TAI TUNG ON ENTERPRISES CO. LTD. v. ORIENTAL HORSE CO. Ltd.

1994 M.P. No. 3329

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

MISCELLANEOUS PROCEEDINGS

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J U D G M E N T

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1. In early 1994 the building now known as Chatswood Villa was in the course of being constructed at 126 Caine Road, Hong Kong. The developer was Yeuti Investment Limited ("Yeuti"). The plan was that the building was going to be a 25 storeys building including the ground floor. The ground floor was designed for commercial use and the floors above were domestic flats with one flat on each floor. It is common ground that the ground floor of this Chatswood Villa was at the level of Caine Road.

2. By a memorandum of sale and purchase dated 1st March, 1994, Yeuti agreed to sell the 1st to the 24th floors of the building under construction to the Defendant. This memorandum specifically provided that the Defendant as the purchaser had the right to name the building and also the right to nominate the first manager of the building. It further provided that the purchaser shall have the right to prepare for the vendor's approval the Deed of Mutual Covenant in respect of the building provided that such deed shall comply with the guidelines laid down by the Law Society of Hong Kong. It is significant to note that there was no express provision to enable the Defendant to re-number the floors of the building.

3. On or about 4th May, 1994, Yeuti and the Defendant entered into a formal sale and purchase agreement to give effect to the memorandum of sale and purchase dated 1st March, 1994. It is significant to note that in this agreement, the property to be purchased by the Defendant was stated to be "ALL THOSE FIRST FLOOR and its Flat Roof, SECOND, THIRD, FOURTH, FIFTH, SIXTH, SEVENTH, EIGHTH, NINTH, TENTH, ELEVENTH, TWELFTH, THIRTEENTH, FOURTEENTH, FIFTEENTH, SIXTEENTH, SEVENTEENTH, EIGHTEENTH, NINETEENTH, TWENTIETH, TWENTY-FIRST, TWENTY-SECOND, TWENTY-THIRD and TWENTY-FOURTH FLOOR and its ROOF THEREOF". There were also plans annexed to the formal sale and purchase agreement and there was one plan for each of the floors.

4. The Defendant intended to sell the property it purchased floor by floor. Even before the memorandum of sale and purchase dated 1st March, 1994 was entered into, the Defendant had drawn up various tables setting out the area of each floor, the intended price and the gross and saleable floor area. Many of these tables were never shown or distributed to any one outside the Defendant company. However the Defendant's case was that at least a price list entitled "Internal Price List for Shareholders and Staff (2, 6, 8, 10, 12, 16, & 18/F) 126 Caine Road, Hong Kong" and another price list entitled "Tentative Price List of 126 Caine Road (2, 6, 8, 10, 12, 16 & 18/F) (hereinafter called "the February tentative price list")" both dated 26th February, 1994 had been so prepared and these 2 price lists had been shown to outsiders. In the case of the former, it was the Defendant's case that the price list was applicable to all staffs of the Defendant company as well as the staffs of all other companies beneficially controlled by each of the 3 main share holders of the Defendant. In the case of the February tentative price list, the Defendant's case was that this price list was intended to be shown and was meant for out-siders who wanted to purchase the floors from the Defendant by internal subscription, that is to say, to those who would like to purchase a floor before the Defendant had formally offered the floors to the public for sale. The Plaintiff made no admission on the authenticity of any of the price lists produced by the Defendant in the course of this trial. In particular the Plaintiff put the Defendant to strict proof that the February tentative price List had in fact been produced on the date it bore. What was significant about the various tables and price lists produced by the Defendant was that each of them related to floors numbered from 1st to 28th but with the 4th, 13th, 14th and 24th floors omitted and each of them also bore an express note that there was no 4/F, 13/F, 14/F & 24/F.

5. Since 1st March, 1994, the Defendant had produced further price list. There was one dated 9th March, 1994 entitled "Tentative Price List of 126 Caine Road (2, 6, 8, 10, 12, 16, 18/F) (hereinafter called "the March tentative price list")". The prices for the floors on this list was the same as those set out in the February tentative price list. The only differences between the March and the February tentative price lists were their respective dates and that in the March tentative price list, the 18th floor was marked "SOLD" and the saleable floor area and the efficiency for this floor were not shown. The Defendant's case was that this March tentative price list was shown to all purchasers who made reservations agreements for the purchase of the floors by internal subscription except one Mr. Kwong who entered into a reservation agreement for the purchase of the "15th floor". In the case of Mr. Kwong, Mr. Lam of the Defendant gave conflicting evidence as to whether he was shown the February tentative price list or the March tentative price list.

