WU WAI SAN, JANET v. CHU CHEONG KIT, RAYMOND t/a RAYMOND CHU & CO

DCCJ 2672/2008

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION No. 2672 OF 2008

--------------------

BETWEEN

-------------------

--------------------

JUDGMENT

-------------------

Background

1.  The present dispute arose out of a property conveyancing transaction in which the Plaintiff as the purchaser retained and instructed the Defendant  to act on her behalf to complete the purchase of a property situated at Flat C, 6/F, Block 2, King’s Park Villa, No.1, King’s Park Rise, Homantin, Kowloon together with car parking space C55 (“the Property”).   The Plaintiff now claims against the Defendant for damages suffered resulting from his negligence and failure to act competently to effect the transaction.

2.  The Plaintiff is a medical doctor but has little experience in conveyancing matters.  She bought the Property intending it to be a matrimonial home after her wedding in November 2008.  It was her first experience in property purchase. 

Undisputed facts

3.  The Plaintiff entered into a Provisional Sale and Purchase Agreement dated 27 February 2008 for the purchase of the Property at the consideration of HK$10,280,000.   She paid HK$380,000 as initial deposit at the time of signing the provisional Sale and Purchase Agreement.   She then instructed the Defendant to act for her in the transaction.  The Vendor was represented by Messrs.  Katherine Y.W. Or & Co (“the Vendor’s Solicitors”).

4.  On 11 March 2008, the Plaintiff signed the Sale and Purchase Agreement and paid the further deposit of HK$608,000.    Completion was scheduled for 2 June 2008 before 5:00 pm at the office of the Vendor’s Solicitors, as stipulated in the Sixth Schedule to the Sale and Purchase Agreement.

5.  Subsequent to the execution of the Sale and Purchase Agreement, it was agreed between the Plaintiff personally and the Vendor that completion would be brought forward to 21 May 2008.

6.  On 21 May 2008, when the Defendant’s representative arrived at the office of Vendor’s Solicitors to deliver the completion docket containing the balance of the purchase price, the arrival time stamped by the “time chop” at the reception on the completion docket was 5:06 pm.  This apparently was 6 minutes later than 5:00 pm and was beyond the Business Hours as defined in the Sixth Schedule of the Sale and Purchase Agreement.  The Vendor’s Solicitors refused to complete and indicated that the Vendor would seek a rescission of the Sale and Purchase Agreement and the forfeiture of the total deposit paid in the sum of HK$998,000.

7.  On 24 May 2008, the Plaintiff engaged another firm of solicitors, Messrs. Arculli, Fong & Ng to take over from the Defendant and eventually settled the matter with the Vendor by paying an additional sum of HK$180,000 as consideration for the Vendor to waive all its rights and claims against the Plaintiff for breach of the Sale and Purchase Agreement.  The new completion date was agreed to be on or before 4 June 2008.

8.  Completion eventually took place on 2 June 2008.

The Plaintiff’s case

9.  By her Amended Statement of Claim, the Plaintiff alleges that the Defendant has acted in breach of the implied terms of the retainer to exercise due care and skill to be expected of a reasonably competent solicitor and alternatively, the Defendant has breached its duty of care to the Plaintiff.

10.  The Plaintiff’s complaints are simple.  First, when the Defendant’s representative arrived at 5:06 pm on 21 May 2008, it was late and was outside the Business Hours as defined in the Sale and Purchase Agreement.  This was obviously the mistake of the Defendant.  This constituted negligence on the part of the Defendant.  But for this negligent act of the Defendant, the Plaintiff would have completed the purchase on 21 May 2008 without having to incur an additional expense of HK$180,000.

11.  Secondly, after the Vendor had indicated its position to treat the Plaintiff as acting in breach of the Sale and Purchase Agreement and to forfeit the deposit of HK$998,000, the Defendant  advised her to argue that completion on 21 May 2008 would not be subject to the defined Business Hours and that she was entitled to complete anytime before mid-night. The Plaintiff alleges that the Defendant has failed to compromise the situation with the best interest of the Plaintiff in mind.

12.  The Plaintiff claims against the Defendant for damages in the sum of HK$180,000 together with the additional legal costs in the sum of $1,500 and additional interest payment for mortgage arrangement in the sum of $683.15.

The Defendant’s case

13.  In gist, the Defendant’s pleaded case is that the defined Business Hours of between 9:30am and 5:00 pm would apply only when the completion date remained to be on 2June 2008.   Therefore, when the completion date was brought forward to 21 May 2008, and there being no express or specific agreement for the application of the defined Business Hours, the “mid-night rule” should apply.  Should the Plaintiff compel the Vendor to complete the purchase relying on the argument of the “mid-night rule” and take the Vendor to court for adjudication, she would not have suffered the damage as claimed.

