E VILLAS LTD v. LAI YUK SHAN

DCCJ 2638/2020

[2026] HKDC 225

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 2638 OF 2020

________________________

________________________

________________________

J U D G M E N T

________________________

A.  INTRODUCTION

1.  This dispute stems from an agreement (“Agreement”)  as evidenced by a deed dated 28 July 2017 (“Deed”)  concerning a house to be built under the Small House Policy (“House”)  at Lot No 706 in Demarcation District No 256, Tai Mong Tsai Road, Tsam Chuk Wan, Sai Kung, New Territories, Hong Kong (“Lot”).

2.  The Plaintiff, E Villas Limited, is and was at all material times a company incorporated in Hong Kong. It is the Plaintiff’s case that it operates a building and construction business.

3.  The Defendant, Mr Lai Yuk Shan, is and was at all material times an indigenous male villager who is entitled to build, once in his lifetime, a three-storeyed small house in his own village at the Lot pursuant to a grant dated 3 February 2000 (“Grant”)  issued by the Government of the Hong Kong Special Administrative Region (“Government”).

4.  There is no dispute that:

4.1.  In or about 2017, one Mr Leung Kam Ho Gilbert (“Mr Gilbert Leung”)  was introduced to the Defendant by the Defendant’s brother Mr Lai Yuk Leung (“Mr Martin Lai”), who, according to Mr Gilbert Leung, had known for over 25 years, and was informed of the Grant issued to the Defendant.

4.2.  Mr Gilbert Leung used to work in the Lands Department and had for many years been engaged as a real estate development consultant, primarily handling development projects in the New Territories.

4.3.  The Defendant then sought assistance from Mr Gilbert Leung to build the House on the Lot. Back then, there were discussions between the Defendant and Mr Martin Lai to build the House but the Defendant was short of funds to build the same.

5.  Pursuant to the Deed thereafter executed by the Defendant and one Mr Gilbert Leung on 28 July 2017:

5.1.  Mr Gilbert Leung and the Defendant entered into a joint venture to develop the Lot registered in the Defendant’s name by building a House thereon (“the Development”). 

5.2.  Mr Gilbert Leung agreed to contribute to all related building costs and expenses for the Development (“the Fees”), and:

(a)  Under Clause 2(a), it provides that “In consideration of [Mr Gilbert Leung’s] contribution to the joint venture, [Mr Gilbert Leung] shall be entitled to enjoy and take up the First Floor, the Second Floor together with the Roof Garden thereof during the life of the House free of charge of any kind”.

(b)  Under Clause 2(b), it provides that “[The Defendant] shall retain the Ground Floor of the building to be erected or constructed for his own use and benefit.”.

(c)  Under Clause 2(c), it provides that “[Mr Gilbert Leung] shall be entitled to full right and liberty for [Mr Gilbert Leung] and his successors in title, and his servants agents and licensees (in common with [Mr Gilbert Leung] and all other having the like right)  at all times for all purpose connected with the use and enjoyment of the said First Floor, Second Floor and the Roof Garden thereof, including but not limited to free access from the Ground Floor to the First Floor, Second Floor and the Roof Garden during the life of the building to be erected or constructed on the Land.”

6.  Whether Mr Gilbert Leung entered into the Deed as the principal or an agent of the Plaintiff is a main issue in dispute between the parties. The Plaintiff claims that Mr Gilbert Leung was all along just acting as the Plaintiff’s agent. The Plaintiff further claims that after Mr Gilbert Leung, acting as the Plaintiff’s agent, had entered into the Deed, the Plaintiff “did not feel right”, or, as re-phrased by its counsel Mr Foster Yim in his closing submissions, considered “something was wrong” with the terms of the Deed. It is said that, upon the counter-proposal of the Plaintiff conveyed via Mr Gilbert Leung to amend the same, instead of stating the Plaintiff contributing the Fees, the Plaintiff and the Defendant entered into a further oral agreement on the same day (“Oral Agreement”), under which, inter alia:

6.1.  The Plaintiff would lend money to the Defendant for the purpose of the Development.

6.2.  The Defendant would sign and/or execute all necessary documents and contracts to give effect to the Development.

6.3.  In the event the Defendant failed to repay the loan after the completion of the House, the Plaintiff could, by enforcing the collateral, take ownership of the First Floor, Second Floor and the Roof Garden of the House (“Upper Floors”).

7.  It is undisputed that, in addition to the Deed, a power of attorney dated 28 July 2017 was signed by the Defendant, authorising Mr Gilbert Leung to act as his attorney in accordance with section 7 of the Powers of Attorney Ordinance (“PA”). It is also undisputed that there was a letter, also dated 28 July 2017, signed by the Defendant, appointing one Mr Norman Yiu who was at the material time an AP and Registered Architect of NY Architects & Associates Ltd (“NYAAL”), to handle all matters relating to the Development (“NY Appointment Letter”).

8.  The following facts are also either undisputed or indisputable:

8.1.  A Tun Fu (躉符)  Ceremony, being local Chinese ritual before the core commencement of the building works, was held on 28 May 2018. Mr Gilbert Leung, the Defendant and Mr Martin Lai were among those who attended the ceremony.

8.2.  A letter of authorisation dated 1 June 2018 was signed by the Defendant, authorising the Plaintiff to represent him and to act for and on his behalf as Project Manager in all matters relating to the Development (“Letter of Authorization”).

8.3.  On 12 October 2018, the District Lands Office of Sai Kung, Lands Department (“DLO”)  issued a Certificate of Exemption in respect of the building works for the construction of the House (“Certificate of Exemption for Building Works”).

8.4.  A letter dated 4 March 2019 was signed by the Defendant which stated that the Plaintiff was being appointed to act on the Defendant’s behalf to handle “lease matters processed by the [DLO] and the related matters processed by the concerned Government Departments in connection with the [Development]” (“4 March 2019 Letter”).

8.5.  On 18 October 2019, in the course of processing the application for permission to enter Government land for carrying out excavation/stabilization/site formation works in connection with the Development, the DLO wrote to the Plaintiff’s solicitors Messrs H Y Leung & Co Solicitors (“HYL”), requesting either Mr Gilbert Leung to make a declaration that the PA, which had lapsed for one year, continued to be effective and that the Defendant was still alive, or that Defendant himself confirm in writing the continuing validity of the PA (“DLO’s 18 October 2019 Letter”).

8.6.  On 12 November 2019, Mr Gilbert Leung made the required Statutory Declaration, which was sent to the DLO via HYL’s letter on 15 November 2019

8.7.  Subsequently, the DLO issued a Certification of Exemption dated 15 November 2019 in respect of the drainage works for the construction of the House (“Certificate of Exemption for Drainage Works”).

8.8.  The site formation works for the Development were completed, and, according to a document entitled “Certificate of Payment” certified by NYAAL dated 17 December 2019 (being the last such certificate in evidence included in the trial bundle), a total sum of HK$1,501,000 had been paid for the site formation works carried out at the Lot (“Latest Certificate of Payment”).

9.  However, it is the Plaintiff’s case that when it sought to formalise what it characterises as partly written (the Deed)  and partly oral agreement (the Oral Agreement)  (together, the “Part Written/Part Oral Agreement”)  by having the parties execute a further draft building loan agreement since in or around June 2019 (“Draft Building Mortgage”), the Defendant, despite repeated requests, refused to respond to or sign that document. It is further alleged that the Defendant also refused to sign any other documents provided to him for the Development and the construction of the House.  The Plaintiff says that such conduct of the Defendant constituted a repudiatory breach of what it calls the Part Written/Part Oral Agreement, which the Plaintiff accepted, and that it is therefore entitled to judgment for HK$2,444,500, being repayment of the expenses it claims to have incurred for the Development, damages for breach of contract, and/or a fair sum under the doctrine of quantum meruit. Whether any such composite agreement in fact existed is considered below.

10.  The Defendant, on the other hand, contends the Deed was entered into by Mr Gilbert Leung, as the sole and true principal, with the Defendant, and that the Plaintiff is not a party to it. The Defendant further denies the existence of the Oral Agreement, and in particular denies that he was obliged to sign the Draft Building Mortgage on the basis that he was not, under the Deed, responsible for arranging finance for the Development. He also pleads that, in any event, the Deed is void or voidable for illegality and for breach of the restriction on alienation contained in the Grant, such that the Plaintiff is not entitled to claim restitution (whether by way of quantum meruit or otherwise). For completeness, I should record that it is also the Defendant’s alternative defence that if the Deed was found to be enforceable, it was Mr Gilbert Leung and the Plaintiff who repudiated the Deed. 

B.  LATE INTRODUCTION OF DOCUMENTARY EVIDENCE

11.  The action was commenced on 4 June 2020 and the Pre-Trial Review was held on 27 May 2025. Yet, only about a month before the trial, both parties belatedly filed supplemental lists of documents to introduce various documents. The Plaintiff sought to adduce a total of 54 additional documents by way of the Plaintiff’s 2^nd Supplemental List of Documents filed on 3 July 2025 (items numbered 24 to 76)  (“P’s 2^nd Supp LoD”)  and the Plaintiff’s 3^rd Supplement List of Documents filed on 4 July 2025 (item 47)  (“P’s 3^rd Supp LoD”). The Defendant, for his part, sought to adduce a total of 29 additional documents by way of the Defendant’s Supplemental List of Documents filed on 23 June 2025 (items numbered 4 to 30)  (“D’s Supp LoD”)  and the Defendant’s 2^nd Supplement List of Documents filed on 4 July 2025 (items numbered 31-32)  (“D’s 2^nd Supp LoD”). While all these documents were initially included in the trial bundles, each party indicated their respective objections to the inclusion of some of the said documents at the footnote of the indices of the trial bundles.

