CRYSTAL VIEW ENTERPRISES LTD v. KAN YING KIT INGLEZ

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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JUDGMENT

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INTRODUCTION

1. This is yet another case in which the purchaser of property did not complete the purchase by the date originally stipulated in the sale and purchase agreement. The twist in the story is that it is claimed that the date for the completion of the agreement was postponed in the course of a telephone conversation between the parties. The complication is that the date of completion was fixed by reference to the occurrence of an event which only the vendor would get to hear of, and difficult questions arise as the nature of the vendor's obligation to inform the purchaser of it and the effect of his failure to do so. All dates in this judgment refer to 1991 unless otherwise stated.

THE SALE OF THE FLAT

2. In March 1991, the Defendant, Mr. Inglez Kan, decided to sell his flat in Mid-Levels. The flat was Flat 23B, Block 1, Scenic Heights, 59A-B Conduit Road. It was placed on the market. On 25th March, Mr. William Tso and his wife Cindy came to view it. Mr. Kan agreed to sell the flat to them for $1.94m., and they agreed to buy it through the Plaintiff, Crystal View Enterprises Ltd. ("the Company"), a company which they controlled.

3. The flat had been jointly owned by Mr. Kan and his late wife. She had died intestate in July 1990. The sale could not have been completed, therefore, until the Inland Revenue Department had issued a certificate of receipt of, or exemption from, estate duty in respect of her interest in the flat. It was not known when such a certificate would be issued. It was necessary, therefore, for a special condition relating to the date of completion to be included in the sale and purchase agreement between Mr. Kan and the Company dated 12th April 1991 ("the agreement"). What it provided in Part II of Schedule 3 was that the sale would be completed either

Whichever was the earlier, but not before September 1991. In order to ensure that Mr. and Mrs. Tso knew that the certificate had been issued, and therefore knew that the Company had to complete the sale within a month, Mr. Kan undertook in cl.31 of the agreement to "serve" the Company or its solicitors with notice of the issue of the certificate within seven days of its issue.

4. However, the requirement to give such a notice did not necessarily mean that Mr. and Mrs. Tso were going to know that the Company had to complete within a month. After all, if the certificate was issued in December, they would have less than a month's notice, and if the certificate was issued towards the end of December, they would have hardly any notice at all. However, if Mr. Kan had not "obtained" the certificate by the end of December, there was no question of the Company still being required to complete the agreement. That was because cl.30 of the agreement provided that, in that event, the Company could either give Mr. Kan written notice to rescind the agreement or wait for the certificate to be issued.

5. Part II of Schedule 3 to the Agreement also provided for the time and place of completion. Completion was to take place at the office of Mr. Kan's solicitors, Messrs. Joseph C. T. Lee & Co. ("JCTL"), between 10:00 a.m. and 4:00 p.m. if completion was on a weekday, and between 10:00 a.m. and noon if it took place on a Saturday. Time was expressly provided in cl. 9 to be of the essence.

THE ISSUE OF THE CERTIFICATE

6. The certificate in which the Assistant Commissioner of Estate Duty certified that no estate duty was payable in respect of the late Mrs. Kan's interest in the flat was dated 29th November 1991. It was sent to JCTL under cover of a letter dated 3rd December, and that letter was stamped as having been received by JCTL on 6th December.

7. In my judgment, the certificate was "issued" on 6th December when it was received by JCTL. Cls. 30 and 31 of the agreement contemplated that the date of the issue of the certificate would be the date when either Mr. Kan or JCTL received it. Cl. 31 would not make sense otherwise. How could notice of the issue of the certificate be served by Mr. Kan within seven days of its issue if its issue was the date it came into existence and if a period of more than seven days elapsed between that date and Mr. Kan becoming aware of its existence? And the use of the word "obtain" in cl. 30 shows that the agreement was linking the "issue" of the certificate to its receipt by Mr. Kan.

8. Moreover, the High Court of Australia in Koon Wing Lau v. Calwell (1949) 80 CLR 533 had to consider the meaning of the word "issue" in the context of the issue of a certificate of exemption. Latham C.J. said at p.568:

"The word 'issue' involves the idea of something passing from one person to another, sending forth, delivering. A document which is at all times retained by a person in his own sole control cannot be said to have been issued by him. He might execute or create the document and then decide not to give it to anybody. In such a case he would not have issued the document or even have purported to issue it."

9. Two consequences follow from my finding that the certificate was issued on 6th December. First, Mr. Kan was obliged to serve notice of its issue on the Company or its solicitors by 13th December. Secondly, the contractual date for completion of the sale was 31st December. Since 31st December was a Tuesday, the time for completion was between 10:00 a.m. and 4:00 p.m.

