PARK KIT INVESTMENT LTD. v. TSANG KWOK FUN t/a DICKIE TSANG & CO., SOLICITORS (a firm)

HCA4757/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.4757 OF 1998

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J U D G M E N T

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Introduction

1. This is a case involving the conveyance of some real property in the New Territories. The plaintiff's case was basically that its director, Fung Ting, had intended to use the plaintiff to purchase the property called Tim Yuen Villa ("Tim Yuen"). However, due to the negligence of its solicitors, the defendant, it had only purchased two lots of land within the boundary of Tim Yuen and not the whole of Tim Yuen. The plaintiff therefore claimed damages against the defendant for having failed to discharge its duties properly and failed to exercise a reasonable standard of care in the preparation of the conveyancing. The defence argued, however, that the firm had not been negligent and it had carried out the instructions of Fung Ting dutifully.

2. At the trial, the plaintiff had called two witnesses and the defence had called three. The two basic issues involved were whether the defendant was liable and if so, what should be the amount of damages. I shall deal with the issue of liability first. In relation to this question, the main witnesses would be PW1, Fung Ting and DW1, Chan Lap Bong. It would be useful to summarize first what they had said in their testimonies.

The evidence of Fung Ting, PW1

3. Fung Ting ("Fung") was the person behind Park Kit Investment Limited, the plaintiff. He was using the company as a vehicle in the purchase of the property in question. He was 66 years of age and lived in Shun Fung Wai, Tuen Mun. Shun Fung Wai is a village covering different lots of land.

4. Fung said that the transaction involving Tim Yuen had taken place in 1993. However, before that, he had also made purchases of neighbouring lots in Shun Fung Wai. He said that in 1987, he had purchased some adjacent property from a person called Leung Tim Moon ("Leung"), who was also the owner of Tim Yuen. According to Fung, Leung was not an honest person. When Fung had requested him to make some access in the boundary wall surrounding his property, Leung used the opportunity to extract money from him.

5. Against this background, when Fung heard about the offer by Leung to sell Tim Yuen in 1993, instead of doing it himself, he instructed Lau Yuk Wing ("the Agent") to do the negotiation with Leung. After the negotiation, the Agent came back to Fung and reported that an agreement had been concluded. The purchase price was $6 million and a deposit of HK$200,000 had already been paid to Leung. The Agent handed the receipt of deposit ("the Receipt") to Fung. It should be noted that the description of the subject matter of the sale in this receipt was "新界屯門順風圍第D.D.130 Lot No.2064 E.F. 兩座物業。" This was the first written description of the property concerned.

6. Fung first went up to the defendant firm in March 1993. He was introduced to Chan Lap Bong ("Chan") who was a staff of the defendant. According to Fung, what happened at the firm was that he gave the Receipt to Chan. Having checked the details, Chan said the Receipt was invalid as it referred to the Agent as the purchaser and not the plaintiff. Chan then gave a standard contract to Fung for him to take back to Leung for signing.

7. Fung said he took this document, which was a blank document, and went to Leung's home at Tim Yuen. He asked Leung to fill in the details, but Leung managed to get a further deposit of HK$200,000 from him before he did so. This document was the first Provisional Sale and Purchase Agreement ("the 1st PSPA"). Regarding the description of the property, it was written down as "新界屯門順風圍，第DD130 Lot 2064E, F 兩座。" It appeared that this was basically the same description as in the Receipt.

8. Fung said that when he received the 1st PSPA from Leung, he actually raised the query that as Leung was selling the whole thing, why did he just write down those two numbers. According to Fung, Leung said "It is OK. Just show it to your solicitor". Fung said that there was nothing he could do. Then, on the next day, he took the document back to the firm and showed it to Chan. But Chan still said it was not acceptable, as it made reference to the payment of deposit of $200,000 only but in fact Fung had altogether paid HK$400,000. There were also problems in relation to other terms such as the date of completion. According to Fung, what he had told Chan regarding the property was : "Two blocks of 3 storey of village houses and enclosing walls and the garden. The whole property of Tim Yuen Villa". However, Fung said that Chan had told him that the lot numbers had to be checked before finalizing.

