BRIGHT GOLD LTD v. MEGA WELL DEVELOPMENT LTD

HCA 2194/2011

[2019] HKCFI 54

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2194 OF 2011

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(by Original Action)

(By Counterclaim)

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J U D G M E N T

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1.  This action concerns disputes arising from the sale and purchase of a landed property known as Duplex Flat B on 32 & 33/F of Block 1 and car parking spaces No 165, 166 and 167 on Level 1 (collectively “Duplex B”) of Hill Paramount (“Development”), Shatin, which was acquired by Mega Well Development Ltd (“Mega Well”) in August 2011 at the price of HK$69.8 million.

2.  Bright Gold Ltd (“Bright Gold”) was the developer of the Development and the vendor of Duplex B.  It was a subsidiary of the Henderson Group.  Centaline Property Agency Ltd (“Centaline”) was the estate agent involved in the sale and purchase of Duplex B.  Messrs Woo Kwan Lee & Lo (“WKLL”) were the solicitors acting for Mega Well for the purchase.  These are the parties involved in this action.

3.  The disputes over the purchase of Duplex B are revolved around the allegation of misrepresentation by Centaline to Mega Well over the roof of Duplex B.

Background

4.  Pursuant to the directions of this court, a Statement of Agreed Facts and a List of Agreed Issues had been filed by the parties.  The background facts below are not in dispute, save where indicated otherwise.

5.  As the price suggests, Duplex B was a property at the higher end of the market.  Apart from the covered area, it included 2 areas on the Roof Floor of Block 1 (“Roof”).  There was an internal staircase on the 33/F of Duplex B which led onto the Roof.  At the top of the stairwell (“Stairwell”), there was a glass door (“Glass Door”) and by opening that outwards one could enter the Roof.  However, only a narrow strip of the roof area just outside the stairwell of about 25 sq ft (about 0.5m x 4.7m)[1] (“Strip”) belonged to Duplex B.  The second area was located on top of the stairwell where the outdoor units of air-conditioners and boilers serving Duplex B were situated (“B Upper Roof”).  It was only accessible by way of a cat ladder.  Evidently, B Upper Roof was not meant to be an area to be enjoyed by the residents of Duplex B as part of the living space.

6.  The focus of this action concerns the roof which was to be sold as part of Duplex B.  According to the Sales Brochure for the Development, Duplex B had an “Extra Roof Area” of 199 sq ft (saleable area).

7.  There was another duplex on the same floors as Duplex B.  I shall refer to it as “Duplex A”.  It came with a significant part of the Roof which located immediately above the 33/F area of Duplex A, as well as part of the Upper Roof.  According to the Sales Brochure, the area of the Extra Roof Area was 483 sq ft.

8.  One floor down from Duplex B, there was another duplex at a different wing of the building, Flat C on 31 & 32/F (“Duplex C”).  Duplex C included an area on the Roof (“C Roof”), almost a square shape, which was located right above the covered area of and was only accessible from Duplex C.  It appears from the Sales Brochure that the outdoor air-conditioner units (probably also the boilers) for Duplex C were located there.  There is no evidence on the area of C Roof[2].

9.  Duplex B was introduced by a staff of Centaline, Ms Stella Wong (“Wong”) to Ms Katherine Cheng (“Cheng”), who was the sole director and shareholder of Mega Well.  What Wong had said to Cheng about the roof area of Duplex B is highly controversial and will be dealt with below. 

10.  The Provisional Agreement for the sale and purchase of Duplex B (“PSPA”) was signed at a temporary sales office (converted from one of the units in the Development) on 16 August 2011.  The Formal Agreement (“SPA”) dated 19 August 2011 was later signed by Cheng at WKLL’s office.  On 29 November 2011, the Assignment was signed by Cheng at WKLL’s office.  The sale and purchase of Duplex B was completed on 2 December 2011.

11.  Upon completion of the purchase, Mega Well mortgaged Duplex B to a bank by an “all moneys” mortgage, to which the property remains subject.  Further, since about 2 December 2011, Mega Well has been in possession of Duplex B.

12.  It is not in dispute that after Mega Well took possession of Duplex B on 3 December 2011, it was discovered that the Roof Plan annexed to the SPA included C Roof erroneously as part of Duplex B.

This action

13.  In this action, Bright Gold seeks reliefs against Mega Well for rectification of the Roof Plan attached to the SPA so that C Roof would be excluded from Duplex B.

14.  By its counterclaim, Mega Well seeks various reliefs against Centaline, WKLL and Bright Gold.  Mega Well says that, prior to its decision to purchase Duplex B, misrepresentations were made by Centaline and Bright Gold to the effect that the roof area of the property included a much larger part of the Roof immediately outside the Stairwell (“Yellow Area[3]”).  That part of the Roof was located right above the covered area of Duplex B.  However, the Yellow Area was part of the common area (fire refuge) of the Development.  Mega Well’s claim against WKLL is based on their alleged breach of duty of care owed to it as solicitors for the purchase. 

Promotional materials

15.  At the sales office, there were available to potential buyers promotional materials, which included the Sales Brochure already mentioned[4] and 2 marking brochures.  I shall refer to them as Marketing Brochure A[5] and B[6].  In both the Sales Brochure and Marketing Brochure A, there was a plan for Block 1 which consisted of the 33/F Plan, Roof Plan and Part Plan of Upper Roof.  Three colours were used to identify the areas of the 3 Duplexes: brown for Duplex B; green for Duplex C and lime green for Duplex A.

16.  On the 33/F Plan, Duplex B was shown in brown with the Flat Roof and Terrace on that floor in light brown or beige.  On the Roof Plan, the Stairwell was in brown and the Strip in light brown and marked “Roof B[7]”. On the Part Plan of Upper Roof, B Upper Roof was also in light brown and marked “A/C B”).  Both Brochures referred to Duplex B having an Extra Roof Area of 199 sq ft. 

