PANG KETIAN SALLY v. TAM YUK HUNG ANNIE

CACV 147/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 147 OF 2013

(ON APPEAL FROM HCA 298/2012)

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BETWEEN

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J U D G M E N T

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Hon Cheung CJHC:

1.  This is the plaintiff’s appeal from the judgment dated 11 June 2013 of Mr Recorder Coleman SC, whereby the learned recorder dismissed the plaintiff’s claim for a one‑third interest in the subject property registered in the name of the defendant.

The facts

2.  The background facts, largely uncontroversial by this stage, may be briefly stated.  The plaintiff, the defendant and a Madam Fung used to be friends.  As the recorder observed, there was also a quasi‑family relationship in that the plaintiff’s father‑in‑law was the boyfriend of the defendant.  In October 2007 when the property market was still booming, the parties and Madam Fung agreed to join forces in a property speculation exercise, involving a residential unit in an uncompleted development known as Island Lodge in Java Road, Hong Kong (“the property”).  Essentially, the three ladies agreed that they would each contribute one‑third of the 15 % initial deposit and conveyancing fees required for purchasing the property in the name of the defendant only.  In other words, the defendant would sign the sale and purchase agreement with the developer in her own name, but she would hold her interest in the property under the agreement on trust for the three of them in equal shares.  Furthermore, it was agreed that the property would be resold before completion (which would only take place after the completion of the construction of the development in a year or so’s time) as confirmor for profit. At that time, the property market was rising, and it was hoped that within the time required for the developer to complete construction of the development, the market would have risen to an extent such that they would make a decent profit out of the intended resale.  They never contemplated otherwise and there was no thought of, and certainly nothing was planned for, the eventuality that the property could not be resold at a profit or at all, and the defendant would have to take up the assignment of the property in accordance with the sale and purchase agreement.

3.  As with many litigations, things did not happen as the parties had expected.  The global financial crisis in late 2008 triggered a substantial cooling off and then fall of the local property market.  By April 2009, when the sale and purchase of the property was due to complete after the completion of the construction of the development, the market value of the property had dropped to the region of $7.1 million, that is, more than HK$1 million lower than the agreed purchase price of $8.143 million about 1.5 years before.  Worse still, there were actually very few buyers in the market.  In those circumstances, the parties and Madam Fung had great difficulties in finding a suitable buyer willing to take up the assignment of the property which was due very soon.

4.  As the recorder observed, all this gave rise to a dilemma.  If they were able to find a buyer (which was not at all likely), they would have to sell at a substantial loss – a loss which would, depending on the actual sale price, likely go beyond the monies they had paid by way of deposit and part payment towards the purchase price of the property. Alternatively,if they failed to resell the property and did not complete the purchase, they would lose the deposit and part payment and, depending on what the developer would want to do with the property, they might well face a claim by the developer for further loss.  On the other hand, if they were to complete, that would require a further substantial payment and the taking out of a mortgage loan (assuming such a loan could be arranged) in order to pay for the balance purchase price, and, of course, the mortgage loan would have to be repaid by monthly instalments.

5.  It was in those difficult circumstances that the three ladies had a meeting, attended also by a supposedly neutral “witness” Madam Yau, in around late February or March 2009 at Festival Walk.  Unbeknown to those present, Madam Yau secretly tape recorded the whole meeting but the last part thereof (apparently due to the batteries running out), as a result of which there was a transcript before the recorder of what was said in that meeting save for the last part.  It is the plaintiff’s case that no conclusive agreement was reached at that meeting (and there was no other meeting afterwards).  But, both the defendant and Madam Fung said that towards the end of the meeting (which had not been recorded), the three ladies reached an oral agreement whereby the plaintiff agreed to forego her interest in the property in return for a release of her from all further liability in relation thereto (beyond the one‑third deposit and conveyancing expenses she had already paid), and the defendant and Madam Fung would, on their part, arrange for a mortgage loan to complete the sale and purchase of the property in the defendant’s name.  In other words, the plaintiff would exit the property speculation exercise leaving the defendant and Madam Fung to complete the purchase with a mortgage if they could, which they would have to achieve between themselves alone.  And this was what eventually happened.

