YEN WING CHOI AND OTHERS v. MATCH POWER INVESTMENT LTD

FAMV No. 2 of 2011

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO. 2 OF 2011 (CIVIL)

(ON APPLICATION FOR LEAVE TO APPEAL

FROM CACV NO. 5 OF 2010)

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Between:

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DETERMINATION

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Mr Justice Ribeiro PJ:

1.  At the hearing we dismissed this application for leave to appeal with reasons to be provided later.  These are our reasons.

2.  The applicant is a property developer and a member of the Cheung Kong group of companies.  The respondents are purchasers of flats in the defendant’s development known as One Beacon Hill.  Under the sale and purchase agreements, provision was made for interest to be payable on monies received from the purchasers in the event of delay by the vendor in completing the transactions.  In 2005, the respondents issued writs against the applicant claiming such interest.  That claim is resisted, one ground of defence being that any such claims have been settled or waived by an agreement (“the Agreement”) signed by the relevant respondents. 

3.  A preliminary issue was tried regarding that ground of defence and it was held by Chu J at first instance[1] and by the Court of Appeal[2] that on its true construction, the Agreement did not constitute a settlement or waiver of the respondents’ claim for interest.  That decision is the subject-matter of the present application for leave to appeal.

4.  The applicant formulated in writing two questions on which leave to appeal is sought, namely:

(a)  “Whether there is a distinction to be drawn between evidence relating to prior negotiations (inadmissible) and evidence establishing that there were no negotiations (admissible according to the Court of Appeal); and

(b)  Whether, if there is a category of evidence relating to the fact of non-negotiation, the identification of the actual facts which were relevant and those which were not relevant to construction is logical and correct.”

5.  The second question is case-specific and cannot independently support this application.  It only arises if leave is granted on the first question.

6.  Three additional issues were canvassed by Mr Nicholas Green QC[3] in oral submissions.  The first involved the complaint that the courts below had failed properly to construe the words “full and final settlement” and “the property” in the Agreement.  This is again a case-specific question of construction which raises no issue of great general or public importance.

7.  The other two questions were advanced in reliance on the House of Lords’ decision in BCCI v Ali.[4] It is, however, hard to see how that case has any bearing on the present application. There was no doubt in BCCI that the parties had entered into an agreement for a general release from liability. The issue there concerned the scope of that release, particularly in relation to a form of liability that the parties were unaware of since it had not previously been recognized by the courts.  Here, the debate is whether, as a matter of construction, the Agreement amounts at all to a waiver or release of the plaintiffs’ claims to interest. 

8.  We turn therefore to the only possibly viable question for leave to appeal, as set out in paragraph 4(a) above.

The factual background

9.  When the plaintiffs signed provisional agreements to purchase the flats in the development, they were also granted an option to purchase a car parking space for $1.00, on conditions stated in a document referred to as “the option letter”.  It was obviously contingent on them completing purchase of the flats.

10.  They later claimed that there was a delay in the development’s completion, giving them a right to interest.  Those claims had reached the stage of complaints to the Consumer Council and solicitors’ correspondence when the plaintiffs were invited to attend at the offices of the applicant’s agents to select their respective car parking spaces.  They were shown floor plans and each duly chose a parking space.  They signed the Agreement and surrendered the option letter for cancellation.  In a separate document, they were given “warnings” about the desirability of obtaining separate legal advice.

11.  The Agreement is brief.  Its heading states:

“The property comprises Car Parking Space No. [P ] on Car Park [ ] and Flat [ ], [ ] Floor, Block [ ], One Beacon Hill.”

Its body provides:

“The purchaser, namely, , has selected the above car parking space today. The full purchase price of the above car parking space is HK$1.00. By signing this letter, the car parking space purchase option letter between the purchaser and Match Power Investment Limited is hereby exercised as the full and final settlement of all the purchaser’s rights relating to the purchase of the property. The car parking space purchase option letter No. [ ] is hereby returned to Match Power Investment Limited for cancellation. This letter is part of the formal agreement.

Match Power Investment Limited will pay the legal costs for preparing the formal agreement for sale and purchase and the assignment in respect of the above car parking space prepared by solicitors designated by Match Power Investment Limited.”

The applicant’s case

12.  The applicant’s case is that by signing the Agreement, the plaintiffs waived or compromised their interest claims. Reliance is placed on the words:

“By signing this letter, the car parking space purchase option letter between the purchaser and Match Power Investment Limited is hereby exercised as the full and final settlement of all the purchaser’s rights relating to the purchase of the property.”

