Keung Shiu Tang v. D.H. Shuttlecocks Ltd.

IN THE COURT OF APPEAL

1994, No. 5
(Civil)

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J U D G M E N T

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Godfrey, J.A. :

1. This appeal arises out of a purchaser's action for specific performance of a contract for the sale of land, a contract constituted by a provisional Sale and Purchase Agreement made on 12 September 1991 and accepted by both vendor and purchaser at the trial of the action as being a binding agreement.

2. The facts are not in dispute. I shall refer to them in a moment.

3. The case came on for hearing before Mr. Justice Rhind on 8 and 9 November 1993. On 3 December 1993, the judge, in a reserved judgment, decided the case in favour of the purchaser. He did not however in terms declare that the contract ought to be specifically performed and carried into execution. What the judge did was to say :

"I now enter interlocutory judgment in the Purchaser's favour, but, on a date to be fixed, would like to be addressed on remedies, unless the parties can reach agreement on that."

4. For myself, I am puzzled by this for I do not know what "interlocutory judgment" the judge had in mind; but I take the judge to have been intending to make an order declaring that the agreement of 12 September 1991 ought to be specifically performed and carried into execution but adjourning further consideration of the details of the order.

5. As it happens, however, no judgment or order at all has yet been made; and, strictly speaking, this appeal is in competent. An appeal lies only against a judgment or order, which means a formal judgment or order of the court. Time for appealing such an order is regulated, under Order 59 rule 4 of our local Rules of the Supreme Court, as follows:

"Every notice of appeal must be served under rule 3(5) not later than the expiration of the following period beginning on the date immediately following the date on which the judgment or order of the court below was sealed or otherwise perfected."

6. There follow the various time limits which are applicable. Plainly, before an appeal to this court can be competent, a judgment or order has to be made which has been "sealed or otherwise perfected". This problem can however be overcome by postponing the making of the order this court will make on this appeal until after the judge below has himself made an order along the lines I have suggested. Once that order has been perfected, this appeal can be disposed of as an appeal against that order.

7. I can now turn, from these technical matters, to the facts of the case.

8. The provisional Sale and Purchase Agreement was, as I have said, made on 12 September 1991. The judge set it out in his judgment and I must do the same. It read as follows:

"Provisional Sale and Purchase Agreement

No. 45 Granville Road
Kowloon

This Agreement signed between KUENG SHIU TANG (the Vendor) of 3/F, 45 Granville Road, Kowloon and D.H. SHUTTLECOCKS LIMITED (the Purchaser which shall includes its assignees and nominees) of 1102-3 Taikoktsui Centre, 11-15 Kok Cheung Street, Taikoktsui, Kowloon for the sale & purchase of the above-mentioned property on the following main terms and conditions:-

1. Sale Price

HK$1,080,000 (HONG KONG DOLLARS ONE MILLION AND EIGHTY THOUSAND ONLY) subject to good title and vacant possession and free from encumbrances.

2. Terms of payment

i) An initial deposit of HK$200,000.00 payable on the signing of this Agreement. (The said deposit shall be held by F. ZIMMERN & CO the Vendor's Solicitor, as stakeholder money and shall not be released to the Vendors unless and until the signing of the formal Sale & Purchase Agreement).

ii) A further deposit of HK$400,000.00 payable on the signing of formal Sale & Purchase Agreement within 5 working days after the date of receipt of the title deeds by the Purchaser's Solicitor.

iii) The balance of HK$480,000.00 payable on completion of Sale.

3. Completion of Sale

Within 2 weeks from the signing of formal Sale/Purchase Agreement or 11th October 1991 whichever the later.

4. Legal Costs

Each party shall bear its own costs.

5. Stamp Duty

To be borne solely by the Purchaser.

6. Remarks

The premises is to be sold in its existing conditions.

Notwithstanding anything contained herein to the contrary, upon receipt of the initial deposit by the Vendors, this Agreement shall have binding effect and neither party can rescind from the Agreement with the exception that should the title of the property be defective, the Purchaser shall have the right to terminate this Agreement and thereupon, the said initial deposit shall be returned to the Purchaser but without interest.

