XCHRX MAK YAN YAN WINNIE v. THE ORIENTAL ARTS TRADING CO. (H.K.) LTD.

HCA6946/97

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.6946 OF 1997

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J U D G M E N T

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1. This is an application by the Plaintiff under O.86 for rescission of the Formal Agreement for Sale and Purchase dated 21st March 1997 mentioned in the Statement of Claim ("the S/P Agreement") in relation to the property known as Flat A, 8th floor, Champion Building, Nos. 301-309 Nathan Road, Kowloon ("the Property"), repayment of the deposit in the sum of HK$1,000,000 ("the Deposit") and damages for breach of the S/P Agreement, and a declaration that the Plaintiff has a lien on the Property for the deposit together with the conveyancing expenses and agent's commission in the sums as set out in para.12 of the Statement of Claim with interest thereon and for costs of the action and the application.

2. The facts of the case are as follows : On 21st March 1997, the parties signed the S/P Agreement, in pursuance of which the Plaintiff paid the Defendant a deposit of $1,000,000. The Agreement was for the purchase of the Property at the price of $10,000,000 and the date of completion was agreed to be 18th June 1997. The Property was sold subject to a tenancy for two years from 1st November 1996 until 31st October 1998 for a portion of the Property at the monthly rental of $23,000. In the 7th Schedule of the S/P Agreement, of the matters specified as required by Cap.117 was the following :

The following consideration which the parties hereto know has been paid or given, or has been agreed to be paid or given, to the following person(s) for or in connection with the Agreement for sale or any conveyance on sale (excluding legal expenses) :

- Estate agent's commission paid or payable by the Purchaser : HK$100,000.00

- Name of Agent : The Incorporated Owners of Champion Building.

Clause 6 of the S/P Agreement states :

"Any requisitions of objections in respect of the title or otherwise arising out of this Agreement shall be delivered in writing to the Vendor's Solicitors within seven working days (including Saturdays) after the date of receipt of all the title deeds and documents by the Purchaser's Solicitors otherwise the same shall be considered as waived (in which respect time shall be of the essence of the Agreement)."

Clause 7 of the S/P Agreement states :

"Such of the documents of title as relate exclusively to the Property shall be delivered to the Purchaser."

Clause 8 of the S/P Agreement states :

"The Vendor shall show and give a good title to the Property. The Vendor shall prove his title to the Property at the Vendor's own expenses and shall at the like expenses make and furnish to the Purchaser such original certified or attested copies of any deed or document or title, wills and matters of public records as may be necessary to prove such title under s.13(1) of the Conveyancing and Property Ordinance (Chapter 219)."

Clause 12 of the S/P Agreement states :

"Time shall in every respect be of the essence of this Agreement."

3. In respect of the sale, the Plaintiff was represented by Fairbairn Catley Low & Kong ("FCLK") and the Defendant by Tai, Tang & Chong ("TTC"). The chronology of events was as follows :

4. Under Clause 8 of the S/P Agreement, the Purchaser was entitled to receive either the original or certified or attested copies of any Deed or document of title which related exclusively to the Property and which had to be provided to enable the Vendor to prove his title under the Conveyancing and Property Ordinance. Godfrey J., as he then was, in Yeung Sau Chuen Sammy v. Chung Chun Ting and Cheung Sai Mui (MP4080 of 1992) said :-

"When not all the title deeds are delivered, and there are others which are delivered later, it follows that in relation to those title deeds of which copies are delivered late, the Purchaser's solicitors must have seven working days after their receipt to consider those documents."

I have set out the chronology in some detail to show that even though the S/P Agreement was signed on 21st March 1997, the title deeds were not sent by TTC until 13th May 1997. Seven days after that, FCLK, as they were entitled to, asked for certified copies of the Crown Lease and three Deed of Variation Memorials. They also asked for other documents which in my judgment they were also entitled to. On 4th June 1997, instead of sending certified copies of the Crown Lease and the Conditions of Exchange, TTC only undertook to send them as soon as they became available. TTC also declined to let the Purchaser have copies of a tenancy agreement and the Deed of Surrender. In my judgment the Purchaser was entitled to have a copy of the tenancy agreement, to see if the said tenancy had expired and was no longer an encumbrance on the Property. They were also entitled to have the Deed of Surrender to see, if the surrender was in respect of the tenancy, that the tenancy had been properly surrendered to the lessor who was presumably the owner of the Property.

