LI YEK LEUNG v. LIU MAN BUN AND ANOTHER

(Actions consolidated by Order dated the 6th day of November 1984)

Action 1984, No. 6936

IN THE HIGH COURT OF JUSTICE

HONG KONG

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JUDGMENT

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1. These proceedings concern the sale of a flat known as Flat D Jardine Court in Hong Kong together with a car port and the garden space.

2. The background is this. On the 16th May 1984 Mr. Li, the vendor, wanted to sell that flat and he approh an estate agent, Mr. Billy Wong of Meikwong Properties, to sell it for him. The price then as$1.66 million. Apparently it was advertised and there was no interest. By June the vendor had lowered the price. Mr. and Mrs. Liu, the purchasers, became interested. Mr. Liu is an experienced and successful businessman. When he and his wife had seen the flat, they decided they would like to buy. There were certain matters which were of particular interest to them. Mr. Liu liked the front door of the flat very much. It was a refined door. It had carving or engraving upon it and it had been treated in some way so as to expose the grain and the texture.

3. Mrs Liu saw a peach tree in the garden She had never seen such peaches as were on that tree in Hong Kong before. Mr. Liu thought the environment of the flat was good and the fung shui was good. They thought that the peach tree was a good omen; it signified that it was a fertile place.

4. The price between vendor and the purchasers was agreed at $1,316,800 and on the 21st June a Temporary Sale and Purchase Agreement was signedS $30,000 was paid as a deposit and the paies were required to attend the solicitor Mr. Wong Yiu Tak on the 27th June to sign the Sale and Purchase Agreement. He was a member of the company of P. H. Sin & Co. The Temporary Sale and Purchase Agreement (which is on p. A1 of the bundle of documents and dated 21st June) can be seen to contain the main clauses of the Agreement. Particular note is made of the remarks which indicate that there was to be included in the sale certain items including the plantation in the garden and the main door with engravings.

5. Almost immediately after the Temporary Sale and Purchase Agreement was signed the vendor regretted the sale. It is not clear why and I am not going to speculate. On many occasions after the 21st June he tried to persuade Mr. and Mrs. Liu not to proceed with the bargain. Also on certain occasions he said to Billy Wong, the estate agent, and to the solicitor that he thought the price was low. His reluctance to fulfil the bargain which he had made and complete the sale is evident throughout his actions from the 21st June until the final meeting when completion ought to have taken place on the 30th September.

6. On the 27th June, as arranged, all the parties attended the solicitor. Mr. Billy Wong was present. The full deposit was paid (that now totalled $230,000) and the Agreement which appears on p. A8-10 was signed together with a receipt for the deposit. In due course I will refer to the relevant terms of that Agreement. The completion was to be on the 18th August. The items that had been specified in the remarks section of the Temporary Agreement of the 21st June were not specifically included but the matter had been raised between the parties and they had said to one another that they were honest men and they trusted one and other. The vendor had said words to the effect "Well, don't you trust me" and of course the purchasers did trust him and so it was that no specific mention was made of those matters. It does not affect the case for those items about which there is dispute were undoubtedly part of the Agreement and there has been no issue before me to the contrary.

7. As the 18th August approached, the solicitor, who was acting for both parties, got in the money from the purchasers. Some came from them and some he arranged by way of mortgage from the bank. Mr. Wong Yiu Tak, the solicitor, was also in this matter acting for the bank. He prepared the documents. Merefit Company Limited was the company which was going to take the conveyance on behalf of the purchasers and mortgage document D1 was also prepared and signed by the purchasers.

8. The vendor continued to behave strangely because of his regret in having made the bargain. On the day before completion was due to take place, he came to the solicitor's office and asked if the sale could be cancelled. He said, as he had said to Mr. Liu personally, that he was emotionally and physically affected by the sale. For reasons which were given (and no reasons had to be given) Mr. and Mrs. Liu would not agree to the cancellation of the bargain. The vendor said that in any event he could not give possession on the 18th because he was still living there. Eventually the purchasers agreed to a postponement of the completion until the 30th September.They did not need to agree to that but they did so. That was on the 17th August. Consequently the solicitor told the bank the money would not be required at that time.

