NG CHUEN FAI RAYMOND v. NG YIU KWOK AND ANOTHER

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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1988, No. A105

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J U D G M E N T

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1. On the 30th December 1986, Mr & Mrs Ng signed a Chinese agreement with Mr Raymond Ng in the office of an estate agent, Tak Man Property Trading Company. The Chinese agreement is in printed form with a heading "Sale and Purchase Agreement", whereby Unit 4 on the 6th Floor of Block 32, Heng Fa Chuen, then under construction, was agreed to be sold by Mr & Mrs Ng to Mr Raymond Ng. Dispute arose between Mr & Mrs Ng and Mr Raymond Ng as to the agreed form of transfer for implementing the transaction. Mr & Mrs Ng had themselves acquired the suit premises from the Mass Transit Railway Corporation. I shall call it for short "MTRC"

2. The case of Mr & Mrs Ng is that it was to be an "outright sale" by way of a cancellation of their original agreement with MTRC with Mr Raymond Ng substituted as MTRC's new purchaser under another fresh agreement. The tranaction was to be concluded on or before the 10th January 1987.

3. The case of Mr Raymond Ng is that the sale was to be formalized by the signing of a formal Agreement for Sale and Purchase engrossed by Messrs Anthony Y.L. Au & Co. which was, by consent, to act for both parties.

4. Saturday, the 10th January 1987 came. The parties attended the offices of the jointly instructed solicitors who were only able to present a formal Agreement for Sale and Purchase for signatures. The parties went to the MTRC's site office at Heng Fa Chuen, but documentation for cancellation of the existing agreement with MTRC and substitution of Mr Raymond Ng as the direct purchaser would not be ready until the next Monday morning, the 12th.

5. Counter-allegations of breach of contract were raised. Mr & Mrs Ng accused Mr Raymond Ng of failure to complete the transaction of sale by cancellation with Mr Raymond Ng substituted as MTRC's new direct purchaser. Mr Raymond Ng charged Mr & Mrs Ng with wrongful refusal to sign the formal Agreement for Sale and Purchase in accordance with the provisions of the Chinese Sale and Pruchase Agreement. Cross actions were brought by one against the other and they were consolidated by an order of a master. In these consolidated actions, I shall call Mr & Mrs Ng "the plaintiffs", and Mr Raymond Ng "the defendant". Shall call Tak Man Property Trading Company "Tak Man".

6. It is the allegation of the plaintiffs that the parties in dispute finally came to terms whereby they were mutually released, one by the other of them from their respective alleged contractual obligations. The plaintiffs seek a declaration that their contractual obligations were discharged by the defendant's breach or alternatively, a further declaration that they were discharged and released by the subsequent compromise and in any case, an alternative declaration that on account of the defendant's said breach the plaintiffs were so discharged upon the issuance of the writ.

7. The defendant counterclaims for specific performance of the Chinese Sale and Purchase Agreement and damages in addition to or a lieu of it in the sum of $20,000. In the alternative, the defendant claims to have been relieved of all his liability by reason of the plaintiffs' repudiation. Return of the $20,000 deposit is also sought. The defendant further holds the plaintiffs responsible for any service charges incurred by Tak Man.

8. In September 1986, the plaintiffs agreed to purchase the suit premises, a residential flat, from MTRC at Heng Fa Chuen for $465,300. An equitable mortgage of the flat was procured from Hang Seng Credit Limited to the extent of $418,770. The plaintiffs had themselves paid the 10% first instalment for the flat i.e. $46,530. The plaintiffs' motive for selling the flat some three months later is of peripheral importance. They had decided to dispose of it by the middle of December. They approached Tak Man.

9. According to the plaintiffs, they had decided on a clean break on the casual advice of a couple of friends. They had allegedly decided on a sale by "transfer of name" so as to sell the property "right off". They had previously declined an approach by Tak Man on the basis of a sub-sale to a prospective buyer. Counsel for the plaintiffs had no specific instructions as to and was unable to explain why they preferred an outright t sale. On the casual advice from a lady friend and another friend, the plaintiffs believed it to be trouble-free to have a clean break, otherwise the bank would look to them for payment of unpaid instalments. However, the plaintiffs understood that their equitable mortgage was to be redeemed. When the husband plaintiff asked Mrs Chan of Tak Man when he was returned his paid 1st instalment, he was told : "The purchaser had got nothing to do with the bank. After the bank had made the calculations, Woo & Woo would be notified and in term Woo & Woo would inform us to get back the money". Messrs Woo & Woo were solicitors for the developer MTRC and the mortgagee bank.

10. The husband plaintiff was also given to understand by their friends that problems in any sub-sub-sales would involve them as the first purchasers on the record. He was not able to elaborate how they might be so involved. Whether or not there was any substance in the casual advice on possibility of risk, the plaintiffs thought it wise to have a clean break and regarded it as "more simple and direct".