5. On 12th June 1997 TTC again only undertook to forward certified copies of the Crown Lease and Conditions of Exchange as soon as possible. Clearly, by that date, even if the documents of title were sent on that date, the Purchaser's solicitors would not have had seven working days to consider the documents, as they were entitled to have. The plain copy of the Crown Lease which was sent on 13th May 1997 appeared to have been illegible in some material parts and so legible copies were requested on 13th June 1997. Another copy of the Crown Lease was sent on 16th June 1997 and this was again illegible so FCLK had to request on the same day for a better copy. Another copy of the Crown Lease was sent on 17th June 1997 and even on the date of completion, namely, 18th June 1997, FCLK had to write to say that some parts of the Crown Lease (especially page 1) were still illegible. Therefore up to the date of completion, the Vendor still had not supplied the original or certified copy of the Crown Lease as they were obliged to do under s.13 of the Conveyancing and Property Ordinance. Furthermore the copies of the Crown Lease supplied were not completely legible and hence the task of the Purchaser's solicitors of studying the documents of title was made impossible. Furthermore copies of the missing documents requested by FCLK on 20th May 1997, except items (a) and (g) which were never supplied, were only supplied by TTC on 17th June 1997.

6. In my judgment the requisitions raised by FCLK on 18th June 1997 were proper requisitions which could only have been raised after receipt by them of most of the documents on 17th June 1997. I do not agree with the Vendor's solicitor's contention that these are fresh requisitions. I find that even if it is true that the Vendor's solicitors did not have sufficient time to deal with these additional requisitions, that was of their own making and I find that the query about the possible breach of the Crown Lease by the erection of a multi-storey building on the plot was a justified requisition which, up to the time of completion, remained unanswered. In my judgment, therefore, the Vendor's solicitors had not shown good title by the time of the scheduled completion and therefore the Purchaser's solicitors were entitled to treat that omission as a wrongful repudiation of the Agreement. Time was clearly of the essence of the Agreement and I find that the Purchaser's solicitors were entitled to accept the Vendor's repudiation to terminate the Agreement. Apart from it being a condition of the Agreement that time was of the essence, it was said by the Court of Appeal in Wong Wai Chi Ann & Anor v. Cheung Kwok Fung Wilson & Ors, [1996] 3 HKC 287, at p.290 :-

"... In these provisional agreements for sale and purchase in today's secondary market in Hong Kong, everybody does, usually, proceed on the footing that time is to be of the essence, and that a purchaser who refuses or fails to sign the agreement, if it is available for signature on the specified date, and there is no blame to be attributed to the vendor, will be held to be in repudiatory breach of the agreement. ... But in the absence of special circumstances, it will usually be the case that a provisional agreement for sale and purchase in the common form in use in Hong Kong will be treated as one of which time is of the essence, although no express provision in that behalf is contained in the agreement....."

7. It was submitted on behalf of the Defendant that the Plaintiff, by her solicitor's letter of 18th June 1997, must have communicated a desire to postpone the completion. Alternatively, it was said that when the Plaintiff raised the further requisitions on 18th June 1997, she was thereby affirming the Formal Agreement and waived any breach of the Agreement on the Defendant's part. I do not agree that anywhere in the three letters written on her behalf by the solicitors on 18th June 1997, did the Plaintiff evince any intention or desire to postpone the completion. Nor, in my judgment, can it be said that the Plaintiff in any way affirmed the Agreement or waived the breach on the Defendant's part. In Chitty on Contracts 27th Ed., para.24-002, it is stated that :-

"Where the innocent party, being entitled to choose whether to treat the contract as continuing or to accept the repudiation and treat himself as discharged, elects to treat the contract as continuing, he is usually said to have 'affirmed' the contract. ... Affirmation may be express or implied. It will be implied if, with knowledge of the breach and of his 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."

In para.22-336 this was said about Waiver :-

"Waiver (in the sense of 'waiver by estoppel' rather than 'wavier by election') may also be held to have occurred if, without any request, one party represents to the other that he will forebear to enforce or rely on the term of the contract to be performed or observed by the other party, and the other party acts in reliance on that representation."

