TO HU SING v. CHEUNG KWAI CHUEN AND OTHERS

HCA 1930/2015

[2020] HKCFI 2747

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 1930 OF 2015

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J U D G M E N T

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Introduction

1.  This action concerns the sale and purchase of the 3‑storey house known as Block K, Wilhelmina Garden (慶庭雅苑), 168 San Hing Tsuen, Tuen Mun (“House”).  This trial concerns only the claims and counterclaims between the plaintiff vendor and the 1^st and 2^nd defendants who were the purchasers.  The plaintiff seeks to recover possession of the House from the 1^st and 2^nd defendants who counterclaim specific performance of the sale and purchase.  The main issues are whether the defendants are barred by laches or by an “escape clause” in the provisional agreements from seeking specific performance.

The facts

2.  The plaintiff is a Hong Kong permanent resident and a member of the To Tuen Kuk Cho (陶屯谷祖) but has been residing with his own family in the United Kingdom.  As a member of the Cho he was assigned the land in 1995 on which the House was eventually erected in around 2005. Since then he had left the management of the House to one Mr To Yat Wah, who was an uncle (in the loose sense) of his and who was subsequently joined as the 3^rd defendant in the action.  I shall refer to To Yat Wah by his name below, reserving the term “defendants” for referring to the 1^st and 2^nd defendants (unless otherwise specified).

3.  The defendants are husband and wife.  Up to 2009 they had lived in a 3‑storey house in Villa Pinada, Tuen Mun, which they owned through a company.  They planned to sell that property and buy a new one in which to live in their retirement, and engaged an estate agent for that purpose.  The agent recommended several houses in Wilhelmina Garden and they chose Block K, ie the House.  On 21 November 2009, they each entered into a provisional sale and purchase agreement based on the standard form of the estate agent (“Provisional Agreement”) with the plaintiff acting through To Yat Wah, whereby the plaintiff agreed to sell the second floor and the roof of the House (“the 1^st Property”) to the 1^st defendant at the price of $1,880,000, and the ground and first floors (“the 2^nd Property”) to the 2^nd defendant at the price of $2,000,000 respectively (collectively, the “Properties”). Effectively, the defendants agreed to buy the entire House.  Why the transaction was split in this way is not important.  It might have had to do with the higher rate of stamp duty payable if it were a combined sale and purchase.

4.  As mentioned below, the plaintiff subsequently alleged as against To Yat Wah that he had no authority to sell the Properties and joined him into the action to answer for a claim that he had acted in excess of authority.  It is, however, clear from the pleadings and Ms Alison Choy, who appears in this trial on behalf of the plaintiff, has also confirmed that, as against the defendants, the plaintiff does not raise any issue of lack of authority.

5.  The 1^st defendant paid an initial deposit of $10,000 and the 2^nd defendant $20,000 to the plaintiff upon the signing of the Provisional Agreements.  The terms of the 2 Provisional Agreements were essentially the same.  Both provided for the signing of a formal agreement on or before 4 December 2009 when a further deposit would be paid bringing the total deposit to 10% of the purchase price. The balance of the price was to be paid upon completion on or before 8 February 2010.  The actual wording of the relevant clause is as follows (using the version for the 2^nd Property):

“ 2. 該物業之成交價為港幣

The Purchase price of the said premises shall be HK$ 2,000,000.00

買方須按下述方式付款予賣方

which shall be paid by the Purchaser to the Vendor in the manner as follows:-

(a) 於簽訂本合約之同時即付臨時訂金港幣

Initial deposit shall be paid upon signing of this agreement in the sum of HK$ 20,000.00

(b) 於簽署正式買賣合約之時或以前,即

Upon signing of the Formal Agreement for Sale and Purchase on or before 4^th Dec, 2009

加付訂金港幣

further deposit shall be paid in the sum of HK$ 180,000.00

(c) 再付訂金餘款於

Further deposit shall be paid on or before ______/________

即港幣

In the sum of HK$ ______________/__________________

(d) 於完成交易之時或以前,即

Balance of purchase price shall be paid upon completion on or before 8^th Feb, 2010

並在賣方之代表律師行付清樓價餘款港幣

at Vendor’s solicitors in the sum of HK$ 1,800,000.00

*上述(a), (b)及(c)條文所列之訂金，須由賣方之律師行以保管人身份加以保管，

The further deposits payable under (a), (b) and (c) above shall be paid to the Vendor’s solicitors as stakeholders who may release the

並在確保該樓價餘款足夠清還現存之按揭及債務的同時，

same to the Vendor provided that the balance of the purchase price is sufficient to discharge the existing legal charge / mortgage

更要經買方之律師行於收到該物業樓契的七個工作天內加以查閱；

and the title deeds of the said premises shall have been approved and accepted by the Purchaser’s solicitors who shall have seven

確實同意及接受後，方可將該訂金轉交賣方。

working days to peruse and to raise requisitions or objection in respect of the title to the said premises upon receipt of the said title deeds.”

