GUO JIANJUN AND AND ANOTHER v. DRAGON FAME INVESTMENT LTD

CACV 131/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 131 OF 2014

(ON APPEAL FROM HCMP NO. 318 of 2013)

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JUDGMENT
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Hon Lam VP (giving the Judgment of the Court):

1.  By an agreement of 20 October 2011 [“the Agreement”], the 1^st Plaintiff agreed to purchase four office units in Shun Tak Centre[1] from the Defendant. The Agreement was made in the form of a provisional agreement for sale and purchase prepared by an estate agency. Annexed to the printed form were two pages of additional terms written in Chinese. The agreed price was $219,360,719. Completion was to take place on or before 30 March 2012. Two sums were paid as deposits: (a) initial deposit of $10 million paid upon signing of the Agreement; and (b) a further deposit of $11,936,071.90 was payable on or before 4 November 2011.

2.  In respect of the subject matter of the sale, the office units were identified on Plan A attached to the Agreement.  Office unit 3328 was situated at the south side of the floor, unit 3326 at the east side whilst units 3316 and 3318 were at the west side of the floor.  There were other units on the same floor which were not the subject matter of the sale.  A copy of Plan A is annexed to this judgment for reference.

3.  There was re-partitioning of the office units on the relevant floor of the building [“the Re-partition”]. Originally, at the west side of the floor there were 4 units: 3313, 3315, 3316 and 3318.  Unit 3318 was adjacent to unit 3328 which was a unit occupying the whole of the southern part of the floor.  According to the finding of the Judge (based on the evidence before him and the concession by the then counsel for the Defendant), re-partitioning works were done in February 2012: the 4 western units (as well as the western part of unit 3328) were repartitioned and converted into 3 units: unit 3313 ceased to exist and, as shown on Plan A, there were only units 3315, 3316 and 3318.  Each of the three units became bigger in size and unit 3318 extended partly into some area formerly occupied by unit 3328.

4.  It is fair to say that the Agreement was ambiguous as to whether the re-partitioning works had been done before the making of the Agreement.  Mr Yu SC (appearing with Ms Sit for the Defendant in this appeal) drew our attention to the fact that it was a term of the Agreement that office 3316 was sold subject to tenancy.  However, the Defendant’s own evidence was to the effect that the re-partitioning was done in February 2012, see paragraph 6(1) of the Affirmation of Tham Qian of 10 May 2013.  Mr Chan SC (appearing with Mr Lee for the 1^st Plaintiff) informed us (and this is not disputed by Mr Yu) that at the court below, leading counsel for the Defendant (not Mr Yu) conceded that to be the case.  The Judge made a finding to that effect at paragraph 3 of the judgment of 6 June 2014.  There is no appeal against that finding.  Thus, Mr Yu properly accepted before us that he could not advance the submission that the Re-partition was in situ at the time of the Agreement in this appeal.

5.  In the Agreement, two additional clauses written in Chinese annexed to the printed form related to the Re-partition:

“ 5. 賣方清楚向買方展示兩張平面圖，分別標記為圖A及圖B。圖B實際上是附在Sub-Sub-Deed of Mutual Covenant Memorial No. 07050701480098內之附圖。賣方因利便出租及使用的安排，所以將圖B中顯示的Offices Nos. 3313, 3315, 3316, 3318及3328的5個單位，重新間隔為4個單位及命名為Offices Nos. 3315, 3316, 3318及3328，其現狀位置及間隔正如圖C中顯示的Offices Nos. 3315, 3316, 3318及3328。圖C則清楚顯示圖A及圖B重疊一起的情況，賣方同意就上述單位如圖A顯示現時的重新間隔，會在物業成交前簽立一份Deed Poll，將原有圖B的offices Nos. 3313, 3315, 3316, 3318 及3328正式改為如圖A的Offices Nos. 3315, 3316, 3318及3328，並向買方提供一份由認可人仕發出之認可人仕証明書証明該如圖A顯示的現時重新間隔的合方性並不違反任何建築條例。而買方必須同意，接受及滿意該証明書為上述單位如圖A顯示重新間隔的合法性及有效性的最終文件，而不得要求賣方提供其他文件（包括政府及／或管理處的批准書）或以此點向賣方提出任何業權上的質詢，提問或反對。

