YEE PUI PUI ANNA v. LAM MEI LIN & Another DCMP 1377/2007

S’s words:-

From the decisions of the Privy Council in Chong Kai Tai Ringo & Another v. Lee Gee Kee & Another [1977] HKLRD 461 and Edward Wong Finance Co. Ltd v. Johnson Stokes & Master (a firm) [1984] 1 A.C. 296, it has been decided that a party to a sale and purchase agreement of land is entitled to require formal completion unless there is agreement to the contrary. Such is still our law up to today.

Paragraph 12 of the Law Society's circular 91/82 issued on 28 December 1982 reads that "it will be assumed that completion will take place by way of undertaking unless the solicitors concerned notified the other side in good time that standard undertakings will not apply and that formal completion is required". The circulars of Law Society, as in many other occasions dealing with the same issue or others, are still not the law or any strict regulations requiring all legal practitioners to follow. In no doubt, such is expected.

Personally, it is difficult to blame the Defendant in this case. The Plaintiff from the very first beginning insisted for formal completion. We have no idea why the Plaintiff or her solicitors decided the same. In some situations, there may be unusual circumstances supporting a purchaser’s solicitors requiring the same. However, in many other occasions, purchasers’ solicitors are used to rely on formal completion as a tactics.

The judgment itself did not tell us know whether there was any other reason(s) the purchaser’s solicitors insisting for formal completion. If there was no such special circumstances, it would definitely be a bad example (but update) for the solicitors of the purchasers in future to insist on asking for formal completion. Split cheques may also be another weapon for the solicitors of the purchasers.

Besides, it is difficult (but not impossible certainly) to arrange the mortgagee to have the release/discharge be executed in escrow or invite their representatives to attend the office of the vendor’s solicitors. That is a practical issue one may have to consider.

Maybe we have to advise the estate property agencies to re-draft their respective provisional agreement for sale and purchase to include completion by way of undertaking and a vendor can require a purchaser to split the cheques for payment(s).

--- quote from judgment ---

Date of handing down Judgment : 20 September 2007

This is the Plaintiff’s application by Originating Summons for declarations that the Defendants were in breach of an agreement for the sale and purchase of a property by failing to complete on the contractual completion date, that the Plaintiff is entitled to terminate the agreement by reason of the wrongful breach on the part of the Defendants, and that the Plaintiff is entitled to a refund of the deposits paid by them under the agreement.

The parties were therefore unable to agree on the terms of the formal agreement for sale and purchase, and none was eventually signed.

On 19 April 2007, the Plaintiff's solicitors sent a draft assignment of the Property to the Defendants' solicitors for approval, and asked for the specific time for the formal completion of the sale and purchase on 20 April 2007. On the same day, in response to the letter of 19 April 2007 from the Plaintiff's solicitors, the Defendants' solicitors wrote to say that the draft assignment was approved without amendments, and asked for the draft of the "Undertaking Letter" from the Plaintiff’s solicitors for their approval, to comply with the Law Society's Circular No. 3/92. The Defendants' solicitors also reminded the Plaintiff that completion was scheduled to take place at or before 5 p.m. on 20 April 2007, and asked for payment of the sum of HK $1,287,000 by three split cheques (HK $942,275.81 in favour of the mortgagee, HK $340,729.19 in favour of the Defendants, and HK $4,000 in favour of the Defendants’ solicitors). This letter was faxed at 5:13pm on 19 April 2007.

On the evidence, it is not disputed that the Plaintiff attended the offices of the Defendants' solicitors with her legal representatives at 3:55 p.m. on 20 April 2007. They brought with them the approved assignment and a cashier order in the sum of HK $1,287,000 which was issued in favor of the Defendants, and asked for completion to take place. They were informed by the Defendants' solicitors that the Defendants were not in their office, and that the Defendants had never accepted formal completion to be held on that day. According to the evidence of the Defendants, the Plaintiff's solicitor, Mr. Tang, produced to Mr. Tsang, the legal executive of the Defendants' solicitors handling the transaction, a cashier order for payment of the balance of the purchase price. Having noted that the sum of HK $1,287,000 was not made payable in accordance with the split cheque instructions given by the Defendants' solicitors, Mr. Tsang informed Mr. Tang that there was "no basis for formal completion". The Plaintiffs and Mr. Tang then left.

