WOONSING LTD. v. WONG YI MING

HCA 6744/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 6744 OF 1998

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J U D G M E N T

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1. In this action, the plaintiff claims against the defendant for the return of a deposit paid under an agreement for sale and purchase of property. The defendant counterclaims for damages in breach of agreement and in slander of title.

Background

2. The defendant was the registered owner of a property situates at Flat F 31/F. Goldwin Heights, No. 2 Seymour Road, Hong Kong ("the Flat") and a car park no.13 situates at L2 level of Goldwin Heights ("CP13"). In April 1998, the defendant, through various estate agencies, offered the Flat and CP13 for sale at an asking price of HK$9.5 million. One of the agencies he used was Chi Cheung Property ("Chi Cheung").

3. The plaintiff is a company dealing essentially in the investment of landed properties. One Mr Lam Wai Shuen ("Mr Lam") is a director of and controls the plaintiff. On about 12 April 1998, Mr Lam learnt from 2 employees of Chi Cheung, Miss March Lam ("ML") and Mr Eric Lau ("EL"), that the Flat and CP13 were available for sale. Mr Lam, accompanied by ML and EL, then went to inspect the Flat. It is not in dispute that he did not inspect the car park. Mr Lam was interested in the Flat. After the inspection, he offered to buy the Flat and CP13 at the price of HK$8.2 million. He signed a provisional agreement for the purchase of the Flat and CP13 at the price of HK$8.2 million ("the 1st Agreement"). He also issued a cheque in the amount of HK$250,000 in payment of the initial deposit. It is common ground that, despite that the defendant had signed on it, the 1st Agreement was not acted upon by the parties. The parties are, however, at variance as to the circumstances leading to this, a matter that I shall return to deal with later.

4. It is also common ground that on 13 April 1998, the defendant signed another provisional agreement for the sale to the plaintiff of the Flat and a car park described as "L2#3" at the price of $8.95 million ("the 2nd Agreement"). Subsequently on the same day, Mr Lam also signed on the 2nd Agreement on behalf of the plaintiff. The cheque of $250,000 previously given by the plaintiff was applied towards the initial deposit for the 2nd Agreement. The description of the car park in the 2nd Agreement was later amended by ML by inserting the figure "1" before the figure "3" so that it reads "L2#13". The 2nd Agreement forms the subject matter of the plaintiff's claim herein. The circumstances leading to the making and amendment of the 2nd Agreement and the events immediately following 13 April 1998 are in dispute.

5. Then on 20 April 1998, the plaintiff through its solicitors, Messrs. Laurence Pang & Co. ("LP"), wrote to the defendant's solicitors, Messrs. Sam Leung & Co. ("SL"), enclosing the 2nd Agreement and also requesting for the relevant title deeds and the draft formal sale and purchase agreement be sent to them for approval. On 22 April 1998, SL sent to LP a draft formal agreement for the sale and purchase of the Flat and CP13 at $8.95 million.

6. On 25 April 1998, LP wrote to SL pointing out that the 2nd Agreement was in relation to the Flat and car park no. 3 on L2 ("CP3"). LP noted that, since the land search showed that the defendant was the owner of CP13, there was a crucial mistake in the 2nd Agreement, rendering it void. LP, however, went on to request for a copy of the floor plan of the car parks so as to enable the plaintiff to decide whether it is willing to purchase CP13 instead of CP3. There was no reply from SL to this letter.

7. On 27 April 1998, LP returned the draft formal sale and purchase agreement with certain amendments made to it, and requested for an engrossed copy of the agreement for execution by the plaintiff. On the same day, SL sent to LP the engrossed copy of the agreement for the sale and purchase of the Flat and CP13.

8. Then on 28 April 1998, the day for execution of the formal agreement and payment of further deposit, LP informed SL that the plaintiff had decided not to proceed with the sale and purchase on the basis that there was a material mistake in the 2nd Agreement which rendered it void. LP requested in the same letter for a refund of the deposit. SL replied on the same day stating that should the plaintiff fail to execute the formal agreement and pay the further deposit within the day, the defendant would treat it as repudiation on the part of the plaintiff and forfeit the deposit.

9. The parties did not execute any formal agreement and the plaintiff did not pay the further deposit. The defendant forfeited the initial deposit and gave notice of the same to the plaintiff on 29 April 1998.

10. The plaintiff commenced these proceedings on 29 April 1998. The Plaintiff caused the Writ to be registered against the Flat and CP13. By an order made by consent on 12 June 1998, the registration was ordered to be vacated upon the defendant paying into court the amount of $250,000. The defendant made the payment into court on 8 August 1998. By a consent order filed on 8 September 1998, the plaintiff consented to the dismissal of its claim for declaration of interest in the Flat and the CP13.

11. In September 1998, the defendant sold the Flat and the CP13 to another purchaser at the price of $6.3 million.

The Pleadings

12. It is necessary to deal with the pleadings of the parties in some length in view of the fact that a significant part of the trial dates had been taken up by last minute applications to amend the pleadings and applications for further and better particulars of the pleadings.

13. In the General Indorsement annexed to the Writ, the plaintiff claims that there had been a mistake as to the subject matter of the sale and purchase. The plaintiff therefore seeks a declaration that the 2nd Agreement was null and void, and alternatively, a declaration that the plaintiff has legal or equitable interest in the Flat and CP13. The plaintiff further claims the return of the deposit paid and a lien on the Flat and CP13. The claim was expanded in the Statement of Claim filed on 4 June 1998.

14. In the Defence and Counterclaim, the defendant denies there was any mistake, or any mistake that goes to the existence of the subject matter of the 2nd Agreement. The defendant pleads that the 2nd Agreement was subject to a collateral agreement to the effect that the parties were to confirm the car park number after the plaintiff had signed the 2nd Agreement. The defendant further pleads the amendment made by ML to the 2nd Agreement. The defendant counterclaims for declarations that the 2nd Agreement had been repudiated and rescinded, and that the defendant was entitled to forfeit the deposit. The defendant further counterclaims for damages in slander of title occasioned by the registration of the Writ herein.