6.  On 30 November 2009, Messrs Tam, Pun & Yipp (“TPY”), the purchasers’ solicitors, wrote to Messrs Hagon Wai & Partners (“HWP”), the vendor’s solicitors, asking the latter for the draft Agreements for Sale and Purchase (“Formal Agreements”) for the purchasers’ approval.

7.  On 2 December 2009, HWP sent TPY the drafts, stating:

“ If you approve the draft Agreement for Sale and Purchase without amendment, please treat it as engrossment and arrange for your client to sign and return the same (in duplicate) to us for our client’s signature.

When returning to us the said Agreement for Sale and Purchase (in duplicate) duly signed by your client and attested by you, please let us have your cheque (i) for the sum of HK$178,000.00 [or HK$180,000.00 in the case of the 2^nd Property] in favour of Hagon Wai & Partners being the further deposit and further part payment of the purchase price (ii) HK$2,500.00 in our favour being the Plan Fee payable by your client upon signing of the said agreement for sale and purchase.

We stress that nothing herein contained or in the said Agreement shall be binding on our client or shall supersede the Provisional [Agreement] made between our respective clients unless and until the said Agreement for Sale and Purchase has been duly signed by our respective clients and exchanged by us.”

8.  On 4 December 2009, TPY sent the Agreements for Sale and Purchase (signed by the defendants) and the requisite cheques to HWP, stating:

“ We refer to your letter dated 2^nd December 2009 and enclose herewith the Agreement for Sale and Purchase (in duplicate) of the above property duly signed and attested together with (i) our cheque drawn in favour of ‘HAGON WAI & PARTNERS’ for the sum of HK$178,000.00 [or HK$180,000.00 in the case of the 2^nd Property] being further deposit; and (ii) our cheque in favour of ‘HAGON WAI & PARTNERS’ for the sum of HK$2,500.00 being the plan fee for your further action.

Please note that the said cheque are sent to you against your firm’s undertaking to return us the counterpart Agreement for Sale and Purchase duly signed and attested within the next 3 working days.”

9.  Following the letters of 4 December 2009, HWP cashed the cheques for the further deposits (as can be inferred from the fact that the cheques were never returned and the plaintiff’s acceptance in his statement of claim that the further deposits were paid by the defendants in accordance with clauses 2(a) and (b) of the Professional Agreements), but the plaintiff did not sign the Formal Agreements and HWP did not send TPY any Formal Agreements duly signed by the plaintiff.

10.  As the defendants were selling their previous residence, they wanted to be able to move into the Properties as soon as possible.  On around 11 December 2009, the defendants received a licence agreement from the estate agent, apparently signed in the name of To Yat Wah, which allowed the defendants to enter into occupation of the Properties as licensees for renovation purposes, in return for a fee of $10,000.  This agreement provided as follows:

「 買方於2009年12月11日收取上述物業之門匙10條作為借用上述物業作裝修之用途。

業主與買家同意，買家取匙時，交港幣壹萬元正，此款用作借匙裝修期間之租金。亦到完成成交為止。

買方於收取上述物業之匙後，買方同意遵守以下之條件：

1. 買方只以借用人(Licensee) 身份使用該物業，該等佔用並不構成任何租約。

2. 買方由借用日開始負責支付一切有關該物業之差餉、地租、管理費、水費、電費及石油氣費等開支。

3. 如買方未能根據正式買賣合約完成交易，買方須即時將物業交還賣方，並應在賣方的書面要求下根據該物業之原本狀況將其還原。

4. 上述借用情況並不會構成買方已接受該物業之業權。

5. 買方由供用日期開始，如該物業有任何損壞及維修，均由買方負責。」

(English translation)

“ A total of 10 keys to the door of the said Property are collected by the Purchaser on the 11^th day of December, 2009 for the said Property to be temporarily used by the Purchaser for the purpose of renovation.

