WISE UNICORN DEVELOPMENT LTD. v. KWEK BUCK NOI

A194 of 1997

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINSTRATIVE REGION

COURT OF FIRST INSTANCE

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J U D G M E N T

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Introduction

1. The Defendant's husband was the registered owner of a flat at Provident Centre, North Point ("the suit property"). On 4 December, 1996, the Defendant, as agent for the vendor, signed a document headed "provisional sale and purchase agreement" with the Plaintiff purporting to sell the suit property to the Plaintiff ("the Disputed Document"). At the time of signing this document, the Defendant's husband was not in Hong Kong. The husband denies that he wanted to sell the suit property, or that he had authorized the Defendant to sign any sale agreement on his behalf. The Plaintiff contends that by reason of an express clause (Clause 13) of the Disputed Document, the Defendant has incurred a personal liability and therefore sues the Defendant for loss and damages for not being able to purchase the suit property.

2. The Defendant, on the other hand, disputes the Plaintiff's claim on the following grounds:-

(a) she made clear to the Plaintiff's estate agent that she would not accept any personal liability even if she signed on the Disputed Document;

(b) the Plaintiff's estate agent misled her into believing that she would not incur personal liability even if she signed the Disputed Document;

(c) in any event, Clause 13 was a clause expressly exempting her from personal liability; alternatively, because of the way in which a Chinese character in that clause was written, Clause 13 could reasonably be construed as such an exemption clause;

(d) (this is a point raised by Mr. Westbrook at the end of his final submissions) the Disputed Document was in the nature of a wagering contract contingent upon the husband's authorization;

(e) even if the Defendant were liable, the Plaintiff has failed to prove that it has suffered loss.

Evidence Adduced

3. It was agreed between the parties that the copy documents in the following bundles can be looked at and considered by the Court:-

(a) the Plaintiff's Bundle of Documents ("P's Bundle");

(b) the Plaintiff's Supplemental Bundle of Documents ("P's Supp. Bundle");

(c) the Plaintiff's 2nd Supplemental Bundle of Documents ("P's 2nd Supp. Bundle");

(d) the Defendant's Bundle of Documents ("D's Bundle").

Further to the said bundles, the following documents have been produced:-

(a) the purchaser's (Plaintiff's) copy of the Disputed Document: exhibit "P1";

(b) statutory declaration of the Plaintiff's solicitors explaining the loss of the original of "P1": exhibit "P2";

(c) data relating to comparables used in the Plaintiff's valuation reports: exhibits "P3a" to "P3c";

(d) statistics used in the Plaintiff's valuation reports: exhibits "P4a" and "P4b";

(e) faxed copy of a document headed "provisional sale and purchase agreement" (original of p. 1 of D's Bundle): exhibit "D1a";

(f) résumé of Ms. Maggie Wong Man Yee (DW1): exhibit "D2";

(g) the vendor's (Defendant's) copy of the Disputed Document: exhibit "D3";

(h) fax record of Metalasia, a trading company run by the Defendant's husband, Yeo: exhibit "D4";

(i) original fax (recipient's copy) of p. 11 of D's Bundle: exhibit "D11a";

(j) original fax (recipient's copy) of p. 15 of D's Bundle: exhibit "D15a";

(k) original fax (recipient's copy) of p. 16 of D's Bundle: exhibit "D16a".

4. Apart from Mr. Ng Man Ho ("Ng"), a representative of the Plaintiff, and the Defendant, the following witnesses were also called to testify:-

(a) Mr. Tsoi Chi Chung ("Tsoi"), the estate agent acting for the Plaintiff in negotiating for the purchase of the suit property. In essence, Tsoi's testimony was that he secured the agreement of the Defendant and Maggie Wong that the Defendant would not only sign a provisional agreement for her husband, but also shoulder up personal liabilities for the said agreement. He also denied having in any way misled Maggie Wong or the Defendant;

(b) Mr. William W.L. Wong ("William Wong"), a surveyor who prepared 3 valuation reports in this action for the Plaintiff in relation to the market value of the suit property;

