Archive for the ‘specific performance’ Category

Specific performance: ready willing and able; hardship; calculating damages

June 8, 2016

In Siu Wei v Ng Ying Ying ([2016] HKEC 1162, CFI) S and P entered into a provisional sale and purchase agreement for the sale and purchase of property. S later decided that she wanted to keep the property and refused to complete. S admitted that she was in breach of contract. P now sought specific performance.

  1. Was P ready, willing and able to perform his obligations under the contract?
  2. S argued that specific performance would inflict great hardship on her and so should be refused.
  3. P sought damages in addition to specific performance. How should these be calculated?

1 Ready, willing and able?

This must be the case both at the date of the writ and at the date of the decree. Anthony To J. commented that P needed to show:

‘on a balance of probability that he was and is ready, willing and able to perform his obligations at the material times as those obligations fall due in the sense that he is not presently incapacitated from future performance and is not indisposed to do what the contract requires when the time comes. It is all a matter of evidence, a matter of credibility for the court.’ ([33])

P satisfied this test.

2 Relevance of hardship

Specific performance will not be granted if to do so would inflict great hardship on the defendant (S here). Hardship involves a balancing of the position of both parties:

‘A defendant has to show hardship in the sense of relative prejudice. He has to show that he would suffer greater prejudice if an order of specific performance is made against him than that likely to be suffered by the injured party if the order is refused.’ ([38])

This test favoured P; he really wanted to live in the flat while it was merely a commodity for S. He would be put to additional transaction costs (including a higher level of stamp duty) if he had to buy another property([44] – [46]).

Conduct was also relevant and S had not conducted her defence in good faith ([44]).

3 Calculation of damages

‘In the case of delay in conveyance of property, the normal compensation is the value of the user of the property, which will generally be taken as its rental value, for the period from the contractual time for completion to the date of actual completion’ ([48])

P was entitled to the rental value of the property for this period but reduced by the amount of mortgage interest that he would have had to pay, had completion gone ahead, but had been ‘saved’ from by the refusal of S to complete on time ([52]).

Michael Lower

Advertisements

There is no equitable lease unless specific performance of the agreement would be ordered

September 15, 2014

In Warmington v Miller ([1973] QB 877, CA (Eng)) M’s lease contained a covenant prohibiting him from assigning, underletting or parting with possession of part only of the demised premises. He entered into an agreement with W to grant W a tenancy of part of the demised premises but refused to execute the underlease. W sought specific performance.

This failed since specific performance would not be awarded ‘where the result would be a breach by the defendant of a contract with a third party or would compel the defendant to do that which he is not lawfully competent to do.’ (at 886 per Stamp LJ).

There was no equitable lease, the rule in Walsh v Lonsdale did not apply, unless the lessee was entitled to specific performance. (at 887 per Stamp LJ).

Michael Lower

Wise Think Global Ltd: had a further deposit been paid?

November 14, 2013

In Wise Think Global Ltd v Finance Worldwide Ltd ([2013] HKEC 1790, CFA) S agreed to sell property to P. A deposit of HK$500,000 was paid on the signing of the provisional agreement. A further HK$3.1m was to be paid on the signing of the formal agreement. The provisional agreement provided that if the vendor failed to complete the agreement, it would refund the deposit paid together with a further amount equal to the deposit. The provisional agreement also provided that the deposits would be held by the vendor’s solicitors as stakeholders.

The terms of the formal agreement were agreed and P sent the agreement signed on behalf of P and a cheque for HK$3.1m. P’s solicitors’ accompanying letter declared that the agreement and cheque were sent against S’ solicitors undertaking to send in return the part of the formal agreement signed on behalf of S within three days. S’ solicitors did not give this undertaking. They cashed the cheque but did not send a part of the formal agreement signed on behalf of S. Instead, more than three days later, S purported to terminate the provisional agreement by paying liquidated damages in accordance with the terms of the provisional agreement. S refunded both of the deposits and paid a further $500,000 (equal to the initial deposit). The question was whether it had also to pay further liquidated damages equal to the HK$3.1 m further deposit.

Litton NPJ said that the central question was whether the deposit had been paid to and accepted by the vendor’s solicitors ([23]). They were to hold the deposits as stakeholders but they were also the vendor’s agents. When they cashed the cheque, the money was received and paid ([25]). The terms of the undertaking that the purchaser’s solicitors sought to impose did not render the payment conditional. The only realistic interpretation of the proposed undertaking was that the vendor’s solicitors were being asked not to cash the cheque unless they were in a position to send the vendor’s signed part of the contract to the purchaser’s solicitors ([28]). Litton NPJ emphasised that this case turned on its special facts; it would be rare for a purchaser to pay a deposit before the contract had been signed ([31]).

Bokhary NPJ approached the matter on the basis that the purchaser had accepted the risk that the further deposit would be forfeited and that there was an expectation that the right to resile, and the consequences of doing so, would be matching (the same for each party) ([37]).

Lord Millett NPJ said that the vendor’s solicitors could refuse the deposit by returning the cheque, by holding it without cashing it or by cashing it on the express basis that the money was held to the purchaser’s solicitors order ([41]). Simply cashing the cheque, by contrast, amounted to acceptance of the deposit monies ([42]).

Since the right to resile had not been validly exercised, the Court of Final Appeal ordered specific performance of the contract.