15. In the Reply and Defence to Counterclaim, the plaintiff denies the plea of collateral agreement. The plaintiff also denies the authority of ML to amend the description of the car park. It contends that any amendment to the 2nd Agreement is unenforceable by reason of it not being reduced into or evidenced by writing. The counterclaim is also denied.

16. The Defence and Counterclaim was amended on 8 October 1999 to add to the counterclaim a claim in slander of title, particulars concerning the plaintiff's initial refusal to agree to the dismissal of the claim for a declaration of interest in the Flat and CP13 and also particulars of the damages sought. Consequential amendments were made to the Reply and Defence to Counterclaim.

Interlocutory Applications Made at Trial

17. 3 days before the commencement of the trial, the defendant took out a summons applying to re-amend the Defence and Counterclaim by adding a plea of rectification and by adding 2 further items of damages. The amendment relating to the particulars of damages was not opposed, but the amendment to add the plea of rectification was.

18. After hearing arguments, I allowed the amendment to add the plea of rectification. Although the alternative plea was introduced late, it is a relevant plea that arises from the pleadings and the facts already pleaded. There is also no suggestion of sharp practice or deliberate attempt on the defendant's part to delay the proceedings. Counsel for the plaintiff argued that the new plea is inconsistent with the defendant's case of collateral agreement. However, it is clear from counsel for the defendant's submissions that the plea of rectification is an alternative plea and will only arise if the plea of collateral agreement should fail. It is therefore not fundamentally or inherently inconsistent as being unable to stand together with the plea of collateral agreement. Counsel for the plaintiff further argued that the proposed amendment is inadequate in that the capacity of the estate agents had not been fully particularized in respect of each and every act or development in the case. Had the defendant's case of the plaintiff having knowledge of the unilateral mistake is based on the knowledge of the agents, then I would agree that there is a need to particularize with precision the capacity of the agents. But as counsel for the defendant had indicated that the defendant's case is that the plaintiff had actual and direct knowledge of the defendant's mistake, the failure to particularize the capacity of the agent is not fundamental as to prevent the plea being introduced. In addition, as the new plea of rectification does not involve new factual matters, there is no substantial prejudice to the plaintiff. It may be that the plaintiff's approach or preparation will have to take on a new front, but that is inevitable with every amendment that introduces a new plea. The plaintiff has not demonstrated that there is prejudice over and above that to be expected from an amendment. The amendment sought by the defendant is therefore allowed.

19. When allowing the defendant to re-amend the defence and counterclaim, I had granted leave to the plaintiff to re-amend the Reply and the Defence to Counterclaim. Accordingly, on the second day of the trial, the plaintiff sought to re-amend the Reply and the Defence to Counterclaim. Paragraph 9 of the proposed re-amendment averred that ML was not authorized by the plaintiff to make the amendment to the 2nd Agreement and that the collateral agreement pleaded by the defendant was unenforceable due to lack of consideration and uncertainty. Counsel for the defendant objected to this amendment on the basis that it is not consequential upon the defendant's amendment. Counsel for the plaintiff argued that as a result of the new plea of rectification, paragraph 10 of the Reply and Defence to Counterclaim, which averred that the collateral agreement was unenforceable for want of a written memorandum, was no longer good and sufficient to meet the defendant's case. It was said that the plaintiff had to, and should be entitled to take a further point. That may be the reason or motivation behind this new paragraph 9, but that hardly brings paragraph 9 within the ambit of consequential amendment. The plaintiff could have included the averment in paragraph 9 at the outset, but had consciously chosen not to. It would not be right to allow the plaintiff to take advantage of the defendant's amendment and to have the averment slipped in as a consequential amendment. Paragraph 9 is therefore disallowed on that basis.

20. The plaintiff then sought leave to introduce paragraph 9 as a separate amendment. Counsel for the defendant opposed on the basis that insufficient particulars had been pleaded. I allowed the application as I considered that the authority of ML to amend the 2nd Agreement was already in issue with or without the proposed amendment. Further, although it would be desirable to have as much particulars as possible, as the trial was due to commence and the parties' case and evidence would have been apparent from the witness statements, the provision of further particulars would not materially advance the parties' case or assist the conduct of the trial.

21. This was then followed by an application by the plaintiff for further and better particulars on the Re-Amended Defence and Counterclaim. The request for particulars broadly relates to 3 matters. The first is for particulars of the telephone(s) and telephone number(s) involved in the various telephone calls allegedly made between the estate agents, Mr Lam and the defendant. The second category of request relates to the capacity of the estate agents with reference to their alleged acts and oral representations. The last category of request relates to paragraph 4(c)(ix) of the Defence and Counterclaim. The application was refused after arguments. In my view, only requests for particulars that are absolutely necessary for meeting the new plea of rectification should be allowed. Requests that could have, but had not been, made at the interlocutory stage should not be allowed at the stage when the trial was due to commence. The first category of request is clearly not a proper matter for particulars; it is a matter of evidence that is more appropriately dealt with by interrogatories. At any rate, such request should have been sought at an early stage and not at the commencement of the trial. Similarly, the requests on the capacity of the estate agents do not arise from or related to the new plea of rectification. Counsel for the plaintiff had submitted that because of the new plea of rectification, the averment that the collateral agreement was unenforceable due to want of written memorandum was no longer adequate such that the plaintiff had to dwell into other areas. That in my view does not provide a causal link between the defendant's amendment and the request sought. It is not a justification for ordering particulars that could have been sought much earlier on. The same applies to the third category of request. There has been no amendment to paragraph 4(c)(ix) of the Defence and Counterclaim. If the paragraph has any ambiguity, it would have been apparent since the pleading was filed in July 1998. There is no reason for particulars to be sought almost 2 years later.

