MILLION UNITY INTERNATIONAL LTD v. PACIFIC SOUTH (ASIA) HOLDINGS LTD.

1996 M.P. No. 4457

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 vendor and purchaser summons. For the purpose of this hearing only, counsel for the Plaintiff and the Defendant have agreed that the facts are as set out in the affidavit of Lo Siu Fai dated 20th December 1996, and those set out here are taken from that affidavit.

2. By a provisional agreement for sale and purchase dated 21st November 1996, the Plaintiff agreed to buy, and the Defendant to sell, the whole of the 20th floor of Nine Queen's Road, Central for a price of $205,000,000. It was signed on behalf of the Plaintiff by a Mr. Jason Sze, and on behalf of the Defendant by a Mr. Paul Ng, and was accompanied by a personal cheque of Mr. Sze for $5,000,000, upon a copy of which Mr. Ng signed that he had accepted it. Upon the request of Mr. Ng later, and in order to accommodate him, it was exchanged for a cashier order.

3. The provisional sale and purchase agreement provided for the formal sale and purchase agreement to be signed on or before 2nd December 1996 and completion on or before 1st May 1997. Payment was to be by a further deposit of 20% of the purchase price, less the deposit already paid, on the signing of the formal sale and purchase agreement, and the balance upon completion, clause 4(b) of the agreement which dealt with the further deposit reading as follows:-

Deposit

A further deposit of 20% of the purchase price (inclusive of the initial deposit of HK$5000000) shall be payable to the Vendor upon the signing of the Formal Sale and Purchase Agreement.

4. In accordance with the agreement, the Defendant's solicitors sent the title deeds to the Plaintiff's solicitors on 28th November, and on 29th November sent a draft formal agreement under cover of a letter in which they said, inter alia:-

"If you approve the said Agreement without amendment, kindly treat it as engrossment and return us the same duly signed by your client and witnessed by you together with your cheque of $36,000,000.00 in favour of our client being further deposit payable on signing of the Agreement."

5. On 30th November the Plaintiff's solicitors wrote to the Defendant's solicitors returning the draft agreement with amendments for their consideration, but, being a Saturday, it was not actually sent until the morning of 2nd December.

6. The same day, at 2.46 p.m., the Plaintiff's solicitors sent another letter enclosing their client's personal cheque for $36,000,000 in respect of the further deposit payable, and adding:-

"As the Provisional Agreement provides that the further deposit is payable by our client upon signing of the formal Agreement for Sale and Purchase and such a formal Agreement for Sale and Purchase has not been made between our respective clients, the said sum of $36,000,000.00 is sent to you against your firm's personal undertaking not to release the same to your client, the Vendor herein, unless and until the formal Agreement for Sale and Purchase has been duly signed by our respective clients and thereafter strictly in accordance with the terms and conditions of the formal Agreement for Sale and Purchase."

7. Later that afternoon, at 4 p.m., the Plaintiff's solicitors received the draft back from the Defendant's solicitors further re-amended, and at 5.10 p.m. a fax arrived from them which read as follows:-

"We refer to your letter dated 2nd December 1996 together with the purported tender of the cheque drawn by Lo Siu Fai, Louis in the sum of $36,000,000.00.

We must say that the purported tender is not in accordance with the Provisional Agreement. Furthermore, your client has no right to impose the undertaking on us unilaterally. In the premises, we return herewith your said cheque.

All our client's rights are reserved."

