LEE WAI MAN v. TSO YAN

cacv 366/1999

in the high court of the

hong kong special administrative region

court of appeal

civil appeal no. 366 of 1999

(on appeal from HCA NO. 11301 of 1997)

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REASONS FOR JUDGMENT

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Hon Rogers VP:

1.  I have had the advantage of reading the judgments of both Mrs Justice Le Pichon JA and Madam Justice Yuen JA.  At the hearing of this appeal I agreed that this appeal should be dismissed.  I did so for the simple reason that the master had held the plaintiff’s solicitors had sent the letter of 30 October 1997 to the defendant and that that constituted an election for the remedy of damages and an abandonment of the claim for specific performance.  I saw no ground for disturbing that finding.  It was consistent with everything else the plaintiff’s solicitors had done at that time.  If that finding stood, there was no ground for disturbing the date taken by the master as the date for assessment of the damages.  The fact that the plaintiff’s solicitors may or may not have tried to take a different stance in relation to that letter in another action cannot affect the finding of fact nor the legal consequences which follow, at least as regards the present case.

Hon Le Pichon JA:

2.  This was an appeal from an assessment of damages made by Master Wilson on 12 November 1999 following a default judgment obtained by the plaintiff purchaser in an action brought against the defendant vendor.  The Master assessed damages in the sum of $120,000.  At the conclusion of the appeal hearing, the appeal was dismissed with written reasons to be given later which we now do.

3.  It is to be noted that it has taken six years for this appeal to reach this court.  Such delays compromise the efficient administration of justice.  They should not have occurred and are totally unacceptable.

Background

4.  This was a case in which the defendant had sold the same property to two different purchasers: having entered into a provisional agreement on 1 August 1997 with Minimax, the defendant entered into a separate provisional agreement with the plaintiff on 18 August 1997 in respect of the same property.

5.  On 24 October 1997, the plaintiff issued the writ in this action against the defendant for specific performance and damages in lieu of and/or in addition thereto and on 25 October obtained an ex parte mareva injunction to freeze the proceeds of sale of the property to Minimax save in so far as they exceeded the sum of $429,000 after repaying the mortgagee bank.  At the hearing the court was informed by counsel for the plaintiff that the plaintiff was pursuing a claim for damages only although the pleadings mentioned specific performance.  This was reflected in the judge’s note made at the time of the application.

6.  On 30 October 1997, the plaintiff’s solicitors wrote to the solicitors for Minimax stating that their client “will waive all the claim in relation to specific performance” of the provisional agreement in the High Court action and acknowledged Minimax’s prior interest in the property because of its earlier registration.  Later the same day, the plaintiff’s solicitors sent a letter to the defendant’s solicitors explaining the effect of the mareva injunction, namely, that the defendant was at liberty to apply the proceeds other than the sum of $429,000 which was frozen.  What was controversial in this appeal was whether a third letter from the plaintiff’s solicitors also dated 30 October 1997 (“the 30 October letter”) was ever sent to the defendant.  That letter was to the effect that the defendant was in breach of the provisional agreement and that the plaintiff’s solicitors “hereby accept your rescission and we will amend the writ to the effect that no specific performance of the provisional agreement will be claimed.”  On 31 October 1997, the defendant’s legal advisers advised Minimax that the defendant would not complete until the dispute with the plaintiff had been resolved.

7.  Minimax took out an originating summons on 5 November 1997 seeking specific performance as against the defendant and an order to vacate the registration of the plaintiff’s agreement as against the plaintiff.

8.  On 23 February 1998, the plaintiff entered judgment against the defendant for damages to be assessed in this action.  On 28 February 1998, the plaintiff requested the Land Registry to vacate the registration of its provisional agreement with the defendant.

9.  By the time the Minimax proceedings came before Deputy Judge Jackson on 11 June 1998, the only issue left was the question of costs as between the plaintiff and Minimax, Minimax and the defendant having, by consent, settled their dispute and agreed to an order for specific performance.  That issue meant resolving the question whether Minimax was entitled to take proceedings against the plaintiff on 5 November 1997 to vacate the registration of the plaintiff’s agreement.