The parties’ positions

6.  The disagreement between the parties as to what was or was not agreed at the Festival Walk meeting, as the meeting was referred to in the judgment below, thus became a crucial issue before the recorder, and the single issue on this appeal. According to the plaintiff, since nothing was agreed at that meeting, therefore the parties’ relationship in respect of the property was and is still governed by their original agreement, and therefore she should have a one‑third interest in the property now, which after completion, is registered in the sole name of the defendant, by virtue of her one‑third contribution to the initial deposit and conveyancing expenses.  The plaintiff rests her case on a common intention constructive trust.  Pausing here, the plaintiff’s claim for a one‑third interest has only to be stated to be rejected because she has never contributed to the payment of the balance purchase price upon completion, or to the repayment of the mortgage loan taken out by the defendant.  As the recorder found, which finding is not challenged on appeal, the original agreement was not that each of the three ladies would get a one‑third interest in the property regardless.  Rather, each of them would have a beneficial interest in the property in accordance with their respective monetary contributions.  Originally, since they all contributed equally to the initial deposit and conveyancing expenses, of course they would, as among themselves, each have a one‑third interest in the property.  However, after completion, the position changed completely.  Recognising all this, Ms Lisa Wong SC leading Mr Tim Wong, argued on behalf of the plaintiff in this appeal that her client should have a 5%, rather than a one‑third, interest in the property, given that the initial deposit only amounted to 15% of the total purchase price.  She asked for leave to amend the pleadings accordingly.

7.  On the other hand, based on the defendant’s case that there was a binding agreement reached at the Festival Walk meeting, the defendant argued that the plaintiff has foregone all interest in the property in return for a release of her from all liability regarding the same, and therefore she no longer has any interest in the property after completion.

The judgment below

8.  What was said or not said in the Festival Walk meeting therefore becomes decisive in this litigation.  The recorder was greatly assisted by the transcript of the secret recording, although rather “coincidentally” the last part of the meeting in which the crucial agreement was (allegedly) made was not recorded.  The recorder’s summary of what was recorded is not challenged on appeal:

“32. It seems to me a number of points can fairly be made about the transcript as a whole.

(i) There was a recognition by the plaintiff, the defendant, Madam Fung and the witness, Madam Yau, of some of the objective circumstances pertaining at that time.

(ii) Those circumstances included that the value of the property had fallen to the point that the initial $400,000‑odd that each of the parties to the original agreement had provided by way of deposit was a total loss and that if the purchase were not to be completed in time each party might also face a claim and so lose a further $200,000 to $300,000.

(iii) None of the plaintiff, the defendant or Madam Fung really wanted to complete the purchase or to take out a mortgage in order to be able to do so.

(iv) Nor was it clear that a mortgage would in fact be able to be taken out.

(v) The defendant expressed that as the legal owner of the property she felt most exposed to the risks.

(vi) A number of possible alternative ways out of the situation were raised and discussed.

(vii) It was suggested by the defendant that the property purchase might be completed, assuming a mortgage could be obtained, and that the tripartite investment could be continued so long as each party continued to contribute to the cost, in particular, to monthly mortgage repayments.

(viii) The plaintiff was insistent that the original agreement, as she saw it, should be maintained and that the property should be sold or at least that there should be no completion.

(ix) But the plaintiff also said that if the defendant and Madam Fung were to complete with the benefit of a mortgage, she would wish to retain at least a 5 per cent interest in the property to reflect her contribution to date.

(x) This suggestion was flatly unacceptable to the defendant and Madam Fung who did not think it was fair.  Their position was that if completion were to occur the plaintiff had to participate equally or give up her interest entirely.

(xi) The plaintiff made it clear that she was unable to invest further in the property because her husband would not agree to further family funds being used for that purpose. 