(c) Ms. Maggie Wong Man Yee ("Maggie Wong"), the estate agent acting for the vendor/the Defendant in negotiating for the sale of the suit property. In summary, Maggie Wong's testimony was that she expressly informed Tsoi that the Defendant would only agree to sign the Disputed Document if the Defendant did not have to bear personal liabilities for doing so. She testified that Tsoi agreed to do so by nodding his head on a number of occasions prior to the Disputed Document being signed by the Defendant;

(d) Mr. Yeo Cheng Swee ("Yeo"), the Defendant's husband. He testified that even before he left Hong Kong for an overseas business trip, he already instructed Maggie Wong to withdraw the suit property from the market and to rent it out for half a year. He further testified that he maintained such stance throughout and upon learning that Maggie Wong had obtained a firm offer from the Plaintiff (while he was in California), immediately repeated his earlier instructions. In short, Yeo's testimony was that he never authorized any sale of the suit property, let alone authorized the Defendant to sell it;

(e) Ms. Amy Lo Wai Lin ("Amy Lo"), Yeo's secretary. Her testimony dealt principally with what time it was when (1) certain faxes were given to her by Maggie Wong, (2) when she faxed them to Yeo as well as (3) when she received faxes from Yeo.

Clause 13 of the Document

5. The first dispute between the parties is how this clause should be read and construed. The Plaintiff contends that this clause should read as follows:-

"上述物業ＹＥＯ ＣＨＥＮＧ ＳＷＥＥ 由ＫＷＥＫ ＢＵＣＫ ＮＯＩ代簽,並負本合約之法律責任。".

This clause is translated as follows:-

"The above property signed by KWEK BUCK NOI for and on behalf of YEO CHENG SWEE also responsible for the legal liabilities under this Agreement.".

6. The Defendant, on the other hand, contends that Clause 13 should read, or could reasonably be read as:-

"上述物業ＹＥＯ ＣＨＥＮＧ ＳＷＥＥ 由ＫＷＥＫ ＢＵＣＫ ＮＯＩ代簽,並免本合約之法律責任。"

The Defendant's translation of the clause is:-

"The above property signed by KWEK BUCK NOI for and on behalf of YEO CHENG SWEE also [exempt from] [she is not liable for] the legal liabilities under this Agreement.".

7. The parties agreed that in deciding this issue, the test is an objective one; that is, what the reasonable man considers have been written, and not what the parties subjectively considered to be the case: see Chitty on Contracts (1994) 27th ed., para. 5-020, in particular text to nn. 3 and 4 (same as Chitty (1991) 26th ed., para. 330, in particular text to nn. 81 and 82 referred to by the Defence). I will first approach this issue without taking into account the way in which the other characters in the relevant document was written. I agree with the Defence suggestion that this character was not written in the clearest way. However, having looked at the Chinese character in question, I find that it was written clear enough for me to conclude that it is the character "負" and not "免".

8. In coming to this conclusion, I bear in mind that the issue is to be decided on the basis of what a reasonable man would read this Chinese character in similar circumstances as when Maggie Wong and the Defendant read the clause, and not what a reasonable man would read it in a more careful and considered way as, for example, after the dispute has arisen and particular attention has been directed to the clause.

9. The credibility of the witnesses is not relevant to this issue. In any event, I consider that my findings on the credibility of the witnesses do not militate against my conclusion on what the Chinese character in question is, or what it reasonably looks like.

10. Having approached the matter in the above manner, I then consider whether the way in which the other characters in the same document (in particular, the other characters in the same clause) was written would militate against or further reinforce my earlier conclusion that the character is "負" and not "免". I consider that my earlier conclusion is further reinforced by the following. The character "責" and the character "負" both contain the element "貝". The lower part of the character "責" (that is, the part which looks like "貝") as written in Clause 13 looks similar to the lower part of the character in dispute.

Credibility of Witnesses

11. I find that Ng and Tsoi are truthful and reliable witnesses. Mr. Westbrook invited me in particular not to accept Tsoi's testimony. In his written "Closing Submission for the Defence", Mr. Westbrook made the following criticisms of this witness: ".... TSOI was a rather 'wooden' witness who gave the impression of having carefully studied and prepared his lines which he recited almost without deviation. A well prepared witness is not necessarily a credible witness.". I agree with Mr. Westbrook's comments that Tsoi was a careful witness. However, I consider that his testimony is both concise and precise and that this was because he was an honest and reliable witness, rather than the result of merely being well prepared, or "wooden". I was in fact very impressed by his testimony.

