MAN SUN FINANCE (INTERNATIONAL) CORPORATION LTD. v. LEE MING CHING, STEPHEN

IN THE COURT OF APPEAL

1992, No. 203
(Civil)

Headnote

Provisional agreement for sale and purchase of domestic flat - Parties to "complete the formal Agreement for Sale and Purchase" on or before 3 April 1992 - In the event the vendor is unwilling to enter into the formal Agreement "all deposits already paid shall be double refunded to the purchaser without interest, otherwise the purchaser reserves the right to buy the premises" (clause 8) - Purchaser ready willing and able to perform on 3 April 1992 but not vendor - "Double deposit" tendered by vendor on 22 April 1992 purportedly under clause 8, but not accepted by purchaser.

Held (Court of Appeal, affirming trial judge on this point): The "alternative performance" to be rendered by vendor under clause 8 must be on or before 3 April 1992. Accordingly, tender on 22 April 1992 too late, purchaser entitled to order for specific performance, requiring vendor to assign the flat, on payment of balance of purchase price.

IN THE COURT OF APPEAL

1992, No. 203
(Civil)

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J U D G M E N T

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Litton, J.A.:

Introduction

1. This case concerns the proper construction of a provisional agreement dated 24 March 1992 for the sale and purchase of Flat No. 6, 9th floor, Fontana Gardens, Tai Hang, Hong Kong together with one carparking space. By his judgment given on 8 December 1992 Jones J. upheld the Master when she entered judgment under Order 86 rule 3 for the plaintiff (purchaser) against the defendant (vendor) for specific performance of the agreement, requiring the vendor to assign the property to the purchaser. The vendor now appeals.

2. The agreement provides for the sale and purchase of the property for HK$5,450,000 payable as follows:

"A. Temporary Deposit : (and also being part payment of the purchase money) HK$200,000 shall be paid upon signing of this agreement.

B. Balance of Deposit: HK$617,500 shall be paid upon signing of formal Agreement For Sale And Purchase on or before 3rd April 1992.

C. Balance of Purchase Price : HK$4,632,500 shall be paid upon completion on or before 25th June 1992".

3. The provisional agreement is awkwardly worded and, as counsel says, seems to have been drafted by someone not completely familiar with the English language. Of relevance to this appeal are the following terms :

"1. The Vendor and the Purchaser shall complete the formal Agreement for Sale and Purchase in respect on the above premises at the offices of Messrs. on or before 3rd April 1992.

The Vendor and the Purchaser agree that they shall separately appoint their own solicitors. The Vendor shall be represented by Messrs. Philip Wong, Kennedy Wong & Co. whereas the Purchaser shall be represented by Messrs. Chan & Cheng Solicitors. The Vendor and the Purchaser shall pay his own legal costs.

3. The stamp duty on the Assignment shall be borne and paid by the Purchaser. All Solicitors' cost and all other disbursements pertaining to the Assignment shall be borne and paid by the Purchaser.

4. All outgoings and charges relating to the premises up to and including exciting the date of the Assignment shall be borne and paid by the Vendor (e.g. Water, electricity, gas, rates, property tax, management fee, etc.) Vacant possession of the premises must be delivered on completion.

5. In connection with this transaction the Vendor and the Purchaser agree that L&W Property Consultants Limited shall have the right to receive HK$ from the Vendor and HK$30,000 from the Purchaser as service charge such service charge shall be paid not later than 3rd April 1992.

6. If in any case either the Vendor or the Purchaser fails to complete the sale and purchase in the manner herein contained the defaulting party shall compensate at once L&W Property Consultants Limited HK$30,000 as liquidated damages.

7. If the Purchaser fails to observe the above condition when due, all deposits or part payment of purchase money already paid shall be forfeited by the Vendor. The Vendor shall have the absolute right to re-sell the above premises to any other person without notice.

8. In the event the Vendor is unable or unwilling (for whatever reasons) to enter into formal Agreement for Sale and Purchase with the Purchaser and all deposits already paid shall be double refunded to the Purchaser without interest, otherwise the Purchaser reserves the right to buy the premises.

