LEE SHU MAN v. CHU WING HING AND ANOTHER

1996, No. 52
(Civil)

H E A D N O T E

Agreement for sale and purchase of premises - purchaser let into occupation prior to completion - question of payment for use and occupation of the premises by the purchaser - interest on balance of purchase price not payment "in respect of the defendant's use and occupation of the land" within the meaning of Order 29, rule 12(b) - noted that no Greenwood v. Turner Order (see [1891]2 Ch. 144) had been sought in the present case.

IN THE COURT OF APPEAL

1996, No. 52
(Civil)

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J U D G M E N T

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Bokhary, J.A.:

1. This is an interlocutory appeal. It is by the defendant. He appeals against an Order made by Le Pichon J on February 26, 1996, whereby she ordered him to make interim payments in respect of his use and occupation of the suit property, a shop space in Tai Po to which I will refer as "the Property".

2. As drawn up, the Order reads:

"1. The Defendant do pay the 2nd and 3rd Plaintiffs by way of interim payment in the amount of $23,000.00 per month from 14th April, 1994 to 17th February, 1996 being the sum of HK$506,000.00 within 21 days of the date hereof.

2. The Defendant do thereafter pay the 2nd and 3rd Plaintiffs a sum of HK$23,000.00 on the 18th day of each month until further order, and the first payment to be made on the 18th day of March, 1996.

3. Costs incidental to and occasioned by this application to be to the 2nd and 3rd Plaintiffs in any event."

3. As the action is still at the interlocutory stage, it is necessary to avoid saying anything which might prejudice its fair trial.

4. By a Provisional Agreement for Sale and Purchase dated March 18, 1994, the 2nd and 3rd plaintiffs, who are husband and wife, agreed to sell and the defendant agreed to purchase the Property for $3.3 million. I will refer to that agreement as "the Agreement".

5. The Agreement names the 2nd and 3rd plaintiffs as the "vendor". And, under the heading of "title", it provides that the Property "is sold by the vendor as registered owner with vacant possession and free from any encumbrances or any third party claims".

6. Nevertheless, the Amended Statement of Claim begins by stating that the 1st plaintiff was at all material times until April 28, 1994, the registered owner of the Property. And it is then pleaded that she had in 1993 agreed in writing with the 2nd plaintiff to sell the Property to him and/or his nominee. The Assignment of the Property by the 1st plaintiff to the 2nd and 3rd plaintiffs is dated April 25, 1994.

7. Reverting to the Agreement, it provided for the payment of an initial deposit of $100,000 upon signing. That initial deposit was duly paid.

8. The Agreement also provided for: the signing of a formal agreement for sale and purchase on March 28, 1994; the payment of a further deposit in the sum of $230,000 upon the signing of that formal agreement; completion on or before April 18, 1994; and the payment of the balance of the purchase price upon completion.

9. Time for payment, the Agreement provided, was of the essence.

10. The final clause of the Agreement reads:

"The Vendors hereby agree to grant to the Purchaser a licence to occupy the Property with effect from the date of this Agreement to 17th April, 1994 for an occupation rent of HK$23,000.00 provided that a rebate of HK$766.00 should be given by the Vendors to the Purchasers should the actual date of completion be earlier than 18th April, 1994."

11. On March 18, 1994, the date of the Agreement, the Defendant entered into occupation of the Property.

12. When the time came for the signing of the formal agreement and the payment of the further deposit, the defendant raised requisitions on the 2nd and 3rd plaintiffs' title to the Property. And instead of paying the further deposit, he tendered a cheque for the amount thereof to be held by the 2nd and 3rd plaintiffs' solicitors as stakeholders conditional upon and pending satisfactory answers to his requisitions.

13. In the result: no formal agreement has been signed; no further deposit has been paid; and completion has not taken place.

14. By their solicitors' letter of May 9, 1994, the 2nd and 3rd plaintiffs asserted that each of those omissions constituted a repudiatory breach by the defendant of the Agreement, and treated the same as discharged thereby.

15. It is their pleaded case that his licence to occupy the Property terminated on April 18, 1994, alternatively on May 9, 1994.

16. They also complain of alterations made by him to the Property, and of his failure to provide them with evidence that he has paid management fees, utility charges and rates in respect of the Property during his occupation thereof.

17. The items of relief set out in their prayer are: possession of the Property; mesne profits of $766 per day from April 18, 1994, to delivery up of vacant possession; arrears of management fees, utility charges and rates; an order for the reinstatement of the Property; an injunction prohibiting further alterations thereto; damages; further or other relief; interest; and costs.

18. In answer to all of that, the defendant denies that he has repudiated the Agreement; says that he only made such alterations to the Property as the 2nd and 3rd plaintiffs had consented to; that no management fees were payable; and that he has paid all rates and utility charges.