6. 買方同意就該物業現時的重新間隔（如圖A所顯示），是否符合屋宇署的規定及是否獲得管理公司的同意方面，不得向賣方提出任何業權上的質詢提問或反對。”

6.  The certified translation of these two clauses is as follows:

“ 5. The Vendor has clearly shown to the Purchaser two floor plans marked as Plan A and PlanB respectively. Plan B is in fact attached to the Sub-Sub-Deed of Mutual Covenant Memorial No. 07050701480098. To facilitate letting out and usage, the Vendor had re-divided the five Offices Nos. 3313, 3315, 3316, 3318 and 3328 as shown in Plan B into four office units and re-named as Offices Nos. 3315, 3316, 3318 and3328 which current condition, location and partitioning are as shown in Plan C as Offices Nos. 3315,3316, 3318 and 3328. Plan C clearly shows the overlapping parts of Plan A and Plan B. Concerning the re-partitioning of the above-mentioned office units as shown in Plan A, the Vendor agrees to sign a Deed Poll prior to completion to formally change the original Offices Nos 3313, 3315, 3316, 3318 and 3328 as shown in Plan B into Offices Nos. 3315, 3316, 3318 and 3328 as shown in Plan A. The Vendor also agrees to provide the Purchaser with a certificate issued by an Authorized Person to prove that the legality of the current re-partitioning as shown in Plan A and that the same does not constitute a breach of any building ordinances. The Purchaser shall agree, accept and be satisfied that such certificate shall be the final document on the legality and validity of the current re-partitioning of the abovementioned office units as shown in Plan A, and shall neither require the Vendor to provide any additional documents (including letters of approval issued by the Government and/or management office) nor raise any requisitions, queries or objections as to title on this point.

6. The Purchaser agrees that it shall not raise any requisitions, queries or objections as to title against the Vendor in relation to whether the current re-partitioning of the Property (as shown in Plan A) conforms to the requirements of the Buildings Department or consent has been obtained from the management company.”

7.  A central issue in this appeal is the proper construction of these clauses.  Before we discuss this issue, we shall continue with the recitation of the relevant facts.  The Defendant did obtain a certificate from an architect for the purpose of complying with Clause 5.  The certificate [“the Certificate”] was a document issued by an authorized person on 27 February 2012 in the following terms:

“ I, WAI HING WAH, Authorized Person … hereby certify that:

1. The subdivision of the captioned premises (as shown on the attached plan) complied with the present Buildings Ordinance & Regulation.

2. The partitioning and the partition walls of the units as shown on the attached plan do not constitute any structural alteration and can be carried out without the application to or to obtain approval from the Building Authority under the provision of section 41(3) of the Buildings Ordinance (Cap. 123).  Such partitioning does not contravene the current Fire Services Regulation.”

8.  The plan attached to the certificate corresponded with Plan A.

9.  For reasons which have not been disclosed to us, solicitors acting for the Defendant in the conveyancing transaction did not give the Certificate to the solicitors acting for the purchaser (the 1^st Plaintiff had nominated the 2^nd Plaintiff to became the purchaser of the property[2]) until 6:07 pm on 30 March 2012.

10.  Although it is common ground that the midnight rule applied in respect of the time for completing the transaction, the Plaintiffs’ case was that the Defendant failed to provide the Certificate at a reasonable time before completion and was therefore in repudiation of the Agreement.  By a letter of 2 April 2012, solicitors for the Plaintiffs alleged that the Defendant had failed to prove and show a good title to the property at a reasonable time before completion and in breach of its obligation under the Agreement.  The Plaintiffs accepted the repudiation and rescinded the Agreement.  They demanded for the return of the deposit in the sum of $21,936,071.90.

11.  The Defendant disagreed and its solicitors, in a letter of 2 April 2012, asserted that good title had been shown and proved and demanded completion of the transaction.  Later, on the same day, after reading the letter from the solicitors for the Plaintiffs, solicitors for the Defendant regarded the Plaintiffs as evincing an intention to repudiate the Agreement and accepted the repudiation.  The Defendant forfeited the deposit.

12.  In the vendor and purchaser summons proceedings commenced by an originating summons of 14 February 2013, the Plaintiffs claimed against the Defendant for the return of the deposit and damages for breach of the Agreement.  The Defendant counterclaimed for declarations that the Plaintiffs were in breach and it was entitled to forfeit the deposit.  It also counterclaimed for damages.

