CHEUNG WEI MAN VIVIEN AND ANOTHER v. CENTALINE PROPERTY AGENCY LTD AND OTHERS

HCA 286/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 286 OF 2000

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J U D G M E N T

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A.  introduction

1.  The Plaintiffs were victims of an abortive conveyancing transaction in which they were the purchasers.  On 2 March 1998, they entered into a provisional agreement [“the Agreement”] with Winleaf (Pacific) Limited [“the Vendor”] for purchasing House No. 81 Palm Drive, The Redhill Peninsula [“the Property”] at the price of $30.5 million.  An initial deposit of $3 million was paid upon the signing of the Agreement.  A further deposit of $3.1 million was paid upon the signing of the formal agreement on 16 March 1998.  There was no stakeholding.  The sale and purchase was to be completed on or before 26 February 1999.

2.  The Vendor acquired the Property in 1997 at the price of $52.5 million.  The Property was subject to a charge in favour of a bank.  The Vendor had defaulted in the service of the loan and the bank commenced a mortgagee action in HCMP 2119 of 1998 on 13 May 1998.  Order for possession was made in favour of the bank on 28 July 2003.  The judgment debt was $95 million odd, far exceeding the value of the Property.  The Vendor was unable to complete the sale and purchase with the Plaintiffs.

3.  On 1 September 1998, the Plaintiffs accepted the Vendor’s repudiation and rescinded the Agreement.  The Plaintiffs commenced an action against the Vendor on 10 September 1998 suing for the return of deposit and damages.  Judgment was entered in favour of the Plaintiffs on 3 November 1998.  That judgment has not been satisfied.

4.  The Plaintiffs now try to recover their losses in that abortive transaction from the Defendants, the agents who acted for the Plaintiffs in the purchase.  Although a number of causes of action are relied upon, on final analysis, putting aside the legal niceties and forensic twists and turns, the Plaintiffs’ claims revolved around five misrepresentations allegedly made by the Defendants before the signing of the Agreement. 

5.  Adopting Mr Chang SC’s phraseology, the five misrepresentations are,

(a)     The asking price misrepresentation – the 2^nd Defendant misrepresented to the Plaintiffs that the Vendor reduced the asking price from $32 million to $30 million;

(b)    The unauthorized or illegal structures misrepresentation – the 3^rd Defendant misrepresented to the Plaintiffs that there was no unauthorized or illegal structures in the Property;

(c)     The financial misrepresentation – the 2^nd Defendant misrepresented to the Plaintiffs that the Vendor was a substantial company of good financial standing;

(d)    The sole agency misrepresentation – it was represented that the 1^st Defendant was the sole agent for the Vendor in respect of the Property throughout the period from 27 February to 2 March 1998 and this was false;

(e)     The no decision misrepresentation – it was represented to the Plaintiffs that the Vendor had not reached a decision on the offer of the Plaintiff between 27 February and 1 March 1998 whilst in truth the offer had been rejected.

6.  The Plaintiffs alleged in the Re-re-amended Statement of Claim that these representations were made by the Defendants with the knowledge of the falsity of the representations or with recklessness as whether the same were true.  The Plaintiffs said the Defendants were liable for deceit in the Derry v Peek (1889) 14 App Cas 337 sense.  However, in his closing submissions, in the light of the defence based on Section 13 of the LARCO, Mr Chang put his primary case on the financial misrepresentation on negligent mis-statement as opposed to deceit.

7.  The Defendants denied the making of the first three representations.  As regards the last two representations, the Defendants denied their falsity.  In any event, the Defendants said apart from the financial misrepresentation, the other alleged misrepresentations are matters of little moment with regard to the loss suffered by the Plaintiffs.

8.  Having heard the evidence and the submissions of the parties, even though quite a number of legal points were made and  many cases were cited, I agree with the submission of Mr R Wong SC that the primary battlefield focuses on the factual disputes.  Hence I will turn to the factual disputes immediately.

B.  The factual issues

B(1)  The asking price misrepresentation

9.  The primary issue is whether the 2^nd Defendant had made the alleged representation.  If the representation had been made, the contemporaneous computer record of the 1^st Defendant (at Bundle A2 p.516) shows that the Vendor had not reduced the asking price to $30 million.  In fact, the defence did not call any evidence to establish such a reduction or to suggest that the 2^nd Defendant [“Terry”] had any basis for believing so.

10.  As Mr Horace Wong SC submitted, the Plaintiffs’ evidence in this respect has departed from the pleaded case on the nature of the represented price of the Vendor.  In the pleadings, Paragraph 21.5 of the Re-re-amended Statement of Claim pleaded it was represented that the asking price of the Vendor for the Property as at 27 February 1998 was $30 million.  Paragraph 23.5 pleaded the falsity of the representation as follows: the Vendor had not reduced the asking price from $32 million to $30 million but continued to hold out for $32 million until late on 2 March 1998.

11.  In the witness statement of Cheung Wei Man Vivien [“Vivien”], she again referred to the representation by reference to the asking price of the Vendor.  The witness statement of Chan Kim Thiam [“Kim”] simply adopted the witness statement of Vivien and he had no personal knowledge of the representation since it was allegedly made in a telephone conversation between Terry and Vivien on 27 February 1998 before the inspection of the Property.  It can however be said that the same representation was repeated during the meeting at Po Garden that evening when the Plaintiffs asked Terry why the Vendor had reduced the asking price from $32 million to $30 million so quickly.  Kim was present on that occasion.  The witness statement again referred to the asking price of the Vendor in the context of this alleged representation.

12.  In her evidence given at the trial, Vivien changed her case by referring to the net price or the non-negotiable price of the Vendor.  In her evidence in chief (at p.30M of the Trial Transcript), she said Terry told her on 25 February 1998 that “the vendor was prepared to sell at 32 but that would be a net price and not a negotiable price…” She said the Plaintiffs were not interested as it exceeded their budget.  Then on 27 February 1998, Terry called in the afternoon informing her that “the vendor had changed his mind and reduced the price from 32 net to 30 million bottom …” (p.31E of the Trial Transcript).  She confirmed in cross-examination that she was talking about net price instead of asking price and all references to asking price in the witness statement should mean net price (p.206 and 207 of the Trial Transcript).

13.  Mr Chang tried to downplay the departure by suggesting to Vivien that it was the asking price in terms of the net price in examination in chief (p.31N).  However, on careful analysis, the departure reflects a defect in the Plaintiff’s case on this alleged misrepresentation.  As Mr Horace Wong submitted, a representation as to asking price of a vendor would not normally deter a purchaser from putting forward a lower offer.  It is the very nature of sale and purchase that asking prices are subject to haggling.  Hence, if Terry merely represented to the Plaintiffs that the asking price was $32 million, there was nothing to prevent the Plaintiffs from putting forward an offer of $30 million.  The Plaintiffs had done so in an earlier offer regarding a flat at Kennedy Height.  Therefore, in order to establish the relevance of this representation by showing that but for the misrepresentation in the reduction of the price there would not have been any interest from the Plaintiffs, they needed something more than a representation as to asking price.

14.  Further, if it was merely a representation of asking price, it is inherently improbable that the Plaintiffs would make an offer which was exactly the same as the asking price.  A purchaser usually comes back with an offer which is lower than the asking price of the vendor.  I find it hard to believe that purchasers with the experience and sophistication of these Plaintiffs would simply make an offer on the same level as the asking price of a vendor without any attempt in bargaining.  Vivien herself testified to such effect on 12 January 2005 (p.207D of the Trial Transcript).

15.  It is all the more incredible that the Plaintiffs would, as they testified, authorize Terry to increase their offer beyond the asking price up to another additional $500,000 on 28 February 1998 when they had yet to have any response from the Vendor on their offer on 27 February that matched its asking price.

16.  A representation of net price can address these problems.  However, it has its own problems.  In his closing submission, Mr Chang struggled hard to explain to this court what was the precise nature of this price of the Vendor as represented by Terry.  Different terms were used by counsel: the price that the Vendor wanted (p.2044R of the Trial Transcript); the price that the Vendor was willing to sell (p.2045A); the indicated price (p.2045B); a price that you could take it or leave it (p.2045N); a price that the agent judged to be the lowest (p.2046G).

17.  I must say these expressions may well have different meanings for each other.  As I said in the course of submissions, in the present context, the representation must have conveyed to the Plaintiffs a price that had some sort of endorsement of the Vendor before it could have any significance as a representation from the Plaintiffs’ point of view.  In other words, if the agent merely said that he thought the Vendor might consider a particular price, it would only be his own assessment of the situation.  That would not prevent the Plaintiffs from putting a higher or lower offer based on their own assessment.  The case would be different if the agent said the Vendor told him that he would sell at a particular price. The Plaintiffs’ case is that Terry represented the price as a price endorsed by the Vendor.

18.  Mr Chang however emphasized that it was not a price binding on the Vendor (see p.2045H).  Counsel is constrained by his clients’ version of events in this regard.  Obviously the Plaintiffs did not regard the $30 million price as binding on the Vendor since they authorized Terry to negotiate up to $30.5 million on 28 February 1998.

19.  This exposes the weakness in Vivien’s evidence that Terry actually used the words “實價一口價” in describing the price coming from the Vendor in the conversations of 25 and 27 February 1998 (p.206S-207T of the Trial Transcript).  That expression conveys the message that it was a firm price, not a minimum price nor an indicative price.  It strikes me as odd that an agent would use such an expression to convey to potential purchasers the price that a Vendor might consider.

20.  If that was the expression that Terry had used on 25 and 27 February 1998, it would simply be unimaginable that he would have the audacity to suggest to the Plaintiffs to give him authority to top up the offer by $500,000 on 28 February 1998 when the offer based on a “實價一口價” had yet to be considered by the Vendor.  Such a suggestion would completely destroy the credibility of the agent and given the characters and experience of the Plaintiffs based on what I heard and observed in evidence, I could not believe for one moment that they would  swallow that.

21.  Vivien tried to explain that Terry persuaded them to give him authority to increase the offer as there were potential competing offers and the Vendor might have second thoughts.  I do not find this convincing.

22.  Vivien attempted to bolster up her credibility on this point by saying that Terry told her on 28 February 1998 that the other offer might be more concrete.  When she was confronted with her earlier evidence that on 27 February the Plaintiffs had been told that there were other people interested, Vivien’s initial response was that Terry mentioned it a second time on 28 February 1998.  It was only when she was asked further on the topic, she tried to play on the difference between “interest” and “offer”.  Even so, the best she could muster was that Terry said on 28 February that a group of people was thinking about making an offer and she did not ask for more details (p.259-260 of Trial Transcript).

23.  I am wholly unimpressed by this part of her evidence.  If what she testified were true, I believe she would have asked Terry for more details.  She would at least have a doubt in her mind as to how Terry could have learnt about what another group of potential purchasers were thinking.  She would certainly try to find out more about the Vendor’s reaction to their original offer that match the  “實價一口價” of the Vendor before she authorized any increase in the Plaintiffs’ offer.

24.  Moreover, this part of her evidence in cross-examination is not the same as her evidence in examination in chief.  On 10 January 2005, her evidence in chief about what Terry told her was as follows, “And on Saturday he repeated that there are other parties interested and he was discussing with me just in case the vendor had any second thoughts, given that he had come down 2 million, if there may be potential competitors the vendor may want a slightly higher price, a little bit more, and he discussed with me if that scenario happened …” (p.79 of Trial Transcript).

25.  She said nothing about Terry telling her the potential competition has become more concrete and a competing offer was expected.

26.  In Paragraph 79 of her very detail witness statement of 30 March 2001, Vivien did not even make any reference to potential competition as the cause for the Plaintiffs’ agreement to authorize Terry to negotiate up to an extra $500,000.  The reason given in that paragraph was that the Vendor might have second thoughts as it had just reduced the asking price from $32 million to $30 million.

27.  In this respect, Kim’s evidence in the witness box did not support Vivien.  On 6 March 2006, he testified that Terry said on 28 February 1998 that there were other people interested in the Property and asked the Plaintiffs to give him a maximum offer for him to negotiate (p.981C of Trial Transcript).  He did not refer to any material change of circumstances between 27 and 28 February.

28.  In contrast, the evidence of Terry is inherently more probable.  He testified that he learnt from other colleagues the Property was a potential good buy (筍盤) on 26 February.  He confirmed that with Simon Shea [“Simon”] the agent who had been dealing with the Vendor.  Simon said he could try to sell to the Vendor an offer of $32 million with 6 months’ completion.  Terry informed Vivien about the same.  He told her that the Vendor might consider an offer of $32 million with a maximum of 6 months’ completion.  He did not say the price was a firm one and the Vendor would not consider anything less.  Vivien said she needed to discuss with Kim.

29.  On the next day, Vivien phoned to express interest.  Inspection was arranged.  After that, in the evening of 27 February 1998, at the meeting at Po Garden, the Plaintiffs made an offer of $30 million with 12 months’ completion.  Terry thought there was no harm trying.  He therefore got the provisional agreement and cheque to Simon for him to try with the Vendor.

30.  The agents could not contact the Vendor on 27 February and neither could they find the person in charge in the morning of 28 February.  Terry contacted Vivien and informed of her about the lack of progress and that the person in charge was in mainland China.  He did not suggest her to authorize him to increase the offer as the Vendor had yet to consider the $30 million offer and he had no idea what price the Vendor would accept.

31.  According to Terry, the $30.5 million offer came about as follows.  In the morning of 2 March 1998, the agents learnt from the Vendor that a friend of Mr Yeung (the person in charge of the Vendor) would like to inspect the Property and might make an offer of $30.5 million with 12 months’ completion.  Terry relayed the information to the Plaintiffs.  The Plaintiffs decided to make a similar offer. 

32.  According to his evidence, at no stage did Terry represent to the Plaintiffs that the Vendor had reduced the price from $32 million to $30 million.  The price of $32 million was a price that the agents felt the Vendor might consider.  The price of $30 million was the idea of the Plaintiffs.  The price of $30.5 million was an offer to match with an alleged competing offer from a friend of Mr Yeung.

33.  Terry’s evidence was corroborated by the evidence of Simon and that of the 3^rd Defendant [“David”].

34.  Mr Chang attacked the credibility of Terry by reference to the contemporaneous computer record of the 1^st Defendant regarding the Property (A2 p.516).  First, there was no reference to the $32 million asking price around 26 February 1998.  Second, the record shows that between 20 February and 2 March 1998, there were prices ranging from $40 million to $31.5 million.  On 2 March 1998, there were two entries, one for $36 million and the other for $33 million.  These were considerably higher than $32 million.  Third, the record (including the record from 11 March to 16 December 1998 at D163-4) shows that the agents had a practice of guessing the bottom lines of the parties and counsel suggested this was exactly what had happened in late February 1998.

35.  Mr Chang suggested that Terry knew the budget of the Plaintiffs and based on the past entries in the computer record came up with a ‘can try’ price of $32 million and put it forward as the price of the Vendor to Vivien.  When this did not work because of the budget of the Plaintiffs, Terry tried to induce them by falsely represented to them that the Vendor had reduced the price to $30 million.

36.  I do not accept that suggestion.  Mr Chang based his theory on an entry of 21 January 1998 where it was said if the price was $32 million, there could be one year’s completion.  He suggested Terry got the idea of $32 million from that entry.  The record shows that the Vendor had been vacillating a lot in the past as regards the price.  Even if an agent were to test the bottom line of the parties, one would expect more current information be used for that purpose.  If Terry had had regard to what had been set out in the computer record prior to 27 February to come up with a price that might clinch a deal, it would be most unlikely that he would choose a figure of $32 million to start with and then proceed downwards with a significantly lower figure of $30 million.

