LI AH SHUN v. HSIEH HAW SHANE, GRAY and Another

1991, MP No. 2691

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

MISCELLANEOUS PROCEEDINGS

__________

_______________

J U D G M E N T

_______________

1. This is somewhat convoluted litigation. It started life on the 11th September 1991 as an originating summons whereby the Plaintiff sought Declarations against both defendants in respect of separate sale and purchase agreements for the sale of the suit premises being Flat C on the 31st Floor of Hing Hon Building in King's Road.

2. The action against the 1st Defendant was settled. In the supporting affirmation to the originating summons, the Plaintiff gave a detailed background description of the circumstances whereby the said sale & purchase agreements had not been proceeded with but that the Agreements had been registered against the suit premises at the Land Office.

3. As it became clear that the evidence given by the Plaintiff would be contested an order was made for pleadings to be filed so that the proceedings could be framed as an action. This was done.

4. The statement of claim which was filed ran to 10 pages. It is by no means simple to reconcile to the claims being made with the background circumstances referred to by the Plaintiff in the affirmation in support of the originating summons.

5. Put very briefly the Plaintiff claimed that the provisional sale and purchase agreement which he concluded with the the 2nd Defendant was not a genuine sale of the suit premises.

6. The 2nd Defendant was an Estate Agent. The arrangement between the parties was that the 2nd Defendant would agree to sell the suit premises to one of her customers for $760,000.00. She would then find a flat for the Plaintiff with a larger area than the suit premises at a "reasonable" price and she would act as the Agent in this transaction.

7. The 2nd Defendant had been unable to find a purchaser of the suit premises at the required figure and had sought extensions of time to enable her to meet her side of the bargain.

8. One of the allegations made by the Plaintiff was that the 2nd Defendant had caused amendments to be made to the Provisional Sale & Purchase Agreement and that these amendments had not been agreed to by him. A considerable amount of time was expended in attempting to secure agreement on the form of the court certified translation of this document.

9. The Plaintiff's evidence in chief was in the form of a witness statement which had been ordered by the Court.

10. He was subjected to a lengthy and searching cross examination by Mr. Chan who represented the 2nd Defendant.

11. Perhaps not surprisingly Mr. Chan spent some time on the discrepancies between the evidence the Plaintiff gave in his affirmation in support of the originating summons and the evidence contained in the witness statement which he had affirmed as being correct in the witness box.

12. In the said affirmation he made no reference to the arrangement he had referred to in the statement of claim and in his witness statement whereby he would in effect be obtaining a larger flat than the suit premises without having to pay a "substantial" additional amount.

13. A considerable amount of time was also spent on the background circumstances surrounding the claim he had originally attempted to make against the 1st Defendant.

14. It transpired on the Plaintiff's evidence that this also had not been a straight forward sale and purchase transaction.

15. He gave evidence that the 1st Defendant through a Finance Co. had made a loan to him of $50,000.00. As security for this loan he had been required to enter into a sale and purchase Agreement of the suit premises and the arrangement had been that when the loan was repaid the sale and purchase agreement would be cancelled.

16. The loan had been repaid and he had signed a cancellation agreement. He subsequently learnt that the 1st Defendant had not signed the cancellation agreement. Worse than that the sale and purchase Agreement had been registered in the Land Office against the suit premises and the registration had not been vacated.

17. Again there had been no reference to these background circumstances in the affirmation in support of the originating summons.

18. It was not just these inconsistencies which led me to view the Plaintiff's testimony with some suspicion. What was even more important was the inherent improbability of his evidence.

19. He claimed that there was no detailed discussions concerning the steps which would need to be taken to implement the rather unlikely scheme that the 2nd Defendant would simply purchase a replacement flat for the Plaintiff which would meet his needs without the necessity of pricing or costing the different steps.

20. For example how was it proposed that both sales and purchases should be synchronised so that the Plaintiff could just exchange flats. When questions relating to any practical details were put to the Plaintiff he just repeated like a litany that he placed reliance upon the 2nd Defendant and assumed that everything would be sorted out.