It is agreed by the Vendor and the Purchaser that a sum of Ten Thousand Hong Kong dollars, payable upon collection of the keys by the Purchaser, shall be paid as the rent for the temporary use of the said Property during the renovation period, and until such time when the transaction is completed.

The Purchaser agrees to observe the following terms and conditions after collection of the keys to the said Property:

1. The Purchaser shall use the property as Licensee only. Such occupation shall not provide the Purchaser with any tenancy over the property.

2. From the commencement date of temporary use of the property, the Purchaser shall pay all charges in respect of the property including rates, government rent, management fees, water, electricity and LPG, etc.

3. In the event that the Purchaser fails to complete the transaction according to the formal Sale and Purchase Agreement, the property shall be returned to the Vendor with immediate effect, and the property shall be restored to its original state at the written request of the Vendor.

4. The Purchaser shall not be deemed to have accepted title of the property by the aforesaid temporary use.

5. From the commencement date of temporary use of the property, the Purchaser shall be liable for any damage and repair of the property.”

At the same time, the defendants paid $10,000 as stipulated and were given the keys.  They went into occupation and started renovating the Properties.

11.  There is in evidence also a written licence dated 4 December 2009 for the defendants to occupy the Properties signed in the name of To Yat Wah in these terms:

「 本人TO YAT WAH I. D. NO. C610975(4)，茲証明屯門慶庭雅苑K座DD130 LOT 497S.C之物業乃陶氏家族之產業，因上述物業之持有人TO HU SING未能在海外回來辦理出售手續，現本人保証新買家CHEUNG KWAI CHUE I.D.NO. H031379(5)及HUNG LAI WAI I.D.NO. H449642(8)支付樓價壹成後（即港幣叁拾捌萬捌仟圓正），可無需支付任何租金入住上述之物業，但需支付水電及差餉地租之費用，直至上述之物業之持有人TO HU SING 完成辦理出售手續為止。」

(English translation)

“ I TO YAT WAH, I.D. NO. C610975(4), hereby certify that the property at Block K, Wilhelmina Garden, LOT 497S.C DD 130 Tuen Mun is the assets of the TO Family. Since TO HU SING, the owner of the said Property, is overseas and may not be able to return for the sale formalities, I now give my guarantee that the Purchaser, CHEUNG KWAI CHUE I.D. NO. H031379(5) and HUNG LAI WAI I.D. NO. H449642(8), upon payment of 10% of the purchase price (namely Three Hundred and Eighty‑eight Thousand Hong Kong dollars), may live at the said Property without paying any rent, save and except the payment of charges on water, electricity, rates and government rent, until such time when the sale formalities are completed by TO HU SING, the owner of the said Property.”

This document was not signed by the defendants or witnessed by the estate agent and it is not clear when it was given to the defendants.  In any event, I find that the defendants actually paid $10,000 and went into occupation thereafter pursuant to the licence agreement of 11 December 2009.

12.  Clause 33 of the Formal Agreements also stated that “The Vendors has, on or before the signing hereof, allowed the Purchaser or his agents to enter into the Property for the sole purpose of decoration” on certain specified terms and conditions.  As stated above, however, they had not been signed by the plaintiff.

13.  On 22 December 2009, TPY wrote to HWP noting that they had not yet received the Formal Agreements duly executed by the vendor, and reserved the purchasers’ rights.  On the same date, HWP sent the title deeds of the Properties to TPY for their perusal.

14.  By a letter dated 28 December 2009, TPY raised requisitions on title on behalf of the purchasers.  On 5 January 2010, HWP responded with answers.

15.  Meanwhile, the defendants (via their company) had entered into an agreement to sell their old home at Villa Pinada for $6.8 million with completion to take place on 3 February 2010.  Further, by late January 2010, the defendants had already obtained approval for a mortgage loan facility with Standard Chartered Bank.  With the net proceeds of sale of their previous home at Villa Pinada, they would be ready to complete the purchase of the Properties on 8 February 2010.

16.  On 1 February 2010, HWP wrote to TPY recording that their respective clients had agreed to postpone the completion date from 8 February to 1 March 2010, stating:

“ All other terms and conditions of the Agreement for Sale and Purchase shall remain unchanged save and except the completion date as aforesaid.”

