EUROPEAN ASIA (HONG KONG) INVESTMENT LTD v. WONG SHUN ON ANTHONY

CACV 120/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 120 OF 2010

(ON APPEAL FROM HCA NO. 2431 OF 2008)

________________________

BETWEEN

________________________

________________________

REASONS FOR JUDGMENT

________________________

Hon Rogers VP:

1.  I agree with the judgment of Le Pichon JA.

Hon Le Pichon JA:

2.  This was an appeal by the plaintiff from an order dated 11 May 2010 of Deputy High Court Judge L Chan.  The matter arose out of an agreement for sale and purchase dated 26 November 2007 made between the plaintiff as purchaser and Wong Yick Wan (“the deceased”) as vendor of a flat in Kowloon for $25.68 million.  The judge dismissed the plaintiff’s Order 14 summons for the return of the deposit and entered judgment for the defendant, holding that the defendant was entitled to forfeit the deposit of $2.568 million.  At the conclusion of the hearing the appeal was allowed for the reasons which we now give.

Background

3.  The agreement provided for completion to take place on 28 January 2008.  However, the deceased passed away on 29 December 2007.  The deceased’s solicitors advised the plaintiff solicitors by letter dated 7 January 2008 of the deceased's death which event had the effect of terminating the authority of the deceased's solicitors in the transaction.

4.  The plaintiff’s solicitors responded the following day, 8 January 2008, in these terms:

“We regret to learn that the Vendor having passed away and having consulted with our Client, we are instructed to inform your Client’s Personal Representative through your goodself that the Purchaser is prepared to grant a period of Six Months for your Client to apply for Letters of Administration or Probate as the case may be and upon expiration of the said period and if deemed necessary our Client will entertain a further extension to enable your Client’s Personal Representative to obtain legal authority to assign the property to our Client per the terms of the Sale and Purchase Agreement dated 26 November 2007.”

The meaning of this letter (“the January letter”) and its effect is at the heart of this appeal.

5.  The deceased’s former solicitors replied as follows:

“Please be informed that we have not yet received any instructions regarding the application to Court for the grant of Probate/Letters of Administration of the estate of Wong Yick-wan, deceased.

However, we shall keep you informed where circumstances shall change.”

6.  There was no communication thereafter until 8 October 2008 when the plaintiff’s solicitors wrote (“the October letter”) stating:

“Reference to your letters dated 7^th and 9^th January 2008 regarding the Sale and Purchase Agreement … dated 26 November 2007, we deeply regret that your client the Vendor had not been able to proceed to Completion on 28^th January 2008 (the date fixed for Completion). Due to no agreement has been reached by the Purchaser with the Personal Representative of the deceased Vendor, the Vendor is deemed to have repudiated the S & P Agreement. The Purchaser our client now exercises his rights under the said Agreement as the aggrieved party to demand through you for the return of all the deposits paid in the total sum of $2,568,000.

Kindly cause to be remitted to us on behalf of our client the said deposit within 7 days from the date hereof.”

7.  Correspondence ensued between the plaintiff’s solicitors and Bernard Wong & Co, representing the intending administrator in his application for the grant of letters of administration, as well as K B Chau & Co who were apparently the solicitors who would be instructed to act for the estate once the grant of letters of administration had been obtained.

8.  By writ dated 27 November 2008, the plaintiff sued the personal representative of the estate of the deceased seeking the return of the deposit.  On 31 December 2008, letters of administration were granted to Wong Shun On Anthony.  On 9 February 2009, the master ordered that the action be continued against Anthony Wong.

9.  The judge held that by the January letter, the plaintiff not only had waived the right to insist on performance on 28 January 2008, but also the essential condition that time was to be of the essence.

This appeal

10.  Two principal issues arose in this appeal: (1) whether the January letter constituted a waiver in law; and, if so (2) whether it had the effect of waiving the essential condition as to time.

Whether the January letter constituted a waiver

11.  Mr Yu SC who appeared for the plaintiff submitted that the January letter could not in law constitute a waiver because, first, to be effective, a waiver has to be communicated to the other contracting party, and second, a proposed or intending administrator has neither the status nor title to bind the estate of the deceased.  For those two propositions of law (which are not challenged), Mr Yu relied on Buckland v Farmar & Moody [1979] 1 WLR 221, 231A-B and Chan Pak-man v Chan Pang-fee and Another [1981] HKLR 483, 503.  Applying those propositions, the consequence is that there was no one to whom the communication could have been made and, indeed, no one to whom the purchase price could have been paid.

