Asgain Co Ltd v. Cheung Ka Yan
Court of Appeal
Civil Appeal No 197 of 2017
Cheung CJHC, Lam V-P and Poon JA
7 March, 12 April 2018

Land law — title/sale of land — receipt clause — whether conclusive evidence of payment —claim by vendor for unpaid purchase price — whether defeated by receipt clauses in agreement and assignment — whether clauses gave rise to contractual estoppel in favour of purchaser — whether s.18(1) applicable to defeat vendor’s claim — Conveyancing and Property Ordinance (Cap.219) s.18(1)

Words and phrases — “sufficient discharge” — Conveyancing and Property Ordinance (Cap.219) s.18(1)

Conveyancing and Property Ordinance (Cap.219) s.18(1)]

V, the vendor of a property (the Property), brought these proceedings against P, a purchaser, for the unpaid purchase price of P’s interest in the Property. The Memorandum of Agreement and the Assignment recited that the full purchase price had been paid by the purchaser and that payment and receipt of that sum was acknowledged by the vendor (the Receipt Clauses). The Deputy Judge gave judgment to V, rejecting P’s primary case that she had paid the full purchase price for her interest in the property; and finding that P had only paid a lesser sum in part payments for such interest (the Part Payments). The Judge rejected P’s argument that the Receipt Clauses gave rise to a contractual estoppel in her favour, on the grounds that: (a) V was not aware of the Receipt Clauses and so the parties had not agreed their effect, as such the Receipt Clauses were not there to acknowledge payment (the First Reason); and (b) there was no reliance on the Receipt Clauses, since P had made the Part Payments after execution of the Assignment (the Second Reason). The Deputy Judge further ruled that P could not rely on s.18(1) of the Conveyancing and Property Ordinance (Cap.219), which provides “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”, to defeat V’s claim. P appealed.

Held, dismissing the appeal, that:

  • P’s plea of contractual estoppel failed. However, the First Reason was not supportable. Parties of full age and understanding would be held to documents they had chosen to sign, without actually knowing the terms, unless there was a recognised legal basis for concluding that their apparent consent had been vitiated. A receipt clause could operate as an estoppel even though both parties knew the statement was not true if, as here, there were no vitiating factors such as illegality or misrepresentation. Thus, the fact that V and D knew that payment had not been made was not sufficient to defeat the effect of the Receipt Clauses (Ming Shiu Chung v Ming Shiu Sum (2006) 9 HKCFAR 334, Prime Sight Ltd v Lavarello [2014] AC 436 applied). (See paras.9–13, 26.)
  • As for the Second Reason, the contractual estoppel alleged by P was akin to an estoppel by convention for which reliance was not a discrete element. An estoppel by convention would arise if, even knowing the full facts, the parties were shown to have assumed a different state of facts or law as between themselves for a particular transaction. The claim of the party raising the estoppel was that he believed (and agreed) that the assumed facts or law should be treated as true (Grundt v Great Boulder Proprietary Gold Mines Ltd (1937) 59 CLR 641, Prime Sight Ltd v Lavarello [2014] AC 436 applied). (See paras.14–16, 24.)
  • Here, as V accepted the Part Payments from P as payment towards the purchase price, the necessary inference from the parties’ conduct was that the assumption of discharge of the payment obligation in the Receipt Clauses was abrogated by them. If the Receipt Clauses gave rise to an estoppel, it was subsequently extinguished by a counter-estoppel or waiver arising from the first part payment by P, unequivocally acknowledging that she continued to have an obligation to pay notwithstanding those Clauses. (See paras.16–18, 25.)
  • Properly construed, a “sufficient discharge” under s.18(1) of the Ordinance meant the discharge was sufficient but not conclusive. The purpose of the section was to avoid the need to have another receipt endorsed on the instrument. It had never been the legislative intent or the law that by reason of the first part of s.18(1), the vendor could not sue the purchaser for the unpaid purchase price if the prima facie discharge was rebutted by evidence of non-payment. As between the third-party subsequent purchaser or mortgagee and the vendor, the effect of s.18(1) was to give protection to the former in priority (absolving them from further inquiries where there was a receipt clause in the instrument) provided they had no notice of the vendor’s claim on entering into the transaction (Bateman v Hunt [1904] 2 KB 530, Capell v Winter [1907] 2 Ch 376, Kwok Wai Fan v Tse Kin Chung [1998] 2 HKC 105, Close Asset Finance Ltd v Taylor [2006] EWCA Civ 788 applied; Best Joint Investments Ltd v Kagani Ltd (HCA 2608/2006, [2015] CHKEC 550 doubted disapproved). (See paras.40–41.)

Appeal

This was an appeal by the defendant-purchaser against the judgment of Deputy Judge Tracy Chan in the District Court giving judgment to the plaintiff-vendor in an action for the unpaid price of a property. The facts are set out in the judgment.

Jurisdictions: 

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