NOTICE OF THE ISSUE OF THE CERTIFICATE

10. There is a substantial dispute as to when notice of the issue of the certificate was given. Mr. Kan's case is that notice of the issue of the certificate could be given orally, and that it was given orally on 6th December. The Company's case is that it could only be given in writing, and that it was not given in writing until 21st December when a copy of the certificate was faxed to the Company's solicitors. The importance of the dispute is that, if notice of the certificate was not given until 21st December, Mr. Kan would have been in breach of cl. 31 of the agreement, and that may have had an effect on the obligation of the Company to complete the sale on 31st December.

11. I have no doubt that the notice required to be given by cl. 31 had to be in writing. That is the combined effect of sections 62(1) and 62(5) of the Property and Conveyancing Ordinance (Cap.219). Section 62(1) provides:

"Any notice relating to land required or authorized by this Ordinance to be served or given shall be in writing."

Section 62(5) extended this provision to instruments affecting land, such as the agreement for the sale of the flat by Mr. Kan:

"Unless the contrary intention is expressed, the provisions of this section shall extend to... notices required to be served by any instrument affecting land..."

No contrary intention is expressed in the agreement: indeed the use of the word "serve" in cl. 31 reinforces the point. Whether an obligation "to serve a notice" can be met by the giving of notice orally will depend on the context in which the obligation arises, but the selection of the word "serve", as opposed to "give", implies that it is notice in writing which is contemplated: see R. v. Shurmer (1886) 17 QBD 323. I do not discern anything in the agreement from which it could be inferred that the word "serve" should not bear its usual implication.

12. In reaching the conclusion that the notice required to be given by cl. 31 had to be given in writing, I have not overlooked cl. 26 of the agreement on which Mr. Nigel Aiken Q.C for the Company placed some reliance. However, I do not read cl. 26 as requiring that any notice required to be given by the agreement be given in a particular way. In my view, cl. 26 merely dealt with the legal effect of a notice given in a particular way, namely a notice sent by post.

EFFECT OF FAILURE TO GIVE NOTICE OF THE ISSUE OF THE CERTIFICATE UNTIL 21ST DECEMBER

13. The Company did not complete the sale on 31 st December. It claims that it did not do so for two reasons. First, it alleges that on 21st December Mr. Kan agreed with Mrs. Tso that completion of the agreement would be postponed to 21st January 1992. I shall return to that allegation in detail later. Secondly, the Company alleges that Mr. Kan's breach of cl. 31 of the agreement in failing to give notice of the issue of the certificate until 21st December left the Company with insufficient time to raise the funds which it needed to pay the balance of the purchase price of the flat.

14. The law on the topic is clear. In China Pride Investment Ltd. v. Silverpole Ltd. [1995] 1 HKLR 48, Godfrey J.A. said at p.61:

"... if the failure of the purchaser to complete at the date and at the time fixed for completion is attributable, or partly attributable, to the conduct of the vendor, the vendor will not be allowed to rely on the purchaser's default as justification for calling off the contract and forfeiting the purchaser's deposit."

Godfrey J.A. made it clear that this was the simple application of the ordinary law of contract to agreements for the sale and purchase of land. However, Godfrey J.A. also recognised the existence in Hong Kong of a wider rule of equity, which was applied in Wong Kwok Yan v. Lee (CA 151/93). I described the effect of that rule in Rusky & Rose Imports Ltd. v. Loon Wear Garment Factory Ltd (HCA 9625/93) as follows:

15. Mr. Anthony Chan for Mr. Kan argued that there were two reasons why the Company's failure to complete the sale on 31st December was not even partly attributable to Mr. Kan's breach of cl. 31, and why that breach should not be stigmatised as conduct of the kind which would make it unconscionable to permit Mr. Kan to insist on his strict legal rights:

16. There is an acute conflict of evidence as to when Mr. and Mrs. Tso knew of the issue of the certificate. Mr. Kan's case is that Mrs. Tso was informed of its issue on 6th or 7th December, whereas the Company's case is that Mrs. Tso was not informed of its issue until 12th December. However, that is not an issue I need to resolve because, in either event, Mrs. Tso had been told of the issue of the certificate prior to 13th December, which was the date by which written notice of the certificate had had to be given.

17. The twist in the story relates to what Mr. Kan is alleged to have done on 13th December. He is alleged to have telephoned Sherman Ha, one of the two estate agents involved in the sale, and told her that the certificate had not been issued, that the mistake was that of his solicitors, and that the transaction could not be completed yet. That is denied by Mr. Kan, and I shall have to refer to it later in another context, but Miss Ha's evidence was that she relayed that information to Mrs. Tso. In the meantime, Miss Ha's partner, Alice To, telephoned JCTL. Her evidence was that she spoke to a Miss Lau who confirmed that the certificate had been issued.