14.  In the Defendant’s Amended Defence, there is no allegation that the Vendor’s Solicitors were wrong to hold that the arrival time of the completion docket was at 5:06 pm, nor is there any positive assertion of the correct arrival time.   The Defendant is ambiguous as to the arrival time.  I refer to paragraph 12(g)(iv) of the Amended Defence where no express denial is pleaded but an inference that the arrival time was before 5:00 pm.  I quote paragraph 12 (g)(iv) as follows:

“(iv) therefore, the vendor was not entitled to:-

   (a) Refuse accepting the payment of balance of purchase price made at 17:06 pm; and

   (b) Adopt the position as stated in the said covering letter of its solicitors for the returned cheques to Raymond Chu & Co dated 21^st May 2008”

15.  In this connection, it is necessary to consider the letter dated 21 May 2008 to understand the Defendant’s allegation.  While the whole letter has centred on the arguments why the defined Business Hours of between 9:30 am and 5:00 pm should not apply when the completion date changed from 2 June to 21 May, there is no complaint or protest at all that the Vendor’s Solicitors’ record of time is incorrect and there is no positive assertion of the time that the Defendant’s representative arrived.  It is only very ambiguously expressed in paragraph 8 of this letter that “Our representative who delivered the cheques to your firm insisted that he arrived your Firm before 5:00 pm. ”

16.  At  the commencement of the trial, the Defendant wanted to adduce as evidence a certificate from the Hong Kong Observatory (dated 28 October 2010) and a Supplemental Witness Statement of Mr. Simon Chan (the Defendant’s representative on 21 May 2008) to say that he arrived at 4:58 pm on 21 May 2008 according to his watch which only has a discrepancy of 0.2 seconds per 24 hours with the Master Clock at the Hong Kong Observatory.    When the Defendant was reminded that the time of arrival had not been pleaded in his Amended Defence, the Defendant then sought leave to further amend the Amended Defence to insert a new paragraph 11 which reads: “Paragraph 6 and 7 are denied.  The Defendant avers that the completion was tendered on or before 4:58 pm on 21 May 2008.”

17.  In the interest of justice and noting that by an earlier witness statement of Mr. Simon Chan dated May 2010, the Defendant first mentioned the arrival time was 4:58 pm., I gave the Defendant leave to amend the Amended Defence as per the draft Re-Amended Defence and to allow the Supplemental Witness Statement of Mr. Chan and the certificate from the Hong Kong Observatory as part of the Defendant’s evidence.

Applicable Legal Principles

18.  Parties are in agreement that the Defendant owed a duty to the Plaintiff to exercise due care and skill to be expected of a reasonably competent solicitor: (see Midland Bank Trust Co Ltd v Hett Stubbs and Kemp [1979] Ch 384 at 402.)

19.  Parties are also in agreement with the legal principle that the agreed time for completion, being expressly provided as of essence in the Sale and Purchase Agreement, must be strictly adhered to. [See: Union Eagle Ltd v Golden Achievement Ltd [1997] 1 HKC 173; Ocean Force Enterprises Limited & Anor v Grand Fully Holdings Limited & Anor, HCA 3571/1997 (14 April 1999); Leung Ching Fai Jacky v Tang Ka Fai, HCA 2313/2004 (1 February 2006)]

Issues

20.  The remaining issues are first, whether the defined Business Hours would apply when the complete date changed from 2 June to 21 May, and if yes, whether the Defendant was in breach of contract and/or was negligent in failing to tender completion on behalf of the Plaintiff on 21 May 2008 by 5:00 pm.   The arrival time of the Defendant’s representative at the Vendor’s Solicitors’ office would be a question of fact to be considered.

21.  If the Defendant is found to be late and negligent, whether the Plaintiff is entitled to claim the sum of $180,000 as damages suffered in her bid to mitigate her loss.

Whether defined Business Hours should apply on 21 May 2008

22.  The Defendant has argued that when the completion date changed from 2 June 2008 to 21 May 2008, and in the absence of an express agreement on whether the Business Hours would continue to apply, the Defendant was not obliged to tendering the completion before 5:00 pm. Therefore, it was open for them to complete on behalf of the Plaintiff before mid-night on 21 May 2008.