(As an aside, the husband confirmed in evidence that he was not prepared to release further funds for investment though he identified, and I accept, that he had the assets to have done so and to have borne any loss as might realistically have arisen from the repudiation of the sale and purchase agreement relating to the property.)

(xii) As Madam Yau put it in evidence, the plaintiff felt that if she could not achieve her goal within the original investment period she would let go.

(xiii) It was discussed as to whether the defendant and Madam Fung should speak to the plaintiff’s husband, Mr Chong, on the basis that he might hold the family purse strings, but the plaintiff had stated in effect that there was no point in anyone speaking to her husband as his position had been made clear to her.

(xiv) One thing which was not apparently being suggested was that the plaintiff would somehow retain a full one-third interest in the property if there were to be completion of the purchase and yet no further contribution from her.

33.  At the point the recording and the transcript ends, it is probably correct to say that there is no common intention evidenced as having been reached by the parties although the respective stance of the parties was tolerably clear. …”

9.  In his careful judgment, the recorder explained why, eventually, he decided to accept the defendant’s and Madam Fung’s evidence on what subsequently happened at that meeting.  Both of them had said in evidence that towards the end of the meeting, the plaintiff had communicated her surrender of the interest in the property as follows:

“Plaintiff : ‘If a mortgage has to be taken out then you two go ahead yourself. I would not go ahead for a mortgage. My husband would not give me money for mortgage instalments.’

Madam Yau : ‘Then you would lose all your money.’

Plaintiff : ‘That would have no way out. My husband would not give me money for monthly instalments.’”[1]

10.  The recorder made his finding of fact after a detailed consideration of the inherent probabilities of the competing versions of the meeting which he tested against the contemporaneous documents.  This is how he described his approach:

“In deciding the issues, I do not think I will be greatly assisted by any consideration of the demeanour of the witnesses. Instead, I shall focus primarily on inherent likelihoods or unlikelihoods and what can be tested against contemporaneous documents including the transcript of the Festival Walk meeting.” (para 56)

11.  In particular, the recorder took into account the following matters – they are taken from paragraph 9 of Ms Wong’s skeleton submission which provides a fair and useful summary:

“(1) that the Property had by then fallen in value to such an extent that not only the entire Deposits had been lost, but that the parties would each lose a further $200,000 to $300,000 were the purchase not completed, which circumstance was recognised by all 3 parties;

(2) that the likely view of the market held by all 3 parties would have been, was in fact, pessimistic;

(3) that it would therefore have been desirable for the Plaintiff to exit the investment at a loss limited to the contribution of $400,000 odd that she had made;

(4) that the Defendant and Madam Fung felt compelled to complete and take out a mortgage. Their firm position, which was not unreasonable, was that assuming that a mortgage could be taken out and the purchase completed, it would be unfair for the Plaintiff to then retain any interest in the Property (even one limited to 5%) and that the Plaintiff should either continue to contribute or drop out altogether;

(5) that the Plaintiff was categorical in refusing to put further funds into the investment;

(6) that the Plaintiff had no option in the overall circumstances but to agree to walk away from the investment and to surrender her interest in the Property; and

(7) that there was no further meeting or discussion after the Meeting which was consistent with a consensus having been reached by the end of the Meeting.”

The plaintiff’s arguments

12.  In this appeal, Ms Wong recognised that she is challenging a finding of fact.  However, she argued that the recorder arrived at his finding of fact, not on the basis of the credibility of the witnesses or the preference of the evidence of one witness to that of another, but by a process of inference.  She submitted that in those circumstances, it is easier for this court to form an independent opinion about the proper inference of fact, subject only to the weight that should, as a matter of course, be given to the opinion of the judge at first instance.  She submitted that this court is not in any way disadvantaged from undertaking its own independent assessment as to the proper inference to be drawn.  She submitted that the recorder drew the wrong inference.

