LUCKYLOT LTD. v. YAN KWOK FAI AND ANOTHER

1991, No. A6869

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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J U D G M E N T

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1. This is an appeal from the refusal of Master Yam on the 2nd December 1991 to order specific performance of a contract for the sale of an interest in land under order 86 of the Rules of the Supreme Court.

2. I heard argument on the 14th January 1992 and dismissed the appeal with costs and gave certain directions for trial, the Master having ordered a speedy trial. I said that I would reduce my reasons into writing which I now do.

3. The facts fall within a small compass. The property in question is the first floor, 6 Kimberley Street, Tsimshatsui, Kowloon (the premises) which are registered in the name of the 1st defendant who is the son of the 2nd defendant.

4. The plaintiff is a member of a group of companies under Asia Standard International Ltd (Asia). Mr. Phileas Kwan is employed by Asia. Another company in the Asia group has purchased Nos. 2 & 4 Kimberley Street which adjoined No. 6 & 8. It was intended that the plaintiff and the other company would purchase Nos. 2, 4, 6 & 8 Kimberley Street and redevelop it as a combined site. Mr. Kwan met the 2nd defendant in July 1989 and negotiations commenced.

5. I need not go into all the background. Suffice it to say that Mr. Kwan contends that on the 21st August 1991 he and the 2nd defendant agreed on a price for the sale of the property in the sum of $7m. At this time, the 2nd defendant wrote out a document in Chinese wherein he warranted and represented that he had authority to sell the property on behalf of the 1st defendant at that price. The 2nd defendant also produced a power of attorney given by the 1st defendant to the 2nd defendant.

6. After this oral agreement, Mr. Kwan went back to his office and prepared a Provisional Agreement in Chinese for the sale and purchase of the property at $7m.

7. In his first affirmation in support of this application for specific performance, Mr. Kwan affirmed that he took this agreement to the premises on the 27th August 1991 for the 2nd defendant to sign. Both parties duly signed it. After signing, Mr Kwan affirms that a cheque for $50,000.00 as deposit was given to the 2nd defendant and acknowledged at the end of the agreement. Mr. Kwan alleges that on the 6th September 1991, the 2nd defendant told him that neither he nor his son would sell the property to the plaintiff.

8. The Provisional Agreement provided in Clause 5 for an initial deposit of $100,000.00 to be paid on the signing of the Provisional Agreement with the balance of $600,000.00 being paid on the signing of the formal agreement for sale and purchase. At the end of this Agreement, there appears the following words:-

"At the time of signing this Provisional Purchase and Sale Agreement RECEIVED from the purchaser the initial deposit of DOLLARS FIFTY THOUSAND ONLY Hong Kong currency. The vendor signed in acknowledgement of the payment". (sic)

9. It can be seen that although the Provisional Agreement provided for an initial deposit of $100,000.00 only $50,000.00 was paid and accepted. Both sides accept that there was no breach of contract in the payment of this sum on 27th August. How then did matters unfold?

10. In order to understand the impasse that was reached and which gives rise to this dispute, one has to have regard to Mr. Kwan's supplemental affirmation. Mr. Kwan contends that during his discussion with the 2nd defendant before the Provisional Agreement was executed, it was clearly agreed that an initial deposit of $50,000.00 would be paid on execution of the Provisional Agreement. At the meeting on 21st August, Mr. Kwan brought with him a cheque for $50,000.00 in favour of the 1st defendant. The 2nd defendant asked for the payee's name to be changed to his name. There was no question of the amount being changed.

11. On 27th August 1991, when Mr. Kwan took the Provisional Agreement for execution, he took with him a cheque for $50,000.00 payable to the 2nd defendant. On this occasion, the 2nd defendant asked that the initial deposit be raised to $100,000.00 and this was agreed and the figure of $100,000.00 was duly inserted into.the space provided in the printed agreement. However, Mr. Kwan pointed out that he had only brought with.him a cheque for $50,000.00 as previously agreed. In order to get round this difficulty, Mr. Kwan alleges that he agreed with the 2nd defendant that only $50,000.00 would be paid there and then, and the balance of $50,000.00 would be paid at the same time as the balance of $600,000.00, i.e. on the signing of the formal agreement. On this basis $650,000 was to be paid on the signing of the formal Agreement.

