TEAM LEADER DEVELOPMENT LTD. v. TANG PAK CHUNG AND ANOTHER

CACV 88/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 88 OF 2001

(ON APPEAL FROM HCA NO. 11746 OF 1997)

____________________

____________________

_________________________

REASONS FOR JUDGMENT

_________________________

Hon Rogers VP:

1. This is an appeal from a judgment of Deputy Judge Woolley given on 6 December 2000. The action concerned a claim by the plaintiff arising out of a contract for the sale and purchase of a substantial area of land in the New Territories. The plaintiff claimed that it had effectively rescinded the sale and purchase agreement by reason of the defendants' repudiation of the contract in failing to deliver vacant possession of the land. The relief sought included the return of the deposit of HK$2,200,000 which had been paid in accordance with the agreement. The judge gave judgment for the plaintiff and against that judgment the defendants appealed.

2. The contract for the sale and purchase of the land had been made on 16 October 1997. It provided for completion to be within 14 days from the date of the agreement i.e. on or before 30 October 1997. Completion was to take place between the hours of 9 am and 5 pm at the offices of Anthony Y.L. Au & Co, who were in fact the 2nd defendant's solicitors. By clause 5 of the sale and purchase agreement it was provided that:

"It shall be a condition of this Agreement that vacant possession of the Property shall be given to the Purchaser on the actual day of completion."

Reference might also be made to clause 10(1) which read:

"Possession will be retained and the rents and profits (if any) shall be received and all outgoing shall be discharged by the Vendor up to and exclusive of the actual day of completion, and as from but inclusive of that day (as the case may be) all outgoing shall be discharged by the Purchaser."

3. The land in question was undeveloped, although part of it had been used for agriculture in the past. It was overgrown and wild apart from a few small buildings most of which were ruined and, as the judge found, there were probably some discarded items. The important point for the purpose of this case was whether the land was also occupied. The judge accepted that on 23 October 1997 two representatives of the plaintiffs, one of whom was a Mr Chan, had inspected the land and found that there was a house on one of the lots which appeared to be occupied with people living there. Mr Chan had returned on 28 October and nothing appeared to have changed. There were signs of human habitation inasmuch as there was a light on in a house and there were also dogs guarding it. As a result, the plaintiff's solicitors wrote to the solicitors for the defendants on the following day and drew attention to the fact that the property seemed to be occupied and invited them to have a joint inspection the next day which was, of course, the day fixed for completion. Solicitors for the 1st defendant replied and referred to a guarantee which had been given by the agent of the other defendant that vacant possession could be obtained; the letter went on to say:

" We have also been instructed that the said agent or the 2nd Vendor and your client or its agent will inspect the above property tomorrow morning to see whether the problem can be resolved.

In fairness, we are instructed that our client has no objection to extend the date of completion to 31st October, 1997 or a few days more, subject to the agreement of the 2nd Vendor."

The letter also indicated that the 1st defendant's solicitors had not been able to receive any reply from the 2nd defendant's solicitors.

4. On the morning of 30 October, Mr Chan again visited the site and there met a Mr Chan Ki, who was a free lance estate agent who appeared to be acting on behalf of the defendants. Mr Chan Ki had no keys for the property but he showed Mr Chan, the plaintiff's representative, a document which was said to have been signed by the occupier of the premises, namely a Mr So Kin Hung, to the effect that he would vacate the property.

5. The two persons again returned to the area at about 4:40 pm on the same day. On that occasion the gate to the particular premises was opened by a lady who was subsequently identified as Mr So's wife. Later Mr So himself arrived. The judge accepted the evidence that the defendants were not in a position on 30 October to be able to give vacant possession. He found that Mr So was living in the house with his wife and a young child and that the house was clearly being used: it was furnished and equipped with air-conditioning. The judge rejected Mr So's evidence that he had moved out of the house. On the other hand the judge did not consider that the presence of rubbish, old farm implements and even abandoned vehicles on the land would have prevented vacant possession being given.

6. At the same time as the inspection of the land was taking place, a Miss Mak, who was a conveyancing executive with the plaintiff's solicitors, was despatched to the 2nd defendants' solicitors' office with the necessary cheque for the completion monies, a completion letter and a duly executed assignment as well as with a letter which expressed acceptance of the defendants' repudiation of the agreement and a demand for the return of the deposits. Miss Mak arrived at the solicitors' office before 5 pm. She waited for telephone instructions from the plaintiff which came as a result of the inspection and following a brief discussion between the plaintiff and its solicitors. At approximately 5:30 pm or 5:35 pm she was told by telephone of the conclusion which had been reached and she promptly informed Miss Li of the 2nd defendants' solicitors that the plaintiff could not take over the land.

