is the date falling 18 months less one day after the date of the Agreement.

6. In Dodds v Walker [1981] 1 WLR 1027, HL, where the court was concerned with the interpretation of section 29(3) of the Landlord and Tenant Act 1954 which provides:

“No application [for a new tenancy] under section 24(1) of this Act shall be entertained unless it is made not less than two nor more than four months after the giving of the landlord’s notice under section 25 of this Act …”

The landlord’s notice was given on 30 September 1978, and the tenant applied for a new tenancy on 31 January 1979.  The House of Lords held that the tenant’s application was too late.  At page 1029B, Lord Diplock, with whose judgment the other Law Lords agreed, stated:

“My Lords, reference to a ‘month’ in a statute is to be understood as a calendar month.  The Interpretation Act 1889 says so.  It is also clear under a rule that has been consistently applied by the courts since Lester v. Garland (1808) 15 Ves.Jun. 248, that in calculating the period that has elapsed after the occurrence of the specified event such as the giving of a notice, the day on which the event occurs is excluded from the reckoning.  It is equally well established, and is not disputed by counsel for the tenant, that when the relevant period is a month or specified number of months after the giving of a notice, the general rule is that the period ends upon the corresponding date in the appropriate subsequent month, i.e. the day of that month that bears the same number as the day of the earlier month on which the notice was given.”

7. Mr Beresford submits, therefore, applying the corresponding date rule, 18 months after the date of the Agreement means the date of the same number in June 2003, ie 6 June 2003, following the same number of 6 December 2001.

8. He draws our attention to a number of authorities.  In cases such as Webb & Fairmaner (1838) 3 M & W 473 (“in” a period of months) and  South Staffordshire Tramways Co Ltd v Sickness and Accident Association Ltd [1891] 1 QB 402 (a period of months “from” a certain date), the corresponding date rule was applied.  Some other authorities cited dealt with the interpretation of provisions such as one calendar month’s notice “at least before” the action shall be commenced (Freeman v Read (1863) 4 B & S 174) and a period “within” which to do an act (Manorlike Ltd v Le Vitas Travel Agency and Consultative Services Ltd [1986] 1 All ER 573).  In the last case, Kerr LJ said:

“… the word ‘within’, used in the context of a period of time, is capable of meaning ‘before or at the expiry of’ that period”.

9. Mr Beresford argues that there are three relevant groups of dates, namely,

(1) The dates which are more than 18 months after 6 December 2001.  These are 7 June 2003 and subsequent dates.

(2) The dates which are less than 18 months after 6 December 2001.  These are 6 December 2001 to 5 June 2003 (inclusive).

(3) The date which is 18 months after 6 December 2001.  That is 6 June 2003.

10. Mr Beresford complains that the interpretation suggested by the plaintiff and adopted by the judge would have the effect of inserting into Clause 8(D) after the word “before” the words “or at the expiry of” or simply to substitute the word “within” for the words “before the date which falls”.  He contends that the judge was wrong to hold that “the date which falls 18 months after the date of this Agreement” must be 7 June 2003, which is the date identified after the passing of 18 clear months.  The date which falls 18 months after the date of the Agreement cannot be a date which falls after 18 months after the date of the Agreement.  He argues that the judge ought to have held that the substitution of the words “identified after the passing of” for the word “falls” did such violence to the wording of the clause that it could not conceivably have reflected the intention of the contracting parties.  The way that the judge interpreted the clause would be tantamount to substituting the wording of the clause by one or other of the following: “within 18 months” or “before or at the expiry of 18 months” or “before the date which falls 18 months and one day after the date” of the Agreement. 

11. Mr Beresford also relies heavily on the word “before”, meaning earlier in time, and on the contention that the phrase “the date which falls …” refers to a specific date.  If 18 months after the date of the Agreement is 6 June 2003 as he submits, then the word “before” must be before 6 June and not on 6 June 2003. 

The plaintiff’s arguments

12. On behalf of the plaintiff, Mr Charles Sussex SC argues that 6 June 2003 was a date “before the date which falls 18 months after the date of” the Agreement.  He submits that the key factor which points to the resolution of the question is that the two reference points are dates.  6 December 2001 is the first reference point.  If “months” in Clause 8(D) mean “clear months”, the second reference point is 7 June 2003.  A day comprises the entirety of 24 hours, and therefore a “clear day”, as that phrase is understood by lawyers.  The passage from one day to the next is instantaneous, midnight on one date is represented as 24.00 but it is also 00.00 on the next date.  There is therefore no time between one date and the date next following. 

