LEUNG KAI CHE v. WONG PING PING

1993, No.A10740

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 action by the Plaintiff for specific performance of the Sale and Purchase Agreement ("the Agreement") of Flat M, 4th Floor, New Lucky House, 13-15, Jordon Road ("the property"). The Agreement which is dated 10 November 1993 was made between the Defendant as vendor and the Plaintiff as purchaser, the purchase consideration being $200,000. The deposit was $5,000 and the balance of $195,000 is to be paid upon completion which was stipulated to be within 5 days of the Agreement.

2. Clause 12 of the Agreement provides in effect for the cancellation of the obligations of both the vendor and the purchaser who were parties to an I.O.U. or loan receipt which was annexed to the Agreement. The Agreement was witnessed by the respective solicitors acting for each of the parties. The annexure which is the I.O.U. I referred to earlier is in the following terms:-

"I, Wong Ping Ping, borrowed Hong Kong Dollars Five Hundred Thirty Thousand (HK$530,000) from Mr. Leung Kai Che on 18th September 1993 (to) purchase Flat M, 4th Floor, New Lucky House, Nos.13-15 Jordan (Road). Despite the charges of bank interest rates, fixed interest at the rate of 5.5% on the balance due to be paid to Mr. Leung, repayment in full will be made by instalments within five years. This loan receipt/agreement takes effect upon the signing by both parties, either party could not breach this agreement."

3. There followed the signature of the parties on the bottom right hand corner of the document and on the bottom left hand corner, there is another clause which reads:-

"These premises will be owned by party Wong, Party Wong have to pay Six Hundred Thirty Thousand Dollars to Party Leung in addition. Party Wong should not refuse without reasonable excuse."

4. I ought to add that this I.O.U. was written in Chinese.

5. The defence to the action is one of duress. The Defendant says that she was subjected to duress by the Plaintiff or his agents, and I will come to that a little later, and for that reason, she says, the Agreement should not be enforced. Rather, it should be set aside.

6. I need to go a little into the background of this Agreement. I will deal with the events in chronological order. It appears that in late July 1993, the Defendant advertised in a Chinese newspaper under a caption which read "earnestly seeking boyfriend". The Plaintiff responded to the advertisement and the first meeting occurred on 4 August. Shortly thereafter, it appears that the Defendant suggested to the Plaintiff the idea of purchasing a flat in joint names. Three weeks after their first meeting, a deposit was paid for the property. The deposit was for the amount of $100,000. It is common ground that the Defendant issued a cheque for this sum. The Plaintiff says that he paid her $50,000 for his share. He says that $35,000 was paid by a cashier's order and the remaining $15,000 was paid in cash. The Defendant denies this, so there is a dispute as to whether or not the Plaintiff had contributed $50,000 towards the deposit.

7. The Defendant admits that before the deposit was made, she knew that she had difficulty in coming up with her share of the purchase price and that she expected the Plaintiff to help her pay for her half share. The Plaintiff's understanding is a little different. He said that she told him she had money in China and that she asked him to lend it to her, as it were, as a bridging loan until she was able to get the money from China. There is also a dispute as to the reason for buying the flat. The Plaintiff says: "Well, it was for the purpose of cohabitation with a view to subsequent marriage", but the Defendant says she never contemplated or agreed to cohabitation. She thought it would be a worthwhile investment and as the Plaintiff had accumulated savings, she thought it was a good idea for him to invest in property and she herself also thought it worthwhile to invest in property. I think it is also a fact that she needed accommodation for herself, her mother and the baby that she was expecting at the time as well as accommodation for her sister, but I do not think that this aspect is material.

8. The fact of the matter is that the property was purchased on 18 September 1993. It is common ground that the Plaintiff paid the balance of the purchase price of HK$1.16m. This was paid by way of a draft or cashier's order in the sum of $530,000 and the balance of $630,000 was drawn on his bank account and it is again not disputed that his account was overdrawn.

