WISE THINK GLOBAL LTD v. FINANCE WORLDWIDE LTD

HCMP 571/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 571 OF 2010

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BETWEEN

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J U D G M E N T

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Introduction

1.  The Plaintiff in this action, Wise Think Global Limited, is the purchaser of a property known as the Ground Floor of Block C, Nos. 301 and 301A-C, Prince Edward Road West, Kowloon, Hong Kong (the “Property”) under a Provisional Agreement for Sale and Purchase dated 31 December 2009 (the “Provisional Agreement”).  The Defendant, Finance Worldwide Limited, is the vendor named in the Provisional Agreement.

2.  The sale and purchase of the Property under the Provisional Agreement has not proceeded in accordance with the terms of that agreement, through no fault of the Plaintiff.  By this action, the Plaintiff seeks a number of declaratory relief as well as an order for specific performance of the Provisional Agreement against the Defendant.

3.  This action is commenced by way of an Originating Summons.  In the title to the action, there is a reference to Section 12 of the Conveyancing and Property Ordinance, Cap. 219.  An application under that section is often referred to as a vendor and purchaser summons.  When it was pointed out that there might be some doubt on whether, in a vendor and purchaser summons, the Court had power to grant a decree of specific performance, Mr Lam for the Plaintiff sensibly agreed that the reference to that section of the Ordinance in the title of the action could be deleted.  Since nothing turns on the title of the action, I shall proceed on the basis that this is an ordinary action commenced by way of an Originating Summons without further consideration of the type of relief which may be granted under Section 12 of the Conveyancing and Property Ordinance.

Basic facts

4.  The basic facts of this matter are relatively straight forward, and not in dispute.

5.  By the Provisional Agreement, the Defendant agreed to sell and the Plaintiff agreed to purchase the Property at the price of HK$18,000,000.  The Provisional Agreement is apparently in a standard form used by a firm of estate agent known as Century Consultant Company in Hong Kong.

6.  Similar to many provisional agreements for sale and purchase of real properties in common use in Hong Kong, the Provisional Agreement is a bilingual document in both the English and Chinese languages.  English is used by the parties to fill in various blanks in the Provisional Agreement, but an additional provision, Clause 15, is written in Chinese.

7.  The following terms of the Provisional Agreement are relevant:-

“2.

該物業之成交價為港幣 The purchase price of the said Premises shall be HK$18,000,000 which shall be paid by 買方須按下列方式付款矛賣方: the Purchaser to the Vendor in the manner as follows: (a) 在簽訂此合约之同時即付臨時定金港幣 Initial deposit shall be paid upon signing of this Agreement in the sum of HK$500,000 (b) 於下述日期或以前須加付定金，即 Further deposit shall be paid on or before ________ 金額港幣 in the sum of HK$_________ (c) 在簽訂正式買賣合约之時，即 Upon signing of The Formal Agreement for Sale and Purchase on or before 13/1/2010 或以前須加付定金港幣 further deposit shall be paid in the sum of HK$3,100,000 and (d) 完成交易日期定於 Balance of purchase price shall be paid upon completion on or before 26/2/2010 或以前，並在賣方之代表律師付清樓價餘款為港幣 at the office of the Vendor’s solicitors in the sum of HK$14,400,000

7.

如賣方在收取定金後，不依此合约之條款完成買賣， Should the Vendor after receiving the initial deposit paid hereunder fail to complete the sale in the manner herein contained, 則賣方除須退還買方所付之定金全數外，並須以同等數目之金額賠償矛買方 the Vendor shall immediately compensate the Purchaser with a refund of the initial deposit together with a sum equivalent to the amount of the initial deposit as liquidated damages 另負責繳付/退還此合約之厘印費； and the reimbursement/payment (as the case may be) of stamp duty of the said Premises 惟買方不可再向賣方追究任何責任，包括其他賠償或特定履行。 and the Purchaser shall not take any further action to claim for damages or to enforce specific performance.”

