KUNG PIK HA MARIA v. TANG KWOK KAI

IN THE COURT OF APPEAL

1993, No. 59
(Civil)

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REASONS FOR JUDGMENT

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Liu, J. :

1. These are the reasons for dismissing this appeal on 1 July with costs.

2. On 7th April 1991, the plaintiff and the defendant entered into a Provisional Agreement for the sale and purchase of House 27 Fairview Park, First Street, Section C Yuen Long for $1.8m. A deposit of $80,000 was paid. After some delay finally on 26th April 1991, the plaintiff and the defendant signed a formal Agreement for Sale and Purchase for that property. The total deposit came to $180,000. The plaintiff had procured $1.05m banking facilities to finance his purchase. For the purposes of this appeal, under the said Agreement for Sale and Purchase completion was to be at 5 p.m. on 5th May 1991. By Clause 21 of the said Agreement for Sale and Purchase, time was made of the essence of the contract. Under Clause 19, upon the defendant's failure to complete in accordance with the terms of the said Agreement for Sale and Purchase, the plaintiff would be entitled to the return of the $180,000 deposit and any damages sustained.

3. On 2nd May 1991, the plaintiff's solicitors demanded from the defendant's solicitors production of the title deeds and documents and warned that 7 days would be required for investigating title. The plaintiff also reserved his right to claim for any loss and damage suffered as a result of failure on the part of the defendant to complete.

4. The due date for completion on 5th May 1991 passed without any assignment. In fact, title deeds and documents were not tendered until the next day, 6th May. By a letter despatched on the same day, which must have crossed with the letter tendering the title documents, the plaintiff complained that title deeds and documents had not yet been received, but agreed "to postpone the completion date until 7 working days after" receipt of all title deeds and documents "(if no requisitions)".

5. On 7th May, the plaintiff's solicitors sought from the defendant's solicitors a copy extract of Articles of Association and a Board resolution of a prior shareholder, Dynamic Profit Limited, as well as a certified copy of a Re-Assignment memorial. However, in the meantime, the plaintiff's solicitors had taken it upon themselves to make the relevant search and were satisfied with the information obtained in respect of these requisitioned copy documents. On the same day, 7th May, the plaintiff's solicitors sent over to the defendant's solicitors a draft assignment with a request for instructions as to how the balance of the purchase price was to be "split".

6. On 8th May 1991, solicitors for the defendant replied that the draft assignment had been duly approved without amendments and that payment of the balance of the purchase price was to be effected by three cheques, one for the defendant's solicitors, one for her mortgage bank and one for the defendant herself. The letter closed with the following paragraph :

"Please note that the above requisition is only valid up to 10th May 1991, (sic) please also enquire from us again if your client complete (sic) the purchase of the above property later than 10th May 1991"

7. After the receipt of this letter of 8th May, the plaintiff was advised by his solicitors that the defendant was prepared to complete on 10th May. The plaintiff confirmed : "It was alright". The plaintiff's solicitors then calculated the amounts specified in the defendant's solicitors' letter of 8th May and verified their accuracy with one Miss Liu of the defendant's solicitors over the telephone. Miss Liu's reply was: "The sum was alright. You could just send over." The plaintiff was told to attend the central office of his solicitors on 10th May with a cashier order to make up for a shortfall in one of the three other cheques. The plaintiff thereupon instructed his estate agent to arrange with the defendant for delivery of possession on 10th May. At about 10 a.m. on 10th May, the plaintiff signed documents including the assignment at his solicitors' office and left with them a cashier order in favour of the defendant's solicitors.

8. On the same day, the bank was notified by the plaintiff's solicitors to allow a drawdown to finance, with the said cashier order, the completion of the purchase. By a letter of 10th May 1991, the plaintiff's solicitors delivered to the defendant's solicitors the executed assignment and 4 cheques. They were received by the defendant's solicitors at 12:08 p.m. The letter of 10th May of the plaintiff's solicitors read :

"We refer to your letter of 8th May 1991 and on behalf of our client, the abovenamed purchaser to complete the purchase of the above property on 10th May 1991, we are instructed to enclose the following cheques:

[3 cheques and 1 cashier order were enclosed]

The above cheques are sent to you against your firm's personal undertaking (which is however subject to the usual Law Society qualifications):-

1. .............................

2. To forward to us forthwith the keys of the property or the necessary authority to collect the keys so that possession could be taken without delay.

3. .............................

4. .............................

Your undertaking will be deemed given unless you advise us to the contrary in writing as soon as practicable indicating the revision to the undertaking you require. If however you so request a revisions (sic) of the undertaking and we are unable to agree a revised form of undertaking you will return the money to us on demand."