21. He was not prepared to condescend to any details as to how any discrepancies in price would be dealt with or what would happen if the 2nd Defendant produced a replacement flat answering the general description required to in the sale and purchase agreement but did not meet his approval.

22. I do not believe that any scheme or arrangement was agreed by the parties along the lines described in either the statement of claim or the Plaintiff's evidence. It seems to me to be very much more likely that it was a straight forward sale and purchase of the suit premises to the 2nd Defendant and that the Plaintiff fabricated the evidence concerning the alleged arrangement for the 2nd Defendant to find a replacement flat for him.

23. There was other evidence which all pointed in this direction. The Plaintiff gave seriously conflicting evidence concerning the time scale over which according to him the deal went sour. In one of his affirmations he claimed that the 2nd Defendant was still attempting to implement the arrangement up to June 1989. Paragraphs 15 & 16 of his witness statement read

"15. Since about June 1989, the 2nd Defendant ceased to accompany any of her clients to visit my flat and I did not hear anything further from her.

16. There was a sharp drop in the value of real property shortly after the June Massacre in the Tienanmun Square in 1989. I tried to find the 2nd Defendant on the question of the sale and purchase of the flat but I was unable to find her. I discovered that the 2nd Defendant has ceased her estate agency business at her address."

24. This evidence was entirely at variance with the evidence he gave in the witness box to the effect that the 2nd Defendant stopped bringing prospective purchasers to the flat in April 1988. This discrepancy was important as the whole sequence of events was dependent upon the timing of the particular parts.

25. Even more important than this was the nature of the explanations given by the Plaintiff. When the 2nd Defendant discovered the registration of the sale and purchase agreement registered by the 1st Defendant she took the matter up with the Plaintiff. He then went to lengths to convince the 2nd Defendant that he had discharged his obligations under the first sale and purchase agreement and that he was in a position to perform his part of the sale and purchase agreement he had with the 2nd Defendant. He went to the length of producing to her a receipt he had obtained from Gary Mak & Co Solicitors which referred to a cancellation agreement of the first sale & purchase agreement.

26. I find this evidence to be rather surprising if all that had been agreed to between the Plaintiff and the 2nd Defendant was that the 2nd Defendant would perform functions in a role as an Estate Agent. Indeed during the course of his cross examination the Plaintiff did give evidence that he realised that he had agreed to sell the suit premises to the 2nd Defendant.

27. The Plaintiff was an extremely poor witness. He simply refused to answer questions which he didn't like and gave rambling explanations of his version of events. He just repeated himself endlessly. Also whenever he was confronted with conflicting evidence in his affirmations or in the witness statement he adopted as his evidence in chief, he claimed that as he didn't understand written English he had no idea what was contained in the documents.

28. In a similar manner he alleged that the 2nd Defendant had altered parts of the sale and purchase agreement in question without obtaining his authority to do so. When asked in cross examination to be specific on the subject he was unable to say more than that any alternation without his signature did not have his authority. His attention was then drawn to a minor amendment which was not initialled and he said that this was not one of the matters he was complaining of. I do not think that the Plaintiff has made out any serious attempt to substantiate this allegation.

29. The 2nd Defendant gave evidence concerning her involvement in the matter. Although she was conducting a business as an Estate Agent in 1988 she was insistent that she had intended to purchase the suit premises for her own use.

30. After inspecting the premises the price had been agreed at $760,000.00. It was also agreed that the pro forma type form she used in her business should be used to record the transaction and that the printed conditions should apply.

31. Originally it was her evidence that the provisional sale and purchase agreement had been signed on the 28th January 1988 and that she had paid a deposit of $10,000 and that there had been no modification of the printed form to delete part of paragraph 1 and the whole of paragraph 2 of the remarks column on the 28th January.

32. It is necessary to refer to the provisional sale and purchase agreement and to the amendments which were made to it.

33. The parties agreed a form of translation which included the deletions referred to in the original and this was exhibited as evidence.

"

BESTWAY REALTY CO.