13.  Ms Wong argued that the defendant rested her case of the plaintiff’s surrender of interest entirely on the exchanges set out above.  She observed that an integral part of the oral agreement reached was that the plaintiff would be let off, not only in respect of further contribution to the purchase of the property, but also as regards liability for further loss arising from the speculation exercise, over and above the amount of the contribution she had already made.  The relief of the plaintiff from exposure to further loss was indeed put as and found to be the reason why she would forgo her interest in the property.

14.  Ms Wong argued that there was no evidence of any words having been said at the meeting which expressed an intention on the part of the defendant and Madam Fung to cap the plaintiff’s loss to the amount she had paid even if she were to surrender her interest in the property, or words from which such an intention could be inferred.

15.  Ms Wong also argued that the defendant and Madam Fung would not have, and had not, released the plaintiff.  She pointed out that at the time of the meeting, no mortgage loan had yet been applied for and there was no certainty that such a loan could be obtained.  Given the potential further loss involved if no mortgage loan could be found and the purchase could not be completed, it was unlikely that the defendant and Madam Fung would be prepared to release the plaintiff from any such further loss.

16.  Ms Wong also relied on a solicitors’ letter dated 20 June 2009 written by the defendant’s solicitors which specifically reserved the defendant’s right to claim against the plaintiff for all her loss and damage.

17.  Ms Wong was also critical of the recorder’s repeated references to the plaintiff having “no real choice” or having “no option” but to go along with the oral agreement.  She argued that absent any such oral agreement and an agreement which obliged the parties to invest further over the purchase of the property, the defendant and Madam Fung could not compel the plaintiff to agree to completion and to share in the burden of putting up at least another 15% of the purchase price and repaying the 70% mortgage loan.  Nor could they forfeit the interest that the plaintiff had already acquired in the property even if she refused to make any further contribution.  Even if the defendant and Madam Fung were to proceed and complete the purchase, all it would mean was that their shares in the property would grow with their contributions while the plaintiff’s share in percentage would shrink but not forfeited as her contribution ceased.  And that was indeed why, even according to the transcript, the plaintiff recognised that she would retain a 5% interest in the property if the sale was completed and she made no further contribution to the balance purchase price or mortgage loan repayment.  In other words, there was no compelling reason for the plaintiff to enter into the alleged oral agreement at the meeting.

18.  For these reasons, Ms Wong submitted that the recorder’s finding of fact could not stand.

The defendant’s arguments

19.  Mr Christopher Chain, for the defendant here and below, submitted otherwise.  In essence, he submitted that the recorder did not say that he did not take into account the demeanour of the witnesses at all. All he was saying was that he would place comparatively greater emphasis on assessing and analysing the inherent probability of the parties’ respective cases as tested against the contemporaneous evidence.  His approach did not mean that this court could lightly disturb his finding of primary fact, unless it was “plainly wrong”: Ting Kwok Keung v Tam Dick Yuen (2002) 5 HKCFAR 336.  Mr Chain further submitted that the recorder was fully justified in making his finding of primary fact based on the evidence before him.  He submitted that the brief exchanges referred to above towards the end of the meeting had to be understood “within the context of everything which had earlier happened in the meeting” (paragraph 72 of the judgment).

20.  Counsel argued that the solicitors’ letter of 20 June 2009 must be read in the light of the finding of the recorder that it was doubtful that the defendant specifically instructed the use of the legalese used in that part of the letter relied on by the plaintiff (paragraph 43 of the judgment), and of the alternative case set out in the solicitors’ letter.

21.  Mr Chain also complained that the possibility of the defendant and Madam Fung not being able to obtain a mortgage was never raised in pleadings or explored in evidence.  In particular, the matter was never put to the defendant or Madam Fung in cross‑examination.

22.  As regards the recorder’s references to the plaintiff having “no real choice” etc, Mr Chain emphasised that the recorder qualified his references by the words “in practical terms” (paragraph 77 of the judgment) and “in the overall circumstances” (paragraph 69).  The recorder was not talking about the theoretical or technical/legal choices that were still open to the plaintiff.

