KWAN LAI KIT EDDIE AND ANOTHER v. LEUNG MUK LAN

HCA 2179/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2179 OF 1998

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J U D G M E N T

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1. The 1st and 2nd Plaintiffs are husband and wife. At all material times, the Plaintiffs were the registered owners of the property known as 2/F & Roof, Lot No. 845 in Demarcation District 226, Sai Kung, New Territories, Hong Kong ("the property").

2. It is common ground that in about May 1997, the Plaintiffs wished to sell the property and put it up for sale. The Defendant was interested in the property and wished to purchase it.

3. It is the Plaintiffs' case that by an agreement in Chinese with the title "Provisional Agreement for Sale and Purchase of Property" dated 31 May 1997 made between the Plaintiffs and the Defendant ("the agreement"), the Plaintiffs agreed to sell and the Defendant agreed to purchase the property.

4. The agreement provided that the purchase price was HK$3.53m. The sum of HK$150,000 was payable as the initial deposit by the Defendant to the Plaintiffs upon the signing of the agreement. The formal agreement for sale and purchase was to be signed on or before 16 June 1997 at which time a further deposit of HK$203,000 would be paid to the Plaintiffs. The outstanding purchase price of HK$3.177m. was to be paid on or before 8 August 1997. Completion was to take place on or before 31 August 1997. It was provided that the purchaser should be solely liable for stamp duty. It was also provided that should the purchaser fail to complete the purchase, the deposit should be forfeited. It was also provided that the agreement superseded all previous negotiations, representations, understanding and agreements of the parties.

5. It is the Plaintiffs' case that upon the signing of the agreement, the Defendant drew a cheque for HK$150,000 dated 31 May 1997 drawn upon the Hang Seng Bank made payable to the 1st Plaintiff. It was paid as the initial deposit under the agreement. The cheque was duly presented for payment but was dishonoured as the Defendant had countermanded payment. The Plaintiffs' case is that the Defendant was in breach of the agreement. She evinced an intention not to be bound by the agreement and by a letter dated 3 June 1997, the Plaintiffs, through their solicitors, gave notice to the Defendant, through her solicitors, that the Plaintiffs accepted her repudiation of the agreement. Notice of dishonour of the said cheque was also given.

6. The 1st Plaintiff claims the sum of HK$150,000 being the amount of the dishonoured cheque. Alternatively, the Plaintiffs claim the sum of HK$150,000 as damages for breach of the agreement. The Plaintiffs paid the sum of HK$70,600 as stamp duty for the agreement and the Plaintiffs also claim reimbursement of the said sum paid as stamp duty.

7. The Defendant denies that she ever entered into a legally binding agreement for the sale and purchase of the property. She does not dispute that she did sign the agreement and initialled amendments to the same. This was produced in evidence as exhibit P1. This was prepared and signed in duplicate, with one copy being retained by the Plaintiffs and the other copy given to her. Copies of the same are also in Bundle D.

The Issues

8. The issues which arise on the pleadings are as follows:

(1) Whether the agreement signed by the parties was a legally binding agreement for sale and purchase of the property or whether the same was a mere memorandum of representations.

(2) Whether the Defendant's signature on the document was procured by misrepresentations.

(3) Whether by the agreement the Plaintiffs were agreeing to sell premises which were materially different from the description in the Sai Kung Land Register.

(4) Whether there was a clear understanding between the parties' solicitors that the parties should proceed to sign an agreement for sale and purchase, not a provisional agreement, if the terms and conditions had been agreed.

(5) Whether the agreement was a tenancy agreement.

(6) Whether the agreement was a receipt for the acceptance of a cheque for HK$150,000.

(7) Whether a substantial and material part of the agreement was illegible and some Chinese characters so blurred that they should be omitted in the construction of the agreement.

(8) Whether the Defendant was solely liable to pay stamp duty under the agreement.

(9) Whether the agreement was incomplete to fulfil the requirements for stamp duty payment.

(10) Whether the agreement should have been charged to a different amount of stamp duty as a tenancy agreement.

(11) Whether the cheque for HK$150,000 was issued by the Defendant when she suffered from exhaustion and pressure from the Plaintiffs for her to issue the same.

(12) Whether the said cheque was issued and given to the 1st Plaintiff as the initial deposit payable under the agreement or whether the 1st Plaintiff represented to the Defendant that the said cheque would not be presented for payment and should be used merely as a refundable security and to be drawn on only when the solicitors for the Defendant had approved the agreement for sale and purchase to be drafted by the Plaintiffs' solicitors.

(13) Whether the 1st Plaintiff agreed on or about 6 June 1997 with the Defendant to cancel the agreement and did so by stamping the word "cancelled" and signed on the Defendant's counterpart of the agreement.

(14) Whether the Plaintiffs made the representations pleaded in para.10 of the Amended Defence and Counterclaim to the Defendant and if so, whether the same were untrue.

(15) Whether the Defendant is entitled to damages for fraudulent misrepresentation.

9. I heard evidence from the 1st and 2nd Plaintiffs. They have conveniently been referred to respectively, as Mr and Mrs Kwan in the course of the trial and I shall also refer to them as Mr and Mrs Kwan. I also heard evidence from the Defendant. She also called Mr Chan Hon Tsang, the person from whom she subsequently purchased a flat.