10.  The judge ruled against Minimax.  He concluded that the plaintiff had a choice and she could either seek specific performance or claim damages.  The remedy of specific performance was available to her if the transaction between Minimax and the defendant fell through.  He was of the view that (should the sale to Minimax fall through) the plaintiff was not precluded from pursuing a claim for specific performance against the defendant at any time up until the date when the claim for damages was resolved.  He said:

“5. …She had not at any stage prior to February 1998 categorically refused to vacate the registration: but she refused to vacate “for the time being” as on 30^th October 1997 when the Plaintiff had not completed its purchase with the 1^st Defendant.  As soon as that (sic) she had elected to enter judgment for damages against the 1^st Defendant, the 2^nd Defendant indicated to the Plaintiff through her solicitors, that she would not seek to re-register her agreement with the 1^st Defendant.

6. …[Minimax] commenced its action against the [plaintiff] whilst the latter had a very real interest in the property which interest was both registerable and registered.  She was under no obligation to vacate that registration at the suit of [Minimax] whilst the possibility existed that [Minimax] might not be able to complete its purchase and whilst she had not settled her claim against the [defendant] for damages.”

The 30 October letter was not before the judge and was not mentioned by the plaintiff’s counsel during the June 1998 hearing.

11.  The master held the appropriate date for the assessment of damages to be 30 October 1997 on the basis that that was the date when the plaintiff elected to seek damages only.

The appeal

12.  The principal point which arose in the appeal was whether the master was correct in holding that 30 October 1997 was the appropriate date for assessing damages.  It was crucial to the defendant’s case that the master’s finding of fact regarding the dispatch of the 30 October letter be set aside.  Mr Chan SC who appeared for the defendant submitted that in assessing the credibility of Mr Paul Yip, the plaintiff’s handling solicitor, the master had completely overlooked the fact that the evidence before the judge in the Minimax proceedings was totally at odds with the plaintiff’s case before the master.

13.  The plaintiff’s case in the Minimax proceedings was that its right to specific performance was only abandoned on 23 February 1998 when the plaintiff obtained its default judgment against the defendant.  Before the master, the plaintiff relied on the 30 October letter as evidencing an unequivocal abandonment of the claim to specific performance.  Mr Chan referred to the following passage in the transcript of Mr Yip’s cross-examination explaining why the 30 October letter had not been mentioned in the Minimax proceedings:

“A. It’s a litigation between my client, Lee Wai-man, and the Minimax.  I think it’s not necessary to mention that date, it’s my strategy.  That’s to protect the interests of my client.

Q. Any other reason for not mentioning -- for only mentioning the date of default judgment but not October 30, 97?

A. That’s the official record of the court.

Q. Record of what?

A. The election of liquidated damages.

Q. Are you referring to the default judgment?

A. Yes.”

(Transcript, page 147 H-L)

14.  Mr Chan submitted that the passage showed that the plaintiff had misled the court and, in the alternative, that it was an abuse of process for the plaintiff to run her present case on her solicitor’s present assertion of an earlier act of election rather than election by the default judgment, when the plaintiff in the Minimax action had as a matter of “strategy” withheld the 30 October letter from the court and deposed to there being no earlier act of election and in either case it should vitiate the master’s finding of the dispatch of the 30 October letter.

15.  It is plain from the master’s judgment that as regards the 30 October letter, the issue he had to determine was simply whether or not, on the balance of probabilities, that letter was sent to the defendant.  The conflict of evidence he had to resolve was limited to that issue.  There was no allegation that the letter was a subsequent fabrication or that it did not exist at the relevant time.  Based on evidence of the usual office practice of the plaintiff’s solicitors, the master made a factual finding, namely, that the letter was sent.  On the evidence before him, the master was perfectly entitled to make the finding that he did.  For my part, I cannot see any valid basis for setting aside that finding.

16.  What then of the inconsistent stance taken by the plaintiff before the judge?  Quite simply, in my view, that is a matter for Minimax to pursue if so advised.  Whilst it would appear that the plaintiff was “blowing both hot and cold” regarding her remedies, that is not necessarily to be equated with wilfully and knowingly misleading the court or abusing the process.  The plaintiff’s solicitors might have been misguided or disingenuous in the way they conducted the case for the plaintiff in the Minimax proceedings or could be said to have been lacking in judgment.  That, however, is a far cry from dishonourable conduct.  Before the master, the submissions made to this court as regards this inconsistent stance had all been canvassed.  No legitimate criticism could be made that the master failed to have regard to that matter in making the finding of fact concerning the 30 October letter: it was not germane to the resolution of the conflict of evidence before him and the factual finding he had to make.