23.  I cannot agree with this argument.  It is clear from reading the letters exchanged between the Defendant on behalf of the Plaintiff and the Vendor’s Solicitors dated 13 May and 14 May 2008 on the matter of advancing the completion date, that the only variation to the Sale and Purchase Agreement was the date of completion.  It has been treated as a simple matter and the respective solicitors confirmed the new completion date to be 21 May 2008.  There was no discussion or requests at all for other consequential changes.  The intention is clear that the transaction would still be subject to the same terms and conditions of the Sale and Purchase Agreement except the new completion date, or there is an implied agreement to the same effect.

24.  The relevant clauses of the Sale and Purchase Agreement are as follows:

(i)   Clause 3.01: “The purchase shall be completed at the office of Messers. Katherine Y.W. Or & Co., Solicitors (the “Vendor’s Solicitors”) now situated at Suite 1205, 12^th Floor, Lippo Centre, Tower Two, 89 Queensway, Hong Kong or as the Vendor may direct on or before the date and time as set out in Sixth Schedule hereto (the “Completion Date”) when the balance of the Purchase Price shall be fully paid.”

(ii)   Clause 7.01: “Time shall in every respect be of the essence of this Agreement.”

(iii)   Clause 21.01: “If the Purchaser shall fail to complete the purchase…, the Vendor may rescind this Agreement and the deposits up to 10% of the Purchase Price …shall be absolutely forfeited…”

(iv)   Clause 25.01(a): “In this Agreement, unless the context otherwise requires:- the word “day” or “working day” wherever used in this Agreement shall mean calendar day PROVIDED that in respect of any of the date or dates stipulated herein for payment or completion, such payment or completion shall take place during the Business Hours as defined in the Sixth Schedule hereto…”

(v)   The Sixth Schedule (Completion Date and Business Hours): The 2^nd day of June 2008 within the Business Hours between 9:30 am and 5:00 pm.”

25.  I have been referred to two letters dated 20 May 2008 written by the Defendant to Bank of China on behalf of the Plaintiff, confirming certain information for the mortgage execution. In the first letter, the Defendant reminded the Bank that “completion shall take place on or before 5:00 pm on 21 May 2008” and that the Bank should arrange for drawdown before 3:30 pm on the same day.  In the second letter, it was confirmed that completion was scheduled on or before 4:00 pm on 21 May 2008 and the Defendant requested funds to be ready before 3:00 pm on 21 May 2008.

26.  In his oral testimony, the Defendant admitted that there was the intention to complete before 5:00 pm and that it was the normal completion time for conveyancing transactions.  He even said that solicitors would rarely rely on the so-called “mid-night” rule.  He said that he thought of using it as a tactic hoping to reach a compromise with the Vendor’s solicitors, and this would avoid all arguments on the exact time of arrival and on whether his representative was late or not.

27.  My conclusion on this issue is that in the absence of express contrary provisions, all terms and conditions of the Sale and Purchase Agreement remain applicable and this would certainly include the Business Hours as defined in the Sixth Schedule(except the new completion date).

The arrival time of the Defendant’s representative

The Plaintiff’s evidence

28.  In her witness statement, the Plaintiff gave a detailed account of how she handed her cheque to the Defendant much earlier in advance than requested to facilitate completion.  On this particular day on 21 May 2008, she and her husband called the Defendant a few times to ensure that things were smooth.  They also confirmed with the mortgagee bank on their own initiative that progress was smooth.  She was told to go to the Defendant’s office at 6 pm to get the keys of the Property.

29.  The Plaintiff said that shortly before 6 pm, she received an urgent phone call from the Defendant telling her that the keys were unavailable and that the Vendor’s solicitors had refused to complete as scheduled and refused to accept the cheque of the Plaintiff as it arrived at 5:06 pm instead of 5:00 pm.  She was also told that the Vendor might sue for breach of contract and forfeit the deposit of close to $1 million.

30.  The Plaintiff also said that the Defendant was very apologetic over the phone and admitted several times that it was entirely his fault.   The Plaintiff also said that (in paragraph 32 of her witness statement) the Defendant gave her a few reasons to explain for the delay, which are:

(a)   He was given the wrong address of the Vendor’s law firm in Lippo Centre;

(b)   Vendor’s law firm was suspected to have deliberately delayed accepting the cheque;

(c)   The mortgagee bank, BOC was very troublesome and demanding and they transferred the money to the defendant’s  account late;

(d)   He also complained that he had to issue multiple cheques to the Vendor’s law firm.”

31.  On top of the above, the Defendant also said he would try to locate the video copies of the surveillance camera of Lippo Centre to show that his staff entered Lippo Centre at 5:00 pm.  This would be “strong proof” that his staff was punctual for the transaction.

