WONG MAN HONG AND ANOTHER v. POON KIN CHIU AND ANOTHER

DCCJ 5363 / 2006

  IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 5363 OF 2006

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BETWEEN

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JUDGMENT

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I.  Introduction

1.  On 26 August 2006, the 1^st and 2^nd Plaintiffs as vendors signed a provisional sale and purchase agreement with the 1^st and 2^nd Defendants as purchasers for the purchase of a flat at Tin Shui Wai. The Defendants through the estate agent had provided the Plaintiffs a cheque of $80,000.00 as payment for the initial deposit.  The Plaintiffs presented the cheque for payment on 28 August 2006.  It was dishonoured.

2.  This is the Plaintiffs’ application for summary judgment against Defendants for $80,000.00, on the basis that the Defendants were in breach of the agreement, and according to its term, the Plaintiffs are entitled to recover this sum.

3.  The Defendants deny liability on various grounds, of which I would elaborate below.

II.      Background

4.  The following background facts are undisputed.

5.  In late August 2006, the Defendants through an estate agent named Mr Tse looked at the flat with a view of purchasing it. 

6.  The provisional agreement for purchasing the flat at $1,600,000.00 was signed by the Plaintiffs on 26 August 2006. 

7.  It was provided expressly under the provisional agreement that:

(1)    The Defendants had to pay an initial deposit of $80,000.00 upon signing it.

(2)    The Plaintiffs shall be entitled to forfeit the initial deposit if the Defendants failed to complete the purchase in accordance with the provisional agreement.

8.  When the Plaintiffs signed the provisional agreement, Mr Tse gave them the 1^st Defendant’s cheque dated 25 August 2006 of $80,000.00, for the purpose of paying the initial deposit under the provisional agreement.

9.  The cheque’s drawee name was initially Messrs Ng, Tam, Ko & Chan as the intended solicitors for the Plaintiffs.  However, it was later amended to Messrs Raymond Chan, Kenneth Yuen & Co, when the Plaintiffs through Mr Tse confirmed to the Defendants of the name of the Plaintiffs’ solicitors’.  The 1^st Defendant initialled the amendment on the cheque.

10.  On 28 August 2006, the Plaintiffs’ solicitors presented the cheque for payment by depositing the same with the bank.   

11.  The cheque was bounced, and the Plaintiffs’ solicitors were so advised by the bank on 29 August 2006.

12.  On 30 August 2006, the Plaintiffs’ solicitors wrote to the Defendants’ then solicitors stating that the Defendants were in breach of the provisional agreement as the cheque was dishonoured.   It also asked the Defendants’ solicitors to confirm within 2 days whether they had instructions to accept service of court documents due to the Defendants’ breach.

13.  At the same time, on the evening of 30 August 2006 and on 31 August 2006, the parties were negotiating amongst themselves concerning the matter.  They also negotiated on entering into a new provisional sale and purchase agreement with a new purchase price. 

14.  Following these negotiations, a new provisional agreement was drafted for the purchase of the flat for $1,638,000.00, with a $70,000.00 initial deposit payment requirement.  There was also a draft sale and purchase memorandum, which provided, inter alia, that (a) the Defendants would pay the Plaintiff’s portion of the estate agent’s commission, and (b) upon the signing of the new provisional agreement, and payment of the initial deposit, the previous provisional agreement would be cancelled, and the previous cheque would not be presented for payment.  Mr Tse drafted all these documents.

15.  The parties then met at Mr Tse’s office on the night of 31 August 2006.  However, the new provisional agreement and the memorandum were not signed eventually.

16.  On 1 September 2006, the Defendants’ present solicitors wrote to the Plaintiff’s solicitors stating that the parties had agreed to cancel the previous provisional agreement on the basis that the Plaintiffs had refused to accept the initial deposit of $80,000.00.  It also asked the Plaintiffs to return the cheque within 3 days.

