Conditions for specific performance

In Lau Suk Ching Peggy v Ma Hing Lam ([2010] 3 HKLRD 247, CFA) M Ltd was the owner of a flat. M Ltd was the wholly owned subsidiary of K Ltd. S and K Ltd (‘the sellers’) gave L an option to purchase either the shares of M Ltd or the flat. The option was exerciseable on or before 28th September 2004 and L gave the necessary notice to exercise the option to buy the shares. There were negotiations concerning the terms of the share sale agreement and the completion date but these did not come to a conclusion. The sellers then purported to fix the completion date for not later than 6th October failing which they asserted that the option would lapse. When that date passed, the sellers asserted that the agreement had lapsed. L began proceedings for specific performance. As M Ltd sold the flat during the course of the proceedings, the claim was for damages in lieu of specific performance.

L’s claim succeeded. The contract formed on the exercise of the option was open (no completion date had been specified). Thus, completion had to take place within a reasonable time. The sellers had no right to unilaterally fix the completion date and the court could not do so either. Only when there had been unreasonable delay in completing an open contract could a notice be served to fix a completion date in respect of which time would be of the essence. Where (unlike this case) a completion date had been fixed but time was not of the essence, notice could be served once the completion date had passed. Thus, the sellers committed a repudiatory breach when they purported to treat the transaction as being at an end.

In fact, however, L opted to keep the contract alive by bringing the specific performance proceedings. Was she entitled to succeed? Was she ready, able and willing to complete? Was she ready and able to do whatever the contract required (essentially to pay the purchase price) at the time when she would be called upon to perform her side of the bargain.  In this case there was no completion date so she had to be ready and able at the date of the service of the writ and at the time of the trial. There must be no incapacity to perform and no definite resolve not to perform. L satisfied these requirements. There was no need to show that she had the money in this case since the sellers had made it clear that they would not accept it.

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