9. Because of the problems in relation to this provisional agreement, Chan said that he would write out another one for Fung, which had to be signed by Leung again. Fung said that Chan then filled in the details in the Second Provisional Sale and Purchase Agreement ("the 2nd PSPA"). The description of the property in this document was : "新界屯門青山道221/2 咪順風圍第130約2064E及F地段，連花園圍牆及上蓋兩座700呎三層小型鄉村屋宇連屋內外固定裝修". Fung stressed that when he met Chan for the purpose of preparing the documents, he was unaware of the lot numbers of the property.

10. Subsequently, Fung had returned to the firm to deal with the Formal Sale and Purchase Agreement ("the Formal Agreement"). He could not remember the exact date of this event. But Fung recalled that he had told Chan about the background of the purchase and that Leung was a dishonest man. He asked Chan to look at the title deeds carefully and to get everything required for him. According to Fung, Chan's reply was that he also knew Leung and that he would exercise great care in carrying out the search for Fung. In the Formal Agreement, the property was described as :

"All those pieces or parcels of ground registered in the Tuen Mun District Land Registry as Section E of Lot No.2064 and Section F of Lot No.2064 both in demarcation district No.130 together with the messuages erections and buildings thereon."

11. Fung met Chan again at the firm. That meeting was for the purpose of paying stamp duty. On that occasion, Fung said that he stressed to Chan that it was most important for him to collect the title deeds and look at the deeds carefully. According to Fung, Chan reassured him that he had looked at them already. Madam Wong, another director of the plaintiff, was also present. Fung remembered that she had actually asked Chan whether it was necessary to get a surveyor to measure the land. The reply by Chan was that the whole property had been sold and it was surrounded by the enclosing wall, so they should not waste the money.

12. Then on the completion date, Fung went to Chan's office again to pay the balance and the legal fees. This time, Fung said he had asked Chan whether he had collected everything for him. Chan said that he had. When shown the assignment, Fung said he did not understand anything in it and that he did not know that the garden area and the boundary wall were not included. Further, Fung said that before and at the time of his signing of the Formal Agreement, no one from the firm had explained the contents to him. Chan just told him to sign and said that all the title deeds had been obtained.

13. Then in 1996, Fung said that some officers from the Official Receiver came to his place and made enquiry about the property. Fung explained to them that the plaintiff had become the owner of the property since 10 June 1993. He also referred them to Chan. Later, Fung went up to see Chan in connection with the incident, but Chan said that nothing would happen and there was perhaps just an overlapping of land lots. When Fung tried to sell the property, he thought he was selling the whole area of Tim Yuen. But it turned out that he did not own all the lots within Tim Yuen. His ownership extended to 2064E & F only and not the other smaller lots.

14. In cross-examination, Fung clarified that in fact what he had purchased in the Shun Fung Wai area were three sets of adjacent lots : first 2759 and 2760, then 2064B2 and 2064B3 in 1987, and lastly 2064E and 2064F in 1993. It was in relation to 2064E and 2064F that Fung had engaged the Agent to negotiate for him with Leung and that he believed he was purchasing Tim Yuen. As to the other two areas of land he had purchased earlier, he named them Park Kit Garden and Park Kit Villa.

15. Regarding the reason why Fung had asked the Agent to negotiate for him with Leung, he admitted that it was because he wanted to get a lower price. He confirmed that he had not participated in the negotiation with Leung. It was only the Agent who subsequently informed him orally that a deal was made and the deposit had been paid.

16. Fung insisted that when he first met Chan, he told Chan that the property concerned was inclusive of a garden wall and two 3-storey buildings. When defence counsel suggested to Fung that he was the one who had told Chan of the lot numbers, Fung said that the lot numbers were written by Leung, and he himself had no knowledge of the lot numbers at the time. He said that as far as he was concern, the proper address of the property should be Tim Yuen in Castle Peak Road. It was put to Fung that it was Chan who had suggested calling for a land survey report regarding the boundary and lot description. Fung disagreed, and he reiterated that when Madam Wong made the proposal, Chan had advised against it.

