CHEUNG BING SUM JUANA v. LEO LEE

IN THE COURT OF APPEAL

1993, No. 146
(Civil)

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J U D G M E N T

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Nazareth, J.A. (giving the judgment of the Court) :

1. This is an appeal against the judgment of the late Deputy Judge Evans in High Court Action No.A82985 of 1987. In his statement of claim filed on 22nd May 1987 the plaintiff claimed that by an oral agreement between him and the defendant on or about 15th October 1986, the defendant agreed to sell to him her flat in City One Shatin for $380,000, and that the sale should be completed 15 days from 15th October 1986. Pursuant to the agreement he had duly paid the defendant $25,000 as a deposit on 15th October 1986 receipt of which was acknowledged in a written document (Exhibit P3) which referred to it as a deposit for purchase of the particular flat, and set out the purchase price, time for completion, requirement for delivery up with vacant possession, and as will be seen, damages on breach. In breach of the agreement and despite repeated requests, the defendant failed to complete the sale. He claimed specific performance, further or alternatively damages for breach of contract, further or alternative liquidated damages in the sum of $15,000 as provided in the agreement and other relief.

2. By her home-made defence dated 5th June 1987, the defendant disputed the claim for the following reasons:

(a) the nature of the case was of loan sharking, and the so-called down payment receipt had been forged by the plaintiff as the defendant had originally signed a blank sheet of paper;

(b) the plaintiff's claim was part and parcel of an earlier civil claim Action No. 916 of 1987 in Shatin District Court;

(c) she had only borrowed $19,750 in June 1987 from the plaintiff who treated the total loan as HK$25,000 but had deducted $5,000 as monthly interest in advance together with HK$250 as fees. The plaintiff had moreover 10 cheques of hers each with a face value of $5,000 and one cheque of a face value of $25,000. She was prepared to settle her debt by paying reasonable interest but the plaintiff refused to accept less than $40,000.

3. The plaintiff had in fact taken out a District Court writ a few weeks before, on 5th May 1987. On 13 July 1987 the case came before the Shatin District Court and on the defendant's admission of the receipt of the sum of $19,750, judgment was entered for the plaintiff in that sum and the case adjourned for trial on the balance of the claim, i.e. $10,250. That trial commenced on 25th November 1987; the plaintiff gave evidence and was part cross-examined. On the second day, the connection the defendant's defence had with that in the High Court Action resulted in the judge by consent ordering the case to be adjourned sine die. About six months later, on 5th May 1988, the matter came before a Master and he made an order for consolidation of the two actions to be tried in the High Court.

4. Deputy Judge Evans in his judgment pointed out that there had been no order for retrial of the District Court action, that it remained part-heard in the District Court, and that no order for transfer from the District Court, as required by s.39(2) of the District Court Ordinance, had ever been made. He held that he had no power to make such an order and observed that in his view the order for consolidation was one which the master lacked power to make. He therefore declined to exercise any jurisdiction or to make any orders in relation to it. He nonetheless recognised that in resolving the factual matters in the High Court case he would have to cover much of the same territory as was concerned in the District Court action.

5. Proceeding then to the evidence, the plaintiff's version was that he met the defendant in March/April 1986 at the office of a garment manufacturer. She was introduced as a sub-contractor of the factory owner. She invited him to invest $60,000 in a business venture. He declined. But she persisted and after a series of pager calls they met again. This time she asked for a contribution of $30,000 but again the plaintiff declined. She continued to phone him and ultimately he agreed to invest $15,000 upon the defendant's assurance that he would receive a further $15,000 profit within six months. They then met and he gave her $15,000 in cash and received six post-dated cheques each for $5,000. When the first cheque was presented on 5th July 1986 it bounced. The defendant asked for and received two months' grace. At the end of September 1986 the defendant told the plaintiff she had found a new partner and asked him to accept $25,000 instead of the $30,000 and end their relationship. He agreed and it was arranged that he would give back the six cheques once he obtained payment on the $25,000 cheque offered. But when that cheque was presented, it bounced as did the August and September cheques for $5,000 each. The defendant asked for time.

