FAST HAPPY LTD v. LEE CHUN PONG BRUCE

HCMP 3176/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 3176 OF 2016

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HCMP 3177/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 3177 OF 2016

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J U D G M E N T

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1.  The two Notices of Motion seek orders to vacate the registrations of two preliminary agreements for sale and purchase of land both dated 26 August 2016 and made between Fast Happy Ltd. and Fast Famous Corporation Ltd as vendors respectively of (i) Lot 3805; and (ii) the RP of Lot 3807 both in DD 104 and the defendant as purchaser thereof (collectively as “the PSPAs”).

2.  The hearing took two days.  The second day of the hearing was for resolving the issue of whether the plaintiffs have waived or are estopped from relying on the defendant’s breach of the conditions of payment of deposits in the PSPAs so that they had to accept the late payment by the defendant by a cashier order for $800,000 on 1 September 2016.  It is for the defendant to prove the waiver or estoppel.

3.  The law of waiver by election has been set out by Yuen JA in Large Land Investments Ltd v Cheung Siu Kwai [2003] 1 HKLRD 313 at §15:

“15.  The principles to be applied in this area of law are as follows:-

(1)  A waiver by election occurs “in the context of a binding contract, when a state of affairs comes into existence in which one party becomes entitled, either under the terms of the contract or by the general law, to exercise a right, and he has to decide whether or not to do so. His decision, being a matter of choice for him, is called in law an election” (The Kanchenjunga at 398).

(2)  It is a prerequisite of election that the party making the election must first be aware of the facts which have given rise to the existence of his right (The Kanchenjunga at 398).

(3)  It may be that the party must also be aware of his legal right of affirming or rescinding the contract when there has been a repudiation by the other party (Peyman v Lanjani [1985] 1 Ch 457 - although this aspect was not disputed and therefore not considered by the House of Lords in The Kanchenjunga).

(4)  Further, since a party who elects not to exercise a right which has become available to him is abandoning that right, he will only be held to have done so if he has so communicated his election to the other party in clear and unequivocal terms (The Kanchenjunga at 398).”

Time is of the essence

4.  Mr Hon, counsel for the defendant accepted at the beginning of the adjourned hearing that the times for payments of deposits were of the essence. 

The plaintiffs’ case

5.  On 29 July 2011 the plaintiffs became the respective owners of the two plots.

6.  On 26 August 2016, the plaintiffs and the defendant signed the PSPAs.  The prices are: (i) $2,000,000 for Lot 3807RP; and (ii) $14,000,000 for Lot 3805.  The payment terms are contained in clause 2(a) as modified by the Chinese handwriting on page 2 of the PSPAs.  Their combined effect is that the defendant (purchaser) should pay the plaintiffs (vendors) initial deposits in the following manner:

Payment	Due Date	Lot 3807RP	Lot 3805
Partial initial deposit	2016.8.26	$50,000	$50,000
Balance of initial deposit	2016.8.29	$50,000	$650,000
Total		$100,000	$700,000

7.  Clause 9 of the PSPAs provides:

“Should the Purchaser fail to complete the purchase in the manner herein contained the deposit shall be forfeited to the Vendor and the Vendor shall then be entitled at his absolute discretion to sell the said premises to anyone he thinks fit and the Vendor shall not sue the Purchaser for any liabilities and/or damages caused by the Purchaser’s default of this Agreement [i.e. the PSPAs].”

8.  Clause 11a provides:

“All deposits of item 2(a) and 2(b) payable by the Purchaser shall be paid to the Vendor’s solicitor......”

9.  The defendant gave the plaintiffs a cheque of $100,000 ($50,000 for each plot) on 26 August 2016 payable to the plaintiffs’ solicitors, Fu and Cheng in payment of the first part of deposits totalling $100,000. 

10.  The defendant did not pay the balance of the initial deposits at ($50,000 + $650,000 =) $700,000 when they fell due on 29 August 2016.

11.  The plaintiffs deposited the cheque for $100,000 into the cheque deposit machine of Fu and Cheng’s bank on Monday, 29 August 2016 at 6:09 p.m.  Since the time of deposit was outside the banking hours, the cheque was only processed on the next day i.e. Tuesday, 30 August.  On 31 August 2016, the cheque was dishonoured and returned to Fu and Cheng.  The reason of dishonour as stated by the bank’s notice to Fu and Cheng was:

“Drawn against uncollected funds”.

