MISSION MARKETING LTD v. CHAN YUET FOON AND OTHERS

HCMP 258/2014

[2020] HKCFI 910

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 258 OF 2014

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JUDGMENT

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A. INTRODUCTION

1.  This trial concerns the sale and purchase of a property situate at Shop A5, Ground Floor, Man Fatt Mansion, Nos 30, 30A, 30B and 30C Belcher’s Street and Nos 20, 22, 26 and 28 Sands Street, Kennedy Town, Hong Kong (the “Property”), which was at all material times used by the Defendants for the operation of an electrical appliances and maintenance business.

2.  The Plaintiff (represented by Mr Kay Chan and Ms Lydia Hon) was the purchaser of the Property; the Defendants (represented by Mr Jeremy Chan) were the vendors of the Property; and the Third Party (represented by Mr Nigel Kat SC and Mr Robert Chan) was the firm of solicitors acting for the Defendants in the conveyancing transaction.

3.  The Plaintiff, who asks for the return of the deposits of HK$2,480,000 (the “Deposits”) and compensation of wasted expenditure,complains that the Defendants failed to show and/or give good title to the Property. 

4.  In his oral opening submissions, Mr Kay Chan, counsel for the Plaintiff, confirmed to this Court that the Plaintiff would only rely on the complaint of unauthorized building works (the “UBWs”) to advance its case against the Defendants and would not pursue the other complaints in this trial.

5.  The Defendants deny that they failed to show or give good title.  They contend that the works complained of were not illegal and that, even if they were, there was no real risk of enforcement.  On this basis,they counterclaim against the Plaintiff for damages for loss in terms of the difference between contractual price and the then market price of the Property[1].  Insofar as they are held liable for the Plaintiff’s claims, the Defendants would seek damages/contribution from the Third Party on the basis that the Third Party was in breach of their common law duty of care and/or contractual duties in their conduct of the conveyancing transaction.

B. FACTUAL GROUND

6.  In or about early November 2012, the Plaintiff through an estate, one Mr Tong (“Mr Tong”), came to know that the Property was for sale.

7.  Upon the arrangement of Mr Tong, Mr Sin Chung Yin, Ronald (“Mr Sin”) of the Plaintiff inspected the Property.  Mr Sin observed that the floor area of the Property was around 500 to 600 square feet and that there was a “cockloft” of similar floor area for storage.

8.  On 16 November 2012, the Plaintiff and the Defendants entered into a provisional sale and purchase agreement whereby the Plaintiff agreed to buy and the Defendants agreed to sell the Property at the price of HK$24,800,000, with the agreed completion fixed one year later on 4 December 2013.

9.  By 4 December 2012, the Plaintiff paid to the Defendants the Deposits in the total sum of HK$2,480,000.  On the same day, the Plaintiff as the purchaser and the Defendants as the vendors entered into the formal agreement for the sale and purchase of the Property (the “Formal Agreement”).

10.  On 10 May 2013, the Third Party acting as the Defendants’ solicitors provided the title deeds to the Plaintiff’s solicitors.

11.  On 15 May 2013, the Plaintiff’s solicitors raised requisitions by letter.  One of the requisitions was the request for the provision of certified copy of the relevant occupation permit by the Defendants.

12.  On 11 November 2013, the Third Party on behalf of the Defendants responded by stating, inter alia, that they were obtaining a certified copy of the relevant occupation permit and would send the same to the Plaintiff upon receipt of the same in due course.

13.  On 19 November 2013, the Plaintiff arranged a qualified surveyor, Mr Andrew Kung (“Mr Kung”), to inspect the Property.

14.  By a letter dated 27 November 2013, the Plaintiff’s solicitors put on record that according to the Plaintiff’s surveyor, three contraventions of the Buildings Ordinance were found, namely (1) an unauthorized projection at the shop front of the Property, (2) an unauthorized “cockloft”inside the Property, and (3) an authorized “basement” inside the Property (collectively, the “Questionable Works”).  They further stated that the Questionable Works rendered the Defendants’ title to the Property defeasible and that the Defendants accordingly failed to show and give good title. They also stated that the inspection report prepared by the Plaintiff’s surveyor would be available for inspection upon prior appointment.

15.  On 27 November 2013, the Third Party provided the Plaintiff with, inter alia, a certified copy of the occupation permit.

16.  On 28 November 2013, the Plaintiff’s solicitors wrote to the Third Party raising the questions as to why the “cockloft” and the “basement”inside the Property were not mentioned in the occupation permit; or alternatively, whether such alterations had been approved by the Building Authority.

17.  Between 29 November 2013 and the agreed completion date of 4 December 2013, there were communications some between the Defendants and Mr Victor Chan (“Mr Victor Chan”) and Mr Orlando Wong (“Mr Wong”) of the Third Party to discuss the requisitions raised by the Plaintiff’s solicitors,including those requisitions concerning the Questionable Works.   I will deal with the evidence concerning these communications when I consider the Defendants’ claim for damages/contribution against the Third Party.

18.  On 2 December 2013, the Plaintiff’s solicitors reiterated their request for an explanation from the Defendants as to why the “cockloft” and “basement” were not included in the occupation permit; or alternatively,whether such alterations had been approved.

19.  On 2 December 2013, the Third Party on behalf of the Defendants wrote a letter to address the issues concerning the Questionable Works and stated that:

“ We refer to your letter dated 27^th November 2013.

We are instructed that your allegations of contraventions of Buildings Ordinance are all misconceived. The ‘so-called’ three(3) contraventions referred to in your letter are not contraventions to the Buildings Ordinance.

In the circumstances, we are instructed to put on record that our clients expect completion of the sale and purchase of the property to take place on 4^th December 2013.  If that does not take place our clients will terminate the Agreement, forfeit the deposit and take action against your client for recovery of their loss and damages accordingly.”

20.  On 3 December 2013, the Plaintiff’s solicitors replied to the Third Party, stating that:

“ We are of the strong view that by merely saying that the contraventions are misconceived and are not contraventions to the Buildings does not suffice to answer our requisition satisfactorily and adequately. With respect, we are afraid that you have to provide us with documentary evidence to support your such allegation bearing in mind that the contraventions were/are pointed out by a chartered building surveyor / authorized person with an Inspection Report available for your perusal at our office.”

21.  Later on the same day, the Third Party on behalf of the Defendants responded by stating that:

“ …even if the three (3) contraventions are indeed contraventions to the Buildings Ordinance, such contraventions are only very minor and insignificant ones. Hence, we do not see any serious risks of enforcement proceedings at all. We do not agree that the said contraventions would render the title of our client defeasible.”

22.  The sale and purchase of the Property did not proceed to completion on 4 December 2013.  On 5 December 2013, the Plaintiff’s solicitors wrote to the Third Party, stating that the Defendants had failed to answer requisitions satisfactorily and that the Plaintiff was entitled to rescind the Formal Agreement.

23.  Thereafter, the Defendants ceased to retain the Third Party as their solicitors and instructed their current solicitors, Messrs Lennon & Lawyers (“LL”), to handle the case.  On 16 December 2013, LL issued a letter on behalf of the Defendants to the Plaintiff’s solicitors stating,amongst others, that all the requisitions had been adequately answered by the Third Party prior to the time scheduled for completion and that the Plaintiff was obliged to complete the sale and purchase.  By this letter, LL on behalf of the Defendants invited the Plaintiff to complete the sale and purchase of the Property on or before 23 December 2013.

24.  On 20 December 2013, the Plaintiff’s solicitors issued a letter to LL, stating that the Plaintiff would not complete the sale and purchase of the Property and would ask for the return of the Deposits of HK$2,480,000 and other wasted expenses.

25.  The Plaintiff commenced these proceedings against the Defendants by way of Originating Summons issued on 29 January 2014. By an Order made on 13 May 2014, these proceedings were converted into proceedings begun by writ and directions were given for the conduct of the third party proceedings by the Defendants against the Third Party.

26.  In July 2014, the “cockloft/false ceiling” was damaged by a fire, which resulted in the demolition of the entire structure. Also, some time before the inspection of the Property by the Defendants’ expert, the “trench” had also been filled.

C. ISSUES

27.  Although each of the parties has put the issues in a slightly different manner, there is no disagreement that the main issues of the trial are as follows:

 (1) Whether the Defendants were able to give good title to the Property?  This involves two sub-issues:

 (a) Whether the Questionable Works were UBWs at the material time?

 (b) If the answer is “yes”, whether there was a real risk of enforcement action being taken by the Building Authority that rendered the Defendants’ title to the Property defeasible?

 (2) Whether the Defendants were able to show good title to the Property by answering the Plaintiff’s requisitions satisfactorily?

 (3) In the event that the Defendants are found to be liable to the Plaintiff in the main proceedings, whether the Third Party is liable to compensate or make contribution to the Defendants?  This in turn involves two sub-issues:

 (a) Whether the Third Party had acted in breach of their duty owed to the Defendants?

 (b) If the answer is “yes”, whether the Third Party’s breach of duty caused the loss suffered by the Defendants in the main proceedings.

D. WITNESSES CALLED BY THE PARTIES

28.  The Plaintiff called one factual witness, ie Mr Sin, and one expert witness, ie Mr Kung.

29.  The Defendants called two factual witnesses, ie Mr Chan Wai Ho, Herman (“Mr Herman Chan”) and Mr Chan Wai Chung (“Mr WC Chan”), and one expert witness, ie Mr James Law (“Mr Law”).

30.  The Third Party called one factual witness, ie Mr Wong, and one expert witness, ie Mr Jackson Chu (“Mr Chu”).  It is pertinent to note that the Third Party has also filed witness statements from some other witnesses, including Mr Chan Chung Yin, Victor (ie Mr Victor Chan) who was the file handler of the Third Party in relation to the conveyancing transaction in question.

