TSANG YUK LAN AND ANOTHER v. LAU LAI

1997, No. A8199

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 8199 OF 1997

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J U D G M E N T

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1. This action concerns the sale and purchase of a flat in Hong Kong namely, Flat A on the 16th Floor of Tower 2 of Marble Garden, 33 Marble Road, North Point in Hong Kong ("the property"). The property is more fully described in paragraph 1 of the Statement of Claim.

2. The 1st and 2nd Plaintiffs were the purchasers of the property and the Defendant was the vendor. The 1st and 2nd Plaintiffs are respectively, mother and son. Completion of the sale and purchase of the property did not take place. The Plaintiffs' claim against the Defendant is for damages for breach of contract and the return of deposit paid. There is a counterclaim by the Defendant for damages for breach of contract.

3. It is common ground between the parties that by a provisional agreement dated 18th June 1997 made between the Defendant as vendor and the Plaintiffs as purchasers, the Defendant agreed to sell and the Plaintiffs agreed to purchase the property on the terms set out therein ("the provisional agreement"). The purchase price was $4,800,000. An initial deposit of $100,000 was paid by the Plaintiffs on that day with a further $380,000 to be paid on or before 3rd July 1997. A formal agreement for sale and purchase had to be signed on or before 3rd July 1997. The solicitors for the Plaintiffs were stated to be 'Knight & Co.' and the solicitors for the Defendant were stated to be 'Leo K.W. Lok & Co'.

4. There is no dispute also that on the same day, shortly after the provisional agreement was signed, the parties met at a restaurant. The provisional agreement was amended to advance the completion date to 21st July from the original completion date of 31st July 1997 and a rider clause was also included in the provisional agreement.

5. Both the 2nd Plaintiff and the Defendant gave evidence. The 2nd Plaintiff confirmed the truth of his witness statement. His evidence was that after the making of the provisional agreement, he and his mother left the property at about 1:00p.m. on 18th June 1997. On his way home, he discovered that the number of the identity card of the Defendant as shown in the provisional agreement was different from that as shown in the photocopy of the deed of assignment. He then called the Defendant at her husband's mobile phone number and asked her to clarify the matter and an arrangement was made to meet at 2:00p.m. that same day in a restaurant. His evidence was that when they met at 2:00p.m. that day, the Defendant confirmed to him that the number of the identity card as appeared in the provisional agreement was correct and he had no further queries about her proof of title.

6. After that was sorted out, the Defendant proposed to advance the completion date from 31st July 1997 to 21st July 1997. At first, he and his mother did not agree to that but they finally agreed to advance the completion date. But this was only on the condition that he and his mother would successfully obtain a mortgage loan for the purchase of the property on or before 21st July 1997 and that in the event that they were unable to obtain the mortgage loan on or before 21st July 1997, they could fall back on the original completion date of 31st July 1997. It was in those circumstances that the rider clause came to be included in the provisional agreement.

7. He denied what was put to him in cross-examination that the Defendant had made the request for the advancement of the completion date because she had told him that she had purchased another property at Shatin with a date of completion at 23rd July 1997 and that she would therefore like the date of completion in respect of the property to be advanced from the 31st July 1997 to 21st July 1997. He also denied that he was told that the Defendant would make use of the sale proceeds and the balance of the purchase price in respect of the property to complete her purchase of the Shatin property.

8. The 2nd Plaintiff said in evidence that the reason put forward by the Defendant for advancing the date for completion was that the Defendant told him that the solicitor acting for her would be out of town. He was told that her solicitor was William Au. He also said in cross-examination that the rider clause in the provisional agreement was inserted to protect himself. The reasons for doing so was because the Defendant requested advancing the completion date to 21st July and there might not be sufficient time for the bank to process their application for a mortgage loan and he also needed time to get proof of income for himself.

