CHENG YEE KIT SHIRLEY v. NG SHEK HING by his Guardian ad litem NG WING LEUNG

HCA 2669/2017

[2023] HKCFI 2092

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2669 OF 2017

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J U D G M E N T

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A.  THE DISPUTE

1.  The parties to this dispute live in Tseung Kwan O Village in Sai Kung (“the Village”). The Plaintiff and her husband have rented a flat in the Village since 2008. The Defendant is an indigenous villager.

2.  The Plaintiff claims that the Defendant breached a contract made between them in 2011 (“the 2011 Agreement”) for the development a Village house (“the House”). She seeks inter alia a declaration of beneficial ownership over “1/F, 2/F and Roof” of the House (“the Disputed Property”), now since built, and an order for possession of the Disputed Property along with mesne profit.

3.  The Defendant disputes the Plaintiff’s claim. At trial he was represented by his fourth son acting as guardian ad litem without the assistance of any solicitors or counsel on record. The Defendant was however legally represented at earlier stages in the action, including the pleadings, which are signed by counsel, and in the preparation of witness statements.

4.  The Defendant had originally pursued a Counterclaim against the Plaintiff in respect of the Disputed Property. But when he failed to attend the Pre-Trial Review before Mr Justice Keith Yeung, the learned judge provisionally struck out the Counterclaim under O.25 r.1C of the Rules of High Court. On the first day of trial, the Defendant confirmed that he was no longer pursing the Counterclaim. The order for striking out became final.

B.  FACTUAL BACKGROUND

5.  The following matters were undisputed by the Defendant at trial and are in my judgment clearly made out on the evidence.

6.  The Defendant is an indigenous villager who became registered owner of the lot on which the House is located (“the Land”) by a New Grant dated 4 November 2010 (“Grant”). The Grant provides that the Defendant shall erect a typical 3-storey village house on the Land. 40 other similar grants were made at the same time to 40 other indigenous villagers.

7.  The 41 lots are in close proximity and were fenced off as a construction site (“the Site”) with a single vehicular access guarded by a locked barrier. The Village formed a special committee to oversee the construction of the 41 houses (“the Committee”), which was solely responsible for the site formation and common drainage for those houses.

8.  Having rented a flat in the Village since 2008, the Plaintiff and her husband became interested in purchasing a property within it. Through the introduction of her neighbour Chan Yuk Sing (“YS Chan”), a building contractor, the Plaintiff entered into the 2011 Agreement with the Defendant. The Chinese language agreement is dated 19 March 2011 and was executed by the parties in a solicitor’s office with YS Chan acting as witness.

9.  Special Condition 3 of the Grant provided that the House should be built within 36 months from the date of grant on 4 November 2010. It was however also stated in the Grant that no building work could commence until the 4 corners of the House had been “set out” by the Director of Lands. The Lands Department only set out the corners in August 2015. Given inter alia the delay in setting out, there is no dispute that Special Condition 3 has in effect been extended or waived to the extent necessary to enable the House’s completion.

10.  Immediately after the August 2015 setting out, YS Chan started building works for the House, having also been engaged for the construction of 4 other houses within the Site.

11.  The construction work soon ran into difficulties in the form of triads. Triad activity targeting the Site was apparently orchestrated by a gentleman known as “General Pig” and included from the outset threats made to workers.

12.  On 23 December 2015, a series of threatening acts were discovered including the dousing of red paint over the houses built by YS Chan, the blocking of the drains of such houses with concrete, the scattering of leaflets alleging that YS Chan was in debt, and a notice posted on a wall within the Site alleging conspiracy to defraud the villagers and the Government by YS Chan and the grantees for whom he was building.

13.  By 2016 only YS Chan and those from another construction enterprise (Wing Tai) remained working on the Site. While the houses built by Wing Tai suffered no triad interference, those built by YS Chan continued to suffer.

14.  As matters continued to escalate in early 2016, a meeting was held at YS Chan’s home in May 2016 attended by the grantees and buyers / buyers’ representatives of the houses he was constructing. While the Plaintiff alleges that a joint decision was made at the May 2016 meeting to temporarily halt further building works, the Defendant denies any such joint decision, and instead relies on an agreement, allegedly reached in June 2016, by which the Plaintiff was given a deadline to restart work on or before 15 August 2016. As further addressed below, the Defendant’s case is that the Plaintiff, acting in breach, failed to do so.