12.  The bank’s notice also had the following words stamped on it: “this cheque will be represented on 31 August 2016, advice will be sent by normal mail.”  Unknown to the plaintiffs or Fu and Cheng, the cheque was represented by the bank on 31 August and cleared on 1 September 2016.  But there is no dispute that the plaintiffs were entitled to forfeit the $100,000 by representing the cheque on 31 August 2016 if the defendant should have repudiated the PSPAs upon or before the representation.  This should have been known to the defendant.

13.  The plaintiffs then treated the defendant’s failure to pay the balance of deposits totalling $700,000 on 29 August 2016 and to honour the cheque for initial deposits totalling $100,000 on 31 August 2016 as the defendant’s repudiation of the PSPAs.  They regarded that the PSPAs had come to an end pursuant to clause 9.  Their solicitors had also sent a notice of termination by e-mail (at 19:30 hours on 31 August 2016) and by post (on 1 September 2016) to the defendant through the estate agency (because the PSPAs did not contain the address of the defendant) stating that the PSPAs had been terminated under clause 9 on the grounds of:

(i) the defendant had failed to pay the balance of the deposits totalling $700,000 on 29 August 2016; and

(ii) the defendant’s cheque for the partial deposits totalling $100,000 was dishonoured on 31 August 2016.

14.  On 7 September 2016, the defendant caused a carbon copy of each of the PSPAs to be registered at the Land Registry against (i) Lot 3807RP; and (ii) Lot 3805.

15.  On 3 October 2016, the plaintiffs’ solicitors invited the defendant to sign a cancellation agreement.  The solicitors repeated the request by a further letter of 14 October 2016.  But the defendant did not respond to the letters.

The defendant’s case

16.  The defendant filed two affirmations made by himself on 12 December 2016 and 30 December 2016.  He also filed two affirmations by two estate agents Messrs Leung Ka Wai and Lee Yiu Hon made on 30 December 2016.  The witnesses were cross-examined on their affirmations. 

17.  The first issue between the parties was the allegation by the defence witnesses that the plaintiffs had on 26 August 2016 agreed not to present the cheque for $100,000 until after 6:00 p.m. on Monday, 29 August 2016.  I do not think the resolution of this issue will take either party’s case any further as this cheque was indeed deposited at 18:09 hours on 29 August 2016.  The resolution of this issue will not also produce any significant impact on the issue of credibility of the witnesses on both sides.

18.  The defence witnesses further alleged that on 29 August 2016 at about 3:00 p.m., the staff of the estate agency Messrs Lee Yiu Hon and Leung Ka Wai delivered for the defendant a cheque for $700,000 payable to Fast Happy Ltd. (the plaintiff in HCMP 3176 of 2016) to pay the balance of deposits under the two PSPAs.  But the plaintiffs refused the delivery and insisted that the cheque should be made payable to the plaintiff’s solicitors Fu and Cheng.  Hence, the defendant believed that the plaintiffs had given him time to prepare this cheque.

19.  The defendant’s third allegation is that when the agents Messrs Lee and Leung delivered to the plaintiffs a cheque for $800,000 payable to Fu and Cheng to pay the deposits to the plaintiffs on 31 August 2016 at about 4:45 p.m., the plaintiffs refused the delivery but insisted on a cashier order for $800,000 payable to Fu and Cheng to pay the outstanding deposits. Since the plaintiffs’ request was made after banking hours, the defendant believed that the plaintiffs had allowed him extra time to beyond 31 August 2016 for him to pay the deposits and the PSPAs were still effective. 

20.  Messrs Lee and Leung then arrived at the plaintiffs’ office on 1 September at about 11:00 a.m., but were told to deliver the cashier order to Fu and Cheng.  But after they had delivered the cashier to Fu and Cheng at about 12:30 p.m. on the same day, one Ms Tang, a solicitor of Fu and Cheng told them at about 1:00 p.m. on the same day to take it back which they did after having consulted the defendant.

21.  The defendant also said that the plaintiffs or their representative had not communicated to him that the PSPAs had been terminated or the plaintiffs had the intention to do so.   

Breaches made good by late tender of payment

22.  Mr Hon, counsel for the defendant made a further alternative submission in § 41 of his opening submissions that despite the defendant having failed to pay the deposits by the deadline of 29 August 2016, the plaintiffs had lost their right to treat the PSPAs as having been discharged because the estate agents had delivered for the defendant to the plaintiffs a cheque payable to Fu and Cheng on 31 August 2017 at about 4:45 p.m. to pay all deposits.  This delivery had cured all breaches of the PSPAs by the defendant.