18. Was Mrs. Tso informed of that, and if so, when? She did not give evidence on the point. Miss Ha could not recall whether she telephoned Mrs. Tso to tell her what Miss Lau had said. However, Miss To's evidence was that Miss Ha did telephone Mrs. Tso, and that she told Mrs. Tso that in Miss To's presence. Miss To did not expressly refer to that conversation as having taken place on 13th December, but I infer from the context that that was what Miss To was saying, and I find that on 13th December Mrs. Tso was told that the certificate had been issued, despite what Mr. Kan was supposed to have told Miss Ha earlier that day. That was only to be expected. If Miss Ha had informed Mrs. Tso earlier on 13th December that Mr. Kan had told her that the certificate had not been issued, Miss Ha would have got in touch with Mrs. Tso as soon as she heard that the certificate had in fact been issued. And the fact that Mrs. Tso had had it confirmed to her on 13th December that the certificate had been issued is borne out by the fact that it was on the following day, 14th December, that she and Mr. Tso visited a branch of the Bank of East Asia to apply for a loan (to be secured by way of a mortgage on the flat) for the balance of the purchase price.

19. There was one thing, though, which caused me to pause before I found that it was on 13th December that it was confirmed to Mrs. Tso that the certificate had been issued despite what Mr. Kan was supposed to have told Miss Ha earlier that day. That was the evidence of both Mr. and Mrs. Tso that the manager of the branch of the Bank of East Asia refused their application for a loan, despite being shown the sale and purchase agreement, because the date for completion could not be identified. That suggests that he was not told that the certificate had been issued, and if he was not told that, that suggests that Mrs. Tso had not had it confirmed to her that the certificate had been issued.

20. However, there are two other reasons, unrelated to the issue of the certificate, as to why the Company's application for the loan might have been refused:

21. In these circumstances, I do not accept the evidence of Mr. and Mrs. Tso that the application for a loan on 14th December was rejected on the basis that the date of completion could not be identified. Apart from anything else, the branch manager would have seen from the sale and purchase agreement that the date of completion was going to be on 31st December if the certificate was issued before then. In the circumstances, I think it more likely than not that if he had been prepared to grant a loan, he would have done so conditional upon completion taking place by 31st December, with the offer of a loan lapsing if it did not.

22. I should add that in due course a sub-sale agreement for the sale of the flat by the Company to Mrs. Tso was executed. It was dated 27th December 1991. The purchase price was $3m., i.e. more than 50% more than the sum of $1.94m. which the Company had agreed to buy the flat from Mr. Kan for. Mr. and Mrs. Tso told me that the sub-sale of the flat to Mrs. Tso had nothing whatever to do with their decision to find a way round the 70% ceiling on mortgage loans. They claimed that some time before December 1991 it had been decided that the flat should be in Mrs. Tso's name. Mr. Tso gave three reasons for that: Mrs. Tso particularly liked the flat, he had had reservations about its price, and the flat in which they were living was in her name Indeed, it was because the flat was going to be in her name that when a car parking space was bought to go with the flat in September 1991, the provisional agreement for its sale referred to the purchaser as Mrs. Tso or her nominee.

23. It may be that Mr. and Mrs. Tso had intended the flat to be ultimately in Mrs. Tso's name, but I am wholly unable to accept the evidence of Mr. and Mrs. Tso that the sub-sale had nothing to do with their decision to find a way round the ceiling on mortgage loans. The timing of the sub-sale agreement, the fact that it purported to confirm that an initial deposit of $300,000.00 had already been paid by Mrs. Tso to the Company (when no such sum had in fact been paid), the fact that it provided that the balance of $2.7m. would be paid by Mrs. Tso to the Company on completion (when no such payment was going to be made), and the fact that the agreement did not provide for a date or time for completion - all those factors overwhelmingly suggest that the sub-sale agreement came into existence for the purpose of enabling Mr. and Mrs. Tso to borrow 70% of $3m. rather than 70% of $1.94m.

24. In these circumstances, it is not necessary for me to reach a concluded view on Mr. Chan's alternative argument that Mr. and Mrs. Tso should have been ready to complete by 31st December in any event.

THE POSTPONEMENT OF THE DATE OF COMPLETION

25. The Company's case is that in the course of a telephone conversation between Mr. Kan and Mrs. Tso on 21st December, it was agreed that completion of the agreement would be postponed to 21st January 1992. That is the central issue of fact which I have to decide. It is necessary to look at the surrounding circumstances, of course, because they cast light on what was said in this crucial conversation.

          (i) The investment in Zhuhai. Mr. Kan's evidence was that he wanted to use the proceeds of sale of the flat to invest in a factory in Zhuhai. He had become involved in the project in March 1991, and had agreed to invest $1m. by the end of December. I have no reason to doubt any of that. It is confirmed by the evidence of Charles Cheung, a certified chartered accountant, who was Mr. Kan's Hong Kong partner in the venture. The need to invest his $1m. by the end of December was therefore the reason why Mr. Kan claims that he was very anxious for the sale to be completed by 31st December.