The evidence of Chan Lap Bong, DW1

17. Chan was a staff of the defendant firm. He had been dealing in conveyancing matters for about 91/2 years. His role at the firm was to interview clients, read the preliminary documents first and then assign the case files to the conveyancing clerks. He would also check the progress of each file and to assist in mortgage arrangement. He was working under the instruction and direction of the solicitors.

18. Chan recalled that he first met Fung in mid-March 1993, then again on 21 March. When they first met, Fung told him that he had purchased two small houses, i.e. Ting Houses（丁屋）in Shun Fung Wai and he wanted to get a solicitor firm to do the conveyancing. Then Fung showed him the Receipt. What took place afterwards regarding the signing of the two provisional agreements was generally the same as what Fung had said.

19. However, according to Chan, when he was asked by Fung to fill in the details in the 2nd PSPA, Fung had specified, inter alia, that he wanted to buy the two lots of 2064E and 2064F with the structures（上層建築）. He had asked Fung whether he knew the area well and whether he was sure that the lots were 2064E and 2064F. Chan said that he had further advised Fung that if he was not clear about it, or if there was any doubt about the location, the size of the lots and the boundary, a professional surveyor should be engaged to prepare a report. He said that the surveyor could also find out whether there were illegal structures on the property. Chan said that Fung then inquired about the possible costs. When Fung heard that it would be about $10,000, he declined, saying that he knew the area well, that he was living in the adjacent property, and that he had also purchased nearby lots before. Chan recalled having said to Fung that then he himself had to bear the risk. After that, Fung left his office.

20. At about the end of March, Chan said he saw Fung again for the payment of the main deposit. However, he said he did not personally attend to Fung, and it was Joyce Chung who had done so. Chung was another staff of the defendant. Chan recalled that the stamp duty was paid on or about 2 April and he denied that on such an occasion Madam Wong had asked for his advice concerning the need for a surveyor's report. For the execution of the assignment, Chan said that it was done on 9 June 1993. On that day, Chan recalled having seen Fung but he was not further involved. Again, it was Joyce Chung who had handled the matter. In relation to the plaintiff's suggestion that Fung had persistently reminded him about the title deeds, Chan said that he would not usually know when the title deeds would be received. Such matter would be dealt with by the conveyancing clerk and the solicitor.

21. Chan was further questioned in cross-examination about the lot numbers that appeared in the Receipt. Chan said that he was not in a position to know whether there was a problem with the lot numbers. They were provided by Fung as a client and before Fung came to him, there was already an agreement about the subject matter. To him, the purchase simply involved lots 2064E and 2064F as stated. At the time, he did not know that the lot numbers were written down by Leung. He was not told by Fung that the purpose of the purchase was to avoid further extortion by Leung. He disagreed that on the very first occasion of their meeting, Fung had already expressed his concern about the garden area and the boundary wall. Moreover, Chan pointed out that he did not know that the property had a name called Tim Yuen and that it was enclosed by a boundary wall. He stated that Fung never mentioned that he was going to buy Tim Yuen. Although Chan agreed that very few people would know pieces of land by their formal lot numbers, here he did not feel strange when Fung used the lot numbers as he said he was living in the area and knew it well. Chan maintained that on the first occasion when they met, he had confirmed with Fung whether he was purchasing these two lots and Fung's reply was in the positive.

22. Chan said that when he filled in the particulars for Fung in the 2nd PSPA, what he had done was just to "translate" Fung's instruction into words. He agreed that it was on this occasion that he first heard Fung referring to a garden and the boundary wall. However, he did not feel strange despite these additional description because if there were a garden, a boundary wall and other fixtures within the two lots, they would all be included in the purchase. He was questioned as to what would happen if the garden was not within the two lots. Chan said that according to his understanding, which was based on Fung's instruction, the garden referred to would be within the lots, and the same applied to the boundary wall.

