LAI MING LAN v. SHING YIU MING formerly t/a YIU SHING CONSTRUCTION CO

DCCJ 2789/2007

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 2789 OF 2007

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JUDGMENT

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The dispute

1.  This is a dispute arising from an agreement for sale and purchase of a flat in a village house in the New Territories.

2.  By a written agreement in Chinese (認購書) dated 3July 1997 (“the Agreement”), Yiu Shing Construction Company (“Yiu Shing”) (the trading name referred to in the description of the Defendant above) agreed to sell and the Plaintiff agreed to purchase a property (which was yet to be developed) known as 2^nd Floor (三樓) (including the roof) of the village house at Section B of Lot No. 1482 in Demarcation District No. 129 (also known as No. 184 Mong Tseng Tsuen), Yuen Long, New Territories (“the Property”).

3.  The Agreement provided that Yiu Shing was the owner of the land referred to above and had applied to the Government for a building licence for the construction of the village house.

4.  During closing submissions at trial, an issue as to whether the Plaintiff has named the proper party as the Defendant was raised.  I will discuss this issue later in this judgment.  For the time being, I wish to point out that according to the records kept at the Business Registration Office, Yiu Shing commenced its business upon the application by the Defendant alone in 1995.  It became a partnership operated by the Defendant and another person in April 1996.  In February 1998, Yiu Shing changed its business status from a partnership to a sole proprietorship of the Defendant alone again.  The records also reveal that Yiu Shing ceased business in 2000.

5.  The gist of the Plaintiff’s case can be summarised as follows:-

(1)  Pursuant to the Agreement, the Plaintiff has paid the first 3 instalments (i.e. 30% of the purchase price in total) in the aggregate sum of HK$414,000 to the Defendant.  There is no dispute that such payments have been made.

(2)  According to the Agreement, after Yiu Shing had taken all necessary procedures (which were required for the transfer of title to the Property), upon the Plaintiff’s payment of 3 instalments of the purchase price, Yiu Shing would notify the Plaintiff who would then be required to pay the balance of the purchase price within 21 days.

(3)  The notice (as referred to in subparagraph (2) above) given by Yiu Shing to the Plaintiff for payment of the balance of the purchase price, after the certificate of compliance and also the document regarding payment of the premium (which was required as a result of a “non-assignment” clause contained in the Building Licence in question) had been issued, should deal with matters regarding completion (such as the dates of the execution of the formal agreement and also payment of the balance of the purchase price) .

(4)  There is no dispute that the Plaintiff has paid the first 30% of the purchase price (in the total sum of HK$414,000) to Yiu Shing.  However, as alleged by the Plaintiff, the Defendant has failed to notify the Plaintiff of the intended date of completion and has never assigned the Property to the Plaintiff.

(5)  The Plaintiff, by way of this claim, seeks, the return of HK$414,000 paid plus interest.

6.  The essence of the Defendant’s case is that the Plaintiff had evinced an intention not to proceed with completion for the sale and purchase of the Property as she had not been contactable since August 2000.  The Defendant alleges that by a letter dated 9 December 2002 from his solicitors, the Plaintiff was informed that the certificate of compliance had been issued by the District Lands Office and that the Defendant was in the course of obtaining consent to sell the village house.  By that letter, the Defendant intended to tell the Plaintiff that completion would take place soon (without any particular date of completion specified).  The letter was returned from the post office marked “UNCLAIMED RETURN TO SENDER”.  The Defendant has adduced evidence that he subsequently made attempts to find the Plaintiff but to no avail.  The Plaintiff’s conduct, according to the Defendant, amounted to a breach of the Agreement on the part of the Plaintiff (who was required to notify the Defendant of any change of address).  By way of counterclaim, the Defendant seeks damages from the Plaintiff.

