FACV No. 19 of 1998
IN THE COURT OF FINAL APPEAL OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
FINAL APPEAL NO. 19 OF 1998 (CIVIL)
(ON APPEAL FROM CACV No. 150 OF 1997)
|KWAN SIU MAN JOSHUA
|Chief Justice Li, Mr Justice Litton PJ, Mr Justice Ching PJ, Mr Justice Bokhary PJ and Lord Hoffmann NPJ
Date of Hearing: 7 and 8 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 Mr Justice Litton PJ and the order he proposes.
Mr Justice Litton PJ:
2. This appeal concerns a purported oral contract to sell a flat known as the 2nd Floor of K.Y. Mansion, No. 4A Shiu Fai Terrace, Stubbs Road together with a carparking space there. For simplicity's sake the flat and carparking space will be referred to as "the property".
3. The defendant was the owner of the property and, since about December 1983, the plaintiff occupied the property as the defendant's tenant. The property was subject to statutory control under Part IV of the Landlord and Tenant (Consolidation) Ordinance, Cap 7 and, in the successive tenancy agreements relating to the property, the carparking space let to the plaintiff was described as "carpark No. 4". This was a misdescription which no one had noticed. In fact, the space used by the plaintiff (and misdescribed as "carpark No. 4") had, at some time prior to the event giving rise to this piece of litigation, been sold to someone else.
4. The defendant had another flat in K.Y. Mansion in which he lived from time to time. He travelled extensively.
5. The relationship between the parties, as landlord and tenant, was not a happy one. In December 1989 the defendant took action in the High Court against the plaintiff for non-payment of rent as a result of which the plaintiff was ordered to pay the costs of the action. This order was made in August 1991.
6. As for the tenancy, the defendant had, in September 1990, served notice of termination under Part IV of the Landlord and Tenant (Consolidation) Ordinance and this was met by the plaintiff's application seeking a further renewal of the tenancy. The application became the subject of proceedings in the Lands Tribunal: Application No. 1074 of 1991, fixed for hearing on 21 November 1991.
Negotiations to buy the property
7. On 21 March 1991 the plaintiff's solicitors wrote to the defendant offering to buy the property. No reply was received to that letter. The plaintiff then made verbal approaches to the defendant but the discussions were desultory. The defendant was often away from Hong Kong. At one stage, a price of HK$5m was mentioned by the defendant and, later, the defendant's wife asked for HK$4.3m. It seems that, at about that time, the defendant had it in mind to sell the property and purchase a flat in Guildford Road, the Peak.
8. It is common ground that on about 15 or 16 November 1991 the parties met by chance in the lift lobby of K.Y. Mansion. Arising from what the parties discussed at this chance meeting, the trial judge (Deputy Judge Beeson) found that there was a concluded and binding agreement for the sale of the property at $4.25m for which she ordered specific performance in the plaintiff's favour; this was because the three essential elements for an "open contract" had been agreed: the property, the parties and the price. She also ordered that the defendant should compensate the plaintiff for the value of the carparking space which the defendant was unable to convey to the plaintiff because he did not own it.
9. On appeal to the Court of Appeal (Nazareth V-P, Liu and Leong JJ.A.), Deputy Judge Beeson's judgment was affirmed.
The oral agreement
10. The findings of the courts below regarding the oral agreement are set out in Nazareth V-P's judgment, as follows:-
" About 15 or 16 November 1991, the plaintiff and the defendant met casually in the building (in which the defendant also lived on an upper floor) and reopened negotiations on the sale price. They settled at $4.25m. There was at the time a Lands Tribunal hearing of the defendant's application for possession pending and due for hearing only a few days later, on 21 November 1991. Not surprisingly the two came to discuss the outstanding legal fees for the High Court action. The plaintiff gave evidence that a compromise was reached at $70,000. However, the defendant could not recall such agreement. The judge accepted that they discussed the Lands Tribunal hearing and probably also the amount of the outstanding legal fees for the High Court action. She also considered it more likely than not that this was an agreement to compromise the matter but that no sum was fixed. The judge found that the plaintiff and the defendant agreed on the sale of the flat and the price but discussed no other details or terms of the conveyance. She also found that the defendant said his lawyers would send an agreement to the plaintiff and that both parties were very clear as to the belief that it was for the lawyers to deal with all other formalities and that they expected them to do so. She found also that the plaintiff and the defendant intended that all matters outstanding were to be settled, the sale and purchase of the flat, the question of the High Court costs, and the Lands Tribunal's application for possession."