23. Chan denied that there was a practice to put down the size and area of any purchased lot, although he agreed that the present dispute could be avoided if such information were to be included. But in order to do so, a survey was required. He rejected the suggestion that he had failed to advise Fung to obtain a surveyor's report. He stated that in fact when a transaction involved land lots, it would be his standard procedure to give the advice of engaging a surveyor. As to the issue of the title deeds, Chan said it would also be the practice of the firm to check the title deeds carefully.

24. The above would be the main witnesses' evidence on the issue of liability. I have dealt with them in greater detail as their evidence was important and should be considered in context.

The plaintiff's pleaded case

25. I now turn to the cases pleaded respectively in the Statement of Claim and the Defence.

26. The plaintiff first filed the Statement of Claim on 26 March 1998. Concerning the subject matter of the purchase, paragraph 2 stated :

"Sometime in about early 1993, it was agreed between Leung Tim Mun ('Leung') as the vendor of one part and the Plaintiff as the purchaser of the other part that Leung would sell and the Plaintiff would purchase Leung's property known as Lot No.2064E in D.D. 130 and Lot No.2064F in D.D. 130 at Shun Fung Wai 221/2 Miles Castle Peak Road Tuen Mun New Territories together with the 2 three-storey village houses and garden as demarcated by the boundary wall erected thereon ('collectively referred to as the Property unless otherwise specifically referred to') at a price of HK$6,000,000.00."

27. This constituted the basis of the plaintiff's case regarding the property as it was first pleaded. However, an amendment was made on this important issue of what was the subject matter of the sale. In the Amended Statement of Claim, dated 24 July 1999, paragraph 2(a) stated as follows :

"Sometime in about early 1993, it was agreed between Leung Tim Mun Moon ('Leung') as the vendor of one part and the Plaintiff as the purchaser of the other part that Leung would sell and the Plaintiff would purchase Leung's property known as Lot No.2064E in D.D.130 and Lot No.2064F in D.D.130 at Shun Fung Wai 221/2 Miles Castle Peak Road Tuen Mun New Territories as shown and coloured pink on the surveyor's plan annexed hereto including the boundary wall erected thereon ('the said boundary wall') together with the 2 three-storey village houses and garden as demarcated by the boundary wall erected thereon ('collectively referred to as 'the Property' unless otherwise specially referred to') at a price of HK$6,000,000.00. The Property comprises the following lots, namely, Section E of Lot 2064, Section F of Lot 2064, the Remaining Portion of Section D of Lot 2064 ('Lot No.2064DRP'), the Remaining Portion of Section G of Lot 2064 ('Lot No.2064GRP') and the Remaining Portion of Lot 2064 ('Lot No.2064RP')."

28. As to the basis of the claim against the defendant, the plaintiff was relying on both contract and negligence. The plaintiff argued that the defendant had been in breach of contract and was negligent in that the defendant had failed to discover and/or inform and/or advise the plaintiff that Leung had not produced the title deeds to part of the Property, namely, Lot Nos.2064DRP, 2064GRP and 2064RP in Demarcation District No.130. The plaintiff also argued that the defendant had failed to explain to and/or advise the plaintiff the contents of the Provisional Agreement and/or the Formal Agreement for the sale and purchase of the Property and the Assignment of the Property wherein the descriptions of the Property do not contain the Portion.

29. The plaintiff averred that had it not been for the defendant's breach of duty and/or negligence, the plaintiff would not have entered into the Provisional Agreement or the Agreement or the Assignment and paid Leung HK$6,000,000. Further, by paragraph 6(a) of the Amended Statement of Claim, the plaintiff tried to formulate another basis of claim i.e. an actionable misrepresentation in that Chan had orally represented to Fung that Leung had title to the Portions and would convey the same to the plaintiff and there were title deeds in respect of the Portion.

30. Finally, the plaintiff asked for damages to be assessed and a declaration for indemnity for the loss that would incur in connection with the sale by the plaintiff to its intended purchaser.

