HEUNG KAM FAI AND OTHERS v. HUGEWIN DEVELOPMENT LTD. AND OTHERS

HCA 3814, A3815, A3816, A3817, A3818 & A3819/1989

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NOS. 3814, 3815, 3816, 3817, 3818 & 3819 OF 1989

(CONSOLIDATED)

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J U D G M E N T

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1. This case has a chequered history. An outline of the dispute between the parties is as follows.

2. The 11th Plaintiff, U Fook Shing Tso (俞福勝祖) ("the Tso"), was the first owner by way of Government Grant of two pieces of land at Yau Yue Wan, Hang Hau, Sai Kung, New Territories, known as Lot Nos. 745 and 746 in D. D. 242. By an agreement in Chinese dated 19 October 1987 ("the Chinese Agreement"), the Tso agreed to sell the two pieces of land to the 1st and 2nd Defendants, Hugewin Development Limited and Simstar Development Limited trading under the name of Chungs Construction Company.

3. The purchase price of the two pieces of land was HK$2,600,000.00 and HK$400,000.00 was paid by the 1st and 2nd Defendants to the Tso as deposits. The 1st and 2nd Defendants were given the right to erect buildings on the land under the Chinese Agreement. After the building works had been completed, the Tso was to apply for a certificate of compliance in respect of the building works, and when the certificate of compliance was issued by the Government authorities, the Tso was to apply to the District Officer for consent for the sale of the land. The sale and purchase was to be completed within 30 days after the memorandum of consent given by the District Officer had been delivered to the 1st and 2nd Defendants.

4. In 1988, the 1st and 2nd Defendants entered into six sub-sale agreements ("the sub-sale agreements") with individual purchasers in respect of the units in the two houses of three storeys each erected on the two pieces of land. These individual purchasers are the 1st to 10th Plaintiffs in this action. The sub-sale agreements were stated to be made with the benefit of the Chinese Agreement and completion of the sale and purchase was to take place within 30 days of the individual purchasers being notified in writing that a certificate of compliance had been issued and the 1st and 2nd Defendants were in a position validly to assign the units to these purchasers. They were drafted by the solicitors subsequently sued as the 3 rd Defendant.

5. On 17 May 1989, letters of compliance were issued by the Sai Kung District Lands Office in respect of the two houses erected by the 1st and 2nd Defendants.

6. Prior to completion of the purchase of their units, the individual purchasers discovered that there were two sale and purchase agreements in English dated 25 May 1989 ("the English Agreements") made between the Tso and the 5th Defendant, Comcewood Development Limited ("Comcewood") in respect of the two pieces of land. The English Agreements were registered in the Land Registry whereas the Chinese Agreement and the sub-sale agreements were not. Six actions were commenced by the individual purchasers in 1989 against, inter alia, the 1st and 2nd Defendants to enforce their rights under the sub-sale agreements. The six actions came on for trial before Mayo J (as he then was) on 22 June 1992. On the first day of trial, the Plaintiffs' claim against the 3rd Defendant for professional negligence was settled and the 3rd Defendant ceased to take part in the proceedings. Several days later, the ten Plaintiffs reached an agreement with the managers of the Tso by which the Tso agreed to sell the two pieces of land to the Plaintiffs in lieu of the 1st and 2nd Defendants in accordance with the terms of the Chinese Agreement. The ten Plaintiffs agreed to pay an additional HK$400,000.00 to the Tso as compensation and the Tso agreed to join in the proceedings as the 11th Plaintiff. On 26 June 1992, the case was part heard and adjourned and Mayo J gave directions for consolidation and amendment of the writ to add the Tso as the 11th Plaintiff, Cheung Kai Yin Danny (a director of the 1st Defendant; "Danny Cheung") as the 4th Defendant, Comcewood as the 5th Defendant and Or Ching Ho (a director of Comcewood; "Or") as the 6th Defendant.

7. The trial of the consolidated action resumed before Mayo J on 8 December 1993. By then, the Statement of Claim had been re-amended to plead that the English Agreements were procured as a result of fraudulent misrepresentations made to the Tso by Danny Cheung. The Tso sought an order for specific performance of the Chinese Agreement against the 1st and 2nd Defendants and the 1st to 10th Plaintiffs sought an order for specific performance of the sub-sale agreements against the 1st and 2nd Defendants. All the Plaintiffs sought a declaration against Comcewood that the English Agreements were obtained by fraud and were null and void and an order that the registration of the English Agreements be vacated from the Land Registry. In addition, they sought damages for conspiracy to injure the Plaintiffs against all the Defendants save for the 3rd Defendant. All the Defendants were absent at the trial before Mayo J in December 1993. After hearing evidence from the Plaintiffs, the Judge ordered that judgment be entered for the Plaintiffs in the following terms:

(1) As for the 1st, 2nd, 3rd, 4th, 5th, 6th, 9th and 10th Plaintiffs, the sum paid into Court by the 1st and 2nd Defendants would be paid out to them with interest accrued.