12.  In §20 of the judgment, the judge correctly applied those propositions when he held that no one could have or had indeed entered into any agreement on behalf of the deceased’s estate with the plaintiff to extend the completion date. However he went on to hold in §21 that the plaintiff had by the January letter waived the right to insist on performance on 28 January 2008.  The judge did not explain the basis of that holding.  Prima facie, it was inconsistent with what he had held in the §20, namely, there was no one to whom the notice could have been served who was in a position to bind the estate.

13.  Mr Chiu, who appeared for the defendant, submitted that the clear intention to be discerned from the January letter is that communication was intended to the persons entitled to apply for a grant and, in any event, it amounted to waiver by estoppel because the defendant had acted on the representation.  Unless it can be shown that the recipient of the communication had the status and title to bind the estate, I cannot see that those submissions can assist the defendant.  Given the decision in Chan Pak-man, plainly Mr Chiu was in no position to do so.

14.  Be that as it may, on the question of estoppel and whether the defendant had acted on the representation in the January letter, the judge said:

“29 … there is the undisputed evidence that the defendant had exercised reasonable diligence in applying for the letters of administration. He had also made no attempt to seek the assistance of the Official Administrator to apply for a limited grant under section 16 of the PAO to complete the Agreement. That was a more expensive way to complete as the Official Administrator would charge a commission for the proceeds received. The defendant had also not applied for a limited grant under section 36 of the PAO which would have required security to be given.”

15.  Whether the defendant had exercised reasonable diligence in applying for a general grant of letters of administration is beside the point.  The real point is whether it was reasonable for the defendant to have done so.  The judge appears to have proceeded on the basis that this had been the case when, as a matter of common sense, the defendant should have applied for a limited grant under section 36 of the Probate and Administration Ordinance to enable completion of the sale of the property to take place.  That a general grant of letters of administration is a far more complicated and time-consuming process than an application for a limited grant is self-evident and needs no further elaboration.

16.  Undeniably, completion of the sale of the property was in the best interests of the estate and it is inconceivable that a court would not have exercised its powers under section 36 to facilitate completion.  It required a simple and straightforward application.  Instead, the judge came up with excuses for the defendant for proceeding otherwise than for a general grant, excuses that do not appear to be valid.

17.  First, the judge appears to have misunderstood section 36 in that he considered that it required security to be provided in every case.  Section 36 reads:

“…where it appears to the court to be necessary or convenient to appoint some person to be the administrator of the estate of the deceased person or of any part of such estate …the court may …appoint such person as the court thinks fit to be such administrator, on his giving such security, if any, as may be required under this Part or as the court may direct, and every such administration may be limited in such manner as the court thinks fit.”

It would be surprising if the court would have required any security when the transaction was manifestly in the best interests of the estate and provision could easily have been made to safeguard the proceeds of sale if circumstances had warranted it.

18.  Second, section 16 of the Ordinance provides in pertinent part:

“16. Cases in which Official Administrator

is entitled to administration

(1) On application made by the Official Administrator, the court shall, unless it sees good reason to the contrary, grant to him administration in any of the following cases-

…

(b) where a person dying intestate, whether in Hong Kong or elsewhere, has left property situate in Hong Kong and the next of kin of such person who is resident in Hong Kong files in the Registry a request for or consent to the making of such grant, in writing signed by him;

…”

The defendant had not filed the requisite request/consent to trigger section 16(1)(b).  The judge appeared to excuse that inaction on the ground that it would have cost the estate the commission required under section 19.  But it seems to me that the defendant cannot have it both ways: if the section 19 route was too expensive, then he should have proceeded under section 36.

19.  It was also said that on receipt of the January letter, the defendant as a layman understood it as meaning that time was no longer of the essence and that as a consequence he could take as long as he needed to obtain a general grant.  In §7 of his first affirmation, the defendant stated that “[the deceased’s former solicitors] had briefed me about the situation soon after my father passed away” but without elaborating on precisely what he had been ‘briefed’.  By 15 January 2008, no more than a week after the January letter and after he had been ‘briefed’, he had consulted solicitors to apply for the grant. In my view it is difficult to believe that no mention was made of the transaction to the solicitors who were instructed to apply for a grant.

