WONG WUI v. YIN SHIU HEE PETER

HCA9042/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.9042 OF 1998

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J U D G M E N T

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1. On 20 March 1998, the plaintiff as purchaser and the defendant as vendor entered into a sale and purchase agreement ("the Agreement") in respect of a flat at Unit L, 28th Floor, Vigor Industrial Building, 49-53 Ta Chuen Ping Street, Kwai Chung. The price was $738,000 and the completion date was 26 March 1998. Clause 31 of the Agreement required the vendor to allow the purchaser to inspect the property once before completion. In reliance on the Agreement, the plaintiff paid deposits totalling $147,600. He paid legal expenses in the sum of $9,465 and he says that he paid the estate agent, in cash, a commission of $7,380.

2. The completion date was postponed by agreement to 20 April 1998. The plaintiff was unable to arrange inspection of the property by that date. On 23 April his solicitors wrote to the defendant's solicitors to say that unless completion was arranged by 12 noon on 24 April, the plaintiff would exercise his rights under the Agreement for the return of his deposits and institute proceedings for specific performance and damages.

3. Nothing was heard from the defendant and on 4 June 1998, the plaintiff issued these proceedings. In his Statement of Claim he claimed specific performance or damages in lieu thereof. On 7 September 1998, he filed an affirmation and an inter partes summons claiming for declaration of rescission of the Agreement upon his election to pursue damages in lieu of specific performance. He subsequently amended his Statement of Claim to include this. He now claims return of the deposits paid and damages to cover the legal fees and commission paid by him. The total is $166,445 as set out above.

4. The defendant's case is that he was informed through the estate agent on about 15 April that the plaintiff wanted to inspect the property. He told the agent that there was a watchman in the premises at all times and inspection could be carried out at any time. However, the plaintiff failed to arrange the inspection, and thereafter wrongfully failed to complete. The plaintiff sought wrongfully to rescind the Agreement and pursue damages in lieu of specific performance. The defendant counterclaims for a declaration that the Agreement has been lawfully determined by him, a declaration that he has lawfully forfeited the deposits, and damages.

Evidence

5. The plaintiff's evidence is that from about 13 April, through the estate agent, Miss Wong Tsui Yung of Joe Lee Property Agency, and his own solicitors, Ng, Tam, Ko and Chan, he made various attempts to arrange inspection but to no avail. The agent told him that she could not locate the defendant; when she telephoned him, no one answered. Various letters were written by the solicitors, which I will deal with later. On about 18 August, through the two firms of solicitors, the defendant demanded an additional $50,000 before the plaintiff could inspect the property; which the plaintiff refused to pay. Still there was no inspection and no response from the other side; so ultimately he had instructed the issue of these proceedings.

6. The plaintiff said that when he first visited the property with Miss Wong, it had been empty but there had been a watchman present whose name the plaintiff did not know.

7. The plaintiff was the only oral witness. Two affirmations by Miss Wong were produced as well as the affirmation of a solicitor as to the fact that she could not be found, and the attempts to find her. According to her affirmations, she tried to contact the defendant by telephone to arrange inspection but at first could not. When she eventually did contact him, he repeatedly told her that he demanded another $50,000 from the plaintiff before he would be allowed to inspect. She was never told that a watchman was on duty all the time, and in any event, even if there had been one, she would have had to obtain the defendant's permission before taking the plaintiff to the premises for inspection.

8. Correspondence between the plaintiff's solicitors and the defendant's then solicitors, Messrs Thomas Li and Yu, has been produced. There are also some letters from the defendant's then solicitors to him, and copied to the plaintiff's solicitors. Objection was taken to the production of these on the ground of privilege but I admitted them because I considered that privilege had been waived by the defendant when he gave affirmation evidence about these in earlier Order 14 proceedings.

9. On 15 April and 16 April 1998, the plaintiff's solicitors wrote to Messrs Thomas Li and Yu asking for replies to requisitions as well as inspection. On 20 April, they again wrote to say that since the defendant had failed to arrange inspection, the plaintiff was not obliged to complete. They also put on record the defendant's demand for an extra $50,000 prior to inspection. On 23 April they wrote to say that unless the defendant arranged inspection before 12 noon on 24 April, the plaintiff would institute proceedings.

10. On 17 April Messrs Thomas Li and Yu wrote to the defendant at the address of the suit premises with a copy of the letter received from the plaintiff's solicitors and asking when he would allow inspection. On 21 April, they wrote to him advising him that the purchaser had elected not to complete because of his failure to allow inspection and giving notice that they would cease to act for him. On 23 April they sent him a copy of the letter from the plaintiff's solicitors extending the time for inspection until 12 noon the next day. In each of these letters, reference is made to a telephone conversation between the defendant and Miss Chan of the solicitors' firm.

11. On the defendant's side there were two witnesses, the defendant himself and Mr Wong Tung Yat, who said that he was the defendant's watchman.

12. The defendant's evidence was that Mr Wong Tung Yat had been staying at the premises since about January. His duty was to let people in to inspect and he had let Miss Wong and the plaintiff in on their first inspection before the contract was made. Once that was done, the estate agent had introduced him to his solicitors, and he had had no more contact with her. On 26 March he had waited at his solicitor's office for completion but no one from the purchaser's side had turned up. Later, they had told him of the new completion date and he had said that he would go to their office as soon as the money was paid over.

13. He had not received the letters from his solicitors; he was not living at the factory, and in any event because of renovations there he did not know where the letter boxes were and he had no keys to them. He had only found out about the letters after he was sued.