(2) As for the 7th and 8th Plaintiffs, the deposits in the sum of HK$115,000.00 were to be refunded to them with interest.

(3) As for the 11th Plaintiff (i.e. the Tso), HK$400,000.00 under the Chinese Agreement was to be forfeited and a declaration was made that the English Agreements were obtained by fraud and were null and void and of no effect and liable to be set aside. The Judge also ordered that the registration of the English Agreements was to be vacated from the District Lands Office, Sai Kung.

8. After judgment was pronounced for the Plaintiffs, the Tso sought consent from the District Officer on 3 January 1994 to assign the units in the two houses to the 1st to 10th Plaintiffs. Consent was granted on 29 March 1994. In July 1994, the Tso executed various assignments of the units in the two houses in favour of these Plaintiffs.

9. In February 1996, Comcewood took out an application to set aside the judgement of Mayo J in December 1993 pronounced in its absence. On 2 May 1996, Mayo J ordered that those parts of the judgement entered on 8 December 1993 against Comcewood were to be set aside and that Comcewood was to be at liberty to file its Defence and Counterclaim, which was done on 12 June 1996. Thereafter, the action was revived by Comcewood against the Plaintiffs.

10. The action came on for trial before Deputy High Court Judge Z. E. Li on 21 June 1999. The trial was aborted due to the late discovery of documents by Comcewood. The Judge gave directions for the amendment of pleadings as a result of the further discovery and ordered that the costs thrown away by the adjournment be paid by Comcewood to the Plaintiffs.

11. A week before the commencement of this trial before me, I gave leave to Comcewood to re-amend its defence and leave to the 4th and 11th Plaintiffs to amend their Reply and Defence to Counterclaim consequentially. Comcewood amended its defence once again in the course of the trial to particularise its claim for damages against the Tso. I also made an order that Comcewood be restored to the register kept by the Registrar of Companies on the personal undertaking given by one of its directors to file with the Companies Registry all annual returns that have not been filed.

12. The main protagonists in the trial before me are the Tso (represented by Miss Jennifer Tsang) and Comcewood (represented by Mr Kevin Wong and Mr Raymond Lau). Miss Tsang also appeared for one of the individual purchasers, the 4th Plaintiff. All the other Plaintiffs acted in person. None of the other Defendants took any part in this trial.

The Tso's case as pleaded and relief sought

13. As mentioned earlier, the Tso's case against Comcewood is based on fraudulent misrepresentations and conspiracy to injure the Plaintiffs by fraud. The Statement of Claim was amended subsequently to raise a plea of non est factum. In so far as misrepresentation and non est factum are concerned, it is alleged that the managers of the Tso, Yu Koon Kau, Yu Kwai and Yu Cho Sing, who could not read English, were led to believe by Danny Cheung that the English Agreements executed by them were translations of the Chinese Agreement. At all material times, they did not know that the Tso was to sell the two pieces of land to Comcewood under the English Agreements. Further, contrary to what was stated in the English Agreements, they were not signed by the managers at the office of the 3rd Defendant, nor did the 3rd Defendant's clerk, Mo Kar Chai Johnny ("Johnny Mo") witness the managers' signatures. Instead, the English Agreements were signed by the managers at the house of Yu Cho Sing. Further, contrary to what was stated in the English Agreements, the Tso did not receive any deposit from Comcewood in the sum of HK$400,000.00 or at all.

14. It is also alleged that at the time when the managers signed the English Agreements on 25 May 1989, they were tricked by Danny Cheung into signing their names on two application forms to the District Lands Office for consent for the sale of the two pieces of land under the belief that the application was to facilitate the sale of the properties to the 1st and 2nd Defendants under the Chinese Agreement.

15. It is pleaded that the fraudulent misrepresentations were made by Danny Cheung on his own behalf and on behalf of all the other Defendants except for the 3rd Defendant.

16. As for the conspiracy claim, it is alleged that the aforesaid misrepresentations of Danny Cheung were made pursuant to a conspiracy entered into by all the Defendants except for the 3rd Defendant, Johnny Mo and other persons unknown to the Plaintiffs. The conspiracy was to induce the Tso to enter into the English Agreements with the intent that the Plaintiffs would lose the benefit of the Chinese Agreement and the sub-sale agreements and that the units in the two houses could be sold to others at a greater profit to take advantage of the rising property market. For the overt acts of the conspiracy, the Tso relies on inferences to be drawn. The Tso did not appear to gain any benefit under the English Agreements because the purchase price under these agreements was HK$2,600,000.00, the same as the purchase price under the Chinese Agreement. It is alleged that the 1st and 2nd Defendants must have been parties to the conspiracy because these companies had never protested to the Tso about the English Agreements nor had they asked the Tso to proceed with the Chinese Agreement or demand a return of the deposit under the Chinese Agreement. It is alleged that Comcewood must have been a party to the conspiracy because its director, Or, signed the English Agreements which contained false statements in that no deposit was paid by Comcewood to the Tso.