37.  Mr Chang made a suggestion in cross-examination that Terry might have discussed with David and Simon to come up with a “can try” figure of $32 million to induce the Plaintiffs to make an offer.  Terry denied that.  Mr Chang did not pursue this line in his cross-examination of Simon.  In his closing submission, counsel did not placed much reliance on this argument.

38.  In any event, how the figure of $32 million came into the picture is not the focus of the current dispute.  It is not the case of the defence that it was a figure from the Vendor.  The evidence of the defence witnesses was that it was represented to the Plaintiffs as a price that the agents felt the Vendor might consider.  Terry told Vivien so.  Hence, the Plaintiffs should have no misapprehension that it is a price that the Vendor must accept.  The Plaintiffs did not dispute that.

39.  The focus of the current dispute is about how the $30 million came into being.  The Plaintiffs said it was suggested by Terry as the net price of the Vendor.  The Defendants said it was an offer from the Plaintiffs.  I have dealt with the inherent probabilities of the two competing versions.

40.  Simon explained about some of the entries in the computer record in his evidence.  He said the entry on 26 February was put down by him after he had secured a renewal of the sole agency.  However, he made mistakes in respect of the expiry date of the renewed sole agency as well as the price.  It should be $35 million instead of $36 million.  He had no recollection about the entry on 2 March by another agent called Eric.  As regards his own entry on 2 March, he said it was put down by him after his telephone conversation with Yan Hong [“Yan”] early in the morning.  Yan told him that if he got an offer of $33 million, she could make the decision to accept.  However, since the offer of the Plaintiffs was $30 million, that had to be decided by Mr Yeung.  He therefore made the entry into the computer.  Later that morning, he and David attended the office of Yan.  Yan told them about Mr Yeung had a friend who was interested in the Property and he could offer $30.5 million with one year’s completion.  David then relayed that to Terry who in turn informed the Plaintiffs. 

41.  In my view, whilst these computer entries might assist the Plaintiffs in showing the falsity of the alleged representation of the Vendor reducing the price to $30 million, they do not shed any light on the question whether the figure of $30 million came from the Plaintiffs (as Terry and David testified) or from Terry (as the Plaintiffs testified).  It is not the defence case that even if a representation of an asking price of $30 million had been made, the same was true.  Hence, falsity is not an issue here. 

42.  The remaining significance of these entries, in the present context, lies in the credibility of the witnesses as regards how the figure of $30.5 million came into the scene.  Mr Chang’s point boils down to this: given what were set out in the entries, it was unlikely that there was any indication of $30.5 million being acceptable to the Vendor in the morning of 2 March and hence the defence case as to the genesis of the $30.5 million offer could not be true.

43.  But it is not the defence case that the Vendor had reduced the asking price to $30.5 million in that morning.  The defence case was that Yan told Simon that there was a competing offer of $30.5 million from a friend of Mr Yeung and Terry relayed the same to the Plaintiffs.  The Plaintiffs then decided to increase their offer to meet the competing offer.  There was no indication in the morning whether $30.5 million was acceptable to the Vendor.  In this connection, I take into account of the tape recording VC-31 of a conversation between David and Vivien on 26 April 1999.  I do not think there is any inconsistency between what was said by David in that conversation and the evidence given by the defence witnesses in court.  The reference to the trip to the Property in the afternoon of 2 March 1998 was in fact corroborative of their evidence. 

44.  Further, the Vendor did finally accept $30.5 million in the evening.  Hence, the entries regarding the prices in the morning of 2 March paled into insignificance as far as the likelihood of such a figure being acceptable to the Vendor is concerned.

45.  I shall need to come back to the evidence of Simon in my discussion about the sole agency representation.  His evidence about the entry on 2 March and what happened at the office of Yan in that morning was consistent with the evidence of Terry and David.  I prefer their evidence to that of Vivien and Kim.  I find as a fact that the increase from $30 million to $30.5 came about in circumstances testified by Terry.

46.  In coming to this conclusion, I have not overlooked the documents signed by Terry and David at the request of Vivien.  I shall deal with the reasons why this court does not attach much weight on these documents in a later section of this judgment.  In the context of the asking price misrepresentation, bearing in mind that the real dispute is about whether the $30 million figure came from the Plaintiffs or from Terry, the relevant documents are (a) the Calendar of Events signed by Terry on 16 December 1998; and (b) the Record of Events signed by David on 14 May 1999.

47.  I do not regard the Affirmation of Terry of 2 December 1998 shed any light on the origin of the $30 million offer.  Mr Horace Wong had made some forceful criticism regarding the lack of basis for the Plaintiffs to come up with the idea that Terry and David knew on 27 February 1998 that the Vendor would accept an offer of around $31 million in Paragraphs 58 to 62 of his Closing Submissions.  Although this is only a side issue, the cross-examination of Vivien on this aspect demonstrated on occasions, the witness had difficulties in differentiating what actually had happened and what she thought to have happened based on what she thought she was told.

48.  Neither did I find what David said on 28 November 1998 (recorded in VC-17) and his statement made on 15 December 1998 of much assistance in resolving the genesis of the $30 million offer.

49.  The Calendar of Events and the Record of Events did suggest that the price of $30 million was coming from Terry.  However, as discussed in greater details below, I accept Terry and David’s explanation about these documents.  I prefer their evidence in the witness box to what were said in these documents.

50.  Mr Chang also referred to the conversation between Vivien and Terry on 19 November 1998 (recorded in VC-16), in particular item 143.  I shall address the weight to be attached to these taped conversations later.  Bearing in mind the circumstances in which the conversations were conducted, I do not regard the response of Terry to the self-serving statement of Vivien on that occasion to be a piece of reliable evidence on the genesis of the $30 million offer.

51.  Mr Chang invited this court to reject the suggestion that the terms of the offer originally set out in the Agreement came from the Plaintiffs as they did not need a 12 months’ completion.  The submission focused on the term as to the timing for completion.  Counsel emphasized that the Plaintiffs did not ask for a long completion in their earlier offer for the flat at Kennedy Height.  Since it was part and partial of the $30 million offer, it is convenient to consider the point at this juncture.

52.  The Defendants said the idea of 12 months’ completion came from the Plaintiffs.  On the other hand, the Plaintiffs said it was put forward by the agents as something offered by the Vendor.  However, even on the Plaintiffs’ evidence, they realized that there was a price for the lengthy completion period: the deposit had to be higher (it ended up with 20 % instead of the usual 10%) and there would be no stakeholding.  Vivien described these as matters of give and take in her evidence.

53.  According to Vivien, the Plaintiffs also found the long completion period attractive.  Even though it was not absolutely necessary for the Plaintiffs to wait for the sale of the Po Garden flat before completing the purchase, they regarded the flexibility provided by such long completion period an added advantage.  They could borrow less from the bank.

54.  The Defendants said the Plaintiffs were keen to have a longer completion period because they were contemplating the possibility of reselling the Property for profit before completion.  Terry testified that the Plaintiffs looked for property on a “半炒半住” basis, meaning that the property could either be resold for profit or if not so resold, used for self residence.  The Plaintiffs actually appointed the Defendants as agents for reselling the Property and there had been some viewings though nothing had materialized into a serious negotiation for resale before the bank took out the mortgagee proceedings.

55.  The Plaintiffs denied they had any intention for resale as the Property was purchased as a new home for the family.  They said the engagement of the Defendants as agents for resale was merely a gratuitous act on their part as a favour to Terry and David at the latters’ request.  They said the price set in the agency agreement was unrealistically high and there had not been any serious negotiations for resale. 

56.  Between 1991 and 1999, the Plaintiffs had been engaged in a number of property transactions as particularized in exhibit P-8.  Vivien gave explanations for these transactions and testified that none of these transactions were property speculation although the Plaintiffs did make some profit out of a few transactions.

57.  Mr Chang submitted that the indicia of a property speculator are absent here.  Counsel referred to the large amount of deposit paid, the use of personal names in the purchase as opposed to shelf company, the absence of any sale by the Plaintiffs as confirmor, the retention of a shop unit at Shun Tak Centre for rental income, the explanations given for the sale of the other properties in P-8, the putting of Po Garden flat on sale and its subsequent withdrawal from the market when problem arose in respect of the Property.

58.  On the other hand, Mr Ronny Wong referred to the last sentence in the affirmation drafted by Vivien for Terry’s signature in October 1998 (exhibit P-1) to show that the Plaintiffs had the saleability of the Property in their mind.  Counsel had cross-examined Vivien about this sentence and she said this sentence had no relevance.  Kim was also cross-examined on this and he said it was drafted from the perspective of Terry and the agent also had the sale of the Property in mind.

59.  Mr Wong also referred to the drafting as regards the inspection clause in the formal agreement to show that the Plaintiffs were keen to facilitate inspection by potential sub-purchasers.  Kim said in his evidence that the drafting was to avoid dispute as to what were reasonable time and he was hoping that he could bring his family to visit the Property from time to time pending completion.  He thought it would be a good idea to be able to make some weekend visits to check on the condition of the Property since it was located beside the sea and the salty air might damage the Property.

60.  On the balance of probabilities, I find the idea of 12 months’ completion came from the Plaintiffs.  I prefer the evidence of Terry and David to that of the Plaintiffs.  With respect, Mr Chang had placed undue weight on the significance of the less than 3 months’ completion provided for in the Kennedy Height offer.  As explained by Terry, the offer had a different negotiating history and the vendor had specified that long completion period would not be considered.

61.  I do not believe the Plaintiffs would agree to pay a higher deposit and forego stakeholding if they did not ask for a longer completion period.  With their education and professional background and their experience in dealing with properties, given their characters and shrewdness as demonstrated by their ways of answering questions in the witness box and the manner in which they prepared for the evidence in this case, they would surely bargain for a shorter completion period with a less deposit and stakeholding if they did not regard the long completion as beneficial to them.  Even though it was not an absolute necessity, the Plaintiffs would prefer to finance the purchase of the Property with sale proceeds from Po Garden.  Kim had also testified that they wanted to sell Po Garden quickly and that was why the Plaintiffs engaged several agents in that sale.

62.  Further, although the Plaintiffs did consider buying the Property for self-use, I find that they were also prepared to resell the same for profit if the price was right.  They were keeping their options open and if the market moved in the right direction and the profit was handsome enough, they would resell.  Vivien’s statement in the conversation at City Garden Hotel on 22 October 1998 (Bundle T(a) p.29 item 592) betrayed that the Plaintiffs were looking for bargains in the property market at the material time.  If they had no intention to resell whatsoever, I do not believe they would enter into the agency agreement with Centaline for the resale of the Property and were content to leave the keys with the agents even after the expiry of that agreement purely as a favour to Terry and David.  The contemporaneous computer records showed that there were discussions between the agents and Vivien regarding the conduct of the resale between March and April 1998.  I do not believe Vivien was merely acting out of courtesy in having such discussions with Terry.  Kim accepted in cross-examination that he would agree to resell if the price was right.

63.  The explanation given by Kim as to the drafting of the inspection clause is unconvincing.  I also agree with Mr Wong that the inclusion of a reference to saleability of the Property in P-1 betrays this was something in the mind of the Plaintiffs when they drafted this document.  This document was drafted by them without consulting Terry as to its contents.  Terry did not have any contributions in terms of its drafting.  The Plaintiffs’ intention behind this paragraph in P-1 is evidenced by Vivien’s own explanation of it at the meeting of 22 October 1998 captured at items 151 and 155 of Bundle T(a) p.8.  She said the paragraph could support a claim by the Plaintiffs for consequential loss due the inability to resell.  This reinforced Mr Wong’s submission.

64.  I do not find the indicia of speculators put forward by Mr Chang exhaustive or conclusive.  In other words, the absence of such indicia in the present case does not rule out the Plaintiffs purchasing the Property on a “半炒半住” basis as testified by Terry.

65.  In conclusion, I find that Terry had not made any representation of asking price as alleged by the Plaintiffs.  The Plaintiffs failed on the facts under this head of claim.

B(2)  The financial misrepresentation

66.  I find it more convenient to deal with the financial misrepresentation next since it is closely connected with the alleged asking price misrepresentation and the genesis of the term regarding 12 months’ completion discussed above.

67.  Like the asking price misrepresentation, the key factual issue here is whether the representation had ever been made.  There are however a number of sub-issues,

(a) whether the agents had made any statements to the Plaintiffs concerning the financial standing of the vendor;

(b) what precisely were the statements made by the agents;

(c) under what circumstances were such statements made, in particular whether the statements were made in the context of discussion about stakeholding of deposit;

(d) did the Plaintiffs rely on the statements of the agents in foregoing stakeholding; and

(e) whether the agents were aware or should be aware that the Plaintiffs would place reliance on such statements. 

68.  In Paragraph 11.1 of the Re-re-Amended Statement of Claim, the Plaintiffs pleaded the asking misrepresentation, the loss sustained by the Vendor due to the difference in price of acquisition and price of sale, the long completion period as matters of concern leading to the making of the financial misrepresentation by Terry.

69.  At the trial, the evidence of Vivien and Kim focused on the loss of the Vendor as prompting them to be concerned about the financial standing of the Vendor.  They said Terry represented to them at the meeting on 27 February 1998 at Po Garden the Vendor was a substantial company in good financial standing owning many luxury residential properties (including another house in Redhill) as well as an office at the Far East Finance Centre in Hong Kong.  According to them, Terry also told them that they knew the Vendor as Centaline had acted for the Vendor in many transactions and Simon knew the directors of the Vendor and got a sole agency for the Property.  Terry also said the loss arising from the Property was nothing to the Vendor.

70.  According to the Plaintiffs’ own evidence, stakeholding and deposits had not yet been discussed at that stage.

71.  Subsequently, when the discussion moved onto the question of stakeholding of deposit, the Plaintiffs testified that they had raised a suggestion of having 5% out of the 15% stakeheld.  The agents again assured them as to the wealth of the Vendor so as to persuade them to forego any stakeholding.

72.  The Plaintiffs said they believed the agents’ representation in view of the facts they put forward to support their assurance as to the wealth of the Vendor.  They did not feel there was any need to ask for details of the properties owned by the Vendor or to verify the financial standing of the Vendor by other means.

73.  The defence case is that no representation as to the financial standing of the Vendor had ever been made by the agents.  Terry said in his evidence that he and David did not know the Vendor or its directors.  The computer records only showed to them a contact person Ms Lam who was only a secretary and had no authority to make decision.  At all time, their intention was to pass the offer of the Plaintiffs to Simon for him to work on the Vendor.  Terry only learnt of the Vendor having business in mainland China on 28 February, the Saturday.  They were therefore not in a position to give the Plaintiffs any information about the financial standing of the Vendor and they did not do so.

74.  According to his evidence, when the land search was shown to the Plaintiffs, Terry had explained to the Plaintiffs that the Vendor probably had a negative equity in the Property.  He told the Plaintiffs that if completion was to take place within a relative short time like 2 months, the Vendor could agree to stakeholding of deposit.  However, as the Plaintiffs themselves proposed a completion period of 12 months with a price below the one that they said the Vendor might consider, they did not express any request for stakeholding nor seek any assurance regarding the financial standing of the Vendor.

75.  Mr Chang submitted that given the likelihood of the Vendor having a negative equity in the Property and the long completion period, it is inherently more likely that the Plaintiffs would have some concern over the financial standing of the Vendor.

