CHEUNG HING (HK) INVESTMENT LTD v. WONG YU CHOI

CACV 273/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 273 OF 2006

(ON APPEAL FROM HCA NO. 14441 OF 1999)

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REASONS FOR JUDGMENT

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Hon Tang VP (giving the reasons for of the Court):

1.  The plaintiff, at that time, known as Pearl Billion Investment Limited, as purchaser and Goodwill Gate Limited (“Goodwill”) as vendor entered into a provisional agreement on 7 August 1997, in respect of the property known as Section A of Lot No. 1200 in Demarcation District No. 29 located at Tai Po, together with the messuages erections and buildings thereon (“the Property”).

2.  On 14 August 1997, the same parties entered into a formal Sale and Purchase Agreement.

3.  The provisional agreement was not produced in evidence.  However, the formal Sale and Purchase Agreement which was produced at trial recorded, in the Third Schedule at (F), that the provisional Sale and Purchase Agreement was made on the same terms.

4.  The relevant terms of the formal Sale and Purchase Agreement were:

(i)      the price $3,000,000;

(ii)      the sale was to be with vacant possession;

(iii)     completion not later than 15 August 1998.

5.  The defendant was a director and shareholder of Goodwill.

6.  On 7 August 1997, the plaintiff and the defendant entered into what has been called the “Possession Agreement”.  It was in Chinese.

7.  The certified translation of the Possession Agreement is as follows:

“Agreement to Assist in Obtaining Possession and Compensation

Party A:  Pearl Billion Investment Limited

Address:

Party B:  Wong Yu Choi [the identity card number was stated]

Address:  66 Sa Po Village, Yuen Long

The representative of Pearl Billion Investment Limited (herein below referred to as Party A) invites Mr Wong Yu Choi (herein below referred to as Party B) to assist this company to complete the matters relating to obtaining vacant possession of DD 29 Lot 1200A.  This company will pay Mr Wong Yu Choi Hong Kong dollars one million and [blank] tens of thousands as the fee for obtaining vacant possession.  A sum of Hong Kong dollars one hundred thousand is paid on 7^th day of August 1997, the balance of one million and one hundred thousand dollars will be paid on the 15^th day of August 1997 after the signing of the formal agreement.

Signature of Party A:  representative LEE WAI HONG

Signature of Party B:  (signed) (illegible)

Witness:  (signed) (illegible) Lam Wai Cheung [the identity card number was stated]

Date:  7^th August 1997

Remark:  I will repay the fee of Hong Kong dollars one million and two hundred thousand for assisting in obtaining vacant possession if the vendor and the purchaser cannot complete the sale and purchase transaction.”

8.  On 14 August 1997, in the receipt for the balance of $1,100,000, the defendant had written in Chinese, of which the following is the translation:

“I, Wong Yu Choi, [the identity card number was stated], now having received from Pearl Billion Investment Limited the sum of one million one hundred thousand dollars, together with a sum of one hundred thousand dollars, for assisting Peal Billion Investment Limited in completing in the matter of obtaining vacant possession of DD 29, Lot 1200A.  If delivery of vacant possession and the parties to the sale and purchase fail to strike a deal, and I will also return the fee for assisting delivery of vacant possession i.e. HK$1.2 million to the purchaser.”

9.  However, as the learned judge recorded, the last sentence of the receipt had been interpreted by the trial interpreter from the original Chinese.  From the transcript one could see that the court interpreter also said that the meaning of the original Chinese sentence was not clear enough because it was not well-formed.

10.  In this court all of us can read the original Chinese.  The same Chinese expression “未能達成買賣” was used in both the Possession Agreement and the receipt.  But it was translated as “cannot complete the sale and purchase transaction” in the Possession Agreement and “fail to strike a deal” in the receipt.

11.  We are in full agreement with the learned judge that they have exactly the same meaning and effect.

12.  A little background may be helpful.

13.  Goodwill had purchased the Property from Mr Lai, who had remained on the Property, apparently as a tenant for the fixed term of one month commencing 13 May 1996.

14.  Mr Lai, however, was unwilling to give up vacant possession so that Goodwill had to bring proceedings against him in the District Court to obtain vacant possession.  That was District Court Action 21263 of 1996 which was commenced on 15 October 1996.

15.  In August 1997, the District Court proceeding was still continuing.

16.  Later, on 30 September 1997, Mr Lai Muk-hing was the plaintiff in High Court Action 10330 of 1997 against Goodwill as well as Wong Yu-choi and others.  That was a claim to avoid the deed of assignment dated 13 May 1996 whereby the Property was assigned by the defendant to Goodwill.

17.  Eventually, Goodwill was unable to deliver vacant possession to the plaintiff by the due date of 15 August 1998.

18.  Attempts to re-negotiate a new completion date pursuant to Part V of the First Schedule to the Sale and Purchase Agreement was unsuccessful, and the sale was rescinded by the plaintiff.

19.  In the present action, the plaintiff sued the defendant for the return of the $1,200,000.

20.  The matter was tried by Deputy Judge Carlson, who on 7 July 2006 ordered the defendant to repay the sum of $1,200,000 to the plaintiff.