17.  Given the factual finding relating to the dispatch of the 30 October letter, what remained to be decided by the master was the legal effect of that letter.  In my view, if the letter was indeed sent it plainly constituted an election for damages.  The master’s ruling is thus sustainable.

18.  The defendant also raised a number of subsidiary points.  Mr Chan sought to extrapolate from Keep Point Development Ltd v Chan Chi Yim and Others (2003) 6 HKCFAR 160 at 187, Keep Point Development Ltd v Chan Chi Yim and Others (No. 2) (2004) 7 HKCFAR 246 and Keep Point Development Ltd v Chan Chi Yim and Others (unreported HCMP No. 6550 of 1998) judgment dated 15 June 2005, the proposition that in a sale and purchase of land where a vendor fails to convey, the assessment of damages should be based on a notional repurchase of the substitute property, the valuation date of which should be delayed by a reasonable period i.e. two months after the date of breach or election.  If correct, that would constitute a departure from the normal measure of damages in such cases taken to be the difference in value (if any) of the property at the date fixed for completion and the contract price subject to the caveat that where the innocent party had acted reasonably in pursuing the remedy of specific performance, the relevant date for the assessment of damages would be the date on which that remedy became aborted (not by the fault of the innocent party).  See Johnson v Agnew (1980) AC 367 at 401D.

19.  The facts in Keep Point were highly unusual and involved the sale by the defendants of existing units in a building which was to be redeveloped in exchange for units in the redevelopment with a value in excess of the old units.  The claim by them was against their solicitors in negligence in respect of the transaction.  The measure of damages was thus peculiar to the facts of that case and is of no general application in the assessment of damages in what might be considered to be the garden-variety of a breach of contract for the sale of land.

20.  The remaining subsidiary points raised were not seriously pursued at the hearing and little purpose would be served by going into them.

Hon Yuen JA:

21.  I agree that the appeal should be dismissed.  However as some of my reasons for arriving at that conclusion differ slightly from those set out in Le Pichon JA’s judgment, I have set out my reasons below.

22.  As there were two sets of proceedings (this action and the Minimax proceedings), I have referred to the plaintiff in this action (the respondent in the appeal) as “Miss Lee” and the defendant in this action (the appellant in the appeal) as “Mr Tso”.

23.  The issue whether 30 October 1997 was the relevant date for assessing damages payable by Mr Tso to Miss Lee turned essentially on whether on that day (1 day before the scheduled completion date between Mr Tso and Minimax), Miss Lee’s solicitors sent and Mr Tso received a letter in which Miss Lee expressly accepted Mr Tso’s repudiation and stated that the writ will be amended to abandon the claim for specific performance.  (As Miss Lee’s solicitors alleged that they had written 3 different letters regarding the property on the same day - 1 to Mr Tso himself, 1 to his solicitors and 1 to Minimax’s solicitors, I shall refer to the letter to Mr Tso as the “abandonment letter”).

24.  Mr Tso disputed the allegation by Miss Lee’s solicitors that they sent the abandonment letter.  Before the master, Miss Lee’s solicitor Mr Paul Yip Wai-chuen gave oral evidence of that primary fact and was cross-examined by counsel for Mr Tso.

25.  A main plank of that cross-examination was Miss Lee’s position in the Minimax proceedings that she had abandoned her claim to specific performance when she entered default judgment against Mr Tso on 23 February 1998 (and by inference, not earlier - when she sent the abandonment letter to Mr Tso on 30 October 1997).

26.  That position was indicated in affirmations made by Mr Yip and submissions by Miss Lee’s counsel Mr Simon H.W. Lam.  In an affirmation made on 27 March 1998 Mr Yip said:

“It is true that by electing for damages in the default judgment ... [Miss Lee] has given up the claim for specific performance ...” (para. 7);

“In fact [Miss Lee] upon our advice from the very beginning, well knew that she has acquired interest in the premises, although rank in priority next to [Minimax’s] and such view has been reflected in exhibit ‘AB-17’, the letter by us to [Minimax’s] solicitors from the very beginning and the choice of electing for damages in the default judgment ” (para. 9).