26. However, Mr. Kan recognised that if the sale was not completed until 31st December, and if the balance of the purchase price was therefore not paid until then, it would be difficult for him to pay his investment by that precise date. For that reason, he asked the estate agents if they knew which bank was going to finance the Company's purchase of the flat. If he knew that, he could open an account at that bank, and arrange for the bank to transfer $1m. to the factory in Zhuhai as soon as the balance of the purchase price had been credited to his account. Again, I have no reason to doubt that evidence. Miss Ha confirmed that on one occasion Mr. Kan had asked her the name of the "mortgage bank", though she could not recall when.

27. On the other hand, I do not think that Mr. Kan thought the problem through properly. If the balance of the purchase price was not paid until 31st December, Mr. Kan could not have remitted $1m. to Zhuhai the same day unless special arrangements had been put in place. If the $1m. was to be remitted by telegraphic transfer, he needed the name of the receiving bank, but he agreed that he had never obtained it. If it was to be paid by cheque, it would take a few days for the cheque to be cleared, but Mr. Kan did not assert that he had made arrangements for speedy clearance. I am not surprised that Mr. Kan did not think the matter through. The idea that he had to have an account at the same bank as the "mortgage bank" to facilitate the speedy remittance of the $1m. was a financially naive one, and Mr. Kan's background as the manager of a printing factory did not suggest that he is a man of commercial sophistication.

28. In these circumstances, I find that, as a result of his proposed investment in Zhuhai, subject to what he is alleged to have said to Mrs. Tso and Miss Ha, Mr. Kan remained anxious throughout December 1991 for the sale, if it was to be completed, to be completed by 31st December. In reaching this conclusion, I have not overlooked Mr. Cheung's evidence that, when Mr. Kan told him on the afternoon of 31st December that he had not received the balance of the purchase price of the flat, he told Mr. Kan that his investment "would be cancelled for the time being". The phrase "for the time being" suggests that a later payment of the $1m. might have been acceptable. Mr. Cheung gave evidence in Cantonese, and there was disagreement between Mr. Chan and Mr. Anderson Chow (Mr. Aiken's Junior) as to whether this was an accurate translation. But assuming in the Company's favour that the translation was accurate, I do not think that the Company can derive any assistance from what Mr. Cheung told Mr. Kan. What Mr. Cheung told Mr. Kan on 31st December is beside the point. The question is whether, at the time of Mr. Kan's conversation with Mrs. Tso on 21st December, he thought that the date for the payment of $1m. was cast in stone, and could not be deferred for even a few days. On that issue, although Mr. Kan never asked Mr. Cheung whether the payment could be deferred for a short while, Mr. Cheung's evidence (which I have no reason to doubt) was that he had never told Mr. Kan that he, Mr. Cheung, would have been content to have the money a few days after 31st December.

29. However, I should explain why I have added the words "if it was to be completed" to my finding that "subject to what he is alleged to have said to Mrs. Tso and Miss Ha, Mr. Kan remained anxious throughout December 1991 for the sale ... to be completed by 31st December". That is because I also find that Mr. Kan would have preferred the sale to have fallen through. True, he would not have been able to invest in the project in Zhuhai, but he knew that the market value of the flat had increased substantially since March, and I find that he reckoned that the inability to invest in Zhuai at that time would have been offset by the significantly greater sum for which he could have sold the flat if the sale to the Company did not go ahead.

          (ii) Mr. Kan's conversation with Miss Ha on 13th December. I have already referred to the fact that Mr. Kan is alleged to have telephoned Miss Ha on 13th December and told her that the certificate had not been issued, that the mistake was that of his solicitors, and that the transaction could not be completed. Miss Ha's evidence was that she then telephoned Mrs. Tso and told her what Mr. Kan had said. Mrs. Tso agrees the Miss Ha telephoned her with the news that the certificate had not been issued after all, but her evidence was that Miss Ha said that the source of her information was Mr. Wong of JCTL, not Mr. Kan. For his part. Mr. Kan denies speaking to Miss Ha over the telephone at all before 18th December or thereabouts, and Mr. Wong denies telling Mr. Kan at any time after 6th December that the certificate which had been issued on 6th December was not in fact the one required for the purposes of completion. He was never asked whether he had ever told Miss Ha that, but he did not say that he had.