11. The plaintiffs secured a price of $517,000 from which they were able to take a profit of $51,700 and to recoup themselves their first instalment payment of 10% i.e. $46,530.

12. The question that immediately leaps to mind is how the plaintiffs expressed their wish in their instructions to Tak Man and more importantly, whatever instructions they had meant to give Tak Man, what instructions were in fact given as reflected in the agreement ultimately prepared by Tak Man for the signatures of the parties. No one has disowned the Chinese Sale and Purchase Agreement the parties signet. Therefore, it must embody and is regarded as embodying the agreed terms. The plaintiffs endeavour to introduce additional terms, implied or by collateral agreement, and I shall deal with such attempt later in my judgment.

13. The husband plaintiff told the Court that he distinctly mentioned "transfer of name" in the office of Tak Man on the 30th December when the Chinese Sale and Purchase Agreement was signed, and much was sought to be made on the plaintiffs' agreement to pay charges for cancellation of their own Agreement for Sale and Purchase of the suit premises with MTRC. The plaintiffs maintained that the defendant was fully aware of the sale as one by cancellation as he had insisted on having the word "old" inserted in the provision under the Remarks Column for the plaintiffs to pay expenses for cancellation. The defendant denied that he was the author of that character "old".

14. The wife plaintiff explained that they had asked for the transaction to be concluded the next day, the 31st. The husband plaintiff told the court that the defendant suggested the 10th January. The defendant's version is that he preferred the 14th January but that it was the plaintiffs who insisted on the 10th. The defendant also testified that the husband plaintiff even assured him that the transaction could be, if pressed for time, finalised a day or two later. I prefer the defendant's version. The defendant was minded to arrange a mortgage and he was in the course of selling his residential flat. It is more probable that he would need time.

15. According to the plaintiffs, both Mrs Chat of Tak Man and the defendant assure them that all could be completed in the solicitors' office. Meesrs. Anthony Y.L. Au & Co. were the solicitors proposed by the defendant and agreed to by the plaintiffs. The wife plaintiff added that Mrs Chan of Tak Man claimed to have sought confirmation by telephone from the site office of Heng Fa Chuen.

16. It was the first time that the plaintiffs sold property. They had no clear concept of the legal consequences in either a "transfer of name" or a sub-sale. In fact, under an equitable mortgage, the balance of the purchase price would be, from time to time, wholly financed by the bank to which the plaintiffs would have to pay instalment payments. Payment to the developer would thus be secured from the bank, and there was virtually no possibility of the developer having to claim against the plaintiffs in default. For arrears in mortgage instalments, the plaintiffs would only be liable to the bank as mortgagors. The equitable mortgage of the plaintiffs was also expected to be redeemed in a sub-sale and the liability to the mortgagee bank would then be taken over by the defendant if he should prefer to continue with the same monthly instalments. Of course, the defendant could choose to satisfy the whole mortgage liability instantly. Therefore, both before and after a sub-sale, having been financed by the bank, the developer did not have to resort to the plaintiffs. The mortgage liability, if continued with the bank, would be taken over by the defendant. In a sub-sale, the plaintiffs would not be "chased after by the bank" in default of instalment payments.

17. I accept that the plaintiffs preferred a "transfer of name" or the cancellation method so as to achieve "a sale right off" with a clean break. I prefer their evidence that the defendant insisted on adding the character "old" and assured them together with Mrs Chan that all, including cancellation, could be processed in the solicitors' office on the 10th January 1987. I also accept that the plaintiffs had previously turned down an offer through Tak Man for a sub-sale by a prospective purchaser. But their instructions to Tak Man as well as Tak Man's reception must be in some confusion because in the explanation given by Miss Yip and Mrs Char, whilst the plaintiffs were told of their responsibility to pay the cancellation charges, both parties clearly understood that a formal Agreement for Sale and Purchase was to be signed and legal fees paid. That was a sub-sale. What was envisaged was to replace the Chinese document by a Formal Agreement for Sale and Purchase and to cancel the plaintiffs' own agreement, the "old" agreement with MTRC. Time for signing the formal Agreement to replace the Tak Man's Chinese document was set on the 10th January, but time for cancellation was not specified in the Chinese Sale and Purchase Agreement.

18. The plaintiffs had no knowledge of the procedure for implementing the Chinese Sale & Purchase Agreement. They did not really know how the signing of such formal replacement agreement and cancellation was to be co-ordinated. The plaintiffs admitted ignorance. Another good illustration is the wife plaintiff's understanding or lack of understanding as to how the balance of the purchase price was to be paid under the Chinese Sale and Purchase Agreement.