17.  Then followed a series of exchange of letters between the parties’ respective solicitors until 6 September 2006.  In the correspondence, the Plaintiffs repeatedly denied any agreement to cancel the original agreement and refusal to accept the deposit, and insisted on the Defendants’ breach of the agreement given the dishonour cheque.  The Defendants on the other hand insisted on the Plaintiffs’ refusal to deposit the cheque again, and that they would vigorously defend any claim by the Plaintiffs.

18.  In the meantime, on 2 September 2006, the Plaintiffs contracted to sell the flat to another purchaser at the price of $1,638,000.00.

19.  On 27 October 2006, the Plaintiffs brought the present claim against the Defendants for $80,000.00.

III.    Applicable principle

20.  The principles applicable to a summary judgment application are well established.  The burden is on the defendant to establish a triable defence, which is not frivolous or is worthy of belief.  The defendant must also condescend to particulars in relation to the defence.  See:  Hong Kong Civil Procedure 2008, paras 14/4/1 – 14/44, 14/4/8-14/4/9.

IV.    The present case

The Defences

21.  By way of the Defence, the affirmations filed and counsel’s submissions, the Defendants raise the following defences:

(1)    The Plaintiffs presented the cheque prematurely, since the cheque was delivered with an express oral condition that the Plaintiffs should not present it for payment before the Defendants deposited money into the checking account on 28 August 2006.

(2)    There is no fundamental breach on the part of the Defendants, as sufficient fund was in fact provided to the checking account by 29 August 2006, and the Plaintiffs could have re-presented the cheque for payment.

(3)    The Plaintiffs have no proper cause of action since the original provisional agreement was already superseded by a subsequent oral purchase agreement reached during the negotiations.  The Plaintiffs cannot now sue on the original agreement.

(4)    The Plaintiffs have waived the Defendants’ breach of the original agreement by their conducts in the negotiations for entering into the subsequent oral agreement to sell the flat at $1,638,000.00.

Discussions

The conditional presentation defence

22.  It is the Defendants’ case and evidence that when they gave the cheque to Mr Tse on 25 August 2006, which was to be handed to the Plaintiffs the next day, they informed Mr Tse that they would only be able to put sufficient funds in the bank account on 28 August 2006, and thus the Plaintiffs should not present the cheque before that. 

23.  It is therefore the Defendants’ case that it is an express condition to the cheque that the Plaintiffs should not present it for payment until money was deposited into the current account of the cheque on 28 August 2006.

24.  The 1^st Defendant further deposes that the Defendants again reminded Mr Tse this condition again, when the 1^st Defendant initialled the amendment of the payee on the cheque on 27 August 2006.

25.  The Plaintiffs in the 1^st Plaintiff’s affirmation deny having any knowledge of the condition.

26.  Given the conflict of the above affirmation evidence, coupled the facts that (a) the Plaintiffs did not in fact present the cheque until 28 August 2006, and (b) the 1st Defendant did deposit $80,000.00 by way of a cheque to his current account also on 28 August 2006, I am prepared for the present purpose to accept that there are triable issues on whether the cheque was delivered with this condition on its time of presentation, and whether the Plaintiffs were aware of and consented to the condition.

27.  Notwithstanding this, Mr Chan, counsel for the Plaintiffs, submits that there is no triable defence arising from this issue, since it is common ground that the Plaintiffs did in fact present the cheque only on 28 August 2006.   The condition thus was, Mr Chan further submits, satisfied and not breached.  There is therefore no question of a premature presentation of the cheque.

28.  Mr Sherwin Wong, counsel for the Defendants, however contends that given the condition, it is at least arguable that the Plaintiffs should only present the cheque a day after 28 August 2006 (i.e., 29 August), as they should have reasonably expected that the Defendants might or would deposit money into the checking account by way of cheque on 28 August 2006 (as they eventually did), and it would require a day before the money could become available.

