WONG CHI PING AND ANOTHER v. HO MEI YUK

HCA 940/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 940 OF 2012

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J U D G M E N T

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INTRODUCTION

1.  The plaintiffs who are husband and wife, respectively 69 and 60 years of age, are the owners of Lot 2067 in Demarcation District No 17 in Yuen Long.  A house has existed on the lot for over 25 years and there is a photograph of it in the extensive bundles of documents which shows features of some importance.

2.  It is clearly a house of three levels with balconies on the 1^st, 2^nd and 3^rd levels. These balconies extend the whole width of the house and by so doing lend a balance architecturally even to the untrained eye.  The other feature to be noted is the entrance door which is at the middle front of the building (see p 538).  In fact, there appear to be two front doors, one almost in the middle and the other on the extreme left as one faces the building from the roadway.  The latter gives access to the staircase leading to the upper floors.

3.  A relatively minor footnote to this period is a letter from the District Lands Office dated 15 January 1998 to the plaintiffs. Described as a “Toleration Letter” it pointed out that the width (or depth) of the balcony was 0.13 metre in excess of that approved and that the breach of condition would be tolerated only for the life of the existing building.  In the event of further development the conditions would have to be complied with strictly.  The plaintiffs had paid a fine in respect of the breach committed.

4.  In April 2006, the plaintiffs had decided to redevelop their site by demolishing their existing house and building a new one, more or less along the same lines in terms of accommodation and units (floors) but with some change of style and features.

5.  A location plan prepared by Ted Chan and Associates Limited highlighted two features in particular.  One was the septic tank but, the other, more important to this case, was the balcony which was the full length of the proposed new house (at 9.205 metres) and its width (1.22 metres) complied with the original condition set out in the 1998 “Toleration Letter”.

6.  A sketch for the redevelopment reflected these details with measurements and a side view of the proposed building.  The balcony was clearly shown running the length of the building on both levels (1/F and 2/F).

7.  A dimension plan dated March 2006 (also by Ted Chan & Associates) also shows the balcony running the full length of the house as it was its original house.

8.  The final document of interest before the development agreement of June 2009 is a letter from the District Lands Office dated 29 March 2007 (p 297/8) giving notice of the plaintiffs’ application to redevelop their Exempted House.  It was not a guarantee of permission but gave the opportunity to anyone affected by the development to make written representation.  The site plan prepared by the Lands Department gave basic details of the proposed house.  They included “Proposed Balcony — length 2.205m (the stated length of the house) x width 1.22 metres”.

9.  Unfortunately some neighbour did object to the development and although we have not been concerned with the basis of his objection, right or wrong, it was this that triggered a situation bringing the plaintiffs into contact with the defendant and her allies, Ho Yuk Ching (her brother) and Ho Yun Fat (another brother) who happened to be the village head, eventually leading to a Joint Venture Agreement.

THE PRELIMINARY DISCUSSIONS OF MARCH/APRIL 2009

10.  According to the 1^st plaintiff these took place between himself and Ho Yuk Ching, essentially the latter in effect representing the defendant.  The points of discussion were set out in an undated, unsigned document in which the plaintiffs were referred to as Party A and Ho Yuk Ching as Party B.

11.  There were six points itemised as raised by Ho Yuk Ching, only four of which were accepted by the plaintiffs (those excluded being 1 and 5).  It was suggested on behalf of the defendant that there was no reference in that discussion document to the matter of the full‑width balcony and the position of front door access.  I do not consider that a valid point.  The discussion or negotiation, however described, was on points of principle, the commercial enterprise, not detail of design or features.  Mr Wong Chi Ping was not prepared, he said, to come to a development agreement with Mr Ho Yuk Ching himself but was willing to allow him to sort out any persisting problem with the difficult neighbour.

12.  It seems to me that Ho Yuk Ching must have had a copy of the original plan submitted to the District Lands Office.  The idea that there would have been such a preliminary discussion without knowledge on the part of Ho Yuk Ching of the plans submitted, particularly since there had been some local objection to the plaintiffs’ application, is not realistic.

