Ji Shan International Investment Ltd. v Resources Main Enterprises Ltd. And Another

CourtCourt of Final Appeal (Hong Kong)
Judgment Date21 December 1998
Citation(1997-1998) 1 HKCFAR 377; [1999] 1 HKLRD 456
Subject MatterFinal Appeal (Civil)
Judgement NumberFACV18/1998
FACV000018/1998 JI SHAN INTERNATIONAL INVESTMENT LTD. v. RESOURCES MAIN ENTERPRISES LTD. AND ANOTHER

FACV000018/1998

FACV No. 18 of 1998

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

FINAL APPEAL NO. 18 OF 1998

(ON APPEAL FROM CACV No. 213 OF 1997)

_____________________

Between:
JI SHAN INTERNATIONAL INVESTMENT LIMITED
Appellant
AND
RESOURCES MAIN ENTERPRISES LIMITED
1st Respondent
DOUGLAS LIMITED
2nd Respondent

_____________________

Court:
Chief Justice Li, Mr Justice Litton PJ, Mr Justice Ching PJ, Mr Justice Bokhary PJ and Lord Hoffmann NPJ

Date of Hearing: 14 December 1998

Date of Judgment: 21 December 1998

__________________

J U D G M E N T

__________________

Chief Justice Li :

1. I agree with the judgment of Lord Hoffmann NPJ and the order proposed.

Mr Justice Litton PJ :

2. I agree with Lord Hoffmann NPJ's judgment and the order proposed.

Mr Justice Ching PJ :

3. I too agree with the judgment of Lord Hoffmann NPJ and the order proposed.

Mr Justice Bokhary PJ :

4. I concur in Lord Hoffmann NPJ's judgment.

Lord Hoffmann NPJ :

5. The issue in this case is the right of a sub-purchaser to specific performance of a contract of sale against the vendor over the head of an uncooperative intermediate purchaser. The vendor, Douglas Ltd ("Douglas") entered into an agreement dated 1 March 1994 to sell a house in Hong Lok Yuen to Resources Main Enterprises Ltd ("Resources") for $20 million. The deposit was $6 million. Completion was deferred for over two years, until 12 noon on 31 August 1996. Meanwhile the market fell. On 31 March 1996 Resources agreed to sell the house to a sub-purchaser, Ji Shan International Investment Ltd ("Ji Shan") for $15.36 million. Completion was also to be on 31 August 1996, at 11 am.

6. The position of Resources was therefore that if the contracts were completed, it faced a certain loss of $4.64 million. It therefore did its best to ensure that the contracts were not completed. It purported to rescind the sub-contract with Ji Shan on the grounds that the drafts for the purchase money were not tendered until 12.15 pm, 75 minutes late. But this was because Resources had failed to specify the amounts of the drafts until 11.05 am that morning. As against Douglas, which held its deposit, it raised at the last minute and then persisted in a requisition about an alleged illegal wall. On this ground, it refused to complete. At the trial the judge held the objection to have been maintained in bad faith. There is now no dispute that Resources was trying, as Mr Warren Chan SC (who appeared for Douglas) put it, to sabotage the transaction.

7. On 4 September 1996 Ji Shan tried to save the main contract by offering to pay Douglas the balance of the purchase price in return for an assignment to itself. It repeated this offer on 11 September. Douglas's position was that it had no privity of contract with Ji Shan and would not complete unless Resources was a party to the assignment. For this purpose, it granted four successive extensions of the time for completion, the last of which expired on 9 November 1996. While these extensions were running, on 25 September 1996, Ji Shan issued a writ for specific performance, joining both Douglas and Resources as defendants. On 13 November 1996 Douglas's solicitors wrote to the solicitors for Resources, purporting to terminate the contract and forfeit the $6 million deposit. On 27 November 1996 Douglas commenced proceedings against Resources, claiming a declaration that the contract had been terminated and that it was entitled to forfeit the deposit. Resources counterclaimed for repayment of the deposit, saying that the wall was a defect in Douglas's title.

8. Deputy Judge Beeson held that Resources had not been entitled to terminate the sub-sale contract and that Ji Shan was entitled to specific performance against Douglas. The Court of Appeal, by a majority (Nazareth V-P and Liu JA, Rogers JA dissenting) reversed her decision, dismissing the claim to specific performance and holding that Douglas was entitled to forfeit the deposit.

9. One of the grounds upon which the majority of the Court of Appeal held that Ji Shan was not entitled to claim specific performance appears to have been that time had not been made of the essence of the contract. But the question of whether time was of the essence of a contract is relevant only if one party claims to terminate the contract because the other has not performed in time. It has nothing to do with a sub-purchaser's right to specific performance, which arises as soon as the contractual date for completion has passed and depends upon the contract still being on foot and the sub-purchaser having title to sue and being ready and willing to perform the obligations of the purchaser under the contract. (See Shaw v Foster (1872) LR 5 HL 321). Mr Warren Chan disclaimed any submission that a party cannot sue for specific...

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