The factual background and evidence

7.  On or about 18 June 1997, the Plaintiff’s sister, Ms Lai Ming Mei (“Mei”) entered into an agreement with Yiu Shing to purchase G/F with terrace and 2/F (三樓) with roof of a village house in Section E of Lot No. 1495 in Demarcation District 129 (also known as 178 Mong Tseng Tsuen), Yuen Long, New Territories (“Mei’s Property”) at the price of HK$2,300,000.

8.  The agreement regarding Mei’s Property is not directly relevant to the present dispute.  However, as I will discuss later, the previous dealings between Mei and Yiu Shing (or the Defendant) may throw some light on the credibility of the Defendant’s case that the Plaintiff was not contactable until commencement of this action.  Yiu Shing was also engaged to provide renovation work for Mei’s Property and the sale and purchase in respect of Mei’s Property was completed in 2001 although, as alleged by Mei, she did complain about the delay in completing transaction in respect of that property. 

9.  After Mei entered into the agreement with Yiu Shing in June 1997, she learned that Yiu Shing intended to develop and sell the Property.  Mei asked the Plaintiff to consider buying the Property.  It was intended that Mei would make payment for the purchase but the Plaintiff would be named as the purchaser of the Property.  As explained by Mei at trial, such an arrangement was made with a view to facilitating her application for mortgage regarding the purchase of the two properties.

10.  As mentioned above, on or about 3 July 1997, the Plaintiff entered into the Agreement (written in Chinese) with Yiu Shing for the intended sale and purchase of the Property (which was to be developed) at the price of HK$1,380,000.

11.  I now set out the relevant terms of the Agreement as follows:-

(1)  The Preamble (which has been described as摘要 in the Agreement) sets out the steps which would need to be taken before the Property could be assigned to the Plaintiff.  In particular, it provides that the Property could not be assigned unless and until all the procedures regarding payment of the premium were completed.  Further, according to the Preamble, the Plaintiff was required to “wait” (靜候) for Yiu Shing’s completion of all necessary procedures.  The Preamble reads:-

“摘要：賣方為下列物業之業主，現應買方要求向賣方認購以下物業。賣方已用該物業向政府申請建造一座約700呎三層高丁屋，將會獲得地政處批準及發給建屋牌(即開工紙)現該物業業主將於建築完成後向政府申請辦理補地價手續，所以買方應清楚明白在未獲政府批出辦理補地價手續前該業主不能將業權正式轉讓，買方應在預期之時間內需靜候業主辦理一切有關手續，買方亦清楚明白政府對物業批出建屋牌照政策所訂下之一切條文，現雙方協議買賣條件詳列如下…”

(2)  According to the payment term (付款方法) contained in the Agreement, the Plaintiff was required to pay 10% of the purchase price (i.e. the 1^st instalment) upon signing the Agreement and she was then required to pay another 20% (in the form of 2 instalments) of the purchase price when the construction work progressed to a certain stage.  It further provides that after Yiu Shing has completed all the procedures required for the assignment of the Property, it should notify the Plaintiff of the matters regarding completion.  The actual wording of the payment term is as follows:-

“付款方法:  於簽定本認購書時，買方先付總樓價百份之十，即港幣壹拾三萬捌仟元正 (HK$138,000.00)作為訂金，再到賣方建築該物業至二樓時，賣方通知買方支付第二成總樓價百份之十之七天內，買方需支付港幣壹拾三萬捌仟元正(HK$138,000.00)，再到賣方完成三樓外牆色面後，賣方通知買方支付第三成總樓價百份之十之七天內，買方需支付港幣壹拾三萬捌仟元正 (HK$138,000.00)，餘數於賣方辦妥所有樓契手續，通知買方於二十一日內一次過付清樓價尾數，即港幣肆拾壹萬肆仟元正 (HK$414,000.00)。”

(3)  Clause 1 of the Agreement reiterates that after the certificate of compliance and the document confirming receipt of the payment of the premium have been issued, Yiu Shing shall notify the Plaintiff of what should be done for execution of the formal sale and purchase agreement and, eventually, completion.  Clause 1 provides:-

