JIM LI LING BETTY v. SUN & LIN CO. LTD.

1991, No.A8854

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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J U D G M E N T

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1. This is a purchaser's action for specific performance. The plaintiff purchaser is Jim Li Ling Betty; I shall refer to her as "the plaintiff". The defendant vendor is Sun & Lin Company Limited; I shall refer to it as "the defendant". On the plaintiff's side the negotiations for the sale and purchase of the property in question were conducted by the plaintiff herself. On the defendant's side they were conducted by Mr Francis Poon. The plaintiff and Mr Poon gave evidence before me. They were the only witnesses. Each side was represented throughout (until, as I shall mention in a moment, a very late date indeed) by solicitors. The plaintiff's solicitors were Laurence Pang and Co; I shall refer to them as "the plaintiff's solicitors". The defendant's solicitors were Raymond T.M. Lau & Co; I shall refer to them as "the defendant's solicitors". The property the subject matter of the action is House No.49, Redhill Peninsula, 18 Pak Pat Shan Road, Hong Kong; but the negotiations between the plaintiff and the defendant concerned also another property, No.81, Redhill Peninsula. I shall refer to these two properties as "No.49" and "No.81" respectively.

2. The history of the matter is as follows.

3. In the summer of 1991, the plaintiff entered into negotiations with the defendant for the sale by the defendant to the plaintiff of No.49 and No.81. In respect of each property, the parties concluded the initial stage of their negotiations by entering into a memorandum confirming their agreement to the sale and purchase. It now appears to be common ground that each of them, the plaintiff and the defendant, signed the memoranda on 18 July 1991, although the memoranda are undated. The purchase price for each property was $7,300,000.00. The memoranda set out terms of payment (and certain other terms) which are material. I refer in particular to the terms of the memorandum relating to No.49. This reads as follows :

"Terms of payment :

(i) Deposit : HK$300,000.00 being initial deposit payable to the Vendor on signing of this Agreement hereof;

(ii) Second Payment : the formal Agreement for Sale and Purchase will be signed by the parties hereto on or before the 26th July 1991 and HK$430,000.00 shall be paid to the Vendor's Solicitors upon signing of the formal Agreement for Sale and Purchase;

(iii) Balance : HK$6,570,000.00 payable on completion date upon the execution of the Deed of Assignment;

(iv) Date of Completion : on or before 2nd September 1991.

The above property shall be sold subject to existing tenancy and lettings. It is hereby agreed between the parties that the property will be leased to a prospective Tenant and that in the event of a failure to enter into such tenancy, the Purchaser shall withdraw from purchasing the said property and the Vendor shall return the deposit to the Purchaser without any interest or compensation. The Purchaser shall not have any claim whatsoever against the Vendor in respect thereof.

If the Purchaser fails to perform this Agreement, the deposit will be forfeited and the Vendor shall have the right to resell the Property to other parties. Neither party shall have any further claim against each other.

If the Vendor fails to perform this Agreement, the Vendor should pay double of the deposit to the Purchaser, i.e. (HK$600,000.000). Neither party shall have any further claim against each other.

All stamp duties of the Assignment shall be borne by the Purchaser absolutely.

Each party shall pay his own legal costs."

4. The memorandum concludes with the following provision:

" It is hereby agreed that time in every respect shall be of the essence of this Memorandum of Agreement for Sale and Purchase."

As I have said, this memorandum was duly signed by the plaintiff, and was duly signed for and on behalf of the defendant, on 18 July 1991.

5. On the same day, 18 July 1991, the plaintiff's solicitors wrote to the defendant's solicitors stating that the plaintiff's solicitors were acting for the purchaser of No.49 and No.81 and enclosing the two memoranda relating to those properties. They asked the defendant's solicitors to send them, on the usual understanding, the draft agreement for sale and purchase in respect of the properties, together with the relevant title deeds and documents, for their approval on behalf of the plaintiff.

6. On 23 July 1991, the defendant's solicitors sent to the plaintiff's solicitors the draft agreement for sale and purchase relating to No.49 and asked for a cheque for $430,000.00, being the deposit payable under the terms of the memorandum.

7. On 25 July 1991, the plaintiff's solicitors put forward 2 new clauses by way of amendment to the draft agreement for sale and purchase.

8. On 31 July 1991, the defendant's solicitors replied accepting (with slight amendments) the 2 new clauses proposed by the plaintiff's solicitors.

