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

Judgment Cited authorities 17 Cited in Precedent Map Related
Vincent
Judgment Date15 October 2014
Year2014
Judgement NumberCACV272/2013
Subject MatterCivil Appeal
CourtCourt of Appeal (Hong Kong)
CACV272/2013 HOWARTH CHEUNG NATALIE JANE Y. S. v. TSANG HONG KWANG OK AND ANOTHER

CACV 272/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 272 OF 2013

(ON APPEAL FROM HCA 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 : Hon Cheung CJHC, Lam VP and Cheung JA in Court

Date of Hearing : 17 September 2014

Date of Judgment : 15 October 2014

________________________

J U D G M E N T

________________________

Hon Cheung CJHC :

1. I agree with the judgment of Cheung JA and the additional observations made by Lam VP.

Hon Lam VP :

2.1 I respectfully agree with the judgment of Cheung JA, which I have read in draft. I only wish to add a few words on the question of equitable relief. As far as Hong Kong law is concerned, as discussed in my Lord’s judgment, the judgment of Lord Hoffmann in Union Eagle is conclusively against the case of the plaintiff. Mr Lee valiantly tried to escape from this inevitable result by contending that the erroneous and unforeseeable event causing default in the present case was not remotely in the contemplation of either party. With respect, I cannot accept this submission. As my Lord explained, it was perfectly open to the plaintiff to arrange for payment of the initial deposit by way of a cashier order. Alternatively, the plaintiff can also arrange for such payment by way of a cheque marked good by the bank. The plaintiff chose instead to make such payment by an ordinary cheque. In so doing, unless there are contractual provisions to the contrary, the plaintiff assumed the risk attendant upon such a mode of payment.

2.2 As a matter of substance, I cannot see any material distinction between the present case and the situation of the purchaser in Tanwar Enterprises Pty Ltd v Cauchi (2003) 210 ALR 359. Thus, even if there were scope for the more liberal approach in the Australian authorities to be applied, it cannot be of any avail to the plaintiff. In addition to the passages cited by my Lord, I would also draw attention to paragraphs 120 to 122 of the judgment of Kirby J in that case, where His Honour underscored the requirement of a burden upon the conscience of the innocent party. At paragraph 122, Kirby J made the following observations,

‘ In the present instance, … there is no such burden on the vendor’s conscience. Given the nature of the transaction and of the parties, … the language of the strict stipulation as to time and its obvious purpose, the arrangement of the purchaser … was one that carried inherent risks of delay resulting in breach of the essential stipulation. When those risks eventuated, they did not constitute an accident.’

In my view, the same observations can be made here.

2.3 Mr Lee accepted in the course of argument that the estate of a purchaser who died at an inopportune moment before making a payment on time (despite he had the necessary fund for doing so) could not claim equitable relief in a conveyancing transaction. This illustrates the mere insistence on a strict time limit for payment in a conveyancing transaction cannot be regarded as unconscionable notwithstanding the default of a purchaser is due to unfortunate circumstances beyond his control. There is thus no room for the grant of any equitable relief in the present case.

Hon Cheung JA:

I. Background

3.1 The plaintiff is the purchaser (‘the purchaser’) of a property in the residential development known as Vienna Court, Realty Gardens, situated at 41 Conduit Road, Hong Kong together with a car park (‘the property’). The defendants, a married couple, are the vendors (‘the vendors’) of the property.

3.2 The parties entered into a Preliminary Agreement dated 27 November 2012 (‘the Agreement’) for the sale of the property in the sum of $25 million. Clause 2(a) provided that, among other things, a deposit of $1,240,000 shall be paid upon signing of the Agreement. This is slightly less than 5% of the purchase price.

3.3 Upon signing the Agreement, the purchaser provided a cheque dated 26 November 2012 of $1,240,000 drawn on her bank, HSBC, in favour of the vendors’ solicitors Messrs Edmund W H Chow & Co. (‘Edmund Chow’) as deposit under the Agreement.

3.4 On 4 December 2012 Edmund Chow informed the vendors that the cheque was dishonoured upon presentation. Edmund Chow was informed by HSBC of the dishonour on 3 December 2012. The reason for the dishonour was said by HSBC to be ‘Drawer’s chop/signature differs from specimen in our possession.’

