DISTINCT FORTUNE LTD v. HYNDLAND INVESTMENT CO LTD

HCA 1287/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1287 OF 2010

____________

__________________

J U D G M E N T

__________________

1.  The defendant applies to strike out the writ and the statement of claim on the ground that they are scandalous, frivolous, vexatious or an abuse of the process of the court.

2.  The plaintiff claims in this action for specific performance of an oral agreement for the sale and purchase of some units in Far East Mansion in Middle Road, Tsim Sha Tsui (“the Property”) with damages in addition to or in lieu of specific performance.

Background

3.  The defendant was the register owner of the Property and another unit in the building.  It put the Property and the other unit up for sale sometime in June this year.  The asking price was $200 million.  The plaintiff was interested in the offer.

4.  It is the plaintiff’s case that the representatives of both sides had at an inspection of the Property on 25 June and agreed in principle for the sale and purchase of the Property and the other unit to be at $184 million.  The plaintiff then signed a draft provisional sale and purchase agreement prepared by its estate agent, but the defendant did not want to sign this agreement until it had been reviewed by the defendant’s solicitors.

5.  On 26 June, the defendant informed the plaintiff that the other unit would not be sold.  The plaintiff says that after further negotiation on the telephone, the parties reached another agreement in principle for the sale and purchase of the Property without the extra unit to be at $178 million.

6.  On 28 June, the plaintiff signed another draft provisional sale and purchase agreement.  It provided for payment by the plaintiff of an initial deposit and part payment at $6 million upon its signing.  It further provided for payment of $11.8 million further deposit and part payment upon the signing of a formal agreement for sale and purchase.

7.  The plaintiff’s representative one Mr Peter Tse attended the office of the defendant’s solicitors and met one Mr Chu, the solicitor handling the sale and purchase for the defendant, and his clerk one Mr Ng.  Peter Tse gave Chu the new draft provisional sale and purchase agreement and $6 million.  The money was received by the defendant’s solicitors as earnest money for the purchase of the Property.  The defendant did not want to sign this draft sale and purchase agreement and preferred to sign a formal agreement for sale and purchase.

8.  The solicitors on both sides then corresponded on the terms and conditions for preparation of the formal sale and purchase agreement. 

9.  It is also the plaintiff’s case that from 29 June onwards, one Mr Tim Cheung represented the defendant in the negotiations with Peter Tse of the plaintiff on the detailed terms of the sale and to liaise with Tse on the progress of and matters relating to the proposed sale.  Cheung told Tse that he took instructions directly from a director of the defendant Mr Keswani.

The solicitors’ correspondence, the telephone conversations and the SMS

10.  The plaintiff’s solicitors wrote the first letter to the defendant’s solicitors on 28 June asking for the title deeds and documents of the Property for approval.  The letter was headed “Subject to Contract” and ended with the statement “[i]t is understood that nothing herein shall be binding upon our client unless and until the formal Agreement for Sale and Purchase has been signed”.

11.  On 7 July, the defendant’s solicitors replied and enclosed a draft formal sale and purchase agreement together with some copy tenancy agreements for perusal by the plaintiff’s solicitors.  This letter was also headed “Subject to Contract” and ended with the statement “[i]t is to be understood that nothing in this letter shall be treated as binding on our client unless and until the said Agreement has been signed by both parties”.

12.  On 8 July, the plaintiff’s solicitors returned the draft formal sale and purchase agreement with amendments to the defendant’s solicitors.  The covering letter was also headed “Subject to Contract” and ended with the statement “[i]t is understood that nothing herein shall be binding upon our client unless and until the formal Agreement for Sale and Purchase has been signed”.

13.  On 10 July, the plaintiff’s solicitors wrote and enclosed further amendments to the defendant’s solicitors.  This letter was also headed “Subject to Contract” and ended with the same statement as in their letter of 8 July.

14.  On 12 July, the defendant’s solicitors wrote and enclosed the draft formal agreement for sale and purchase with approved amendments for consideration by the plaintiff’s solicitors.  This letter was also headed “Subject to Contract” and ended with the statement “[f]urther it is understood that nothing in this letter shall be treated as binding on our client unless and until the said Agreement has been signed by both parties”. 