12. On the other hand, I do not find either Maggie Wong or the Defendant to be truthful or reliable witnesses. I reject their testimony insofar as they asserted that (a) there was any agreement (whether made orally or by conduct) reached with Tsoi that the Defendant would not bear personal responsibilities for the Disputed Document; or (b) Tsoi misled Maggie Wong or the Defendant into believing that the Defendant would not bear personal responsibilities for the Disputed Document. I also do not believe their testimony that they read the Chinese character in dispute as "免". I do not propose to set out each and every reason for rejecting the testimony of the Defendant and Maggie Wong. These reasons include the following:-

(a) in relation to Maggie Wong:-

(1) it was Maggie Wong's testimony that she told Tsoi the Defendant would sign the Disputed Document after the vendor, that is, the Defendant's husband, had confirmed the sale and therefore Tsoi was told to wait (and in fact had been waiting) in Maggie Wong's office. If that had been Maggie Wong's stance, there is no reason why Maggie Wong should ask the Defendant to drive to Maggie Wong's office and sign the Disputed Document before Maggie Wong received the confirmation from Yeo. According to Maggie Wong, the suggestion that the Defendant should not bear any legal responsibility came from the Defendant out of no apparent reason at all. I find these to be not believable;

(2) one of Maggie Wong's assertions was that she always intended to leave the matter to Yeo's decision. However, it was apparent from the evidence that she was of the view (whether motivated by a real concern for Yeo, or self-interest or both) that the offer from the Plaintiff was very attractive, that there was no good reason for not accepting it and that this offer should be taken up. This can be seen from a number of matters. One, I accept Yeo's testimony that even before he left Hong Kong, he already instructed Maggie Wong to withdraw the suit property from the market. Maggie Wong did not do so and instead entered into negotiations with the Plaintiff, sent various faxes to Yeo and procured the Defendant to sign the Disputed Document. Further, I accept the Defendant's testimony when she confirmed the 2nd and 3rd sentences of para. 5 of her witness statement (p. 27, P's Bundle). These sentences show that Maggie Wong pressed the Defendant to meet Tsoi as Maggie Wong felt that the price was good and efforts should be made to keep the offer and that Maggie Wong said to the Defendant that there is a risk in losing this buyer. I rather consider that Maggie Wong had a mind of her own regarding the suit property and she persuaded the Defendant to take the risk of signing the Disputed Document despite the lack of authorization from Yeo;

(3) as Maggie Wong agreed in her testimony, she would not have agreed to her clients entering into an agreement similar to the one contended for by the Defence. Further, she has never heard of other estate agents entering into similar agreements. This evidence confirms the inherent implausibility of the "exemption clause" contended by Maggie Wong;

(4) there were inconsistencies between her testimony and her witness statement. One such inconsistency was whether Tsoi orally represented that the Defendant could sign the Disputed Document without the need to incur personal liabilities (see para. 11 and 12 of Maggie Wong's statement (pp. 40-1, P's Bundle)). Another inconsistency is whether Maggie Wong informed Tsoi that there was a deadline as to when the purchaser could consider the deal as having fallen through. In fact, Maggie Wong was not entirely consistent over this point even within her testimony;

(5) when the fax at p. 17 of D's Bundle was sent to Yeo, Maggie Wong made no mention as to whether the Defendant was liable for the Disputed Document. In the 3rd paragraph of this document, she merely said this about her: "Knowing that we could not hold the cheque any longer, until 6:00 p.m. Mrs. Yeo decided to sell and signed the agreement for you.". In the next paragraph thereof it was stated: "Every body know your wife signed under no authorization from you .... The agreement become void and null without you the owner to proceed to the formal agreement. In result, it is actually still your own choice to sell the property or not.". I consider that this fax shows that she was only concerned with whether Yeo would be bound by the Disputed Document to sell the suit property. Maggie Wong was not at all concerned with whether the Defendant would be liable thereunder;