13.  The matter was heard by L Chan J [“the Judge”] in May 2014.  On 6 June 2014, the Judge decided in favour of the Plaintiffs and ordered the Defendant to return the deposit and pay the wasted conveyancing costs to the Plaintiffs. 

14.  The Judge held that the Defendant had an obligation to produce the Certificate at a reasonable time before completion and it had failed in that regard.  Thus, notwithstanding his finding that the Certificate satisfied the requirement of Clause 5, the Plaintiffs were entitled to accept the repudiation of the Agreement by the Defendant.

15.  The Defendant appealed against this judgment and after hearing submissions, we reserved our judgment. 

Construction of Clauses 5 and 6 and the implied term

16.  The first issue we have to decide is whether the Judge was correct in holding that the Defendant had an obligation to deliver the Certificate within a reasonable time before completion.  Clause 5 does not contain any express term requiring the Defendant to deliver the Certificate or a copy of the same within a reasonable time before completion.  Mr Yu contended that it actually provided to the contrary, viz that the Defendant was only obliged to produce the Certificate on completion.  Because of the operation of the midnight rule (not disputed by Mr Chan) as to the time for completion, counsel submitted that the Defendant would have been within its right to produce the Certificate at 11:59 pm on 30 March 2012. 

17.  Mr Yu’s analysis involved construing Clause 5 as a bare obligation to produce the Certificate without giving solicitors for the Plaintiffs (as purchaser) the opportunity to consider the Certificate before completion.  

18.  On the other hand, Mr Chan submitted that Clauses 5 and 6 should be read together and the provision of a certificate under Clause 5 was intended by the parties to be the answer to any potential requisitions relating to the Re-partition.   

19.  The Judge construed Clause 5 as exempting the Defendant from answering requisitions on the Re-partition (see paragraph 27 of the judgment).  However, he also held that there was an implied term that the Defendant should deliver the Certificate within a reasonable time before completion (see paragraph 32 of the judgment):

“ It is clear that the clause 5 certificate had replaced the defendant’s obligation to answer requisition on the repartitioning. It was to assure the plaintiffs that the repartitioning was done lawfully and would cause no taint on the title. The certificate is thus a document of title and important. Given its importance as a document of title, I agree with Mr Chan that both parties must have understood and intended that it should have been delivered to the plaintiffs within a reasonable time before completion so that their solicitors could consider whether it could have satisfied the requirements in clause 5. I agree with Mr Chan on this point.”

20.  The modern approach on construction of contractual provisions is not in dispute.  Lord Hoffmann’s judgments in West Bromwich Building Society (No 1) [1998] 1 WLR 896 and Jumbo King Ltd v Faithful Properties Ltd (1999) 2 HKCFAR 279 have repeatedly been cited in this jurisdiction.  In the recent judgment of the Court of Final Appeal in Fully Profit (Asia) Ltd v Secretary for Justice (2013) 16 HKCFAR 351, Ma CJ said at paragraph 15:

“ …What emerges from these cases – and other authorities on contractual interpretation – is the overall importance of context when construing contractual terms.  The statements of principle in Investors Compensation Scheme and in Jumbo King refer time and again to the relevant background against which the relevant contract and contractual terms must be viewed.  It is in my view not particularly helpful in most cases to refer to the “ordinary and natural meaning” of words because, as very often experience tells us, there can be much debate over exactly what is the ordinary or natural meaning of words.  The surer guide to interpretation is context.  Here, I would just add that in the area of statutory and constitutional interpretation, it is context that is key; context is the starting point (together with purpose) rather than looking at what may be the natural and ordinary meaning of words.”

21.  We would further emphasize that another important facet in the modern approach is that the provisions must be construed by having regard to the agreement as a whole (which is actually part of the relevant context).  The object of the exercise is to find out what a reasonable person would have understood the parties to mean having regard to the relevant factual matrix and context.

22.  Mr Yu further referred this court to Lord Hoffmann’s judgment in Attorney General of Belize v Belize Telecom Ltd [2009] 1 WLR 1988 where His Lordship developed the same theme in considering whether a term could be implied into a contract.  The overriding question for the court is again to find out what the instrument would convey to a reasonable person against all the background knowledge, see paragraphs 16 to 27.  Thus, at paragraph 21, His Lordship said:

“ It follows that in every case in which it is said that some provision ought to be implied in an instrument, the question for the court is whether such a provision would spell out in express words what the instrument, read against the relevant background, would reasonably be understood to mean ...”