23.  I requested Mr Roy Lau, counsel for the plaintiffs to address me with authorities on the question of “whether the defendant was entitled to make good his breaches of contract after the time for performance had lapsed but before the plaintiffs had accepted the repudiations”.  Mr Lau filed his further opening submissions to answer my question.  He referred to Ho Chi Keung v Yip Lai Ping Elizabeth, DCCJ 7062/2003, 19 October 2004 which cited Union Eagle Ltd v Golden Achievement Ltd [1997] AC 514, a Privy Council decision, where Lord Hoffmann said at 518C to E:

“...It is true that until there has been acceptance of a repudiatory breach, the contract remains in existence and the party in breach may tender performance. Thus a party whose conduct has amounted to an anticipatory breach may, before it has been accepted as such, repent and perform the contract according to its terms. But he is not entitled unilaterally to tender performance according to some other terms. Once 5:00 pm had passed, performance of the contract by the purchaser was no longer possible. The vendor could be required to accept late performance only on the grounds of some form of waiver or estoppel.” (emphasis supplied)

24.  Mr Lau further referred to Sun Lee Kyoung Sil v Jia Weili (22 January 2010), [2010] 2 HKLRD 30, a judgment of Mr Recorder P Fung, SC, where the relevant clauses are similar to this case.  In that case, the purchaser’s cheque for paying the initial deposit was dishonoured.  On the next day, the purchaser delivered a cashier order to the vendor’s solicitors to pay the initial deposit and to make good the breach caused by the dishonor of the cheque before the breach was accepted by the vendor.  The vendor returned the cashier order to the purchaser’s solicitors and accepted the purchaser’s repudiation of the provisional agreement in not paying the initial deposit in accordance the agreement.  The purchaser argued in court that it was the vendor who was at fault by refusing to accept alternative modes of payment subsequently offered by the purchaser.  The learned Recorder found that time was of the essence and did not accept the purchaser’s arguments.  He ordered that the registration of the provisional agreement at the Land Registry be vacated.

25.  After Mr Lau had made the supplemental submissions with authorities, which are clearly correct and applicable to this case, Mr Hon did not pursue this issue anymore in his final submissions. 

The defendant’s evidence

26.  The estate agents Messrs Lee and Leung worked together in these transactions.  Mr Leung said in evidence that he and Mr Lee arrived at the plaintiffs’ office on 29 August 2016 at about 15:00 hours with a cheque for $700,000 payable to Fast Happy Ltd. (the plaintiff in HCMP 3177 of 2016) to pay the further deposits under the two PSPAs.  (This cheque was obviously no good as clause 11a of the two PSPAs required the deposits to be paid to the Vendor’s solicitors Fu and Cheng.  Furthermore, the vendors in the two PSPAs are different.  One cheque payable to one vendor could not be used to effect payment to two vendors.) 

27.  When they presented the cheque to one Ms Fan of the plaintiff, she refused the delivery and insisted that the cheque should be payable to Fu and Cheng.  Mr Lee called the defendant who instructed him to take the cheque back as the defendant would issue another cheque payable to Fu and Cheng.  

28.  When Ms Fan insisted on a cheque payable to Fu and Cheng, Mr Leung believed that she was aware of the deadline of 29 August 2016 for paying the further deposits.  He therefore believed that the plaintiffs had allowed the defendant further time to prepare the cheque to pay further deposits. (Though Mr Leung believed that the plaintiffs had on 29 August 2016 given extra time for the making of a replacement cheque payable to Fu and Cheng, no fresh cheque was tendered to the plaintiffs on 30 August 2016.)

29.  Mr Lee then received from the defendant a cheque for $800,000 payable to Fu & Cheng at around 16:00 on 31 August 2016.  It was to replace the rejected cheque for $700,000 and the dishonoured cheque for $100,000.  Mr Leung then contacted the plaintiffs’ staff for the delivery of the cheque to the plaintiffs. 

30.  Messrs Lee and Leung arrived at the plaintiff’s office at around 16:45 on 31 August 2016 with the cheque for $800,000. However, the plaintiff’s representative (Mr Chung Tsz Chiu (“Nero”)) said that as the cheque for $100,000 had been dishonoured, Mr Eric Wong (a director of the plaintiffs) requested that the deposits should be paid by a cashier order.  Mr Leung immediately responded that the banks were already closed and a cashier order could not be obtained on 31 August 2016. 