The defence case

31. By the amended defence dated 2 September 1999, the defendant argued that the Property purchased was "All those pieces or parcels of ground registered in the Tuen Mun District Land Registry as Section E of Lot No.2064 and Section F of Lot.2064 both in Demarcation District No.130 together with the messuages erections and buildings thereon." The defence denied that the Property should comprise the three Remaining Portions as added in the amended statement of claim. It was stated that the plaintiff had purchased the two lots of land exactly as he had instructed the defendant to do.

The issues on liability and the findings

32. I am grateful to counsel for the plaintiff who had prepared a very succinctly written final submission. It had clearly identified the issues to be decided and the relevant evidence. Counsel for the defendant had also rendered assistance to this court by a detailed written reply to the plaintiff's arguments.

33. Counsel for the plaintiff pointed out that there were three main questions on the issue of liability. They were:

(a) What property did the vendor namely, Leung Tim Moon, and the plaintiff intend to sell and purchase?

(b) What instructions were given to Chan Lap Pong of the defendant by Fung of the plaintiff?

(c) Did the defendant breach its duty and/or act negligently as solicitors for the plaintiff in the purchase of the subject property?

34. On the first question, counsel pointed out that the plaintiff's case was that it had intended to purchase from Leung the whole area of Tim Yuen as demarcated by the boundary wall erected thereon. The basis of the argument was that the plaintiff must have wanted to purchase the whole of Tim Yuen, including the other three lots ("the Garden Lots") situated between the boundary wall and 2064E / 2064F, otherwise Fung could not have access to 2064E and 2064F without trespassing into the Garden Lots. Counsel argued that if the Garden Lots were to be retained by Leung, he should have discussed with Fung about the right of way over the Garden Lots.

35. One of the main difficulties here was that Fung had not participated in the negotiation with Leung regarding the purchase. He had asked the Agent to discuss the sale with Leung. While this could have been a clever move on his part regarding the price, he now faced the difficulties of not knowing what was being discussed between the Agent and Leung. Unfortunately, both Leung and the Agent were not available as witnesses in the trial. What Fung had received was just the Receipt. There was no reference to Tim Yuen in the Receipt, only the two lot numbers were stated. In fact, Tim Yuen was never written down in any of the documents as the subject matter of the sale. In the circumstances, the proper interpretation could only be that Leung was intending to sell only these two specific lots. When Fung gave the Receipt to Chan and asked him to deal with the conveyancing of the property, Chan was entitled to suppose that the transaction involved these two specific lots and nothing more.

36. In any case, without the evidence of either the Agent or Leung, it would be difficult for me to accept counsel's submission that the only reasonable inference in the circumstances must be that Leung and the plaintiff agreed to sell and purchase the whole property enclosed by and including the boundary wall called Tim Yuen. Fung may well be right in his observation that Leung was a dishonest person. One may even suspect that Leung had deliberately described the subject matter in such a way so as to enable him to retain the Garden Lots. But Fung had no knowledge of what was being said between the Agent and Leung. He had only the Receipt and the description in the receipt was clear enough. According to Fung, he did have some concern at the time when he received the 1st PSPA concerning why Leung only wrote down the lot numbers, however, instead of insisting on a clarification there and then, he simply accepted what Leung said and took the document to Chan.

37. In this regard, I have to accept the defence submission that there was really no sufficient basis to say that Leung had actually agreed to sell Tim Yuen which included the Garden Lots and the boundary wall. The defence rightly pointed out that when stating his address in the various documents, Leung did write down Tim Yuen. But he never used that name to describe the property he was selling. On the other hand, Fung had not instructed the Agent to specify the property as Tim Yuen and he himself had not insisted on such a description when he later approached Leung. In the face of the evidence, especially the documentary evidence, I could not say that because of the need for access, it must be inferred that Leung had intended to sell Tim Yuen. In any case, I accept the defence argument on the issue of access.

38. As to the second question, there were two conflicting accounts as to what had transpired between Fung and Chan in their meetings. It would be necessary for me to come to a view about the credibility and reliability of the witnesses.

