CHEUNG SUET FUN MARIA AUSILIA v. LEUNG SHUK KAM

IN THE COURT OF APPEAL

1992 No. 182
(Civil)

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J U D G M E N T

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Power, V.-P.:

1. This is the judgment of the Court.

2. This is an appeal against an order of Deputy Judge Ribeiro, Q.C. in which he gave a decree of specific performance of a provisional agreement for the sale of a property by the 1st defendant to the plaintiff. The facts and issues cannot be better outlined than by reference to the judgment which was handed down on 27th October 1992.

"The persons and the property involved

The 1st Defendant is the registered owner of a property known as Flat H on the 43rd Floor of Block 5 of Belvedere Garden, Phase 2, in Tsuen Wan ('the property'). The Plaintiff brings this Action inter alia for specific performance of a 'Provisional Agreement for Sale and Purchase' dated 10th July 1991 ('the provisional agreement') whereby, the Plaintiff contends, the 1st Defendant agreed to sell the property to her.

The provisional agreement, which was on a form provided by the Luen Pong Property Agency ('the estate agency'), was signed by the Plaintiff and the 2nd Defendant, but not by the 1st Defendant. The Plaintiff alleges that the 2nd Defendant did so as the 1st Defendant's agent or alternatively, that the 1st Defendant subsequently ratified such signature on her behalf. This is denied by the 1st Defendant.

The 2nd Defendant has not appeared and was not represented at the trial. Substituted service had been ordered. Exactly what, if any, relationship there was between the 1st and 2nd Defendants is in issue. According to the Plaintiff, the 2nd Defendant was the boyfriend of or otherwise closely related to the 1st Defendant's elder sister, Miss Cheung Yuen Kwan ('the elder sister'), who beneficially owned or had a beneficial interest in the property. The 1st Defendant denies any knowledge of the 2nd Defendant and alleges that he was merely an employee of the agency, its proprietor being one Miss Candy Wong Hui-wan ('Candy Wong'). It is accepted by the 1st Defendant that the elder sister was a friend of Candy Wong.

The 1st Defendant testified that she lived in the property together with her mother and her younger sister called Cheung Suet-man ('the younger sister').

The Plaintiff, the 1st Defendant and the younger sister testified as witnesses. Candy Wong was also called on the 1st Defendant's behalf and started her evidence near the end of the Court's sitting on Friday, 2nd October. However, she failed to re-appear in Court when it resumed sitting on Tuesday, 6th October (after a public holiday Monday). I was informed by Counsel for the 1st Defendant that on the Friday, Candy Wong had allegedly been subjected to intimidation in respect of her testifying as a witness and that this had led her to refuse further attendance at court. A report to this effect had been made to the police. As she was not under subpoena and as no application was made to issue a subpoena to compel her attendance, the trial proceeded without further evidence from Candy Wong. Although she did not herself appear, she sent a friend who delivered to the Court a cashier order in the sum of HK$50,000 made out in favour of the Plaintiff, explaining that it represented the return of the deposit which Candy Wong had received. That cashier order is held by the Plaintiff's solicitors pending the outcome of this Action and further directions from the Court.

This is a case where the parties gave sharply conflicting versions of the relevant events. I shall set out each such version in turn.

The Plaintiff's version of events

On 10th July 1991, answering a newspaper advertisement for sale of the property, the Plaintiff and her husband went to inspect the flat, having made an appointment by telephone with Candy Wong for this purpose. They met Candy Wong on the ground floor of the building in question and were shown upstairs to the flat by a girl who appeared to be one of its occupants.

In the flat, the Plaintiff and her husband first met the 2nd Defendant. He emerged from an inner room, apparently putting on of adjusting his clothing and was introducing by Candy Wong as the owner of the property. Also present were an elderly woman who was introduced by the 2nd Defendant as his mother in law and a second small girl that he said was his daughter. In addition, a woman of about 30 years of age was present but the Plaintiff was unclear as to who she was.

The 2nd Defendant showed the Plaintiff and her husband the flat. Favourably impressed by the property, the Plaintiff and her husband started discussing the price with the 2nd Defendant. They persuaded him to reduce the asking price of $1,600,000 by $6,000 to $1,594,000. During these discussions, the 2nd Defendant received several telephone calls from someone who wanted to know about the progress of the sale. He addressed that person as his wife.