15.  In September 2016 the Plaintiff discovered that the construction of the House had been taken over by Wing Tai, purportedly on the Defendant’s behalf. At no point was the Plaintiff consulted about the matter. Once Wing Tai was on the Land, she was prevented from entering or carrying out any work on the House.

16.  The Plaintiff brought the present action against the Defendant in 2017.

17.  As at early 2018, the House remained uncompleted.

18.  An inspection of the House in August 2019 revealed that the Defendant had unilaterally and substantially altered various structures within the Disputed Property, necessitating rectification works to restore the House to the Plaintiff’s original building plan.

19.  By an order dated 29 August 2019, the parties undertook to the Court that neither the Plaintiff nor the Defendant would carry out or continue any construction or decoration work at the Disputed Property, and neither would allow, cause or permit any party to reside in any part of the Disputed Property.

20.  Yet in or about May 2020 the Plaintiff discovered that the Defendant had allowed or permitted someone to occupy the 1^st floor of the Disputed Property.

21.  In around September 2021, Ng Wing Leung (“Ng Jr”) became the Defendant’s guardian ad litem due to the latter’s impaired mental capacity.

C.  MAIN ISSUE

22.  By the time of closing submissions, the relief sought by the Plaintiff was:

(1)  A declaration that the Defendant holds the Disputed Property on trust for the Plaintiff until title to the same is legally transferred to her.

(2)  Specific performance of the 2011 Agreement.

(3)  Mesne profit from 1 September 2017 (this being the date which the Plaintiff says the House should have been built and ready for occupation by) to delivery of possession of the Disputed Property as of 1 September 2023, in the amount of $2,220,100.

23.  The core of the Plaintiff’s case is her claim for breach of the 2011 Agreement.

24.  The Plaintiff relies on several express terms of the 2011 Agreement (“the Express Terms”) to the effect that:

(1)  The Defendant was to immediately deliver vacant possession of the Land to the Plaintiff (Clause 1).

(2)  The Plaintiff was responsible for financing and arranging construction of the House, including its foundation and superstructure (Clause 2).

(3)  The Defendant would provide the Plaintiff with all assistance necessary for all relevant building and related applications without delay (Clause 4).

(4)  The Defendant undertook to neither directly nor indirectly act in any way detrimental to the Plaintiff’s rights and interests in the agreement (Clause 7).

25.  Clause 4 and Clause 7 may be read with Recital 3, which refers to the parties’ agreement to cooperate on the development and construction of the House in accordance with the terms of the Grant and the remaining provisions of the 2011 Agreement.

26.  The Plaintiff also relies on the following implied terms (“the Implied Terms”):

(1)  The Defendant would allow and permit the Plaintiff’s agents and/or servants to enter the Land for the erection of the House.

(2)  The Defendant would not repossess the Land.

(3)  The Defendant would not engage or enter into any agreement to engage any other party to erect the House on the Land.

27.  As Ng Jr clarified in the course of his oral opening submissions, the Defendant’s essential case at trial was simply that, while the 2011 Agreement originally set a deadline for completion of works by June 2016, the parties orally agreed in June 2016 that the Plaintiff was to restart work on the House by 15 August 2016. Although Ng Jr did not put it in so many words, his contention was in effect that the 2011 Agreement was varied in June 2016 as to the timeline for completion of building works – the further implication being that the Plaintiff’s failure to do so amounted to a breach of agreement.

28.  This highlights a feature of the 2011 Agreement that neither party seemed much alive to at trial but which in my view is plain – namely that the 2011 Agreement specified no date by which the construction of the House was to be completed in the first place. There is certainly no express provision as to the date of completion. And even assuming (without finding) there was some implied term to the effect that completion had to be in accordance with the Grant, the reality is that the time for completion under the Grant had been extended until at least 2018 due to the fact that setting out had only taken place in 2015. I will return to the significance of this later.