THE ORAL PROMISES

13.  As the plans submitted by the 1^st plaintiff to the Lands Office indicated, he wanted a full length balcony on the new house together with a frontal access to the staircase which would lead to the 1/F and 2/F.  This simply replicated the situation in his existing house except that in that house the access to the staircase was on the left front, and the access door to the ground floor was in the middle at the front.

14.  His evidence was that, on viewing the local house shown in the photograph on page 304, Ho Yuk Ching said he could have what features he wanted and his clear indication was that he wanted the position to be that which obtained on the house to be demolished.  He wanted the access to the staircase to be at the front of the house and a full‑length balcony.

15.  He also liked the style of the house viewed and he wanted the new house to reflect that style specifically in respect of the four corners described as pillars. It reflected a traditional western (perhaps colonial) style.  He understandably relied upon the promises made by Ho Yuk Ching as agent for the defendant who was to become the actual party in the development agreement.  The interior of the house was not visited but its external appearance was the real subject of interest.

16.  In fact, as a matter of simple common sense, or reasonableness or as an aspect of a joint venture agreement (and the defendant and her brother both spoke of the spirit of cooperation) the 1^st plaintiff’s desire in respect of such features was bound to be reflected (unless technically impossible to achieve).

17.  Throughout what followed the plaintiffs’ submitted plans to the defendant which reflected what he wanted and what he believed was the understanding and what was promised.

18.  The evidence of Ho Yuk Ching in respect of the conversation with the plaintiff at, and/or following the visit to the stylised house was confused, contradictory and unconvincing.

19.  At the start of his cross‑examination by Mr Jackson Poon, for the plaintiffs, he said:

“He [the 1^st plaintiff] would not have a say in the design of the new house … he could design the layout of the 1^st and 2^nd floors … he was entitled to that only. That was my understanding.”

Later on he said:

“I was negotiating with him. I did not know whether he had any say or not.”

20.  This conflict he was not able to resolve but other aspects of his evidence made in my judgment, the position quite clear:

“We merely took a look there [at the house in photo page 304].”

“When he saw the house he said something about the four pillars, the top of the house and the colours.”

“I saw the entrance to the 1^st and 2^nd floors was not on the front. I told him the entrance was on the left side.”

“I said, if our cooperation was to work, the entrance [of the new house] would be on the [right] side facing the village office.”

“I asked him — ‘is there any problem with it?’”

“I said it looks as if the balcony is 2/3m length.”

“He said fine, no problem?

He said ‘outward style’ should look like the house in photo p.304.”

“The opening of the staircase in [his] old house was on the front so I was just asking if he was ok with it.”

21.  Although he was saying at first that the 1^st plaintiff was entitled only to decide upon the layout of the 1/F and 2/F and that they merely looked at the specimen house, they did not go inside the house so never saw what the internal layout of that was.  One gained the impression that if the 1^st plaintiff was to have no say in the design of the proposed house that the visit must have been a complete waste of time.  However the new house as substantially finished reflected very accurately the external style of the specimen house in general save as to the balconies and access to the staircase.  One also gained the impression that in the course of his evidence Ho Yuk Ching had forgotten what he was supposed, or required to say — hence the inconsistencies.

22.  I am satisfied that in that meeting and visit with Ho Yuk Ching the 1^st plaintiff was assured that he could have what he wanted as to the length of the balcony and the siting of the front door access to the staircase.  The contrary does not make sense and would be inconsistent with the staircase access of his old house as well as with all the plans submitted and available to date.  He was also assured that the external style of the new house would reflect that of the house they visited.  Any suggestion that his choice was limited to the layout of certain floors flies in the face of common sense.

23.  The notion that he was willing to have a side door as access to the staircase and the building as a whole is so unreasonable as to render unnecessary further consideration of this aspect — save that it obviously persisted in the thinking and unreasonable stance of the defendant as the matter progressed.

24.  I am satisfied that the plaintiff made clear his requirements as to access and the length of the balcony and that these were to be incorporated in the new house, these oral assurances formed terms of the agreement.

The joint venture agreement of 22 June 2009

25.  The parties to this agreement are the plaintiffs and the defendant.  No‑one else became a party to it.  This is important, in view of the defendant’s misconceptions as to the rights encompassed by it.