13.  Chu J referred to the well-known principles on the interpretation of contracts set out by Lord Hoffmann in Investors Compensation Scheme Ltd v West Bromwich Building Society,[5] and identified the matters she considered relevant as part of the factual matrix. These included the option letter; the fact that the right to exercise the option had accrued by the time the plaintiffs went to the agents’ office; the fact that demands for interest had previously been made by the plaintiffs; the agents’ request that the plaintiffs attend to select a parking space; the selection of such parking spaces; cancellation of the option letter after signing the Agreement; and the absence of any mention of delay or the interest claims during or in connexion with the signing of the Agreement. 

14.  Against that background, Chu J rejected the applicant’s contention that the Agreement effected a waiver or settlement of the plaintiffs’ claims for interest.[6] Her Ladyship’s judgment was upheld by the Court of Appeal.  Le Pichon JA expressed the view which both courts had taken as follows:

“While evidence of prior negotiations is inadmissible for the purpose of construing the Settlement Agreement, in my view, the fact that there had been no negotiations of any kind must form part of the relevant factual matrix.”[7]

15.  It is that approach which gives rise to the question set out in paragraph 4(a) above.  The applicant argues that there is no material difference between impermissibly referring to pre-contractual negotiations on the one hand and taking into account the absence of such negotiations on the other.   It contends that by referring to the absence of any prior negotiations, the courts below relied on inadmissible material and misconstrued the Agreement.  In any event, the applicant says, the question whether there is any material difference between the two classes of evidence is one of great general or public importance.

16.  We do not consider the applicant’s contention reasonably arguable.  As Lord Hoffmann points out in the passages from the Investors Compensation Scheme case cited by Chu J, pre-contractual negotiations are excluded as irrelevant since the Court is concerned with discovering the parties’ objectively ascertained contractual intention, and not with their “declarations of subjective intent”.  As his Lordship notes, that was the rationale of the principle as explained by Lord Wilberforce in Prenn v Simmonds.[8]  But the absence of court proceedings or of prior negotiations between the parties signing the Agreement is an objective fact of an obviously different character. 

17.  The peculiar difficulties caused by pre-contractual negotiations were recognized by Lord Hoffmann in Chartbrook Ltd v Persimmon Homes Ltd,[9] where his Lordship stated:

“...pre-contractual negotiations seem to me capable of raising practical questions different from those created by other forms of background. Whereas the surrounding circumstances are, by definition, objective facts, which will usually be uncontroversial, statements in the course of pre-contractual negotiations will be drenched in subjectivity and may, if oral, be very much in dispute. It is often not easy to distinguish between those statements which (if they were made at all) merely reflect the aspirations of one or other of the parties and those which embody at least a provisional consensus which may throw light on the meaning of the contract which was eventually concluded.”[10]

18.  The courts below were entitled to have regard to the absence of any prior court proceedings or settlement negotiations between the parties, among the other objective facts enumerated above, as part of the circumstances surrounding the signing of the Agreement.    There is a qualitative difference between reference to such negative facts as an aspect of the factual matrix and reference to any negotiations between parties seeking to reach a consensus as an aid to construction.  We do not think any question of principle of the requisite importance arises and therefore dismissed the application for the leave to appeal with costs. 

19.  It is unnecessary for us to comment on the merits of the construction adopted below.  However, since Mr Green QC addressed the Appeal Committee at some length on the construction, we might say a few words on the topic.  The construction adopted below is hardly surprising given that the Agreement deals from start to finish with the selection and acquisition of parking spaces.  That was the matter remaining to be dealt with after completing the purchase of each flat.  The sentence so heavily relied on by the applicant begins with the stipulation that by signing the Agreement, “the car parking space purchase option letter ... is hereby exercised”.  The words which follow, namely, “as the full and final settlement of all the purchaser’s rights relating to the purchase of the property” state the consequence of exercising that option.  The courts below quite properly understood them to mean that acquisition of the parking spaces by exercising the option amounted to the settlement in full of all the property rights to which each purchaser was entitled in relation to their purchase of the flat and the parking space. It was natural that a particular parking space should be linked to a particular flat in the Agreement’s title since the option to purchase a space for $1.00 was dependent on purchase of the relevant flat.  The Agreement says not a word about outstanding claims to interest in respect of alleged delay.  The courts below were, in our view, quite entitled to hold that the Agreement in general and the sentence relied on in particular had nothing to do with extinguishing any such claims.

20.  Complaint was also made as to adverse comments said to have been unfairly voiced by the Court of Appeal in a “postscript” to its judgment.  Such complaints do not constitute an independent ground for seeking leave to appeal and we do not consider it necessary to discuss that “postscript” any further.