17. The Tso seeks rescission of the English Agreements and a declaration that they were null and void. There is also a claim for damages for conspiracy being the loss of interest on the unpaid balance of the purchase price under the Chinese Agreement, i.e. HK$2,200,000.00 from mid 1989 (when the transaction under the Chinese Agreement should have been completed) to mid 1994 (when the Tso actually assigned the units in the two houses to the 1st to 10th Plaintiffs). The Tso is willing to give credit for the partial compensation it had received from the 1st to 10th Plaintiffs in the sum of HK$827,000.00 being the increase in the purchase price at which the units in the two houses were sold directly by the Tso to these individual purchasers in mid 1994.

Comcewood's case as pleaded and the relief sought

18. Comcewood's case is that it had no knowledge at all material times of the Chinese Agreement. It is pleaded that Danny Cheung, who was operating as an estate agent under the name of Honest Properties, had introduced Or and Shing Man Lung ("Shing") to the two pieces of land. At some stage, Or and Shing decided to acquire Comcewood and use it to purchase the properties. A provisional agreement dated 19 May 1989 was signed for each piece of land. It is pleaded that the provisional agreements were signed by Or and Shing as purchasers as they had not acquired Comcewood at that time. These were followed by the English Agreements in which Comcewood had replaced Or and Shing as the purchaser with the consent of the Tso. A deposit of HK$50,000.00 was paid to Danny Cheung on the signing of the provisional agreements and he had acknowledged receipt of this deposit on behalf of the Tso. A total sum of HK$400,000.00 was paid by Comcewood to the Tso as deposits when the English Agreements were signed. The English Agreements were executed in the office of the 3rd Defendant and Johnny Mo had witnessed the execution by the managers and by Or on behalf of Comcewood.

19. Subsequence to the English Agreements, the Tso had preformed various acts to carry out its obligation under these agreements. The Tso had instructed a firm of solicitors, Messrs Patrick Chung & Co. to apply to the District Officer for consent to sell to Comcewood and for that purpose, various documents signed by the managers were submitted to the District Lands Office by the said solicitors on behalf of the managers including the two application forms for sale dated 16 June 1989 and the minutes of the meeting of the members of the Tso. It is alleged that the Tso had wrongfully failed to complete the sale under the English Agreements.

20. Comcewood no longer pursues a claim for specific performance of the English Agreements. Instead, it seeks the return of the deposits paid under the English Agreements in the sum of HK$400,000.00 and it claims damages against the Tso being the difference between the contract price under the English Agreements and the market value when completion should have taken place, which would be in or about December 1993 when the Tso entered into various agreements for sale and purchase with the 1st to 10th Plaintiffs shortly after judgment was pronounced for the Plaintiffs by Mayo J.

21. As against the 1st to 10th Plaintiffs, although it is pleaded that Comcewood seeks a declaration against these Plaintiffs that they hold the properties subject to the interest of and/or on trust for Comcewood and an order that these Plaintiffs do assign their interests to Comcewood, it would appear that Comcewood has in effect abandoned this claim against the individual purchasers at the trial. This is probably because the individual purchasers were bona fide purchasers without notice of Comcewood's interest as the properties were assigned to these purchasers after judgment was given by Mayo J and it was ordered that the registration of the English Agreements was to be vacated from the District Lands Office. Further, out of the six units in the two houses, five units had since been sold to others. It would not be open to Comcewood to seek the reliefs claimed against the individual purchasers due to intervening third party rights.

The case of the 1st to 10th Plaintiffs as pleaded and the relief sought

22. The 1st to 10th Plaintiffs rely on the Re-amended Statement of Claim which was filed in December 1993 shortly before the trial before Mayo J, when the 1st-10th Plaintiffs and the Tso were represented by the same solicitors. The individual purchasers allege a conspiracy of all the Defendants save for the 3rd Defendant to deprive them of the benefit of the sub-sale agreements and the Chinese Agreement. Their case in conspiracy is the same as that of the Tso.

23. The 1st to 10th Plaintiffs claim damages against Comcewood for conspiracy to injure the Plaintiffs. They claim that they have suffered loss and damage due to the delay in completion of the transaction under the sub-sale agreements, which eventually took place only in July 1994 after the judgment of Mayo J and after the Tso had obtained consent from the District Officer to the sale. The heads of their loss and damage include additional stamp duty paid in 1994, the cost of repairs to the properties which were left vacant over a 5-year period, rental for alternative accommodation during this period, and fees paid to the estate agent.