12.  As summarised in Technic Star Universal Limited v Tiny Love Limited [2021] HKCFI 2284 at §25, Deputy High Court Judge Richard Khaw SC (as he then was), citing Kinetics Medical Health Group Company Ltd & Anor v Dr Tse Ivan Cheong Yau(HCA 1115/2010, 8 May 2013)  at §§32-33 per Deputy High Court Judge Marlene Ng (as she then was), where discovery is given at the eleventh hour just before trial, it is impermissible for the litigant seeking to rely on such new evidence to do so under the guise of voluntary discovery without seeking leave of the court, and it is incumbent on a litigant giving such late discovery to make proper inter partes application to seek leave. Further, in Hong Lok School Limited & Anor v Chow Sai Yiu & Anor [2003] 2 HKLRD 782, per Deputy High Court Judge Lam (as Lam VP then was)  (also cited in Technic Star Universal Limited at §24), held that a litigant giving discovery at the eleventh hour should provide the court and the other side with full and accurate information as to: (1)  the reasons why the subject documents were not disclosed earlier; (2)  the provenance and the makers of such documents; (3)  the relevance of such documents to the issue before the court; and (4)  the availability or unavailability of the makers to attend trial for cross-examination in case the opponent objected to the hearsay evidence.

13.  Neither party made any proper application by summons for leave to adduce these lately- discovered documents, nor did they provide the full and accurate information and explanation required in accordance with the above authorities. Before the parties delivered their oral opening submissions, I directed the parties to put their heads together to try to work out a way as to how to resolve the situation and their differences in an amicable way. Eventually, the parties reached a consensus that they would be permitted to rely on, and include in the trial bundles as evidence at trial in this action, only the following documents: item number 24, 25, 29, 35, 38, 42, 52, 56 and 67 of P’s 2^nd Supp LoD, Item number 77 of P’s 3^rd Supp LoD, and Item 14-22 of D’s Supp LoD (collectively, “the Late Discoveries”). Accordingly, the remaining late-discovered documents were expunged from the trial bundle. A consent summons giving effect to the above was filed by the parties on 8 August 2025, and I now make an order in terms of that consent summons.

C.  THE ISSUES

14.  Prior to the trial, there was a list of Agreed Issues prepared by the parties. During the opening submissions, Mr Oscar Tan (together with Mr Kelvin Wong)  counsel of the Defendant, confirmed that the Defendant would no longer pursue Issue 4, namely the allegation of non est factum in relation to the documents executed by the Defendant, nor rely on the Money Lenders Ordinance (as pleaded in §1GG of the Amended Defence)  to challenge the enforceability of the alleged Part Written/Part Oral Agreement. Thereafter, counsel for the parties have regrouped and reformulated the Agreed Issues in their respective written Closing Submissions. They are broadly in agreement over the core issues and I will address the issues in accordance to the following reformulation:

14.1.  Whether the Plaintiff is a party to or otherwise has the locus standi or entitlement to enforce the Agreement, ie the Deed and/or the Oral Agreement.

14.2.  Whether the Agreement is unenforceable due to illegality and/or violation on the restriction on alienation contained in the Grant.

14.3.  If the Agreement is enforceable and the Plaintiff is entitled to sue under it, whether the Plaintiff has repudiated the same in failing to complete the Development.

14.4.  Whether the Plaintiff is entitled to recover the expenses it allegedly spent on the Development on a quantum meruit/unjust enrichment basis.

15.  Before I turn to consider these issues and set out my views and findings on the evidence in so far as it relates to the them, I shall briefly summarise my assessment of the witnesses.

D.  THE WITNESSES

16.  In assessing credibility and finding facts, I adopt the following principles:

16.1.  As summarized by K Yeung J in Wah Sung Construction & Piling Limited v Cheer Wide Limited [2024] HKCFI 45 at §53:

“Counsel has cited to me a number of cases on the approach in assessing the credibility and reliability of witnesses. I remind myself when considering a witness’ credibility of the importance of considering the inherent likelihood or unlikelihood of the witness’ evidence, the consistency of the witness’ evidence with undisputed or undisputable evidence, with contemporaneous conduct and documents, the internal consistency of the witness’ evidence amongst their witness statements and with pleadings, and any material change of case. I need to consider the totality of the evidence. I remind myself that lies themselves do not necessarily mean that the entirety of that witness’s evidence is to be rejected. I warn myself against attaching undue weight on demeanour, though demeanour is obviously relevant when considering credibility.”

16.2.  The Court bears in mind not only the witnesses’ demeanor in court, but also the history of events, the contemporaneous documents and the inherent probabilities of the witnesses’ accounts: Esquire (Electronics)  Ltd v The Hong Kong and Shanghai Banking Corp Ltd [2007] 3 HKLRD 439 at 494C.

16.3.  In Hui Cheung Fai and Anor v Daiwa Development Limited and Ors (HCA 1734/2009, 8 April 2014)  at §§77, 81-82, it was said by DHCJ Eugene Fung SC (as he then was):

“77. Generally speaking, contemporaneous written documents and documents which came into existence before the problems in question emerged are of the greatest importance in assessing credibility: Onassis v Vergottis [1968] 2 Lloyd’s Rep 403 at 431 (Lord Pearce)  …

…

81. The practical approach to assessing credibility of witnesses in a case such as the present may have best been summarised by the words of Robert Goff LJ, as he then was, in The Ocean Frost [1985] 1 Lloyd’s Rep 1 at 57:

“Speaking from my experience, I have found it essential in cases of fraud, when considering the credibility of witnesses, always to test their veracity by reference to the objective facts proved independently of their testimony, in particular by reference to the documents in the case, and also to pay particular regard to their motives and to the overall probabilities.  It is frequently very difficult to tell whether a witness is telling the truth or not; and where there is a conflict of evidence such as there was in the present case, reference to the objective facts and documents, to the witnesses’ motives, and to the overall probabilities, can be of very great assistance to a Judge in ascertaining the truth.”

82. Whilst these words were spoken in the context of a fraud case, I believe they are applicable to any case where a witness’s credibility features prominently in the court’s determination. They are particularly apposite in a case like the present where very serious allegations (akin to allegations of fraud)  have been made by the Son against the defendants.

83. In approaching the evidence in this case, I have also borne in mind that the allegations made by the Son are very serious, and that the more serious the allegation sought to be proved is, the more cogent the evidence relied upon to support it must be: see Re H (Minors)  [1996] AC 563 at 586D-587F (Lord Nicholls)  and ADS v Brothers (2000)  3 HKCFAR 70 at 77J-78G (Lord Hoffmann NPJ).”

16.4.  Moreover, it is also well established that if a witness has told lies on a central issue, that may have a significant adverse impact on the credibility of his or her evidence as a whole: Progetto Jewellery Co Ltd v Lau Chiu Ying [2020] HKCFI 209 at §§28-31.

17.  Each of the parties has only called one factual witness. The Plaintiff only called Mr Gilbert Leung, while the Defendant gave evidence himself.

18.  I find that the Defendant was on the whole a credible witness. He was unshaken during cross-examination. In my view, the Defendant’s evidence was in line with his case:

18.1.  Mr Yim takes particular issue in his Closing Submissions of the Defendant’s denial in cross-examination of his knowledge of Mr Norman Yiu, despite signing the NY Appointment Letter. I find that explicable when, as per Mr Gilbert Leung’s own evidence, the Defendant said he devoted full trust in him to build the House. With such trust (to the extent of being willing to give a PA to Mr Gilbert Leung), the mere fact that the name of Mr Norman Yiu appeared in documents signed by the Defendant, or Mr Norman Yiu’s statement in his letter that he acted for the Defendant does not necessarily follow that the Defendant knew Mr Norman Yiu in person. The Defendant could, as he clarified during cross-examination, only have knowledge of Mr Norman Yiu’s name on paper. Based on the trust in Mr Gilbert Leung who was introduced to him by his brother, he would just sign on “paperwork” as directed by Mr Gilbert Leung. The same applies to the Letter of Authorisation.

18.2.  While the Defendant would frequently ask Mr Yim to repeat his questions during cross-examination and would exhibit an eccentric manner, occasionally murmuring to himself and making unusual facial expressions, I am of the view that he remained serious and would give solid answers, as submitted by Mr Tan, once there was a meeting of minds between the Defendant and Mr Yim as to what the question was about. Rather than being evasive, I consider that he was very cautious and it is not unusual for a witness to be cautious.

19.  On the other hand, I am afraid I am of the view that the evidence given by Mr Gilbert Leung for the Plaintiff is generally not reliable. As will be apparent from the next section, I have formed the view that Mr Gilbert Leung gave incredible answers regarding his capacity in entering into the Deed with the Defendant and the true nature of the transaction between them. In my view, the evidence shows that the reality was that Mr Gilbert Leung was seeking to exploit the opportunity arising from the Defendant’s lack of funds to construct the House to obtain an interest in the Upper Floors, free riding on the concessionary terms and privileges which only the Defendant himself was entitled, and derived, under the Small House Policy (to be further explained in Section F below). His attempt to portray a different picture was disingenuous, and there are many aspects of his evidence which are unsatisfactory and contrary to inherent probabilities.

E. THE PLAINTIFF’S LOCUS STANDI TO SUE / STANDING TO ENFORCE THE DEED AND/OR THE ORAL AGREEMENT

20.  The Plaintiff’s position is that Mr Gilbert Leung entered into the Agreement with the Defendant on 28 July 2017, partly in writing (the Deed)  and partly orally (the Oral Agreement), as the Plaintiff’s agent, and that the Plaintiff is therefore entitled to sue on the Deed and/or the Oral Agreement in its capacity as principal.  While the Plaintiff’s primary case is that it was a disclosed principal, it also contends that, in any event, it is entitled to pursue its present claim as an undisclosed principal. Insofar as the principles on undisclosed principal are concerned, they can be found in the judgment of the Privy Council in the case of Siu Yin-kwan v Eastern Insurance Co Ltd [1994] 2 A.C. 199 at 207:

“(1)  An undisclosed principal may sue and be sued on a contract made by an agent on his behalf, acting within the scope of his actual authority. (2)  In entering into the contract, the agent must intend to act on the principal's behalf. (3)  The agent of an undisclosed principal may also sue and be sued on the contract. (4)  Any defence which the third party may have against the agent is available against his principal. (5)  The terms of the contract may, expressly or by implication, exclude the principal's right to sue, and his liability to be sued. The contract itself, or the circumstances surrounding the contract, may show that the agent is the true and only principal.”

21.  On the other hand, the Defendant strongly contends that the Deed was entered into between the Defendant and Mr Gilbert Leung as the sole and true principal, and that the Plaintiff is not a party to the Deed. The Defendant further contends that there was never any Oral Agreement at all.