6. In Mid-October they met again and she told him because of financial difficulties she had to sell her flat and offered it to him at the price she had paid for it, i.e. $380,000. She produced two documents showing that price. She exhibited one of them, a solicitor's bill showing that purchase price. The plaintiff insisted on paying a deposit of $25,000 and that completion be within 50 days. The defendant phoned next day and accepted those terms. They then met in a restaurant and together drafted the terms of a receipt (i.e. Exhibit P3) which both signed and the plaintiff kept. He returned the dishonoured cheques for $25,000 to the defendant but kept the six $5,000 cheques pending completion of the sale.

7. Turning to the defendant's evidence, she is a housewife who has not worked since marriage. In effect she admitted to being an inveterate gambler. Her travel documents confirmed that at material times she was constantly in Macau for that purpose, on occasions going there several times a day. Sometimes she stayed for days. Sometimes, she stayed for days. She spoke of wins and losses of considerable sums of money. She regarded no less than $50,000 as necessary to go gambling in Macau. Her patronage was apparently so sought after by casino operators that she was supplied free hydrofoil transport and hotel accommodation. She admitted to being constantly in debt to family and friends, and agreed she was an experienced borrower from loan sharks.

8. She testified that in May 1986 she lost in Macau and was given the plaintiff's name-card by a friend as being a person from whom she could borrow money so long as she had a property. She contacted him and they met on 7th June in a restaurant in Waterloo Road. He inspected the documents she had brought to establish her ownership of the flat and then went with her to inspect it. He agreed to lend not the $30,000 she was asking for, but $25,000 which was to be repaid on 5th September 1986 with interest of $5,000 per month to be paid in the meantime by cheques each post-dated a month apart. She received $19,750 in cash representing a loan of $25,000 less a "procedural fee" of $2,500 and $5,000 as interest in advance. She wrote out 11 cheques in all, ten for $5,000 and one for $25,000 dated 5th September 1986. The arrangement was that if the latter cheque was met on presentation, the three $5,000 cheques for July, August and September would cover the interest and the loan considered repaid. If the $25,000 cheque was not met, the remaining seven cheques for $5,000 would be presented as they became due. In the event, all the cheques bounced.

9. The judge was acutely aware of the conflicting nature of the evidence of the plaintiff and defendant. He had no difficulty in determining that it was the defendant and her husband who were not telling the truth. He believed and accepted the evidence of the plaintiff. He specifically rejected the defendant's claim and evidence that she signed Exhibit P3 in blank. Having inspected that document, we think the judge's conclusion inescapable having regard to the position of the defendant's signature and words which she testified that she had made upon the document. These fit neatly into the writing on Exhibit P3 in positions that could hardly have been anticipated prior to the document being completed. Moreover, as the judge pointed out important parts of the defendant's evidence were improbable in the extreme, e.g. a hard-headed woman well-versed in dealing with loan sharks was unlikely in the extreme to have signed a document in blank in the particular circumstances. No less unlikely is the possibility that the plaintiff would have stolen from the defendant a bill from her solicitors (showing the price at which she purchased the flat) in the circumstances she suggested. And not least it is plain from the evidence that the plaintiff was prepared to sell her flat, and indeed that she purported to do so shortly after her dealings with the plaintiff, to a third party at $420,000, an amount not significantly more than the disputed sale price to the plaintiff.