Mr and Mrs Kwan's evidence

10. Mrs Kwan gave evidence that she had engaged estate agents to sell the property in May 1997. The Defendant was a neighbour living in a flat in the house opposite the Plaintiffs. She was interested in purchasing the property and went to look at it on 17 May 1997. There is no dispute that she went there with her son. The Defendant had learnt that the property was available for sale from a neighbour, Mr Yau. Mrs Kwan said that the Defendant looked around the property and enquired about the price. She told the Defendant that it had been offered in the market for HK$3.58m. After looking around the property, the Defendant said that she wanted to buy the flat. She had also told Mrs Kwan that the she did not want to change schools for her son and wanted to buy a flat there. The Defendant asked for a reduction in price and suggested that since she had come without an estate agent, no commission would be payable. Mrs Kwan said that she could reduce the price by about HK$20,000 to HK$30,000. However, the Defendant informed her that she really liked the property and bargained for a further reduction.

11. Mrs Kwan agreed to a final reduction of the price to HK$3.53m. According to Mrs Kwan, the Defendant said that she would buy the property. She agreed to the figure of HK$3.53m as the purchase price of the property. The Defendant was also keen that other prospective purchasers should no longer inspect the flat. The Defendant informed Mrs Kwan that what they had was an oral agreement and requested that other persons should no longer be permitted to view the property. Mrs Kwan agreed. The Defendant also told her that she would give her a deposit right away but that she had not brought a cheque with her.

12. The Defendant gave Mrs Kwan the telephone number of Mr David Chan, her solicitor, as she had to know some details about the flat, like the period of the lease and whether the flat really belonged to the Plaintiffs. Mrs Kwan told her that she would have to get hold of the solicitor who had previously handled the purchase of the flat for her and would contact him the following Monday. There were no other queries.

13. Mrs Kwan said that on Monday 19 May 1997, she contacted Mr Adrian Lo of Joseph C.T. Lee & Co. who had assisted her previously in the purchase of the property. She also contacted Mr David Chan as requested by the Defendant. She also informed the estate agents to stop bringing people to view the property.

14. There were communications between Mrs Kwan and the Defendant during the week commencing on 19 May 1997 and a few days thereafter. Mrs Kwan accepted that in her second meeting with the Defendant, the Defendant informed her that she was getting a loan under the Housing Society's sandwich class housing loan scheme. Mrs Kwan denied that the Defendant ever mentioned to her that the purchase price had to be limited to HK$3.3m. She denied that a copy of exhibit D1a, the certificate of eligibility for the loan, was given to her by the Defendant but accepted that a copy of exhibit D1b, the printed terms and conditions, were given to her. These she did not read but faxed to her solicitor. Her solicitor informed her that the obtaining of a loan by the Defendant had nothing to do with her. As she had agreed not to let others view the flat, she was anxious to receive a deposit from the Defendant and asked the Defendant to make arrangements for payment of a deposit. She also informed the Defendant that she was just selling the property and was not concerned with her application for a loan. The Defendant told her that it would be better if she could obtain a low interest loan but that it would not matter if she could not obtain it as she was able to obtain from elsewhere the money to pay for the property.

15. There were also discussions as to when the flat would be delivered and this was agreed to be by 31 August 1997. According to Mrs Kwan, the Defendant also asked whether the Plaintiffs would leave things behind for her when they left the property and which would be given to her free of charge. Mrs Kwan told her that she would leave the things that they would not want when they moved out but that she was unable to decide at that time what those things were.

16. As the purchase price and the date when the property would be delivered had been agreed with the Defendant, Mrs Kwan wanted to collect a deposit and to sign a provisional sale and purchase agreement with the Defendant. She told her solicitor that she wanted to collect a deposit and asked him to supply her with a provisional sale and purchase agreement. She mentioned to the Defendant that since she had to obtain a deposit from her, they should sign a provisional sale and purchase agreement. The Defendant told Mrs Kwan that she had no problem with that. They arranged to meet for the Plaintiffs to obtain a deposit and for the parties to sign a provisional sale and purchase agreement.

17. The document faxed over by her solicitor to Mr and Mrs Kwan was exhibit P1 without the blanks filled in. According to Mr Kwan, the words in cl.13 after the word "Remark" had been filled in by the solicitor, namely:

"It is hereby agreed that the vendor is not responsible for assisting the purchaser to apply any kinds of loan and/or mortgage".

By that time, Mrs Kwan had already been advised by her solicitor that the matter of the Defendant obtaining a loan had nothing to do with the Plaintiffs.

18. Mrs Kwan denied that the Defendant ever told her that she could only pay HK$3.3m as the purchase price. She also denied that she was ever asked by the Defendant to provide a schedule listing out items such as furniture, fixtures, electrical appliances and car parking space amounting to a value of HK$230,000. She denied meeting the Defendant on 24 May or on 29 May 1997 when, it was suggested to her, the Defendant handed Mrs Kwan a cheque for HK$20,000 which was refused.

19. Mrs Kwan said that the appointment with the Defendant was fixed for 30 May 1997. Mr and Mrs Kwan denied that there was an appointment for lunch with the Defendant on that day. It does not, in my view, matter if, as the Defendant said, there was an appointment for lunch. It is common ground that there was a meeting only at night on 30 May 1997.

20. Mrs Kwan did not meet the Defendant on 30 May 1997. Mr Kwan did. The Defendant was supposed to be at the property at 8 pm but she was running late. Mr Kwan said that at about 8 pm the Defendant telephoned him saying that she would be late and would arrive at around 10.30 pm. At about 10.35 pm, she telephoned again and said that she would be there in about half an hour. Mr Kwan said that she finally arrived at about 11.35 pm. Mrs Kwan was at that time in the bedroom with their daughter who was about 2 years old and was putting her to sleep. They were due to go to Macau the following morning.

