LAI KAM WAH v. TALENT SUN INVESTMENT LTD

HCA 1166/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1166 OF 2011

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D E C I S I O N

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1. This is the defendant’s appeal against the decision of Master Kwang, entering summary judgment in favor of the plaintiff.

2. By a provisional agreement for sale and purchase dated 28 September 2007 (“Agreement”), the plaintiff as vendor agreed to sell to the defendant as purchaser the property known as the remaining portion of lot number 1892 in demarcation district number 106, Yuen Long (“Property”).

3. The dispute between the parties turns on the construction of clause 3 of the Agreement, which confers an option on the parties to cancel the transaction of sale and purchase after 1 October 2009 (“Option”).  The plaintiff claims that he has validly exercised the Option on 14 May 2011 and seeks a declaration in this action that the Agreement has been cancelled or rescinded.

4. It is clear to me that construed as a whole, the plain, ordinary and natural meaning of the words used in clause 3 of the Agreement is that both the vendor and the purchaser have the right at any time after 1 October 2009 to exercise the Option and cancel the transaction contemplated by the Agreement, and that neither party will have any claim against the other. The words used expressly provide for this option, and a reasonable person would have understood the parties to mean exactly what the words clearly provide.

5. Read as a whole, the Agreement envisages completion of the sale and purchase to take place on or before 1 October 2009, which is 2 years from the date of the Agreement, when the balance of the purchase price is to be paid. Under the Agreement, the vendor had the obligation to apply to and obtain the consent of the Highways Department to remove the railing to the access road to the Property, and to construct a road for vehicles to access the Property (“Consent”). In view of the distant completion date and the uncertainties as to the time that may be required and the likelihood of obtaining the Consent from the Highways Department, Clause 3, read as a whole, provides for a limit to be placed on the period allowed for completion of the transaction, and confers options on the parties to cater for the possible delay and the uncertainties surrounding their obligations.

6. Under clause 3, if the vendor is unable to provide the Consent before the date for completion on 1 October 2009, completion is said to be extended, to take place within one month from the date of the vendor’s written notice to the purchaser that the Consent has been obtained.  However, the purchaser is also given the right at any time on or after the date for completion on 1 October 2009 to serve notice on the vendor and require the vendor to obtain and furnish the Consent within 14 days. Finally, clause 3 provides that both parties have the right to cancel the sale and purchase at any time after 1 October 2009, in order to place a limit on the time allowed for completion, and to enable the parties to opt out of the transaction if the sale and purchase cannot be completed by 1 October 2009.

7. The defendant argues that the Option is unenforceable by reason of uncertainty, since it is exercisable on the completion date envisaged under the Agreement. The Option is actually expressed to be exercisable after, and not on, 1 October 2009. Bearing in mind that the date of 1 October 2009 falls 2 years after the date of the Agreement, to envisage the application for the grant of the Consent, I do not agree that it can be said that the Option to cancel has no meaning.  It is precisely because of the time lapse between the date of the Agreement and the date scheduled for completion, to cater for the delay in the application for the grant of the Consent, that the Option is conferred on the parties, to be exercisable after 1 October 2009.

8. Nor do I agree that the Option to cancel after 1 October 2009 is in any other way unclear or uncertain. Read as a whole, I fail to see how clause 3 or the Option can be capable of “an almost infinite variety of possible meanings”, and so severance is neither necessary nor appropriate. Nor has the defendant in the evidence filed in opposition to the application for summary judgment raised any facts relating to the background, the consideration of which will lead to any other conclusion on the construction of clause 3 as I have held.

9. It is clear that for the purpose of the construction of contracts, the intention of the parties is the meaning of the words they have used. Counsel for the plaintiff has already referred to the oft cited passage used by Lord Hoffman NPJ in Jumbo King Ltd v Faithful Properties Ltd & Ors (1999) 2 HKCFAR 279, 196 D-H.  Lord Shaw also made it clear in Great Western Railway v Bristol Corp (1918) 87 LJ Ch 414:

“…courts of law when on the work of interpretation are not engaged upon the task or study of what the parties intended to do, but of what the language which they employed showed that they did; in other words, they are not constructing a contract on the lines of what may be thought to have been what the parties intended, but they are construing the words and expressions used by the parties themselves.”

