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Howarth Cheung Natalie Jane Y. S. v Tsang Hong Kwang Ok And Another

Judgment Cited authorities 8 Cited in Precedent Map Related
Vincent
Judgment Date22 November 2013
Year2013
Judgement NumberHCA2298/2012
Subject MatterCivil Action
CourtHigh Court (Hong Kong)
HCA2298/2012 HOWARTH CHEUNG NATALIE JANE Y. S. v. TSANG HONG KWANG OK AND ANOTHER

HCA 2298/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO. 2298 OF 2012

________________________

BETWEEN
HOWARTH CHEUNG NATALIE JANE Y. S. Plaintiff

and
TSANG HONG KWANG OK (曾洪光玉) 1st Defendant
TSANG SHING HONG (曾勝康) 2nd Defendant
________________________
Before: Deputy High Court Judge Leung in Chambers
Date of Hearing: 24 September 2013
Date of Judgment: 22 November 2013

________________________

J U D G M E N T

________________________

1. The plaintiff was the vendor while the 1st defendant and her husband, the 2nd defendant, were the purchasers of a residential property with car parking space at Conduit Road under a preliminary sale and purchase agreement. The sale fell through. The parties blame each other for repudiation of the agreement.

2. This is the defendants’ application for summary judgment on their counterclaim.

BACKGROUND

3. The defendants are the owners of the property in question. Through estate agent, the parties entered into the preliminary agreement dated 27 November 2012 for the sale of the property in question at the price of HK$25,000,000 to the plaintiff (“the Preliminary Agreement”).

4. The Preliminary Agreement contained, among others, the following terms:

Clause 2(a)

“The purchase price of the said premises shall be HK$25,000,000.00 which shall be paid by the Purchaser to the Vendor in the manner as follows:

(a) HK$1,240,000.00 shall be paid upon signing of this Agreement as deposit.

……”

Clause 8

“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.”

Clause 9

“Should the Vendor after receiving the deposit paid hereunder fail to complete the sale in the manner herein contained the Vendor shall immediately compensate the Purchaser with a sum equivalent to the amount of the deposit as liquidated damages together with the refund of the deposit and the Purchaser shall not take any further action to claim for damages or to enforce specific performance.”

5. The plaintiff signed the Preliminary Agreement and tendered to the estate agent her cheque for the initial deposit dated 26 November 2012 drawn in favour of the defendants’ then solicitors. The estate agent brought the Preliminary Agreement and cheque to the defendants. The defendants signed the agreement; and the cheque was forwarded to their then solicitors.

6. On 4 December 2012, the defendants were informed by their then solicitors that the cheque was dishonoured upon presentment. The bank subsequently advised that the cheque was dishonoured because “drawer’s chop/signature differs from specimen in our [the bank’s] possession”.

7. Upon knowledge about the dishonour, the plaintiff, according to her, drew a new cheque for the estate agent to bring to the defendants. She subsequently learned from the estate agent that the defendants had decided not to proceed with the deal due to the bounced cheque and refused to accept the new cheque.

8. Later on the same day, the plaintiff’s husband visited the defendants’ at home. The plaintiff’s own case is that the defendants, as well as their daughter, maintained that the deal had already been terminated on the ground that the initial deposit was not paid pursuant to the Preliminary Agreement. There was said to be further negotiation. But the fact remained that there was no further agreement between the parties.

9. On the following day, 5 December 2012, the defendants, through their then solicitors, formally gave notice of termination of the Preliminary Agreement on the ground that the plaintiff’s failure to pay the initial deposit pursuant to the agreement amounted to repudiation, which they accepted.

10. The plaintiff took the initiative to commence litigation. Hence the present action. The plaintiff seeks specific performance of the Preliminary Agreement; further or alternatively, damages for the defendants’ failure or refusal to complete.

11. By way of counterclaim, the defendants seek declaration that they were entitled to terminate and have validly terminated the Preliminary Agreement for the repudiation of the same by the plaintiff. They claim the sum of HK$1,240,000 equivalent to the amount of the initial deposit and orders for the vacation of the registration of the Preliminary Agreement and the writ herein against the property.