8.  Clause 14 of the Provisional Agreement (“Clause 14”) states as follows:

“此合約以中/英文本為準。

This Agreement should be interpreted in its Chinese/English version in case of ambiguities”.

9.  It may be noted immediately that the Chinese and English versions of Clause 14 do not carry the same meaning.  The other point of note is that the parties have crossed out both the word “英” in the Chinese version and the word “English” in the English version.  It cannot therefore be said that the English version of Clause 14 should be ignored.

10.  The meaning or effect of Clause 14 is itself problematic.  Clause 14 is obviously intended to apply to the situation where there is a conflict between the English and Chinese versions of the Provisional Agreement.  There is no problem with the Chinese version of Clause 14 in this regard.  However, the English version of Clause 14 would suggest that the Chinese version is to be preferred only where there are ambiguities.  It does not deal with the situation whether there is no ambiguity in either version, but there is a clear conflict between the two.  Also, it is not clear where the “ambiguities” should occur, i.e. whether in either or both versions, before the Chinese version should prevail.  In an ordinary provision of this nature, it would normally say that where there is a conflict between the two versions, one or the other version should prevail, but where there are ambiguities both versions should be considered to resolve, so far as possible, the ambiguities.

11.  Be that as it may, it seems to me clear that the intention of the parties is that, in the event of any conflict between the two versions, the Chinese version shall prevail.  This much is, I understand, common ground between the parties.

12.  The initial deposit of HK$500,000 was duly paid, receipt whereof was acknowledged by the Defendant in the Provisional Agreement.  Presumably, in accordance with Clause 2 of the Provisional Agreement (“Clause 2”), it was held by the Defendant’s solicitors, Messrs Gallant Y T Ho & Co, as stakeholders.

13.  Following certain negotiation over the terms of the formal sale and purchase agreement, on 12 January 2010, Messrs Gallant Y T Ho & Co sent to the Plaintiff’s solicitors, Messrs Edward Ko & Company, the re-engrossed Agreement for Sale and Purchase for execution by the Plaintiff.  At the same time, Messrs Gallant Y T Ho & Co asked Messrs Edward Ko & Company to return the same duly signed by the Plaintiff and attested together with the latter’s cheque for HK$3,100,000 drawn in favour of their client (i.e. the Defendant) “being the further deposit payable by [the Plaintiff] to [the Defendant] on or before 5:00 p.m. on 13^th January 2010”.

14.  This the Plaintiff duly did on 13 January 2010, save that the cheque was made payable to Messrs Gallant Y T Ho & Co.  The fact that the cheque was not drawn in favour of the Defendant was not objected to, and could not have been, in view of the provision in Clause 2 regarding the stakeholding arrangement. The cheque was cleared on 14 January 2010.

15.  In the covering letter dated 13 January 2010, Messrs Edward Ko & Company stated that the formal Agreement for Sale and Purchase (in duplicate and signed by the Plaintiff and attested by them) and the cheque were sent to Messrs Gallant Y T Ho & Co against the latter’s undertaking to return to the former one copy of the said agreement duly signed by the Defendant and attested by Messrs Gallant Y T Ho & Co within three working days from the date of the letter.

16.  On 14 January 2010, Messrs Gallant Y T Ho & Co sent to Messrs Edward Ko & Company a draft Power of Attorney, the purpose of which was to enable the Plaintiff to represent the Defendant to negotiate and enter into a new tenancy agreement with the existing tenant of the Property, in accordance with Clause 15 of the Provisional Agreement (Clause 15).  It would appear that at that time, the Property was occupied by a tenant whose tenancy was to expire on 28 February 2010.  On 15 January 2010, Messrs Edward Ko & Company returned page 3 of the draft Power of Attorney, amended by the addition of the address of the registered office of the Plaintiff in Part II of the First Schedule to Power of Attorney, to Messrs Gallant Y T Ho & Co.