30. Having considered this evidence with care, I find that Mr. Kan did speak to Miss Ha on 13th December, that he did tell her what she claims he told her (save that he added that it was Mr. Wong who had given him the information about the mistake), and that Mrs. Tso mistook the reference to Mr. Wong which Miss Ha relayed to her as a reference to the immediate, as opposed to the ultimate, source of Miss Ha's information. Why did Mr. Kan tell these untruths to Miss Ha? I find that he had by then decided that it would have been preferable for the sale to fall through. He knew that if the certificate had not been issued by 31st December, the Company could have pulled out of the sale, and he was hoping that Mr. and Mrs. Tso would have become so frustrated by the delay that they would decide to call off the sale. Again, he had not thought the matter through. He should have realised that the increase in property prices meant that the Company had got a very good deal, and that Mr. and Mrs. Tso were hardly likely to look for another flat instead. And he should have realised that his deception about the issue of the certificate would soon be exposed, because it was inevitable that (a) Miss Ha would tell Mr. or Mrs. Tso, (b) they would tell the Company's solicitors, and (c) the Company's solicitors, would get in touch with JCTL to check whether the certificate had been issued after all.

          (iii) Mr. Kan's alleged unwillingness to move out of the flat. The Company's case is that Mr. Kan wanted to postpone the date of completion because he was having difficulty moving out of the flat. That is something else which Miss Ha claims Mr. Kan told her when he telephoned her on 13th December. Mrs. Tso says that Mr. Kan told her that as well when she spoke to him over the telephone on 21 st December. Her recollection is that he said that it was because his father-in-law had moved in to live with him, and that it was difficult at that time of the year to find alternative accommodation. His father-in-law was 70, and did not want to move out of the flat in view of the financial stake which his late daughter had had in the flat.

31. Mr. Kan's evidence was that his father-in-law, Fok Kam Kan, had not been living in the flat. That is what Mr. Fok told me as well. In addition, Mr. Kan told me that Mr. Fok had never expressed an interest in his daughter's share in the flat, and Mr. Fok himself told me that he had not even visited the flat since his daughter's death. Mr. Fok is an old man, and had considerable difficulty in following a relatively straightforward question which I put to him. He would, I think, have been quite unable to remember any script which Mr. Kan might have told him to learn. On the other hand, I think that he would have remembered things which had actually happened to him. I accept the evidence of Mr. Kan and Mr. Fok on these topics. I find that Mr. Fok was not living at the flat, and that whatever Mr. Kan may have said to Miss Ha and Mrs. Tso, he had no reason, and was not prepared, to delay completion (and thereby lose the chance of investing in the project in Zhuhai) simply for the sake of a few more weeks in the flat. What Mr. Kan wanted was for the sale not to go ahead at all, but if it was to go ahead he still wanted it to be completed by 31 st December.

          (iv) The circumstances in which the conversation between Mrs. Tso and Mr. Kan took place. I have identified Mr. Kan's state of mind by the date when the telephone conversation between himself and Mrs. Tso took place: he did not want the sale to go through, but if it had to go through, he wanted it to be completed by 31st December. What about the state of mind of Mr. and Mrs. Tso? For the reasons I have already given, they had had it confirmed to them by 13th December that the certificate had been issued, and they therefore knew that the date for completion was 31st December. However, as a result of their visit to the Bank of East Asia on 14th December, they knew that before they could borrow the $2m. which they had wanted to, the purchase price of the flat had to be increased from $1.94m. to something close to $3m. so as to ensure that the loan which they wished to obtain was within the ceiling on mortgage loans, and that would require an agreement for the sub-sale of the flat to Mrs. Tso to be drawn up by their solicitors. Since Mr. and Mrs. Tso realised that they would not be able to raise the balance of the purchase price until after an agreement had been drawn up, they would have been desperate to get Mr. Kan to agree to a postponement of the date of completion.

          (v) The conversation: Mr. Kan's evidence. Mr. Kan's evidence was that on 22nd December he asked Miss To for the telephone number of Mrs. and Mrs. Tso. He wanted to speak to them about handover matters. and the payment of the purchase price. She gave him their telephone number, and that was how he spoke to Mrs. Tso that day. He claims that their conversation was a long one and that it lasted 45 minutes or so.

32. He asked whether she was going to borrow the money needed to complete the sale from Citibank (which was the bank which he had, on an earlier occasion, been told would be financing the Company's purchase of the flat). She told him that she was not, because Citibank would not advance her the 90% of the purchase price which she needed in the light of the new 70% ceiling on mortgage loans, and that some banks would not lend to companies, only to individuals. However, she said that she knew many banks so that raising the money would not be any problem. He told her that she should let him know which bank she was going to borrow the money from so that he could arrange to transfer the sum necessary to Zhuhai. His evidence was that his involvement in Zhuhai was the main topic of the conversation, but by that I think he meant that the main topic of the conversation was his need to have the proceeds of sale in order to proceed with his investment in Zhuhai.