22.  As submitted by Mr Yim, and which I agree, this issue falls to be resolved on the facts and the evidence. However, for the reasons I shall endeavour to state, I am of the view that the Plaintiff was not the principal and has no locus standi to enforce the Agreement, whether under the Deed or under any Oral Agreement (if such existed). On my findings, the only person who could plausibly claim to be principal under the Deed is Mr Gilbert Leung personally.

23.  First of all, the plain wording of the Deed itself clearly shows that it was entered between the Defendant and Mr Gilbert Leung as principal in his own right, and Mr Gilbert Leung did not intend to act on anyone else’s behalf. I accept Mr Tan’s submission that on a plain reading of the Deed, there is literally nothing to suggest that the Plaintiff, or any company, was to be involved in the proposed joint venture:

23.1.  Under the Deed, Mr Gilbert Leung himself was explicitly named as the party, namely “Party B”. He signed the Deed in his personal capacity, using his own identity card number and giving an address at 24-D, Pak Sha Wan, Sai Kung, New Territories, Hong Kong, which appears to be his own personal address, rather than the Plaintiff’s address at the material time. In circumstances where, as Mr Yim accepts in his closing submissions, the Plaintiff’s case is that it was a disclosed principal (and not merely an undisclosed principal), and bearing in mind Mr Gilbert Leung’s evidence in cross-examination that the Deed was drafted by a friend with a legal background, it is, in my view, inconceivable that the Plaintiff’s name does not appear anywhere in the Deed in any capacity.

23.2.  At Clause 2 - Right of the Parties, §(c)  provides that:

“Party B shall be entitled to full right and liberty for Party B and his successors in title, and his servants agents and licensees (in common with Party B and all other having the like right)  at all times for all purpose connected with the use and enjoyment of the said [Upper Floors]…” (emphasis added)

Had the Plaintiff been the principal, one would expect the word “its” rather than “his” to have been used. The natural reading is that ‘Party B’ refers only to Mr Gilbert Leung, and not to the Plaintiff, which is a company. 

23.3.  Having regard also to Clause 4 – Confidentiality, which provides that “None of the parties shall, without the prior written consent of the other party, disclose the terms of, or any matters referred to in his Deed.”, the Deed is, in my view, personal in nature, arising out of the personal trust between Mr Gilbert Leung and the Defendant, who was the brother of Mr Gilbert Leung’s long-term friend Mr Martin Lai. According to Mr Gilbert Leung’s evidence in cross-examination, he was aware that the Defendant had no place to live, had been living in a vehicle but lacked the funds to build a house.

24.  Second, I agree with Mr Tan’s submission that to say the Plaintiff is the principal, whether  hidden or disclosed principal, is inconsistent with the contemporaneous records. Mr Gilbert Leung’s evidence in cross-examination is also inconsistent with his witness statement and militates against the Plaintiff’s case:

24.1.  There is no dispute that the Defendant was introduced to Mr Gilbert Leung by Mr Martin Lai at a dinner meeting.  It is Mr Gilbert Leung’s unchallenged evidence that the Defendant indicated at that time that he would like to enlist Mr Gilbert Leung’s help to build the House in light of Mr Gilbert Leung’s experience in property development in the New Territories. While it was Mr Gilbert Leung’s evidence at §5 of his witness statement that he had then introduced that his company, which he was merely an employee, was specialized in building back then:

(a)  Yet, Mr Gilbert Leung did not hand out his business card to the Defendant.

(b)  Further, according to §8 of his witness statement, he had, prior to the drafting of the Deed, already obtained the “green light” from the Plaintiff and the Defendant was informed of the same. Yet, there is no reason why the Plaintiff was not mentioned anywhere in the Deed, let alone named as a party to the Deed.

(c)  Likewise, the PA, which was executed on the same date as the Deed, could have been granted in favour of the Plaintiff instead of Mr Gilbert Leung personally.

24.2.  His evidence as to the events leading to the signing of the Deed, in particular the alleged involvement of one Mr Patrick Fan (“Mr Patrick Fan”), is, however also inherently contradictory:

(a)  In §7 of Mr Gilbert Leung’s witness statement, Mr Gilbert Leung claimed that after the introduction dinner but before the Deed was drafted, he had already “communicated the Defendant’s situation to my friend Mr Patrick Fan, who was very experienced and later became the manager of the Plaintiff and he expressed interest in working together with the Defendant ［可以睇吓點樣一齊做］”. In §8, he further stated that “Getting the green light from the Plaintiff (and Mr FAN), I told the same to the Defendant and asked him what his plan was. He said that it was simple—you contributed the money, I contributed the land; after the House was built, he would take the ground floor and the rest (which I understood to be the First Floor, the Second Floor together with the Roof Garden, given by my building background)  would belong to the Plaintiff to collect rent［好簡單啫，你出錢、我出地，間屋起好之後, 地下嗰層係我嘅，二、三樓嗰啲咪歸你哋收租囉］”. He further said at §10, that after the Deed was signed,he then brought it back “to the office of the Plaintiff with the hope of showing off and getting a handsome reward. To my surprise, once Mr FAN read it, he told me that that could not work as somehow he felt something was not right ［咁唔得嘅，份約我硬係覺得有啲問題］.”

(b)  However, in cross-examination, Mr Gilbert Leung’s account of Mr Patrick Fan’s involvement emerged only in relation to the period after the Deed had been signed. Moreover, it is the Plaintiff’s own pleaded case that Mr Patrick Fan “has only been working for the Plaintiff as an employee since 1^st February 2018”, and thus he was not yet employed by the Plaintiff on the date when the Deed was signed. This pleaded fact sits uneasily with, and in my view directly undermines, Mr Gilbert Leung’s suggestion in his witness statement that he had already obtained the “green light” from the Plaintiff (and Mr Fan)  before the Deed was drafted and signed.

(c)  Moreover, Mr Gilbert Leung admitted that, on the very day the Deed was signed, he sought Mr Patrick Fan’s opinion about it. He further accepted that Mr Patrick Fan just happened, coincidentally, to be present at the Plaintiff’s office at that time and that his presence there was not pre-arranged. Mr Gilbert Leung sought to explain this coincidence by saying that Mr Patrick Fan was at the office that day to discuss his employment contract with the Plaintiff, and that he merely seized the opportunity to obtain Mr Patrick Fan’s views because he wanted professional opinion on the Deed, given that Mr Patrick Fan had previously held a more senior post as Assistant Director in the Lands Department and, in Mr Gilbert Leung’s view, would have more up-to-date knowledge regarding land development in the New Territories than he did himself. However, it is undisputed that Mr Patrick Fan had already retired from the Lands Department by then, and Mr Gilbert Leung himself confirmed that he did not know when Mr Patrick Fan had in fact retired. It is therefore uncertain how “up-to-date” Mr Patrick Fan’s knowledge could have been.

(d)  When Mr Gilbert Leung was challenged in cross-examination that, by involving Mr Patrick Fan in this way, he had acted in breach of the Deed’s confidentiality clause (Clause 4), he initially asserted that Mr Patrick Fan had not seen the Deed and had only been told its contents because he needed Mr Patrick Fan’s professional opinion. He was then confronted with §10 of his own witness statement, where he had expressly stated that “Mr Fan read it…”, and he reluctantly accepted that Mr Patrick Fan had in fact read the Deed. He nonetheless attempted to draw a distinction by suggesting that Mr Patrick Fan had not seen the draft version of the Deed, and that his earlier viva voce evidence that Mr Patrick Fan had not seen it referred only to the draft. In my view, this shifting account is a clear example of Mr Gilbert Leung making up his evidence as he went along.

24.3.  To support his case that he was acting as the Plaintiff’s agent in entering into the Deed and/or the Oral Agreement, the Plaintiff belatedly, as part of the Late Discoveries, disclosed an employment contract between the Plaintiff and Mr Gilbert Leung dated 1 April 2017 (“Employment Contract”). However, the evidence surrounding this alleged employment contains multiple suspicious features:

(a)  Although Mr Gilbert Leung’s evidence was that he was, at the material time, employed by the Plaintiff’s owner, Mr Chiu Chun Lung (“Mr CL Chiu”), and that, as appears from the Employment Contract, it was Mr CL Chiu who signed it on the Plaintiff’s behalf, the companies’ annual returns for 2017 and 2018 show that Mr CL Chiu was neither a director nor a shareholder of the Plaintiff until 7 July 2017.

(b)  The Employment Contract bears the Plaintiff’s letterhead showing an address at 16/F, Tak Sing Alliance Building, No 115 Chatham Road South, Kowloon (“Tak Sing Address”). However, the Companies Registry records for the Plaintiff show that, as at 22 May 2017, its registered office was at 21/F, Man Hing Commercial Building, Nos 79–83 Queen’s Road Central, Central, Hong Kong, and that the registered office was not changed to the Tak Sing Address until 9 March 2018, almost a year after the Employment Contract was said to have been signed.

(c)  No convincing answers have been given by Mr Gilbert Leung to explain the above. In light of these unusual features of the Employment Contract, I am unable to place significant weight on it as evidence of any genuine employment relationship.

(d)  When Mr Gilbert Leung was further questioned as to where the Employment Contract was signed, he displayed marked hesitation and evasiveness. His initial answer was that he did not know. He then said that it should have been signed in Hong Kong, and thereafter that it should have been signed at Mr CL Chiu’s office. When asked whether that was the Plaintiff’s office, he changed his evidence again, saying that he could not recall where it was signed and suggesting that it might have been signed at a restaurant. In my view, his first answer—that he did not even know where a contract which he personally executed was signed—simply defies common sense, and the subsequent shifts in his account further undermine his credibility. 

(e)  When Mr Gilbert Leung was asked when he officially started working for the Plaintiff, he said that he did not commence work immediately after the Employment Contract was signed, explaining that he had taken leave to care for his seriously ill mother. However, when pressed for the date on which he in fact started work, he was unable to give any specific date and merely said that he worked from home. When asked when he first attended the Plaintiff’s office to work, he said that this was likely after his mother passed away in or about August 2017, and that the office he went to was at the Tak Sing Alliance Building, i.e. the Tak Sing Address. When it was put to him that, on his own case, he would therefore have been required to procure the signing of the Deed on behalf of the Plaintiff even before he had officially returned to work at the Plaintiff’s office, he then said that he had already begun working from home for the Plaintiff at that time, but he could not recall whether he went back to the office after the Deed was signed. This is, again, in stark contrast to §10 of his witness statement, where he specifically stated that he brought the Deed back to the office with the hope of “showing off” and obtaining a handsome reward.

