Case Detail

CACV000194/1997

1997, No.194
(Civil)

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

BETWEEN
	Lord Energy Limited	Plaintiff (Respondent)

	AND

	Paul Chen	1st Defendant (1st Appellant)

	Marianna Chen	2nd Defendant (2nd Appellant)
	(by Original Action)

And Between
	Paul Chen	1st Plaintiff
	Marianna Chen	2nd Plaintiff

	AND

	Lord Energy Limited	1st Defendant
	Simon Siu and Wong (a firm)	2nd Defendant
	(by Counterclaim)

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Coram : Hon. Mortimer, V.P., Godfrey & Rogers, JJ.A. in court

Dates of hearing : 17 & 18 February 1998

Date of judgment : 18 February 1998

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J U D G M E N T

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Godfrey, J.A. (giving the first judgment at the invitation of Mortimer, V.-P.) :

Introduction

1. This is an appeal from Mrs. Justice Le Pichon, who on 4 June 1997 gave judgment in favour of Lord Energy Limited ("the purchaser") in the purchaser's action for specific performance of a contract for the sale of a flat and car park space in Baguio Villa. Mr. and Mrs. Chen ("the vendors") had called off the contract, purporting to forfeit the purchaser's deposit, and the purchaser, anxious to complete the transaction, instituted its action for specific performance accordingly. The purchaser having succeeded before the judge, the vendors now appeal.

The facts

2. The material facts are as follows.

3. By an agreement made on 9 July 1973, Ko Wan Company Limited ("the grantee") agreed with the Crown to carry out the terms and conditions of certain Particulars and Conditions of Exchange No. 10485 and the Crown bound itself to grant to the grantee a lease of the property to which they related, Hong Kong Inland Lot No. 8334. The Conditions of Exchange contained a number of special conditions, two of them relating to car park spaces to be provided in the development of the lot (to become known as Baguio Villa). I set out these two special conditions :-

"(16)(a) Space shall be provided within the lot to the satisfaction of the said Director [of Public Works] for the parking of motor vehicles at the rate of not less than one and one half cars per flat in the building or buildings erected or to be erected on the lot. The space so provided shall not be used other than for the purpose of parking private motor vehicles belonging to the residents of the building or buildings erected or to be erected on the lot.
(b) Car ports under the building or buildings at or above ground level will be permitted and any storey designed and used solely for this purpose will not be regarded as a storey for the purpose of calculating coverage limitations.
(17) A lay-out plan indicating the parking spaces or car ports to be provided within the lot in accordance with Special Condition No. (16) and approved by the Building Authority, or a copy of such plan certified by an authorized architect, shall be registered by the grantee by memorial in the Land Office. No transaction affecting the lot or any part thereof or any building or part of any building erected or to be erected thereon shall be entered into prior to such registration. The parking spaces or car ports indicated on the said approved plan shall not be used for any purpose other than the purpose set out in Special Condition No. (16). The grantee shall maintain the parking spaces or car ports in accordance with the said approved plan and shall not alter the layout except with the prior written consent of the said Director."

4. General condition 8 of the Conditions of Exchange provided, among other things, for the fulfilment by the grantee of its obligations under the general and special conditions. It provided that in the event of default by the grantee in complying therewith, such default should be deemed to be a continuing breach, and that the subsequent acceptance, by or on behalf of the Crown, of any Crown rental, rates or other payment whatsoever should not, subject to certain immaterial exceptions, be deemed to constitute any waiver or relinquishment or otherwise prejudice the enforcement of the Crown's right to re-entry for or on account of such default.

5. On 20 October 1978, the grantee caused to be executed an instrument (a "Letter with Car Parks Layout Plans attached") which reads as follows :-

"The attached plans relating to Blocks Nos. 25, 26 and 27 of Baguio Villa erected on a portion of the above lot, duly signed by Mr. Don Pan, authorised Architect, are presented for registration in the Land Office pursuant to Special Condition No. 17 of the Conditions of Exchange No. 10485."

6. A memorial of that instrument was registered at the Land Office on 25 October 1978 as Memorial No. 1599984.

7. On 16 May 1979, the grantee assigned to the vendors nine equal undivided 2,635th parts or shares in the building, Blocks 25, 26 and 27 of Baguio Villa, together with the full right to the use occupation and enjoyment of Flat D on the 24th floor of Block 25 of Baguio Villa, and also the car park space No. 157 on the second lower ground floor of the building of which that block formed part.