8. The original with the cheque was delivered ten minutes later.

9. The Plaintiff's solicitors replied by a letter faxed that evening at 8.30 p.m., with the original delivered the next morning at about 9.30 a.m., accepting the re-amendments, except one minor amendment as to time for completion, but disputing the allegation that the payment tendered was not in accordance with the Provisional Agreement, and, in pointing out that it was not possible for the formal agreement to be signed that day, referred to the case of Health Link Investment Ltd. v. Pacific Hawk Investment Ltd. Civil Appeal No. 147 of 1994, as authority for the proposition that where the payment and the signing of the formal agreement were linked, if the signing of the formal agreement was postponed, the payment would also be postponed. They also re-tendered the cheque saying that the solicitors may release it to their client when the formal agreement is executed. At this stage, they were clearly under the impression that the Defendant's solicitors were objecting to holding the cheque until the parties had signed the formal agreement although there had been no indication from the Defendant's solicitors as to how or why the tender of the cheque was not in accordance with the provisional agreement, and it is clear from this letter that the Plaintiff's solicitors did not appreciate that it was the cheque itself to which the solicitors for the Defendant were taking exception. In any event, as the cheque had not been returned until after banking hours, had they been told that payment in another form was required, nothing could have been done that day.

10. As I have said, the cheque was re-tendered by 9.30 a.m. on 3rd December, and the next communication was at 12.19 p.m. when the engrossed formal agreement was sent by the Defendant's solicitors for the Plaintiff's signature, with no comment on the cheque now held by them. The agreement was duly signed and witnessed and returned to the Defendant's solicitors at 2.37 p.m. with a letter saying that they may release the cheque to their client.

11. At 5.22 p.m. the Plaintiff's solicitors received a copy of the formal agreement back signed by the Defendant with a letter which said inter alia:-

"As your client has not tendered payment of the further deposit pursuant to Clause 4(b) of the Provisional Agreement, the receipt clause in page 16 has been deleted by us. We also take this opportunity to return the cheque drawn by Lo Siu Fai Louis to you."

12. The Plaintiff's solicitors replied by fax at about 9.00 p.m. the same day refuting the allegation that payment was not in accordance with the provisional agreement and at about 9.00 a.m. the next morning, 4th December, sent the original, again returning the cheque. However, before that was received, a reply came by fax timed at 27 minutes past midnight on the morning of 4th December, saying:-

"As your client has failed to tender payment pursuant to Clause 4(b) of the Provisional Agreement, we are instructed to, which we hereby do, rescind the Sale and Purchase of the above property........."

13. In reply later that day, the Plaintiff's solicitors pointed out that the Defendant's solicitors had never specified in what way they alleged that the payment was at variance with clause 4(b), and asking them to specify in what way their client would like payment, and at 2.42 p.m. received a letter returning the cheque "as the sale and purchase of the above property has been rescinded" and adding:-

"We would like to take this opportunity to put on record that on 21st November 1996 our client refused to accept a cheque which was drawn and tendered in payment of the initial deposit of $5 million, whereupon a cashier order was tendered by your client and accepted by ours in payment of the initial deposit."

14. As is clear from the Plaintiff's affidavit, and the documentary evidence of the Defendant's Mr. Sze's signature accepting the cheque for the initial deposit, this is not strictly true, but it appears to be the first time that the Defendant intimated in what way they objected to the tender. By a further letter received by the Plaintiff's solicitors at 5.08 p.m. that day it was explained in more detail for the first time that in the absence of an express agreement the further deposit had to be paid in cash or by cashier order, or by their solicitors' cheque, and that a personal cheque was not acceptable.

15. It is clear on the authority of Camberra Investment Ltd. v. Chan Wai-tak [1989] 1 HKLR 568 that an effective tender requires cash or its equivalent. The judgment of Penlington J. at page 575 seems to suggest that, in the absence of other agreement, a cashier order is equivalent to cash. However, it is, as Mr. Chan for the Plaintiff has submitted, well settled at common law that, where a tender of payment is made in any other form, unless the payee has, at the time of the tender, expressly objected to the same on the ground of quality of the tender, it will be treated as good and valid. As authority for this proposition he drew my attention to Polglass v. Oliver (1831) 2 Cr. & J. 15, where Garrow B. pointed out that: "It is much more convenient to the mercantile world, that a tender in paper, if not objected to at the time, should be considered valid." And Bayley B. added: "If he object to accept the sum tendered because it is in paper, which he is not bound to receive, he gives the party tendering an opportunity to make his tender in coin." And further on the same page: "...if you objected expressly on the ground of the quality of the tender, it would have given the party the opportunity of getting other money and making a good and valid tender;" This decision affirmed that in Lockyer v. Jones [1796] Peake 238, in which Lord Kenyon held that "the Plaintiff in this case was precluded from now objecting to the legality of the tender by his conduct at the time it was made;".