31.  I will address the credibility of the witnesses when I deal with the main issues of this trial.  Suffice it to say, I have reminded myself that in assessing the credibility of a witness’s evidence, I have to take into account (a) whether the evidence is inherently plausible or implausible; (b) whether the evidence is consistent with the witness’s conduct and contemporaneous documents, if any; (c) where it is shown that the witness has been discredited over one or more matters to which he has given evidence using the above tests, this would be relevant to the assessment of his overall credibility; (d) a witness’s motive for deliberately not giving truthful evidence; and (e) the demeanor of the witness: see Star Glory Investment Ltd v Kai Tuo (HK) Technology Co Ltd HCA 3523/2002,13 August 2005 (per Chung J) at para 12; Securities and Futures Commission v Yin Yingneng Richard & Ors HCMP 2502/2012, 16 January 2015 (per Anthony Chan J) at para 58.

32.  For the sake of completeness, I should make this observation: During the course of the trial, questions were raised about the Plaintiff’s motive in relation to the purchase of the Property.  In my judgment, save for the purpose of assisting the Court to assess the credibility of Mr Sin’s evidence, the Plaintiff’s motive is irrelevant.  Even assuming that the Plaintiff was a speculator seeking to get out of a bad bargain, if it had the legal right to do so, the court cannot deny it of that right simply because the Plaintiff’s motive was to get out of a bad bargain.

E. DID THE DEFENDANTS GIVE GOOD TITLE?

E1. Were the Questionable Works UBWs?

What are building works that require approval from the Building Authority?

33.  Section 2(1) of the Buildings Ordinance (Cap 123) (the “Ordinance”) defines “building works”; and section 41(3) of the Ordinance makes provisions for exemption of the requirement of approval from the Building Authority for the carrying out of any building works.  For building works to come within the exemption, the first requirement is that they must not involve the structure of a building and the second requirement is that they must be in a building[2]: see Mariner International Hotels Ltd v Atlas Ltd (2007) 10 HKCFAR 1, per Bokhary PJ at para 49.

34.  In the present case, it is not in dispute that the Questionable Works are building works in a building within the meanings of the Ordinance.  Indeed, there is no dispute between the parties’ experts that the “shop extension” is a UBW.

35.  In Mariner International Hotels Ltd v Atlas Ltd (supra), when Bokhary PJ discussed the first requirement for the exemption that the works must not involve the structure of the building, he made the observations (at para 51) that:

“ …Mr Sumption submits that the exemption has to be construed narrowly in a manner consistent with the statutory scheme of which it forms a part. I accept that submission. A purpose, if not the purpose, of the approval scheme of our building legislation is to protect the public by subjecting the matter of structural acceptability to the scrutiny of the Building Authority. To widen the exemption would be to reduce such scrutiny. In my view, Mr Sumption is right in his submission, on the first requirement, that building works added to a building involves its structure if they serve a structural function or are capable for some reason of affecting the integrity of the structure. …” (emphasis added)

36.  In this regard, my attention was drawn to what is said by the learned authors of Hong Kong Conveyancing Law and Practice (Issue 87) at para V[151.2]:

“ Clearly whether building works involve the structure of the building is a matter of law and fact applied in the context of the particular works in question. The court will usually base its conclusion upon expert evidence from a surveyor or architect and decided cases tend to serve merely as illustrations‌…”

(emphasis added)

37.  Bearing in mind the above principles, I will move on to assess the evidence adduced by the parties on the question as to whether the Questionable Works were UBWs.

The “Cockloft/False Ceiling”

38.  There is no dispute the area covered by the “cockloft/false ceiling” was the same as the floor area of the Property.  There was a “hole”which gave people access to the space above the “cockloft/false ceiling”. In order to do so, one had to climb up a removable ladder which had its upper end placed at the “hole”.

39.  The Plaintiff’s factual witness, Mr Sin, testified that he had, through the arrangement of Mr Tong, inspected the Property before the signing of the provisional sale and purchase agreement. According to Mr Sin, during that inspection, he noticed that there was a “cockloft”.  He, however, was not allowed to enter into the “cockloft”; but was only allowed to climb up the ladder, which led to the “cockloft”, one or two steps. He was told that the space up there was for keeping goods.  He further observed that a person could stand in the space up there, though he also fairly accepted some of the beams were quite low.  This aspect of Mr Sin’s evidence was not seriously challenged at trial, and I therefore accept Mr Sin’s account of what happened during his inspection of the Property.

40.  The Defendants’ factual witnesses (namely, Mr Herman Chan and Mr WC Chan) also accepted that goods were placed on the space above the “false ceiling”.  They, however, stressed that only “small quantity” of light-weight goods (eg light bulbs, extraction fans) were kept in that space for replenishment purpose, and that they did not need to set their feet on it in order to reach the goods stored in that space.  According to them, they stored and retrieved goods by standing on the removable ladder.

41.  For the reasons explained below, I do not accept the evidence of the Defendants’ witnesses concerning their use of the space above what they describe as the “false ceiling” of the Property.

42.  As shown by the photograph taken by Mr Kung during his inspection (ie Exhibit PR-7), boxes were stored at a corner very close to the ceiling.  There is no dispute that the height of the “space” was about 1.5 meters. Judging from the said photograph, the boxes that were kept at the corner were at least (horizontally) a few feet away from the “hole”.  Between the “hole” and the location where the boxes were placed, there was a beam hanging from the ceiling.  Bearing in mind the distance between the “hole” and those boxes, and also bearing in mind the physical setting of the “space”, it appears strongly to me that it would be extremely difficult, if possible at all, for a person to place or retrieve those boxes by simply standing on the ladder placed around the “hole”.   

43.  Further, it can be seen from the photograph that a red banner with the words “出入平安”, meaning “go in and out safely”, was stuck on the beam hanging between the “hole” and those boxes at the far top right corner.  This appears to me to suggest that there were concerns about the safety of people going in or out that area beyond the beam.

44.  Additionally, I also observe that Mr Herman Chan’s evidence was rather evasive when he was cross-examined by Mr Kay Chan on this topic.  For example:

 (1) When he was asked whether the carton boxes shown on the left of the said photograph (ie Exhibit PR-7) were about 2 to 3 feet from the “hole”, he did not answer the question but simply stressed that he could reach them by his hands.  

 (2) Then, he was asked whether he could see 5 boxes stacked up at the far top right corner of the photograph.  In response, Mr Herman Chan said that it was not clear.  In my view, the photograph clearly shows 5 boxes stacked up at the far top right corner, and that Mr Herman Chan could not have been candid when he said it was not clear to him from the photograph.  

 (3) Later, he was asked whether the position of those 5 boxes were at least 5 to 6 feet from the “hole”, Mr Herman Chan disagreed. He, however, did not answer the question as to how far those boxes were from the “hole”; rather, he simply said that he remembered that he could reach those boxes with his hands.

The above answers from Mr Herman Chan give me an impression that he was trying to avoid answering questions that would expose the impossibility or improbability of his evidence that he placed and retrieved goods from the space above the “false ceiling” without setting his feet on it.

45.  Indeed, if only a small quantity of goods was kept in that space and that the Defendants (or their staff) only placed or retrieved those goods by standing on the removable ladder, one would naturally expect that those goods would be placed at locations closer to the “hole”; rather than stacked up at such location that was horizontally a few feet away from it and so close to the ceiling.

46.  Indeed, another photograph taken by Mr Kung (ie Exhibit PR-8) shows that a few free-standing shelves were placed on top of the floor board of the “cockloft/false ceiling”, and boxes of goods were placed and stored on each layer of these free-standing shelves.  The said photograph clearly shows that considerable amounts of goods were stored in the space above the “false ceiling”, so much so that free-standing shelves were placed thereon in order to increase the storage capacity of such space.

47.  In the circumstances, I find that the Defendants’ factual witnesses are not candid about their use of the space above the so-called “false ceiling”.  In particular, I find it incredible for the Defendants to say that they did not set their feet on the space for storing or retrieving goods. I also find it to be an understatement for them to say that only a small quantity of goods was stored in the space. In my judgment, people from time to time entered into and walked on the space above the “false ceiling”for the purpose of storing and retrieving goods.

48.  As far as expert evidence is concerned, the only expert who had examined the “cockloft/ceiling” is the Plaintiff’s expert, Mr Kung. 

49.  Mr Kung’s opinion is that the “cockloft” was a UBW.  The reason given by him in his report in support of his opinion is that the entire structure was absent from the approved building plans.  

50.  When Mr Kung was cross-examined by Mr Jeremy Chan, Mr Kung accepted that the installation or decoration of a false ceiling does not require approval.  He also accepted that putting things above a false ceiling does not turn it into a UBW.  He further admitted that during his inspection, he did not check the weight of the goods stored above the “false ceiling”, and that also he did not check the load-bearing of the structure,the attachment points and the transfer of weight to the structural members.

51.  Mr Kung, however, stressed that one has to define what is a false ceiling.  Whilst no approval is required for installing a “genuine” false ceiling, the same cannot be said when the false ceiling is “not genuine”. 

52.  I then asked Mr Kung to clarify how to draw the line between a “genuine” and “non-genuine” false ceiling. The gist of Mr Kung’s evidence is that a “genuine” false ceiling is one that serves the primary function of a false ceiling.  This in turn requires the consideration of a number of factors, such as the materials used for the construction of the false ceiling,the method of construction and support, and the existence or non-existence of another decking on top of the false ceiling.