6. It is common ground that sometime in the second half of April, 1994 the Defendant offered to sell to the Plaintiff the "15th floor" of 126 Caine Road, and had told the Plaintiff that this floor had been earlier reserved by another person who would like to get rid of the property. On 30th April, 1994 in the office of Messrs. Ho and Chan who subsequently became the Plaintiff's solicitors, a "Confirmation of Instructions" was signed by the Plaintiff and the Defendant. This document was in a printed form prepared by the Defendant. It is also common ground that this document was a binding preliminary sale and purchase agreement between the Plaintiff and the Defendant. The description of the premises purchased was "15th floor of 126 Caine Road, Mid-levels, Hong Kong". The purchase price was HK$5,410,653 and a deposit of $811,598 was payable and paid on the signing of the Confirmation of Instruction, and two further sums of HK$405,799 each were payable on or before 1st June, 1994 and 1st July, 1994 respectively. The balance of the price was payable within 10 days of the Plaintiff's being notified of the issuance of the occupation permit. The Confirmation of Instruction provided for the execution of a formal sale and purchase agreement within 3 days. However the formal sale and purchase agreement was not signed by the Plaintiff until 8th June, 1994. This agreement was dated 10th June, 1994 being the date when the Defendant signed the agreement. It was not in dispute that the reservation agreement with Kwong was cancelled shortly after the Plaintiff had signed the Confirmation of Instruction.

7. Meanwhile on 4th May, 1994 the Defendant entered into the formal sale and purchase agreement with Yeuti. In order to implement the Defendant's desire to change the numbering of the floors, the Defendant sent a draft of a Deed Poll to effect the re-designation of the floor numbers for Yeuti's execution on 30th April, 1994. Although the document was called "Deed Poll", it was intended to be executed by both Yeuti and the Defendant jointly. Yeuti's solicitor returned the Deed Poll duly executed by Yeuti for the Defendant's execution on 10th May, 1994. There was no evidence as to exactly when the Defendant executed this document. However the document itself was dated 4th May, 1994.

8. The formal sale and purchase agreement was signed by the Plaintiff on 8th June, 1994 at the Defendant's solicitors' office in a form prepared by the Defendant's solicitors. The property agreed to be sold was described as "all that 15th floor of the building which said floor for the purpose of identification only is shown and coloured pink on the Plan annexed hereto". It was common ground that in fact no plan was annexed to the agreement at the time when it was executed by the Plaintiff. The agreement provided that completion shall take place at the office of the Defendant's solicitors within 10 days of the Plaintiff being notified of the issuance of the occupation permit.

9. It was common ground that the Plaintiff had duly paid all the deposits and part payments due under the agreement. The total amount thus paid was HK$1,623,196. On 15th September, 1994, the Defendant's solicitors sent to the Plaintiff's solicitors the title deeds of the property sold and amongst the documents sent was the Deed Poll to effect the re-designation of the floor numbers dated 4th May, 1994. This deed had not caused the Plaintiff's solicitors undue concern and no requisition was raised in relation to the re-numbering of the floor. Indeed I am of the view that the numbering of the floor is a matter of conveyancing and is not a proper matter for requisition as the building did have a 15th floor whether under the original numbering or under the re-designated numbering. On 15th October, 1994, the Plaintiff's solicitors requested the Defendant's solicitors to send along a copy of the plan which should have been annexed to the formal sale and purchase agreement dated 10th June, 1994. On the same day the Defendant's solicitors duly sent to the Plaintiff's solicitors a plan for the 15th floor according to the original floor numbering. Apparently this plan was taken from the plan of the 15th floor annexed to the sale and purchase agreement between Yeuti and the Defendant. The problems arising from the re-numbering of the floors was first spotted by the Plaintiff's solicitors on or about 2nd November, 1994 when they wrote to the Defendant's solicitors saying that the property to be sold should be described as "18th floor (formerly known as 15th floor)". This would undoubtedly be right if what was agreed to be purchased by the Plaintiff was the 15th level above the ground floor level of the building because as a result of the re-designation of the floor numbers with the omission of the 4th, 13th and 14th floor, what was the 15th level above the ground floor would become the 18th floor. In the draft assignment tendered by the Plaintiff's solicitors for the Defendant's solicitors' approval on 2nd November, 1994, the property was described as "EIGHTEENTH FLOOR (formerly known as FIFTEENTH FLOOR). By a letter dated 8th November, 1994, the Defendant's solicitors said that the property purchased by the Plaintiff should be "15th floor (formerly known as 12th floor)" and enclosed with that letter a floor plan of this 15th floor (formerly known as 12th floor) for the Plaintiff's solicitors' "further action". By a letter dated 9th November, 1994, the Defendant's solicitors approved the draft assignment with some amendments. In particular the description of the property was amended to read "15th floor (formerly known as 12th floor)". There after there were exchange of correspondence as to whether the property to be assigned should be as described by the Plaintiff or by the Defendant.

10. The parties could not reach any agreement as to how the property should be described because the parties were in dispute as to whether what the Plaintiff had agreed to purchase was the flat on the 15th level above ground floor or on the 12th level above ground floor. Eventually on 23rd November, 1994, the Plaintiff issued the present proceedings by way of a vendor and purchaser summons. By the Order of Leong J, this action was ordered to continue as if it was begun by writ and pleadings were filed. By these proceedings, the Plaintiff sought to claim the refund of the amount of $1,623,196 paid on the ground that the Defendant was unable to assign the floor which the Plaintiff had contracted to purchase. Alternatively, it was also the Plaintiff's claim that if what the Defendant had intended to sell was the 15th floor (formerly known as 12th floor before the re-designation) then there was no binding agreement between the parties as the agreement was vitiated by mistake or lack of consensus ad idem. The Defendant's case was that there was definitely a binding agreement between the parties and there was no mistake. The Defendant said that having regard to how the contract had come to be concluded on 30th April, 1994, the parties had intended to buy and sell the 15th floor (formerly known as 12th floor before the re-designation). As the Plaintiff had not completed the sale and purchase of that floor, the Defendant counterclaimed for an order of specific performance. It is however notable that the Defendant did not seek rectification. The Defendant simply rested its case on the construction of the agreement and contended that in the context of the agreement, 15th floor should mean the 15th floor as re-designated i.e. the 12th level above the ground floor level. The defences raised in paragraphs 14 & 15 of the Defence based on collateral agreement and estoppel were not pursued.

