KWOK CHOR SHAN v. EMPIRE PROPERTIES DEVELOPMENT CONSULTANTS LTD

DCCJ14764/2000

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 14764 OF 2000

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JUDGMENT

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1. In November 1997 the Plaintiff and the Defendant entered into an agreement for the sale and purchase of a property situated on the first floor of a structure erected at Section A, Lot No. 432 in D.D. 23, Tai Po, New Territories (hereinafter called "the said structure" and "the said flat"). The agreement was reduced in writing on 19 November 1997 in an instrument which the parties referred to as the provisional agreement for sale and purchase (hereinafter called "the said instrument").

2. The Defendant is a developer of village houses commonly known as‘丁屋’. The right to build this type of village houses is conferred to the male members of the indigenous population in the New Territories under the Government's small house policy. The person who has been conferred such a right is not allowed to transfer the village house built until after the house is completed and the consent to transfer has been granted and the premium assessed and paid to the Hong Kong Government. License to build at the said piece of land was granted on 28 October 1996 to the then registered owner.

3. Unfortunately, the said instrument had not been stamped by either party under s. 3 of the Conveyance and Property Ordinance Cap. 219. Consequently, neither party are allowed to bring an action under the said instrument under s. 3 of the Ordinance. Under s. 15 of the Ordinance the said document cannot be received in evidence in any proceedings unless it has been duly stamped or an undertaking to have it stamped has been given by the solicitor representing the vendor or the purchaser. Neither party had given such an undertaking at the hearing because of the high penalty it may attract under s. 9 of the Ordinance. I have already set out the background and the relevant legislation in my earlier ruling on the admissibility of the said instrument delivered on the first day of the trial, I do not propose to repeat them here. It was my ruling that the said instrument should not be read or received as evidence in these proceedings.

4. In the amended Statement of Claim filed by the Plaintiff at the close of the Plaintiff's case, the Plaintiff claims that the agreement between the parties was partly oral, she further relies on the 4 receipts issued by the Defendant acknowledging the deposit payment of $500,000 in support of her claim for its recovery under s. 3 of the Conveyancing and Property Ordinance Cap. 219 as memoranda in writing.

5. The Defendant counterclaims against the Plaintiff for damages for breach of agreement to purchase the said flat.

Facts not disputed

6. It is not disputed that the Plaintiff was working as a clerk at the Defendant company in November 1997. The Plaintiff and Defendant signed the said instrument on 17 November 1997 for the sale and purchase of the said flat, that the agreed purchase price was $2 million, the deposit to be paid was $500,000 which the Plaintiff duly paid by 4 instalments. It was pleaded by the Defendant that the completion date would be within one and a half month of the Government's issue of the demand letter for payment of premium. No formal sale and purchase agreement was signed though it was originally agreed one would be prepared and signed by the parties in January 1998.

7. It is also not disputed that on 4 January 2000 the registered owner of the land and structure erected on Section A Lot 432 of DD 23 (hereinafter called "the said property") received a letter of demand for payment of premium. The premium was paid on 19 January 2000 by the registered owner and on 20 January 2000 the Defendant entered an agreement for sale and purchase of the said property with the registered owner for the sum of $5.4 million. On the same day, the Defendant took out a mortgage from the Kwangtung Provincial Bank to secure general banking facilities.

Disputed Facts

Plaintiff's Case

8. It is the Plaintiff' s case that she intended to purchase the said flat for her own residential use, she further claimed that the Defendant's then general manager Mr. Tam Yu Hong (DW1) promised in November 1997 prior to the signing of the said instrument that the said property would be ready for completion between March and June 1998. She claimed that DW1 Mr. Tam knew she required the said flat for her own residential use in the early part of 1998.

9. It is the evidence of the Plaintiff that in reliance to the promise she paid the said deposit of $500,000 in four instalments to the Defendant. Meanwhile, since March 1998, she repeatedly sought Mr. Tam out enquiring as to the date of completion because she required it for her own accommodation soon. She claimed Mr. Tam repeatedly told her it would be ready soon at the initial stage, and that later on, he had refused to meet her. It was due to the intervention of her friend Madam Cheng (PW2) that these later meetings were made possible. These meetings yielded no result as to a March to June 1998 completion, as with meetings subsequent to March 1998, these took place in October 1998, July 1999, August 1999 and December 1999.