23.  In any event, Mr Chain opposed any attempt to amend the pleadings at this late stage.  As a final fallback, Mr Chain argued that given the various expenses connected with the purchase of the property, whatever interest that the plaintiff might still have in the property would be less than 5% and it would have to be assessed.

Challenging a finding of primary fact

24.  At the heart of this appeal is the plaintiff’s challenge of a finding of fact made by the recorder that an oral agreement as alleged by the defendant was indeed made towards the end of the Festival Walk meeting.  As mentioned, Ms Wong submitted that because the recorder relied on the inherent probabilities of the competing versions of fact to arrive at his finding, this appeal is one against a finding of fact made by a process of inference, rather than a finding of primary fact, a distinction drawn by Bokhary PJ in the leading case of Ting Kwok Keung, para 34.  She also referred, in her written submissions, to the apparent definition of a “finding of primary fact” given by this court in Tin Kwong International Enterprise Co Ltd v San Tung [2006] 2 HKLRD 185, para 14(b)[2], which appears to suggest that findings of primary fact are those “based on the credibility of the witnesses or the preference of the evidence of one witness for that of another”.  Since a challenge against a finding of fact based on a process of inference is, comparatively speaking, much easier to make out than a challenge against a finding of primary fact, which can only be disturbed if the finding is “plainly wrong”, Ms Wong, by classifying her challenge as falling within the former category, felt at liberty to base her arguments on several aspects of the evidence available and of the recorder’s reasoning only.

25.  With respect, this is an approach which must be corrected, lest it leads to an unwarranted proliferation of this type of factual challenge on appeal.

26.  It has to be appreciated that nowadays, very rarely can a finding of fact be entirely based on the demeanour of the witnesses, except in “the simplest of cases”: Tradepower (Holdings) Ltd v Tradepower (Hong Kong) Ltd (2009) 12 HKCFAR 417, para 140 (per Litton NPJ).  One situation where demeanour alone may be decisive is where neither rival account is appreciably more inherently probable or improbable than the other, and there is little or no evidence other than the testimony of the protagonists, each with an interest to serve.  In such a situation, “there may be little or nothing for the fact‑finding judge to go on apart from demeanour”: Ting Kwok Keung, para 38.  That represents one “extreme” end of the possible situations.

27.  “At the other extreme”, there can be situations such as where the judge found that he could get nothing from the demeanour of the witnesses, and expressly proceeded to choose between their rival accounts according to the inherent probabilities – see the real example given by Bokhary PJ in paragraphs 38 and 39 of Ting Kwok Keung.

28.  But, as the learned judge pointed out, most cases fall somewhere in between these two extremes.  In fact, unless the contrary is expressly said, one proceeds on the basis that demeanour or credibility did play some part in the finding of fact made by a trial judge, irrespective of whether the judge made any observation with regard to credibility or not.  Ting Kwok Keung, para 39.

29.  The reality, as explained in paragraph 40 of that case, is that no judge can afford to be complacent about his ability to arrive at the truth by assessing demeanour; but, likewise, no judge can afford to be complacent about his ability accurately to say which story is more probable.  Therefore, in practice, almost invariably trial judges are expected to and indeed do take into account both demeanour and inherent probability in arriving at their findings of fact, save in those exceptional circumstances falling within either of the two extremes explained above.

30.  It was in the context of that discussion that Bokhary PJ, in Ting Kwok Keung, came to the conclusion that as a general rule, the Court of Appeal, which does not enjoy the advantages enjoyed by the trial judge who received the evidence at first hand, should only disturb a finding of fact if it is satisfied that the same is “plainly wrong”: paras 41 and 42.