If the Purchaser shall fail to sign the Sale & Purchase Agreement on or before the date specified as mentioned in paragraph 2 above for reasons other than defective title, the initial deposit mentioned herein and all other payments (if any) made by the Purchaser shall be absolutely forfeited to the Vendor as liquidated damage and thereupon this Agreement shall be terminated and neither party shall have any further claims against the other and the Vendor shall be at liberty to resell the premises."

Then the date appears; and the signatures of the parties; and the receipt for the initial deposit of HK$200,000.00.

9. The judge said:

"Despite the inclusion of the word "Provisional" in the title of that document signed by the parties on 12th September 1991, there can be no doubt about its being a fully binding contract."

10. The parties had so agreed before the judge. In this court, counsel for the appellant sought to argue that in fact this agreement was not "a fully binding contract" (as the judge called it) at all. However, this court did not think it right to give the appellant leave to argue this point, having regard to the way in which the case was conducted below.

11. I turn now to the history of the matter.

12. On 16 September 1991, the purchaser's solicitors wrote to the vendor's solicitors asking for a draft of the formal Sale and Purchase Agreement (which was, of course, intended, once its terms were settled, and it was duly signed, to supersede the provisional Sale and Purchase Agreement).

13. On 18 September 1991, the vendor's solicitors sent the purchaser's solicitors the title deeds.

14. On 19 September 1991, the vendor's solicitors sent to the purchaser's solicitors the first draft of the formal Sale and Purchase Agreement which they proposed for the purchaser's solicitors' consideration.

15. On 25 September 1991, a flurry of activity took place at the end of which the negotiations between the parties' solicitors over the details of the formal Sale and Purchase Agreement ran into the sand and the contract went off.

16. The exchanges on 25 September 1991, which consisted of no less than 8 letters, started with a letter from the purchaser's solicitors to the vendor's solicitors in which a letter the purchaser's solicitors returned the draft formal Sale and Purchase Agreement to the vendor's solicitors proposing a number of amendments. By a second letter, the purchaser's solicitors sent to the vendor's solicitors a cheque for HK$400,000.00, as provided for in the provisional Sale and Purchase Agreement, but on terms as to its retention and disposition to which the vendor's solicitors took objection. (Although the original HK$200,000.00, the initial deposit, was to be held by the vendor's solicitors as "stakeholder money", the vendor's solicitors did not want to retain on the same terms the further deposit of HK400,000.00.) The very first letter from the vendor's solicitors to the purchaser's solicitors, in response to all this, contained an unjustified allegation of breach of contract, which did not augur well for the future of the negotiations. This was followed by a third letter from the purchaser's solicitors to the vendor's solicitors, which raised a requisition on title. Then there was a fourth letter from the purchaser's solicitors to the vendor's solicitors, stating that they were awaiting an engrossment of the formal Sale and Purchase Agreement incorporating the amendments they had proposed. This was followed by a second letter from the vendor's solicitors to the purchaser's solicitors, dealing with the purchaser's proposed amendments to the formal Sale and Purchase Agreement. That was followed by a third letter from the vendor's solicitors to the purchaser's solicitors enclosing an engrossment of the formal Sale and Purchase Agreement but in terms which had not been agreed; at this stage the negotiations had not resulted in any agreement as to what the formal Sale and Purchase Agreement should contain. The last letter of the 8 was a fourth letter from the vendor's solicitors to the purchaser's solicitors returning the cheque for HK$400,000.00. The farce was over.

17. On 26 September 1991, the vendor's solicitors wrote to the purchaser's solicitors calling the contract off and purporting to forfeit the purchaser's initial deposit. The purchaser's solicitors, in their reply to the vendor's solicitors, made it perfectly clear that the purchaser wanted to pursue the negotiations over the detail of the formal Sale and Purchase Agreement; on 27 September 1991, the vendor's solicitors wrote to the purchaser's solicitors reiterating that the contract was off.