17.  The Yellow Area was not identified in the Brochure Plans.  The area where it was located was not coloured, save for the Strip as described above.

18.  In respect of Duplex C, the Brochure Plans showed that C Roof on the Roof Plan was in light green and marked “A/C C”.

The PSPA

19.  The PSPA was contained in a printed form prepared by Henderson Real Estate Agency Ltd (“Henderson Agency”).  It provided for the inclusion of “platform (平台)” and “roof (天台)” as part of Duplex B, but it contained no information on the location or size of those parts.  Instead, Clauses 0.6 and 0.9 of that document provided as follows :

“06. The purchaser has inspected the property and agrees to purchase the same on ‘as is’ basis, including its conditions and area, and the delivery of vacant possession by the vendor will be on the same basis (買方已實地觀察承購之單位並同意根據已建成之實際形狀、情況及面積為賣方交吉交樓之標準).

09. The purchaser has inspected the platform/roof and confirms the installations of pipes and meters within these areas.  The purchaser agrees that the sizes and conditions of the platform/roof as at the time of grant of Occupation Permit would be the basis of delivery of vacant possession by the vendor (買方已實地視察購買之平台/天台並確認該等平台/天台範圍內之水喉、渠管、錶位等裝置，並同意以入伙紙發出時該等平台/天台之實際形狀，大小及情況為賣方交吉交樓之標準).”

20.  A copy of the Occupation Permit was made available.  The document did not contain any information relating to the size or condition of the roof of Duplex B.  Indeed, there was no reference to any roof in the Occupation Permit. 

Declaration

21.  After the PSPA was signed, Cheng was asked by a staff of Centaline, Mr Philip Ng (“Ng”) to sign a document which would enable Centaline to get commission from Henderson.  Cheng thought that it was a reasonable request and she signed it without reading the contents of the document.  This part of Cheng’s evidence was not challenged. 

22.  This Chinese document[8] was headed “買客/地產介紹人聲明 (Purchaser / Estate Agent Declaration)”.  Mega Well was the stated purchaser and Centaline (with Ng identified) was the estate agent.  The following terms can be found in the Declaration :

“介紹人以「恒基兆業地產代理有限公司」 (後稱 “恒代”) 中介人身份，向本人推介上述單位，…

本人 (等) 現應「恒代」要求，確認下列聲明：

(一)  介紹人並無代「恒代」許下任何承諾或存在任何「恒代」須承擔之責任，而「恒代」亦無義務為介紹人履行任何承諾或責任；

(二)  本人 (等) 與介紹人之任何轇轕，概與「恒代」無涉，本人 (等) 不會以此拖延買賣之正常交易。

(三)  買方不反對「恒代」支付佣金予介紹人。”

The SPA

23.  The draft of the SPA was provided by Bright Gold’s solicitors, Messrs Fairbain Catley Low & Kong (“FCLK”).  The details of Duplex B were provided in the draft.  There were 2 plans attached to the document which identified the constituent parts of Duplex B by colouring them pink.  On the 33/F Plan, there were 2 “Flatroofs” coloured pink.  They had an area of approximately 14.74 sq m according to Schedule 3 of the document.

24.  On the Roof Plan, 2 areas were identified and coloured pink, namely, the Stairwell and Strip (marked “(P) B”) and C Roof (marked “(P) A/C B”).  On the same plan and marked Part Plan of Upper Proof, B Upper Roof was likewise coloured pink (marked “A/C (P) B”).  Apart from the “flat roof”, Schedule 3 also provided, inter alia, the approximate sizes for the “roof” and “roof staircase”.  Reading the Roof Plan in conjunction with Schedule 3, the area of about 11.73 sq m for the roof staircase should cover the Stairwell.  It was not made clear whether the roof staircase included the Strip. 

25.  The evidence of Ms Joey Lau of WKLL (“Lau”), the solicitor who handled this transaction for Mega Well, was that she understood that the Strip was not part of the roof staircase.  Instead, the Strip, C Roof and B Upper Roof made up the roof of 18.53 sq ft according to Schedule 3. Whilst these understandings or reading of the Plans are not unreasonable, I do not believe that it would be readily apparent to an untrained reader that, eg, the Strip was not part of the roof staircase and the B Upper Roof was part of the roof.

26.  The area of the roof as per Schedule 3, about 18.53 sq m, was consistent with the information found in the Sales Brochure and Marketing Brochure A (18.53 sq m is equivalent to about 199.46 sq ft[9]).  However, the Roof Plan contained no measurement.  Therefore, the measurement itself would not reveal anything amiss in the Roof Plan, namely, an additional area was included.

27.  There was no indication in the SPA Plans about the Yellow Area.  According to the valuation report of the Joint Expert (“Report”), the size of the Yellow Area would be 486 sq ft (equivalent to about 45.15 sq m).

28.  The draft SPA, including the Plans, was duly approved by WKLL and was subsequently executed on 22 August 2011.  A copy of the Roof Plan on which is marked the Yellow Area (part of which overlaps with the Strip) is attached to this Judgment and marked “Annex I”.

Assignment

29.  It should be mentioned briefly that the draft Assignment provided by FCLK was approved by WKLL, signed by Mega Well and returned to FCLK upon the usual undertaking.  Thereafter, dispute arose over the roof of Duplex B, and FCLK refused to return the executed Assignment with the same plans as attached to the SPA.  In order to preserve the rights of their lay client, WKLL presented the Assignment without the plans for registration, which has been withheld by the Land Registrar due to the deficiency. 

Issues

30.  The central issue in this case is the factual question whether Duplex B was purchased by Mega Well under the misrepresentation by Centaline.  Unless that question is answered in favour of Mega Well, its case will collapse and Bright Gold will be entitled to rectification of the SPA.