9. Between completion on 18 September and 7 October, the Defendant was in China. She returned some time on the 7 October 1993. The parties then signed the I.O.U. that I described a little earlier. The Plaintiff gave evidence to the effect that he became very suspicious when the Defendant returned from China and the money was not forthcoming. He had expected her to return with her share of the purchase price. By this time, of course, she was already a co-owner of the property and the Plaintiff was anxious to obtain some evidence of the loan of $530,000 to her. The I.O.U. was prepared by the Defendant. The Plaintiff says that although he was not happy with the terms such as interest of 5.5% and repayment by instalments within five years. His main concern was that there should be some evidence of the loan and that was for that reason that he signed the I.O.U. There is also no dispute that two days later, on 10 October, a clause was added to the I.O.U. and that is the clause that appears on the bottom left hand corner of the document. The effect of the clause is that it gave the Defendant a right to buy from the Plaintiff his share of the property for $630,000. The Plaintiff said he never agreed to this clause. In fact, he wanted the Defendant to pay him what she owed him within a week or two weeks and he refused to sign on the document again to signify his consent to the additional clause.

10. I now come to the 10 November 1993. The Plaintiff and the Defendant met at a restaurant in Jordan Road. This meeting was pre-arranged. The Defendant was there with her friend, a Mr Ng and two of his colleagues whom she did not know. The Plaintiff says that he went there alone. The Defendant disagreed. She said that he was there with about ten people and in fact came up with two or three friends to the table where she was sitting with Mr Ng and his colleagues.

11. In the pleadings, it is alleged that the three unknown Chinese males, this is, I think, a reference to the three friends of the Plaintiff, swore at the Defendant and one of them, a fat Chinese person, slapped the Defendant's right cheek. In her statement, she said:-

"... one of the 3 persons, a fatty fellow, said - 'Is that her?'. The Plaintiff said 'Yeh' and nodded his head. The fat fellow and the other 2 started to swear at me. The fat person sat down next to me and slapped my right cheek. One of the other 2 said be easy on me. I said to the Plaintiff - 'You told someone to beat me.'"

12. When she gave her evidence-in-chief, the Defendant said that the fat man slapped her twice. After this incident, it appears that the Plaintiff, the Defendant, Mr Ng, Mr Ng's friends and the so-called "fat man" sat down to negotiate. They went to a second restaurant and thereafter at about 3:30 in the afternoon, they apparently went to inspect the property. I believe that the reason for the inspection was that the Defendant had said that she had spent money on redecorating the flat. In negotiating the price for her interest in the property, she was asked how much she had spent on the flat and she said $160,000. One of Ng's friends then said the selling price would be $200,000. The fat person said $180,000 and at the end it was agreed at $200,000. When they inspected the property, or just before that, it appears that the Plaintiff asked for the keys. When they were there, the Plaintiff returned the keys to the Defendant because the Defendant still had belongings in the flat and those had to be moved out at some later stage.

13. The parties then proceeded to go to a firm of solicitors to formalize the agreement reached for the purchase of the Defendant's interest by the Plaintiff for $200,000. They went to three firms. The first was K.F. Wong & Co. This firm was the Defendant's choice. They had acted for the Plaintiff and the Defendant when the property was purchased in September. However, when they arrived at the offices of K.F. Wong, they were told that Mr Wong was not there and a member of Mr Wong's staff suggested that they go to another firm and introduced them to Tsang & Chan.