19. The defendant claimed to be unaware of the plaintiffs' purchase from MTRC. That I accept. I also accept that he was not familiar with procedure or documentation, but he understood that as part of the transaction, in addition the plaintiffs had to cancel some form of agreement which they had previously made for the acquisition of the flat. The defendant understandably regarded it as neither his affair nor his responsibility. In any case, all the documentation, including the cancellation in whatever form, was to be dealt with by solicitors who also acted for plaintiffs. There was hardly any real consensus with these different notions entertained by the plaintiffs and the defendant. As I have said, one would be best guided by the agreement ultimately prepared by Tak Man, from which neither party has resiled.

20. Mr Lo, the clerk-in-charge of the MTRC Heng Fa Chuen project in Messrs Woo & Woo described two acceptable modes of disposition, a sub-sale or a cancellation. It must be acknowledged that they are not the only possible routes in conveyancing practice. But it is noteworthy that Mr Lo did not mention any mixed transaction of a sub-sale to be followed by cancellation. That would not likely be feasible in terms of costs and possibly stamp duties. He stated that more preferred a cancellation to a sub-sale. For a cancellation, the vendor would have to bring it to the site office of Heng Fa Chuen his document signed with MTRC known as "Confirmation of Instructions" together with a receipt for his paid deposit. The application for cancellation would be processed for a fee of $3,000. Thereafter, a Side Letter with a photostat copy of the cancelled "Confirmation of Instructions" and a new "Confirmation of Instructions" signed by the purchaser would be sent to solicitors with a covering letter in terms of p. 124 of Bundle A requesting for a new Agreement for Sale and Purchase to be prepared. Solicitors would then search the Land Office Register before they would cause a new Agreement for Sale and Purchase Agreement to be signed between the new purchaser and MTRC. The old Sale and Purchase Agreement between the previous vendor and MTRC would thereupon be also cancelled. Evidently, the equitable mortgage would have to be redeemed and liability discharged or assumed by the new purchaser.

21. Mr Lo also listed out documents for a sub-sale when Messrs. Woo & Woo was acting for both parties. A sub-sale document would have to be signed and the mortgagee bank would have to be written to for redemption of the equitable mortgage. No deposit would be released to the vendor in the sub-sale unless the calculations made by the mortgagee bank would yield a surplus. Signing of a Letter of Authorization would follow after redemption of the equitable mortgage. The Letter of Authorization would be in terms of a Declaration of Trust or Power of Attorney. After redemption, a Deed of Release would be signed by the bank. Upon issuance of an Occupation Permit and the receipt of a Certificate of Compliance, the parties to the sub-sale would have to execute the assignment respectively as confirmor and assignee Naturally, MTRC was to be the assignor.

22. Mr Lo further explained that in either of these modes of implementing the transaction, the equitable bank mortgage of the plaintiffs would be redeemed at the same time as the signing of the documents for the transfer either by way of cancellation or sub-sale.

23. I turn then to consider Chinese Sale and Purchase Agreement in the light of the plaintiffs' alleged implied and/or oral collateral term.

24. The Chinese agreement was entitled "Sale and Purchase Agreement". It was not an agreement for "transfer of name". It was an agreement for sale and purchase of a property with a proviso for cancelling the vendors' previous agreement. The parties were vendors and purchaser. It contained a sub-heading "Property for Sale and Purchase". The property was sold, though only as regards its beneficial interest. The sale price was given as $517,000 under the "Payment Schedule". After the $20,000 deposit, a further deposit representing the first 10% instalment already paid by the plaintiffs became payable by the defendant upon the signing of a formal Agreement for Sale and Purchase in the offices of a solicitors' firm. Legal fee was expected to be paid for this formal Agreement for Sale and Purchase between the plaintiffs and the defendant in equal shares. Moreover, it was expressly provided - "It is hereby agreed by the purchaser and the vendor" - that the party making default in signing this formal Agreement for Sale and Purchase on the appointed date should be "treated as in breach". The appointed date is given under the "Payment Schedule" column as the 10th January 1987. Therefore, on the 10th January 1987, an Agreement for Sale and Purchase must be signed by the plaintiffs and the defendant.

25. The Chinese Sale and Purchase Agreement in its Remarks column contained the following proviso :

"The expenses for cancelling the old agreement shall be paid by the Vendor".

It is tolerably clear that the plaintiffs' own current agreement for the suit premises would have to be cancelled. How and when it should be cancelled was not specified. Without any stipulation, it may be argued that it was to be cancelled within such a reasonable time as would give effect to Chinese document and that the plaintiffs had the responsibility for taking steps to cancel it.

26. The plaintiffs put it quite differently : in paragraph 4(3) of the Amended Statement of Claim, they plead this proviso as a written term of the Chinese Sale and Purchase Agreement. Even as a written term, it is evident that it did not specify the manner and time for implementing the cancellation.