10. PW2 Madam Cheng's evidence supported the Plaintiff's evidence. She claimed that Mr. Tam had told her at a meeting in the absence of the Plaintiff in January 2000 that the Defendant intended to sell the said structure to a single purchaser in spite of the November 1997 agreement to sell the first floor to the Plaintiff. It is the Plaintiff's case that that was the reason why the Defendant had refused to complete the sale to her. She regarded the Defendant had repudiated the agreement and consequently issued the writ against the Defendant for the recovery of the deposit based on the breach of agreement by the Defendant.

11. It may be useful to set out here the dates of the four instalments of deposit paid by the Plaintiff. They were:

(i)	19 November 1997	$50,000;
(ii)	4 December 1997	$280,000;
(iii)	16 December 1997	$70,000;
(iv)	26 January 1997	$100,000

receipts for these payments can be found in pages 21, 22, 23 and 24 of the agreed bundle, copy of the cheque of 4 December 1997 can be found on page 20 of the agreed bundle.

12. The four receipts issued by the Defendant each stated the date, the name of the Plaintiff as the payee, the amount of payment, the number of instalments of the payment as deposit for the said flat setting out the address of the said flat with the Defendant's signature as the recipient endorsed with the Defendant's company chop.

13. It was both the Plaintiff Miss Kwok's and Madam Cheng's evidence that on a date after March 1998, they went to visit the said structure a second time though Mr. Tam had refused to give them the keys to enter the said structure. They found the condition of the said structure exactly as they saw it the first time in November 1997. That, like the first time, the floor boards still have not been laid. It was the Plaintiff's evidence that she left the Defendant's employ in or about March 1998.

The Defence Case

14. The Defendant's former general manager Mr. Tam Yu Hong denied in his evidence in Court that he had ever told the Plaintiff that completion would take place between March and June 1998. He claimed the Plaintiff, Miss Kwok, and PW2 Madam Cheng had wanted to purchase the said flat for purposes of resale for profit . It was Mr. Tam's evidence that on the same day of signing of the said instrument, he had written out an agreement for the Plaintiff and Madam Cheng to sign stating that the Plaintiff had signed the said instrument on behalf of herself and Madam Cheng, and that the $500,000 deposit was to be borne by both equally with future profits arising from resale to be shared by both equally. Further, he was contacted by the Plaintiff in March or April 1998 who told him she was in financial difficulties and would not be in a position to complete the purchase due to the fall in property value. He said the Plaintiff had asked for the return of half of the deposit paid by her. This was refused by the Defendant. The Plaintiff, however, repeated the same request between 1998 and 1999 according to DW1.

15. Mr. Tam claimed he met Miss Kwok on or about 8 September 1999 after the letter of compliance was issued and informed her that she should prepare for the completion of the purchase. He said the Plaintiff told him then that she had no money to complete the purchase and requested for an extension to which the Defendant agreed because the Plaintiff had been a former employee and the state of the property market was poor and the Defendant had not been able to sell the said structure at a good price.

16. Mr. Tam said he met the Plaintiff and Madam Cheng at a restaurant on 20 January 2000 and informed them the Defendant is ready to complete the sale. The Plaintiff and Madam Cheng requested for more time. The Defendant again agreed to their request. Since then, he claimed he had not been able to contact the Plaintiff for she had stopped her mobile phone and changed her telephone number.

17. Consequently, the Defendant regarded the Plaintiff to have refused to complete the purchase of the said flat.

18. The Defendant's director Chung Wan Sang's evidence supported Mr. Tam's evidence. He confirmed that upon the issuance of the Government's letter of demand of 4 January 2000, premium for the transfer of the said structure was paid but he was unable to recall the exact amount of the premium, he recalled it was between $600,000 to $700,000. He admitted he had left Mr. Tam in charge of it although Mr. Tam had left Defendant's employ in September 1998. He admitted he had expected the premium to have fallen to $400,000 to $500,000 due to the fall in property prices since 1997, but the government did not lower the premium in its assessment.

