LEE WAI MAN AND ANOTHER v. TANG CHOI SAM AND ANOTHER

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JUDGMENT

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Nazareth V-P:

1. This is an appeal against the decisions of Yuen J refusing the appellants' Order 14 summary judgment and by order granting the respondents unconditional leave to defend.

2. The appellants were purchasers under an agreement for the sale and purchase of certain property from the two defendants who were the vendors.

3. The matter came before Yuen J and the defendant vendors appeared in person. That was in February 1999. They had in May 1998 in the context of those same proceedings filed an affirmation in which they said, among other things, that when the purchasers viewed the property prior to entering into the sale and purchase agreement, the two defendants had pointed out to the appellants that there was an illegal structure on the roof. They said that they had explained to the purchasers in the presence of the estate agent who was the common agent for both parties, that all the roof structures on village houses were in contravention of the law. They also said that nevertheless the purchasers were prepared to purchase the particular property. All this was said by them in an affirmation. They went on to say in their affirmation that they actually asked the purchasers to note that down in the provisional sale and purchase agreement, and that again in the presence of the purchasers, the estate agent told the vendors that it would be very difficult for the purchasers to get a mortgage if that was written down, and asked the vendors to accommodate the purchasers and leave it out of the provisional sale and purchase agreement. The vendors said that thereupon they did not insist on having that written down in the provisional sale and purchase agreement. So much for the background.

4. At the end of the hearing the judge concluded in the exercise of her discretion that the application being one for summary judgment, in the light of the factual matters which had been raised in the defendants' affirmation right from the start, this was not a suitable case for summary judgment, and she gave the defendants unconditional leave to defend.

5. Mr Lee Tung Ming, who now appears before us on behalf of the appellants, accepts that the judge's decision was made in the exercise of her discretion. He submits, however, that first, the collateral agreement by which description the judge referred to what had taken place, was quite a separate matter from a requisition concerning an advisory letter from the New Territories Administration asking the vendors to remove their illegal structure or the Government would take appropriate action. The background to that point is that between 14 October 1997 and 1 November 1997 the purchasers solicitors issued six letters making requisitions from the vendors for specification of what action they had taken to remove the illegal structure. They received no reply to these letters. Mr. Lee's submission is that the inference to be drawn from this is that the collateral agreement never existed. In the context of that submission, he points out that the date of completion was on 23 October 1997. I pause to mention also that the point was made below to the judge that it would have been quite an easy matter for the vendors solicitors, they being represented at the time, to have answered those requisitions. Speaking for myself, if any inference can be drawn from the lack of any replies to those six letters, pointing to the absence of a collateral agreement, in my view, which I doubt, it must be one that has very little strength.

6. The second point relied upon by Mr Lee is that there was in the sale and purchase agreement entered into by the parties a warranty that there were no illegal structures on the property. This he submits, is inconsistent with a collateral agreement. That may well have been so in ordinary circumstances, but the collateral agreement here is claimed to have included a specific term that no mention would be made of the existence of the illegal structure. Moreover, in the ordinary way, it might not have been unlikely that in the New Territories in relation to the sort of property being dealt with, that such warranties were normally included. There might have been no evidence to that effect, but again I do not find this to be a point that is of any great strength.

7. Notwithstanding all of that, Mr Lee is right that those two features may be thought to point to the absence of the collateral agreement.

8. Third, Mr Lee relies upon a letter from Midland Realty, the estate agent which acted for both parties, to the vendors which refers to their request that the estate agent should have put into the agreement a reference to the property being accepted upon an "as is" basis. The point was made that there was no ground for this complaint as the provisional agreement did indeed contain an reference to the "as is" basis. Again, I have to say that if any inference of assistance can be drawn from this matter, it cannot, in my view, be other than of the weakest sort.

9. I pause at this point to mention two matters that Mr Lee very properly brought to the attention of this Court. The first was a passage that appears at the top of p.5 of the judge's judgment which reads:

This passage followed immediately after the judge referred to the submission before her on behalf of the purchasers that it would have been easy enough for the vendors solicitors to have answered the requisition on the basis the defendants outlined in their affirmation. Mr Lee does not suggest this passage in arty way undermines the judge's conclusion. But, given particularly that the defendants were not represented, he felt it his duty to bring it to the attention of the Court. For my part, I think he is to be commended for doing so, but I cannot see that it has any material bearing on the appeal.

10. Mr Lee, on the same basis and in the best traditions of the Bar, also drew the Court's attention to an affirmation of the vendors which made a reference to the possibility that the Lands Department might issue again letters concerning the roof structure, and referring to the risk of action being taken. However, here again, this matter does not seem to me to add very much to the vendors' case.

11. I come then to the nub of the appeal. The judge decided this matter in the exercise of her discretion. I can find no good reason to interfere with the exercise of that discretion. To intervene I would have to reach a conclusion that she was plainly wrong. Far from coming even remotely close to that conclusion, it seems to me she rightly exercised her discretion in refusing summary judgment and granting unconditional leave. This case cries out for trial on the facts. Furthermore, I wholly reject the artificial distinction that Mr Lee sought to draw between the collateral agreement and the requisitions directed at title. He was at pains to emphasise that the latter were not in respect of the collateral agreement, but in respect of the letter from New Territories administration requiring the removal of the illegal structure. That submission I find to be wholly artificial and unattractive. The collateral agreement, if made, would have been specifically directed to suppression of any reference to the illegal structure, and moreover, to full acceptance of its existence. Even mere reference to those terms seems to me to be an adequate answer to any such requisition. assuming the latter to be properly made.

12. Accordingly, I would dismiss the appeal.

Leong JA:

13. I agree. The crux of the matter is whether there was, as asserted by the respondent, a collateral agreement between the parties that the property was to be purchased with the illegal structure and that this agreement should not be put into the provisional agreement or the formal agreement lest the respondent be in difficulty to get a mortgage from the bank.

14. It appears that if there was such a collateral agreement, the requisition as to the advisory letter from the government concerning the illegal structure would not have been properly raised to require any answer.

15. The facts that six letters were sent from the appellant's solicitors to the respondent's solicitors within a period of 17 days raising or referring to this requisition to which there was no response, the formal sale and purchase agreement does contain a warranty by the respondent that there was no illegal structure and further that there was a reply from Midland Realty, the estate agent, acting for both parties, to the complaint of the respondent about the lack of a "as is" term in the provisional agreement do not give rise to any strong inference that there was no such collateral agreement between the parties.

16. This issue of collateral agreement cannot be resolved summarily without a trial.

17. The Judge was right in exercise of her discretion to refuse the application for summary judgment and give the respondent unconditional leave to defend. I would also dismiss the appeal.

Nazareth V-P:

18. The appeal is accordingly dismissed.