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HCA 490/2011
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
ACTION NO 490 OF 2011
________________________
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BETWEEN
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TAM KING HANG |
Plaintiff |
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and
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YUEN LEI GWUN |
Defendant |
| _________________________ |
| Before: Deputy High Court Judge B Chu in Court |
| Date of Hearing: 14 – 16 January 2014 |
| Date of Judgment: 16 April 2014 |
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J U D G M E N T
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Introduction
1. The plaintiff’s claims against the defendant arose out of the alleged breaches of an agreement relating to the sale and purchase of two properties, one on the 1st floor and the other on the 2nd floor of a 3 storey village house in Ma Wan, New Territories (“Building”).
2. The Building is situated on Lot 642, and at No 101, Ma Wan Main Street Village South, 馬灣大街村南.
3. The Building consists of a total of 3 floors/properties, the ground floor (“Ground Property”), the 1st floor including a balcony (“1st Property”) and the 2nd floor including a balcony and the roof above (“2nd Property”).
4. The dispute over the 3 properties in the Building has resulted in a total of 6 actions in the High Court, including the present one before this court.
Background
5. The defendant Yuen Lei Gwun 袁麗君 (“D”) is married to one Leung Hop Fook 梁合福 (“Leung”).
6. Leung’s grandfather, Leung Yan Hing (“Grandfather”), an indigenous resident of Ma Wan, was the sole legal and beneficial owner of a piece of land in Ma Wan and previously registered in the Land Registry as Ma Wan Lot 120 together with the messuage erections and buildings thereon (“Lot 120”).
7. Grandfather died intestate and Leung’s father then became the sole beneficiary of Grandfather’s estate including Lot 120.
8. Leung’s father later died on 25 April 1974 without administering the Grandfather’s estate, and leaving two children, namely Leung and his sister Leung Kan (“Sister”).
9. In about 1993, the Sun Hung Kai group started to acquire land in Ma Wan from the indigenous owners for the purpose of redeveloping the area and was offering in exchange for the old lots newly built 3 storey village house on new lots. It would appear that on about 25 March 1993, a deed was executed by Leung and Sister (“Deed of Family Arrangement”)[1] whereby it was agreed that, among other things, as follows:
(i) Leung was to apply to the District Lands Officer or District Office for succession to Grandfather’s estate, including Lot 120 which was to be transferred to his name;
(ii) Leung was to hold Lot 120 and the ensuing entitlement to a new 3-storey village house in trust as follows:
(a) The ground floor of the new house for Leung himself;
(b) The 1st floor of the new house for Leung and Sister as tenants-in-common in equal shares;
(c) The 2nd floor of the new house for Sister solely.
10. Pursuant to the Deed of Family Arrangement, Leung obtained succession to Lot 120 and entered into an exchange agreement with a subsidiary company of the Sun Hung Kai group (“Exchange Agreement”).
11. The effect of the Exchange Agreement was that Lot 120 was to be exchanged for the grant of a new lot (later known as Lot 642) together with a new 3 storey village house (later the Building).
12. Some years thereafter, by a Deed of Gift dated 29 August 2001, Leung assigned Lot 120 to his wife D (“Deed of Gift”)[2].
13. Leung later entered into an agreement with D dated 8 June 2006 (“Transfer Agreement”) under which Leung agreed to transfer the new Lot 642 to D, in order for Lot 120 to be transferred back to Leung to facilitate the new grant of Lot 642 to Leung under the Exchange Agreement[3].
14. Pursuant to the Transfer Agreement, D assigned Lot 120 back to Leung by an assignment dated 8 June 2006[4].
15. Shortly thereafter on 2 July 2006, Sister died and her son Lam Chi Ming 林智明 (“Lam”) was appointed the sole executor of her estate.
16. On 16 August, 2007, the New Grant of Lot 642 was duly issued in favour of Leung together with the Building thereon pursuant to the Exchange Agreement[5].
17. On 11 October 2007, Lam issued proceedings in the High Court against Leung, namely HCMP 1972 of 2007[6] (“1st Action”), seeking declarations pursuant to the Deed of Family Arrangement that :
(i) Leung held the 1st Property for himself and Lam (as executor of Sister’s estate) as tenants-in-common in equal shares;
(ii) Leung held 2nd Property solely in trust for Lam (as executor of Sister’s estate) solely.
18. Then on 17 October 2007, pursuant to the Transfer Agreement, Leung, as beneficial owner, assigned to D all his interest in the new Lot 642 and the Building thereon by an assignment of that date[7] (“1st Assignment”).
19. On 17 January 2008, Lam issued another writ in the High Court, namely HCA 96 of 2008[8], this time against both Leung and D, seeking that the 1st Assignment be set aside, and also similar relief as in the 1st Action, and damages (“2nd Action”).
20. Lam’s two actions, namely the 1st Action and the 2nd Action were later consolidated on 21 October 2008[9] (“Litigations”).
21. It appears that on the same day, 21 October 2008, D entered into a Deed of Relinquishment and Assignment with Leung, under which D relinquished all her rights and interest in Lot 642 and the Building to Leung, and Leung, pursuant to the Transfer Agreement, then assigned back to D all his interest in the Ground Property and its related 1/3 share in Lot 642[10] (“Deed of Relinquishment”). The purpose of entering into the Deed of Relinquishment was stated to be that doubt had been raised as to the validity of the 1st Assignment[11]. In fact, as seen from the Land Registry registration record of Ground Property, D2 had signed a preliminary sale and purchase agreement on 13 September 2008 to sell the Ground Property for HK$2.05m, which appeared to be subsequently cancelled on 2 December 2009[12].
22. Anyway, under an assignment dated 22 April 2009, Leung assigned to D all his interest respectively in the 2nd Property together with its 1/3 interest in Lot 642 at a consideration of HK$500,000 (“2nd Assignment”)[13]. It appears from the Land Registry registration record that a similar 2nd Assignment had been entered and registered in respect of the 1st Property[14]. After the Deed of Relinquishment and the 2nd Assignments, D became the sole registered owner of all 3 properties.
23. It was not disputed that at the end of 2010, D was in need of money to pay the legal costs for the Litigations. I understand that the trial was to commence in January 2011. She then approached the plaintiff (“P”) and offered to sell the Ground Property to him[15].
24. It was then that P came into the picture. Apart from being also a resident in Ma Wan at the time, P was/is unrelated to the Leung family.
25. According to P, he was eyeing the Building in Ma Wan in 2010 with a view of purchasing the whole Building for the residence of his family. He later met D and had understood that she was the registered owner of the Building.
26. It was P’s case that he and D had reached a global agreement for him to purchase the Ground Property, the 1st Property and the 2nd Property at the respective purchase price of HK$2,300,000, HK$1,950,000 and HK$2,300,000 (“Global Agreement”), and that the Global Agreement was made partly orally, and partly in writing and supported by part performance.
27. Further, it was P’s case that the Global Agreement was evidenced, among other things, by a Chinese Provisional Sale and Purchase Agreement for the Ground Property dated 3 January 2011 (“Provisional S & P Agreement”)[16], and a further Chinese agreement/ memorandum also dated 3 January 2011, under which D agreed to sell to P the 1st Property and the 2nd Property (“Chinese Agreement”)[17]. Both agreements were signed by P and D.
28. I will go into the terms of the Global Agreement and the Chinese Agreement later. Suffice to say at this stage, only the Ground Property was duly assigned to P by D on 31 May 2011 (“Ground Property Assignment”)[18].
29. Shortly after the alleged Global Agreement, it would appear that Lam on the one part, and Leung and D on the other part attended mediation on 18 January 2011 with a view to settle the Litigations. A mediation agreement was later signed by all three of them on that day 18 January 2011 (“Mediation Agreement”)[19]. The agreed terms of the Mediation Agreement were subsequently incorporated as part of a Tomlin Order made on 16 February 2011 (“Tomlin Order”)[20]. Under the agreed terms in the schedule of the Tomlin Order, among other things, Leung and D agreed to transfer the 2nd Property to Lam subject to existing tenancy, such transfer to be completed on or before 31 March 2011and Lam was to pay Leung a sum of HK$100,000 as maintenance on completion date.
30. When P found out about the Tomlin Order, he issued the writ herein on 23 March 2011.
31. It came to Lam’s notice that P had attempted to register the Chinese Agreement at the Land Registry against the 1st Property and the 2nd Property, but the registration was “stopped” for some reasons, and later P then registered the writ herein against the 2 properties in the Land Registry. As a result, the transfer of the 2nd Property to Lam under the Tomlin Order failed to take place, and Lam issued a new action on 20 September 2011, against Leung, D , and also P, namely HCA 1590 of 2011 (“3rd Action”)[21].
