XCHRX CHEUNG YUET KIU v. NEW FUND DEVELOPMENT LTD. AND CHUNG TIM FAT (Third Party)

1997 No. A4660

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

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J U D G M E N T

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Introduction

1. This is an appeal from an order made by the master on the Plaintiff's summons under Ords. 14 and 86 of the Rules of the High Court. The master gave the Defendant unconditional leave to defend the action. In order to understand the issues which arise on this appeal, it is necessary for me to give a brief summary of the relevant facts, all but one of which are not in dispute.

The facts

2. Chung Tim Fat was the owner of a flat in Kowloon. He had purchased it from the Housing Authority under the Home Ownership Scheme. He could therefore only sell it if he paid a premium to the Housing Authority, which was to be assessed by the Director of Housing. By an agreement dated 26th November 1996 ("the head agreement"), Mr. Chung agreed to sell the flat to the Defendant.

3. The Defendant decided to re-sell the flat, and by an agreement dated 31st January 1997 ("the sub-sale agreement"), it agreed, in its capacity as confirmor, to sell the flat to the Plaintiff. The date for completion of the sub-sale was fixed for 28th February 1997 "or within 21 days from the date of notification of assessment of premium issued by the Director of Housing, whichever is the later".

4. Those words are ambiguous. They could refer to the date on which the Director of Housing issued his assessment of the amount of premium payable by Mr. Chung. Alternatively, they could refer to the date on which the Defendant's solicitors were notified of the amount of premium which the Director of Housing had assessed. Alternatively, Mr. C.Y. Li for the Plaintiff argues that they refer to the date on which the Plaintiff's solicitors were notified of the amount of premium which the Director of Housing had assessed.

5. It is not disputed that (i) the date on which the Director of Housing issued his assessment was 10th February, (ii) the date on which the Defendant's solicitors were notified of the amount assessed was 20th February, and (iii) the date on which the Plaintiff's solicitors were notified of the amount assessed was 27th February. Accordingly, if Mr. Li's construction of the provision in the sub-sale agreement is correct, the date for completion of the sub-sale agreement was 20th March, but it is also possible that the date for completion of the sub-sale agreement was either 3rd March or 13th March. The Defendant's solicitors at the time treated the date for completion as 3rd March.

6. The Plaintiff did not tender the balance of the purchase price by 3rd March. The Defendant elected to treat that failure as a repudiation of the sub-sale agreement. It purported to rescind the sub-sale agreement and to forfeit the deposits which the Plaintiff had previously paid. For their part, the Plaintiff's solicitors contended that the Plaintiff still had until 20th March to tender the balance of the purchase price, and that she was ready, willing and able to do so by then. They contended, therefore, that it was the Defendant who had repudiated the sub-sale agreement by purporting to treat the Plaintiff's failure to tender the balance of the purchase price by 3rd March as a repudiation of the agreement.

The proceedings issued by the Plaintiff

7. It was against that background that the Plaintiff issued the present proceedings against the Defendant. The primary relief sought was an order for specific performance of the sub-sale agreement and damages for its breach. Alternatively, on the footing that specific performance was not available, and that the parties should be relieved of their obligations under the sub-sale agreement, the Plaintiff sought the return of her deposit and damages for breach of the sub-sale agreement, including the payment of the stamp duty and the estate agent's commission which she had previously paid. In her summons for summary judgment under Ords. 14 and 86, she sought judgment only on the alternative basis on which she had originally formulated her claim.

The construction of the provision relating to the date for completion

8. The master took the view that there was a triable issue on the proper construction of the provision relating to the date for completion. For that reason, she gave the Defendant unconditional leave to defend the action. It may be that the master had in mind the one factual issue which may have been in dispute, namely whether the date for completion had been extended by agreement in the course of a telephone conversation between the Plaintiff's solicitors and the Defendant's solicitors on 28th February to a date beyond 3rd March. However, as will emerge later in this judgment, I have not regarded it as necessary to resolve the issue of the date for completion for the purposes of determining this appeal. That is because I have reached the conclusion that, even if the date for completion had been 3rd March, i.e. the date least favourable to the Plaintiff, this appeal must nevertheless be allowed for the reasons which I now proceed to give. For present purposes, therefore, I shall assume that the date for the completion of the sub-sale agreement was indeed 3rd March.

The obligations of the parties

9. Under clause 3(1) of the sub-sale agreement, the parties had concurrent obligations to perform on the date for completion. The Plaintiff's obligation was to tender the balance of the purchase price. The Defendant's obligation was to "execute a proper assurance of the [flat] to the [Plaintiff]... free from incumbrances". The Plaintiff did not tender the balance of the purchase price on 3rd March - albeit because her solicitors believed that the date for completion had not arrived. But even if the Plaintiff had tendered the balance of the purchase price, the Defendant was not in a position to convey the flat to her. That was because the sale of the flat to the Defendant by Mr. Chung had not been completed. The reason for that was because Mr. Chung's solicitors claimed that the Defendant had not tendered the balance of the purchase price by the time fixed for completion under the head agreement.