9. On 2 August 1991, the defendant's solicitors forwarded the title deeds and documents relating to No.49 to the plaintiff's solicitors.

10. It will be remembered that the memorandum for sale and purchase relating to No.49 provided that the formal agreement for sale and purchase should be signed by the parties on or before 26 July 1991. However, for reasons into which it is not necessary now to go, that date was missed. Neither party took any point on this. However, there were problems which made it difficult to complete the transaction in accordance with the terms of the memorandum. There is a difference between the plaintiff and the defendant is to what those problems were. The plaintiff was anxious to arrange finance for her purchases in the most advantageous way and naturally took whatever steps she could to achieve that object. The defendant was anxious to enhance its cash flow and to fulfil its promises to its own bankers. The question as to how the transaction was to proceed was the subject of a discussion between the plaintiff, on the one hand, and Mr. Poon, for the defendant, on the other hand, which took place on 9 August 1991 (a Friday). The plaintiff was anxious to complete her purchase of both properties, but it was going to be difficult for her to do that in the most advantageous way if she was to be expected to put up all the money she had agreed to put up by 2 September 1991, the date fixed for completion. The plaintiff says that during the course of her conversation with Mr. Poon, the suggestion was put forward by him that she should pay to the defendant, no later than the following Monday in relation to No.81 a sum of $730,000.00, on the basis that, so far as No.49 was concerned, the defendant would accept a postponed completion date of 15 October 1991. This would give the plaintiff enough time to get her finances into order in the way most advantageous to her own interests. This arrangement, she said, was acceptable. and on this footing, she did in fact send the next day the sum of $730,000.00 to which the arrangement related to the defendant.

11. Mr. Poon's version of the conversation was quite different. He said that this proposal was put forward by the plaintiff entirely for her own benefit, not as the plaintiff had suggested, put forward by him to obtain an accelerated payment. He says that she needed, and wanted, the postponement to 15 October 1991 to complete these two transactions and that he was prepared to agree to this on the footing that the two transactions would be treated separately, so that if she came up now with $730,000.00 in relation to each of them, then each of them could be given a postponed completion date of 15 October 1991. Alternatively, she could elect to take this course in relation to one of the properties only, so that if he got just $730,000.00, appropriated to one of them, then in relation to that one, but that one alone, the completion date could be postponed as mentioned. Lastly, if she chose not to accept this suggestion, and chose therefore there to send no money at all, the result would be that the completion date would remain as it always had been, 2 September 1991; and she would, on that date, be expected to come up with all the money for both properties.

12. In the amended statement of claim in its final form including an amendment made by my direction at an early stage of the trial, the plaintiff put her case in this way (I read from para.5 of the re-amended statement of claim):

"5. The Plaintiff duly paid the Defendant the said sum of $730,000.00 on 10th August 1991. This payment was made at the Defendant's request in relation to No.81 and the Plaintiff agreed to make it on the basis that the time for completion of the purchase of No.49 should be extended to 15 October 1991."

13. I have to consider which (if either) of these two versions of the conversation of 9 August 1991 I should prefer.

14. I have come to the conclusion that neither party fully understood what the other was saying during the course of their conversation on 9 August 1991. There does not seem to me to have been a meeting of minds. I am not prepared to find that either Mr. Poon or the plaintiff was deliberately telling me untruths. I simply believe that they never really came to any concluded agreement on the basis of which this court could safely proceed. I believe there was some misunderstanding between them. That is what lies at the heart of the problem. The defendant did in fact pay the $730,000.00 on 10 August 1991 and completion of the transaction relating to No.81 duly took place on 2 September 1991. But that is not clear and unequivocal evidence of the variation of the terms of the contract affecting No.49 which the plaintiff seeks to set up; and indeed when I look to the contemporaneous documents, these are, on the contrary, entirely in the defendant's favour, not the plaintiff's.

15. On 9th August 1991, the plaintiff's solicitors wrote to the defendant's solicitors about the transactions, and so far as No.49 and No.81 are concerned they wrote in the following terms:

" We are instructed to put forth the following revised terms of sale and purchase :-

House No.49

(1) Our client shall pay the further deposit of $430,000.00 on or before 13 August 1991.

(2) The completion date shall be on or before 15 October 1991.

(3) Vacant possession shall be delivered up upon completion.

House No.81

(1) Our client shall pay a further deposit of $730,000.00 (in addition to the deposit already paid) on or before 13 August 1991.