53.  In this regard, Mr Kung pointed out that the photograph (ie Exhibit PR-7) shows that the structure consisted of 3 layers.  At the bottom is a layer of 0.25-inch plywood with white finishing on its lower side, which is the “false ceiling”; in the middle is a 4-inch wooden joist which runs through the width of the shop; on top of such wooden joist is another layer of 0.25-inch plywood which serves as the floor board for storage.  Mr Kung pointed out that the 4-inch wooden joist is not the standard light-weight materials or structure normally used for constructing a false ceiling, and the floor board installed on top of the wooden joist shows that the structure was designed for bulk storage.  In the circumstances, Mr Kung opined that in view of the design, the materials and the method of construction of the structure in question, its primary function was for storage and there must be loading transfer to the structure of the building.  Thus, the works in question would need approval from the Building Authority.

54.  Mr Kung’s opinion is endorsed by Mr Chu, the Third Party’s expert.

55.  By the time when Mr Chu was engaged by the Third Party in this case, the “cockloft/false ceiling” had already been demolished and the “trench” had also been filled.  Hence, Mr Chu did not have the chance to inspect these structures.  Mr Chu, however, stressed that based on the photographs contained in Mr Kung’s report, he came to the same view as Mr Kung.  In Mr Chu’s opinion, the photographs suggest that that the space above the “false ceiling” is a place for storage and a place where people go up and down, and that it is a purpose-built level to serve those functions. Since no approval was obtained from the Building Authority, he opined that the structure in question was a “cockloft” and a UBW.

56.  As pointed out by Mr Jeremy Chan during cross-examination, Mr Chu did not explain the reasoning for his opinion.  When he was asked why he had not done so, Mr Chu explained that his instruction was simply to comment on Mr Kung’s report; and that since he agreed with Mr Kung, he simply endorsed it without setting out his own reasoning in any detail.  

57.  As far as the defence case is concerned, the Defendants rely on the evidence of their expert, Mr Law.

58.  Mr Law also did not have the opportunity to inspect the “cockloft/false ceiling”.  He, however, inspected the false ceilings of some shops next to the Property and opined that since the building order issued by the Building Authority on 6 February 2007 in relation to the building (the “2007 Building Order”) did not include the “false ceiling” previously existed in the Property, the “false ceiling” in question, like the other false ceilings in the neighbouring shops, must be regarded generally acceptable by the Building Authority.

59.  With respect, I am unable to accept Mr Law’s reasoning and analysis for the following reasons:

 (1) Under cross-examination, Mr Law admitted that he has no knowledge or information as to the scope of inspection that resulted in the 2007 Building Order being made; he cannot tell which parts of the building were inspected during such inspection; and he also cannot tell how comprehensive such inspection was carried out.  Thus, one cannot logically conclude that simply because the “cockloft/false ceiling” was not included in the 2007 Building Order, it must have been considered to be acceptable by the Building Authority. 

 (2) In this regard, the flaw of Mr Law’s reasoning is fully acknowledged by Mr Jeremy Chan, who in his written closing fairly accepts (at para 74) that “given that [Mr Law] conceded he does not know whether the 2007 inspections involved the inside of the shop … nor how ‘comprehensive’ it was, the Defendants can no longer rely on the [2007] Building Order and Compliance Letter as evidence that there is no real risk of enforcement”.

 (3) Further, I also find that there is no logical reason for Mr Law to opine on the legality of the “cockloft-ceiling” of the Property by comparing it with or drawing inference from the false ceilings that can be found in the shops nearby.  Upon cross-examination, Mr Law accepted that the false ceilings of the nearby shops were lightweight ceilings made of standard materials, which were very different from the “cockloft/false ceiling” in question.  Further, Mr Law accepted that he had not studied the structure of the other false ceilings, and did not even know when those false ceilings were installed.   In these circumstances, I cannot see how Mr Law could come to his view simply based on the fact that no enforcement action has been taken against the false ceilings in the nearby shops in the same building.

60.  During cross-examination, Mr Law stressed that at the time when the “false ceiling” in question was constructed back in 1960s or 1970s, there was no standard materials.  He, however, agreed to Mr Kat’s suggestion that the structure of the “false ceiling” in question is a complicated one, but not a lightweight one; and there are a lot of things that need to be considered in order to decide whether it was a UBW, and that he would like to qualify his opinion set out in his written report accordingly.

61.  In view of the matters explored during cross-examination, I find that Mr Law’s evidence is incapable of showing that the “cockloft/false ceiling” was legal.  The best that Mr Law could say is that he was not certain about that.

62.  Then, this leaves the question as to whether I should accept or reject the opinion expressed by Mr Kung and endorsed by Mr Chu that the “cockloft/false ceiling” was a UBW.

63.  In his written closing, Mr Jeremy Chan for the Defendants places much emphasis on the fact that Mr Kung agreed to his suggestion that he had not checked the weight of the goods stored above the “false ceiling”, the load-bearing of the structure, the location of the attachment points, and the transfer of weight of the structure to any structural members.    He further points out that Mr Kung affirmed in his oral evidence that the “false ceiling” was affixed to the partition wall.  On these bases, Mr Jeremy Chan submits that there is insufficient evidence to show that the “cockloft/false ceiling” in question was a UBW involving the structure of the building.

64.  Despite his commendable efforts, I am not persuaded that the above matters constitute sufficient basis for me to reject the opinion of both Mr Kung and Mr Chu.  

65.  While I can understand that measuring the weight of goods stored on the “false ceiling” and studying the transfer of weight of the “false ceiling” to the structural members of the building would assist an expert to form a view as to whether the “false ceiling” was a UBW, there is nonetheless no evidence before me suggesting that an expert cannot form an opinion on this matter without carrying out those examinations.  As explained above, the gist of Mr Kung’s opinion (which is endorsed by Mr Chu) is that in view of the design, the materials and the method of construction of the “cockloft/false ceiling”, it was built for the primary purpose of storage and that it would necessarily involve the transfer of loading to the structure of the building.

66.  Indeed, if the carrying out of those examinations is absolutely essential for an expert to form a view on the matter, I would expect the Defendants’ expert, Mr Law, to say so in his written report.  In fact, even though he was present in court when Mr Kung was cross-examined, Mr Law never said in his oral evidence that those examinations must be done before an expert can come to the view that certain building works are works “involve the structure of the building”.  In this regard, I also observe that whilst Mr Chu in the witness box elaborated the reasoning as to why he viewed the “cockloft/false ceiling” as a UBW, it was not suggested to him that an expert could not form such view without carrying out the said examinations.

67.  At the oral closing, I raised the question with Mr Jeremy Chan as to why the essentiality of those examinations was not mentioned in the evidence given by his own expert, Mr Law.  In answer to my question, Mr Jeremy Chan submitted that whether a structure is a UBW is a question of law, and that he was entitled to elicit evidence from the other parties’ experts.  

68.  With respect, I do not think these submissions answered my question.  It is clear whether a building work is one involving structure of the building is a mixed question of law and fact.  What Mr Jeremy Chan elicited from Mr Kung was that Mr Kung did not carry out those examinations.   However, Mr Kung maintained his opinion that the “cockloft/false ceiling”was a UBW within the meaning of the Ordinance, even though he had not done any of those examinations.  In these circumstances,unless there is positive and reliable opinion evidence from an expert saying that the carrying out of those examinations is a must for the purpose of forming a view as to whether a work involves structure of the building, I do not think there is sufficient basis for me to reject the opinion expressed by Mr Kung and Mr Chu that the “cockloft/false ceiling” was a UBW.

69.  In this regard, Mr Jeremy Chan also makes the criticism in his Reply to Closing that the reports prepared by all experts were short and contained little explanation or reasoning in support of their respective views, and that such explanation or reasoning only came out upon oral examination.   Whilst I accept that Mr Jeremy Chan’s criticism is to some extent valid, and that the experts should have elaborated the bases of their respective views more thoroughly in their reports, I do not consider that this constitutes a sufficient reason for me to reject the opinion evidence of Mr Kung and Mr Chu, who in my judgment are fair and reliable witnesses.

70.  In his written closing, Mr Jeremy Chan further refers me to two cases to support his argument that the “cockloft/false ceiling” was not a UBW. In my view, those cases do not take Mr Jeremy Chan’s argument any further: 

 (1) As far as the decision of Cheung J (as he then was) in Homyip Investment Ltd v Chu Kang Ming Trade Development Co Ltd [1995] 2 HKC 458 is concerned, the plaintiff in that case accepted that the ceiling, which was still in existence at the time of completion, was not illegal; hence, the question of legality or illegality of the structure was not an issue of the decision at all.

 (2) Regarding the decision of DHCJ Chu (as she then as) in Century Crown Ltd v Ho Wing Chun & Anor HCMP 2147/1998(20 March 2000), the finding that the timber deck temporarily added by the tenant for storing paper and boxes on top of the false ceiling was an “exempted work” is one made on the basis of the judge’s assessment of the credibility of the experts.  It is difficult to see how such finding can assist this Court to determine whether the “cockloft/false ceiling” in question, which seems to be a very different structure, was a UBW.  As noted by the learned authors of Hong Kong Conveyancing Law and Practice (supra) at para V[151.2], whether a work involves the structure of the building is a matter of law and fact applied in the context of the particular work in question. The court will usually base its conclusion upon expert evidence, and decided cases only serve as illustration.