21. According to Mr Kwan, the Defendant appeared to be very normal and was not surprised to see him. They sat in the sitting room. He informed her that Mrs Kwan was in the bedroom with their daughter putting her to sleep. He talked to her about entering into a sale and purchase agreement. He said that the Defendant had a document in English about half the size of an A4 sheet. As he is not proficient in English, he took that document into the bedroom to show it to Mrs Kwan. Mrs Kwan informed him that they should not sign on it as it provided that if the Defendant was unable to obtain a loan under the sandwich class scheme, then the deposit of $20,000 would be refunded to her. After he came out of the bedroom, Mr Kwan told the Defendant that they could not accept the document. He told her that they could not guarantee that she would obtain a loan. They would not be liable for that. He also told her that she could refuse to buy the property but the Defendant was anxious to buy. She telephoned her maid to bring over a document which she did. This was a copy of the terms and conditions. The Defendant explained to him that she could purchase a flat up to the value of HK$3.3m and make arrangements to pay the balance of the purchase price. She told him that there were two ways of obtaining a loan under the scheme. One was to buy a flat under HK$3.3m, the other was to get a loan of $600,000. She said that she chose to obtain a loan of $600,000. On hearing that, he asked her whether she would buy the flat if she were unsuccessful in getting the loan. She told him that it would not matter. She was able to manoeuvre her cash. She told him that there was no difficulty for her as she could manage it herself.

22. According to Mr Kwan, he then discussed the agreement, exhibit P1, with the Defendant.

23. He said that the price of HK$150,000 as the initial deposit was arrived at after the Defendant bargained it down. He had wanted to collect as the initial deposit the equivalent of 5% of the purchase price, which was slightly more than HK$170,000 but the Defendant bargained it down to HK$150,000. He also said that the Defendant wanted compensation in the event that they failed to give vacant possession by 31 August 1997. The Defendant asked for this and he agreed. That is the reason why he wrote in cl.13 after the word "Schedule", the following:

"Should the Vendor fails to deliver vacant possession before 31 August 1997, the Vendor shall pay daily rent of HK$1,000 to the Purchaser."

This was written pursuant to the Defendant's request.

24. He filled in the agreement and made the amendments with the Defendant watching him. He then did the same with the counterpart of the agreement. He had also asked the Defendant for her identity card but she had not brought it with her but gave him the number.

25. He signed both copies of the agreement and initialled the same and took them to his wife who was in the bedroom together with a cheque for HK$150,000 issued by the Defendant. However, Mrs Kwan discovered that there was a mistake in the words in English on the cheque and did not sign the documents. Mr Kwan came back to the sitting room and pointed out the error to the Defendant who issued another cheque for HK$150,000, namely, the cheque which was subsequently dishonoured. Mr Kwan took these documents together with this cheque to Mrs Kwan. As the cheque was correctly filled in, Mrs Kwan signed the documents and initialled the amendments. Mr Kwan said that he then brought the documents back to the Defendant. The Defendant signed and initialled the amendments on both copies of the agreement but before she did so, she read the documents. He said that she appeared perfectly normal and in good mood when she signed. She did not object to anything in the agreement.

26. He said that he wanted to check her identity card and as she had not brought it with her, he suggested that he go with her to her home to check it. She did not have a problem with that. He gave her the counterpart of the agreement which was also signed and initialled. He also gave her a copy of the cheque she had given him. Mr Kwan said that it was about 1.30 am when they left the property. At the Defendant's home her son was still awake watching television and he greeted Mr Kwan. The Defendant produced her identity card and he checked the number with what was written down in the Defendant's copy of the agreement. He then left and returned home at about 1.45 am.

27. Mrs Kwan's evidence also supports what Mr Kwan said happened on the occasions he went into the bedroom to discuss matters with her whilst the Defendant was in the sitting room. Mrs Kwan also said that she asked Mr Kwan about the addition after the word "Schedule" in cl.13. Mr Kwan explained to her that the Defendant wanted some sort of compensation if the property could not be delivered by 31 August 1997. She thought it was fair and did not object to it.

28. Mr Kwan denied that he told the Defendant that the agreement was just an outline for discussion. Mr Kwan denied that the purchase price of the flat included furniture. He said that there was no discussion with the Defendant about furniture at all on the night of 30 May 1997. He denied that there was a discussion about the provision of a schedule of furniture, electrical appliances and decorations. He also denied that he was asked to supply the Defendant with information to confirm that there was no illegal structure on the roof.

29. Mr Kwan said that in the morning of Saturday, 31 May 1997 at about 9 to 10 am before boarding the bus to take the family to the pier for their trip to Macau, he deposited the cheque for HK$150,000 into his bank.