Having agreed the price, the Plaintiff, her husband, Candy Wong and the 2nd Defendant decided to go to the estate agency to sign an agreement. However, they first went to the Plaintiff's home to collect her cheque book. At the agency, Candy Wong introduced the Plaintiff and her husband to a woman said to be the 2nd Defendant's wife. At the trial, the Plaintiff indicated that the person so introduced was a particular woman who was sitting in the public gallery of the Court and who was subsequently identified as the elder sister.

The Plaintiff was then shown the provisional agreement and asked to sign it. It was only then that the 2nd Defendant said that he was not the registered owner. He asserted that nevertheless he was the 'real owner' of the flat and fully able to dispose of it. The Plaintiff read the provisional agreement for herself and saw that the Vendor named in it was the 1st Defendant and not the 2nd Defendant. This caused her to question whether they should proceed without the registered owner signing the agreement. They were however persuaded by the staff of the estate agency and by 2nd Defendant to sign.

The Plaintiff however erroneously signed the provisional agreement in the space provided for the vendor and also erroneously signed the receipt clause. Similarly, the 2nd Defendant erroneously signed in the space intended for the purchaser. Nothing turns of this as a matter of law as both parties are agreed that these were merely mistakes. The Plaintiff explains that this occurred as she had simply signed in the places pointed to by staff of the estate agency.

After signing, the Plaintiff handed her deposit cheque for $50,000 to the 2nd Defendant. The estate agency offered to arrange for a solicitor to act for the Plaintiff but she declined, saying that she had solicitors of her own although she had not yet decided which firm to use. The Plaintiff and her husband then left the estate agency.

She discussed the question of which solicitors to use with her husband on the next day (11th July) and possibly also on 12th July. In any case, by 12th July 1991, they had instructed Messrs. Rowdget Young & Co. ('Rowdget Young') to act on their behalf and by that time the estate agency had been informed of the Plaintiff's choice of solicitors.

On 12th July 1991, Rowdget Young wrote to Messrs. Norman Yung & Co. ('Norman Yung') enclosing a copy of the provisional agreement 'signed by our respective clients', asking Norman Yung to 'take your client's instructions to confirm the terms and conditions' of that agreement and asking for a draft Agreement for Sale and Purchase.

Norman Yung replied on the next day, 13th July 1991, enclosing a draft Sale and Purchase Agreement.

Thereafter, as appears from a letter dated 18th July 1991, the Plaintiff, through Rowdget Young, approached the Hang Seng Bank for a mortgage in the sum of $1,100,000 to help finance purchase of the property.

Under the provisional agreement, the parties were to 'attend their solicitors' firms to handle the procedures' and the Plaintiff was to pay a further deposit of $109,400 on or before 23rd July 1991. Two or three days before that date, the Plaintiff started to receive a number of telephone calls from the 2nd Defendant who claimed that he had been offered $1.68 million for the property and that the Plaintiff therefore had to raise her offer if she wanted to complete the purchase. He suggested that the Plaintiff should otherwise take back her deposit and not proceed, saying that even if she managed to acquire the flat, he would destroy everything in it, adding that he had many contacts among policemen and triad members.

The Plaintiff ignored these threats and, on 23rd July 1991 went to see Rowdget Young who had, by then, had amended the Norman Yung draft Sale and Purchase Agreement. She placed her solicitors in funds for the further deposit and, under cover of a letter dated 23rd July 1991, these solicitors sent the amended draft Sale and Purchase Agreement together with a cheque for $109,400 by way of further deposit to Norman Yung on the Plaintiff's behalf.

Two days later, on 25th July 1991, Norman Yung wrote to Rowdget Young returning the cheque for $109,400 stating: '..... we write to inform that we no longer have any instruction to act for the Vendor (of the property).'

The earlier deposit of $50,000 had been paid into the 1st Defendant's current account with the Hongkong & Shanghai Banking Corporation and, apart from the suggestion made by the 2nd Defendant in his threatening telephone calls that the Plaintiff take back her money, no one offered to return that deposit. It had still not been paid back to the Plaintiff.

