ZHENG CHULIN v. WO KEE HONG KONG INDUSTRIAL LTD

DCCJ 2581/2010

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 2581 of 2010

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BETWEEN

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DECISION

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Introduction

1.  This is an appeal against Master’s Decision.  By a Summons dated 23 May 2011 (“the Plaintiff’s Summons”), the Plaintiff amongst others, sought to amend his Statement of Claim under O. 20 r. 5. The parties did not file any affidavit.  Master T. Chan on 9 August 2011 allowed the application.  The Defendant now seeks to appeal against that decision.  This is in effect, a rehearing of the abovesaid application.

Background

2.  The action relates to a sale of two adjoining properties (“the Two Properties”). According to the Statement of Claim, by virtue of various written agreements entered into between the parties (“the subject agreements”), the Plaintiff agreed to purchase and the Defendant agreed to sell the Two Properties.

3.  By correspondences between their solicitors, the parties further agreed to complete on 26 February 2010 (“the Completion Date”).

4.  According to the Statement of Claim, on or about the Completion Date, shortly before executing the assignments, the Plaintiff was informed by the property agent representing both parties, that the Two Properties were occupied by a tenant who had no intention to move out.  This was confirmed by the Defendant.  The Defendant also confirmed that vacant possession of the Two Properties could not be delivered.  On this basis, the Plaintiff says that the Defendant was in breach of the agreements.  Further or in the alternative, the Plaintiff also pleaded that the Defendant evinced an intention no longer to be bound by the agreements and repudiated them. 

5.  On the other hand, the Defendant in its Defence and Counterclaim alleged that, it was the Plaintiff who failed to complete the purchase of the Two Properties and repudiated the agreements.  The Defendant hence by a letter dated 26 February 2010 accepted the Plaintiff’s repudiation.  The Defendant also denied that there was any existing tenant occupying the Two Properties at the material time.  The Two Properties were all along used by the Defendant for storage purpose and were never let to anyone.

6.  The Plaintiff initially claimed for damages only in the Statement of Claim, but he now seeks to amend it by introducing an additional claim of specific performance, and some other minor amendments.

The Proposed Amendments

7.  The Plaintiff’s proposed amendments consist of:-

(a)   Amendments relating to the additional relief of specific performance

(i)   The addition of Paragraph 23A, which reads:

“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”;

(ii)   The inclusion of additional reliefs of specific performance of the conveyances of the Two Properties;

(iii)   Amending the initially claimed relief of damages to become damages in lieu of or in addition to specific performance; (Collectively “the SP Amendments”)

(b)   Minor Amendments

Other minor amendments at Paragraphs 9, 20 and 26A of the proposed Amended Statement of Claim (Collectively the “Minor Amendments”).

The Defendant’s Oppositions

8.  Mr Wong, Counsel for the Defendant, submitted that the Plaintiff must have accepted the alleged repudiation on the part of the Defendant by issuing the Statement of Claim, which claimed for damages only.  This is particularly so when the Statement of Claim is viewed together with the Plaintiff’s delay in seeking specific performance (10 months after issuance of Statement of Claim and 15 months after Completion Date).  The Plaintiff is thereby barred from seeking specific performance, and hence the SP Amendments are not maintainable.

9.  Further, Mr Wong contended that under the equitable principles of laches, the Plaintiff was required to “come to court quickly once he knows that his rights are being infringed”, but he failed to do so.

10.  Mr Wong did not oppose to the Minor Amendments at all.

The Plaintiff’s Contentions

11.  The Plaintiff contended that the Statement of Claim shall not be construed as an acceptance of repudiation because:-

(a)   It was never expressed in the Statement of Claim that the Plaintiff accepted the Defendant’s repudiation;

(b)   It was expressly pleaded in the Statement of Claim that the Plaintiff, but for the Defendant’s breach, was ready and willing to complete the transaction of the Two Properties (at Paragraph 11 & 22 of the Statement of Claim); and

(c)   That the Plaintiff has pleaded in his Statement of Claim in Paragraphs 9(c), 9(d), 20(c) and 20(d) that the Defendant was the one who was in breach of the subject agreements.

12.  The Plaintiff also contended that even if the Defendant’s arguments were valid, the hearing of the present Summons is not the proper venue to determine the issue. It should be proceeded with an O. 14A application.

Issues

13.  It is common ground that if the Statement of Claim, claiming for damages only, amounts to an acceptance of repudiation, the Plaintiff will be barred from seeking specific performance.    The issue is thus whether the Statement of Claim, claiming for damages only, amounts to an acceptance of repudiation.

14.  The other issue is that whether the Plaintiff’s silence/inactivity/delay in pursuing specific performance will bar him from doing so now.