3.5 Upon the advice of Edmund Chow, the vendors decided to terminate the Agreement. However, on the evening of 4 December the husband of the purchaser (‘Mr Nihalani’) approached the vendors, as they happened to be neighbours living in adjacent flats and there were discussions between Mr Nihalani and one of the vendors (‘Mr Tsang’) about the dishonour of the cheque and the transaction. Mr Tsang informed Mr Nihalani that they had decided to terminate the transaction and nothing came out from the discussion.

3.6 On 5 December 2012 Edmund Chow issued a letter of the same date to the purchaser’s solicitors Messrs Vincent T. K. Cheung, Yap & Co. (‘Vincent Cheung’) stating, among other things, that the purchaser was in breach of Clause 2 of the Agreement by paying a cheque for the deposit which was dishonoured. The vendors confirmed that they had accepted the purchaser’s repudiation and the Agreement was terminated.

3.7 The purchaser then commenced the present action seeking, among other things, specific performance of the Agreement. The vendors raised a counterclaim for, among other things, the sum of $1,240,000.

3.8 Pursuant to the vendors’ application for summary judgment for the sum of $1,240,000, Deputy High Court Judge Simon Leung gave judgment for the vendors. The purchaser now appeals.

II. Time of the essence

4.1 Although there was no express provision in the Agreement making time to be of the essence, it is now beyond argument that in the context of Hong Kong conveyancing, time was of the essence of the Agreement. Further, although the document signed by the parties was described as a Preliminary Agreement, it was to all intents and purposes a binding and enforceable agreement. The time of essence principle has been clearly stated by this Court in Wong Wai Chi Ann & Anor v Cheung Kwok Fung Wilson & Ors [1996] 3 HKC 287 by Godfrey JA at 290 :

‘ …… 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 is contained in the agreement (for helpful dicta to that effect in this court see: Man Sun Finance International Ltd v Lee Ming Ching Stephen [1993] 1 HKC 113 at 120B-D, [1992-93] CPR 340 at 347 A-D per Litton JA; Lee Kenny v Wong Kwok Yan [1994] 2 HKC 309 at 316, [1994-95] CPR 356 at 363 per Macdougall VP; and Health Link Investment Ltd v Pacific House Investment Ltd [1995] 1 HKC 249 at 258, [1994-95] CPR 399 at 408 per Liu JA).’

4.2 This was approved by Court of Final Appeal in Kwan Siu Man v Yaacov Ozer (1997-98) 1 HKCFAR 343 per Litton PJ at p.355C–E :

̒ Further, as is common knowledge in Hong Kong, the property market is highly volatile. Whatever might have been the position in England in the last century — when the concept of an “open contract” was first developed in a climate of a stable pound sterling and no inflation — in the Hong Kong of today, the date of completion is an essential term of any contract for the sale and purchase of land: to the extent that in the case of a provisional agreement in the common form in use here, time for completion would normally be treated as of the essence of the agreement, even though no express provision to that effect is in the agreement: see Wong Wai Chi v Cheung Kwok Fung [1996] 3 HKC 287.’

4.3 Mr Thomas Lee, counsel for the purchaser, does not challenge this principle on appeal, although he states that, in the event that the purchaser is granted leave to defend, he would argue the issue of time of the essence at the trial having regard to the particular situation at the time of Agreement which was shortly after the Government had introduced measure by way of stamp duty to cool the overheated property market.

4.4 In Union Eagle Ltd v Golden Achievement Ltd [1997] AC 514, the Privy Council on appeal from Hong Kong, rejected the purchaser’s contention that tender of the balance price ten minutes after the 5 pm deadline for completion was good tender where time was of the essence of the contract. Lord Hoffmann at 518 stated that :

̒ ……But he is not entitled unilaterally to tender performance according to some other terms. Once 5 p.m. 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.’

4.5 If time was of the essence of the Agreement, then the failure of the purchaser to pay the cheque on time by reason of its subsequent dishonour clearly constituted a repudiation of the Agreement which entitled the vendors to accept and terminate the Agreement.

III. Implied term suspending payment

The Purchaser’s case

5.1 Mr Lee, however, submits that the time of essence provision is further subjected to an implied term that the payment of the deposit is suspended because of the extraordinary event that had happened which was beyond the control of the purchaser. It was an error on the part of the bank. He categorised the event as a ‘catastrophic accident’ which was not foreseeable...

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