23.  Mr Yu also reminded this court that for a term to be implied, it is not enough that the court considered the term to be one that is reasonable for the parties to agree on.  It must be “necessary” in the sense that the court must be satisfied that it is what the contract actually means, see paragraph 22 in Attorney General of Belize v Belize Telecom Ltd, ibid. 

24.  Citing passages from Lewison, The Interpretation of Contracts, 5^th Edn paragraph 6.05; Crema v Cenkos Securities plc [2011] 1 WLR 2066 at paragraph 51 and Chantry Estates v Anderson [2010] EWCA Civ 316 paragraphs 16 and 17, Mr Yu submitted that the court should only hold that a term is implied if it can be satisfied that this must be what the contract means to such reasonable person.  In our judgment, this is borne out by what was said by Lord Hoffmann in Attorney General of Belize v Belize Telecom Ltd, ibid, at paragraph 18:

“ In some cases, however, the reasonable addressee would understand the instrument to mean something else. He would consider that the only meaning consistent with the other provisions of the instrument, read against the relevant background is that something is to happen. The event in question is to affect the rights of the parties. The instrument may not have expressly said so, but this is what it must mean. In such a case, it is said that the court implies a term as to what will happen if the event in question occurs. But the implication of the term is not an addition to the instrument. It only spells out what the instrument means.”

25.  Hence, it is appropriate to consider the construction of Clauses 5 and 6 together with the implied term question.  The task of the court is to ascertain what a reasonable person would have understood to be the obligations of the Defendant in relation to the production of the Certificate in the context of the Agreement: whether the obligations include an obligation to provide the Certificate at a reasonable time before completion.

26.  At this juncture, we shall first dispose of the submission of Mr Yu that Clause 5 expressly provided for the production of the Certificate “before completion” (“在物業成交前”) as opposed to, as in Clause 4, “before the date of completion” (“在物業成交日前”).  Counsel submitted that it means that Clause 5 explicitly permits the Certificate to be produced on the date of completion.  He went so far as suggesting that it could be produced at 11:59 pm on 30 March 2012 because of the midnight rule.  Hence, there was no scope for any implied term that the Certificate had to be produced at a reasonable time before completion.

27.  We cannot accept this submission.  We do not think one can derive much mileage from the difference of the wordings in Clause 4 and those in Clause 5 in the present case.  The obligation in Clause 4 involved the reinstatement of the corridor previously encroached by unit 3328. It also involved the production of a certificate to certify the legality of the reinstated works.  As a matter of fact, the Certificate served the purposes of Clause 4 as well as Clause 5. 

28.  The expression before completion” (“在物業成交前”) is ambiguous.  It does not specify how much time before completion. Having regard to what we said below in respect of the context of the transaction, we have no hesitation in rejecting Mr Yu’s contention that Clause 5 explicitly permits the Defendant to produce the Certificate at 11:59 pm on the date of completion.

29.  In our judgment, there is no doubt that Clauses 5 and 6 should be construed together.  Clause 6 must not be read on its own as meaning that the Plaintiffs had accepted that there would not be any problems flowing from the Re-partition.  Otherwise, Clause 5 would be otiose: there would not be any need for getting a certificate if the Plaintiffs had already accepted the Re-partition as problem-free.  Though Clause 6 on its face prohibits the purchaser from raising requisition in respect of the Re-partition, it must be predicated upon Clause 5 being complied with.  It is quite plain that Clause 5 was not there to give rise to an independent obligation on the part of the Defendant to procure a piece of paper in the form of a certificate. 

30.  It is plain to a reasonable person having knowledge of the relevant factual matrix that the underlying purpose of the exercise was to give an assurance from an authorized person to the Plaintiffs that the Re-partition was legal.  The legality of the Re-partition was important as it might impinge on the ability of the Plaintiffs in showing a good title to the property in future sales.  Mr Yu had to accept in the course of arguments before us that without Clauses 5 and 6, the Plaintiffs would have been entitled to raise requisitions in respect of the Re-partition.  The fact that the Defendant or his lawyers regarded the Re-partition as non-structural is not germane.  In a future sale, the Plaintiffs would have to satisfy the future purchaser and his solicitor (who might take a different view from the Defendant or his present lawyers) that the Re-partition would not be a problem. 