30. Mrs Kwan said that the Defendant telephoned her between 9 and 10 am on 31 May 1997 telling her that there was some problem with the loan. She was told that the bank had informed the Defendant that the amount in the agreement should only be HK$3.3m. The Defendant asked her if she could assist her by changing the purchase price of the property to HK$3.3m with the balance of slightly more than HK$200,000 to be paid to her separately upon completion. Mrs Kwan told the Defendant that she had already faxed the agreement to her lawyer. She would check to see if he had received it and whether there would be any problem with the Defendant's request. She also asked the Defendant how she proposed to pay the money after making the change. The Defendant told her that she could obtain a loan from a bank for decoration purposes and could obtain another loan that way. Mrs Kwan then telephoned her solicitor. She told him about the Defendant's request. He informed her that he had already received the agreement. He also told her that by changing the agreement in the manner requested by the Defendant, there would be a lesser sum payable for stamp duty. He advised her that this could amount to cheating the Government. He also told her that the Defendant's suggestion that she pay about HK$200,000 separately on completion was only verbal and asked her what she would do if the Defendant refused to pay. He advised her that there was no obligation to assist the Defendant under the agreement. She told her solicitor that she did not wish to commit an offence. He said that he would proceed with the matter and prepare a formal agreement for sale and purchase for her.

31. Mrs Kwan said that she telephoned the Defendant after her conversation with her solicitor and told her that by changing the purchase price, the Government would be cheated out of some stamp duty. She told the Defendant that she did not want to get into trouble and told her that she did not want to do what the Defendant requested. She also reminded her that the Defendant had previously said that she had ways of arranging the loan and suggested that she should think of some other ways. The Defendants said that she would look into it. She denied that the purpose of the Defendant's telephone call on 31 May 1997 was for the Defendant to get a schedule of a list of furniture and other items.

32. Mr Kwan also said that he paid the stamp duty for the agreement in the sum of HK$70,600 as advised by his solicitors.

The Defendant's evidence

33. The Defendant gave evidence that she was interested in buying a flat. In May 1997, she lived at E2, 2nd Floor, Denon Terrace, Clear Water Bay Road, Hong Kong. This was a flat in the house opposite the property where Mr and Mrs Kwan lived. She was aware that there was a sandwich class housing loan scheme available and made an application. She obtained a certificate of eligibility, a copy of which was produced in evidence as exhibit D1a, as well as the terms and conditions, exhibit D1b.

34. Through Mr Yau, she discovered that Mr and Mrs Kwan wanted to sell their property, so she went there on 17 May 1997 with her son to have a look at it. She said that she asked Mrs Kwan whether the asking price of HK$3.58m could be reduced. She said that she told Mrs Kwan that she wanted to go back to have a look to see if she could buy it and for Mrs Kwan to consider whether it could be cheaper. She denied that there was any agreement as to price on that day. She said that Mrs Kwan claimed that the flat had good fung shui and that it had been decorated recently.

35. The Defendant said that she went back again on the following Monday, 19 May 1997 together with a friend who knew about fung shui. He told her that the flat was alright and asked her to talk about the price. She said that she saw Mrs Kwan again on 20 May 1997 where the price and details were discussed. Later on, when cross-examined about the date of her second meeting with Mrs Kwan, she said that she was mistaken about meeting her on 20 May 1997. She said that she took with her all the information relating to the Housing Society loan scheme. She left behind copies of the documents with Mrs Kwan.

36. The Defendant also said that there was a discussion with Mrs Kwan on the purchase price on this visit and the price was negotiated and agreed at HK$3.53m. She said that she did not agree the price on the first occasion that she met Mrs Kwan. She said that Mrs Kwan told her that they intended to emigrate and that there could be a lot of things that they would not need and would leave behind in the flat. She said that she also mentioned what was a rather important part in the negotiations with Mrs Kwan namely, that there should be a schedule listing out all the things mentioned, such as the furniture, fixtures, parking space and the structure on the roof. She said that she told Mrs Kwan that even if she wanted to buy the property, she had to think of ways to get the money and that she really had to know whether the conditions of the Housing Society would be met before she could buy. She said that she would go back to reconsider the matter.

37. The Defendant also said that her solicitor had received some documents from Mr and Mrs Kwan's solicitors. She had made an appointment with her solicitor to go over the documents on Monday, 2 June 1997. Her solicitor told her that if all the terms and conditions were confirmed, an agreement would be made. She said that subsequently Mrs Kwan asked her whether she was sincere in purchasing the property and as they had done quite a lot, she should pay some sincerity money. She said that she told Mrs Kwan that the terms and conditions with the Housing Society had to be fulfilled before she could buy the property and that the Housing Society had set 11 June 1997 as the last day for her to decide whether or not she wanted to buy a flat. She told Mrs Kwan that she did not mind putting up sincerity money if she wanted but that if it really turned out that she could not buy a flat, she had to return the money.

38. The Defendant also said that 29 May 1997 was fixed as the day for her to give a cheque to Mrs Kwan. She went to the property in the evening of 29 May 1997 with a cheque already written out for HK$20,000 and asked Mrs Kwan to take it to show her sincerity. Mrs Kwan refused to accept HK$20,000 saying that it was too little and that that they should sit together to talk clearly about the sale. She said that she suggested that they have lunch on the following day, 30 May 1997, at the Aviation Club near Kai Tak. She said that she received a telephone call from Mrs Kwan telling her that they could not make the lunch appointment and that a later appointment was fixed for 8.00 pm. Shortly after 8 pm she left her office and on her way home she telephoned Mrs Kwan asking her whether it was too late for her to come. Mrs Kwan said that it did not matter and she would wait for her. She said that she arrived home at about 10.30 pm and telephoned the Plaintiffs to enquire whether it was too late to go there at that time. Mrs Kwan said that as they were close by it did not matter and she went there at about 10.35 pm.