9. The Purchaser may name other person or representative to buy about premises and the Vendor shall have no objection thereto.

10. Date of completion : on or before 25th June 1992.

11. This Provisional Agreement for Sale and Purchase shall not be binding unless and until for the Vendor has signed his name hereon and has received the temporary deposit, otherwise the temporary deposit shall be refunded to the Purchaser without interest or any other compensation whatever".

4. It is common ground between the parties that this provisional agreement is effective in law to confer rights and liabilities on the parties in relation to the flat and carparking space. The only question is whether, in the circumstances which have transpired, the purchaser is entitled to summary judgment for specific performance, requiring the vendor to complete the sale of the flat and carparking space. The vendor, as the appellant before us, argues that the purchaser is not so entitled; or, at least, that there are issues of fact to be tried before the rights of the parties can be finally determined; the judge, the vendor says, erred in not reversing the Master and giving the vendor leave to defend under Order 86 rule 4.

Background Facts

5. What transpired after the parties had entered into the provisional agreement on 24 March 1992, and the purchaser had paid the "temporary deposit" of $200,000, can be briefly stated. On 2 April 1992 the vendor's solicitors sent to the purchaser's solicitors the engrossment of the formal Sale and Purchase Agreement in duplicate, incorporating all the mutually agreed amendments and asking for the purchaser's execution as soon as possible.

6. On 3 April 1992 the purchaser's solicitors returned the two copies of the formal Sale and Purchase Agreement to the vendor's solicitors, duly signed by the purchaser and attested, together with a cheque for $617,500 being the further deposit payable upon the signing of the formal Sale and Purchase Agreement. The purchaser's solicitors' letter of 3 April 1992 went on to say :

"This said cheque is sent to you subject to your firm's undertaking to return us a copy of the said Agreement for Sale and Purchase duly signed by your client and attested by you within five days from the date hereof".

7. Some time round about 3 April 1992 (the affidavits lodged by the defendant are unclear as to this, but the precise time is irrelevant for the purposes of this appeal) the defendant became unwilling to enter into the formal Sale and Purchase Agreement and to go through with the transaction upon the terms set out in the provisional agreement. The cheque for $617,500, being the balance of the deposit, made out in the name of the vendor's solicitors, was held by them, not presented to the bank for payment.

8. Some time after 3 April 1992, the vendor initiated negotiations with the purchaser through the estate agent but these were fruitless. On about 14 April 1992 the vendor's solicitors told the purchaser's solicitors on the telephone that the vendor was unwilling to enter into the formal agreement and proposed to pay the purchaser $400,000 being twice the amount of the initial deposit. By letter dated 22 April 1992 the vendor's solicitors sent to the purchaser's solicitors a cheque for $400,000 drawn in favour of the purchaser "in accordance with .....clause 8", and, at the same time, returned the cheque for $617,500.

The Judge's Conclusion

9. Jones J. concluded that the vendor was not entitled to resile from the provisional agreement under clause 8 for two reasons:

(i) The provisions of clause 8 that "all deposits already paid shall be double refunded to the purchaser" meant that the vendor was required not only to pay $400,000, twice the amount of the temporary deposit, but also a sum of $1,235,000, being twice the amount of the balance of deposit; and

(ii) the vendor had failed to pay the required sum under clause 8 promptly: this, in the view of the judge, meant that the compensation should be paid "when the formal agreement was to be signed or promptly within 24 hours".

Ground (i)

10. As to the first ground, I am of the view that the judge was wrong. This is a plain matter of the proper construction of the provisional agreement. In construing a contract, what is imputed by the court to the parties is that they intended to give effect to their own agreement. In this instance, the contemplation of both parties was that the formal agreement should be signed on 3 April 1992 when, at the same time, the balance of the deposit of $617,500 would be paid. Once this occurs, all rights and liabilities under the provisional agreement would be subsumed; the provisional agreement would have merged with the formal agreement. Where clause 8 refers to the vendor being "unable or unwilling" to enter into the formal agreement, it must follow that such inability or unwillingness must be expressed before the formal agreement is signed, that is before the balance of deposit is payable or paid. Hence, where clause 8 refers to "all deposit already paid" it could only refer to the "temporary deposit" of $200,000. To construe clause 8 otherwise is to make nonsense of the rest of the agreement. Take clause 7 which gives the vendor the right to forfeit "all deposits" if the purchaser failed to "complete": how could this possibly refer to the balance of the deposit? The words "all deposits" must have the same meaning in the two clauses.