708B, OPULENT BLDG., 402-406

HENESSY RD., H.K. H757213-6 (4 lines)

TEMPORARY PURCHASE/SALE AGREEMENT No. 0228

Date : 28-1-1988

To Order : Flat C on 31st Floor of Hing Hon Building, Kings Road,

Hong Kong

Completion before the 31st

March 1988 at solicitor's firm

==============================================

Vendor: Name LI AH SHUN H.K. Identity Card No.

H033511(A)

Address Flat C, 31st Floor, Hing Hon

Building, King's Road, Hong Kong

Tel. H784434 (res.)

Purchaser: Name BEATRICE, LEUNG CHEUK SEE

Price: HK$760,000.00 (Seven Hundred and

Sixty Thousand)

Twenty

Deposit: HK$20,000.00 (Ten Thousand) [2 initials]

Terms of Payment:

Purchase Price : HK$760,000

Deposit: HK$20,000 [2 initials]

$56,000 [2 initials]

Down Payment: HK$76,000 (including initial

deposit of HK$20,000) [initial]

Balance of Purchase Price: $684,000 shall be

paid on or before

31st March 1988 at solicitors' office

16th May 1988

on or before 15th May 1988 [2 initials]

1. Down Payment : $76,000

2. Deposit has been paid at the time of signing this

temporary agreement : $20,000 [2 initials]

3. The down payment after deducting the deposit :

$66,000 $56,000 [2 initials]

sale and purchase agreement

4. Procedure for change of name shall take place on

or before :

the 25th day of February 19 88 at ___________

5th day of March [2 initials]

30th April [2 initials]

5. (Notice from developer) proceed to __________

solicitors firm to sign sale and purchase agreement.

[2 initials]

6. Cashier Order a. to pay vendor $66,000 56,000 LI, AH SHUN

(after change of name and

signature)

Cashier Order b. to pay solicitors' firm___/____

Cashier Order c. to pay developer_____/_____

7. If the Vendor has paid deposits for water, electricity and gas, the Purchaser shall repay the Vendor $ according to the bills

REMARKS:1.The owner of the aforesaid property cannot go back on his words and refuse to sell, otherwise he shall compensate the Purchaser double the amount of the deposit $10,000 and to pay Bestway Realty Co. double the amount of its service charges that is ___________.

2.The costs of cancellation agreement shall be borne by the Vendor.

sale and purchase agreement

3. At the time of signing the change of name or the formal sale and purchase agreement, the Purchaser may sign in his capacity as the agent for another person or to nominate another person to purchase the above mentioned property.

4. In the event of the aforesaid payments being made after the time stipulated in the above payment method, the Vendor is entitled to forfeit the deposit paid by the Purchaser whereupon this agreement shall be null and void.

5. Please make ready the identity card and all documents for the purpose of the necessary procedure.

34. At the commencement of the trial and before any evidence was led the 2nd Defendant submitted a supplemental witness statement in which she stated that having considered the original provisional sale and purchase agreement and having reflected further on the matter she was no longer confident that the deletions of part of remark No. 1 and the whole of remark No. 2 had taken place early in February as stated in her original witness statement and in an earlier affirmation.

35. It would appear that one of the matters which brought about this change of mind was the existence of different coloured inks appearing on the original version of the said agreement. Under cross examination she freely accepted that the deletions to remarks 1 and 2 had been effected in black ink whereas the deletions and substitutions which had been made on the 2 subsequent occasions had been done in blue ink.

36. The situation was further complicated by the fact that the Plaintiff had claimed to have lost his original copy of the agreement so that reference could only be made to the 2nd Defendant's original copy.

37. In addition to this an attempt was made to throw further light on the matter by examining the documents which were lodged with the Land Office when the 2nd Defendant registered the provisional sale and purchase agreement. Mr. Chan sought on the last day of the trial to introduce as evidence correspondence exchanged between the 2nd Defendant's then solicitor Kevin L.H. Kwong and the Land Office which he submitted tended to show that the deletions had been present when the agreement had been lodged with the Land Office. After hearing submissions from both counsel, I was not prepared to admit this further evidence. The main reason for this was that were I to allow this evidence to be admitted the Plaintiff would be placed at a disadvantage as his advisors would have an insufficient opportunity of dealing with the evidence in a satisfactory manner.