10. I do not, of course, need to address the question whether Mr. Chung's solicitors' argument is correct. That will be decided in the Third Party proceedings which the Defendant has commenced against Mr. Chung. What it does do is to explain why the Defendant could not perform the concurrent obligation which it owed to the Plaintiff: it could not convey the flat to her because Mr. Chung had not conveyed the flat to it.

11. Accordingly, the question is: what is the legal position if neither of the parties to a sale and purchase agreement of a flat perform their concurrent obligations on the date for completion? The answer is provided by the decision of the Privy Council in Chung Kai Tai Ringo v. Lee Kee Kee [1997] HKLRD 461. Lord Hutton said at p.470A-B:

"... as the obligations of both parties were concurrent and as the vendors were unable to deliver an executed assignment to the purchasers on [the date for completion], they were not entitled to claim that the purchasers had repudiated the contract by failing to pay the balance of the purchase money on that date. In those circumstances time ceased to be of the essence of the contract and the parties had a reasonable time in which to complete."

The undisputed evidence is that the Plaintiff would have been in a position to complete the purchase within a day or two of 3rd March upon being given reasonable notice to complete. What would then have prevented completion taking place (had the Defendant's solicitors not sought to treat the agreement as having been repudiated by the Plaintiff's failure to tender the balance of the purchase price by 3rd March) was the Defendant's inability - which has continued up to today - to convey the flat to the Plaintiff.

12. It follows that since the Plaintiff was in a position to complete the purchase within a reasonable time of 3rd March, and since it was the Defendant who prevented such completion taking place by being unable to convey the flat to the Plaintiff, it was the Defendant who was in repudiatory breach of the sub-sale agreement. Accordingly, even if the date for completion was 3rd March, and not either 13th March or 20th March, the Plaintiff is, subject to one final argument which I must address, entitled to summary judgment against the Defendant.

The effect of the Plaintiff's summons

13. Mr. Kenny Lin for the Defendant relies on the fact that the primary relief originally sought against the Defendant was an order for specific performance of the sub-sale agreement. That amounted to an affirmation of the sub-sale agreement, i.e. an election on the part of the Plaintiff not to treat the Defendant's repudiatory breach as bringing the parties' obligations under the sub-sale agreement to an end. It is argued that limiting the relief sought in the summons to the alternative relief which had originally been sought amounted to an abandonment of the claim for specific performance, and a repudiatory breach of the sub-sale agreement by the Plaintiff which the Defendant subsequently accepted. In addition, it is said that the abandonment of the claim for specific performance could only be done by the giving of reasonable notice to the Defendant. It is said that the failure to give such notice also amounted to a repudiatory breach of the sub-sale agreement by the Plaintiff which the Defendant subsequently accepted.

14. I cannot accept this argument. Limiting the relief sought in the summons to the alternative relief which had originally been sought was not a repudiation of the sub-sale agreement by the Plaintiff. It was simply the realistic recognition by the Plaintiff that specific performance was not possible in view of the Defendant's continuing inability to convey the flat to the Plaintiff. At that stage, the Defendant had not issued its Third Party claim against Mr. Chung seeking specific performance of the head agreement. Indeed, there was no certainty that, even if such a claim was made, it would succeed.

15. In any event,

"in the case of a breach which is persisted in by the other party, the fact that the innocent party has continued to press for performance will not normally preclude him at a later stage from treating himself as discharged": Chitty on Contracts, vol. 1, 27th ed., para. 24-003.

Thus, in Johnson v. Agnew [1980] A.C. 367, the House of Lords held that a vendor can elect whether or not to pursue the remedy of specific performance or that of damages at any time even as late as the trial of the action, and that having originally sought specific performance, it is nonetheless open to a vendor to apply to the court to put an end to the contract and ask for damages for breach of the contract. As in Johnson v. Agnew, specific performance of the sub-sale agreement in the present case was not possible - at any rate, for the time being.

Conclusion

16. For these reasons, therefore, this appeal must be allowed, the order of the master must be set aside, and summary judgment must be given for the Plaintiff. Mr. Lin wanted to address me on the form which that judgment should take. Both he and Mr. Li agreed that the course which I should take today was to leave it to the parties to see whether they could agree the terms of the judgment. I propose to adopt that course, and I therefore give the parties liberty to restore this appeal in the event of them not being able to agree the terms of the order which I should make.

(Brian Keith)

Judge of the Court of First Instance