9. According to the evidence of the Defendant, it was she who phoned the 2nd Plaintiff shortly after the making of the provisional agreement informing him that she had already purchased another property known as Flat A, 4th Floor, Tower 6, Grandeur Garden in Shatin, New Territories ("the Grandeur Garden property") with completion on 23rd July 1997 and that she would make use of the proceeds of sale of the property to complete the purchase of the Grandeur Garden property. That was why she wanted to advance the completion date to 21st July 1997. She said that the 2nd Plaintiff agreed to an earlier completion date. On being informed that he was at the Fook Sing Restaurant at North Point, she and her husband met the Plaintiffs there. The completion date was amended to 21st July 1997 in the provisional agreement. She also gave evidence that when she signed the provisional agreement, she had forgotten about the purchase of the Grandeur Garden property and that the completion of that property was to be on 23rd July 1997. That was why, she said, she telephoned the 2nd Plaintiff to advance the completion date.

10. She did, however, say in cross-examination that the 2nd Plaintiff was rather worried about advancing the completion date to 21st July 1997 because he was wondering whether there was sufficient time for the bank to consider the loan application and therefore the 2nd Plaintiff asked her to insert a clause to protect himself if he was unable to complete the deal on 21st July 1997 then he could postpone the date to 31st July 1997. She agreed to this and her husband wrote down the rider clause in the provisional agreement.

11. The rider clause in the provisional agreement, according to the certified translation presented by the Plaintiffs, provided as follows:

"Both parties agreed that on or before the 21st day of July 1997 should the purchaser fail to secure the grant of mortgage loan from bank, the date of delivery of vacant possession shall be postponed to the 31st day of July 1997."

12. There is some difference in the translation in the certified translation presented by the Defendant in the Defendant's bundle of documents which translates that clause as:

"Both parties agreed that on or before the 31st day of July 1997 should the purchaser fail to make successful application for the grant of (mortgage) loan from bank, the date of delivery of vacant possession shall be postponed to the 31st day of July 1997."

13. In cross-examination, the 2nd Plaintiff was asked to read out the rider clause in the provisional agreement. This was translated by the court interpreter as follows:

"Both parties have agreed if the purchaser cannot successfully apply for a loan from the bank on or before 21st July 1997, the date of vacant possession shall be postponed to 31st July 1997."

14. Although there is a difference in the translations, nothing in my view turns on the translations of the rider clause in the provisional agreement. The provisional agreement was superseded by the formal agreement for sale and purchase which was prepared by the solicitors for the respective parties and which was dated 3rd July 1997 ("the formal agreement"). The parties' rights and obligations are governed by the formal agreement and not by the provisional agreement. I shall come back to the formal agreement later on.

15. On the dispute of fact between the parties, I find as a fact that the Defendant did not inform the 2nd Plaintiff about the Grandeur Garden property with completion on 23rd July 1997 and that she did not tell the 2nd Plaintiff that she would make use of the proceeds of sale of the property to complete her purchase of the Grandeur Garden property. I prefer the evidence of the 2nd Plaintiff and reject the evidence of the Defendant on this. I note that although the provisional agreement stated that the Defendant's solicitors were Leo K.W. Lok & Co., it was in fact William Au & Co. who acted for her in the sale and purchase of the property. Knight & Ho, the then solicitors for the Plaintiffs wrote on 20th June 1997, two days after the provisional agreement was signed, to William Au & Co. stating that they acted for the purchasers of the property and were given to understand that they, i.e. William Au & Co., acted for the vendor, namely the Defendant. It is probable that Knight & Ho got that information from their client who got it from the Defendant in the first place. As I have said, it was the 2nd Plaintiff's evidence, which I accept, that the Defendant gave as an excuse for advancement of the completion date to 21st July 1997 that her solicitor William Au would be out of town.

16. I observe also that in the correspondence between the solicitors there is no mention whatsoever of the Grandeur Garden purchase by the Defendant and the fact that she needed the proceeds of sale from the property to complete her purchase of the Grandeur Garden property.