(2) The completion date shall be on or before 15 October 1991."

16. This letter from the plaintiff's solicitors requires careful examination. It is to be observed that the letter does not refer to any agreement already arrived at between the plaintiff and Mr. Poon. It is couched in terms which suggest, not that an agreement has been reached, but that that proposed revised terms are being put forward: "We are instructed to put forth the following revised terms of sale and purchase". And in relation to No.49 it is proposed that the plaintiff pay a further deposit of $430,000.00 on or before 13 August 1991. This proposal is quite contrary to the plaintiff's case.

17. The suggestion made in each case that the completion date should be postponed to on or before 15 October 1991 is consistent with the version of the facts offered by Mr. Poon, when he said that that was what the plaintiff was asking for. Finally, the proposal that "vacant possession shall be delivered up upon completion" was of course a proposal inconsistent with the original term of the memorandum in relation to No.49, that the plaintiff should take the property already tenanted. The idea was then that the property was being purchased by the plaintiff as an investment, and that it would be left to the defendant to find a tenant before completion took place. What actually happened was that the defendant did find a tenant, but, unfortunately, the tenant turned out to be unsatisfactory; he complained about the condition of the property and refused to pay rent until the complaint was remedied. In these circumstances, the plaintiff was prepared and indeed anxious to give up her requirement that the property should be delivered to her in a tenanted condition (although by now in fact it was too late). But the most important thing about the letter of 9 August 1991 is that it does not at all accord with the plaintiff's evidence in the witness box of what she had agreed with Mr. Poon, or of what she had instructed her solicitors. In these circumstances it seemed to me right to invite those solicitors to consider withdrawing from their representation of the plaintiff. After consideration of the matter, they applied to do this and because I thought it in the best interests of justice to allow the application I allowed it, and made an order giving them leave to cease to act for the plaintiff. The plaintiff thereafter acted for herself with such limited assistance as I was able to give her.

18. To revert to the history of the matter. On 21 August 1991, the plaintiff's solicitors wrote to the defendant's solicitors (there seems to have been no other correspondence between the parties or their respective solicitors between 9 August 1991 and 21 August 1991) stating as follows :

" We are instructed that in about mid-July 1991, our client signed in escrow a memorandum of agreement for sale and purchase ('the memorandum') in respect of the property. Our client paid a sum of HK$300,000.00 in the nature of earnest money to your client. Since then, our client had no knowledge whether or not the memorandum had been signed by your client. It was until yesterday when our client was verbally informed by your Mr. Raymond Lau that the memorandum had been signed by your client. Such purported acceptance (or communication of acceptance) of our client's offer was in our view, late and ineffective. In the memorandum, time was expressed to be in every respect of the essence. The date for the signing of a formal agreement for sale and purchase was 26th July 1991. Our client's offer, as stated in the memorandum, has therefore already lapsed by 26th July 1991.

We recall that in our previous correspondence, we have been negotiating the terms of the proposed transaction on behalf of our respective clients on a 'subject to contract' basis. No concluded terms or agreement have been reached.

We are now instructed to discontinue the negotiation and hereby return your draft Agreement for Sale and Purchase (in duplicate) and the title deeds and documents as set out in the annexed schedule.

Please advise your client to return the said sum of HK$300,000.00 to our client without delay."

19. Now this letter of 21 August 1991 was either written on the plaintiff's instructions or it was not. If it was written on the plaintiff's instructions, it was clearly an intimation of an intent on the part of the plaintiff no longer to be bound by any contract into which she may have entered. Her contention was that there was no contract. That may or might not have been right; but whether there was or there was not, a letter like this is as plain a repudiation as one could possibly have if there was indeed a contract.

20. About this letter, the plaintiff told me that it was not at all her intention at all to withdraw from the transaction. She wanted in fact to complete it. This letter was therefore written without her instructions. She said she thought it was a letter which her solicitors could properly write in order "to protect my interests". How anybody as intelligent as the plaintiff seemed to me to be could possibly come to that conclusion, I really do not know. A copy of the letter was sent to her, yet she seems to have raised no objection to it. It may well be that, in some confused sort of way, the plaintiff's solicitors, and the plaintiff herself, did think that she could get the best of both worlds by writing this ridiculous letter. But since in fact it amounted to a repudiation, that is neither here nor there.