33. Mr. Kan claims that he told her that he could hand over the flat to her after 27th December, but not later than 31st December. He also claims that he told her about the conversation he had had with Miss To in which she had confirmed telling Mrs. Tso on 6th or 7th December about the issue of the certificate, and he claims that Mrs. Tso admitted that she had been told that then.

34. This is a much expanded account of the conversation and how it came about than that given by Mr. Kan in his witness statement. In view of that, I ought to set out what his witness statement says. The relevant paragraphs are paras. 11 and 12:

35. Mr. Kan claims that Mrs. Tso did not ask for a postponement of the date of completion in this conversation. That was what she asked for when she telephoned him on 27th or 28th December. She told him that she could not get a bank to lend her 90% of the purchase price, and she asked for the completion date to be postponed for a month to give her more time to raise the money. He told her that he needed the money to transfer to Zhuhai, and that the deadline was 31st December. She told him that he had been late in giving notice of the issue of the certificate but he insisted that the date could not be postponed.

          (vi) The conversation: Mrs. Tso's evidence. Mrs. Tso's evidence was that prior to 21st December, Miss To told her that Mr. Kan wanted to delay the date on which vacant possession would be given. Miss To did not know why, and she suggested that Mrs. Tso speak to Mr. Kan direct. Mrs. Tso claims that this request came as bad news to her, because she wanted to move into the flat as soon as possible. Despite that, she did not get in touch with Mr. Kan immediately, and she told me that she did not remember why she did not do so. On 21st December, Mrs. Tso received a telephone call from the Company's solicitors. She was informed that a copy of the certificate had been faxed to them. That was when she decided to get in touch with Mr. Kan to find out if he still wanted to delay the date on which vacant possession would be given. Having got Mr. Kan's pager number from Miss To or Miss Ha, she paged Mr. Kan, and Mr. Kan returned her pager call later that day.

36. She asked him whether he wanted to delay the completion date. He said that he did. That was when he told her about his father-in-law (which I have already recounted). She asked him how long he wanted. She claims that he was rambling, and making very little sense, though it had nothing to do with when completion should be. Eventually, she proposed to him that the completion be put off for a month, i.e. to 21st January 1992. He agreed. He asked what would happen if he had not moved out of the flat by then, and she told him that he would have to speak to his solicitors. That was when the conversation ended, and although she did not say so in terms, I assume that she denies that she spoke to Mr. Kan at all on 27th or 28th December.

          (vii) The conversation: Miss Ha's evidence. Miss Ha gave relevant evidence as to how it came about that Mr. Kan and Mrs. Tso spoke to each other. Her evidence was that a few days after 13th December Mr. Kan telephoned her. He told her again that he wanted the completion date postponed. He wanted Mrs. Tso's telephone number so that he could speak to her about it. After getting Mrs. Tso's permission to give her number to Mr. Kan, she gave it to him.

          (viii) Findings. I find that Mr. Kan was anxious to speak to Mrs. Tso, and that Mrs. Tso was anxious to speak to Mr. Kan, but that neither of them have been candid in their evidence as to why they wanted to speak to the other. Mr. Kan's primary reason for wanting to speak to Mrs. Tso was to get a sense of whether she would consider backing out of the sale altogether if she thought that the completion had to be postponed indefinitely (as a result of the certificate not having been issued) or even if she thought that Mr. Kan wanted it postponed for a few weeks. It was only if she was as interested as ever in going ahead with the sale that he was concerned to ensure that the balance of the purchase price would be paid in a manner which would enable him to remit $1m. to Zhuhai by 31st December. However, in order to encourage Mrs. Tso to be so exasperated by the prospect of further delay that she might be tempted to pull out of the sale, he told Miss Ha that the reason why he wanted to speak to Mrs. Tso was because he wanted to postpone the completion date:

37. For her part, Mrs. Tso did not want to speak to Mr. Kan to dissuade him from seeking a postponement of the completion date. On the contrary, she wanted to speak to him to tell him that she was reluctantly prepared to agree to a postponement of the completion date, though privately she was delighted that he wanted the completion date postponed because it would give her and Mr. Tso more time to raise the $2m. loan on the back of the sub-sale agreement which had not yet been prepared.

38. This lack of candour on the part of Mr. Kan and Mrs. Tso has made it more difficult for me to evaluate their evidence as to what was said in the course of the conversation - especially as I have rejected other parts of their evidence as well. I therefore approach what both of them have told me about the conversation with a considerable degree of scepticism. But what I have no doubt about is that the conversation was a discursive one, and that Mr. Kan was rambling on in it. That was because he had no clear idea of how he was going to find out whether Mrs. Tso would be so exasperated by the prospect of further delay that she would consider pulling out of the sale altogether. He could not ask her that directly because that would expose what his ultimate objective was. He therefore had to go about it in a roundabout way, and that was why, initially at any rate, he was talking about postponing the date of completion, and he did refer to problems with his father-in-law, even though no such problems in fact existed. He was just looking for a reason to explain why he wanted a postponement of the date of completion, and he wanted to talk about the possibility of postponement of the date of completion to draw Mrs. Tso out into revealing whether a further delay would result in her pulling out of the sale.

