LAU WAN HA and Another v. MAXGOLD DEVELOPMENT LTD. and Another

1994, No. A8758

IN THE HIGH COURT OF HONG KONG

COURT OF FIRST INSTANCE

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J U D G M E N T

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1. This is actually a very simple and straight forward case in which virtually all facts were supported by documentary evidence. The trial had been prolonged because Plaintiff's counsel did not know what was pleaded, what case he had to meet and had obstinately tried to argue against his own case.

FACTS

2. On 25th July 1992 Yip Siew Chung deceased ("the deceased") by a provisional sale and purchase agreement agreed to purchase from the 1st Defendant, a sub-purchaser, the property known as Flat 1 on the 2nd floor of Block C Shek To Yuen in the outer Ling Ding Island of Zhuhai City in PRC ("the property") for $504,900.00. The purchase price was subsequently reduced to $454,410.00. The 2nd Defendant was the estate agent. The deceased under that agreement also agreed to pay to the 2nd Defendant an agency commission equivalent to 1% of the purchase price.

3. The Plaintiffs entered into a formal sale and purchase agreement on or about 15th November 1992. The following clauses of the formal sales and purchase agreement are material for the present proceedings:-

Clause 4	All moneys payable hereunder shall be made to Messrs. Joseph Chan & Co., Solicitors ("the said Solicitors") and a sum equal to seventy per cent (70%) of payment payable by the Purchaser to the Vendor under and by virtue of this Agreement shall be deducted from each payment of the Purchaser and retained by the said Solicitors in their account as stakeholder for the purpose of securing the performance and completion of the 1st Agreement and the 2nd Agreement. The remaining thirty per cent (30%) of each payment shall be released to the Vendor.
Clause 6	The construction of the Property will be completed on or before 31st May 1993 and vacant possession of the Property shall be delivered to the Purchaser upon completion.
Clause 7	Completion of the sale and purchase of the Property shall take place when construction of the Property has completed and when the relevant department or authority of the Government of the People's Republic of China ("PRC") has issued the Passing Certificate of the structure of the Property after examination of it, whether such Daily Certificate is issued before or after 31st May 1993.
Clause 8	The Vendor shall cause the issue by the relevant authorities of the Government of the PRC of all necessary certificates licences Permits and/or other documents including but not limited to the Passing Certificate, Notarial Certificate, Ownership Certificate, Permit for sale in Overseas (including Hong Kong & Macau) prior to the completion and where appropriate the grantee thereof shall be the Purchaser or its nominee. The Vendor further undertake to comply with any rules and regulations of PRC which affect the Property or any part thereof.
Clause 14	The Vendor shall upon notification by the Developer of the issue of the Passing Certificate serve on the Purchaser a notice in writing requiring the Purchaser to complete the sale and purchase in accordance with this Agreement within 6 days after service of such notice. Should the Purchaser fail to complete this Agreement as requested the Vendor shall be entitled to forfeit the deposit and to resell the Property, any deficiency in price and all expenses incurred in such resale shall be recoverable from the Purchaser.
Schedule E	Purchase Price
	The Purchase Price for the Property is HONG KONG DOLLARS FIVE HUNDRED FOUR THOUSAND AND NINE HUNDRED ONLY (HK$504,900.00) which shall be paid and satisfied by the Purchaser in the following manner :- 1. HK$50,490.00 being initial deposit was paid by the Purchaser to the Vendor's solicitors Messrs. Joseph Chan & Co. to hold the same as stakeholders and to release the same only in accordance with the terms and conditions herein. 2. HK$201,960.00 being further deposit and part payment of the purchase price shall be paid by the Purchaser on or before 27th February 1993 to Messrs. Joseph Chan & Co. to hold the same as stakeholders and to release the same only in accordance with the terms and conditions herein. 3. HK$201,960.00 being further deposit and part payment of the purchase price shall be paid by the Purchaser on or before 27th March 1993 to Messrs. Joseph Chan & Co. to hold the same as stakeholders and to release the same only in accordance with the terms and conditions herein. 4. The balance of HK$50,490.00 shall be paid by the Purchaser to the Vendor on or before completion to Messrs. Joseph Chan & Co. to hold the same as stakeholders and to release the same only after inspection and acceptance in accordance with the terms and conditions herein. 5. Completion and handover day 30th June 1993 with maximum permissible time extension of 30 days for whatsoever reasons causing delay in completion. Liquidated and ascertained damages calculated at HK$10,000.00 per month (calculated as whole months and not as parts thereof) shall be paid to the Purchaser for failure to complete and handover of the premises to the Buyer beyond the completion date or extended completion date stated above.