32. P filed his statement of claim on 7 November 2011 in which he pleaded the Global Agreement. The statement of claim was later amended on 19 December 2013 (“Amended SOC”) and he sought, among other things:-
(i) A declaration that D be estopped from denying the existence and performance of the Global Agreement as pleaded and be bound by it;
(ii) A declaration that D was a trustee for P in respect of the interest in the 1st Property and the 2nd Property and that she was not entitled to dispose or otherwise deal with any interest in the 2 properties;
(iii) Specific performance of the Global Agreement in respect of the 1st Property, or damages in lieu thereof;
(iv) Damages in lieu of specific performance of the 2nd Property;
(v) Alternatively, damages for breach of the Global Agreement;
(vi) A declaration that D was to indemnify P of damages being legal costs and expenses incurred and to be incurred in the 3rd Action.
33. D denied that there was a Global Agreement, and that the sale of the Ground Property pursuant to the Provisional S & P Agreement was completely separate from and independent of the Chinese Agreement, and further the Chinese Agreement was subject to two conditions precedent, namely (i) that D was to win in the Litigations; and (ii) D obtained the title to the ownership of the 1st Property and the 2nd Property (“Conditions Precedent”). As there was a settlement in the Litigations, D’s case was that she did not “win” in the Litigations, and therefore the Chinese Agreement would be void and invalid and she was not bound by it.
34. D counterclaimed for, among other things, that the registration by P of the writ in the Land Registry against the 1st Property and the 2nd Property be vacated, and for a declaration that P was to indemnify her of all the loss and damages incurred and to be incurred in the 3rd Action, and damages for wrongful registration of the writ in the Land Registry.
35. In the meantime, D failed to file her defence and counterclaim within time in the 3rd Action and she later tried later to apply for leave to file the same out of time. Her application was refused and this led to judgment being entered against her on 4 September 2012 with costs, and she was adjudged, among other things, to carry out specific performance of the Tomlin Order and pay damages for breach of the Tomlin Order to be assessed[22].
36. In D’s application for leave as aforesaid, she had produced a psychiatric assessment report of Leung dated 5 November 2009 by Dr Paul Tam Mo Shing (“Dr Tam”) of the Union Hospital in Shatin. Dr Tam was of the opinion that Leung was not suffering from “formal mental disorder” but his intelligence was “below normal”[23].
37. Nevertheless, Leung, claiming to be a mentally incapacitated person with limited intelligence, through his son as his next friend and guardian ad litem, issued two writs[24] as follows:
(i) A writ against Lam on 10 January 2013, namely HCA 50 of 2013, seeking declarations that the Mediation Agreement and the Tomlim Order were void, invalid and/or unenforceable and should be set aside, due to Leung’s mental incapacity at the date of signing of the Mediation Agreement;
(ii) A writ against D on 8 May 2013, namely HCA 797 of 2013, seeking a declaration that the 1st Assignment by Leung to D was void, invalid and/or unenforceable and should be set aside, due to Leung’s mental incapacity at the date of signing of the 1st Assignment.
38. After obtaining judgment against D in the 3rd Action, on 20 August 2013, Lam filed a Notice of Discontinuance against Leung.
39. On 22 August 2013, D, who was then acting in person, filed a notice of appeal seeking leave to appeal against the judgment against her in the 3rd Action out of time. In this application, D suddenly claimed that she herself was also suffering from mental illness and she produced 2 psychiatric reports in support thereof, one dated 24 May 2012 by a Dr Lam King Seng of Tai Po Hospital (”Dr Lam”), and one dated 25 May 2013 by the same Dr Tam who wrote the report on Leung.
40. Notwithstanding these claims and her reports, D’s application for leave to appeal out of time was subsequently dismissed by DHCJ Ng on 7 November 2013[25].
41. The present status of these latest 3 actions are, so far as this court is aware, as follows:
(i) Lam’s claim against P in the 3rd Action in relation to the 2nd Property is continuing, but pending the decision of this court in the present action;
(ii) As for Leung’s action against Lam, a defence had been filed by Lam, and a reply was filed by Leung, and the action is continuing;
(iii) So far as Leung’s action against D, D had indicated in the acknowledgment of service that she was not contesting the action. Leung apparently tried to apply for judgment, but on 3 October 2013, the action was adjourned sine die by Chung J.
42. Leung’s action against D was only in relation to the validity of the 1st Assignment. In fact, D eventually acquired title/ownership to the 1st Property and the 2nd Property under the 2nd Assignments, and so far there had been no action seeking that the 2nd Assignments be set aside. In any event, there was no objection from either party to the trial proceeding before this court, notwithstanding all the above legal actions.
D’s Mental Capacity
43. After the conclusion of the trial before this court and shortly before the handing down of this judgment, D suddenly sent a personal letter dated 3 April 2014 direct to the court, enclosing a bundle of documents, among which were 2 further psychiatric reports on her mental condition as follows:
(i) A report dated 20 June 2013 from Dr Tam;
(ii) A report dated 4 January 2014 from Dr Lam.
44. According to Dr Tam’s 20 June 2013 report, from what was reported by D herself and a report from another Dr Chow, D had a long history of both depression and schizophrenia, and was attending Tai Po Hospital regularly. Dr Tam was shown a copy of the Mediation Agreement by D who had made a strong request for him to compile the report as she was to appear in court shortly. Dr Tam said that in view of her long history of depression and schizophrenia “it was not unreasonable to opine that she was not in top form when she had to sign the agreement forms”, and she said she was also dizzy at the time as she was physically weak from diabetes and cancer treatment. Notwithstanding this, it seems Dr Tam found D’s speech coherent. Further Dr Tam concluded that he had no intention to interfere with the court proceedings and that he produced the report at D’s request.
45. It appears from Dr Lam’s 4 January 2014 report that D had first attended the Li Ka Shing Psychiatric Centre in 1987 and was diagnosed anxiety and depressive disorder at that time. She was later referred to the Tai Po Hospital and was given various antidepressant medications and since November 2006, was given antipsychotic medication, which were stopped in April 2011, as she reported to her case officer that she had not been taking such medication for some time and she had no psychotic symptoms at that moment. D apparently reported to the case officer on 20 April 2012 that she had signed a document under the influence of hallucinatory voice and resulted in a dispute over the ownership of the apartment she was living in. However, Dr Lam stated that he did not know her mental state on the day she signed that document and he was not able to comment on whether or not she had signed the document under psychotic influence. According to Dr Lam, D was last seen on 15 November 2013 when she was seen to be anxious, having coherent and relevant speech without active suicidal idea but complained of hearing multiple non-existing voices talking to her in a derogatory manner. Dr Tam, however, stated “a possible but less likely differential diagnosis is schizophrenia”.
46. Having considered the above reports, there appeared to be no sufficient medical evidence to show that at the time of the trial D was under mental disability within the definition of Order 80 of the Rules of the High Court, or that she was incapable of managing and administering her property and affairs. In any event, she was legally represented at the trial and there had been no application made on her behalf under Order 80 for an order that a guardian ad litem be appointed for her.
47. D’s letter of 3 April 2014 and attachments including the above two reports were forwarded to her solicitors, and copied to P’s solicitors. There were no further submissions or applications from them.
The alleged Global Agreement
48. I will first of all set out P’s pleaded case in relation the alleged Global Agreement.
Alleged Representations, warranties, and undertakings
49. In P’s amended statement of Claim (“Amended SOC”), it was pleaded that D had represented to him that, despite the Litigations, D was the registered owner of all 3 properties in the Building and would ultimately be in the position to sell all 3 properties to P solely[26] and further that :
(i) D would sell the Ground Property to P by entering into the Provisional S & P Agreement, at consideration of HK$2.3m and the sale to be completed on or before 31 May 2011;
(ii) D agreed and undertook to sell the 1st Property and the 2nd Property to P so that he could become the sole owner of the whole Building, in return for which P had to pay a large deposit of HK$500,000;
(iii) D warranted to P that she stood a very high chance to win in the Litigations and that P would have to pay her the deposit, being 10% of the agreed purchase price of HK$1,950,000 for the 1st Property and 10% of HK$2,300,000 for the 2nd Property within 3 months after conclusion of the Litigations and also to execute a “Must Buy Must Sell” (必買必賣) agreement to be completed within the 3 months;
(iv) D further represented to P that only if she should lose the Litigations then she and P should have no claims against each other.[27]
(“Representations”)
50. In P’s reply and defence to counterclaim, P had pleaded 4 further expressed or other implied warranties and/or undertakings on the part of D (“Further Warranties”)[28] as follows:
(i) The sale and purchase of the 1st Property and 2nd Property was a “Must Buy Must Sell” agreement;
(ii) D would make her best endeavour to win the Litigations;
(iii) In no circumstances, D would compromise the Litigations without prior reference to or consent of P;
(iv) Only if D should lose the Litigations, which being the only situation, then D would no longer be obliged to sell the 2 properties to P and the parties would have no claims against each other.