11. Moreover, the judge was also wrong on the facts. On 22 April 1992 when the vendor, through its solicitors, invoked clause 8, the "balance of deposit" amounting to $617,500 had not been paid. Since the parties clearly contemplated by clause 1 of the provisional agreement that the performance of the parties thereunder would be concurrent and mutual, the cheque could only have been tendered on the basis that the vendor would on its part sign the formal agreement. The vendor never signed; the cheque was never presented for payment; hence the "balance of deposit" was never "paid". It was tendered, but not paid.

Ground (ii)

12. I now turn to the second ground for the judge's decision. The way the judge expressed his reasoning is this:

"Although no time is prescribed by the clause, it has been held in two recent unreported decisions,..... that the compensation should be paid when the formal agreement was to be signed or promptly within 24 hours."

13. The two recent unreported decisions were : Chan Chun Ming Colman v. Chung Lik Keung, A4025/1991, 17 June 1992 and Soo Kok v. Tsui Yat Ming Rustam A4614/1991, 18 June 1992. In the resolution of this point, I have derived little assistance from these two cases. In my view, it is not helpful to see how differently formulated contractual provisions have been construed by other courts, when the task at hand is the proper construction of the provisional agreement in this case.

14. The effect of clause 8, counsel for the purchaser argues, is this:

(i) It is in the nature of an 'escape' clause in the vendor's favour, allowing the vendor to render 'alternative performance'; that is, the vendor must, on the day when performance is due, either enter into the formal agreement or refund double the deposit.

(ii) he provisional agreement named only one day when such performance was to be rendered: 3 April 1992.

(iii) If the vendor elects to adopt the 'alternative performance' of refunding double the deposit, it must also be on the same day.

15. Miss Yuen, counsel for the purchaser, further argues that full effect must be given to the words in clause 8 "otherwise the purchaser reserves right to buy the premises"; there are no words in clause 8 which say that if the vendor does not perform on 3 April 1992 by either entering into the formal agreement or making the double refund, the purchaser's "right to buy the premises" is left in abeyance for a period.

16. If the provisional agreement allows no elasticity of time, then Miss Yuen is plainly right. The vendor, she says, had the right from 24 March 1992, the date of the provisional agreement, at any time up to 3 April 1992 to "resile" from the agreement by refunding double the deposit. By entering into the formal agreement on 3 April 1992, the right to resile under clause 8 would plainly have become extinguished; it must follow that the "alternative performance" could not be rendered after 3 April 1992.

17. Mr. Graham, counsel for the vendor, argues that, as a general principle of equity, unless the agreement specifies otherwise, time is not of the essence in a contract for the sale of land. Accordingly, he argues, when the time for "performance", that is 3 April 1992, has passed, and neither party had given notice appointing a reasonable time for performance, the tender of the cheque for $400,000 on 22 April 1992 was within time. At least, arguably so, and accordingly the vendor should have leave to defend.

18. In my judgment, the 'principles of equity' upon which Mr. Graham relies do not justify this conclusion.

19. Historically, at common law, a term of a contract stipulating when the contract should be performed was always regarded as an essential term but, in contracts for the sale of land, equity, having a concurrent jurisdiction, did not look upon the stipulation as to time in precisely the same light: see Buckley LJ in Rainieri v. Miles [1981] AC 1050 at 1058D. The reason, based upon practical difficulties concerning the conveyance of land in England, is explained thus by Croom-Johnson J. in Phillips v. Lamdin [1949]2 KB 33 at 42-43 (cited with approval by Lord Edmund Davies in Rainieri v. Miles at 1084E-F):

"There is no distinction to be drawn in general .... between contracts for sale of land and any other contracts except in this respect, that where the contract is not completed owing to some conveyancing difficulty, or some difficulty with regard to title and the matter goes off, courts of equity will not give damages for loss of the bargain, the reason apparently being that the uncertainty of title in this country is thought to make an exception to that general rule ...."