9. On the 18th August they all attended to sign the Agreement to postpone. By the time they came on the 18th August, the vendor was saying that he would execute the assignment and he would stay on as licencee until the 30th September. The other parties were prepared to go along with that suggestion. So the bank was telephoned by the solicitor and told the money would be required and the licence was prepared. After it was drawn up the vendor then said he would not sign. Not unnaturally by this time the purchasers said that they would not change their minds again and said the completion would have to take place that day. Indeed I think an assignment was prepared and signed by them. Mr. Li, the vendor, refused to sign and there was dead lock. In due course, the solicitor prevailed upon the purchasers to agree to a postponement in order to avoid litigation and a further document was prepared by which they agreed to postpone until the 30th September. The bank were telephoned once again and told that the money was not needed after all.

10. It was not surprising, therefore, that after the 18th August the purchasers and indeed the solicitor who was acting for both parties were wondering what the vendor would do next. It was consequent upon the fears of the purchasers and the solicitors, that letters were written on the 20th September, 21st September and on the 28th September to the vendor, the effect of which to inform him that the completion would have to take place. The solicitor was also tried to contact the vendor to make an arrangement with him as to when he would attend to complete. When asked during the period before the 30th September to make the arrangement, the vendor was evasive. He said, in effect, "There is plenty of time and let's see what happens on the 30th". To use an English expression he was "playing ducks and drakes" with the solicitor and the purchasers.

11. In the period just before the 30th September, for reasons about which I will not speculate, the vendor did some very dreadful things. First of all he, or those acting on his behalf, removed the front door which I have described, and replaced it with a very ordinary door. He took ( or had taken up ) from the garden a number of trees and the peach tree was damaged in that the main branch was broken. On the balance of probability, I agree with a remark that Mr. Liu later made - that he did not think that peach tree could have been damaged accidentally. The damage to the peach tree simply follows a pattern in relation to other damage that was done in the flat. Cupboards were removed, light fittings were removed, sockets were removed and the light switches were removed. I need not go into all that. There are photos in the bundles and it is a matter which will be investigated by another tribunal.

12. I take the view that the damage particularly to the door and the peach tree was done because it was thought by the vendor that this would so damage the fung shui of the premises and that the damage to the peach tree would so destroy the omen of fertility that the purchasers might then wish not to complete the purchase. Up to that time all the vendor's actions had been designed to avoid the agreement.

13. Preparing for the completion the solicitor received again from the purchasers, and the bank on behalf of the purchasers, the full balance of the purchase price. The documents are in bundle C at p.4 & 5 and I need say no more about it. By the 28th September, therefore, the solicitor held the whole of the purchase price.

14. Let me turn to the 30th September. Difficulties arose even on the 30th in relation to the meeting between the parties to complete the purchase. Late on the 29th Mr. Billy Wong had succeeded in making arrangements with the vendor to attend the solicitor's office at 3 p.m. It was a Sunday and the arrangement was made for the meeting at that time. At about 2 p.m. the vendor telephoned the solicitor saying that he was still moving his things from the flat and he would be about an hour late. I am satisfied on the evidence that the vendor was doing no such thing at that time but it matters not.

15. By 3 o'clock the purchasers and the estate agent had arrived at the solicitor's office and because it was known the vendor was not coming for about an hour, it was arranged that the three of them should go up to the premises and see whether they could take possession, the information being that the vendor was at the premises. They went to the premises. No one was there. They could not get in. They saw from the outside that the door had been removed and replaced and that trees in the garden were missing. Not surprisingly they were angry. They went back to the solicitor's and on arrival they reported the matter to him.

16. Mr. Wong Yiu Tak's account of what happened thereafter on that day is one which I broadly accept. It is my view that Mr. Wong Yiu Tak was doing his best to give an accurate account of what had taken place in circumstances which were difficult for him, because he was the solicitor acting for both parties. I do not wish to say anything about that particular fact. A solicitor who acts for both parties always puts himself in a difficulty if there is a dispute. This case is no exception.

