LANGAL LTD v. LIU MENG ZHAO

DCCJ 6759/2003

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. DCCJ 6759 OF 2003

D E C I S I O N

1. The Plaintiff applies for summary judgment under Order 14 of the Rules of the District Court.

2. The claim arises out of a cheque (“the Cheque”) issued on 28 October 2003 to the Plaintiff as vendor by the Defendant as purchaser but was eventually countermanded on 31 October 2001. The Cheque, at the amount of $200,000.00, was purported to be payment for deposit pursuant to clause 2(a) of a provisional sale and purchase agreement (“the Provisional Agreement) in respect of the purchase of a property situated at House No. 23C, Chateau Royale, No. 1 Yung Yi Road, Tai Po, N. T.  (“the Property”).

3. Counsel for the Plaintiff, Mr. Fong, submits that a bill of exchange in the form of a cheque is as good as cash and there is no defence for it not be honoured except for some good reasons. He further submits that the defence as pleaded by the Defendant in her Amended Defence could not make out an triable case on the claim.

4. The defence runs along four lines. First, the Defendant avers that there was a condition precedent or a collateral contract or a warranty to the Provisional Agreement and that is the property should have no graves view (paragraph 11 of the Amended Defence); secondly, the offer to buy had been withdrawn by the Defendant before the signed Provisional Agreement and the Cheque were presented to the Plaintiff for execution (paragraph 14 of the Amended Defence); thirdly, instruction was given to the bank to stop payment for the Cheque because the Defendant found that she was fraudulently or negligently misrepresented that the Property sees no graves (paragraph 4 of the amended Defence); and fourthly, the Plaintiff had promised not to sue the Defendant and was estopped from doing so (paragraphs 15 to 17 of Amended Defence).

Condition Precedent, oral collateral contract or warranty

5. On the defence that the Plaintiff was in breach of a condition precedent, Mr. Fong says that the Defendant has failed to prove her case that there was graves view from the Property at the material time.

6. I agree with Mr. Fong’s saying that there is little evidence proving that there was graves view from the house at the time. I note that in fact it has been pleaded in paragraph 9 of the Amended Defence that the Defendant subsequently found that one could see graves from the Property, I find it difficult to attach any weight to it. First it lacks particulars as to how and when it was so discovered, and secondly, it was not elaborated in her affirmation except that she craved leave to refer to her Amended Defence in paragraph 11 of her affirmation. In the circumstances, the breach on the part of the Plaintiff has not been proved.

7. Mr. Fong further says that by clause 12, the Provisional Agreement would have superseded all prior negotiations, representation, understanding and agreement of the parties. Mr. Hui for the Defendant submits that clause 12 would not have been intended to supersede a misrepresentation.

8. It is my view that the alleged condition precedent oral collateral agreement or warranty that the Property should have no graves view would be superseded by clause 12 unless it was reduced into writing and incorporated in the Provisional Agreement. Clause 12 renders “inadmissible extrinsic evidence to prove terms other than those in the written contract, since the parties have by the clause expressed their intention that the document is to contain all the terms of their agreement.”  (Chitty on contract para 12-102 Vol.1 28 Edition). It was clear from the Amended Defence that the alleged condition precedent was made out in early October 2003, where as the Provisional Agreement executed was by end October. In my view, the alleged condition precedent etc. must be within the meaning of allprior negotiations, representation, understanding and agreements of the partiesas stipulated in cause 12. I therefore find that there is not an arguable defence put forward by the Defendant as pleaded in paragraph 11 of the Amended Defence.

Withdrawal of Offer to buy

9. On the second line of defence that the offer to buy had been withdrawn before the Provisional Agreement was passed to the Plaintiff for execution together with the Cheque, I find that there are some blatant inconsistencies between the affirmation of the Defendant and the Amended Defence. The Amended Defence itself also contains facts contradicting each other. In paragraph 5 of the Amended Defence, it is pleaded that the Defendant gave instruction to the estate agent to withdraw the offer to buy immediately having the knowledge of the misrepresentation that no graves could be viewed from the Property. In paragraph 14 of the Amended Defence, it is pleaded that after the offer by the Defendant was once rejected by the Plaintiff, the Defendant immediately withdrew the offer to buy because the Defendant would now refuse to buy at the price she earlier offered and because she had only viewed the Property for 5 minutes in early October 2003 and was not in a position to personally confirm whether or not there were graves view from the Property. The said two paragraphs in the Amended Defence are inconsistent with each other.

10. Further in paragraph 9 of her affirmation, she said that she was not in a position to confirm whether or not there were graves view from the Property and therefore she asked the estate agent to stop the offer if the Property could see graves (paragraph 10 of her affirmation). The version in the affirmation was more close to what has been pleaded in paragraph 14 of the Amended Defence but the two are still inconsistent because according to the affirmation, the withdrawal of offer was conditional on the Property could see graves. These inconsistencies render this line of defence unbelievable.

11. Moreover, there was no evidence to say that upon knowing that the offer to buy had been made contrary to her instructions, she had done anything to annul or set aside the Provisional Agreement. In fact in paragraph 3 of the Amended Defence, it is pleaded that the Cheque was stopped because the Defendant had been fraudulently or negligently misrepresented that the Property sees no graves, withdrawal of offer is not mentioned.