31.  Thus, the Plaintiffs would need to have some assurance and the form of assurance agreed upon is a certificate from an authorized person proving the legality of the Re-partition.  In this connection, we reject Mr Yu’s submission based on his contention that the Re-partitioning was clearly insubstantial and non-structural.  As mentioned, at the time of the Agreement, according to the finding of the Judge the Re-partition had yet to be done.  We do not accept one can simply confirm that the Re-partition would be non-structural by examining the plans attached to the Agreement.  Also, without the assistance of an authorized person, one cannot say that non-structural works would not generate problems under the relevant statutory regime or the relevant deed of mutual covenant.   In some instances, one may need to have legal advice as well.  Further, there was no evidential basis for suggesting that the Plaintiffs had accepted that the Re-partition would not pose a problem.  Further, as explained above, the Plaintiffs would also be concerned about showing to the future purchaser that the Re-partition is not a problem.  Hence, the fact that the Defendant regarded the Re-partition as insubstantial and insignificant in terms of title problem is neither here nor there.  

32.  Put in another way, bearing in mind the conveyancing context and the parties’ concern about the Re-partition, construing these clauses from the point of view of a reasonable man, it can hardly be disputed that the Plaintiffs (as purchaser) did not accept the Re-partition to be problem-free.  They required an assurance from an authorized person.  Without such assurance, the Plaintiffs were entitled not to complete.

33.  Further, it should be noted that the authorized person was not appointed jointly as an independent expert.  And Clause 5 did not provide for the precise wording of the certificate.  Hence, this is not a case where the parties had delegated the task of verifying the legality of the Re-partition to a jointly appointed neutral expert for his determination.  The authorized person was to be appointed by the Defendant and his identity would not be made known to Plaintiffs until the certificate was produced. 

34.  Having regard to the above analysis as to the function of the certificate in the context of the Agreement, in our view it must be implied that the certificate would be a proper certificate prepared by an authorized person in good faith.  Short of that, the assurance which the Plaintiff wished to have (as manifested in Clause 5) could not be achieved by a certificate.  For example, if the authorized person stated on the certificate that he was of the opinion that the Re-partition was legal though he had not inspected the same, that could not satisfy the requirement of Clause 5.

35.  In Global Time Investments Ltd  v Super Keen Investments Ltd (2000) 3 HKCFAR 440, the Court of Final Appeal had to consider the effect of a certificate by an architect in a conveyancing agreement which included a provision for the usual architect’s extension of time (for completing the building works).  Though the terms were different from those in the Agreement, what was said by Lord Hoffmann in the context of that case at p.447 could shed light on how we should approach the matter in the present case.  His Lordship said there:

“ In the absence of express words making the certificate conclusive, I do not think that the parties should be assumed to have wanted certainty at the expense of having to accept total capriciousness and irrationality. They agreed to be bound only by something which could fairly be called an architect’s certificate under the contract. This meant that they had to accept as final his answers to the question of whether the circumstances fell within one or other of the heads of cl 23. But they were not binding themselves to accept an extension granted without regard to whether they fell within any of those heads or not. Provided that the architect answered the right question, they had to accept his answer. They could not complain that the answer was wrong. But they did not agree to accept his answer to a different question altogether.”

36.  That was of course said in the context of the facts of that case.  We readily acknowledge that Clauses 5 and 6 are different from the relevant clause there.  In particular, the last sentence of Clause 5 provided for the conclusiveness of a certificate provided pursuant to that clause.  However, we are of the view that the wording in Clause 5 does not preclude the Plaintiffs from contesting whether a document produced by the Defendant actually complied with the requirement of that clause at least in the following respects.

37.  First, the document must be issued by an authorized person.  We do not think Mr Yu disputed that.  And it must be issued by an authorized person who had that qualification at the time he performed the work relating to the certificate and the time when he issued the document. Again we do not think Mr Yu disputed that.  As the judge found, a check on the internet would only reveal a list effective a few days earlier, see paragraph 44 of the Judgment.  

