XCHRX LEUNG PING MAN DICKY v. NGAN KWOK CHUNG

HCA12776/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.12776 OF 1998

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REASONS FOR JUDGMENT

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The appeal

1. The plaintiff appealed against the decision of the master. I dismissed the appeal. These are my reasons.

Order 14A

2. The plaintiff applied under Order 14A for "A declaration that the provisional agreement signed by the plaintiff and the defendant on 20 June 1997 is not a binding agreement" and for "An order that the defendant do return the deposit of HK$940,000 to the plaintiff forthwith".

3. In essence, the plaintiff was seeking a determination that the agreement between the parties was not a binding agreement. No issue was taken on the form of the relief sought by the plaintiff. The master refused the application.

The facts

4. On 20 June 1997, the parties entered into a Provisional Agreement ("the Agreement") for sale and purchase of a house ("the property") in the New Territories for $5,450,000. The plaintiff is the purchaser of the property and the defendant is the vendor. The relevant part of the payment term in clause 2 is as follows :-

"(a) H.K. Dollars $940,000.00 as initial deposit to be paid upon the signing of this agreement.

(b) H.K. Dollars $150,000.00 as 20% deposit of the purchase price to be paid upon the signing of the formal agreement/the subscription (after the deduction of payment of initial deposit) within 7 days from the date the developer obtaining a permit of the Commencement of building works issued by the government.

(c) --

(d) H.K. Dollars $3,815,000.00 as the balance of the purchase of the Purchase Price upon completion of the sale and purchase."

There is a further provision for payment under the Remarks of the Agreement. It is stated that the third 10% of the purchase price in the sum of $545,000 shall be paid upon the completion of the construction and the delivery of keys by the developer. The Remarks also stated that the property is a New Territories Small House land and the developer had to pay land premium in the sum of $700,000.

Clause 3 not dealing with completion?

5. The dispute in this case is on the meaning of clause 3. I will set out its term in Chinese :-

"該物業交吉日期以發展商補妥地價作實。"

The plaintiff's case is that the Agreement does not provide for the completion date of the sale of the land. It is argued that clause 3 only deals with the delivery of vacant possession of the property to the plaintiff. In this case, a third party, namely, the developer, is involved in the building of the house. It is argued that under the Remarks, delivery of vacant possession is to take place when the developer completes the building work and the key is delivered to the plaintiff.

6. It should be noted that the Remarks does not specify to whom the key is to be delivered. It may mean delivery to the defendant or the plaintiff. Even if, for the purpose of argument, the key to the house is to be delivered to the plaintiff, it does not mean that clause 3 must necessarily refer only to delivery of vacant possession and not completion. When the words "交吉" are used in an agreement for the sale of land, they are generally understood to mean delivery of vacant possession with good title of the property being given to the purchaser. In other words, the completion of the sale and not merely letting the purchaser into possession of the property.

7. I agree with Mr Chiu, counsel for the defendant, that one must consider the factual background of the case in construing the terms of the Agreement. The case is concerned with the sale of a New Territories Small House. The Agreement expressly provides for the payment of premium by the developer to the government. The ability to confer good title may well depend on the payment of the premium. Hence, even if the plaintiff may be allowed to enter into possession when the building is completed, it does not mean that clause 3 has no relevance on whether there is any provision for completion of the sale in the Agreement. This is clearly not a point that can be conclusively determined at this stage of the proceedings.

Clause 3 is subject to further negotiation?

8. It is further argued by the plaintiff that if clause 3 is to deal with completion, then its meaning is that the date of completion is to be confirmed upon the payment of the additional premium by the developer. In other words, it is subject to further negotiation. I do not think this is the only meaning one would attribute to this clause. In fact, it seems the following interpretation accords more with the true meaning of clause 3, namely, the completion of sale and purchase is to take place upon the payment of the premium by the developer to the government. If the latter meaning is adopted, then clearly there is a provision for the completion of the Agreement. I do not wish to say further on this because this is not a matter that can be resolved without considering the factual background of the case.

9. Mr Liu, counsel for the plaintiff, refers to the problems that may occur with the second interpretation, namely, short notice may be given by the vendor to the purchaser to complete the sale and the sale may not be completed if the premium is not paid on the date scheduled for completion. In my view, these problems have no relevance to the issue on whether there is an express provision for the completion of the sale of the land.

Date of completion essential term of contract

10. The plaintiff is not able to get over the initial hurdle of showing that the Agreement itself did not provide for the completion date. This being the case, it is not necessary for me to deal with the Court of Final Appeal decision of Kwan Siu Man v. Yaacov Ozer [1997-1998] 1 HKCFR 343 where Litton PJ at 355 stated that the date of completion is an essential term of any contract for the sale and purchase of land.

Costs to be paid forthwith

11. This is not a suitable case for bringing the Order 14A application. The plaintiff argued that the appeal is required because the master had said in his oral reasons that there is provision for completion in the Agreement. Patrick Chan J (as he then was) in Fu Tong, Deceased and Fu Mai Ki Maggie v. Yeung Kong, HCA4844/93 had stated that the consequence of an Order 14A application is that a determination on the point, one way or the other will be binding on the parties. The plaintiff argued that the appeal is needed to ensure he is not precluded from raising this issue at the hearing.

12. The draft order which was prepared by the plaintiff and approved by the master did not refer to any determination of the issue. This is not surprising in the light of the actual relief sought by the plaintiff in the Order 14A summons. It is clearly not justified to pursue the appeal. The plaintiff is required to pay the costs of the appeal forthwith to the defendant.

Quantum of costs

13. Mr Chiu informed me that the costs of the appeal is $80,000, $40,000 is counsel's fee and $40,000 is solicitor's costs. Although the plaintiff does not challenge the figures, I have great reservation on the solicitor's charge. This is an appeal from the master where the major work is the hearing itself. Even taking into account the drafting of the affirmation by the solicitor, in my view, the $40,000 charged by the solicitor is far too high. This being an interim assessment, the costs that I will allow at this stage for the solicitor's costs is $15,000. From the $55,000, a further sum of $2,000 is to be deducted to take into account the costs of a notice of appeal lodged by the defendant which was later withdrawn. Hence, the defendant is entitled to the costs of $53,000. This is a provisional assessment and the figures have to be adjusted in the final taxation.

Caution in launching interlocutory application

14. I would urge parties in a litigation to exercise great caution before they launch interlocutory applications. The plaintiff had already applied and failed in a summary judgment application in March 1999. They now failed before the master and in this appeal. Apart from incurring unnecessary costs, the plaintiff has, so far, actually failed to achieve what he wishes to achieve by bringing this action against the defendant, namely, for the recovery of the deposit of $940,000 paid to him. The action was first commenced on 31 July 1998. If it had proceeded expeditiously without wasting time on interlocutory skirmishes, I have no doubt that final determination of this case would have been reached a long time ago.

15. I will authorize the judgment to be published.