20. Hence, in contracts for the sale of land, where completion is stipulated to take place at a certain time, equity would restrain the vendor from recovering the equitable interest in the land created by the contract, and would also not allow the purchaser to repudiate, simply because on the day fixed for completion one or other of the parties was unable to complete or unless, of course, time has been made expressly "of the essence": see Templeman LJ in Rainieri v. Miles at 1062D.

21. But this does not mean that equity will amend or re-write the contract. As Lord Shaw of Dunfermline said in Maclaine v. Gatty [1921]1 AC 376 at 393:

".... my mind cannot comprehend the elasticity of punctuality. I know of no method of construction of a contract by way of contradiction of it."

22. The "principle" for which Mr. Graham contends comes to no more than this : where it could do so without injustice to the parties equity would decree specific performance of a contract for the sale of land, notwithstanding that the date fixed for completion has passed: but this "principle" would have no application where, for instance, there was something in the nature of the property or the surrounding circumstances which would render it inequitable to treat it as a non-essential term of the contract.

23. The parties here have appointed 3 April 1992 as the day when (at the latest) the balance of the deposit must be paid and, simultaneously, the formal agreement signed. They appointed no other day. They did not say: "3rd April 1992 or some reasonable time thereafter". Assume that it was the purchaser who was unable or unwilling to complete the formal agreement and pay the balance of deposit on 3 April 1992: is the vendor not entitled there and then to invoke clause 7, forfeit the deposit of $200,000 and re-sell the flat and carparking space the next day? Is clause 7 to be construed as if the rights of the vendor were (to use Miss Yuen's expression) "left in abeyance" for a period, not to crystallize until it has served a notice requiring the purchaser to "complete"? Is the vendor required to wait for the purchaser's further failure before he could invoke clause 7? The answer to my mind must be no. If time is "of the essence" for the purchaser in clause 7, why should it not be so for the vendor in clause 8?

24. In my judgment, Miss Yuen is correct in her primary contention.

Time extended by the purchaser?

25. I must now turn to Mr. Graham's fall-back position, developed in the course of argument before us. It is this: when one reads the purchaser's solicitors letters, once sees that the purchaser himself was not in fact insisting upon 3 April 1992 for "completion", and therefore time became "at large".

26. Mr. Graham relies on the letter of 3 April, referred to earlier, where the solicitors asked for the return of the executed Sale and Purchase Agreement within five days, bringing the date up to 8th April 1992. He also relies on a further letter dated 9th April 1992 where the solicitors said:

"Please note that unless we receive the Agreement for Sale and Purchase duly signed by your client and witnessed within 2 days from the date hereof, our client will take the necessary legal action against your clients as may be advised."

27. These were fresh dates for "completion" which the vendor, says counsel, never accepted; hence time became "at large" and unless and until one or other of the parties gave formal notice fixing a new date for "completion", time remained at large.

28. In my judgment this argument fails for this reason: The solicitors were not in any way extending the contractual date 3 April on behalf of the purchaser. When they sent the formal agreement and the cheque to the vendor's solicitors on 3 April they said that this was subject to "your firm's undertaking" to return the duly executed agreement within 5 days. They were not saying :"your clients have a further 5 days to execute the agreement". Nothing they said can be so construed. In my judgment Mr. Graham's "fall-back" position has no merit.

Conclusion

29. Mr. Graham submits that the provisional agreement is a commercial arrangement freely entered into by the parties which enabled either party to back out with a monetary penalty; it provided a "cooling off" period whereby the parties had the opportunity to reflect on whether they wished to proceed with the sale and purchase. That submission, broadly, is correct. By the agreement the "period" lasted until 3 April 1992 when the clock stopped ticking.