31.  This “plainly wrong” test, in other words, is applicable unless the finding of fact is based purely on inferences, or otherwise has nothing to do with the witnesses’ demeanour or the trial judge’s having received the evidence at first hand.  In this regard, it is worth remembering that when Bokhary PJ referred to the dichotomy between a finding of primary fact and a finding of fact made by a process of inference in paragraph 34 of the judgment, he referred to Benmax v Austin Motor Co Ltd [1955] AC 370 as an example to illustrate the second category of finding of fact based on inference.  As explained by the judge, the issue of fact in that patent case was whether the invention claimed involved an inventive step.  No question of credibility arose.  By a process of inference, the trial judge found that the invention claimed involved an inventive step. Also by such a process, the Court of Appeal reversed the finding.  The House of Lords affirmed the Court of Appeal’s decision and pointed out that whilst there is a universal reluctance to reject a finding of specific fact, particularly where the finding could be founded on the credibility or bearing of a witness, there is no less a willingness to form an independent opinion about the proper inference of fact, subject only to the weight which should, as a matter of course, be given to the opinion of the trial judge (per Viscount Simonds at page 374).

32.  Paragraph 14(b) of Tin Kwong International Enterprise should therefore be understood in the light of the above discussion.  There, this court (differently constituted) was not giving a definition of a finding of primary fact, nor was it defining a finding of primary fact as limited to one based only on the credibility of the witnesses or the preference of the evidence of one witness to that of another.  For that would have been an extremely narrow definition of a finding of primary fact which could seldom be satisfied, given the rarity of situations where a finding of fact could justifiably be made on the basis of credibility or demeanour alone. A finding of primary fact includes, of course, a finding which is based entirely on credibility or demeanour (where that is appropriate).  But, in my view, it also includes a finding of fact which is partly based on demeanour and partly based on inherent probabilities, which is the commonest of all situations.  To challenge such a finding of primary fact, the appellant must succeed in persuading this court that the finding is “plainly wrong”.

33.  This case is no exception.  What is involved is a finding of primary fact.  It is true that the recorder did not refer to the demeanour or credibility of the witnesses as such.  But it does not follow that he did not take them into account or they played no part in his fact finding exercise.  Paragraph 56 of his judgment does not mean, as Mr Chain correctly submitted, that he did not take into account or even ignore the demeanour or credibility of the witnesses.  What he said was that he would not be “greatly assisted” by any consideration of the demeanour of the witnesses.  In other words, he was saying that he would place greater emphasis on inherent probabilities rather than demeanour, an approach which, given the nature of the factual issues before him, cannot be faulted.  To challenge his finding of fact on the making of the alleged oral agreement, the plaintiff must therefore persuade us that the finding is “plainly wrong”.

Capping the plaintiff’s loss

34.  Turning first to Ms Wong’s argument that there were no express words said in the meeting which expressed an intention on the part of the defendant and Madam Fung to cap the plaintiff’s loss to the amount she had paid upon her (allegedly) agreeing to surrender her interest in the property, or words from which such an intention could be inferred, there are several valid answers.

35.  First, there was indeed evidence to that effect.  According to the supplemental witness statement of the defendant dated 4 March 2013, which was adopted by the defendant as part of her evidence at trial, and which was also adopted by Madam Fung as part of her evidence:

“At the end of the Meeting, the Plaintiff decided that she did not wish to take the risk of completion and clearly told us that she wanted out, surrendering her interest in the Property. Indeed, at the time it was a benefit to the Plaintiff that she could freely extract herself from the Property. Due to the drop in the price of the Property, the value of our deposits was already effectively zero. By being allowed to freely extract herself and surrender her interest in the Property, the Plaintiff was not losing anything (the deposit was already lost at the time) and additionally received the benefit of being off the hook for any potential action by the developer of the Property. As mentioned above, this was an option that I would have been happy with myself if it was available to me.”