31.  Mr Leung believed that the plaintiffs’ representative was aware of the deadline for paying the deposits.  He thus believed that the plaintiffs, in asking for a cashier order after the banks had closed, must have allowed the defendant further time to obtain the cashier order to pay the deposits and also intended that the sale and purchase of the properties to continue despite the original dates for the payment of deposits had expired.

32.  On 1 September 2016 at about 9:00 a.m., Messrs Lee and Leung received from the defendant a cashier order for $800,000 and took it to the plaintiff’s office at around 11:00 on that day.  But Ms Fan told them to take it to a Ms Tang Miu Fung of Fu & Cheng.  Mr Leung then delivered the cashier order to Fu & Cheng at about 12:30.  But at around 13:00, Ms Tang phoned him and asked him to take the cashier order from the defendant.  He did so at around 14:00.

33.  Mr Lee’s evidence has some conflicts with that of Mr Leung and that of Ms Fan.  He said that he and Mr Leung did not meet Ms Fan on 29 August.  That is contrary to the evidence of Mr Leung and Ms Fan.  He also said that he had been to the office of Fu and Cheng on 1 September and witnessed the delivery by Mr Leung of the cashier order to Fu and Cheng. However, Mr Leung said that he had not gone upstairs to the office of Fu and Cheng but just waited downstairs and looked after the car.  Mr Hon preferred the evidence of Mr Leung.

The plaintiffs’ evidence

34.  The plaintiffs’ witnesses had also been cross-examined on their affirmations.  Regarding what happened in the afternoon of 29 August 2016, Ms Fan said that on 29 August 2016 at about 10:43 hours, she received from Mr Leung through the whatsapp apps on her smart phone an image of a cheque for $700,000 payable to Fast Happy Ltd.  She phoned and told Leung that the cheque should be payable to Fu and Cheng as in the case of the last cheque for $100,000.  Leung replied that he had to ask the defendant to rewrite the cheque.  He also asked Ms Fan for the bank account number of Fu and Cheng which Ms Fan gave him.  Ms Fan was adamant that the cheque for $700,000 was never been delivered to the plaintiffs in the afternoon of 29 August 2016 or at any other time. 

35.  At about 14:00 hours on the same day, Ms Fan phoned Mr Leung to check the status of the payment of the balance of deposits totaled $700,000 because the sum was due on that day.  Mr Leung did not answer and she sent him a message at about 14:01 hours saying: “Please call me”.

36.  Mr Leung replied at about 14:02 hours by whatsapp that he was having a discussion with a client and would reply her later.  He phoned her later and asked her not to deposit the cheque for $100,000 with the bank as he would like to have a discussion with Mr Eric Wong in person.  He said he would arrive at the plaintiff’s office at about 3:00 pm.

37.  At about 3:00 pm, Messrs Lee and Leung arrived at the plaintiffs’ office and met Mr Eric Wong and Ms Fan.  Mr Lee said that the defendant intended to pay only $100,000 as initial deposit and asked the plaintiffs to wait for 7 days for payment of the balance of deposits at $700,000.  Mr Lee explained that the defendant would like to use the PSPAs to obtain pre-approval of mortgage finance by a bank.  The defendant would pay the $700,000 after he had obtained the pre-approval. 

38.  Mr Eric Wong rejected Mr Lee’s suggestions right away.  He told Messrs Lee and Leung that payments had to be made according to the times stated in the PSPAs.  Lee and Leung then phoned the defendant to discuss the matter.  They later told Mr Eric Wong that they would meet the defendant for discussions.

39.  Mr Eric Wong later told Ms Fan that Lee and Leung were unable to come up with a definite solution to proceed with the transactions.  He instructed her to inform Leung that the transactions were to be cancelled by (i) the plaintiffs returning the defendant’s cheque of $100,000; and (ii) Mr Leung returning all signed copies of the PSPAs to the plaintiffs.

40.  Ms Fan then phoned Mr Leung intending to tell him about Mr Eric Wong’s position, but Mr Leung did not answer her call.  She at about 16:12 hours sent another whatsapp message to him saying: “please do not leave, return to us all copies of the prelim, (i.e. PSPAs), cancel the transactions!”  There was no reply from Mr Leung or Mr Lee.