The issues

24. The issues raised on the pleadings which I have to decide may be summarized as follows:

(1) where the English Agreements were entered into by the Tso as a result of fraudulent misrepresentations made by Danny Cheung;

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

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

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

25. If liability is established as a result of the determination on one or more of the above issues, I would need to consider the quantum of damages.

The witnesses

26. The Tso only called the surviving manager Yu Cho Sing to give evidence. The other managers Yu Koon Kau and Yu Kwai had passed away in 1994 and 1995 representatively. The Tso also relies on the witness statement of Yu Koon Kau dated 4 December 1993 and his oral testimony at the trial before Mayo J on 22 June 1992 and 8 December 1993.

27. As for the individual purchasers of the six units in the two houses, the purchasers of five of the units gave evidence of the loss and damage sufferred by them due to delay in completion. They were Heung Kam Fai (the 1st Plaintiff), Ting Lai Ping Bonny (the 3rd Plaintiff), Heung Moon Chiu (the 4th Plaintiff), Ting Lai Ming (the 6th Plaintiff) and Ho Kim Ning Agatha (the 10th Plaintiff).

28. Comcewood called its director Shing to give evidence as well as Johnny Mo. The other director, Or, who had executed the English Agreements on behalf of Comcewood as well as the two provisional agreements, was not called as a witness.

29. Danny Cheung and Chung Kan Wah (who represented the 2nd Defendant) were not called as witnesses, nor had they given any witness statement. Other than Johnny Mo, no staff or solicitor from the 3rd Defendant was called. No one from Messrs Patrick Chung & Co. (the firm of solicitors allegedly engaged by the Tso to apply for consent from the District Officer to sell to Comcewood) was called. Nobody from the District Lands Office who had processed the Tso's application for consent to sell the two pieces of land was called to give evidence. However, the documents and correspondence kept by the Sai Kung District Office in respect of the Tso's application were produced in the Agreed Bundle as well as a letter from the District Office describing the procedures they adopted in processing an application for the sale of Tso or Tong property at the relevant time in 1989.

The evidence of Yu Cho Sing

30. Yu Cho Sing is the principal witness for the Plaintiffs. He is 65 years old. Although he does not understand English and can only read Chinese characters slowly because he had not received any formal education, I found him to be alert and shrewd. He had no problem in understanding the questions put to him by his counsel and had responded to those questions in an appropriate manner. He only had difficulty in answering questions and started to give contradictory answers in his cross-examination and re-examination. At one stage, his counsel Miss Tsang informed me that he had pain in his chest due to heart problem but he did not wish to say he was unwell and he thought he could carry on with his evidence. Nevertheless, an adjournment was sought in the late afternoon of 6 April 2000 when Mr Wong indicated that he had finished his cross-examination of this witness as Miss Tsang felt that it would not be appropriate to start her re-examination given his condition. I granted the adjournment. In the end, after reviewing his evidence, I do not think the inherent inconsistencies in Mr Yu's evidence could be explained by his being "unwell".

31. His evidence in chief may be summarized as follows.

32. In about 1987, the members of the Tso had decided in a meeting to sell the two pieces of land as well as an adjoining lot being Lot No. 744. The sale of Lot No. 744 was to a Miss Chan and the transaction went through smoothly. Miss Chan arranged for a firm of solicitors, Messrs Lo, Wong and Tsui, to be instructed and these solicitors attended to the application to the District Officer for consent to sell Lot No. 744 on behalf of the managers.

33. As for the two pieces of land in question, Chung Kan Wah, a director of the 2nd Defendant and a fellow villager, had approached the Tso and Mr Chung introduced the managers to Danny Cheung who represented the 1st Defendant. The Chinese Agreement was signed in October 1987 and the deposit thereunder was paid to the managers.

34. As for the circumstances in which the English Agreements were signed, Mr Yu said that in the evening of 25 May 1989 (a date which he could recall with no difficulty but could not explain satisfactorily how he was able to recall this date when he could not recall quite a number of things as I shall deal with later), the other two managers went to his home with Danny Cheung. Danny Cheung told the managers that the transaction under the Chinese Agreement was to be completed that evening and asked the managers to sign documents in English. When the managers asked him what were the English documents as they could not read English, Danny Cheung told them to trust him as he and Chung Kan Wah were old friends and the managers should trust him in the same way as Mr Chung. He explained to them that the documents in English were the translations of the Chinese Agreement and they were requested to sign the English Agreements because English was the official language. The managers signed in the belief that the English Agreements were for the sale of the two pieces of land to the 1st and 2nd Defendants. According to Mr Yu, the Chinese name of Comcewood was not inserted in the space in brackets after its name in English when they executed the English Agreements, nor did the company chop of Comcewood, with its name in English and Chinese, appear on the relevant pages of the English Agreements for signatures. Johnny Mo did not witness the managers' signatures nor did they receive any deposit from Comcewood, contrary to the receipt clauses which they signed. On that occasion, the managers also signed two application forms to the District Lands Office for consent to sell the two pieces of land. The Chinese name of Comcewood was not written on the two forms when they signed and they did so in the belief that the application was for consent to sell the properties to the 1st and 2nd Defendants. The managers first discovered they had executed documents to sell the properties to Comcewood in or about 1989 when the individual purchasers came to the village to make inquiries and informed them of the English Agreements.