16. Mr. Tang seeks to distinguish this case from those on the basis that here the Defendant had objected to the tender at the time, and had previously refused to accept the cheque for $5,000,000 as initial deposit. As to the latter point, I have already noted that the account by Mr. Lo in his affidavit shows that the cheque was accepted at the time. It was only later, and to accommodate the Defendant, that a cashier's order was exchanged for it.

17. What then of the Defendant's objection? The first, at 5.10 p.m. on 2nd December, merely said that it was not in accordance with the provisional agreement. There is no clue as to whether the objection is as to the amount, the time of payment, the form of payment, or any other provision of the agreement. They then go on to object to the imposition of an undertaking upon them, which, intentionally or not, led the Plaintiff's solicitors to assume that the objection was as to time. In any event, what is clear is that there was no express objection to the quality of the tender. The objection, such as it was, was in general terms, and no reasonable person reading the letter in which it was written would be able to tell what it was that was objected to.

18. In my view an objection of this nature is not sufficient to take this case out of the category of those cited above. An objection in general terms, without reference to the specific complaint as to the tender, and in particular with no complaint as to the quality of the tender, is not an objection which can be relied on later when arguing that it was not a proper tender. Mercantile dealings between parties should not be conducted as a sort of childish guessing game, which, if you get wrong, you lose. They must be on the basis of what is reasonable in the circumstances. I do not consider it reasonable to leave the other side in a state where they have been told that there is an objection but, because it has not been specific, either do not know what it is or are led into a misapprehension as to its nature.

19. Here the misunderstanding, or misconception, was compounded by the behaviour of the Defendant's solicitors the next day. Having received the cheque again at 9.30 a.m., they proceeded with the approval of the formal agreement, returned it to the Plaintiff's solicitors for signature by their client, and received it back shortly after 2.30 p.m., all the time retaining the Plaintiff's cheque, without mentioning any objection to it, until their letter delivered at 5.22 p.m., again, as the day before, after banking hours, and again without being specific. Indeed, it is not until after 5 p.m. on 4th December, after they had purported to rescind the agreement, that they finally explained that their objection was to the cheque, and that payment should have been by cash or cashier order. This objection itself does not mention that a solicitor's cheque would have been acceptable, as their letter of 29th November might be interpreted, and as Mr. Tang now interprets it, to read.

20. What is abundantly apparent is that the Plaintiff was at all times ready and willing to perform the obligations of the agreement, and, had their solicitors been told in certain terms what the objection was, and in time to rectify the matter, instead of being presented with general objections at a time after banking hours when nothing could be done, there would have been no obstacle to this agreement being performed. I accordingly hold that the Defendant cannot now rely on the nature of the tender at the time to support rescission of the agreement.

21. Before I leave this part I would refer to another point relied on by Mr. Tang on behalf of the Defendant. This is that it was the duty of the solicitors to advise their client as to the proper method of making payment under the agreement, and that they are trying to shift the duty to do so on to the Defendant. This ignores the fact that a personal cheque had already been accepted earlier in these parties' dealings, even though later exchanged for a cashier order, that a cheque had been referred to in the Defendant's solicitors' letter of 29th November, and that no specific objection had been raised to the cheque as such up to and beyond the signing of the formal agreement. I can see no reason why a competent solicitor in those circumstances should not assume that payment by cash or cashier order had been waived for payment by other means, and that in the absence of objection to the cheque in specific terms, that was acceptable.