41.  Ms Fan then reported to Mr Eric Wong of her inability to contact Mr Leung.  Mr Eric Wong told her to wait till 5:00 pm, being the time of close of business.  If the plaintiffs did not receive the total of $800,000 deposits from the defendant by that time, she should inform the plaintiff’s lawyers to sue the defendant on the transactions.

42.  Ms Fan phoned Mr Leung again intending to tell him about Mr Eric Wong’s instructions.  But Mr Leung did not answer her call.  She therefore sent him another whatsapp message at 16:34 hours saying: “Please call me”.  But Mr Leung did not phone her.  She then sent him another whatsapp message at 16:39 hours saying: “Mr Wong said that he would wait until 5:00 pm, if the deposits at $800,000 were not received, he would inform the lawyers to sue the purchaser.”

43.  Ms Fan waited until 6:00 pm but there was still no answer from Mr Leung.  She then left the plaintiff’s office and deposited the cheque of $100,000 into Fu and Cheng’s account at 6:09 pm into the bank’s cheque deposit machine. 

44.  The defendant did not pay the balance of the deposits at $700,000 on 29 August 2016.

45.  In the morning on 30 August 2016, Ms Fan phoned Leung but he did not answer.  At about 09:27 hours, Ms Fan sent a whatsapp message to Leung saying: “Please call me”.  At about 09:34 hours, Leung sent her a whatsapp voice message telling her that he was driving and would return call later.  Ms Fan replied “ok”.  But Leung did not call back.  At 11:38 hours, Ms Fan sent another whatsapp message to Leung urging him to call her as soon as possible.  There was again no reply.  She therefore sent him another whatsapp message at 17:45 hours saying: “Please call me.”

46.  Ms Fan all along intended to tell Leung that because the defendant had failed to pay the balances of the deposits in accordance with the PSPAs, the plaintiffs would pass the case to the lawyers.  But Leung did not return her calls or answer her messages on 30 August 2016.

47.  Ms Fan was on sick leave on 31 August on 2016.  Mr Chung Tsz Chiu “Nero” of the plaintiffs took her place.

48.  Nero tried phoned Leung repeatedly in the morning on 31 August 2016, intending to tell him that the PSPAs were terminated because the defendant had failed to pay the balances of the deposits totalling $700,000 on 29 August 2016.  But Leung did not answer his calls.

49.  At about 14:00 hours on that day, the plaintiffs learnt through Fu and Cheng that the defendant’s cheque for $100,000 had been dishonoured.  The bank’s advice dated 31 August 2016 showed that the defendant’s cheque was not cleared because it was “Drawn against uncollected funds”.  Mr Eric Wong then confirmed to Nero to terminate the PSPAs and pass the case to the plaintiffs’ lawyers Fu and Cheng.

50.  Nero then phoned Leung to tell him about Mr Eric Wong’s decision, but Leung did not answer the call.  Nero at about 14:27 used the same whatsapp account previously used by Ms Fan to send a message to Leung saying: ‘We will engage lawyers to handle the case”.  The whatsapp apps showed that Mr Leung had read the message instantly, but he did not reply.

51.  About 1-2 hours later, Leung phoned Nero and said he and Lee were coming to the plaintiffs’ office.  They arrived shortly. They told him that they had brought along a cheque for $800,000.  Nero informed Mr Eric Wong accordingly.  Mr Eric Wong said that the defendant’s cheque for $100,000 had been dishonoured, thus he did not believe in the defendant anymore.  He would inform the plaintiffs’ lawyers to terminate the PSPAs. 

52.  Nero then passed on Mr Eric Wong’s comments to Mr Leung.  Messrs Lee and Leung then phoned the defendant and afterwards told Nero that they might not be able to pay $800,000 by cashier order on that day. Nero replied to them that there was nothing more to discuss (or “we would not discuss the matter any further” - Nero’s oral evidence).

53.  On 1 September 2016, Ms Fan resumed duty.  Leung phoned her that he would come to the plaintiff’s office with an $800,000 cashier order.  She refused to meet Leung as the case had been passed to Fu and Cheng.  More importantly, a notice terminating the PSPAs had already been sent by Fu and Cheng to the estate agency on 31 August 2016 through email.  She therefore told Leung to contact Ms Tang of Fu and Cheng as the lawyers would be in a much better position to deal with the situation.  At about 11:11 hours, she sent a whatsapp message to Leung giving him the telephone no. of Ms Tang of Fu and Cheng.  Contrary to the defendant’s allegations, Mr Eric Wong and Ms Fan had not met Leung, Lee or the defendant on 1 September 2016.  She had also never informed Leung, Lee or the defendant to deliver a cashier order to Ms Tang of Fu & Cheng as alleged by the defence witnesses.