21.  At the trial, the defendant appeared in person.  On appeal, the defendant is represented by counsel Mr Stanley C K Siu.

22.  Mr Siu relied on 4 propositions.

23.  First, the parties’ contractual obligations under the Possession Agreement should be determined on the Possession Agreement itself and not “to be defined or altered by any subsequent agreements to which he is not a party, e.g. the Sale and Purchase Agreement between the plaintiff and Goodwill Gate” (para. 2(A), defendant’s skeleton submission).

24.  Secondly, vacant possession and completion are two different matters.  There could be completion without vacant possession so that if the plaintiff had elected to rescind the Sale and Purchase Agreement, it did not mean that the defendant had failed to assist in arranging (or even obtaining) vacant possession of the Property from Mr Lai.

25.  Thirdly, extrinsic verbal evidence was not admissible in construing the express terms of the Possession Agreement.

26.  Fourthly, there is a presumption of construction that at the time of reaching an agreement, the parties intended performance instead of breach.

27.  In aid of the 1^st proposition Mr Siu submitted that at the time of the Possession Agreement, the Sale and Purchase Agreement dated 14 August 1997 between the plaintiff and Goodwill had not yet been signed.  Therefore, Mr Siu submitted it would be wrong to “evaluate the defendant’s contractual obligations under the Possession Agreement by reference to the Sale and Purchase Agreement” (para. 3, defendant’s skeleton submission).

28.  But as noted above, on 7 August 1997, on the same day as the Possession Agreement, the provisional agreement was signed, with the same terms of as the formal Sale and Purchase Agreement.

29.  The Possession Agreement has to be construed in its factual matrix.  See Lord Wilberforce in Reardon Smith Line Ltd v Hansen - Tangen [1976] 1 WLR 989 at 997C.  The factual matrix included the fact that the plaintiff was purchasing the Property from Goodwill with vacant possession and that the last day upon which vacant possession would have to be delivered was 15 August 1998.  The Possession Agreement expressly referred to the “signing of the formal agreement”.  So the fact, common to property transactions in Hong Kong, that the provisional agreement would be followed and superseded by the formal Sale and Purchase Agreement was clearly within the contemplation of the plaintiff and the defendant.

30.  In the Possession Agreement, the defendant agreed to repay “if the vendor and purchaser cannot complete the sale and purchase transaction”, as a matter of construction, we do not accept that this referred to the signing of the Sale and Purchase Agreement on 14 August 1997.

31.  The defendant’s evidence to that effect was rejected by the learned judge.  This was a finding of a primary fact by the learned judge which we were not entitled to interfere.  Moreover, with respect, we agreed with the learned judge.

32.  In any event, as Mr Siu’s 3^rd proposition recognized, it was not a matter for oral evidence but for construction of the Possession Agreement.

“… the question is not what one or other of the parties meant or understood by the words used, but ‘the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract …’” Chitty on Contracts, General Principles, (28^th Ed.), para. 12-043.

33.  In the context of the Possession Agreement, completion of the transaction meant completion in accordance with the terms of the provisional agreement which, as noted, was the same as the formal Sale and Purchase Agreement.  In other words, completion with vacant possession on or before 15 August 1998.

34.  It was unnecessary to look at the receipt of 14 August 1997.  But the receipt was consistent with the Possession Agreement.

35.  We do not disagree with Mr Siu that vacant possession and completion are different matters and that there can be completion without vacant possession.  But the important point here is that vacant possession was required by the formal Sale and Purchase Agreement on completion.

36.  When the Possession Agreement was construed in its factual matrix, the refund was required if vacant possession and completion did not take place pursuant to the Sale and Purchase Agreement.

37.  As for the 3^rd proposition, namely extrinsic verbal evidence, is not admissible, we have already dealt with that in para. 32 above.

38.  As to the presumption that at the time of reaching the agreement, the party intended performance instead of breach, we have no difficulty with that proposition either.  The question was within what time must vacant possession be procured.  In the circumstances of this case, vacant possession must be procured no later than the time for completion which, unless extended by further agreement, fell on 15 August 1998.

39.  The cases to which Mr Siu referred us, namely, Inchbald v Western Neilgherry Coffee, Tea, & Cinchona Plantation Co. Ltd [1864] 17 CB(NS) 733 and Luxor (Eastbourne) Ltd. v. Cooper [1941] AC 108 did not help at all.

40.  This was not a case where the plaintiff had done anything to make it impossible for the defendant to earn his fee.  Rather, on the proper construction of the Possession Agreement, he was liable to repay if completion and vacant possession did not take place on or before 15 August 1998.

41.  Mr Siu submitted that in the context, the defendant should be given a reasonable time to procure vacant possession.  But there was no evidence what was a reasonable time.  Nor was the point taken below or in the Notice of Appeal.

42.  In the circumstances, we are of the view that the defendant was entitled to no more time than what the formal Sale and Purchase Agreement provided for, namely 15 August 1998.  In any event, we see no reason why that was not a reasonable time, having regard to the fact that at the time of the provisional agreement there was only the outstanding claim in the District Court for possession against Mr Lai based on the fixed term tenancy of one month.

43.  For the above reasons, we dismissed the appeal with costs.