35. I find Mr Yu's evidence unsatisfactory and I am not able to accept what he said as to the circumstances in which the English Agreements were signed and the alleged fraudulent misrepresentation made by Danny Cheung. I bear in mind that cogent evidence is required to establish a case of fraudulent misrepresentation. Mr Yu's evidence failed to meet that standard. I am mindful of the fact that Mr Yu's evidence in chief tallied with Yu Koon Kau's statement and oral testimony at the trial before Mayo J where the Defendants were absent. However, Yu Koon Kau's evidence was not tested in cross-examination and I attach little weight to it. I set out the major aspects in which I regard Mr Yu's evidence as unsatisfactory and that was why I reject his testimony:

(1) Mr Yu mentioned that the managers did not engage Messrs Patrick Chung & Co. at any time to apply to the District Officer for consent to sell the properties to Comcewood. The parties have obtained from the Sai Kung District Office all the relevant documents and correspondence in relation to the application for consent to sell to Comcewood. In addition, I have a letter from the District Officer listing out the documents that would be required to process such an application in 1989. These documents could only have been provided by the managers to the solicitors for the latter to send to the District Officer as many of these documents required the signatures of the managers. They included copies of the Hong Kong Identity Cards of the managers, the minutes of meeting of members of the Tso authorising the sale, a list of members of the Tso, the written consent signed by the beneficiaries agreeing to the sale of the property at the price stated and the application form for consent to sell the Tso property. There was no or no satisfactory explanation from Mr Yu as to why and how the District Office had come to be provided with these documents in an application made by Messrs Patrick Chung & Co. on behalf of the managers for sale of the properties to Comcewood.

(2) According to the letter of the District Office to Comcewood's solicitors dated 9 December 1999, after the requisite documents were submitted, the managers would be interviewed by the District Officer regarding the documents. Mr Yu's evidence regarding the interview by the District Officer was most evasive. At first, he said he was interviewed by the District Officer in relation to the application for consent to sell the two pieces of land and this was at the same when the managers applied for consent to sell Lot No. 744 to Miss Chan. Later, he denied he was ever interviewed by the District Officer regarding the proposed sale of the two pieces of land and stated that he was only interviewed in respect of the sale of Lot No. 744. I find that difficult to believe. According to the letter of the District Office, the managers would be interviewed about the documents they submitted and only if the District Office had made satisfactory inquiries as a result of the interview would a public notice be posted giving notice of the proposed sale to the purchaser named in the notice and stating that any objection to the proposed sale should be made to the District Office within a month of the public notice. Two public notices dated 12 September 1989 were posted up by the Sai Kung District Office naming Comcewood as the intended purchaser for the two pieces of land. It is improbable that the public notices would have been posted up without the managers having been interviewed about the proposed sale to Comcewood.

(3) Mr Yu was asked about the list of members of the Tso that had been submitted to the District Office. At first, the list submitted consisted of five members with a family tree showing the relationship of the five members signed by the managers. In respect of some of the fongs in the family tree, it was stated that there was no offspring. Later, a list of members of the Tso consisting of eleven names was submitted together with a new family tree showing how the eleven members were related. Some of them were said to be descendants of the fongs which had been represented by the managers as having no offsprings in the first family tree with five surviving members. I am satisfied that Mr Yu knew what it meant by the words "no offspring" in the first family tree that the managers had provided to the District Office. His explanation under cross-examination that some of the fongs were described as having no descendants merely meant there was no one from those fongs to represent them in matters concerning the Tso is not a truthful explanation.

(4) Mr Yu was asked why the lists of members of the Tso were submitted to the District Office in re-examination. He said that had nothing to do with the intended sale of the Tso properties. The lists were submitted in connection with the removal of the villagers of Yau Yue Wan to a new village and the list of members was required by the Government to establish the villagers' entitlement to be allocated a village house. When Mr Yu was reminded by his counsel that the list of members was actually attached to the public notices issued by the District Office in September 1989 giving notice of the proposed sale to Comcewood, he changed his evidence and said he could not remember the circumstances under which the list of members of the Tso was provided. He even stated that he had only signed a list of members consisting of five names and suggested that someone had added six names to the list which he had signed. That seems to me to be patently false because the signatures of the managers on the list with five names and the list with eleven names are quite different, just by looking at the two documents.