15.  On the same day, the plaintiff’s solicitors sent some further proposed amendments to the solicitors for the defendant.

16.  The plaintiff then pleaded in the statement of claim that in the early afternoon of 13 July, one Ms Chan, a clerk of the plaintiff’s solicitors, had a telephone conversation with Ng of the defendant’s solicitors whereby they agreed on the amendments to the formal agreement for sale and purchase subject to Ng’s reporting to and seeking the final confirmation from the defendant.

17.  The plaintiff further pleaded that there was then a telephone conversation on the same day between Peter Tse and Tim Cheung whereby Tse confirmed the plaintiff’s acceptance of the terms of the sale and purchase that the defendant found agreeable.  There was then one more telephone conversation between them on the same day in which Cheung confirmed the defendant’s acceptance of all the terms for the sale and purchase of the Property to be contained in the engrossment of the formal sale and purchase agreement (“Engrossment SPA”) and that the sale and purchase of the Property should proceed upon those terms pending the preparation of the Engrossment SPA by the solicitors for signing by the parties.

18.  Tse referred to this conversation in his affirmation as follows:

“28. Later on, Tim Cheung telephoned me and told me that the defendant had confirmed its agreement to the terms of the sale and purchase as accepted by the plaintiff through the said negotiations between the plaintiff’s solicitors and the defendant’s solicitors. He also said that the deal had been struck and it should proceed as agreed, and what was to be done was for the solicitors to get the document ready for signing by the parties.”

These two conversations are referred to as the Peter Tse/Tim Cheung conversations. 

19.  Tse also referred to an SMS that he received from Tim Cheung at about 4:00 p.m. on 13 July.  The plaintiff regarded this SMS as the defendant’s further confirmation of the agreement to sell the Property to the plaintiff upon the terms as agreed between the solicitors, namely the terms to be contained in the Engrossment SPA.  Tse said in his affirmation that the SMS from Tim Cheung read “Kim said he’ll gave instruction to pig to go ahead with the deal”.  “Kim” referred to the defendant’s director Keswani and “pig” referred to the defendant’s solicitor Chu.

20.  The plaintiff then referred to a further telephone conversation between Chan of the plaintiff’s solicitors and Ng of the defendant’s solicitors that took place in the morning of 14 July.  The plaintiff pleaded that Ng in this conversation confirmed on behalf of the defendant that all the terms had been agreed and the Engrossment SPA was ready and was being sent to the plaintiff’s solicitors for execution by the plaintiff.  This conversation and the conversation between them on 13 July are referred to as the Chan/Ng conversations.

21.  The Engrossment SPA was then sent by the defendant’s solicitors to the plaintiff’s solicitors on 14 July for the plaintiff’s signature.  The covering letter was still headed “Subject to Contract” and ended with the statement “[i]t is to be understood that nothing in this letter shall be treated as binding on our client unless and until the said Agreement has been signed by both parties.”

22.  Also on 14 July, the plaintiff’s solicitors returned to the solicitors for the defendant the Engrossment SPA duly signed by the plaintiff with a cheque for $11.8 million for the further deposit and part payment.  The covering letter imposed an undertaking on the defendant’s solicitors that read “[p]lease note that the said cheque and the said Agreement (in duplicate) are sent to you against your strict undertaking to send us the duplicate of the said Agreement duly signed by your client and attested within 2 days from the date hereof.”

23.  The defendant did not sign the Engrossment SPA. On 16 July the defendant’s solicitors returned to the plaintiff’s solicitors the Engrossment SPA and the cheque for $11.8 million together with another cheque drawn by the defendant’s solicitors for $6 million as refund of the earnest money to the plaintiff. 

The issues in the plaintiff’s claim

24.  It is the plaintiff’s case that by the Peter Tse/Tim Cheung conversations and/or the Chan/Ng conversations, the plaintiff and the defendant had reached an oral agreement for the sale and purchase of the Property at $178 million (“the Oral Agreement”).