17. Having reported the damage that they had seen to the flat, the solicitor asked them what they wanted to do. It was Mrs.Liu who said that they should settle this matter about the damage, after signing the assignment. Her view was that it was better not to raise the matter because the vendor might refuse to complete. She was wise in her assessment. It was based on a long history of the vendor's activities. She told the solicitor that she was keen to complete because she was afraid of what might happen if they did not complete. She thought that if they raised the matter there would be chaos.

18. At about 4.15 p.m. the vendor arrived. He was sweating. He said he was tired because he had been moving and had not had his lunch. So Billy Wong went out and bought some food and drink. On return, the solicitor asked the vendor if he was prepared to make the completion. He said "Of course".

19. Five cheques were then produced by the solicitor to the vendor. They made up the full balance of the purchase price. First of all the solicitor asked the vendor whether he had brought with him the bills for the utilities so that he could make up his aportionment account. The vendor had been reminded to bring those receipts with him on a number of occasions. It is in the correspondence, and Billy Wong the estate agent had also reminded him but he had not brought them. The solicitor, perhaps fearing the worst, was one move ahead for he had already prepared a cheque for $5,000. This was made out to cater for this situation. The solicitor explained carefully what each of the cheques was for. Each of the cheques was drawn on solicitor's account and it was drawn in favour of the vendor; a very important matter of fact in this case. There was a cheque for $10,000 which was related to the postponement of completion agreed on the 18th August. It was a cheque, as I have said, made out to the vendor and the solicitor explained that he wanted that cheque endorsing back to the purchasers. The effect being that it was the vendor's money but he owed that sum to the purchasers because of the postponement. (That is P2). The cheque (P4) for $5,000 was explained to the vendor. He was told that the solicitor (not the purchaser) was going to hold that cheque as stakeholder so he could make up his aportionment account in relation to payments for utilities when that matter was resolved. In due course, the vendor was happy about that. There was a cheque for $2,870, P5. That was a cheque for the amount of the solicitor's charges including drafting the supplemental agreements. There was a bit of bargaining about that and the vendor persuaded the solicitor to reduce the sum by $300. Again that cheque was to be endorsed back to the solicitor. The remaining cheques, P3 and P1, were the balance of the purchase price. The vendor at one time, checked that the arithmetic was correct on his calculator.

20. Matters proceeded. Having explained the cheques, the solicitor interpreted the assignment to all the parties word by word and the petitioner had already signed that assignment. The vendor was asked if he understood and he said he did. Then the receipt at p. A30 was interpreted. He asked the vendor to sign the attestation clause and asked him to sign the receipt clause. At that moment he said "Where is the money". The cheques were all there and he was asked to endorse the cheques that he had to endorse. (He had agreed to do that before the interpretation of the assignment). He then endorsed the cheques which he was asked to endorse, receiving a receipt and giving a receipt where necessary. Those receipts are P7. The two large cheques were then left to be dealt with. The receipt clause (bundle A p.30), was signed by the vendor and then all the parties went up to the premises. It is not absolutely clear on the evidence who first suggested that they should go to the premises. Billy Wong said at one stage "Shall we go up to the premises for them to be accepted and taken over" and the purchasers, certainly Mr. Liu, was anxious to do so because he had not seen inside. He graphically said "Well, even when you take a banknote, you examine it before accepting it". The parties went up to the premises. The vendor had been reluctant to go. He said it was late to do it. He was wondering about the money and the solicitor said "Well you don't have to worry about the money because I have the cheques"and the solicitor said he would wait there for them to return.

21. Mr. Liu had been suppressing his feelings for a long time in this matter and by the tine they were going up to the flat he had become very angry. He was challenging the vendor and scolding him about what he had done. Initially the vendor was inclined to deny the damage but eventually he agreed that he done part of it and other matters, he said, must have been a misunderstanding. The parties went up and then they saw the full extent of what had happened in the flat. That is all displayed on the photographs in bundle A at p.32-58. They returned. Mr. Liu by this time was beside himself with anger. The reason why photographs were taken was that Mr. Liu had stopped to buy camera on the way to the flat, obviously in order to take photographs of the damage and probably because it had occurred to him, as a businessman, that some record of the situation at that time ought to be made. I am asked to find by way of inference that the photographs were a result of the solicitor's advice but I do not so find. As the solicitor himself said, "in some matters Mr. Liu is better than me". I think Mr. Liu was perfectly intelligent enough and worldly enough to know that it was a very good idea to make a record of the state of the flat when he went there.