17. The draft formal agreement was prepared by William Au & Co. as solicitors for the Defendant and amendments were made by Knight & Ho as solicitors for the Plaintiffs before execution of the same. On signing the formal agreement, a further deposit of $380,000 was paid by the Plaintiffs making a total of $480,000 or 10% of the purchase price of the property which was paid to the Defendant.

18. Completion was stipulated to be on or before 21st July 1997. By Clause 5, time in every respect was made of the essence of the formal agreement. One of the amendments made to the draft formal agreement was the addition of the rider clause at page 14(a) of the formal agreement ("the rider clause"). This provided as follows:

"Notwithstanding anything herein to the contrary provided, it is hereby agreed by and between the parties that if the Purchaser is unable to obtain financial assistance or a mortgage loan from a bank in Hong Kong, the Purchaser shall be entitled to postpone the date of completion to 31st July 1997."

19. Mr. Lincoln Ho, a partner of Knight & Ho gave evidence before me. I accept his evidence. He confirmed the truth of his witness statement. His evidence was that his firm also acted for Citibank. The Plaintiffs applied to Citibank for a mortgage loan in order to finance the purchase of the property. Mr. Ho confirmed in evidence that Citibank had in principle approved the mortgage loan to the Plaintiffs subject to conditions imposed by Citibank. These conditions were set out in the letter from Citibank dated 17th July 1997 to Knight & Ho, the relevant part of which provided as follows:

"Upon production of the relative title deeds, and your satisfaction that we will have irrefutably good title, please prepare a FIRST LEGAL CHARGE/MORTGAGE in our favour ......"

20. So, it is clear from that letter and from the evidence of Mr. Ho that the mortgage loan would be granted to the Plaintiffs subject to two conditions. First, all relative title deeds must be produced. Secondly, Knight & Ho must be satisfied that Citibank will have irrefutably good title to the property. It is only sensible that a bank would wish to have ample protection and to impose such conditions before advancing money under a mortgage.

21. As the correspondence shows, Knight & Ho as solicitors for the Plaintiffs raised certain requisitions as to title in respect of the property. I am not concerned with whether these requisitions were properly raised or not, or whether the requisitions were satisfactorily answered or not. The fact remains that Knight & Ho were not satisfied as to title and the mortgage loan was not advanced by Citibank.

22. Mr. Ho confirmed in evidence that the only reason why the mortgage loan was not granted to the Plaintiffs was that his firm was not satisfied with the title to the property.

23. In those circumstances, by letter dated 21st July 1997 the Plaintiffs' solicitors, Knight & Ho, wrote to the Defendant's solicitors stating, inter alia, that the Plaintiffs wished to postpone the completion of the sale to 31st July 1997 relying on the rider clause set out in the formal agreement. By letter of the same date, the solicitors for the Defendant denied that the Plaintiffs were entitled to rely on the rider clause and reserved all the Defendant's rights under the formal agreement.

24. There is some dispute between the parties as to what happened on 21st July 1997. The Defendant gave evidence that she had been in touch with the 2nd Plaintiff from time to time even before 21st July 1997 and had been told by the 2nd Plaintiff that the Plaintiffs had successfully applied for a mortgage loan from a bank to finance the purchase of the property. In cross-examination, she said it was on two occasions when this occurred. The first was when the 2nd Plaintiff returned from Japan. The Defendant, it appeared to me, was confused as to when this took place, saying it was on 18th or 19th June 1997 on a number of times when she gave her evidence in cross-examination. But in re-examination, it was only after repeated questioning by her counsel that she said she meant July instead of June. The second occasion was when she met the 2nd Plaintiff because he wanted the keys to the property to facilitate decoration works.

25. What she said happened on these two occasions was never put to the 2nd Plaintiff when he gave evidence. The 2nd Plaintiff denied that there was ever a conversation with the Defendant shortly after he returned from Japan. I reject the Defendant's evidence that the 2nd Plaintiff told her that the Plaintiffs had successfully applied for a mortgage loan.