8. On 1 August 1991, the vendors entered into an agreement described as "The Provisional Agreement" for the sale by the vendors to the purchaser of that flat and car park space.

9. The sale price was $2,500,000, to be paid as follows :-

"1) An initial deposit of Hong Kong Dollars Fifty Thousand (HK$50,000) to be paid by the Purchaser to the Vendor upon signing of this Agreement. This deposit is not refundable except in the case whereby the Purchaser may find a defect in the title of said property.
2) A further deposit to be paid by the Purchaser to the Vendor upon signing of the formal Agreement for Sale & Purchase in the solicitors office on or before 10th August 1991. This deposit in the sum of Hong Kong dollars Two Hundred Thousand (HK$200,000).
3) The balance of the agreed sale price payable to the Vendor is to be settled in the solicitor's office on or before 15th September 1991. This to be the sum of Hong Kong Dollars Two Million Two Hundred and Fifty Thousand (HK$2,250,000)."

10. The vendors' solicitors were to be Shaw, Ng & Ma; and the purchaser's solicitors, Simon Siu & Wong. Then follows what, I fear, is really the most important provision in these provisional agreements, a provision that commission of 1% of the purchase price was to be payable by the vendors to the agents who acted in the transaction.

11. The vendors' solicitors and the purchaser's solicitors entered into correspondence about the content of the formal sale and purchase agreement by which the parties intended their rights to be regulated. But the date of 10 August 1991 went past without any such agreement being signed and without any such payment being made as had been provided for by the provisional agreement.

12. On 2 September 1991, the vendors' solicitors sent to the purchaser's solicitors what the vendors' solicitors called "the relevant title deeds and documents" as mentioned in the schedule annexed thereto. That schedule listed an attested copy of the Conditions of Exchange No. 10485 and a number of other documents (including an attested copy of the Deed of Mutual Covenant and copies of two Occupation Permits affecting the property). But it contained no reference to the "Letter with Car Parks Layout Plans attached" which was the subject of the Memorial No. 1599984 registered on 25 October 1978.

13. On 3 September 1991, the purchaser's solicitors wrote to the vendors' solicitors asking for this instrument, or a certified true copy thereof, to enable them to approve the title to the property. (Its existence had no doubt come to the attention of the purchaser's solicitors by reason of a search made at the Land Office in relation to this transaction.) The purchaser's solicitors also asked for a certified copy of the Certificate of Compliance to prove that the grantee was entitled to a grant of the Crown Lease in pursuance of section 14(3) of the Conveyancing and Property Ordinance, Cap. 219. (This effects the conversion of an equitable interest in the property to a legal estate, where there is a right to a Crown Lease, but no such lease has been granted despite the fact that the conditions precedent to the grant of a Crown Lease have been complied with.)

14. On 9 September 1991, the vendors' solicitors replied as follows :-

"1. our client is not prepared to supply you with certified copy of Letter Memorial No. 1599984 as the same does not affect title to the above property.
2. there is no Certificate of Compliance issued up to date hereof."

15. On 12 September 1991, the purchaser's solicitors wrote to the vendors' solicitors stating that they were still looking forward to the vendor's satisfactory answers to other outstanding requisitions and "in particular written document proving that the conditions under the Conditions of Exchange No. 10485 have been complied with to the satisfaction of the Director of Public Works and the Registrar General (Land Officer)".

16. On the same day, the vendors' solicitors replied :-

"With respect, we consider your requisitions invalid and do not raise any doubts on title. In the circumstances, we insist that completion to take place on or before 15th September 1991 as scheduled of which time is of the essence ......"

17. The purchaser did not regard these answers as satisfactory. It did not complete the transaction on 15 September 1991.

18. On 16 September 1991, the vendors' solicitors wrote to the purchaser's solicitors in the following terms :-

"We write to put on record that your client has failed in accordance with the terms of the Provisional Agreement for Sale and Purchase to pay to our clients on or before 15th September 1991 the balance of purchase price inclusive of the further deposit payable under the said Provisional Agreement.
In the circumstances, we are instructed by our clients to give you notice that in view of your client's breach and repudiation of the contract which is hereby accepted by our clients, the said Provisional Agreement for Sale and Purchase is hereby terminated and that the initial deposit paid by your client has been absolutely forfeited. Our clients are entitled to re-sell the property and will claim against your client for all loss, damage and expenses and any deficiency on the re-sale."