39. She said that she saw Mr Kwan and asked him where Mrs Kwan was. She was told that she accompanied her daughter to sleep. She said that she wanted to go away because all her previous contacts were with Mrs Kwan and she asked Mr Kwan if he knew about the discussions she had had with Mrs Kwan previously. He said that as he was also an owner it would be the same if she spoke to him and suggested that since she was there, they should go ahead and discuss it and fix up the matter. She agreed. She said that she produced the cheque which she had brought with her for HK$20,000. Although Mrs Kwan had refused it the previous day, she still insisted on paying HK$20,000 and hoped that they would accept it. She also produced a receipt which she said had been prepared by her solicitors on the basis that the deposit was refundable. She told Mr Kwan that she had agreed with Mrs Kwan to pay sincerity money. Mr Kwan said that he was not proficient in English and put aside the piece of paper saying that he would speak to his wife about it. She said that she started to explain to him about the application for a loan which could either be a mortgage of 70% of the purchase price or $550,000, whichever was less. She asked her maid to bring over some documents which she did. She said that she explained to him that the purchase price was HK$3.3m. and that other items were exclusive of the purchase price.

40. They discussed when the property would be delivered up and she was told roughly at the end of August 1997. She asked him what would happen if they could not manage delivery of possession by that time and he suggested that if they could not really do it, he would pay rent to her at $1,000 per day. She said that they talked further about the documents which she required as soon as possible before she could fill in a report on title for the loan.

41. She also said that Mr Kwan asked her to pay more sincerity money. She told him that if she could not sort out the terms and conditions and be in a position to really buy the property, she wanted the money to be returned. Mr Kwan said that since they were neighbours, if she really could not buy the flat, he had other buyers. Mr Kwan took the receipt that she had produced and the cheque for HK$20,000 into the bedroom to show them to his wife. After a while, Mr Kwan came out and said that he did not want to sign the receipt because there was a term to the effect that if the application was unsuccessful, the money had to be returned. He said that they were just selling the flat with no guarantee from them about the loan. He emphasized that it did not matter because if she were unsuccessful in the application, she would not have to buy the property. She said to him that if that were the case, she would think of paying him sincerity money. She said that Mr Kwan produced the agreement. She said she had never discussed nor agreed with Mrs Kwan about the date when vacant possession would be delivered.

42. According to the Defendant, Mr Kwan said that he would write down all the matters that they had discussed that night and the document would be handed to their solicitors. She also said that there were words in the agreement which were blurred but she was unable to identify these. She said that she had her original counterpart of the agreement when she moved. She said that she also told Mr Kwan that several questions required by the Housing Society should be answered, for example, that there should be no illegal structures. She also said that Mr Kwan told her that the value of the furniture, structure on the roof and parking space would be equivalent to the value of the difference in the purchase price so that she could buy the property. According to her, Mr Kwan said that he would write down what they had discussed but for matters that he did not know at that time he would provide them to her later, such as, a list of the furniture and other items, including electrical appliances.

43. She said that Mr Kwan insisted on a cheque for HK$150,000 as security money and said that he would deposit the cheque only after she had first looked at the documents and if they were alright. She agreed to that as she had an appointment to meet her solicitor on 2 June 1997. She said that she made writing mistakes when writing a cheque for HK$150,000. There is no dispute between the parties that she made a mistake in the words in English for the amount. She also said that she made a mistake in the name of Mr Kwan in another cheque she wrote.

44. She signed the agreement and initialled the amendments. She said that she did not read the agreement but that Mr Kwan read the document to her but not word for word. She was given a copy of the same. She said that he insisted on having a look at her identity card. She said that she asked him to look at it on another day but he insisted and she agreed to his going back with her to her home to check her identity card. It was already 2.00 am.

45. She said that at about 9.00 am on 31 May 1997, she made an inquiry with the Housing Society about purchasing a flat at a certain price which included the furniture and miscellaneous items. She was informed by them that if that was the case, it should be so stated clearly in the sale and purchase agreement. She at once telephoned Mrs Kwan and told her that the Housing Society required her to state clearly what was inside the schedule or else she would not comply with the conditions to get the loan. She said that she told Mrs Kwan that she should provide her clearly with the furniture list which should be in detail. She said that she did not ask Mrs Kwan to make a change to the agreement. Mrs Kwan told her she would speak to her solicitor as the agreement had already been faxed to them. She called Mrs Kwan again to ask her what the situation was. She was told that if she wished to separate the furniture price from the purchase price, that would be equivalent to avoiding tax. She told Mrs Kwan that the Housing Society allowed her to do that because the proper purchase price was HK$3.3m, otherwise she would be unable to buy the property. She said that she told Mrs Kwan to tell her solicitors to clearly specify the purchase price and the amount in the list of furniture and other items. Mrs Kwan was agitated and said that the solicitors should do the talking.

46. On Monday 2 June 1997, she telephoned her solicitors. She said that she told her solicitors about the list to be supplied and the discussions on 30 and 31 May 1997. She also faxed to him the agreement. She also told him that she had given a cheque to Mr and Mrs Kwan. She told her solicitors that there was a schedule to be attached but after speaking to Mr and Mrs Kwan, they appeared be unwilling to provide it. She had also informed her bank on 31 May 1997 to refer to her before paying on the cheque. On 2 June 1997 she confirmed her instructions to the bank to stop payment. Her solicitors wrote to the solicitors for Mr and Mrs Kwan on her behalf on 2 June 19997. The matter was handled by the solicitors and the correspondence has been included in Bundle D.