51. P’s case in his Amended SOC and his reply and defence to counterclaim was that in reliance of the Representations and Further Warranties, he agreed to purchase the Ground Property, the First Property and the 2nd Property at the respective consideration of HK$2.3m, HK$1.95m and HK$2.3m totaling HK$6.55m at the basic terms mentioned above and that this formed the Global Agreement reached between P and D on about 3 January 2011[29].
52. It was P’s case that the Global Agreement was partly orally and partly in writing, and partly orally by an oral agreement, and further there were implied terms.
Alleged Written Terms
53. The written terms were evidenced by the Provisional S & P Agreement and the Chinese Agreement.
Alleged Oral Agreement
54. The oral agreement, as pleaded in P’s Amended SOC were[30]:-
(i) D should proceed expeditiously to prove the title of the Ground Property, the 1st Property and the 2nd Property so as to sell and assign the whole Building to P as soon as possible;
(ii) D undertook to disclose the fact and terms of the Global Agreement to any third parties regarding the interest of P in the Ground Property, 1st Property and the 2nd Property whenever necessary so as to protect P’s interests;
(iii) D would not divest of otherwise dispose of or deal with any of her interest of and in the Ground Property, the 1st Property, and the 2nd Property to any third parties without P’s prior consent.
(“Oral Agreement”)
Alleged Implied Terms
55. As further pleaded by P in the Amended SOC, the Global Agreement also contained the following 6 implied terms (“Implied Terms”)[31]:
(i) D was the legal and beneficial owner of all 3 properties and had the absolute right and interest in the same;
(ii) No third party in fact had any right or interest whatsoever whether legal or equitable in the 3 properties;
(iii) D undertook to use her best endeavours to ensure the success of the Litigations and to pursue her legal and beneficial entitlement in the 1st Property and the 2nd Property;
(iv) P would buy all 3 properties, and that D undertook to use her best endeavours to ensure that P would be able to purchase the same;
(v) In the event that D only were to succeed in obtaining title to the 1st Property, or the 2nd Property, D should nevertheless transfer whatever property she had obtained the title to P;
(vi) D should, among other things, show, prove and give title of all 3 properties to P.
The Main Issues
56. The Main Issues in the present case were :
(i) Whether there was a Global Agreement between the parties?
(ii) If the court finds that there was the Global Agreement, whether D was in breach of that Global Agreement or any terms thereof?
(iii) Whether the Chinese Agreement was an effective and binding contract? If so, whether the Chinese Agreement was made void due to the non-occurrence of the Conditions Precedents?
57. In D’s defence and counterclaim, there had been another issue raised, namely whether the Chinese Agreement was valid or not since it had not been duly stamped.
58. At the commencement of the trial, P’s solicitors were willing to provide an undertaking to have the Chinese Agreement stamped within 7 days, and this was duly carried out. There was thus no longer any need to deal with this issue.
The Evidence
59. P and D were the only two witnesses who attended the trial and gave oral evidence.
60. I have had the opportunity to observe D’s demeanour when giving evidence. There were quite a number of inconsistencies between her oral evidence and her witness statement and/or what was pleaded in the defence and counterclaim, so much so that I do not find D a reliable and credible witness. I prefer P’s evidence where it conflicts with D’s.
Whether there was the alleged Global Agreement between the parties?
61. As mentioned earlier, P’s case was that he had relied on the Representations and Further Warranties by D and entered into the alleged Global Agreement.
62. His case was further that the Global Agreement was supported by part performance, to his detriment, pleaded as follows[32]:
(i) P signed the Provisional S & P Agreement on 3 January 2011 and made an immediate payment of HK$500,000 to D on the same day;
(ii) P started to gather sufficient funds to finance the purchase of all 3 properties to pool sufficient funds to effect purchase of all 3 Properties;
(iii) The purchase of the Ground Property was completed on about 31 May 2011, when D received full purchase price;
(iv) D had continued to sell such necessary landed properties to finance the purchase of the 1st Property and the 2nd Property.
Events leading up to 3 January 2011
63. The documents in writing relied on by P as evidence of the written part of the Global Agreement were the Provisional S & P Agreement and the Chinese Agreement.
64. There were two ‘unusual’ terms in the Provisional S & P Agreement:
(i) An immediate payment of a large deposit of HK$500,000 to D direct, upon signing of the Provisional S & P Agreement; and
(ii) A long completion period of almost 6 months.
65. The deposit of HK$500,000 was about 22% of the purchase price for the Ground Property, which seemed even on D’s own evidence, was higher than normal for a provisional sale and purchase agreement and this was paid direct to D. P’s case was he agreed to pay D a large immediate deposit, as part of the terms of the Global Agreement and upon D’s agreement to sell him the 1st Property and the 2nd Property.
66. D’s initial explanation for the large deposit was that she had wanted to sell the Ground Property to P for HK$3m, but P only offered to pay HK$2.3m and further requested a long completion period. She accepted both of his terms on condition that he paid her an immediate deposit of HK$500,000.
67. This was the case thus put to P by D’s Counsel, Mr Tsang.
68. P had pointed out that prior to approaching him, D had earlier in November 2010 signed an agreement to sell the Ground Property to a third party, a Madam Wong, for HK$2.2m, but that transaction fell through as he was told by D that due to title problems, Madam Wong was not able to obtain a mortgage loan. The agreed price between P and D of HK$2.3m was in fact higher than the price D had agreed to sell to Madam Wong, and was thus not any special or reduced price.
69. P also said that as D needed a sum of $500,000 at that time, it was she who contacted D on about Boxing Day, ie 26 December 2010 to try and persuade him to help her in the Litigations. P told the court that he and his family were living in a 3 storey house at that time in 2010, and also at the time of the trial. He said at the end of 2010, he was viewing the entire Building with the intent to purchase all 3 floors for his family to reside in. When D telephoned him, she told him that she needed money for the Litigations, and she also told him that she had a very high chance of winning in the Litigations. She then showed P a copy of the writ and her defence. P said after reading those documents, he believed what D told him, that she had a high chance of winning the Litigations, and that after the conclusion of the Litigations, she would sell the 1st Property and the 2nd Property to him. It was under such circumstances that the Global Agreement was arrived at.
70. As time was short, P told D that he needed time to raise funds for the 3 properties and that was why he had asked D for a long completion period in the Provisional S & P Agreement.
71. Further, after he paid D the deposit of HK$500,000, P said he started to raise sufficient funds to finance the purchase of all 3 properties by, among other things, selling his other landed properties.
72. D admitted that she needed money for the Litigations at end of 2010. When she was asked whether in order for her to raise funds one of her options would be to sell the Ground Property, P had at first answered she had wanted to sell it at HK$3.5m but she seemed to want to change what she had said, as she then said that from beginning to end, she did not think of selling as writs were registered against all of the properties, and the agent had contacted her 10 odd times (由始至終無諗住賣，因為全部釘住，經紀搵我十幾次). She said the agent Mr Tsoi later brought along Madam Wong who agreed to purchase the Ground Property, upon the encumbrances being removed, at a price of HK$2.2m.
73. I do not find D’s explanations as to why she asked for an immediate large deposit of HK$500,000 credible for the following reasons:
(i) The sale price D had agreed to sell on 13 September 2008 was HK$2.05m, and that sale appeared to be only cancelled in December 2009;
(ii) The sale price D agreed with Madam Wong as stated in the agreement for sale and purchase dated 18 November 2010 for the Ground Property was only HK$2.2m, and this agreement was only entered into about 6 weeks before the Provisional S & P she signed with P;
(iii) There was no reasonable explanation by D as to why she agreed to sell to Madam Wong the Ground Property for only HK$2.2m when she claimed she was asking for or hoping for HK$3.5m;
(iv) Madam Wong only paid HK$50,000-$60,000 as an initial deposit;
(v) D agreed that she did not ask Madam Wong for a higher initial deposit even though D agreed to sell to her at a reduced price of HK$2.2m, a price which was even lower than the price she sold to P, and considerably lower than the HK$3m she claimed she was asking for from P;
(vi) There was no dispute that the above sale to Madam Wong did not go through, and D did not dispute what P said, that Madam Wong was not able to obtain a mortgage loan for completion;
(vii) D had admitted at the end of 2010 it was she who approached P as she needed money to pay for the legal costs for the Litigations[33].