Applicable Legal Principles

Amendment of Pleadings

15.  It is stated in Paragraph20/8/24 of the Hong Kong Civil Procedure 2011, Vol.1 that:-

“The court will always look at the materiality of the proposed amendment (Wood v Earl of Durham (1888) 21 Q.B.D. 501). An inconsistent or useless amendment will not be allowed … nor an addition of a claim which the plaintiff had precluded himself from raising (Morel Brothers v Westmorland [1903]1 K.B. 64 at 77; [1904] A.C. 11).”

Acceptance of Repudiation

16.  In Johnson v Agnew [1980] AC 367, Lord Wilberforce stated at 392 that:-

“First, in a contract for the sale of land, after time has been made, or has become, of the essence of the contract, if the purchaser fails to complete, the vendor can either treat the purchaser as having repudiated the contract, accept the repudiation, and proceed to claim damages for breach of the contract, both parties being discharged from further performance of the contract; or he may seek from the court an order for specific performance with damages for any loss arising from delay in performance. (Similar remedies are of course available to purchasers against vendors.) This is simply the ordinary law of contract applied to contracts capable of specific performance.

Secondly, the vendor may proceed by action for the above remedies (viz. specific performance or damages) in the alternative. At the trial, he will however have to elect which remedy to pursue.

Thirdly, if the vendor treats the purchaser as having repudiated the contract and accepts the repudiation, he cannot thereafter seek specific performance.  This follows from the fact that, the purchaser having repudiated the contract and his repudiation having been accepted, both parties are discharged from further performance.”

17.  In Vitol SA v Norelf Ltd [1996] AC 800 at 810, Lord Steyn stated that:-

“My Lords, the question of law before the House does not call for yet another general re-examination of the principles governing an anticipatory breach of a contract and the acceptance of the breach by an aggrieved party. For present purposes I would accept as established law the following propositions. (1) Where a party has repudiated a contract the aggrieved party has an election to accept the repudiation or to affirm the contract: Fercometal S.A.R.L. v Mediterranean Shipping Co. S.A. [1989] A.C. 788. (2) An act of acceptance of a 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 that aggrieved party is treating the contract as at an end.”

18.  In Hansun Investment Ltd. v Sincere Union Development Limited and Another (Unreported, HCMP 351/2007, 15 May 2008), the 1^st Defendant did not expressly accepted the repudiation of the 2^nd Defendant.  However, the Court considered that “the acceptance does not have to be as succinctly communicated” by quoting Vitol SA v Norelf Ltd.

19.  The 1^st Defendant in Hansun by letters to the 2^nd Defendant called for the return of deposits.  The Court considered the appropriate test to be: “If one had been the recipient of the letters written by [the 1^st Defendant’s solicitors] post the completion date, could one treat them as unequivocal conveyance by [the 1^st Defendant] that the provisional agreement is at an end?”

20.  It is stated in Chitty on Contracts, 30^th edition, at Paragraph 24-013, that:-

“An act of acceptance of a repudiation requires no particular form. It is usually done by communicating the decision to terminate to the party in default, although it may be sufficient to lead evidence of an:

“Unequivocal overt act which is inconsistent with the subsistence of the contract … without any concurrent manifestation of intent directed to the other party.””

Silence/Inactivity & Laches

21.  It is stated in Chitty on Contracts, 30^th edition, Paragraph 24-013 that:-

“Acceptance of repudiation must be clear and unequivocal and mere inactivity or acquiescence will generally be regarded as acceptance for this purpose.”

22.  In Lindsay Petroleum Co. v Hurd (1874) L.R. 5 P.C. 221, Lord Selborne L.C. stated that:-

“Where it would be practically unjust to give a remedy, either because the party by his conduct done that which might fairly be regarded as equivalent to a waiver of it, or where by his conduct and neglect he has, though perhaps not waiving that remedy, yet put the other party in a situation in which it would not be reasonable to place him if the remedy were afterwards to be asserted, in either of these cases lapse of time and delay are most material, but in every case if an argument against relief which otherwise would be just is founded upon mere delay, that delay, of course, not amounting to a bar by any statutory limitations, the validity of that defence must be tried upon principles substantially equitable.

Two circumstances always important in such cases are: the length of the delay and the nature of the acts done during the interval which might affect either party and cause a balance of justice or injustice in taking the one course or the other so far as relates to the remedy.”

23.  In Nelson v Rye [1996] 2 All ER 171, at p. 201, Laddie J. stated that;-

“The courts have indicated over the years some of the factors which must be taken into consideration in deciding whether the defence runs. Those factors include the period of the delay, the extent to which the defendant’s position has been prejudiced by the delay, and the extent to which that prejudice was caused by the actions of the Plaintiff. I accept that mere delay alone will almost never suffice, but the court has to look at all the circumstances, including in particular those factors set out above, and then decide whether the balance of justice or injustice is in favour of granting the remedy or withholding it. If substantial prejudice will be suffered by the defendant, it is not necessary for the defendant to prove that it was caused by the delay. On the other hand, the plaintiff’s knowledge that the delay will cause such prejudice is a factor to be taken into account.