“(一)  當滿意紙及補地價文件發出後，賣方隨即通知買方在七天內到賣方指定律師樓辦理樓契合約手續，當買方簽妥正式合約起計十四天或之前成交，逾期作放棄上述認購權益，賣方有權沒收買方之訂金及取消本合約，不作任何賠償。”

(4)  Clause 7 of the Agreement requires each party to notify the other of any change of correspondence address as it states:-

“(七)  雙方通信地址如上述所註，倘若通信地址有變，則通知對方，通知方式則以香港郵政局之平郵遞為準。”

(5)  At the end of the Agreement, there is a note which states:-

“備註：此認購書條文共十條，雙方清楚並願意共同遵守，於簽署後即時生效。”

12.  According to the evidence of the Plaintiff and Mei, the Plaintiff spent a lot of time in Mainland China and Mei was therefore responsible for dealing with the matters arising from the Agreement.  The address (i.e.黄大仙翠竹花園 13 座17/F J 室) and the contact number (2322 6512) written on the Agreement were actually the contact particulars of Mei.  They were given for the sake of convenience because, according to the Plaintiff’s case, Mei was supposed to be the person in charge of all matters arising from the Agreement (even though the Plaintiff was named as the purchaser).

13.  Both parties have agreed that the 1^st and 2^nd instalments of the purchase price in the total sum of HK$276,000 were paid pursuant to the Agreement.  In fact, the payments were made by Mei.

14.  There is, nevertheless, a dispute as to what happened before the 3^rd instalment was paid.  According to Mei’s evidence, in August 2000, the Defendant telephoned Mei (at her mobile phone number) and asked her to pay the 3^rd instalment of the purchase price in the sum of HK$138,000 in accordance with the Agreement.  The Plaintiff’s own evidence is that she has never talked to the Defendant or any of his staff in relation to the payment of the 3^rd instalment as all relevant matters were handled by Mei.

15.  However, the Defendant has given evidence that in August 2000, his clerk, Ms Wu (who passed away in 2005), notified the Plaintiff over the telephone that the works for the external wall had been completed and asked the Plaintiff to pay a sum of HK$138,000.  In the telephone conversation, according to the Defendant’s evidence, the Plaintiff asked if the sum could be paid by way of 3 tranches.  Mei, in her oral testimony, admitted that she made such a request in the telephone conversation.

16.  The Defendant said that he acceded to the Plaintiff’s request and asked Ms Wu to notify her of his decision.  He also gave evidence that when Ms Wu talked to the Plaintiff again on the phone, the Plaintiff provided her with a new address i.e. 屯門兆邦苑29樓5室 (“the Tuen Mun address”) and Ms Wu noted the change in one copy of the Agreement.  During the course of trial, the Defendant produced a copy of the Agreement with some handwritten notes regarding the change of address. 

17.  According to the evidence of both the Plaintiff and Mei, they did have a discussion in about May 2000 as to whether they should change the Plaintiff’s address (which was Mei’s address in Wong Tai Sin) originally provided in the Agreement as Mei was about to move to No. 178 Mong Tseng Tsuen.  However, they deny that they have ever contacted the Defendant or his staff for any change of address.

18.  The Defendant, while giving evidence in court at trial, was somewhat uncertain as to what happened in the telephone conversations referred to above.  When he was referred to the handwritten notes (regarding the change of address) contained in the copy of the Agreement produced by himself, he told the Court that such handwritten notes might have been made by one Ms Wong as opposed to Ms Wu.  At the same time, he said that Ms Wong had left the company by the end of 1999.  But, according to the document regarding the renovation work for Mei’s Property, Ms Wong was still working in the Defendant’s company in about April 2000.  Having been further cross-examined, he then sought to correct himself by saying that both Ms Wu and Ms Wong should have been working in the company in 2000.

19.  In any event, whatever happened during those telephone conversations, the documentary evidence shows that the 3^rd instalment in the sum of HK$138,000 was paid by way of 3 cheques post-dated 21 August 2000, 31 October 2000 and 30 December 2000 respectively.