74. In view of the above, I find it unlikely that when D approached P in December 2010, she would still be asking HK$3m from P for the Ground Property.
75. D had also agreed with P’s Counsel Mr Wong under cross-examination that she would leave all selling and purchasing matters to the agent and that she would not ask for a larger deposit because the completion period was longer.
76. It was thus clear from D’s own evidence that the large deposit of HK$500,000 had nothing to do with any an alleged reduction of price from HK$3m to HK$2.3m for the Ground Property or P’s request for a longer completion period.
77. Anyway, notwithstanding her pleading in the defence and counterclaim, her evidence in her witness statement, and what was put to P by her Counsel, D subsequently changed her evidence regarding the HK$500,000 completely during the trial. Under cross-examination, D suddenly said for the first time that the HK$500,000 was in fact not an initial deposit for the Ground Property, and that it was a loan from P to her for the legal costs of the Litigations. What she said was the following, or words to that effect:
“$500,000 不是訂金，佢話借錢俾我打官司，佢話一直好鍾意我層樓有無敵海景，佢要我攞哂的文件俾佢......俾佢律師去打, 才借$500,000俾我，佢話鍾意我層樓，想成層住哂”
78. She had at first also said part of the HK$500,000 was loan, and part of it was deposit, and when asked to clarify the amount of each part, she then changed again and replied the total sum of HK$500,000 was a loan. She was later asked to clarify whether she meant that the condition of the loan was that she agreed to sell the entire Building to P, she said no, and that after winning the Litigations, she would sell to P but the price was to be discussed “借$500,000俾我，打贏官司後賣俾佢，另外講價錢”.
79. She later added that she was only referring to the Ground Property. When she was again asked to clarify what she meant by her above answer, in particular what she meant by“另外ˮ. She then said in future, if any property were to be sold, it would be the “seafood price” (將來有樓賣都係海鮮價).
80. She then accused P of being very “cunning” (狡猾), and that he said the loan was to be regarded as the deposit and that P would lend her the money, but there was to be a 6 month completion period and that the house was to be sold to him.
81. None of what D said above about HK$500,000 being a loan was in her witness statement, nor in her defence and counterclaim.
82. From D’s above evidence, she was clearly aware that P had all along wanted to buy the entire Building, namely all 3 properties, and not just the Ground Floor. D had further admitted that she needed HK$500,000 for the Litigations towards the end of 2010 and that she had shown P the relevant documents in the Litigations, although she said it was P who asked to see them.
83. Whether it was P who asked to see the documents in the Litigations or not, D admitted that she did provide them to P. As seen from the defence and counterclaim filed by Leung and D in the Litigations that their defence was, among other things, that Leung was 61 years old and illiterate at the time of the Deed of Family Arrangement and that Lam had beaten him by slapping him and further Lam threatened to continue to beat him unless he signed, and therefore it was the case of Leung and D that the Deed of Family Arrangement was void and unenforceable.
84. HK$500,000 was not a small sum for legal costs and the trial was approaching. I find that the fact that D was willing to pay such sum for legal costs and trying to raise such sum for her legal costs would indicate her intention of continuing to fight under the belief that she had a high chance of success. I accept P’s evidence that D was trying to persuade him to agree to pay her $500,000, and thus notwithstanding D’s denial, having considered the parties’ evidence, I find that it was more probable than not that D did tell P that she stood a very high chance of winning.
85. As to whether it was only should she lose, then the parties would have no claims against each other, there was no sufficient evidence that D was contemplating settling or compromising the Litigations at that time. Further, she herself had admitted that she told P that after she won, she would sell to P, except she had claimed that it would be at “seafood price”. Thus, it would seem that at that time, when she was persuading P to pay her HK$500,000, in her mind, it was either winning or losing. Having weighed the parties’ respective evidence, I would accept P’s evidence that D did tell him that only if she should lose the Litigations then she and P should have no claims against each other.
86. I also accept that D had said to P that she agreed to sell to him the Ground Property along the terms which would later be set out in the Provisional S & P Agreement, and further she had said that she would sell the 1st Property and the 2nd Property to him after winning the Litigations and conclusion of the Litigations, along the terms which would later be set out in the Chinese Agreement, so that he would become the sole owner of the entire Building, and that in return P had to pay a large deposit of HK$500,000.
87. In light of the above, I find that D did make the 4 alleged Representations to P.
88. As to the 4 alleged Further Warranties, the first of these was that the sale and purchase of the 1st Property and 2nd Property was a “Must Buy Must Sell” agreement. D’s agreement to sell the 2 properties was according to P evidenced by the Chinese Agreement. During the trial, P had admitted that the Chinese Agreement was not a “Must Buy Must Sell Agreement”, and what P alleged to the first of the Further Warranties was not supported by the terms of the Chinese Agreement, and in fact was contradictory to what was expressed therein. In any event, I do not find that there was sufficient evidence for me to infer or imply there had been such a warranty.
89. Regarding the 2nd of the Further Warranties, in light of the Representations I have found, in particular that D had represented to P that she stood a very high chance to win in the Litigations and she would agree to sell the 1st Property and the 2nd Property to P after conclusion of the Litigations, I would accept that there was an implied warranty on the D’s part to make her best endeavours to win the Litigations.
90. As for the 3rd of the alleged Further Warranties, namely that in no circumstances, D would compromise the Litigations without prior reference to or consent of P, as I have said earlier, there was no sufficient evidence that the possibility of compromise was in either party’s mind on 3 January 2011. I do not find there was such a warranty, whether expressed or implied.
91. Regarding the 4th of the alleged Further Warranties, I have accepted that one of the Representations was that only if D should lose the Litigations then she and P should have no claims against each other, and that any Further Warranty on her part would be to this extent only.
92. To summarise, the two Further Warranties found by me were as follows :
(i) D would make her best endeavours to win the Litigations;
(ii) Only if D should lose the Litigations, the agreement would be void and the parties would have no claims against each other.
The Provisional S & P Agreement
93. During the trial, D suddenly alleged for the first time that she did not recall seeing the 1st page of the Provisional S & P Agreement, and she had further alleged that the Provisional S & P Agreement was illegal and was void (非法屬於無效). D had also said during the trial that she had not seen the Ground Property Assignment, nor had anyone interpreted to her the contents thereof.
94. In fact, the Provisional S & P Agreement showed that D had initialled against clause 5 on the first page and further the Ground Property Assignment was prepared by solicitors instructed by her and she had clearly received the balance of the purchase price of HK$1.8m for the Ground Property.
95. When it was put to her that it was her own solicitors who prepared the Ground Property Assignment, D then replied by saying she was confused as she said she was receiving chemotherapy treatment due to her cancer and she could not recall.
96. When asked by this court when she had cancer and chemotherapy, she said it was sometime in 2011. D claimed that P knew of her cancer. Dr Tam’s 20 June 2013 report had referred to a report from a Dr Lee Sum of the Department of Surgery of Northern Hospital dated 30 June 2011 indicating that D had thyroid cancer and had undergone an operation to remove the tumour. According to D, she would still require chemotherapy. There was no medical evidence as to when she underwent chemotherapy, or the effects of such chemotherapy. In mid morning on the 2nd day of the trial, D did ask for a short break for her to take two pills as she had forgotten to take her diabetic medication that morning. There was no medical evidence to indicate that D was not well to give evidence at the time of the trial. I find D’s evidence of not having seen the first page of the Provisional S & P Agreement, or that she had not seen the Ground Property Assignment or that it was not interpreted to her simply not credible.
97. I accept P’s evidence that he agreed to pay a large deposit of HK$500,000 to D immediately on the date of signing the Provisional S & P Agreement because D had agreed to sell him the 1st Property and the 2nd Property.
The Chinese Agreement
98. The main body of the Chinese Agreement, below the parties’ respective names and Hong Kong Identity Card numbers, stated as follows[34]:
“甲方﹕袁麗君馬灣大街642號地下業主，由於1F及2F現時有法律爭議不能賣給乙方及收取定金 本人承諾一旦該場官司勝訴取得業權後，1F全層以港幣1,950,000 (壹佰玖拾伍萬)，2F全層連天台以港幣2,300,000 (弍佰叁拾萬)賣給乙方，訴訟完結取得法庭判決取得業權後，三個月內買方付一成訂金，雙方簽署一份必買必賣之買賣合約,三個月內完成交易。如甲方敗訴本協議無效, 甲、乙雙方均不得追究對方。”
99. The parties’ respective signatures then appeared below the above paragraph, followed by the full address of the 1st Property and the 2nd Property, and then the date of 3 January 2011.