22. On the 4th day of the trial, the plaintiff made an application to amend the Statement of Claim by adding a new paragraph 15A. Paragraph 15A is to introduce 2 alternative pleas. The first is in money had and received. The second is to plead lack of or failure of consideration for the deposit paid by the plaintiff. In fact, in the course of opening submission, counsel for the plaintiff indicated that the plaintiff's claim is both based on mistake and also on breach of contract in that the defendant was unable to convey to the plaintiff the car park described in the 2nd Agreement. It was then pointed out by the Court that the plaintiff's pleaded case was confined to mistake, which counsel accepted was the case. Apparently, the amendment to the Statement of Claim was made in response to the Court's observation. Understandably, it was opposed by the defendant. There can be no doubt that this is a very late amendment. It is to add an alternative plea in law or cause of action. But it does not involve any new evidence or change in the factual basis. As with any late amendment, it will occasion some prejudice to the opposing party in that the case may have to be approached and analyzed differently. The prejudice, however, is not irreparable or such as to outweigh the concern to have all the relevant issues properly before the court. Having regard to these considerations, I allowed the amendment to the Statement of Claim.

23. As late as in the course of the defendant's closing submission, the defendant applied to further amend the Counterclaim to include a claim for damages for breach of the contract. The application was refused as it was blatantly too late when all the evidence had been tendered and the point was not taken at all during the examination of the witnesses.

The Evidence

24. Mr Lam is the only witness for the plaintiff. As for the defence case, the defendant himself had testified and one other witness, Miss Leung Siu Wai, was called. Before dealing with the witness' evidence, it is necessary to mention 2 other applications made at the commencement and during the trial relating to witness statements and the calling of witnesses.

25. Shortly after the institution of these proceedings, the defendant had procured from EL a witness statement and from ML a statutory declaration, both dealing with the events before and after the making of the 1st and 2nd Agreements. On 12 April 2000, the defendant served a hearsay notice in respect of the witness statement of EL and the statutory declaration of ML. The hearsay notice contends that the 2 makers cannot be called at the trial on the basis that they cannot be located, despite the exercise of reasonable diligence. This hearsay notice was served out of time. The plaintiff, nevertheless, served a counter notice on 18 April 2000.

26. At the commencement of the trial, the parties sought a ruling on the admissibility of these documents. The plaintiff's first objection was that the hearsay notice was served out of time. It is not disputed by counsel for the plaintiff that despite this, the Court retains a discretion to admit the notice. The defendant and Miss Leung had filed affirmations explaining the unsuccessful efforts made to locate the 2 estate agents, hence the giving of the hearsay notice out of time. On the basis of these affirmations, the defendant had made out a case that the unavailability of the estate agents was beyond his expectation and there was no deliberate flouting of the rules on his part. The Court's discretion ought therefore to be exercised in his favour and the hearsay notice should be allowed to stand. There is then the counter notice challenging the ground given in the hearsay notice, and before a ruling was made, the plaintiff sought leave to adduce affirmation evidence in opposition and to cross-examine the deponents of the defendant' affirmations. Leave was granted and the plaintiff filed on the second day of the trial an affirmation, stating that he understood from an ICAC investigating officer that the ICAC had means of contacting the estate agents. What had happened was Mr Lam of the plaintiff had made a complaint to ICAC against the estate agents in relation to the statements they gave to the defendant. This came about after Mr Lam had a conversation with ML and EL discussing how the statements came to be given. Unknown to the estate agents, Mr Lam had taped this conversation and the plaintiff had initially intended to adduce the tape recording in evidence. Both Mr Lam and the defendant as well as Miss Leung were cross-examined on their respective affirmations on the issue of the availability of the estate agents. The plaintiff had initially wished to call the ICAC officer, but did not pursue the matter after being informed by the officer over phone that the ICAC would not divulge any information relating to the investigation, including the means of contacting the 2 estate agents.

27. The defendant's application was made under O.38 r.27 RHC which obliges the defendant to establish the exercise of reasonable diligence and that, despite diligence, it is not possible to locate the witnesses. Having regard to the evidence filed and the submissions made, I am not persuaded that the defendant had exercised reasonable diligence to locate ML and EL. The case was set down for trial in January this year, but the first attempt to find the witnesses was only made in May. In this regard, the hearsay notice is technically defective in that the ground stated therein did not exist at the time it was issued since the first attempt was made after it was issued. There was no explanation at all as to why no earlier attempt was made and through the witnesses' former employer, Chi Cheung. It is also unusual that no official or formal enquiry had ever been made by the defendant's solicitors with Chi Cheung as to the means of contacting ML and EL. I however do not agree that the defendant should be criticized for not approaching the ICAC and the Estate Agent Authority for information. These approaches are unlikely to produce any or any useful results. The defendant had therefore failed to make out a case under O.38 r.27 RHC. There is, nevertheless, a residual discretion under O.38 r.29 RHC. But this is clearly not a proper case for exercising the discretion in favour of the defendant. Firstly, there was no attempt to locate the witnesses until about 2 weeks before the trial due to commence. Secondly, the credibility of the witnesses is very much in issue, so is the manner in which the statements came to be made. Given that the plaintiff would be deprived of the opportunity to cross-examine the witnesses and the Court would not have the benefit of seeing and hearing the witnesses, the weight that could be placed on the witness statement and statutory declaration is unlikely to be substantial. For these reasons, I ruled that the witness statement of EL and the statutory declaration of ML could not be adduced as hearsay evidence.