76.  The Plaintiffs referred to the following as evidence corroborating the Plaintiffs’case,

(a) A letter dated 16 March 1998 from Edward Kwan & Co to the Plaintiffs stating as follows,

“We understand that given the estate agent’s assurance to you that the vendor is of good financial standing, you would not insist on the stakeholding arrangement and had hence agreed to the vendor’s request for releasing the further deposit to it when signing the Provisional Agreement.”

(b) The “Affirmations” of Terry and David of 22 October 1998 stating that they had assured the Plaintiffs immediately before the signing of the provisional agreement that “the vendor was of means and owned other properties in Hong Kong” and “the vendor also owned an office at the Far East Finance Centre” respectively.

(c) The recorded conversation between Vivien and Terry on 9 November 1998, the transcript of which appeared at Bundle T p.5-8.

77.  Edward Kwan acted for the Plaintiffs in the conveyancing transaction.  When he gave evidence, he was rather vague and general about what Kim told him in March 1998 about the alleged assurance from the agents as to the financial standing of the Vendor.  He was unable to tell this court what precisely such assurance was and what were the words used by the agents in making such assurance.  He admitted that he had no independent recollection of that apart from what had been set out in the letter.

78.  Mr Horace Wong attacked the accuracy of what were said in the letter of 16 March 1998.  Counsel submitted it was a letter written on a busy day and Mr Kwan accepted that what were said in the first paragraph of that letter was not a full and detail record of what happened as regards the proposed option to occupy the Property before completion.  Mr Wong also referred to the fact that in an earlier letter dated 12 March 1998, the solicitor asked the Plaintiffs to issue cashier order for the deposit in favour the vendor instead of its solicitors, indicating that, contrary to the evidence of Mr Kwan, it was accepted before 16 March that there would be no stakeholding.

79.  I am not convinced that I can brush aside what had been said in the letter of 16 March 1998 about assurance from the agents on the basis of the points canvassed by Mr Wong.  It was a letter written at a time when Mr Kwan had no reason to suspect that mortgagee action by the bank was imminent.  I consider it as evidence showing that Kim had told Mr Kwan that he had some sort of assurance from the agents.  However, given the lack of independent recollection by Mr Kwan as to what precisely was said, I do not think one can simply based on the letter to conclude that Terry did make the representations in the manner suggested by the Plaintiffs in their evidence.

80.  There could be many reasons why Kim and Vivien might have got the impression that the agents had given an assurance on financial standing and had told Mr Kwan accordingly.  However, whether what had been said by the agents constituted actionable misrepresentation depends very much on what was said precisely and the context in which the statement was made.  One must therefore focus on the reliability of the Plaintiffs’ testimonies on what happened at the meeting at Po Garden. 

81.  Based on my observations of the Plaintiffs in the course of the trial, I find them to be persons who have a tendency of falling into the trap of taking something for granted irrespective of what actually happened.  A good example is the insistence by Vivien that the offer had been rejected by the Vendor over the weekend a number of times by reference to what David said in conversations on 28 November and 15 December 1998.  I shall come back to this when I discuss the no decision representation.  It is quite plain that David was not saying that the offer had been rejected.  Rather he was saying that the deal had not been closed and they had to pursue the Vendor for a couple of days.

82.  Another example was Vivien’s evidence when she was cross-examined by Mr Ronny Wong about express instruction given by the Plaintiffs to the agents to report about every change in the course of negotiation.  At first she gave the impression that express instruction has been given.  On further pressing she revealed that it was only her belief that the agents knew the Plaintiffs expected them to do so (see p.544-545 of Trial Transcript).

83.  I shall discuss further below Vivien’s belief that the agents knew the Vendor would accept an offer around $31 million.  That provides a further example of her treating her own belief as the truth without an adequate objective basis to support the same. 

84.  The lack of objectivity could have distorted the collective memory of the Plaintiffs.  But if Terry did not say anything about the financial standing of the Vendor, what had happened between 27 February and 16 March to cause the Plaintiffs to labour under the belief that such an assurance had been given?

85.  For reasons given below, I do not attach much weight on the statements contained in the Affirmations of Terry and David.

86.  In the conversation on 9 November 1998, Vivien reiterated that Terry had told them the vendor had means and had other properties.  Terry said the information was supplied by Simon and colleagues in the commercial department.  Terry explained in the witness box that he had assisted the Plaintiffs in checking about the other properties owned by the vendor after they learnt about the mortgagee action.

87.  However, that was not the relevant point in time in the context of that conversation.  I have heard the tape recording and read the transcript of that conversation at Bundle T.  The relevant passages are at items 77 to 124.  It seems to me that both Terry and Vivien were talking about the time before the signing of the provisional agreement when Terry told her about the means of the vendor and ownership of other properties.  The expressions “初初” and “個陣時” could not have meant the period after they had learnt of the mortgagee action because at items 100 and 117, Terry and Vivien referred to Simon’s role in the transaction and at item 104, Terry referred to problems arisen subsequently.

88.  Mr Horace Wong contended that in view of the lack of knowledge on the part of Terry and David as regards the background of the Vendor, it is unlikely that they would invent something to mislead the Plaintiffs.  It was rather a simple decision of give and take.  The Plaintiffs wanted to have a long completion period and it was made known to them that the Vendor would not consider stakeholding for long completion.  Hence, the Plaintiffs had to accept the risk inherent in a long completion and did not ask about the financial standing at all.  Counsel also submitted that it is unconvincing to suggest the Plaintiffs could regard the alleged representation from Terry as satisfactory answer to their concern if they had any worry about the means of the Vendor.  Ownership of other properties is not evidence of means as the owner’s interest therein could also be negative equity.

89.  Mr Wong referred to the evidence of Simon and made the point that it is unrealistic to expect an estate agent to have accurate and intimate knowledge about the finance of a client.  Counsel referred to the evidence of Vivien to demonstrate that the Plaintiffs knew that the agents could not guarantee the financial standing of the Vendor.  On 13 January 2005, she testified as follows under cross-examination,

“Q. Well, madam, even assuming that you had been told that the vendor was of means as of 27 February 1998, what is there to guarantee his financial position 12 months afterwards?

A.   Yes, we are – we asked Mr Or and Mr Kang whether they were in a position to know about the vendor and the property and they confidently assured us that they were in a position to know and then they proceeded to give us details of that which I have told the court.  And, of course, if the vendor, with hindsight, had gone into bankruptcy on the tenth month of the transaction or unexpected to everybody’s surprise, then I think there would be reason for us to excuse Mr Or and Mr Kang for what they have told us.  But, with hindsight, we discovered that even on 27 February, the vendor was already insolvent to the extent of 95 million.  Well – and that was at the very time when they were assuring us even a loss of 20 million would be a small loss.”

Counsel placed specific reliance on the sentence underlined.

90.  I do not accept Terry had no knowledge at all about the background of the vendor.  In my view, the conversation of 9 November 1998 established that Terry had learnt something about the Vendor from his colleagues and communicated the same to Vivien prior to the signing of the provisional agreement.

91.  However, I find it less easy to decide whether the information concerning the means of the Vendor was given in circumstances as testified by the Plaintiffs.  As explained above, I find the term of 12 months’ completion originated from the Plaintiffs.  Could it be that the Plaintiffs, as suggested by Mr Horace Wong, regarded it as a matter of give and take and therefore made no further enquiries on stakeholding?

92.  On balance, I find it improbable that if the Plaintiffs had any great concern about the financial ability of the Vendor, they would just accept the words of the agents.  I agree with Mr Horace Wong that with their experiences and training, they should have no problem in appreciating a general statement that the vendor had means and owned some other properties was not much an assurance to guarantee the security of the deposit.  Vivien had operated an estate agency and Kim has been a solicitor.  Both of them had studied law.  They had previously been engaged in a number of property transactions.  I do not believe that they were so naïve as to regard an estate agent as being in a position to give accurate information concerning the financial soundness of a client even though it acted as the sole agent for the Property.  Further, had the Plaintiffs really been that concerned about the security of the deposit and the financial standing of the Vendor, I believe they would have asked for more details regarding the properties and attempted to check the net worth of the same.

93.  It is equally unlikely if Terry were asked about the means of the Vendor in the context of foregoing stakeholding, he would be so bold as giving an unqualified assurance that it would be safe to do so.

94.  I find that neither the Plaintiffs nor Terry had told this court the whole truth as to the circumstances under which Terry talked about the background of the Vendor.  I do not have reliable evidence as to the context and what was precisely said when such information was given.  Yet, I am able to conclude that it was not given when payment of deposit without stakeholding was mentioned at the Po Garden meeting.  I need not speculate but it is possible that the Plaintiffs regarded it as an acceptable risk to forego stakeholding in the light of what had been said by Terry concerning the Vendor in another context.  As such they subconsciously believed an assurance had been given.  Hence, Kim told Mr Kwan that to be the case.

95.  The Defendants also contended that the Plaintiffs failed to establish the falsity of the alleged representations.  Given my conclusion above, in ignorance of the precise context in which the information as regards the means and ownership of properties were given by Terry, I find it somewhat difficult to consider the question of falsity.  However, insofar as ownership of the properties was concerned, as Mr Horace Wong submitted, the Vendor had in fact owned some properties in 1997.  Those were sold in 1997.  The office at Far East Finance Centre was not owned by the Vendor but by an associated company.  It really depends on the context under which information as regards “ownership” was passed on in order to determine whether the statement was misleading and false.  The same applies to a general statement that the Vendor was substantial and had a lot of money.

96.  The statement about business connection in mainland China is neither here nor there.  The Plaintiffs did not adduce any evidence to prove the Vendor did not have such business connection.

97.  Given my above conclusion, I am not satisfied that the statements were made by Terry in circumstances under which he believed or should reasonably believe that the Plaintiffs would rely on the same in deciding not to require stakeholding of the deposit.

B(3)  The sole agency representation

98.  There is no dispute that Terry had told Vivien in a telephone conversation that Centaline had a sole agency from the Vendor regarding the Property.  The same was mentioned at the Po Garden meeting on 27 February 1998.  The factual dispute is whether the statement was correct.  If it is incorrect, the court will have to consider whether Terry made the statement knowing that it was false or was reckless as regards its accuracy.

99.  Centaline had produced a written sole agency agreement signed by the Vendor for 24 December1997 to 13 February 1998 in respect of the Property.  It was unable to produce a written agreement showing that sole agency had been renewed after 13 February 1998.  However, there was a contemporaneous computer entry on 26 February 1998 recording that the sole agency had been extended to 23 April 1998.  The entry was input by Simon, the agent who dealt with the Vendor.

100.  Mr Chang did not challenge the authenticity of the record although he did not accept its accuracy.  The entry was made before anyone in Centaline could foresee that there would be disputes between the Plaintiffs and Centaline on the existence of the sole agency.  The evidence does not suggest any reason why Simon would have any motive in making a false entry to that effect on 26 February 1998.

101.  Simon gave direct evidence about the renewal of the sole agency in February 1998.  He said the Vendor had agreed in principle to renew in early February and he proceeded to prepare the written agreement.  He was able to produce a draft renewal agreement contained in a floppy disk he managed to locate when he moved to a new office in 2000.  The disk was produced for inspection by the Plaintiffs.  There is no suggestion from the Plaintiffs that this had been subject to tampering.  The last saving date of the document as recorded in the disk is 5 February 1998.

102.  The draft agreement was for extending the sole agency from 14 February to 13 April 1998.  The price set out in the draft was $35 million.  Simon gave evidence that he had brought a copy of that renewal agreement to the Vendor’s office on 5 February 1998.  The person that Simon had been dealing with was not in the office and the agreement was left with a secretary.  It was on 25 February 1998 that Simon collected the signed agreement from the Vendor.  He then input the information into Centaline’s computer.  In so doing, he made a mistake of typing 23 April instead of 13 April.

103.  Simon gave the signed agreement to his supervisor Gary Lam.  He did not see it again.  When Centaline tried to locate the agreement for the purpose of this litigation, it cannot be found.  Gary Lam had left Centaline to study abroad and he only re-joined Centaline recently.  Given that and the lapse of time, and in view of the other evidence available, I am not prepared to draw any adverse inference as Mr Chang invited this court to draw by Centaline’s omission to call Gary Lam to give evidence. 

104.  The Plaintiffs mainly relied on some statements by Phoebe Chan [“Phoebe”] in conversation with Vivien and a letter dated 20 November 1998 drafted by her to discredit Simon’s account.  In a conversation of 20 November 1998, she referred to the Vendor approaching Centaline for renewal of sole agency but no document had been signed.  She also told Vivien that there was no written agreement with the Vendor when the Provisional Agreement was signed.  In her letter of the same date, she said, “We have information in computer recording that the Vendor orally suggested a renewal of appointing our Company as the sole agent again on 6 February 1998”.

105.  Phoebe was working in the Legal Department of Centaline in November 1998.  She handled the claim for refund of deposit by the Plaintiffs.  She did not have any legal training and she joined Centaline several months prior to November 1998.  She had several meetings and telephone conversations with Vivien.  Vivien recorded these conversations covertly.

106.  She had no idea as to why the question of sole agency was relevant as she did not regard it as material to the refund of commission.  In view of Vivien’s enquiry about the sole agency of Centaline, Phoebe made some enquiries to satisfy her.  Her inquiries only produced the agency agreement expired in February 1998.  There was a misunderstanding between Phoebe and Simon which led her to ask Gary Ng instead of Gary Lam for copy of the renewed agency agreement.  Gary Ng referred her back to Simon.  Simon thought she should get the document from Gary Lam instead of asking him repeatedly.  He was not particularly helpful.  Phoebe had also checked with Terry and learnt from him that there was a computer entry about the sole agency agreement renewed up to April 1998.  Phoebe therefore faced the difficulty that she could not produce the renewed agreement to Vivien although there was some evidence of renewal in the computer entry.

107.  At that time, Vivien pressed Phoebe quite persistently for confirmation as to the non-existence of the renewed agreement.  Her efforts in this regard were borne out by the recordings of her conversations with Phoebe.  Having had the opportunity of observing both Vivien and Phoebe giving evidence, it is quite plain to me that Vivien is much more domineering, calculated and overbearing.  It was quite plain from the transcript of the conversation at 6:00 pm on 20 November 1998 that Vivien was trying hard to press Phoebe to admit that there was no renewal.  Phoebe indicated several times she had no personal knowledge on the matter and she could not be very certain about whether there had been a renewal (see items 76, 78, 92, 94, 106 and 134).

108.  I accept the evidence of Phoebe in the witness box that she was trying to wrap up the query about the renewed agreement (which she regarded as irrelevant) and proceeded to settle the question of refund of deposit.  Not alerted by Vivien or anyone about the real purpose of the Plaintiffs in seeking the confirmation, she was therefore quite prepared to make some casual remarks that suggested the written renewal agreement had not been signed in order to end the discussion on the topic.  This was an easier solution for her at that time as compared with telling Vivien that the sole agency had been renewed though she could not produce the written agreement.  I am quite certain that the scale of her inquiry and the degree of precision in choosing her language would be quite different if she had been told that the Plaintiffs were contemplating litigation against Centaline for alleged misrepresentation regarding the existence of sole agency relationship.

109.  According to Phoebe, Simon had not unequivocally confirmed to her that the sole agency agreement had not been renewed.  I prefer the evidence given by Phoebe in the witness box to those statements by her covertly recorded by Vivien.  I also accept her explanation about the wordings of the letter dated 20 November 1998 and her entries made in the complaint file.