26.  It was prepared by solicitors and both parties had solicitors advising them.  The preamble is important especially clause (2) which I set out:

“Party A [The Plaintiffs] submitted an application for reconstruction of the property to the DLO, Yuen Long in September 2005. At the time, Party A had appointed a surveyor to prepare suitable plans and had submitted that plan to the DLO.”

The only obstacle, repeated in the agreement, was the objection of an indigenous villager, also named Ho.

27.  Party B [The defendant, not Ho Yuk Ching] indicated in the preamble, clause (4), that she was confident of peacefully resolving the villager’s objection and was interested in carrying out the reconstruction.

28.  It is beyond argument that the defendant knew of the existing plans, clear reference having been made to them in the Agreement and that she had access to them at the District Lands Office.  She could also have obtained them from the plaintiff, if necessary.  It would no doubt have been easier.  It is also inconceivable, in my judgment, that the defendant would have become a party to the Agreement in the ignorance of the submitted plans.

29.  The purpose of the agreement, essentially the consideration for the contract was set out under “Allocation of interests”.

30.  Following construction and after receipt of the appropriate certificate of “No obligation to occupy” from the District Lands Office, the plaintiffs were to have title to the 1^st and 2^nd floor units including the roof whilst the defendant was to have title to the ground floor unit.

31.  The second part of this “allocation of interest” is a somewhat curious and vague provision.  After the completion of the construction “the relatives [unidentified] of Party B [the defendant] were to have “priority” to purchase the 1^st floor unit from the plaintiffs at a price of HK$1,200,000” to be exercised within three months of completion.  Thereafter the plaintiffs would be free to exercise their right without inhibition.  This clause is unenforceable.  The relative (or relatives) is not identified.  It is not a party to the agreement.  There is no consideration moving from a party to it.  The 1^st plaintiff in his evidence was concerned about the possible effect upon his right in respect of the 1^st floor unit and was assured by his solicitor that it did not impose an obligation upon him to sell if he did not wish to do so.

32.  The solicitor was correct and the 1^st plaintiff rightly assured. Even if it had been an enforceable term with an identified party to the agreement and due notice given it was no more than a priority, ie if the owner (the plaintiffs) wanted to sell that unit within three months of completion, he had to do no more than offer it to the party (if identified) for first refusal at that price.  It was not an option to purchase which the plaintiff would be obliged to meet if exercised within the three‑month period.  There is no further mention in the agreement of any such priority.

33.  Clause 9 deals with the specifications of the new house.  The style of the exterior is to accord with the photographs of the house visited by the plaintiff and Ho Yuk Ching.

34.  The plaintiff can choose the exterior layout design and materials for the building other than the ground floor.

35.  Although earlier in the agreement there was an express allocation of the interest of the defendant in the building, clause 10(3) suggests that is by no means settled because it says:

“If in the future [the Plaintiff] assigns the ground floor unit to [the defendant][‘in the future’ is repeated][the defendant] must pay the stamp duties etc. for the unit.”

There are other provisions relating to the liability for various incidental costs (with the plaintiff shouldering at the very least half of these (see clause 4(1)(b) and (c), and clause 5.1(a) and (b).

36.  The defendant is to pay all the costs of demolishing the old house and constructing the new one, the latter at a minimal cost (applying the then current average standards) of HK$1,200,000 (HK$1.2 million).

37.  There is also a liquidated compensation provision (HK$1,000,000) in the event of either party being in breach of the agreement and causing loss to the other.

38.  Finally, if construction work is delayed by factors other than the plaintiff’s failure to provide certificates of exemption etc, then the defendant can postpone construction.

The interim period

39.  Almost two years elapsed between the signing of the agreement and the handing over by the plaintiff of the keys to the old house for the defendant to obtain possession of the site and demolish the old house — 7 May 2011.

40.  At a meeting with the building contractor hired by the defendant, the plaintiff made it clear that the balcony should be full length and the staircase access/entrance at the front.  He handed over plans that illustrated this quite clearly.  Ho Yuk Ching who was present raised no query about it.  This was on 26 April 2011.  The contractor similarly accepted what the plaintiff wanted in this regard.

41.  The plans of 28 May 2011 submitted by the 1^st plaintiff to the contractor and/or the defendant unarguably show the plaintiff’s wishes as to the balcony and front door access (pp 586‑588).