29.  In light of the above, the main issue before me is essentially: which party breached the 2011 Agreement?

30.  After no written opening submissions were filed for the Defendant (contrary to earlier Court directions), I asked Ng Jr to confirm whether the Defendant’s case at trial involved any contentions besides those relating to the alleged 2016 agreement / variation of the 2011 agreement. Ng Jr confirmed this to be the case in his oral opening submissions, and his subsequent conduct of the trial[1] was consistent with this limited scope of dispute.

31.  That said, after setting out my analysis of the main issue I will briefly address a number of other defences and issues that had at earlier points in the dispute been raised on his behalf.

D.  FACTUAL WITNESSES

32.  In reaching my judgment on the main issues at trial, I have taken into account the evidence of the parties’ factual witnesses along with the following observations and findings.

33.  The factual witnesses for the Plaintiff were herself, YS Chan and Leong Wing Sum (“Leong”). Leong is another person for whom YS Chan was building a house on the Site. He lives in rented accommodation in the Village and is a third party to the dispute with no discernible interest in the outcome of the litigation.

34.  The Defendant’s factual witnesses were Ng Jr and Chan Chiu Ming (“Ming”), who was originally hired by YS Chan to work on the concrete structures of the 5 houses on the Site for which YS Chan had been engaged as contractor, and who subsequently worked for other builders on the Site – ones not targeted by triads. Counsel for the Plaintiff, Ms Dora Chan, described these other builders as “triad approved parties” but I make no finding on this.

35.  The Plaintiff, YS Chan and Leong were hardly cross-examined by Ng Jr. I agree with Ms Dora Chan’s submission that their evidence supports the Plaintiff’s case.

36.  With regard to Ng Jr’s evidence, I agree with Ms Dora Chan’s observation that he performed poorly under cross-examination, that his evidence overall lacks credibility, and that in parts of his evidence he markedly (most likely unwittingly) contradicted the Defendant’s pleaded case and witness statements.

37.  In addition to giving many answers to the effect of “I don’t know” on a range of questions on key matters for which he ought to (and in his witness statement purportedly did) have knowledge of, Ng Jr gave evidence which differed substantially from his witness statement and / or the Defendant’s pleaded case.

38.  A stark example was when Ng Jr said that the Defendant only came to know the Plaintiff was the counterparty to the 2011 Agreement just before he executed the agreement in the solicitors’ office on 19 March 2011. That is contrary to the Defendant’s pleaded case of mistaken identity, and the witness statement of Ng Jr, which stressed repeatedly that the Defendant only learned of this mistake in the middle of 2016.

39.  While under cross-examination Ng Jr admitted that all of his account before August 2015 was by way of hearsay from his father. Yet in his witness statement Ng Jr conveyed the distinct impression that he had personal knowledge of many events which took place before August 2015.

40.  Remarkably, when Ng Jr was confronted under cross-examination with information that undermined the Defendant’s stance on whether the Plaintiff or YS Chan had spent any money on the House by November 2013, his response was to say that his father, the Defendant, might have been be lying to him.

41.  When Ng Jr was asked during cross-examination about his response to the Plaintiff when she told him over the telephone on 24 August 2016 that she / YS Chan had found a new builder to restart works, he said in effect that he had responded by urging the Plaintiff to start the works as soon as possible. This is contrary to the Defendant’s case (maintained by Ng Jr in his oral submissions) that, amidst the delay to construction in 2016, the Plaintiff was told and agreed that she must restart the works by 15 August 2016, and that it was because of the Plaintiff’s failure to restart works by then that the Defendant terminated the 2011 Agreement.

42.  As for Ming, while called by the Defendant to the stand, his evidence on the whole aligned with the Plaintiff’s case, and in particular that the stoppage of works was due to the disruptive acts at the Site in December 2015.

E.  FINDINGS ON THE MAIN ISSUE

43.  In my judgment it was the Defendant who breached the 2011 Agreement. The reasons are straightforward.

44.  The Defendant’s claim that the parties in June 2016 orally agreed that the Plaintiff was to restart work on the House by 15 August 2016 is unsubstantiated on the evidence and implausible.

45.  The Defendant’s case is premised on the Plaintiff having been required under the 2011 Agreement to complete work by June 2016 (if not sooner) – thus necessitating an agreement between the parties to extend the time for that completion, failing which the Plaintiff would be in breach. But the Defendant’s premise is unsound: as noted in Section C above, there is no basis for suggesting that the 2011 Agreement required the Plaintiff to complete work on the House by any particular date.