31.  If there was such misrepresentation, the court will have to consider whether (a) Bright Gold is liable for the same and (b) whether WKLL were in breach of their duties to Mega Well and that such breach had caused loss to Mega Well.  These broad issues involve a number of sub-issues and they will be addressed below.

Witnesses

32.  On behalf of Mega Well, Mr Roberto Passador (“Passador”), Mr Ivor Tam (“Tam”), Cheng and Ms Miranda Cheung (“Cheung”) had given evidence in this trial.  For Centaline, Wong, Ms Wendy Shum (“Shum”) and Ng were called to give evidence.  Lau and her secretary, Ms Wen Ho (“Ho”) gave evidence for WKLL.  Four witnesses were called by Bright Gold, Mr Eric Lai (“Lai”), Ms Cherry Leung (“Leung”), Mr Yu Wai Yiu, Mr Leung Ka Shing and Ms Luk Siu Fong.

Misrepresentation

33.  The person alleged to have made the misrepresentation is Wong.  All 4 of Mega Well’s witnesses had heard the same misrepresentation.  The important evidence concerns 3 viewings of Duplex B by Cheng and the people who accompanied her; the signing of the PSPA; and the meeting on 19 August 2011 at the office of WKLL during which Lau explained the draft SPA to Cheng.  I shall summarise such evidence below.

1^st Viewing

34.  On 14 August 2011, Cheng had an appointment with Wong to look at some properties in the New Territories.  Cheng was accompanied by her husband, Tam and her secretary, Cheung, whilst Wong was accompanied by a colleague, Shum.  Cheng did not find the properties shown to her suitable.  As an impromptu response, Wong suggested that she should look at a new development (the Development).  Cheng was subsequently shown 2 units at the Development, a house and Duplex B.  Cheng was not interested in the former.   

35.  Duplex B was furnished.  It was used as a show flat.  After looking at the covered area, the party of people then went up to the Roof via an internal staircase on the 33/F.  The area right outside the Stairwell was decorated with a circular artificial lawn, plants in pots and garden furniture.  There was no marking on the Roof to demarcate the area which formed part of Duplex B.  Cheng therefore asked Wong about the location of the same.  The foregoing is not in dispute.

36.  Thereupon, according to Mega Well, Wong said that the roof which formed part of Duplex B extended from the Glass Door to 2 pillars at a distance away, ie, the Yellow Area (“Misrepresentation”).  Cheng was excited about what she saw because there was sufficient outdoor space for her to hold barbecue parties for her business associates and to entertain her family, which she frequently did.

37.  Cheng and her husband were driven home by Wong after the viewing.  Inside Wong’s car, Cheng obtained a copy of Marketing Brochure B.  It is common ground that the document did not contain any specific information about Duplex B, in particular, there was no information about the location or size of the roof which formed part of that property.

38.  That evening, Cheng discussed with her husband and her family about Duplex B which she found desirable.  She had in mind living with her brother’s family in that large property.

39.  Centaline’s case on what Wong said about the roof is quite different.  It is alleged that Wong showed Cheng her ipad which contained a Roof Plan of Block 1 (showing also a Part Plan of Upper Roof).  It appears that the Roof Plan was identical to those in the Sales Brochure and Marketing Brochure A.  In other words, the Stairwell, the Strip and B Upper Roof were identified under the colouring scheme (see para 16 above).  With that Plan, Wong identified to Cheng the roof which belonged to Duplex B.  She also said to Cheng that save for the identified parts, the Roof was part of the common areas.

40.  However, Wong was unable to tell from the Roof Plan the size of the roof belonging to Duplex B.  After the viewing, Wong went to the sales office to ask for the size information.  Later, she told Cheng that the Strip only extended to the artificial lawn and gave her a copy of the Sales Brochure.  From the photographs in the Bundles, it can be seen that the artificial lawn was very close to the Stairwell, and therefore it would have been apparent that the Strip was very narrow. 

2^nd Viewing

41.  On the next day, Cheng arranged with Wong to look at Duplex B again.  She went with her husband, met Wong and was taken to a room inside the sales office to wait for her brother.  After the arrival of Cheng’s brother and his family, the party of people, including Shum, went to Duplex B.  At the Roof, in response to the brother’s enquiry, Wong repeated what she had said the previous day, ie, the Duplex B roof extended from the Glass Door to 2 pillars.  According to Cheng, they stayed at the Roof for about 30 minutes. 

42.  Wong’s version is that she went to the 2^nd viewing with Shum and Ng (Cheng and Tam denied that Ng was there on that day).  When the party of people were looking at the Roof, Cheng said that the roof area (belong to Duplex B) was too small for any barbecue and that she wanted to keep a barbecue grille, table and chairs on the Roof.  Wong immediately said to Cheng that she could not do so because that was common area.  Cheng then asked Ng whether she could have a barbecue outside her area.  Ng said to her that if she did it surreptitiously, no one would know about it but she needed to clean up the place afterwards to avoid complaint by the neighbours. 

43.  Wong said that the viewing at the Roof took about 15 minutes.  Before Cheng left the Development, she was told by Ng that the asking price for Duplex B was HK$75 million.

3^rd Viewing

44.  The 3^rd visit of Duplex B took place on 20 August 2011, after the PSPA was signed but before the execution of the SPA.  On that day, Cheng went with Tam, Cheung and a large party of her family members as well as a friend, Passador, to look at the property she had just bought.  Wong and Shum were there. 

45.  When the party of people was looking at the Roof, Wong was asked by, inter alia, Passador to identify the roof which belonged to Duplex B.  The same representation as previously made by Wong on 14 and 15 August 2011 was repeated.  According to Tam, that visit lasted half a day with most of the time spent on the Roof.