19. On the same day, the purchaser's solicitors replied to the vendors' solicitors in the following terms :-

"As your clients have evinced an intention not to be bound by the Agreement, we have instructions to issue proceedings against your clients for, inter alia, specific performance and damages."

20. So the battle lines were drawn.

The issue

21. The judge was asked, on these facts, to decide among other things whether by 15 September 1991 the vendors had satisfactorily answered the purchaser's requisitions; the parties were agreed that if they had not, the vendors had not been entitled to call off the contract. She decided this issue, which is now the only live issue, in favour of the purchaser.

The judgment below

22. The judge held (in my opinion quite correctly), in the light of the conduct of the parties after their entry into the provisional agreement, and after 10 August 1991 (when the $200,000 further deposit was due to be paid) that time, at any rate for the making of that payment, had ceased to be of the essence. The judge held that the question whether the purchaser was in breach of contract by failing to complete and pay the whole balance of the purchase price on 15 September 1991 turned on whether, by that date, the requisitions raised by the purchaser had been satisfactorily answered. She held that they had not been satisfactorily answered.

The case for the vendors

23. The case for the vendors on this appeal is that the judge was wrong to find that the requisitions raised by the purchaser had not been satisfactorily answered.

24. As to the instrument of 20 October 1978 the subject of Memorial No. 1599984, the appellant says that was not a document affecting the title to the property. The judge thought that it was. I agree with her. Occupation Permits, Certificates of Compliance and other instruments of that sort which demonstrate that the vendor is entitled to a legal estate in the premises and that his title is not defeasible are instruments by which the premises "may be affected" (see section 2(1) of the Land Registration Ordinance, Cap. 128). They are properly registrable at the Land Office and ought to be produced to the purchaser when he asks for their production. The refusal of the vendor to supply the purchaser with a copy of this instrument was, in my opinion, a failure satisfactorily to answer the requisition raised in respect of it.

25. As to the (non-existent) Certificate of Compliance, I accept, of course, that if there is no Certificate of Compliance, an answer to that effect is a sufficient answer to the requisition. But the purchaser here asked, as in my judgment it was entitled to do, for proof that the conditions under the Conditions of Exchange had been complied with: see the purchaser's solicitors' letter of 12 September 1991. Without that proof, or some satisfactory conveyancing evidence equivalent to such proof, the purchaser might well be buying, if not a pig in a poke, at any rate only an equitable interest rather than the legal estate to which he was entitled under his contract. The vendors were unjustified in refusing to provide such proof.

Conclusion

26. In the present case, the purchaser's solicitors cannot fairly have been expected to make up their minds, between 12 September 1991 and 15 September 1991 (which incidentally was a Sunday) as to whether to advise their clients to accept the title offered or not.

27. When such a situation arises, the vendor, even when time for completion is of the essence, is obliged to give the purchaser a reasonable time to consider whether to go on with the contract, or to call it off and ask for the return of his deposit. That did not happen. The vendors elected, on 16 September 1991, to call the whole thing off themselves. It was the vendors who repudiated the contract between the parties, not the purchaser. On 15 September 1991, the purchaser was anxious to complete, not to repudiate the contract. But it needed, as it seems to me, a reasonable time in which to consider its position. It was not given that opportunity. The vendors pre-empted the matter by calling off the contract themselves. I think the judge was right to come to the conclusion that in these circumstances an order of specific performance ought to be made in favour of the purchaser and I would accordingly dismiss this appeal.

Rogers, J.A. :

28. I agree.

29. I consider that the Judge was correct in coming to the conclusion that the vendors had not satisfactorily answered the requisitions and that they could not demand completion in any event on 15 September 1991.

30. I wish, however, to say a few words about the expert evidence in this case.

31. An expert may give evidence as to a term of art but he is not entitled to say nor is his counsel entitled to ask him what a document means nor what a letter or an agreement or conditions of sale or an assignment mean. The construction of a document is a matter for the Court. Still less is an expert witness entitled to give evidence as to what the law is.