It is to be noted that although the Formal Agreements had not been signed by the plaintiff, in the letters of 1 February 2010 HWP referred to those agreements as though they were already binding on the parties.

17.  By letter dated 4 February 2010, TPY wrote to HWP complaining that they had still failed to return the duly signed Formal Agreements and threatening to report the matter to the Law Society.

18.  On 22 February 2010, TPY sent HWP the draft Assignments and Undertaking Letters for completion purposes.

19.  In around middle or late February 2010, the defendants were informed by the estate agent, who had received instructions from To Yat Wah, that the plaintiff could not complete the sale and purchase as he had not come back to Hong Kong yet, but would complete as soon as he returned, and that they could continue occupying the Properties rent‑free until completion, subject to their paying the government rent and rates and all maintenance expenses of the Properties.  The agent also told them that a written confirmation of the arrangement would follow.  They agreed to the arrangement, and began living in the Properties, the renovations of which had been completed.

20.  On 26 February 2010, TPY wrote to HWP stating that their respective clients had agreed to postpone the completion date again from 1 March to 31 March 2010, and to enter into a licence agreement for the purchasers to occupy the Properties until completion.

21.  The defendants were ready, willing and able to complete their purchase but the plaintiff did not complete the sale of the Properties on 31 March 2010.

22.  On or about 16 May 2010, the defendants received a further licence agreement, again through the estate agent, apparently signed in the name of To Yat Wah, granting them a licence to occupy the Properties pending completion in the same terms as the licence dated 4 December 2009 as quoted in §11 above (except that the name of the 1^st defendant was corrected).  The 2^nd defendant signed this licence agreement and the estate agent also signed it as a witness.  The defendants continued their occupation of the Properties on the basis of this licence.

23.  The defendants thereafter checked with the estate agent from time to time as to when the plaintiff would return to Hong Kong to complete the sale and purchase, but did not receive a definite answer. They also raised with the agent their plan to rent out one or two floors of the House to earn an income.

24.  On around 15 March 2011, according to the defendants, Mr To Mei Lan, the elder brother of To Yat Wah, gave them a document which was signed in the name of the plaintiff and authorised the 2^nd defendant to rent out the Properties.  The 2^nd defendant’s evidence is that in early 2011, To Mei Lan was involved in the construction of a house (Block Q) located behind the House.  He came to the site frequently and passed by the House, and sometimes had conversation with her.  She asked him why the plaintiff had not yet completed the sale and purchase, but To Mei Lan never gave her a definite answer, and often responded simply by saying that the plaintiff lived in the United Kingdom and rarely returned to Hong Kong.  She told him about their plan to let out one or two floors of the House and that the estate agent had previously said that she would be provided with a letter of authorisation for that purpose in due course.  She asked if To Mei Lan knew when such a letter would be available.  He said he would look into it.  On a subsequent occasion, To Mei Lan handed her a copy of the document which however erroneously referred to Block J rather than Block K.  This was later rectified when he gave her a corrected version of the document.  Mr To Mei Lan testified and denied having given such a document to the defendants at all. 

25.  On balance it seems to me the defendants’ version is more credible.  They are unlikely to have forged the document or made up the story completely.  They are likely to remember who gave them the document, which was an important event for them.  In contrast, for To Mei Lan, it was simply an occasion where he helped his neighbours by procuring the document, perhaps from his brother To Yat Wah, who had been acting for the plaintiff in relation to the House.  The signature may or may not be the plaintiff’s, but I find that the document was passed by To Mei Lan to the 2^nd defendant. To Mei Lan could well have forgotten the incident or, if he remembered it, considered it might bring him into trouble for having passed on the “letter of authorisation” without the plaintiff’s actual authority.  After all, his brother To Yat Wah had been sued by the plaintiff for acting in excess of authority.

26.  On 20 April 2012, the Law Society intervened in the practice of HWP.

27.  On 16 December 2013, a solicitors firm, William W L Lee & Co, acting on behalf of To Yat Wah, wrote to the defendants and stated that the vendor would not come back to Hong Kong and the sale and purchase of the Properties had fallen through.  A similar letter was sent to TPY dated 17 March 2014, enclosing 2 cashier’s orders for the return of the deposits in the amounts of $188,000 and $200,000 respectively.