9. There was no advice in writing "to the contrary" from the defendant's solicitors. The despatch of the three cheques and a cashier order was not questioned by the defendant's solicitors who made no complaint as to this on 10 May and, as it will soon emerge, later returned all of them without comment or complaint that four cheques had been sent rather than three as requested.

10. The plaintiff's solicitors faxed another letter of 10th May 1991 at 9 p.m. complaining that the defendant had failed to complete and had wrongfully repudiated the sale and purchase agreement. They demanded the return of the cheques together with the deposit money. In response, the defendant's solicitors wrote on 11th May in these terms :

" We refer to your letter of 10th instant and regret to inform you that we cannot locate the Assignment under your said covering letter.

We hereby return all the cheques being balance of purchase price for your safe custody.

Please note that subject to our client's instructions, if we have not received from you the Assignment together with the balance of purchase price on or before 5:00 p.m. on 13th May 1991, our client will (sic) no alternative but to determine the Agreement for sale and purchase entered by our respective clients.

We hereby reserve our right to claim against your clients (sic) as a result of your client (sic) in breach of the said Agreement for sale and purchase.

Kindly acknowledge receipt."

It was agreed by both Mr. Chain for the defendant and Mr. Li for the plaintiff that this appeal gave rise to six issues:

(1) Whether the letter dated 8th May 1991 constituted an offer;

(2) If so, whether time remained of the essence;

(3) Assuming the letter dated 8th May 1991 to be an offer and time to remain of the essence of the Agreement for completion, whether the offer had lapsed on 10 May;

(4) Whether the request seeking three cheques had been sufficiently met by sending three cheques and a cashier order;

(5) Whether the offer had been pleaded; and

(6) Whether the interest paid by the plaintiff to his bank on the loan it had advanced to him to purchase the property was recoverable.

Issue 1, whether the letter of 8th May constituted an offer

11. Default was made by the defendant on the day set for completion under the said Agreement for Sale and Purchase. By the letter dated 6th May, the plaintiff through his solicitors "agreed", in effect, to postpone the completion date for a reasonable period of time. The agreed extension was plainly an indulgence to the defendant. The plaintiff was not in breach. He permitted the defaulting defendant vendor to remedy her default by offering her an extension. By the letter dated 8th May, the defendant, through her solicitors, clearly indicated her intention to complete on 10 May unless in the meantime the plaintiff indicated that he wanted a later date. On both occasions, the extension envisaged was for the defendant's benefit so that her pre-existing contractual bargain could be brought to a satisfactory conclusion despite her breach. The said letter of 8th May did not, as contended for by Mr. Chain for the plaintiff, purport to grant an option to enjoy a new benefit or right. It was an offer capable of being accepted by a tendered performance. Unlike an option for good consideration, it could be withdrawn. While it shared some of the characteristics of an option, the letter was none the less an offer. It is therefore unnecessary to embark on an analysis of the erudite discourse on options delivered by Diplock L.J., as he then was, in United Dominions Trust (Commercial) Ltd. v. Eagle Aircraft Services Ltd., [1968] 1 WLR 74 at pp.82-83 and on which Mr. Chain placed reliance. The plaintiff's acceptance by performance, the conduct of the defendant's solicitors and the conduct of the defendant herself on the site when possession was requested, though inadmissible as aids for the interpretation of the letter of 8th May, were nevertheless all consistent with the only reasonable construction of the letter as an offer to complete on 10 May. Despite the inelegance of wording of the letter its meaning is clear.

12. The judge was right in holding that it was an offer, and that that offer was accepted by the plaintiff's tendered performance.

Issue 2, whether time remained of the essence of the Agreement

13. Clause 21 of the said Agreement for Sale and Purchase made time of the essence of the contract. Paragraph 126, 42 Halsbury's Laws of England, at p.98 reads :

"Where time is or has been made of the essence, an extension of the time for completion to a new date makes that new date of the essence."

That is trite law and no authorities need be cited for fortification. There was no evidence of any variation of clause 21. Every term of the written contract of sale and purchase other than the date for completion remained in full force and effect, including the provision in clause 7 that if the completion date fell on a weekday completion should take place between the hours of 9.30 a.m. and 5.00 p.m.