36.  Secondly, a good answer to Ms Wong’s point may be found in the oral agreement itself.  According to the oral agreement, the defendant and Madam Fung would obtain a mortgage loan and pay for the further 15% required in order to complete the purchase of the property.  After completion, they would rent out the property, and the rentals would be used to discharge the monthly mortgage instalments and they would use their own resources to make up for any difference.  All this would be done in the hope that the property market would eventually pick up before they would decide what to do next – probably by reselling the property at a better price.  In other words, they did not contemplate an eventuality in which they would need to go after the plaintiff for any further loss.  Indeed the defendant testified at trial that she had not thought of the possibility of claiming against the plaintiff for any further loss after completion.  In this regard, it should be remembered that the three ladies are lay persons, and it would be wholly unrealistic to expect them to think of or spell out all possible eventualities as if they were legally trained.  On the basis of what was agreed in the context of the entire discussion, I have no doubt that the contractual intention was to cap the plaintiff’s loss at the amount that she had paid.

37.  Thirdly, as Mr Chain rightly pointed out, the present argument of Ms Wong (who did not appear below) was never put to either the defendant or Madam Fung, and this court does not have the benefit of whatever answers that they might have given if they had been asked.  It would be totally unfair to the defendant to allow this point to be run based on a case not put to the defendant or Madam Fung.

Securing a mortgage loan

38.  As to Ms Wong’s argument that there was no certainty that the two ladies would be able to secure a mortgage loan, again it is not an argument which can be entertained on appeal.  It was never put to either the defendant or Madam Fung.  Nor was it raised as an issue in the pleadings or in the submissions to the court.  One simply cannot tell what answers the two ladies would have given if they had been asked.  For all we know, they might have said that in entering into the oral agreement, they had taken a calculated risk on their obtaining a mortgage loan successfully.  Or they may have replied to the effect that the agreement was subject to a condition precedent (or subsequent) that such a mortgage loan would be successfully obtained.  Under either of these hypothetical answers of the two ladies, the finding of an oral agreement would stand without difficulty.  But the fact remains that one simply does not know what their answers would have been.  It would be wholly unfair for this point to be run for the first time on appeal.

The solicitors’ letter

39.  As for the solicitors’ letter dated 20 June 2009, the judge paid detailed attention to the letter and came to the conclusion that the letter, obviously written by a lawyer based on instructions from the defendant, did not contradict the existence of the oral agreement: paragraph 78 of the judgment.  He was entitled to that view.  He was also entitled to accept that the letter did broadly identify the defendant’s case and the method by which the plaintiff surrendered her interest in the property.  By that, the recorder was obviously referring to the alternative case put forward in the solicitors’ letter to the effect that as a result of the meeting, the plaintiff had agreed to surrender all her interest in the property “by treating all [her] contributions as losses leaving [the defendant and Madam Fung] to proceed with completion”.  The recorder’s view cannot be faulted.

No real choice

40.  As regards Ms Wong’s criticism of the recorder’s repeated references to the plaintiff having “no real choice” or having “no option” but to go along with the oral agreement, I think the recorder has very realistically looked at matters from the plaintiff’s then position.  In paragraph 65 of his judgment, the recorder analysed her situation as follows:

“Against these circumstances, for the plaintiff to exit the agreement at a loss limited to the amount of her initial deposit of $400,000-odd would have been obviously reasonable and desirable. I am conscious that the plaintiff herself and through her counsel has sought to stress that she has brought this claim to clarify her interest in the property, irrespective of whether that would ultimately give rise to a profit or a loss. Nevertheless, on her own case, she was prepared to bear a loss arising from either the sale of the property at a value lower than the purchase price, or by repudiating the agreement to purchase. Either of those scenarios would have resulted not just in a loss but, in the end, of any involvement by the plaintiff in the investment in the property. If she was prepared to act in either of those ways, at a loss, and to end further involvement with the property, I do not see why it is unreasonable to find that she would have been prepared simply to walk away from her contribution thereby crystallising and capping her loss and ending any further involvement with the property.