28. In addition to this application, there is another application relating to the calling of witness. It arose in this way. When Mr Lam gave evidence for the plaintiff, he was cross-examined at some length on the correspondence sent by LP to SL and on the fact that LP only made land search on CP13 and CP3 10 days and 2 weeks after being instructed. The cross-examinations were to demonstrate that the contents of the letters and the steps taken by the solicitors were inconsistent with Mr Lam's assertions, including that he would only pay $8.95 million if it were CP3. At the conclusion of Mr Lam's evidence, the plaintiff applied to call a Miss Sung, the solicitor who was responsible for handling the transaction for the plaintiff. Miss Sung was not scheduled as a witness and she had not given any witness statement. Counsel for the plaintiff argued that O.38 r.2A RHC has no restriction on the calling of new witness, and that the need for calling Miss Sung arose purely out of new matters occurring during the trial. I refused the application. I take the view that O.38 r.2A does not permit the calling of a witness, who had not given a witness statement, unless there are good cause and the court has given leave: The Supreme Court Practice 1999 vol. 1 paras. 38/2A/3 and 38/2A/4. I do not accept the cross-examination of Mr Lam on the solicitors' correspondence and the timing for the land search are matters or circumstances arising since the exchange of witness statements. The correspondence and the land search results had been disclosed a long time before the trial. Any inconsistencies between them and Mr Lam's assertions would have been apparent upon a reading of Mr Lam's witness statement. It is also not open to the plaintiff to suggest that it is a new matter because the cross-examination is relevant to the new plea of rectification. Irrespective of this new plea, the relevance and impact of these documents on Mr Lam's evidence and the plaintiff's case are obvious. The plaintiff has chosen not to deal with them at any early stage and it is much too late to try to do so in the middle of the trial. Following my ruling on the application, the plaintiff applied for an adjournment to enable an appeal be made against the ruling. I refused the application. Good reasons, let alone special circumstances, had not been offered for justifying the course proposed when the trial, which had already been fraught with a number of very late interlocutory applications, was half way through.

29. I now return to deal with the evidence of the witnesses in this trial. An important feature in this case, as is the case of many property transactions carried out in Hong Kong, is that there had been minimal contact between the vendor and the purchaser. Most of the contacts and communications were made through the 2 estate agents, and to a large extent, Mr Lam and the defendant were acting on information related to them by ML and EL. The integrity and the accuracy of what they reported to Mr Lam and the defendant are highly relevant. Unfortunately, they are not available as witnesses. The question of their credibility remains at large while what the witnesses learnt from them remains hearsay. At the same time, it has to be recognised that ML and EL, like any other estate agent, will have their own interest to serve in that they make their livelihood out of the commissions they earn on successful deals. These are pertinent background considerations that this Court has to bear in mind when approaching and assessing the evidence.

30. There are principally 2 areas of dispute on the evidence of Mr Lam and the defendant. The first relates to the events leading from the 1st Agreement to the 2nd Agreement and the second concerns the events after the defendant had signed the 2nd Agreement.

31. The evidence of the defendant is that after the inspection by Mr Lam on 12 April 1998, ML and EL returned to the Flat with the 1st Agreement and a cheque for the deposit, and tried to persuade him to sell at $8.2 million. The defendant did not agree. However, at the suggestion of the agents, he signed on the 1st Agreement but inserted a clause to the effect that the agreement would only take effect upon the cheque being cleared and receipt acknowledged. The part of the 1st Agreement for acknowledging receipt of deposit was also left blank. Neither the plaintiff nor the defendant had been given a copy of the 1st Agreement, and no copy of it is therefore in evidence at the trial. Eventually, the defendant decided that the price of $8.2 million was too low and he communicated to the agents on the same day that he would not sell. Mr Lam on the other hand said that the agents told him over phone on the same day that there was no problem with the 1st Agreement.

32. According to the defendant, at about 5:30 p.m. on 13 April 1998, ML and EL came to the Flat when the defendant's colleague, Miss Leung was also present. After some persuasions, the defendant finally agreed to sell at $8.95 million on the understanding that part of the agent's commission would be waived. ML then wrote out the 2nd Agreement which did not contain the agreement on waiver of commission, which ML said would be reflected in a separate document. ML and EL then left in a hurry to meet Mr Lam. After their departure, Miss Leung commented that the 2nd Agreement was signed in such a haste and queried whether the defendant had checked such details as the furniture and fittings to be sold and also the description of the car park. On hearing this, the defendant telephoned and spoke to EL, pointing out that he had not checked the details in the 2nd Agreement. EL replied to the defendant that these matters could be confirmed later, and that what was most important was the price. The defendant said he could hear from the phone that there was another male with ML and EL. Miss Leung also gave evidence confirming that she did comment about the hasty manner in which the document was signed and that she had asked the defendant whether he had checked the details relating to the furniture and the car park description.

33. As for Mr Lam, he said that he met ML and EL in the afternoon of 13 April 1998 and was told that the vendor had made a mistake about the car park no. in that it should be "3" and not "13". It was said that the vendor wanted a higher price as a result. After some discussions, Mr Lam agreed to raise the price to $8.95 million, but on the agents' agreement to waive the purchaser's commission completely. This was recorded in the 2nd Agreement on which Mr Lam then signed.

34. On the defendant's account, later in the evening at about 7 p.m. when he was having dinner with Miss Leung and a customer, EL informed him over the phone that the plaintiff had signed the 2nd Agreement and asked to talk about the question of commission. Later that evening, ML and EL came to the Flat requesting the defendant to pay a full 1% commission on the basis that it had been a difficult deal and the purchaser was not paying any commission. The defendant said he then noticed that the description of the car park in the 2nd Agreement was unclear and he asked for it to be rectified. The defendant also indicated that he would pay 1% commission if indeed the purchaser was not going to pay commission. EL then telephoned Mr Lam, during which Mr Lam confirmed to the defendant that the plaintiff would not be paying commission. After the call, EL asked ML to rectify and to spell out the description of the car park more clearly in the 2nd Agreement. ML then added the figure "1" to the defendant's copy of the agreement so that "L2#3" became "L2#13".

