XCHRX LAI KAM HON v. WONG LUN HING

1991, No.A8131

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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J U D G M E N T

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1. The plaintiff in this action is the purchaser and the defendant the vendor of Subsection 154 of Section I of Fairview Park, Yuen Long, ("the said property") under a sale and purchase agreement dated 29th July 1991. The completion date for the said property was 25th September 1991. At that time the plaintiff was represented by William Au & Co. and the defendant vendor by Boris Lui & Co.

2. The property was subsold by the purchaser to one Yuen Kong Ling, Cana and Chow Hwei Kun. After the subsale the subpurchasers were represented by Boris Lui & Co. instead. The defendant vendor was then represented by Raymond Tse & Co. instead of Boris Lui & Co. and the purchaser plaintiff was represented by Norman Yung & Co.

3. As I have said the completion date was agreed and scheduled at 5 p.m. on the 25th September 1991. The subsale agreement was the subject matter of litigation in High Court Action 7502 of 1991 tried before Godfrey J. (as he then was) and judgment was delivered on the 31st December 1993. Judgment was given for the subpurchaser against the 1st defendant, the purchaser therein with damages to be assessed. The action against Boris Lui & Co. as the 2nd defendant was dismissed.

4. I would comment here that it was quite surprising that, I was told by counsel who appear before me, an application to consolidate the action tried by Godfrey J. with the case before me or otherwise to have the two cases tried at the same time was dismissed by the master. Godfrey J. then had to try the case between the subpurchaser and the purchaser. To my mind, the two actions concerned with exactly the same subject matter and the issues of delay in the completion should be tried in one trial before one judge. In the end, Godfrey J. was constrained in not making finding of certain issues of facts which he said would affect another action between the original vendor and purchaser.

5. The defendant took out an O.86 summons before me and applied to enter judgment against the purchaser on his counterclaim since he said it is an undisputed fact the purchaser was late in tendering the purchase money after 5 p.m. on the 25th September 1991. For the purpose of this application, both parties agreed that the purchase money was only tendered at the defendant's solicitor's office, Raymond Tse & Co., in Yuen Long at about 5:30 p.m.

6. The defendant relied on the case of Ip Ming Wai & Another v. World Ford Development Ltd., CA187 of 1992, 2nd April 1993 per Litton, Bokhary J.J.A. and Sears J. In this case, it was held that as a matter of proper construction of the contract between the parties, the de minimis principle was not applicable when there was a delay of 24 minutes or when it could not be disputed that there was a delay however small. Accordingly, it is the defendant's case that on the authority of Ip Ming Wai, the defendant is entitled to judgment against the plaintiff being the purchaser in the delay of 30 minutes on the completion of the assignment.

7. Mr Chan for the purchaser did not argue that according to the case of Ip Ming Wai the principle of de minimis did not apply on the construction of the sale and purchase agreement where time was stipulated as the essence of the contract or that 30 minutes' delay by the purchaser was not a breach of the contractual obligation. However, he relied on a subsequent decision of the Court of Appeal in Wong Kwok Yan v. Lee Kenny, CA No.151 of 1993, 27th April 1994 per Macdougall V.P., Nazareth and Godfrey J.J.A. In that case, it was decided at p.11 that :

"In all the circumstances, the vendor's insistence on termination of a contract and forfeiture of the purchaser's initial deposit was unconscionable and that it would therefore be inequitable to deny the purchaser relief."

Mr Chan submitted that Ip Ming Wai was concerned with the ambit of the contractual obligation between the parties, i.e. proper construction of the contract. It did not deal with the equitable jurisdiction of the court to prevent a party from insisting on its strict contractual rights when, in all the circumstances, such would be unconscionable for him to do so. It did not deal with the equitable jurisdiction as propounded in Wong Kwok Yan because no such argument was advanced by counsel for the purchaser in the Court of Appeal, nor was such any part of the reasoning of Jones J. at the court below. He further referred to two Australian cases in support of his arguments, which were cited in Wong Kwok Yan : Legione v. Hateley [1983] 152 CLR 406 and Stern v. McArthur [1988] 165 CLR 489. In Legione Gibbs C.J. and Murphy J. at p.429 said this :

"In the present case, the circumstances reveal by the existing evidence indicated that it would be unjust for the vendor to insist on the forfeiture of the purchasers' interest in the land. Important amongst those circumstances is the fact that the purchasers have erected on the land a house of considerable value and if the contract is rescinded, the vendor will receive an ill-merited windfall."