42.  Once in possession of the keys and the site for development the defendant proceeded, and ignored the promises and terms relating to the balcony and frontal access. Despite repeated instance on these features by the plaintiff, the defendant continued construction in June and July 2011.  That construction, in the material respects which are the principal issues in this action, ignored the oral promises and consistent requirements as represented by all the plans supplied by the plaintiff which themselves replicated the plans supplied to the District Lands Office.

43.  Before the construction reached its final stage it was apparent from the photographs of the progress of the construction that the contractor himself did have regard for the plaintiff’s requirement as to frontal access to the staircase.  The photographs taken by the 1^st plaintiff on 15 November 2011 (page 532‑20‑4) clearly showed that at the front of the building on the right hand site, there was a doorway opening fully framed, from top to floor level.  The proper inference is that the contractor was aware of the plaintiff’s wish.  However shortly afterwards it was bricked up from the floor level to halfway — also illustrated by a photograph (page 532‑5‑bottom photograph).

The incident of 15 November 2011

44.  The 1^st plaintiff and his wife on seeing the front opening half‑bricked up eventually decided in their frustration to make their point more effectively.  They took a long handled lump hammer to the building and the 1^st plaintiff demolished the brick structure.  There are photographs illustrating what turned out to be a confrontation with the defendant’s brother (and agent) Ho Yuk Ching.  Unfortunately the 2^nd plaintiff appears to have thrown a piece of brick at Ho Yuk Ching which caused some minor soreness.

45.  The 2^nd plaintiff was convicted of assault.  The 1^st plaintiff was convicted of criminal damage to what was to become his property on his land.  I regard that as a travesty of justice. He was fined HK$2,000.  Although he sought to review this conviction, he was not allowed to and there was no appeal.

46.  The 1^st plaintiff had however demonstrably made his point.  Nevertheless the defendant blocked up the door opening again to about half‑way and a window frame took up the remaining part of the opening.  She proceeded with her own scheme of things which entailed two French windows on the front for the unit which she was to acquire.  The plaintiffs were left with an inconvenient, unattractive kind of “tradesman’s” entrance down the side of the building with a gap of a little over 3 feet, between that entrance and a stone wall, in which to effect an entry.

The aftermath

47.  By letter of 2 June 2011 the solicitors originally acting for the plaintiffs (John Chan & Co) sent two plans for the proposed rebuilding.  These clearly set out the plaintiffs’ provisions for the full length balcony and the front door access.  The defendant’s reply to that letter was to the plaintiffs.

48.  The defendant’s reply of 28 June contained the following:

“In accordance with clause 9.3 of the Agreement, it is specified that you only have the right to choose the internal layout design and finishing materials for the units on the 1^st and 2^nd floors with the roof, but not the staircases location. I provide the draft plan to you again …”

49.  It was an unpleasant threatening letter.  It made no mention of the full width of the balcony which was clearly indicated on the plaintiffs’ plans.

50.  The next letter of importance is from the plaintiff’s new solicitors, Hagon Wai & Partners and is dated 17 June 2011.  It re‑iterated the position of the staircase access as on the front at the side and that the building was to be constructed in accordance with the plans which had been supplied by the previous solicitors.  If rejected the defendant’s request that the plaintiff sign and approve another plan:

“I enclose a photo of the front side of the entire house … That … shows that the front side of the house is not the entrance of the 1^st and 2^nd floors and the length of the balcony is about two-thirds of the length of the house. Therefore the length of the balcony had the indication map of the ground floor staircase on that plan will not be adopted.”

51.  In those two letters by way of her response, is, I conclude the key to this case. The defendant showed herself to be high handed, unreasonable and in breach of the terms of the agreement, whether they be express or implied, or both.

52.  This clearly did not support the description of the agreement whether it be joint venture or cooperation.  She was determined that her own preference would prevail both in relation to the balcony and the front access.

53.  At this time the development had scarcely began but by 15 July 2011 she wrote directly to the plaintiffs:

“-- (Your) plan for balcony and ground floor entrance … do not match the photos in clause 9.2 of the Agreement, therefore the length of balcony and ground floor indication plan will not be adopted …

I will build the house according [to] the plan submitted by contractor and the photos contained in the Cooperation Agreement.”