4. Pursuant to the aforesaid agreements the deceased had by 2nd April 1993 paid a total sum of $403,920.00 to Messrs. Joseph Chan & Co. leaving an unpaid balance of $50,490.00. The Plaintiff did not dispute that this amount had not been paid.

5. On 27th April 1993 the Defendants signed a letter of guarantee contents of which are as follows:-

"We, the hereinunder named persons, hereby personally undertake to jointly and severally guarantee that the property purchased by you will be completed and handed over to you for occupation on or before 31st July, 1993, failing which we the undersigned jointly and severally guarantee to refund the purchase price you have already paid for the said property, plus interest and costs in consideration of having received payment from you of 90% of the value of the said property. As an alternative, at the option of the buyer, Maxgold Development Co., Ltd. will pay the buyer a sum of HK$10,000.00 each calendar month (or part thereof) as liquidated and ascertained damages for late completion and hand-over of the said property."

6. On 11th May 1993 the deceased informed the 2nd Defendant of his wish to carry out structural alterations and decorations to the property. The 2nd Defendant asked the deceased to set out his proposed alterations in writing and passed the same to the Developer for approval. On 28th May 1993 the Developer replied by endorsing on the sketch plan submitted by the deceased to the effect that the deceased would be permitted to carry out the proposed alteration after delivery of vacant possession.

7. On 5th June 1993 after an inspection tour of the development the deceased informed the 2nd Defendant of his wish to take possession and get the keys to the property so that he could engage one Wong Ah Sang to carry out the decoration and alteration work. A letter authorising Wong to obtain the keys was signed by the deceased. On the 6th June 1993 Wong signed the handover record of the property. Wong then started the alteration and decoration works.

8. The "Passing Certificate" was issued by the relevant authority in PRC on 20th November 1993.

9. On the 29th November 1993 the 1st Defendant by letter informed the deceased of the completion of the building and demanded the payment of the balance of the purchase price and an additional $20,000.00 for payment of tax in China and the necessary fees for completion.

10. On 7th December 1993 the deceased and his twin brother Yip Siew Koh executed a power of attorney before Messrs. Chung Pui Lam Solicitors authorising one Guan Yeran to act as agent to go through the procedures in respect of the purchase of the property. On the same date pursuant to the letter of the 29th November 1993 the deceased issued a cheque in the sum of $20,000 to Junffrey & Albany Realty.

11. Apparently there was dispute as to the work carried out by Mr. Wong Ah Sang in respect of the decoration and alteration of the said property, the deceased did not pay the balance of the purchase price.

12. The 1st Defendant on 15th April 1994 wrote to the deceased and called for completion within 10 days and the 1st Defendant further stated that it had handed the property to the deceased's appointed representative to carry out the alteration and decoration works. The deceased by letter dated 2 May 1994 set out the defects in the alteration and decoration work.

13. The deceased died on the 3rd March 1995 and the proceedings is carried on by the personal representatives of the deceased.

THE PLAINTIFF'S CASE

14. The Plaintiffs' claim against the Defendants for $130,000.00 and continuing damages.

(1) AGAINST THE 1ST DEFENDANT

15. The Plaintiffs' claim is based on 2 limbs:- (i) under the sale and purchase agreement on the ground that the 1st Defendant has failed to complete and hand over the vacant possession of the property by 31st July 1993 and (ii) under the letter of guarantee.

(2) AGAINST THE 2ND DEFENDANT

16. The Plaintiffs claim against the 2nd Defendant under the letter of guarantee.

17. Under the first limb against the 1st Defendant, the Plaintiffs' contention is that the alteration work to the property had not been completed and did not agree that they had taken over the property. This is reflected by the exchange of correspondence between the deceased and the 1st Defendant on 15th April, 2nd and 6th May 1993.

18. The fact that the deceased had obtained vacant possession of the property was evidenced by the following documents:-

1) a document dated 5th June 93 by the deceased authorising Mr. Wong Ah Sang to take delivery (p. 31 of the bundle of documents)

2) The handover record dated 6th June 1993 (p. 66 of the bundle of documents).

