LEUNG LAI KEUNG v. TSE YUEN LUNG

IN THE COURT OF APPEAL

1986, No. 144
(Civil)

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JUDGMENT

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Sir Alan Huggins, V.-P.:

1. This action arises out of an agreement between the Defendant as the vendor, and the Plaintiff, as the purchaser relating to some land in the New Territories. There was originally an agreement in Chinese reached between the parties under which the Purchaser had the right to withdraw from the contract if he was not allowed to use the land for a specific purpose. The Chinese agreement was subsequently replaced by a written agreement drawn up by a solicitor. That agreement was in basically similar terms, but there then arose a doubt whether the Purchaser could withdraw after completion.

2. The Vendor applied to the Land Office for what is known as a “short term waiver” of the covenant in the Crown Lease as to user. The Vendor had already been refused permission to use the land for a dyeing works. The Purchaser wished to use the land for a godown and for the storage of concrete pipes and of metal. Application was made on 10th August 1981. That application was in fact refused on 29th October 1981. The whole case turned upon whether or not the Plaintiff (the Purchaser) had been told of the refusal.

3. It was common ground in the court below that there was an implied duty on the Vendor to inform the Purchaser of any refusal, because the Purchaser's right to rescind was dependent upon his giving notice within thirty days of his being told of the refusal. The Plaintiff denied that he had ever been told. The Defendant's case was that the Purchaser was told by a telephone call to a third party in mid-November 1981, that third party undertaking to inform the Plaintiff. The Defendant said that on the same evening, i.e. in mid-November 1981, the parties met at the Couronne Restaurant in Mongkok and that the Plaintiff was then shown a copy of the refusal sent by the District Lands Officer. He said that there was a subsequent meeting in mid-December 1981 in the Yuen Long Restaurant. There were others present at that meeting, including some officers from the District Office and he said that those officers then went to the site and that there was a discussion about the use of this land. He said that the officers from the District Office suggested that a further application be made. As I understand it, it was his case that such a further application was made, but not until 4th June 1982, in a letter of which we have only a copy, this being a letter addressed by the Defendant to the District Office in terms which may be ambiguous since it relates to an application which could be either the original application, if the Plaintiff is telling the truth, or a later application, if the Defendant is telling the truth. Desmond Keane, Esq., Q.C., sitting as a Deputy Judge of the High Court, in the event believed the Defendant and, in so doing, he relied in part upon the demeanour of the witnesses. That is always a strong point when an appellate court has to consider whether the judge has come to a wrong conclusion and it is something of which I do not lose sight. However, the judge gave other reasons for believing the Defendant and disbelieving the Plaintiff. He said

“There is something inherently improbable about the Defendant concealing from the Plaintiff a written decision from the District Office which would be recorded and open to subsequent inspection by the Plaintiff.”

With respect to the judge there was no evidence that this would be recorded and open to subsequent inspection by the Plaintiff. We are here not concerned with a change of user which is limited by statute: we are concerned with a waiver of a covenant in a Crown Lease. There was no evidence that there was any record which would be open to inspection by the Plaintiff.

4. Then the judge said that the Plaintiff was alleging misrepresentations which went far beyond anything which was pleaded. That was indeed true, but the judge had permitted the Plaintiff to give evidence of these misrepresentations. After the examination in-chief the judge himself drew attentions to the pleading and, upon that, counsel for the Plaintiff sought leave to amend. The judge however refused leave to amend and this refusal is one of the grounds of appeal. As Mr. Bernacchi said, all that was being asked was that the pleadings be amended in accordance with evidence which the judge had already allowed to be given, and it was not evidence which raised something new, for it had been forecasted in a solicitor's letter before action. In my view the editors of the 1985 White Book have correctly set out the law at p .343 para. 20/5  8/11 and this was a case where the amendment ought to have been allowed. The fact that the evidence went beyond the pleading was therefore not a ground for disbelieving the Plaintiff.

5. The contract for the sale and purchase gave a date for completion, namely 8th June 1982. The Plaintiff's case was that it had been put as far ahead as that because he wanted to know the result of the application for change of user before completion. The parties agreed to several postponements of that completion date. The Plaintiff's case, of course, was that those postponements were because he had not yet been told the result of the application for change of user. However, the judge believed the Defendant's case on this, which was that the Plaintiff was short of money. It was never suggested to the Plaintiff in cross-examination that that was the reason why the completion date was postponed. The judge disbelieved the Plaintiff on the other hand because “there was no particular link in the dates of extension with any scheduled meetings of the District Board”. With respect I am not at all clear what the District Board had to do with this matter at all. This was a case where what was sought was a waiver of a covenant in a Crown Lease, and that was a matter for the executive branch of the Government: there was no evidence that a decision would only be made after consultation with the District Board.

6. In my view the reasons which were given by the judge for disbelieving the Plaintiff are clearly open to attack and it is not enough that he relied in part upon the demeanour of the witnesses. Whether or not he reached the right decision is neither here nor there. In my judgment the decision cannot stand.

7. It is argued on behalf of the Plaintiff that the documents speak for themselves and that it is open to us to enter judgment for the Plaintiff on those documents. Undoubtedly those documents are not inconsistent with the Plaintiff's case. They present difficulties for the Defendant, but in my view they are not conclusive. Accordingly I think the only proper course is to order a new trial. I would allow the appeal and order accordingly.

Fuad, J.A.:

8. I agree with my Lord the Vice-President that the judgment of the learned deputy judge cannot be allowed to stand. I agree, too, that there should be a re-trial before another judge.

Clough, J.A.

9. I agree with both the judgments that have been delivered and wish to add nothing.