(f)  It also remains unexplained why the Employment Contract was not mentioned at all in Mr Gilbert Leung’s witness statement and had to be adduced by way of a hearsay notice, despite being plainly a document of the Plaintiff and one which Mr Gilbert Leung, as the alleged employee who signed it, would be expected to address in his own evidence. This omission further undermines both the reliability of his account and the plausibility of the Plaintiff’s case that Mr Gilbert Leung ever genuinely intended to act as an agent of the Plaintiff when entering into the Deed and/or the alleged Oral Agreement.

24.4.  While Mr Gilbert Leung claimed that he was just an agent and/or an employee of the Plaintiff, his various answers in cross-examination, in my view, indicate that he was in truth the principal:

(a)  His viva voce evidence was that he had not seen the Grant himself, and that his understanding that the Defendant had the right to build the House under the Grant was based solely on what Mr Martin Lai told him, in whom he reposed his trust. It is, however, inconceivable that he would have been prepared to assume the commitments contained in the Deed – whether in contributing to expenses or providing building finance for the Development – purely on the basis of that trust if, as he contends, he was acting on behalf of the Plaintiff, a company he had only recently joined, rather than in his own personal capacity

(b)  Further, when he was, on his account, advised by Mr Patrick Fan that the Deed “could not work” and that a counter-proposal was required (which led to the alleged Oral Agreement, a transaction wholly different in nature from the Deed), Mr Gilbert Leung accepted in cross-examination that he was able, on his own, to formulate and put forward that proposal without first consulting the Plaintiff, notwithstanding that, on the Plaintiff’s case, he had only been with the company for a matter of months. It would plainly have been more prudent and in the Plaintiff’s interests for any such Oral Agreement to be reduced into writing. Yet he again decided, on his own, not to do so, a course of conduct which, in my view, is inconsistent with that of a mere employee or agent and strongly suggests that he was acting as principal in the circumstances of this case.

(c)  In the course of his cross-examination:

(i)  He also inadvertently confirmed that the relevant financial contribution was made by himself personally, rather than by the Plaintiff. In explaining what the alleged Oral Agreement was about:

Mr Gilbert Leung: 我哋喺口頭上喺大家喺有個咁嘅明白，有咁嘅understanding呀嘛。我是可以拎一樓同埋二樓同天台出去租家嘛當喺愛嚟去offset我嘅finance in advance 家嘛

Mr Tan: 搞清楚先,頭先你嘅證供就話，grantee可以借錢，即喺[The Defendant可以借錢, 還唔到錢嘅時候, 先至用一樓二樓天台嚟去還錢被你，呢個係你嘅講法, 啱啱喺咪?

Mr Gilbert Leung: Peter [the Defendant] 係有咁嘅權，喺可以將我所拎出來的錢還俾我，如果佢本身嚟講,佢還唔到嘅，咁我咪將一樓二樓同天台作為collateral,愛嚟收租。收租嘅租金愛嚟offset 我嗰個contribution.

(Emphasis added)

He thus repeatedly described the funding as “my finance” and “my contribution”, not as money provided by the Plaintiff.

(ii)  When Mr Gilbert Leung was put to the fact that prior to the signing of the Deed,  there was no mention at all of the Defendant borrowing money from him personally, Mr Gilbert Leung’s answer have somehow shifted to become  “是由我哋去負責個建築費,咁如果佢本身嚟講係還唔到個建築費呢，係 我哋係可以將二樓和三樓嗰個租金呢去抵銷嘅,  二三樓係歸我哋收租”。Likewise, when asked how he had explained to the Defendant, after being told by Mr Patrick Fan that something was wrong with the Deed, what the revised arrangement was, his evidence was that “應該呢我哋要將整個嘅安排呢, 係由我哋提供finance俾你去起屋, 然後你將一樓 二樓呢喺作為一個collateral俾我哋去擔保呢份咁嘅案揭 呢份咁嘅building mortgage。咁然之後呢 如果你還不到呢，我哋就去二樓和三樓租出去, 將租金嚟offset 翻你的借款 , 但你放心, 地下嗰層呢一定是由你去住嘅, 我哋唔會愛嚟租出去的”. I then sought to clarify with Mr Gilbert Leung what did “我哋” meant? His first and immediate answer was that he himself. Then he subsequently said it was “he and the Plaintiff” would provide finance. When asked to clarify who would be the entity providing finance, he further changed to just “the Plaintiff”.  This vacillation between “I” and “we”, against the repeated references to “my finance” and “my contribution”, reinforces the conclusion that it was Mr Gilbert Leung himself who was the true funder and principal actor, rather than a mere employee or agent implementing decisions on behalf of the Plaintiff.

25.  Third, I have also considered the Letter of Authorisation which Mr Yim submitted to be evidence that the Defendant knew of the Plaintiff’s role and identity as principal. I am also aware of the 4 March 2019 Letter. In my view, those documents merely record the Plaintiff’s appointment as project manager and as the Defendant’s representative in dealing with the Government over the Development. They say nothing to indicate that the Plaintiff was, or was ever regarded by the Defendant as, the principal under the Deed or any alleged Oral Agreement. In this regard, I note that Mr Gilbert Leung initially described the Plaintiff’s role as that of ‘project manager’ only, and only in re-examination did he attempt to add that the Plaintiff was also intended to be the lender/financier. This late embellishment is inconsistent with his earlier answer and with the contemporaneous documents. Such a purported late clarification, and the documents just mentioned, cannot displace the compelling reasons already given for concluding that it was Mr Gilbert Leung, and not the Plaintiff (whether as disclosed or undisclosed principal), who was the true principal under the Deed. The Plaintiff’s submission that, in ordinary commercial contracts for works, an agent may assume that an undisclosed principal can step in as a party has no application on the facts as I have found them.

26.  Insofar as it is suggested that the Defendant entered into an Oral Agreement, whether with the Plaintiff or with Mr Gilbert Leung, I accept Mr Tan’s submissions that no such Oral Agreement ever existed:

26.1.  According to the Plaintiff’s Re-Amended Statement of Claim (“RASoC”), the Answer to the Defendant’s Request for Further and Better Particulars of the Amended Statement of Claim and Mr Gilbert Leung’s witness statement, the alleged Oral Agreement stemmed from a counter-proposal said to have been suggested by Mr Patrick Fan. Instead of contributing money towards the construction of the House in return for an interest of the Upper Floors as provided for under the Deed, the Plaintiff would lend money to the Defendant and, if the Defendant failed to repay the loan after the completion of the House, the Plaintiff could take the Upper Floors as collateral.

26.2.  It is plain that the alleged Oral Agreement and the Deed are completely different in nature. This is reflected in the Plaintiff’s own pleading, which describes the oral arrangement as a "counter-proposal", and in Mr Gilbert Leung’s witness statement, in which he sought to explain and acknowledge the difference between the two at §§12-14. I find it difficult to see how the Plaintiff can advance a “partly written and partly oral” contractual claim when the alleged oral component was clearly put forward as a counter-proposal to, rather than a supplementation of, the written Deed. The Plaintiff’s attempt to present them as forming a single "partly written and partly oral" agreement is therefore conceptually incoherent and I reject it.

26.3.  In cross-examination, however, Mr Gilbert Leung’s evidence was that the Deed was too simple and did not reflect its alleged true nature as a building finance arrangement. He said that he had been advised by Mr Patrick Fan that the building finance had to be documented “as if it were a loan” (“當借錢”). He further explained that it had to be “當借錢” because the Grant permitted the Defendant to do so. To begin with, the Deed was plainly not a building finance arrangement for the benefit of the Defendant. On its face, it was expressed to be a joint venture between Mr Gilbert Leung and the Defendant. In my view, the nature of that joint venture is plain and simple: the Defendant was to contribute the Lot for the construction of the House, while Mr Gilbert Leung was to contribute all the expenses for the construction of the House, and, in return for entering into such a joint venture, the Defendant would retain the Ground Floor and Mr Gilbert Leung would be entitled to take up and enjoy the Upper Floors. There is nothing unclear about the Deed, which explains why, in cross-examination, Mr Gilbert Leung was unable to pinpoint any clause in the Deed which he said was unclear.

26.4.  Yet, in an effort to substantiate his allegation that the Deed required clarification, he went so far in cross-examination as to deny that “making contribution” is completely different from a “loan”, and even shifted the Plaintiff’s case to say that the word “contribution” in §C of the Preamble to the Deed, which states that “Party B agrees to make contribution to all related building lots, professional fees and related expenses for the development”, already reflected a loan agreement. He sought to distort the plain meaning of §C by asserting that it in fact meant “contribution to provide finance” to pay for the expenses. If that had truly been the Plaintiff’s understanding, all that would have been required was a clarification or amendment of the Deed; there would have been no need to plead an Oral Agreement as a “counter-proposal”. There is an inherent contradiction in the way the Plaintiff’s case has been advanced. As Mr Gilbert Leung eventually, and reluctantly, admitted, this interpretation of the Deed was never mentioned in his witness statement.

26.5.  Further, when Mr Gilbert Leung claimed in §§10-11 of his witness statement that he was “scared and shocked” when told by Mr Patrick Fan that “something was not right” with the Deed and that it “could not work”, and that he therefore had to make the alleged counter-proposal, it defies commercial logic that he did not insist on reducing the terms of the alleged Oral Agreement into writing. If, as he says, the written Deed “could not work” and the oral agreement was intended to make it work, it would be only natural and commercially sensible to have that new agreement recorded in black and white. In cross-examination he added that he was worried he might be in trouble and concerned about being reproached by the Plaintiff, a company he said he had only just joined, yet he still did not take the obvious precaution of having any new terms recorded in writing. That is all the more so given that the alleged Oral Agreement contained a term wholly absent from the Deed, namely that the Defendant would “sign and/or execute all necessary documents and contracts”, and Mr Gilbert Leung’s own evidence at §16 of his witness statement that the Defendant agreed to that Oral Agreement and “even asked whether they should sign a new contract［咁我哋使唔使簽個份新約］”

26.6.  In any event, so far as the alleged Oral Agreement said to have been made on or about 28 July 2017, under which the Defendant would “sign and/or execute all necessary documents and contracts”, is concerned, that pleaded case (and the evidence at §§15-16 of Mr Gilbert Leung’s witness statement)  is again contradicted by the Plaintiff’s own evidence in cross-examination. There, Mr Gilbert Leung accepted that he only raised with the Defendant the need for him to sign such documents after the development project had commenced, following the “Tun Fu” ceremony on 28 May 2018.