47. The Defendant said that one day when she was in the office she received a telephone call from Mr Kwan. He told her that it did not matter if she did not buy the flat, however, they wanted to sell the property and there was no need to create trouble. She asked for the return of the cheque but he told her that he had not deposited the cheque for the time being but had torn it up. She told him that the agreement should be cancelled and returned to her. He said that he did not have the original with him and she should give him her copy as quickly as possible to wind up the matter. She telephoned her maid to take it to him which she did. On 7 June 1997, when she returned home after work, her maid told her the matter was fixed. She saw the agreement with the word "void" stamped and Mr Kwan's initial on it.

48. The Defendant has not produced the original of her counterpart of the agreement as she said that it was lost when she moved. She has also not called a handwriting expert and there is no admissible evidence that Mr Kwan's initial appears by the word "cancelled" in exhibit D4, the copy of the alleged 'cancelled' agreement.

Findings

49. The case rests on the credibility of the witnesses. I was impressed with Mr and Mrs Kwan. They struck me as honest and credible witnesses. I am satisfied that they were telling me the truth. I believe them.

50. The Defendant was not, in my view, a credible witness. She was evasive and I am satisfied that she was not telling me the truth about the events leading up to and surrounding the entering into of the agreement. I do not believe her version of events. She was also not telling me the truth about what transpired with Mr and Mrs Kwan after the agreement was entered into. I do not believe her. Where the evidence of Mr and Mrs Kwan is at variance with the evidence of the Defendant, I prefer and accept the evidence of Mr and Mrs Kwan and reject the Defendant's evidence. I believe them but disbelieve the Defendant.

51. I find that at the first meeting with Mrs Kwan on 17 May 1997, the Defendant agreed orally with her to purchase the property at the price of HK$3.53m. I find also that at the Defendant's request, Mrs Kwan did inform estate agents that they should no longer bring persons to view the property. I find that there was no discussion about including in the purchase price furniture and car parking space, structure on the roof, or electrical appliances. At the first meeting, the Defendant did not mention that she had applied for a loan under the sandwich class housing loan scheme. This was only subsequently mentioned to Mrs Kwan who was given some documents which included the terms and conditions, exhibit D1b but not the certificate of eligibility, exhibit D1a.

52. The Defendant said that in her discussions with Mrs Kwan when she met her on 20 May 1997 she told her that the purchase price should be split between the price of the property and other items which had to be specified in a schedule. She said later that she was mistaken about the date 20 May 1997. She said that it was a rather important part of their negotiations because if the schedule did not clearly list the items making up the difference, then she would not be able to buy the property. I do not believe the Defendant.

53. There was never, in my judgment, any agreement at any time to split the purchase price between the sum of HK$3.3m for the property and the balance of HK$230,000 for other items. It was pointed out to me by Miss Cheng, Counsel for the Plaintiffs, that this alleged agreement was neither pleaded nor was it mentioned in the Defendant's witness statements. Until recently, the Defendant was represented at all times by her solicitor, Mr David Chan of Messrs David W. T. Chan & Co.

54. I accept that during the week commencing on 19 May 1997 or a few days thereafter, there were discussions between Mrs Kwan and the Defendant. I find that they orally agreed that the property would be delivered up by 31 August 1997. I do not believe the Defendant when she said that she met Mrs Kwan on 29 May 1997 and had with her a cheque already issued for HK$20,000 which she tried to give to Mrs Kwan but that it was not accepted by her. The Defendant relied on the counterfoil of the cheque for HK$20,000 to show that it was dated 29 May 1997. Even if it were so dated, I do not believe that she met Mrs Kwan on 29 May 1997 and tried to give the cheque to her. She gave a different version in her witness statement. According to para. 17 of her witness statement, it is quite clear that she was saying there that the cheque for HK$20,000 was issued in preparation for the meeting on 30 May 1997. I find that the cheque for HK$20,000 was only produced by the Defendant at the meeting on 30 May 1997 but not before.

55. I find that the Defendant went to the property on 30 May 1997 for the specific purpose of paying a deposit and entering into a provisional agreement for sale and purchase of the property. She had already agreed with Mrs Kwan the purchase price and the date when the property could be delivered up. Mrs Kwan was, understandably, anxious to collect a deposit and to sign a provisional sale and purchase agreement with the Defendant as she had asked estate agents not to bring prospective purchasers to view the property. There was nothing yet to bind the Defendant.

56. I accept Mr. Kwan's evidence that the Defendant eventually arrived at about 11.35 pm and that she appeared to be normal. Mrs Kwan was putting their daughter to sleep in the bedroom. There was, in my view, nothing sinister about her not meeting the Defendant that night and in her not being present in the sitting room when there were discussions between the Defendant and Mr Kwan. It is not surprising that Mr and Mrs Kwan refused to accept HK$20,000 as a deposit which would be refundable if the Defendant failed to obtain a loan. Cl.13 expressly provided that the Plaintiffs were not to be responsible for assisting the Defendant to apply for any kind of loans. I find that the Defendant discussed with Mr Kwan and agreed the terms as set out in the agreement. I do not accept that she was suffering from exhaustion or was pressured by Mr Kwan to issue the cheque for $150,000 or to sign the agreement. I do not believe her. I find that the Defendant knew that she was signing a provisional agreement for sale and purchase and was giving a deposit to secure the deal. There was no question of paying any refundable security and I do not believe that she suggested this to Mr Kwan or that he ever agreed to this.