“The reason why [Miss Lee] applied for the injunction order is that upon our advice, [Miss Lee] well understands that her interest in the property ranks next to [Minimax’s] and in case the transaction between [Minimax] and [Mr Tso] goes to completion, [Miss Lee’s] interest in the property will be extinguished.  But before that (completion of the transaction between [Minimax] and [Mr Tso]), it is still possible for [Miss Lee] to acquire the property and the alternative claim for specific performance in the writ of summons issued by [Miss Lee] against [Mr Tso] caters for the possibility that in case the transaction between [Minimax] and [Mr Tso] falls through for whatever reason, [Miss Lee] can then go for this alternative claim.  This is the reason why we refuse to vacate the registration of the provisional agreement (between [Mr Tso] and [Miss Lee]) at the Land Registry before the transaction between [Minimax] and [Mr Tso] is completed.  In fact up to the date of this affirmation, the transaction has not been completed, not to mention the date when [Minimax] started this action” (para. 10). (Emphasis added).

The impression given is that Miss Lee had not abandoned her claim to specific performance because of the hope that she would obtain the property if the transaction between Mr Tso and Minimax fell through, and that she only gave up her claim when she entered default judgment for damages on 23 February 1998.

27.  This position was confirmed by submissions made by Miss Lee’s counsel Mr Lam before Deputy Judge Jackson in the Minimax proceedings.  At one point at the hearing, counsel for Minimax referred to the letter of 30 October from Miss Lee’s solicitors to Minimax’s solicitors which said “our client will waive all the claim in relation to specific performance” and submitted that that meant “we [Miss Lee] have abandoned our claim in the High Court”.  At this point Mr Lam interjected saying:

“My Lord, I don’t think that is right.  We will waive, it’s not we have abandoned it.  It’s different” (Transcript p12 Q-R).

Moreover, in his own submissions, Mr Lam said:

“Both cases refer to the entering of judgment as ... which would be taken as a conclusive election, but now, [Miss Lee], until 23 February this year, had entered judgment against [Mr Tso] for damages.  Only at that time on, that she had already ... she had given up specific performance or waive her interest in the land.” (Transcript p.35 J-K).

“There’s no evidence at all to suggest that she has so abandoned her such right of SP.  And only starting from February, say 23 or 28 February this year, after she entered judgment, that she had given up the rights of SP, ...” (Transcript p.36L-N).

“My Lord, one more point I want to stress is that even as from February, say March 98, this year, after [Miss Lee] had elected for damages instead of SP, who is the party entitled to apply to the court for vacation of the registration of [Miss Lee’s] document?” (Transcript p.36 P-R).  (Emphasis added).

28.  In cross-examination before the master, Mr Yip said that he had decided not to mention the abandonment letter in the Minimax proceedings as a matter of “strategy” in order to protect the interests of his client Miss Lee but this was not further explored.

29.  Having seen and heard Mr Yip and received evidence of the practice in his office regarding despatch of letters (para. 10), the master found as a fact that the abandonment letter had been despatched.  That was a finding of primary fact made after Mr Yip was cross-examined by Mr Tso’s counsel based on the matters I have just referred to.

30.  An appellate court should be very slow to interfere with findings of primary fact.  As Lord Hoffmann said in Biogen Inc v Medeva plc [1997] RPC 1 and repeated in Piglowska v Piglowski [1999] 1 WLR 1360:

“The need for appellate caution in reversing the trial judge’s evaluation of the facts is based upon much more solid grounds than professional courtesy.  It is because specific findings of fact, even by the most meticulous judge, are inherently an incomplete statement of the impressions which was made upon him by the primary evidence.  His expressed findings are always surrounded by a penumbra of imprecision as to emphasis, relative weight, minor qualification and nuance .... of which time and language do not permit exact expression, but which may play an important part in the judge’s overall evaluation”.  (Emphasis added).

To this, Bokhary PJ added in Ting Kwok Keung v Tam Dick Yuen [2002] 1 HKC 601:

“Where the judgment turns on an issue of fact, the Court of Appeal must have regard to the nature of that issue of fact.  And it must have regard to the advantages enjoyed by a trial judge who received the evidence on such an issue at first-hand, in other words, in whose presence the whole of the evidence unfolded in its living state.  Such advantages can be, as Lord Shaw of Dunfermline put it in Clarke v Edinburgh Tramways at p.36, ‘sometimes broad and sometimes subtle’.  The question for the Court of Appeal is whether, even though it does not enjoy the advantages enjoyed by the trial judge who received the evidence at first-hand, it is nevertheless satisfied that his conclusion on the facts is plainly wrong.  The Court of Appeal should intervene if so satisfied.  But if not so satisfied, the Court of Appeal should defer to the trial judge’s conclusion even if in some doubt as to its correctness”.  (Emphasis added).