At p.449, it has been said :

"Whether the exceptional circumstances existed in a given case hinges on the existence of unconscionable conduct. It is impossible to define or describe exclusively all the situations which may give rise to unconscionable conduct on the part of a vendor in rescinding a contract for sale. Nonetheless, it may be said that where the conduct of the vendor, though not creating an estoppel or waiver has effectively caused or contributed to the purchasers' breach of contract, there is ground for exercising the jurisdiction to relief. And if it also appears that the object of the recession is not to safeguard the vendor from adverse consequences which he may suffer as a result of the contract remaining on foot, but merely to take unconscientious advantage of the benefits which will fortuitously accrue to him on forfeiture of the purchasers' interest under the contract, there will be even stronger ground for the exercise of a jurisdiction. In the ultimate analysis the result in a given case will depend upon the resolution of subsidiary questions which inevitably arise. The more important of this are :

1. Did the conduct of the vendor attribute to the purchaser's breach?

2. Was the purchaser's breach (a) trivial or slight, and (b) inadvertence and not wilful?

3. What damage or other adverse consequences did the vendor suffer by reason of the purchaser's loss and vendor's gain if the forfeiture is to stand?

4. Is specific performance with or without compensation and adequate safeguard for the vendor?"

And at p.450 :

"The conclusion which we have reached is that the court had jurisdiction to relieve against forfeiture. In the circumstances of this case that there is a serious question to be tried in the exercise of that jurisdiction and that the decision in the case will ultimately depend on considerations to which the parties have not had the opportunity of directing evidence."

In the end, Mr Chan for the purchaser submitted that in all the circumstances of this case there are triable issues in considering whether it would be unconscionable for the vendor defendant before me to forfeit the deposit and repudiate the contract of sale. He listed out the following facts as issues to be tried for that purpose : viz.:-

1. The delay in spilt cheque instructions by the vendor

8. Under the contract of sale and purchase, Clause 32 (b) and (c) provided as follows :

"(b) Where the purchase price or any part thereof is required to be applied by the Payee to discharge an existing mortgage, charge or incumbrance, or to pay any person(s) who will be a party to the assignment on completion of the sale and purchase herein, the Payee or the Payee's solicitors shall be entitled to require the Payer to split such payment and deliver to the Payee's solicitors one or more cashier order(s) or cheque(s) drawn by the Payer's Solicitors issued in favour of the person(s) or party(ies) entitled to such payment(s) and a separate cashier order or a cheque drawn by the Payer's Solicitors in favour of the Payee for the balance.

(c) A Payer shall not be deemed to have discharged the obligation to make payment hereunder unless in making such payment, the Payer also complies with the provisions of this Clause."

9. Under this clause the purchaser plaintiff was contractually obliged under the contract to pay the balance of the purchase price in accordance with the spilt cheque instructions of the vendor's solicitors. However, there was no contractual stipulation as to when was the deadline by which the vendor's solicitors should provide such instructions. From the papers before me the vendor's solicitors' instructions to the purchaser's solicitors on the spilt cheque arrangement were only given at about 2 p.m. on the completion date when the time for completion of the subsale was set at 4 p.m. and the time of completion of the head sale was in turn set at 5 p.m. of the very same day.

10. Mr Chan pointed out that the situation is similar to the case of Wong Kwok Yan where there was a delay in the vendor's solicitors in providing the draft formal sale and purchase agreement to the plaintiff's solicitors to approve. Further, Mr Chan submitted that if there is a dispute of fact as to whether this delay had contributed to the delay of the purchaser and it is an issue to be tried and should not be resolved in summary judgment proceedings.