100. D’s initial case as reflected in her pleadings and her witness statement was that the Chinese agreement was subject to the Conditions Precedent as earlier set out. Thus, her case was that she did sign the Chinese Agreement and fully understood the contents, and she was only relying on the Conditions Precedent not being fulfilled. Again D changed her evidence during the trial.
101. There seemed to be no dispute that the Chinese Agreement was handwritten by a 3rd party Mr Lau. According to P, on 3 January 2011, when the parties met to sign the documents and for payment of the deposit, D had asked her friend Mr Lau to accompany her and Mr Lau came with D. D, on the other hand, claimed she did not know Mr Lau well, and that P knew him better than she did. She denied it was she who had asked Mr Lau to accompany her, and when asked whom Mr Lau had come with, she replied that she did not know. P was there with his wife. There was no reason put forward by D as to why P would need to ask Mr Lau or any one else to come along to the meeting. I find D was evasive and I prefer P’s evidence to hers, that it was D who had asked Mr Lau to accompany her.
102. D’s evidence during the trial was although she admitted that the signature on the Chinese Agreement was hers, she said the Chinese Agreement was not signed on the same day that P paid her $500,000, and that when she signed, the Chinese Agreement did not contain so many words which were added later. She claimed that she did not know when she signed, and that there was no date. She was asked to circle those words which she claimed to be added later. She then circled the Chinese characters “Ground”, “1st floor”, and “2nd floor whole floor” (as underlined in the extract in paragraph 98), and also the date which she said were added later. Again, none of such evidence was in her witness statement.
103. In fact, when it was put to D that she had repeated what was written in the Chinese Agreement in its entirety in paragraph 11 of her own witness statement[35], she then complained that Mr Wong was “picking on” what she said, and maintained that she saw P’s wife adding words after she had signed, and she further said she could not recall what was written in paragraph 11 of her witness statement. She also claimed that she did not recall P had discussed with her about wanting to buy the 1st Property and the 2nd Property, and denied telling P that she had a high chance of success in the Litigations.
104. D also alleged suddenly during the trial that there was a conspiracy between P, his wife and Mr Lau in producing the Chinese Agreement and forcing her to sign, and also P was a con man (老千) and had cheated her. She claimed the prices were written in by P, and that she had always said the prices should be “seafood prices” (海鲜價). She then said words to the effect she was not of clear mind on that day as from morning to night, she was walking around the Jordan area and when she was driven to the meeting place to sign, she did not read the document.
105. She thus seemed to be alleging a conspiracy to defraud on the part of P, P’s wife and Mr Lau. This was again never pleaded. In any event, if one were to take out those words circled by D which she alleged were added later, that whole paragraph would make no sense. Anyway, she did not “circle” the prices and thus they were not added later.
106. Mr Wong had also pointed out to D that the Chinese Agreement was photocopied after being written with all those words which she claimed were added later before she signed, and thus she knew the contents of the Chinese Agreement before signing, and that the parties had signed on both the original and the photocopy. Mr Wong then produced and showed to D the photocopy with her signature, D then became silent and gave no response. She was clearly caught out.
107. As Mr Wong has submitted, D seemed to be ‘inventing’ new versions of her evidence as she was in court. Anyway, I find D’s evidence inconsistent and unreliable due to the different versions of her evidence.
108. I find that there were no additions to the Chinese Agreement after D had signed the same. I do not find any evidence that P was trying to cheat D, as alleged by her. I find that the Chinese Agreement was duly signed on the same day, ie 3 January 2011, either shortly before or after the Provisional S & P Agreement and the payment of the HK$500,000, and that D knew perfectly well what she was signing when she signed the Chinese Agreement.
109. I will consider the legal effect of the Chinese Agreement separately later.
Oral Agreement
110. It was P’s case that the Global Agreement contained also the Oral Agreement. In the defence and counterclaim D denied that there was the Oral Agreement[36]. P was not really cross-examined on the detailed terms of the Oral Agreement as set out by him in the Amended SOC or his witness statement[37]. He was, however, asked during cross examination as to what Oral Agreement he had with D and he replied when D called him on Boxing Day 2010, she told him she had a high chance of winning the Litigations and she showed him the documents, and he thought she would win, and that D persuaded him to pay her HK$500,000 to help her fight the Litigations and she agreed after she won and obtained title, to sell the Building to him.
111. The terms of the Oral Agreement set out in the Amended SOC were somewhat legalistic, and it did not seem to be the kind of words D would have said, or indeed P. Having considered the Representations and those of the Further Warranties as found earlier, and also that parties’ evidence, I am only prepared to find that that it was orally agreed between the parties as follows:
(i) D would proceed expeditiously to obtain good title of all 3 properties in order to sell the entire Building to P;
(ii) D would not sell or transfer the 3 properties to any third parties.
D’s other submissions
112. Mr Tsang’s submissions that no Global Agreement existed were based mainly on :
(i) The vast difference and glaring contrast in the format of the Provisional S & P Agreement and the Chinese Agreement;
(ii) D’s inability to accept deposit for sale and purchase of 1st Property and 2nd Property;
(iii) The lack of evidence in connecting the Provisional S & P Agreement and the Chinese Agreement;
(iv) The overriding effect of Clause 14 of the Provisional S & P Agreement, namely the “entire agreement” clause.
113. As for (i) above, Mr Tsang submitted that if the 3 properties were a group bargain and were of one and same deal, it would be difficult to imaging why the parties chose to draft two separate contracts which were vastly different in format and style. I accept that the Provisional S & P Agreement was a standard form with details to be filled in, and that the Chinese Agreement was handwritten. As D herself had said, no agents were involved in the signing of the Provisional S & P Agreement in relation to the sale of the Ground Property, and P seemed to have “borrowed” a standard form from an agent and added words of his own. The standard form would not have been applicable for those terms in Chinese Agreement since there were the Litigations, and D was not able to immediately accept any deposit or sign any provisional sale and purchase agreement in respect of the 1st Property and the 2nd Property. I do not find the difference in the format of the two agreements meant that there was no Global Agreement.
114. As for (ii), Mr Tsang submitted that as D was not able to accept a deposit for the 1st Property and the 2nd Property, the HK$500,000 was a deposit for the Ground Floor only, and that the HK$500,000 could not have had anything to do with the sale and purchase of the 1st Property and the 2nd Property. I have earlier dealt with the reason why P agreed to pay $500,000.
115. In relation to (iii), Mr Tsang submitted that there was a lack of evidence to connect the Provisional S & P Agreement with the Chinese Agreement, and that neither document contained any express or implied reference to the other. The connections would be in my view in the Representations, the Further Warranties and the terms of the Oral Agreement as found earlier. Mr Tsang had referred this court to the case of Tiverton Estates Ltd v Wearwell Ltd [1975] CA 146 in which the parties orally agreed on the sale of the property, and this was followed by the defendant’s solicitors’ letter referring to the proposed sale subject to contract. The plaintiff decided later not to go on with the sale. It was held that for the purposes of section 40 of the Law of Property Act 1925 a memorandum or note had not only to state the terms of the contract but had also to contain an acknowledgment or recognition by the signatory to the document that a contract had been entered into, and that since the words “subject to contract” appears in the defendant’s solicitors’ letter, this showed that the signatory did not acknowledge a contract, and there was no sufficient memorandum for the purposes of section 40[38].
116. The Chinese Agreement did not bear the words “subject to contract”, and I will consider the legal effect of the Chinese Agreement later. In any event, P was not simply relying on the Chinese Agreement, but a Global Agreement. I am of the view that the Tiverton case would not help D’s case that there was no Global Agreement.
117. As for the (iv) point, namely the overriding effect of Clause 14, or the entire agreement clause, in the Provisional S & P Agreement, it has been stated in Chitty on Contractsthat extrinsic evidence is admissible to prove the true nature of the agreement, or the legal relationship of the parties, even though this may vary or add to the written instrument.[39]
118. I have found that D had made the Representations to P and there were also certain Further Warranties as found. P’s evidence was that it was in reliance of these Representations and Further Warranties that he had agreed to the terms of the alleged Global Agreement, evidenced by the Provisional S & P Agreement, the Chinese Agreement, and the Oral Agreement as found by this court. These would all be extrinsic evidence to support what P had claimed to be the true nature of the agreement. P had also pleaded that in reliance of D’s Representations, there had been part performance of the alleged Global Agreement to his detriment and D was estopped from denying the existence of the Global Agreement[40].