35. Mr Lam's evidence on this is that some time past midnight, ML telephoned him saying that the vendor had again made a mistake and the number of the car park should be "13" and not "3". EL then took over and said that the vendor considered there was no difference in substance and all that was needed to be done was to add an "1" before the figure "3". Mr Lam said he disagreed and told EL that if the vendor did not have car park no. 3 to convey, then he should refund the deposit. Mr Lam also referred to a brief telephone conversation he had with the defendant that night during which he confirmed that the agents had waived the commission payable by the purchaser, but he said this was a different conversation from the one he had with ML and EL relating to the mistake in the car park number. Mr Lam said he never agreed to change the description of the car park from "L2#3" to "L2#13", and that, after he entrusted the matter to LP, he had on the solicitors' advice, made a report to the police about the alteration to the 2nd Agreement.

36. As for the events from 14 April 1998 onwards, the defendant said he was informed by ML and EL that the valuation by the plaintiff's bank only came to $8.6 million. The agents said that the plaintiff refused to alter the description of the car park in the agreement, and indicated that it would buy at $8.2 million. Mr Lam denied these allegations.

37. The evidence of both Mr Lam and the defendant reveals that after 14 April 1998, the agents had approached them on the question of reducing the price, but no agreement was reached. Their evidence also shows that the plaintiff had caused advertisement to be inserted in the newspapers for the sale of the Flat and a car park at $9 million. Mr Lam said that the advertisement had appeared for 4 days and the defendant had produced the one appearing on the 17 April 1998 issue. Mr Lam said that as a result of the advertisements, he had received some enqueries from estate agents, and he had to tell them to wait because something had gone wrong. Mr Lam's evidence is that between 14 and 28 April 1998, he was not sure whether the purchase would fall through. He thought there was a possibility that the defendant would sell at $8.2 million or would acquire CP3 from the market to complete the transaction.

Findings on the Facts

38. Although the accounts given by Mr Lam and the defendant, particularly as to the events on 13 April 1998, are rather different, it is not necessarily a case that one of them must be lying. The variance, as one can see, evolves around what they were told by ML and EL in relation to the other party. I am conscious that the court should be slow to make any adverse comment or finding about ML and EL without the benefit of hearing their evidence. But on the totality of the evidence, there is a distinct possibility or, to put it mildly, one cannot rule out the possibility that the agents had been saying one thing to Mr Lam and another to the defendant with a view to closing the deal and in the hope that things would eventually work out. Unexpectedly, things did not work out and the situation got out of hand.

39. Counsel for the plaintiff submitted that it is not necessary for this Court to resolve the differences in the accounts given by Mr Lam and the defendant in order to arrive at a determination of the issues herein. To a large extent, I agree. Despite the differences in the evidence, the salient facts that can be distilled are as those set out under the "Background" section in this Judgment. However, for the purpose of determining the issues herein, the court has still to resolve the disputes over several facts.

(1) The subject matter of the 2nd Agreement

40. The first of these is the subject matter of the sale and purchase covered by the 2nd Agreement. The fact that part of the property to be sold and purchased under the 2nd Agreement is the Flat is not in dispute. As to what is the other part of the property, there can be no doubt that when the defendant signed the 2nd Agreement, he was intending to sell CP13. He could not have intended otherwise as he knew full well that he only had CP13 to convey. For the plaintiff, Mr Lam's evidence is that he was intending to buy CP3 when he signed the 2nd Agreement. The objective evidence as appears from the 2nd Agreement is that the parties had contracted for the car park described as "L2#3". The defendant suggests that the precise meaning of this can be ambiguous because it is not clear what "#" means. I am unable to accept such a contention. To any reasonable man, apprised of the information possessed by the parties, reading the 2nd Agreement, "L2" must be a reference to Level 2 and "#" is the abbreviation for the word "number" so that "#3" means "no. 3". The description of "L2#3" is plainly a reference to car park no.3 on level 2, and there is no ambiguity at all.

41. Counsel for the defendant had submitted that Mr Lam was untruthful when he said that the number of the car park is of paramount concern to him and that he would only pay $8.95 million if the car park is no.3 and not no.13. I agree that Mr Lam was probably exaggerating on the effect of the number "13" on the sale price of a car park or a property and also on his dislike for property or car park bearing the number "13". Had the number of the car park been a matter of such grave concern for him, it would be difficult to understand why he would readily accept the agents' representation at the meeting on 13 April that the vendor had made a mistake in the number of the car park. On his evidence, he had not even enquired how it was that the vendor would have made such mistake.

42. The letters written by LP to SL also contradicts his evidence in this regard. Firstly, they in no way reflect Mr Lam's assertion that he had as early as 14 April instructed LP that he would not buy at $8.95 million if it was CP13. Nothing of the sort was mentioned in the very first letter, which was not written until 20 April. It is also of significance to note that LP did not cross out "13" from the description of the car park in the draft sale and purchase agreement sent by SL and/or insert "3" therein. All that LP had done was to put a "?" against the number "13". Not only that, LP did not do anything in relation to the purchase price appearing in the draft sale and purchase agreement. LP even went as far as asking for a copy of the floor plan of the car parks with the stated purpose of enabling the plaintiff to consider whether to accept no.13 instead of no.3. Also as observed earlier, LP only conducted land search to verify the ownership of CP13 and CP3 on 25 April and thereafter respectively. All these matters show that Mr Lam did not really have such strong preference against the number "13". On the contrary, they suggest that Mr Lam was prepared to acquire property, irrespective of whether it bears the number "13", so long as the price is right. By the same token, he was quite prepared to accept CP13 provided that it was a good bargain. That probably explains why LP did not state categorically in the early correspondence that the plaintiff would cancel the transaction because the car park was no. 13 and not no. 3 as contracted for. Instead, it was said that there was a crucial mistake in the 2nd Agreement, which suggests that the plaintiff was hoping to exert some pressure on the defendant to come down on the price and to re-negotiate. Mr Lam was evidently trying to get the best bargain out of the situation. This state of mind is best illustrated by his own evidence that until 28 April 1998, he was not sure whether the transaction would or would not go through. His suggestion that the defendant might acquire CP3 from the market to complete the transaction is wholly unrealistic. The truth of the matter is he was hoping that the defendant would reduce the price on account of the description of the car park in the 2nd Agreement. A further illustration of Mr Lam's opportunistic approach is the fact that he advertised for the sale of the Flat with car park at a time when he clearly knew that the car park to be conveyed, if the sale were to go through, would not be no. 3. He knew of the problem about the car park shortly after the midnight of 13 April. He said the placing of the advertisement was handled by his staff on his instruction, but it is common ground that 14 April was the first working day after the Easter vacation. At any rate, he could have instructed for the withdrawal of the advertisement.