In light of the above, I am left in grave doubt as to the veracity of the Plaintiff’s account of the circumstances said to have led to the Oral Agreement, and of the existence of any such agreement at all. I therefore reject Mr Gilbert Leung’s evidence on this issue as incredible.

27.  Lastly, as appears from the above, Mr Patrick Fan played a prominent role in Development, whether regarding the Deed, the alleged Oral Agreement or, subsequently, the unsigned Draft Building Mortgage. However, he was not called by the Plaintiff to give evidence.

28.  The principles governing when it is permissible for a court to draw an adverse inference from the unexplained failure to call a witness who might reasonably be expected to give direct evidence on a particular issue are well settled. In Pacific Electric Wire & Cable Company Limited v Texan Management Limited & Others (CACV 90-96/2012, 17 September 2013)  at §106-107, Kwan JA approved the dicta of Brooke LJ in Wisniewski v Central Manchester Health Authority [1998] PIQR 324 at 340:

“(1)  In certain circumstances a court may be entitled to draw adverse inferences from the absence or silence of a witness who might be expected to have material evidence to give on an issue in an action.

(2)  If a court is willing to draw such inferences, they may go to strengthen the evidence adduced on that issue by the other party or to weaken the evidence, if any, adduced by the party who might reasonably have been expected to call the witness.

(3)  There must, however, have been some evidence, however weak, adduced by the former on the matter in question before the court is entitled to draw the desired inference: in other words, there must be a case to answer on that issue.

(4)  If the reason for the witness's absence or silence satisfies the court, then no such adverse inference may be drawn. If, on the other hand, there is some credible explanation given, even if it is not wholly satisfactory, the potentially detrimental effect of his/her absence or silence may be reduced or nullified.”

29.  In the light of my analysis above, it is not strictly necessary for me to rely on any adverse inference. However, in so far as it is necessary, I agree with Mr Tan that such an inference should be drawn against the Plaintiff on all material issues concerning the conversations between Mr Gilbert Leung and Mr Patrick Fan and the alleged Oral Agreement. On the Plaintiff’s own case, and on Mr Gilbert Leung’s written and oral evidence, Mr Patrick Fan was the mastermind behind who initiated the need for the alleged Oral Agreement and the Draft Building Mortgage, and to whom Mr Gilbert Leung reported.  He was the person who, according to the written resolution of the Plaintiff, was authorised to all such acts and things as might be necessary in relation to this action. He was the person representing the Plaintiff in signing the statement of truth of the RASoC, the Amended Reply and the Answers to the Defendant’s Request for Further and Better Particulars. He was also the person who made the affirmation for the Plaintiff in opposition to the Defendant’s application to strike out the Plaintiff’s claim. Yet no credible explanation has been given for the Plaintiff’s failure to call him. When Mr Gilbert Leung was expressly asked about this, he was unable to provide any explanation beyond saying that he himself had merely been called to give evidence.

F.  ILLEGALITY AND ENFORCEABILITY OF THE AGREEMENT

30.  To meet the Defendant’s defence of illegality and violation on the restriction on alienation, the Plaintiff contends that there is no evidence before this Court capable of establishing such a defence in relation to the Agreement.  In reliance of the “Hollington principle” derived from the case Hollington v Hewthorn [1943] KB 587 at 596, Mr Yim submits that it is impermissible for the Defendant to rely on judgments in other cases as evidence of, or as a basis for inferring, the content of the Small House Policy, and objects to that approach.

31.  The “Hollington principle” is well settled and has been summarised by the Court of Appeal in Bank of Huludao Co Ltd v Zhongting Int’l Holding Group Limited [2025] HKCA 978:

31.1.  In essence, at §25,  “a judgment and factual findings of another court or tribunal in earlier proceedings, whether civil or criminal, are inadmissible in subsequent proceedings, unless the party against whom the finding is sought to be deployed is bound by them by reason of an estoppel per rem judicatam: Capital Century Textile Company Limited v Li Dianxiao & Anor[2018] HKCFI 729 , per Lisa Wong J at §23; Jin Jiang Investment Limited & Anor v & 深圳市威廉金融控股有限公司 & Ors [2022] HKCFI 378, per Coleman J at §44”  

31.2.  However, as explained at §§27-29:

“27. The Hollington principle does not apply to the evidence referred to in an earlier judgment such as the contents of documents or the evidence of witnesses: Capital Century Textile at §29. Putting it generally, statements or reported statements of the factual evidence before the previous court are not excluded by the Hollington principle: Jin Jiang Investment at §45.

28. In Rogers v Hoyle, the statements or reported statements of fact in the AAIB report, even those unattributed, were admitted in evidence as not falling foul of the Hollington principle.

29. In Jin Jiang Investment at §45, Coleman J recorded that “Mr Chong said his reliance on the PRC Judgment does not fall foul of the Hollington principle, because he did not seek to rely on the findings of the PRC Court. He sought only to rely on the statement or reported statements in the PRC Judgment of the factual evidence before that court.” Coleman J agreed that such materials were not excluded by the operation of the Hollington principle”

32.  In the present case, it is common ground that the House to be built under the Development, as provided for in the Deed, is a small house. The nature of the “Small House Policy” has been considered in numerous cases, including the judgments of the Court of Appeal and the Court of Final Appeal, some of which were cited by the parties in their respective opening and closing submissions.  There could also be no dispute that, in the New Territories, there is a “Small House Policy” under which every indigenous male villager (who can trace his ancestry to a resident of recognised village in 1898)  can have one concession during his lifetime to enable him to build a small house (commonly known as a “Ding House 丁屋”)  in his own village for his own occupation. To become entitled to benefit from such a concession, the indigenous male villager would have to apply for a small house grant from the Government and would be required to make certain declarations. Further, such concession under the small house grant is subject to a restriction against alienation: see Lau Kwai Kiu v Bian Xintian [2012] 2 HKLRD 955 at 958-959, Best Sheen Development Ltd v Official Receiver [2001]1 HKLRD 866 at 872-873, Kwok Cheuk Kin v Director of Lands (No 2) (2021)  24 HKCFAR 349 at §3, Kwan Hung Shing v Fong Kwok Shan, Christine and Others [2023] HKCA 1020 at §64, 67. These are, in my view, statements of fact, not case-specific findings of fact, and therefore do not fall foul of the Hollington principle. In any event, neither party has suggested that the factual descriptions of the Small House Policy in the decisions of the Court of Appeal and the Court of Final Appeal are inaccurate.

33.  While I am prepared to infer some declaration would have been made by the Defendant in his application for the Grant, there is, as Mr Tan properly accepted in his closing submissions, no evidence in the current case as to the precise wordings or terms of any such declaration. In light of Mr Tan’s concession that the Defendant no longer relies on any declaration to establish illegality, I will say no more about this.

34.  It was also accepted by Mr Tan in closing that the allegation of illegality based on the Plaintiff’s characterisation of the advances as a "loan" would arise only if I were to find that the alleged Oral Agreement existed. On that footing, the Defendant’s contention was that the Plaintiff’s assertion that the money advanced for the Development was a loan under the alleged Oral Agreement was merely a device to mask the illegality of the Deed and to circumvent the restriction under the Small House Policy. In light of my finding that no such Oral Agreement existed, that species of illegality does not arise.  What remains for consideration is whether the Deed is nonetheless unenforceable as being contrary to public policy by reason of a violation of the restriction on alienation contained in the Grant issued by the Government to the Defendant.

35.  The Grant from the Government, under which the Defendant was permitted to build the House pursuant to the Small House Policy, contains a restriction on alienation in clause 5(a)  of the Special Condition, which provides as follows:

“5(a). Except as provided in sub-clauses (b), (c)  and (d)  of this Special Condition, the Grantee (which expression shall, for the purpose of this Special Condition, include any mortgagee, whether legal or equitable, or an assignee of such mortgagee), having obtained this grant by way of private treaty at a concessionary premium, shall not assign, partition, mortgage, charge, demise, underlet, part with the possession of or otherwise dispose of the lot or any part thereof or any interest therein or any building or part of any building thereon or enter into any agreement so to do, whether directly or indirectly, or whether by way of direct or indirect reservation, grant of any right of first refusal, option, power of attorney, building agreement or through a solicitor, agent, contractor, trustee or otherwise howsoever.”

36.  As per Chung Mui Teck v Hang Tak Buddhist Hall Association Ltd [2001] 2 HKLRD 471, 477I “Insofar as intention is relevant, that falls to be ascertained from the Deed itself and if performance of the terms of the Deed necessarily involves the making of false declarations, that is sufficient to render the Deed illegal and unenforceable on public policy grounds”. Although the present case does not concern the making of any false declaration, it does involve a private arrangement for the transfer of an interest in the Upper Floors of the small house, notwithstanding the restriction on alienation in the Grant. Mr Gilbert Leung accepted that he was familiar with the Small House Policy. In any event, it is inconceivable that he, with his experience in New Territories property development and having consulted Mr Patrick Fan, who likewise had worked in the Lands Department for many years, would have been unfamiliar with the Small House Policy and the restrictions it imposes. In these circumstances, I am satisfied that he must have appreciated that performance of the Deed would involve dealing with the House in a way inconsistent with the restriction on alienation in the Grant.