27. A Sale and Purchase Agreement and a cancellation agreement would appear to be mutually exclusive. If an existing purchaser wishes to sub-sell, he does not begin by cancelling his interest with MTRC to allow for the substitution of a new pruchaser otherwise he would have no interest to sell. He cannot transfer what he has not. On the other hand, if an existing purchaser cancels its Agreement for Sale and Purchase with MTRC to make way for a direct transfer to the new purchaser, he cannot purport to sub-sell. He would have nothing to sell after the cancellation. As envisaged by the Chinese document, the cancellation of the "old" agreement must therefore be after the formal Agreement for Sale and Purchase. Unless otherwise agreed, it was quite unnecessary for the cancellation to be concluded at the same time or on the same day. And unless otherwise stipulated, it would be for the plaintiffs, by themselves or through their solicitors, to cause the "old" agreement to be cancelled.

28. In paragraph 6 of the Amended Statment of Claim, the plaintiffs seek to introduce an implied term to the Chinese Sale and Purchase Agreement to the effect that the plaintiffs' Agreement for Sale and Purchase with MTRC was to be cancelled with the defendant substituted as the new direct purchaser from MTRC and that all the documents necessary for carrying into effect such cancellation and substitution were to be signed or executed before or at the same time as the signing of the formal Agreement Sale and Purchase. It is quite ludicrous to suggest a prior cancellation because the plaintiffs would have been left with nothing to sell.

29. The plaintiffs contended that such an implied term was obvious and necessary to give business efficacy to the Chinese Sale and Purchase Agreement. Lord Simon of Glaisdale had this to say of the legal bases for an implied term in his speech delivered in the Privy Council in B.P. Refinery (Westernport) Pty. Ltd. v. Shire of Hastings [1978]52 A.L.J.R. 20 :

"In their [Lordships'] view, for a term to be implied, the following conditions (which may overlap) must be satisfied : (1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that 'it goes without saying'; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract."

These criteria would seem to be culmulative. Lord Denning in Shell U.K. Ltd. v. Lostock Garage Ltd. [1976]1 W.L.R. 1187 explained the circumstances from which an intention to have an implied term can be imputed to the contractual parties, thus :

"Such an imputation is only to be made when it is necessary to imply a term to give efficacy to the contract and make it a workable agreement in such manner as the parties would clearly have done if they had applied their mind to the contingency which has arisen. These are the 'officious bystander' type of the case."

Suggestion has been made that some of the conditions referred to by Lord Simon may not have to be culmulative for the introduction of an implied term. See Mosvolds Rederi A/S v. Food Corporation of India [1986]2 Lloyd's Rep. 68.

30. Suffice it for our purpose to say that the Chinese Sale and Purchase Agreement would not be ineffective without the implied term. It is neither obvious nor dictated by business efficacy that such an implied term must be imputed to the parties. As a matter of fact, part of the implied term for prior cancellation would even contradict the express term for the signing of a formal Agreement for Sale and Purchase.

31. The plaintiffs also seek to bring in the same term by an alleged collateral agreement. Mr Hung, counsel for the defendant, obtained leave to plead section 3 of the Conveyancing and Property Ordinance, Cap. 219. I think I should set out paragraph 268, page 161, of Vol. 1 Chitty on Contracts, 25th edn.:

"Collateral agreements. If a collateral agreement, not involving the acquisition of land, is entered into at or before the time of making a written contract concerning land, the collateral agreement does not require to be evidenced in writing. So, on the purchase of land an oral promise by the vendor to make up the road leading to the premises sold is not a contract for an interest in land apart from a conveyance on the highway. Any such collateral agreement must be clearly proved."

32. The alleged collateral agreement in paragraph 8 of the Amended Statement of Claim relates to time for disposition, i.e. "transfer of name" or cancellation to be concluded before or at the same time as the signing of the formal Agreement for Sale and Purchase. An agreement for a cancellation can reasonably be spelt out of a proviso in the Chinese Sale and Purchase Agreement. The alleged collateral agreement specified time for such cancellation. An oral agreement is sufficient to discharge or cancel the "old" agreement with MTRC. See para. 1487 of Chitty on Contract, 25th edn., Vol. 1. An agreement as to when such a cancellation was to be effected would clearly not involve an acquisition of an interest in land.

33. But evidence as to the time for implementing a cancellation is vague : the emphasis was on dispensing with personal attendance at the site office of Heng Fa Chuen. It was suggested that the services provided by Messrs Anthony Y.L. Au & Co. would include procuring documents from the site office themselves, so as to facilitate the "transfer of name". This time and labour saving device was to enable the cancellation of the old purchase agreement with MTRC, the making of a new purchase agreement and the signing of the formal Agreement for Sale and Purchase to be processed at the same time in the offices of solicitors. The plaintiffs were unfamiliar with procedure, and the simultaneous processing was more for personal convenience. In fact, the plaintiffs enquired if they should go to the site office the next day, the 31st December for the "transfer of name". They abandoned the idea when they were told that it could be done at the same time on the 10th January. Like the redemption of the equitable mortgage, it was not specifically made a contract term. It was casual talk. It was a suggestion made and accepted for expedience and not intended to have any binding force. It is also crucial to note that the plaintiffs were to be responsible for cancellation charges, that it was the plaintiffs' "old" agreement which was to be cancelled, that Messrs. Anthony Y.L. Au & Co. was also their solicitors and that the defendant had never categorically assumed any obligation to implement the cancellation or to implement it by a certain specified time. I am not prepared to find that there was such a collateral contractual term.