20.  The Plaintiff’s case is that since Mei spoke to the Defendant over the telephone in August 2000, the Plaintiff or Mei did not hear from the Defendant at all until the Defendant responded to the Plaintiff’s claim in this action.  Mei said that she went to the Defendant’s office in December 2000 and found that it was closed.  The Defendant admitted that he ceased business in 2000 as he did not find it prosperous.  She then made various attempts to try to speak to the Defendant but did not manage to reach him.  Mei told the Court that she formed the view that the Defendant might have gone bankrupt or rendered himself untraceable.  In the circumstances, as alleged by the Plaintiff, the Defendant has failed to notify her of the date of completion and thus failed to assign the Property to the Plaintiff.  According to the Plaintiff’s case, it was discovered in 2006 that the Property was sold to and actually occupied by someone else.

21.  By a letter dated 9 December 2002 (which was apparently sent to the Tuen Mun address of the Plaintiff), the Defendant’s solicitors, Messrs C Y Chan & Co, intended to inform the Plaintiff that the certificate of compliance had been issued and that the Defendant had liaised with the District Lands Office regarding payment of the premium and also asked for their consent to sell.

22.  The above letter was, however, returned undelivered and marked “UNCLAIMED RETURN TO SENDER” in January 2003.  The Defendant alleges that Messrs C Y Chan & Co subsequently tried to get in touch with the Plaintiff through the contact number stated in the Agreement but no one answered the phone.

23.  The Defendant’s evidence is that he then remembered the relationship between the Plaintiff and Mei.  He visited Mei’s Property at No. 178 Mong Tseng Tsuen and talked to a man.  The Defendant said that the man told him that he was the father of the Plaintiff.  In fact, in the Defence and Counterclaim, it was pleaded that the man whom he spoke to was the father of the Plaintiff.  However, in the course of the proceedings, the Plaintiff disclosed that her father passed away in 1994.  In the face of this fact, the Defendant admitted that he had made a mistake and said in his witness statement that the man “might be just” the  father-in-law of the Plaintiff.

24.  In September 2003, the Defendant caused the village house at No. 184 Mong Tseng Tsuen to be mortgaged in favour of Kowloon Development Limited for the purpose of obtaining sufficient finance for payment of the premium to the District Lands Office.  In October 2003, the District Lands Office, upon receipt of the premium, issued its consent to sell.  In 2005, Kowloon Development Limited decided to exercise its power of sale under the mortgage by way of an auction.  Notice of the auction dated 9 December 2005 was posted at No. 184 of Mong Tseng Tsuen and, according to the Defendant, some other areas in the village.

25.  The Defendant alleges that he was unable to contact the Plaintiff and the Plaintiff did not take any initiative of contacting him before the commencement of this action.  The Defendant has also complained that the Plaintiff has failed to notify him of any change of address (as required under Clause 7 of the Agreement).  He has therefore taken the view that the Plaintiff had evinced an intention not to proceed with completion for the sale and purchase of the Property.  However, Mei has given evidence that her home phone number (as stated in the Agreement) has all along remained unchanged though she has moved to other places.

26.  The Defendant also said that owing to the effect of SARS in 2003, all the purchase of the other apartments of the village house falled to proceed with completion.

The issues

27.  It appears to me that the core issue is whether the Defendant has failed to notify the Plaintiff regarding completion of the transaction and also payment of balance of the purchase price in accordance with the Agreement after all necessary steps (including payment of the premium) had been taken.

28.  However, as mentioned above, the parties have made submissions on whether the Plaintiff has named the proper party as the Defendant in this action.  I will deal with this preliminary point first.

Preliminary point

29.  As stated above, according to the records of the Business Registration Office, the Defendant (as an individual) applied for business registration of the Yiu Shing, apparently in the form of a sole-proprietorship in September 1995.  In April 1996, Yiu Shing became a partnership run by the Defendant and another person.  However, in February 1998, it resumed its status as a business operated by the Defendant alone when the Defendant’s partner left.  Finally, in November 2000, Yiu Shing ceased business.