(5) At one point in his re-examination, Mr Yu stated that the written consent given by the members of the Tso to sell the two pieces of land had nothing to do with the proposed sale of the properties. It was only when his counsel drew his attention that it was expressly stated on each of the written consent that the property was to be sold at a stated price that Mr Yu reluctantly agreed that the members of the Tso had signed written consent agreeing to the sale of the two pieces of land.

(6) There is also the "cancellation agreement" in Chinese dated 25 May 1989. According to Mr Yu, the managers were tricked by Danny Cheung into signing their names on a blank piece of paper about ten odd days before 25 May 1989. Danny Cheung had asked them to meet him at the Sai Kung District Office and he told them to write their names on a blank paper for him to verify the members of the Tso. It is suggested that the blank paper was later written up as a cancellation agreement between the Tso, the 1st and 2nd Defendants whereby the parties agreed to cancel the Chinese Agreement and the managers thereupon returned the deposit of HK$400,000.00 to the 1st and 2nd Defendants. I reject Mr Yu's evidence on this. The place where the managers signed their names was about two-thirds down the page. The agreement was neatly written out. The managers' signatures were followed by those who signed on behalf of the 1st and 2nd Defendants and the signature of the attesting witness. At the end of this one-page document, there was a receipt clause and a date. It would be very difficult for anyone to pin-point the exact position on a blank piece of paper in which the managers were to sign their names and then write out the contents of the agreement in such a manner so that the managers' signatures would fit snugly in the right position. Further, since Danny Cheung already knew the names of the managers, there was no reason why he should ask each of them to write out their names in order to verify the members of the Tso. There was also no reason why one of the managers could not have written out the names of all three to give to Danny Cheung instead of each of the managers writing out his name in turn.

36. For the above reasons, I reject Mr Yu's evidence that the managers were induced to sign the English Agreements by the fraudulent misrepresentation of Danny Cheung. Likewise, the plea of non est factum must also fail because I do not accept Mr Yu's evidence that the managers had signed the English Agreements in the belief that they were the translations of the Chinese Agreement. As Mr Yu is the Tso's principal witness and as I have rejected his evidence on fraudulent misrepresentation, it follows that I must reject the Tso's claim against Comcewood for fraudulent misrepresentation and damages for conspiracy.

37. I turn to consider Comcewood's claim against the Tso and the evidence adduced in support of that claim, being the evidence of Shing and Johnny Mo.

The evidence of Shing and Johnny Mo

38. Even though I have rejected Mr Yu's evidence as to how the managers had come to sign the English Agreements, Comcewood would still need to establish that the English Agreements were executed by the parties in a proper manner and that there was nothing in the way the agreements were executed that may give rise to doubts that the agreements were a sham.

39. As I have mentioned earlier, the 6th Defendant Or, who is one of the two directors of Comcewood, did not give evidence. Or had signed the two provisional agreements dated 19 May 1989 and the English Agreements on behalf of Comcewood and it is alleged that the deposits under the English Agreements were handed over by Or to Danny Cheung to be paid to the managers. According to Shing, Or was engaged in a fung shui business and had to travel to the mainland at the time of the trial, hence his inability to attend court to give evidence. I find this a rather lame excuse, bearing in mind that the trial dates were fixed well in advance. It does not seem to me there was any compelling reason why Or could not have attended the trial if he had really wanted to do so.

40. I find the evidence adduced by Comcewood unsatisfactory in a number of respects. I will deal with the two provisional agreements dated 19 May 1989 first.

41. There are a number of odd features about these two provisional agreements:

(1) According to the witness statement of Or dated 17 April 1998, Or and Shing had lost their copies of the provisional agreements. In their witness statements and in the Defence of Comcewood (which has not been amended in this respect), it is stated that the two provisional agreements were signed by Or and Shing in their individual capacities and it is pleaded that after the provisional agreements were signed and with the consent of the Tso, Comcewood replaced Or and Shing as the purchaser. Copies of the provisional agreements were only disclosed by Comcewood in July 1999, after the aborted trial in June 1999. The purchaser in each of the provisional agreements was stated to be Comcewood and contrary to Or's witness statement and the Defence, they bore the rubber stamp of Comcewood and were executed by Or on behalf of Comcewood. There is no explanation from Shing as regard the different version in the Defence and Or's witness statement, which was confirmed by Shing in his witness statement. What is more, a receipt dated 19 May 1989 for the payment of the deposit under the provisional agreements was disclosed in Comcewood's List of Documents in September 1997 and the receipt was issued to Or and Shing, who were not the purchasers as stated in the provisional agreements.

