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HCA005920/1989
IN THE SUPREME COURT OF HONG KONG
HIGH COURT
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BETWEEN
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GRANDWIDE LIMITED
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Plaintiff |
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AND
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BONAVENTURE TEXTILES LIMITED
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Defendant |
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Coram: Hon. Jones J. in Chambers
Date of hearing: 16 February 1990
Date of handing down judgment: 23 February 1990
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JUDGMENT
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1. This is an appeal against a decision of Master Jones made on the 8th December 1989 when he granted the plaintiff's application for summary judgment under Order 14 of the Rules of the Supreme Court, inter alia, for the sum of $13,740,000 damages to be assessed and a declaration of indemnity.
2. The proceedings arise as a result of a written agreement made on the 18th May 1989 for the sale by the defendant to the plaintiff of six floors and ten car parking spaces on the ground floor of an industrial building formerly known as the Bonaventure Industrial Building at Cheung Sha Wan for the sum of $68,700,000. A deposit of $13,740,000 was paid under the agreement by the plaintiff to the defendant.
3. The latest date for completion of the purchase was 12:00 noon on the 30th September 1989 whilst in every respect time was to be of the essence. The defendant was aware that the plaintiff had entered into the contract for the resale of the property to various sub-purchasers which agreements were also due to be completed on the same date.
4. It is necessary for me to consider the following clauses of the agreement for the purposes of this appeal:-
"7. The Purchaser hereby declares that the Purchaser has inspected and is fully satisfied with and accepts in all respects the existing state, condition and finishes of the said premises. No warranty is given by the Vendor on any of the following matters, namely :-
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(a) |
The physical state and condition, quality or fitness of the fittings and finishes or the installations and appliances (if any) incorporated in the said premises or in the Building;
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(b) |
The physical state and condition of the said premises or of the Building. |
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9. Possession will be retained and all outgoings (including but not limited to rates, crown rent and management fees) will be discharged by the Vendor up to but exclusive of the actual day of completion and as from and inclusive of that day possession will be taken and all outgoings (including but not limited to rates, crown rent and management fees) in respect of the said premises will be discharged by the Purchaser and all current outgoings shall if necessary be apportioned between the Vendor and the Purchaser and paid on completion.
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21. Vacant possession of the said premises shall be given by the Vendor to the Purchaser on completion." |
5. By a letter dated the 29th September 1989 the day before the date fixed for completion solicitors acting for one of the sub-purchasers Gloss Express Limited who had agreed to purchase the 4th and 5th floors and car parking spaces Nos. 5, 10, 11 and 12 informed the plaintiff's solicitors that the premises were in such a state that there appeared to be a doubt as to whether vacant possession would be able to be given as agreed. The plaintiff's solicitors then wrote to the defendant's former solicitors on the 30th September 1989 setting out details of the complaints that had been received in the following terms:-
"Re : Bonaventure Industrial Building, Kowloon
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We refer to the above property, the completion of the sale and purchase of which is scheduled to take place on or before 12:00 noon today.
Upon inspection of the above property by our client's representative today, the following observation is made .-
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6. 4th and 5th Floors
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(a) |
On the flat roof of 4th Floor, there is a greenhouse. The particulars of such greenhouse, which are made of glass, are broken. Weed is also found inside and around such structure;
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(b) |
There is also on the flat roof of the 4th Floor an illegal structure;
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(c) |
The wooden partitions installed and erected in the said floors have not been removed;
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The false ceiling has not been removed;
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The overhead lights have not been removed;
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Air-conditioning pipes have not been removed;
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A lot of chairs and rubbish are found in the said floors. |
Car Parking Spaces
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All car parking spaces are obstructed or blocked by rubbish or other heavy materials.
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We take the view that the aforesaid situation should immediately be remedied or rectified by your client before completion, failing which your client will not be able to deliver vacant possession of the above property to our client and/or its purchaser(s).
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As it is a condition precedent of the Agreement for Sale and Purchase between our respective clients that vacant possession of the above property should be delivered on possession. Your client's immediate attention to the aforesaid is appreciated.
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In the meantime, we are instructed to confirm that our client is willing, able and ready to complete the purchase of the above property so long as vacant possession of the above property can and is delivered to our client on completion.
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Yours faithfully, |
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BAKER & MCKENZIE" |
7. On the same day a series of photographs were taken at the premises on behalf of the plaintiff and defendant at various times, both before and after 12 noon. The photographs show rubbish, articles and equipment on the various floors and common areas and in the car parking spaces with some accompanied by written comments at the side of the photograph. Some of the car parking spaces were also occupied by vehicles that did not belong to the defendant. However, the defendant alleges that all its machinery, stock and furniture had been removed from the premises by the 25th September 1989 leaving only some miscellaneous small items for removal while further removal work continued up to and including the date fixed for completion.
8. Mr Rogers, counsel for the plaintiff, submitted that clause 9 of the agreement to which I have referred entitles the plaintiff to take possession with effect from midnight on the 29th September 1989 with the result that if goods and rubbish belonging to the defendant were still on the premises at that time, vacant possession could not have been given on completion. However, I do not accept that interpretation for I agree with Mr Tang, counsel for the defendant, that clause 9 must be read in conjunction with clause 21 whereby vacant possession must be given on completion. Clause 9 is directed to the outgoings of the premises for the purposes of apportionment. Physical possession of the premises only takes effect from the time of completion.