119. In fact, D in her latest evidence said the deposit of HK$500,000 was in fact a loan and it seems from her own evidence the Provisional S & P Agreement would not reflect the true nature of the parties’ agreement. In any event, I am of the view that Clause 14 would not help D’s case.
Conclusion
120. In light of all I have said above, I find that there was a Global Agreement evidenced in writing by the Provisional S & P Agreement and the Chinese Agreement and also orally by the Oral Agreement containing the terms as found by this court.
121. The terms of the Global Agreement found by this court were as follows:
(i) D would proceed expeditiously to obtain good title of all 3 properties in order to sell the entire Building to P ;
(ii) D would not sell or transfer any of the 3 properties to any third parties;
(iii) P agreed to pay D $500,000 immediately upon signing of the Provisional and S & P Agreement;
(iv) The parties agreed to enter into the Provisional S & P Agreement in relation to the sale of the Ground Property at HK$2.3m to P, subject to the terms of that agreement;
(v) The parties agreed to enter into the Chinese Agreement with P in relation to the sale of the 1st Property at HK$1.95m and the 2nd Property at HK$2.3m to P, subject to the terms of that agreement;
122. As mentioned earlier, it was P’s case that after signing of the Provisional S & P Agreement and the Chinese Agreement and the payment of the $500,000 on 3 January 2011, he started to raise funds to finance the purchase of all 3 properties by starting to sell his other landed parties had been sold with a view to pool sufficient funds to effect the purchase of all 3 properties. He stated that he would provide particulars, and although D had put him to strict proof, there had been no request on D’s part to seek any further and better particulars from P. Further, P was not cross-examined or challenged on such part of his evidence.
123. In the above circumstances, I accept that there had been part performance of the Global Agreement (as found by this court) to the detriment of P.
Implied Terms
124. P had also pleaded 6 Implied Terms of the Global Agreement. Mr Wong referred this court to the paragraph 13-003 of Chitty on Contracts 31st Edition:
“The implication of a term is a matter of law for the court, and whether or not a term is implied is conventionally said to depend upon the intention of the parties as collected from the words of the agreement and the surrounding circumstances.”
125. The paragraph went on to say that in many classes of contract, however, implied terms have become standardized, and it is somewhat artificial to attribute such terms to the unexpressed intention of the parties[41]
126. Mr Wong further referred to paragraphs 13-004 and 13-005:
Paragraphs 13-004
“The court…will be prepared to imply a term…in two situations: first, where it is necessary to give business efficacy to the contract, and, secondly, where the term implied represents the obvious, but unexpressed, intention of the parties. These two criteria often overlap and, in many cases, have been applied cumulatively, although in other cases they have (more sensibly) been treated as alternative grounds. Both are predicated to depend on the presumed common intention of the parties. Such intention is, in general, to be ascertained objectively and is not dependent on proof of the actual intention of the parties at the time of contracting.”
Paragraph 13-005 further stated:-
“More recently, however, a much broader approach to the implication of terms was adopted … the court [was required] to answer the single question: Is what the instrument, read as whole against the relevant background, would reasonably be understood to mean?”
127. It was P’s case that the Global Agreement was reached on 3 January 2011. As of that date, the Litigations were still ongoing. Looking at the then surrounding circumstances, and in particular the wording of the Chinese Agreement, no matter how confident D might have been of her success in the Litigations, her position could not have been that she had the absolute right and interest in the 1st Property and the 2nd Property, or that no third party had any right or interest therein, or that D should show, prove and give good title of those two properties to P. I am therefore unable to infer or imply a mutual intention between the parties in relation to the 1st, 2nd and the 6th of the 6 Implied Terms as alleged by P.
128. As for the alleged 5th term of the 6 Implied Terms, namely that in the event the D could only succeed to obtain title to either the 1st Property or the 2nd Property, D should nevertheless transfer whatever property she had obtained the title to P. Again, looking at the then surrounding circumstances, and in particular it was P’s clear intention to buy the whole Building, I am unable to infer or imply that this was the parties’ mutual intention.
129. I have found that a term of the Oral Agreement was that D would proceed expeditiously to obtain good title of all 3 properties in order to sell the entire Building to P. I have also accepted that one of the Further Warranties was that D would make her best endeavours to win in the Litigations. In such circumstances, and in any event, to give business efficacy to the Global Agreement and also I find they were the obvious intention of the parties, I am prepare to accept that there were the following Implied Terms of the Global Agreement :
(i) D would use her best endeavours to ensure the success of the Litigations and to pursue her legal and beneficial entitlement in the 1st Property and the 2nd Property;
(ii) D would use her best endeavours to ensure that P would be able to purchase the same.
Whether the Chinese Agreement was an effective and binding contract? If so, whether the Chinese Agreement was made void due to the non-occurrence of the Conditions Precedents?
130. I will next consider the 3rd Main Issue, as above, raised by Mr Tsang in his closing submissions in relation to the Chinese Agreement, before I consider the issue of whether there was a breach of the Global Agreement. Mr Tsang’s submissions were premised on D’s case that there was no Global Agreement and the Chinese Agreement was separate and independent from the Provisional S & P Agreement.
Whether effective and binding contract
131. D’s case was that the Chinese Agreement was not binding and effective because :
(i) It lacked conclusiveness;
(ii) It lacked certainty in an essential term, namely the completion date.
132. Mr Wong had submitted the above was not actually pleaded in the defence and counterclaim as D’s defence was based mainly on the Conditions Precedent. Mr Tsang came into the picture just shortly before the trial and he raised the above issues in his opening submissions and thus at the commencement of the trial, Mr Wong was fully aware of such submissions and he could have sought further time to take instructions or to prepare his closing submissions. He did not, and in fact agreed to make his closing submissions on the last day of the trial. Mr Tsang’s submissions were really based on legal arguments, and I am of the view that Mr Wong had had sufficient time to deal such submissions.
133. On the (i) point above, namely the Chinese Agreement lacked conclusiveness, Mr Tsang referred this court to Yeung Siu Hong v Chan Siu Mei Sandie [1992] 2 HKC 559. Godfrey J, as he then was, had to consider the true effect of the parties signing what was stated to be a “provisional agreement” for sale and purchase in the standard form produced by a property agent. From its description in the judgment of that case, this agreement appeared to be in a similar form which the present Provisional S & P Agreement was based on. Anyway, in the view of Godfrey J, it would have been more aptly described as an agreement preliminary to the sale and purchase, and that he called it the preliminary agreement.
134. After the signing of the preliminary agreement, and prior to the signing of the formal agreement for sale and purchase, the purchaser’s solicitors wrote to the vendor’s solicitors a letter referring to the proposed sale and this letter was headed “subject to contract”, setting out the terms and conditions of the purchase. The subsequent reply from the vendor’s solicitors was also so headed.
135. For various reasons, the vendor in the above case later called off the transaction and the formal agreement for sale and purchase was never signed. Godfrey J had said that it was clear that until the parties signed the preliminary agreement, the whole transaction remained in the course of negotiation, and before signing the preliminary agreement either side could have changed its mind and refused to go on, without incurring any liability to the other[42].
136. However, as pointed out by Godfrey J, the parties did sign the preliminary agreement, which contained a number of terms some of which reflected what had already been agreed but others of which did not appear to have been discussed, or even mentioned, during the negotiations, and in particular, it contained terms to deal with the situation if no sale and purchase agreement was in fact concluded[43].
137. Godfrey J then considered the legal effect of the preliminary agreement once the parties had signed it and stated there were a number of possibilities[44], namely (i) the preliminary agreement operated as a note or memorandum of an agreement already concluded orally between the vendor and the purchaser; (ii) by signing the document the parties concluded an immediately binding agreement in writing for the sale and purchase of the property, but with each party having the right to withdraw on making payment of a sum of money to the other; (iii) the agreement was not an immediately binding agreement for sale and purchase at all but simply an agreement to agree, coupled with an agreement on the steps to be taken, and the payments to be made, preliminary to the constitution of an agreement for sale and purchase (and with additional terms providing for what was to happen if no such agreement was in fact concluded ).
138. Godfrey J then concluded that the (iii) possibility was the correct one, as the parties had merely agreed on some of the terms of the proposed transaction, on the footing that the contract itself was to be concluded by the signing of the formal agreement for sale and purchase.