On 16th August 1991, the Writ was issued, initially only against the 1st Defendant. On 30th October 1991, Candy Wong wrote to the Plaintiff offering to refund the deposit and alleging that she had repeatedly attempted to do so. On 14th February 1992, after the Plaintiff had moved from her previous address, the 2nd Defendant again telephoned to threaten her, demanding that she accept a return of the deposit and proceed no further with the proceedings. On 19th March 1992, the Writ was amended to join the 2nd Defendant as a party alleging breach of warranty of authority in the alternative against him.

The 1st Defendant's version of events

On 13th October 1988, the elder sister had entered into an agreement with the developer for the purchase of the property for $790,500 but on 24th May 1989, before completion, she had on-sold the property to the 1st Defendant for the same price. The 1st Defendant had paid 10% of the price to the elder sister and thereafter, she had made the mortgage payments on the property using her own money, assisted by contributions from her mother. Such mortgage payments are evidenced by entries in a savings account passbook produced as Exhibit D1. The 1st Defendant is and was therefore the beneficial as well as the registered owner of the property.

As Phase III of Belvedere Garden was approaching completion, the 1st Defendant decided that she wanted to trade up to a larger flat in that new phase of the development. She therefore approached several estate agencies and placed the property on their books. The price she demanded was $1.6 million and a period of some 2 to 3 months before completion and delivery of vacant possession was to be required as she needed time to purchase the new flat and to have it decorated.

While the elder sister was a friend of Candy Wong, the proprietor of the estate agency, the 1st Defendant did not know the 2nd Defendant at all. He is not her brother-in-law and she does not know whether he is the elder sister's boyfriend or is otherwise known to her. He has no interest in the property.

On 10th July 1991, Candy Wong telephoned to say that she had prospective purchasers who wished to view the property. The 1st Defendant informed Candy Wong that she would be out that evening but agreed to the flat being viewed provided that Candy Wong brought along a male colleague. She made this a requirement since only her elderly mother and the younger sister would then be at home and she considered the presence of a male employee of the estate agency a safeguard against possible wrongdoing by persons let in to view the flat. The 2nd Defendant was apparently the male colleague brought along by Candy Wong.

The next morning, the 1st defendant heard from Candy Wong by telephone that the persons who had viewed the flat the night before had wanted to purchase the flat and that consequently, a provisional agreement had been signed at the estate agency and their cheque for a deposit of $50,000 had been paid by Candy Wong into the 1st Defendant's account. The account number and the 1st Defendant's Identity Card number (which had been written on the provisional agreement) had been obtained by the estate agency from the 1st Defendant's mother on her being told by Candy Wong that the flat had been sold.

The 1st Defendant was annoyed that this had been done without her consent, in particular because the estate agency had purported to agree a sale price of $1,594,000 (instead of $1,600,000) and a completion date only one month (instead of two months) away. She therefore told Candy Wong that the arrangement was unacceptable, whereupon the latter assured her that it had been made plain to the Plaintiff and her husband that the 1st Defendant could simply return the deposit and cancel the agreement if she were unwilling to accept the terms negotiated.

The 1st Defendant ascertained on the following day, 12th July 1991, that the $50,000 had indeed been credited to her account. Because she was anxious to ensure that the money was returned to the would-be purchasers as soon as possible, she had, the night before, arranged to obtain $50,000 in cash from the elder sister in order to return the deposit to the estate agency. The 1st Defendant thought that this would be a convenient course to take and that returning the money in cash would preclude the would-be purchasers from refusing to accept return of the deposit by the simple expedient of not presenting a cheque for that sum. She had approached the elder sister since she generally had large sums of cash in hand, in keeping with her being in the 'fashion business'. The 1st Defendant also adopted this approach since she knew that she would not have time on 12th July, to get to the bank while it was open to withdraw the cash herself. Accordingly, when she saw that $50,000 had indeed been credited to her account, the 1st Defendant transferred that sum into her sister's account, effecting such transaction at an electronic teller machine. That evening, in accordance with their previous day's arrangement, the 1st Defendant went from her office in Kwai Fong to Cheung She Wan where the elder sister lived (a journey taking some 45 minutes and together, the two sisters went to Castle Peak Road where the estate agency was, 'a few streets away'.