110.  I accept the evidence of Simon that there had been a renewal of the sole agency from 14 February to 13 April 1998.  There was no misrepresentation by Terry when he told the Plaintiffs that Centaline had a sole agency in respect of the Property.

111.  Further, given the computer entry, it is impossible to suggest that Terry was acting with a fraudulent intent in Derry v Peek sense when he told Vivien of the sole agency.  The suggestion that Terry and Simon put their heads together to make a bogus entry in the computer on 26 February is completely fanciful and devoid of any merit on the evidence.

B(4)  The no decision misrepresentation

112.  The Plaintiffs alleged the agents had misrepresented to them that the relevant director of the Vendor was in mainland China until 2 March 1998 whereas in fact the offer of the Plaintiffs had already been rejected several times before 2 March 1998.

113.  There is a dispute as to the identity of the relevant director.  The Plaintiffs’ case is that Li Wong and Yan Hong were the effective controlling shareholders of the Vendor and they were both in Hong Kong between 27 February and 2 March 1998.  It was also pleaded that they had repeatedly rejected the offer of $30 million from the Plaintiffs on 27 and 28 February and insisted on a price of $32 million.

114.  On the other hand, the Defendants’ case is that by 27 February, Li Wong and Yan Hong [“Yan”] were no longer in control of the Vendor though Yan Hong continued to act as the intermediary contact person.  The relevant decision maker was Yeung Leung Wan [“Yeung”] and he was not in Hong Kong until 2 March.  Yeung signed the Agreement on behalf of the Vendor.

115.  The documents filed with the Company Registry show that Li Wong and Yan had resigned as directors of the Vendor on 18 December 1997.  Yeung together with another person called Lin were appointed as directors on the same date.

116.  In the computer records of Centaline, there was an entry on 19 February 1998,

“SS: Can use tel. No. contact Mr Yeung (Mrs Lee change all share to Mr Yeung) If Mr Yeung not there, don’t leave message”.

117.  Simon gave evidence that on 19 February 1998, he was told by Yan that Yan and Li Wong had transferred their shares in the Vendor to Yeung.

118.  As regards the negotiation with the Vendor leading to the signing of the Provisional Agreement of 2 March 1998, the defence evidence is as follows.  The agents did not manage to contact the Vendor on 27 February as it was quite late by the time Terry and David got the agreement signed by the Plaintiffs.  Simon and David managed to contact Yan on 28 February and they were told that she had no authority to decide on the Plaintiffs’ offer of $30 million.  Yan told the agents Yeung was in the mainland and she would try to contact him.  The agents said they were prepared to go the mainland for the signing of the agreement if Yeung accepted the offer.  These were relayed to Terry who in turn informed Vivien.  There was however no more news from Yan on 28 February and 1 March.  Terry and David had waited for Yan at the lobby of her residence on 1 March without any success.

119.  According to Simon’s evidence, early in the morning of 2 March 1998, he talked with Yan over the phone.  At that stage, she said she had not yet been able to get hold of Yeung.  She added a remark that if the offer was at $33 million, it could be accepted.  As regards the offer of the Plaintiffs at $30 million, it would have to be decided by Yeung.  Yan also mentioned an offer of $31.5 million from another agency.  Simon thought it might not be a genuine offer as Yan did not tell him whether “the offer” came with a cheque.  After the conversation, he put the information into the computer of Centaline with the following entry,

“SS:  vendor call me 33 million can accept, market information On’s have price offer $31.5 million, please be quick, any offer can call me.”

120.  Simon and David went to the office of Yan later that morning.  They were told by Yan that a friend of Yeung had expressed interest in buying the Property at $30.5 million with one year’s completion and 20% deposit without stakeholding.  The message was relayed to Terry who was with the Plaintiffs at that time.  Terry informed the Plaintiffs accordingly.  The Plaintiffs then increased their offer to the same term, viz. $30.5 million, 20% deposit without stakeholding and one year’s completion.  This increased offer was communicated to Yan.  Yan indicated that Yeung might give priority to his friend’s offer but his friend had to inspect the Property at about 4:00 pm on that day.

121.  Terry and David waited at the Property at about 4:00 pm to see whether there was any inspection by the friend of Yeung.  Nobody turned up.

122.  Simon and David then went to see Yan and told her the friend did not turn up for inspection.  Yan said she would discuss with Yeung.  Later that evening, Yan informed Simon over the phone that she had talked to Yeung and Yeung accepted the Plaintiffs’ offer of $30.5 million.  Appointment was made for signing of the agreement by the Vendor at a restaurant that evening.

123.  Terry testified that throughout the process he had informed Vivien about the progress.

124.  The Plaintiffs relied on the following evidence to assert that Yan remained as the real controlling shareholder of the Vendor after her resignation as director,

(a)     Yan signed the sole agency agreement of 23 December 1997 on behalf of the Vendor;

(b)    Simon gave evidence that he took the renewal agreement to Yan for execution as owner;

(c)     Simon continued to contact Yan regarding the Property after 19 February including the preliminary enquiry by Terry regarding acceptability of $32 million, the Plaintiffs’ offer of $30 million;

(d)    Simon thought Yan to be a partner of Yeung and she told Simon to contact her and she would handle the matter as it was difficult to locate Yeung who was quite busy;

(e)     In a conversation on 15 December 1998, in response to Vivien’s suggestion that Yan could make decision, David said she could.

125.  In my judgment, the Plaintiffs failed to establish that Yan was the real decision maker in terms of the Vendor’s acceptance or rejection of the Plaintiffs’ offers of $30 million and $30.5 million.  The Agreement was executed by Yeung.  There is not enough evidence to suggest that the resignation of directorship by Yan and Li Wong was a sham.  Given that Yeung was not that easy to be located, I do not regard it as remarkable that Yan was given some limited authority in dealing with the Property, e.g. signing agency agreement.  The evidence showed that Yan had actually been given some idea as to the offer that Yeung would accept.  In this connection, I bear in mind Simon’s evidence of the indication of Yan that she could have accepted an offer of $33 million in the morning of 2 March 1998.  However, it does not necessarily follow that Yan could reject an offer of $30 million or $30.5 million on behalf of Yeung.  According to Simon, what she said was that she had to leave such decision to Yeung. 

126.  Simon’s reference to Yan as a “partner” of Yeung was obviously a reference in a loose sense.  The overall effect of the evidence is that Yan acted as an intermediary in dealing with the Property on behalf of Yeung.

127.  David’s response to Vivien on 15 December 1998 was clearly referring to the past if one read the conversation in its proper context.

128.  Mr Chang invited this court to infer on balance of probabilities that Yan at least had the authority to reject offers of $30 million or $30.5 million and this was what happened.  I do not regard it as appropriate to draw such inference in view of cogent direct evidence to the contrary from Terry, David and Simon.

129.  I accept the evidence of the Defence witnesses and find what they told this court about the process of negotiation with the Vendor is true and correct.  A significant difference between the Plaintiffs’ version and the Defence’s version of events is how the increase in the offer from $30 million to $30.5 million came about.  I have explained why I reject the Plaintiffs’ version.  I find the Defence’s version to be credible and supported by cogent evidence.

130.  In the conversation between Vivien and David on 15 December 1998, David had given a brief account of what happened in dealing with the Vendor.  He mentioned about the unfruitful waiting for Yan at the service apartment on that Sunday (viz. 1 March 1998), Yan’s intimation of a potential competing purchaser on Monday (2 March 1998), the agents’ visit to the Property at about 4:00 pm and the failure of the competing purchaser to turn up.  David had no idea whatsoever at that stage that the Plaintiffs were intending to sue him and obviously he had no reason to believe what he said would be captured and produced as evidence in the future.  It is therefore understandable that he had not been very precise in the use of language and had not covered every relevant detail.  However, on the whole, I find what he said to be in line with the evidence that I have heard from him, Terry and Simon in the witness box.

131.  In another conversation between David and Vivien on 28 November 1998, David mentioned Terry was at the office of Kim when Simon and him were talking with Yan about the property (Bundle T p.93).  This is consistent with what the agents testified about what happened in the morning of 2 March.

132.  Mr Chang cross-examined the witnesses extensively by reference to the computer records of Centaline.  Counsel suggested that in view of the prices that were mentioned in the entries between 20 February and 2 March 1998, the Vendor had no interest in an offer of $30 million or $30.5 million.  It was further suggested that the agents had got their heads together to induce the Plaintiffs to make an offer of $30 million and then procured the Plaintiffs to top it up to $30.5 million in order to test the bottom line of the Vendor.  Based on the entries on 2 March 1998, Mr Chang postulated that the agents knew that the Vendor would not accept $30 million on 2 March.

133.  This theory was categorically refuted by the agents in their evidence.  Those entries have to be considered in the light of the following background.  Based on all the entries, it can be seen that the Vendor was, as deposed by Terry, rather erratic.  It had changed its position quite frequently over the months.  Given the volatility of the Hong Kong property market, this is not too surprising.  Further, the prices in these entries were figures put forward for negotiation only.  Simon had accounted for the figure of $33 million he put into the computer in the morning of 2 March.  He could not remember anything about the entry by Eric on the same date regarding $36 million.  It may or may not be a reference to the wrong figure Simon put down on 26 February 1998.

134.  More importantly, the offer of $30.5 million was actually accepted by the Vendor in the evening of 2 March 1998.  This is evidence that the offer of $30 million could not be too wild off the mark.  One may ask rhetorically if the Vendor had regarded an offer of $30 million or $30.5 million so far from its target causing it to reject the same outright between 27 February and 2 March (as the Plaintiffs would have it), what had happened that caused the Vendor to change its mind in the evening of 2 March?

135.  In my view, it is more likely to be the case that an offer of $30 million was worthy of serious consideration but the Vendor was trying to see if there could be a better offer.  Hence, Yan had not rejected the offer and said it had to be decided by Yeung.  I have no means to tell whether Yan was really unable to contact Yeung prior to Monday and whether there was really a friend who would offer $30.5 million.  I am however satisfied that the agents were told that Yan would try to contact Yeung but they had no feedback prior to Monday morning.  I further find that at the meeting in the morning of 2 March Yan did intimate to Simon and David that there was such a competing offer and this information was relayed to the Plaintiffs through Terry.  I also found as a fact that the Plaintiffs increased their offer to $30.5 million with 20% deposit as a result.

136.  The Plaintiffs referred to David’s conversations with Vivien on 28 November and 15 December 1998 to assert that there had been rejections by the Vendor.  Whilst the conversations did show that an offer at the same price had been rejected by the Vendor about two months ago (Bundle T p.85 items 197-199), it does not follow that the Vendor would not change its mind given the changes in the property market and perhaps its own personal circumstances.  In respect of the transaction in question, what David had said was that it had taken several days to get the deal closed and they failed to procure signature of the agreement by the Vendor despite several visits.  I do not think he went so far as saying that the offer had been rejected a number of times (Bundle T p.87-88; p.93-94; p.125-130).

137.  There were also some self-serving statements by Vivien in the conversations between Terry and Vivien in VC-30 and VC-34 about Terry suggesting the offer be increased to $30.5 million on 28 February.  Plainly, Vivien was saying these things with litigation in mind whilst Terry did not pay too much attention to such remarks.  The principal subjects of those conversations were other properties and Vivien just slipped in these remarks to serve her ulterior purpose.  I have no difficulty in preferring the evidence of Terry in the witness box to whatever responses he had to such statements during those conversations.

138.  The statement signed by David on 15 December 1998 (mis-dated as 14 December), the calendar of events signed by Terry on 16 December 1998 and the Record of Events signed by David on 14 May 1998 contained statements contrary to the defence case.  I shall deal with these below.  Suffice to say here that I prefer the agents’ evidence in the witness box to those set out in these documents.

139.  On my findings regarding the process of negotiation with the Vendor, the agents had not misrepresented the position to the Plaintiffs.

B(5)  The illegal structure misrepresentation

140.  Mr Chang put this misrepresentation at the forefront of his case in his closing submissions.  The Plaintiffs said David had misrepresented to them that there was no unauthorized structure at the Property at the time of inspection.

141.  The evidence shows that there were a number of unauthorized structures at the Property.  The details are set out in a report by an architect dated 17 September 1998 at Bundle A1 p.114.  I do not need to go through these structures in details.  The most obvious ones were the karaoke room, the glass structure on the ground floor and the relocation of the kitchen.  It is common ground that the additions and alterations to the Property were quite apparent to the agents as well as the Plaintiffs (they having lived in a house of similar house type at Redhill before).  On 10 January 2005, I ruled that on the pleadings, it was not open to the Defendants to dispute that the structures were unauthorized.  At the trial, what the Plaintiffs actually complained about is that the agent had misrepresented to them that the additions and alterations had been duly approved.

142.  The Plaintiffs testified that at the time of inspection, David told them in response to their queries about the addition and alteration in the Property that the Vendor told him all regulations had been complied with at the time of renovation.  David assured them there was no problem with the alterations and no illegal structure.

143.  When Vivien was cross-examined, she told this court what precisely according to her had happened in these words,

“… Secondly, at the time, it was as stated in my statement, me and my husband asked Mr Kang firstly about the addition in the karaoke room and secondly about the alterations in the structure.  And Mr Kang had assured us that the vendor told him it had complied with all the regulations in its renovations of the property.  So by that, we assume, as we can tell in a way that there had been alteration, that even there is alteration, it would mean that such alteration would be required – would have been authorised, that the relevant consent would have been given.  We are not suggesting that we did not know that something had been changed.  We acknowledge there had been alteration but what we did not know is whether consent had been obtained.  But this was assured to us by Mr Kang.

Q.   Yes.  In fact that these were alterations had been expressly pointed out to you. 

A.   Yes, they pointed out to us they were alterations and he said the vendor told him that it had complied with all the regulations in his renovation of the property.”  

144.  Later on, Vivien told this court that David’s assurance was a blanket one without specifying any particular structure.

“I said Mr Or – Mr Kang told us that the vendor told him that the vendor had complied with all the regulations in his renovations of the property.

Q.   Yes.

A.   But I did not know whether structure A would require consent and structure B would not.  In blanket, we were told that whenever consent was necessary, it had been obtained.

Q.   So you did not even know whether consent would be required.

A.  We were told that when consent was required for a particular thing, it would have been obtained.

Q.   You were specifically told of that - that when consent was required, they had been obtained.

A.   Yes.

Q.   And that was specifically told to you by David Kang.

A.   Yes.

Q.   I see.  And – but David Kang did not actually tell you which was the structure which required consent and which was not.

A.   Yes, and we...

Q.   I see.

A.   Having believed him and having past dealing with him and trusted him, we did not feel the need to go into detail of asking him which particular structure required consent or, for that matter, we may not think he may not really have the complete information.”

145.  The second part of the last answer is inconsistent with Vivien’s testimony that the Plaintiffs regarded the issue of unauthorized structure as fully resolved by David’s assurance and they did not see any need to discuss further on the topic again at the meeting at Po Garden that evening. 

146.  Kim’s evidence was more specific.  He said David gave similar assurance on three occasions: in relation to the partition, in relation to the glass structure and when the parties were going up the stairs.  On each occasion, David told them the vendor confirmed that the structures were legal and authorized. 

147.  It is not suggested by the Plaintiffs that David had told them there had been independent professional verification about the legality of the additions and alterations to the Property.

148.  The Plaintiffs said they had emphasized to the agent their concern about the legality of the structures as they did not want to purchase a house with illegal structures that might have to be demolished later.