21. Nevertheless, that was not the end of the matter. The date for completion, it will be recalled, was 2 September 1991. In the face of the letter of 21 August 1991, nothing (not surprisingly) seems to have been done towards any such completion. On 3 September 1991 the defendant's solicitors wrote to the plaintiff's solicitors in these terms :

" We refer to your letter of 21st August 1991 upon which we have taken our client's instructions to reply as follows.

Your client executed 2 Memorandum of Agreement for Sale and Purchase on 17th July 1991 on similar terms and paid a total sum of $600,000.00 for 2 properties namely House 81, Path Drive, Redhill Peninsula ('House 81') and House 49, Cedar Drive, Redhill Peninsula ('House 49') each for $300,000.00 to our client as initial deposit and part payment of the purchase price. The sale and purchase of the properties was both scheduled to be completed on 2nd September 1991.

The signing of the Agreement for Sale and Purchase for both properties was fixed for 26th July 1991.

After the signing of the said Memorandum, your firm wrote to us in an open letter requesting for the draft Agreement for Sale and Purchase for the 2 properties aforesaid.

Your client had from time to time requested the execution of the said Memorandum by our client.

On 25th July 1991 your firm wrote to us openly proposing amendments to our client's draft Agreement for Sale and Purchase in respect of House 49 and requesting for our re- engrossed Agreement to be forwarded to you.

On 27th July 1991, which was one day after the scheduled time for execution of the said Agreement, your firm wrote to us with proposed terms to be incorporated in the said Agreement for House 81. Not until the 6th August 1991, your firm returned to us the signed Sale and Purchase Agreement for House 81.

At the beginning of August, your client has been orally informed that the 2 Memorandum had been signed by our client and that the tenant of House 49 had also executed a Tenancy Agreement with respect to House 49.

On 9th August 1991 your firm wrote to us agreeing to pay a further deposit of $430,000.00 on or before 13th August 1991 relating to House 49 and re-schedule the complete date to 15th October 1991 in order to enable your client to have amply time to deal with the mortgage arrangement. All of a sudden on 9th August 1991, your client suggested vacant possession of House 49 be delivered on completion knowing full well that a Tenant has executed a Tenancy Agreement of this property.

Between the beginning and the middle of August, your client did on number of occasions expressed difficulties in arranging finance of the purchase of House 49. At the instance of your client, our client did speak to the present mortgagee bank in a bid to assist your client in resolving the loan advancement for the purchase of House 49. However, such attempt was proved to be abortive.

It was until 21st August 1991 your client through your goodselves, wrote to us informing that she no longer wishes to complete the transaction with our client.

Insofar as the purchase of House 81 is concerned, the completion has been duly formalized within the agreed time scheduled by your client.

We are instructed that our client insists that your client should complete the sale and purchase of House 49 within the course of the next 7 days, in default thereof our client will have no alternative but to forfeit all deposit paid hereunder by your client and to file a claim against yours for our client's loss and damages suffered resulting from your client's breach of the Memorandum of House 49 as our client sees fit."

22. Now although, as I have pointed out, the plaintiff by her solicitors' letter of 21 August 1991 had clearly repudiated the agreement for sale and purchase of No.49, by this letter of 3 September 1991, the defendant refused to accept the repudiation. Instead, the defendant elected to offer a further 7 days to the plaintiff for the completion of the transaction. But the plaintiff chose not to take advantage of this. Instead, her solicitors wrote the defendant's solicitors on 6 September 1991 in the following terms : it has come to our client's knowledge that the " Our client specifically denies the allegation that she was orally informed at the beginning of August that the 2 Memoranda of Agreement for Sale and Purchase had been signed by your client. It was on 20th August 1991 when our client was first informed by your Mr. Raymond Lau that the memorandum relating to the Premises had been signed by your client.

The other points made in your letter are, with respect, not relevant to the issues.

Further existing tenant recently notified your client's representative that he was refusing to take possession of the Premises and to pay rent by reason of the defective condition of the Premises. We trust you would be in a batter position to tell whether or not the tenant's conduct amounts to repudiation of the tenancy agreement. In the circumstances, even if there is a binding sale and purchase agreement between our respective clients (which is denied), your client is not entitled to give notice to our client to complete the sale before the dispute with the tenant is resolved."

23. The effect of this letter, with its denial of any contract, was, once again, to repudiate any contract there may have been for the sale and purchase of house No.49. The letter of 6 September 1991 was answered by the defendant's solicitors on 13 September 1991. It was seen by the plaintiff shortly after it was despatched, as she told me in evidence. It reads as follows:

" We refer to your letter of 6th September 1991.