22. Were the above not sufficient for me to say that the Defendant was not entitled to rescind this agreement, I find further support in the wider principle enunciated by Somervell L.J. in Heisler v. Anglo-Dal Ltd. [1954] 1 W.L.R. 1273, that a party, in not taking a point at the time, which, if taken, could have been put right, cannot later rely on it. I have already found that the Defendant did not take the specific point as to the cheque at the time. The chronology of events also shows that there was ample opportunity for them to do so at a time when the Plaintiff could have put the matter right, by producing a cashier order from his bank, or even cash, had it been required. The objection, in inadequate terms, was first raised after banking hours on 2nd December, and, after delaying for almost the whole of the next working day while at the same time holding the Plaintiff's cheque without further complaint, was repeated again after banking hours on 3rd December, when it was clearly too late for the Plaintiff to make alternative arrangements, even if informed precisely what the objection was.

23. One is bound to wonder, and I put it no higher than that, what the intentions of the Defendant here were. They had a willing purchaser, who was clearly able to make payment and comply with the terms of the agreement, and a situation where they must have known that all they had to do was be specific as to the method of payment they required. And yet they kept silent, until they had purported to rescind. What is lacking is what is described by Winn L.J. in Panchaud Frères S.A. v. Et. General Grain Co. [1970] 1 Lloyd's Rep. 53 as "a criterion of what is fair conduct between the parties."

24. Which brings me to the last but one point raised by Mr. Chan for the Plaintiff, that the conduct of the Defendant was unconscionable and calculated to mislead, and it would accordingly be inequitable to deny the purchaser relief. He relies on the decisions in China Pride Investment Ltd. v. Silverpole Ltd. [1994] 2 HKC 341 and Lee Kenny v. Wong Kwok Yan [1994] 2 HKC 309 in support of this contention. However, in each of these cases there had been conduct on the part of the vendor amounting to a breach of duty which was at least partly the cause of the purchaser's failure to complete, in the former, failure to submit a draft mortgage and guarantee in time for it to be approved, and in the latter, failure to deliver the draft agreement in time, or to deliver the title deeds at all. Here the Defendant's solicitors' conduct may well have been calculated to mislead, or at the least have amounted to a failure to co-operate, when it must have been apparent to them that the Plaintiff's solicitors were not aware of the nature of their complaint, or, with regard to 3rd December, the day when the agreement was being signed by both parties, that there was a complaint at all, until the cheque was returned after banking hours. But in the absence of a breach of duty beyond that, while there may well have been a degree of sharp practice, I am not able to say that this case falls within the narrow range of unconscionable conduct required to say that the purchaser should have relief on this ground alone.

25. The final point raised by Mr. Chan was that, by signing the agreement, the Defendant affirmed the contract by signing it in the knowledge that the payment tendered was in the form that it was, and that cash was not being offered.

26. The time for payment was stipulated in the provisional agreement to be "upon the signing of the Formal Sale and Purchase Agreement". Where simultaneous signing is not going to take place, there are, in my view, three other possibilities as to a permissible time for payment to comply with this. At the time the purchaser signs, or when the vendor signs, or within a reasonable time of signing, which I take to be on the same day as the signing. It seems that here the Defendant's solicitors took the same view, as they did not send their fax purporting to rescind until after midnight that day, being clearly of the view that had cash been delivered before that time, they may have been obliged to perform the contract. The fact that the Defendant had signed before, in their opinion, proper tender of payment had been made, does not assist the Plaintiff, as failure by the Defendant to sign would have amounted to a breach on their part and without a right to bring proceedings such as these.

27. For the reasons above I accordingly find that the Plaintiff is entitled to the relief sought, although I think that, in order to give effect to my findings, all that is required is an order in terms of paragraphs 1 and 4 of the Originating Summons, with liberty to apply in the event that further orders or directions are sought.

28. There will also be an order nisi for costs in favour of the Plaintiff with a certificate for two counsel.