37.  As in Chung Mui Teck, if the Deed were implemented according to its terms, each application submitted to the Government would necessarily involve a misrepresentation to the Government. The following observations of Le Pichon JA (as she then was)  in Chung Mui Teck at 478B–479F are particularly relevant:

“In Best Sheen Development Ltd v Official Receiver [2001] 1 HKLRD 866, Yuen J found on the facts of that case that there was a “development scheme” between the plaintiff and L whereby: (1)  the plaintiff would provide the land and bear all construction and other costs for the building of a small house; (2)  L would apply to Government for the grant of a free building licence to build the small house; and (3)  L would have no interest in the land or the house to be erected. L also executed powers of attorney in favour of the plaintiff as well as a will appointing the plaintiff his sole executor to whom the land was bequeathed. She held that the agreement was illegal: its purpose was to misrepresent that L was the true owner in order to enable the plaintiff to obtain the concessionary terms in the building licence available under the Small House Policy only to individual indigenous villagers and not the plaintiff.

Central to the decision is the holding that in making the application, the villager is representing to the Government that he is the legal and beneficial owner of the land in respect of which the application for a grant under the Small House Policy is made. That holding appears to me to be correct. An indigenous villager who holds the land as a mere nominee would not qualify given the purpose of the Small House Policy which is “to allow an indigenous villager to apply for permission to erect for himself during his lifetime a small house within his own village”. See para.(1)  of the explanatory notes to the pamphlet published by the Lands Department in September 1997 entitled “The New Territories Small House Policy, How To Apply For A Small House Grant”. It is a once in a life time grant for the villager and the small house is intended for that villager’s own habitation. It is plain that the benefits that accrue from a grant under the Small House Policy such as a free building licence, and the special privileges are intended to benefit the villager personally and not anyone else.

Under the terms of the Deed, the applicants would not be purchasing the sections or lots of the Land to be assigned to them. Whilst they would have legal title to the relevant section or lot which is a condition precedent to an application as owner, the small houses when erected would belong, not to the applicants, but to the Owner or the Developer. In other words, the applicants will not be or become beneficial owners of the relevant sections or lots of the houses erected on them.

It is evident that neither of the defendants is eligible to apply for a grant under the Small House Policy. The concessionary terms and special privileges that become available as a result of the applications being successful will be for the benefit of the defendants and not the applicants under the Deed. In essence, the arrangement under the Deed is no different from the development scheme considered in Best Sheen Development Ltd v Official Receiver [2001] 1 HKLRD 866. Indeed, they share many common features.

Under the Deed, an applicant will inevitably be making a representation in his application as to the legal and beneficial ownership of the section or lot in respect of which the application is made and which is untrue. Although the tort of misrepresentation is not committed until an application is made, in effect the Deed is an agreement to procure villagers to make applications which necessarily involve misrepresenting to Government the beneficial ownership of the section or lot in question. That being so, I agree this is a further reason why the Deed cannot be performed without the commission of a civil wrong. In my judgment, it is an additional reason rendering the Deed unlawful and unenforceable under common law.

Order

In my judgment, the Deed is plainly unenforceable on public policy grounds because performance according to its terms necessarily involves the swearing of false declarations and the making of misrepresentations to Government.”  (emphasis added)

38.  In my judgment, the arrangement in the present case likewise involves the Defendant, as villager, seeking exemptions or permissions in relation to the construction of the small house under the Small House Policy on the basis of applications which necessarily misrepresents to Government the true beneficial ownership of the House so that the concessionary terms and special privileges arising from a successful application would in fact enure to the benefit of Mr Gilbert Leung, even though, under the Small House Policy, those benefits are intended to be enjoyed personally by the Defendant and by no one else. In substance, therefore, performance of the Deed would also entail the making of misrepresentations to Government as to beneficial ownership, notwithstanding the restriction on alienation contained in the Grant.

39.  There is no evidence that the Deed was ever disclosed to the Government, and the development scheme has throughout proceeded on the basis that the Defendant alone was the beneficial owner of the House. This is borne out by all the documents created after the Deed. Despite the existence of the Deed:

39.1.  The PA makes no mention of any entitlement of Mr Gilbert Leung to an interest in the Upper Floors.

39.2.  In the NY Appointment Letter, only the Defendant is described as the “owner” of the Lot, with no reference at all to Mr Gilbert Leung, notwithstanding that he, as provided for under the Deed, is to acquire an interest in the Development.

39.3.  In NYAAL’s letter dated 30 May 2018 to Grandtex Enterprise (Asia)  Limited (宏泰實業(亞洲)有限公司)  (“Grandtex”), only the Defendant is named as the owner (業主), with no mention of Mr Gilbert Leung, and the Plaintiff is described merely as the project manager (“NYAAL’s 30 May 2018 Letter”).

39.4.  The Letter of Authorisation likewise records only that the Plaintiff is the project manager authorised by the Defendant, and only the Defendant is identified as the owner of the Development.

39.5.  More importantly:

(a)  The 4 March 2019 Letter sent to the DLO refers to the Development as the Defendant’s development and makes no reference to Mr Gilbert Leung or to the Plaintiff as having any proprietary interest. The Plaintiff’s subsequent letter to the DLO dated 12 March 2019 also only described the Defendant was simply as “our client”, without suggesting that either Mr Gilbert Leung or the Plaintiff had any beneficial interest in the House (“Plaintiff’s 12 March 2019 Letter”).

(b)  It is also clear that, at least up to 9 September 2019, the DLO regarded the Defendant alone as owner. The DLO’s letter dated 9 September 2019 concerning the “Application for Permission to enter Government land for carrying out excavation/stabilisation /site-formation works in connection with [the Development]” (“DLO’s 9 September 2019 Permission Letter”), and the corresponding demand notes for the prescribed fees, were both addressed only to the Defendant.

(c)  It is further apparent from DLO’s 18 October 2019 Letter that Mr Gilbert Leung represented himself to the DLO as acting solely as the Defendant’s attorney, and did not disclose that he himself, or the Plaintiff, would have any beneficial interest in the House.

40.  Insofar as any reliance is placed on the Li Pui Wan v Wong Mei Yin [1998] 1 HKLRD 84 and Lau Kwai Kiu v Bian Xintian [2012] 2 HKLRD 954 which the Court of Appeal took the view that the deeds which involved alienation of the interest in the Ding Houses was not contrary to public policy, those cases are clearly distinguishable on their facts.

41.  In Li Pui Wan, the contractual documents produced therein showed that the parties did not intend to breach the grant conditions. This is evident from the passages at 90G-H - “Obviously, the contractual parties agreed that the sale and purchase would not be completed until formalities of application to the government for assignment were complete and the premium paid. The parties had no intention of completing the transaction prior to obtaining approval for assignment or payment of premium from the government. In our view, even if government approval had not been given and the amount of premium not settled at the time of formation of the contract, the parties did have the intention to complete the sale and purchase in accordance with the terms and conditions set down by the government. In the circumstances, this transaction of sale and purchase is not against public policy.”

42.  Likewise, in Lau Kwai Kiu, at 965 (§44), the Court found that” Had the plaintiff been in funds to pay the premium, it was the parties’ intention (as found by the Judge)  that she would have applied to the Government to remove the restriction and to have the property assigned to her.”.

43.  However, in the present case, there was no such provisions at all and there is no evidence that the parties, at the time the Deed was entered into, intended to seek Government approval or to pay any premium to remove the restriction. All along, as transpired in the correspondences with the Government and the evidence available, there has never been any indication that the Upper Floors or the House were to be built otherwise than for the Defendant’s sole benefit, nor that any premium was ever sought to be paid. The “jumping the gun” feature present in those two authorities therefore does not arise here.

44.  I agree with Mr Tan’s submissions that the fact that Mr Gilbert Leung and, on Mr Gilbert Leung’s evidence, Mr Patrick Fan sought to rectify the irregularity by asking the Defendant to execute the Draft Building Mortgage strongly indicates that both of them appreciated that the Deed would otherwise be unenforceable.

45.  In relation to the Draft Building Mortgage, as a matter of fact it contains no repayment schedule, nor was any such schedule drawn to my attention. The only repayment mechanism contemplated was via rental income from the Upper Floors, yet no time frame was stipulated within which those floors had to be let and the rents applied in reduction of the loan. On its face, the lender could demand repayment at any time and for any amount, and any failure to comply would constitute a default entitling foreclosure and the exercise of the power of sale, which is unusual. While it is unnecessary for me to decide whether this Draft Building Mortgage would have satisfied any approval requirements said to be imposed by the Legal Advisory and Conveyancing Office of the Lands Department (“LACO”)  in this case (on which, in any event, I have insufficient evidence), Mr Gilbert Leung’s evidence makes it clear that:

45.1.  Such Government approval was required before the Draft Building Mortgage could be enforced and registered in the Land Registry.

45.2.  He had never read the Grant, but said that Mr Patrick Fan had told him that, subject to prior Government approval, the Grant permitted the grantee to obtain building finance, by way of a building mortgage, to construct the House.

46.  Had the Draft Building Mortgage been accepted by the Defendant and approved by LACO, it would have enabled Mr Gilbert Leung or the Plaintiff, upon any default by the Defendant in repaying the alleged loan, to foreclose on the Upper Floors notwithstanding the restriction on alienation. On my assessment of the evidence as a whole, the Draft Building Mortgage was an afterthought devised by Mr Gilbert Leung in an attempt to circumvent Clause 5(a)  of the Grant on ‘Restriction on alienation’ by repackaging the Deed as a so-called building mortgage under Clause 5(b), and the alleged Oral Agreement was yet another afterthought advanced to explain the emergence of the Draft Building Mortgage.

47.  Even if I am wrong in my view of the Draft Building Mortgage, it is indisputable that the Plaintiff’s pleaded case is that its purpose was to formalise what the Plaintiff has called Part Written/Part Oral Agreement. In light of my finding that the no such Oral Agreement existed, there was in truth no such composite agreement to formalise, and this alleged purpose of the Draft Building Mortgage cannot be correct and must fail at the outset.

48.  In the circumstances, and following the Court of Appeal’s decision in Chung Mui Teck, I find that the Deed is unlawful and unenforceable at common law on grounds of public policy. That conclusion sits consistently with the approach adopted in Kwan Hung Shing, where similar small-house development schemes were held to be contrary to the public interest underlying the Small House Policy.