46.  According to Wong, no such conversation took place.  To the contrary, during the viewing of the Roof, Cheng again expressed the wish to keep furniture at the common area for her barbecue and to enjoy coffee.  Wong again told Cheng that she could not keep anything at the common area, which did not belong to her.  Wong said that the visit lasted 20 to 25 minutes, and that most of the time was spent in the covered area. 

47.  In the course of the 3^rd Viewing, one of Cheng’s relatives took a photograph which showed the Yellow Area (“Photograph”).  The area was decorated with plants and outdoor furniture, and might give the impression of a private garden.

Signing of the PSPA

48.  At the time when the PSPA was signed Ng allegedly used the plans contained in a Sales Brochure to explain to Cheng about the various constituents of Duplex B, including the roof which was “coloured pink”.  This is disputed by Mega Well.

Meeting on 19 August 2011

49.  Cheng was accompanied by Tam, Cheung and Wong. They met Lau at a conference room and sat around a long conference table. According to Lau, she was at the head of the table with Cheng to her right and Tam next to his wife.  Cheung and Wong were at the other end of the table. 

50.  According to Cheng, during the course of the meeting, after having referred to Schedule 3, Lau told her that the parts coloured pink on the Roof Plan attached to the draft SPA belonged to her and that she should check it carefully.  Thereupon, Wong said to Cheng that the roof was so big and well sufficient for her use.  Lau then said that it should not be exaggerated and that only the parts highlighted in pink belonged to the unit Cheng had bought.  Wong also said to Cheng that part of the roof was for storing the air-conditioners and the like.  At that time, Cheng was confused about the Plan.  Her evidence is that she did not know how to interpreted plans.  However, Wong, who was sitting opposite her, picked up the document in front of Cheng, took a look and said that there was no error and that Cheng could sign it. 

51.  Wong’s evidence is that when Lau explained the Plans, Cheng discussed them with Tam.  Cheng then pointed at the area where the air-conditioners were located (B Upper Roof) and asked Wong how to get there. To which she replied that it was accessible via a cat ladder.  Cheng then said that the roof was too small.  Wong then told her that the roof available for her use was so big.  After Lau having pointed out that Cheng was only entitled to the parts coloured pink and the rest was common area, Wong explained to Cheng that although Duplex B only came with the parts coloured pink, normally no one would use the Roof and therefore as a matter of fact she could use it as she liked (Wong’s evidence is that, apart from the occupants of Duplexes A and B of Blocks 1 and 2 who could access the Roof via internal staircases, the other occupants could only access the Roof via fire exits and fire doors.  The use of fire door would trigger an alarm.  Hence, normally the other occupants would not access the Roof.).

Analysis

52.  Given the number of parties involved, the evidence in this trial (especially that of Cheng) was subjected to very thorough examination.  I approach the evidence based on inherent probabilities, common sense, whether it had withstood the test of cross-examination and how the witnesses behaved in the witness box. Uncontroversial or uncontroverted documentary evidence will of course be accorded due weight[10]. I agree with the approach set out in Star Glory Investment Ltd v Kai Tuo (HK) Technology Co Ltd, unrep, HCA 3523/2002, 13 August 2005, §12. 

53.  On drawing of inference, I shall be guided by the dicta of Ribeiro PJ in Ming Shiu Chung & Ors v Ming Shui Sum & Ors (2006) 9 HKCFAR 334, §§78 and 79.

54.  Having considered all the evidence, there is no real doubt in my mind that the Misrepresentation was in fact repeatedly made to Cheng and in her presence by Wong. 

The requirement of sufficient outdoor space

55.  Firstly, Cheng’s evidence that she was looking for a property with outdoor space that was sufficiently large for barbecue party and entertaining her guests is certainly credible.  She explained, inter alia, that she found that restaurants were too noisy and preferred her own space.  That would echo the sentiment of many people in Hong Kong.  Cheng’s wish to live with her brother’s family and taking many of her family members to visit the new place she bought reflected the fact that she liked to be with her big family. 

56.  Of the 3 properties purchased by Cheng prior to Duplex B, one had a roof and the one where she was residing in August 2011 had a large garden and light well of about 1,000 sq ft.  Given the price of Duplex B, it would be surprising for a potential buyer not to have an expectation that it came with a decent size roof.

57.  Wong’s evidence agreed with that of Cheng on her requirement[11] for a roof to accommodate her barbecue party, although Wong said that she only knew about it on 15 August 2011 during the 2^nd Viewing.  Finally, Leung’s evidence confirmed that on the day when Cheng took possession of Duplex B (3 December 2011), she had a long argument with the building management and was clearly upset[12] that she was told by them that she would not be allowed to have any barbecue on the Roof.  I do not believe that Cheng merely wanted to use the common area.  Cheng must have known that she had no specific right over the common area.  There was no reason for her to be so insistent over the right to barbecue unless she believed that the area belonged to her (see also para 78 below). 

The Viewings

58.  There is no argument that Cheng asked Wong about the location of the roof which belonged to Duplex B on 14 August 2011 (during the 1^st Viewing).  Indeed, it was the most natural thing for a potential buyer to ask.  It is unlikely for Cheng to be enthusiastic about the property if she was told that the roof was merely a narrow strip outside the Glass Door (apart from the area for the air-conditioners).  The fact is that Duplex B did not actually have any useable roof.  Lai (a senior sales staff of Henderson Agency at the material times) agreed that it was the case.  Further, Wong and Shum, both very experienced estate agents, agreed that they had never come across a case where the roof was merely a narrow strip. 