28.  In TPY’s reply dated 1 April 2014, they stated that the Provisional Agreements were entered into with the plaintiff, not To Yat Wah.  The 2 cashier’s orders were returned.

29.  On 23 August 2014, the plaintiff made a power of attorney in favour of his old friend Mr Yu Yiu Chuen (“Mr Yu”) for him to help deal with the matters relating to the House.  Mr Yu instructed another firm of solicitors, T K Tsui & Co, to act on behalf of the plaintiff. T K Tsui & Co then asked TPY for the return of the title deeds which were held by TPY upon the usual undertaking to return them on demand. After some correspondence, TPY returned the title deeds on 18 December 2014.

30.  On 10 February 2015, T K Tsui & Co wrote to the defendants stating that they had been unlawfully occupying the Properties through unauthorised dealing with the 3^rd defendant, and that the plaintiff had never appointed To Yat Wah to handle the sale or letting of the Properties.  The defendants were asked immediately to deliver up vacant possession.

31.  On 29 June 2015, T K Tsui & Co wrote to TPY referring to the Provisional Agreements between the plaintiff as vendor and the defendants as purchasers and complained that in breach of the Provisional Agreements, the purchasers had failed to sign the Formal Agreements on or before 4 December 2009 and complete the sale and purchase by 8 February 2010.  It was stated that the plaintiff would treat such failure as a breach of contract discharging him from his obligations and require the defendants to deliver up vacant possession of the Properties.  The defendants did not reply and did not vacate the Properties.

32.  As described below, the plaintiff instituted this action against the defendants in August 2015.

33.  Shortly before the trial, on 19 September 2020, the plaintiff, by his new solicitors, Messrs Kwok, Ng & Chan, indicated that he would not complete the sale of the Properties and instead invoked clause 8 of the Provisional Agreements, offering a refund of the initial deposits together with sums equivalent to the amount of the initial deposits as liquidated damages.  The plaintiff’s solicitors were also instructed to return to the defendants the sums paid as further deposits. Accordingly, the plaintiff’s solicitors sent to the 1^st defendant a cheque for $198,000 (being $10,000 + $10,000 + $178,000) and the 2^nd defendant a cheque for $220,000 (being $20,000 + $20,000 + $180,000).

34.  On 22 September 2020, TPY on behalf of the defendants returned the cheques to the plaintiff’s solicitors, indicating that the defendants remained intent on seeking specific performance.  The plaintiff’s solicitors replied on the same date by saying that the sale and purchase had been terminated under clause 8 and the two cheques would be available for collection at their office.

The proceedings

35.  The plaintiff instituted the action on 24 August 2015 against the defendants.  His original case was that the defendants failed to sign the Formal Agreements by 4 December 2009 and failed to complete the purchase by 8 February 2010, and the plaintiff accepted their repudiation immediately after 8 February 2010.  As stated in the writ, the plaintiff claimed against them: possession of the Properties; mesne profits from 9 February 2010 onwards; declarations that the plaintiff has been discharged from the further performance of the Provisional Agreements and is entitled to retain the deposits.

36.  By amendment made in September 2016, the plaintiff joined To Yat Wah as the 3^rd defendant alleging that he did not have the plaintiff’s authority to sell the Properties, and also joined HWP as the 4^th defendant alleging that they failed to ascertain that To Yat Wah had the plaintiff’s authority or knew that he did not, and that they failed to advise To Yat Wah of the risks in letting the 1^st and 2^nd defendants into possession prior to completion and to take steps to determine the sale and recover possession after completion did not take place.

37.  On 14 December 2018, the plaintiff obtained interlocutory judgment against To Yat Wah in default of defence.  The plaintiff has since discontinued the action as against the 4^th defendant.

38.  Following further amendments including the latest re‑re‑amendment of the statement of claim shortly before the trial, the plaintiff no longer complains that the defendants have in any way breached the Provisional Agreements by failing to enter into the Formal Agreements or to complete the purchase.  Instead, the plaintiff seeks to recover possession on the basis that the sale and purchase of the Properties had been terminated by the plaintiff by invoking clause 8 of the Provisional Agreements.  The plaintiff also contends that the defendants are precluded by delay from obtaining specific performance.

39.  The defendants’ case is that the plaintiff is bound by the Formal Agreements or the Provisional Agreements to sell the Properties to them and that they are ready, willing and able to complete the purchase.  Further or alternatively, the plaintiff is estopped from denying he is bound to sell the Properties to them.