G.  REPUDIATION

49.  Given my findings that (i)  the Plaintiff has no locus standi to sue under the Deed, and (ii)  the Deed is in any event unenforceable on grounds of public policy, the issue of repudiation is strictly academic and does not affect the outcome of this action. For the sake of completeness, and because the parties addressed it in their submissions, I add the following brief observations on the assumption, contrary to my primary findings, that the Deed were enforceable and that the Plaintiff had standing to sue under it.

50.  The Plaintiff’s pleaded case is that the Defendant repudiated the Agreement by conduct, in particular by refusing to sign and execute the documents said to be necessary for the Development, including (but not limited to)  the Draft Building Mortgage and the documents required to apply for Certificate of Exemption from the Lands Department.  Yet, in the Plaintiff’s Closing Submissions (§§13, 26–30), the only breach ultimately relied on was the Defendant’s refusal to execute the Draft Building Mortgage.

51.  I have held that the Deed was of a wholly different nature from the alleged Oral Agreement, and that no such Oral Agreement ever existed. The Defendant was therefore under no obligation arising out of any such Oral Agreement to ‘sign and/or execute all necessary documents and contracts’, including the Draft Building Mortgage. Nor does the Deed itself contain any term requiring the Defendant to sign or execute all documents said to be necessary for the Development.

52.  Further, the counterparty under the Draft Building Mortgage was not the Plaintiff at all but Jumbo Grace Finance Limited, which Mr Gilbert Leung merely asserted in his viva voce evidence (without any documentary support)  to be a wholly-owned subsidiary of the Plaintiff. The draft also contained new terms not found in the Deed, and, as Mr Gilbert Leung accepted, not even in the alleged Oral Agreement (including, for example, clauses 3.02, 4.05, 5.01 and 5.04). The Defendant was therefore being asked to enter into an agreement different in kind from the Deed. Mr Gilbert Leung further accepted that the Defendant was free to seek his own legal advice on the terms and to propose changes, which makes plain that the terms of the Draft Building Mortgage were still a matter for negotiation. In any event, Mr Gilbert Leung also accepted in cross-examination that the Development could have proceeded even if the Draft Building Mortgage was never executed, and that failure to execute it need not have impeded the Development as agreed under the Deed.

53.  In these circumstances, I see no factual basis for asserting that the Defendant, by refusing to enter into the Draft Building Mortgage (a document wholly different in nature from the Deed), in any way repudiated the Deed. On the contrary, it was open to the parties to proceed with the Development in accordance with the Deed alone. In the absence of any prior repudiation of the Deed by the Defendant, it is also unclear on what legal or factual basis Mr Gilbert Leung, or, on the Plaintiff’s case, the Plaintiff, could be treated as discharged from his or its obligation (if any)  to complete the Development.

H.  QUANTUM MERUIT/ UNJUST ENRICHMENT & QUANTUM

54.  It is the Plaintiff’s case that, if its claim for relief under the Deed fails, it is nevertheless entitled to recover on a quantum meruit for the work done, on the basis of the Defendant’s unjust enrichment. It claims, by reference to Mr Yim’s closing submissions at §50, a sum of HK$2,444,500, said to represent the costs incurred in completing the site-formation works for the Development.

55.  The Defendant contends that the Plaintiff has not properly pleaded its unjust enrichment claim and should not be allowed to run such claim at trial. In particular, the Defendant argues that the Plaintiff has failed to plead any unjust factor, and that what is pleaded is no more than a distinct and limited claim for “a fair sum of money under the doctrine of quantum meruit”. In any event, Mr Tan submits that, if the Court were to hold that the Deed is unenforceable for illegality, the Plaintiff would not in those circumstances be entitled to restitution on a quantum meruit basis.

56.  I will first address the pleading point.

57.  It is trite that where the necessary facts to support a claim of unjust enrichment have been pleaded, the absence of an express reference to “unjust enrichment” is not fatal: Ng Po Yu & Anor v Lam Kai On, the executor of the estate of Wong Mui, deceased [2021] HKCA 263 at §§39-62. At§48, the Court of Appeal cited and adopted the following passage from Charles Uren v First National Home Finance Limited [2005] EWHC 2529 at [16] and [18] “he has to plead facts that are capable of bringing the case within one of the established restitutionary claims or some justifiable extension of them. But if the facts were sufficient it would not matter that there is no pleading of some particular category of restitutionary claim”. (emphasis added)

58.  There could be no dispute that a claim of unjust enrichment involves four questions: Shanghai Tongji Science & Technology v Casil (2004)  7 HKCFAR 79 §67 – (i)  Was the defendant enriched? (ii)  Was the enrichment at the plaintiff’s expense? (iii)  Was the enrichment unjust? (iv)  Any of the defence applicable?

59.  For the present purpose, the relevant question is whether the material facts for the first three elements have been sufficiently pleaded in the RASOC. And on a fair reading, I consider that the necessary facts have been so pleaded. It is clearly the Plaintiff’s contention that the Defendant was enriched because work, including site-formation work, was carried out for the Development at the Plaintiff’s expense, funded by the alleged loan. By expressly pleading an alternative claim for a “fair sum” under the doctrine of quantum meruit, the Plaintiff is, in effect, asserting that it would be unjust for the Defendant to retain the benefit of that work without payment.

60.  As to the illegality point:

60.1.  For quantum meruit, it is stated in Keating on Construction Contracts, 12^th Ed, at §4-036 that:

“The entitlement is based on restitutionary principles. If a contractor carries out work or renders services under a contract subsequently found to be void or unenforceable, they may be entitled to a quantum meruit for the work or services. This principle may not apply to a contract which would have been unenforceable for illegality. In Taylor v Bhail, a builder could not claim a quantum meruit in circumstances in which the contract price had deliberately been inflated in order to defraud an insurance company. However, in Patel v Mirza, the Supreme Court held that the claimant could recover money paid pursuant to an illegal agreement to invest using inside information, where there had been a total failure of consideration. Whether or not a claim will lie in any given case will depend on the policy behind the relevant illegality, any other public policy issues and the need for proportionality.” (emphasis added)

60.2.  As summarised by Hon Chu VP in Kwan Hung Shing v Fong Kwok Shan, Christine and Others [2023] HKCA 1020, at §67:

“In Patel v Mirza, an action to obtain restitution and recover money transferred under an illegal contract, the UK Supreme Court by a majority laid down a new “range of factors” (or “factors-based”)  approach in place of the reliance test in Tinsley v Millgan. Under this approach, the primary question is whether allowing recovery of the claim tainted with illegality would be harmful to the integrity of the legal system, and the court could not answer the question without regard to a trio of necessary considerations, namely (1)  the underlying purpose of the prohibition that has been transgressed, (2)  any other relevant public policies which may be rendered ineffective or less effective by denial of the claim, and (3)  the possibility of overkill unless the law is applied with a due sense of proportionality.” (emphasis added)

60.3.  In the context of an illegal development scheme under the Small House Policy, Mr Tan also referred me to §67 of Kwan Hung Shing, where Hon Chu VP, having taken into account the evidence available in that case, held that:

“In these circumstances, having regard to the policy factors involved and the public interest underlying the SHP, the requirement for the statutory declaration and the restriction against alienation of interests in the small houses, the nature and circumstances of the illegal conduct in question and the role and conduct of the 1^st defendant and her companies as well as the disparity between her culpability and that of the plaintiff, it is not a disproportionate response to disallow the 1^st defendant to recover what had been expended in implementing the illegal development scheme. On the contrary, allowing her counterclaim would have the effect of enabling her to benefit from her own wrongdoings and would also be contrary to public policy consideration that the law should not be inconsistent and self-defeating. In short, applying the approach in Patel v Mirza would also lead to a rejection of the 1^st defendant’s claim.” (emphasis added)

That passage illustrates that, even where a claim is tainted by illegality, the Patel v Mirza factors provide a structured basis on which the court may refuse restitution on public-policy grounds in such cases.

61.  For the reasons set out in §§33-34 above, there is, however, insufficient evidence of the precise declaration made by the Defendant to establish the defence of illegality against the Deed, and the allegation of illegality arising from the alleged Oral Agreement does not arise for consideration in light of my finding that no such agreement existed. I have instead found the Deed to be unenforceable because, as a matter of substance, it is contrary to public policy, in that it offends the restriction on alienation contained in the Grant under the Small House Policy. 

62.  In those circumstances, I do not approach the case as one where the Plaintiff’s restitutionary claim is "tainted with illegality" in the Patel v Mirza sense, and the “range of factors” approach does not fall to be applied. Instead, I turn to consider whether the Defendant has been unjustly enriched at the Plaintiff’s expense by reference to the orthodox elements of unjust enrichment, bearing in mind the public-policy context already discussed.

63.  As explained by Clarke LJ in Benedetti v Sawiris & Ors [2013] UKSC 50, at §9:

“It is common ground that the correct approach to the amount to be paid by way of a quantum meruit where there is no valid and subsisting contract between the parties is to ask whether the defendant has been unjustly enriched and, if so, to what extent.…”

64.  Given my findings that the only agreement reached in relation to the Development was the Deed between Mr Gilbert Leung and the Defendant, it logically follows that any payments alleged to have been made pursuant to that agreement were, in substance and in law, to be borne by Mr Gilbert Leung under the Deed rather than by the Plaintiff.

65.  The contemporaneous documents available showthe Plaintiff presenting itself only as project manager or as the Defendant’s agent in relation to the Development. It was described as project manager in the Letter of Authorisation, and as the Defendant’s agent (the Defendant being described as “our client”)  in the Plaintiff’s 12 March 2019 Letter. Mr Norman Yiu of NYAAL was, under the NYAAL Appointment Letter, appointed by the Defendant, not by the Plaintiff, as authorised person and registered architect for the Development. There is nothing in the evidence available before the Court to show that the alleged payments which the Plaintiff claims to have made for the Development were in truth funded from the Plaintiff’s own resources, as opposed to funds provided by Mr Gilbert Leung.

