‘Hong Kong style’ completion and sub-sales

In Wellfit Investments Ltd v Commence Ltd ([1997] HKLRD 857, PC) the Privy Council had to consider the impact of an agreement to effect a Hong Kong style completion and the fact that both parties were aware that the transaction was a sub-sale on the construction of the provisions as to completion in the sub-sale agreement.

The agreement was for the sub-sale of an apartment. Time was of the essence in the agreement. The funds from completion of the sub-sale were to be used to finance completion of the head contract. The sub-sale was to be completed by 3pm on the stipulated date and the deadline for completion under the head contract was two and a half hours later. The sub-contract was ‘subject to and with the benefit of’ the head contract. The sub-contract provided that on completion, the seller would execute a ‘proper assurance’ and give vacant possession. The parties agreed to a ‘Hong Kong style’ completion (on completion, the seller gave an undertaking to forward the executed assignment within 17 days of completion). The sub-purchaser had not provided the completion monies by 3pm and the sub-seller rescinded 24 minutes later. The sub-purchaser sought specific performance.

The buyer’s argument that the deadline had been waived or varied  by virtue of a telephone conversation between the solicitors acting for the parties failed. The words used did not amount to a clear representation that the sub-seller would not insist on its contractual rights.

The buyer argued that the seller was in breach since on completion it would not be in a position to execute a proper assurance or give vacant possession (it could only do this when the head contract was completed). This failed since these obligations were to be interpreted in the light of the agreement to complete by undertakings and because both parties were aware of the sub-sale context and had factored this into their contract.

The sub-purchaser sought relief in equity. This judgment was handed down a few months before Union Eagle. The Privy Council expressed no view as to whether such jurisdiction existed. We had to wait for Union Eagle to learn the answer to this. The Privy Council held that it would not grant such relief even if it had the power to do so. Given the linkage between the sub-contract and the head contract, there was nothing unconscionable in the sub-seller’s insistence on its strict contractual rights.

Michael Lower

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