43. Having said all that, the only inference open to this court is that Mr Lam did not in fact have a strong or particular dislike for car park bearing no.13, and that he was embellishing on his case by exaggerating on the adverse effect of the number "13" on property prices. That, however, is not the same as saying that when Mr Lam signed the 2nd Agreement, he knew that the vendor was selling CP13, that the subject matter of the sale was CP13 or that he was intended to take CP13. What Mr Lam had done and tried to achieve, as reflected by the letters of LP, were all subsequent to the signing of the 2nd Agreement. They cannot subtract from the plain fact that the 2nd Agreement described the car park as "L2#3". It is true that such a description has failed to reflect the defendant's intention accurately, but as the defendant had subscribed his signature to the document, he was bound by it. He was offering, by signing on the 2nd Agreement, to sell car park no. 3 on level 2, which was accepted by the plaintiff acting through Mr Lam, before the description was altered. The contract as contained in the 2nd Agreement is therefore for the sale and purchase of the Flat together with CP3 at the consideration of $8.95 million.

(2) ML's authority to amend the 2nd Agreement

44. The other issue of fact that this Court has to resolve is the authority of ML to add the figure "1" to the description of the car park in the 2nd Agreement. While ML clearly had the mandate of the defendant to do so, the evidence does not establish that she had the requisite authority from Mr Lam to do so. The defendant was not privy to the conversations between Mr Lam and ML or EL. At the most, he could only say that, as far as he could observe, ML and EL appeared to be talking to Mr Lam over the phone in an amicable manner. Whatever ML or EL may have told the defendant about Mr Lam's instruction or agreement remains hearsay since the agents had not testified. Mr Lam on the other hand denied that he had given any consent or authority to ML to alter the car park description. There is simply no evidence that Mr Lam had authorized ML to add an "1" to the description of the car park. Yet in order to bind the plaintiff to the altered description of "L2#13", the defendant has to prove that the plaintiff through Mr Lam had agreed to vary the description of the car park from "L2#3" to "L2#13". This the defendant has failed to prove. Counsel for the defendant had submitted in some details on the credibility of Mr Lam as a witness. I had indicated that Mr Lam has not been totally candid in his evidence. But even if I were to disbelieve Mr Lam entirely, that does not provide a basis for finding that ML had the necessary authority from Mr Lam to alter the description of the car park. There is simply no evidence to that effect.

45. Counsel for the defendant had also submitted that ML effected the amendment to the 2nd Agreement as agent of the plaintiff. Whether the 2 estate agents were acting as agents for the plaintiff or for the defendant, as counsel rightly observed, is a mixed question of fact and law. But the fundamental and underlying question is always the issue of authority. Even accepting that the defendant's argument that ML was the plaintiff's agent when she returned to the defendant with the 2nd Agreement, and then made the amendment to the 2nd Agreement, it does not necessarily follow that she had the authority to amend the description, whether implied, express or apparent. As pointed above, there is just no admissible evidence to show that ML was authorized to amend the description of the car park in the 2nd Agreement.

Mistake

46. The plaintiff's claim was initially based solely on mistake. It was only at the trial that it was amended to include a claim in money had and received arising from the lack of or no consideration for the payment of the deposit. Counsel for the plaintiff submitted that the precise legal basis of the claim does not matter. I cannot agree. The authority of Sheldon v. Davidson [1968] 1WLR 1083, on which the plaintiff relied, is decided on very different factual basis. In that case, which concerns a claim for repayment of money, the plaintiff claimed that the payment was by way of loan whereas the defendant contended that it was a gift. There were no circumstances giving rise to a presumption of advancement. The English Court of Appeal, having regard to the fact that receipt of the money was admitted, considered that there was prima facie an obligation to repay so that the burden fell on the defendant to show why the money was not to be repaid. In the present case, it is not disputed that the money was paid pursuant to a contract as a deposit for the purchase of property. In order to have the money returned, it is incumbent upon the plaintiff to demonstrate the circumstances and the legal basis giving rise to an obligation to return the deposit so paid.

47. It is apparent from the tenor of counsel's closing submissions that the plaintiff has in effect abandoned the cause of action in mistake, and is proceeding solely on the basis that the defendant, being not in a position to perform his part of the bargain under the 2nd Agreement by conveying CP3, is obliged to refund the deposit paid by the plaintiff.

48. As a matter of fact, there is no prospect of the plaintiff succeeding on a claim in mistake at all. As a starting point, it is unclear from the pleading as to which category of operative mistake that the plaintiff is relying upon. If the plaintiff is relying on mutual mistake in that both parties had made the same mistake which is fundamental to the agreement (i.e. over the car park no.), then it is plain that the evidence does not bear out any fundamental misapprehension of fact. If the plaintiff is suggesting that the parties' mind did not meet because they were at cross-purpose over the car park number, then it is imperative that there be some ambiguity in the terms of the contract. I had held, and it is in fact the plaintiff's own case, that there is no ambiguity in the description of "L2#3". There is thus no operative mistake. At any rate, it cannot be a case of mutual mistake in that it is not the plaintiff's case at all that Mr Lam was mistaken as to the car park that the plaintiff was contracting to buy.