At the estate agency, the sum of $50,000 in cash, all in $1,000 notes, was handed to Candy Wong who issued a receipt for the same. She also confirmed that return of the deposit meant that the transaction was void.

However, in the days following 12th July, Candy Wong telephoned the 1st Defendant 'every two days or so' saying that the purchasers had refused to take the deposit back and still wanted to proceed with the sale. The 1st Defendant declined to sell, saying that the price and the short completion period were unacceptable. Apart from this, the 1st Defendant had lost all confidence in the estate agency since it had acted without her consent in signing the provisional agreement and in paying the deposit into her account so that she was unwilling to effect the sale through that agency.

The 1st Defendant never instructed Norman Yung to act on her behalf and does not know that firm of solicitors. She did not herself take any steps to contact the would be purchasers directly."

3. The judge was satisfied that there were four issues arising on the evidence:

"(1) Whether in signing the provisional agreement, the 2nd defendant was acting within the scope of his actual ostensible authority as the 1st defendant's agent."

He was satisfied that there was no evidence to establish that the 2nd defendant had any authority to act as an agent.

"(2) If not, whether the 1st defendant subsequently ratified the 2nd defendant's signing of the provisional agreement on her behalf."

The Deputy Judge rejected the 1st defendant's evidence that immediately upon becoming aware of the existence of the sale and purchase agreement she repudiated it and tried to return the deposit. He was satisfied that her retention of the money and her transfer of the amount to her sister evidenced ratification of the agreement.

"(3) Whether the validity of the provisional agreement was conditional on the 1st Defendant herself signing the document."

The deputy judge was satisfied that the validity was not conditional upon the 1st defendant herself signing. We need not refer further to this aspect of the matter as there was no suggestion upon appeal that he was wrong in this finding.

"(4) If the provisional agreement is in law binding on the 1st defendant, whether the remedy of specific performance is available to enforce it in the light of its provisions regarding pecuniary compensation for non-performance."

The deputy judge was satisfied that specific performance was available and again we need not deal further with this aspect of the matter as this finding was not called into question on appeal.

4. There were originally five grounds of appeal. However, in the outcome Miss Lam, who appeared for the appellant, pursued only three of them. She argued grounds 1 and 3 together. They read:

"(1) That the learned trial Deputy Judge erred in finding on the evidence that "acceptance of the deposit in her (i.e. 1st defendant's) bank account and transferring it to her sister's account were acts which, without more, would be sufficient to establish implied ratification" to make the Defendant liable under the provisional agreement;"

"(3) That the learned trial Deputy Judge erred in finding on the evidence that the 1st defendant had full knowledge of all the material circumstances under which the provisional agreement was signed by the 2nd defendant."

5. The argument advanced under these two grounds was that the evidence did not disclose that the 1st defendant had full knowledge of all of the material circumstances and that the placing of the deposit in her account and her transferring of the amount thereof to her sister's account could not establish implied ratification of the agreement. Miss Lam conceded that when giving evidence the 1st defendant had said that on the morning of 11th July Miss Candy Wong had telephoned her and told her that a buyer had signed a provisional sale and purchase agreement at the estate agent's office, that the signatories had been the purchaser and the estate agency, that the price had been $1.594m, and that the completion date was 5th August. Miss Lam submitted correctly that there was no evidence that the 1st defendant was aware of the name of the purchaser or of the fact that the agreement provided for a part payment on 23rd July in the sum of 109,400. Miss Lam referred to Article 16 of Bowstead on Agency (p.64) which reads as follows-

"Knowledge necessary for Ratification

In order that a person may be held to have ratified an act done without his authority it is necessary that, at the time of the ratification, he should have full knowledge of all the material circumstances in which the act was done, unless he intended to ratify the act and take the risk whatever the circumstances may have been."