149.  On the other hand, the Defendants said it was Gary Ng who attended the viewing with the Plaintiffs in that afternoon and David was not there.  Gary had identified the unauthorized structures to the Plaintiffs and they did not raise any queries.  The Plaintiffs actually said they were quite familiar with the layout of houses at Redhill.  The question of unauthorized structures was mentioned again later that night at Po Garden because the Vendor required a clause waiving any objection to title based on unauthorized structures to be added to the agreement.  Kim suggested an alternative by adding certain words to Clause 5 in order to avoid problems that might arise in mortgage.  Terry and David thought since Kim was a lawyer, the additional words should serve the purpose.  In any event, the clause would have to be considered by the Vendor and it was up to the Vendor to decide whether the alternative proposal was acceptable.

150.  The first principal sub-issue is the identity of the agent who viewed the Property with the Plaintiffs in the afternoon of 27 February 1998.  The defence case is that Gary Ng was the agent who accompanied the Plaintiffs to view the property on 27 February 1998.  Terry and David were unavailable due to an engagement in Queensway.  On the other hand, the Plaintiffs said it was David who conducted the viewing with them on that day.

151.  There is no evidence from the Plaintiffs as regards misrepresentation by Gary Ng at the viewing.  The pleaded case of misrepresentation regarding the unauthorized structures founded solely on representations by David, see Paragraphs 10, 24.2.1 and 24.2.6 of the Re-re-amended Statement of Claim and my Reasons for Decision of 20 March 2006 Para.37.

152.  Likewise, there is no evidence from the Defendants as regards Plaintiffs being informed of the unauthorized structure by David at the viewing although Terry said the question of unauthorized structure was brought up again during the meeting at Po Garden at night on 27 February 1998.

153.  Hence, if the finding of this court were that Gary Ng was the agent who conducted the viewing as opposed to David, the Plaintiffs’ claim based on misrepresentation regarding unauthorized structures must fail.  If the finding were that David was the agent who conducted the viewing, the court will have to consider what had been said by him during the inspection and whether what happened at the Po Garden meeting had any effect upon the alleged misrepresentation by David during the viewing.

154.  Both Plaintiffs gave evidence about the viewing.  Terry, David and Gary Ng also testified on the topic, the formers giving evidence that they were not present and arrangement made with Gary Ng to conduct the viewing whilst the latter confirming that he was the agent who did the viewing with the Plaintiffs.  There were several documents procured by the Plaintiffs from Terry and David in which they confirmed that David was present at the viewing.  I was also referred to the transcripts of some taped conversations between Vivien and David.

155.  An important independent and objective piece of evidence about the identity of the agent involved in the viewing is the visit record kept by the management office of Redhill at C248.  That document recorded Gary Ng’s identity card number and the registration number of his car for that visit.

156.  The Plaintiffs suggested that Gary Ng acted as the driver driving David there for the purpose of the viewing.  That was refuted by Gary Ng.  He was the supervisor of David and it is to say the least extraordinary for a supervisor to play the role as a driver of his subordinate.  Mr Chang suggested in cross-examination that Gary Ng was on his way to Redhill to inspect other units and it was therefore quite plausible for him to give David a lift.  That suggestion was again refuted by Gary Ng.

157.  The entry record showed that the entry regarding Gary Ng was made together with that of Kim.  This was inconsistent with Gary Ng’s recollection that he waited for the Plaintiffs at the Property instead of outside the main entrance.  I take this into account in weighing the evidence.  Having regard to all the evidence, I believe in this respect there is a lapse of memory on Gary Ng’s part which is not surprising given the time between the event and the trial.  However, I do not regard such mistake as undermining the credibility of his evidence regarding his role in the viewing.

158.  The entry record was retrieved from the management office by the parties in December 2001.  This means when the defence put forward Gary Ng as the agent conducting the viewing in a letter dated 19 October 1999 from the Defendant’s solicitors, they did not have that record to support their case.  It was in fact the Plaintiffs’ solicitors who first made an enquiry on 17 April 2000 with the management office of Redhill about the entry record.  Gary Ng only approached the management office through solicitors on 25 May 2001 for such record.

159.  One of the attacks by Mr Chang against the defence case on this point is the lack of reference to Gary Ng prior to 19 October 1999.  However, the letter of 19 October 1999 was the first substantive response by solicitors for Terry and David to the very lengthy demand letter of the Plaintiffs’ solicitors of 8 July 1999.  I do not attach great significance to the failure of Terry and David to refer to Gary Ng at the Dynasty Club confrontation or in their earlier conversations with Vivien and their mistakes about that in their witness statements.  In the earlier conversations, the agents simply had no inkling that the Plaintiffs were going after them and Vivien had deliberately misled them as to the significance of the documents they were requested to sign.  They were not forewarned about the confrontation and it was quite understandable that the agents needed to check into the details before giving their response to such detail and serious allegations about events more than one year ago.  In any event, Gary Ng was not involved in that confrontation.

160.  The Plaintiffs tried to discredit Gary Ng by reference to his failure to recognize Vivien in late 2000.  I do not find such failure to be remarkable.  By that time, the viewing of the Property took place more than two years ago.  Gary Ng did not have further dealings with Vivien after the viewing.  Vivien was introduced to Gary in 2000 as 曾太. 

161.  Mr Chang said Gary Ng’s evidence of what happened at the viewing lacked some details like how he identified the car coming, how he introduced himself, he could not remember whether he gave a business card to the Plaintiffs and whether he brought along a floor plan.  On the other hand, Mr Wong submitted that he gave other details like the baby was there and it was raining.  In m view, it would not be too helpful to compare what he remembered with what he did not.  It is common experience that when one tries to recall events taking place long in the past, different people remember different things in terms of details.  I do not regard the matters that Gary Ng could not remember as sufficiently significant to cause this court to doubt his veracity.

162.  Counsel also invited the court to disbelieve Gary Ng as his testimony about the reaction of the Plaintiffs to his explanation about the illegal structures was not logical.  According to Gary Ng, they told him they were familiar with the layout of Redhill properties as they had lived there before.  Counsel submitted that it would be natural for the Plaintiffs to ask for more details if they had been told so.

163.  Whilst I agree that usually an intended purchaser would like to find out about the details regarding illegal structures, there are some special circumstances in the present case which undermine the force of this submission.  First, Gary Ng’s role in that afternoon was only to show the Property to the Plaintiffs and it was the expectation of everybody that the detail follow-up would be done by Terry and David later.  Second, according to Gary Ng’s evidence, he only pointed out to the Plaintiffs that the glass structure and the karaoke room were unauthorized and the kitchen had been relocated.  He said they were not able to go into the karaoke room because he did not have its key (the Plaintiffs also testified to that effect).  He said those were obvious alterations and indeed they must be (as confirmed by the evidence of Vivien).  Hence, there was not much he could say by way of further details.  Third, the evidence shows that illegal alterations were quite common in Redhill and the Plaintiffs were aware of that.  This was mentioned in conversations between Vivien and David.  Fourth, the Plaintiffs were experienced in property dealings and were indeed familiar with the layout of this house type as they had lived in a similar house before.

164.  I shall discuss below as regards the apparent lack of follow-up enquiries by the Plaintiffs in respect of the approval for the alterations.  Suffice to note here it is an indication that the agents did not give any assurance that consent had been given.  A purchaser would not ask any question about consents if he has been told that the structures were unauthorized.  In contrast, if he had been told that consents had been given, it would be natural to ask for more information and evidence regarding the consents. 

165.  Mr Chang suggested that a purchaser might ask about the risk of demolition, the cost of such and the effect of that on mortgage application.  I do not think these are questions that an agent could usefully answer and the Plaintiffs, given their backgrounds, should have appreciated that.  It depends on a lot of factors.  For example, the cost depends on how the reinstatement works were to be done and the requirements of the owner.  The risk of demolition depends on the enforcement policy and efficiency of the management office as well as the Building Authority and these could vary from time to time.

166.  Counsel also referred to possible queries regarding adjustment of price on account of illegal structures and demolition notices.  As Gary Ng was only doing the inspection of the Property and the rest of the transaction was handled by Terry and David, I do not find it surprising that no such queries were raised that afternoon.

167.  All in all, I do not regard the evidence of Gary Ng about the response of the Plaintiffs upon learning there were illegal structures at the Property to be inherently incredible.

168.  By the time of trial, Gary Ng was no longer working for Centaline.  There is no suggestion as to how he would benefit from lying in the witness box.  Mr Chang made some fainted allusion to his sharing in commission.  This was not explored with Gary Ng in his testimony.  But if he had any share in the commission of this transaction, it would have been paid way back in the past. 

169.  Gary Ng did not have any recollection of Terry reminding him to inform the Plaintiffs about illegal structures.  For reasons given later, I find that the Vendor had not given any specific instruction to the agents about illegal structures.  I find that Terry had not reminded Gary Ng.

170.  On the whole, I find Gary Ng to be a credible witness.

171.  The Plaintiffs gave detail evidence about the viewing and David misrepresenting to them consent had been obtained in respect of the illegal structures.  I have reservations about their credibility in this respect.  If they regarded consents for alterations as material to their decision whether to enter into negotiation about the purchase of the Property as they would have this court to believe, I find it incredible that they would regard some general oral statements from an agent as sufficient to, using Vivien’s expression, resolve the matter.  On their evidence, they did not even have any idea whether the consent was from the management office or the Building Authority.  As highlighted earlier, Vivien testified that the Plaintiffs did not think David had complete information about the unauthorized structures.  How could they be content with a general assurance from him?  With their training and experience, and given their characters as demonstrated by their subsequent conducts in getting evidence and pursuing this litigation, I believe they would have asked David or Terry for written evidence of such consent.

172.  Neither did they instruct Mr Kwan to obtain evidence of consent from the Vendor regarding these alterations.  According to Mr Kwan, Kim had instructed him to include a clause in the formal agreement providing a warranty that there was no unauthorized structure in or structural alteration of the Property.  But that is not the same as seeking evidence of consent.  The Plaintiffs were anxious to tell this court that in the absence of consent, they would not go ahead with the transaction.  Hence, in view of the scale of the alteration, there was every reason for them to seek some verification before proceeding further.  The signing of the Provisional Agreement could not be a reason for not making the enquiries or not telling Mr Kwan about the same.  On the Plaintiffs’ case, there was nothing in the Provisional Agreement which prevent them from backing out from the transaction if they found out that there were unauthorized structures in the Property.

173.  Had there been representations from the agents that consents had been obtained for alterations as substantial as those in respect of the kitchen and the glass structure and had that been a major concern on the part of the Plaintiffs, I believe instead of regarding such concern resolved by the representations Kim would have consulted Mr Kwan about it.  Mr Kwan would have, in addition to the inclusion of such warranty in the formal agreement, sought evidence of consent from the Vendor’s solicitors.  He would have also made enquiry with the management office about those structures when he wrote to them on 11 March 1998.

174.  In my judgment, the absence of any follow-up inquiry on the part of the Plaintiffs as regards the alleged consent is wholly inconsistent with the Plaintiffs’ case.

175.  The Plaintiffs relied on the taped conversation between David and Vivien on 14 May 1999 (“VC-38”) as evidence of admission by David that he was the agent who conducted the viewing.  Having listened to the tape and read the transcript, in particular the relevant part of the conversation at items 131 to 147 at Bundle T p.180, I do not regard that as a reliable unambiguous admission.  The first reaction of David (at items 131 and 133) was that he did not conduct the viewing.  Vivien continued to prompt him and David finally acceded to her request to sign the document with some hesitation.  Bearing in mind the circumstances under which the conversation was conducted and what I shall say later about the Plaintiffs’ evidence collection exercise, I prefer the evidence of the agents in the witness box to this so-called admission as regards the identity of the agent who conducted the viewing.

176.  In my view, David’s response to Vivien’s inquiries about unauthorized structures in two earlier conversations on 28 November 1998 sheds more light on this sub-issue on identity.  The relevant part of the transcript is at items 184 to 187 at Bundle T p.84 and items 70 to 103 at Bundle T p.107-8.  After getting an admission from David that he knew there were unauthorized structures at the Property, Vivien specifically asked David about his duty as agent to inform the purchaser of the same.  David readily agreed that the agent would have such a duty and went on to discuss with Vivien about their lack of knowledge regarding consent at the time of negotiation.  Had David been the agent who conducted the viewing and had misrepresented to the Plaintiffs regarding the consent for the unauthorized structures, having been alerted by Vivien to his duty as agent, it is highly unlikely that he would give such forthcoming responses in that conversation.

177.  Mr Chang emphasized that it was unlikely that Kim and Vivien could have mistaken Gary Ng for David and there was no reason why the Plaintiffs would choose to accuse David instead of Gary Ng making the misrepresentation had the latter been the agent conducting the viewing.

178.  In effect, the Plaintiffs alleged that Gary Ng, David and Terry put their heads together after they learnt of the Plaintiffs’ claims to conjure up this story of Gary Ng conducting the viewing to discredit the Plaintiffs.  However, as mentioned earlier, at the time when the name of Gary Ng was put forward, the entry record was not obtained and there was no independent objective evidence to support one version or another.  In fact, the documents signed by David and Terry at Vivien’s request were available to the agents at that time and they were evidence pointing against the defence case.  The tapes were not yet disclosed and without those, the documents constituted quite formidable evidence.  A concoction as regards the identity of the agent involved in the viewing may very well backfire in the wake of that.

179.  It is perhaps not too useful for this court to engage in the speculation as to the real reason behind the differences between the parties’ case.  Human minds and memories are so complex that it would be impossible for a judge with the limited information and expertise available in a trial to have a ready answer to each and every question as to the motive of a witness in testifying in a particular way.  I simply have no means to tell whether the Plaintiffs might or might not have forgotten about the identity of the agent involved in the viewing at the time when Vivien embarked on her evidence collection exercise.  I have to assess the weight of the evidence based on the materials before me.

180.  The Plaintiffs adduced evidence from a bank manager to support their case.  Mr Choy said, in the course of cross-examination, that Kim had told him that he was misled into the purchase of the Property.  He said Kim told him that the unauthorized structures were quite substantial.  I do not find his evidence on this point to be of much assistance in resolving the disputes between the parties.  To start with, Mr Choy understandably did not have a clear recollection as to what was said precisely.  As shown in his re-examination, he had some hesitation as to whether the word “misleading” was used.  Also, he could not shed light on how Kim was said to have been misled by the agents as regards unauthorized structures.  There is also some confusion in his evidence about the stage at which the problem regarding unauthorized structures was mentioned.  In his cross-examination, he said it was mentioned when Kim asked him to make a witness statement (see Trial Transcript p.878P).  In re-examination, he took up the suggestion of Mr Chang and said it was at the time of Kim’s complaint of being misled.

181.  Taking to its highest, his evidence only showed that Kim was under the belief that he had been misled.  Such belief could be justified or unjustified.  Even if it is justified in a general sense, the grievance might not be actionable or not actionable by way of the cause of action presently formulated.  I have to focus on the evidence as regards the dealings between the agents and the Plaintiffs to determine whether any misrepresentation as alleged by the Plaintiffs had been made. 

182.  I prefer the evidence of Gary Ng to that of the Plaintiffs.  On the balance of probabilities, I find Gary Ng to be the agent conducting the viewing with the Plaintiffs and David was not present on that occasion.