17.  Notwithstanding the matters aforesaid, it appears that the Defendant never signed the formal Agreement for Sale and Purchase, or Messrs Gallant Y T Ho & Co never sent it to the Plaintiff’s solicitors.  Instead, on 28 January 2010, Messrs Gallant Y T Ho & Co returned to Messrs Edward Ko & Company the formal Agreement for Sale and Purchase (in duplicate) which had been signed by the Plaintiff (but not by the Defendant) and a cheque in the amount of HK$3,100,000 drawn by Messrs Gallant Y T Ho & Co in favour of Messrs Edward Ko & Company, “being the further deposit therefor”. It was stated in Messrs Gallant Y T Ho & Co’s letter of 28 January 2010 that this was done upon instruction without any further explanation, although it must have been obvious at that stage that the Defendant did not wish to proceed with the sale of the Property.

18.  After some further exchange of correspondence between the two firms in the course of which it became clear that the Defendant was seeking to rely on Clause 7 of the Provisional Agreement (“Clause 7”), on 10 February 2010, Messrs Gallant Y T Ho & Co again sent to Messrs Edward Ko & Company the said cheque for HK$3,100,000 (which had been returned in the meantime) together with a further cheque in the amount of HK$1,000,000 also drawn by Messrs Gallant Y T Ho & Co in favour of Messrs Edward Ko & Company.  This sum of HK$1,000,000 represented, according to Messrs Gallant Y T Ho & Co, “the refund of initial deposit and liquidated damages payable by [the Defendant] to [the Plaintiff] as per clause 7 of the Provisional Agreement.”

19.  It is not necessary to summarise the rest of the correspondence subsequently exchanged between the two firms.  Essentially, the Defendant’s position is that it is entitled not to proceed with the sale of the Property under the Provisional Agreement by reliance upon Clause 7, whereas the Plaintiff says that the Defendant cannot rely on Clause 7 in the events which have occurred and that it is entitled to enforce the Provisional Agreement specifically.

The Defendant is not entitled to rely on Clause 7

20.  There are, in my view, two main issues which have to be resolved in determining whether the Defendant can rely on Clause 7 to resile from the transaction, namely:-

(1)    Whether there was any payment of the further deposit of HK$3,100,000 by the Plaintiff to the Defendant;

(2)    Assuming that there was such payment, whether the Defendant was required to compensate the Plaintiff by payment of double the amount of the initial deposit as well as the further deposit if it wished to avail itself of Clause 7 to resile from the transaction.

21.  On the first issue, there was, on the face of the matter, payment of the further deposit of HK$3,100,000 by the Plaintiff on 13 January 2010.  The cheque was accepted by Messrs Gallant Y T Ho & Co and cleared on 14 January 2010.  Mr Suen submits that there was no payment of the further deposit in pursuance of the Provisional Agreement because payment of the further deposit was linked to, or conditional upon, the signing of the formal Agreement for Sale and Purchase by both parties.  According to Mr Suen, the cheque for the further deposit was tendered by the Plaintiff on the basis that the Defendant would sign the formal Agreement for Sale and Purchase.  However, it was never signed by the Defendant.  Hence, the further deposit was tendered, but not paid.

22.  I do not accept this submission.  In the first place, although the English version of Clause 2(c) would suggest that the further deposit was payable only upon the signing of the formal Agreement for Sale and Purchase (by both parties), it seems to me clear from the Chinese version of Clause 2(c) that the further deposit was required to be paid either upon the signing of the formal Agreement for Sale and Purchase, which was scheduled to take place on 13 January 2010, or before that date.  In other words, the further deposit was payable at the latest on 13 January 2010, independently of the signing of the formal Agreement for Sale and Purchase (for the effect of a similar provision seeSee To Keung v Sunny Way Ltd [2009] 5 HKLRD 300).

23.  I may add that in the correspondence between the parties’ solicitors, there was some discussion on the status of the further deposit which was paid to Messrs Gallant Y T Ho & Co as stakeholders. However, Mr Suen expressly confirmed at the hearing that it was not part of his submissions that there was no payment of the further deposit merely because the money was paid to or received by Messrs Gallant Y T Ho & Co as stakeholders.