34. In any case, time was not made of the essence of the contract nor indeed has it been so pleaded by the plaintiffs. Miss Kwan called in aid paragraph 4(5) of the Amended Statement of Claim which pleads a provision of the Chinese Sale and Purchase Agreement, Clause 1, for the parties to "attend the appointed solicitors on the appointed date for the signing of the agreement" which is the formal Agreement for Sale and Purchase. Clause 1 merely treated any party in default of so signing that formal agreement as being in breach. Clauses 2 & 3 provided the penalties, either payment of compensation to the purchaser or forfeiture of the deposit by the vendors. Clause 1 did not even refer to any cancellation. In conclusion, time was neither made nor pleaded as being of the essence of the Chinese Sale and Purchase Agreement for the alleged signing or execution of cancellation documents.

35. Counsel for the plaintiffs, Miss Kwan, conceded that by the Chinese Sale and Purchase Agreement the plaintiffs had disposed of their interest in land as the then beneficial owners. Unless the plaintiffs were returned their beneficial interest, they would seem to have no locus standi to cancel their own agreement with MTRC. The interest they held under their agreement with MTRC had been vested in the defendant. The plaintiffs had no more interest to cancel.

36. Miss Kwan suggested, at one time, the possibility of incorporating in "a special" formal Agreement for Sale and Purchase so as to cater for the proposed cancellation. Counsel did not elaborate. This suggestion of counsel tends to reinforce my view that nothing was specific enough for imputing the implied term or establishing the oral collateral agreement.

37. In my view, if there had been such a term allegedly implied or agreed to later, the time of signing or execution of any documents necessary for the cancellation was never made of the essence of the contract. The Chinese Sales and Purchase Agreement set down a time only for the signing of the formal Agreement for Sale and Purchase. One would not be driven by the circumstances and/or the nature of the transaction to the conclusion that there was any fixed time to be strictly adhered to for cancellation. In this case, a formal Agreement for Sale and Purchase was expected to be signed in the offices of solicitors and a cancellation, if agreed to, could be executed any time thereafter. Nothing called for simultaneous signing. A later cancellation within reasonable time as part of the transaction would cause no hardship or prejudice.

38. The defendant maintained that it was a sub-sale : the first sentence in the Remarks column for cancellation was put in by Miss Yip of Tak Man and he was quite unaware of its consequence. However, I find that the subject of cancellation was broached and the need for cancelling the plaintiffs' "old" agreement with MTRC was agreed and incorporated into the Chinese Sale and Purchase Agreement. The Chinese Sale and Purchase Agreement expressly made it the plaintiffs' responsibility for paying such cancellation expenses.

39. For all the reasons I have given, the Chinese Sale and Purchase Agreement was a sub-sale with a cancellation to follow either immediately or later. For personal convenience, it was expected to be processed at the same time on the 10th January but it was never made a contractual term. There was no time element attached to the agreed cancellation. Time for cancellation was never made of the essence of the contract. There was no real necessity for cancellation documents to be signed or executed simultaneously with the signing of the formal Agreement for Sale and Purchase, particularly when the building of which the suit premises form parts was not expected to be completed until early 1988. Provided documents necessary for the agreed cancellation were signed or executed within a reasonable time as part of the transaction between the plaintiffs and the defendant, there would be no breach of any term in the Chinese Sale & Purchase Agreement.