14. The Plaintiff, the Defendant, Mr Ng, and it would appear the fat man, all then went along to the offices of Tsang & Chan where they met a solicitor, Henry Woo Ka Wai who was subpoenaed by the Plaintiff to give evidence at the trial. Mr Woo is a solicitor of the Supreme Court. He has been in practice for four years and he recalls preparing the memorandum dated 10 November. He told the court that he represented the Plaintiff. He identified his signature on the Agreement. He said he witnessed the Agreement and also interpreted the Agreement to the Plaintiff before the Plaintiff executed it. He said that he saw the Defendant on that occasion and that she was the vendor. When asked about her demeanour at the time, Mr Woo could not recollect anything unusual. He said that she appeared normal, that she was with a male friend and she was talking to her friend and she was smiling and everything looked normal. He described the sequence of the events as follows. He recalled that the Plaintiff, the Defendant and the other persons arrived at his office at around 4 or 5 in the afternoon. The Plaintiff went into Mr Woo's office with his fat friend; the Defendant was sitting outside with her friend. After taking instructions from the Plaintiff, he prepared the memorandum in his office. After it was ready, he came out and met the Defendant and her friend. The Plaintiff and his friend were also there at the time. He asked the Defendant if she was represented by a firm and she said that she was not. He explained that he could not act for both parties and that she needed independent advice. She apparently asked him to recommend a solicitor whereupon he telephoned Howard Wong Hiu Ngon who was with the firm of Norman M.K. Yeung & Co. and ascertained that Mr Wong was still in the office. By this time it was about 7 p.m. in the evening.

15. Mr Woo said that as the parties did not know how to get to the offices of Norman M.K. Yeung & Co., he accompanied them. He said that the Plaintiff signed the Agreement in his office in the presence of the Defendant and after that they left for the offices of Norman Yeung & Co. It was about three or four minutes away. When they reached the offices of Norman Yeung & Co., Mr Woo asked for Howard Wong whom he had contacted before and told him that the vendor was with him and that Mr Wong was to give the Defendant independent legal advice. According to Mr Woo, the Defendant and her friend went into Mr Wong's office. He, Mr Woo, stayed outside with the Plaintiff. He stayed until after Mr Wong had interviewed the Defendant and the Defendant had signed the documents. Mr Woo left with a copy of the Agreement.

16. Howard Wong was also subpoenaed by the Plaintiff. He is a solicitor of the Supreme Court and qualified in 1991. He recalled the memorandum and recalled that he was contacted by Henry Woo on the day in question. When they spoke on the telephone, he had asked Mr Woo to fax over a copy of the Agreement so that he could see what the transaction was about. So, by the time they reached the offices of Norman Yeung & Co., Mr Wong had already seen the Agreement. Mr Wong said that the Defendant was accompanied by a man and that she and her friend entered his office and that the Plaintiff remained outside with Mr Woo. He began to explain the contents of the Agreement to the Defendant and her friend and he remembered specifically that the Agreement contained an annexure which is the I.O.U. Mr Wong gave evidence that he explained the contents to them. He recalled there being unusual clauses and in particular he referred to Clause 12. That clause related to the annexure and the effect of Clause 12 was the cancellation of the parties' mutual obligations under the I.O.U. Mr Wong said that it appeared to him that the Defendant fully understood the contents of the Agreement. After being satisfied that she understood what she was doing, he said to her: "If there is no problem, you can sign this document." He also recalled that he specifically asked if she had received the $5,000 deposit and she said "yes". The document was then signed and dated. He also asked the Defendant to put her signature at the side of the I.O.U. He confirmed that the Plaintiff was not present in his office at the time when he attended the Defendant and her friend, Mr Ng, who were in his office with him for approximately 30 minutes.

17. Mr Wong also gave the following explanation of events that occurred after the signing of the Agreement. He said that the day after the Agreement, he wrote to the mortgagee's solicitors K.F. Wong on behalf of the Defendant and asked for the title deeds. He received the documents on the 13 November and prepared the formal Agreement for sale and purchase which he sent to Tsang & Chan. They approved the draft and on 15 November they sent the document back. Mr Wong said that he then called the Defendant and asked her to come to his office to sign the Assignment. It was then that she told him a different story. She told him that she did not want to sign the formal Assignment and when he asked why, she said that she did not want to sell the property to the Plaintiff. He asked her why she had signed the Agreement as he had explained on 10 November that failure to comply with the Agreement would result in a law suit. The Defendant told him that on 10 November she had signed the memorandum under duress. She told him that earlier that day somebody had threatened her and when Mr Wong asked her why she did not tell him when was in his office, the Defendant told him that she was frightened at the time and that someone would treat her badly. Thereupon Mr Wong asked the Defendant to write to him explaining the situation. Mr Wong said that by that time he had fallen into a very embarrassing situation because if her version was true she had not signed the Agreement of her own free will.