Provisional Agreements or Formal Agreements

40.  Although the Formal Agreements have not been signed by the plaintiff, Mr Robin D’Souza and Mr Ted Chan, appearing on behalf of the defendants, submit that they are nevertheless binding on the parties, because there has been “part performance” by the defendants.  It seems to me the doctrine of part performance is there to deal with an agreement for the sale or disposition of land that is unenforceable for lack of writing by virtue of section 3(2) of the Conveyancing and Property Ordinance (Cap 219).  It does not give rise to a contract where none exists in the first place.  Moreover, many of the acts of performance relied upon by the defendants are explicable on the basis of there being a sale and purchase in terms of the Provisional Agreements, and do not therefore support an inference that the parties had by conduct agreed to be bound by the Formal Agreements: see Shanghai Tongji Science & Technology Industrial Co Ltd v Casil Clearing Ltd (2004) 7 HKCFAR 79, §§37-48; Inspiring Investments Ltd v Chun Hu Hing and another [2020] 2 HKLRD 959, §38.

41.  In Wise Think Global Ltd v Finance Worldwide Ltd [2013] 1 HKLRD 513 (CA), a similar situation occurred, in that the further deposit together with the draft formal agreement were sent by the purchaser’s solicitors to the vendor’s solicitors against the usual undertaking.  The vendor’s solicitors cashed the cheque but did not thereafter provide the purchaser with a copy of the formal agreement signed by the vendor. Yuen JA, dissenting in the Court of Appeal, noted that the provisional agreement in question provided that it was upon the signing of the formal agreement that the further deposit was to be paid.  She held that the two obligations were “linked”, so that where the terms of the formal agreement had been agreed and the vendor accepted payment of the further deposit, he thereby placed himself under an obligation to sign the formal agreement, and the purchaser acquired an entitlement to be handed the formal agreement executed by the vendor.  Accordingly, the vendor could not thereafter resile from the transaction based on the escape clause in the provisional agreement (see §§65.1‑72.3).  The Court of Final Appeal allowed the appeal[1] but not on the basis of this particular line of reasoning, which Litton NPJ described as “superficially attractive” (§33).

42.  On behalf of the plaintiff, Ms Choy submits that Yuen JA’s reasoning in Wise Think Global should not be followed.  She submits it is inconsistent with the principle that parties to a provisional agreement are not obliged to enter into a formal agreement and that the purchaser has no obligation to pay the further deposit if the formal agreement is not signed.  Further, HWP’s letters to TPY of 2 December 2009 enclosing the draft Formal Agreements expressly stated that nothing therein was binding unless and until the Formal Agreements had been duly signed by their respective clients. TPY’s letters to HWP enclosing the Formal Agreements signed by the defendants were marked “subject to contract”.

43.  I do not think that the principles relied upon by Ms Choy detract from Yuen JA’s analysis.  However, I have not heard any argument on whether an obligation to sign a formal agreement would be specifically enforceable in equity[2] or any argument regarding a vendor’s solicitor’s usual authority.  In Wise Think Global Ltd, Lord Millett NPJ said (at §42) that by simply cashing the purchaser’s cheque for the further deposit, a vendor’s solicitor would not commit his client to sign a formal contract, for he had no power to do so.  Since in the light of my conclusions below it is ultimately unnecessary for the defendants to rely on the Formal Agreements, I would refrain from expressing any view on this argument and simply proceed on the basis that the parties are bound by the Provisional Agreements.

44.  It is well established that a provisional agreement for the sale and purchase of property is nonetheless binding on the parties and specifically enforceable: see eg See To Keung v Sunny Way Ltd [2009] 5 HKLRD 300 at §4.  Two matters have been raised by the plaintiff which are said to bar specific performance in the present case: the escape clause and laches.

The escape clause

45.  Clauses 7 and 8 of each of the Provisional Agreements provide:

“ …

7. 如買方未能履行本合約之條款完成買賣，賣方除將買方已付之訂金沒收外，

Should the Purchaser fail to complete the purchase in the manner herein contained, the deposit shall be forfeited to the Vendor and

並有權將該物業再行售予他人，

the Vendor shall then be entitled at his absolute discretion to sell the said premises to anyone he thinks fit and the Vendor shall not

惟賣方不可再為此向買方追究任何責任或要求任何賠償或特定履行。

sue the Purchaser for any liabilities and / or damages or to enforce specific performance.