40. I turn next to the events after the 30th December, the signing of the Chinese Sale and Purchase Agreement in the office of Tak Man. On coming Monday, the 5th January 1987, the husband plaintiff instructed his wife to contact Tak Man who complained that solicitors had received no documents from Messrs Woo & Woo, solicitors for MTRC. Messrs Woo & Woo were contacted and the plaintiffs were told that in fact Messrs. Anthony Y.L. Au & Co. had made no request for relevant documents. On Tuesday, the 6th January the wife plaintiff was given to understand by Tak Man that the defendant had secured all necessary documents for the transaction to be concluded on the 10th January, a Saturday, at 11:30. The appointment time was finally fixed at 9 a.m. On Wednesday, the 7th January, the wife plaintiff confirmed with Miss Yip of Tak Man. On Thursday, the 8th January, in the afternoon Miss Yip telephoned, and in the evening Mrs Chan telephoned the wife plaintiff and further confirmed the same. These and other hearsay conversations were admitted merely to show the awareness and mental attitude of the plaintiffs and the defendant. In fact on both Wednesday and Thursday, the 7th and 8th January, the husband plaintiff communicated with Mr Lo of Messrs Woo & Woo who disclosed that his firm, acting for MTRC, was still holding all the relevant documents in their possession. The husband plaintiff even made an appointment to visit Mr Lo of Messrs Woo & Woo in the afternoon on Friday, the 9th. Mr Lo of Messrs Woo & Woo had a conference with the husband plaintiff in the afternoon of the 9th for about two hours. He categorically confirmed to the husband plaintiff that MTRC had not yet received any instructions to prepare documents from Messrs Anthony Y.L. Au. & Co., acting for both the plaintiffs and the defendant and that, therefore, despite the husband plaintiff's request, Messrs Woo & Woo declined to prepare any new Agreement Sale and Purchase with MTRC. However, a cancellation agreement had been prepared in escrow by the 9th January. The plaintiffs signed it. Mr Lo reiterated his advice on the difference between a cancellation and a sub-sale to the husband plaintiff, and the husband plaintiff was advised that the Chinese Sale and Purchase Agreement provided for a cancellation, not a sub-sale.

41. Advice so given by Mr Lo is apparently inconsistent with my views on the legal effect of the Chinese Sale and Purchase Agreement. The husband plaintiff was left in no doubt that he should be wary of the documents he would be asked to sign on the 10th January, which could only be documents for a sub-sale.

42. With clear knowledge that no cancellation could be possibly effected on the 10th January, the plaintiffs kept that appointment at the offices of Messrs Anthony Y.L. Au & Co. They arrived at about 9:05 after Mrs Chan and Miss Yip of Tak Man. A clerk, Mr Wong of Messrs. Anthony Y.L. Au & Co., was in attendance. When the defendant arrived thereafter, upon the insistence of the plaintiffs to have a cancellation, Mr Wong allegedly also advised the defendant that the Chinese Sale and Purchase Agreement provided for "transfer of name". The plaintiffs refused to sign any papers without the documents for cancellation, and Mr Wong allegedly observed that the plaintiffs were in the right. According to the plaintiffs, it was Mr Wong who claimed to have spoken to the manager at the site office of Heng Fa Chuen and told the parties to go there for making "the transfer of name". Mr Wong allegedly assured the parties that the manager would deliver to them a "transfer of name form" for bringing back to Messrs Anthony Y.L. Au & Co. so that the cancellation and a new purchase agreement with MTRC could be effected.

43. The defendant's version is slightly different: he claimed that the appointment was not 9:00 o'clock but 9:30 and he only arrived at 10. He kept himself suitably funded. Mr Wong, the clerk of Messrs Anthony Y.L. Au & Co., collected their I.D. cards and produced a formal Sale and Purchase Agreement which the plaintiffs refused to sign. The husband plaintiff maintained that the purchase price of $517,000 was incorrect and that it should have been $460,000. The husband plaintiff made a call and thereafter invited the defendant to go to the site office of Heng Fa Chuen.

44. In the main, I prefer the evidence of the plaintiffs. I find that they refused to sign any documents on the 10th January in the offices of solicitors not because of the purchase price disclosed in the document but because of their insistence on signing the cancellation documents at the same time. Mr Lo recalled that the husband plaintiff telephoned him from Messrs Anthony Y.L. Au & Co. complaining not being given the right documents to sign and sought his advice and that he advised the plaintiffs to go to the site office of Heng Fa Chuen. Subject to this, I prefer the version of the plaintiffs that it was Mr Wong who claimed to have communicated with the manager of the site office and asked them to go there for a "transfer of name form".

45. They arrived at the site office at about 11:45. They spoke to a female staff, Miss Sze, and she told the parties that it was quite impossible to allow any "transfer of name form" to leave the office. She categorically advised the parties that as time was coming up to noon on a Saturday, the necessary documents would be sent by the site office to Messrs Anthony Y.L. Au & Co. on Monday morning. But the husband plaintiff was adamant that unless he could sign all the documents at the same time, they would not sign any at all. Having been told that the cancellation agreements would not be ready until Monday, he accused the defendant of being in breach and left the site office with the wife plaintiff at about 11:15.

46. The defendant explained to the court that he understood the Chinese Sale and Purchase Agreement to be a sub-sale, but he was quite prepared to sign any cancellation document to accommodate the plaintiffs. He had implored the husband plaintiff to accept his Cashier Order three times pending finalization of documents on the following Monday morning, but the husband plaintiff refused.