57. I also find that she read the agreement and signed the same as well as initialled the amendments. This was after Mr and Mrs Kwan had signed and initialled both copies of the agreement. By signing the agreement and initialing the amendments, she confirmed that she accepted and agreed to the contents.

58. The Defendant was well capable of negotiating the terms with Mr Kwan that night. I also find that the sum of HK$150,000 was a figure arrived at after some bargaining with Mr Kwan as he had initially wanted to collect slightly more than HK$170,000, being the equivalent of 5% of the purchase price. I also find that she bargained for and obtained an agreement that she was to be given compensation in the daily sum of HK$1,000 in the event that vacant possession could not be delivered up by 31 August 1997.

59. In my view, the fact she was able to negotiate and bargain for favourable terms demonstrates that she was well able to look after her interests that night when entering into the agreement. I find that Mr Kwan did not make any representation that the agreement was a mere memorandum or a record or anything of the sort The Defendant is not a country bumpkin or a na?ve housewife. She is an intelligent person. She is also a smart businesswoman. Although she tried in evidence to minimise her role in Wise Ford Development Ltd, I am satisfied that she played an important role in that company. She has been described as the chief executive officer for the publication put out by this company, namely "Golf Digest" and another publication. It is clear that she is experienced in the publishing industry, in particular, golf publications. She also signed annual returns as the secretary of Wise Ford Development Ltd. She has also owned shares in a number of companies. According to her, she was also well connected in the Mainland and she was the chief executive officer because of this. She was also well able to conduct negotiations with clients in the Mainland.

60. I am also satisfied that the Defendant knew that the cheque for HK$150,000 was given as the initial deposit for the purchase of the property. That is clearly stated in the agreement and in the receipt clause therein. The Defendant wrote the word "Denon Terrace" and "Deposit" in the counterfoil for this cheque. She said that this was written contemporaneously. She also wrote the words "refundable security" but in the counterfoil produced, these words appear to be squeezed in between the words "Denon Terrace" and "Deposit". She said that the words "refundable security" were written later after she had written "Deposit" but I do not believe that the words "refundable security" were written contemporaneously. I find that she wrote the word "Deposit" on the counterfoil because that is precisely what the cheque was for namely, the initial deposit payable under the agreement. I find that the words " refundable security" were added subsequently after the events in early June 1997 in an attempt to bolster her case. She also subsequently added the words "refundable" and "refundable security" in the two preceding counterfoils. I do not think that it matters whether she wrote one or two cheques before issuing a cheque for HK$150,000 with the correct particulars filled in. I am satisfied that Mr Kwan did not pressure her into issuing the cheque.

61. The Court of Appeal has held in Man Sun Finance (International) Corp. v. Lee Ming Ching Stephen [1993] 1 HKC 113 that a 'provisional' agreement, so long as it contains all the essential terms of a contract for the sale of land, stands on its own and is specifically enforceable. All further references to a 'formal' agreement are illusory and neither side is entitled to demand that the other party enter into it.

62. The agreement contained all the essential terms of a contract for the sale of land. I am satisfied that the agreement was a legally binding agreement and not a mere agreement to agree. It was not a mere memorandum of representations.

63. It is trite law that the intention of the parties is to be derived objectively from the words used in the agreement. The intention of the parties is not to be derived from what the parties subjectively meant or understood by the words used.

64. By the words after the word "Remark" in cl.13, the intention of the parties was that the Plaintiffs were not to be responsible for assisting the Defendant to apply for any kind of loans and/or mortgage. It was also the intention of the parties that the agreement superseded all prior negotiations, representation, understanding and agreements of the parties (cl.10).

65. I also find that there was never an agreement to provide a list or a schedule of furniture and other items. Cl.11 of the agreement does not, in my view, assist the Defendant. As Mr Kwan said and as I accept, there was no schedule to be attached to the agreement. There was no discussion about furniture. As such, cl.11 was meaningless and although it would have been better if cl.11 had been deleted, the fact that it was not does not assist the Defendant.

66. Cl.2(c) of the terms and conditions, exhibit D1b, provided that the purchase price of a unit excluding any consideration paid or to be paid for, inter alia, furniture or fittings therein or car parking space shall not exceed HK$3.3m.

67. I find that although the Defendant had received a certificate of eligibility for a loan under the sandwich class housing loan scheme and the terms and conditions for the same (exhibits D1a and b), she did not fully know or appreciate, until the morning of 31 May 1997 when she spoke to the Housing Society, that if she wished to buy property with such a loan, the sale and purchase agreement should clearly set a limit of HK$3.3m just for the purchase price and that things like furniture, fittings and car parking space should be separately listed in the sale and purchase agreement. I find that this was the reason why she immediately telephoned Mrs Kwan on 31 May 1997 and asked her to change the purchase price in the agreement from HK$3.53m to HK$3.3m and to separate this from the balance which she would pay upon completion. She knew that the agreement had already been entered into and this was an attempt on her part to get Mr and Mrs Kwan to agree to change the purchase price in the agreement as above.

68. Mr Chan Hon Tsang, the brother of the Defendant's solicitor, Mr David Chan, said that in June or July 1997 he signed an agreement with the Defendant to sell his flat to her with a split price for the property in the sum of HK$3.3m and $300,000 for the car park. This evidence does not, in my view, assist the Defendant. By June or July 1997, she and her solicitor must have been fully aware of the requirements of the Housing Society and the agreement with Mr Chan Hon Tsang must have been prepared with those requirements in mind.