59.  If Cheng was shown a plan of the Roof, as alleged by Wong (and Shum), indicating that only a narrow strip of the Roof belonged to Duplex B, one would expect Cheng to be at least surprised and said something about it.  Both Wong and Shum said that Cheng had no reaction after she was told about the Strip and the party of people then left the Development.  Such evidence is not credible.  A normal person, let alone a prospective purchaser, would be quite surprised by the revelation that only the Strip belonged to Duplex B.  Such a person would likely have reacted by, eg, asking what was the point for having an internal staircase going to Roof?  

60.  It was agreed by Wong that at the price of nearly HK$70 million, a purchaser looking for a good amount of outdoor space would have ample choices.  I do not believe that Cheng would have been interested in Duplex B if she knew that it had no useable roof.  She would not have taken her brother and his family to look at the Roof with enthusiasm on 15 August 2011 (2^nd Viewing).  She would not have repeated that exercise with more members of her family as well as her friend (Passador) on 20 August 2011 (3^rd Viewing). 

61.  Cheng’s evidence that during the 2^nd and 3^rd Viewings, members of her family asked Wong to identify the roof which belonged to Duplex B is inherently credible.  Passador, a gentleman from Italy, was called to give evidence about what he was told by Wong in answer to his question about the roof which came with Duplex B.  The Misrepresentation was repeated to him.  I take into account that Passador was a long standing friend of Cheng and had become a business partner of hers.  It was a natural question for Passador to ask when there was no marking on the Roof.  I see no reason why he would travel thousands of miles to Hong Kong to give false evidence.  Quite the contrary, he impressed the court as an honest witness.

19 August 2011

62.  Cheng’s evidence about what took place at a conference room inside the office of WKLL is largely consistent with and supported by that of Lau, as well as being consistent with the recorded conversation between Lau and her on 24 December 2011 (“Recorded Conversation”).  The recording was made by Lau without informing Cheng. Although Lau said that it was for the purpose of making a report to the senior partner about the matter, I have little doubt that she was alive to the possibility that the matter might turn into litigation and wanted, at least in part, to preserve some evidence about what took place on the 19 August 2011 for her own protection.

63.  Importantly, Cheng’s evidence that she was unable to read the Plans shown to her by Lau is consistent with what Lau was recorded to have said – Lau saw that Cheng appeared doubtful or confused and asked Wong about the Plans.  Further, Lau’s evidence confirmed that Cheng had relied on Wong to approve the Plans.

64.  Some of the evidence of that meeting militate against the suggestion that Cheng had been shown the Brochure Plan and was told that the Duplex B roof was made up of only the Strip and an area for air-conditioners.

65.  To begin with, she was in doubt or confused when the Roof Plan was shown to her by Lau.  If she had seen the Brochure Plan, she should not be in doubt, and she would have been able to tell easily that there was something wrong about the Roof Plan, because it contained 3 areas coloured pink, whereas the roof in question was only made up of 2 areas. 

66.  Cheng’s evidence that she was labouring under the belief that C Roof as shown on the Plan was the Yellow Area is credible. She also relied upon the fact that C Roof was marked “B” like the other 2 areas.  I accept this evidence despite the heavy criticisms based on the variance between C Roof and the Yellow Area in terms of location and size. Cheng’s evidence is indirectly supported by the evidence of Wong. 

67.  Wong said that she pointed out to Cheng with the Roof Plan where B Upper Roof was.  That document clearly showed 3 areas coloured pink, and C Roof appeared immediately above B Upper Roof.  Despite Wong’s denial, she must have seen that the document showed 3 pink areas.  Her failure to point out the clear error is an important piece of evidence which supports Mega Well’s case.  It suggests that, contrary to the contention that Cheng was shown the Brochure Plan and knew that Duplex B only came with the Strip and an air-conditioners area, Wong had in fact told her that it came with more than those 2 areas, and Wong did not attempt to correct the misunderstanding which Cheng was labouring under as a result of what she was told.

68.  Further, the fact that Wong said to Cheng at the meeting that the roof was big and well sufficient for her use is at odds with the suggestion that Cheng was told from day 1 that the roof was limited to the Strip and the air-conditioners area.  I reject Wong’s suggestion that she was merely explaining that the common area could be used by Cheng.  I see no honest reason why Wong would have said that when Cheng was asked by Mega Well’s solicitors to check the Plans carefully to ensure that they reflected what she was buying.

Wong’s motive

69.  I believe that Wong was keen to be present at the meeting to ensure that the approval of the SPA went smoothly.  She was to be handsomely rewarded from the commission to be earned in the transaction (3% of the purchase price and from which Wong would be entitled to a share in the sum of HK$400,000)[13]. Wong declined to leave the meeting despite Lau’s request to do so.  What Wong said about the roof suggests that she was indeed keen that the SPA be approved by Cheng.

Inspection of Duplex B

70.  Finally, Mega Wells’ case on the Misrepresentation is supported by the fact that when Tam instructed a qualified person (“Jim”) to inspect Duplex B for the purpose of getting approval for the unauthorised alterations there, he provided an estimate of 500 sq ft for the roof.  There is an invoice from Jim’s company to evidence that.  Unless Tam believed that Duplex B came with a sizable roof, it is inconceivable that he would have provided such an estimate. 

Cheng’s credibility

71.  Cheng is a credible witness.  Her evidence was rigorously tested by the cross-examination on behalf of the other 3 parties.  I have not noticed any hesitation in any of her answers.  With the exception of 1 matter (see para 80 below), there is no major inconsistency in her evidence.  There are of course variances in details compared with the evidence of other witnesses, eg, the duration of the discussion with Wong over the Plans at the meeting.  I believe that such differences are matters of recollection or impression, and can be expected with honest witnesses.   