(b) in relation to the Defendant:-

(1) when cross-examined, she testified that she signed the Disputed Document in order to show her sincerity to the purchaser. However, this cannot logically stand with her earlier testimony that she told the Plaintiff, and the Plaintiff agreed, that (1) the sale would have to await her husband's confirmation and (2) she would not be liable for the agreement. If the earlier testimony were true, the Plaintiff should not expect to obtain anything at all either from the Defendant or from her husband. If her earlier testimony were not true, she would have to show her sincerity by at least agreeing to provide a guarantee of some kind to the Plaintiff in relation to the sale of the suit property;

(2) there was no useful purpose (apart from the earlier assertion that she wanted to "show her sincerity") why she needed to go to Maggie Wong's office and signed the Disputed Document if she all along considered that she (and the Plaintiff) should wait for her husband's confirmation before the agreement could be signed;

(3) similar to Maggie Wong, there was inconsistency between her testimony and her Defence as to whether Tsoi orally misled her or whether he merely did so by nodding his head: see para. 19 of the Defence.

13. There is a dispute between the parties as to whether (a) the $50,000 commission payable by the vendor pursuant to the Disputed Document was payable to Tsoi or Maggie Wong, and (b) the $300,000 cheque was kept by the Defendant after Tsoi handed it over. These are points of collateral relevance in that they only relate to the credibility of Tsoi and Maggie Wong (as regards point (a)) and also that of the Defendant (as regards point (b)). I also accept the testimony of Tsoi over these points, that is, (a) the commission was payable to Maggie Wong and was included in the Disputed Document at Maggie Wong's request, and (b) the Defendant did not refuse to keep the $300,000 cheque after Tsoi handed it over.

14. I do not regard the credibility of either Yeo or Amy Lo to be material to the issues in this case. For the sake of completeness, I consider both of them to be truthful and reliable witnesses. If there is any discrepancy between their testimony and that of the other witnesses, for example, as to when faxes were received or sent out, I prefer their testimony.

Misrepresentation and/or Oral Agreement relating to the Defendant's Liability

15. By reason of the findings set out above, I conclude that there was no misrepresentation on the part of Tsoi, whether orally, by conduct or by way of the wordings in Clause 13. I also find that there was no oral agreement to the effect that the Defendant was not to bear personal liability as regards the Disputed Document.

Clause 18 of the Document

16. In his opening for the Defence, Mr. Westbrook argued that in case I should find against the Defendant on her pleaded case, he would further rely on Clause 18 of the Disputed Document as an additional defence to the Plaintiff's claim. His point was that since the vendor's liability under the Disputed Document was limited to the return of the initial deposit by virtue of Clause 18, the Defendant's liability cannot be greater than that of the vendor's. At one stage, Mr. Chan objected to the point being raised without being pleaded. However, Mr. Chan, quite rightly in my view, later withdrew the objection and instead submitted in his closing submissions that there is no substance in this point.

17. Clause 18 reads as follows:-

"Effective Agreement upon signing by the Vendor

Initial deposit received on behalf of the Vendor by the Agent will become effective upon receipt by the Vendor. If the Vendor refuses to receive the said initial deposit and to sign this Agreement, then the said initial deposit shall be returned to the Purchaser as-is but without interest or compensation. The Purchaser shall not claim for any compensation thereafter." (see p. 35, P's Supp. Bundle).

18. The word "Vendor" was defined in the Disputed Document as Yeo. It is not asserted by the Plaintiff that Yeo had ever received the initial deposit. Mr. Westbrook argued that since the deposit had never been received by Yeo, Clause 18 applied and therefore the Plaintiff is not entitled to any claim apart from the initial deposit. Since this was never paid by the Plaintiff (the Plaintiff's cheque was never presented), the Plaintiff has no claim against the Defendant.

19. Mr. Chan argued that Clause 18 does not help the Defendant because this clause is only applicable in cases where the initial deposit was handed over to the "Agent". This word was clearly defined in the Disputed Document as referring to "Asia Property Agency Co., Ltd." (Tsoi's employer). In this case, the cheque was received by either Maggie Wong or the Defendant. I agree with Mr. Chan's submission on this point and therefore consider that Clause 18 is not applicable to this case.