71.  In his written closing, Mr Jeremy Chan also points out that the Defendants’ evidence is that the present configuration (ie using shelves for storage with no false ceiling) holds even more goods as compared with the previous false ceiling.  On this basis, he submits that the previous “cockloft/false ceiling” could not be a UBW, since the shelves in the present configuration would not be UBWs.  With respect, I am unable to accept Mr Jeremy Chan’s submission based on this comparison exercise for the following reasons:

 (1) First, I have already found that the Defendants’ factual witnesses were not candid about their use of the “false ceiling”when they gave their evidence.  I have also found that people did from time to time enter into and walk on the space above the “false ceiling”.  Accordingly, even assuming that more goods are stored on the shelves in the present configuration, that may not have any bearing on the actual loading, let alone the loading capacity, of the “cockloft/false ceiling” in the previous setting.  Thus, I take the view that the said comparison exercise is unhelpful.

 (2) Second, as explained by Mr Kung (which I accept), his opinion about the legality of the structure was based on his observations relating to the design, the materials and the method of construction.  The actual usage of the structure is just a way to reaffirm his opinion.  However, it is the structure (rather than the actual usage) that determines whether approval by the Building Authority is needed.  It, therefore, follows that the said comparison exercise is of tangential relevance at best and is certainly insufficient to displace the opinion expressed by both Mr Kung and Mr Chu on the issue concerning the legality of the “cockloft/false ceiling” in question.

72.  For the above reasons, and bearing in mind the observations of the Court of Final Appeal in Mariner (supra), I accept the opinion evidence of Mr Kung and Mr Chu and find, on the balance of probability, that the “cockloft/false ceiling” was not an “exempted work” and was a UBW within the meaning of the Ordinance.

The “Basement/Trench”

73.  Regarding the so-called “basement/trench” of the size of 3.3 m (L) × 1.5 m (W) × 0.4 m (D), both Mr Kung and Mr Chu opine that it was an illegal excavation work and, hence, a UBW[3].  Mr Law disagrees.  Mr Law states in his report[4] that the trench was non-structural work and could be easily rectified by refilling.

74.  In my view, Mr Law does not answer the point made by Mr Kung and Mr Chu.  There is no dispute that the “trench” or “underground void” did not affect the structure of the building.  However, Mr Kung and Mr Chu view it as a UBW not because it was an illegal structural alteration, but because it was an illegal excavation work.  Thus, the point made by Mr Law that the “trench” was non-structural is neither here nor there.

75.  Based on the evidence available before me, I find on the balance of probabilities that the “trench” in the Property was also a UBW.

E2. Was there a real risk of enforcement?

76.  Given my findings that the “cockloft/false ceiling” and the “trench” in the Property were UBWs, and also given that there is no dispute between the parties that the “shop extension” is also a UBW, the next question is whether there was a real risk of enforcement action being taken by the Building Authority so as to render the Defendants’ title defeasible.

77.  In Spark Rich (China) Ltd v Valrose Ltd [2006] 2 HKC 589, the vendor agreed to sell to the purchase a house which had on its roof an unauthorized penthouse.  The vendor contended that since the penthouse had been in existence for 40 years and that the building had been inspected by the Buildings Department, there was no real risk of enforcement.  Godfrey JA, who delivered the leading judgment of the Court of Appeal,rejected the vendor’s contention and held that there was a real risk of enforcement.  In his judgment (at 598B):

“ … if, in an ‘unauthorised structure’ case, the court concludes that,beyond reasonable doubt, the purchaser will not be at risk of any successful action against him by the Building Authority, it should declare in favour of a good title shown ….”

 ( emphasis added)

78.  In the present case, Mr Law in his report expresses the view that there was no real risk of enforcement by the Building Authority against any of the Questionable Works.  

79.  However, as I pointed out to Mr Jeremy Chan during his oral opening, pursuant to the Order made by Registrar Lung on 30 January 2015 (at para 4), the parties were given leave to adduce expert evidence on “whether or not each of the three alleged illegal structures … is illegal”. No leave has been granted to the parties to file expert evidence on the question of whether, if the structures were illegal, what would be the risk of enforcement action being taken by the Building Authority.  Thus, it appears that Mr Law’s opinion on the issue of risk of enforcement is beyond the scope which the parties are allowed to adduce expert evidence.

80.  In answer to my observation, Mr Jeremy Chan pointed out in the same Order, Registrar Lung (at para 6) also directed the Defendants to appoint an expert to prepare a report on whether or not each of the alleged illegal structures is illegal and to comment on the Plaintiff’s expert report. Mr Jeremy Chan submitted that since the Plaintiff’s expert (ie Mr Kung) mentions enforcement action by the Building Authority, the Defendants’ expert (ie Mr Law) is therefore entitled to comment on the issue of risk of enforcement in his report.

81.  During cross-examination, it was pointed out to Mr Law that according to his own report (at para 1.3), his instruction was merely confined to giving his opinion as to whether the Questionable Works were illegal structures, and that he was not instructed to give any opinion on whether, if they were illegal, there would be any risk of enforcement by the Building Authority.  When Mr Law was asked to explain why he opined on the issue of risk of enforcement in his report when he was not instructed to do so, he did not say that he did so because of the need to comment on the Plaintiff’s expert report.  Rather, Mr Law claimed that he did so because he wanted to stress that the Building Authority could tolerate minor illegal works.

82.  Thus, it is quite clear that when Mr Law decided to express his view on the issue of risk of enforcement in his report, he did not do so because of any need to comment on the Plaintiff’s expert report, as so suggested by Mr Jeremy Chan in his oral opening.  Instead, Mr Law did so because he somehow thought that in addition to opining on the issue which he was instructed to give his view, he should also stress that the Building Authority could tolerate minor works even though they were illegal. 

83.  An expert witness is supposed to assist the court by offering his impartial and independent opinion on certain specific issues.  Where an expert expresses a view favorable to the party instructing him on a matter which goes beyond his scope of instructions, there would be legitimate reason for the court to have concern as to whether the views expressed by such expert are truly independent and impartial.

84.  In the present case, my concern that Mr Law does not fully understand the role of an expert witness to give independent and impartial opinion evidence to the court is further heightened by the fact that Mr Law sought to justify his view that there was no risk of enforcement action on the basis of his assertion that the Buildings Department had carried out “comprehensive inspection” to the building in or around 2007.  Upon cross-examination, Mr Law accepted that he did not know how the inspection was conducted and how comprehensive it was.  Thus, there is plainly no basis for Mr Law to make the above assertion in his report (at para 3.1.1) and consequently to express the opinion, which is based on such assertion, that the Questionable Works were acceptable to the Building Authority and no enforcement action would be taken against them.

85.  For the reasons explained above, I am unable to accept the opinion expressed by Mr Law that there was no risk of the Building Authority taking enforcement against the Questionable Works, which, as I have found, were illegal structures.  In my judgment, the fact that no enforcement action had been taken by the Building Authority before the date of completion is insufficient to show that the purchase, beyond reasonable doubt, would not be at risk of being subject to such enforcement action in the future.

86.  In this regard, I must say that I see some force in Mr Jeremy Chan’s submission that since the “shop extension” in question is in the area immediately below the “bulkhead” which formed the subject matter of the2007 Building Order, there was simply no way that it could have been “missed”by the Building Authority.  While I also view that the chance of enforcement action being taken against the “shop extension” is in the circumstances unlikely, I am unable to say that it is beyond reasonable doubt that there is no risk of such enforcement action.

87.  In light of the ruling in Spark Rich (supra), I find that there was a real risk of enforcement action being taken by the Building Authority against the “cockloft/false ceiling” and the “trench” in the Property.

88.  There is no dispute between the parties that whether the presence of illegal structures in a property constitutes risk of encumbrance so as to affect the vendor’s obligation to pass a good title is a matter of degree: see De Monsa Investments Ltd v Whole Win Management Fund Ltd(2013) 16 HKCFAR 419, per Litton NPJ at para 109.

89.  In the present case, having considered the nature and the size of the Questionable Works (in particular, the “cockloft/false ceiling”), I am satisfied that the risk of enforcement against the Questionable Works precluded the Defendants from giving good title to the Property.

F. DID THE DEFENDANTS SHOW GOOD TITLE?

90.  There is no dispute that in addition to their obligation to “give” good title, the Defendants also had the obligation to “show” good title by satisfactorily answering the requisitions raised by the Plaintiff.

91.  In view of the correspondence exchanged between the parties’ solicitors on the subject of illegal structures as referred to in Section B above, it is plain that the Plaintiff’s requisitions were not satisfactorily answered.   It is plainly inadequate for the Defendants to answer the requisitions by making bare assertions that the Questionable Works were not illegal and/or that there was no risk of enforcement by the Building Authority.

92.  For the above reasons, the Plaintiff succeeds in showing that the Defendants failed to give and show good title to the Property and is, therefore, entitled to its claims against the Defendants in the main proceedings.

G. IS THE THIRD PARTY LIABLE FOR THE DEFENDANTS’ LOSS?

G1. Implications of my findings on the Third Party Proceedings

93.  There is no dispute that the claims by the Defendants against the Third Party will only succeed if the breach of duty by the Third Party (if any) was the cause of the loss suffered by the Defendants.  Clearly, the Third Party’s breach of duty (if any) could not be the cause of the Defendants’loss if such loss would have occurred in any event: see Jackson & Powell on Professional Liability (8^th ed), para 11-247.

94.  Since I have found that the Defendants were unable to “give”good title by reason that there was a real risk of enforcement action being taken against the Questionable Works in the Property, a question therefore arises as to whether the Plaintiff would be entitled to lawfully rescind the Formal Agreement irrespective of what the Third Party (as solicitors acting for the Defendants) did or failed to do in the transaction.  If the answer to that question is “yes”, then even assuming that the Third Party was in breach of duty, the loss suffered by the Defendants was not caused by any negligence on the part of the Third Party, but was caused by the Property having those illegal structures in it.