183.  However, as regards what happened at the Po Garden meeting, I do not accept the defence’s case that a request was made for a specific clause to be included in the provisional agreement regarding unauthorized structures.  There is compelling evidence showing that the Vendor did not ask the agents to insert such a clause.  First, the Vendor did not object to give a warranty in Clause 14(5) of the formal agreement that there was no unauthorized structures in or structural alteration to the Property.  Had the Vendor been so mindful of the problem regarding unauthorized structures, it is inexplicable why such a clause was agreed.

184.  Second, in his taped conversations with Vivien on 28 November 1998, David told Vivien quite categorically that the Vendor had not told them about the unauthorized structures (Bundle T p.84 items 184 to 185). David further told Vivien rather gratuitously that the Vendor might not be aware of the unauthorized structures since those were done by the previous owner (Bundle T p.107 items 81 to 83).

185.  I take my rejection of the evidence of Terry and David about the clause on unauthorized structures into account in assessing the weight of their evidence and that of the Plaintiffs.  Given my reservations to the Plaintiffs’ evidence, I am unable to infer from my rejection of Terry and David’s evidence on this point that the agents had made the misrepresentation as alleged by the Plaintiffs.

186.  There are statements in the documents signed by the agents supporting the Plaintiffs’ case.  For reasons given below, I do not find such evidence reliable.

187.  On the whole, I am not satisfied that the agents had told the Plaintiffs that all necessary consents for the alterations at the Property had been obtained.

C  The documents signed by the agents and the Plaintiffs’ evidence collection exercise

C(1)  The general background and approach in dealing with admissions

188.  I have mentioned about the documents that Vivien procured Terry and David to sign in her evidence collection process in my discussion on the respective misrepresentation.  I have given due regards to these documents and the taped conversations produced by the Plaintiffs in my deliberation on the evidence.  I find it more convenient to discuss about these evidence under a separate heading.  I shall give my analysis on such evidence.

189.  It cannot be disputed that David and Terry were in the dark as to the real purpose of Vivien in procuring them to sign these documents.  Vivien gave them some false excuses as to why she needed them to sign these documents.  Vivien did not indicate that the Plaintiffs were considering legal proceedings against Centaline or the agents.  Neither did she inform them specifically that these statements were intended to be used in proceedings against them or Centaline.  They were also in the dark as to their conversations with Vivien being taped.  The agents first learnt of the Plaintiffs’ allegations against them at the confrontation at Dynasty Club on 5 July 1999.

190.  On the other hand, the Plaintiffs embarked on this exercise after they had obtained legal advice on the possible causes action against Centaline and its employees.  The Plaintiffs were of the view that they needed to have more evidence on the misrepresentations before they launched their claims.  In crude terms, Vivien tried to obtain statements from Terry and David to provide the Plaintiffs with some useful evidence in advancing their case.  To achieve that, and to make sure that what the agents said would be useful to the Plaintiffs, the Plaintiffs drafted some documents and presented the same to the agents for signatures.  In order to procure their co-operation, Vivien did not inform the agents of the real purposes of the documents and approached them on the pretext that her friends were interested in some other properties. 

191.  Although defence counsel made trenchant attack against the manner in which the documents were procured and the conversations were taped, they did not challenge the admissibility of the evidence.  With respect, counsel are correct to accept the admissibility of the evidence in view of Jones v University of Warwick [2003] 1 WLR 954.  Even assuming that this court has any discretion to exclude evidence improperly obtained in a civil trial (such assumption may not be correct since we do not have the equivalent of Rule 32.1(2) of the English Civil Procedure Rules in Hong Kong), the ultimate consideration is to have a fair trial.

192.  In the present case, whilst it can be said that the parties were on unequal footings when the conversations were taped and signatures of the documents were procured, I am not sure if one can draw an analogy with cases of covert surveillance.  Terry and David knew that they were talking to Vivien and signing documents for her.  The unequal footing lies in the careful scheming on the part of the Plaintiffs in preparing the documents to support their case and procuring signatures for such documents on the one hand and the obvious ignorance on the part of the agents as to what the Plaintiffs were driving at and their consequential thoughtless signing of the documents on the other.

193.  In a criminal trial, statement obtained by a person in authority without caution is an infringement of the fundamental right against self-incrimination.  However, such consideration does not arise in a civil trial.

194.  In my judgment, the court must have regard to the circumstances under which a statement against interest was obtained in assessing the weight that could be attached to the same.  An admission against interest is often regarded as more reliable because it is common experience that a person will exercise more care in ensuring the accuracy of a statement if he knows it is intended to be used against him.  If the statement was obtained by misleading tactics, so much so that the statement maker was not aware of the possibility of the statement being used as evidence against himself, the court will naturally place less weight on such statement than a statement made with full knowledge that it could be used against the maker.

195.  Further, it is not unknown that a person could make a wrong admission due to carelessness, wrong recollection or other reasons.  In some circumstances, an admission prepared by others for the maker’s signature may not even worth the paper on which it is written.  The court must enquire the extent to which the maker understands and adopts the contents of the document as his statement and the degree of care he exercises in checking the accuracy of the contents before he signs the same.  The state of knowledge of the maker, the time that he is given to consider the statement, the understanding of the maker as to the contents, the solemnity of the occasion at which he is asked to sign, the inducement offered (if any) for his signature, the influence exercised by those around him to procure his signature are some of the relevant factors to be taken into account.  Depending on the circumstances of the case, there could be other material factors that the court must take into account in assessing the weight of an admission.

196.  Hence, the court will not regard an admission as conclusive without consideration of the circumstances under which it is obtained.  This approach will redress the inequality generated by an admission obtained by misleading tactics.  The court will only give such weight to an admission as it considers appropriate in the light of such circumstances.  There is no unfairness in admitting the admission as evidence.

197.  The same applies to oral admissions made in the course of conversations.  Although there is no question of someone else saying things on behalf of the maker, the court will be alert to leading questions.  Very often, an answer given to leading question in a casual conversation on a subject which is only of marginal significance to the speaker may not be absolutely accurate. 

C(2)  The “Affirmations” of 22 October 1998

198.  These documents were signed at the coffee shop of the City Garden Hotel.  There is a dispute about whether Vivien had told Terry that she wanted the agents to sign documents about the transaction regarding the Property in the telephone conversation making the appointment at City Garden Hotel.  Terry said he was not so told.  He said at that time, Vivien had asked him to look for properties and the appointment was for discussion of properties.

199.  On the other hand, Vivien claimed she had told Terry that the purpose of the meeting was for the agents to confirm some facts which the agents had stated at the time of the Plaintiffs making an offer to purchase the Property.  She said she had asked the agents for their identity card numbers to be put on the affirmations and she told Terry that a solicitor would act as a witness.

200.  The conversation between the parties at the City Garden Hotel meeting was recorded on “VC-1”.  Even though it is not conclusive, on balance I find the recorded conversation to be more consistent with Terry’s evidence.  First, there is no reference to the previous request made on the phone for documents to be signed.  Had such request been made, it would be natural for Vivien to recap that when she presented the documents to the agents. 

201.  Second, the recorded conversation clearly showed that Terry had intended to bring a list of properties to Vivien at the meeting.  Third, a lot of the discussion at the meeting revolved around the property market.  In contrast, the time spent on the contents of the documents was relatively minimal.  If the common purpose of the meeting was for confirmation of some facts as represented by the agents at the time of the offer, it is likely that the agents would be more on guard instead of subscribing their signatures to the documents as casually as they did on that occasion.  The tape had been played at the trial and the agents spent only about 20 to 25 seconds to read the documents after they were produced by Vivien. 

202.  Fourth, the taped conversation at the meeting showed that Vivien had been rather opaque in explaining the purpose of having the agents’ signatures of the documents.  She said it was for keeping a record that might be useful in the future (Bundle T(a) p.7 items 133 and 143).  In explaining the contents to the agents, she said it mainly referred to sole agency, land search and company search conducted, identity of owner, inspection and furniture (Bundle T(a) item 144) and the focus was on the vendor and to claim for consequential loss due to the Property being rendered not saleable (Bundle T(a) items 151 and 155).  Had Vivien told Terry earlier in the telephone conversation that the agents were expected to confirm statements made by them at the time of offer, she would have no fear to be more forthcoming at the meeting of 22 October 1998 in explaining the main points in the documents.

203.  Further, Vivien tried to bolster her credibility by reference to the identity card numbers.  However, there was a mistake in the document prepared for Terry.  His identity card number was wrongly typed as Gxxxxxx(7) as opposed to Gxxxxxx(9).  The identity card numbers of the agents also appeared in the provisional agreement of 2 March 1998.  The identity card number for Terry in the agreement could easily be mistaken as Gxxxxxx(7).  Had Vivien specifically asked for identity card numbers from the agents for inserting into the documents, it is unlikely that such a mistake would have been made.

204.  In this respect, I prefer the evidence of Terry to that of Vivien.  I find that the agents were not told of any request to sign the documents when the appointment was made for the meeting.  The agents went there to discuss with Vivien about properties.

205.  In any event, it is not disputed that the agents had not been given any opportunity to read the documents prior to the meeting.  In other words, they were not given any chance before the meeting to consider whether anything in the documents needed to be verified or checked.

206.  Another factual dispute concerning the circumstances leading to the signatures of these documents is whether Terry and David had been told that a solicitor would act as a witness.  Vivien testified that they were told in the telephone conversation making the appointment.  It follows from my finding above that I reject her evidence on this point.  This conclusion is reinforced by the fact that the agents were about to proceed to sign the documents shortly after they were produced without waiting for the arrival of the solicitor and when Vivien stopped them, she did not remind them of she having told Terry over the phone about a solicitor being present.

207.  The transcript showed that Vivien did not tell Terry and David during the meeting that a solicitor would act as witness.  Although Vivien initially testified otherwise, she accepted the transcript to be the accurate record in the end.  Had she told Terry earlier over the phone that a solicitor would act as a witness, there was no need for her to refer to Edward Kwan cryptically as a friend during the meeting.

208.  The transcript also showed that Edward Kwan was in a hurry (see items 227 and 273 at Bundle T(a) p.12 and 14).  He did not introduce himself to Terry and David.  As soon as he arrived, he asked them to sign the documents.  He did not go through the documents with the agents although he did ask rather perfunctorily if any explanation is required after the agents signed.  He did not even bother to fill in the jurats before the documents were signed.  Nobody had told the agents they were on affirmation when they put their signatures on the documents.  Vivien and Edward Kwan regarded the words and “affirmation” and “affirm” as sufficient notice for that purpose.  The agents testified they did not know the legal implications of these words.

209.  In the present context, it is not necessary to decide whether the documents could properly be regarded as affirmations although Mr Horace Wong made a number of criticisms regarding the manner in which the documents were signed based on the formal requirements of affirmations.  I would take this opportunity to remind those administer oath or declaration or affirmation the importance of the formal requirements as explained in R v Low Robert Eli [1996] 4 HKC 125 and the duty to make sure the person signing the document understands fully what he is swearing, see Hardy Kowara v Headwell Investments Ltd  HCMP 2701 of 1994, 9.12.1994, Para.18; Desmond Yiu Chown Leung v Chow Wai Lam William CACV 223 of 2003, 7.9.2004, Para.45.

210.  In R v Schultz (1922) 69 DLR 267, a decision of the Saskatchewan Court of Appeal cited and applied by Sears J in R v Low Robert Eli, the following was said,

“The mere fact that it was signed by accused does not make it a solemn declaration.  The written statement by the commissioner that it was ‘declared before him,’ is not true.  The essential requirement of the Act is not the signature of the declarant but his solemn declaration made before the commissioner.”

211.  The making of an oral declaration or affirmation serves to enhance the solemnity of the occasion and the seriousness of ascertaining the truth of the contents of the documents before one subscribe to it by signing.  It is not disputed that Terry and David were not asked to make an oral affirmation before Edward Kwan.  The solemnity of the occasion had not been impressed upon them.  They were not even told that the documents could be used as evidence in court proceedings, let alone proceedings against them.

212.  Vivien’s professed purpose of obtaining the documents were to keep a record for future use.  From the transcript, it can be seen that Vivien had directed the focus of discussion relating to the Property on making claims against the Vendor.  She enquired about the progress of Centaline’s claim for commission against the Vendor.  When she mentioned about the keeping of record, she elaborated by saying the Plaintiffs hoped to claim against the Vendor (see items 133 to 143 at Bundle T(a) p.7).  Later on  (at item 151 at Bundle T(a) p.8), Vivien said specifically that they would mainly focus on the Vendor.  As they were waiting for the arrival of Edward Kwan, Vivien talked with the agents about difficulties in locating the Vendor.

213.  Vivien attempted to justify this in the witness box by saying that the Plaintiffs genuinely wished to pursue against the Vendor and the documents would assist in that.  This is obviously untrue as the Plaintiffs had already obtained a default judgment on 21 October 1998.  Vivien eventually had to admit that the Plaintiffs were targeting against the agents when their signatures to these documents were procured.

214.  I find that Terry and David had no inkling that these documents were to be used against them when they signed the same.

215.  As mentioned, there is no requirement of a caution being administered before an admission can be admitted as evidence in a civil trial.  However, the misrepresentation as to the real purpose of the documents means that the agents did not have their self-interest in mind when they signed the same.  In the circumstances, the usual consideration for attaching greater weight to admission against self-interest does not apply. 

216.  As regards the contents, Vivien did not touch upon the crucial points in her explanation, viz. the representations of the agents on the means of the Vendor and the structures being authorized.  She said in cross-examination that it was a part explanation and the agents had the documents to read for themselves.  She thought that would be sufficient.

217.  However, it is apparent that the real objective of Vivien was to secure admissions regarding the representations on the means of the Vendor, ownership by the Vendor of its office and the legality of the structures.  She conveniently steered clear from those in her explanation.

218.  Vivien also suggested that the agents had more than 25 seconds to read the documents whilst they waited for the arrival of Edward Kwan.  However, the transcript showed that the agents were ready to sign before Vivien called Edward Kwan to come along.  This was in fact confirmed by Vivien in her evidence.  After the brief pause of about 20 to 25 seconds, the agents engaged in conversation with Vivien.  I preferred the evidence of the agents that they only briefly glanced through the documents before they signed the same.

219.  The lack of care on the part of the agents in signing the documents is hardly surprising given what they were led to believe to be the purpose of the documents and the lack of solemnity of the occasion.  After all, it would have been quite obvious that an action against the Vendor was a long shot. 

220.  As submitted by Mr Horace Wong, the documents were drafted in a way that it would not be easy for the agents, within the short time they had spent on reading the documents, to appreciate the potential incriminatory statements amongst other innocuous ones.  This was particularly so when Vivien had specifically directed their attention to the innocuous parts.

221.  The agents were asked to sign documents recording something happened more than half a year ago.  They had not been given any advance notice and they obviously did not exercise too much care in verifying the contents.

222.  The Plaintiffs said the agents could have refused to sign if they were not happy about the contents.  However, Vivien had offered bait to them by way of her expression of interest in some properties.  Terry and David would not want to upset Vivien by refusing to sign some documents that they regarded as harmless.

223.  Mr Chang emphasized that Vivien had sent copies of the documents back to the agents by registered post.  In the covering letters, Vivien had highlighted the incriminatory parts and stated that the Plaintiffs might use the documents against any party.  Had the agents had any reservations about the contents, they could have raised with Vivien subsequently.  Counsel submitted the fact that they did not do so is an indication of their acceptance of the truth of the contents.

224.  Terry and David testified that they did not pay much attention to the letters.  Given the significance they attached to the signed documents, and bearing in mind that they had no inkling whatsoever at that stage that the Plaintiffs were actually targeting against them, I can understand why they reacted in that manner.  In the circumstances, I do not regard the non-action on the part of the agents upon receipt of the letters as admissions by them.