20.  In summary, I consider the reasons given by the judge unsustainable.  There was no basis for the conclusion that the defendant had exercised ‘reasonable diligence’ or had acted reasonably.

Whether the January letter was a waiver of time being of the essence

21.  If contrary to my view, the January letter constituted a waiver in law, the correctness of the judge’s holding that its effect was that the condition of time being of the essence had been waived needs to be considered.  That turns on the true interpretation of the January letter.

22.  Mr Yu submitted that fairly read, the January letter merely allowed an extension of time and that waiving the right to insist on performance by the stipulated time does not operate as an entire waiver of the essential condition as to time.  As Jessel MR explained in Barclay v Messenger (1874) 43 LJ Ch 449, 456:

“If a man says a contract is to depend upon payment of money by a certain day and a party entitled to receive the money says, “I will extend your time, I will give you a week or a month,” why that should put the party in a better position than if it had been originally put in the contract I cannot conceive.  It appears to me plain that a mere extension of time, and nothing more, is only a waiver to the extent of substituting the extended time for the original time, and not an utter destruction of the essential character of the time.”

23.  I respectfully agree.  The grant of an extension for a period of time is no different from the grant of an extension to a specific date.  In my view the judge fell into error in failing to appreciate that fact and that the grant of an extension for a period of time does not have the effect of dispensing with or waiving the essential condition altogether, as was explained in Barclay.

24.  Mr Chiu invited the court to read the January letter literally: that the intended administrator had 6 months within which to make the application for a grant and thereafter it could seek and would be granted further time (whatever period that might be) to obtain the necessary authority to assign the property.  I do not consider that to be a fair and proper reading of the January letter.  If effective as a waiver, it amounted to no more than an extension of a period certain (i.e. 6 months) for the necessary steps to be taken to enable good title to pass to the plaintiff and that, if more time were required, a request for a further extension would be entertained.  There was no promise that it would be granted regardless of the circumstances.  It cannot be read as an open-ended offer to grant an extension at large for a specific purpose, irrespective of the amount of time which may be required.

25.  For those reasons, I am unable to agree with the judge that the January letter had the effect of waiving the essential condition relating to time.

Acceptance of repudiation

26.  A subsidiary point that arose was whether it was open to the plaintiff to accept repudiation, whether by the October letter or by its writ of 27 November 2008.

27.  Although completion did not take place on 28 January 2008, it did not bring into play the principle in Camberra Investment Ltd v Chan Wai-tak [1989] 1 HKLR 568, 574E, which was a case of mutual default.  In view of the January letter, absent notice given to the plaintiff prior to 28 January 2008 that the defendant was in a position to pass good title to the plaintiff, the plaintiff was entitled to proceed on the basis that there was no one to whom the purchase price could be paid who had the authority to act on behalf of the estate.  Accordingly, the fact that completion could not take place on 28 January 2008 was not the plaintiff’s fault.

28.  It matters not whether the plaintiff became entitled to accept the defendant’s repudiation on 28 January 2008 or, if the January letter was effective as a waiver, on 28 July 2008.  An innocent party may delay accepting the repudiation because lapse of time does not operate against a party who is entitled to elect to repudiate liability under a contract unless there is prejudice to the defendant or rights of third parties have intervened or the delay is of such a length as to be evidence that the party entitled so to elect had in truth decided to affirm the contract: see Cheung Ching Ping Stephen v Allcom Ltd [2010] 2 HKLRD 324 at §§21 and 22 and the cases therein cited and Everwin Inc Ltd v MTR Corporation Ltd, unreported, HCA 884/2008, 22 July 2008, CACV 218/2008, 30 November 2008 and FAMV 65-77/2008, 27 March 2009, where acceptance of the repudiation took place some two years after the repudiation.  On the facts of the present case, in my judgment it was not too late for the plaintiff to accept repudiation by the issue of its writ of 27 November 2008.

Hon Stone J:

29.  I agree with the Reasons for Judgment of Le Pichon JA.