25.  It is also the plaintiff’s case that the SMS and the terms in the Engrossment SPA constitute a sufficient memorandum of the Oral Agreement and the SMS had been signed by Tim Cheung as a person lawfully authorised by the defendant for the purpose of section 3 of the Conveyancing and Properties Ordinance, Cap. 219. 

26.  Section 3 of the Ordinance provides:

“3. (1) Subject to section 6(2), no action shall be brought upon any contract for the sale or other disposition of land unless the agreement upon which such action is brought, or some memorandum or note thereof, is in writing and signed by the party to be charged or by some other person lawfully authorized by him for that purpose.

(2)   This section applies to contracts or other dispositions whenever made and does not affect the law relating to part performance or sales by the court.”

27.  The plaintiff also relies on part performance of the Oral Agreement as an alternative and pleaded the following as the particulars of part performance:

(a)     In the afternoon of 14 July 2010, Peter Tse of the plaintiff telephoned Tim Cheung enquiring why the Engrossment SPA had still not reached the plaintiff’s solicitors.  Tim Cheung replied that he would enquire with the defendant forthwith.

(b)    Pursuant to the matters aforesaid, the defendant’s solicitors sent the Engrossment SPA under cover of a letter of 14 July to the plaintiff’s solicitors for the plaintiff’s signature which was received by the plaintiff’s solicitors at 2:43 pm on 14 July.

(c)     Peter Tse of the plaintiff made another telephone call to Tim Cheung on 14 July 2010 and informed him that the Engrossment SPA would be signed by the plaintiff, and the signed Engrossment SPA together with a cheque for the further deposit at $11.8 million would reach the defendant’s solicitors at about 5 pm on 14 July.  Peter Tse further requested Tim Cheung to ask the defendant to attend the defendant’s solicitors on 14 July to sign the Engrossment SPA.

(d)    At about 4 pm on 14 July, one Mr Lei of the plaintiff attended the office of the plaintiff’s solicitors.  He signed the Engrossment SPA and provided funds for the said further deposit of $11.8 million.

(e)     Sometime after 4 pm on 14 July, Tim Cheung of the defendant telephoned Peter Tse to chase for the Engrossment SPA signed by the plaintiff and the further deposit of $11.8 million.  Cheung requested for the same to be sent to the defendant’s solicitors on 14 July.  In that conversation, Peter Tse informed Tim Cheung that the Engrossment SPA had been signed by the plaintiff and it together with the further deposit of $11.8 million would reach the defendant’s solicitors on 14 July.

(f)     Shortly afterwards, Tim Cheung of the defendant telephoned Peter Tse and informed him that the representative of the defendant, Keswani, would attend the office of the defendant’s solicitors at about 6 pm on 14 July to sign the Engrossment SPA.

(g)     At about 5:00 to 5:15 pm on 14 July, Ng of the defendant’s solicitors telephoned Chan enquiring whether the plaintiff’s solicitors would return the Engrossment SPA duly signed by the plaintiff to the defendant’s solicitors on that day.  Chan replied that the Engrossment SPA had already been signed by the plaintiff and was being rushed over to the defendant’s solicitors with a cheque of the plaintiff’s solicitors for the further deposit of HK11.8 million.

(h)    About 15 to 20 minutes later, Ng telephoned Chan again seeking confirmation that the Engrossment SPA signed by the plaintiff and the cheque for the further deposit of $11.8 million would reach the defendant’s solicitors on 14 July.  Chan confirmed the same.

(i)     Under cover of a letter dated 14 July from the plaintiff’s solicitors and received by the defendant’s solicitors shortly after 5 pm on 14 July, the plaintiff returned to the defendant the Engrossment SPA signed by the plaintiff together with the cheque for $11.8 million for payment of the balance deposit pursuant to the Oral Agreement and the Engrossment SPA (after giving credit to the $6 million earnest money).

28.  The plaintiff’s three issues are firstly, there was the Oral Agreement made between the plaintiff and the defendant on 13 or 14 July for the sale and purchase of the Property at $178 million.  Secondly, there was a sufficient memorandum of the Oral Agreement signed by Tim Cheung as a person lawfully authorised by the defendant in compliance with the requirements of section 3 of the Conveyancing and Properties Ordinance. Thirdly, which is an alternative to the second issue, there was part performance by the plaintiff of the Oral Agreement.

