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CACV000183/1990
| IN THE COURT OF APPEAL |
1990 No. 183 |
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(Civil) |
Headnote
Plaintiffs initially pursued a claim for specific performance of a tenancy agreement. The Master allowed an amendment abandoning this claim pleading repudiation and acceptance. This order was set aside by a judge and from this decision appeal was brought. The amendment on its face did not plead acceptance. Submitted (1) that a failure specifically to plead acceptance did no more than leave plaintiffs open to a request for particulars; (2) alternatively that acceptance could, in the circumstances, be left to the perception of the defendant; (3) that, if required, an application to amend pleading acceptance should be allowed.
Held: Court refused application to amend as it considered matter must be dealt with on basis of the pleading as it stood before Master and the Judge. Acceptance cannot be left to the perception of a party. He is entitled to know with exactness what is alleged. The amendment as formulated being useless the appeal was dismissed.
| IN THE COURT OF APPEAL |
1990 No. 183 |
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(Civil) |
BETWEEN
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TECHNOWAY LIMITED |
Plaintiff
(Appellant) |
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AND
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PENMACK HOLDINGS LIMITED |
1st Defendant |
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THE HONG KONG CHINESE BANK LIMITED |
2nd Defendant
(Respondent) |
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(By Original Action) |
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| AND BETWEEN |
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PENMACK HOLDINGS LIMITED |
Plaintiff |
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AND |
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TECHNOWAY LIMITED |
1st Defendant |
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SZETO HIN LEUNG and YEUNG HOI KAM, THOMAS trading under the firm name of SZETO & YEUNG |
2nd Defendant |
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(By counterclaim) |
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Coram: Hon. Fuad, V.-P., Power & Penlington, JJ.A.
Date of Hearing: 22 January 1991
Date of Handing Down Judgment: 27 March 1991
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JUDGMENT
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Power, J.A.:
1. This is the judgment of the Court.
2. This is an appeal by Technoway Ltd. (Technoway) against the order of Nazereth J. setting aside the order of Master O'Donnell which gave leave to Technoway to amend its Statement of Claim.
3. Technoway's original Statement of Claim naming Penmack as defendant was dated 8th March 1989. It sought specific performance of a tenancy agreement. This Statement of Claim was amended on 13th November 1989 by adding the Hong Kong Chinese bank Ltd. ("HCB") as a second defendant. The claim for specific performance was maintained against Penmack and damages were claimed from HCB.
4. The facts relied on in the Amended Statement of Claim are set out hereunder.
5. On the 10th of November 1986, the Overseas Trust Bank ("OTB") by a tenancy agreement granted a two-year lease of office premises ("the premises") to Technoway from 16th September 1986 to 15th September 1988.
6. On 19th February 1987, OTB assigned its reversion to the Hong Kong Chinese Bank Ltd. (HCB) which in May 1988 agreed in a series of letters to grant a new tenancy to Technoway on the expiry of the original tenancy for the period from 15th September 1988 to 30th September 1990. This was the agreement of which specific performance was sought.
7. On 27th May 1988, HCB entered into a sale and purchase agreement of the property with Penmack Holdings Ltd. ("Penmack") pursuant to which the premises were assigned to Penmack on 25th August 1988.
8. On 6th June 1988, a letter from Bond First Pacific Davies was written on behalf of HCB requiring delivery of vacant possession on 15th September 1988.
9. On 8th June, HCB wrote to Technoway saying that the previous correspondence which, it seems clear, was the "series of letters" referred to above, was subject to contract.
10. On 30th August 1988, Penmack sent Technoway a Notice of Termination. They stated that it would take effect on 15th March 1989.
11. On 15th September 1988, the lease expired. The May tenancy agreement, given that it was valid, would then have commenced.
12. Technoway added HCB as a second defendant on 10th November 1989 upon the basis that its assignee had breached the agreement of May 1988 of which it was seeking specific performance and amended its Statement of Claim accordingly on 13th November 1989.