Formal completion or completion by undertakings

On the authority of the decisions of the Privy Council in Chong Kai Tai Ringo & Another v. Lee Gee Kee & Another [1977] HKLRD 461 and Edward Wong Finance Co. Ltd v. Johnson Stokes & Master ( a firm) [1984] 1 A.C. 296, it is clear that a party to a sale and purchase agreement of land is entitled to require formal completion unless there is agreement to the contrary. Paragraph 12 of the Law Society's circular 91/82 issued on 28 December 1982 reads that "it will be assumed that completion will take place by way of undertaking unless the solicitors concerned notified the other side in good time that standard undertakings will not apply and that formal completion is required". Notwithstanding that, the Privy Council decisions have well established that save for cases where the contract provides expressly to the contrary, a purchaser is entitled to refuse to pay the purchase price due on completion except against delivery to him of the duly executed assignment and, where the vendor has mortgaged the property, also the duly executed release or discharge of the mortgage. The obligations of the purchaser to pay and the vendor to complete by giving an executed assignment are to be carried out simultaneously unless there was an express or implied term to the contrary.

Chong Kai Tai's case makes it clear that "the question is not whether the circumstances require the implication of a term that payment and completion were to be simultaneous, but whether the circumstances require the implication of a term that there would be a departure from the normal rule that they would be simultaneous" (Chong Kai Tai v. Lee Gee Kee [1997] HKLRD 461, 467G-H). Since it is the Plaintiff's right to require formal completion, whether formal completion is necessary or reasonable is not relevant.

It is clear from the decision of Recorder Edward Chan, S.C. in Cheng Jui Lung Kris v. Perfect Best Ltd. HCA 1347 of 1998 that the rights of a purchaser under the contract to formal completion cannot be varied by the Law Society circular which requires three working days’ notice to be given "as a matter of professional courtesy" before formal completion. In the light of the clear authorities binding this court, I am not persuaded that a term has to be implied in the Agreement that reasonable notification for formal completion has to be given before the Plaintiff can insist on her right to formal completion. In any event, the Plaintiff's solicitors had indicated on 20 March 2007 that the Plaintiff wished to have formal completion. On that basis, the Plaintiff had given reasonable and adequate notice.

Whether proper tender of payment

The decision of the Court of Final Appeal in Kensland Realty Ltd. v. Whale View Investment Ltd. (FACV No. 10 of 2001) deals with, inter alia, a term being implied into an agreement for the sale and purchase of land, where the land is subject to an existing mortgage, for split payment, and the time to be implied for giving split payment instructions. However, that decision relates to completion of such an agreement by way of undertaking, and is not directly applicable to the facts of the present case.

Counsel for the Defendants relied on the decision of the Court of Final Appeal in Ma So So v. Chin Yuk Lun [2004] 3 HKLRD 294, and the observation made by Ribeiro PJ that the vendors in the case "were contractually entitled" to require the balance of the purchase monies to be split. However, the parties in the case of Ma So So had signed a formal sale and purchase agreement, with the standard provision to which I referred in paragraph 27 above which confers on the vendor the right to require the purchaser to split the payment of the purchase price or any part thereof in accordance with the split cheque instructions given by the vendor. There is no such formal agreement signed in the present case to give the "contractual entitlement " to the Defendants. Nor does the Agreement confer such a right on the Defendants. In the absence of any agreement to make "split payment" of the purchase price, the Plaintiff is not in breach by virtue of her failure to comply with the request of the Defendants' solicitors to make payment by split cheques.

I am satisfied, on the evidence, that the conduct of the Defendants and their solicitors on 20 April 2007 had made it plain that the Defendants were not prepared to complete the sale and purchase at the scheduled time, notwithstanding the Plaintiff's ability and readiness to proceed, and that the Plaintiff is entitled to treat the Defendants' conduct as a repudiation of the Agreement.