24.  In any event, even if the further deposit was only payable, as a matter of contract, upon the signing of the formal Agreement for Sale and Purchase, this cannot alter the fact that the further deposit was actually paid and received.  The Defendant could have returned the cheque if it did not want to receive the further deposit but chose not to do so.

25.  In view of the Defendant’s stance that the further deposit was only payable upon the signing of the formal Agreement for Sale and Purchase, no argument has been advanced by Mr Suen that the Plaintiff was in breach of the Provisional Agreement for failing to tender the further deposit unconditionally.  It will be recalled that the cheque for the further deposit was tendered subject to Messrs Gallant Y T Ho & Co’s undertaking to return to Messrs Edward Ko & Company one copy of the formal Agreement for Sale and Purchase duly signed by the Defendant and attested by Messrs Gallant Y T Ho & Co within three working days from 13 January 2010.  However, even if such an argument were advanced, I do not think it would succeed.  This is because the Defendant never complained that the Plaintiff had failed to tender the further deposit unconditionally.  On the contrary, the Defendant continued to perform the Provisional Agreement by sending a draft Power of Attorney to the Plaintiff’s solicitors in pursuance of Clause 15 on 14 January 2010, thereby affirming the Provisional Agreement. Moreover, the undertaking sought to be imposed by Messrs Edward Ko & Company was ignored, in that Messrs Gallant Y T Ho & Co went ahead to clear the cheque on 14 January 2010 but never returned the formal Agreement for Sale and Purchase duly signed by the Defendant and attested by Messrs Gallant Y T Ho & Co within three working days from 13 January 2010 or at all.  In the circumstances, I do not consider that the Defendant is entitled to complain about the failure of the Plaintiff to tender the further deposit unconditionally on 13 January 2010.

26.  On the second issue, it seems to me that the reference to “定金” (deposit) in the Chinese version of Clause 7 can refer to both the initial deposit and the further deposit (if paid).  This is because in Clause 2, the various sums payable under sub-paragraphs (a), (b) and (c) are all treated as “定金” (deposit), and the same term should generally carry the same meaning throughout the Provisional Agreement.  Further support for this conclusion can be found in the use of the words “定金全數” in the Chinese version of Clause 7.  In Chan Yuen Ka Crystal v Chu Cheong Kit Raymond, HCA 1459/2009, the relevant “escape clause” was virtually identical with Clause 7 here, and Rogers VP (sitting as an additional Judge of the Court of First Instance) considered that the words in Chinese were sufficiently clear to lead to this conclusion (see paragraph 24 of the judgment of Roger VP in that case).

27.  Mr Suen for the Defendant submits that this conclusion of Rogers VP is inconsistent with the judgment of Litton JA (as he then was) in Man Sun Finance (International) Corp v Lee Ming Ching Stephen [1993] 1 HKC 113.  In particular, Mr Suen refers me to the following passages at pp 117-118 of the report:-

“Jones J. concluded that the vendor was not entitled to resile from the provisional agreement under clause 8 for two reasons:
(i)	The provisions of clause 8 that “all deposits already paid shall be double refunded to the purchaser” meant that the vendor was required not only to pay $400,000, twice the amount of the temporary deposit, but also a sum of $1,235,000, being twice the amount of the balance of deposit; and
….. Ground (i) As to the first ground, I am of the view that the judge was wrong. This is a plain matter of the proper construction of the provisional agreement. In construing a contract, what is imputed by the court to the parties is that they intended to give effect to their own agreement. In this instance, the contemplation of both parties was that the formal agreement should be signed on 3 April 1992 when, at the same time, the balance of the deposit of $617,500 would be paid. Once this occurs, all rights and liabilities under the provisional agreement would be subsumed; the provisional agreement would have merged with the formal agreement. Where clause 8 refers to the vendor being “unable or unwilling” to enter into the formal agreement, it must follow that such inability or unwillingness must be expressed before the formal agreement is signed, that is before the balance of deposit is payable or paid. Hence, where clause 8 refers to “all deposit already paid” it could only refer to the “temporary deposit” of $200,000. To construe clause 8 otherwise is to make nonsense of the rest of the agreement. Take clause 7 which gives the vendor the right to forfeit “all deposits” if the purchaser failed to “complete”: how could this possibly refer to the balance of the deposit? The words “all deposits” must have the same meaning in the two clauses. Moreover, the judge was also wrong on the facts. On 22 April 1992 when the vendor, through its solicitors, invoked clause 8, the “balance of deposit” amounting to $617,500 had not been paid. Since the parties clearly contemplated by clause 1 of the provisional agreement that the performance of the parties thereunder would be concurrent and mutual, the cheque could only have been tendered on the basis that the vendor would on its part sign the formal agreement. The vendor never signed; the cheque was never presented for payment; hence the “balance of deposit” was never “paid”. It was tendered, but not paid.”