14. He was ready to complete on 24 April, but after that he had never received any further request for inspection. Miss Chan of his solicitors had mentioned it but he had told her that she need not trouble him because Miss Wong could contact the watchman and inspect at any time.

15. He remained and remains ready and willing to complete. He denied being unable to complete because of incumbrances over the property. He said that management fees could have been paid from the proceeds of sale and although there had been an injunction against him disposing of the property, that had been discharged. He produced papers to this effect, though curiously enough the injunction remains on the land search. Though it appeared that the property had been advertised for letting, he knew nothing about this.

16. DW2 Mr Wong Tung Yat said that he had been living at the suit premises since late 1997 and until mid-1998. He would, however, sometimes go to stay in the New Territories or to his old home on the Mainland. The arrangement was that he would let people in to inspect the premises. The estate agents had his number and could page him. Miss Wong had brought potential purchasers and he had let them in to inspect. She had never called him to arrange inspection. Nor had the defendant told him to arrange inspection with anyone. If letters came for the defendant, he would inform the defendant and arrange for him to pick them up. There were letter boxes at the management office of the building.

The Issue

17. The factual issue is whether the defendant wilfully failed to arrange inspection, having been asked to do so by Miss Wong and/or his solicitors; and whether he demanded an extra $50,000. There is a legal issue also; the defendant says that the plaintiff has affirmed the contract. I will deal with that later.

Evaluation

18. The plaintiff himself did not make any direct demands for inspection. They were all made either through Miss Wong or his solicitors.

19. Miss Wong's evidence is hearsay. There is no objection to its admission but the considerations in section 49 of the Evidence Ordinance have to be applied in deciding what weight to give it. The same applies to the solicitors' correspondence.

20. I have applied the section 49 considerations. The affirmation and the correspondence all agree. It seems most unlikely that Miss Wong would say that there had been a demand for an extra payment if that had not happened; there is no reason for her to lie about this. Nor is it likely that the plaintiff would have had his solicitors put this on record if he had not heard it and believed it to be true. According to him, he heard it from Miss Chan of Messrs Thomas Li and Yu.

21. I note from the letters from that firm to the defendant that they all refer to conversations between him and Miss Chan on 17 April, 20 April and 21 April. Again, though this is hearsay, it is difficult to imagine why a solicitor would make this reference in a letter to the client and copied to the other side in a conveyancing transaction if it did not happen.

22. I have considered the evidence of the defendant and that of his witness. The defendant had a tendency to become over-talkative and to try to put forward argument instead of evidence. Mr Wong seemed straightforward enough. However, it must be remembered that even on his own evidence he was not at the suit premises all the time, and he is an elderly man whose memory for detail may not be entirely reliable.

23. The evidence of the injunction is somewhat equivocal in that while the defendant has produced an order of discharge dated 5 September 1997, the land search shows that the injunction was registered on 21 April 1998. There is evidence that the premises were offered for rent and the defendant's explanation that he knew nothing about it and it was done by his agent, is not very likely. It is difficult to understand why, if the defendant wanted to sell the property as he says, and if he had been told of the postponed completion date as he says, he would not have been in close touch with his solicitors to make sure that everything went ahead according to plan. In fact the correspondence shows that he must have been in close touch with his solicitors by telephone at that time.

24. Looking in particular at the affirmation and the correspondence, it seems to me much more probable than not, that the defendant knew, through his solicitors, of the plaintiff's requests for inspection. Whether he demanded an extra $50,000 or not, he simply did nothing about the inspection. I do not believe that he ever said that the watchman was there and inspection could take place at any time. If he had told Miss Chan that, she would surely have passed it on to the plaintiff's solicitors; the inspection would have taken place; and completion would have gone ahead. The breach of the term of the Agreement providing for inspection was not a minor breach of a mere warranty or innominate term; the defendant has abandoned that argument. Inspection was fundamental; the plaintiff had to have it to satisfy himself that he was getting what he had contracted for. By his conduct in refusing or avoiding inspection, the defendant repudiated the contract.

Affirmation

25. Mr Chung argues that the plaintiff affirmed the contract in particular by his solicitor's letter of 27 April giving notice of the claim for specific performance, he affirmed the contract. Such affirmation is irrevocable. There can only be re-election of the remedy of rescission if there is a continuing breach. The plaintiff should have asked for inspection again but did not and therefore he could not later elect for rescission. I cannot quite see the point of this; I would have thought that once there was a claim for specific performance, it was for the defendant to remedy the breach by offering the inspection that had been sought all along.

26. The plaintiff did, of course, affirm the contract as does any party who sues for specific performance. However, he also claimed damages in lieu and/or in addition to specific performance. A plaintiff who pleads in this way may elect which remedy to pursue up to or at trial. See Johnson v Agnew [1980] AC 367; per Lord Wilberforce at 392G. In fact the plaintiff made that election by his summons filed on 7 September 1998 and subsequent amendment of the pleadings to claim rescission.

27. I do not see that there is any merit in the argument based on affirmation.

Finding

28. I am satisfied that the defendant refused or avoided completion and thereby repudiated the contract. The plaintiff is entitled to specific performance or damages in lieu. He has elected the latter and he must succeed.

29. Judgment in favour of the plaintiff for damages amounting in total to $166,445 with interest thereon from the date of the writ to the date of judgment at the Hong Kong Association of Bankers' best lending rate plus 1% and thereafter at the judgment rate. The defendant's counterclaim is dismissed. Costs nisi in favour of the plaintiff, to be taxed if not agreed.