XCHRX CHOW CHIU YIT and Another v. WONG KING CHEONG EDDIE

1997 No. A7609

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

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J U D G M E N T

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The facts

1. By a sale and purchase agreement dated 18th April 1997, the Defendant agreed to sell a flat in Chai Wan to the Plaintiffs. The completion of the sale was fixed for 21st July (which was a Monday) between 9.30 a.m. and 5.30 p.m. The agreement required the Defendant to show good title to the flat.

2. On 12th May, the Defendant's solicitors sent the Plaintiffs' solicitors copies of various title deeds and other documents relating to the flat. On 14th May, the Plaintiffs' solicitors raised certain requisitions on the Defendant's title. Those requisitions were not answered, and on 18th July the Plaintiffs' solicitors wrote to the Defendant's solicitors purporting to rescind the agreement. The Plaintiffs' case is that the Defendant was in breach of an implied term to answer the requisitions within a reasonable time. The Defendant denies being in breach of such a term.

3. The Defendant's solicitors answered the requisitions on 19th July, and by a letter dated 21st July (which the Plaintiffs' solicitors received at 4.33 p.m.) they offered the Plaintiffs' solicitors seven working days from 19th July to peruse the relevant documents. However, on 22nd July, the Defendant's solicitors took the view that the Plaintiffs' solicitors had not taken up this offer, and by a letter faxed to the Plaintiffs' solicitors at 11.26 a.m., they treated the Plaintiffs' failure to complete the purchase on 21st July as amounting to a repudiatory breach of the agreement. For their part, the Plaintiffs claim that the letter of 21st July amounted to the grant of an extension of time for the completion of the agreement, and that it was the Defendant who repudiated the agreement by treating the agreement as repudiated before the extension of time had expired.

4. The Plaintiffs issued proceedings against the Defendant on 22nd July, and in due course they sought summary judgment under Ord. 86 of the Rules of the High Court. Master Cannon dismissed the Plaintiffs' summons, and the Plaintiffs now appeal. The appeal has been exceptionally well argued on both sides.

The issues on the appeal

5. Two issues arise on the appeal. First, is it arguable that the Plaintiffs were not entitled to treat the agreement as repudiated by reason of the Defendant's failure to answer the requisitions prior to 18th July? Secondly, if so, is it arguable that the Plaintiffs were not entitled to treat the agreement as repudiated by reason of the Defendant's failure to honour the extension of time which his solicitors had offered to the Plaintiffs?

The first issue

6. The Court of Appeal held in Active Keen Industries Ltd. v. Fok Chi Keong [1994] 1 HKLR 396 that a vendor's obligation to answer requisitions and objections must be discharged within such time as the purchaser reasonably needs to satisfy himself that the vendor has shown good title, to get his money ready and to complete on the day fixed for completion. In this case, the Plaintiffs' solicitors never reminded the Defendant's solicitors before 18th July that they had not yet answered the requisitions raised on 14th May. In these circumstances, it is arguable that the Defendant's failure to answer the requisitions by 18th July should not be held against them. As Godfrey, J. (as he then was) held in A-Mayson Development Co. Ltd. v. Betterfit Ltd. [1992] 2 HKC 533 (in the context of explaining the circumstances in which a purchaser may call off the contract without waiting to see whether the vendor can succeed in proving title on or before completion), the purchaser may not treat the contract as at an end merely for minor deficiencies, removable defects, matters of conveyance and so on. Where proof of title is insufficient, but the title is not necessarily defective, the purchaser is bound in the ordinary way to give the vendor a proper opportunity of establishing the title. I appreciate that this case was decided before Active Keen, but in my view it is arguable that giving the Defendant's solicitors a proper opportunity to establish title in the present case would have involved reminding them before 18th July of their failure to answer the requisitions.

7. Moreover, having regard to the nature of the requisitions in the present case, I think that it is arguable that at the trial of the action it will be found that answering the requisitions by the letter of 19th July (which was received by the Plaintiffs' solicitors at 10.03 a.m. on that day) gave the Plaintiffs' solicitors sufficient time (although it was a Saturday) to satisfy themselves of the Defendant's title and to complete the purchase on time. It is arguable that the documents which were enclosed with that letter could be perused by an experienced conveyancing solicitor very quickly, and it is not suggested that the documents themselves made it necessary for further requisitions to be raised.