38.  Second, it must be a document which “prove[s] that the legality of the current re-partitioning as shown in Plan A and that the same does not constitute a breach of any building ordinances”. (Emphasis supplied) Hence, the authorized person must certify the matters which Clause 5 required to be certified: the legality of the current re-partitioning as shown in Plan A and that the same does not constitute a breach of any building ordinances.  Mr Yu also had no quarrel with this. 

39.  Further, given the purpose of requiring the certificate in the context of the Agreement as discussed above, because of the operative word “prove[s]” as highlighted in the above paragraph, if on the face of the document there was information which negates the evidential value of the opinion given by the authorized person, it would not be a document which complies with the requirement of Clause 5.  For example, if the authorized person stated on the certificate that he could not be held liable by any person for the statement on the certificate and any person other than the Defendant must seek independent advice on the legality of the Re-partition, it would not be a document which satisfies Clause 5. 

40.  Although none of these features appear in the Certificate, these examples demonstrate that notwithstanding the last sentence of Clause 5, there is still scope for disagreement by the Plaintiffs as to the validity of a document produced by the Defendant in purported compliance with Clause 5.  Like Lord Hoffmann, in the present context, we are not minded to hold that the Plaintiffs had, by Clause 5, accepted that any piece of paper purportedly issued by an authorized person and produced by the Defendant would discharge the obligation under Clause 5.

41.  It therefore follows that it was necessary for the solicitors of the Plaintiffs to ascertain whether the certificate procured by the Defendant could be regarded as a proper certificate for the purpose of Clause 5 before the Defendant could demand for completion.  Further, we are of the view that the Plaintiffs should not be required to make a snap decision.  In line with the duties of the parties in a conveyancing context as expounded in Active Keen Industries Ltd v Fok Chi-keong [1994] 1 HKLR 396 at p.405, we are of the view that though the production of the Certificate is not a matter of answering a particular requisition, solicitors for the Plaintiffs should be given a reasonable time to do consider the document before completion.  The Judge was correct in holding that there was such an implied duty though we would not characterize the Certificate as a “document of title” (as it would not be binding on parties other than the Plaintiffs and the Defendant, and in respect of them only to the extent as provided by Clauses 5 and 6).

Was the Certificate provided within reasonable time before completion?

42.  To recap, the Certificate was furnished to the solicitors for the Plaintiffs at 6:07 pm on the scheduled date for completion. It is common ground that the midnight rule applied.  Hence, Mr Yu submitted that the Plaintiffs’ solicitor did have a reasonable time before completion to consider the Certificate.

43.  Mr Yu relied heavily on the judgment in Summit Link v Sunlink Group [2000] 2 HKLRD 724 to support his case.  In that case, the Court of Appeal held that the production of a copy letter on the date of completion setting out the approval by the manager on the relocation and enlargement of an entrance of a commercial unit was an answer to a requisition given within reasonable time before completion.  Woo JA (as he then was) said at p.735 to 6:

“ What should be considered as reasonable time must be considered in the light of the prevailing circumstances, including the parties' knowledge at the time if it can be proved and what the parties would each be reasonably contemplating at the time. From the correspondence passed between the parties' solicitors at the time from the date of the agreement of 6 January 1998 up to the date of completion, ie, 28 May 1998, there is no evidence to show that the plaintiff or its solicitors knew that the defendant needed time in the matter of days to get money ready for completion. Insofar as the defendant was left in no doubt that the Manager had given approval for the relocation and enlargement of the entrance to Unit 3601, there could be no impediment to completion. The answer to the requisition is simple, and it does not need more than a few minutes for any solicitor to be satisfied that the Manager's approval, especially where it was one dated as late as one day before completion date, had been obtained. In the circumstances, I am of the view that this requisition had been satisfactorily answered within reasonable time.”

44.  That case was decided in 2000.  Since then, the Court of Final Appeal had to consider the implied duties of the parties to a conveyancing transaction in Kensland Realty Ltd v Whale View Investment Ltd (2001) 4 HKCFAR 381.  At paragraphs 70 to 75, the Court examined what terms should be implied in light of the mechanics for completion.  For present purposes, the summary at paragraph (2) of the headnotes in the law report is sufficient:

“ In assessing what was a reasonable time, account must be taken of all matters which both parties were or might objectively be taken to be aware of at the time of making the contract. The time which a vendor must allow, was the time reasonably required by the purchaser to perform its obligations, in relation to completion, in the ordinary course of business. This would normally include the purchaser’s dealing with bankers and solicitors. Hence, as far as the bankers were concerned, whilst the purchaser should previously have lined up finance, a reasonable period to enable the purchaser to apply for a draw down and for the bank to go through its final checks and authorisations had to be factored in. As far as the solicitors were concerned, a reasonable time for the performance of their duties in relation to completion had to be allowed for. Further, reasonable allowance should be made for the time needed for delivery of the payment instruments by hand to the venue for completion.”