139. In particular, Godfrey J said as follows:
“It is trite law that an agreement on some of the terms of a proposed sale does not constitute an agreement for sale; just as it is trite law that an agreement to agree on a contract of sale, the terms of which are as yet unsettled, is no agreement at all. Of course, when the terms of a contract are concluded, and nothing remains but to reduce it into a form shape, the contract may be enforced. But not so if there are other points to be determined and made the subject of a future agreement (as each side’s solicitors, in my view rightly, assumed here): cp. Wood v Midalev (1854) e De GM. &G41, per Lord Justice Turner at p. 46[45]”
140. Mr Wong sought to distinguish the present case from the Yeung Siu Hong case in that in that case, both the letters from the purchaser’s solicitors and the vendor’s solicitors were both headed “subject to contract” and that showed that, even from the “intended” purchaser’s point of view, there was no firm agreement.
141. The words “subject to contract” did not seem to appear in the preliminary agreement in the Yeung Siu Hong case, and they only appeared in subsequent letters between solicitors.
142. Coming back to the present case, it was stated in the Chinese Agreement that :
(i) D was not able to sell the 1st Property and the 2nd Property, or to accept a deposit, as there were Litigations;
(ii) D undertook that once she won the Litigations and obtained title, she would sell the 1st Property and the 2nd Property to D at the stated prices;
(iii) Upon obtaining the order of the court and the title after the Litigations, within 3 months, the purchaser was to pay 10% deposit, and the parties would sign a “Must Buy Must Sell” sale and purchase agreement, completion within 3 months;
(iv) If D lost in the Litigations, this agreement would be void and the parties would have no claims against each other.
143. Mr Wong submitted there was no evidence as to what D meant by a “Must Buy Must Sell” agreement. The plain meaning of the words is that the purchaser must buy and the vendor must sell. In any event, I find that the parties clearly understood what it meant. P himself had admitted during the trial that the Chinese Agreement was not a “Must Buy Must Sell” agreement. I have found that there was no sufficient evidence that the sale and purchase of the 1st Property and the 2nd Property was a “Must Buy Must Sell” agreement and that there was no such warranty on the part of D.
144. The Chinese Agreement started off by D stating that she was not able to sell the 1st Property and the 2nd Property to P or to accept any deposit. Unlike in the Yeung Siu Hong case, no deposit had even been accepted by D. It was also not clear whether the sale was to be with vacant possession or subject to tenancies. Although it was clearly the parties’ intention that another “Must Buy Must Sell” agreement was to be signed three months after the conclusion of the Litigations and D obtaining a court order and title to the 2 properties, no date, or deadline, was given for the conclusion of the Litigations. There was provision as to when the agreement would be void, and that the parties would have no claims. Having considered the terms of the Chinese Agreement, I come to the view that the Chinese Agreement was only an “agreement to agree”, and was not immediately binding concluded agreement.
145. As to the (ii) point which Mr Tsang put forward for submitting that the Chinese Agreement was not binding and effective, namely that it lacked certainty in the completion date, Mr Tsang referred this court to the Court of Final Appeal case of Kwan Siu Man Joshua v Yaacov Ozer [1999] 1 HKC 150.
146. The parties in the above case were originally involved in a landlord and tenant dispute, and while this was going on in the Lands Tribunal, the plaintiff/tenant offered to purchase the property from the defendant/landlord/owner, and there was a chance meeting at the lift lobby of the building where they both were living and they had an oral discussion about, among other things, the sale and purchase of the property, and the defendant orally promised to sell the property for a certain price to the plaintiff. The defendant’s solicitors then wrote a letter marked “without prejudice” and set out various proposed terms of the sale and purchase of the property including the requirement of a deposit and the date of completion, in addition to what was orally discussed at the previous chance meeting. The letter became the written instrument relied upon by the plaintiff as a memorandum of the oral agreement.
147. Subsequently, negotiations broke down and the defendant changed his mind regarding the sale of the property. The plaintiff sued upon the oral agreement. The judge at first instance found that there was an agreement as to the price, the property, and the parties, and concluded that there was an “open contract” between the parties, as evidenced by the “without prejudice” letter and ruled in favour of the plaintiff. The Court of Appeal upheld this decision.
148. The Court of Final Appeal allowed the appeal by the defendant. It was held, among other things, as follows[46]:
“(i) It was possible, but not probable, that an ‘open contract’ could exist in the case of the sale and purchase of real property. …The making of such a contract was not to be found just because there had been a meeting of minds as to parties, property and price, as such meeting of minds could merely be a stage in the course of negotiations;
(ii) The date of completion was an essential term of any contract for the sale and purchase of land in Hong Kong. The trial judge’s finding that the parties had not agreed on the date of completion should lead to the conclusion that there was no concluded agreement reached regarding the sale and purchase of the property. …;
(iii) For a contract regarding the sale and purchase of land to be legally enforceable, the statutory requirement as set out in s 3 (1) of the Conveyancing and Property Ordinance (Cap 219) must be satisfied, ie there must be a written and signed memorandum evidencing the contract as finally agreed between the parties and nothing else. A written document containing additional proposed terms was not a memorandum of the contract. Therefore the oral agreement as found by the trial judge was unenforceable at law. …”
149. Mr Tsang thus submitted that as the Litigations could drag on for years, since there would be a real possibility for an appeal to the Court of Appeal, it would simply be impossible to ascertain a definite date on which the Litigations would end, or when D would obtain title, and thus there was no certainty as to the completion date for the sale of the 1st Property and the 2nd Property.
150. As Mr Wong had pointed out, what was said by the Court of Final Appeal in relation to the completion date being an essential term and the lack of agreement on the completion date leading to no concluded agreement was said in relation to the oral agreement in that case. In the Kwan case that during the chance meeting the parties negotiated about the price of the property and settled at HK$4.25m. That was all there was in relation to the sale of the property, and the other discussions were in relation to the Lands Tribunal matter. As said by the Litton PJ, the question of a deposit of $425,000 upon the signing of a formal sale and purchase agreement, the completion date, and court approval under the Landlord and Tenant (Consolidation ) Ordinance in the “without prejudice” letter which the plaintiff in that case had relied on as a written memorandum were never discussed[47].
151. In the Kwan case, there was no agreement at all as to when completion was to take place. Although in the present case, completion was agreed to be within 3 months of the signing of the “Must Buy Must Sell” agreement, what was however, uncertain was when the Litigations would be concluded, and when the “Must Buy Must Sell” agreement was to be signed.
152. In view of this, I accept Mr Tsang’s submissions that there was uncertainty in the Chinese Agreement.
153. Mr Tsang had submitted that there would be two “ramifications” in event that the Chinese Agreement was not a binding agreement, namely there could be no Implied Terms and also the Oral Agreement would be unenforceable. These submissions could only be right if the Provisional S & P Agreement, the Chinese Agreement and the Oral Agreement were all separate and independent of each other.
154. I have earlier concluded that there was the Global Agreement, and it contained not only the two written agreements but also the Oral Agreement and Implied Terms. I find also that there had been part performance of the Global Agreement by the sale of the Ground Property pursuant to the Provisional S & P Agreement, the signing of the Chinese Agreement, and the payment of the HK$500,000. I thus do not accept Mr Tsang’s submission on the “ramifications”.
Conditions Precedent
155. I have found the Chinese Agreement to be not an immediately binding concluded agreement on its own. Nevertheless, I will also deal with Mr Tsang’s submissions on the Conditions Precedent as this was the defence relied on by D originally.
156. Generally, in relation to construction of contract, Mr Wong had referred this court to the Court of Final Appeal case of River Trade Terminal Co Ltd and Secretary for Justice [2005] 2 HKLRD 326. At issue in that case was the construction of a special condition in the Government grant of a lot for the purpose of a river trade terminal. It was held in construing a commercial contract such as the grant in that case, the factual matrix, meaning of the objective surrounding circumstances, known to both parties, in which the agreement was made, could be taken into account[48].
157. The construction of a contract was also more recently considered in the UK Supreme Court decision Rainy Sky SA v Kookmin Bank [2011] 1WLR 2900. It was held in that case that :
“…the ultimate aim of interpreting a provision in a contract, especially a commercial contract, was to determine what the parties meant by the language used, and that involved ascertaining what a reasonable person would have understood the parties to have meant; that the relevant reasonable person for that purpose was one who had all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract; that where the parties had used unambiguous language the court had to apply it, but it was not necessary to conclude that unless the most natural meaning of the words produced a result so extreme as to suggest that it was unintended, the court had to give effect to that meaning; that the court had to have regard to all the relevant surrounding circumstances and if there were two possible constructions the court was entitled to prefer the construction which was consistent with business common sense and to reject the other; that it was not necessary to conclude that a particular construction would have an absurd or irrational result before having regard to the commercial purpose of the agreement. …”[49]
158. What was said by Lord Clarke who gave the leading judgment in the above case was also followed by our Court of Appeal in Sinoearn International Ltd v Hyundai-CCECC Joint Venture (a firm) CACV 83/2011, 23 December 2011.