7. On the basis of the evidence the judge found that the plaintiff was certainly able to complete the agreement, it had sufficient funds and Miss Mak had the necessary cheque and documents in order for completion to take place. The judge also found that the plaintiff was willing to complete the sale in the sense that if it believed that the defendants were in a position to deliver vacant possession it was prepared to honour its side of the bargain.

8. The issues at trial appear to have turned upon whether the plaintiff was in a position to complete the sale and also whether in fact vacant possession was tendered. These were factual matters and, as indicated above, the judge came to clear views. Those findings were not challenged on this appeal.

This appeal

9. On this appeal, Mr Hung, on behalf of the defendants, attempted to argue two points which both suffered from the difficulty that they had not been covered by the pleadings and hence the evidence was not directed to them and the judge had made no findings in respect of them.

(a) Completion was to be by 12 midnight on 30 October

Basing himself on the wording of clause 5 of the sale and purchase agreement, which is set out above, Mr Hung argued that vacant possession only needed to be given at midnight of the day of completion. In my view this would turn the law of conveyancing on its head since the assignment of a property together with vacant possession in exchange for the completion monies lies at the root of the normal conveyance. If it were to be intended that clause 5 should provide that vacant possession need only be given some 7 hours after completion took place, there would have to be extraordinarily clear wording to that effect. The part of clause 10(1) quoted above emphasizes the fact that on the day of completion the purchaser was to obtain the property.

The defendants' argument therefore fails at the first hurdle. It is not made any better by the fact that paragraphs 4 and 25 of the defence make it quite clear that until this argument was raised for the purposes of this appeal, it was the defendants' contention that vacant possession had to be given by 5 pm. As a consequence the whole of the hearing in the court below was directed to that and not to the question of whether vacant possession would have been given by 12 midnight. In any event given the findings of fact as to the occupation of the relevant house by Mr So and his family as their home, together with the presence of his belongings and the various items relating to his trade, there does not seem to be the slightest indication that the judge would have found as a fact that the vacant possession would have been given by 12 midnight.

(b) Anticipatory breach

Mr Hung then sought to raise an argument on the basis that there had been anticipatory breach of contract because at least by the morning of 30 October it had become clear that the defendants could not give vacant possession. Counsel was reminded that it was clear on the evidence and from the correspondence that the plaintiff's course of conduct had been that after it had become aware that there was a live question as to whether vacant possession could be given in time, it drew this to the defendants' attention and attempted to try and resolve the matter. In particular the plaintiff had waited until 5 pm to see whether vacant possession could be given. The argument was then adjusted. It was said that the delay between 5 pm and 5:30 or 5:35 pm was sufficient to constitute the contract having been kept alive by the plaintiff beyond the time for completion such that the plaintiff could thereafter only insist on completion with vacant possession on reasonable notice being given. As pointed out above, again, the defendants were handicapped by the fact that there were no pleadings as to this and the judgment and evidence were therefore not directed to this. It is therefore not a point which could be taken on this appeal. But even if the defendants were to be able to take this point on the appeal, it is in the circumstances described in the judgment untenable.

10. The plaintiff had very properly drawn the defendants' attention to the difficulty of vacant possession. They had sought a joint inspection. They had waited until 5 pm to see whether vacant possession would be given. Shortly before 5 pm they were presented with a situation which was, if anything, worse than they had discovered before, namely that Mr So and his family were indeed in residence. What took place in the short time between 5 pm and 5:35 pm was not analysed in detail by the judge because it was not relevant. Nevertheless, if a purchaser is presented with a situation at the last minute where he then has to decide whether to accept a property which is considered not to be vacant, the vendor, who is in breach and not able to tender vacant possession, cannot complain if the purchaser takes a few minutes to assess the situation, decide the significance and importance, for example, of persons being in residence on the property, consult its solicitor and then give definite instructions.

11. In those circumstances this appeal was dismissed with costs.

Hon Le Pichon JA:

12. I agree.

Hon Yuen JA:

13. I agree.