11. This case would thus boil down to whate is true construction of the Confirmation of Instruction dated 30th April, 1994, and in particular the true construction of the words "15th floor of 126 Caine Road, Mid-levels, Hong Kong". Both parties agreed that the relevant law was well summarised in paragraph 12-104 of Chitty on Contract 27th edition which said :-

"Meaning of words and phrases. Where the words of a written agreement have a clear and fixed meaning, not susceptible of explanation, extrinsic evidence is not admissible to show that the parties meant something different from what they have written. But where the wording or phraseology is susceptible of more than one meaning, or if an ambiguity emerges when it is sought to apply the language of the document to the circumstances under consideration, extrinsic evidence will be admissible to ascertain the true meaning of the words or phrases used."

Counsel for the Plaintiff contended that the words "15th floor" had a well defined meaning as common English words. As ordinary common English words, the 15th floor would be understood to mean that floor which was at the 15th level above the ground floor level. Thus no extrinsic evidence was admissible to show that in fact it would mean something else and the second sentence quoted above had no application. Counsel for the Defendant however contended that the words "15th floor" did not necessary mean that floor which was at the 15th level above the ground floor level. He said that it was not unknown that some buildings in Hong Kong were without any 4th floor and/or 13th floor and/or 14th floor, so that 15th floor did not necessary mean the 15th level. Further more there were buildings such as the Supreme Court building where the lowest floor was not the ground floor and so the 15th floor might not necessary mean the 15th level above the lowest level of the building. Accordingly counsel for the Defendant submitted that this was a case that the Court should have regard to the circumstances as to how the parties come to enter into this agreement and based on what kind of documents the parties concluded their deal. Counsel for the Defendant submitted that if the Court would consider all these matters, the Court would come to the conclusion that the flat which the Plaintiff had agreed to buy must be the one at the 12th level above the ground floor i.e. the 15th floor according to the re-designated floor numbering.

12. I am of the view that in the ordinary case, the 15th floor as common English words must be understood as meaning the floor at the 15th level above the ground floor level of a building. In the ordinary case, the ground floor would be the floor at street level and it may not be the lowest level of the building. There may be buildings with basements which are below the street level. There may also be buildings which straddle over 2 streets at different levels such as the Supreme Court Building where it may be necessary to resort to other information to find out which level is designated as the ground floor. In construing the meaning of the words "15th floor of 126 Caine Road", it is thus necessary and permissible to have regard to the type of building standing at 126 Caine Road. In the present case, it is common ground that the building had no basement and was not one which straddled on 2 streets with different levels. It must be common ground that the ground floor of the building is at the street level of Caine Road, and I have no hesitation in holding that the words "15th floor Caine Road" must mean the floor which is at the 15th level above the ground floor of the building standing at 126 Caine Road. Even if the building was not yet completed by 30th April, 1994, in my view the words "15th floor" must be construed to mean the 15th level above the ground floor of the building being constructed at the site.

13. I am therefore of the view that the words "15th floor" are plain in their meaning and there is no ambiguity in their meaning. There is also no latent ambiguity in the meaning of these words as the building constructed at the site is an ordinary building without any basement and without any level other than the one abutting Caine Road which could be said to be the ground floor. In these circumstances, I am of the view that it is not permissible to call in aid evidence on how the parties had come to conclude their agreement and it is not permissible to rely on matters set out in the price list which was alleged to have been shown to the Plaintiff when the agreement was being negotiated, even assuming that such price lists were in fact shown.

14. If however I am wrong in holding that the extrinsic evidence on the circumstances leading to the conclusion of the agreement were not admissible in this case, I would have to consider whether in the light of such evidence, the agreement should be so construed as to mean that the premises which the parties had intended to buy and sell was the 12th level above the ground floor, i.e. the 15th floor accordance with the re-designated floor numbers as contended by the Defendant.

15. In summary the Defendant's contention was that :-

(1) The Defendant always intended to sell to the Plaintiff only the 15th floor according to the re-designated floor numbering.

(2) The Plaintiff was or should be aware that the building although consisted of 25 storeys including the ground floor in fact did not have any 4th, 13th, 14th and 24th floors, so that when the Plaintiff and the Defendant was negotiating for the sale and purchase of the 15th floor, the floor that they were talking about must be the floor at the 12th level above the ground floor and the words "15th floor, 126 Caine Road" in both the Confirmation of Instruction dated 30th April, 1994 and the agreement dated 10th June, 1994 should similarly be construed to mean the floor at the 12th level above the ground floor, or the 15th floor as re-designated.