26. As to what happened on 21st July 1997, the Defendant's evidence is that on that day in the afternoon she attended the offices of William Au & Co. with the intention to execute the assignment to complete the transaction and to receive the proceeds of sale. When she arrived at her solicitors' offices, she was informed that the Plaintiffs had failed or refused to tender the balance. She immediately phoned the 2nd Plaintiff to ascertain the reason. She said she was told by the 2nd Plaintiff that there was some dispute between him and his solicitors but that the dispute would soon be solved. Over the phone she was first requested to postpone the completion date but she said that she needed the proceeds of sale on or before 23rd July 1997. She said she told the 2nd Plaintiff that the completion money must reach the offices of William Au & Co. no later than 23rd July 1997 failing which she would forfeit all the deposit. She also said that the 2nd Plaintiff made no objection to that. This is the conversation she said took place when she was at the offices of William Au & Co.

27. In cross-examination, she said that the date 23rd July 1997 was fixed as a result of a request by the 2nd Plaintiff when she telephoned him while she was at the offices of William Au & Co. She said the 2nd Plaintiff asked her whether she could give him two more days until 23rd July 1997 for completion. She said she agreed to that and to extend the completion to 23rd July 1997 but told the 2nd Plaintiff that he must tender the balance of the purchase price before 5:00p.m. on 23rd July 1997. She said the 2nd Plaintiff did not object to that. I observe that this was never put to the 2nd Plaintiff when he gave evidence. This also formed no part of the Defendant's pleaded case and is also contrary to what is stated in the correspondence. I reject the Defendant's evidence on this. I disbelieve her.

28. The letter from William Au & Co. to Knight & Ho dated 23rd July 1997 stated, inter alia, as follows:

"We refer to the conversation between your Mr. Wong and our Mr. Raymond Chiu and have been advised that the sale and purchase for the abovementioned property will only take place tomorrow 24th July 1997."

This alleged agreement was denied in the correspondence by the Plaintiffs' solicitors. It was never pursued by the Defendant either in her pleadings or in her evidence. I would, however, observe that the alleged agreement was that the sale would be completed on 24th July 1997. If indeed the Defendant was intending all along to use the proceeds from the sale of the property to pay for her purchase of the Grandeur Garden property, I fail to see why she would agree to completion to take place on 24th July 1997, one day after completion of the sale and purchase of the Grandeur Garden property. As I have said, I reject her evidence that there was ever an agreement to postpone the completion date to 23rd July 1997.

29. I turn to the construction of the rider clause in the formal agreement. This has been set out above. I was referred to para. 12-104 of Vol. 1, Chitty on Contracts, 27th Edition where it stated:

"Where the words of a written agreement have a clear and fixed meaning, not susceptible of explanation, extrinsic evidence is not admissible to show that the parties meant something different from what they have written."

30. The rider clause is, in my judgment, clear and unambiguous. If the purchaser is unable to obtain financial assistance or a mortgage loan from a bank in Hong Kong, the purchaser shall be entitled to postpone the date of completion to 31st July 1997. The word 'unable' is clear and unambiguous. It simply means 'not able'. Because the solicitors Knight & Ho were not satisfied with the title to the property, the mortgage loan was not granted to the Plaintiffs. The Plaintiffs were therefore, in my judgment, not able to obtain financial assistance or a mortgage loan from a bank in Hong Kong and the Plaintiffs were entitled under the rider clause to postpone the date of completion to 31st July 1997.

31. By the letter dated 21st July 1997 from Knight & Ho to William Au & Co., the Plaintiffs effectively postponed the completion date to 31st July 1997 by relying on the provisions of the rider clause. By their letter dated 23rd July 1997, William Au & Co. demanded that completion take place by 5:00p.m. on that day, otherwise the deposit paid would be forfeited. The letter provided, inter alia, as follows:

"As we have satisfactorily answered all your requisitions, we are instructed to inform you that our client will forfeit your client's deposit and reserve her rights for damages if the sale and purchase of the abovementioned property is not completed before 5:00p.m. today."