Discussion

24.  As pointed out in Vitol SA v Norelf Ltdand Hansun, an acceptance of repudiation does not need to be spelt out. I, thus consider Mr D’Souza’s argument that the Statement of Claim does not contain an expressed acceptance of repudiation to be neither here nor there.

25.  On the other hand, Mr D’Souza also relied upon Paragraphs 11 and 22 of the Statement of Claim (which are identical except for the name of the properties) and advanced the argument that the Plaintiff was still ready and willing to complete the transactions of the Two Properties. These paragraphs were pleaded as follows:-

“11.    At all material times, except because the Defendant failed to provide vacant possession to the Plaintiff for the Unit B1 Property [Unit B2 Property in Paragraph 22], the Plaintiff was ready and willing to complete.”

26.  I will reject Mr D’Souza’s argument for the following reasons:-

(a) It was only pleaded that the Plaintiff was ready and willing to complete but for the Defendant’s breach. It is the Plaintiff’s case that the Defendant was now in breach. Under such circumstances, was the Plaintiff still ready and willing to complete notwithstanding the Defendant’s breach? There is no answer in the Statement of Claim.

(b) It was only pleaded that the Plaintiff “was” ready and willing to complete at all material times. It did not go so far as to indicate whether the Plaintiff was still holding the same stance when the Statement of Claim was filed.

(c) As such, I am of the view that the Paragraphs 11 and 22 of the Statement of Claim do not assist the Mr D’Souza’s application.

27.  Mr D’Souza’s argument that the Plaintiff has pleaded in the Paragraphs 9(c), 9(d), 20(c) and 20(d) of the Statement of Claim, that it was the Defendant who was in breach the subject agreements, is again neither here nor there. Who was in breach of the subject agreements is a matter for trial. It has no bearing as to whether the Plaintiff has by his Statement of Claim accepted the Defendant’s repudiation. I cannot see how those paragraphs of the Statement of Claim can assist the Plaintiff’s application.

28.  Further, I do not accept Mr D’Souza’s argument that the dispute should be dealt with by way of O.14A. Such a proposal is in my view inconsistent with the underlying objectives under O.1A

29.  After considering the abovementioned authorities, and by looking at the Statement of Claim objectively, I have the following conclusions:-

(a) The loss and damages claimed by the Plaintiff in respect of: (i) return of deposits; (ii) Apportionment costs; (iii) agency fees; and (iv) legal costs, (at Paragraphs 24 & 25 of the Statement of Claim) in my view may not amount to “loss arising from delay in performance” (as elaborated in Johnson v Agnew).

(b) But having said that, it is pleaded at Paragraph 26 of the Statement of Claim that: “Further or in the alternative to paragraphs 24 and 25 above, damages to be assessed.” It is unclear as to what alternative damages was sought under Paragraph 26. Arguably, it can be damages for loss arising from delay in performance. It is thus ambiguous from the Statement of Claim as to which of the two courses set out in Johnson v Agnew (or both as alternatives to each other) was opted by the Plaintiff.

(c) There is no evidence filed by the parties. Under the circumstances, I cannot say definitely that the Plaintiff must have elected to accept the Defendant’s repudiation. At the least, it cannot be said that the Plaintiff’s conduct was clear and unequivocal in treating the subject agreements as at an end.

(d) Mr Wong also relied on Sam Woo Civil Contractors Limited v Ho Kwok Poon & Another (Unreported, HCA 714/2004, 26 June 2004) and Hansun. However, both cases are distinguishable on their facts. In Sam Woo, the Plaintiff pleaded in its Statement of Claim that it has accepted the Defendants’ repudiation. In Hansun, the 1^st Defendant intimated that it was neither willing nor ready to continue with the purchase and persistently called for the return of the deposits. These factors do not appear in the present scenario.

(e) I have also considered the silence and/or inactivity on the part of the Plaintiff in pursuing specific performance. But it is trite law that mere silence or inactivity will not be regarded as communication of acceptance of repudiation.

(f) For the above reasons,it is arguable that the Plaintiff has not accepted the repudiation of the subject agreements.

(g) In respect of Mr Wong’s arguments on laches, I have to see whether and how the Defendant was prejudiced by the Plaintiff’s delay (as enunciated in Lindsay Petroleum Co. v Hurd and Nelson v Rye). However, as both parties did not file any evidence, I am unable to see any such prejudice.

(h) Hence, the SP Amendments shall be allowed.

Conclusion

30.  For the above reasons, the appeal is dismissed. 

Costs

31.  I will make an order nisi, to be made absolute in 14 days, that the costs for this appeal be to the Plaintiff, to be taxed if not agreed, with Counsel Certificate.