16. In support of contention (1), the Defendant through its manager, Mr. Lam gave evidence to the effect that since about mid February, 1994 and even before the Defendant had entered into the agreement with Yeuti, the Defendant had decided to sub-sell the property it was going to purchase floor by floor, and had made various plans for so doing. He gave evidence that the Defendant would not like to have floors with numbers which were considered by the Chinese as unlucky numbers and hence there was the decision to re-number the floors to omit the 4th, 13th, 14th and 24th floors. He told me that he had asked his secretary to prepare various price lists and tables and charts showing the floor area of each of the floors and the efficiency and also the proposed price etc. He pointed out that in these charts and price lists, there was no 4th, 13th, 14th and 24th floors, and also on each of them, there was a note saying that "there is no 4/F, 13/F, 14/F & 24/F". The earliest of such list was dated 21st February, 1994 although it was clear from the computer record that this list as recorded was not saved in the computer until 28th February, 1994. Mr. Lam also gave evidence that he had asked his secretary to prepare the Internal Price List for shareholders and staff (2, 6, 8, 10, 12, 16 & 18/F) dated 26th February, 1994, as well as the February tentative price list. The Internal Price list was still found stored in the computer disc and it was clear that it was in fact so prepared and stored on 26th February, 1994. However the February tentative price list was not found in the computer disc storing the documents prepared in relation to this project. This is a matter that I will revert to later. Mr. Lam gave evidence that on 9th March, 1994 one Mr. Sze had entered into an agreement to reserve the 18th floor and on that day he caused the March tentative price list to be prepared. I would rule that the evidence concerning the 8th March, 1994 reservation agreement to be inadmissible. Plainly it was the Defendant's case that such agreement with the alleged Mr. Sze was a written document and there was no explanation as to the where about of this document or any copy thereof. Further more in his evidence in chief Mr. Lam initially gave evidence to the effect that on 9th March, 1994, the Defendant had entered into an agreement with Mr. Tong in the form of Confirmation of Instruction for the sale of the 18th floor to Mr. Tong, although from the date of the cheque given by the purchaser, it is plain that such Confirmation of Instruction was unlikely to have been entered into until 6th May, 1994. It was not until when his attention was drawn to the difference between the Confirmation of Instruction and Reservation Agreement that he told me that in fact originally one Mr. Sze had entered into a reservation agreement for the purchase of the 18th floor and that he later on wanted to withdraw from the purchase and hence another person Mr. Tong was found to take his place and Mr. Tong entered into an agreement directly with the Defendant in the form of Confirmation of Instruction. The evidence concerning whether there was ever a reservation agreement dated 9th March, 1994 with any one for the purchase of the 18th floor and if so what was the date of that agreement was wholly unsatisfactory and I am not at all satisfied that such agreement did exist or if it ever existed at all, it was made on 9th March, 1994. Apart from this reservation agreement, the Defendant relied on a number of other reservation agreements entered into between Seasonal Limited and various purchasers whereby different flats at 126 Caine Road were reserved for these purchasers to purchase.

17. Seasonal was a company to which one Mr. James Lee, 1 of the 3 beneficial owners of the Defendant, was the sole beneficial owner. By the terms of the reservation agreement, the purchaser concerned had requested Seasonal to use its best endeavour to procure the Defendant to enter into a sale and purchase agreement with the purchaser agreeing to sell to the purchaser the flat reserved at the price specified in the reservation agreement. Under the reservation agreement, a sum of $100,000 was payable as deposit to Seasonal and there were further provisions for further payment of the price of the property and Seasonal was authorised to pay over these sums to the Defendant as part of the price. I was told that there was in fact no contractual relationship between Seasonal and the Defendant so that the Defendant was not in any way obliged to enter into any sale and purchase agreement with any of the person who had so reserved a flat with Seasonal. Under the terms of this reservation agreement, Seasonal would not be liable to the purchaser if the Defendant did not enter into the sale and purchase agreement and the only right of the purchaser in that event was to obtain back the money he paid. There was no dispute that there were such reservation agreements in respect of the 10th, 11th, 15th, 16th, 17th, 19th, 20th 25th, 26th and 28th floors between 12th March, 1994 and 7th April, 1994.

18. The Defendant's case was that with the exception of the 15th floor, all these reservation agreements were made with reference to the March tentative price list. The significance of that was that the floors referred to in these agreements were the floors as re-designated. Of course apart from the reservation agreements in respect of the 25th, 26th and 28th floors, on the face of the reservation agreements it is impossible to say that the floors therein referred were the floors as re-designated. However I would consider that it would be unrealistic to say that Seasonal would have entered into some reservation agreements with reference to the floors as originally numbered and some reservation agreements with reference to the floors as re-designated. In view of the fact that the Defendant and Seasonal were in fact both manned by essentially the same staffs, I would consider that it would be a fair inference that since about 12th March, 1994, when the floors were being disposed of, the Defendant's subjective intention was that the floor numbers would refer to re-designated floor numbers. Thus when the 15th floor was reserved for Mr. Kwong, both Seasonal as well as the Defendant would have understood that the 15th floor should refer to the 15th floor according to the re-designated numbering. Likewise when Mr. Kwong's 15th floor was offered to the Plaintiff, the Defendant's Mr. Lam and Mr. Ho would have understood that the floor being offered to the Plaintiff was the 15th floor according to the re-designated floor numbering.