39. Fung impressed me as an intelligent and cautious person. He obviously was not a first timer in purchasing land lots in the New Territories. He had, according to his own evidence, made a number of purchases in the vicinity of Tim Yuen before. In fact, he appeared to be rather systemic in acquiring adjacent lots. When he received the Receipt, he should be aware that the formal lot numbers were being used to describe the property and not Tim Yuen. But then he proceeded to instruct Chan to deal with the conveyancing matter by virtue of the information in the Receipt. He might be, subjectively, under the impression that it was Tim Yuen that he was purchasing; however, as I said earlier, the documents did not show that. To say that he had nevertheless orally informed Chan that he was purchasing Tim Yuen but Chan had failed to clarify the instruction and had failed to accept the suggestion to appoint a surveyor was not very convincing. In my assessment of Fung, if he thought that it was necessary to have a surveyor, I would not believe that he would be so easily persuaded by Chan to drop the idea, especially when it was the first time he had dealing with Chan and the firm.

40. Having seen and heard both Fung and Chan, I would accept, on a balance of probabilities, the testimony of Chan. I consider that Chan's account of the event to be more credible. I would not venture to say that Fung had deliberately lied in Court but I believe that his memory might have failed him on what had taken place between him and Chan. In the end, I would agree with the defence's analysis of the evidence.

41. In the circumstances, the direct answer to the second question raised by the plaintiff was that I found that Fung had not specifically told Chan he was purchasing Tim Yuen. His instruction to Chan was in relation to the two specific lots and that Chan had followed his instructions in preparing the conveyance documents. More specifically, I found that it was Chan who had advised Fung to engage a surveyor to prepare a report on the property but Fung had rejected the idea. On the basis of the above, it would be difficult to argue that Chan, and in turn, the defendant, had been negligent or had breached any contractual obligation towards the plaintiff. Without being instructed about the Garden lots, and having his suggestion to appoint a surveyor rejected, it would be difficult to blame Chan and the firm for being negligent.

42. On the third question, the plaintiff had argued, inter alia, that even if the court were to accept the evidence of Chan, there would still be a situation under which the defendant might be found liable for negligence : there was a failure to specify in the Formal Sale and Purchase Agreement and in the Assignment the garden and boundary walls. This submission was based on the argument that by a proper interpretation of the property description in the Provisional Agreement, the garden and boundary walls may refer to the pieces of land outside the territory of Lots 2064E and F. It was contended that "together with" should mean "in addition to". Hence, it would be wrong for DW2, the expert, to say that the specification of the garden and fence walls in the property description did not refer to the part of garden and fence walls situated outside Lots 2064E and F.

43. First of all, I could not agree that "together with" should be taken to mean "in addition to". I accept the defence suggestion that it should really mean "include". Such an interpretation would be more consistent with the Chinese description of "連" and "及" used in the second Provisional Sale and Purchase Agreement.

44. Furthermore, although the Formal Agreement did not indeed specify any garden and boundary walls, I would accept DW2's testimony that if a reference was made to a specified lot, and that on the lot there was a field which formed part of a larger field, the purchase of the specified lot included the field thereon but not the part of the larger field beyond the specific lot. I would also agree that the concept of a garden and boundary wall, in the context of the present case, are rather ambiguous terms. A garden could be simply an open ground, or some area covered by earth with or without vegetation. It would be difficult to say that there was no garden area, whether with or without walls, in the two lots purchased by the plaintiff. In any case, it was true, as the defence had argued that this was not raised as a basis of negligence in the Amended Statement of Claim.

45. Having accepted the evidence of Chan and the defence expert, as the plaintiff's counsel had rightly conceded, there could not be any basis to support the plaintiff's claim of negligence or breach of contract against the defendant. I would not propose to deal with the point about actionable misrepresentation as there was simply no foundation for such a submission and the plaintiff did not really seriously argue it.

46. In the circumstances, I found the plaintiff had failed to establish, on a balance of probability, its claim. The action must be dismissed. Costs to the plaintiff, to be taxed if not agreed.