Archive for the ‘contractual estoppel’ Category

Receipt clauses and contractual estoppel

May 14, 2018

Introduction

In Asgain Co Ltd v Cheng Ka Yam ([2018] HKEC 889, CA) Asgain assigned land to CKM and CKY as tenants in common in equal shares. CKM was Asgain’s sole shareholder.

The consideration for the transfer was HK$1.5 million. The memorandum of agreement and the transfer each contained a clause acknowledging Asgain’s receipt of the purchase price.

In fact, however, no payment was made to Asgain at the time of the assignment. CKY subsequently made payments totalling HK$67,000 towards the purchase price.

CKY was later ordered to pay Asgain HK$683,000 (the outstanding balance of her share of the purchase price). She appealed arguing:

(i) that the receipt clauses gave rise to a contractual estoppel in favour of CKY; and

(ii) Asgain’s claim was defeated by section 18(1) of the Conveyancing and Property Ordinance.

 

Contractual estoppel

Lam V-P referred to the Court of Final Appeal decision in Ming Shiu Chung v Ming Shiu Sum ((2006) 9 HKCFAR 334), that of the Privy Council in Prime Sight Ltd v Lavarello ([2014] AC 436) and that in Grundt v Great Boulder Proprietary Gold Mines Ltd ((1937) 59 CLR 641).

Lam V-P also referred to this statement from the 4th edition of Spencer Bower, Estoppel by Representation:

‘an estoppel by convention need not involve any misleading of a representee by a representor, nor is it essential that the representee shall be shown to have believed in the assumed state of facts or law. The full facts may be known to both parties; but if, even knowing those facts to the full, they are shown to have assumed a different state of facts or law as between themselves for the purposes of a particular transaction, then a convention will be established. The claim of the party raising the estoppel is, not that he believed the assumed version of facts or law was true, but that he believed (and agreed) that it should be treated as true’ (at p.197).

Any estoppel was, however, extinguished ‘by a counter estoppel arising from the part payments by [CKY]’ (at [18]). These payments showed that her payment obligation had not been discharged by the receipt clauses. Reliance is not an element of this type of estoppel ([24]).

The contractual estoppel plea failed.

 

Section 18(1) of the Conveyancing and Property Ordinance

Section 18 reads:

‘A receipt for consideration in the body of an instrument shall be a sufficient discharge to the person paying the consideration and, in favour of any other person acting on the faith of the receipt, shall be sufficient evidence of payment.’

The effect of section 18(1) is that a receipt is conclusive at common law but in equity it only gives rise to a rebuttable presumption of payment. The vendor can sue, despite section 18, if there is evidence of non-payment.

Michael Lower

 

Advertisements

Promised sea view? Misrepresentation claim.

October 7, 2015

In Yang Dandan v Hong Kong Resort Co Ltd ([2015] HKEC 2050, CFI) Y bought a duplex on the top floors of a block of flats. The apartment has the benefit of a sea view. Y claimed that she was induced to enter into the contract to buy the apartment from the developer by two representations:

  1. the written representation in the sales brochure that the open land (‘the Amalfi land’) between her apartment and the sea would be used for a ‘mid-rise residential development’; and
  2. an alleged oral representation made by the developer’s employee before the contract that the apartment would enjoy a view of Victoria Harbour and that only a hotel then under construction would interfere with the sea view.

The developer also owned the Amalfi land and block one of the later Amalfi development partially obscured the sea view from the terrace of Y’s apartment. Y sought damages for misrepresentation under section 3(1) of the Misrepresentation Ordinance. She claimed that the representations led her to believe that she would have an unobstructed sea view and that the developer intended to ensure that this would not change.

There was no actionable misrepresentation since Y had not pleaded that the developer had been reckless as to the truth of its statements as to its future intentions and yet the case did not concern a question of a present fact as at the time of the negotiations and contract. That aside, the question is how the representation would have been understood by a reasonable person in Y’s position and with her characteristics (a highly sophisticated and intelligent business person for whom an unobstructed sea view was important). In that regard, the written representation had to be considered in the context of the whole of the sales brochure in which it was to be found. The brochure contained disclaimers making it clear that the developer could change its mind as to how the Amalfi land would be developed.There was no evidence that the oral representation had been made.

Despite the finding that there had been no actionable misrepresentation, Kent Yee DJ went on to consider whether Y was estopped from bringing any such claim by virtue of a clause to the effect that, ‘The terms and conditions of this Memorandum shall supersede any and all oral and written agreements or representations made by or on behalf of the Vendor’. The developer sought to rely on contractual estoppel in this respect. Y’s argument that the controls on exemption clauses in section 4 of the Misrepresentation Ordinance were engaged by the clause was rejected since, on its proper construction, the clause did not exclude or limit liability. Rather, it allowed the written terms to supersede all earlier agreements and representations ([77]). Even if section 4 were engaged, the provision was reasonable ([78]). On the other hand, it was accepted that another clause in the agreement (the ‘entire agreement’ clause) did not preclude an action for misrepresentation.

Finally, had Y succeeded, she sought damages for loss of the opportunity to buy ‘the Ideal Property’ with the characteristics she thought she had been led to expect. This would be another property with a permanent and unobstructed sea view in Discovery Bay or elsewhere within her budget. Y had to show that she had a reasonable chance of buying such a property. Four comparable properties were identified but three of these were not available at the time of Y’s purchase. The fourth was in the same development as Y’s property and its sea view was similarly affected by the Amalfi development.

Michael Lower