Analyses and decision on the evidence

54.  Mr Hon made the first point that the estate agents Messrs Lee and Leung had nothing to gain in this case.  They therefore had no motive to lie.  Hence, their evidence (or Leung’s evidence) is believable. 

55.  Ms Fan, when being cross-examined on why did she wanted to contact the estate agents so urgently on 30 August, said that she wanted to tell them that the defendant had failed to perform the PSPAs and the plaintiffs wanted to cancel them.  When Mr Hon asked her why did she not send Mr Leung on the whatsapp a message to the same effect, she said she had not thought about that at the time.

56.  Nero in cross-examination also said that on 31 August, he did not send the estate agent Mr Leung a whatsapp message saying that the transactions had been cancelled because he thought that it was necessary to tell the agents in words. 

57.  These points do carry some weight.  If the defendant’s case is just on the balance, these points may indeed tip the scale.  However, there are many significant points that operate against the defendant’s case.

58.  It is the defendant’s case that the agents Lee and Leung went to the plaintiffs’ office on 29 August at 3:00 pm. with a cheque for $700,000 payable to Fast Happy Ltd.  But Ms Fan insisted on the cheque being made payable to Fu and Cheng.  They therefore regarded that the plaintiffs had given the defendant time to make good the cheque.

59.  However, the indisputable evidence is that Mr Leung had sent an image of the cheque payable to Fast Happy Ltd. to Ms Fan at 10:43 hours on 29 August.  The plaintiffs’ whatsapp record, which has not been challenged, shows that Ms Fan had been used the whatsapp repeatedly on 29 August since 10:58 hours.  Hence, she must have been aware of the wrong payee in the cheque soon after 10:43 hours.  It is her evidence that after discovering the error in the payee, she phoned Leung and asked for the cheque to be made payable to Fu and Cheng.  Leung said that he had to ask the defendant to rewrite the cheque.  He also asked Ms Fan for the bank account number of Fu and Cheng and Ms Fan gave it to him.  Ms Fan was adamant that the cheque for $700,000 was never been delivered to the plaintiffs in the afternoon of 29 August 2016 or at any other time.  Thus she did not ask for the payee to be corrected save in the phone call shortly after 10:43 hours.

60.  In the light of the fact that the image of the cheque with the wrong payee was sent to Ms Fan and she was aware of the error shortly after 10:43 hours, there was no reason why she would not have phoned Mr Leung to correct the error there and then but to do so only at the alleged meeting at 3:00 p.m. on that day.

61.  Furthermore, if the meeting had indeed taken place at 3:00 p.m. on 29 August, there was no reason why the defendant could not have delivered a replacement cheque before 5:00 p.m. on the same day.  But the fact is that there was no delivery of the correct cheque even on Tuesday, 30 August.  One estate agent alleged in oral evidence that the defendant was not in Hong Kong on 30 August, but this was unbelievable as it was not mentioned in the affirmations of the defendant or the two estate agents.  I also cannot imagine why this, if true, was not mentioned in the whatsapp exchanges between Ms Fan and Mr Leung on 30 August by way of a request to the plaintiffs for extension of time to Wednesday, 31 August for delivery of the correct cheque. The true picture appears to be that the defendant did not have sufficient funds to pay the $700,000 even on 30 August.  Thus he first issued a $700,000 cheque with a wrong payee on 29 August hoping to delay the payment by the need to replace the cheque.  But this could not buy him time until 31 August, hence, he and the agents just refused to be contacted by Ms Fan on 30 August.

62.  I also note that Ms Fan had sent to Leung a whatsapp message at 16:12 hours on 29 August telling him: “please do not leave, return to us all copies of the prelim, (i.e. PSPAs), cancel the transactions!” This is consistent with her evidence that Lee and Leung only came at 4:00 p.m. to ask for postponement of the payment of the $700,000 by seven days.  Such request showed that the defendant was unable to pay the $700,000 by 5:00 p.m. on 29 August.  Hence, it was reasonable for Ms Fan to have sent out that whatsapp message.