72.  There are some points of credibility made against Mega Well which I would deal with specifically.  Firstly, suggestions had been made that Tam and Cheng did not mention the Yellow Area to Lau until much later, which was Lau’s evidence.  In this regard, I believe that Tam had provided a credible explanation.  He said that it was on the 8 or 9 December 2011, shortly after Jim’s inspection of Duplex B on 7 December 2011and confirmation that the Yellow Area did not form part of it, that he mentioned it to Lau over a telephone conversation.  At that time, there was a meeting with Henderson’s management scheduled on 12 December 2011, Tam wanted to ask Lau for advice as to how the matter might be resolved.  In the course of the conversation, he asked Lau if it was possible to get “our roof” (the Yellow Area).  Lau told him that it would not be possible because it was mostly common area but suggested to him to explore at the meeting whether there was any area which belonged to Henderson. 

73.  WKLL were Mega Well’s only solicitors at the time.  It is inherently credible for Tam to have consulted Lau in anticipation of the meeting.  Tam’s explanation was detailed and coherent.  I see no reason to disbelieve the evidence. 

74.  As to any variance between Tam’s evidence and that of Lau in this regard, it is likely to be matters of recollection and/or confusion over events which took place many years ago.  No doubt those were trying times not only for Cheng and Tam but also Lau.  When Lau was cross-examined about Mega Well’s complaint over the roof, Lau said that Cheng was complaining about how small the roof was, and she agreed with the court that Cheng thought that the roof was bigger, otherwise there was no cause for complaint.  Further, Lau in cross-examination agreed that in complaining about Wong’s misrepresentation over the roof, Cheng had mentioned the exact location and area of the roof that was supposed to be sold to Mega Well.

75.  On this topic, Cheng explained that the discussions with Lau (and Ho) after taking possession of Duplex B were conducted mainly by her husband (on 24 December 2011 Lau actually rang Tam but he passed the phone to his wife because he was driving (see para 62 above)). She believed that there might be misunderstanding or confusion over what Tam had said about Mega Well’s entitlement over the roof. 

76.  I believe that Cheng is probably right about the misunderstanding or confusion.  The term “Yellow Area” was only coined after the filing of Mega Well’s pleading.  Tam would have to describe what he was told about the roof.  Such an exercise, no doubt carried out in circumstances of stress, over the phone and quite likely without the assistance of plan, was liable to result in misunderstanding.  Importantly, I fail to see why Tam should be complaining only about C Roof as suggested by WKLL, Bright Gold and Centaline.  It was inaccessible and not an area of any interest to Mega Well. More likely than not, he was complaining about something else.

77.  Tam’s explanation is supported by the evidence of Ho, who said that, during a period of 2 weeks from 8 December 2011, he had repeatedly complained to her that Wong had made misrepresentation about the roof.  Although Ho said that Tam’s complaint was not specific, it is unlikely that Tam was repeatedly complaining about misrepresentation without mentioning what the misrepresentation was.

78.  There is also support in the evidence of Leung. She had to go to the Roof on 3 December 2011, the day Mega Well took possession of Duplex B.  There was an argument between Cheng and the management about the roof and Leung was asked to deal with it.  Although she was unable to recall what she was told about the argument, she took along a copy of the Sales Brochure believing that it would assist in resolving the argument.  Later in cross-examination, Ms Leung agreed that the argument was about what Mega Well maintained to be the size of the roof which belonged to it.  In re-examination, Leung said that the argument was mainly about “their” wish to barbecue at the Roof. Whilst I had detected an unwillingness on the part of Leung to acknowledge that Cheng did complain about the size of the roof belonging to Mega Well, it is reasonably clear from her evidence that it must be the subject matter of argument on the 3 December 2011. 

79.  Secondly, much criticism had been made about Cheng’s evidence that she did not obtain a copy of the Sales Brochure.  When Cheng was taxed on this topic by Mr Ho SC, who appeared for Bright Gold with Mr Lee, she said that she based her purchase on the physical inspection of Duplex B. Cheng was a business person.  Her success was self-made, having completed only her secondary education and started her own business at a young age.  It is quite plausible that such a person might place reliance on what they see rather than reading up on the details as, eg, lawyers are inclined to do.  Indeed, the terms of the PSPA emphasized the primary importance of inspection of Duplex B (see para 19 above).  The court bears in mind also the fact that Cheng had a long standing relationship with Wong, having purchased 3 properties through her.  Naturally, she would have trusted Wong in what she had said to her.  I do not believe that this is a point which materially damage Cheng’s credibility.

80.  Thirdly, serious criticisms were made about the evidence of Cheng and Tam that they only saw a copy of the Sales Brochure after Mega Well had instructed its solicitors for this action in early 2012.  Such evidence is inconsistent with what Cheng had said in the Recorded Conversation, which may suggest that she had seen the Brochure Plan before that day.  Whilst I agree that this is one of the matters to be taken into account in assessing the credibility of Mega Well’s evidence, I do not see anything sinister in it. Bearing in mind that this was about events after the purchase had been concluded, I am unable to see why Cheng and Tam would deliberate lie about this matter.  It would not materially improve Mega Well’s case.  Cheng and her husband might have been confused or their recollection was flawed.  I have to bear in mind that the circumstances at the material times must have been testing for them.   

81.  Fourth and finally, much had been said that Mega Well’s case on the Misrepresentation is incredible in that the lie could easily have been revealed, eg, if Cheng had taken a look at the Brochure Plan before signing the PSPA.  Experience informs that human behaviour cannot always be explained by logic or common sense, especially with the benefit of hindsight. It might be the case that Wong was misled by the decoration of the Yellow Area and thought that it was part of Duplex B (the visit to the Development was an impromptu event) or she had in mind that, if caught out, she would try to salvage the situation by telling Cheng that the Roof would not be accessible by other owners save in the case of emergency (which was what she said at the meeting on 19 August 2011).  However, trying to look into Wong’s mind would be a matter of speculation. 