10. In contrast to the actions below, the defendant has since been represented in this appeal, and her notice and supplementary notice of appeal have been prepared by solicitors and counsel. At the hearing before us, she was represented by Mr Peter Graham who although appearing at very short notice in place of counsel who had originally been briefed, presented her case to us very fully. He pursued her application for leave to adduce additional evidence on the basis that the issue of loan sharking had been raised on the pleadings, that the plaintiff had denied these allegations, the additional evidence related to such activity on the part of the plaintiff and if in the light of the additional evidence the court were to reject the evidence of the plaintiff the whole of the evidence and the credibility of the plaintiff would have to be reconsidered, leading to re-assessment of the defendant's case. Having heard Mr Graham at considerable length and been taken to the additional evidence, we refused leave to adduce it. We do not find it necessary to say any more than that the evidence consisted of affidavits of the defendant, of three new witnesses, and of the defendant's solicitor. Those of the defendant and her solicitor were almost entirely discursive and pertained more to the application than to any substantive evidence relevant to the issues in the substantive action. The evidence of a Madam Wong Pui-wan was in essence that she had seen an assortment of cheques, some post-dated in the plaintiff's flat in 1990, some four years after the matters in question. The affirmation of Madam Leung Wai-ming was simply that she received from a friend the plaintiff's name-card as a person who lent money at a high rate of interest but the borrower had to have a house to guarantee repayment. Finally the affidavit of Madam Cheong Oi-sum Ader was that she was sued by the plaintiff for dishonouring cheques given in respect of monies borrowed because of gambling losses in circumstances very similar to that alleged by the defendant. Linked to the affidavits were a large number of documents of an amorphous nature comprising a file almost two inches thick. Most of these were obviously of little relevance to the issues in the substantive action. After considerable culling Mr Graham elected to proceed upon only some of them, but the probative value and relevance of even those remain highly questionable. Likewise the accounts of the Three deponents were, almost entirely irrelevant, although that of Madam Cheong cast considerable suspicion upon the plaintiff, but could not be regarded as going beyond. There were other difficulties, in addition, which we mention without canvassing. The evidence by and large could not be said to be credible or such that it would have an important influence on the result of the case; also it was concerned more with credibility rather than issues in the action. In those circumstances we had no hesitation in refusing leave to adduce such additional evidence.

11. Turning then to the defendant's amended grounds of appeal, several were concerned almost entirely with the plaintiff's evidence, which the judge accepted, that he made a loan of $15,000 to the defendant and was to receive $15,000 "profit" at the end of six months regardless of how the so-called investment turned out and without any further contribution to the said investment. On the face of that evidence, that transaction appears to have been a loan at the rate of 200% interest per annum. As Mr Graham contended, on its face it was an illegal transaction under s.24 of the Money Lenders Ordinance. As he submitted, the judge does not appear to have fully addressed that transaction in the context of the Money Lenders Ordinance.

12. However, even if it was an illegal transaction and an offence under s.24 of that Ordinance, which makes loans at an effective rate of interest in excess of 60% an offence liable to a fine of $100,000 and imprisonment for two years, on the evidence it was not connected with the agreement for purchase of the defendant's flat. The evidence shows that the defendant received $25,000 in cash as a deposit in the context of the agreement for purchase and sale of the flat. In that light the agreement for sale and purchase plainly would not be tainted by the illegality of what must therefore be a separate transaction.

13. Furthermore, in the light of the Deputy Judge's careful analysis of the implications of the evidence of the plaintiff and the defendant and the rejection of the latter in the light of his personal observation of both parties during their evidence, we do not consider that this Court is in a position to intervene upon those findings of fact. It follows that, notwithstanding Mr Graham's eloquence and the powerful points he made upon them, all the grounds founded upon the illegality of the loan of $15,000 must fail.

14. It is convenient to observe at this point, that in addition to her lack of credibility, it was a general weakness of the defendant's case that virtually all the evidence she relied and sought to rely upon relates to two individual dealings, one with the defendant and the other with Madam Cheong, which could hardly have founded the sort of continuity implicit in the carrying on of business as a money lender.

15. We turn then to the remaining grounds of appeal pursued by Mr Graham. He submitted that upon the acceptance of the plaintiff's evidence, it was a term of the contract for sale and purchase that the plaintiff would deduct from the purchase price the amount of the loan and interest, i.e. $30,000. Therefore, since it was not mentioned in Exhibit P3 (the house purchase deposit receipt), that document could not be a written memorandum of the agreement of sale and purchase within the requirements of s.3 of the Conveyancing and Property Ordinance (Cap.219). In this regard we accept the submissions of Sir Oswald Cheung, QC who appeared with Mr Li Chau-yuen for the plaintiff that, first, it was not open to the defendant to make such a submission as the matter had not been raised in the court below (see the Supreme Court Practice 1993, Vol.1 p.990 para.59/10/6); and furthermore that if a term of the agreement was for the benefit of the plaintiff (as it obviously is here) the plaintiff was entitled to waive the benefit of it (Barnsley's Conveyancing Law and Practice, 2nd Edition, p.115).