22. The parties returned at about 6.50 p. m. As I have said Mr. Liu was beside himself with anger. He was still scolding the vendor for what he had done. To his credit, by this time, the vendor was saying that he admitted that he was in the wrong that it was his fault; but in respect of the lights and switches he said the workers must have mis-interpreted what he told them when they were taking the chandliers away. That was not accepted by Mr. Liu, he said it could not be true and he was repeating his complaint about the damage to the door, the damage to the fung shui and the damage to the peach tree which he said could not have been accidental.

23. The keys had not been handed over when they gone up to the premises. The parties were still discussing the state of the premises all the way back from the flat to the solicitor's office and at the solicitor's office. The vendor, at one stage, said that he would remedy the damage. Mr. Liu said that he would not trust him to do so having regard to what he had already done. There were arguments about this matter because the vendor was not prepared or able to say how or to what extent he would remedy the damage.

24. It was then the solicitor (still having the cheques in his possession) made a suggestion. He suggested to the vendor that he should hand over the larger cheque but should hold P1, the cheque for $170,000, as stakeholder until the following day so that a surveyor could go with the vendor to the premises to arrive at a figure for the damage that has been done. The solicitor suggested that he would then deduct that amount from the cheque that he held, and pay over the balance.

25. I pause at that stage. Mr. Wong Yiu Tak gave evidence that this was his own idea, he said that he had received no instructions from either Mr. or Mrs. Liu to make the suggestion; indeed, Mr. Liu himself gave evidence that there were no specific instructions from him to act in that way. That is to make the suggestion that he should hold the cheque as stakeholder or in any other way. The vendor would not agree. He first of all thought that the purchaser was going to keep the cheque for $170,000, but it was explained by Mr. Wong Yiu Tak, the solicitor, that he was holding the noney and not the purchaser.

26. At that stage the solicitor and the vendor fell out. The vendor said that if he did not get the whole of the money he was not accepting any and he was accusing the solicitor of cheating him because he had acknowledged the receipt of the money and he was not getting the money from the solicitor. On the accusation of being cheated, the solicitor himself became (as he put it) not happy. What he meant was that he became very angry. It was his view that far from cheating the vendor he had gone out of his way to try and help him for some considerable time and so he said "If you think that you can make your complaint to the law society". Little further happened. By this time the solicitor and the vendor had fallen out about the money. Mr. Wong Yiu Tak was not able to stay after 7.30 p.m. at his office and everyone left. His office was locked up and there the matter rested.

27. Of course the agreement specified in clause 18 that "time shall in every respect be of the essence of this agreement". The 30th September had passed and there had been no completion. Whether the vendor took advantage of the opportunity not to complete as a result of Mr. Wong Yiu Tak's suggestion that he should hold part of the money as stakeholder, I am not prepared to say. It is certainly a possible view of his action but so far as this case is concerned it does not matter.

28. I come now to what could be described as the aftermath. On the 1st October a letter was written by Mr. Wong Yiu Tak to Messrs. Ko and Co. Mr. Wong Yiu Tak had explained the night before when he fell out with the vendor that he could not act for him any further and Messrs. Ko and Co. were then acting. His letter of the 1st October (bundle B at p.4) says among other things that he had instructions to write on behalf of Mr. Liu and on p.5 at the end of the first paragraph he says:

"In the circumstances we are instructed by our client to release only $895,500 to your client and the balance is to be released after assessment and deduction of the damage to the above premises but your client refused to accept.

        In view of the circumstances we are now instructed to inform you that upon your firm's personal undertaking to indemnify our client for all the damages that have been caused to the above premises we shall send all the balance purchase price (the amount is given) to you on behalf of your client including the $300.00 aforesaid to be refunded by us to your client. "

That letter is relied upon by the vendor. It is relied upon as indicating that in failing to hand over the smaller cheque the solicitor was acting on the instructions of the purchasers. That is clearly said in the letter and it is pointed out for my consideration that there was no retraction by the purchasers or anyone on their behalf of the statement in that letter that the solicitor was acting on instructions until these proceedings had started in court. That is a matter I have to consider with the greatest care in relation to how it impinges upon the evidence that has been given.