45.  Mr Chan on behalf of the Plaintiffs relied on this authority and persuaded the Judge that the time needed for the making of these arrangements should be taken into account in considering whether the Certificate was produced within a reasonable time before completion, see paragraph 53 of the judgment.

46.  It is clear from the judgment that the Judge concluded on the facts that the Certificate was not provided within a reasonable time because it was provided after office hours.  He adverted to the difficulties in verifying the professional status of the person who issued the Certificate, and the unreasonableness of requiring the solicitors to stay behind after office hours.  Though he referred to other matters, what he said at paragraph 49 was, in our respectful view, the right test:

“ I am therefore of the view that the certificate should have been provided to the plaintiffs’ solicitors within a reasonable time before the end of the office hours 30 March. The reasonable time should be long enough to afford the plaintiffs’ solicitors a reasonable opportunity to conduct the checks which are reasonably necessary and to do so in the normal course of business. The time should not be so short that the solicitors would have to stretch all their available resources to the extreme so as to accomplish the tasks.”

47.  Mr Yu submitted that the observations in Kensland Realty, ibid, only related to split cheque instructions and do not apply to the duty to provide the certificate pursuant to Clause 5 within reasonable time.  Though it is correct that in Kensland Realty, the Court of Final Appeal was not concerned with the timing for answering requisitions or the production of an architect’s certificate pursuant to a clause similar to Clause 5, we do not see any sound reason why what had been said in that judgment relating to the need for factoring in the time required for making final arrangements for completion (including drawdown) should not be relevant in determining the reasonable time frame for these matters.  In our judgment, what had been said by Ribeiro PJ in those paragraphs are equally applicable in respect of the duty to show a good title within a reasonable time before completion as well as, in the present context, the production of the Certificate pursuant to Clause 5.

48.  Mr Yu further submitted that there was no evidence from the Plaintiffs about difficulties in making similar arrangements for completion and in the absence of such evidence, the court should not give credence to that as a ground for holding that there was not enough time to complete.  Counsel also asked us to consider the conduct of the parties after the Certificate was supplied.  In the correspondence despatched immediately after that, there was no reference to practical difficulties in making the necessary verifications or obtaining final clearance from the bank in respect of financing.

49.  Though we agree that what is reasonable must depend on the circumstances, what happened after the Certificate had been supplied could not be relevant.  In Kensland Realty, ibid, Ribeiro PJ said at paragraph 70:

“ The contract is one for sale and purchase of property in Hong Kong. In assessing what constitutes a reasonable period for present purposes, the court takes account all matters relevant to completing such a contract which both parties are, or may objectively be taken to be, aware of at the time of the making the contract. The time which the vendor must allow is the time reasonably required by the purchaser to perform its obligations in relation to such completion, in the ordinary course of business.” (our emphasis)

50.  In addition, one should proceed on the general assumption that purchasers will rely on mortgage financing in a conveyancing transaction, see paragraph 71 of Kensland Realty, ibid, and evidence is not required.  Summit Link, ibid, was not a case where the relevant document was supplied by the vendor after office hours.  Insofar as there is any inconsistency between Summit Link and Kensland Realty in this respect, we should follow the latter.

51.  Though there may be force in Mr Yu’s submission that solicitors for the Plaintiffs did not require a long time to check the contents of the Certificate, there is no answer to the practical difficulties in terms of making final arrangements (including drawdown) for completion and the verification of the professional status of the authorized person after office hours. 

52.  Despite the able arguments of Mr Yu, we conclude that the Judge was correct in finding that the Certificate was not provided within a reasonable time before completion.

Disposition

53.  We therefore dismiss the appeal and order the Defendant to pay the costs of the 1^st Plaintiff in this appeal with certificate for two counsel, such costs are to be taxed if not agreed.

Annex