32. In this case, the plaintiff's expert in his witness statement took one page to give his experience, half a page to explain the meaning of one of the sections in one of the Ordinances, one and a half pages in setting out and repeating documents and correspondence and one page setting out history primarily of that correspondence and the remaining two pages discussing what a conveyancer would do. All this, in my view, was inadmissible in this case. The defendants' expert was basically a mirror image in a more condensed form of the plaintiff's expert.

33. The oral evidence was no better. When the plaintiff's expert was called, after confirming his witness statement and amplifying his qualifications, he was asked :

"Would you turn to page 75. ..... Please look at the second and third paragraph of that letter. Do you agree that they were requisitions raised by the firm Simon Siu and Wong?"

Answer: "Yes, I do agree."

Question: "Do you agree that they were valid requisitions?"

Answer: "Yes. If I were acting for them, I would raise the same requisitions."

Then he was asked to look at page 86 and asked to consider a letter from Messrs. Shaw, Ng & Ma to Simon Siu & Wong and he was asked :

"Do you agree that the requisitions raised were invalid, the requisitions raised were invalid?"

Answer: "No. With due respect, I do not agree."

But later on, he was asked whether another letter contained satisfactory answers to the requisitions or not.

"No, I do not agree."

In answer to that, the defendants' expert witness was called and his evidence started off like this.

"If you look at page 75 ..... 3rd of September 1991, a letter from Messrs. Simon Siu to Messrs. Shaw, Ng & Ma."

Then I have to say there follows a page of explanation to the witness because apparently he was unfamiliar with the documents but it carries on to the crunch question :

"What's your view on Messrs. Shaw, Ng & Ma's reply?"

Answer: "When I saw this letter by Simon Siu & Wong on the 3rd September my impression is it was not really a requisition, in a strict sense. For me my impression is that he is just getting a copy of a document which he thinks that forms part of the chain of title."

Question : "Does it form part of a chain of title to the flat and car park?"

Answer : "You see that my practise is that normally we don't ask for a car park plan in our conveyancing transaction because firstly it is normally a very bulky thing. We are talking about a car park plan is compiled with a thick pile of plans and it really has no significant value for our approval title point of view, so normally we don't ask for car park plan."

34. Counsel on each side was not able to draw attention to any matter in the witnesses' evidence in chief which could be described as admissible evidence. The suggestion was made that there might have been some admissible evidence somewhere in one of the witnesses' evidence but that has not been drawn to our attention.

35. In my view, the so-called expert evidence in this case was a complete waste of time and it should never have been called or admitted and I can only conclude by quoting the words of Lord Tomlin more than 60 years ago in the case of British Celanese Ld v. Courtaulds Ld in 52 R.P.C. 171 where at p. 198, he says :

"The disadvantages of these methods are two-fold.
In the first place time is wasted and money spent on what is not legitimate. In the second place there accumulates a mass of material which so far from assisting the Judge renders his task the more difficult, because he has to sift the grain from an unnecessary amount of chaff. In my opinion, the trial court should make strenuous efforts to put a check upon an undesirable and growing practice."

36. I too would dismiss this appeal.

Mortimer, V.-P.:

37. For the reasons given by Godfrey JA, I agree that this appeal should be dismissed. I would affirm the judge's order.

38. In those circumstances the appeal is dismissed.

39. I would add for my part agreement with everything that has been said by Rogers JA about the calling of inadmissible expert evidence. It confuses the issues. It causes unnecessary expense and takes up unnecessary time. One only hopes that lay clients are not charged with the calling of unnecessary evidence of this kind.

40. The costs will follow the event - the costs of the appeal will be to the respondent.

(Barry Mortimer)	(Gerald Godfrey)	(Anthony Rogers)
Vice President	Justice of Appeal	Justice of Appeal

Representation:

Sir John Swaine, S.C. & Mr. Peter Lo (M/s. Shaw, Ng & Ma) for the Appellants/Defendants (Vendors) (By Original Action)

Miss Audrey Eu, S.C. & Mr. Johnson Lam (M/s. Liu, Choi & Chan) for the Respondent/Plaintiff (Purchaser) (By Original Action)

Remarks:
Appeal dismissed entered for the Appellants. Please refer Judgment FACV000011/1998.

Lord Energy Ltd. v. Paul Chen and Another

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