28.  However, Mr Suen also accepts that the reasoning of Litton JA expressed in the above passages was based on, and must be understood in light of, the fact that under the provisional agreement in that case the obligation to pay the balance of the deposit (or further deposit) was upon the signing of the formal agreement.  In the present case, I have found that upon the true construction of the Provisional Agreement, the obligation to pay the further deposit is not linked to the signing of the formal Agreement for Sale and Purchase.  I have also found that as a matter of fact, the further deposit was paid to and accepted by the Defendant.  I do not therefore think that what Litton JA said in Man Sun Finance (International) Corp governs the present case.  On the other hand, the escape clauses in Chan Yuen Ka Crystaland in the present case are virtually identical and I consider that I ought to follow the judgment of Rogers VP in Chan Yuen Ka Crystal.

29.  In all, in the events which had occurred, if the Defendant wished to rely on Clause 7 to resile from the transaction, it was required to refund both the initial and further deposits, and pay compensation to the Plaintiff in a sum equivalent to the total amount of the initial and further deposits.  This the Defendant never did.  It follows that the Defendant cannot rely on Clause 7 to resile from the transaction.

30.  I should add that Mr Lam for the Plaintiff accepts that the Defendant was, in principle, entitled to rely on Clause 7 at any time up to the date of completion (i.e. 26 February 2010).  I do not therefore have to consider whether there is any further implied time limit for the Defendant to exercise its right or power under Clause 7, e.g. whether such right could only be exercised up to the scheduled date for the signing of the formal Agreement for Sale and Purchase (i.e. 13 January 2010).  Mr Lam’s argument on “time” is that once the Defendant had sought to exercise the right to invoke Clause 7 on 28 January 2010 and that exercise was invalid (which clearly was in view of the fact that there was no refund of the initial deposit or payment of any compensation, whether of an amount equivalent to the initial deposit or both the initial and further deposits), the Defendant could not seek to invoke Clause 7 again, and thus what Messrs Gallant Y T Ho & Co did on the Defendant’s behalf on 10 February 2010 could not, in any event, be a valid exercise of the power under Clause 7.  I do not accept this argument.  In the first place, it is by no means clear that the Defendant was seeking to rely on Clause 7 on 28 January 2010.  There was no mention of Clause 7 whatsoever in Messrs Gallant Y T Ho & Co’s letter of 28 January 2010.  More importantly, I see no reason in principle why an invalid exercise of the right under Clause 7 would preclude a further valid exercise of such right in future, assuming that what is done is otherwise sufficient to comply with the requirements of that clause.

31.  These having been said, for the reasons mentioned above, I hold that the Defendant’s attempt to resile from the transaction in reliance on Clause 7 is not effective.

Conclusion

32.  The Defendant has not suggested that it has any other defence to the Plaintiff’s claim herein.  I grant to the Plaintiff an order of specific performance of the Provisional Agreement against the Defendant.  I shall leave it to the parties to agree on the terms of the order, with liberty to the parties to apply in the event of disagreement.  I do not consider that the declarations sought by the Plaintiff will serve any useful purpose and I decline to grant the declarations.  The Plaintiff is also entitled to the costs of and incidental to this action, to be taxed if not agreed.

33.  Lastly, I wish to thank counsel for their assistance in this matter.