30.  In the present case, the Plaintiff has named “Shing Yiu Ming盛耀明formerly trading as Yiu Shing Construction Company 耀盛建築工程公司” as the Defendant.  In the circumstances, this is not a case in which the Plaintiff has relied on the rule of procedural convenience under O.81 of the Rules of the District Court by naming the Defendant by merely referring to its trading name.

31.  According to the Agreement, the Defendant was only under an obligation to notify the Plaintiff of the matters regarding completion after all procedures necessary for the assignment of the Property (such as the issuance of the certificate of compliance and the document confirming payment of the premium) had been taken.  Hence, the cause of action (as relied on by the Plaintiff) could not have arisen before 2003 (when payment of premium was made and consent to sell was issued).  In 2003, Yiu Shing had already ceased business.  Before cessation of business, Yiu Shing was a sole-proprietorship of the Defendant alone.  Hence, I see nothing wrong in the Plaintiff’s decision to sue only the Defendant in this present action.

Core issue

32.  After considering all relevant materials and evidence, I find that the Defendant has failed to give notice to the Plaintiff for the completion of the transaction.  From my point of view, the Defendant’s case that there was no way for him to contact the Plaintiff after August 2000 is quite inconceivable.  I also do not find the Defendant’s case credible in general.  I now provide my reasons in the following paragraphs.

33.  According to the Defendant’s own evidence, his clerk managed to contact the Plaintiff for the purpose of dealing with payment of the 3^rd instalment over the telephone in August 2000.  The only contact details which had by then been supplied by the Plaintiff were the address and telephone number of Mei.  It has been admitted by the Defendant during cross-examination that his staff relied on the contact details stated in the Agreement even though the Defendant said that he was not concerned about how his staff actually contacted the Plaintiff.  Had that been the case, there is no reason why the Defendant could not have continued to contact the Plaintiff or Mei through the same means thereafter.  According to the evidence of Mei, although she moved from Wong Tai Sin to Mei Foo in 1999 and eventually moved to her flat at No. 178 Mong Tseng Tsuen in 2000, her telephone number has remained unchanged.  This has not been disputed by the Defendant.

34.  The letter dated 9 December 2002 from Messrs C Y Chan & Co (even on the assumption that it was addressed to the correct address) did not amount to a notice required under the Agreement.  The letter only provided that the certificate of compliance had been issued and that steps would be taken for payment of the premium.  When the letter was issued, it was simply unknown as to when the consent to sell would be issued.  The letter was thus silent on when completion would actually take place.

35.  The Defendant has asserted that Messrs C Y Chan & Co had tried to contact the Plaintiff by dialling the telephone number stated in the Agreement and that there was no answer.  However, the Defendant has failed to call any person from Messrs C Y Chan to give evidence in this respect.  This is no evidence that the Defendant himself has tried to contact the Plaintiff through that telephone number.

36.  The Defendant’s evidence that he, after December 2002, suddenly remembered the relationship between the Plaintiff and Mei is highly questionable.  Given his previous dealings with Mei, it is most unlikely for him to have all along forgotten about their relationship.

37.  I find the Defendant’s evidence regarding his conservation with a man during his visit to No. 178 Mong Tseng Tsuen highly unsatisfactory.  As stated above, the Defendant first said in his pleaded case that he talked to the Plaintiff’s father.  However, upon discovery by the Plaintiff that his father passed away in 1994, he said that the man “might be” the Plaintiff’s father-in-law.  Even at trial, the Defendant was unable to say whom he had spoken to.   Further, on the assumption that the conversation did take place, the Defendant said during cross-examination that he simply passed a message to that man asking him to tell the Plaintiff to contact Messrs C Y Chan & Co.  The Defendant, however, did not give evidence as to whether and how he left his contact details or the contact details of Messrs C Y Chan & Co with the man.  In the absence of such details, the conversation between the Defendant and the man seemed rather meaningless.  I have serious doubt as to whether the alleged conversation took place or not.