39. However, I find that it became clear to Mr. Kan after a while that Mrs. Tso was not pulling out of the sale. That was when he attempted to move the conversation away from the possibility of postponing the date of completion to a discussion as to how the balance of the purchase price was to be paid and the importance to him of getting the money in time so that he could proceed with his investment in Zhuhai. I find that at one stage in the course of the conversation Mrs. Tso did indeed suggest to Mr. Kan that the completion be postponed by a month to 21st January 1992. I think it more Likely than not that she put that proposal to Mr. Kan when she began to see that Mr. Kan was moving the conversation away from the possibility of postponing the date of completion. However, I find that Mr. Kan did not agree to the proposal. He had never in fact being interested in delaying the date of completion - he had only been saying that he had been in order to find out Mrs. Tso's true intentions, but once he realised that she was going ahead with the sale in any event, he realised that it would have to go ahead. True, he would be selling the flat at less than its current market value, but at least he would be able to invest in the project in Zhuhai. Since that investment would be jeopardised if the completion was merely postponed, there was no reason whatever for him to agree to Mrs. Tso's request. On the contrary, there was every reason for him not to.

40. I therefore find that the conversation contained parts of the evidence both of Mr. Kan and Mrs. Tso. The first part of the conversation, broadly speaking, was along the lines of Mrs. Tso's evidence, save that Mr. Kan did not agree to a postponement of the date of completion. The second part of the conversation contained elements of Mr. Kan's evidence, though I do not think that everything which he claims to have been said was said, nor do I think that there was another conversation between them on 27th or 28th December. They had, by then, said everything that there was to say to each other.

41. In making these findings, I have not overlooked Mrs. Tso's evidence that after the conversation she informed her solicitors of the postponement of the completion date to 21st January 1992. That is confirmed by the fact that on 27th December, her solicitors sent a fax to JCTL which (in addition to criticising the late notice of the certificate) informed JCTL that they had been instructed that their clients had agreed that completion should be on or before 21st January 1992. I find that as a result of her conversation with Mr. Kan, Mrs. Tso knew that she still had only until 31st December to raise the balance of the purchase price. Since she realised that she might well be unable to, and that there was a real possibility that she would in those circumstances lose the sale and forfeit the deposit of $194,000.00 previously paid to JCTL, she decided to protect herself against that possibility by asserting that Mr. Kan had agreed to postpone the date of completion. Having said that initially, she has not felt able to go back on it.

          (ix) Subsequent events. Apart from Mrs. Tso's instructions to her solicitors, I have not been assisted by events subsequent to the telephone conversation in determining what was said in the course of it. That includes the meeting at the 1,000 Birds Restaurant between Mr. Kan, Miss Ha, Miss To and Mr. Cheung. That is because I regard both sides as having acted consistently with their respective versions of events. For their part, Mr. and Mrs. Tso expressed shock when they heard on 31st December that Mr. Kan was denying having agreed to a postponement of the completion date. For his part, Mr. Kan continued to treat 31st December as the date of completion. He went to his solicitors' office, and waited for completion to take place. I find that, for the reasons I have already given, he was privately hoping that completion would not take place, but that he thought that it would not be disastrous if it did because he could at least proceed with the investment in Zhuhai. After all, he had agreed to go with Mr. Cheung to Zhuhai after office hours that day.

42. For the reasons which I have endeavoured to give, therefore, on the central issue of fact which I have to decide, I find that there was no agreement to postpone the date for the completion of the sale, whether to 21st January 1992 or to any other date. The contractual date for completion remained 31st December.

THE REPUDIATION OF THE AGREEMENT

43. The Company was unable to raise the balance of the purchase price by 31st December, and accordingly it failed to complete the sale on that date. It was therefore in breach of the agreement, and Mr. Kan was entitled to treat himself as discharged from his obligations under it. But did he do so? Mr. Aiken argues that he did not. That is because it is common ground that

Mr. Aiken argues that because Mr. Kan had not, through his solicitors, communicated his acceptance of the Company's repudiatory breach of the agreement, that breach was of no effect, and that therefore Mr. Kan was obliged to accept the performance of the agreement which was tendered on 4th January 1992.