29.  Since the SMS was sent out by Tim Cheung in the afternoon of 13 July, I do not think the plaintiff can say that this is a memorandum of an agreement to be made by the Chan/Ng telephone conversation in the morning of 14 July.  It could not be a memorandum of an agreement that had not yet been made and which might or might not be made at a later date.  It could only be a memorandum of an oral agreement allegedly made before it was sent out by Tim Cheung.  The Chan/Ng telephone conversation in the morning of 14 July can however be discussed in conjunction with the issue of part performance.

30.  The defendant submitted that the plaintiff cannot succeed in any of these issues.

The law on striking out

31.  I have been reminded by the parties that striking out is only for plain and obvious cases.  The claim must be obviously unsustainable that it must be impossible to proceed before it would be struck out.  On an application to strike out, the facts are taken in favour of the party sought to be struck out.  If the viability of the claim is fact sensitive, it should not be struck out.  If the application involves minute and protracted examination of the facts or prolonged and serious argument or determination of difficult question of law, then there should also not be striking out (See para. 18/19/4 of Hong Kong Civil Procedure 2010).

The Oral Agreement

32.  The defendant submitted that the parties had not reached any oral agreement as all correspondence was marked “Subject to Contract” and both parties had all along emphasised that there should be no binding agreement until both sides had signed the formal agreement.

33.  The defendant further submitted that if there was already an agreement before the Engrossment SPA was signed by both parties, then there would be the question of what are the terms of the agreement and in particular the term on the payment of deposit.  The parties must have intended a term for payment of deposit.  The Engrossment SPA did provide for the payment of deposit upon its signing and time was of the essence.  If there would only be a binding contract upon signing of the Engrossment SPA by both sides, then all things would fall in place.  But if there was already an oral agreement and evidenced by a memorandum in the SMS in conjunction with the Engrossment SPA, then there was no need to sign the Engrossment SPA.  If so, there would be no event to invoke the payment of the deposit.  The defendant submitted that it could be so in an open contract which does not have any term on payment of deposit.  But the plaintiff is not alleging an open contract.  The plaintiff is alleging a contract on the terms contained in the Engrossment SPA.

34.  Furthermore, if the plaintiff’s solicitors should have considered that there was already a binding agreement before the signing of the Engrossment SPA by the parties, then they would not have sought to impose the undertaking on the plaintiff’s solicitors in their letter of 14 July which enclosed the Engrossment SPA for the defendant’s signature.

35.  The defendant thus submitted that there was no oral agreement and the agreed basis of negotiation; namely that there would be no binding agreement before the formal agreement was signed by both parties, had not been altered. 

36.  The plaintiff however maintained that there was the Oral Agreement on the terms agreed between Chan & Ng and in the Peter Tse/Tim Cheung telephone conversations in the afternoon of 13 July. Alternatively, the Oral Agreement was made in the Chan/Ng telephone conversation in the morning of 14 July.  I have already noted above that the Chan/Ng conversation on 14 July could not have made an agreement that was recorded in the SMS.

37.  The plaintiff submitted that despite the earlier correspondence between the solicitors was headed “Subject to Contract”, the parties could still enter into an Oral Agreement.  It is a question of construction of whether there was an agreement though the parties were subsequently to have a formal agreement.  I think this is correct as a matter of principle (see Rossiter v Miller (1878) 3 App. Case 1124 at 1151).

38.  The plaintiff further submitted that the qualification of “Subject to Contract” could be removed expressly or by necessary implication.  They could even be ignored if the court is satisfied on the evidence that these words had no meaning (see Hong Kong Housing Authority v Hung Pui [1987] 3 HKC 495 at 497A to 498G).

39.  Therefore, the plaintiff submitted that despite the earlier correspondence was marked “Subject to Contract”, the question of whether the parties have reached the Oral Agreement depends on the evidence and the surrounding circumstances.  This question is also highly fact sensitive and striking out is inappropriate.