63.  Taking the whatsapp messages into consideration and judging from the defendant’s failure to deliver a replacement cheque at anytime on 29 August, I find that Ms Fan’s version of evidence is much more preferable than that of the defendant’s.  I find that Messrs Lee and Leung did not arrive at the plaintiff’s office at 3:00 p.m.  They only arrived at about 4:00 p.m. to ask for the plaintiffs’ indulgence to delay the payment of the $700,000 balance of deposits for seven days.  They also did not present physically the $700,000 cheque payable to Fast happy Ltd. to Ms Fan.  Furthermore, Ms Fan had only asked Mr Leung to correct the payee of the cheque in a phone conversation shortly after 10:43 hours and had not done so again thereafter on that day. Hence, the plaintiffs had done nothing which could have led the defendant to consider that the plaintiffs had waived the time limit of 29 August or had given him any extension of time to beyond 29 August for payment of the $700,000.

64.  The defendant also alleged Nero had said at about 16:45 on 31 August 2016 that Mr Eric Wong of the plaintiffs had asked for a cashier order for payment of the deposits since the cheque for $100,000 had been dishonoured.  On this allegation, the defendant argued that the plaintiffs’ had allowed him further time to obtain the cashier order and also intended that the sale and purchase of the properties would continue.

65.  If Nero should have told the estate agents that the plaintiffs wanted a cashier order for the $800,000 at 16:45 hours, the plaintiffs should expect the cashier order to come in the following morning. It would have unreasonable for the plaintiffs to have sold the properties to other purchaser(s) in the evening of 31 August (as testified by Mr Eric Wong) and for their solicitors to have sent out the notice of termination by e-mail to the estate agency at 19:30 hours.  It would also have been unreasonable for Miss Tang, the solicitor to have asked Mr Leung to take back the cashier order at about 2:00 p.m. on 1 September. 

66.  The notice of termination was addressed to Mr Lee of the estate agency, it stated that the defendant had repudiated the PSPAs by failing to honour the cheque for $100,000 and to pay the further deposits at $700,000 and the plaintiffs accepted the repudiation.  It was sent by e-mail to the estate agency at 19:30 hours and posted to the agency on 1 September.  Mr Lee said in his affirmation that he was only aware of the post containing the notice on 15 September but did not explain why.  He did not say when he was aware of the notice sent by e-mail.  He just said that he did not expect that the notice would be sent by e-mail or post as he had been communicating with the plaintiffs by phone or face to face.  I do not accept Mr Lee’s evidence.  I can see no reason why the letter should not have reached his desk on 2 or 3 September (Friday and Saturday) or at the latest 5 September (the following Monday).  He should also have been aware of the notice through the e-mail at the latest within a few days after it was sent out in the evening of 31 August. 

67.  Regarding the sending of the notice of termination to the estate agency on behalf of the defendant, the defendant had said on affirmation that the plaintiffs or their representative had not communicated to him that the PSPAs had been terminated.  Mr Lau has addressed this point in his written opening.  He referred to Green Park Properties Ltd v Dorku Ltd [2000] 2 HKLRD 400 at 417H-418D where Cheung J (as he then was) said:

“Whether an estate agent is an agent for either the vendor or the purchaser would really depend on the facts of each case: Cheng KwokFai v Mok Yin Wah [1999] 2 HKLRD 440; Happy Face Ltd v Lau Shui King (t/a Fu King Property Agency) (unrep., HCA No 4110 of 1996) and Welltech Investment Ltd v Easy Fair Industries Ltd [1996] 4 HKC 711. Although in this case, AT&A received commissions from both parties, in considering the capacity of AT&A, one has to consider its role at different stages of the negotiation leading to the signing of the agreement. It was Mr Wong (of the vendor, defendant) who asked Mr Lee to sell the property. Mr Lee also informed Mr Wong of the intended inspection and he must have agreed to it. While Mr Leong (the purchaser, plaintiff) was interested in seeing the property, Mr Lee and Mr Andrew Chan were clearly acting as the agents of Mr Wong when they showed the property to Mr Leong and in discussions with him after the inspection. Mr Lee and Mr Andrew Chan might well be acting for the plaintiff when Mr Leong asked them to present the offer to the defendant to buy the property but this would not preclude them to be the defendant's agent before that event. ...”