18. There was subsequent correspondence between the parties; but I need not deal with it.

19. This is, then, yet another case in which a contract has foundered as a result of the unsuccessful attempts of the parties' solicitors to flesh out a half-baked provisional Sale and Purchase Agreement which left it wholly uncertain what it was and was not intended that the formal Sale and Purchase Agreement was to contain, a matter which could be resolved only by negotiation.

20. Speaking from myself, I can discern absolutely nothing in the correspondence to which I have referred which evinces an intention on the part of the purchaser to repudiate the contract. Quite the contrary; the purchaser was anxious to ensure that he obtained the property.

21. If, during the course of the negotiations in these cases over the content of the formal Sale and Purchase Agreement, one party or the other makes demands as to what is to go into the formal Sale and Purchase Agreement which are so unreasonable that he must be taken to be demonstrating an intention no longer to be bound by the contract into which has already entered, then he may well be held to have repudiated it.

22. But a repudiation is not to be lightly inferred. There is now a trilogy of cases in which the court has made it clear that the mere fact that you insist on what you think are your rights, even if you later turn out to have bee wrong about that, is not to be treated as evincing an intention on your part to repudiate the contract. The earliest of the three cases I have mentioned was James Shaffer Ltd v. Findlay Durham & Brodie [1953] 1 WLR 106, in which Lord Justice Singleton (referring to a judgment of Lord Justice Atkin in an earlier case) said this:

"After he had cited definitions of repudiation he added: 'They all come to the same thing, and they all amount at any rate to this, that it must be shown that the party to the contract made quite plain his own intention not to perform the contract.'"

23. In the second case, Sweet & Maxwell Ltd v. Universal News Service Ltd [1964] 2 Q.B. 699, Lord Justice Harman (at p.703) said, in relation to the passage I have cited:

"That again is the test, and judged by that test I do not think the defendants in this case made it plain that they did not intend to perform the contract. It was attractively suggested that what they did was to say "we will only perform the contract "upon our terms and not on yours," and that the contract they offered was a different contract from that which they were bound to perform and that, therefore, they repudiated. But I do not think that a person who maintains his view of the construction of what is, after all, a not very perspicuous document is repudiating because he says "my view of it is this, and this I will do" and the other man says "well, my view is different." Let them go to the court and have the matter determined as they can. But to seize upon an attitude of that sort and call it repudiation in order to serve an object which was then of course dear to the hearts of the plaintiffs, who wanted to get rid of this deed, is not in my opinion justified, and I would therefore differ from the judge's view on that."

The Lord Justice went on to say: "If there was no repudiation there ought to be specific performance."

24. In the third case, Woodar Investment Development Ltd v. Wimpey Construction UK Ltd [1980] 1 WLR 277, Lord Wilberforce, at p.283, said that the proposition that a party who takes action relying simply on the terms of the contract and not manifesting by his conduct an ulterior intention to abandon it is not to be treated as repudiating it; and he agreed with what had been said in the James Shaffer Ltd case and the Sweet & Maxwell case.

25. Applying these well-settled principles of law to the facts of this case, I find myself entirely unable to come to the conclusion that here we should infer from the conduct of the purchaser an intention to repudiate the contract. Having come to that conclusion, there is nothing left in the case. If the purchaser has not repudiated the contract, then it follows that the vendor must have done; because his solicitors' letter of 27 September 1991 clearly evinced an intention to treat the contract as at the end. Solicitors acting for vendors would do well to remember that the vendor under these provisional Sale and Purchase Agreements has no more right than the purchaser to insist on what is to go into the intended formal Sale and Purchase Agreement. If the parties differ, their difference should be resolved by application to the court, not by high-handed unilateral action such as (as here) the purported forfeiture of the purchaser's deposit by the vendor.

26. For the reasons I have endeavoured to state, I am of the opinion that the judge was right to order, as I think he must have intended to order, a specific performance of the contract here and I would accordingly dismiss this appeal.

Mortimer, J.A.:

27. I entirely agree and do not wish to add anything.

Penlington, J.A. :

28. I agree.