40.  The plaintiff also submitted that there is no evidence showing that Peter Tse and Tim Cheung were aware that the correspondence between the solicitors was “Subject to Contract” or that their negotiations were also subject to this qualification.  The plaintiff further submitted that the evidence shows that they were not giving effect to the “Subject to Contract” qualification and had come to an agreement. 

41.  Regarding the “Subject to Contract” qualification in the letter of the defendant’s solicitors dated 14 July enclosing the Engrossment SPA to the plaintiff’s solicitors, the plaintiff submitted that the retention of this qualification was incompatible with the circumstances.  Furthermore, once an agreement has been made, neither side can seek to undo it unilaterally by using the “Subject to Contract” qualification in a subsequent letter (see Au Wing Cheung v Roseric Ltd [1992] 1 HKC 149 at 154C to H and Lam Tam Yi v Chak Wai Man [1993] 2 HKC 537 at 540B to H).

42.  Regarding the undertaking sought to be imposed by the plaintiff’s solicitors in their letter of 14 July on the defendant’s solicitors, the plaintiff submitted that the plaintiff’s solicitors in seeking to impose the undertaking was mainly concerned about the return of the Engrossment SPA duly signed by the defendant.  Leading counsel for the plaintiff even suggested orally that if the plaintiff’s solicitors were at fault, the plaintiff should not be prejudiced.

Decision on the Oral Agreement

43.  The plaintiff’s evidence shows that it had signed two provisional sale and purchase agreements, but the defendant did not want to sign either of them.  It preferred to sign a formal agreement.  The defendant’s intention then was clear.  The correspondence between the solicitors was also clearly qualified to be “Subject to Contract”.  My attention has also been drawn by leading counsel for the defendant to Cohen v Nessdale Ltd [1982] 2 All ER 97 at 103f to 104c where Cumming-Bruce LJ said:

“The starting point, as counsel for the tenant recognises, is really the statement of the law recited in this court in Sherbrooke v Dipple (1980) 41 P & CR 173 and in particular the judgments in this court. Lord Denning MR said (at 176):

‘But there is this overwhelming point: Everything in the opening letter was ‘subject to contract.’ All the subsequent negotiations were subject to that overriding initial condition. We were referred by [counsel for the plaintiffs] to a decision of Bringhtman J. in 1972. It is Tevanan v Norman Brett (Builders) Ltd (223 EG 1945 at 1947). Brightman J said that ‘parties could get rid of the qualification of ‘subject to contract’ only if they both expressly agreed that it should be expunged or if such an agreement was to be necessarily implied’.

Lord Denning MR went on to deal with the application of that principle to the facts of the case before him.

Templeman LJ quoted (41 P & CR 173 at 176) the whole of the passage to which Lord Denning MR had referred from the judgment of Brightman J, and I quote it:

‘… when parties started their negotiations under the umbrella of the ‘subject to contract’ formula, or some similar expression of intention, it was really hopeless for one side or the other to say that a contract came into existence because the parties became of one mind notwithstanding that no formal contracts had been exchanged. Where formal contracts were exchanged, it was true that the parties were inevitably of one mind at the moment before the exchange was made. But they were only of one mind on the footing that all the terms and conditions of the sale and purchase had been settled between them, and even then the original intention still remained intact that there should be no formal contract in existence until the written contracts had been exchanged.’

”Templeman LJ went on to say (41 P & CR 173 at 176):

‘Mr Justice Brightman thought parties could get rid of the qualification of ‘subject to contract’ only if they both expressly agreed that it should be expunged or if such an agreement was to be necessarily implied.’

       I do not think that any assistance is to be derived from looking at the facts in Sherbrooke v Dipple or in Tevanan v Brett.  Brightman J neatly and accurately stated the question: in such a situation, have the parties expressly agreed that subject to contract qualifications should be expunged or should it necessarily be implied?”

44.  I do not think it is the plaintiff’s case that both sides had expressly agreed to expunge the “Subject to Contract” qualification as there is no such evidence.  The plaintiff’s case can only be by necessary implication.  But the Peter Tse/Tim Cheung conversations and/or the Chan/Ng conversations in their surrounding context are much more supportive of the view that the parties were of one mind on the terms and conditions to be included in the formal agreement rather than that there was already an agreement before the formal agreement was signed by both parties.  It is not easy for the plaintiff to establish that somehow the “Subject to Contract” qualification was removed by necessary implication in these conversations.  The SMS from Tim Cheung to Peter Tse also did not appear to have changed the scenario. 