(2) In each of the provisional agreements, there is a provision stating that a preliminary deposit of HK$50,000.00 was paid to the vendor and the vendor thereby acknowledged receipt of this deposit. This provision was signed by someone (whose identity was not made known to me) to acknowledge receipt of the preliminary deposit. On the face of the documents, a total of HK$100,000.00 would have been received on behalf of the Tso. However, according to Shing's evidence, he and Or had only paid HK$50,000.00 as preliminary deposit because they did not have enough money at the time and Danny Cheung had told them that they could pay the balance later when they signed the English Agreements. Assuming that Danny Cheung was willing to accept only a total of HK$50,000.00 as preliminary deposit on behalf of the Tso, there is no reason why the receipt clause in the provisional agreements should have stated otherwise. Moreover, Shing had even suggested in his evidence that Danny Cheung might have paid the shortfall of HK$50,000.00 to the managers on behalf of Comcewood. I find that suggestion incredible, given that Danny Cheung was a total stranger to Shing and Or before Danny Cheung had introduced them to purchase the properties according to Shing's evidence.

(3) The provisional agreements bore the rubber stamp of Comcewood. According to Shing's evidence in chief, before the provisional agreements were signed on 19 May 1989, he and Or had accepted Danny Cheung's suggestion to acquire a company to purchase the properties. Accordingly, Danny Cheung telephoned the 3rd Defendant who provided a list of company names for them to choose and the name of Comcewood was chosen. This is different from Or's witness statement which is to the effect that the decision and steps to acquire a company for such purpose were only taken after the provisional agreements. When it was pointed out to Shing that he and Or only consented to act as directors of Comcewood as from 25 May 1989, he stated that he could not recall whether he had signed the consent on 19 May 1989 or 25 May 1989, nor could he recall if he had signed the consent in the office of the 3rd Defendant or the office of Danny Cheung. He also stated that the rubber stamp of Comcewood was not affixed to the provisional agreements when Or signed them. There is no evidence as to when the rubber stamp was affixed if it was not done at the time when the provisional agreements were executed.

42. Likewise, there are a number of peculiar and unsatisfactory features about the signing of the English Agreements:

(1) In each of the receipt clauses, it is provided that a total of HK$200,000.00 was received as deposit. According to Shing, only HK$50,000.00 was paid as preliminary deposit on signing the provisional agreements, leaving a balance of HK$350,000.00 to be paid as deposit. On the day when the English Agreements were signed, he handed over HK$220,000.00 in cash to Or as his contribution to the deposit. Shing left the office of the 3rd Defendant leaving it to Or to sign the English Agreements and to pay the deposit. He was informed by Or subsequently that the balance of the deposit was handed over by Or to Danny Cheung. However, according to the evidence of Johnny Mo (which I shall deal with below), he only saw HK$300,000.00 being handed over by Danny Cheung to the managers when the managers came to the 3rd Defendant's office to sign the English Agreements after Or had signed and left.

(2) In his evidence in chief, Johnny Mo said he did not verify with the managers from whom they had received the deposit. This is different from his witness statement in which he stated that before he directed the managers to sign the receipt clause, they had told him that they had already received that the deposit of HK$400,000.00 from Danny Cheung. Johnny Mo gave yet another version in cross-examination and stated that he actually saw Danny Cheung handing over HK$300,000.00 in cash to the managers and that he had even counted the bank notes. Such a serious conflict on an important matter could not be put down to inadvertence or mere lapse of memory.

(3) Johnny Mo's evidence on the processing of the documents for Or and Shing to acquire Comcewood is equally evasive. Initially, he stated that the 3rd Defendant had received instructions that Or and Shing would like to acquire a company to purchase a property about two or three days before 25 May 1989 and it was only on 25 May 1989 that he provided the company kit of Comcewood to Or and Shing and asked them to complete the documents to become directors. It was after that was done that he dealt with the execution of the English Agreements by Comcewood. In cross-examination, he changed his evidence and said that Or and Shing had signed the documents relating to the acquisition of Comcewood several days before 25 May 1989 when the company kit was also given to them. Later, he shifted the responsibility of attending to the formalities to acquire Comcewood to his colleagues working in the 3rd Defendant's office. When he was asked why the consent to become directors was to be effective from 25 May 1989 if the documents had been signed before that date, he could not give a satisfactory explanation.

43. There are other unsatisfactory aspects about the evidence of Shing and Johnny Mo:

(1) According to Shing, the properties were purchased by him and Or to be used as their residence. Shing's house in Hang Hau and Or's residence in Lok Fu were about to be demolished at the time when the English Agreements were signed. Despite the demolition of their homes and the substantial rise in property prices, they took no active steps to call for completion under the English Agreements. The only action taken by them was to chase up Danny Cheung and Johnny Mo from time to time regarding completion and they did not query the reply allegedly given to them that completion had to be delayed because there was litigation about the properties and that the dispute was concerned with members of the Tso. It was only five years later, i.e. in January 1994, when Or and Shing learned about the managers' application to the District Officer for consent to sell the properties in question to the individual purchasers that Or and Shing decided to engage their present solicitors to replace the 3rd Defendant and to seek to assert Comcewood's rights under the English Agreements. There was not even any attempt on the part of Comcewood or its directors to ask for a return of the deposit during the 5-year period when their homes were demolished and property prices were on the rise. I find this inexplicable.