30. The primary obligation was to buy and sell the property. When the vendor failed to render performance on 3 April 1992, the purchaser's "right to buy the premises" in accordance with the concluding phrase in clause 8 was in no way prejudiced. The tender of $400,000 on 22 April 1992 was, in my judgment, not due tender under clause 8. The purchaser is therefore entitled to an order for specific performance, requiring the vendor to assignment the property, upon payment of the sum of $617,500 plus $4,632,500. This result is reached by a proper construction of the provisional agreement. There are no factual issues to be explored, such as might otherwise have entitled the vendor to leave to defend under Order 86 r.4.

31. The appeal should therefore be dismissed, with an order nisi for costs to the purchaser (respondent). As regards the form of the order in the court below it is plainly defective as it required the parties to enter into a formal sale and purchase agreement. This was dealt with briefly in the course of the hearing. The order should be amended, if possible by agreement between the parties, and submitted to the judge for approval.

Sears, J.:

32. The sole issue in this appeal is the proper construction to be placed on a provisional sales agreement for the sale and purchase of a flat. The relevant contents have been set out in the judgment of Litton J.A. Although the English of the document is in places ungrammatical, the Court is obliged to construe it in accordance with the standard principles of construction. I have read the draft judgment of Godfrey J. who has set out the commercial reasoning underlying this type of agreement, and it would appear to me that commercial reality therefore dictates a degree of certainty into the parties' actions and re-actions.

33. By Clause 1, the completion of the formal agreement for sale and purchase had to occur "on or before 3rd April 1992". By Clause 8, if that agreement was not entered into then "...all deposits already paid shall be double refunded to the purchaser without interest...". On a proper construction of these two clauses, I am in no doubt that the repayment had to occur on or before 3rd April 1992. In my judgment, if the vendor wished to escape from his obligation to enter into the formal agreement, then he must tender the double deposit before April 3rd comes to an end. This construction is both more certain and more contextually apposite than one which permits a consideration of what is or is not a reasonable time after April 3rd.

34. The money was tendered on April 22nd well after the deadline. This appeal should be dismissed, and the order amended as proposed by Litton J.A.

Godfrey, J.:

35. This appeal requires the Court once more to consider the true construction and effect of a broker's standard form signed by parties who intend in due course to enter, after taking legal advice, into a formal sale and purchase agreement for the sale by one, and the purchase by the other, of an interest in land (usually a residential unit in a multi-storey block).

36. There are a variety of such forms in common use, drafted in Chinese or in fractured English, and in each case produced by the broker through whom the intending vendor and the intending purchaser have been introduced.

37. The broker's concern is to ensure that he gets paid the commission which the intending vendor, or the intending purchaser, has agreed to pay. (Sometimes it is agreed that both parties shall pay commission.) The broker is well aware that, at any time before completion (by which I mean the assignment of the property by the vendor to the purchaser in exchange for the purchase money) the transaction may go off. It may go off because of a change in Hong Kong's often volatile property market. If there is a substantial rise in the market, the vendor will want to call the transaction off and sell elsewhere at a better price. If there is a substantial fall in the market, the purchaser will want to call the transaction off and buy elsewhere at a lower price. And there may be problems even before the specified date for completion; for if, when it comes to the treaty for the intended formal sale and purchase agreement, the purchaser's solicitors discover, or believe themselves to have discovered, some real or supposed flaw in the vendor's title, they will advise the purchaser not to sign at all. The broker wants to see to it, if he can, that none of these events will operate to deprive him of the commission he is expecting to be paid; so, whatever else the form he gets the intending vendor and the intending purchaser to sign may be intended to do, it is plainly intended to secure the broker's commission. No doubt those responsible for the production of these forms are well aware that the law does not look kindly on claims by brokers to be paid commission when the transaction has not proceeded to completion (in the sense in which I have used the word). The law starts from the premise that it is only upon completion that the broker is to be paid. Of course, the law will give effect to an agreement which clearly provides that the broker is to be paid his commission on some other event; for example, on the signing of a formal sale and purchase agreement, or even on the introduction of a party ready, willing and able to enter into such a contract; but such agreements have proved difficult to draft effectively. By dressing up the commission as a "service charge" and by getting the intending vendor and the intending purchaser to sign one of these forms, the broker hopes to get over these problems.