82.  Whilst this criticism of Mega Well’s case is to be taken into account in assessing the evidence, the court should also balance the criticism against the fact that Cheng had no motive to lie.  None had been suggested in the lengthy cross-examination of Cheng (or Tam).  Her evidence is that, after many unsuccessful meetings with Henderson to try to resolve the matter, she received a solicitors’ letter threatening legal action against Mega Well.  In due course, she received a copy of the writ and was struck by a feeling of helplessness.  According to Tam, there was difficulty in obtaining the service of solicitors for the litigation, which involved one of the largest developers in Hong Kong.  I do not see why Cheng would have taken on the might of Henderson if the dispute was only about the C Roof over which she had no access. 

83.  In respect of Cheng’s demeanour as a witness, I find it convincing.  The manner in which she answered questions – maintaining eye contact, forthright and spontaneous – suggests that she was telling the truth.  Indeed, there is a distinct impression that Cheng wanted to pour her heart out on the injustice she had suffered and to vent the pressure (no doubt both mental and financial) she had experienced in this litigation.

Mega Well’s other witnesses

84.  As for Tam and Cheung, I am also satisfied that they are truthful witnesses.  Tam’s evidence very much supported that of Cheng, especially on the Misrepresentation due to his presence when it was repeatedly made. He was cross-examined at considerable length.  His evidence was unshaken.  I see no major inconsistency.  I should add that Tam was quite relaxed in the witness box and he came across as a credible witness.

85.  Cheung also heard the Misrepresentation during the 1^st and 3^rd Viewings.  She was soft-spoken and a careful witness.  In answering questions, she did not hesitate to tell the court that she was unable to recall the matter.  Again, I find no major inconsistency in Cheung’s evidence and I find her to be a credible witness.

Centaline’s witnesses

86.  Turing to Centaline’s witnesses, I have pointed out above an incentive for Wong to have Duplex B sold and analysed some of her evidence.  I do not believe that Wong’s evidence stands scrutiny.  The evidence of both Cheng and Lau that Cheng relied on Wong to confirm that the Roof Plan was correct goes a long way to discredit her evidence. 

87.  Both Shum and Ng participated in the transaction.  They also would have a share in the commission to be earned. Once the transaction had turned into a litigation and what Centaline did was put under the spotlight, one can see the pressure on them to support Wong’s (and Centaline’s) case.

88.  Shum was also an agent of Centaline.  She accompanied Wong at all 3 Viewings, although she said that she did not go to the Roof during the 3^rd Viewing.  I do not find Shum to be a credible witness.  I do not believe her evidence that she did not try to promote Duplex B to Cheng but merely left it to her to make a decision.  This is not what one would expect a very experienced estate agent would do with an expensive property the sale of which would result in substantial commission. Shum tried to argue that the Strip was a useful area to have some plants or a shallow cabinet.  Such suggestion was, in my view, disingenuous.  I have already mentioned that, like Wong, Shum said that that Cheng had no reaction when she was told about the Strip (see para 59 above). 

89.  Ng was a branch manager of Centaline.  I do not find him to be a credible witness either.  He was a combative witness, and had the tendency to give long irrelevant answers despite the court’s advice to pay attention to the questions and to answer the same.  When he was asked whether 2011 was a buyer’s market, he suggested that it was difficult to define a buyer’s market due to various factors.  Upon further questions by the court, Ng said that he understood what the term “buyer’s market” meant but he could not recall the state of the market in 2011.  I do not regard this as the hallmark of a credible witness. 

90.  Ng said that he had showed the Brochure Plan to Cheng at the time of the signing of the PSPA and identified the 2 areas coloured pink on the Roof as belonging to Duplex B.  He was then challenged by Mr Chong, who appeared for Mega Well with Mr Poon, that the relevant parts of the Brochure Plan were not in pink.  Ng tried to explain that he regarded the colour as pink.  When he was asked by the court to look at the car park plan in the brochure in which the car parks were coloured pink, Ng said he thought that the car parks were in “dark pink” and the areas he identified to Cheng in “light pink”.  I am in no doubt that Ng had made up his answers. 

91.  For these reasons, I am satisfied that Wong had made the Misrepresentation to Cheng or in her presence during each of the 3 Viewings. 

Reliance on the Misrepresentation

92.  The only argument is that Cheng was disabused of any misrepresentation by what took place on the 19 August 2011 and/or when she obtained a copy of the Sales Brochure.  Given the court’s acceptance of Mega Well’s evidence, in particular, I do not believe that Cheng had seen a copy of the Sales Brochure before signing the SPA, this argument has no leg to stand on. 

93.  I bear in mind the relevant principles of law which had been helpfully set out in a recent judgment in this area: Joytex Development Ltd v Super Homes Ltd, unrep, [2018] HKCFI 2286, 10 October 2018, per DHCJ Stock SC, §77, in particular §77(4) and (5).  In my view, there can be no serious argument that Cheng (and Mega Well) had relied on the Misrepresentation in purchasing Duplex B, and I so find.

Centaline’s liability for the Misrepresentation

94.  Equally, it is not open to serious doubt that Centaline was acting for Mega Well in the purchase of Duplex B notwithstanding that its commission was to be paid by Bright Gold.  Duplex B was introduced by Centaline to Mega Well as a potential buyer; Cheng and the people who accompanied her were taken by Centaline’s staff to Duplex B for 3 Viewings; what Duplex B came with was explained by such staff; and the price was negotiated with Bright Gold by one such staff (Ng) on behalf of Mega Well.  Further, Mega Well was required to sign the Declaration which was necessary to enable Centaline to be paid by Bright Gold[14].  I have no difficulty finding that Centaline was acting for Mega Well in the transaction. 