29. There was a reply from Messrs. Ko & Go. on the 2nd October. It is clear from that reply that at this time the vendor was making two points. He was making allegations against Mr. Wong Yiu Tak as his solicitor and he was saying, as he said in this case, that the failure to complete was a breach of the agreement by the purchaser.

30. By this time the battle lines had been drawn up. How am I to approach the matter? I am quite satisfied that Mr. Wong Yiu Tak's letter was written in some heat and without the usual consideration which he would give to all the legal matters surrounding the situation as at the 1st October 1984. On a human level, he is perhaps to be forgiven having regard to the history that I have explained, but I am satisfied on the evidence that I have heard from Mr. Liu and Mr. Wong Yiu Tak that the instructions which Mr. Wong Yiu Tak had from Mr. Liu were simply general instructions to act and that he did not have specific instructions to withhold this money. Indeed, that was not what was being said at the meeting, it was being suggested at the meeting that the solicitor should hold the smaller cheque as stakeholder.

31. I am satisfied that what was happening on the 30th September was this. Being in the difficulty of acting for both parties, the solicitor was very anxious to persuade the parties to come to some sensible agreement. It was part of his attempts to persuade the vendor to act sensibly, that he suggested he should hold the money as stakeholder, perhaps having in mind that the vendor had already agreed that he sould hold the cheque for $5,000 as stakeholder in respect of the utilities. The solicitor thought that the vendor would agree and that all the matters would be resolved the following day. In making the suggestion he overlooked a number of matters: one, he probably overlooked the vendor's reluctance to complete; two, he overlooked the provision in the agreement that time was of the essence; and three, he overlooked the question, with which I am about to deal, the question as to on whose behalf he held the money.

32. In considering the facts of the case, I have the advantage of having heard Mr. Liu, the solicitor, Mr. Wong Yiu Tak and the estate agent, Mr. Billy Wong. Their evidence on these matters as cross examined stands. I have not heard any evidence from the vendor who was present throughout those vital meetings on the 30th September. It seems to me having regard to the state of everyone's temper at the latter part of that meeting, that if the solicitor have been withholding that cheque on the instructions of Mr. Liu it would have been impossible for Mr. Liu to stay silent about the matter. He would have been saying to the solicitor in everyone's presence "Don't give him it" because he was so angry with what Mr. Li had done.

33. At that stage; (the 1st October onwards) the battle lines were drawn up. Proceedings were issued by both parties. The purchasers claiming specific performance with an abatment of the price in respect of the damage to the flat, or damages. The vendor on his part, claiming a declaration that the purchasers had repudiated the agreement and the supplemental agreement, and that he had rescinded it and he asks for a declaration that he is entitled to forfeit the whole of the deposit of $230,000 and a declaration that he is entitled to sell, and he asks for damages.

34. I turn now to the agreement. The agreement provides the usual terms which relate to the price, the date of completion and matters relating to title. Then we come to clauses 13, 14 and 15. These clauses are provisions which are inserted into agreements of this type consequent upon a circular from the law society here in Hong Kong. It is a circular that followed difficulties which arose in another case which eventually went to the Privy Council. The purpose of the clauses is to try to clarify the very point which is of importance in this case. The question as to on whose behalf a solicitor holds the money when he is acting for both parties.

35. Clause 13;"The vendor declares that Messrs. P.H. Sin & Co. are the vendor's agents for the purposes of receiving all monies payable to the vendor pursuant to this agreement including the balance of the purchase money payable upon completion".

36. It is to be noted what that clause says. He is the vendor's agent not only for receiving the balance of the purchase money payable on completion, but "all monies payable to the vendor pursuant to the agreement".

37. Clause 14, "The vendor further declares that the payment to such agents of any deposit, instalments of the purchase monies and the balance thereof (if any) shall be a full and sufficient discharge of the purchasers' obligations hereunder".

38. Clause 15 restricts the vendor's power to revoke the authority of that agent. There is no suggestion here that such agency had been revoked.