12. However, the figure of $600,000.00 was still inserted into the Provisional Agreement as payable on the signing of the formal agreement and not the sum of $650,000.00.

13. It is clear that both parties agreed that only $50,000.00 would be paid on the 27th August 1991, but the dispute is when was the balance of $50,000.00 to be paid. Mr. Kwan says the answer to this question is at the time of payment of the $600,000.00.

14. The 2nd defendant has a different version. He affirms that when the Provisional Agreement was about to be signed, Mr. Kwan indicated that there were insufficient funds in the plaintiff's bank account to pay $100,000.00 and he offered $50,000.00 only. The 2nd defendant says that Mr. Kwan promised to pay the balance of $50,000.00 within 5 days, i.e. before the 1st September 1991. The 2nd defendant says that it was only on the strength of this promise that he signed the Provisional Agreement. He did not present the cheque as he intended to present both cheques at the same time, (i.e. 2 cheques for $50,000.00 each). The 2nd defendant alleges that he pressed Mr. Kwan for the second cheque for $50,000.00, but it was not forthcoming and he contended he was told that it would only be paid at completion. The 2nd defendant says that he therefore considered the plaintiff's in breach of contract which he accepted by not proceeding further with this transaction.

15. It is common ground that the plaintiffs were desirous of developing this site and there is also no doubt that around this time they entered into binding agreements with some of the other owners. It is also common ground that at the material time, the plaintiffs did have sufficient facilities to write out a cheque for the second $50,000.00.

16. Miss Eu for the plaintiffs submitted that the defendant's case was so implausible that I should reject it and grant specific performance. There is much force in her submissions that it would have been extraordinary.for the plaintiffs to lose the chance of redevelopment for the sake of $50,000.00. She points to a number of inconsistencies in the defendants' case which she says should lead me to conclude that Mr. Kwan's version is correct and that on that basis I should order specific performance.

17. Miss Eu has reminded me of the case of Murjani v. Bank of India (1990) 1 HKLR 586. The onus is on the defendants to satisfy the court that there is a fair or reasonable probability of the defendant having a real or bona fide case. Statements in affidavits which are incredible or almost incredible by a reason of their inherent implausibility or inconsistency with documents are not themselves sufficient to raise an issue or a question which ought to be tried.

18. Applying this approach, Miss Eu invites me to reject the defendant's explanation of the issue which he says ought to be tried.

19. There are some strange aspects to the defendants' case, but on the other hand, Mr. Martin Lee, Q.C. has pointed out that if Mr. Kwan's version was correct, it seems strange also that he did not insert the figure of $650,000.00 as the sum to be paid on the signing of the formal agreement. There is some force in this point as well.

20. People do from time to time do very strange things and if they did not, the burden of these courts would be much lighter. I am not in a position to tell on affidavit evidence alone which of the two versions is correct. I might be able to judge which version has the most chance of success at trial, but that is not the same thing as saying that the defendant has not raised an issue to be tried. The trial judge will have to decide what was in fact agreed in relation to the payment of the second sum of $50,000.00. This is pre-eminently a question of fact to be decided at trial. This is a very different case from Murjani where there was inconsistency between the documents and the oral agreement contended for.

21. I have not gone into all the points raised by both sides because having decided that the matter must go to trial, the least said the best, The defendants will be unable to sell the property before trial because a caution has been registered against the property. The Master has already ordered a speedy trial. He made directions for service of pleadings which have been complied with.

22. I make a further order that the parties do file and serve their lists of documents verified by affirmation by 4.30 on the 22nd January 1992. Inspection will be 7 days thereafter. I also order that this action can be set down within 7 days of the 14th January 1992 for a 3 day trial not to be listed before the 2nd April 1992. I further order that the plaintiff should pay the defendants costs in any event to be taxed, if not agreed, with a certificate for two counsel.