49. In short, insofar as the plaintiff's claim is pleaded in mistake, it is bound to fail. It is therefore not necessary to deal with the defendant's submissions on the plaintiff's right to rescind for mistake.

Money had and received

50. The plaintiff's alternative cause of action is in money had and received on the basis that the consideration for the payment of deposit has wholly failed. Evidently, the defendant was in no position to convey CP3 as he did not own it. He was therefore unable to perform his part of the bargain under the 2nd Agreement. The defendant however raised a number of arguments in answer to this claim.

(1) Collateral agreement

51. The defendant had averred that there was a collateral agreement between the parties to the effect that the plaintiff would purchase the Flat and a car park, with the exact number of the car park to be confirmed after the plaintiff signed the 2nd Agreement. The defendant's case, as appears from the pleading, is that before Mr Lam signed the 2nd Agreement, the defendant had informed ML and EL over the telephone that he was not sure whether the number of the car park had been correctly stated in the 2nd Agreement. ML duly related his concern to Mr Lam and further suggested that the number of the car park was of no importance and could be ascertained later on, to which Mr Lam agreed and he then signed the 2nd Agreement. It is plain that the pleaded case is not borne out by the evidence before the Court as neither ML nor EL had testified. On the defendant's evidence, all that he could say, and I accept, is that he had, after ML and EL left, telephoned the 2 agents to point out that he had not checked the details in the 2nd Agreement and EL replied that these matters could be confirmed later. Although the defendant also testified that he could hear over the telephone conversation that the agents were with another male and there were exchanges among the 3 of them who were on the other end of the line, the defendant cannot really testify on the contents of the conversations among these 3 persons. Neither can the defendant testify that Mr Lam had agreed with the agents that the car park number was of no importance and was to be confirmed later on. What is more important is that the defendant cannot say, by the time he spoke to EL over the phone, whether Mr Lam had already signed the 2nd Agreement.

52. Counsel for the defendant had in the closing submission submitted that on the basis that ML and EL, as the plaintiff's agents, had informed the defendant that the car park no. could be confirmed later, then there would be a collateral agreement to correct the car park description. It follows that ML was acting as the plaintiff's agent when she amended the description from "L2#3" to "L2#13". This submission is clearly premised on the basis that the agents had told Mr Lam that there were doubts as to the accuracy of the description of the car park in the 2nd Agreement, that Mr Lam had agreed to verify this later on, and that all these happened before Mr Lam signed the 2nd Agreement. But these factual allegations are simply not borne out by the evidence. Even if Mr Lam's evidence is to be disbelieved and ignored entirely, there is still no evidence proving the alleged conversations between Mr Lam and the 2 agents. Neither is there evidence enabling such inferences to be drawn.

53. The averment that there was an agreement collateral to the 2nd Agreement to the effect that the description of the car park was to be confirmed and/or to be corrected later is therefore not made out.

(2) Part performance

54. The defendant also averred and argued that, by reason of the doctrine of part performance and the operation of section 7 of the Conveyancing and Property Ordinance, cap. 219, the agreement he had with the plaintiff is as contained in the 2nd Agreement, but subject to a collateral agreement as aforesaid and as amended by ML. The acts relied upon in support of the doctrine of part performance are said to be the acceptance of the cheque for the deposit, the amendment to the description of the car park made by ML and "the subsequent performance" of the agreement.

55. In deciding whether an act can amount to part performance, the modern judicial approach is to look at the whole circumstances to see whether it is proved that the acts relied on were done in reliance of a contract: see Steadman v. Steadman [1976] AC 536 and Megarry & Wade, The Law of Real Property (5th ed.) pp.592-4. Although the requirement on the acts being unequivocally referrable to the contract alleged has been relaxed, the doctrine of part performance can only be successfully invoked where the acts relied on, to say the least, are consistent with the contract alleged.

56. In the present case, there is no dispute that the parties had reached an agreement for the sale and purchase of property, the bone of contention is the subject matter of the sale and purchase. The payment and acceptance of the cheque for the deposit, while being consistent with there being a contract for the sale and purchase of property, is neutral with regard to the crucial question of the identity of the property. As for the amendment made by ML, I have found that there is no evidence to show that this was with the plaintiff's agreement and authority. Accordingly, this cannot be a sufficient act of part performance. Insofar as the "subsequent performance" of the agreement alleged is concerned, it is not clear what subsequent performance the defendant was referring to. If it is a reference to the parties instructing solicitors to prepare the formal agreement, then it is clearly insufficient for it is again neutral as to the crucial question at stake, namely, the subject matter of the property. The acts which the defendant sought to rely on, whether taken on its own or as a whole, were insufficient to support part performance and this averment must fail.

(3) No total failure of consideration

57. The defendant further argued that there was consideration for the $250,000 deposit in that the agreement between the parties was for the sale and purchase of the Flat and CP13. In view of the finding of fact I made in relation to the subject matter of the 2nd Agreement, this argument cannot be sustained.

