WU HAK KAN v. LAU KIN SING

HCA 14670/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 14670 OF 1998

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REASONS FOR JUDGMENT

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1. These proceedings arise out of an agreement for sale and purchase of a property in Yuen Long entered into between the plaintiff as purchaser and the defendant as vendor on 7 April 1998. The plaintiff seeks a declaration that the agreement has been rescinded, and claims repayment of the sum of $150,000.00 paid to the defendant as deposit.

2. At the hearing of this action I gave judgment for the plaintiff as claimed and said that I would give my reasons in writing, which I now do.

3. The defendant was the owner of the property and was planning to redevelop it in early 1998 into a three storey village house. However, as he was having some difficulty raising the capital necessary to fund the building, work he sought buyers interested in acquiring parts of the building in advance. As one such sale had fallen through he approached the plaintiff. The plaintiff tried to find a purchaser for him, but failed, and the defendant asked him if he would buy the ground floor flat of the property. In order to persuade him , he assured him that he would make a profit on the resale, and reduced the price from $1,200,000.00 to $1,080,000.00.

4. In the course of the discussions between them, other terms were agreed. The first of these, as a quid pro quo for reducing the price, was that, if the plaintiff resold the property within a certain period, and made a profit of more than $200,000.00, then the defendant would receive 20% of that profit from him. The second term was that the plaintiff had the right to resell the property to the defendant. These were incorporated into the provisional sale and purchase agreement as follows:

"Further, should the Purchaser successfully sell the said property at a consideration above HK$1,280,000.00, the Purchaser shall pay the Vendor 20% of its total profit which is effective for a year. However, at the same time, the Purchaser may re-sell the said property back to the Vendor within 1 year at the original selling price of HK$1,080,000.00."

5. The agreement was signed by the parties in the presence of a witness on 7 April 1998, and the defendant confirmed in evidence that he had read it before signing. The same day the plaintiff paid the first two instalments of the purchase price in a total of $150,000.00. The next instalment of $108,000.00 was not due until building work on the 3rd floor was completed.

6. On or about 6 June 1998, the plaintiff informed the defendant that he wished to exercise his right to re-sell back to him, and asked for a refund of the $150,000.00. The defendant refused. Correspondence between solicitors ensued, and the defendant, in order he says to resolve the matter amicably, offered to repay the sum, but asked for payment to be postponed to October 1998. The plaintiff refused to allow this and insisted on immediate payment, upon which the offer by the defendant was withdrawn.

7. It is the defendant's case that the buy back option was offered solely because the plaintiff said that he might have difficulty getting a mortgage, and it was in order to help him if he could not. Further, the defendant contended that the period of one year in the agreement meant one year from the date of assignment. The plaintiff's case is that the time ran from the date of the agreement, and he was within his rights to exercise the option when he did. The question of when the time began to run is really the only issue here.

8. I start with the agreement itself, the original of which is in Chinese but of which an agreed translation was submitted. From the relevant section, which is an addition at the end headed "Remarks", it is clear that the only reference is to a period of a year, without specifying a commencement date. It is also clear that the same period applies to both the 20% share of profit agreement and the option to re-sell, shown by the words "at the same time" in the second sentence. If the defendant is right, that the period of a year commenced with completion and payment of all instalments, not only would the plaintiff be unable to resell to anyone else for a profit before then, which is contradicted by the defendant himself in evidence when he said that, if there was a resale be the plaintiff at a profit immediately after the agreement, he would expect to receive his share. Indeed, clause 6 of the agreement allows for the situation of the plaintiff reselling to another, and a request to the defendant to assign to the plaintiff's nominee, which would not be necessary after it had been assigned to the plaintiff. But in addition, if the defendant's reason for the option, namely a possible difficulty in the plaintiff arranging a mortgage, this would arise well before completion, when the plaintiff was trying raise finance to make payment of the final instalments, not after the property had been assigned to him.

9. In short, the defendant's given understanding of the meaning of the provisions in the agreement does not make sense. The plaintiff's account of an arrangement whereby he can resile from the agreement at any time, as an inducement for him to enter into the sale at all, has more than the ring of truth to it, and I accept his evidence that this was indeed the case.

10. In any event, there is no ambiguity about the period in the agreement. It says: "within 1 year", and, in the absence of anything to the contrary, this must mean within a year of the date of the agreement. Nothing could be clearer. It can mean only at any time within a year after that, and by exercising his option in June 1998, the plaintiff was entitled to rescind the agreement and receive a refund of his deposit.

11. For these reasons I gave judgment for the plaintiff as claimed in the statement of claim.