19. However this does not mean that the Plaintiff must have similarly understood that what the Plaintiff was offered was the 15th floor according to the re-designated numbering. In support of the Defendant's contention that the Plaintiff must have also had a similar understanding on the meaning of 15th floor, the Defendant relied on the following matters given in evidence by Mr. Lam and Mr. Hung Kin Ho :-

(a) In a meeting between Mr. Poon of the Plaintiff and Messrs. Sunny Ho and Lam of the Defendant in a restaurant in mid-April, 1994, Mr. Poon was given a price list dated 11th April, 1994 which contained a statement that the building had no 4th, 13th, 14th & 24th floors and this fact had been expressly drawn to his attention by Mr. Lam. It was also the Defendant's case that it was in this meeting that the Defendant first mentioned to Mr. Poon of the Plaintiff that the 15th floor which had previously been reserved by Mr. Kwong could be offered to the Plaintiff at the same price.

(b) In a meeting at a place which Mr. Lam could not recall between Messrs. Ho and Lam of the Defendant and Mr. Poon of the Plaintiff sometime between the restaurant meeting and 30th April, 1994, Mr. Lam had given the February tentative price list to Mr. Poon.

(c) During the meeting on 30th April, 1994 when the Confirmation of Instruction was signed, Mr. Lam and Mr. Ho had brought along the price list dated 11th April, 1994 and also the February tentative price list. Mr. Lam had specifically pointed to the price of the 15th floor on the February tentative price list to Mr. Joseph Chan of the Plaintiff's solicitors (although at that stage Messrs. Ho and Chan had not formally acted for the Plaintiff). In that meeting and before the Confirmation of Instruction was signed, Mr. Joseph Chan had told Mr. Poon that several floors were missing from the price list.

(d) On 8th June, 1994 when the formal sale and purchase agreement was signed at the Defendant's solicitors' office, Mr. Chan of the Plaintiff's solicitors asked Mr. Poon to check the price stated on the formal sale and purchase agreement whereupon Mr. Poon did so with reference to a price list. Mr. Chan had also asked Mr. Hung if he had prepared the Deed Poll for the renumbering of the floors and Mr. Hung told him that he had. Mr. Hung also offered to show Mr. Chan the Deed Poll for the re-designation of the floor numbers but Mr. Chan declined saying that it would be sufficient if that deed be sent along together with other title deeds.

20. There were serious disputes on facts on any of the events (a) to (d) relied upon by the Defendant. First, Mr. Poon did not agree that he had ever been shown or given any price list. Further more on Mr. Poon's evidence the restaurant meeting was just a social meeting and no specific discussion on the sale and purchase of any floors of 126 Caine Road had ever taken place. The meeting referred to in (b) above was denied by Mr. Poon. Similarly both Mr. Poon and Mr. Chan denied any price list having been shown or referred to in the meetings on 30th April, 1994 and 8th June, 1994 and further more there was no mention in those meetings about any missing floors and certainly no one had ever drawn to the attention of Mr. Poon or Mr. Chan of the missing floors and they were not aware of the missing floors. The Deed Poll for re-designating of the floor numbers was simply not mentioned nor was Mr. Chan aware of such deed at the time.

21. Having heard the conflicting evidence from Mr. Poon and Mr. Chan for the Plaintiff on the one hand and Mr. Lam and Mr. Hung for the Defendant on the other on the events leading to the signing of the Confirmation of Instruction and the formal sale and purchase agreement, I would prefer the evidence given by the Plaintiff's witnesses.

22. In accepting the evidence of Mr. Poon I have taken into account the fact that the sequence of events he gave in evidence was some what different from those stated in his witness statement made in July 1995. I accept his explanation that the sequence of events set out in his statement in July 1995 was mistaken and that having had the opportunity of further reflecting on the matters and the benefit of discussing with his fellow directors the evidence he gave in the witness box was a true account of the events. One main difference between the version set out in his July 1995 witness statement and the evidence he gave in Court was that in the witness statement, he stated that even before the meeting in the restaurant, Mr. Sunny Ho had already telephoned him and told him that he could sell Mr. Poon (or the Plaintiff) a flat for a little over $5 million. Mr. Ho told him the size of the flat and its location was 125 (sic) Caine Road. In his evidence he said that there was never any mention about the sale of any specific flat until in a conversation he had with Mr. Sunny Ho after the meeting in the Restaurant. This would have some bearing on the point of whether any price list was given to Mr. Poon during the meeting in the Restaurant. In accepting Mr. Poon's evidence I take notice that although his evidence differed somewhat from his witness statement made in July, 1995, nevertheless it is never the Defendant's case that in fact there was some discussions between Mr. Sunny Ho and Mr. Poon prior to the meeting in the Restaurant on the sale of the subject premises to the Plaintiff.

