SPEEDY RICH (ASIA) LTD. v. LEUNG PUI SHU AND ANOTHER

CACV 272/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 272 OF 2000

(ON APPEAL FROM HCA 3623/1997)

_________________________________

______________

J U D G M E N T

______________

Hon Mayo VP (giving the judgment of the Court):

1. This is an appeal from the judgment of Seagroatt J.

2. Under an agreement dated 5 March 1997 the Defendants agreed to sell and the Plaintiff agreed to purchase a flat at Laguna City. The purchase price was $7 million and a deposit of $700,000 was paid. Completion was to take place on 7 April 1997 at the defendants' solicitors office prior to 1 p.m. on that day. There was also a provision in the agreement for the plaintiff to inspect the flat on two occasions. Once before completion and once on 7 April 1997 so that the plaintiff could satisfy itself that vacant possession was being rendered up.

3. For various reasons which it is not necessary to go into the plaintiff had not been able to inspect the flat prior to completion. Also it was apparently inconvenient to the defendants for the plaintiff to inspect the flat until later in the day on 7 April 1997.

4. It appears however to have been agreed that completion would take place notwithstanding this and that the defendants' solicitors Messrs Baker and McKenzie would hold the purchase moneys as stakeholders until 7 p.m. on that day and that on being informed that the inspection had been carried out successfully the moneys would be paid to the defendants.

5. There were a number of telephone calls and faxes exchanged between Ms Yu a solicitor of Baker and McKenzie and Mr Chan a managing clerk in Kwan and Kwan, solicitors for the plaintiff.

6. These communications were on the subject of the completion and the arrangements which were being made to that end.

7. When Mr Chan attended at Baker and McKenzie's office at 2:40 p.m. he was kept waiting a considerable period of time and subsequently was informed by Ms Yu that as completion had not taken place at the time stipulated in the agreement the defendants had forfeited the deposit and were refusing to complete the transaction.

8. Two days following this the plaintiff launched the present litigation. For the reasons given in his judgment the Judge held that there had been an agreement to extend the time for completion from 1 p.m. to 3 p.m. and that the defendants had not been entitled to take the action they had. He ordered that the deposit and the stamp duty of $192,500 should be repaid by the defendants to the plaintiff and that it should have its costs on an indemnity basis. It is these orders which are the subject of the present appeal.

9. Mr Ma SC for the defendants accepted that he had an uphill task ahead of him in persuading us that the findings of fact which had been made by the Judge should be set aside. He did however place reliance upon the passage at p. 375 of the speech of Lord Reid in Benmax v Austin Motor Co. Ltd [1955] AC 370:

"Apart from cases where appeal is expressly limited to questions of law, an appellant is entitled to appeal against any finding of the trial judge, whether it be a finding of law, a finding of fact or a finding involving both law and fact. But the trial judge has seen and heard the witnesses, whereas the appeal court is denied that advantage and only has before it a written transcript of their evidence. No one would seek to minimize the advantage enjoyed by the trial judge in determining any question whether a witness is or is not trying to tell what he believes to be the truth, and it is only in rare cases that an appeal court could be satisfied that the trial judge has reached a wrong decision about the credibility of a witness. But the advantage of seeing and hearing a witness goes beyond that: the trial judge may be led to a conclusion about the reliability of a witness's memory or his powers of observation by material not available to an appeal court. Evidence may read well in print but may be rightly discounted by the trial judge or, on the other hand, he may rightly attach importance to evidence which reads badly in print. Of course, the weight of the other evidence may be such as to show that the judge must have formed a wrong impression, but an appeal court is and should be slow to reverse any finding which appears to be based on any such considerations."

10. He placed particular reliance upon the last 4 lines of the passage. He submitted that if the contemporaneous correspondence was subjected to critical analysis and regard was had to all the surrounding circumstances it was difficult to see how the Judge could have reached the conclusion he had that there had indeed been an agreement that the time for the completion had been extended from 1 p.m. to 3 p.m.

11. One of the matters he referred to was the apparent inconsistency between the finding that Mr Chan had been left in an uncertain position and the finding that there had been an unequivocal representation made by Ms Yu to the effect that the completion could be deferred until 3 pm.

12. In our view these findings are not necessarily irreconcilable. What needs to be borne in mind is that the Judge came to the conclusion on the basis of the evidence before him that Ms Yu's deceptive conduct had led to the confusion in Mr Chan's mind. Although Ms Yu had at one stage advised Mr Chan that the completion should take place in accordance with the terms of the agreement, later on when Mr Chan had suggested that the balance of the purchase moneys should be paid and the keys collected at 3 p.m. Ms Yu had not dissented from this suggestion. The Judge had been satisfied that the words and conduct of Ms Yu were such as to justify Mr Chan's belief that there had clearly been acquiescence on the part of Ms Yu to an extension of the time for completion being granted. Mr Chan had also given evidence that Ms Yu had specifically agreed to this.