8. 如賣方在收取訂金後，不依本合約之條款完成買賣

Should the Vendor after receiving the initial deposit paid hereunder fail to complete the sale in the manner herein contained, the

則賣方除須退還買方所付之訂金全數外，並須以同等數目之金額賠償予買方。

Vendor shall immediately compensate the Purchaser with a refund of the initial deposit together with a sum equivalent to the amount

另負責繳付 / 退還本合約之印花稅，

of the initial deposit as liquidated damages and the reimbursement / payment (as the case may be) of stamp duty of the said

惟買方不得再向賣方追究任何責任,包括其他賠償或特定履行。

premises and the Purchaser shall not take any further action to claim for damages or to enforce specific performance.”

46.  Clause 17 of each of the Provisional Agreements provides that the agreement should be interpreted in its Chinese version in case of ambiguities.  The Chinese version of clause 8 is virtually identical to the equivalent clause in Wise Think Global Ltd.[3]  Regrettably the English version of clause 8 as printed in the Provisional Agreements is not an accurate translation of the Chinese version, which should be more accurately translated as follows:

“ If the vendor fails to complete the transaction in accordance with the terms of this contract after receiving the deposit, the vendor shall, apart from refunding the purchaser the deposit paid in full, also recompense the purchaser with a sum in the same amount, and in addition be liable for paying / refunding the stamp duty of this contract. But the purchaser shall not make any further claim against the vendor for any liability, including other compensation or specific performance.”

47.  On the escape clause, Mr D’Souza takes two points.  First, he submits that the Chinese version of the clause means that to invoke it, the plaintiff has to refund the deposits together with an amount equivalent not only to the “initial deposit” (as the English version states), but to the amount of all the deposits paid by the purchaser (買方所付之訂金全數), as liquidated damages.  This was indeed the construction of the equivalent clause in Wise Think Global Ltd and Ms Choy has not argued to the contrary. 

48.  Ms Choy submits that there is no evidence that the cheques for the further deposits were cashed.  I cannot accept this submission.  The plaintiff’s own pleading averred that the defendants paid the relevant sums to the plaintiff’s solicitors in accordance with the Provisional Agreements.  Further, all the circumstances tend to show that the cheques were cashed. 

49.  Secondly, Mr D’Souza submits that although the Chinese version of clause 8 does not expressly state that the vendor has to make payment “immediately” (as stated in the English version), on its proper construction the vendor must invoke that clause on or before the completion date, to be able to benefit from it. 

50.  In Man Sun Finance (International) Corp v Lee Ming Ching Stephen [1993] 1 HKC 113, the provisional agreement required the parties to enter into a formal agreement on or before 3 April 1992 and provided that:

“ In the event the vendor is unable or unwilling (for whatever reasons) to enter into formal agreement for sale and purchase with the purchaser and all deposits already paid shall be double refunded to the purchaser without interest, otherwise the purchaser reserves the right to buy the premises.”

On 3 April 1992, the purchaser’s solicitors sent the formal agreement signed by the purchaser to the vendor’s solicitors together with the cheque for the further deposit.  The cheque was held by the vendor’s solicitors and not presented to the bank for payment.  On 22 April 1992, the vendor’s solicitors sent to the purchaser’s solicitors a cheque for twice the amount of the initial deposit and, at the same time, returned the cheque for the further deposit, invoking the clause quoted above. The Court of Appeal held that the vendor was not entitled to do so.  The clause was to be construed to mean that if the vendor wished to resile from the sale, he had to withdraw from it and pay the requisite amount of money on or before the specified date, and not to be construed so as to leave the parties’ respective positions “in abeyance” for a period after 3 April 1992 (see pp 120C and 126A).

51.  Each contract must of course be construed based on its own terms, but the point made by the Court of Appeal in Man Sun Finance is equally apposite on the wording of clause 8 in the present case.  That clause gave the vendor an option not to complete the sale but to pay the purchaser the appropriate amount of money instead.  The option had to be exercised on or before the agreed date for completion.  It could not have been intended that the vendor could leave his options open for an indefinite period of time after the agreed completion date, and resile from the sale, as the plaintiff purported to do, 10 years later. 

52.  In my view, therefore, the plaintiff’s reliance on clause 8 of the Provisional Agreements is ineffective, both because he failed to tender the amount of money required by that clause and because it was no longer open for him to do so in September 2020.