Michael Lower

Lease: estoppel; Lands Tribunal’s jurisdiction to award specific performance

October 22, 2013

In Fordtime Industrial Ltd v Yip Shing Lam ([2013] HKEC 1613, LT) F had acquired a shop and the cockloft above it (which was a separate property). The acquisition of the cockloft was subject to a tenancy in favour of the previous owner of the shop. The tenancy had come to an end but the tenant refused to leave. The landlord sought vacant possession and mesne profits and was successful.

The tenant contended that the subject matter of the lease did not exist since the cocklofts were not referred to in the DMC. The judge found as a matter of fact that the cockloft did exist at the time of the execution of the DMC. The developer (as owner of all of the unassigned shares) was free to allocate a share to it. In any event, the tenant having enjoyed undisturbed possession during the lease term was estopped from denying the landlord’s title ([33] – [37]).

The landlord also sought an order for specific performance of the tenant’s covenant to reinstate the property by replacing the floor slab between the shop and cockloft at the end of the lease. The Lands Tribunal decided that it did not have jurisdiction to grant specific performance in an action for possession (see Lands Tribunal Ordinance ss. 8(8) and 8(9)).

Michael Lower

Intended common law lease taking effect in equity

March 11, 2013

In Parker v Taswell ((1858) 2 De Gex & Jones 559, 44 E.R. 1106) P sought specific performance of an agreement to grant a lease for a term of ten years. The agreement was signed by both parties but not under seal and P had gone into possession. T argued that the agreement was unenforceable since the intention had been to create a lease that would be valid at common law. This failed. In principle, the agreement could take effect in equity and the relevant legislation did not lead to a contrary conclusion (570 – 571 per Lord Chelmsford).

T also sought to argue that the terms of the agreement were too uncertain in certain respects. This failed too:

‘The agreement, moreover, is admitted to be sufficiently certain as to all the substantial parts of it, and the only portions of it to which uncertainty is attributed are subordinate matters. No authority has been cited to shew that in such a case specific performance may not be decreed.’ (571 – 572 per Lord Chelmsford).

Specific performance of an agreement to surrender where the tenant has gone into administration

December 14, 2012

In A/Wear UK Ltd (In Administration), Re ([2012] EWHC 2050) A/W entered into an agreement to surrender with its landlord. A/W agreed to pay GBP340,000 on completion of the surrender. This sum was held in escrow by the landlord’s solicitors. Before the surrender could take place. A/W went into administration. The landlord (in effect) sought leave to bring proceedings for specific performance of the agreement to surrender. This was refused. The landlord would have to take its place alongside A/W’s other creditors.

The judge, David Donaldson QC pointed out that the effect of specific performance  would be to allow the payment of the agreed sum to the landlords. He  said:

‘The corollary of this benefit is to deprive the Company (and hence its creditors) of its future right to those monies. These considerations would make it in my judgment inappropriate for the court to grant the discretionary remedy of an order for specific performance.’ ([8])

Conditions for specific performance

August 10, 2012

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.

Seller seeking to rely on liquidated damages clause after due date for completion had passed

August 7, 2012

In Earnest Enterprises Ltd v Yip Fung ([2012] HKEC 1096, CFI) B entered into a provisional sale and purchase agreement to buy a flat from S. As provided for in the agreement B paid HK$200,000 by way of deposit and then a further deposit of HK$210,000. No formal agreement was entered into other than the provisional agreement. B gave several extensions of time for completion but the date was eventually fixed.S failed to complete.  B sought specific performance and / or damages in lieu. S offered to refund the deposits paid and a further HK$200,000 by way of liquidated damages. S sought to invoke the liquidated damages clause in the sale and purchase agreement. S failed for two reasons. First, it was no longer possible to rely on the liquidated damages clause as drafted once the completion date had passed. Second, in any event S would have to offer liquidated damages of HK410,000 (the total of the deposits paid) and not merely an amount equal to the first of the deposits. B was entitled to specific performance and damages.

Seller seeking specific performance

June 20, 2012

New Dennis Arthur v Greesh Gai Monty ([2012] SGHC 122) is a Singaporean case. N agreed to sell an apartment to G. Before completion, G discovered that there was a significant problem with water leaking into the property and refused to complete. N sought specific performance and G sought to rescind on the basis of misrepresentation. The misrepresentation claim failed. Even had there been a relevant statement of fact, a statement by N’s agent that there was no water leakage, this would not have induced the contract since G knew that the agent lacked the expertise to comment.

The claim for specific performance failed also. While acknowledging the argument that specific performance ought to be mutual, the court refused to order it to enable N to foist the property onto an unwilling buyer. Nominal general damages and fairly minor special damages were awarded.

Binding effect of a provisional sale and purchase agreement

May 24, 2012

In Au Wing Cheung v Roseric Ltd ([1992] 1 HKC 149, CA) S and P entered into a provisional sale and purchase agreement concerning a shop in Happy Valley. This agreement contained a term to the effect that the agreement ‘is a document with legal binding force.’ There was to be a formal agreement and P’s solicitors wrote a letter marked ‘subject to contract’ calling for a draft agreement. It also stated that, ‘Nothing herein shall bind our client unless and until the agreement for sale and purchase relating thereto has been signed by our client and all parties concerned.’ The seller’s solicitors replied to the effect that they too regarded the negotiations as being still ‘subject to contract’ and purporting to bring them to an end. P sought specific performance and succeeded. The provisional agreement was clearly intended to be binding. The ‘subject to contract’ label applied only to any variations between the provisional agreement and the formal agreement. P’s subject to contract letter did not provide the basis for an estoppel.