19. As for the counterclaim, the main heads of relief counterclaimed by the defendant are: specific performance of the Agreement, further or alternatively, damages for breach of contract; and the return of what he has provided by way of deposit.

20. The application for interim payment was made to the judge under Order 29, rule 12(b), which lays down the High Court's power to order a defendant to make an interim payment to a plaintiff whose action includes a claim for possession of land. The court, it is provided, can only so order if it is satisfied that "if the action proceeded to trial, the defendant would be held liable to pay the plaintiff a sum of money in respect of the defendant's use and occupation of the land during the pendency of the action, even if a final judgment or order were given or made in favour of the defendant."

21. The main point taken on behalf of the defendant in support of his appeal is neatly summarised in paragraph 3 of his counsel's skeleton argument which reads:

"In the present case, the Defendant counterclaim for specific performance or alternatively damages. The Defendant could not be made to elect until earliest at the time of the judgment if the Defendant should succeed. If the Defendant should elect to go for specific performance and had succeeded in getting specific performance. then the Defendant could not be held liable to pay any sum to the Plaintiff in respect of the Defendant's use and occupation of the land during the pendency of the action. Even if because of the delay in the completion of the sale and purchase, the Defendant becomes liable to compensate the Plaintiff by way of interest payment on the unpaid balance of purchase price, such interest is not "money in respect of the Defendant's use and occupation of the land during the pendency of the action". The nature of this liability for interest is clearly demonstrated by the fact that such liability for interest on the unpaid purchase price would not depend on whether the purchaser is, pending completion, in occupation of the land agreed to be sold or not."

22. As I see, that point is correct.

23. That leaves the respondent's notice. Three grounds are contained therein.

24. The first is that the defendant has elected not to claim specific performance. The second is that he is estopped from denying that he is liable to pay for his use and occupation of the Property. And the third is that the defendant is liable to reinstate the Property and to make monthly payments of $23,000.00 until he has effected such reinstatement.

25. For the defendant, it is argued that each of those points are without merit. I am, as I have said, anxious not to say anything which might prejudice the fair trial of the action. All I propose to say is this. None of those grounds would avail the 2nd and 3rd plaintiffs for present purposes unless it is so plainly right that it can be seen now that it is bound to succeed. I am certainly not prepared to take that view of any of those grounds.

26. It remains necessary therefore to deal with this appeal on the basis that the defendant may indeed succeed and that his success may indeed include an order for specific performance.

27. On that basis, the defendant's main point in support of the appeal would hold good for ensuring its success unless there is something else to prevent that result.

28. That brings me to a fourth ground which the 2nd and 3rd plaintiffs seek to add to their respondent's notice. We have entertained that ground de bene esse. It reads:

"The Defendant will be liable to pay the 2nd and 3rd Plaintiffs a substantial sum of money in any event, either as a sum of money in respect of the Defendant's use and occupation of the suit premises or as the interest of the . balance payment of the purchase price of the suit premises - the 2nd and 3rd Plaintiffs will seek to rely on the provisions of O.29 r.12(c) of the Rules of the Supreme Court, Cap. 4 for such purpose."

29. Quite apart from anything else, that ground could never on any view suffice to uphold the judge's order unless it is plain that she would and should have, if she had been asked to do so, exercised her discretion to order interim payment even leaving aside use and occupation and going solely on the basis of interest on the balance of the purchase price. I do not consider it plain that the judge would or should have done anything of the kind.

30. Having succeeded, I hope, in not saying anything which might prejudice the fair trial of the action, I would allow this appeal and set aside the judge's order.

31. I say nothing as to what might have happened if the 2nd and 3rd plaintiffs had sought a Greenwood v. Turner Order, being the form of order which takes its name from the case of that name reported at [1891] 2 Ch. 144.

Godfrey, J.A.:

32. If a final order for specific performance is made in these proceedings in favour of the defendant, the order will provide for interest on the purchase money, after the date fixed for completion, to be paid by the defendant to the plaintiffs. The defendant will not have to pay anything for his use and occupation of the land after that date, since he then became entitled, in any event, to the rents and profits or to possession of the property. In those circumstances, this claim for an interim payment to be made by the defendant to the plaintiffs in respect of his use and occupation of the land was manifestly ill-founded.

33. The suggestion is made that we should entertain a claim, on a completely different basis, not advanced before the judge. This is founded on the premise that the plaintiffs may obtain judgment against the defendant for a substantial sum of money, apart from damages and costs. Since, in my view, the only order that could be obtained by the plaintiffs here would be for damages, this suggestion is also manifestly ill-founded. In any event, I would decline to entertain it at this stage.

34. For these reasons, I entirely agree with Bokhary JA that this appeal must be allowed.

Litton, V.-P.:

35. I also agree. The appeal is allowed and the judge's order is set aside.

[Argument on costs]

Litton, V.-P.:

36. We award the defendant costs here and below in any event.