23. It was common ground that the meeting at the restaurant was attended by Mr. Poon from the Plaintiff, Mr. Sunny Ho and Mr. Lam from the Defendant, and Mr. Ho Tick Man, the father of Mr. Sunny Ho, presumably as the introducer between the Plaintiff and the Defendant and also a few other persons from the New China News Agency. Mr. Poon's evidence was that this was just a social lunch and apart from a very general and superficial remark that the Plaintiff would patronise Mr. Sunny Ho in the event of the Plaintiff's being interested in purchasing property in the future, there was no discussion on any business deal at all. In a meeting over lunch of this kind, it is difficult to see why Mr. Lam should come armed with a photocopy of a brochure of the property 126 Caine Road and a price list of 11th April, 1994. Even on the Defendant's case, there was no suggestion that prior to the meeting, Mr. Poon had indicated that the Plaintiff would be interested in buying any flat from the Defendant. Further more according to Mr. Lam, before the lunch meeting, he had been told by Mr. Sunny Ho that the person they were going to see was a customer of his father and that he was a director of Gold Face which Mr. Lam knew was a listed company. Surely the Defendant must be expecting to establish a contact with a listed company dealing with real property. At the time there was no urgency on the part of the Defendant to try to dispose of any of the flats and I see no reason for Mr. Lam of the Defendant to bring along the photocopy copy of a brochure of Yeuti on the building at 126 Caine Road together with a price list dated 11th April, 1994 of the Defendant in order to interest Mr. Poon in this initial introduction meeting. This would be even more unlikely to be so especially when some third parties such as the persons from the New China News Agency were present in the meeting.

24. Of course the Defendant's case was that the discussion on the sale of flat(s) to the Plaintiff only took place after the persons from the New China News Agency had left and Mr. Lam's evidence was that after seeing these gentlemen off, the parties moved to another table to discuss about the sale of the flat(s) to the Plaintiff. Mr. Poon could not recall any incident of the parties moving to another table but his evidence was clear that there was no discussion on the sale of flat(s) and that there was no price list or copy brochure ever given to him. I accept Mr. Poon's evidence. I do not see any reason for the Defendant's giving the price list of 11th April, 1994 (exhibit D-1) to Mr. Poon at this meeting. The price list of 11th April, 1994 was not one intended for persons who wanted to buy by internal subscription. If indeed it was the intention of the Defendant to sell any flat to the Plaintiff, surely the Plaintiff should be treated as one interested in internal subscription and should be given a different price list. Further more it is to be noted that on exhibit D-1, the only flats which were available for sale would be the flats at 2nd 3rd, 5th, 6th, 7th, 8th and 9th floors, as for the rest of the floors, they were all marked as "sold". Although by mid-April, 1994, Seasonal Limited had already secured purchasers who had reserved quite a number of floors, certainly the Defendant would have many other floors still available for sale. As Mr. Poon was a director of Gold Face which was a listed company dealing inter alia with real property, there was no reason for the Defendant not offering to sell all outstanding flats to the Plaintiff but instead tried to limit Gold Face's choice by giving Mr. Poon a price list with a large number of available flats marked "Sold".

25. As to the alleged meeting that took place between the lunch meeting and the meeting on 30th April, 1994, there was a direct conflict of evidence between Mr. Poon and Mr. Lam as to whether there was any such meeting at all. Mr. Poon's evidence was that it was only after the lunch meeting that he received a telephone call from Sunny Ho who informed him that there was a flat at the 15th floor of 126 Caine Road for sale. According to Mr. Poon, he was told that the flat had been reserved by someone on an internal subscription and that this person was desirous of getting rid of the flat. He was told by Sunny Ho that the price would be slightly over $5 million and that it was about 850 square feet. After discussing with his other directors who were familiar with the property market, he was told that the Plaintiff would be interested in buying this property. Before he had contacted Mr. Sunny Ho again to inform him of the Plaintiff's interest, Sunny Ho contacted him to enquire about the Plaintiff's interest and decision and apparently Sunny Ho wanted the deal to be concluded urgently. Accordingly he arranged with Sunny Ho to meet Sunny Ho at the office of Messrs. Ho and Chan to further discuss the matter with a view to concluding the contract. It was common ground that there was a meeting between Messrs. Poon and Liu of the Plaintiff and Messrs. Sunny Ho and Lam of the Defendant and also Mr. Kwong, the previous purchaser of the 15th floor at the office of Messrs. Ho and Chan on 30th April, 1994 and there were negotiations for well over an hour before the parties had reached any agreement.

26. I reject the evidence of Mr. Lam that there was a second meeting between the lunch meeting and the meeting of 30th April, 1994. In his evidence Mr. Lam was very vague about this meeting. He could not even tell me when and where this meeting took place. It seems to me that this meeting was simply invented in order to create an occasion where it would be convenient to allege that the February tentative price list was given to Mr. Poon. In this regard I also note that the evidence given by Mr. Lam on this meeting was at variance with what was pleaded in paragraph 9 of the Defence and Counterclaim.