69. Mrs Kwan, after consulting her solicitor, very properly refused to change the purchase price in the agreement as it would amount to defrauding the Revenue as less stamp duty would then be payable. I believe Mrs Kwan and disbelieve the Defendant as to their discussions on 31 May 1997. Mr and Mrs Kwan then left the matter in the hands of their solicitors who dealt with the matter on their behalf and dealt with the letters from the Defendant's solicitors.

70. The Defendant said that she called Mr and Mrs Kwan in the morning of 31 May 1997 to ask for the list of furniture to be supplied, otherwise she would stop payment of the cheque. I do not believe her. If this were really said by her, it is inconceivable that her solicitors' letter of 2 June 1997 made no mention of this.

71. I do not believe the Defendant when she said that Mr Kwan telephoned her and told her that he had not deposited the cheque but had torn it up and that he agreed to cancel the agreement. I also do not believe her when she said that her maid took her copy of the agreement to Mr Kwan and brought it back with the word 'void' stamped. As I have said, there was no admissible evidence that Mr Kwan's initial appears after the word "cancelled" in exhibit D4. None of these matters were put to Mr Kwan when he was giving evidence. I do not believe the Defendant's allegations. Mr and Mrs Kwan had already left the matter in the hands of their solicitors. They had already presented the cheque for payment and it had been dishonoured. This would have been known to the Defendant as her bank would no doubt have informed her of this. I cannot accept that Mr and Mrs Kwan agreed to cancel the agreement on or about 7 June 1997 or at any time.

72. The Defendant was, in my judgment, in breach of the agreement by dishonouring the cheque for HK$150,000 being the initial deposit payable under the agreement. She evinced an intention no longer to be bound by the agreement and repudiated the same. By letter dated 3 June 1997 from the Plaintiffs' solicitors to the Defendant's solicitors, the Plaintiffs accepted her repudiation of the agreement. In my judgment they were entitled to and did forfeit the initial deposit under cl.7 of the agreement. Having accepted her repudiation of the agreement, I am satisfied that they did not thereafter on 7 June 1997, or at any other time, agree to cancel the agreement.

73. I have determined issues (1), (2), (6), (11), (12), (13) in favour of the Plaintiffs.

74. As to issue (3), the description of the property in the agreement is not materially different from the description in the Sai Kung Land Register. The use of the words "Flat C2" before the address in the agreement is not a misdescription. It is simply a more detailed address. The property as described in the agreement was sufficiently certain. There is nothing in the point raised.

75. As to issue (4), I also find that there was no clear understanding between the solicitors that a provisional agreement for sale and purchase would not be signed. There was no evidence adduced in support of this. The letter of 26 May 1997 from the Plaintiffs' solicitors does not state that a provisional agreement would not be signed

76. As regards issue (5), I find that the agreement was not a tenancy agreement. The use of the words "daily rent" in cl.13 does not make the agreement a tenancy agreement. It simply provided for compensation by way of liquidated damages in the sum of $1,000 per day to be given to the Defendant in the event that the Plaintiffs failed to deliver vacant possession by 31 August 1997.

77. I am also satisfied that the agreement was not illegible and that the characters were not blurred. There is also nothing in the point raised and issue (7) is also determined in the Plaintiffs' favour.

78. As to issues (8), (9) and (10), I have already found that the agreement was not a tenancy agreement. There is no basis for saying that stamp duty should have been charged for a tenancy agreement rather than for an agreement for sale and purchase. The agreement was a legally binding agreement for sale and purchase for immovable property and stamp duty was chargeable for the same under s.29C of the Stamp Duty Ordinance Cap.117 and the First Schedule thereto. This also provided that the persons liable are all the parties to the agreement. I accept that the Plaintiffs were advised by their solicitors to pay the stamp duty which they paid on 18 July 1997 in the sum of HK$70,600. By virtue of s.15 of the Stamp Duty Ordinance, the agreement would not have been admissible unless duly stamped.

79. Under the agreement, the stamp duty was to be borne solely by the Defendant. As the Plaintiffs have paid it on the Defendant's behalf, they are entitled to reimbursement of the same.

80. There is also no merit in the allegation pleaded that the agreement was incomplete so as to fulfil the requirements for stamp duty. S.29C(2) of the Stamp Duty Ordinance provides that the agreement is chargeable to stamp duty even if:

"(a) it does not contain the matters specified in Section 29B(5)".

It is clear that the Collector of Stamp Revenue had no difficulty in fixing and charging the stamp duty which was paid for the agreement. There is no merit in the Defendant's allegation.

81. As to issues (14) and (15), I find that the Plaintiffs did not make the representations pleaded in para. 10 of the amended Defence and Counterclaim to the Defendant. The Defendant is not entitled to damages for misrepresentation, whether fraudulent or otherwise.

Conclusion

82. I give judgment to the 1st Plaintiff in the sum of HK$150,000 being the amount of the dishonoured cheque. There will be interest on this sum from 3 June 1997 until judgment at 1% above the prime rate and thereafter at judgment rate until payment. I also give judgment to the 1st and 2nd Plaintiffs in the sum of HK$70,600. As there is no evidence of an earlier letter of demand, there will be interest on this sum only from issue of writ i.e. 13 February 1998 until judgment at 1% above the prime rate and thereafter at judgment rate until payment. The counterclaim is dismissed.

83. I also make an order nisi for costs of the action and the counterclaim to be costs to the Plaintiffs and to be paid by the Defendant, such costs to be taxed if not agreed.