29.  Despite the ingenuity of Mr Wong’s argument, there is no evidence presented before me to at least support an arguable case on what he has submitted:

(1)    The Defendants’ own clear evidence is that, the condition was that they would deposit, in their own word, money, into the checking account on 28 August 2006, and the Plaintiffs should not present the cheque for payment until then. 

(2)    However, there is nothing in the evidence to even remotely suggest that it had been expressly or implied conveyed to the Plaintiffs via Mr Tse that the said depositing of “money” might or would be made by way of cheque.

(3)    As such, there is nothing to raise an arguable case that the Plaintiff knew or ought reasonably to have known from the condition that it would take another day from 28 August 2006 before they could present the cheque for payment.  It is important to note that the condition was not to present the cheque until 28 August 2006 when the Defendants would deposit money into the account.

30.  As Mr Chan for the Plaintiffs submits (which I accept), if the Defendants had intended to impose a condition that the Plaintiffs should only present the cheque for payment at the earliest on 29 August 2006, they should and could have said so.  As such, Mr Chan further submits, it is simply unarguable that the condition should be read reasonably as requiring the Plaintiffs not to present the cheque until the earliest 29 August 2006. 

31.  I think Mr Chan’s above submissions have force, and are further underlined by the objective evidence that, in the subsequent correspondence between the parties’ solicitors, it was not even stated by the Defendants’ solicitors that the Plaintiffs had wrongfully and in breach of an alleged condition in presenting the cheque on 28 August 2006.  

32.  The burden is on the Defendants to show a defence with sufficient particulars and prima facie evidence.  For the above reasons, I hold that the Defendants have failed to satisfy me that there is a triable issue arising from this defence.

No fundamental breach defence

33.  This is an argument raised for the first time at the hearing by Mr Wong for the Defendants. 

34.  He submits that it was a fact that the Defendants did intend to pay the initial deposit, as there was already sufficient fund in the relevant checking account by 29 August 2006.  As such, even though the cheque was dishonoured when presented on 28 August 2006, and even if the Defendants were late in making the payment, there was no intention evinced on their part not to be bound by the agreement.  There was therefore no fundamental breach of the agreement, and the Plaintiffs were not entitled to terminate it by acceptance and to forfeit the deposit.

35.  However, it is well established that, even though there is no express provision to make the time of paying an initial deposit as of the essence, unless there are special circumstances to suggest otherwise, the time requirement on the payment is regarded as of essence in a conveyancing transaction in Hong Kong.  See:  Wong Wai Chi v Cheung Kwok Fung [1963] 3 HKC 287 at 290D-H per the late Godfrey JA (as he then was); Sihombing & Wilkinson, Hong Kong Conveyancing – Law and Practice, Vol 1(A), para 351.

36.  Further, the failure to pay the initial deposit under a conveyancing agreement on time has also been held to be a fundamental breach of the agreement, which entitles the innocent party to accept and terminate the contract, and to recover the deposit by way of an action.  See:  Millichamp v Jones [1982] 1 WLR 1422 at 1430G per Warner J.

37.  Given the weight of these authorities, I reject Mr Wong’s submission that there is arguably no fundamental breach of the provisional agreement in this case.  Whether the initial deposit should have been paid on 26 August 2006 (as provided in the agreement) or 28 August 2006 (as under the alleged condition as held above), time was of the essence, and any lateness or failure to pay it on time (as in the present case) constituted a breach of the agreement of which the Plaintiffs were entitled to accept.

38.  This defence in my view is also bound to fail and no triable issue thus arises from it.

The subsequent oral agreement defence

39.  The Defendants’ evidence is that by way of the subsequent negotiations, the parties had reached an oral agreement (a) for the sale of the flat, (b) that the new agreement superseded the original agreement, and (c) that the cheque would not be presented for payment.  The Plaintiffs in their evidence deny that there was such an oral agreement reached in relation to the dealing with the cheque.