13. Turning to the language of Clause 8(D), Mr Sussex argues that “the date which falls … after the date of this Agreement” is 7 December 2001.  That date falls immediately after the date of the Agreement.  The transition at midnight from one date to the next is instantaneous.  There is no intervening period of time.  If an intervening period is introduced, such as “the date which falls one day after the date of this Agreement”, then that must be 8 December 2001.  He therefore argues that the reference to 18 months in Clause 8(D) is clearly to an intervening period of time.  It follows that “the date which falls 18 months after the date of this Agreement” is the date identified as after the passing of 18 months, or as lawyers called it 18 clear months, and that date is 7 June 2003.  Therefore, the written particulars given by the plaintiff on 6 June 2003 were within the time limit as prescribed by Clause 8(D), with the consequence that they were served within time.

My decision

14. The question in issue is one of pure construction of Clause 8(D) of the Agreement.  It is a pure question of law, and the parties do not suggest that this Court should take into account the matrix of facts surrounding the making of the contract to assist in the construction.  Therefore we are in as good a position as the judge in deciding this matter, but of course, we have the benefit of his opinion.  I have already made reference to various parts of his judgment when summarising counsel’s arguments above.  His main reasoning and conclusion is contained in the following passage,

“I appreciate the logical attraction (and ease of application) of the ‘corresponding date rule’, but its application in this instance leads to the result that 6 June 2003 is the date falling 18 months less one day after the date of the Agreement, which is not what the clause in question provides.  The language used admits of the passage of 18 months, and seems to me to be analogous to that group of cases in which a certain time is to elapse between some event and another, and which attracts the ‘clear days’ rule: see the observations of Lord Denning MR in Carapanayoti, op cit., wherein the court was wrestling with the meaning of the term ‘not later than’.  It follows, therefore, that in my view Mr Sussex is right in his ‘clear months’ submission.”

15. None of the authorities cited by the parties to us and to the judge deal with the terminology “before the date which falls … after” that was adopted for Clause 8(D), and they are therefore not of much assistance in its interpretation.

16. The corresponding date rule has been shown to apply to cases where the provision or contractual terminology is “not less than”, or “not more than”, or “in”, a period of time or “from” a certain event. 

17. If one applies the corresponding date rule, an act which must be done within, in, by, or not later than, 18 months after the date of 6 December 2001, the act must be done by midnight on 6 June 2003.  But Clause 8(D) does not use any of such phraseology.  The word it uses is “falls”.  I consider the following meaning of “fall” in item III-23 of the word in the New Shorter Oxford English Dictionary (1993) is applicable to the phraseology used in Clause 8(D).  It reads:

“Occur, come to pass, happen; come at a specified time, have as date.”

18. Substituting the word “occurs”, for example, to the terminology of Clause 8(D), it becomes “the date which occurs 18 months after the date of” 6 December 2001.  

19. There seems to be no dispute between the parties that the first task is to identify “the date” that falls 18 months after the date of the Agreement.  What mainly divides the parties is that while Mr Beresford is dealing with the ascertainment of that date by the use of the corresponding date rule, Mr Sussex’s argument is that the date can only be ascertained by having 18 months as the intervening period in between the two reference dates, being respectively 6 December 2001 and 7 June 2003.  The judge was obviously persuaded by Mr Sussex. 

20. Mr Sussex does not seem to challenge the applicability of the corresponding date rule, but contends that because the intervening period as provided in Clause 8(D) must be a full 18 months, he identifies 7 June 2003 as the second reference date.

21. It seems to me that Mr Beresford is right in submitting that the phrase “the date which falls …” calls for the ascertainment of a specific date, rather than of a period of time.  This follows from the definition of “falls” to which I have referred.  The period within which notice is to be given is only identifiable after the ascertainment of that date. 

22. That being so, I do not see why the corresponding date rule should not apply to the present case.  Applying that rule, the date that is 18 months after the date of the Agreement, 6 December 2001, is 6 June 2003.  The date itself is a unit in its entirety.  It expires at midnight on 6 June 2003.  Using the word “fall”, with its meaning “occurs”, the same result will obtain. 

23. The matter can also be tested by using the phrase “the date which falls 1 month after the date of the hearing of this appeal”, which was heard on 13 January 2005.  Giving effect to the word “after”, 13 January 2005 itself is not to be counted.  The date that falls 1 month after is 13 February 2005.  Saying that it will fall on 14 February 2005 will be doing violence to the language in the various ways as demonstrated by Mr Beresford in his arguments.

24. It follows, therefore, that “the date which falls 18 months after the date of the Agreement” (6 December 2001) should properly be 6 June 2003.  The provision of written particulars having to be served “before” that date does not include that date and must be before that date.  The last date for service was therefore 5 June 2003. 

25. In my judgment, therefore, the plaintiff’s written particulars of claim being given on 6 June 2003 were given one day late and that claim is barred by the operation of Clause 8(D) of the Agreement.

Conclusion

26. In the circumstances, I would allow the appeal with an order nisi as to costs.  That has the effect of disposing of the action as a whole.  I would therefore also dismiss the action with costs.

Hon Yeung JA :

27. I agree.

Hon Barma J :

28. I agree.