18. The Defendant sent a letter to Mr Wong, as a result of which Mr Wong wrote to Tsang & Chan on 17 November saying that the Defendant would not execute the Assignment. He asked them to return the title deeds. Quite properly, Mr Wong informed Tsang & Chan that his firm could no longer act for the Defendant and that she had been informed. That was Mr Wong's evidence.

19. I now turn to the allegation of duress. It all turns on questions of credibility. There is here a direct conflict. The Defendant says she was assaulted in the manner described. The Plaintiff denies that. The Defendant has chosen not to call any witness who might be able to corroborate what happened that day. She does not deny that Mr Ng was present and witnessed everything, or that Mr Ng is her friend. But he was not called as a witness.

20. The Defendant's case is that the I.O.U is a genuine loan transaction. But the transaction, if one looks at it from the Plaintiff's point of view, makes no economic sense because the effect of it is that the Plaintiff is buying a property in joint names but is, in effect, paying for all of it. He has to finance the Defendant's half share by way of overdraft and the I.O.U. only gives him 5.5% interest and then there is a clause which requires him to sell his half share in the property in two years' time at the price at which he originally acquired it. I find it inherently improbable that it was a genuine loan transaction, especially as the parties had really known each other for a very short time. The Defendant's case is that they were mere friends. There was nothing beyond that. In fact, as I mentioned earlier, they came to know each other through the Plaintiff responding to the Defendant's advertisement. If indeed it was a genuine loan transaction, I would have expected it to have been entered into before or at the time of the completion of the purchase of the property. The Defendant admitted that she knew she was not going to be in a position financially to pay for her half share even at the time the deposit was paid and that she had made that known to the Plaintiff and that the Plaintiff had agreed to lend her the money. If the parties had intended that there be a loan, that it be evidenced by an I.O.U., I find it very odd indeed that the I.O.U. should have been made several weeks after completion by which time the Defendant was already a co-owner. I find it more probable that, as the Plaintiff said, he was expecting the Defendant to return from China with the money. When she returned on 7 October without the money he got very concerned and the I.O.U. was some proof to him that she owed him the half share of the purchase price.

21. Counsel for the Defendant submitted that I should not place too much reliance on the evidence of the solicitors. But the solicitors were subpoenaed by the Plaintiff. The Plaintiff had no idea what they were going to say. I find that both Mr Woo and Mr Wong were truthful and independent witnesses. I accept their version of events. They behaved professionally and I believe Mr Wong's evidence that he spent half an hour with the Defendant and her friend in his office going through the memorandum and explaining to the Defendant the effect of the various clauses. He also said in his evidence that she asked him questions relating to legal charges and fees and so on and so forth and it is also right to say that it did not appear to him that the Defendant was not behaving normally.

22. There is also the fact that the Agreement does not seek to take advantage of the Defendant. The Defendant admitted that the market value of the property was the same in November as it was in September, that she had spent $60,000 to $70,000 on redecorating the property and not $160,000 which apparently she had mentioned when negotiations were taking place and she would not really lose out even if she had paid all of the deposit of $100,000.

23. I now turn to the Defendant's evidence. She gave inconsistent answers when it occurred to her that her earlier answer might not advance the case. Generally, she was somewhat emotional and I do not accept that she was telling the truth when she gave evidence. I should also say that the allegation of the assault, even if one were to accept that she was assaulted in the manner alleged, does not support a defence of duress. What she is saying amounts to this: as a result of this assault on her which took place during the lunch hour, she was so emotionally distressed that even six or seven hours later, when she was in the company of her friend throughout, she was still suffering under duress. I agree that if she had been assaulted, she would have felt insulted. I do not think that that amounts to duress. There is no evidence of threats against her and, as I say, taking into account that the Agreement is fair and reasonable, taking into account the background circumstances, I do not accept that what she alleges amounts to the legal defence of duress. The Plaintiff therefore succeeds in this action and is entitled to costs.