27. In relation to the meeting on 30th April, 1994, it is common ground that during this meeting Mr. Poon had from time to time rang his office to take instructions from his fellow directors. It is also common ground that during this meeting the reservation agreement made between Mr. Kwong and Seasonal had been shown to Mr. Poon and later to Joseph Chan. The evidence was that after Mr. Poon and Messrs. Lam and Ho had reached agreement on both the price and the method of payment, Mr. Joseph Chan was informed to join the meeting. Although Mr. Chan was not then the solicitor formally acting for the Plaintiff on the record, it is plain that the role of Mr. Chan was that of an adviser of the Plaintiff. According to Mr. Poon whose evidence I accept, the reason for his arranging to have this meeting to take place in the office of Messrs. Ho and Chan was that because he was not familiar with the procedure for the purchase of property particularly in view of the fact that the property offered to him had been previously "reserved" by someone else, he would like to have the guidance and assistance of Mr. Chan who used to act for the Gold Face group to see to that nothing would go wrong. According to Mr. Chan whose evidence I also accept, after he had ascertained that the parties had reached agreement, he asked to see the reservation agreement with Mr. Kwong and he had also gone through the Confirmation of Instruction which was in the Defendant's printed form. Although Mr. Lam said in his evidence that there were 2 price lists lying on the table before him, Mr. Chan's evidence was that he did not see or read any price list. I do not think that there was any price list placed on the table on that occasion. I do not see very much point in producing or referring to the price lists in that meeting. It must be remembered that by that time, the flat had already been reserved by Mr. Kwong and hence if the Plaintiff did not agree to buy the flat, Mr. Kwong would have to take up the flat or stand to loose his deposit. In this respect, it must be remembered that it was strictly speaking Mr. Kwong agreeing to the deal to "sell" the flat to the Plaintiff by relinquishing his rights to the flat and agreeing to the Defendant's selling the flat to the Plaintiff. Of course by structuring the transaction in the way they did, all parties, i.e. Kwong, the Plaintiff and the Defendant as well as Seasonal would have to agree to the deal. However if the Defendant or Seasonal would not agree to the deal, the transaction could still go through by Kwong's entering into a formal sale and purchase agreement with the Defendant and another sub-sale agreement with the Plaintiff. Thus so far as the price to be paid by the Plaintiff is concerned, the most important thing is that both the Plaintiff and Kwong should agree on the price and in this respect the price lists of the Defendant would not be of much importance. Of course the Plaintiff would certainly be interested to know the price for which Kwong had agreed to purchase the property and for this purpose the document to look at was certainly the reservation agreement signed by Kwong and not any price list which the Defendant would care to generate from its computer.

28. I also accept the evidence of Mr. Poon and Mr. Chan that Mr. Chan had not advised Mr. Poon of the fact that certain floors were missing from the building. I do not accept the evidence of Mr. Lam that there were any express mention by any one of the missing floors during the meeting at all. I am of the view that during the meeting, the parties had merely conducted the negotiation on the basis that the floor to be sold to the Plaintiff was the 15th floor, the same floor which Mr. Kwong had reserved without any one directing his mind as to whether the 15th floor could mean anything other than what those words were normally understood. I find that although it is possible that Mr. Chan could not recall all the small details of the meeting, as the description of the property was obviously a matter of great importance, had Mr. Chan's attention been drawn to the re-numbering of the floors or that there were certain floors missing, I found it rather in-conceivable that Mr. Joseph Chan would not have insisted that the property be properly described so as to remove all possible doubts and ambiguities.

29. The next contact between the parties was the meeting on 8th June, 1994 when Mr. Poon of the Plaintiff came to the Defendant's solicitors' office to sign the formal sale and purchase agreement. It was common ground that Mr. Poon came with Mr. Joseph Chan. It was also common ground that Mr. Poon of the Plaintiff signed the formal sale and purchase agreement in the presence of Mr. Joseph Chan and Mr. Hung Kin Ho, a conveyancing clerk of the Defendant's solicitors. I accept the evidence of Mr. Joseph Chan that in this meeting, Mr. Chan and Mr. Poon had been shown the agreement prepared by the Defendant which Mr. Poon of the Plaintiff signed, and also Mr. Chan had been shown the principal agreement signed between Yeuti and the Defendant. I accept the evidence of Mr. Chan that initially Mr. Chan did not appreciate that the Defendant was entering into the agreement as confirmor and hence he rather thought that Messrs. Edward C.T. Wong, the Defendant's solicitors, could act for both the Defendant and the Plaintiff in the transaction. It was for this reason that for a long time, Messrs. Ho and Chan had not formally acted for the Plaintiff as it would obviously save some cost if the Plaintiff could retain the same firm of solicitors as its vendors. I reject the evidence of Mr. Hung that in the meeting when Mr. Chan asked Mr. Poon to check the price, Mr. Poon took out a price list to check the price. I find it strange that any one should like to check the price from the price list. It must be remembered that this was the occasion of the signing of the formal sale and purchase agreement to give effect to the Confirmation of Instruction and the proper reference for checking the price must surely be the Confirmation of Instruction and not any price list. In the course of his evidence in chief Mr. Hung had further embellished his evidence by telling me that :-

"He [i.e. Poon] said it was right. Mr. Chan asked Poon to check the price and floor numbering. After looking at it [the price list] he told Chan that it was right. I remember Chan also reminded Poon that there were several floors missing and change of floor numbers. Poon said that it was right. Chan asked me if I had prepared the Deed Poll about re-numbering of the floors. I told him I had. I asked him if he wanted to look at it. He said it was not necessary, he told me to give it to him together with the title deeds in due time."