20. Further, I consider that Clause 18 must be read together with Clause 13 and the Receipt Clause (both of which were signed by the Defendant). This is because Clause 18 is part of the pro forma terms and is intended to cover situations where, for example, the Vendor has orally instructed the estate agent to accept the initial deposit. On the other hand, Clause 13 is a hand-written provision specifically inserted in this particular transaction.

21. The Defence argument on this point is flawed. On the one hand, the Defendant recognizes that under Clause 13, she should sign on Yeo's behalf and personally bore liability under the agreement. She also signed on the Receipt Clause. So she was effectively regarded as the vendor and/or having the authority of the vendor. Yet on the other hand, she seeks to deny liability relying on Clause 18 by saying that she is distinct from the vendor and Clause 18 only imposed liability on the vendor, Yeo. These 2 positions cannot stand together. If I have to approach this point by way of construction of the relevant clauses in this agreement, Clause 18 must be read in light of Clause 13 and the Receipt Clause (both signed by the Defendant) and for this reason, the word "Vendor" in Clause 18 should be construed as referring to "KWEK BUCK NOI" rather than "YEO CHENG SWEE".

22. While I am still on this point, I should record that Mr. Westbrook accepted, rightly in my view, that whether the cheque was kept by the Defendant or Maggie Wong after Tsoi handed it over is irrelevant to this point.

Other Issues

23. Mr. Westbrook raised the point that since the Plaintiff was aware that the Defendant was only signing as the vendor's agent without the vendor's confirmation, no warranty of authority was given by the Defendant. If the Disputed Document had not contained Clause 13, this submission may call for some consideration. However, I do not consider that it lies in the mouth of the Defendant to raise this argument, having expressly agreed to take up personal liabilities for the provisional agreement by signing against Clause 13. For this reason, I consider that this point is of no substance and I mention it only to dispose of it.

24. Mr. Westbrook also argued that the agreement was a wagering contract because it was contingent upon Yeo's confirmation. I also do not find that there is any substance in this argument and therefore reject it.

Conclusion on Liability

25. For the above reasons, I find that the Defendant is liable to the Plaintiff for the Plaintiff's claim herein. I shall proceed to deal with the question of quantum of damages.

Quantum of Damages

(1) Loss of the Bargain

26. Mr. Westbrook accepted that the measure of damages for breach of warranty of authority to contract on the principal's behalf for the sale and purchase of land is contained in the following passages of McGregor on Damages (1997) 6th ed., para. 1308, 1311 and 1313:-

(a) para. 1308:

"The damages under the general rule are arrived at by considering the difference in the position he [the person acting in reliance on the warranty] would have been in had the representation been true and the position he is actually in in consequence of its being untrue." (citing Firbank's Executors v. Humphreys (1886) 18 Q.B.D. 54, 60);

(b) para. 1311:

the damages will be based on the measure of damages that the plaintiff could have recovered in an action for breach of contract against the principal had the principal been bound, and this will generally give him damages for the loss of his bargain;

(c) para. 1313:

it was held in Godwin v. Francis (1870) L.R. 5 C.P. 295 that the plaintiff could recover the market value of the land less the contract price, the price at which the alleged principal had resold the land being taken as prima facie evidence of its market value.

27. Mr. Westbrook submitted that no loss had been proven by the Plaintiff because:-

(a) the conclusions reached by William Wong as regards the market value of the suit property were not satisfactory and cannot be relied upon by the Court;

(b) in any event, the "market value" should be the value as at the date of the agreement, that is, 4 December, 1996, and not the other dates suggested by the Plaintiff.

28. Merely because the loss suffered is difficult to ascertain is not a ground for refusing relief. I accept William Wong as a truthful and reliable witness. I also accept his expertise in the valuation of the suit property. I consider his concession that it was difficult to evaluate the market values of the suit property over a relatively short period of time as an indication that this was a fair witness and one who was acutely aware of the need to arrive at a fair and accurate valuation given the difficulties involved in the assignment.

29. Having considered the whole circumstance, I consider that the relevant market value should be the market value on 19 December, 1996 because:-

(a) this was the date when the vendor ought to have paid the further deposit and entered into a formal agreement pursuant to the Disputed Document;

(b) it was on 19 December, 1996 that the Plaintiff received the letter from the solicitors acting for the Defendant and the vendor stating in the clearest terms that the Disputed Document would not be performed by either the Defendant or the vendor.