31.  For my part, I think that Mr Yip’s affirmations and Mr Lam’s submissions in the Minimax proceedings were a relevant factor for the master to take into account when deciding the issue whether the abandonment letter had been sent.  But even though the master did not discuss these affirmations and submissions in detail, that does not mean that he had not taken the point into account.

32.  In para. 10 of his judgment, the master said “there is a conflict of evidence about whether this letter in fact had been despatched to [Mr Tso]”.  It would be noted that the conflict of evidence refers to the despatch of the letter - not to receipt.  The only conflict of evidence about whether the letter had in fact been despatched was the conflict between Mr Yip’s evidence in court and his affirmations in the Minimax proceedings.

33.  That the facts regarding the Minimax proceedings were in the master’s mind was also evident from his discussion of those proceedings in the context of another point immediately following (paras. 11-13) but the master obviously accorded greatest weight to the evidence of primary fact on the sending of the abandonment letter.  He was entitled and in my view right to focus more on the evidence of primary fact than on inferences from actions or omissions which occurred subsequently.

34.  In any event Mr Chan for Mr Tso has not persuaded me that the master’s conclusion on the facts was plainly wrong.  The fact that Miss Lee intimated to the vendor Mr Tso her abandonment of the claim to specific performance on 30 October (and not subsequently) is consistent with the statement made by her counsel to Cheung J on 25 October, which has been referred to in Le Pichon JA’s judgment.

35.  The letter dated 30 October 1997 from her solicitors to Minimax’s solicitors also said

“our client will waive all the claim to specific performance in [the action between Miss Lee and Mr Tso] and there is no need for you to apply to the Court to join your client as the 2^nd Defendant”. 

Although I note the use of the future tense, the waiver of the claim to specific performance was not expressed to be contingent on a future date or event, whether it be the obtaining of judgment against Mr Tso or Minimax’s completion.  That letter was also copied to Mr Tso’s then solicitors.  If it was thought by Mr Tso’s then solicitors that Miss Lee was indicating a future date or event for the abandonment of her claim for specific performance, one would have expected them to pursue the matter as it would be relevant to Mr Tso’s liability for damages in lieu of specific performance.  It would appear that no such inquiries were made, indicating that the abandonment was understood to have been immediate, which is consistent with the terms of the abandonment letter.

36.  Further the letter of the same date from Miss Lee’s solicitors to Mr Tso’s solicitors referred to his freedom to dispose of the proceeds of sale save a sum representing the deposit paid by Miss Lee.  That was also consistent with an abandonment of the claim to specific performance, because if she was still claiming specific performance, she would not be entitled to the return of any deposit.  Nor is there any indication in that letter that abandonment of specific performance was contingent upon any future date or event, a matter that solicitors would normally be anxious to point out if it were in fact the case.

37.  Accordingly, the appellant Mr Tso has not shown that the master’s conclusion on the facts - that Miss Lee’s solicitors had in fact sent the abandonment letter to Mr Tso on 30 October 1997 - was plainly wrong.

38.  As for Mr Chan’s argument based on abuse of process, it may have been that Miss Lee at some stage was trying to “have her cake and eat it”.  Given the falling market and Minimax’s hesitation in completing, Miss Lee may have thought it clever to abandon her claim to specific performance vis-a-vis Mr Tso, but remain waiting in the wings ready to re-negotiate for the property should Minimax decide not to complete after all.

39.  Mr Yip’s reasons for not informing Minimax or Deputy Judge Jackson that Miss Lee had abandoned her claim to specific performance on 30 October may or may not have been valid (there was no further exploration of his evidence that he had done it as a matter of “strategy” and to “protect Miss Lee’s interests”).  However even if one were to assume that there were no valid reasons for doing so, and that had the abandonment letter been disclosed, Deputy Judge Jackson may have given the costs order in favour of Minimax, I do not think that should impact on the matter before the master and this court as I do not see why the beneficiary of the non-disclosure should be Mr Tso, who after all was the party whose actions (in selling the property to Miss Lee after having agreed to sell it to Minimax) had caused the problem in the first place.  In this respect I have noted the evidence that Mr Tso was unwell at some stage, but there was no evidence that his condition was such as to vitiate his capacity to enter into the agreements to sell the property to Minimax and Miss Lee.

40.  Finally as for Mr Chan’s argument based on the decision in Keep Point, I agree with the views expressed by Le Pichon JA in her judgment and have nothing further to add.