THE MAJOR DISPUTE

12. The major dispute lies in the following questions:

(1) Whether the dishonour of the cheque amounted to repudiation of the Preliminary Agreement on the part of the plaintiff;

(2) If yes, whether the defendants have validly accepted the repudiation and terminated the Preliminary Agreement;

(3) If yes, whether the defendants were entitled to the claim the amount equivalent to the initial deposit.

THE PRINCIPLES

13. The applicable principles are trite. For summary judgment to be entered, the court has to be satisfied that there is no triable issue or any other question that ought to be tried. To resist summary judgment, the defendant to the claim must show a credible defence. The determination of the court does not take the form of a mini-trial of difficult points of law or factual dispute on affidavits.

WHETHER THE PLAINTIFF WAS IN BREACH

14. After hearing the plaintiff, it strikes me as very important to set out in the first place the contractual obligation that she is said to have been in breach of. Clause 2(a) is clear. It was the plaintiff’s obligation to pay the initial deposit upon the signing of the Preliminary Agreement.

15. Each case must depend on its own facts. But in the context of secondary property market in Hong Kong, time is usually of the essence of the sale and purchase agreement. In Wong Wai Chi Ann v Cheung Kwok Fung Wilson [1996] 3 HKC 287, the Court of Appeal acknowledged that and said (at 290G):

“……Of course, each case must depend on its own facts. But in the absence of special circumstances, it will usually be the case that a provisional agreement for sale and purchase in the common form in use in Hong Kong will be treated as one of which time is of the essence, although no express provision in that behalf in contained in the agreement……”

16. In Ho Chi Keung v Yip Lai Ping, DCCJ 7062/2003 (19 October 2004, per HH Judge To (as he then was)), the cheque for payment of the initial deposit tendered upon the signing of the provisional sale and purchase agreement was bounced. It was common ground that time was of the essence in relation to payment of the initial deposit. But the learned judge added (at §18):

“……That must be right in the circumstances of the typical transaction of this kind and as the obligation to pay arose immediately upon signing the Agreement……”

17. Likewise, in Wong Man Hong v Poon Kin Chiu, DCCJ 5363/2006 (8 May 2008, per HH Judge Au (as he then was)), the cheque for payment of the initial deposit, pursuant to the provisional agreement containing the same term as clause 2(a) in the present case, was bounced. The learned judge said that:

“35. However, it is well established that, even though there is no express provision to make the time of paying an initial deposit as of the essence, unless there are special circumstances to suggest otherwise, the time requirement on the payment is regarded as of essence in a conveyancing transaction in Hong Kong. See: Wong Wai Chi v Cheung Kwok Fung [1963] 3 HKC 287 at 290D-H per the late Godfrey JA (as he then was); Sihombing & Wilkinson, Hong Kong Conveyancing – Law and Practice, Vol 1(A), para 351.

36. Further, the failure to pay the initial deposit under a conveyancing agreement on time has also been held to be a fundamental breach of the agreement, which entitles the innocent party to accept and terminate the contract, and to recover the deposit by way of an action. See: Millichamp v Jones [1982] 1 WLR 1422 at 1430G, per Warner J.

37. Given the weight of these authorities, I reject Mr Wong’s submission that there is arguably no fundamental breach of the provisional agreement in this case. Whether the initial deposit should have been paid on 26 August 2006 (as provided in the agreement) or 28 August 2006 (as under the alleged condition as held above), time was of the essence, and any lateness or failure to pay it on time (as in present case) constituted a breach of the agreement of which the Plaintiffs were entitled to accept.”

18. Sun Lee Kyong Sil v Jia Weili [2010] 2 HKLRD 30 was another instance of the cheque drawn by the purchaser for payment of the initial deposit being dishonoured upon presentment. The provisional agreement contained similar term as clause 2(a) in the present case. The learned Recorder rehearsed the relevant case law in detail; and came to this conclusion (at §38):

“On the basis of the authorities cited above, I find that time was of the essence of the Provisional Agreement in the present case despite the absence of any express provision to that effect. I base my finding on the nature of the transaction and the property, namely, the sale of a flat in a large development in the secondary market. I further base my finding on the surrounding circumstances, namely, the volatile property market in Hong Kong and the fact that completion was to take place within a relatively short time, ie about nine weeks from the date of the Provisional Agreement.”

19. Mr Lin argued that when the initial deposit was paid by way of a cheque, there should be an...

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