13. What needs to be borne in mind is that it was common ground at the hearing before the Judge that there had been a variation in the terms of the agreement which had been occasioned as a result of the plaintiff not having inspected the flat prior to completion as provided for in the agreement. The fact that there had been agreement between the parties that the plaintiff should be afforded an opportunity to inspect the flat on 7 April 1997 and that Baker and McKenzie would not release the purchase moneys to the defendants until later inevitably had an impact upon the completion arrangements. As the purchase moneys could not be released until 7 p.m. it made very little difference whether the completion took place at 1 p.m. or 3 p.m. In either event the transaction could not in reality be completed until after the plaintiff had informed Baker and McKenzie that the inspection was satisfactory and that it was in order to release the moneys.

14. The other main complaint made by Mr Ma was that if the correspondence was considered in its proper context it was extremely unlikely that there had in fact been any agreement struck to extend the time for completion.

15. A significant feature of the correspondence was that when Baker and McKenzie had written to Kwan and Kwan informing them of their failure to complete in accordance with the terms of the agreement Kwan and Kwan made no reference to any variation in the contract being agreed between Ms Yu and Mr Chan for the completion to take place at 3 p.m.

16. We do not consider that this is necessarily a matter of particular importance. In the letter which Mr Gunnesekra a partner of Kwan and Kwan faxed at 5:07 p.m. to Baker and McKenzie he claimed that it had been the defendants who had been in breach of contract. This breach had been the failure of the defendants to permit the plaintiff to inspect the flat in accordance with the terms of the agreement. It is perhaps not particularly helpful to attempt to speculate why Mr Gunnesekra placed reliance on this rather than on the variation agreement which Mr Chan had claimed he had concluded with Ms Yu.

17. One possibility may have been that the plaintiff's solicitors may have thought that it was on safer ground in referring to this failure on the part of the defendants particularly if they had formed the view that the variation concerning the inspection of the premises formed an integral part of the completion arrangements.

18. Mr Ma also pointed out that the way in which the plaintiff had originally run their case was to refer to the breach of the terms relating to inspection rather than to an extension of time for completion having been agreed. It had only been in the Reply which had been delivered some considerable time later that reliance had been placed on the extension of time. It may be the case that all of this illuminates the way in which the plaintiff's legal advisers decided initially to conduct the litigation rather than reflecting upon whether or not there had been an agreement to extend the time.

19. Mr Ambrose Ho, SC for the plaintiff submitted that where as in the present case the Judge had made findings on primary facts a heavy burden was placed upon any party seeking to reverse the Judge's conclusions. In this respect he referred to the speech of Lord Summer at p. 47 of S.S. Hontestroom v S.S. Sagaporack [1927] AC 37:

"What then is the real effect on the hearing in a Court of Appeal of the fact that the trial judge saw and heard the witnesses? I think it has been somewhat lost sight of. Of course, there is jurisdiction to retry the case on the shorthand note, including in such retrial the appreciation of the relative values of the witnesses, for the appeal is made a rehearing by rules which have the force of statute: Order LXVIII., r. 1. It is not, however, a mere matter of discretion to remember and take account of this fact; it is a matter of justice and of judicial obligation. None the less, not to have seen the witnesses puts appellate judges in a permanent position of disadvantage as against the trial judge, and, unless it can be shown that he has failed to use or has palpably misused his advantage, the higher Court ought not to take the responsibility of reversing conclusions so arrived at, merely on the result of their own comparisons and criticisms of the witnesses and of their own view of the probabilities of the case. The course of the trial and the whole substance of the judgment must be looked at, and the matter does not depend on the question whether a witness has been cross-examined to credit or has been pronounced by the judge in terms to be unworthy of it. If his estimate of the man forms any substantial part of his reasons for his judgment the trial judge's conclusions of fact should, as I understand the decisions, be let alone. In The Julia (1) Lord Kingsdown says: 'They, who require this Board, under such circumstances, to reverse a decision of the Court, below upon a point of this description, undertake a task of great and almost insuperable difficulty. ... We must, in order to reverse, not merely entertain doubts whether the decision below is right, but be convinced that it is wrong.' Wood L.J., in The Alice (1), says: 'The principle established by the decision in The Julia (2) is most singularly applicable. ... We should require evidence that would be overpowering in its effect on our judgment with reference to the incredibility of thc statements made.' James L.J. thus laid down the practice in The Sir Robert Peel (3): 'The Court will not depart from the rule it has laid down that it will not overrule the decision of the Court below on a question of fact in which the judge has had the advantage of seeing the witnesses and observing their demeanour, unless they find some governing fact which in relation to others has created a wrong impression."

20. We are satisfied that this is still an accurate statement of the law.

21. Having regard to the observations made earlier in this judgment we are of the view that the defendants have fallen far short of the requirements referred to by Lord Summer. Even taking into account all of the surrounding circumstances and critically examining the relevant correspondence the Judge was justified in making the findings which are complained of. The consequence of this must be that this appeal fails and this is the order we make. We also make an order nisi that the plaintiff will have their costs of the appeal.