13. On 3rd October 1990, the Master allowed further amendments to the Statement of Claim which abandoned the claim for specific performance and alleged a repudiation by the defendants and acceptance thereof by the plaintiff. As the Statement of Claim stood prior to this further amendment, paragraph 6 alleged that HCB repudiated by
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(1) |
the letter from Bond First Pacific Davies dated 2nd June 1988 requiring vacant possession on 15th September 1988; and
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by the letter of 8th June 1988 informing Technoway that previous correspondence was subject to contract.
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Paragraph 8 alleged that Penmack repudiated by the letter of 30th August 1988, giving Technoway notice of termination of the tenancy and requiring delivery of vacant possession on 15th March 1989.
14. This further amendment sought by paragraph 11 to allege that the plaintiff accepted the repudiation of "the defendants" by:
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(i) |
a letter dated 18th May 1990 from its solicitors to the solicitors for Penmack whereby it is pleaded Technoway accepted Penmack's wrongful repudiation; and
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under cover of a letter dated 31st May 1990 from Technoway's solicitors to Penmack's solicitors, Technoway delivered vacant possession to Penmack by delivery of the keys to the premises.
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On its face, there is no pleading of any acceptance of the alleged repudiation of HCB.
15. The Master having allowed the further amendments, HCB appealed to Nazareth J. against his order. He was satisfied that the appeal should be allowed for the following reasons:
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"I turn then to Mr. Kwok's 2nd broad ground that the claim is bound to fail and is therefore useless. Mr. Kwok submits that Technoway having remained in possession for about 15 months after the notice to quit i.e. from 15th September 1988 to May 1990, clearly affirmed the May 1986 tenancy and could not thereafter repudiate it, he relied upon the following passage in paragraph 1702 of the 26th Edition of Chitty on Contracts:
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'Affirmation may be expressed or implied. It will be implied if, with knowledge of the breach and of its right to choose, he does some unequivocal act from which it, may be inferred that he intends to go on with the contract regardless of the breach or from which it may be inferred that he will not exercise his right to treat the contract as repudiated' and later 'Once the innocent party has elected to affirm the contract, and this has been communicated to the other party, then the choice becomes irrevocable. There is no need to establish reliance or detriment by the party in default. Thus the innocent party, having affirmed, cannot subsequently change his mind and rely on the breach to justify treating himself as discharged:' (This citation stops short.)
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However, Mr. Benjamin Yu for Technoway submits that on Technoway's pleaded version, there was a repudiatory breach of the agreement by the notice to quit in June 1988, shortly after the agreement was made. Technoway could have left; but he says it did not and in March 1988 issued its writ. He submits that it is now clearly established by the House of Lord's decision in Johnson v. Agnew 1980 A.C. 367 that the vendor can elect whether or not to pursue the remedy of specific performance or that of damages at any time even as late as the trial, and that having set out to pursue specific performance, it is nonetheless open to him to apply to the court to put an end to the contract and ask for damages for breach of the contract. He relies also on Tilcon Ltd. v. Land & Real Estate Investments Ltd. (1987) 1 WLK 46 at 53B. However the facts in both those cases were significantly different from those before me. In Johnson v. Agnew, the purchaser was in continuing default but specific performance became impossible when the mortgagees of the property enforced their security by selling the properties. It was in those circumstances that the Court of Appeal held that the order of specific performance that had been obtained should be discharged and damages awarded in lieu.
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And likewise in Tilcon, although there was a repudiatory breach, the time for performance had in a sense not arrived. and there was no issue of affirmation.