225.  On the whole, it is quite obvious to me that Vivien had very carefully planned this exercise and she had taken all possible steps to avoid alerting David and Terry as to the real purposes of procuring their signatures in order to have their co-operation.  The documents were deliberately drafted in a manner to avoid raising any suspicion on their parts that they were the real targets of the Plaintiffs’ intended claims.  As she herself testified, Vivien was aware that the Plaintiffs needed more evidence to support their case and she was anxious to obtain signed admissions from the agents.  Instead of asking the agents to give her answers to questions raised, the Plaintiffs drafted documents for them to sign.  The most important thing for Vivien was to get the signatures of the agents to these documents and she did not quite care whether they fully appreciate the effects of these documents.  For her, the ends justified the means.  Her mindset can be gathered from her own testimony when she was asked about why she did not check with Simon about the renewal of sole agency.  She said at Trial transcript p.560P,

“…at the time, really, it is the conclusion that was first and foremost on my mind.  I think that was what matters …”

The conclusion that Vivien wanted were those set out by her in the documents drafted by the Plaintiffs for the agents’ signatures.

226.  Whilst this sort of attitude on the part of a litigant might be understandable, this court must take into account the way in which the signatures were procured in order to properly assess the weight that could be attached to the documents.  Having regard to the circumstances under which the signatures to the documents were procured, I have no difficulty in preferring the oral testimonies of the agents in the witness box to the statements contained in these documents.

C(3)  The “affirmation” of 2 December 1998

227.  This document was signed at La Terrazza, a café at the Landmark.  Again there is a dispute about whether Terry was told about the signing of another document prior to the meeting.  Terry said the meeting was for the sole purpose of discussion about a property at Jardine Lookout that Vivien had inspected several times.  He said Vivien had actually made an offer.

228.  Vivien accepted that discussion about the Jardine Lookout property was a purpose of the meeting.  However she said she had also told Terry that he would be asked to sign a further document.

229.  There was a taped record of the meeting on 2 December 1998.  However, the initial part of the meeting was not recorded.

230.  Given the mindset of Vivien and my finding as to the lack of prior notice on the previous occasion, it is more likely than not that she refrained from giving prior notice to Terry on this occasion as well.  There was always a risk that if advanced notice were given, Terry might ask for a copy of the document to study.  Hence, as far as Vivien was concerned, it would be better not to forewarn Terry.  After all, Terry had no difficulty about signing a document without any forewarning on 22 October 1998. 

231.  I prefer the evidence of Terry and find that no prior notice had been given for the signing of this document.

232.  The document was witnessed by a solicitor called Selina Luk.  Terry said Vivien had not introduced Luk to him when he arrived as she was then talking with Luk.  It was at a later stage when he saw the chop of Luk on the document that he realized that Luk was a solicitor.  On the other hand, Vivien and Luk testified that the introduction of Luk as a solicitor was made when Terry arrived.  Since the recording did not cover the earlier part of the meeting, there is no record of the introduction on the tape.

233.  In a letter dated 19 October 1999, the solicitors for Terry said the following regarding Luk,

“At all material time during the meeting, your client only introduced that female to Terry Or as her friend namely Ms Luk.  Your client further added that Ms Luk was a solicitor.”

234.  Mr Chang cross-examined Terry by reference to this letter.  Terry maintained that when he arrived no introduction was made.  However he could not remember whether an introduction had ever been made during the course of the meeting.

235.  I do not find Luk to be a satisfactory witness.  On the whole she did not have much recollection about what were said during that meeting.  Perhaps that is understandable given the lapse of time and her lack of interest in the matter.  She said in her witness statement that she had asked Terry if he understood the contents of the document.  However, that was not captured on the tape.  If she had any interest in Terry’s understanding of the documents, I find it difficult to believe that she seems to have completely ignored Terry’s intimation to Vivien about his lapse of memory regarding the dates.

236.  Another difficulty I have regarding her reliability as a witness stems from her evidence on the circumstances surrounding the insertion of the words “Affirmed on” in the document.  She made no reference to that in her witness statement of February 2000.  That by itself was not too surprising as concern to the sequence of events in terms of the insertion of these words was first raised in the course of cross-examination of Vivien on 18 January 2005.  What troubles me is Luk’s evidence in the witness box.  She said she only had a very vague memory that Vivien had called her after the meeting asking if it was necessary to put those words in.  She said because her memory was so vague and she was so uncertain about it that she did not put it in her witness statement.

237.  Hence, she was telling this court that she had given thoughts about it at the time of the preparation of her witness statement but she decided not to include it in her statement as she was too uncertain as to whether there was such a telephone conversation.  It is not a case where she simply did not consider it when the statement was made since nobody asked about it.  If that were true, I cannot understand why she felt able to testify in the witness box about this conversation and gave this as an account of how the words “Affirmed on” appeared on the document.  It is unlikely that a witness who felt unable to vouch for the truth of something in a witness statement could, without any material changes in the meantime, have improved his or her recollection of the event five years later.

238.  It is no good for Luk to qualify her evidence by saying she only had a vague recollection.  Either she remembered or she did not.  When she testified under oath, she should only give this conversation as an account for the inclusion of the words if she truly remembered Vivien did call her after the meeting and said something about the insertion of the words.  If she could not remember, she should just tell the court she could not recall even though she were told by others that such conversation had occurred.

239.  I must say regrettably that I find her to be reluctant to be forthcoming about this.  It seems to me that the truth is she simply had no recollection of this telephone conversation.  Luk said on 18 January 2005 she listened to the tape of the meeting and she was asked about this conversation in the presence of Kim.  The tape could not have assisted Luk in recollecting about this conversation because Luk’s memory about what happened at the meeting was not refreshed even though she had been asked quite a number of questions by reference to the transcript.  Further, the tape did not shed any light on the alleged telephone conversation after Luk had left.  It is, in my judgment, likely that although she did not remember this conversation, she felt obliged to go along with it.  Hence, she kept qualifying her evidence in this respect by saying she only had a very vague recollection and could not be certain.

240.  The jotting of Luk’s memory on 18 January 2005 coincides with an uncanny change of evidence by Vivien.  On 18 January 2005, Vivien testified that the words “Affirmed on” was written by Luk at the meeting.  She had been asked specifically about whether a space was left there by Luk for the date chop to be inserted and Vivien said it would appear to be the case.  I have read the relevant parts of the trial transcript and I am quite satisfied that there was no room for any suggestion that Vivien’s attention was not focusing on the identity of the writer of the words and the circumstances under which these words were put onto the document.

241.  It strikes me as a bit strange that if Luk had written the words “Affirmed on”, she would not complete the jurat by writing down the date as well.  After all, Luk’s evidence was that she considered that the date could be handwritten and there was no need for her to bring a date chop. 

242.  On 19 January 2005, when she was asked about another document, Vivien took it upon herself to inform the court that she had made a mistake in her evidence given on the previous day.  She wanted to correct herself and testified vividly about the telephone conversation with Luk after she had left.  She said she did not note the omission when she put down the date chop before Luk left.  Later, when she noticed that she was not sure if the words were necessary.  She therefore phoned Luk.  Luk told Vivien over the phone that she could add the words “Affirmed on” and this was done.

243.  Vivien said she discovered the mistake in her evidence of 18 January over the night when she went through her witness statement and her testimony given during the trial.  She said she had not discussed with anyone about her evidence and she did not talk with Kim nor Luk about it. 

244.  The reading of her witness statement was not something that she was supposed to do in the middle of her cross-examination.  In any event, I do not see how that could have assisted her in recalling about this telephone conversation with Luk as there was no mention of that in the statement.  As I said, Vivien had been asked specifically about these words a number of times on 18 January and there is simply no credible explanation why she could not remember it was she herself who wrote the words after the telephone conversation and then suddenly recalled it over the night with no prompting.

245.  I cannot believe it was pure coincidence that Luk allegedly told the lawyers about this conversation on 18 January and Vivien changed her evidence on 19 January.  I am not going to speculate how this came about.  Suffice to say it had cast a serious doubt in my mind as to the credibility of Vivien.

246.  According to the transcript of the meeting, before Luk left the scene, Vivien had asked her whether it was necessary to write down some words (item 80 at Bundle T(a) p.43).  On 21 January 2005, when her attention was drawn to this, Vivien in answer to questions from her counsel told the court that she was asking Luk whether it was necessary to write the words “Affirmed on” and Luk indicated it was okay.  Vivien took that to mean that the words were not necessary since Luk left without adding them to the document.  If that were so, I cannot understand why Vivien wished to bother Luk again with the same question by telephoning her.

247.  The precise circumstances under which the words “Affirmed on” were written on the document are perhaps not very important in the present context.  It is not disputed that the words were not there when Terry signed the document and no-one asked him to make an oral affirmation.  No-one told Terry that the document was on oath.  However, I have gone through the subject at some length as it has a bearing on my assessment of the credibility of the Plaintiffs and Luk.

248.  On the whole, I am of the view that whilst it is likely that Luk had been introduced as a solicitor at some stage during the meeting, I am not satisfied that introduction took place as soon as Terry arrived.

249.  The transcript of the meeting showed that Luk was quite passive throughout the meeting and no step had ever been taken by her to impress upon Terry the solemnity of the occasion and the duty of a deponent to ascertain the truth of the contents.  She let Vivien to explain the document to Terry without listening carefully as to what was said.  Luk simply paid no attention to Terry’s concern about the contents of the document.  In view of that, the presence of Luk as a solicitor was just a hollow gesture.

250.  As happened before, Vivien misled Terry as to the real purpose of the document.  She said it was to facilitate the Plaintiffs’ negotiation with the bank by explaining why the purchase price was so low in the light of the unauthorized structures.  When Terry raised his concern about not remembering the dates, Vivien pacified him by telling him they would not use the document if there was no need to do so and the Plaintiffs were hoping to close the file.

251.  Hence, it cannot be disputed that Terry had no idea that the document would be used as evidence against him although that was the real purpose behind the exercise.

252.  Vivien’s explanation of the content of the document was incomplete.  Terry did not have much time to read it.  As far as the controversial issues in the present action are concerned, the relevant admissions in the document are,

(a)     the agents knew on 27 February 1998 the Vendor would accept an offer around $31 million;

(b)    the agents knew that Centaline no longer had a sole agency on 27 February 1998.

None of these were mentioned in Vivien’s explanation.  The knowledge as to unauthorized structure was mentioned but it is not controversial as far as Terry was concerned.

253.  As submitted by Mr Horace Wong, there was no proper basis for the Plaintiffs to include (a) in the document.  Vivien claimed that the source of information was David and it can be found in the tapes.  However, she was not able to make good such a claim.  In the end, she only referred this court to the tape of 15 December 1998 that could not possibly provide the basis for the document signed by Terry 13 days earlier.  In the conversation of 15 December, David was uncertain as to whether the figure was $31 million and he was referring to a computer entry in Centaline.  I have the computer record before me and there was no reference to $31 million.

254.  Vivien then referred to David’s information about the rejection of an offer at the same price as that finally offered by the Plaintiffs, viz. $30.5 million.  From that she got the impression that the agents knew the vendor would accept $31 million.  She explained how she came to that conclusion in her evidence on 18 January 2005 at Trial Transcript p.389,

“COURT:   Is it what they told you or, rather, more specifically, is it what Mr Kang actually told you using the words they “derived”.  That means they – it is something they inferred, they guessed or they speculated.

A.   I hope the court will understand when you engage in sometimes casual conversation, all the words do not come out exactly as I derive.  Sometimes it’s an understand between the two people engaging in conversation.  And the first reference when I made to the court this morning was David Kang referring to an offer of the same price being rejected and then I replied.  And then he also suggests that then they – agents of Centaline continue to speak with the vendor and the vendor, “喂，點解你又唔賣呀？” and the vendor appeared to have a second thought.  Then I replied, “呀，心喐喐，嗄，好似。” in the future the vendor would incline to accept an offer of around 31.  And that is the impression that I get and understanding I get from the conversation with Mr Kang and I’m afraid if it is not in the – those clear and exact words, it happens in conversations – that a lot of assumptions are made between the parties.”

255.  Based on what I can observe during the trial and the evidence before me, I must say this is typical of the Plaintiffs.  They sometimes incorporated their assumptions into what were said by other people.  Whilst I accept that sometimes there could be unspoken assumptions between two people engaging in a conversation, there is always a risk a vindictive person mistakenly takes some unwarranted subjective assumptions on his part as objective fact.

256.  Even on her evidence, what Vivien got from David was that the agents believed the Vendor might consider an offer of $31 million.  It is quite different from saying that the agents knew as a fact that the Vendor would accept an offer of $31 million.

257.  As regards (b), I have already discussed above the evidence relating to the renewal of sole agency.

258.  According to the contemporaneous note taken by Phoebe at Bundle D p.66, Terry had informed her on 20 November 1998 that the computer record of Centaline showed that the sole agency had been renewed until 23 April 1998.  Hence, had Terry’s attention been drawn to the statement in the document of 2 December 1998 about termination of sole agency, he would probably refute the same.

259.  I agree with Mr Horace Wong that the statement regarding sole agency in the document of 2 December 1998 was drafted in a rather convoluted way and it could have escaped the attention of Terry when he signed it.

260.  It is common ground that the meeting was for the purpose of discussing a property which Vivien had shown interest.  It is apparent from the transcript that Terry did not spend a lot of time to study the document at length.  At the same time, Vivien kept focusing his attention on the intended use of the document to persuade the bank, which from Terry’s point of view should be rather innocuous.  Even though he had concerns with the dates (at items 60 and 61 at Bundle T(a) p.42), Terry just went ahead to sign the same.  Parties then reverted to discussion about other matters.  Terry obviously did not exercise much care in understanding and considering the document.  He was just doing a harmless favour for a potential client.

261.  Bearing in mind the circumstances under which Terry’s signature to the document was procured, and in view of other evidence before me on the relevant issues on the Plaintiffs claims for misrepresentations as discussed above, I do not find the statements in this document to be reliable.

C(4)  David’s statement of 15 December 1998

262.  I can deal with this document relatively summarily.  Again Vivien misled David as to the real purpose of having his signature to the document.  She suggested to him it was for accounting to the bank why there was so many dates on the Provisional Agreement.

263.  The meeting was again taped.  It can be seen from the taped record that David did not spend much time on the document.  The document was first produced by Vivien at item 277 of Bundle T p.126 and David signed it as soon as Vivien finished explaining about it at item 290.  In fact, the lack of interest on the part of David to its content was highlighted by the fact that he was actually talking on the phone with someone else at item 290.

264.  The main relevant points in this document are the presence of the director of the Vendor in Hong Kong between 27 February and 2 March 1998 and the rejections of the Plaintiffs’ offer.  In the conversation between David and Vivien, David had in effect said things contrary to what he had supposedly confirmed in the document.  From items 304 to 400 at Bundle T p.126 to 131, David gave a brief account of the history of negotiation.  I have alluded to those in the discussion on misrepresentations.  Whilst David had said that Yan was in Hong Kong, he also said the agents only met Mr Yeung for the first time on 2 March 1998 at the restaurant.  The account of David is consistent with the testimonies of the agents in the witness box.

265.  I have already commented on Vivien’s misinterpretation of the references by David to “唔得” as rejections of offer.

266.  In the circumstances, what was captured on the tape on 15 December 1998 must be much more reliable than what were set out in the self-serving document drafted by the Plaintiffs based on their assumptions and misinterpretations of what had been said by David on earlier occasions.