46.  Given the absence of any duty on the Plaintiff’s part to have completed work by June 2016, and having regard to all other evidence before me, I find that the evidence does not support the Defendant’s case as to the alleged June 2016 oral agreement. Overall, I find that the Plaintiff did not act in breach of the 2011 Agreement or any alleged subsequent agreement.

47.  Shifting focus to the Defendant’s own contractual compliance, there is on the other hand no dispute as to the existence or effect of the express terms of the 2011 Agreement noted in Section C above, i.e. Clauses 1, 2, 4 and 7.

48.  Further, applying the settled law on the implication of terms (Kensland Realty Ltd v Whale View Investment Ltd (2001) 4 HKCFAR 381, Marks & Spencer plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd [2016] AC 742 and Lo Yuk Sui v Fubon Bank (Hong Kong) Ltd [2019] HKCA 261), the Implied Terms invoked by the Plaintiff are in my view well-founded. In particular, the requirement that the Defendant allow and permit the Plaintiff’s agents and/or servants to enter the Land as necessary to erect the House is clearly reasonable, necessary for contractual efficacy, and in all the circumstances obvious.

49.  On the facts set out in Section B above, I find that the Defendant acted in clear breach of the above noted Express and Implied Terms by taking over possession of the House and its construction without the Plaintiff’s consent and preventing her from entering and being able to carry out any work on the House.

F.  OTHER DEFENCES

50.  The Defendant raised a number of other purported defences earlier in the action, each with the aim of having the 2011 Agreement found void or voidable (“Other Defences”). These Other Defences were based on allegations including mistaken identity, fraudulent misrepresentation and public policy illegality.

51.  With regard to the “public policy” defence, it is notable that, while briefly referenced in the Defence (in a two-line paragraph), no material facts were pleaded in support. The matter was also not addressed in the witness statements tendered in support of the Defendant’s case.

52.  By the time of trial, the Defendant (via Ng Jr) made plain that he was no longer relying on any of the Other Defences in response to the Plaintiff’s claim. In opening, Ms Chan for the Plaintiff clearly stated her understanding that none of the Other Defences were being maintained at trial. Consistently with this, Ng Jr advanced no written or oral submissions on any of the Other Defences at any stage of the trial. When directly asked whether the Defendant was seeking solely to rely at trial on the alleged 2016 oral agreement, Ng Jr affirmed that this was his position.

53.  I will accordingly deal no further with the Other Defences save to note that, on the matter of public policy, I presently see no basis for refusing relief to the Plaintiff on illegality or public policy grounds. I have here taken into account the available evidence on the background to the 2011 Agreement and the parties’ overall course of dealings, and the case law addressing claims of illegality against agreements involving interests in New Territories “small houses”, including the relatively recent judgment in Tang Wing Hung Albert v Law Chau Fat [2020] HKCFI 2419.[2]

54.  As discussed with Ms Chan during closing submissions, the orders for declaratory relief and specific performance of the 2011 Agreement should reflect the need to comply with the Conditions of Grant.

G.  DISPOSITION

55.  On the findings set out above, the Plaintiff prevails in her case.

56.  Taking into account the evidence before me and the Plaintiff’s submissions on the specific forms of relief to be granted, and in the absence of any submissions from the Defendant in this regard, I will make the following orders:

(1)  Subject to the Government’s / the lessor’s rights under the Conditions of Grant, a declaration be granted that the Defendant holds the Disputed Property on trust for the Plaintiff until title of the same is transferred to the Plaintiff or the Plaintiff’s nominee.

(2)  Subject to the Government’s / the lessor’s rights under the Conditions of Grant, specific performance of the 2011 Agreement by way of delivery of possession of the Disputed Property pursuant to Clause 1 on or before 1 September 2023.

(3)  Mesne profit from 1 September 2017 to 1 September 2023 at $2,220,100, subject to adjustment based on the actual date of delivery of possession of the Disputed Property.

57.  I will also order that the costs of the action be to the Plaintiff on a party and party basis including all reserved costs orders, to be taxed if not agreed.