16. Mr Graham also submitted that on the plaintiff's evidence, it is clear that he agreed that the six cheques of $5,000 each would be returned but that in breach of such agreement, he failed to do so and indeed presented some of the cheques. We cannot see how that subsequent breach of agreement, if such it was, can have altered what was agreed to earlier as to the sale and purchase, nor how it could be a basis for refusing the plaintiff specific relief, which was also a submission made to us.

17. Finally, it was submitted that the plaintiff was confronted with three obstacles to his claim for specific performance. First, s.35 of the Money Lenders Ordinance which made the loan of $15,000 at 200% per annum interest illegal. We have already held that this transaction, such as it was, was not related to the agreement for sale and purchase.

18. Second, it was submitted that the plaintiff's conduct was such as to require the denial to him of equitable relief. The short answer to this alleged obstacle to the claim for specific performance is that once the loan of $15,000 can be seen to be a separate transaction, then the evidence which merely gives rise to suspicion of money lending is insufficient to constitute good reason for denial of specific performance.

19. Third, that upon the construction of the receipt (Exhibit P3) specific performance was excluded. This submission was founded upon the following words in Exhibit P3: "in the event of a breach, I, apart from compensating the deposit in double, shall also be liable for the losses incurred by the purchaser, Mr Leo Lee." Counsel did not dispute that the parties to an agreement may limit their damages for non- completion by the use of appropriate language (Abdul Cader Abdeen v Abdul Careem Mohamed Thaheer [1958] AC 116). The question always is, what is the contract? (Lee Tat-kwong v Choi Pui-kei (1991) HCA No.2338 of 1991, at p.4, unreported; Wong Lai-fan [1992]1 HKLR 125 at 129, 130) In our judgment the words in the house sale deposit receipt, unlike those in some of the authorities cited to us, do not go as far as providing expressly or by implication that the damages mentioned are to be the exclusive relief or consequence of breach. For the foregoing reasons, all the defendant's grounds of appeal fail and we dismiss the appeal.

There remains, however, obvious difficulty with some of the terms of the order drawn up by the plaintiff's advisers and adopted by the judge. Those terms include the following:

"(c) Let the following inquiry be made: -

(1) An Inquiry whether a good title can be made to the said premises mentioned in the said Agreement ("the said premises").

(2) An Inquiry into the damages suffered by the Plaintiff as a result of the wrongful repudiation of the said Agreement by the Defendant.

(d) Let an Account be taken of what is due to the Defendant for the deposits and balance of the purchase money.

(e) And upon the Defendant making good title to the said premises free from all incumbrances let the Defendant execute a conveyance of the said premises as an escrow to be delivered to the Plaintiff or to whom the Plaintiff shall appoint, such conveyance to be in the form of the conveyance annexed hereto. In the event that the Defendant neglects or refuses to execute the said conveyance let the said conveyance be executed by the Registrar of the Supreme Court nominated for that purpose by the Court under Section 25A of the Supreme Court Ordinance, Cap.4.

(f) The Plaintiff do make payment into court of the balance of the purchase price due to the Defendant once the said conveyance of the said premises has been duly executed and the Registrar do not release the said sum until deduction of the Plaintiff's taxed costs in this action."

It is plain that a greater part of the foregoing paragraphs of the order are unnecessary and likely to cause problems. Having heard counsel, who nonetheless, we think, should have an opportunity to make further submissions, we propose to uphold only paragraphs (a) and (b) of the judge's order by substituting for the order made by the judge, the following by way of order nisi:

(a) The said Agreement as contained in or evidenced by a deposit receipt signed by the Plaintiff and the Defendant and dated 15th October, 1986 as mentioned in the Statement of Claim be specifically performed and carried into execution with liberty to apply; and for this purpose the Defendant do execute a conveyance of the said premises as an escrow to be delivered to the Plaintiff or to whom the Plaintiff shall appoint, such conveyance to be in the form of the draft conveyance annexed hereto.

In the event that the Defendant neglects or refuses to execute the said conveyance let the said conveyance be executed by the Registrar of the Supreme Court nominated for that purpose by the Court under s.25A of the Supreme Court Ordinance, Cap.4.

(b) The Defendant do pay the Plaintiff his costs of the action and this appeal to be taxed if not agreed.