39. I am asked by the vendor to say that not all monies received by the solicitors from the purchaser are received on behalf of the vendor. As a bald proposition that must be correct for a purchaser may pay money over with directions to the solicitor, or with conditions or the payment may be of monies that are not referable specifically to the agreement. The matter in the end is a question of mixed fact and law. It is necessary to look at all the facts and to decide whether the monies which are received by the solicitor are monies paid to him pursuant to the agreement and which he receives pursuant to the agreement as the vendor's agent in discharge of the purchasers' obligation.

40. Therefore, I turn to the question on whose behalf was Wong Yiu Tak holding this money? There can be no doubt in this case that the monies paid over and received by the solicitor on the 28th September were in respect of, and only in respect of, this agreement. By the 30th we come to the point of completion. It was not possible for either of the parties to put off completion any more. If one considers the nature of completion, the final settlement of the business that is what the parties were meeting round the table to do. If one considers completion to be one party pushing over the assignment and the other party pushing over the money, the parties had reached that point. Indeed, when one looks at the documents and sees to what extent they were signed, the matter was as near completion as it could have been.

41. Next, the solicitor had made out all those five cheques to the vendor. He was accounting to the vendor for the money meticulously by having with him cheques made out to the vendor. He was not simply doing a contra, as I suppose he could have done. Even the money that the vendor owed to the purchaser and the money which he owed to the solicitor were the subject of cheques made out to him, the vendor, for him to endorse back.

42. In this case, it is my judgment that the facts are as clear as they could be. Whatever the situation may have been at an earlier stage it is not necessary for me to decide, although I would be inclined to decide that from the moment that the solicitor received all these monies on the 27th and 28th September he held them as the vendor's agent. Whatever be the correct decision in relation to that time by the 30th at that meeting there is in my judgment no doubt whatsoever that in accordance with the agreement he held that money as the vendor's agent and only as the vendor's agent. The matters which arose, therefore, when Mr. Wong the solicitor decided to suggest that he would hold the money as stakeholder were matters arising between principal and agent. It is not necessary for me to make any findings in relation to the duties which arose or were breached between them. I am quite satisfied, however, that as the solicitor held that money on behalf of the vendor, the vendor was entitled to hold out his hand and say that money is mine, you are my agent, hand it over.

43. In the light of that I am satisfied that the solicitor, as the vendor's agent, received the full purchase price. I am satisfied that at the relevant time, that is the meeting of the 30th September, Mr. Wong Yiu Tak held the money as agent of the vendor in pursuance of clauses 13 and 14. The purchasers, Mr. and Mrs. Liu, had fulfilled all their obligations under the contract. I am satisfied that no instructions were given by them to Mr. Wong not to complete. Indeed, I am satisfied that at all times, they were anxious willing and ready to complete in spite of their anger in relation to the damage to flat. Rightly their attitude was that they should complete and then seek recompense after-wards. If one relates even the damage that was done to this flat and the surrounding circumstances in relation to these parties, I mean by that, such matters as the damage to the fung shui; when those matters are compared with the amount of the purchase price of the flat itself the obligation was to complete and seek damages later.

44. I am satisfied that in withholding or seeking to withhold that second cheque, the solicitor was suggesting that he should so it as stakeholder. He was trying to resolve a difficulty by persuading the vendor, his own client and his own principal in relation to the money, to agree so as to resolve the difficulties. His motives at the time were no doubt entirely creditable but unfortunately he was not entitled to withhold that money.

45. In the result I am satisfied that the vendor failed to complete and he was in breach of the agreement whereas, the purchasers had fulfilled their part of the agreement in toto.

46. In those circumstances, are the purchasers entitled to the relief they claim? The purchasers seek an order for specific performance of the contract. I need not dwell on this matter; this is a bargain for the purchase of Flat D Jardine Court not any other. It is this flat which the purchasers want, they bargained to buy this and not any other. They are quite clearly entitled to the relief they claim and indeed, the only way that it is possible to do justice to them in this case is to give them specific performance.

47. Therefore, there will be, in this case, judgment for the plaintiffs for specific performance of the contract on the claim. There will be judgment for the purchasers on the counterclaim which is dismissed. I shall hear counsel about the exact form of the order that the court should make and any consequential orders.