The Law

19. Section 3 of the Conveyance and Property Ordinance Cap. 219 provides that:-

"(1) Subject to Section 6 (2), no action shall be brought upon any contract for the sale or other disposition of land unless the agreement upon which such action is brought, or some memorandum or note thereof, is in writing and signed by the party to be charged or by some other person lawfully authorised by him for that purpose.

(2) This section applies to contracts or other dispositions whenever made and does not affect the law relating to part performance or sales by the court."

20. The aforesaid s. 3 Conveyance and Property Ordinance is adopted from s. 40 of the U.K.'s Law of Property Act 1925 which replaced that portion of section 4 of the Statute of Frauds 1677. S. 40 of the Law of Property Act 1925 has been repealed and replaced by section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 in the U.K. S. 2 of the 1989 Act improved the former s. 40. Peter Gibson L.J. observed in Firstpost Homes Ltd. v. Johnson [1995] 1 WLR 1567 that:-

"the Act of 1989 seems to me to have a new and different philosophy from that which the Statue of Frauds 1677 and section 40 of the Act of 1925 had."

S. 2 of the United Kingdom's 1989 Act is phrased differently from s. 40 of the 1925 Act while s. 40 of the 1925 Act is almost identical to our s. 3 Conveyancing and Property Ordinance, for this reason, references should be sought from s. 40 of the 1925 Act and Hong Kong authorities before the 1989 Act.

21. In the present case, there is a written provisional contract for sale and purchase ("the said agreement") containing all the essential particulars required in a sale of land. The said instrument, however, has not been stamped and the Defendant had raised this as a preliminary issue that it should not be received in evidence in any proceedings under s. 15 of the Stamp Duty Ordinance Cap. 117. Consequently, the provisional contract for sale and purchase has not been received by the Court.

22. S. 15 Stamp Duty Ordinance Cap. 117 states that:-

"(1) Subject to subsection (1A), no instrument chargeable with stamp duty shall be received in evidence in any proceedings whatsoever except-

(a) criminal proceedings;

(b) civil proceedings by the Collector to recover stamp duty or any penalty payable under this Ordinance,

or be available for any other purpose whatsoever, unless such instrument is duly stamped."

23. Sarah Nield, in her book Hong Kong Land Law 2nd ed. page 100, para. 5.3.4 refers to s. 3 of the Conveyancing and Properties Ordinance:-

"5.3.4

Unless the agreement or some memorandum or note thereof, is in writing signed by the party to be charged or by some other person lawfully authorised by him for that purpose.

The parties' agreement for the disposition of an interest in land must satisfy the usual requirements of any valid contract. There must be a concluded contract based upon an offer and acceptance that is supported by consideration and an intent to create legal relations. The parties must also enjoy the capacity to enter into the contract. For this reason, an infant in Hong Kong will have difficulty in purchasing property, although there is no legislative prohibition upon his doing so.

The parties' agreement must be in writing or there must be adequate written evidence of the oral agreement. Many agreements for sale of land are themselves in writing but often, particularly in the early stages of a transaction, the parties will not have put their agreement in formal written terms but will just have entered into some preliminary correspondence or other documentation.

The memorandum must provide evidence of the material terms of the parties' agreement. In particular, the parties must be named or otherwise identifiable, the property must be sufficiently identified, not only as to its physical location but also the legal nature of the interests to be disposed of - for instance, the term and its commencement date if the disposal in question is a lease, the price or a formula for ascertaining the price must be stated, and any other particular terms must also be mentioned unless either the party in whose favour the term is made is prepared to waive it or the party required to perform the term is still prepared to do so."

24. The Defendant attempted to rely on the terms and conditions pleaded in the Defence and Counterclaim; failing the formal production of the said instrument, it would be wrong to accept those were terms agreed by the parties. I cannot ignore the application of s. 15 of the Stamp Duty Ordinance and enforce the terms under the said instrument when the said instrument itself cannot be received in evidence. To do so would tantamount to defy and ignore the application of s. 15 of the Stamp Duty Ordinance and the Statute of Frauds.