40.  Mr Sherwin Wong for the Defendant submits that the following evidence must support at least a triable issue on this question:

(1)    It is common ground and evidence that the parties were in negotiations after the dishonour of the cheque to enter into a new agreement to sell the flat for $1,638,000.00.   The 1^st Plaintiffs’ affirmation in fact confirms that he had agreed in principle to sell the flat at this increased price, and that the Defendants shall also bear the Plaintiffs’ portion of the estate agents fee.  Although the Plaintiffs deny having agreed on the disposition of the cheque, given these agreed terms, it is submitted that how can it be said summarily at this stage that the Defendants would still have agreed to have the $80,000.00 initial deposit forfeited when they needed also to pay an additional sum of $54,000.00 ($38,000.00 as the increase in the sale price and $16,000.00 as the Plaintiffs’ portion of the commission) to purchase the flat. 

(2)    It is also the Plaintiffs’ own evidence that it was the 1^st Plaintiff who had instructed Mr Tse to draft the new provisional agreement and the memorandum. As such, it must be at least arguable at this stage that the documents reflect the agreed terms.  As mentioned above, these written terms include that the previous provisional agreement be cancelled and that the cheque not to be presented for payment.

41.  On the other hand, Mr Chan submits that the Defendants’ own evidence shows that there could not be any binding oral agreement reached as now alleged by them.  This is so because the 1^st Defendant in his affirmation deposes that, when the parties went to Mr Tse’s office for the draft new provisional agreement and the memorandum, all of them suggested that they should respectively first go back to consult their solicitors before signing.   It therefore shows (Mr Chan says) that at this point of time, the parties were still, and were entitled to so still, reflecting on the terms of the negotiations.  In the circumstances, taking the Defendants’ own evidence and to the highest, there could not be any binding agreement formed at this stage.

42.  Again, in my view there is force in Mr Chan’s above submissions, which are further supported by (a) the Defendants’ own evidence that the parties thereafter did not sign the draft documents, and (b) the lack of any evidence or allegations from the Defendants to suggest that it was the Plaintiffs who were at fault in not signing it.  The Defendants’ evidence is entirely neutral as to the reason why the documents were never signed.

43.  In the premises, I accept Mr Chan’s submissions that the Defendants have also failed to show a triable issue that a binding oral agreement as alleged was reached between the parties.

The waiver defence

44.  Mr Wong for the Defendants submits that even if the above negotiations did not amount to a binding agreement, the evidence must raise at least an arguable case that the Plaintiffs had by conducts represented to the Defendants that they had waived the Defendants’ breach.

45.  Mr Chan submits that even if it is triable as to whether there were such clear and unequivocal representations made by the plaintiffs as alleged, the Defendants must also fail in this defence as there is no evidence that they had, as required by the law, acted upon the representations or changed their position because of the representations.  See:   Chitty on contract (29^th ed), paras 22-040 – 22-044.

46.  In reply, Mr Wong contends that Defendants had acted upon the representations by consenting to the Plaintiffs in giving instructions to Mr Tse to draft the documents.

47.  With respect, I cannot accept that such a conduct, taking it to the highest, amount in law to support an operative waiver as now relied on by the Defendants.  In my view, it has to be demonstrated that the alleged act or change of position must be detrimental to the Defendants or must have at least made it inequitable to allow the Plaintiffs now to go back against their representations.  The consent to allow the Plaintiffs to give instructions to draft the documents, which in any event were not signed with no allegation of fault on the part of the Plaintiffs, is in my view clearly insufficient to support the defence of waiver.

48.  For these reasons, I also hold that the Defendants have failed to show any triable issue on this defence.

V.      Conclusion

49.  I am not satisfied that the Defendants have shown a triable defence in the present case.  I therefore grant summary judgment against the Defendants for the sum of $80,000.00.  The Plaintiffs are further entitled to interest on this sum at 1% above the prime rate as from time to time quoted by the Hongkong and Shanghai Bank, from the date of the writ to the date of this judgment, and thereafter at judgment rate until full payment.

50.  I further grant an order that costs of the action, including this application, be to the Plaintiffs to be taxed if not agreed, with certificate for counsel.