 

 

Annexure to Judgment

THIS ASSIGNMENT is made the day of One thousand nine hundred and ninety-three

BETWEEN:-

(1) CHEUNG BING SUM, JUANA of Flat E, 1st Floor, Block 22, City One Shatin, New Territories ("the Vendor") and

(2) LEO LEE Gentleman of Flat F, 12th Floor, New Lucky House, No.15 Jordan Road, Kowloon, Hong Kong ("the Purchaser").

WHEREAS:-

(1) By an Agreement for Sale and Purchase as evidenced by a deposit receipt dated 15th October 1986 signed by the Vendor and the Purchaser made between the Vendor of the one part and the Purchaser of the other part and registered in the District Land Office Shatin by Memorial No. 349073 ("the said agreement") the Vendor agreed to sell and the Purchaser agreed to purchase the land described is the Schedule hereto ("the Property") for the purchase price of HK$380,000.00 and subject to the terms and conditions therein contained.

(2) By an Order dated the day of 1993 given by Action No.A2985 of 1987 and pursuant to High Court registered in the District Land Office Shatin by Memorial No. it is ordered that the said agreement be specifically performed and carried into effect and that the Vendor be ordered to execute an assignment of the Property to the Purchaser or to such person or persons as the Purchaser may direct.

(3) The parties hereto are desirous of completing the sale and purchase of the Property as ordered by the Court in the said Order as registered in the District Land Office Shatin by Memorial No. in manner hereinafter appearing.

NOW THIS DEED WITNESSETH as follows :-

1. In consideration of the sum of HONG KONG DOLLARS THREE HUNDRED AND EIGHTY THOUSAND ONLY (HK$380,000.00) paid by the Purchaser to the Vendor (receipt whereof is acknowledged) the Vendor as Beneficial Owner ASSIGNS to the Purchaser the Property TO HOLD the same unto the Purchaser for the residue of the term of years created by the Crown Lease referred to in the Schedule hereto SUBJECT to the payment of the due proportion of the yearly Crown Rent reserved by and the covenants conditions and provisos contained in the Crown Lease AND SUBJECT to and with the benefit of a Deed of Mutual Covenant registered in the District Land Office Shatin by Memorial No.

2. It is hereby agreed and declared by the parties hereto that the respective covenants by the Vendor and the Purchaser implied by the Conveyancing and Property Ordinance (Chapter 219) shall be construed and incorporated herein as if they were herein written and shall take effect so far as the same relate to or affect the Property but not further or otherwise.

THE SCHEDULE

1. The Property :-

(a) Description :-

ALL THOSE 55 equal undivided 1,500,000th parts or shares of and in ALL THAT piece or parcel of ground situate lying and being at Sha Tin New Territories Hong Kong and registered in the District Land Office Sha Tin as SHA TIN TOWN LOT NO.1 and ALL THOSE 55 equal undivided 221,000th parts or shares of and in the buildings and other structures and ancillary works now erected or hereafter to be erected on the site known and registered in the District Land Office Sha Tin as SECTION B OF SHA TIN TOWN LOT NO.1 which forms part of the Estate known as City One Shatin together with the full and exclusive right and privilege to the use occupation and enjoyment of ALL THAT FLAT "E" on the FIRST FLOOR of BLOCK "22" of CITY ONE SHATIN.

(b) Exception and reservations, etc. :-

(I) Except and reserved as in the Crown Lease is excepted and reserved; and

(ii) Subject to such exceptions and reservations as more particularly described mentioned and/or referred to in the Assignment.

(c) Easements and other appurtenant rights, if any :-

The Property is held subject to and with the benefit of all rights of way (if any) and all privileges easements and appurtenances thereto belonging or appertaining or therewith at any time used held occupied or enjoyed AND such as are more particularly described mentioned and/or referred to in the Assignment so far as the same are still subsisting and capable of taking effect and affect the Property.

2. The Crown Lease :-

(a) Registration number :

New Grant No.11064 as modified by two modification letters respectively registered in the District Land Office Sha Tin by Memorials Nos.180771 and 184534.

(b) Parties :

His Excellency the Governor of Hong Kong of the one part and Paramatta Investment Company Limited of the other part.

(c) Term :

99 years less the last three days commencing from the 1st day of July 1898.

(d) Lot :

Sha Tin Town Lot No.1.

(e) Date :

The 30th day of October 1975.