This was, in my judgment, a breach of the formal agreement on the part of the Defendant as the completion date was postponed to 31st July 1997.

32. By letter dated 26th July 1997, William Au & Co. informed Gary Chan & Company, the new solicitors for the Plaintiffs, that the Defendant had forfeited the deposit pursuant to their letter dated 23rd July 1997 to Knight & Ho. By letter dated 29th July 1997, Gary Chan & Company on behalf of the Plaintiffs accepted the wrongful repudiation of the formal agreement on the part of the Defendant and demanded the return of the deposit and reserved all rights and claims on behalf of the Plaintiffs. The Plaintiffs were, in my judgment, entitled to do so as the Defendant was in repudiatory breach of the formal agreement and such repudiation was accepted by the letter dated 29th July 1997.

33. I now go on to consider what the position is on the basis that the completion date was not postponed to 31st July 1997 but remained at 21st July 1997 under the formal agreement.

34. Time in every respect was of the essence of the formal agreement. This included the time for completion on 21st July 1997. There was no completion on 21st July 1997. The stipulated time for completion lapsed. Even though that time lapsed, the Defendant still wanted to carry on with the formal agreement. The Defendant did not elect to treat the contract at an end when there was no completion on 21st July 1997. It is clear that she still wanted to proceed with the contract. Her solicitors William Au & Co. wrote to Knight & Ho by the letter dated 23rd July 1997 which I have referred to above. That letter was received by Knight & Ho at 3:41p.m. It effectively only gave the Plaintiffs slightly over one hour to complete the sale and purchase by paying the balance of the purchase price and executing the assignment. The Defendant has, in my judgment, waived the requirement in the formal agreement that completion should take place on 21st July 1997 as she still wanted to complete the transaction even though 21st July 1997 came and went without completion. On the basis that the time for the completion on 21st July 1997 was of the essence of the formal agreement, that provision was waived.

35. The Defendant was, of course, entitled to make the time for completion of the essence again but in order to do so, she must give reasonable notice to the Plaintiffs (see e.g. Charles Rickards Ltd. v. Oppenhaim [1950] 1 K.B. 616). By the said letter dated 23rd July 1997 from her solicitors to the Plaintiffs solicitors, the Plaintiffs were given only slightly over one hour to complete on 23rd July 1997. This was wholly unreasonable. No reasonable notice was given. By forfeiting the deposit, she was, in my judgment, in repudiatory breach of the formal agreement. By the letter dated 29th July 1997 from Gary Chan & Company acting for the Plaintiffs, the Plaintiffs accepted the wrongful repudiation of contract on the part of the Defendant. In my judgment, the Plaintiffs are entitled to judgment.

36. The Plaintiffs are entitled to the return of the deposit in the sum of $480,000. There is no evidence that they have paid the legal costs pleaded in the Statement of Claim and I make no award for that sum. Although there is no direct evidence that the Plaintiffs paid the stamp duty in the sum of $132,100, I find that I can infer that the Plaintiffs have paid the sum of $132,000 as stamp duty which is the sum mentioned in the formal agreement for sale and purchase as stamp duty having been paid and collected by the Stamp Office. The Plaintiffs are entitled to claim that sum from the Defendant. I, therefore, give judgment for the Plaintiffs in the sum of $480,000 being the return of the deposit and the sum of $132,000 as damages. I dismiss the counterclaim.

[After hearing submissions]

37. I also order that the Plaintiffs are entitled to interest on the deposit from the date when demand was made, i.e. from 29th July 1997 at 10% per annum until judgment. I also order that the Plaintiffs are entitled to interest on the sum of $132,000 from date of writ i.e. from 6th August 1997 at 10% per annum until judgment.

38. I also make an order that the costs of the action and the counterclaim be paid by the Defendant to the Plaintiffs to be taxed if not agreed save that the costs for the two hours on the 1st day of trial on 2nd November 1998 which were wasted are to be borne by the Plaintiffs and to be paid to the Defendant, such costs to be taxed if not agreed.