45.  In addition, there is also the problem of the payment of deposit.  On the plaintiff’s case, there is no provision on the time for its payment.  The reason being that the Oral Agreement did not impose any requirement for the signing of the Engrossment SPA and the deposit was only payable upon its signing.

46.  In the light of all these, I find that it is unlikely that the plaintiff will be able to establish at a trial that the parties had reached the Oral Agreement.  However, without listening to the evidence of Peter Tse, Tim Cheung, Chan & Ng, I am reluctant to say that it is impossible for the plaintiff to succeed in this task.  I would therefore not strike out the claim on the ground that the plaintiff will not be able to prove the Oral Agreement despite it is a weak case.  I will go further to consider the other issues.

The memorandum under section 3

47.  The plaintiff relied on the SMS read in conjunction with the Engrossment SPA as the memorandum.  The defendant submitted that the Engrossment SPA alone does not speak of its provenance.  It has to be read together with its covering letter from defendant’s solicitors dated 14 July which stated that the matter was “Subject to Contract” and contained the statement:

“[i]t is to be understood that nothing in this letter shall be treated as binding on our client unless and until the said Agreement has been signed by both parties.”

48.  Furthermore, the SMS merely said: “Kim said he’ll give instruction to pig to go ahead with the deal”.  It did not say that an agreement had been made and it made no reference to the Engrossment SPA or the terms to be included in it.  The defendant also referred to Megarry & Wade, 4th edn. 553 and submitted that the SMS could not have referred to the Engrossment SPA which was not in existence at the time when the SMS was sent out.

49.  The plaintiff however argued that by the time of the SMS, all the terms and conditions to be included in the Engrossment SPA had been agreed and crystallized.  Furthermore, the SMS referred to the giving of instructions to the solicitor, Mr Chu to go ahead with the deal.  It thus made an implicit reference to the Engrossment SPA to be sent by the defendant’s solicitors to the plaintiff’s solicitors.

50.  Regarding the question of signature, the defendant submitted that the SMS has no signature and cannot be treated as a memorandum for the purpose of section 3.  The requirement of a signature in section 3 is a formal one and cannot be ignored.

51.  The plaintiff however submitted that section 3 should be given an updated construction by making allowances for social and technological changes.  It further submitted that the SMS was in a visible form and both Tim Cheung and Peter Tse could see it.  The SMS was a personal way of communication by electronic means.  The principal function of a “signature” is to demonstrate an authenticating intention of the signor.  The sending of an SMS should constitute the signing of it by the sender.  The clicking of the send button by Tim Cheung on his mobile phone to send out the SMS should constitute his signing of it as he already had the intention to authenticate its contents.  The plaintiff also referred to the paper published by the Law Commission in England entitled “Electronic Commerce: Formal Requirements in Commercial Transactions” for support.

Decision on the memorandum under section 3

52.  In my view, if the SMS had an implicit reference to the Engrossment SPA, then the implicit reference would also include the covering letter of 14 July from the defendant’s solicitors which reflected the defendant’s instructions to the solicitors.  I also agree with the defendant that the covering letter has to be included to show the provenance of the Engrossment SPA.  But with the inclusion of the covering letter, the documents when read together cannot amount to a memorandum of an agreement as the letter stated clearly that there was not yet any agreement.

53.  I also agree with the defendant that the SMS has not referred to any term, condition, or agreement.  It merely said that the defendant’s director would give instructions to the solicitors go ahead with the deal.  If the “instructions”, which had not yet been given, were for the defendant’s solicitors to engross the Engrossment SPA and send it to the plaintiff’s solicitors, then the covering letter of 14 July also reflected the “instructions”.

54.  I also agree with the defendant that the SMS could not have referred to the Engrossment SPA which was not yet in existence. In any case, even if the reference to “instruction” in the SMS could be the basis for the SMS to be read together with the Engrossment SPA, the “instruction” would also include the covering letter of 14 July of the defendant’s solicitors.  The terms of the letter made it clear that there was no agreement yet.