159. I have earlier found as a fact that D was well aware that P had wanted to buy all 3 properties in the entire Building for his family residence, and not just the Ground Floor, and that D did make the Representations and certain of the Further Warranties upon which P entered into the Global Agreement with her, in particular, only if D should lose the Litigations, the agreement would be void and the parties would have no claims against each other. All these would be the surrounding circumstances relating to the signing of the Chinese Agreement.
160. Although in the Chinese Agreement, it was set out D undertook to sell to P the 1st Property and the 2nd Property upon “winning in the Litigations and obtaining title” (emphasis added) to those two properties, it went on to state the “Must Buy Must Sell” agreement was to be signed and the deposit to be paid within 3 months “after obtaining the court order and the title upon conclusion of the litigations. …” Further, it was stated that the Chinese Agreement would be void in the event that D lost in the Litigations. I find on the construction of the document, and in light of the surrounding circumstances, “winning in the Litigations” was not a Condition Precedent, but “obtaining the title” would be.
161. In any event, for reasons set out below, even if “winning in the Litigations” was a Condition Precedent, I am of the view that the Condition/s Precedent were not fulfilled due to D’s own breach of the terms of the Global Agreement.
Whether D was in breach of the Global Agreement?
162. Under the Implied Terms as found by this court, D was to use her best endeavours to ensure the success of the Litigations and to pursue her legal and beneficial entitlement in the 1st Property and the 2nd Property, and to ensure that P would be able to purchase the same.
163. For the term “best endeavours”, as set out in IBM United Kingdom Ltd v Rockware Glass Ltd [1980] FSR 335, it has been described as the duty “to take all reasonable steps which a prudent and determined man acting in his own interest and anxious would have taken”[50].
164. Mr Tsang submitted that the Chinese Agreement was silent regarding D’s option to settle the lawsuit, and further a litigant is not obliged to stubbornly fight a case till the end, and that the Civil Justice Reform encourages litigants to settle their disputes, and that it would have been unfair and oppressive to force D to carry on with a weak case till the end, and to bear the huge amount of legal costs.
165. At end of December 2010, D’s own case was that she was in urgent need of money to pay for the legal costs of the Litigations. The trial was approaching. I have found that D told P that her chances of winning in the Litigations were high. The evidence showed D attended mediation to settle the Litigations and signed the Mediation Agreement about 2 weeks after she entered into the Global Agreement with P, and after she had persuaded P to pay her $500,000.
166. There was no evidence at all from D to show what endeavours she had used to win in the Litigations or to proceed to obtain good title, and why she decided to settle and agreed to transfer the 2nd Property to P.
167. I accept what was submitted by Mr Wong, D was in breach of the Global Agreement, namely she was in breach of those Implied Terms as found by this court by entering into the Mediation Agreement with Lam. She was also in breach of the terms of the Oral Agreement, as found by this court.
Conclusion
168. In the Amended SOC, P only sought specific performance in respect of the 1st Property, and not of the 2nd Property. I have found that there was no Implied Term as pleaded by P that , in the event that D were to succeed in obtaining title to either the 1st Property, or the 2nd Property, D should nevertheless transfer whatever property she had obtained the title to P. I have also found that the sale and purchase of the 1st Property and the 2nd Property was not a “Must Buy Must Sell” agreement. In light of these findings, I will not order specific performance of the Global Agreement in respect of the 1st Property. P should therefore vacate his registration of the writ in the Land Registry against both the 1st Property and the 2nd Property.
169. As the sale and purchase of the 1st Property and 2nd Property was not “Must Buy Must Sell”, I am of the view that P should not be entitled to an indemnity from D, as sought by him, in respect of the damages being legal costs and expenses incurred and to be incurred in the 3rd Action.
170. D had counterclaimed that the registration of the writ in the Land Registry against the 1st Property and 2nd Property by P was wrongful and slander of title, based on there being no Global Agreement and no Oral Agreement, and that the Chinese Agreement, being a separate agreement, was void and invalid. Although I will order vacation of the registration of the writ, I have not found for D’s case as pleaded in her defence and counterclaim. She is therefore not entitled to damages for wrongful registration and slander of title.
171. D had also counterclaimed against P for damages being her legal costs and expenses incurred and to be incurred in the 3rd Action. So far as D’s counterclaim is concerned, it would appear that she and Leung had initially agreed with Lam not to defend the 3rd Action and to even act as Lam’s witness in that action against P, which as Lam’s solicitors had said, it was a sensible decision. For some reasons, she later changed her mind, as I have mentioned earlier, she then applied to file a defence out of time. Registrar Lung did not allow her application and in his judgment, among other things, said D had not been able to satisfy him that she had a reasonable defence to resist Lam’s claim[51]. On appeal, DHCJ was also of the view that D had no defence[52]. I see no reason as to why P should indemnify D for loss and damages being costs and expenses incurred or to be incurred in the 3rd Action.
Order
172. My order is as follows:
(1) A declaration that a Global Agreement with the following terms existed between P and D :
(i) D would proceed expeditiously to obtain good title of all 3 properties in order to sell the entire Building to P ;
(ii) D would not sell or transfer any of the 3 properties to any third parties;
(iii) P agreed to pay D $500,000 immediately upon signing of the Provisional S & P Agreement;
(iv) The parties agreed to enter into the Provisional S & P Agreement in relation to the sale of the Ground Property at HK$2.3m to P, subject to the terms of that agreement;
(v) The parties agreed to enter into the Chinese Agreement with P in relation to the sale of the 1st Property at HK$1.95m and the 2nd Property at HK$2.3m to P, subject to the terms of that agreement;
(2) P shall be entitled to damages for breach of the Global Agreement, such damages to be assessed;
(3) P’s other claims in the Amended SOC be dismissed;
(4) The registration by P of the writ herein in the Land Registry against the 1st Property and the 2nd Property should be vacated;
(5) D’s other claims in the defence and counterclaim be dismissed.
173. I order that D shall pay P’s costs of this action. This is an order nisi, which shall be made final after 21 days.
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(Bebe Pui Ying Chu)
Deputy High Court Judge
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Mr Kenneth Wong, instructed by Lennon & Lawyers, for the plaintiff
Mr Ray Tsang, instructed by Wong & Wong, for the defendant
[1] Para 6, B: 434-435
[2] Para 3(c), B:482
[3] Para 3(d), B:482
[4] Para 3(e), B:482
[5] Para 3(f), B:482
[6] B:524-540
[7] Para 3(g), B:482
[8] B:541-551
[9] See para 4, B:414
[10] B:149-156
[11] Para (2), Recital, B:149
[12] B: 167
[13] B:158-163
[14] See land search at B:169-175
[15] Para 4h, A:38
[16] B:126-127
[17] B:128-133
[18] B:135-141
[19] B:275-277
[20] B:552-558
[21] B:180-209
[22] B:413-426
[23] B:255-259
[24] Exhibit P2
[25] B:480 -522
[26] Para 2, Amended SOC, A:22
[27] Paras 2 and 3(i) to (iv), Amended SOC, A:22-23
[28] Para 2(iii), A:48
[29] Para 4, Amended SOC, A:23
[30] Para 4(d), Amended SOC, A:24-25; see also para 5(ii), A:70-71
[31] Para 4A, Amended SOC, A:25-26
[32] Para 5, Amended SOC, A:26
[33] Para 10, A:120
[34] B:130; NB: some of the words typed in traditional instead of simplified characters as in the
handwritten original
[35] A: 120-121
[36] Para 3, defence & counterclaim, A:36
[37] Para 5(ii), A: 70-71
[38] See headnote
[39] at paras 12-104 to 12-113, Vol 1, 31st Ed
[40] Paras 5, 6, Amended SOC, A:26-27
[41] At para 13-003, Vol 1
[42] 4th para, at pg 10
[43] 5th para, at pg 10
[44] At pg 11
[45] At pgs 11-12
[46] Headnote, pg 151
[47] Lines A-B, pg 156
[48] Per Ribeiro PJ, paras 34 -36, pg 336, River Trade case
[49] See Headnote
[50] Per G Lane LJ, at pg 345
[51] Para 30, B:424
[52] Para 89, B:518
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