68.  I am of the view that the sending of the notice to the estate agency was sufficient delivery of the same to the defendant.  The reason being that the agency through Lee and Leung was representing both sides to the transactions.  Lee and Leung were closely in touch with the defendant. They had been entrusted by the defendant the tasks of delivering cheques to the plaintiffs.  They communicated with the defendant and acted as per the defendant’s instructions on how to handle the cheques.  Mr Lee would have conveyed to the defendant the notice of termination upon their receipt of it.  The defendant should have been aware of the notice shortly after it was received by Mr Lee.

69.  If the plaintiffs should have acted so unreasonably in firstly asking for a cashier order at 16:45 hours on 31 August but refusing to accept it on 1 September and also called off the transactions in the evening of 31 August, the defendant would have been very furious.  He would have instructed Mr Leung not to take back the cashier order.  He would have also instructed Mr Leung to complain against the plaintiffs’ conduct by whatsapp messages to Ms Fan there and then.  He would also have instructed solicitors to write to Fu and Cheng setting the plaintiffs’ unreasonable conduct and demanding completion of the transactions.  But none of these had happened.

70.  On 7 September, the defendant’s solicitors Ellen Au & Co registered a carbon copy each of the PSPAs at the Land Registry. Ellen Au & Co also sent a letter to Fu and Cheng referring to the PSPAs and asking for the title deeds for perusal.  Not a word was said about the plaintiffs’ unreasonable conduct or the notice of termination. 

71.  Fu and Cheng on 8 September replied to Ellen Au & Co telling them that the PSPAs were terminated by the notice of termination on 31 August. 

72.  Fu and Cheng later discovered that the $100,000 cheque was honoured.  They then sent to Ellen & Co two cheques each for $50,000 to return the $100,000 to the defendant.  They also referred to the defendant’s registrations of the PSPAs and asked for the withdrawal of the registrations.

73.  Ellen Au & Co did not respond to Fu and Cheng’s two letters and set out the plaintiffs’ unreasonable conduct or to demand completion on the ground that the defendant had complied with the plaintiffs’ request to provide a cashier order of $800,000.  This would be extremely surprising if the defendant’s evidence were true.  But this would not be extraordinary if the defendant’s witnesses were lying. 

74.  On the basis of the above analyses, I disbelieve the evidence of the defendant in so far as it is in conflict with that of the plaintiffs as the plaintiffs’ evidence is reasonable and in line with the whatsapp messages and contemporaneous letters but the defendant’s is not.

Affirmation of agreements?

75.  Mr Hon also referred to the representation of the $100,000 cheque as his alternative position.  He suggested that the representation of the cheque amounted to a reaffirmation of the PSPAs. However, Mr Hon accepted that reaffirmation of contract must be made known in clear and unequivocal terms to the party in breach.  There is no evidence to show that the defendant had treated the representation of the cheque as reaffirmation of the PSPAs.  None of the defendant’s affirmation had suggested this.  In any case, the plaintiffs were entitled to present the $100,000 again after it was dishonoured.  They were entitled to cash the cheque and forfeit the cash because of the defendant’s breach of the PSPAs.  Objectively, the defendant should be aware of this.  When the defendant learnt about the return by Fu and Cheng of the $100,000 by two cheques of $50,000 each on 15 September 2016, he was already aware of the notice of termination and Fu and Cheng’s letter of 8 September which confirmed the termination.  On 15 September, he should be aware that the return by the plaintiffs of the $100,000 by the two cheques was not an election to waive his repudiation of the two agreements or an affirmation of them.

Order

76.  Having disbelieved the evidence of the defendant in so far as it is in conflict with that of the plaintiffs and also held against Mr Hon’s point about the representation of the $100,000 cheque, I hold that the defendant has failed to establish that the plaintiffs have waived or are estopped from relying on the defendant’s breach of the conditions of payment in the PSPAs so that they had to accept the late payment by the defendant by a cashier order for $800,000 on 1 September 2016. 

77.  I exercise this court’s inherent jurisdiction and order that the registrations of the PSPAs be vacated from the Land Registry forthwith (see Heywood v. BDC Properties Ltd [1964] 2 All ER 702, Thian's Plastics Industrial Co. Ltd v. Tin's Chemical Industrial Co. Ltd [1970] HKLR 498, [1971] HKLR 249 and Wong Kum Chi v Lee Tit Ying [2003] 1 HKLRD 594 at § 16).

78.  I also make a costs order nisi that the defendant do pay the plaintiffs’ costs of these two sets of proceedings.