U FOOK SHING TSO v. COMCEWOOD DEVELOPMENT LTD.

CACV 284/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 284 OF 2000

(ON APPEAL FROM HCA NOS. 3814, 3815, 3816,
3817, 3818 & 3819 OF 1989 (CONSOLIDATED))

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J U D G M E N T

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Hon Rogers VP :

1. This is an appeal from the judgment of Deputy Judge Kwan given on 26 June 2000. The appeal is by the 5th defendant in the action, a company by the name of Comcewood. The case is a curious case and the judgment has set out the facts in full and I will try to summarise them for the purposes of this judgment.

2. The relevant events started on 19 October 1987 when the mangers of a Tso chose to sell two parcels of land in the New Territories. They sold the parcels to the 1st and 2nd defendants. These are two companies : the Hugewin Development Limited and Simstar Development Limited. The purchase price for the two pieces of land was to be $2.6 million; $400,000 was to be paid by the 1st and 2nd defendants to the Tso's as deposits. The point of the agreements was that houses would be built on the land and that once the houses were built the Tso would apply for a certificate of compliance with the District Officer and then obtain consent to sell the land. The sale and purchase was to be completed within 30 days after the memorandum of consent was given by the District Officer.

3. In 1988, the two companies, the 1st and 2nd defendants, entered into a number of sub-sale agreements with individual purchasers in respect of units in the two houses. These individual purchasers and the sub-purchasers eventually became the 1st to 10th plaintiffs in the action. It is to be noted that the sub-sale agreements to these 1st to 10th plaintiffs were to be made with the benefit of the Chinese Agreement which had been made originally in 1987.

4. The certificates, or letters of compliance, were eventually forthcoming on 17 May 1989 after the two houses had been duly erected. But it was at that stage that the 5th defendant, or at any rate the persons behind the 5th defendant, namely, a Mr Or and a Mr Shing, came on the scene. As a result of what emerged at the trial there is some doubt about whether or not there were preliminary agreements. At any rate on 25 May 1989 there was, what has been termed in the action, the English Agreements. Those were made between the Tso and the 5th defendant Comcewood Development Limited in respect of the two pieces of land.

5. The problem arose because the English Agreements were registered in the Land Registry whereas the original Chinese Agreement and the sub-sale agreements were not. Eventually, an action was started by the plaintiffs against the 1st and 2nd defendants to enforce their rights. The matter dragged on and came to trial before Mr Justice Mayo in December 1993. He gave judgment for the 1st, 2nd, 3rd, 4th, 5th, 6th, 9th and 10th plaintiffs against the 1st and 2nd defendants and the money paid into court by them was to be paid to those plaintiffs. The 7th and 8th plaintiffs had obtained an order that their deposit of $115,000 was to be refunded to them.

6. The 11th plaintiff was the Tso and the $400,000 deposit under the Chinese Agreement which they made with the 1st and 2nd defendants was to be forfeited and a declaration was made that the English Agreements, in other words, those made with the 5th defendant, had been obtained by fraud and were null and void and of no effect and liable to be set aside. The judge also ordered that the registration of the English Agreements which had been made should be vacated. Following that judgment, application was made to the District Officer for consent to assign the two houses to the 1st to 10th plaintiffs and that consent was granted. In July 1994 the Tso executed various assignments of the units of the two houses in favour of the plaintiffs.

7. However, the matter then came to the attention of Messrs Or and Shing. They apparently approached solicitors but it was not until February 1996 that an application was made to Mr Justice Mayo to set aside the judgment which had been entered against the 5th defendant. Leave was so granted. Eventually the matter first came for trial before Deputy Judge Z E Li on 21 June 1999. The 5th defendant, however, produced discovery late and that trial had to be aborted. The matter ultimately came to trial before Deputy Judge Kwan. She summarised the issues before her both on the claim and the counterclaim on page 12 of the judgment and she said the issues were as follows :

(1) Whether the English Agreements were entered into by the Tso as a result of fraudulent misrepresentations which had been made by Mr Danny Cheung who was the estate agent involved.

(2) Whether the managers of the Tso could rely on non est factum in respect of their execution of the English Agreements.

(3) Whether Comcewood has established that the English Agreements were executed in a proper manner in the circumstances as pleaded in the Defence, that the deposits thereunder were paid to the mangers as stated, and that there was nothing to suggest that the English Agreements purportedly executed by the parties might be a sham.