38. Over and above this I was by no means convinced that even if the additional evidence was admitted it would be possible to come to anything more than a tentative view on the matter. The fairest solution was to consider the evidence which was before me at the commencement of the trial and the evidence of the witnesses. As I have stated previously the Plaintiff was unable to be specific concerning his allegation that unauthorised deletions had been made. The 2nd Defendant was definite in her evidence that no unauthorised amendments had been made to the contract.

39. As the 2nd Defendant accepted that it may well have been the case that the deletions were in fact made on the 28th January 1988 this issue assumed less importance than might otherwise have been the case.

40. It did however constitute a fertile field for cross examination by Mr. Chong for the Plaintiff. Mr. Chong suggested that the deletions of the parts of the remarks section I have referred to did mean that in its amended form the provisional sale and purchase contract appeared to be a very one sided document. Whereas the vendor could not resile from the contract the purchaser could at the cost of a fairly nominal deposit.

41. Mr. Chong put to the 2nd Defendant that numerous Estate Agents required their clients to sign such provisional sale and purchase agreements and by so dealing locked them into transactions at a stated price. The Agents could then find a Purchaser who was prepared to pay more for the property and then on sell it to them while themselves pocketing the difference.

42. The 2nd Defendant agreed that she had heard of such practices being adopted but denied ever having done that herself.

43. Mr. Chong also pressed her in cross examination as to why she had not seen fit to take any action sued herself against the Plaintiff. The explanation which she gave for this was that she was negotiating with the Plaintiff in an endeavour to clear the title of the registration of what she described as being the loan shark agreement that is the 1st Defendant's prior provisional sale and purchase agreement.

44. In any event she had commenced legal action against the Plaintiff in HCA 1396 of 1991 prior to the issue of the originating summons which formed the foundation of the present litigation. It is however accurate state that the progress of HCA 1396 was tardy. This to an extent is explained by the existence of this present litigation.

45. The existence or otherwise of these negotiations is important. If the negotiations were proceeding it would negate any suggestion that the parties had abandoned the contract. It would also provide an explanation for what might otherwise appear to be inactivity on the part of the 2nd Defendant and be consistent with her evidence that she was indeed anxious to perform her obligations under the contract. I have no doubt that negotiations were still being conducted and that the 2nd Defendant was the active party in these discussions.

46. The 2nd Defendant was also cross examined upon her capacity to fulfil her contractual obligations in April 1988. I am satisfied from the material available that she would not have encountered any difficulty in raising the deposit payable on the signing of the formal sale and purchase agreement.

47. While insufficient evidence was forthcoming to demonstrate that she could find the balance payable on completion, I was prepared to accept her evidence that she had been in communication with her Bankers and that she would have had no problem in obtaining a mortgage to fund the purchase.

48. Mr. Thomas Young a former colleague of the 2nd Defendant's gave evidence that he attended with the 2nd Defendant at the suit premises when an inspection was made prior to any commitments being entered into. His function had been to advise the 2nd Defendant on the value of the flat. He claimed to have extensive experience of this. It was his understanding that the object of the exercise was that the 2nd Defendant proposed purchasing the flat for her own purposes. He also attended a meeting when there were discussions between the 2nd Defendant and the Plaintiff. His evidence generally corroborated the 2nd Defendant's.

49. During the course of this judgment I have made a number of comments on the evidence of the witnesses who were before me. Unfortunately I have found it to be necessary to be highly critical of the Plaintiff for the reasons I have given. As I have said his evidence was contradictory on important and material matters. Also his evidence did not logically and coherently come together as a whole and the contemporary documentation is far more supportive of the evidence given by the 2nd Defendant and Mr. Young.