C(5)  The Calendar of Event signed by Terry on 16 December 1998

267.  This document was produced by Vivien for Terry’s signature after she attended a viewing of a property at Shouson Hill.  She feigned interest in the property when the Plaintiffs had in fact entered into a contract to buy a flat elsewhere on 10 December 1998.  In order to have an occasion conducive to co-operation on the part of Terry, Vivien acted as if she was really interested in the Shouson Hill property and suggested that Kim might inspect as well.

268.  Although Vivien initially said she had told Terry about the document beforehand, she retracted from that later.

269.  Vivien did not tell Terry the real purpose of the document.  In her witness statement, Vivien said after reviewing evidence they had obtained, the Plaintiffs considered they needed evidence of Terry misrepresenting that the Vendor’s decision maker was in China and no decision had been made to the Plaintiffs’ offer between 27 February and 2 March 1998.

270.  On the other hand, Vivien told Terry that she wanted to have a systematic record of the events before closing the file.  She reluctantly admitted in her evidence that by closing file, she meant putting an end to the matter.  She also tried to convey the message to Terry that it was quite difficult to pursue the Vendor further as it could no longer be located.  In my judgment, these were said in order to give an impression to Terry that the document was not very important. 

271.  According to the tape record of this meeting, not much time was spent by Terry in going through the contents of the document.  Vivien at first asked Terry to check the dates.  It was only at item 346 at Bundle T p.162 that Terry asked whether he needed to check the contents.  Vivien asked him to have a look, adding that it was basically the same things and she only added the dates.

272.  Terry made a remark about his lack of memory about the date of inspection because of the absence of any memorandum for inspection.  Then Vivien directed his attention to something else not pertaining to the contents.  Shortly after, the document was signed.

273.  There are several entries in this document that are inconsistent with the defence case run at the trial.  It suggests that Terry had told Vivien the Property was $30 Million with 12 months’ completion in the afternoon of 27 February 1998, that Terry asked David to show the Property to the Plaintiffs, that Terry promised to return the agreement on 27 February, that in the evening of 2 March 1998 Terry told Vivien the Vendor wanted $30.5 Million and 20% deposit and the Plaintiffs agreed.

274.  These are the sort of details that one might not be able to recall off the cuff without being given some time and opportunity for checking and recollecting.  Terry had indicated previously (on 2 December 1998) and also on this occasion he had problems about the date of inspection as there was no memorandum for inspection.  The event took place almost 10 months ago and the agents must have conducted many inspections during the period.  I do not find it incredible that Terry failed to spot the mistake in terms of the identity of the agent who conducted the inspection on 27 February.

275.  In my judgment, this is just another document signed by Terry as a favour to Vivien as a potential client with the belief that it was a harmless and insignificant act.  Terry did not check as thoroughly as he would have if he were alerted to the possibility that it could be used as evidence in court proceedings, not to mention in legal action against himself.

276.  In the circumstances, I have no difficulty in preferring the other evidence before the court to the content of this document.

277.  Before I leave this document, it should be mentioned that there is a notable omission by the Plaintiffs in drafting this document.  There is no reference to Terry asking them to increase the offer on 28 February 1998 and they agreed to authorize Terry to negotiate up to $30.5 million.  Given that this document was intended to be a record of the significant events involving Terry, and it was prepared by the Plaintiffs carefully with a view to use it as evidence in this case, it is unbelievable that they had omitted a reference to it carelessly as Vivien testified.  The significance of this event was certainly appreciated by the Plaintiffs as they had put it in the next document, viz. the Record of Events that Vivien asked David, but not Terry, to sign.  It is, to say the least, remarkable that Vivien would ask David instead of Terry to confirm a telephone conversation to which only Terry was privy.  Moreover, the Calendar of Events contained an entry for 28 February.  Hence it is not a case of the Plaintiffs not addressing their mind to what happened on 28 February when they prepared this document.

278.  Further, in the entry for 2 March 1998 in the Calendar of Events, it is said,

“Evening: I told Vivien the Vendor wanted HK$30.5 M and 20% deposit by the Sale and Purchase Agreement.  In the end Vivien agreed.”

279.  The entry suggested that an offer of $30.5 Million was not considered prior to the evening of 2 March 1998 and it was a price put forward by the Vendor which the Plaintiffs then agreed.  But the Plaintiffs’ case is that $30.5 million had already been within the authority they had given Terry to accept.  Had there been a prior discussion about $30.5 million on 28 February, it could not have escaped the Plaintiffs’ mind to insert it to avoid any misinterpretation of the entry of 2 March.

280.  This has to be contrasted with the way in which the striking of the bargain in the evening of 2 March 1998 was described in the Record of Events of 14 May 1999,

“In the evening, Vendor finally accepted Maximum offer and Centaline informed Vivien and Vendor proceeded to sign Provisional”.

281.  I ask rhetorically does this change represent a rectification of a careless omission or a shift in the Plaintiffs’ case? 

C(6)  Record of Events signed by David on 14 May 1999

282.  This was a document which Vivien procured David to sign in her car whilst David gave her a list of properties for her consideration.  The meeting was again taped by Vivien without knowledge on the part of David.  In the midst of introducing Vivien to the properties, Vivien told David that in the course of packing for moving she wanted to organize the documents regarding the transaction concerning the Property.  She told David that Terry had signed a document which was basically the same and since David had taken part in the transaction, Terry suggested her to ask David to sign one as well.  She assured David that Terry had checked and it was for the purpose of wrapping things up. 

283.  The first reaction of David was this: it might be necessary to have the document checked by their Legal Department in view of the licensing of estate agents.  Vivien managed to dissuade him by saying that Terry had checked and other people would not have any idea about the matter.

284.  Regarding the contents of the document, David’s first comment was that he did not attend the viewing.  Vivien impressed upon him that he did because Terry was unavailable.  David was still unsure and said it was either one.  Vivien continued to suggest to him that he was the one who opened the door with a key to show the Property to her and Kim.  David then said okay.

285.  David reiterated some concern as to the need to have the document considered by the Legal Department.  Vivien dissuaded him and then the document was signed.

286.  Vivien was deliberately misleading in the following respects in order to procure the signature of David.  First, Terry had not signed a document similar to this one.  The contents of the Calendar of Event and the Records of Event are materially different.  I have already highlighted the discrepancy regarding the alleged increase of authority of Terry to negotiate up to $30.5 million.  Further, there was no reference to rejections of the offer by the Vendor in the Calendar of Event whilst those were the main points in the Records of Event.  Second, it follows Terry could not have checked these matters and Vivien knew it.

287.  Third, I do not believe Terry had suggested Vivien to ask David to sign the document.  When she was cross-examined, she maintained that Terry had not objected to a suggestion by her between December 1998 and April 1999 to have a document of similar nature signed by David.  Even if that were true (which I do not believe to be the case), that was not a suggestion by Terry.  Moreover, it is hard to believe that Vivien would consult Terry about this.  There was simply no need to do so and the Plaintiffs were all along acting with a mindset to proceed covertly in order to reduce the risk of the agents being alerted with the result of not being co-operative.  Such a mindset is well evidenced by Vivien’s effort in dissuading David from showing the document to the Legal Department.

288.  Further, consistent with her mode of operation in the past, Vivien did not tell David the true purpose of getting his signature to this document.  She tried to tone down the importance of it by suggesting it was for organizing her documents and wrapping things up.  She avoided making any suggestion that David had represented to the Plaintiffs that all necessary consents in the Property had been obtained at the inspection.  When David raised doubt as regards his role in the viewing, she did not even mention to David that in the document signed by him on 22 October 1998, he had already admitted implicitly he was at the viewing.

289.  In the circumstances, David signed the document without knowing that it was a document that would be used as evidence in legal proceedings as an admission against his interest.  He signed it despite he had doubt about its content.

290.  David did not spend much time on the document.  On the rejections of the offer set out in the document, Vivien again drafted these based on what she interpreted as the effect of David’s earlier conversations.  I have already alluded to the same and in the light of what were said by David on 15 December 1998 as captured on the tape about the history of negotiation, these entries regarding rejections could not be reliable.

291.  Taking all these into account, the compelling conclusion must be that the evidence of the defence witnesses before the court is more reliable than the admissions contained in this document.

D.  Legal analysis

292.  On my factual findings, there was no misrepresentation and the Plaintiffs’ claims must fail.  I will just briefly deal with a couple of legal submissions advanced by the parties.

D(1)  Deceit and Section 13 of LARCO

293.  The Plaintiffs advanced a number of legal analysis based on the five misrepresentations.  It is alleged that the misrepresentations were made fraudulently and Mr Chang referred to Cartwright’s Misrepresentation Para.4.05 and Derry v Peek (1889) 14 App Cas 337 in identifying the following as the elements that the Plaintiffs need to establish,

(a)    a false representation made,

(b)    either (i) knowingly; or (ii) without belief in its truth; or (iii) recklessly;

(c)    with the intention that the plaintiff should act on it;

(d)    inducement; and

(e)     loss being caused. 

294.  The cause of action based on deceit regarding the financial standing misrepresentation had to be considered against a defence based on Section 13 of the Law Amendment and Reform (Consolidation) Ordinance.  The section is not applicable to an action based on innocent or negligent misrepresentation, see Banbury v Bank of Montreal [1918] AC 626.

295.  Since the alleged misrepresentation was not in writing, the Plaintiffs’ claim would be caught by the section if it is a representation concerning the credit of a person and it was made “to the intent or purpose that such other person may obtain credit, money or goods thereupon”.

296.  I do not think it can be disputed that the alleged financial standing misrepresentation is a representation concerning the credit of the Vendor.  The issue is whether it was made with the requisite intent or purpose.  Counsel submitted that having regard to the nature of the principal transaction, viz. sale and purchase of the Property between the Plaintiffs and the Vendor and the principal objective of the representor, viz. the agent, was to earn commission, the intent or purpose was not for the obtaining of credit.

297.  Whilst I accept it may be arguable that the obtaining of credit was not the purpose, the section refers also to the obtaining of money.  It is precisely the Plaintiffs’ case that the representation was made by the agent to induce them to pay their deposit to the Vendor instead of having it stakeheld.

298.  It does not matter that the only benefit to the agent would be the commission.  Earning the commission was the motive.  The relevant purpose or intent, in order to sustain a cause of action on fraudulent misrepresentation by the Plaintiffs, remains the procurement of the payment of the deposit money to the Vendor.

299.  I therefore hold that the Plaintiffs’ claim based on fraudulent misrepresentation as to financial standing is covered by Section 13 and is not actionable for want of writing.

300.  I have submissions from the parties on whether Section 13 is applicable to a claim based on the Misrepresentation Ordinance by reason of the words “if the person making the misrepresentation would be liable to damages in respect thereof had the misrepresentation been made fraudulently” in Section 3(1) of the Misrepresentation Ordinance.  The point had been conceded by eminent counsel in UBAF Ltd v European American Banking [1984] 1 QB 713.  Since it is not necessary to decide the point in view of my findings in the present case, I will not express any conclusion in this judgment.

D(2)  Causation

301.  In respect of all the causes of action, the Plaintiffs need to establish causation, viz. the loss that they suffered was caused by the wrong committed by the Defendants.

302.  Further, counsel have advanced arguments based on the SAAMCO principle.  Mr Chang submitted that the present case is not a case of failure to advise and the principle is therefore not applicable.

303.  Relying on Downs v Chappell [1996] 3 All ER 344 and Bristol & West Building Society v Mothew [1998] Ch 1, Mr Chang submitted that the test is not what would the Plaintiffs have done if the correct information was given, rather it is what would the Plaintiffs have done if the wrong information was not given.  In the present context, the Plaintiffs said they would not have entered into the transaction had the alleged representations not been made.  Therefore they would not have suffered the loss of their deposit.

304.  The SAAMCO principle is applicable in the context of claims based on negligence.  However the requirement as to causation is applicable to claims based on fraud, and breach of contract, fiduciary duties and Misrepresentation Ordinance as well.  Inducement has to be established to support a cause of action in deceit.

305.  Even adopting Mr Chang’s test derived from Bristol & West Building Society v Mothew [1998] Ch 1, I have strong reservation about the Plaintiffs’ claim based on the sole agency misrepresentation and the no decision misrepresentation.

306.  Even on their own case, the Plaintiffs were told that the offer of $30 million was not acceptable to the Vendor before they agreed to purchase at $30.5 million.  This clearly shows that there is no casual link between the alleged no decision misrepresentation and the Plaintiffs’ subsequent decision to purchase at $30.5 million.  Had they been informed earlier about the rejection of their $30 million offer, they would merely increase their offer to $30.5 million at an earlier stage.  In this connection, I do not believe any useful analogy can be made with their conduct regarding the negotiation for the unit at Kennedy Height.  Each transaction has different considerations and Vivien herself said in one of the taped conversation that the price of the Property was “below market”.

307.  Also I do not believe whether Centaline had any sole agency had anything to do with the Plaintiffs’ decision to purchase the Property though it might have something to do with the Plaintiffs’ agreement to pay commission to Centaline at a certain percentage.

308.  As regards the asking price representation, whilst it might be said to be relevant to the Plaintiffs’ consideration in deciding whether to negotiate for the purchase of the Property, it could not have been material in the Plaintiffs’ entering into the provisional agreement.  By the time of the contract, the Plaintiffs were aware that the Vendor would not accept $30 million, hence the asking price could not be $30 million.  Like the case of the no decision misrepresentation, the chain of causation had been broken.

309.  All these are simple analysis of causation and had nothing to do with the SAAMCO  principle.

D(3)  Assumption of responsibility and negligent mis-statement

310.  It is often said to establish a cause of action in negligent mis-statement, assumption of responsibility for the statement had to be shown.  Mr Chang referred to Phelps v Hillingdon London Borough Council [2000] 3 WLR 776 at 791 and emphasized that in deciding whether a duty of care arises, it is an objective test and the defendant needs not knowingly and deliberately accept responsibility.

311.  I agree.  Having said so, it is useful to refer to the approach of Lord Bingham in Reeman v Department of Transport [1997] 2 Ll Rep 648 at p.685 in applying the objective test,

“The cases show that before a plaintiff can recover compensation for financial loss caused by negligent misstatement his claim must meet a number of conditions.  Among these are three particularly relevant here.  The statement (whether in the form of advice, an expression of opinion, a certificate or a factual statement) must be plaintiff-specific … Secondly, the statement must be purpose-specific: the statement must be made for the very purpose for which the actual plaintiff has used it.  Thirdly, and perhaps overlapping with the second condition, the statement must be transaction-specific: the statement must be made with reference to the very transaction into which the plaintiff has entered in reliance on it.”

312.  I think this is relevant in the context of the financial standing misrepresentation.  Although I find that Terry had probably said something to Vivien about the Vendor’s background, I am unable to find that it was said specifically with regard to the ability of the Vendor to honour its obligation under the Agreement nor in respect of stakeholding.  Hence, I am not satisfied that the statement was made in circumstances where it could be said to be purpose-specific or transaction-specific.  Therefore, objectively speaking, no duty of care arose. 

RESULTS

313.  I do not propose to deal with other legal issues that are unnecessary for my decision.

314.  For these reasons, there will be judgment for the Defendants and I make a costs order nisi that the Plaintiffs shall pay the Defendants’ costs, to be taxed on a party and party basis if not agreed.

315.  Lastly, I thank counsel for their assistance throughout the trial and their very comprehensive written and oral closing submissions.