44. I cannot accept this argument. The agreement was one which was no longer capable of being performed according to its terms. Since time was the essence, the Company had to tender the balance of the purchase price by 31 st December. If the Company could be treated as having performed its obligations under the agreement by tendering payment on 4th January, simply because of Mr. Kan's solicitors' failure to inform the Company's solicitors on 31st December that any tender of the balance of the purchase price in the future would be unacceptable, the Court would be sanctioning a mode of performance which the agreement neither contemplated nor permitted. There is no need for a party not in breach ("X") to inform the party in breach ("Y") of X's decision to treat Y's breach as bringing the party's obligations under the agreement to an end where Y is no longer capable of performing the agreement according to its terms. In such a case, it is Y's breach which discharges X from X's obligations under the agreement, not the communication to Y of X's attitude to that breach.

45. It is, of course, open to X, even in such a case, to agree to substituted performance by Y of his obligations under the agreement. It would therefore have been open to Mr. Kan to agree to the late tender by the Company of the balance of the purchase price. That would have amounted to a new agreement between Mr. Kan and the Company, rather than the affirmation by Mr. Kan of the existing agreement. But as with affirmation ("[m]ere inactivity after breach does not of itself amount to affirmation": Chitty on Contracts, Vol.1 27th ed., para.24-002), such a new agreement cannot be said to have been made simply because Mr. Kan's solicitors did not inform the Company's solicitors that any tender of the balance of the purchase price in the future would be unacceptable.

46. In reaching this conclusion, I have not overlooked cl.6(A) of the agreement which provided that, if the Company failed to pay the balance of the purchase price on the date stipulated for payment, Mr. Kan "may" thereupon determine the agreement by giving notice to the Company or its solicitors. Mr. Aiken did not seek to rely on this clause: indeed, I was not even referred to it. However, even if it required Mr. Kan to give such a notice if he wished to treat the failure to pay the balance of the purchase price by 31st December as discharging him from his obligations under the agreement, such a notice was given by JCTL by their letter of 6th January 1992. The fact that in the meantime the balance of the purchase price had been tendered did not prevent the letter of 6th January 1992 from complying with the requirements of cl.6(A).

THE COMPANY'S CLAIM

47. The effect of these findings is that the Company's claims for the specific performance of the sale and purchase agreement, alternatively for the return of the deposit of $194,000.00, and for damages to be assessed fail, and its claim must therefore be dismissed. I have thought long and hard whether Mr. Kan's conduct should, in the unusual circumstances of the case, be reflected in such order for costs as I make, but in the end I have decided to make an order nisi that the Company must pay to Mr. Kan the costs of the claim to be taxed if not agreed.

MR. KANS COUNTERCLAIM

48. In addition, the effect of my findings is that there must be judgment for Mr. Kan on his counterclaim. The relief which is appropriate for me to give him under the heading of "further and/or other relief" is a declaration that by reason of the Company's failure to pay the balance of the purchase price of the flat by 31st December 1991, he was discharged from all his obligations under the sale and purchase agreement, and was entitled under cl.6(A) of the agreement to forfeit the deposit of $194,000.00. Moreover, in order to preserve its interest in the flat, the Company registered its writ in the Land Registry. There is no evidence before me as to when it did that. Mr. Kan counterclaims for an order that this registration be vacated. In view of my findings, Mr. Kan is entitled to the vacation of the registration, and I make an order to that effect. I also make an order nisi that the Company must pay to Mr. Kan the costs of the counterclaim to be taxed if not agreed, though I do not suppose that the counterclaim has so far involved any costs over and above those incurred in defending the Company's claim.

49. Finally, Mr. Kan counterclaims damages to be assessed. Cl. 6(C) of the sale and purchase agreement permitted Mr. Kan to sell the flat to another purchaser if he exercised his right under cl.6(A) to determine the agreement. By registering its lis pendens, the Company prevented Mr. Kan from exercising that right until such time as the registration was vacated. In preventing Mr. Kan from exercising that right, the Company acted in breach of cl.6(C), now that, by this judgment, I have decided that the Company's failure to pay the balance of the purchase price by 31st December entitled Mr. Kan to invoke cl.6(A).

50. However, at the beginning of the trial, I announced that although I would deal with heads of loss, I would not deal with the quantification of that loss. I therefore direct that the assessment be adjourned to a date to be fixed, and I give the parties liberty to apply for such directions as they may wish me to make in connection with the assessment. In view of my knowledge of the case, I think that it is preferable for that assessment to be conducted by me, but if I am unavailable for one reason or another, I direct that the assessment be carried out by a Master. I should add that the fact that I have directed such an assessment does not, of course, mean that I have formed any view as to whether Mr. Kan has in fact sustained any loss or damage. If the price which he could have obtained for the flat since the registration of the lis pendens has actually increased, it may be difficult for him to establish that any loss has been suffered as a result of the registration.

51. Finally, the time which has elapsed since I reserved judgment is regretted. However, the indulgence which I granted counsel in permitting the trial to be interrupted to enable them to fulfill their other commitments meant that the trial itself was very disjointed. For that reason, it has taken me much longer than would otherwise have been the case to draw all the strands of the evidence together.