I am unable to accept this piece of evidence as true. If Mr. Chan was aware of the re-numbering, I do not see any reason for his not insisting that the property to be sold should be properly described so as to avoid any possible ambiguities. Indeed, it was of great interest to note that in many formal sale and purchase agreements to which different firms of solicitors were acting for the purchaser, the relevant part of the description of the property had been amended to read "xth floor (formerly known as yth floor)". Further more I see no reason for Mr. Chan's being able to know that the Defendant's solicitors had prepared a Deed Poll in respect of the change of floor numbering. Again if Mr. Chan had in fact been aware of the fact that there was a change of floor numbering effected or purported to be effected by the Deed Poll, it was strange that he would not ask to see that Deed Poll to see that the property was properly described with reference also to the new description as stated in the Deed Poll instead of allowing Mr. Poon to check simply with reference to a price list. After all it must be obvious that the change effected by the Deed Poll may or may not be in line with what was stated in the price list. Further more this account of the event given in evidence by Mr. Hung did not agree with what was stated in paragraph 12(b) of the Defence and Counterclaim whether before or after the amendment.

30. As I accept the evidence of Mr. Poon and Mr. Joseph Chan on their accounts of events leading to the signing of the Confirmation of Instruction and the formal sale and purchase agreement, I am of the view that even if it is permissible to construe the agreement between the parties with reference to the background and other circumstances surrounding the negotiation of the agreement or the concluding of the agreement, I would still come to the view that the Plaintiff was not aware of any re-numbering of the floors and the Defendant had not brought to the Plaintiff's attention of any such re-numbering. It follows that even if I were to approach the question of construction of the agreement in the manner invited by the Defendant's counsel, I would still have come to the conclusion that the 15th floor as used in the agreement would mean the 15th level above the ground floor and not the 15th floor as re-designated by the Defendant. As the Defendant has in fact agreed to sell that floor to someone else and was not willing or able to assign that floor to the Plaintiff, the Plaintiff was entitled to the refund of all the money paid with interest from the date of the vendor and purchaser's summons.

31. As it is the Defendant's case that there was a binding agreement between the Plaintiff and the Defendant and on true construction of this agreement, I come to the conclusion in favour of the Plaintiff, it is unnecessary to me to further consider the alternative case of the Plaintiff that there was in fact no binding agreement between the parties in that the parties were never ad idem over what was to be sold. I would only observe that in my view this was a case where objectively the parties had agreed to buy and sell the flat at the 15th level above the ground floor and if there was any mistake on the part of any one it was the mistake of the Defendant who thought that it had agreed to sell the flat at the 12th floor above the ground floor, being the 15th floor as re-designated.

32. As a lot of time had been spent on the subsidiary issue of whether the February tentative price list was authentic, I would also briefly indicate my view on the price lists. The various price lists produced by the Defendant were all generated by the Defendant's computer. The Defendant's case was that all the price lists and other documents concerning this property were stored at a floppy disc running on the B drive of the Defendant's computer. It is quite apparent from run out of the directory to this disc that the date appearing on a price list needs not have any bearing on the date when the document was created or stored in the floppy disc and the February tentative price list and the March tentative price list were not located in the disc at all. I am not convinced by the suggestion that these documents had been over-written and was converted into another document stored in the disc. The lay out and contents of these documents were different from the later price lists and it would not be likely that the documents were simply over-written to become something else. In any event neither Mr. Lam nor his secretary, Lee Wai Ling was able to say what had become of the documents and if these documents had not been converted to something else whether and why they were deleted from the disc. It is notable that the last document contained in this disc was saved into the disc on 26th October 1994. I accept the evidence of Mr. Hung and Mr. Gordon Chan that the February tentative agreement had been faxed by the Mr. Sunny Ho to them respectively on 28th November, 1994 and 23rd November, 1994. It follows that as on 23rd November, 1994, the February tentative price list must have come into existence. However, beyond that, I am not prepared to find that the February price list had come into existence on 26th February, 1994 or on any other date. All that I am prepared to find was that that document had come into existence latest by 23rd November, 1994. As I have found that no price list had ever been shown to the Plaintiff before the Plaintiff entered into the agreement with the Defendant, it is not necessary for me to make any specific finding as to when and what price lists had been generated by the Defendant.

33. To conclude, the Plaintiff's claim succeeded, and I will grant the Plaintiff the reliefs prayed for in paragraphs (i), (iii) & (v) of the statement of claim. In relation to paragraph (vi) I would order that interest on the judgment rate be paid as from 23rd November, 1994. In relation to (vii) I will order the Defendant to pay the Plaintiff costs of investigating title and of the intended purchase to be assessed by the Master. The Defendant's counterclaim is dismissed. I will also make an order nisi that the Defendant should pay the Plaintiff's cost of this action.

(Edward Chan Q.C.)
Recorder