9. By clause 13 of the amended statement of claim, the plaintiff's action against the defendant for failure to deliver vacant possession is in particular directed to the situation on the 4th and 5th floors of the premises and the ground floor car parking spaces which lists the following details :-
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Particulars
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(a) |
rubbish, metal racks, furniture, wooden boards, equipment and materials were left at the Premises;
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(b) |
false ceiling, overhead lights, overhead fans and steel supports were not removed at the Premises;
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(c) |
garments, hangers, wooden shelves, paper cartons, buckets, chemical containers and ception baskets were left at the Premises
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(d) |
a greenhouse-like structure was present on the flat roof of the 4th Floor with weed inside structure;
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disconnected washbasins were left at the Premises;
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the said ground floor car parking spaces were filled with the Defendant's goods, rubbish and materials tendering most of the said car parking spaces inaccessible; and
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a structure with a metal roof and windows was present on the flat roof of the 4th Floor with metal racks inside." |
The reference to fixtures and fittings in the particulars is now no longer relied upon by the plaintiff.
10. The plaintiff contends that the evidence with the admission by the defendant that removal work was still taking place both before and after the time fixed for completion is conclusive that vacant possession could not be given. However, the defendant alleges that a number of items that were still on the premises at 12 noon on the 30th September had been removed during the course of the afternoon that day.
11. Despite the plaintiff's repudiation of the contract the defendant granted an extension to complete until the 2nd October by 5 p.m., but this offer was declined. The defendant subsequently sold the 1st, 2nd, 3rd and 6th floors of the building and seven of the car parking spaces direct to three of the plaintiff's sub-purchasers. Three of the sub-purchasers have instituted proceedings against the plaintiff for breach of contract whilst another has threatened to issue proceedings by reason of the plaintiff's default to complete. The plaintiff seeks an indemnity against the defendant for any liability that it incurs to its sub-purchasers.
12. I was referred by counsel to Cumberland Consolidated Holdings, Limited v. Ireland [1946]1 K.B. 264 which held that :-
"A vendor who leaves chattels of his own on property sold by him to an extent depriving the purchaser of the physical enjoyment of part of the property has failed to give vacant possession, and it is no answer for the vendor to have abandoned his ownership of the chattels on completion."
Lord Greene M.R. who delivered the judgment of the court at p.270 had this to say :-
"Subject to the rule de minimis a vendor who leaves property of his own on the premises on completion cannot, in our opinion, be said to give vacant possession, since by doing so he is claiming a right to use the premises for his own purposes, namely, as a place of deposit for his own goods inconsistent with the right which the purchaser has on completion to undisturbed enjoyment."
Later on page 271, he said :-
".... the right to actual unimpeded physical enjoyment is comprised in the right to vacant possession When we speak of a physical impediment we do not mean that any physical impediment will do. It must be an impediment which substantially prevents or interferes with the enjoyment of the right of possession of a substantial part of the property. Such cases will be rare, and can only arise in exceptional circumstances, and there would normally be (what there is not here) waiver or acceptance of the position by the purchaser."
13. Mr Rogers submitted that subject to the de minimis rule, if the vendor leaves property in the premises, he does not give vacant possession so that the presence of rubbish and goods shown in the photographs with the presence of workmen carrying out removal work, ipso facto provides sufficient evidence that vacant possession could not have been given. He went on to say that the de minimis rule does not apply in this case having regard to the undisputed evidence while the obstruction caused in two of the car parking spaces which were to be sold separately was in itself sufficient evidence of a substantial interference with part of the property to entitle the plaintiff to judgment. However, it is significant to observe that the two car parking spaces in question were two of the seven car parking spaces that were subsequently sold direct by the defendant to one of the plaintiff's sub-purchasers.
14. The defendant relies under clause 7 of the agreement upon the inspection and approval by the plaintiff's sub-purchasers with regard to the physical condition of the 1st, 2nd and 3rd floors as amounting to a waiver of the presence of any rubbish and goods while no complaint was made by the plaintiff about the condition of the 1st, 2nd, 3rd and 6th floors in any event.
15. In respect of the 4th and 5th floors and the car parking spaces on the ground floor, the defendant relies upon the de minimis rule and contends that the obstructions caused were only of a temporary nature.
16. I have been urged to adjudicate the issue as to whether the defendant was in a position to give vacant possession upon the admissions by the defendant with the aid of the photographs. However, these are factual matters which are in dispute and cannot be decided without viva voce evidence. While it is clear that all the defendant's property and rubbish had not been removed by the time fixed for completion, nevertheless, there are undoubtedly triable issues to be determined as to the applicability of the de minimis rule, the issue of waiver or estoppel and whether there was in fact a substantial interference with the right of enjoyment of possession to the various floors and car parking spaces in question.
17. Accordingly the appeal will be allowed and the judgment of Master Jones is set aside. There will also be an order nisi for costs of the hearing before the master and of the appeal to the defendant with a certificate for two counsel. In the circumstances of this case, I consider that an order should be made for a speedy trial. I shall grant liberty to apply in case the parties wish to address me on any other matter.
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(B.L. Jones) |
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Judge of the High Court |
Representation:
Mr Anthony Rogers, Q.C. and Mrs Margaret Clough (Baker & McKenzie) for Plaintiff
Mr Robert Tang, Q.C. and Mr Andy Hung (Ng & Yung) for Defendant
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