What the Plaintiff here did immediately after the time of completion was past, was to write to the Vendor to say that she accepted the Vendor's wrongful repudiation of the Agreement and the Agreement was accordingly terminated by the Vendor's repudiatory breaches.

8. It was also submitted on behalf of the Defendant that I should not reject out of hand the contents of the affirmation of Ho Tak Ming, a solicitor, who at the material time was a trainee solicitor in TTC. Mr Ho in his affirmation said that it was his understanding that FCLK had accepted TTC's undertakings to produce certified copies. He based this on FCLK, in their letter of 10th June 1997, noting TTC's undertaking to supply certified copies and on FCLK in their letter of 13th June 1997 "Not insisting on obtaining certified copies before completion." I see no justification whatsoever for Mr Ho coming to such an understanding. FCLK in their letter of 13th June 1997 referred to the case of Yeung Sau Chuen Sammy v. Chung Chun Ting and Cheung Sai Mui which said that the Purchaser is entitled to seven working days to consider the documents of title.

9. Mr Ho, in his affirmation, also mentioned that in answer to his suggestion made on 16th June 1997 to postpone the completion by three days, Mr Francis Chan of FCLK said he would take his client's instructions. Mr Ho also mentioned that in answer to his suggestion made on 17th June 1997 that the completion should be postponed to a later date, Mr Francis Chan maintained his silence and did not say whether he agreed or disagreed to have a postponement. It is not entirely clear to me what reliance the Defendant places upon this part of Mr Ho's affirmation. If it is suggested that the Plaintiff, by Mr Francis Chan's silence, had agreed to a postponement of the completion, I find no basis or justification for that supposition.

10. It is submitted on behalf of the Defendant that it is a triable issue whether by the two letters written by FCLK on 18th June 1997, the Plaintiff had chosen to waive the essential character of time by conduct and impliedly agreed to postponement of completion. In my judgment this is not a triable issue at all. I have found that by failing to provide certified copies of the Crown Lease and failing to provide copies of two of the missing documents and to answer the further requisitions by 5 p.m. on 18th June 1997, the Defendant was in breach of the S/P Agreement. Because I have so found, in my judgment there is no need to consider the Defendant's further answer given after 18th June 1997.

11. The Defendant has submitted that it should have been given a reasonable time to answer the further requisitions made on 18th June 1997. I have found above that these further requisitions could only have been made after the Purchaser received the plain copies of some missing title documents on 17th June 1997. I am of the view that the Defendant, upon receiving these further requisitions, was not entitled to an automatic extension of time for completion because otherwise it would mean that the Vendor who wanted to postpone the completion could always delay it by late production of the title documents. As Mr Li on behalf of the Plaintiff put it "this will put the whole conveyancing transaction into disarray". I agree. In any case after the Defendant received these further requisitions, it never indicated that it needed time to answer them. The further requisitions were simply ignored and when TTC wrote on 19th June 1997, they maintained that all the requisitions had been answered satisfactorily by 16th June 1997. In this respect, it is pertinent to point out that in the affirmation of Mr Francis Chan, he mentioned that at 3:10 p.m. and at 4:19 p.m. on 18th June 1997 he tried to telephone Mr Ho but without success. Mr Ho had not returned Mr Chan's calls and only telephoned Mr Chan at 4:56 p.m.

12. In the circumstances, I grant to the Plaintiff the relief sought, namely, an order for rescission of the S/P Agreement, final judgment for the Plaintiff in the sum of $1,000,000.00 by way of repayment of the deposit, final judgment for the conveyancing expenses in the sum of $78,250.00 and agent's commission in the sum of $50,000.00. I am only awarding $50,000.00 and not $100,000.00 as claimed because the agreement to pay a commission to the estate agent was not produced and I am not aware under what circumstances, if at all, the balance of $50,000.00 is payable to the Incorporated Owners. I also award interest on the sums of $1,000,000.00 and $50,000.00 from 20th June 1997 to date of judgment at 1% above the prime lending rate, and thereafter at the judgment rate to date of payment. I also grant the Plaintiff the declaration that he has a lien on the Property for the sums for which judgment has been given with interest as awarded. Finally I award the Plaintiff the costs of this action and of the application before me, which are to be taxed if not agreed.