47. The husband plaintiff, and through him, the wife plaintiff were both eager, from first to last, to take advantage of the defendant. The plaintiffs agreed to sell their flat at $515,000, but in the office of Tak Mari, they managed to extract an extra $2,000 more from the defendant. They had allowed Messrs Anthony Y.L. Au & Co. to act also as their solicitors, but they never consulted them directly on documents or procedure. They were in constant touch with Mr Lo of Messrs Woo & Woo as to the nature of the transaction and the necessary documents required. They had it doubly assured that Messrs Woo & Woo had received no instructions to prepare the necessary cancellation documents which would take about two to three days to prepare. Up to the afternoon of Friday, on one hand they sought confirmation from Tak Man that the defendant still claimed to possess all the documents ready for the transaction and on the other, they secured personal advice from Mr Lo of Messrs Woo & Woo that no cancellation documents had been prepared for despatch. The plaintiffs attended the appointed date for finalizing the transaction on the 10th January well knowing it to be a futile exercise. They constantly put pressure to bear on the defendant and left the site office about 11:15 under the pretext that documents were not all ready for signature.

48. If the plaintiffs had been correct in the stance they took, it would have been an anticipatory breach of the Chinese Sale and Purchase Agreement by the defendant at about noon of the 10th January. The site office staff of MTRC clearly indicated that no cancellation documents could have been made ready for processing before Monday morning. Any repudiation by such anticipatory breach in the circumstances could have been accepted by the plaintiffs. I have held that the plaintiffs' view is erroneous, but I must hasten to add that I accept that they genuinely believed that they were in the right. The fact that they were ruthlessly keen in taking advantage of the situation is beside the point.

49. Before the plaintiffs left the site office at Heng Fa Chuen, the defendant enquired as to the return of his deposit. Thereupon, the husband plaintiff remarked that it would be a favour to return the deposit, but if they did not, they would be acting within principle. The wife plaintiff's recollection as to conversation on the deposit at the site office is different. She told the court that no one in fact mentioned it.

50. According to the wife plaintiff, on 12th January, a Monday, Mrs Chan demanded from both plaintiffs the return of the $20,000 deposit. Her husband agreed with Mrs Chan to return the same. Next day, Tuesday, the 13th, in the morning Mrs Yip intimidated the wife plaintiff at a tea house. She demanded the repayment of $20,000. She complained that the plaintiffs had let her down and that if the deposit was not returned the same day, liability would be doubled to $40,000. The wife plaintiff made a report to Homantin Police Station, but not specifically on Mrs Yip's intimidation.

51. On the 13th January, the defendant allegedly telephoned the wife plaintiff, and allowed his wife to demand from the wife plaintiff an immediate return of $20,000 at the police station from which the call was made. The wife plaintiff explained that her husband was not at home and he had to be consulted upon his return. The husband plaintiff claimed that he spoke to the defendant himself on the phone later the same day and agreed to return the $20,000 but only in the presence of witnesses, preferrably before staff of Messrs Woo & Woo. The defendant's telephone number was recorded in the Chinese Sale and Purchase Agreement. The husband plaintiff arranged to contact the defendant again on Thursday, the 15th, at about 11 a.m. for the appointment. According to the husband plaintiff, at pre-arranged time, about 11 a.m. on Thursday, the 15th, he telephoned the defendant at his home to fix a meeting on Monday, the 19th January, at the office of Messrs Woo & Woo at 3 p.m. for returning the deposit.

52. Mr Lo confirmed that the husband plaintiff contacted him about the 15th January enquiring if a cheque could be left with Messrs Woo & Woo for handing over to the defendant as purchaser. Came Monday, the 19th January, the husband plaintiff sent his wife along with a $20,000 cheque to the offices of Messrs Woo & Woo. He himself spoke to Mr Lo as to whether the wife had arrived and assured Mr Lo that if she had not, she was on her way. Mr Lo conveyed the message to him that the defendant had just rung up claiming that he was too busy to attend. The wife plaintiff arrived at 3:20 and was delivered the same message by Mr Lo.

53. The defend ant denied contacting the wife plaintiff from the police station, or allowed his wife to demand the return of $20.000 from her. He claimed that he was never interested in the return of his deposit, as he wanted to acquire the suit premises for self occupation. He had no knowledge of any actions taken by Mrs Chan or Miss Yip of Tak Man. He never spoke to the husband plaintiff on the 13th, nor on the 15th, nor did he speak to the plaintiffs or anyone for the appointment allegedly made for the 19th January, Monday. He was also not the man who spoke to the solicitor's clerk, Mr Lo of Messrs Woo & Woo on the 19th.

54. According to the wife plaintiff the defendant constantly telephoned on the 14th January and early 15th January, and the man claiming to be the defendant spoke in the same voice as the caller from the police station on the 13th January.

55. The defendant told the court that both Miss Yip of Tak Man and the husband plaintiff demanded an extra $20,000 more from him for the flat. After the plaintiffs refused to sign on the 10th January, he returned to Mr Wong of Messrs Anthony Y.L. Au & Co. for assistance and he was introduced to a solicitor, Mr Leung. On 13th January he paid to Mr Leung $5,000.00 for taking action against the plaintiffs. He told Mr Leung his version of the case as well as the demand of an extra $20,000 by the plaintiffs. But it is quite difficult to understand why some five months later, in a letter dated the 10th May 1987 though sent to an incorrect address of the plaintiffs, a wholly different allegation was made against the plaintiffs that they failed to attend at the offices of Messrs Anthony Y.L. Au & Co. on the 10th January 1987 for signing the formal Agreement for Sale and Purchase.