58. The defendant's argument, however, went further. It was also pleaded that the defendant could have conveyed the Flat and CP13, and there was no substantial difference between CP3 and CP13. The defendant's argument is that, other than the locations and the number, the 2 car parks have no substantial difference in terms of the value. Further, Mr Lam had no real concern for the location and number of the car park he was to purchase as he never requested to inspect the car park and it is his evidence that he had no idea where the 2 car parks are situated. The defendant further relied on the case of Goldfulway Development Ltd v. Wellstable Development Ltd [1999] 1HKLRD 56 as supporting that there could have been substantial performance by the defendant. Goldfulway Development Ltd is a case involving a vendor and purchaser summons. The issue there was whether the vendor could demolish an unauthorized structure on the premises and still be in a position to complete by substantially performing the agreement for sale and purchase. The discussion of substantial performance there is in the context of whether a vendor can give a good title by offering substantial performance. Hence, reference was made to Spry, Principles of Equitable Remedies (5th ed.) pp.292-6 on the factors for determining whether a deficiency was essential and would prevent substantial performance, and also to the test laid down in Rutherford v. Acton-Adams [1915] AC 866, namely, whether the vendor will be conveying substantially what the purchaser had contracted to buy.

59. In the present case, we are not concerned with some deficiencies or defects in the title of the property or in the property itself, which the parties had contracted to convey. Instead, the purchaser is asked to accept another property in lieu of the one he had contracted to buy. In a contract for sale and purchase of land, the identity of the land to be conveyed must be a matter of the utmost importance. It is therefore difficult to see how the doctrine of substantial performance can avail a vendor who is offering to convey a property, other than the one contracted for, even though the 2 properties may well be similar in quality and value. I am not convinced that the defendant can rely on substantial performance to say that there was consideration for the $250,000 deposit notwithstanding that he could not convey CP3.

60. It follows from the fact that the defendant could not convey CP3 that he was unable to perform his part of the promise under the 2nd Agreement. That being the case, the consideration for the payment of the deposit must have wholly failed and the defendant had no right to keep the money. The defendant is therefore obliged to return the $250,000 deposit received.

The Counterclaim for Damages

61. Having concluded that the plaintiff's claim in money had and received has been made out, it would not be necessary to go into the counterclaim for damages for breach of contract. Similarly, the part of the counterclaim based on slander on title must also fail since by virtue of the claim over the deposit, the plaintiff was entitled to register the Writ herein against the Flat and CP13.

The Counterclaim for Rectification

62. The defendant also counterclaims for an order that the 2nd Agreement be rectified by substituting CP13 for CP3 and for a declaration that the defendant is entitled to have the 2nd Agreement treated as having been so rectified. The defendant's case is that there was an unilateral mistake on the defendant's part as to the description of the car park in the 2nd Agreement, and this was known to the plaintiff through Mr Lam. The defendant is relying on actual and direct knowledge of Mr Lam, and not that of ML or EL. Three matters were relied upon for contending that there was actual and direct knowledge of the defendant's mistake. The first is that Mr Lam had offered to buy at $8.2 million without having to inspect the car park. The second being that, before Mr Lam signed the 2nd Agreement, the defendant had spoken to EL over the phone about the description of the car park and it was agreed that the car park no. would be confirmed later. The third matter is that ML had informed Mr Lam about the amendment to the 2nd Agreement and Mr Lam did not object.

63. Apart from the first matter, the other 2 matters have no evidential support. As to the first matter, at the most it can only give rise to an inference that Mr Lam was capitalizing on the description of "L2#3" in the 2nd Agreement. It cannot be equated with Mr Lam having knowledge of a mistake on the defendant's part when he signed the 2nd Agreement. As counsel for the plaintiff rightly observed, there is no direct authority on what is the relevant time for considering the question of knowledge. However, having regard to the fact that the doctrine is based on estoppel: see Snell's Equity (13th ed.) para.43-13, and that the conduct of the party opposing rectification must be such as to affect the conscience of the party who has suppressed the fact that he has recognised the presence of a mistake:. per Buckley LJ in Thomas Bates Ltd v. Wyndham's Ltd [1981] 1 WLR 505 at p.515, then the relevant time for fixing knowledge must be at the execution of the agreement. It may well be that at some point after he signed the 2nd Agreement, Mr Lam came to realize that there was a mistake on the defendant's part, the evidence certainly does not show that he knew of any mistake when he signed the 2nd Agreement.

64. There can be no doubt that the burden is on the defendant to prove that the plaintiff had knowledge of the defendant's mistake, and that the conduct of the plaintiff was inequitable or unconscionable. It is an onerous burden and the defendant must do so by "strong irrefragable evidence: Citilite Properties Ltd v. Innovative Devlopment Co. Ltd [1998] 4HKC 62, at p.74G; Snell's Equity, supra, para. 43-15. The evidence in this case clearly falls short of the required standard. The plea of rectification has not been made out.

Costs

65. For the reasons aforesaid, there will be judgment for the plaintiff on the claim and the counterclaim. In the normal course of event, costs should follow event and a successful party will be awarded its costs. There are however certain unusual features in this case. Firstly, as I have observed, the plaintiff's initial claim in mistake has no prospect of success. Had the plaintiff's claim been confined to mistake and but for the amendment to the Statement of Claim, the plaintiff would have lost on both the claim and counterclaim. The crucial amendment to the Statement of Claim was only introduced on the 4th day of the 7 days' trial. Secondly, the first 2 days of the trial were taken up by various interlocutory applications by both parties, as outlined in the beginning part of this Judgment. The plaintiff and the defendant had each succeeded in some of these applications and failed in the others. The costs of these applications had been reserved. In the circumstances, it may not be an appropriate case to adopt the normal rule of costs follow event. I will therefore invite written submissions from the parties on the question of costs, such submissions to be lodged with the Court within 7 days after the handing down of this Judgment, and I shall defer the making of the costs order until after that.

Conclusion

66. There will be judgment for the plaintiff on the claim for the sum of $250,000 together with interest thereon at judgment rate from the date of judgment until full payment. The counterclaim is dismissed. The amount of $250,000 previously paid into Court by the defendant be paid out to the plaintiff forthwith in satisfaction of the judgment. Any interest accrued on the amount paid into court be paid out to the defendant forthwith. The question of the costs of the action be reserved until after the parties have lodged the written submissions thereon, such submissions to be lodged within 7 days after the handing down of this Judgment.