2. Change of place of completion

11. It has been said earlier that the defendant vendor's solicitors has been changed from Boris Lui & Co., whose office was in Central, to Raymond Tse & Co., whose office was in Yuen Long. According to the strict letters of the sale and purchase agreement Clause 5 and Part IV of the Schedule of the Contract, the vendor's solicitors should give a written notice directly to the purchaser's solicitors if there is any change of place of completion.

12. Mr Chan for the purchaser submitted that from the correspondences before me there was no direct written notice to that effect. There was a change of solicitors after the aforesaid subsale on 1st September 1991. Mr Chan submitted that the insistence by the vendor to rely on the strict letters of 5 p.m. on the completion date for the purpose of forfeiture is technical and therefore unconscionable when, in all the circumstances, the vendor himself did not follow the strict letter of written notice for the change of completion place. The change from Central to Yuen Long made the contract more onerous for the purchaser to observe.

3. The Change of Vendor's agent to receive monies

13. Mr Chan submitted that another instance of conduct relevant to the test whether it was unconscionable was the lack of notice in writing in compliance with Clause 3(c) of the contract that it should be Raymond Tse & Co. in place of Boris Lui to be the vendor's agent to receive monies. The defendant, he submitted, was not himself in compliance with the strict letters of the contract in that there was no revocation addressed to the purchaser plaintiff or his solicitors. He asked should the vendor be allowed to insist on 5 p.m. sharp according to the strict letters of the contract and to capitalize on a mere 30 minutes delay when the vendor himself was not in strict compliance with the contract.

4. The purchaser alleged that the vendor asked for $100,000 more for the mere delay of 30 minutes

14. Mr Chan relied on the judgment of Gibbs C.J. and Murphy J. at p.429 of the case of Legione :

"Further, there are the facts that the purchase monies were tendered only four days after the notice expired and that the late payment was explained by the terms of the letter from the vendor's solicitors. The breach by the purchaser was neither wilful nor apparently serious. To enforce the legal rights of the vendor in these circumstances would be to accept a harsh and excessive penalty for comparatively trivial breach."

Mr Chan submitted that such conduct is material in weighing whether the vendor is unconscionable and this is also a triable issue for such a consideration.

5. The arrangement to wait

15. The purchaser alleged that the vendor's solicitor had agreed with the purchaser's solicitor, through one Miss Judy Lam of Boris Lui & Co. the subpurchaser's solicitors, that the vendor would wait for the arrival of the completion money and the assignment which was expected to be late. He submitted that if there was such an agreement on the 25th September 1991, certainty it bears great weight in considering whether in all the circumstances the vendor was unconscionable in forfeiting the deposit and terminating the contract. Similar conversational agreement bore great weight in the case of Legione in which the clerk of the vendor's solicitors said "I think it'll be alright but I'll have to get instructions".

16. I must say that I accept the submission of Mr Chan. The case of Ip Ming Wai only decided to the effect that, as a matter of construction, the de minimis principle would not apply in a matter of sale and purchaser's contract when time was the essence of the contract. The court had never addressed to the issue of the equitable jurisdiction whether a court of equity would not enforce a contract when it would be unconscionable for the vendor to do so and would, in the end, grant relief against forfeiture in an appropriate case after scrutinizing all the circumstances of the case. The factors advanced by the plaintiff purchaser would have to be weighed after careful consideration of all the factors and resolution of disputed facts in a trial.

17. It is, to my mind, still early in the day to consider the case on affidavit. I cannot say the plaintiff's defence to the counterclaim is entirely unarguable. It is not a case of the Murjani where the Court of Appeal decided that the defendant had advanced a case dishonestly and therefore incredible. However, I do not think the defendant is unreasonable in taking out the summons on the strength of the case of Ip Ming Wai and I do not think the plaintiff is entitled to have the summons dismissed. Accordingly the plaintiff is entitled to have unconditional leave to defend the counterclaim with costs in the cause.