95.  In answer to the question set out in the foregoing paragraph, I am of the view that a distinction has to be drawn between the “shop extension”and the “trench” on the one hand, and the “cockloft/false ceiling” on the other hand.

96.  As far as the “shop extension” and the “trench” are concerned, there is unchallenged evidence from Mr Chu, which was elicited by Mr Jeremy Chan during cross-examination, that they could have been removed or reinstated by way of minor works within a matter of weeks. Thus, there is at least a possibility that, had the Defendants been properly advised, they could have remedied the situation by removing or reinstating these two illegal structures in good time.

97.  The case of the “cockloft/false ceiling” is, however, very different. 

98.  As a matter of law, where the demolition of an illegal structure would have the effect of precluding a vendor from substantially performing the sale and purchase agreement, the vendor would not be able to give good title even if he offered to demolish it: see Profit World Trading Ltd v Ho So Yung [2011] 2 HKLRD 773; Max Smart Ltd v First Super Investment Ltd [1999] 1 HKLRD 519.

99.  Under the Formal Agreement, the Property was agreed to be sold on “as is” basis, that is, inclusive of the “cockloft/false ceiling”. There is no dispute that the “cockloft/false ceiling” covered the whole floor area of the Property.  Bearing in mind the size, the nature and the usage of the “cockloft/false ceiling”, I am satisfied that the Defendants would not have been able to pass good title even if they had offered to demolish it,which in fact never happened.  In this regard, Mr Jeremy Chan also fairly accepts in his written closing (at para 74) that “as for the false ceiling/cockloft,total demolition would not have been a viable option”.

100.  Put it simply, the existence of the “cockloft/false ceiling” in the Property would render the Defendants incapable of giving good title,irrespective of what the Third Party did or failed to do in the transaction.  Accordingly, I find that the loss suffered by the Defendants was not caused by the Third Party, and that their claims against the Third Party should for this reason alone be dismissed.

101.  In view of my above findings, it is strictly speaking not necessary for me to deal with the other issues raised in relation to the Third Party Proceedings.  That said, for the sake of completeness, I will address those issues and set out my findings on them, as briefly as I can.

G2. Relevant legal principles

102.  The legal principles governing a lay client’s claim for breach of duty (whether in tort or under contract) against his solicitors do not appear to be in dispute.

103.  As far as the standard of care is concerned, it is well established that:

 (1) The duty of a solicitor is to exercise that reasonable degree of skill and care to be expected of a competent and reasonably experienced solicitor.  The test is “what a reasonably competent practitioner would do having regard to the standard normally adopted in his profession”.

 (2) The duty of a solicitor might be affected by the experience or inexperience of the client in the sense that a client inexperienced in the field in which he seeks advice is “entitled to expect the solicitor to take a much broader view of the scope of his retainer and his duties than will be the case with an experienced client”.

 (3) The standard of care to be expected of a professional man must be “based on events as they occur in prospect and not in retrospect”.

 (4) The onus of proving professional negligence over and above errors of judgment is a heavy one.

See: Foshan Hua Da Industrial Co v Johnson, Stokes & Master (a firm) [1999] 1 HKLRD 418 per Stock J (as he then was) at 425A – 426E; Delhaise v Ng & Co & Anor [2004] 1 HKLRD 572 per DHCJ Gill at para 49.

104.  Where it is disputed as to what advice was given on the merits of a client’s case, a strong indication against the proposition that proper and appropriate advice was given is the absence of an attendance note or other written communication: see Delhaise (supra) at para 51.

105.  However, once the solicitor has told his client of material difficulties and the client instructs the solicitor to proceed regardless, there is no need for the solicitor to keep repeating his advice: see Delhaise (supra) at paras 53 – 54.

G3. The Defendants’ complaints against the Third Party

106.  Since the Plaintiff at the beginning of the trial had narrowed down its case against the Defendants, I therefore asked Mr Jeremy Chan to prepare a summary of the Defendants’ case against the Third Party in view of the Plaintiff’s latest position, bearing in mind that some of the Defendants’complaints might fall away as a result of the Plaintiff narrowing its case.

107.  In his “Summary of Case Against the Third Party”, Mr Jeremy Chan on behalf of the Defendants raises the following complaints against the Third Party:

 (1) Despite being asked to provide the Plaintiff’s solicitors with the title deeds in November 2012, the Third Party delayed in sending them over until May 2013;

 (2) Despite requisitions being raised by the Plaintiff’s solicitors in May 2013, the Third Party did not reply until 11 November 2013 and did not provide the Plaintiff with the occupation permit until late November 2013;

 (3) When the Plaintiff’s solicitors raised the requisition concerning the illegality of the Questionable Works on 27 November 2013, the Third Party did not advise the Defendants that they might have a choice to refuse to answer such requisition based on Clause 15(1) of the Formal Agreement;

 (4) The Third Party did not obtain a copy and/or inspect the Plaintiff’s surveyor report and did not advise the Defendants to do so;

 (5) The Third Party did not advise (or did not do so until it was too late) the Defendants to obtain their own surveyor report to address the Plaintiff’s requisition concerning the illegality of the Questionable Works;

 (6) The Third Party did not ask for more time to resolve the matters;

 (7) The Third Party did not advise on the effect of Clause 15(2) of the Formal Agreement;

 (8) The Third Party did not promptly advise the Defendants about the requisitions raised by the Plaintiff and did not promptly take instructions for prompt reply, and thereby put the Defendants in jeopardy and prejudiced completion.

G4. Discussions and findings

108.  I will address each of the complaints raised by the Defendants in turn, though not in the same order as that set out in the summary prepared by Mr Jeremy Chan.

Complaints (1) and (2)

109.  These complaints can be conveniently dealt with at the same time.  The gist of such complaints is that the Defendants had inexplicably delayed in providing the Plaintiff with the title documents of the Property, in particular, the occupation permit.

110.  On the evidence, there was no explanation from the Third Party as to why they only provided the Plaintiff with the title documents on 10 May 2013 when the Plaintiff had requested for such documents as early as 20 November 2012.  Mr Wong, the only factual witness called by the Third Party, testified that he only became involved in the subject transaction in May 2013.  Mr Wong, however, also could not explain why the Third Party did not provide the Plaintiff with the occupation permit when the Plaintiff asked for the provision of the same by its letter dated 15 May 2013.    He in fact confirmed that he only started looking for the occupation permit in November 2013, a few weeks before the agreed date of completion.  

111.  For the above reasons, I agree with Mr Jeremy Chan’s criticism that the Third Party was guilty of inexplicable delay in providing the Plaintiff with the title documents, in particular, the occupation permit.

112.  That said, I am unable to see any causal connection between the Third Party’s delay and the loss now suffered by the Defendants.  The requisitions raised by the Plaintiff, which led to the falling through of the sale and purchase of the Property and hence the loss of the Defendants,related to the illegality of the Questionable Works.  They were not the kind of requisitions that could only be raised after seeing the title documents of the Property.

113.  As a matter of fact, the Plaintiff’s surveyor report was dated 26 November 2013, which was one day before the provision of the certified copy of the occupation permit by the Third Party under the cover of their letter of 27 November 2013.   In other words, the preparation and the finalisation of the Plaintiff’s surveyor report, on the basis of which the Plaintiff sought the rescission of the Formal Agreement, had been done without the certified copy of the occupation permit provided by the Third Party.  

114.  I note that after receiving the certified copy of the occupation permit, the Plaintiff’s solicitors on 28 November 2013 asked the further question as to why the “cockloft” and “basement” were not included in the occupation permit.  However, in view of the matters stated in the foregoing paragraph, it is in my view clear that irrespective of when the title documents(in particular, the occupation permit) were provided, the Plaintiff could have raised the same requisitions concerning the legality of the Questionable Works and the end result would have been the same.

115.  Accordingly, I find that the Defendants do not have a viable claim for any loss against the Third Party based on their complaints (1) and (2).

Complaint (3)

116.  There is no dispute that at the meeting held on 29 November 2013 between the Third Party (represented by Mr Victor Chan and Mr Wong) and the Defendants, the question concerning the lateness of the Plaintiff’s requisitions was raised, and that Mr Chan advised the Defendants that the Plaintiff had the right to raise it[5].

117.  The gist of this aspect of the Defendants’ complaint is that the Third Party failed to advise the Defendants of Clause 15(1) of the Formal Agreement and give them the choice to refuse answering the Plaintiff’s requisitions concerning the Questionable Works. 

118.  Clause 15(1) of the Formal Agreement provides that:

“ Any requisition or objection in respect of the title of the Property shall be delivered in writing to the Vendor’s solicitors within 7 working days after the date of receipt of the title deeds by the Purchaser’s solicitors otherwise the same shall be considered as waived (in this respect time shall be of the essence of this Agreement), and any further requisition or objection previously raised by the Purchaser shall be delivered to the Vendor’s solicitors within seven working days after the date of receipt of such reply from the Vendor’s solicitors (in this respect time shall be of the essence of this Agreement), failing which the same shall be deemed to have been waived by the Purchaser.”

119.  While Clause 15(1) provides for a timeframe for the raising of requisition, there is no dispute that as a matter of law, a purchaser is always entitled to raise requisitions out of time if (a) such requisitions go to the root of title, and (b) the defect in the defendant’s title could not have been discovered had the purchaser used due diligence: see Lucky Dragon Corp Ltd v Speedy Vantage Ltd [2009] 5 HKLRD 501 (CA) at para 20. 

120.  First, for those reasons which I have already explained, I find that the Plaintiff’s requisitions (in particular, the one relating to the “cockloft/false ceiling”) go to the root of title. 