38.  Although the Defendant alleges that he was unable to contact the Plaintiff despite his repeated attempts, there is no evidence that the Defendant, apart from his alleged conversation with the unknown man, has made any other visits to No. 178 Mong Tseng Tsuen in which Mei resided.  In fact, such visits could have been made easily, particularly in view of the Defendant’s own evidence that he at that time remembered the relationship between the Plaintiff and Mei.

39.  More importantly, one must bear in mind that according to the Agreement, after payment of the premium had been made and all necessary procedures completed, the Defendant was under an obligation to notify the Plaintiff of the date and the steps to be taken for completion.  In the present case, what is fatal to the Defendant’s case is that his evidence, even if accepted and taken at its highest, can only show that he made attempts to pass the message to the Plaintiff that completion would take place soon.  There is simply no evidence that the Defendant has discharged its obligation required under the Agreement regarding what he should do (for the purpose of notifying the Plaintiff of the matters for actual completion) after the premium had been paid.

40.  Insofar as the general credibility of the Defendant is concerned, apart from the matters set out in paragraphs 33 to 38 above, I also rely on what I have said in paragraph 18 above.  Further, the Defendant appeared to be rather defensive when he was asked about the reason why Yiu Shing ceased business in 2000.

The Plaintiff’s evidence

41.  Notwithstanding my views on the Defendant’s case, I feel bound to say that the evidence given for and on behalf of the Plaintiff is  not entirely satisfactory for the following reasons:-

(1)  According to the evidence of Mei, she discovered that the Defendant ceased business in about December 2000.  Subsequently, she tried to speak to the Defendant over the phone but failed to reach him.  From 2001 to 2006 (when the Plaintiff found out that there was someone residing in the Property), both the Plaintiff and Mei have not made any positive attempts to try to find the Defendant.  This is inconsistent with the Plaintiff’s case that she was all along anxious to have the transaction completed.

(2)  What is, perhaps, more perplexing is that Mei said that as she could not locate the Defendant, she decided to delete the Defendant’s phone number from the records kept in her mobile phone.  I take the view that it was rather unreasonable for Mei to do so, given that there were still various matters that the Plaintiff and Mei would require the Defendant to handle.  As admitted by Mei, the Defendant phone number was the only information which was available to Mei for the purpose of contacting the Defendant. 

(3)  Both the Plaintiff and Mei have agreed that in about May 2000, they did have a discussion as to whether the Plaintiff should change her address (as stated in the Agreement) to the Tuen Mun address and the address originally stated in the Agreement was no longer used by Mei.  However, both the Plaintiff and Mei have denied that they have asked the Defendant to change the details of such address.  This is not plausible because the change was recorded in the Defendant’s records and the letter from Messrs C. Y. Chan & Co was sent to the Tuen Mun address.

42.  However, as I have discussed earlier, the Agreement clearly imposed a burden on the Defendant to give notice to the Plaintiff after he had paid the premium and completed all necessary procedures before completion.  The Agreement also expressly stated that the Plaintiff was required to wait until the Defendant had discharged its duty.  In the circumstances, despite my observations on the Plaintiff’s evidence, the Defendant’s case must still fail.

Conclusion

43.  In view of the above, I enter judgment for the Plaintiff and dismiss the Defendant’s counterclaim.  I order that the Defendant shall be liable to return a total sum of HK$414,000 to the Plaintiff with interest at the commercial rate (i.e. 1% above the prevailing prime lending rate).  As to when interest should start to run, I take into account the Plaintiff’s conduct as set out in paragraph 41(1) above and therefore order that interest should run from the date of the Writ (i.e. 27 June 2007) until the date of this judgment and thereafter at the judgment rate.

44.  I further make an order nisi that costs of this action be paid by the Defendant to the Plaintiff, with certificate for counsel, to be taxed if not agreed.  The costs order nisi shall become absolute unless an application to vary the same is made within 14 days from today.