8. Finally on this part of this case, Mr. Ambrose Ho for the Plaintiffs relied on clause 12(a) of the agreement, which provided that requisitions had to be delivered "within seven (7) working days after the date of receipt of the title deeds in the possession of the [Defendant] by the [Plaintiffs'] solicitors". In that connection, Godfrey, J.observed in Yeung Sau Chuen Sammy v. Chung Chun Ting (HCMP 4080/92):

"When not all the title deeds are delivered, and there are others which are delivered later, it follows that in relation to those title deeds of which copies are delivered late, the purchaser's solicitors must have seven working days after their receipt to consider those documents."

I appreciate that some of the documents which the requisitions required the Defendant's solicitors to provide were referred to in the list of incumbrances in the Land Registry particulars. But in my view, it is arguable that the documents which were delivered on 19th July were not title deeds of the kind to which clause 12(a) related. It is arguable that they were simply additional documents which the Plaintiffs' solicitors wanted to peruse in order to ensure that there was no defect in the Defendant's title. However, as will be apparent when I come to the second issue, the Plaintiffs' solicitors were offered an additional seven working days to peruse the documents. That was an offer which the Plaintiffs' solicitors did not take up. There is, therefore, a triable issue on the first issue.

The second issue

9. The Defendant did not treat the Plaintiffs' purported rescission of the agreement on 18th July as itself a repudiation of the agreement. Accordingly, if the purported rescission was of no effect, the Plaintiffs were themselves required to complete the purchase, either by 5.30 p.m. on 21st July, or within seven working days of 19th July if they accepted the extension of time which was on offer. However, the Plaintiffs' solicitors' response to the letter offering them the extension of time (which they received at 4.33 p.m. on 21st July) - which response was faxed to the Defendant's solicitors at 4.52 p.m.-amounted to a rejection of the offer of the extension of time. In those circumstances, the Plaintiff would not have been entitled to treat the agreement as repudiated by reason of the Defendant's failure to honour the extension of time which had been offered by the Defendant's solicitors. In short, that offer had been rejected by the Plaintiffs, who were relying on the purported rescission of the agreement on 18th July.

10. Mr. Ho's response to this argument was as follows. At 10.52 a.m. on 22nd July, before the Defendant's solicitors purported at 11.26 a.m. to treat the agreement as repudiated, the Plaintiffs' solicitors received a letter from the Defendant's solicitors, notifying them that if the Plaintiffs' solicitors failed to tender the balance of the purchase price by noon on 22nd July, they would assume that the Plaintiffs would complete the purchase within seven working days from 19th July. Mr. Ho powerfully argued that that letter meant that the Defendant had elected not to treat the Plaintiffs' response at 5.52 p.m. on 21st July as a repudiation of the agreement, and that they were bound by that election.

11. I see the force of that argument, but on balance I think that it is arguable that the letter received at 10.52 a.m. did not amount to a clear and unequivocal representation that the Defendant would not exercise his right to treat the Plaintiffs' refusal of the previous offer of an extension of time as a repudiation of the agreement. After all, the letter did not refer at all to the Plaintiffs' response at 5.52 p.m. on 21st July, and that suggests that the letter was drafted at a time when the Defendant's solicitors were unaware of that response. That is confirmed by the evidence of the Defendant's solicitors' conveyancing clerk who handled the transaction, namely that the letter was drafted before the Plaintiffs' solicitors' response had been received, that the Defendant's solicitors had attempted to fax it to the Plaintiffs' solicitors, but that for one reason or another the fax did not go through. I acknowledge that it is the impact of the letter on the Plaintiffs' solicitors that is important rather than the subjective intention of the Defendant's solicitors. Indeed, it may be that the Defendant's solicitors should have recalled the fax after the Plaintiffs' response had been received. But these facts are, in my judgment, nevertheless relevant to whether the letter received at 10.52 a.m. on 22nd July had the legal effect for which Mr. Ho contends. There is, therefore, a triable issue on the second issue.

Conclusion

12. For these reasons, I think that Master Cannon was right to dismiss the Plaintiffs' summons for summary judgment, and this appeal must be dismissed.

(Brian Keith)

Judge of the Court of First Instance