XCHRX BEST RANK ENGINEERING LTD. v. TAM KAI HING

HCA11094/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.11094 OF 1999

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J U D G M E N T

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The appeal

1. This is an appeal by the defendant against the decision of the master who granted summary judgment in favour of the plaintiff.

The plaintiff's case

2. The plaintiff is a decoration company. On 26 May 1999, it entered into an agreement ("the Agreement") with the defendant to carry out decoration work at a house in Hong Lok Yuen ("the Property"). The plaintiff claimed that the defendant had repudiated the Agreement by unilaterally terminating the Agreement by a letter dated 3 June 1999.

The defence

3. The defendant had filed a defence in this case, which I have to say, is extremely difficult to read and understand. But the position is, however, clarified by his affirmations filed in opposition to the O.14 summons. The defendant's case is that he had entered into a provisional sale and purchase agreement to purchase the Property from the owner. The completion was 30 June 1999 when vacant possession was to be delivered to him. The defendant at the same time was selling his own property which he had to deliver vacant possession on 24 June 1999. The plaintiff, through one Mr Wong, assured him that it could procure the vendor of the Property to deliver vacant possession to the defendant earlier than the scheduled date. In fact, it was the plaintiff who approached the defendant after the plaintiff had found out about the defendant's purchase of the Property from an estate agent.

4. The defendant said that by reason of the assurance of the plaintiff, he entered into the Agreement with the plaintiff. It was a condition precedent of the Agreement that the plaintiff would procure an earlier date for the delivery of vacant possession of the Property. This is a matter of importance to him because he had to deliver vacant possession of his own property to his own purchaser earlier than when he could move into the Property. He had to live in alternative accommodation at the meantime. He wished to save costs on the alternative accommodation and he had discussion with another decorator before he was approached by the plaintiff. The discussion with the other contractor was that the defendant would move into the Property while the decoration was to be done.

5. Although the defence of condition precedent is one referred to in the defence and affirmation, Mr Ko, counsel for the defendant, also relied on collateral contract. The cases of J. Evans & Son (Portsmouth) Limited v. Andrea Merzario Limited [1976] 1 WLR 1078 and also Dick Bentley Productions Limited and Another v. Harold Smith (Motors) Limited [1965] 1 WLR 623 were relied upon by Mr Ko.

The issue

6. The plaintiff said that there was no negotiation or promise on the vacant possession. It was said that Mr Wong merely speculated that the vendor may move out earlier. The issue is whether what the defendant said is so incredible that it can be rejected as a bona fide defence. I think not.

The quotation

7. The quotation dated 20 May 1999 prepared by the plaintiff stated that the vendor may move out in mid-June to facilitate their decoration works. This indicated that there must be some discussion on the topic between the parties. Mr Wong, counsel for the plaintiff, argued with force that the quotation does not expressly say that the plaintiff had made such a promise. The point is that the reliance by the defendant is not simply on what the quotation said but on an oral promise made earlier. The quotation lent support to this.

Commencement date

8. The Agreement itself did not refer to the commencement date of the work while the finishing date was clearly stated to be 12 July 1999. This further lent support to the defendant's case that earlier possession may be given to the defendant by the assurance of the plaintiff. Mr Wong submitted that the date of payment of 1 July must be taken as the commencement date. In my view, this is not a matter that can be resolved in an O.14 summons.

Finishing date

9. Mr Wong further submitted that the defendant's case really breaks down when he agreed that the work was to complete on 12 July; this is still much later than the 24 June date when he had to deliver his own property to his purchaser. In other words, he could not achieve his aim of getting the decoration done before he left his own property. I do not think this must necessarily be the only conclusion one can reach at this stage of the proceedings. Afterall, there was an earlier discussion between the defendant and his contractor that work was to be carried out while he took possession. The concern was really on the gap between the completion dates of these two properties.

The letter

10. Although the letter sent by the defendant terminating the Agreement was somewhat apologetic in tone and did not mention about the condition precedent, it clearly stated that the vendor did not agree to an early completion, and the decoration arrangement as discussed with the plaintiff could not be carried out. The fact that this notice was dated 3 June does not necessarily mean that it was issued prematurely if by then the vendor had indicated no early vacant possession was to be given.

Term of the Agreement

11. The Agreement itself did not contain the condition precedent. The defendant stated that :

"The Agreement was made with the understanding that the Plaintiff could procure the vendor to deliver vacant possession of the Subject Property substantially earlier than 30 June 1999. Otherwise, I would not have signed the agreement."

He stated in his later affirmation that :

"For the avoidance of doubt, I have to say that when I said in my 1st Affirmation that I would not have signed the Agreement but for the understanding, my actual meaning was that there has been a condition implied into the Agreement that the Agreement would not be effective unless the Plaintiff would successfully procure the vendor of the Subject Property to deliver vacant possession substantially earlier than 30 June 1999."

12. In my view, the absence of further discussion on this topic is not fatal to the defence. Afterall, the quotation was given on 20 May and the Agreement was signed shortly thereafter on 26 May. The Agreement was a handwritten contract containing the basic terms of the work relating to payment methods and the completion date. One would not expect the parties to provide for the condition to be spelled out in the Agreement itself.

Root of the matter

13. Mr Wong further argued that even if there was any such promise, it was in a nature of a warranty and not condition which entitled the defendant to terminate the Agreement. In Halsbury's Laws of England, 4th Ed., Vol.9(1), para.967, it is stated that :

"The question whether the promise of one party is a condition precedent to the liability of the other party or is independent is to be determined by the intention of the parties as appearing from the terms of the contract and the surrounding circumstances; and, in the case of a written contract, this depends upon the construction of the contract taken as a whole. The test applied is whether the particular stipulation goes to the root of the matter, so that a failure to perform it would render the performance of the rest of the contract by the party in default a thing different in substance from what the other party has stipulated for ..."

14. Each case must turn on its own facts. In this case, an earlier delivery of vacant possession may well be of the utmost importance to the defendant. While the defence raised is one based on condition precedent and collateral contract, it seems that the defence of misrepresentation may still be available to the defendant as well.

Conclusion

15. For the purpose of an O.14 application, the matter clearly requires to be tried. Accordingly, the appeal is allowed and the judgment is set aside.