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In the circumstances before me, notwithstanding the pleaded breaches of 6th June and 8th June 1988, which are the only breaches relied upon, the May 1988 tenancy was affirmed by continued possession for almost a year thereafter until May 1990. It is clear from Fercometal v. Mediterranean (1989) AC 788 (H.L. (E) ) at 805 E that:
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'When A wrongfully repudiates his contractual obligations in anticipation of the time for their performance, he presents the innocent party B with two choices. He may either affirm the contract by treating it as still in force or he may treat it as finally and conclusively discharged. There is no third choice, as a sort of via media to affirm the contract and yet to be absolved from tendering further performance.'
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Accordingly, in my view, it is not open to Technoway, having affirmed the contract after the alleged breaches, to found its claim for damages upon those breaches. Clearly therefore the amendment would be useless in the sense mentioned at paragraph 20/5 - 8/2 of the Supreme Court Practice 1991 and it should. not for that reason be allowed."
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16. At the outset of the hearing before this court it was put to Mr. Yu, who appeared for Technoway, that no acceptance of the alleged repudiation by HCB had been pleaded. He submitted, initially, that the averment in paragraph 11 was a good enough indication of acceptance and that HCB were given notice thereof by service of the further amended Statement of Claim pursuant to the order of Master O'Donnell on 3rd October 1990. He then submitted that the acceptance was communicated even earlier by the issue and service of the inter partes summons on 11th June 1990 whereby it was sought to add HCB as the second defendant and that the failure specifically to plead the acceptance did no more than leave Technoway open to a request for particulars. Upon the basis that acceptance of the repudiation had been pleaded Mr. Yu went on to refer to Johnson v. Agnew and Tilcon Ltd. v, Land & Real Estate Investments Ltd.
17. It seems, in the latter case, that acceptance of the repudiation was communicated by the service of the writ. It is, however, clear from the report, at p. 49, that this was specifically pleaded.Mr. Yu was again asked how the pleading could stand without this. averment. He submitted that given the nature of the pleading, it was a matter which could properly be left to the perception of HCB. he argued finally that this was not a matter which could be raised now as Nazareth J. had not relied upon it and there was no Counter Notice. At the eleventh hour, Mr.Yu sought leave to amend his Statement of Claim by adding an averment that acceptance had been communicated by service of the summons or, alternatively, by service of the reamended Statement of Claim.
18. This application was opposed by Mr. Kwok for the respondent. He submitted that the. amendment sought must be dealt with as formulated and that this was not a striking out application, in which the Court would look to see whether any amendment could properly be made, but an application to amend formulated in specific terms by the appellant as to which, given that it had been pursued without alteration to those terms, both before the Master and Nazareth J., it would be wrong to allow any amendment.
19. We dismissed Mr. Yu's application indicating that we considered that it would be wrong for us to approach the matter other than upon the basis of the pleading as it stood before the Master and Nazereth J.
20. Mr. Kwok addressing us upon the appeal submitted that Technoway had affirmed the contract by staying on for 15 months and, while seeking to rely upon the reasoning of Nazareth J. in this regard, went on to inform us that both before the Master and the Judge it had been his submission that the amendments as formulated were useless as no acceptance of the alleged repudiation was pleaded. He conceded that there should have been a Counter Notice and sought leave to file one in the following terms:
"That the amended Statement of Claim is useless in that there is no allegation of any acceptance of D2's or any communication to D2 of any acceptance of repudiation."
The court granted this application.
21. We are satisfied that acceptance of a repudiation must be pleaded and that there was no acceptance by HCB pleaded in the further amended Statement of Claim. Such matters cannot be left to the perception of a party. He is entitled to know with exactness what is alleged against him. The amendment as formulated was, therefore, useless. Given that we take this view it is not necessary for us to canvass further the other issues that were raised.
22. The appeal is dismissed and. we make an order nisi that the plaintiff is to pay the 2nd defendant's costs of the appeal.
Representation:
Mr. Benjamin Yu (instructed by Messrs. Szeto & Yeung) for the Plaintiff/Appellant.
Mr. Kenneth Kwok (instructed by Messrs. Y.T. Chan & Co. for the 2nd Defendant/Respondent.
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