50. On the other hand in all important respects I found the 2nd Defendant to be a truthful and reliable witness. I believed her evidence. I also believed the evidence of Mr. Young in as much as it was of assistance to me. I say this on account to the limited extent of this evidence.

51. At this stage I propose making some findings of fact.

1. I am satisfied that the Plaintiff and the 2nd Defendant did enter into the said provisional sale and purchase agreement and that it was the intention of the parties that the 2nd Defendant would purchase the flat for her own purposes.

2. That the Plaintiff's evidence concerning the arrangement that there should in effect be an exchange of facts was a complete fabrication by the Plaintiff.

3. That there were no unauthorised amendments to the said agreement.

4. That there were protracted negotiations and discussions between the parties concerning the vacating of the 1st Defendant's sale and purchase contract and that it was for this reason that the formal sale and purchase contract was not concluded. I accept the 2nd Defendant's evidence to the effect that she believed that the Plaintiff was genuine when he said that the problem relating to the cancellation agreement would be resolved.

5. I also accept that the 2nd Defendant did continue to press the Plaintiff to fulfil his obligations and that the delay which ensued was in large measure attributable to the default of the Plaintiff.

6. That it was the Plaintiff's realisation over the passage of time of the enhanced value of the suit premises that determined his decision to refuse to accede to the the 2nd Defendant's claims.

7. That the 2nd Defendant was at all material times able and willing to comply with her obligations. I was satisfied with her testimony that she had sufficient financial resources to complete the transaction and would have had no difficulty at the material time in obtaining sufficient mortgage facilities for this purpose.

52. Consistent with these findings of fact I dismiss all of the claims for relief made by the Plaintiff.

53. Under the counterclaim the 2nd Defendant claims specific performance and damages. Mr. Chan accepted that if I was prepared to order specific performance he could not sustain a claim for damages.

54. Specific performance is an equitable relief. Mr. Chong submitted that I should not order it in the present case for the reasons given in the Plaintiff's reply.

"2. If, which is denied, it should be found that the said temporary sale and purchase agreement was, and still is, binding upon the Plaintiff, the Plaintiff avers that it is neither fair nor equitable to specifically enforce the same on the following grounds:-

(i) No action to enforce the said temporary sale and purchase agreement has ever been taken by the 2nd Defendant;

(ii) There has been a lapse of some 4 years since the date of the said temporary sale and purchase agreement before the 2nd Defendant purported to enforce the same;

(iii) There has, since the date of the said temporary sale and purchase agreement, been a material change in the open market value of the said premises;

(iv) Save and expect for the initial deposit of $20,000.00, the 2nd Defendant has never tendered or paid the Plaintiff the balance of the purchase price of the said premises, or any part thereof; and

(v) There is no de facto mutuality of rights in enforcing the said temporary sale and purchase agreement."

55. In my statement of findings I have dealt with all of these matters save 2(iii) and (v).

56. As to the former I do not think that the greatly enhanced value of the suit premises is a good reason why I should not exercise my discretion in favour of the 2nd Defendant. As I have indicated the Plaintiff has been far more culpable on the subject of delay than the 2nd Defendant has. I do not see any reason why the 2nd Defendant should not derive the benefit of the enhanced value of the flat rather than this being obtained by the Plaintiff.

57. On the question of mutuality Mr. Chong referred to the unequal rights under the provisional sale and purchase agreement. If the Purchaser resiled from the agreement the penalty would only be the loss of a comparatively small deposit whereas the vendor would have to complete the sale. At the time of the contract there would not necessarily be a wide disparity. Had the contract been performed within a reasonable period of time it is unlikly that there would be much increase in the value of the flat. It was only as a consequence of the delay which occurred that it would now seem that the the 2nd Defendant is placed in a more advantageous position than the Plaintiff. As I have previously stated the Plaintiff has to bear most of the responsibility for the delay and the observations I have made earlier are pertinent.

58. I do not think the grounds have been made out to justify a refusal to grant the equitable relief of specific performance and I order that there be specific performance of the 2nd provisional sale and purchase agreement.

59. I will hear the parties on the form of the order and on costs.