By a Memorandum of Agreement for Sale and Purchase dated 17th July 1991 entered into by our respective clients, our client as Vendor agreed to sell the Property and your client as Purchaser agreed to purchase the same by signing thereon in terms as stipulated in the said Memorandum.

Our client has given notice to your client to complete the purchase of the Property on or before 10th September 1991 as contained in our letter of 3rd September 1991, your client has in breach of the said Memorandum failed and/or refused to complete the purchase.

Your client seems to place so much reliance on the knowledge of the signing of the said Memorandum in respect of the Property by our client, our client sees no relevancy of such knowledge.

The position in Common Law is that our client offers to sell the Property in terms as stipulated in the said Memorandum and your client accepts the same by signing thereon and paying the initial deposit. This memorandum is binding on our respective client.

The statutory position is contained in Conveyancing and Property Ordinance, Cap. 29, Section 3(1) provides that "... or some memorandum or note thereof, is in writing and signed by the party to be charged ..."

Since your client has signed the Memorandum being "a party to be charged", our client is entitled to enforce the Memorandum against your client requiring her performance of the terms therein mentioned.

There is no room for your client to argue whether there is or is not a dispute between our client and the tenant of the Property whereby resulting a repudiation of the tenancy agreement by the tenant. Our client was ready and able to sell the Property to your client with subsisting tenancy as at 10th September 1991.

In the light of what was said above, our client's rights to pursue its claim against your client for loss and damages consequential upon your client's breach are hereby expressly reserved."

24. This letter, it seems to me, is, at last, an acceptance of the repudiation of the transaction by the plaintiff. Thereafter, in my judgment, the whole transaction was at an end.

25. On 15 October 1991 (a month later), the plaintiff's solicitors came back, now suggesting that the written agreement had been varied by an oral agreement made between the plaintiff and Mr. Francis Poon in the course of their conversation to which I have referred, and now asserting that the agreement was still binding on both parties. So far as the alleged variation is concerned, I pointed out at an early stage in the trial that the plaintiff was in difficulties over this. A variation of a written contract by parol may amount to a complete discharge of the existing contract but it cannot (when the contract has to be in writing) result in the substitution for it of another one. The difficulty is that unless the second contract is itself evidenced in writing it cannot be relied on by the plaintiff. So, although there had been originally a pleading of an oral variation of the contract, the plaintiff, at a time when she was still represented by counsel, elected (in my judgment, quite rightly) to have those parts of the pleading which sought to set up this oral variation of the contract deleted, because the plaintiff's case on this aspect of the matter was bound to fail.

26. Reverting to the letter of 15 October 1991, it was clearly the hope of plaintiff's solicitors that they could revive the transaction. They attempted to have the defendant treat their letter as a notice to complete the transaction within 14 days. On 28 October 1991, the defendant's solicitors refused to accept this suggestion. They denied the oral agreement alleged in the letter of 15 October 1991, and they restated their position as set out in the letters of 3 and 13 September.1991 to which I have already referred.

27. On 29 October 1991, the plaintiff's solicitors attempted again to reiterate that the contract was still binding. But on 1 November 1991 the defendant's solicitors drew the whole matter to an end by stating that their client would regard the memorandum of agreement for sale and purchase as having been repudiated by the plaintiff.

28. In my judgment, the defendant must succeed. I accept the submission that the plaintiff had repudiated the transaction. The only way which I could have been persuaded otherwise, despite her having failed to complete on the date, 2 September 1991, originally fixed, would have been by her establishing to my satisfaction, by clear and unequivocal evidence, that the defendant had made a distinct promise that, in consideration of a payment of $730,000.00 on or about 10 August 1991, the date for completion of House 49 would be extended to 15 October 1991 (thus raising an estoppel against the defendant). This may have been the impression which the plaintiff formed as a result of her conversation with Mr. Poon, but I am not prepared to accept her evidence as sufficiently clear and unequivocal evidence of such a promise, which Mr. Poon of course denied making.

29. As a matter of law, it is doubtful whether there can be a postponement of a completion date fixed in writing by a variation which is not itself evidenced in writing but because I decide this case upon its facts, it is not necessary for me now to go into that question.

30. For the reasons I have endeavoured to state, I am obliged to discuss this action and I will now hear counsel on the form of order I should made and on any question of costs which may arise.