32.  When the Plaintiff was cross-examined on the above telephone conversation, it was put to her that the Defendant never admitted that he was wrong as she had alleged.  The Plaintiff insisted that the Defendant said sorry for a few times.   Regarding the “strong proof” of entering Lippo Centre at 5:00 pm, she recalled her initial response was that she was frustrated and believed that if the representative only entered the lobby at 5:00 pm and taking into account the time spent for waiting and riding in the elevator, it was almost certain that he arrived later than 5:00 pm at the Vendor’s Solicitors’ office on the 12^th floor of the building.

33.  The Plaintiff said she was in a panic that evening and agreed to meet the Defendant in person to talk things over.  She was then advised by the Defendant not to challenge the arrival time but to insist on the argument that the defined Business Hours were not to apply. This gave rise to the letter dated 21 May 2008 written by the Defendant to the Vendor’s Solicitors.

The Defendant’s evidence

34.  The Defendant has made two witness statements (24.11.2008 and 24.3.09).  In his first statement, there is no denial that his representative arrived late or any positive assertion that his representative arrived at 4:58 pm instead of the alleged 5:06 pm.

35.  In his second witness statement, he explains the discussions with the Vendor’s Solicitors on how keys were to be delivered and it was at 4:30 pm that they settled the issue on the keys and his staff, Ms. Lam then arranged for Simon Chan to go to the Vendor’s Solicitors to deliver the cheque for the balance of the purchase price. He says he believed that “there was not a legally binding deadline for completion that day, let alone on or before 5:00 pm.”  His basis for this is that time is no more of the essence when completion date has changed and the timing of completion has not been explicitly specified in the letter dated 14 May 2008 confirming the change of date to 21 May 2008.  Therefore, there was no agreement on the time.

36.  It is worth noting his position that in paragraph 5(10)(f)(1) of his second statement, he said: “I did not believe that Miss Tam had ever warned, mentioned or indicated in her telephone call to Miss Lam at 4:30 pm on 21^st May 2008 or in her earlier telephone conversation with Miss Lam earlier in the afternoon that day or any other time that 5:00 pm would be the deadline for completion or payment of balance of purchase price.  Had she made such intimation to Miss Lam, my firm would assume that the Vendor would be prepared to forfeit the deposits, and I would avoid argument by simply delivering the cheques in good time before 5:00 pm and possibly with a cover letter to :-

a.   Briefly disagree with the right of the Vendor to insist on demanding such payment being made on that day let alone before 5:00 pm.”

37.  This is very clear indication from the Defendant that he has never treated the completion time before 5:00 pm seriously.

38.  In his lengthy statements, not one word is mentioned about the exact arrival time of his representative.  All the Defendant said was in his paragraph 7 where he said: “(a) I deny the Plaintiff’s allegation (in paragraph 7 of the Amended Statement of Claim) that my firm’s messenger did not arrive at the office of the Vendor’s solicitors until after 5:00 pm.  (b) since the dispute with the Vendor’s solicitors on the time of our arrival emerged on 21^st May 2008, my firm had never conceded that we arrived after 5:00 pm.  Indeed, we wrote in our fax letter to the Vendor’s solicitors at about 8:00 pm that night insisting that we arrived before 5:00 pm.”

39.  As a matter of fact, the arrival time of 4:58 pm was first raised in Mr. Simon Chan’s witness statement filed in May 2010, 2 years after the incident.    This statement was made after the party’s argument on the Plaintiff’s application for summary judgment under Order 14.

40.  In answer to the Court’s queries during trial, the Defendant said he knew already on 21 May 2008 that his representative arrived at 4:58 pm and agreed that never challenged the Vendor’s Solicitors’ version that the arrival time was 5:06 pm.  The reason he said was because it would be meaningless to do so as the Vendor’s solicitors would not agree with him and he would not agree with the Vendor’s solicitors.

41.  The Defendant said that on reflection, he should have made the challenge immediately.

Mr. Simon Chan’s evidence

42.  Mr. Chan Po Kau, Simon gave evidence on behalf of the Defendant.   Mr. Chan is an accountant by profession and has been engaged by the Defendant to take care of the accounting matters of the Defendant’s firm since 1998.  Mr. Chan was not involved in the material transaction but for the delivery of the completion docket on 21 May 2008 on a voluntary basis. 