(4) Whether there was any conspiracy of the Defendants other than the 3rd Defendant to injure the Plaintiffs in depriving them of the benefit of the Chinese Agreement and the sub-sale agreements.

8. For clarification I should point out that the 3rd defendant in the action had been a firm of solicitors and settlement had been reached with them at a much earlier stage.

9. The judge heard a considerable amount of evidence. There was only one manager of the Tso who was still alive at the date of the trial and the judge heard evidence from him. She also had the benefit of the witness statement of another manager of the Tso who had unfortunately died in the intervening time. The judge also heard evidence from Mr Shing who was one of the directors of the 5th defendant but not the director who had signed the English Agreements. The judge was not impressed by the evidence as to why Mr Or, who was the director who had signed the English Agreements, did not attend the trial and did not accept the explanation and considered that Mr Or could have attended the trial had he so wished. The judge also heard evidence from a Mr Johnny Mo, who was a clerk with the solicitor's firm, who had been intimately involved with the 5th defendant in both arranging the establishment of the 5th defendant and in the execution of the English Agreements.

10. Unfortunately, as sometimes happens the judge could hardly believe any of the evidence and certainly could not accept the major parts of the evidence of any of the witnesses on either side. The judge's judgment is very precise as to the facts as found and she gives a number of reasons in respect of each of the witnesses as to why their evidence was not believable in the important aspects of the case which impinged on the issues which she had to decide.

11. In particular the judge could not accept Mr Yu's evidence that he had been hoodwinked into signing the English Agreements. She was not prepared to accept that there was a conspiracy in that respect and Mr Yu's evidence failed to come up to the standard of reliability on which the judge could base any finding of fact in that respect.

12. When it came to Mr Mo's evidence, again the judge was unable to accept it. In particular in the context of this appeal there were important findings of fact or important assessments of the witness's evidence as to fact which the judge made. Specifically this was so in relation to the execution of the agreements. It is to be noted, of course, that Mr Or did not give evidence when the judge felt that he could have done. The judge was not satisfied as to the 5th defendant's evidence as to the execution of the agreements. Specifically, the judge was not satisfied as to the payment of the deposit. For reasons which she explained at length, the evidence as to the payment of the deposits in respect to the English Agreements was something which the judge simply could not accept, not least because, in particular Mr Johnny Mo, changed his evidence from his witness statement to his evidence-in-chief and when he was cross-examined. This related to amounts and how the money was paid and whether he had made inquiries of the managers of the Tso as to whether they received the deposit.

13. In the light of the matters which are set out in the judgment, the judge could clearly have come to no other conclusion than that she could not accept the 5th defendant's evidence either as to the execution of the English Agreements or as to the payment of the deposits thereunder. She summarised her conclusion in this way (on page 26 of the judgment) :

"On the evidence adduced by Comcewood, I am not satisfied on the balance of probabilities that the English Agreements were properly executed, that the deposits had been paid by Comcewood to the managers, and that there was nothing to suggest that the English Agreements were a sham."

14. The judge's approached to the case has been criticised by Mr Wong in two respects. First of all, he says that the judge should have relied upon section 23 of the Conveyancing and Property Ordinance, Cap 219 and in view of the production of the agreements that should have sufficed: the judge should have not gone on to consider whether she was satisfied that the agreements were properly executed.

15. That argument is clearly wrong. The judge had heard evidence about the agreements. She had heard evidence from Mr Shing and Mr Mo. She had rejected that evidence and in the light of that and in the light of the fact that the agreements were not admitted to have been properly executed that is the end of the matter. Because the judge clearly approached it on the basis of a balance of probabilities, and there is no lower standard which the court could have applied, if the judge was not satisfied that the agreements were properly executed or the deposits had been paid there falls the 5th defendant's case at that stage.

16. Neither is Mr Wong's criticism that because the judge went on to say that there was nothing to suggest the English Agreements were not a sham, she was applying any higher standard of proof. She clearly was not. She was simply looking at the matter on the basis of the facts which she had found and in the light of the two earlier facts, namely, that she was not satisfied that either, the agreements were properly executed or that the money had been paid. Clearly the judge was then faced with the question as to what those agreements were and the only thing that she had then to consider was whether they were genuine or not. In my view, there was not a shred of a ground on which this appeal could have been brought. It must be dismissed.

Hon Le Pichon JA :

17. I agree with the judgment of the Vice President and have nothing to add.

Hon Cheung J :

18. I agree and have nothing to add.