ZHENG CHULIN v. WO KEE HONG KONG INDUSTRIAL LTD

CACV 56/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 56 OF 2012

(ON APPEAL FROM DCCJ NO 2581 OF 2010)

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BETWEEN

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REASONS FOR JUDGMENT

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Hon Kwan JA (giving the Reasons for Judgment of the Court):

1.  This is an appeal from a decision allowing certain amendments to a statement of claim. The amendments were allowed by Master T Chan of the District Court and upheld by Deputy District Judge G Chung on 9 November 2011. This appeal is brought with leave granted by Tang V-P on 27 February 2012. We have allowed the appeal at the conclusion of the hearing and these are the reasons of the court.

2.  The appeal is within a very narrow compass, namely, whether the matters pleaded in the statement of claim are such that they amounted to clear and unequivocal acceptance of the defendant vendor’s repudiation of the agreements for sale and purchase of two properties so that the plaintiff purchaser should not be permitted to amend his pleading to claim specific performance of the agreements, as once a repudiation has been accepted, the acceptance cannot be withdrawn (Chitty on Contracts, 30^th ed, vol 1, para 24-013).

3.  The relevant background matters taken from the pleadings filed may be briefly stated as follows.

4.  The parties entered into two formal agreements for the sale and purchase of two adjoining properties in Pahsang Industrial Building in Tuen Mun dated 30 April 2008. The terms of the agreements were identical save as to the particulars regarding the property and the price. By subsequent correspondence between the parties’ solicitors, completion was agreed to take place on 26 February 2010. The defendant was to deliver up vacant possession of the properties to the plaintiff on completion. Time was of the essence of the agreements. Clause 21 provided that if either party failed to complete, all stamp duties and estate agency’s commission paid or payable shall be borne by the defaulting party. Clause 26 provided that if the vendor failed to complete, all of the moneys paid by the purchaser to the vendor pursuant to the agreement shall be returned to the purchaser and the purchaser shall also be entitled to recover damages.

5.  Pursuant to the agreements and the supplemental agreements both made on or about 11 March 2009, the plaintiff paid to the defendant the initial and further deposits and the agreed proportion of government rent, rates and management fees up to the completion date.

6.  Completion did not take place on 26 February 2010 as agreed. On the plaintiff’s case, the defendant was unable to complete because there was a tenant or tenants in the properties and the defendant failed to give vacant possession to the plaintiff. The defendant denied the existence of any tenant in the properties or that it was unable to deliver vacant possession on the completion date. On 26 February 2010, the defendant’s solicitors wrote to the plaintiff’s solicitors purporting to accept the plaintiff’s repudiation of the agreements in failing to complete the sale and purchase and to forfeit the deposits. By that letter, the defendant further held the plaintiff liable for any deficiency in price and incidental expenses to the resale of the properties.

7.  The plaintiff issued a writ in the District Court on 28 July 2010 with a statement of claim. After pleading the material terms of the agreements, the payment of monies by the plaintiff pursuant to the agreements, the defendant’s breach was pleaded in these terms:

“9. The Defendant, in breach of the Unit B1 Property Agreement and the Unit B1 Property Supplemental Agreement, failed to provide vacant possession of the Unit B1 Property and thus failed to complete.

PARTICULARS

(a) On or about 26 February, shortly before executing the assignment for the Unit B1 Property, Mr Lee Kam Bor, at the material time, of Flourish Property Agent [sic] Limited, the property agent representing the parties, informed the Plaintiff that upon his inspection of the Unit B1 Property, there existed a tenant in the premises who had no intention of moving out.

(b) The Plaintiff immediately contacted the Defendant who confirmed that vacant possession of the Unit B1 Property could not be given to the Plaintiff and informed the Plaintiff that he did not have to buy the Unit B1 Property if he did not want to.

(c) In the premises, the Defendant, in breach of the Unit B1 Property Agreement and the Unit B1 Property Supplemental Agreement, failed to provide vacant possession to the Plaintiff.

(d) Further or in the alternative, the Defendant, in breach of the Unit B1 Property Agreement and the Unit B1 Property Supplemental Agreement, evinced an intention no longer to be bound by the said agreements and repudiation [sic] it.”

8.  Paragraph 20 of the statement of claim relates to breach of the other property and is in similar terms to paragraph 9.

9.  In the section of the statement of claim under the heading “Remedies”, it was pleaded as follows:

“24. In the premises, pursuant to clauses 21 and 26 of the Unit B1 Property Agreement, the Plaintiff is entitled to and does claim against the Defendant for the sum of HK$219,605.10, being monies paid to the Defendant pursuant to the Unit B1 Property Agreement and the Unit B1 Property Supplemental Agreement. Further or in the alternative, by the Defendant’s breach of the Unit B1 Property Agreement and the Unit B1 Property Supplemental Agreement, the Plaintiff has suffered loss and damage.

PARTICULARS

Description		Amount
(a) Initial Deposit paid to the Defendant		HK$35,000
(b) Further Deposit paid to the Defendant		HK$100,000
(c) 2nd Further Deposit paid to the Defendant		HK$50,000
(d) Apportionment costs paid by the Plaintiff to the Defendant in the sums of HK$4,554.10 paid on or about 28 November 2008, HK$5,517 paid on or about 27 May 2009, HK$5,517 paid on or about 28 August 2009, and HK$5,517 paid on or about 18 November 2009		HK$21,105.10
(e) Agency fee paid to Flourish Property Agency Limited		HK$13,500
(f) Legal costs incurred by the Plaintiff for the purchase of the Unit B1 Property		HK$12,570”

10.  Paragraph 25 of the statement of claim relates to the adjoining property Unit B2 and followed the same pattern as in paragraph 24. The amount claimed was $229,853.30.