25. As to the evidence of the four receipts for the deposit payments as memoranda of the agreement, they bore the Defendant's signature only, the Plaintiff's signature was absent. Neither did they set out the full purchase price or that the payment was for the purchase of the property. Consequently, they may be relied on by the Plaintiff as payments received by the Defendant but cannot be relied on by the Defendant as memoranda in writing in support of the agreement of sale and purchase without further proof by means of some other interconnected documentary evidence in support. The only further proof was the cheque for $280,000. This document cannot be sufficient proof that the money was paid for the purchase of the property even if read together with the receipts due to the failure of full particulars on the documents produced. The memorandum of the four receipts failed for it lacked the formal requirements of recording all the material terms of the parties' agreement.

26. In the circumstances, the Plaintiff's claim cannot succeed unless there is either the production of a stamped instrument or an undertaking from her solicitor to pay the stamp duty and to stamp the said instrument. The Defendant's counterclaim also fails for the same reason that the said instrument cannot be received in evidence and therefore the terms contained therein cannot be relied on.

27. Even if I were wrong and these four receipts together with the cheque can be read together and form sufficient memoranda of the agreement for sale and purchase of the said flat, there is no written evidence of any agreement as to the completion date. Even if this can be overcome by the concession of the parties in court that it would be 1 1/2 month upon issue of the letter of demand of premium, there being a long delay in the Defendant's own completion of the purchase of the said property, a written notice to complete should be served on the other party.

28. According to Mr. Tam's evidence, he was not able to locate Miss Kwok and therefore did not serve any written notice to complete on Miss Kwok. Yet, he claimed he was able to meet Miss Kwok and Madam Cheng on 20 January 2000 and agreed to delay the completion upon a request by Miss Kwok and Madam Cheng. If he was able to meet with Miss Kwok and Madam Cheng on 20 January 2000 and agreed to postpone the completion date, it is unlikely that he would not have obtained the latest address of Miss Kwok and Madam Cheng or contact Miss Kwok with the help of Madam Cheng.

29. I find Miss Kwok and Madam Cheng to be truthful witnesses. The Defendant clearly was not in any hurry to have the said property transferred to its name, property prices had fallen since 1997. Consequently, the Defendant expected the premium payable should be reduced accordingly. Mr. Chung admitted he had hoped to pay a lower premium in 2000. Further, other than the Plaintiff, there were no other purchasers for the other two floors of the said property. It would be to the Defendant's advantage to delay the purchase from the registered owner as long as possible. I also accept Madam Cheng's evidence that had the Defendant been able to sell the whole of the said property to a single purchaser, the Defendant would have no hesitation of repudiating its agreement with the Plaintiff. That was the reason why a formal sale and purchase agreement was not signed and the Defendant had failed to register the provisional sale and purchase agreement, although the Defendant could have recovered the stamp duty from the Plaintiff under the terms of the said instrument.

30. I accept Miss Kwok's evidence on a balance of probability that she was promised completion sometime between March to June 1998 and she had moved from her father-in-law's home to rented premises in May 1998 because she could not wait any further. I further accept that she could have been financed by a mortgage and by her father-in-law had the completion took place at that time. Clearly, the Defendant could have written to her at her last known address which was also the address of her father-in-law. The address should be well known to the Defendant for she was a former employee. As the Defendant failed to serve any formal notice to complete after a long delay, Miss Kwok was entitled to regard any agreement the parties may have entered for the sale and purchase of the said flat to have been repudiated.

31. As to the Plaintiff's alternative claim for the return of the deposit payment for money had and received there is evidence produced by the Plaintiff of the four payments received by the Defendant and the Plaintiff's cheque for $280,000 together with 3 payment advice slips that matched the 4 receipts signed by the Defendant. There is no evidence that these payments were made for any services rendered or goods otherwise supplied. Failing consideration in return for such payments, the Plaintiff is entitled to demand the return of the payment of $500,000.

32. I therefore allow the Plaintiff's claim for the return of $500,000 payment and interest awarded at half judgment rate from the date of writ to date of judgment and full judgment rate from date of judgment to date of full payment.

33. Cost nisi - costs follow the event. Cost to the Plaintiff to be taxed if not agreed. The Plaintiff's own costs to be taxed in accordance of legal aid regulations.