Issue 3, whether the time given to the defendant to complete was reasonable

14. We do not consider that there is any substance in Mr. Chain's submission that the defendant was given insufficient time in which to complete. She had known as early as 7 April that the latest date for completion was 5 May. More importantly, having failed to complete on 5 May, she had accepted the plaintiffs offer to complete on 10 May. The offer was accepted by the tendered performance. Neither prior to nor upon their receipt of the letter of 10th May enclosing the cheques did the defendant's solicitors raise any complaint that the defendant had insufficient time within which to complete by giving vacant possession. The executed Assignment together with the cheques reached the defendant's solicitors shortly after noon, and completion was due no later than 5 p.m. that day. At 2 p.m. when the plaintiff demanded delivery of possession, neither the defendant nor her solicitors raised any objection. Indeed, the defendant told the plaintiff that she would give him vacant possession at 4 p.m. that very day.

Issue 4, 100% strict performance

15. Mr. Chain submitted that by sending to the defendant's solicitors three cheques and a cashier order instead of three cheques as requested, the plaintiff had not strictly observed his obligations and that therefore the defendant was under no obligation to complete on 10 May. In fact, one of the three cheques together with the cashier order represented the precise amount, namely $777,523.72, which the defendant's solicitors had requested the plaintiff to send by cheque in favour of the defendant. As the judge observed, in Clause 25 of the Agreement for Sale and Purchase the defendant expressly declared that her solicitors were her agent for the purpose of receiving all monies payable to her pursuant to the agreement. Moreover, in Clause 26 she further declared that such payments to her agent "shall be a full and sufficient discharge of the (plaintiff's) obligations". The judge rightly rejected the objection that a cheque for the defendant as demanded would not be satisfied by payment of the same sum in a cheque to her and a cashier order to her solicitors.

Issue 5, pleadings

16. Mr. Chain submitted that the judge erred in entering judgment for the plaintiff on a ground not pleaded by her. It was in these words that the judge stated his decision:

"In my judgment the purchaser was perfectly entitled to take the stance he did. By BL & Co's letter of 10 May and tendering performance as requested by the vendor in OLN's letter of 8 May the purchaser was accepting the proposed date for completion. Time remained of the essence."

The following paragraphs of the statement of claim are relevant:

"8. By agreement contained in or evidence by a letter dated 8th May 1991 from OLN to BL and a letter dated 10th May 1991 from BL to OLN, the parties agreed that the completion date for the sale and purchase of the Property should be on 10th May 1991."

"3. The Agreement contains, inter alia, the following express conditions:-

(a) .....

(b) .....

(c) Time shall be in every respect be of the essence of the Agreement (Clause 21)."

17. In our view these pleadings set out the material facts as required by RSC 018 r7. The object of pleadings is to make the pleader's case clear to the other party. That the plaintiff's pleading succeeded in doing so is plain from the following paragraphs in the amended defence:

"2. Save that as evidenced by a letter dated 6th May 1991 from Messrs. Boris Liu & Co. ("BL") to Messrs. Oldham, Li & Nie ("OLN"), the parties by consent varied the original completion date from "on or before 5th May 1991" to "until 7 working days after" BL received all the relevant title deeds and documents in respect of the Property from ONL, and that the relevant title deeds and documents were delivered by OLN to BL on the 6th May 1991, Paragraph 8 of the Statement of Claim is denied. In the premises, the completion date as varied is the 13th May 1991.

2A.If which is denied, the letter dated 8th May 1991 from OLN to BL was an offer to complete on 10th May 1991. The Defendant avers it is an implied term of the offer by reason of clause 15 of the Agreement, that the offer would lapse by 9th May 1991.

6B. Still further and in the alternative, the Defendant further avers that there was no agreement between the parties that the extended time for completion is to be of the essence."

18. We are of the opinion that there is no merit in Mr. Chain's submission. The pleadings in the statement of claim were unexceptionable and the judge gave judgment on the grounds pleaded by the plaintiff.

Issue 6, interest

19. The bank loan was drawn down on 10th May 1991. The three cheques and the cashier order were returned to the plaintiff's solicitors on 11th May. Repayment to the bank was effected on 16th May 1991. This had to be considered in the context of the situation that then prevailed. The defendant's solicitors were alleging that they had not been sent the executed Assignment. Enquiry had naturally to be made into this allegation - which was persisted in at trial and which the judge found to be completely groundless - before the plaintiff could be properly advised. Moreover, the defendant through her solicitors did not purport to forfeit the $180,000 deposit until 15th May. On 18th May, the plaintiff's solicitors repaid the bank $1.05m. Bank interest was paid up to 20th May 1991. It was not suggested that the bank had overcharged for the two days from 18th May to 20th May, which was a weekend. The judge found that although the loan could have been repaid earlier, the delay was not unreasonable in the light of the continuing correspondence between the parties after 11 May. We are not persuaded that we should disturb this finding.

20. In the circumstances, the appeal was dismissed with costs to the plaintiff.