55.  On the question of signature, I think the SMS is not a signed document for the purpose of section 3 of the Conveyancing and Properties Ordinance.  I agree with leading counsel of the defendant that there is not even the expression of “(sd.)”.  If the clicking of the send button would amount to the signing of the SMS, then all SMS and emails are signed documents.  This cannot be right.  This is also not the view of the English Law Commission.

56.  The plaintiff has also repeatedly referred to the last Peter Tse/Tim Cheung telephone conversation where Tim Cheung had allegedly said:

“… the deal had been struck and it should proceed as agreed”

However, this is oral evidence and cannot be treated as part of the written memorandum.

57.  For the above reasons, I hold that there was no memorandum of any agreement for the purpose of section 3 of the Conveyancing and Properties Ordinance.

Part performance

58.  The defendant submitted that the acts pleaded by the plaintiff as particulars of part performance do not demonstrate that an agreement for the sale and purchase of the Property had been made and the plaintiff’s acts do not constitute part performance of any such agreement.  The defendant further submitted that the plaintiff’s acts were only geared to the making of the formal agreement.  If these acts were done pursuant to an agreement, that was only an agreement to enter into an agreement and is null and void in law. 

59.  The plaintiff also referred to Megarry and Wade, 4th edn. 570 for what may amount to performance:

“7. ‘Performance.’ The so-called ‘performance’ need not in fact be performance of an obligation imposed by the contract. Many valid acts of part performance, such as the taking of possession by a purchaser or the making of alternations by him for his own purposes, are cases where he is exercising his rights under the agreement rather than performing his duties. Likewise it is part performance where a vendor makes alternations at the purchaser’s request, even though the contract imposes no obligation to make them and the cost is charged to the purchaser; and also where at the purchaser’s request the vendor gives notice to quit to his tenants. Acts of this kind suffice because the primary requirement is for evidence that a contract exists rather than for performance of it as such.

          Acts which are merely preparatory will not suffice, e.g. if the plaintiff has merely viewed the land, or measured it, or has had the land or the timer on it valued, or has given instructions for a conveyance to be prepared.  For then there is no assurance that any binding commitment has been made.  Part performance requires ‘the parties on both sides acting as if the agreement had been carried into execution.”

60.  Leading counsel for the plaintiff in reply also emphasised that the plaintiff had paid millions of dollars to the defendant in performance of the agreement. 

Decision on part performance

61.  I disagree that the plaintiff had paid any money for the performance of any contract for the sale and purchase of the Property.    The $6 million dollars paid on 28 June was to the defendant’s solicitors as earnest money and not to the defendant.  The $11.8 million tendered in a cheque on 14 July was not for unconditional payment to the defendant.  It was only payable upon the defendant signing the Engrossment SPA.  The defendant did not sign the Engrossment SPA and the money was not paid to it. 

62.  I also agree with leading counsel for the defendant that the other acts relied on by the plaintiff for part performance were only acts gearing to the making of the formal agreement rather than performing it.  The plaintiff is not suing for an agreement to make the formal agreement and then to perform it.  The memorandum that it relies on also does not say that the Oral Agreement is to make the formal agreement and then to perform it.  There is also no evidence that suggests the existence of such an agreement.  I therefore hold that the plaintiff cannot succeed on the issue of part performance as well.

Order

63.  Since I have held that there is no memorandum of the alleged Oral Agreement as required by section 3 of the Conveyancing and Properties Ordinance or part performance of this alleged Oral Agreement, the plaintiff will not be able to succeed in this action.  I therefore strike out the writ and the statement of claim.

Costs

64.  I make a costs order nisi that the plaintiff do pay the defendant the costs of the action including the costs of this application. I also certify the matter fit for leading and junior counsel.

65.  The defendant says that the plaintiff is a $2 company and may not have the means to pay the costs.  I give the defendant the liberty to apply for an order under section 52A(2) of the High Court Ordinance and O.62 r.6A(1) of the Rules of the High Court against those who provide financial backing to the plaintiff to require them to pay the plaintiff the costs ordered above.