66.  In the NYAAL’s 30 May 2018 Letter, it only stated that NYAAL, representing the Plaintiff as the project manager (項目經理)  and the Defendant as the owner (業主), agreed in principle to engage Grandtex to perform the “Site Formation Work” for a consideration of HK$1,500,000.00. On the face of this document, on balance, one would ordinarily expect the Defendant, as named owner, to bear responsibility for payment. Further, given my finding that the only agreement subsisting in relation to the Development was the Deed, one would expect any such payment obligation to fall on Mr Gilbert Leung under the Deed, and not on the Plaintiff.  In this connection, there is also an undated document entitled “平整地盤建築工程合約”, under which the Plaintiff, in the care of NYAAL, is named as owner and Grandtex as contractor in respect of certain foundation works for the Development. There is further another document which appears to be a fee proposal dated 25 July 2019 from NYAAL to the Plaintiff, proposing fees of HK$1,200,000 and a payment schedule for the Development. However, the said fee proposal is signed only by NYAAL, while the “平整地盤建築工程合約” is undated and unsigned by either of the named parties. In any event, neither document was relied upon by the parties at all during the trial. I do not consider they could add much weight, if any, to substantiate the Plaintiff’s case.

67.  Various Certificates of Payments of NYAAL were produced by the Plaintiff to show that, as at 17 December 2019, sums of HK$1,501,000 and HK$60,500, totalling HK$1,561,500, had been paid to NYAAL. Taking the Plaintiff’s case at its highest, and in light of the totality of the evidence, these certificates go no further than showing that NYAAL received certain payments. They do not demonstrate that those payments were in fact made by the Plaintiff, which is merely described as “Employer’s PM” – a designation which, read together with the contemporaneous documents, I would take to mean the Defendant’s project manager.   

68.  There is also the DLO’s 9 September 2019 Permission Letter regarding the “Application for Permission to enter Government land for carrying out excavation/stabilization/site formation works in connection with [the Development]” together with the associated demand notes showing payment on 17 September 2019 in the total sum of HK$4,390. As with the documents discussed above, nothing in this material available before the Court indicates that the sums demanded and paid were borne by the Plaintiff. The permission letter was addressed to the Defendant, as were the demand notes.

69.  There is then a chain of emails between NYAAL, Mr Gilbert Leung, Mr Patrick Fan and probably Mr CL Chiu during the period from 15 and 20 November 2019 which shows that a sum of HK$300,000 was agreed to be released to NYAAL for the “Tsam Chuk Wan Project” (“Chain of Emails”). For the purposes of this Judgment, I shall proceed on the basis that this refers to the Development, Tsam Chuk Wan being the location of the Lot. A deposit slip appears to record that HK$300,000 was subsequently paid into NYAAL’s account. However, having considered all the evidence available in a round, I am not satisfied, on the balance of probabilities, that this payment was made by the Plaintiff:

69.1.  It remains unclear who in fact paid the HK$300,000. As already noted, on the face of the emails it appears that it was Mr Gilbert Leung who decided that HK$300,000 should be paid to NYAAL, which would be consistent with the arrangement recorded in the Deed. I further note that, in cross-examination, it was Mr Gilbert Leung evidence that he was the person who appointed Mr Norman Yiu, without qualifying whether he did so on his own behalf, or on behalf of the Plaintiff or anyone else.

69.2.  Mr Tan criticised the fact that Mr Gilbert Leung replied to NYAAL’s email using a signature describing himself as “Chairman” of one “Our Villas Co Ltd”. There is, however, no evidence before me as to the nature or ownership of that company, its relationship (if any)  with the Plaintiff, or any role it played in the Development. Mr Gilbert Leung’s explanation was that his secretary had set up his Outlook account so that this signature appeared by default. That may account for the use of the title, but in any event, on the face of this email chain it is clear that Mr Patrick Fan reported to Mr Gilbert Leung, and, as was put by Mr Tan to Mr Gilbert Leung in cross-examination, he was the superior (上司). This tends to accord with the Defendant’s case that Mr Gilbert Leung was the driving force behind the joint venture.

69.3.  I note that in the email from Mr Patrick Fan to Mr CL Chiu, it was stated that:

“While E Villas Ltd is in dispute of the Architect’s fee claimed by Norman Yiu for the Tsam Chuk Wan Project, Norman has asked Gilbert to release HK$300,000 as interim payment pending a settlement of the fee dispute.

Therefore, please ask Teddy to issue a cheque in the sum of HK$300,000 for your signature on Monday. After your signature, please phone me for arrangement to pass the cheque to Norman”

No evidence was given as to who Teddy is, or from whose account the HK$300,000 would be drawn. Prima facie, since Mr CL Chiu was at the time a director and shareholder of the Plaintiff, the funds might have been intended to be routed through the Plaintiff’s account. Nonetheless, the email records that “Norman has asked Gilbert to release HK$300,000”, rather than asking “E Villas Ltd” (ie the Plaintiff)  to do so. In these circumstances, the absence of any further evidence to show the source of the HK$300,000. I am not prepared to infer, merely from the wording of this email, that the payment was in fact made by the Plaintiff. Indeed, even if there had been bank statements showing a transfer from the Plaintiff’s account, that would not, without more, establish that the HK$300,000 was ultimately provided from the Plaintiff’s own resources, as opposed to monies put up by Mr Gilbert Leung.

70.  For these reasons, the Plaintiff has not adduced sufficient evidence to satisfy me, on the balance of probabilities, that the sums said to have been paid for the site-formation works were in fact paid by the Plaintiff, as opposed to being borne (directly or indirectly)  by Mr Gilbert Leung. Mr Gilbert Leung’s evidence in cross-examination, to the effect that the money was his (see §24.4(c)(i)  above), only reinforces the doubt as to whether the payments which the Plaintiff claims to have made were in truth made at its expense.

71.  Accordingly, the Plaintiff has failed to establish the second criterion laid down in Shanghai Tongji, namely that any enrichment of the Defendant was at the Plaintiff’s expense. If any person has a restitutionary complaint arising from payments said to have been made for the Development, that person would be Mr Gilbert Leung; he is not, however, a claimant in these proceedings.

72.  Even if I am wrong as to the Plaintiff’s failure on the "at the Plaintiff’s expense" element of its unjust enrichment/quantum meruit claim, there remains a further difficulty as to the quantum claimed.

73.  In this regard, it was accepted by Mr Yim during his oral closing submissions that, on the evidence presently available before the Court, the Plaintiff, apart from the evidence of Mr Gilbert Leung (to which I am unable to attach significant weight given my adverse view of his credibility), has no other evidence capable of substantiating the full amount of HK$2,444,500, and that its case on quantum is capable of proving only a figure of approximately HK$1.8 million derived from the Chain of Emails (which recorded that HK$300,000 would be paid)  and the Latest Certificate of Payment (which recorded that HK$1,501,000 had been paid).

74.  In Keating on Construction Contracts, op cit., at §4-031, it is stated that:

“The expression quantum meruit means ‘the amount he deserves’ or ‘what the job is worth’ and in most instances denotes a claim for a reasonable sum.”

75.  As to how a reasonable sum is to be assessed, Keating on Construction Contracts, op cit., at §§4-037, 4-038, 4-040 further provides that:

“[At 4-037] The courts have laid down no rules limiting the way in which a reasonable sum is to be assessed. Different considerations can arise depending on whether the claim is for a quantum meruit in the absence of a contract or a reasonable price payable within a contractual framework...A restitutionary award made on the basis of unjust enrichment should be calculated as the value of the benefit received by the defendant at the expense of the claimant. The enrichment should be valued at the time it was received and, whether the benefit was in the form of services, the starting point was normally the objective market value of the services, tested by the price which a reasonable person in the defendant’s position would have had to pay for them and taking into account conditions which increased or decreased their objective value to any reasonable person in that position…

[At 4-038] In relation to construction contracts, the starting point should be that the contract should be paid at a fair commercial rate for the work done but taking account of any applicable conditions as described above….

[At 4-040] …Useful evidence in any particular case may include abortive negotiations as to price, prices in a related contract, a calculation based on the net cost of labour and materials used plus a sum for overheads and profit, measurements of work done and materials supplied, and the opinion of quantity surveyors, experienced builders or other experts as to a reasonable sum. Although expert evidence is often desirable there is no rule of law that it must be given and in its absence the court normally does the best it can on the materials before it to assess a reasonable sum.”

76.  Insofar as the HK$300,000 said to be derived from the Chain of Emails is concerned, leaving aside the fact that there appeared still to be a dispute as to the fees alleged by NYAAL, those emails simply do not reveal what work was in fact carried out by NYAAL so as to justify that figure. While the letter dated 25 July 2019 from NYAAL provides some description of the scope of work, it is unsigned and only minimal weight can be attached to it. As for the sum of HK$1,501,000 said to be derived from the Latest Certificate of Payment, that document shows at most that this sum was paid to the contractor; apart from the bare assertion that it was incurred for site formation works, there is no breakdown explaining how that figure was arrived at. I accept Mr Tan’s submission that the Latest Certificates of Payment are simply insufficient.

77.  Mr Yim also invited me to take into account the Defendant’s own estimate, given in cross-examination, of about HK$1 million for the site formation works. However, it is undisputed that the Defendant had no knowledge of how to build a house and had therefore had to enter into a joint venture with Mr Gilbert Leung for that purpose, and in my view, again only minimal weight can be placed on such self-estimation of the Defendant.

78.  There is no direct evidence of the work actually done, nor of the labour and material costs or market rates. There is no evidence from NYAAL or from the contractor Grandtex elaborating on the work performed or on the pricing. And the Plaintiff, on whom the burden of proof lies, has chosen not to adduce any expert opinion to value the work allegedly carried out. In these circumstances, and on the present state of the evidence, I consider that any attempt to assess a fair and reasonable sum would involve an impermissible degree of speculation rather than a judicial estimation based on sufficient material.  

79.  As such, even if the Plaintiff could overcome the difficulties identified above as to liability, its unjust enrichment claim based on quantum meruit would in any event fail because the Plaintiff has not established any sufficiently reliable evidential basis for assessing a reasonable sum, and has therefore not discharged its burden of proof on quantum.

I.  CONCLUSION

80.  For the above reasons, I will dismiss the Plaintiff’s claim.

81.  I also made a costs order nisi that the Defendant shall have his costs of the action, to be taxed on the party and party basis if not agreed, with certificate for one counsel. As per the consensus reached by the parties’ counsel, in case either party wishes to vary the costs order nisi, such application should be dealt with in writing.

82.  It remains for me to thank counsel on both sides for their assistance.