121.  Second, it was not suggested to Mr Sin during examination that the Plaintiff or its solicitors had failed to exercise due diligence and/or that they could have discovered the UBWs earlier had they done so.  Although Mr Sin had inspected the Property prior to the signing of the provisional sale and purchase agreement, he did not have the relevant expertise and could not have discovered the existence of UWBs by his inspection.  In fact, as far as the “cockloft/false ceiling” is concerned, Mr Sin said, which I accept, that he was not allowed to enter into it and he was only able to climb up the removable ladder one or two steps to take a cursory look at it.  Similarly,the Plaintiff’s solicitors also could not have discovered the existence of the UBWs by simply looking at the title documents supplied to them on 10 May 2013.

122.  Accordingly, I am satisfied that the Defendants were not entitled to rely on Clause 15(1) to reject the Plaintiff’s requisitions concerning the UBWs.   

123.  It, therefore, follows that it did not constitute any breach of duty for Mr Victor Chan to advise the Defendants that the Plaintiff was entitled to raise the requisitions; nor Mr Victor Chan’s failure to inform the Defendants of their choice to refuse answering the requisitions based on Clause 15(1) could be said to constitute any breach of duty on his part. Further and in any event, given my ruling on this issue, complaint (3) also could not have caused any loss of the Defendants.

Complaints (4), (5), (6) and (8)

124.  I will deal with these complaints together since they relate to the exchanges between the Third Party and the Defendants between late November and early December 2013.

125.  There is no dispute that the parties had meetings on 29 November, 3 December and 4 December 2013.  The parties’ conversations at those meetings were recorded by the Defendants[6], though there is dispute as to whether such audio recordings are complete.  In addition to the Defendants’ audio recordings, attendance notes of these meetings were also made by Mr Wong of the Third Party.  According to Mr Wong’s oral testimony,these attendance notes were prepared by him a few days after the agreed completion date of 4 December 2013 as a result of his being instructed by Mr Victor Chan to jot down the key points of their meetings with the Defendants.

126.  There is, however, dispute concerning what happened on 2 December 2013.  According to the attendance notes prepared by Mr Wong, Mr Herman Chan called him over the phone around noon on 2 December 2013 to give some instructions to the Third Party; and that in the afternoon of that date, another meeting was held between the Defendants and Mr Victor Chan and Mr Wong of the Third Party to discuss the Plaintiff’s requisitions.

127.  Another matter in dispute relates to a letter dated 2 December 2013 (the “2 December 2013 Letter”) from the Third Party to the Defendants, in which the Third Party set out its advice in connection with the Plaintiff’s requisitions on the UBWs.  The disclosed documents suggest that a scanned copy of the 2 December 2013 Letter was sent by email to Mr Herman Chan’s email address.  Whilst Mr Herman Chan accepted that the email address shown on the documents belonged to him, he denied receiving or seeing the 2 December 2013 Letter.

128.  I will deal with the above factual disputes in the course of my discussions below.   

129.  As far as those undisputed meetings are concerned (namely, meetings on 29 November, 3 December and 4 December 2013), I find that the Defendants’ audio recordings and Mr Wong’s attendance notes provide reliable records of what were discussed between the parties at those meetings.   I appreciate that the attendance notes were prepared by Mr Wong one or two weeks after the meetings.  However, having compared the contents of Mr Wong’s attendance notes with the transcripts of the Defendants’ audio recordings, I am satisfied that Mr Wong’s attendance notes provide a fair and accurate summary of what happened at those undisputed meetings. Further, for those reasons which I will elaborate further, I do not think there is any basis for me to come to any conclusion other than that the attendance notes recorded such discussions that Mr Wong honestly remembered to have taken place between late November and early December 2013.

130.  That said, given the lapse of time after the events, and also given the fact that Mr Victor Chan chose not to testify at trial, I am not prepared to accept any evidence from Mr Wong concerning the discussions at the meetings (whether disputed or undisputed) or over the phone insofar as such evidence is not supported by the contents of those attendance notes prepared by him.

131.  After the Plaintiff had raised its requisitions on the UBWs on 27 November 2013, a meeting was held on 29 November 2013 to discuss the Plaintiff’s requisitions, including those requisitions concerning the UBWs.

132.  It was accepted by Mr Herman Chan and Mr WC Chan during cross-examination that the meeting on 29 November 2013 took about an hour.  However, the Defendants’ audio recording of that meeting only lasts for about 27 minutes.  Thus, it is quite clear that the Defendants’ audio recording is incomplete in the sense that it did not record everything discussed at that meeting.

133.  In relation to the meeting on 29 November 2013 (which was a Friday), the Defendants’ audio recording shows that:

 (1) Mr Victor Chan said that if there were indeed illegal structures, it would impact on the title. That said, he at the same time also said that “the situation is not serious and it is a little bit different from other shops”[7].

 (2) Later, Mr Victor Chan mentioned that he would write a letter to reiterate the Defendants’ stance that those were not illegal structures[8], which was followed by some discussions about the possibility of restoration.  At one point of time, Mr Herman Chan asked Mr Victor Chan whether he would put down in the letter stating that the Defendants would restore the structures.  Before Mr Victor Chan responded, Mr Herman Chan said that “I think it would be better to not include this in writing”[9].

 (3) Following that, Mr Victor Chan said words to the effect that he would not dare say that the structures had no problems at all.  He, however, also said that the Plaintiff touched on these “minor issues” as it was “trying to stir up troubles”[10].

 (4) Then, there was discussion as to whether the Plaintiff was late in raising such requisitions, Mr Victor Chan said that “[the Plaintiff] always has the right” and Mr Wong added by saying that “it is because this is not an issue from … the previous deeds”[11]. 

 (5) Discussing why the Plaintiff would want to stir up troubles,Mr Victor Chan said that “now the question that we need to discuss is to restore it or not”.  In response, Mr WC Chan said that “I think we should not restore”; whereas Mr Herman Chan said that “If I do not agree that it is an illegal structure, then why do I need to take the steps to restore?”[12].

 (6) Mr Victor Chan then explained that offering restoration did not mean that the Defendants were admitting to the existence of illegal structures[13]. He then asked the question as to whether the alleged illegal structures could be cleared up by 4 December 2013, and Mr Herman Chan replied that “I am 100% sure it cannot be done”[14].    

 (7) After that, Mr Victor Chan explained that he would write a letter to the Plaintiff’s solicitors stating, firstly, that the Defendants disagreed those were illegal structures; secondly,that whether they were illegal structures or not, the Defendants could restore them back to the original state; and thirdly,, that the reason why the Plaintiff only raised such requisitions on 27 November 2013 was because it was trying to find excuses to rescind the agreement and leave no time to the Defendants to do the restoration[15]. 

 (8) However, Mr Victor Chan also advised the Defendants not to be stubborn and to consider settlement with the Plaintiff[16].

 (9) Towards the end of the Defendants’ audio recording of the meeting, Mr Victor Chan said that he would follow the Defendants’ instructions.  In response, Mr Herman Chan said that “Let me see…Monday…because eh…there is a member coming back on Monday … We need to ask for his opinion as he has a quarter of the interest.”[17]

134.  In relation to the same meeting on 29 November 2013, the attendance note prepared by Mr Wong[18], which was wrongly dated 27 November 2013, by and large recorded what were recorded in the Defendants’ audio recording.  The only thing in such attendance note that cannot be found in the Defendants’ audio recording is what was recorded by Mr Wong in the last paragraph of his note, which states that:

“ [Mr Victor Chan] asked clients whether they intend to inspect the Inspection Report but clients had no response. Clients said such contraventions are not illegal structures but were not going to employ an authorized person to assist in support of their views.”

135.  As I will explain later, I find that Mr Wong’s record is a piece of reliable evidence of what was discussed at the various meetings,including the meeting on 29 November 2013; and I am satisfied that what was jotted down by Mr Wong in the last paragraph of this attendance note was a matter which was discussed at, but was not recorded in the Defendant’s audio recording of, the meeting on 29 November 2013.

136.  According to an attendance note of Mr Wong, Mr Herman Chan made a phone call to him at around 12 noon on 2 December 2013[19].  This attendance note states that:

“ Herman [sic] Chan complained over the phone why we received requisitions in mid-May but did not tell him before and only replied to purchaser’s solicitors earlier this month and I told him we have to await boss to assign and we are answering requisitions according to the date of completion order. He said he reserves all his rights to claim against us. He instructed me to issue letter to the purchaser’s solicitors today denying the alterations/‌additions as per purchaser’s solicitors [letter] dated 27-11-2013 are illegal structure and demanding the purchaser to complete the purchase on 4-12-2013 as scheduled and claim against the purchaser for any losses and/or damages. He would not consider mediation with the purchaser.”

137.  Further, according to another attendance note of Mr Wong[20], there was a meeting held in the afternoon of 2 December 2013 (with Mr Victor Chan and Mr Wong of the Third Party and the Defendants attending).  The attendance note, as far as material, records that:

“ [Victor Chan] enquired if we should say that the illegal structures were not illegal structure and clients said ‘yes’.

Clients instructed us to reply to the requisitions regarding illegal structures by declining to admit that the illegal structures and to notify the purchaser’s solicitors to force them to complete the sale and purchase on 4-12-2013, failing which all deposits will be forfeited.

Accordingly [sic], a letter was issued to the purchaser’s solicitors after the meeting and cc. to clients.”

138.  On the same day (ie 2 December 2013), the Third Party issued a letter to the Plaintiff’s solicitors stating that they were instructed that the so-called contraventions were not contraventions to the Buildings Ordinance, and that the Plaintiff was expected to complete the sale and purchase of the Property on 4 December 2013.