(2) Johnny Mo was evasive about his knowledge of Danny Cheung. In his evidence, he stated that he first knew Danny Cheung in 1988 or 1989. However, in his witness statement, he stated that he had known Danny Cheung since 1984. When he was asked about the discrepancy, he sought to explain that although they were acquainted since 1984, they did not become familiar. He was asked whether he knew Danny Cheung was a director of the 1st Defendant and he said he only came to learn about this when the provisional agreements were faxed to the 3rd Defendant's office and his colleagues told him at that time Danny Cheung was the 1st Defendant's director. When it was pointed out to him that the 1st Defendant had apparently nothing to do with the provisional agreements, he altered his evidence to say that he could not remember when he was told by his colleagues that Danny Cheung was the 1st Defendant's director.

44. On the evidence adduced by Comcewood, I am not satisfied on the balance of probabilities that the English Agreements were properly executed, that the deposits had been paid by Comcewood to the managers, and that there was nothing to suggest that the English Agreements were a sham. That being the conclusion I have reached, I must dismiss Comcewood's counterclaim against the Tso for the return of the deposits under the English Agreements and for damages for the alleged breach by the Tso of the English Agreements.

The claims of the individual purchasers

45. That leaves the claims of the 1st to 10th Plaintiffs against Comcewood for loss and damage suffered by the individual purchasers due to the delay in completion of the sale and purchase under the sub-sale agreements. As stated earlier, the claims of these Plaintiffs are founded in conspiracy of the Defendants (save for the 3rd Defendant) to injure these Plaintiffs by inducing the Tso to enter into the English Agreements and thereby depriving them of the benefit of the Chinese Agreement and the sub-sale agreements. The conspiracy claim is based on the alleged fraudulent misrepresentation made by Danny Cheung to the managers. The individual Plaintiffs have not advanced any separate case to substantiate their claim in conspiracy or adduced any evidence of their own save as to quantum. As I have rejected Mr Yu's evidence and with it the Tso's claim in conspiracy, it follows that the claims of the 1st to 10th Plaintiffs against Comcewood must also fail. In any event, the allegation against Comcewood that it was a party to the alleged conspiracy would appear to rest on inferences as I have stated earlier. I have not heard any evidence from Danny Cheung or from Or, and it was against Or that it was alleged he had signed the English Agreements on behalf of Comcewood when he knew or must have known that the English Agreements contained false statements. I am not satisfied that the available evidence is sufficiently cogent to establish that Comcewood was implicated as a party to the alleged conspiracy to deprive the individual purchasers of their benefit under the Chinese Agreement and the sub-sale agreements. Although there were suspicions regarding the payment of the deposit, I do not think that can be treated as positive proof to substantiate such a serious allegation of conspiracy involving Comcewood.

46. It is with some regret that I reach this conclusion. The individual purchasers are clearly the innocent parties in these transactions, the entire truth of which has not been made known to the court on the available evidence. Although the individual purchasers did manage to obtain assignments of their properties directly from the managers after the judgment of Mayo J, as part of their settlement agreement with the Tso, they had to pay an additional sum to the Tso to compensate the latter for the loss of interest on the unpaid balance of the purchase price over the 5-year period when the matter was litigated. Further, the individual purchasers had suffered other items of loss and damage for which they have not been compensated. These included additional stamp duty paid when they took the assignments in 1994, the expenses they had incurred for necessary repairs to make the premises habitable as the properties were left vacant over a 5-year period, and the rentals they had paid for alternative accommodation whilst waiting for the litigation to be resolved. As I have dismissed their claims against Comcewood, they would not be able to recover their losses against Comcewood. Even if they were able to obtain a judgment against Comcewood, it is doubtful whether Comcewood would be in a position to satisfy the judgment debts as it would appear to have no assets and was acquired solely for the purpose of being used as a vehicle to purchase the properties in question.

Conclusion

47. I do not propose to deal with the question of the quantum of damages as I have found against the Tso, the 1st to 10th Plaintiffs and Comcewood on their respective claims against one another.

48. I dismiss the Tso's claim against Comcewood and order that judgment be entered for Comcewood on the Tso's claim. I dismiss the claims of the 1st to 10th Plaintiffs against Comcewood and order that judgment be entered for Comcewood on their claims. I dismiss Comcewood's counterclaim against the Tso and the 1st to 10th Plaintiffs and order that judgment be entered for the Tso and the 1st to 10th Plaintiffs on the counterclaim.

49. As the parties have failed in their respective claims against each other, I think it would be appropriate that each should bear his own costs. I make an order nisi that there be no order as to costs on the claims and the counterclaim.