10. The options conferred on the parties under clause 3 make good and logical sense to me, as the parties’ way of addressing the uncertainties that might arise from the need to obtain the Consent. As Lord Hoffman put it in Jumbo King:

“If the ordinary meaning of the words makes sense in relation to the rest of the document and the factual background, then the court will give effect to that language, even though the consequences may appear hard for one side or the other. The court is not privy to the negotiation of the agreement - evidence of such negotiations is inadmissible - and has no way of knowing whether a clause which appears to have an onerous effect was a quid pro quo for some other concession. Or one of the parties may simply have made a bad bargain.”

11. The court should not rewrite the contract for the parties if the meaning of clause 3 is clear, as I have found.  To say that the Option is only exercisable by the plaintiff if he has failed to apply for the Consent is reading conditions which do not exist into the clause, and is tantamount to rewriting clause 3 of the Agreement made between the parties.  No case was been made out that conditions should be implied into clause 3.

12. The defendant argued that the plaintiff’s claim in these proceedings for a declaration that the Agreement has been rescinded or canceled by the plaintiff’s exercise of the Option is inconsistent with the claim made by the plaintiff against the same defendant in HCA 2524 of 2008 (“1^st Action”). In the 1^st Action, the plaintiff sought a declaration that the Agreement was unenforceable for failure to comply with s 30 of the Conveyancing and Property Ordinance. In the 1^st Action, the defendant counterclaimed for specific performance of the Agreement.

13. It is clear from the evidence that the plaintiff’s service of the Option was made without prejudice to its claim in the 1^st Action that the Agreement was unenforceable. Notwithstanding the defendant’s claims of the plaintiff’s alleged breach, including its failure to deliver the title deeds under the Agreement, there is no evidence of the defendant’s acceptance of any wrongful repudiation by the plaintiff. The counterclaim filed in the 1^st Action was for specific performance of the Agreement. The defendant likewise claims in these proceedings that the Agreement is valid, binding and subsisting.  Keung Shiu Tang v DH Shuttlecocks Ltd (1994) 1 HKC 286 [CA] does not assist the defendant in the present case, as its stance in maintaining that the Agreement can be specifically enforced simply means that the plaintiff can rely on the subsisting Agreement, including the Option.

14. As such, even if the 1^st Action can be said to operate as some form of estoppel, as the defendant alleges, I fail to see how the defendant has been prejudiced by the stance adopted by the plaintiff either in the institution of the 1^st Action, or the institution of these proceedings. If the Agreement is still valid and subsisting as the defendant claims, then either the plaintiff or the defendant can, pursuant to clause 3, exercise the Option to cancel at any time after 1 October 2009. In view now of the plaintiff’s exercise of the Option on 14 May 2011, the court can no longer grant any order for specific performance of the Agreement as the defendant claims - whether in the 1^st Action or in these proceedings.

15. As for the question of the plaintiff’s position as a co-administrator, it is clear from the evidence, namely the land search record of the Property, that the death of the other co-administrator was already registered at the Land Registry on 5 January 1996.  I do not see any triable issue as to the title or capacity of the plaintiff, which is made clear in paragraph 1 of the Statement of Claim.

16. At the initial hearing of the plaintiff’s application for summary judgment, the Master dismissed the plaintiff’s claim in the 1^st Action (with the plaintiff’s consent) and entered judgment on the plaintiff’s claim in these proceedings against the defendant.  The defendant appeals against the summary judgment on the basis of the Master’s manner of dealing with the 1^st Action. As the defendant has pointed out, its counterclaim has not been disposed of in the 1^st Action. If it claims to be entitled to any damage under its counterclaim, notwithstanding the plaintiff’s exercise of the Option to cancel the transaction, the defendant may well pursue its counterclaim in the 1^st Action, but I will not deal with the merits of such counterclaim in this action. Nor is it necessary to do so.

17. It suffices to say that I do not see any triable issue having been raised by the defendant in this action, whether on the facts or in law. Questions as to the lack of stamping on the Agreement have been dealt with by the undertakings given to the Master at the hearing. I agree with the Master that judgment should be entered in this action in favor of the plaintiff, in terms of paragraphs 1 and 2 of the Summons as amended.  For the avoidance of any doubt, as this hearing is de novo, the plaintiff’s claims against the defendant in the 1^st Action are dismissed, with costs.

18. The defendant’s present appeal is dismissed, with costs to the plaintiff including certificate for counsel.