Laches

53.  Ms Choy submits on behalf of the plaintiff that the defendants could and should have immediately sued for specific performance after 31 March 2010 — the extended completion date as agreed, and that their failure to do so until their counterclaim herein filed on 27 October 2015 represented such delay as should bar the equitable remedy of specific performance.  Five and a half years does seem to me to be a very long time indeed in which to make a claim for specific performance.  It is, however, to be judged in the context of the defendants having been let into occupation of the Properties since around 11 December 2010.  It seems to me the authorities show that, in such circumstances, the delay will not be looked at as strictly as where the purchaser is not in possession of the property.

54.  In Williams v Greatrex [1957] 1 WLR 31, the following passage from Fry on Specific Performance (6^th ed 1921) was quoted and relied upon (see p 40):

“ 1110. Where the contract is substantially executed, and the plaintiff is in possession of the property, and has got the equitable estate, so that the object of his action is only to clothe himself with the legal estate, time either will not run at all as laches to debar the plaintiff from his right, or it will be looked at less narrowly by the court for the plaintiff has not been sleeping on his rights, but relying on his equitable title, without thinking it necessary to have his legal title perfected.”

55.  It is true that in the present case, the Provisional Agreements did not directly confer on the defendants any right to possession of the Properties before completion.  But the written licences of 11 December 2009 and 16 May 2010, on the strength of which the defendants went into occupation, were both granted to the defendants not as strangers, but as purchasers under those agreements, pending their completion.  The defendants acquired an equitable estate in the Properties by virtue of the Provisional Agreements which were specifically enforceable, and had by separate contractual licence a right of occupation pending the transfer of legal title to them. Irrespective of whether the licence was determinable at will by the plaintiff, the plaintiff did nothing to put it to an end until, at the earliest, the solicitors’ letters written on behalf of To Yat Wah dated 16 December 2013.  Even then, the request for the defendants to vacate the Properties was based on the purported termination of the sale and purchase, which was ineffectual since the Provisional Agreements were binding and clause 8 had not been invoked until September 2020.  In these circumstances it seems to me the same principle is applicable here as in Williams v Greatrex.  I hold that the defendants are not precluded by laches from seeking specific performance.

Plaintiff’s claim for mesne profits

56.  I should record that there are claims by the plaintiff against both defendants for mesne profits on the basis that the licence to occupy the Properties had been terminated by operation of an implied term of the written licence, the contention being that it was implied that the defendants would have to move out “once it became clear that completion would not take place”.  Ms Choy has confirmed that if specific performance is to be ordered then the implied termination of the licence and the claim for trespass fall away, subject to the question of adjustment of rights upon a decree for specific performance.

Rent or interest

57.  Finally, therefore, I come to the terms on which specific performance should be decreed.  In particular, Ms Choy submits that it would be unfair to the plaintiff not to be given any income on the Properties or interest on the balance of the price.  It seems to me there is a point in this.  The cases show that even where completion is delayed by the vendor’s default, “he does not lose both ways”: Re Hewitt’s Contract [1963] 3 All ER 419, 422, per Wilberforce J.  In Wise Think Global Ltd v Finance Worldwide Ltd (No 2) (2014) 17 HKCFAR 190, the vendor, who had unsuccessfully tried to resile from the transaction by virtue of the escape clause, was ordered to account to the purchaser for the rental income and profits it had received less any outgoings expended since the contractual date of completion, while the purchaser was ordered to pay interest at 4% per annum, reflecting the rate which the vendor might have had to pay to borrow the money, on the balance of the purchase price.  I consider that the same approach should be applied here.  Mr D’Souza accepts that if interest is to be paid, the rate of 4% per annum is appropriate.  I hold therefore that the defendants should be required to pay simple interest on the balance of the purchase price at 4% per annum from 1 April 2010 to the actual completion date.

Conclusion and order

58.  There will therefore be judgment dismissing the plaintiff’s action and judgment for the defendants on their counterclaim for specific performance of the Provisional Agreements.  The parties should submit an agreed minute of order on the basis that completion should take place as soon as practicable.[4]

59.  Counsel are agreed that costs should follow the event.  Accordingly, there will be an order that the plaintiff do pay the defendants the costs of the action and counterclaim, to be taxed if not agreed.