Misrepresentation

12. On the defence of misrepresentation, again Mr. Fong says that, there is no proof from the Defendant showing that there was graves view from the Property. Mr. Hui’s submission on this is that the burden is on the Plaintiff to prove that there is no graves view. I am afraid I could not agree with Mr.Hui on this. Application for summary judgment under Order 14 places the onus on the defendant to show that the defence is believable for the Court to see a triable issue in the claim.  If the Defendant pleads misrepresentation, she should bear the burden of proof that there was graves view from the Property. 

13. Further, by reading the Amended Defence together with the affirmation of the Defendant, I must say that although some particulars of the alleged misrepresentation is pleaded in paragraph 12 of the Amended Defence, nothing is said that she was induced by such misrepresentation to sign the Provisional Agreement and to issue the Cheque. Paragraph 13 of the Amended Defence sets out the circumstances in which the Provisional Agreement and the Cheque were signed, misrepresentation is not mentioned.

“	12.	……At the material time of viewing the Property, Mr. Chan Lai Tong, a Director of the Plaintiff and his wife told the Defendant and her mother that the Property was in very good condition an the view was very nice with no graves view at all.  The Defendant and her mother stayed in the Property for about five minutes on this occasion.
	13.	On 29th October 2004, at about 1:00p.m., the estate agent Mr. Eric Tsu had lunch with the Defendant at a Restaurant in Kowloon Bay whereupon the estate agent prepared the Provisional Agreement.  The estate agent Mr. Eric Tsu asked the Defendant to sign the Provisional Agreement and also asked the Defendant to issue a cheque of HK$ 200,000.00 with the name of drawee left blank for him to try an offer at HK$7,680,000.00 with the Plaintiff.”

14. Further, in contradiction to the attempt to say that there was misrepresentation, paragraph 14 of the Amended Defence pleads that the offer to buy was withdrawn because the Defendant could not confirm herself that there was no graves view only 30 minutes after the signed Provisional Agreement and the Cheque was handed over to the estate agent by the Defendant. From such saying, one would ask whether she was induced by the said misrepresentation to sign the Provisional Agreement and the Cheque. The alleged misrepresentation seemed not to have any operation in the mind of the Defendant.

15. Paragraph 9 of the affirmation cannot be of much assistance although misrepresentation is mentioned, it is stated therein that it is an alternative cause of action without giving the particulars of misrepresentation referred to.

“

9.

Further or in the alternative, I was fraudulently or negligently misrepresented by Mr. Eric Tsu, the estate agent who asked me to test the offer by giving him a blank cheque for $200,000.00 to test the offer with the Plaintiff at $7,680,000.00.  This offer was not accepted by the Plaintiff.  He then asked me to increased the offer by $50,000 or $100,000.  Then I said I was not buying the House C23 at HK$7,680,000.00.  I requested my cheque back.  At that time, the Plaintiff was asking a purchase price between $7,800,000 and $8,500,000.  I had only viewed the property House C23 for 5 minutes in early October 2003 and was not in a position to confirm whether or not there were graves view from the Property.”

16. By reading paragraph 9 of the Defendant’s affirmation, one cannot tell whether she was referring to the misrepresentation of no graves view or something else such as the purpose for the signing of the Provisional Agreement and the Cheque. No alternative cause of action on misrepresentation is pleaded in the Amended Defence.

17. Further while misrepresentation may amount to a defence to a claim arising from the Provisional Agreement, it is not a defence to a claim for payment arising from the Cheque. There is no counterclaim pleaded for rescission  of the Provisional Agreement in the Amended Defence, I do not have to deal with this issue.

Promissory estoppel

18. The last line of defence is the allegation of a promise not to sue made by the Plaintiff. Generally a promisee should show that in reliance on the promise he has suffered some detriments or at least has done something to alter his position. There is not even the slightest suggestion pointing to that direction in the present case, let alone any evidence to prove. 

19. The general principle stated in paragraph 18 above is not disputed.  “Reliance” has been pleaded.  The “reliance” mentioned in paragraph 14 of the affirmation is however not reliance contemplated by the law. In the paragraph, the Defendant pleads in gist that after learning that the Plaintiff had decided to sue her, she became ill. At best, it only shows that the Defendant was extremely unhappy with the change of mind of the Plaintiff.

20. Further the reason for inequity as pleaded in paragraphs 15 to 17 of the Amended Defence i.e. the Property has been sold at a higher price and the Plaintiff has not suffered any loss, is not a ground to say that it would be inequitable if he sues the Defendant.

21. I also agree with Mr. Fong’s submission that promissory estopple generally has effect of suspending obligatory only and the promissor may revert to these rights upon giving reasonable notice of his intention to the other party. Mr. Fong goes on to say that the letter from the Plaintiff’s solicitor reserving the right is good notice in the present case. I agree. And in my view, since there is no reliance by the Defendant, notice is immaterial.   

Conclusion

22. For reasons set out in the above, I am satisfied that the Defendant has failed to prove an arguable case for trial on her liability to the Cheque. I therefore enter judgment for the Plaintiff for a sum of 200,000.00 with interest at half judgment rate from 29 September 2003 until judgment and at judgment rate thereafter until payment in full. I also order the Defendant to pay costs, to be taxed if not agreed.