43.  Mr. Chan made two witness statements for the present proceedings.  He has said in his first witness statement that he acted as the messenger to deliver the completion docket on 21 May 2008.  He said that he realized around 4:30 pm that Miss Lam would need to go to Lippo Centre and he offered his assistance.  He said he left the Defendant’s office shortly after 4:30 pm and took a taxi from Sheung Wan to Lippo Centre. He said when he arrived at the Vendor’s Solicitors’ office, and when he was told that he arrived late, he checked his watch and it was 4:58 pm.  He believed that his watch matched with the time as announced on the radio.

44.  In his Supplemental witness statement made on 29 October 2010, shortly before the trial, Mr. Chan said that he was wearing a Seiko wrist-watch (Serial Reference Number: S/N 2N0330) on 21 May 2008 which has been working well.  This watch was subsequently tested by the Hong Kong Observatory against the Master Clock during 27 and 28 October 2010 and the discrepancy was found to be less than 0.2 seconds per 24 hours.

45.  During cross-examination, when the Plaintiff’s counsel asked Mr. Chan whether he checked the time on his watch when he left the Defendant’s office on 21 May 2008 to run the errand, Mr. Chan said no and was not exactly sure about the time then but he checked his watch on the taxi and it was not yet 5:00 pm.   Yet, when he later addressed the court’s queries, he said that it was around 4:37 pm or 4:38 pm that he left the Defendant’s office and he was well aware that he had to arrive before 5:00 pm.

46.  Ms. Lam made a witness statement for the Defendant but has not turned up during the hearing as a witness.   In her statement, she said that subsequent to a telephone conversation at 4:35 pm on 21 May 2008, she arranged for the documents to be delivered to Lippo Centre. The rest of Ms. Lam’s evidence would not be considered or given weight to.

Findings

47.  Having heard the witnesses and considered the evidence, I am not convinced that the Defendant’s representative actually arrived at 4:58 pm on 21 May 2008 at the Vendor’s Solicitors’ office.   Had that been the case, it would be beyond comprehension that the Defendant, as an experienced lawyer, would decide not to take this matter up immediately as a matter of top priority with the Vendor’s Solicitors and challenge the accuracy of the clock of the Vendor’s Solicitors.  The discrepancy of 8 minutes should have been resolved immediately as a matter of fact before venturing into arguments whether “mid-night rule” applies or the defined Business Hours.  This would be a crucial step to take to protect his client’s interest in the transaction.

48.  Not just that the late arrival time was not challenged at the spot, it has never been challenged throughout the proceedings.  It is the Defendant’s own evidence that he had never challenged the alleged arrival time of 5:06 pm on 21 May 2008, save for the letter written on the same evening of 21 May 2008 when the Defendant said his representative “insisted” that he arrived before 5:00 pm.

49.  The exact arrival time has not been pleaded until the last minute amendment before trial.  The Defendant has made no mention to this crucial time of 4:58 pm in his two witness statements although he said in oral testimony that he knew on 21 May 2008 that Mr. Chan arrived at 4:58 pm.  This is hard to accept.

50.  The evidence that the Seiko wrist-watch is accurate now in 2010 carries no weight in the circumstances.  I am not convinced that it was in the same condition in May 2008, with the slight discrepancy from the Master Clock, even if assuming that Mr. Chan was wearing the same watch.   I do not accept Mr. Chan’s evidence that he simply accepted the allegation of late arrival without protest when he actually arrived at 4:58 pm and being well aware that he had to arrive before 5:00 pm.

51.  I find that the Defendant was well aware of the condition that “time is of the essence” in this particular transaction and that completion should be within the defined Business Hours. To ensure that the completion docket arrive on time before 5 pm at the Vendor’s Solicitors in the circumstances is the least that one expects from a responsible and reasonably competent solicitor.  Also, by insisting to argue on the application of the “mid-night rule” rather than solving the discrepancy on the arrival time does not seem to be an appropriate way to handle the problem with the best interest of the Plaintiff. Apparently, the Defendant was negligent and has failed to discharge his duties owed to the Plaintiff with the standard required of a reasonably competent solicitor.

Conclusion

52.  The Defendant’s counsel has conceded in his final submissions that if the Court finds that the Defendant was late and negligent, the additional payment of $180,000 would be reasonable in the circumstances.  The same applies for the additional legal costs of $1,500 and the additional mortgage interest of $683.15.

53.  I give judgment in favour of the Plaintiff.  The Plaintiff is entitled to the total sum of $182,183.15 with interest.  There is no reason why costs should not follow the event and therefore, the Defendant shall pay the Plaintiff’s costs of the proceedings with certificate for counsel.   In addition, the Defendant shall also pay the costs of the two Summons heard before the commencement of the trial and the application for re-amendingthe Amended Defence, to be taxed if not agreed.