41.  No challenge can be made against the recorder’s analysis.  As regards the scenario where the defendant and Madam Fung decided to proceed with completion by their own means including the taking out of a mortgage, the position of the plaintiff was equally weak.  It is true that if no oral agreement was reached, the plaintiff would, as a matter of law, retain, after completion, a small percentage of beneficial interest in the property proportional to the amount that she had paid.  However, it must be remembered that as at the time of completion, the property market had so fallen that the property was worth substantially less than its original purchase price.  In other words, the plaintiff’s 5% interest in the property after completion was worth very little in practice, and was in fact a potential liability for further loss (absent the oral agreement).  This being the case, asking rhetorically as the recorder did in paragraph 65 of his judgment recited above: why is it unreasonable to find that she would have been prepared simply to walk away from her contribution thereby crystallising and capping her loss and ending any further involvement with the property, including the so called 5% (or less) interest in the property after completion?

42.  In my view, from more perspectives than one, the plaintiff obtained a very reasonable and indeed good bargain under the oral agreement according to the prevailing circumstances at the time it was made.

The telephone conversation

43.  Finally, I turn to the telephone conversation that took place in May 2009.  Ms Wong pointed out that the defendant accepted, in cross‑examination, that the plaintiff called her to maintain a claim of 5% interest in the property after learning of the completion of the purchase.  Counsel argued that this was inconsistent with the existence of the oral agreement.  In my view, the defendant’s answer in cross‑examination must be read in the entire context of the telephone conversation as testified to by her.  And that conversation, in turn, must be read in the light of all other evidence and the inherent probabilities that the recorder took into account before reaching his finding of primary fact.

44.  All the defendant was saying in her answer was that the plaintiff still wished to maintain a 5% interest in the property after learning of the completion.  That is not at all inconsistent with the plaintiff having already reached an oral agreement at the Festival Walk meeting several months back.  For there is simply nothing in life to stop people from seeking to renege on their promises or to renegotiate what has already been agreed.  In any event, according to the defendant’s evidence, she rebuked the plaintiff for seeking to make a claim, she (the plaintiff) having decided not to contribute further towards completing the purchase of the property.

Conclusion on the factual challenge

45.  For all these reasons, I am far from convinced that the recorder’s finding of primary fact is “plainly wrong”.  Quite the contrary, in my view, his finding of fact was one that he was quite entitled to make on the basis of the evidence before him.

The pleadings

46.  This therefore spells the end of the plaintiff’s appeal.  For the sake of completeness, I would briefly say that even if she had been successful in challenging and reversing the finding of primary fact in her favour, I would still have dismissed this appeal on the basis that her claim as pleaded was and is restricted to a one‑third interest in the property.  That claim was and is based on the pleaded premise that under the only agreement between the three ladies, each of them shall have a one‑third equal interest in the property.  That premise was totally rejected by the recorder under his other finding of fact that the ladies’ interests in the property were proportional to their respective contributions to the purchase price and convenyancing expenses, a finding of primary fact which the plaintiff does not challenge on this appeal.  Coupled with the fact that there is no alternative plea for a lesser interest in the property, it is simply not open to the plaintiff to ask the court to give her relief based on 5% or any smaller percentage.  That is not covered by her pleadings.

47.  As for amendment of pleadings, I would have refused the same on the simple ground that it would be quite prejudicial to the defendant to allow such a late amendment.  A one‑third claim is substantially different from a 5% (or lesser) claim.  The defendant’s position regarding, for instance, whether to settle the case by making a sanctioned payment or sanctioned offer would be greatly affected by this sudden change of stand.  The forum of the trial would also be affected.  In this post Civil Justice Reform era, no party can assume that an amendment can as a matter of course be bought by offering to pay costs.

Disposition

48.  For all these reasons, I would dismiss the appeal.  I would also make a costs order nisi that the plaintiff pay to the defendant the costs of this appeal, to be taxed if not agreed.

Hon Kwan JA:

49.  I agree with the judgment of the Chief Judge.

Hon Barma JA:

50.  I also agree.

Hon Cheung CJHC:

51.  Accordingly, we make the orders disposing of this appeal as indicated in paragraph 48 above.