3) An endorsement by the developer on the proposed plan for alteration to the property. (p. 65 of the bundle of documents).

19. By the Plaintiffs' own pleading in their Reply and Defence to Counterclaim at para. 12(i) it was pleaded "The Plaintiffs say that the said Wong Ah Sang was a sub-contractor of the Developer on the site of the suit property and that he was engaged through the 1st Defendant by the deceased only to do the said alteration works on the suit property but nothing further or otherwise"

20. With this admission and the documentary evidence I cannot see how the Plaintiffs can possibly argue that the deceased had not taken possession of the property.

21. During the trial Plaintiffs' counsel even objected to the statement of Wong Ah Sang being admitted under the hearsay rules and applied to have Wong Ah Sang to be called. Wong Ah Sang is a Chinese national and is beyond the seas. This is an exception under the hearsay rules. Obviously counsel was not aware of that rule. Besides it is a reflection that he was not aware of what was pleaded.

22. There is not a shred of evidence that the property had not been handed over to the deceased.

THE LETTER OF GUARANTEE

23. Plaintiffs' counsel argued that the 2 Defendants had signed the letter hence they are both liable to the deceased. In his final address however he submitted that "the factual matrix, the specific words chosen by the letter of guarantee all point to the direction that Fan & Havercroft signed it in their personal capacity as guarantors". This submission is wholly unintelligible. If they signed in their personal capacity then the 1st Defendant should not be sued under this letter of guarantee.

24. In any event the Plaintiffs claim only for the liquidated damage and not for refund of the purchase price, the only relevant part in this letter is the last sentence which stated "As an alternative, at the option of the buyer, Maxgold Development Co. Ltd. will pay the buyer a sum of HK$10,000.00 each calendar month (or part thereof) as liquidated and ascertained damages for the late completion and hand over of the said property". I need not go into the question of whether there is consideration suffice for me to say that in respect of the 1st Defendant liquidated damages has already been agreed in the sale and purchase agreement and this letter is superfluous. As for the 2nd Defendant, the deceased only had the option to go against the 1st Defendant for the liquidated damage. The 2nd Defendant cannot be held liable under this letter on the plain construction of this letter. The claim against the 2nd Defendant must therefore fail.

WHEN WAS THE 1ST DEFENDANT READY TO COMPLETE

25. Although vacant possession had been delivered to the deceased as early as June 1993 the 1st Defendant was not in a position to transfer the legal title to the deceased. Clause 7 stipulated that completion shall take place when the construction has completed and the government of the People's Republic of China has issued the Passing Certificate. Since no Passing Certificate was issued in June 1993, the 1st Defendant was not able to complete. The 1st Defendant was only able to complete after 20 November 1993 when the Passing Certificate was issued and had notified the deceased to complete by letter dated 29 November 1993.

26. The 1st Defendant was therefore in breach of the sale and purchase agreement in that it has failed to complete by 30 July 1993.

DAMAGES

27. Under Clause 5 of Schedule E of the sale and purchase agreement, it allowed an extension of 30 days for completion failing which the 1st Defendant is liable to pay to the Plaintiffs liquidated damages calculated at $10,000.00 per month until completion. Since the 1st Defendant was not able to complete before the month of Nov 1993, the 1st Defendant is therefore liable to pay to the Defendants $40,000.00 being liquidated damage for 4 months.

28. It is inconceivable how the Plaintiffs can claim for continuing damages. It is trite law that the Plaintiffs have to mitigate damages. Even if the 1st Defendant refused to complete (which is not the case) the Plaintiffs have to either sue for specific performance or damages in lieu within reasonable time of the completion date.

COUNTERCLAIM

29. It is admitted that the Plaintiffs or the deceased have not paid the 1st Defendant the final instalment of $50,490.00 nor the agency fee of $5,049.00.

30. In the premises the orders will be as follows:-

1) Judgment for the Plaintiff against 1st Defendant in the sum of $40,000.00 with interests at % p.a. and costs on District Court Scale.

2) Claim against 2nd Defendant dismissed with costs.

3) Judgment for the 1st Defendant on counterclaim in the sum of $50,490.00 with interests at % p.a. and costs.

4) Judgment for the 2nd Defendant on counterclaim in the sum of $5,049.00 with interests at % p.a. and costs.

(Wesley Wong)

Deputy Judge of the Court of First Instance