38. But the position of the intending vendor and the intending purchaser may (as we shall see) be very seriously compromised by signing such a form.

39. Let me consider first the position of the intending vendor. He wants the intending purchaser to be bound to proceed to completion. He does not want the intending purchaser to be able to get out of the transaction simply by refusing to sign a formal sale and purchase agreement. On the other hand, he does want to be able to get out of the transaction himself by refusing to sign the formal sale and purchase agreement if the market goes up.

40. Now the intending purchaser. He wants the intending vendor to be bound to proceed to completion. He does not want the intending vendor to be able to get out of the transaction simply by refusing to sign the formal sale and purchase agreement. On the other hand, he does want to be able to get out of the transaction himself by refusing to sign the sale and purchase agreement if the market goes down.

41. Both the intending vendor and the intending purchaser know that, after they have signed the formal sale and purchase agreement, it will be too late to call the transaction off. But each of them wants to reserve to himself a locus poenitentiae; an opportunity to get out of the transaction on or before the specified date on which he is to sign the formal sale and purchase agreement.

42. The truth is then that all these are transactions "in which each side hopes the other will act like a gentleman and neither intends so to act if it is against his material interests" : cp. Goding v. Frazer [1967] 1 WLR 286 per Sachs, J. at p.293.

43. In these circumstances the first and the most fundamental problem which these forms pose is this. Will the signing of the form by the intending vendor and the intending purchaser bring into effect an immediately binding agreement for sale and purchase? The broker hopes so; for this is his best hope of getting his commission (or "service charge", or "compensation" or "liquidated damages"; the label does not matter) if the intending vendor and the intending purchaser, or one of them, fails to sign the formal sale and purchase agreement.

44. That is all very well from the point of view of the broker; but not, or not necessarily, from the point of view of the intending vendor and the intending purchaser. If the signing of the broker's form brings into existence an immediately binding agreement (if, in other words, the agreement between the parties is not an agreement subject to contract) neither side will be able, in the absence of express stipulation, to withdraw from the transaction simply by refusing to sign the formal sale and purchase agreement. The court will grant a decree of specific performance against the defaulting party in the absence of any stipulation in the agreement clearly operating to preclude the other party from claiming that remedy. The failure of the defaulting party to sign a formal sale and purchase agreement will be entirely irrelevant.

45. There may be cases, however, in which the form evidences an agreement, not to be immediately bound to the sale and purchase, but only to be bound later, i.e., by an agreement in the terms of the formal sale and purchase agreement not yet made. In those cases the parties will have succeeded in concluding no more than an agreement to agree which is no agreement at all, at any rate, so far as the obligation of the intending vendor to sell, and the intending purchaser to purchase, is concerned. But on the basis that (as will usually be the case) the signing of the form brings into existence an immediately binding agreement, it does so on the terms on which it expressly contains and otherwise on the terms of what the law describes as an "open contract". From the moment the ink is dry on the parties' signatures, all references to the formal sale and purchase agreement are illusory; there is already in existence an immediately binding agreement and neither side is entitled to demand that the other side enter into a further one. The existing agreement, so long as it contains all the essential terms of a contract for the sale of land (the price, the date of completion; whether vacant possession is to be given) stands on its own and is from that moment on specifically enforceable at the suit of either party.

46. I do not know how the parties would react if they were told that the signing of the formal sale and purchase agreement was a pure formality to which they were not entitled and which could safely be ignored. I suspect they would be astonished. Yet such is said to be their intention; at any rate in those cases where it I agreed or held that what the parties have done is to enter into an immediately binding agreement.

47. When all is going well, none of this matters. The parties proceed to the formal sale and purchase agreement; and thence to completion. The vendor gets his money; the purchaser gets his flat; and the broker gets his commission. But when things do not go well, the difficulties of reconciling the irreconcilable immediately become apparent.

48. Say the vendor, or the purchaser, repents of his bargain. He refuses to sign the formal sale and purchase agreement. That he can do; but it does not help him in the absence of some express stipulation on which he can rely. He is already a party to an immediately binding agreement.