11.  This was followed by paragraph 26 which read as follows:

“26. Further or in the alternative to paragraph 24 and 25 above, damages to be assessed.”

12.  In the prayer for relief, the plaintiff claimed:

“(1) The sum of HK$219,605.10 and/or damages for breach of the Unit B1 Property Agreement and the Unit B1 Property Supplemental Agreement and/or damages to be assessed;

(2) The sum of HK$229,853.30 and/or damages for breach of the Unit B2 Property Agreement and the Unit B2 Property Supplemental Agreement and/or damages to be assessed;

(3) Interest;

(4) Further or other relief;

(5) Costs.”

13.  The plaintiff sought to amend the statement of claim by adding this paragraph in the section headed “Remedies” as follows:

“23A. By reason of the aforesaid, the Plaintiff purchased the Unit B1 Property and the Unit B2 Property because of, inter alia, the adjoining features and the proximity of the two said properties making it so that the Plaintiff is unable to find such replacement in the market.”

14.  In the prayer for relief, the plaintiff sought to add two paragraphs claiming specific performance of the agreements for the two properties and to amend the existing claims for damages by adding the words “damages in lieu of or in addition to specific performance” of each of the agreements.

15.  The legal principles are not in dispute.

16.  An amendment should be allowed if it is for the purpose of determining the real question in controversy between the parties to proceedings or of correcting any defect or error in the pleadings. But if an amendment is not maintainable in law, it would not be allowed.

17.  The act of acceptance of repudiation requires no particular form. A communication does not have to be couched in the language of acceptance. It is sufficient that the communication or conduct clearly and unequivocally conveys to the repudiating party that the aggrieved party is treating the contract as at an end (See Vitol SA v Norelf Ltd [1996] AC 800 at 810G to811A). Mere inactivity or acquiescence will generally not be regarded as acceptance for this purpose (Chitty on Contracts, op cit, para 24-013).

18.  It is unnecessary to mention the other authorities cited by both parties on whether the courts have held there was acceptance of repudiation in a given case, as this is a fact sensitive issue and these authorities do not add anything of significance to the general principles.

19.  Where a vendor in a contract for the sale of land has repudiated the contract, the purchaser can accept the repudiation and claim damages for breach of contract or seek specific performance with damages for any loss arising from delay in performance. He is not required to make this election when he proceeds to sue. He may claim damages or specific performance in the alternative and elect at the trial which of the remedies he wishes to pursue. If he treats the vendor as having repudiated the contract and accepts the repudiation, he cannot thereafter seek specific performance, as this follows from the fact that both parties are discharged from further performance once repudiation has been accepted (Johnson v Agnew [1980] AC 367 at 392E to H).

20.  The judge held in favour of allowing the amendments as he found it arguable on the statement of claim that the plaintiff has not accepted repudiation of the agreements. He pointed to paragraph 26 of the statement of claim and opined it is unclear as to what alternative damages were sought in that paragraph. He took the view that arguably it can be damages for loss arising from delay in performance and it is ambiguous as to which of the two courses in Johnson v Agnew, or both as alternatives to each other, the plaintiff has opted in the pleading. He did not think that the plaintiff’s conduct was clear and unequivocal in treating the agreements as at an end.

21.  I agree with the submission of the defendant’s counsel Mr Kenneth Wong that paragraph 26 of the statement of claim has not given rise to any ambiguity and that on an objective and proper reading of the statement of claim, the plaintiff has clearly and unequivocally accepted the defendant’s repudiation of the agreements.

22.  Paragraphs 24 and 25 seek the return of all monies paid by the plaintiff pursuant to the agreements, alternatively, loss and damage suffered by the plaintiff by reason of the defendant’s breach. The loss and damage, as particularized in those paragraphs, are in respect of the monies paid by the plaintiff under the agreement, plus agency fee and legal costs incurred in the transaction. The claim for the return of monies paid and costs and expenses wasted are plainly inconsistent with the subsistence of the contract.  

23.  Paragraph 26 seeks, “further or in the alternative to paragraphs 24 and 25 above, damages to be assessed”. All that this paragraph seeks to do is to claim damages to be assessed by reason of the defendant’s breach, instead of the sums particularized and quantified in paragraphs 24 and 25. It cannot be read as referring to a claim for damages for loss arising from delay in performance, which has not been pleaded in any of the foregoing paragraphs.

24.  Mr Robin D’souza argued for the plaintiff that repudiatory breach was pleaded as an alternative in the last sub-paragraph in paragraphs 9 and 20 of the statement of claim. I do not think this would assist him. The first three sub-paragraphs in paragraphs 9 and 20 pleaded facts and matters to substantiate an allegation that the defendant was in breach of the agreements. The last sub-paragraph merely pleaded repudiation as an alternative to breach of the agreements.

25.  Mr D’souza relied on Bear Sterns Bank Plc v Forum Global Equity Ltd [2007] EWHC 1576 (Comm) in which it was stated at paragraph 127 that: “A decision not to pursue a remedy of specific performance does not commit the innocent party to accept a repudiatory or anticipatory breach. He is entitled to claim other relief, including damages for the breach, and at the same time maintain the contract.” These dicta do not apply to the situation where the innocent party has clearly and unequivocally accepted repudiation.

26.  For the above reasons, we have allowed the appeal, set aside the order of the judge on 9 November 2011 and disallowed the amendments in paragraph 23A and the prayer for relief of the draft statement of claim. We order the plaintiff to pay the costs of the defendant in this appeal and in the hearing before the judge.