Miss Lam contended that the 1st defendant had not been aware of all of the material circumstances and that there was, therefore, no ratification. She submitted that the "material circumstances" of which a person ratifying an agreement had to be aware included, at least, the "material terms" necessary to be recorded in a memorandum which would satisfy s.40 of the Law of Property Act 1925. She referred to Halsbury's Law of England 4th ed. Vol.42 at para.35 which states, inter alia, that the identity of the parties and anything agreed by the parties which is not implied by law are material terms. She submitted that the first defendant was not aware of the identity of the purchaser or of the agreement as to the further part payment to be made on 23rd July. Both of these s he submitted were material terms. It was, therefore, her submission that these two matters were also material circumstances and that as they were not known to the 1st defendant she could not be held to have ratified the act done without her authority. We reject the suggestion that material circumstances can be equated with material terms. We must then ask whether, in the circumstances obtaining, the name of the purchaser and the fact that he was prepared to make an additional part payment before the completion date could properly be regarded as material circumstances. We are satisfied that the identity of the purchaser was of no materialty nor was the fact that the 1st defendant was to obtain part payment at an earlier date than that told to her.

6. We turn to Ground (2).

"2. That the learned trial Deputy Judge erred in finding that the 2nd Defendant signed the provisional agreement and purported to sell the property to the Plaintiff on behalf of the 1st Defendant."

This submission relies upon the evidence of the plaintiff. The plaintiff said that the 2nd defendant told her that she was the real owner of the property and that he had, for reasons of his own, used his sister-in-law's name when purchasing it. Miss Lam referred to Article 15 of Bowstead p.58 which states as follows:

"Who may ratify

The only person who has power to ratify an act is a person in whose name or on whose behalf the acts purported to be done, and it is necessary that he should have been in existence at the time when the act was done, and competent at that time and at the time of ratification to be the principal of the person doing the act; but it is not necessary that at the time the act was done he was known, either personally or by name, to the 3rd party."

7. Miss Lam submitted that the 2nd defendant did not purport to act as the agent for the 1st defendant but had told the plaintiff, according to her own evidence, that he was acting on his own behalf as beneficial owner of the property. Miss Lam submitted that the judge had failed to make any specific finding in this regard. She acknowledged that he had said "Plainly the 1st defendant had knowledge of the material circumstances of the 2nd defendant's purported signing of the provisional agreement on her behalf" but submitted that he had failed to turn his mind to the evidence of the plaintiff which indicated that the defendant had not purported to sign on behalf of the 1st defendant. This argument had, at first sight, if only the evidence of the respondent was examined, some attraction. Mr. K.S. Edward Chan Q.C., with him Mr. Miu, ho appeared for the respondent, when he came to address us was, however, quick to point out that the issue was whether the 1st defendant had ratified the agreement. What was of crucial importance, therefore, was the representation, if any existed, made by the 2nd defendant at the time when he signed the agreement. The Agreement recites that "Cheung Suet Fun" is the vendor and it is signed "Chan Kay Fung (representative)". Mr. Chan submits that this is conclusive evidence that when he signed the agreement the 2nd defendant purported to do so as the agent of the 1st defendant. Mr. Chan also referred to para.4(j) of the Defence which pleaded:

"Further, the 1st Defendant was not happy with the 2nd Defendant entering into any agreement purportedly for the sale of the said property without her prior knowledge and consent."

He also refers to the following passage in cross-examination of the 1st defendant:

"Q. Did you know D2 had signed as your representative?

A. I knew it but. But I did not admit that I had a representative because I did not appoint anyone.

Q. How did you know D2 had signed?

A. On 11/7 Candy Wong said Provisional Sale and Purchase Agreement had been signed between purchaser and one person belonging to the property agent.

Q. Did you query her what authority to sign for you?

A. She said signature was just put there on my behalf. If I did not agree, I could refuse to recognize it. Although the money had been deposited into my account if only I returned it, things would be all right."

8. Mr. Chan submitted that there was never any issue raised at trial suggesting that the 2nd defendant had not purported to sign on behalf of the 1st defendant and that the judge, given the evidence and particularly the contents of the agreement itself, had been right to find that the 2nd defendant had purported so to sign.

9. We are satisfied that the judge was entitled to hold that the 2nd defendant did purport to sign the agreement on behalf of the 1st defendant and that this ground of appeal must, therefore, fail.

10. The appeal is dismissed and the appellant is ordered to pay the respondent's costs to be taxed.