54.  I have no doubt that she was seeking to construct the new house, and had embarked upon that construction (although little by way of actual construction had been achieved by them) on the basis of her fixed desire to have it built as she wanted, given her interest in the ground floor and her potential indirect interest in the first floor unit.  She thus excluded from her contemplation what had previously been agreed, in writing and by way of oral promises.  Quite simply I do not believe her.  She was obdurate, unreasonable and acted highhandedly.

55.  The building of the house went ahead in complete disregard of the plaintiffs’ requirements and, as I find them to be, the terms of the contract, both oral and written.  Certainly the spirit of the joint venture was discarded and it is at least arguable that there was implied term that full account would be taken of the plaintiffs’ interests as persistently expressed.  The plaintiff does not need this as an additional finding but the implied term meets the condition expressed by Lord Simon of Glaisdale in BP Refinery (Westport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 which Lord Hoffmann adopted in Att. Gen. of Belize Telecom Ltd (PC) (2009) l WLR 1988:

“… not as a series of independent tests which must each be surmounted, but rather as a collection of different ways in which judges have tried to express the central idea that the proposed implied term must spell out what the contract actually means.”

Those conditions were:

(i) it must be reasonable and equitable;

(ii) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it;

(iii) it must be so obvious that “it goes without saying”;

(iv) it must not contradict any express term of the contract; and

(v) it must be capable of clear impression.

56.  As to the latter condition the following would meet the situation and thereby illustrate the appropriateness of such an implied term:

“The parties will have full regard for and implement where possible, all reasonable and practical requirements of each other as to the form of the building, in accordance with the cost provided for in the joint venture.”

There is no doubt that wording could be improved upon.

57.  The plaintiffs allegation of breach of fiduciary duty is a valid alternative approach, though it does not have any advantage over the above implied term argument.

Summary of findings

58.  There were breaches of the express oral terms in the form of the breaking and/or ignoring of the promises made to the plaintiffs.

59.  Clause 9.2 of the Agreement does not preclude the plaintiffs’ requirement as to the length of the balcony and position of the door access to the staircase.  The word is “style” not “form” or “structure”.

60.  The preamble at (2) of the background governs the essential structural feature in outline.  The defendant knew what these plans showed, and thereby they were incorporated in the agreement.

61.  The defendant is in breach of contract.  She proceeded on an arbitrary unilateral basis in the face of clear requirements by the other party.

62.  She is liable to construct full length balconies and alter the side access to frontal access at her own expense at the plaintiffs’ insistence.  Alternatively she is liable to pay them damages for the said breaches which would take the form of payment to the plaintiffs to enable them to have the remedial work carried out.  Those damages can be assessed only when such costs are known. The question of the liquidated damages will need to be resolved at a later stage.  By reason of the breach the defendant is not entitled to the transfer of title to the ground floor unit to herself, until she has fully remedied the breaches and/or the plaintiffs have been compensated for them.

63.  The unnamed relative in clause 2.1 has no legal entitlement to the first floor unit not being a party to the contract and not having provided any consideration.  In any event the interest as expressed is no more than a prior opportunity to purchase at a figure which is almost certainly irrelevant after this lapse of time.

Judgment

64.  The defendant is in breach of the agreement.

65.  There will be an order requiring the defendant to build full length balconies on the 1^st, 2^nd and 3^rd floor levels as there had been on the original house and frontal access to the staircase, and carry out the necessary removal of the side door access.

66.  Alternatively the defendant do pay to the plaintiffs as damages the costs of effecting the said requisite construction work, such costs to be assessed.

67.  The defendant’s counterclaim is dismissed with costs to the plaintiffs.

68.  The defendant shall pay to the plaintiffs their costs of this action including future costs incurred as a result of rectifying the defendant’s breaches of the Agreement.

69.  In re‑enforcement of the undertaking given in evidence by the defendant to hand over to the plaintiff all relevant documentation, certificates etc to enable them to obtain all government approvals and licenses etc and register title to the said lot and house, I make an order to this effect.

70.  There will also be liberty to apply to perfect any of these orders where necessary.