11. As can be seen from the findings set out above, three matters were mentioned in the lift lobby: (i) The Lands Tribunal proceedings (to determine the defendant's application for possession and the plaintiff's application for a fresh tenancy, due to be heard on 21 November); (ii) the outstanding legal fees for the High Court action, and (iii) the sale of the property. The judge found as a fact that the parties "intended that all matters outstanding were to be settled", and that, with regard to the sale of the property at $4.25 million, they were "very clear as to the belief that it was for the lawyers to deal with all other formalities and ... expected them to do so".
12. Pausing here to examine the intentions of the parties objectively, as revealed by the findings set out above, it is difficult to see how one could conclude that they had, there and then in the lift lobby, entered into a legally binding agreement to settle everything; and a finding that the parties intended to finalize one matter only, the sale of the property, leaving the other two matters unresolved would be directly contrary to the judge's finding that the parties "intended that all matters outstanding" should be settled.
13. It is worth emphasizing here the judge's use of the word "agreement" with regard to the High Court legal fees. She said (p.6 of her judgment):
"... there was an agreement to compromise the matter, but ... no sum was fixed." (Emphasis added).
14. As a layman's use of the word "agreement", in a loose and not a technical legal sense, this is perfectly understandable; but to say that the parties had entered into a legally binding agreement to discharge the plaintiff from further liability to pay the High Court legal fees when no sum was fixed would be absurd. Was the "agreement" to sell the property at a price of $4.25 million an agreement of the same kind? This question, crucial to the determination of the plaintiff's claim, received scant attention in the courts below.
The 18 November 1991 letter
15. On 18 November 1991 the defendant's solicitors sent a letter to the plaintiff's solicitors. It was rightly regarded as occupying a "crucial position" at the Court of Appeal hearing, for it was this, and nothing else, which was relied upon by the plaintiff as the written memorandum required to satisfy the provisions of s.3(1) of the Conveyancing and Property Ordinance, Cap. 219.
16. The letter was marked "Without Prejudice" (a fact not referred to in the Court of Appeal's judgment). It was written with reference to the Lands Tribunal proceedings, due to be heard on 21 November. It reads:
"Re: L.T. Application No. 1074 of 1991
With reference to the above application, we are instructed that our respective clients have reached a settlement on the following terms:-
1. There be a stay of proceedings on the present application.
2. Your client shall purchase and our client shall sell the suit premises at a price of $4.25 million, which shall be paid as follows:-
(a) $425,000.00 as part payment and deposit upon the signing of the sale and purchase agreement in the form annexed hereto, and
(b) the balance of purchase price in the sum of $3,825,000.00 shall be paid upon completion.
3. Completion shall be on or before 21st December 1991.
4. The parties shall enter into a sale and purchase agreement in the form annexed hereto within 7 days from the date of the Court order approving the settlement.
5. Such sale by our client be approved by Court under Section 119(H)2 of the Landlord and Tenant (Consolidation) Ordinance.
Please confirm the above terms and we shall draw up the necessary consent summons incorporating the above for filing before the 20th November 1991."
17. The reference to "Court" in paragraphs 4 and 5 above was clearly an error: What the solicitors must have meant was the "Lands Tribunal" which has power to approve sales of properties governed by Part IV of the Ordinance in certain circumstances: Nothing turns on this.
18. Two matters are worthy of note:
(i) The focus of the letter was upon the impending Lands Tribunal proceedings, and the proposal to enter into a formal sale and purchase agreement in relation to the...