30. I accept the valuation of William Wong that the market value of the suit property on 19 December, 1996 was $10 million. The contract price was $9.05 million. The difference is therefore $950,000. There will therefore be judgment in favour of the Plaintiff in the sum of $950,000 under this head of claim.

(2) Stamp Duty

31. The Plaintiff paid the sum of $248,875 on 20 December, 1996 being the stamp duty payable under the Stamp Duty Ordinance, Cap. 117.

32. Mr. Westbrook argued that the Plaintiff cannot claim for this sum because:-

(a) the Disputed Document was never confirmed by the vendor and therefore is not a stampable document;

(b) in any event, the Plaintiff could have recovered the stamp duty paid under either s. 13 (adjudication of stamp duty) or s. 52 (remission of stamp duty) of Cap. 117.

33. Mr. Chan argued that in relation to the first point raised by Mr. Westbrook, the following provisions of Cap. 117 indicate that the document in question is a stampable document:-

(a) s. 29A provides that an "Agreement for Sale" includes an instrument in which a person contracts to sell or purchase immovable property;

(b) s. 29A(2) provides that "An agreement for sale .... may be enforceable or unenforceable, absolute or conditional .... provisional or non-provisional";

(c) s. 29C provides that "(1) An agreement for sale .... is chargeable with stamp duty even if the agreement is cancelled, annulled, or rescinded or is for any reason not performed" and "(2) An agreement for sale .... is chargeable with stamp duty even if .... it has not been executed by all persons who are required by s. 29B(1) to execute it". The persons required by s. 29B(1) to execute the document are the purchaser and vendor of the agreement in question.

Alternatively, Mr. Chan argued that it was reasonable for the Plaintiff to stamp the document in view of s. 4(2) and the First Schedule as well as s. 15 of Cap. 117. S. 4(2) provides for additional amounts of stamp duty to be paid if the document is not stamped within the prescribed time limits. S. 15 of Cap. 117 provides that the document is inadmissible as evidence if it has not been properly stamped. I agree with these submissions of Mr. Chan and reject the first point raised by Mr. Westbrook.

34. As regards the second point raised by Mr. Westbrook, the burden of proving that a specific mode of mitigating the loss ought reasonably to have been adopted by the plaintiff lies with the defendant: see McGregor, para. 2052. In fact, this point should properly be a point of mixed law and fact and as such ought to have been pleaded in the Defence. Mr. Chan for the Plaintiff has not objected to the point being raised but submitted that the Defendant had not adduced any evidence to show that such modes of mitigation were reasonably available to the Plaintiff, for example, that the Stamp Duty Office would have adjudged that stamp duty was not payable for such a document, or that stamp duty paid would have been remitted or refunded in such a case. I also agree with Mr. Chan on this point and therefore reject the second point. Judgment is therefore entered in favour of the Plaintiff in the sum of $248,875 under this head of claim.

(3) Conveyancing Expenses

35. There is no evidence that the Plaintiff has paid, or needs to pay, any conveyancing expenses in relation to this transaction. I will therefore not make any award in favour of the Plaintiff under this head of claim.

(4) Agency Commission

36. Although the Plaintiff has not yet paid any agency commission to Tsoi's company, that is, the sum of $32,000, I agree with Mr. Chan that the claim of Tsoi's company is not time-barred. In exercise of my discretion, I will make a declaration order in favour of the Plaintiff in terms of paragraph (2) of the prayer for relief, that is, the Defendant shall indemnify the Plaintiff from all claims of commission under the provisional agreement dated 4 December, 1996.

(5) Interest

37. Mr. Chan submitted that interest on the judgment sums should be at judgment rate from the date of Writ to date of Judgment and thereafter also at judgment rate until payment. Mr. Westbrook agreed that this is the appropriate order for interest. I also consider that this is the correct order relating to interest on the judgment sums.

Costs Order Nisi

38. The parties agreed that it is appropriate in this case to make a costs order nisi pursuant to R.H.S. Ord. 42 r. 5B(6). I do not see any reason for departing from the usual rule that costs should follow the event and therefore make an order nisi that the costs of this action be paid to the Plaintiff by the Defendant to be taxed if not agreed.