56. The defendant himself made a report to the police on 14th January at 12:51 and not, as he claimed, at 11 p.m. The defendant testified that he was never advised by the police to contact the plaintiffs directly to get back his deposit. But according to the police report, he was in fact so advised by the police. The relevant report reads as follows:-

"Informant who is the buyer, reported that he still hasn't received the deposit money from seller, therefore he wanted police to take action against the seller. However, the seller has already promised to return the deposit money yesterday, its only a matter of time; therefore, the informant was advised to contact seller directly, so as to collect his deposit back."

"After laws of Hong Kong explained to informant only civil action can be taken if informant feel necessary; therefore, informant try to contact the seller first. (Through the Tak Man Company which act as middleman)."

57. This report is also somewhat inconsistent with the defendant's evidence that ha was not interested in the return of the deposit. It would seem that he was indeed advised by the police to contact the plaintiffs for the deposit.

58. Another report as recorded by the police of the husband plaintiff seeking on the 28th January 1987 at 16.52 hours to place a cheque of $20,000 with the station for collection by the defendant. The husband plaintiff's request was rejected by the police but was recorded.

59. The defendant was the only witness for the defence. The defendant denied any agreed compromise reached on the 13th January for the $20,000 deposit to be returned on the 19th January.

60. The wife plaintiff was concerned enough to report to the police on Mrs Yip's "strict" request to sell the premises. The husband plaintiff rang the defendant on 13th and 15th of January, at his home on the 15th. If the husband is telling the truth, the defendant must have been the caller from the police station on the 13th. On the 15th the husband plaintiff also made a special arrangement with Mr Lo of Messrs Woo & Woo for the return of the deposit in his presence. On the 19th January, at about 3 p.m. someone claiming to be the defendant telephoned Mr Lo of Messrs Woo & Woo excusing himself from coming to the appointed meeting. On the 28th January, the husband plaintiff attempted to leave a cheque of $20,000 with the police. The plaintiffs seemed to believe that there was cause for alarm.

61. The defendant claimed not to be interested in the return of the deposit and was never advised by the police to contact the plaintiffs direct to collect it. That is not wholly consistent with the police records of his report made on the 14th January, which he was quite prepared to concede as correct but made a vain attempt to challenge its accuracy in his re-examination. In re-examination, the defendant finally claimed to have no recollection if he had been so advised by the police.

62. The background and conduct of the plaintiffs as documented reflect their grave concern. There would appear to be every incentive for them to try to appease the defendant by offering to return the deposit in settlement. The defendant's version is unconvincing and conflicts with the police record. The events subsequent to the 10th January as described by the plaintiffs are more probable, consistent with he known scenario and well coroborated by Mr Lo and the police reports. I find that the defendant was offered the return of the $20,000 deposit in circumstances as related by the plaintiffs. I further find that it was a compromise reached on the 13th with the appointed date and time finalized on the 15th for the whole affair to be resolved on the 19th. I also find that the defendant deliberately absented himself from the offices of Messrs Woo & Woo for the return of the deposit. Nevertheless, he is still so entitled to the $20,000. Counsel for the plaintiffs informed the court that the $20,000 was there for collection by the defendant.

63. The dispute was thus settled on the 13th January. It was an agreed mutual release in the form of a compromise. Both parties genuinely believed in the validity of their respective complaints of default against the other of them. The plaintiffs maintained that since all the relevant documents were not ready for signature on the 10th January, the defendant was in breach. After all, even Mr Lo of Messrs Woo & Woo took the view that it was a cancellaiton, and the plaintiffs signed a cancellation agreement in escrow prepared by Mr Lo. The plaintiffs were tempted to forfeit the deposit, though they repented under pressure. The defendant's stance was that it was a sub-sale with a cancellation of whatever previous agreement the plaintiffs had with MTRC, the responsibility of which lay with the plaintiffs. The parties are bound by the compromise reached on the 13th January. The Chinese Sale and Purchase Agreement thus ceased to have effect.

64. In the circumstances, the plaintiffs' claim succeeds to the extent that a Declaration be made that the plaintiffs were discharged from their obligations under the Chinese Sale and Purchase Agreement as from the 13th January 1987. Counterclaim of the defendant be therefore, dismissed.

65. The plaintiffs succeed in less than half of their original claim. Their claims on implied term and collateral agreement wholly fail, but testing the defendant's version as to what transpired after the 10th January took almost as much time as the time wasted on the failed issues. Subject to what Counsel have to say, a fair order for costs should be : no order as to costs.