49. How are the parties to have their cake and eat it? How are they to achieve an immediately binding agreement which nevertheless gives each of them an opportunity to call the whole thing off if he repents of his bargain and decides not to go ahead?

50. The Hong Kong answer is this. Just provide, in the case of the vendor, that, if he decides not to sign the formal sale and purchase agreement on or before a specified date, he is to be free from his obligation to assign the property to the purchaser, but assumes instead an obligation to pay money to the purchaser (whether described as "compensation" or "damages" or anything else; again, the label does not matter). This obligation is conventionally quantified at twice the amount of the purchaser's preliminary deposit (the balance of the deposit will usually have been made payable on the signing of the formal sale and purchase agreement which, ex hypothesi, is not going to happen). And provide, in the case of the purchaser, that if he decides not to sign the formal sale and purchase agreement on the specified date, he is to forfeit his preliminary deposit to the vendor.

(Let me pause for a moment to point out that there is nothing unfair about all this. Say the preliminary deposit was $50,000. If the purchaser calls off, the vendor is $50,000 better off. If the vendor calls off, the purchaser is $50,000 better off.)

51. Under these arrangements, the obligations of the parties crystallize on the specified date. At any time up to then, the parties may sign the formal sale and purchase agreement; if and when they do, it will of course supersede their preliminary or provisional agreement.

52. If, however, the purchaser fails to sign the formal sale and purchase agreement on or before the specified date, the vendor will be entitled to forfeit the preliminary deposit. But is the vendor entitled, instead of doing so, to insist on specific performance?

53. If the vendor fails to sign the formal sale and purchase agreement on or before the specified date, he will become bound to pay to the purchaser double the preliminary deposit. But is the purchaser entitled, instead of accepting that, to insist on specific performance?

54. These are the questions which the courts seem to have found it hard to answer.

55. The problem which has to be addressed in all these cases, as it seems to me, is whether the provision which the provisional agreement makes in relation to a failure by one of the parties to sign the formal sale and purchase agreement is one which limits (and, if so, to what extent) what would otherwise be the right of the other party to insist on specific performance. If the relevant provision takes away the innocent party's right to specific performance but only on terms that the defaulting party performs some alternative obligation instead, then the defaulting party, given this option, must perform that alternative obligation strictly in accordance with its terms in order to take the benefit of the provision.

56. I approach the problem raised in the present case accordingly. The vendor was unwilling to enter into the formal sale and purchase agreement on the specified date. Under Clause 8 he was entitled in that event to call off the contract (which was an immediate binding contract) by paying the purchaser double the amount of his preliminary deposit of $200,000; i.e., $400,000; otherwise the purchaser's right to specific performance would remain unaffected. Clause 8 must be construed as imposing an obligation on the vendor, if he wished to exercise the option conferred on him to withdraw from the sale, to pay the $400,000 either on or before the specified date. It cannot be right to attribute to the parties an intention that the vendor, having failed to enter into the formal agreement of sale and purchase on the specified date, was to be entitled to keep the purchaser waiting indefinitely for his $400,000.

57. In fact, it is perfectly clear that the vendor did not promptly tender the $400,000 to the purchaser; he waited until 22nd April 1992 before making any such tender. If the vendor, on or before the specified date, 3rd April 1992, had tendered the $400,000 to the purchaser and the purchaser had refused it, the matter would have been entirely different; in those circumstances I would have had no hesitation in holding that the purchaser had lost his right to specific performance. But that is not what happened. No such tender was made until 22nd April 1992.

58. In the circumstances, there must be a decree of specific performance, being a remedy to which in the circumstances the purchaser is entitled. It cannot however take the form of the order approved by the judge below, since this form requires the vendor to enter into a further agreement for sale and purchase, which he is not bound to do.

59. Subject to the point I have made above as to the appropriate form of order, I agree that this appeal must be dismissed. The vendor has no arguable defence to the purchaser's claim for specific performance. The case should be remitted to the judge to determine the form of the order unless the parties can agree to dispense with this.