139.  In addition to the said letter, as mentioned above, the Third Party also issued the 2 December 2013 Letter to the Defendants.  As far as material, the 2 December 2013 Letter states as follows:

“ We have carefully considered the letter from the Purchaser’s Solicitors dated 27^th November 2013. We are of the view that regardless of how minor or trivial of the alleged three contraventions in the property, it is the view expounded by a professional surveyor and authorized person.

In the circumstances, in the absence of any professional opinion to the contrary, it is not possible for us to refute the allegations of the purchaser. It [sic] follows that in case of litigation it is likely that the purchaser can succeed in arguing that you have failed to show and give good title to the property and therefore in breach of clause 14 of the Agreement for Sale and Purchase.” (emphasis added)

140.  The Defendants deny holding meeting with Mr Victor Chan or Mr Wong of the Third Party on 2 December 2013.  They deny giving instructions to the Third Party to issue the said letter dated 2 December 2013 to the Plaintiff’s solicitors denying the allegations of illegal structures.  They also deny receiving the 2 December 2013 Letter from the Third Party.

141.  I do not accept the evidence of the Defendants’ witnesses on the matters set out in the foregoing paragraph for the following reasons:

 (1) First, according to the Defendants’ audio recording, towards the end of the meeting held on 29 November 2013 (which was a Friday), Mr Victor Chan said that he would follow the Defendants’ instructions in writing his response to the Plaintiff’s requisitions, and the Defendants replied by saying that they would make a decision on Monday (ie 2 December 2013)[21]. Thus, it appears to be consistent with the discussion at the meeting of 29 November 2013 for the Defendants to give instructions to the Third Party on 2 December 2013 with regard to their response to the Plaintiff’s requisitions.

 (2) Secondly, it is quite clear from the Defendants’ audio recording of the meeting of 29 November 2013 that Mr Victor Chan wanted to have the Defendants’ instructions as to whether he could on their behalf offer to the Plaintiff to reinstate the alleged illegal structures.  Hence, it is inherently improbable for the Third Party to issue the letter of 2 December 2013 to the Plaintiff (which simply denied the allegations of illegal structures and did not make any offer for reinstatement) without first obtaining the Defendants’ instructions.  

 (3) Third, according to the Defendants’ audio recording of the meeting of 3 December 2013, Mr Victor Chan expressly mentioned that he wrote a reply letter the day before setting out the Defendants’ instruction that there were no illegal structures (ie the letter of 2 December 2013 to the Plaintiff’s solicitors). If the Defendants were unaware of such letter, or that such letter was issued without their instructions, I would expect the Defendants to react when Mr Victor Chan mentioned such letter.  The Defendants, however, did not react at all.  Their silence militates against their case that they did not meet with or give instructions to the Third Party on 2 December 2013.

 (4) Fourthly, I also find it inherently incredible that the Defendants did not receive or read the 2 December 2013 Letter issued to them by the Third Party.  There is no dispute that the email account, to which the 2 December 2013 Letter was sent, was used by the Defendants to send documents to the Third Party on 29 November 2013.  It is quite inconceivable that the 2 December 2013 Letter sent by the Third Party to that email account was not received and read by the Defendants.

 (5) Fifthly, the inference that the Defendants did receive and read the 2 December 2013 Letter is further supported by their conduct at the meeting on 3 December 2013.  The Defendants’ audio recording of that meeting shows that Mr Victor Chan at that meeting twice referred to the fact that he had written a letter to the Defendants concerning the illegal structures[22]. On the evidence, the letter referred to by Mr Victor Chan could only be the 2 December 2013 Letter.  Further,whenever he referred to such letter, Mr Victor Chan also expressly stated that that was the matter worried him.  Thus, if the Defendants did not receive or read such letter, I would expect the Defendants to say “what letter?” or “what was said in that letter?” at the meeting.  There is, however, no question of this kind recorded in the Defendants’ audio recording.  Theabsence of such kind of questions suggests that the Defendants must have received and read the 2 December 2013 Letter before the meeting on 3 December 2013.

142.  For the above reasons, I do not accept the evidence of Mr Herman Chan and Mr WC Chan in relation to what happened on 2 December 2013.  On the contrary, I find that the attendance notes prepared by Mr Wong contain a fair summary of the major events happened on that day.  Thus, I find that the Defendants did meet with Mr Victor Chan and Mr Wong on 2 December 2013; they did give instructions to the Third Party to issue the letter dated 2 December 2013 to the Plaintiff, which denied the existence of illegal structures in the Property; and they did receive and read the 2 December 2013 Letter, which set out the Third Party’s views on the matter.

143.  In making the above findings, I have not lost sight of the submission of Mr Jeremy Chan, citing Ip Man Shan v Ching Hing Construction [2003] 1 HKC 256 at 307 (at para 155), that this Court may in appropriate circumstances draw inference against a party who elected not to call certain evidence.  However, in rejecting the Defendants’ evidence and making the above findings in favour of the Third Party, I rely on the inherent probabilities or improbabilities arising from the undisputed factual background, the contents of the audio recordings made by the Defendants at various meetings, as well as the contemporaneous documents prepared by and the oral evidence of Mr Wong.  Thus, I do not think it is appropriate for me to draw any inference simply because Mr Victor Chan elected not to testify at trial.

144.  As far as the meeting on 3 December 2013 is concerned, as mentioned above, there is no dispute that such meeting did take place.  According to the Defendants’ audio recording of that meeting:

 (1) Mr Victor Chan referred to the fact that he had issued the letter to the Plaintiff’s solicitors denying the existence of illegal structures.  After referring to that letter, Mr Victor Chan advised the Defendants by saying that “I think from a legal standpoint that may not be sufficient, because he has indeed carried out a survey”[23].

 (2) Mr Victor Chan then suggested that the Defendants should send an additional letter emphasizing that even if (which was not admitted) the structures in question were illegal, they would not lead to enforcement action by the Building Authority.  Mr WC Chan agreed with such suggestion[24].

 (3) Thereafter, Mr Victor Chan moved on to deal with the other outstanding requisitions before coming back to the topic of illegal structures.  As mentioned above, Mr Victor Chan referred to his letter to the Defendants on the topic (ie the 2 December 2013 Letter) and told the Defendants that that was the matter worried him[25].

145.  Regarding the meeting on 4 December 2013, which is also not in dispute, the Defendants’ audio recording shows that:

 (1) Mr Victor Chan said time and again that the issue worried him most was the issue of illegal structures[26].

 (2) Mr Victor Chan then said that the Defendants could engage their own chartered surveyor to check whether the structures in question were in fact illegal.  He further claimed that “actually I have suggested this before”.  The Defendants did not appear to disagree what Mr Victor Chan claimed to have suggested previously[27].

 (3) Mr Victor Chan explained that the Plaintiff was “holding the upper hand” since it had an expert report; and that he would not know whether any expert report obtained by the Defendants would have a different conclusion.  In response, one Mr Chan Wai Chi (a brother of the Defendants) said that “everything has 2 sides…we can do so too”.  Mr Victor Chan responded by confirming that the Defendants could engage their own surveyor and it was up to them to decide[28]. 

 (4) Mr Victor Chan then discussed the issue of forfeiture of deposit with the Defendants in the event that the Plaintiff did not complete the sale and purchase.  Mr Victor Chan said that he had reservations because he was worried about the structures[29].

 (5) Then, there were discussions between the Defendants and their family members as to whether they would “kill off the agreement [ie forfeit the deposit]”.  The board consensus of the Defendants appeared to be that they were minded to forfeit the Plaintiff’s Deposits[30]. 

 (6) Mr Victor Chan then said that he would not influence the Defendants’ decision; but since he had given them advice on the illegal structure issue, he wanted the Defendants to sign on a Chinese document confirming that they had been advised of the risk that the Plaintiff might take legal action against them based on the illegal structures[31].  In this regard, I should also mention that the Defendants eventually did not sign on that Chinese document[32].

 (7) Towards the end of the discussions, the Defendants said that they still needed to discuss amongst themselves and Mr Victor Chan reminded them of the risk that the Plaintiff might sue them based on the illegal structure issue[33].

146.  As to the matters stated in paragraph 145(2) above, I wish to add the following observations:

 (1) The agreed transcript of the Defendants’ audio recording shows that after Mr Victor Chan claimed that he had previously suggested the Defendants to engage their own surveyor, Mr WC Chan (who is identified as “Male 3” in the transcript) responded by stating that “Yes … it does not matter (XXX)”.  

 (2) However, after I listened to the actual recording and sought confirmation from all parties, it was agreed that what “Male 3” said was in fact “Yes … that’s right (XXX)”.  This prompted the Defendants to make an application before the oral closing seeking leave to admit the Witness Statement of Chan Wai Chi Atus. 

 (3) For those reasons that I will explain in Section H below, I dismissed the Defendants’ application.  Suffice it to say, I do not think the difference identified by me after hearing the actual recording affects my assessment of the evidence.  One way or another, it is quite clear to me that the Defendants did not appear to disagree with Mr Victor Chan’s statement that he had previously advised them of engaging their own surveyor.   

 (4) This is also consistent with my finding that the Defendants did receive and read the 2 December 2013 Letter, which states that the Plaintiff’s allegations of illegal structures were supported by a professional surveyor and that in the absence of any professional opinion to the contrary, it would not be possible for the Defendants to refute the Plaintiff’s allegations.

147.  In passing, I should also add that the matters jotted down by Mr Wong in his attendance notes for the meetings on 3 December 2013 and 4 December 2013 are consistent with what were recorded by the Defendants in their audio recordings.  I am, therefore, satisfied that Mr Wong’s attendance notes contain reliable summaries of the parties’ decisions at those meetings, as well as all other previous meetings.

148.  In light of the above matters, my findings on major issues involved in the Defendants’ complaints (4), (5), (6) and (8) are as follows:

 (1) At the meeting on 29 November 2013, Mr Victor Chan did tell the Defendants to consider reinstating the illegal structures. The Defendants, however, were very hesitant about it.

 (2) Also, at the meeting on 29 November 2013, Mr Victor Chan did ask the Defendants as to whether they wanted to inspect the Plaintiff’s surveyor report, and the Defendants did not respond. 

 (3) As rightly submitted by Mr Kat, the letter dated 27 November 2013 from the Plaintiff’s solicitors contains such photographs and descriptions that are sufficient to enable the Defendants to understand why the Plaintiff claimed the structures to be illegal structures.  I do not think it can be said to be a breach of duty on the part of the Third Party simply because they did not inspect the Plaintiff’s surveyor report, or they did not advise the Defendants to do so.  In any event, given my finding below that the Defendants (despite advice) did not engage their own surveyor to address the issue of illegal structures, it appears to me that the complaint that the Third Party failed to inspect, or to advise the Defendants to inspect, the Plaintiff’s surveyor report is rather inconsequential.

 (4) By the letter dated 2 December 2013 from the Third Party (which was received and read by the Defendants), the Defendants were advised of the need to engage their own surveyor and expressly told that “in the absence of any professional opinion to the contrary, it is not possible for [them] to refute the allegations of the purchaser”.  Advice along this line was further repeated by Mr Victor Chan at the meetings held on 3 and 4 December 2013.  Hence, I do not accept the Defendants’ complaint that the Third Party failed to advise the Defendants to procure their own expert to address the issue of illegal structures. 

 (5) Despite such advice, the Defendants did not engage or instruct the Third Party to engage a qualified surveyor; instead, they instructed the Third Party to issue a letter denying the Plaintiff’s allegations that the structures were illegal.

 (6) Also, notwithstanding that they were told by Mr Victor Chan at the meetings held on 3 and 4 December 2013 that he was worried about the illegal structure issue and that the Plaintiff was holding the “upper hand” on such issue, the Defendants did not engage or instruct the Third Party to engage another surveyor to address the issue; on the contrary, the Defendants’ board consensus towards the end of the meeting on 4 December 2013 was still to forfeit the Plaintiff’s Deposits based on its failure to complete the sale and purchase.

 (7) In these circumstances, whilst it may be said that it would have been preferable for the Third Party to convey some of the above advice to the Defendants a few days earlier (say, shortly after the receipt of the letter from the Plaintiff on 27 November 2013 which for the first time raised the requisitions on illegal structures), I am not satisfied that it would have made any difference.  In my judgment, the Defendants’ conduct in this matter demonstrates that they would have conducted themselves in exactly the same manner even if they had received some of the above advice a few days earlier.

149.  For the above reasons, I also reject the Defendants’ claim against the Third Party based on their complaints (4), (5), (6) and (8).

Complaint (7)

150.  I can deal with this complaint, which concerns the alleged failure on the part of the Third Party to advise on the effect of Clause 15(2) of the Formal Agreement, very briefly.

151.  Clause 15(2) of the Formal Agreement provides that:

“ If the Purchaser shall insist on any objection or requisition either as to title or any matter appearing on the title deeds or otherwise which the Vendor shall be unable or … unwilling to remove or comply with, or if the title of the Vendor shall be defective, the Vendor shall notwithstanding any previous negotiation or litigation be at liberty on giving to the Purchaser or the Purchaser’s solicitors not less than three working days’ notice in writing to annul the sale in which case unless the objection or requisition in question shall have been in the meantime withdrawn the sale and purchase shall at the expiration of the notice be annulled and the Purchaser shall be in that event entitled to the return of the deposit in full forthwith but without compensation, and interests (if the return is made within 7 days from demand) or costs, and the parties hereto shall at their own costs enter into a cancellation agreement of this Agreement.”

152.  Based on the Defendants’ own audio recording, at the first meeting on 29 November 2013, there were already lengthy discussions between the Defendants and Mr Victor Chan about balancing the risks between keeping the Deposits and returning them to the Plaintiff[34].  

153.  Further, as I have found, despite being advised that the Plaintiff was holding the “upper hand” on the illegal structure issue, the Defendants’ board consensus towards the end of the meeting on 4 December 2013 (ie the agreed completion date) was still to forfeit the Plaintiff’s Deposits.

154.  Accordingly, I do not see how the Third Party can be said to have acted in breach of duty by failing to advise on the effect of Clause 15(2), which would require the Defendants to return the entire Deposits to the Plaintiff against their wish.  In any event, I am of the view that the evidence clearly shows that the Defendants would have acted the same even if the Third Party had thoroughly advised on the legal effect of Clause 15(2).

H. REFUSAL OF THE DEFENDANTS’ SUMMONS DATED 29 AUGUST 2018

155.  During the time when the trial was adjourned for the parties to prepare their written closing submissions, I spent some time listening to the Defendants’ audio recordings.  

156.  As I mentioned at paragraph 146 above, I discovered that at the meeting on 4 December 2013, after Mr Victor Chan mentioned that he had previously suggested the Defendants to engage their own surveyor, a person identified as “Male 3” (which the parties agreed to be Mr WC Chan) said “Yes…that’s right (XX)”, instead of what is recorded in the transcript “Yes … it does not matter (XXX)”[35].

157.  I, therefore, wrote to the parties to seek their confirmation of my observation, and the parties agreed that the correct version of the transcript of this part of the recording should be “Yes… that’s right”.

158.  In light of this development, the Defendants took out a Summons dated 29 August 2018 applying for leave to adduce the Witness Statement of Chan Wai Chi Atus (“Mr Atus Chan”). Mr Atus Chan is a brother of Mr Herman Chan and Mr WC Chan.

159.  According to Mr Atus Chan’s witness statement, he was one of the persons present at the meeting on 4 December 2013, and that it was him (rather than Mr WC Chan) who said “Yes … that’s right”.  Mr Atus Chan said that he had not been aware of any advice given by Mr Victor Chan any time before the meeting, and that when he said “Yes … that’s right”, he only meant that he agreed it could be done that way.

160.  The Defendants’ application was heard immediately before the parties’ oral closing.  Mr Kat on behalf of the Third Party objected to the Defendants’ application.  Having heard the parties’ submissions, I dismissed the Defendants’ application with costs.

161.  The reasons for my dismissing the Defendants’ application are as follows:

 (1) First, I can see that all parties were equally blameworthy for the mistake made in the transcript as to what was said at the meeting on 4 December 2013.  However, as to the identification of the person saying those words, the Defendants were clearly in a much better position than the other parties to identify who on their side said those words.  In my view, had the case been properly prepared, the Defendants should have discovered that those words were indeed said by Mr Atus Chan, and could have adduced Mr Atus Chan’s witness statement earlier.

 (2) Secondly, I do not think Mr Atus Chan’s witness statement has any real impact on my assessment of the evidence.  Even assuming that I accept what Mr Atus Chan says in his witness statement, the point is still that after Mr Victor Chan claimed that he had previously suggested to the Defendants that they should engage their own surveyor, neither Mr Herman Chan nor Mr WC Chan (who were in constant communications with Mr Victor Chan and Mr Wong) reacted to it.  The mere fact of their lack of reaction forms one of the bases of my finding that Mr Victor Chan had already suggested to the Defendants that they should engage their own surveyor.  Mr Atus Chan’s witness statement, even if admitted, simply does not explain why Mr Herman Chan and Mr WC Chan did not react to what Mr Victor Chan said if they in fact had not received such advice from him.

 (3) Thirdly, if Mr Atus Chan’s witness statement was to be admitted, the other parties (in particular, the Third Party) should be given a fair opportunity to cross-examine Mr Atus Chan. Although I agree that it is only a short statement, it (if admitted) would require the legal representatives of the Third Party to look into the matter and see whether there was anything to suggest that Mr Atus Chan might have some knowledge of the previous advice given by Mr Victor Chan. As submitted by Mr Kat, if he had to cross-examine Mr Atus Chan, he would need to take instructions and could only do it after the time slot originally allocated to the trial. In other words, the admission of Mr Atus Chan’s witness statement would derail the trial.

 (4) For the above reasons, and having taken into account all the circumstances as well as the underlying objectives set out under Order 1A, rule 1 of the Rules of the High Court (Cap 4A), I exercised my discretion to refuse the Defendants’ application with costs. 

I. CONCLUSION

162.  For the reasons explained above, the Plaintiff succeeds in its claim against the Defendants and the Defendants fail in their third-party claim against the Third Party. 

163.  Accordingly, I make the following orders:

 (1) judgment be entered in favour of the Plaintiff in respect of those relief sought in prayer for relief (1), (2), (3) and (6) of the Amended Statement of Claim, and also in respect of a monetary award in the total sum of HK$2,507,100 (ie Deposits of HK$2,480,000 + solicitors’ fees and disbursements of $27,000 + stamp duty of HK$100)[36], with interest at usual commercial rate (ie 2% above prime rate quoted by HSBC) from the date of the writ till the date of the judgment and thereafter at judgment rate till full payment;

 (2) the Defendants’ counterclaims against the Plaintiff be dismissed;

 (3) the Defendants’ claims against the Third Party be dismissed;and

 (4) there be a costs order nisi that the Defendants do pay to the Plaintiff the costs of this action, and to the Third Party the costs of the third party proceedings in this action, to be taxed if not agreed.

164.  Given that I have not heard parties’ submissions on the issues of interest and costs, the parties are at liberty to take out Summons within 14 days to vary my said orders on interest and/or costs, failing which the said orders will become absolute.

165.  Lastly, I wish to thank counsel for their valuable assistance rendered at the trial.