95.  As Mega Well’s professional agent, Centaline clearly owed a duty of care to the former (see Midland Realty (Comm. & Ind.) Ltd v NCF (HK) Ltd, HCA 1830/2013, unrep, 22 May 2015, §§74 to 79). There is no contrary submission advanced on behalf of Centaline to suggest that it did not owed a duty of care to Mega Well in the purchase of Duplex B. Making the Misrepresentation to Mega Well was a blatant breach of such duty, and I so find.

Bight Gold’s liability over the Misrepresentation

96.  I turn next to consider whether Bright Gold is liable for the Misrepresentation.  This turns on whether Centaline was acting as Bright Gold’s agent for the purpose of providing information about Duplex B’s roof to Mega Well. 

97.  I respectfully adopt the dicta of Deputy High Court Judge To (as he then was) in Hondon Devlopment Ltd & Anr v Powerise Investments Ltd & Ors, HCA 1208/1998, unrep, 1 September 2003, §27 :

“… It is trite law that agency can be created expressly or by implication when it is reasonable to infer that an agency relationship has resulted: Freeman and Lockyer v Buckhurst Park [1964] 2 QB 480. It is a question of fact in each case whether an estate agent is an agent authorised by his principal in providing information relating to a property to another party. The authority may be express or implied.”

98.  I also bear in mind the dicta of DHCJ S Kwan (as she then was) in Yili Concepts (HKG) Ltd v Lee Wai Chuen, unrep, HCA 12911/1997, 29 September 2000, pp 21 and 22.

99.  In my view, there is ample evidence to justify the inference that Centaline was acting for Bright Gold as its agent in the sale of Duplex B and in providing information about that property to potential purchasers. 

100.  According to Lai, Henderson Agency would promote the Development with their own clients or potential buyers sourced by them. For buyers introduced by outside estate agents, they would be handled by those agents.  In cross-examination, Lai agreed that Centaline’s role was to promote the Development for Bright Gold, and if it resulted in a sale Centaline would get commission from Bright Gold.  He agreed that Centaline’s role did not change in the negotiations over the purchase price as it was trying to bring the promotion to fruition and earn the commission.  He agreed also that Centaline’s interest aligned with that of Bright Gold in attaining a higher selling price, and that Centaline was looking after the interest both of itself and Bright Gold in the negotiations over the price. 

101.  In re-examination, Lai tried to resile from what was said by emphasising that Centaline did not introduce its clients to only the Development, and he said that in the negotiations of the purchase price Centaline was only representing Mega Well.  Lai also said that Centaline might just be looking after whether the deal could be done and if not, it could take the buyer to other properties.  He further said that Centaline was not looking after Bright Gold’s interest, it was mainly looking after the buyer’s interest. 

102.  I do not believe the fact that Centaline did not only promote the Development detracts from its role vis-a-vis Bright Gold.  It speaks volumes that Centaline was going to be paid 3% of the purchase price for any success in promoting the Development.  What Lai accepted in cross-examination sits with plain common sense.  Critically, there was no one doing the promoting for Bright Gold in respect of the buyers brought along by the estate agents other than those estate agents.  In this case, there was no contact between Mega Well and Bright Gold prior to the signing of the PSPA. Plainly, Centaline must be acting for Bright Gold in the transaction. 

103.  Further, in the course of promoting the Development to potential purchasers, obviously Centaline would, and was expected by Bright Gold to, provide information about the properties, such as the roofs which came with the top floor duplexes. 

104.  The negotiations over the purchase price between Mega Well and Bright Gold were carried out via Centaline.  It was plainly part and parcel of the promotion exercise to bring it to fruition.  The suggestion that Centaline was only representing Mega Well sits poorly with Ng’s evidence that, on one hand, he had discussions with Mega Well with the view to getting Bright Gold to come down on the price with incentives such as a shorter completion period or negotiation over the amount of rebate of stamp duty.  On the other hand, Ng had discussions with Bright Gold to exploring how the Mega Well might be encouraged to improve its offer, eg, with an additional car parking space as sweetener.  Plainly, Centaline (via Ng) was acting for both Mega Well and Bright Gold in the transaction, and I so find.

105.  Finally, the existence of the Declaration (see paras 21 and 22 above and the analysis below) by which Henderson Agency attempted to exclusion its liability for, inter alia, misrepresentation made by Centaline fortifies the fact that it knew and expected that representation would be made by the latter to potential purchasers.  Although it was not a document of Bright Gold, it is part of the evidence on which it endeavoured to rely and it fortifies what can only be a common sense view. 

106.  Bright Gold placed considerable reliance on the CA judgment of Montrio Ltd & Anr v Tse Ping Shun David [2013] 4 HKC 505, §§28-31.  However, the critical distinction is that in Montrio the vendor did not instruct the agent to market its property.  In any case, the finding here is highly facts sensitive.    

107.  In the premises, I find that Centaline was acting for Bright Gold in the sale of Duplex B and that it was impliedly authorised by the latter in providing to Mega Well information about the property.  In the premises, Bright Gold is liable for the Misrepresentation.  

108.  Mega Well also has a claim of implied representation against Bright Gold based on the presentation of the Yellow Area as depicted in the Photograph.  Lai agreed that a potential purchaser who had looked at 32/F and 33/F of Duplex B, walked up the internal stairs onto the Roof, pushed open the Glass Door and entered an area decorated in the manner shown in the Photograph might get the impression that the area was part of the furnished property.  Lai said that nothing was done to prevent potential purchasers from getting that impression.  He also agreed that normally one would expect that the roof which belonged to the property would situate immediately above the covered area. 

109.  The legal test for an implied representation is what a reasonable person would have inferred was being impliedly represented by the representor’s words and conducts in their context: see Joytex Development Ltd, supra, §77(3).

110.  Having considered the matter with care, I am not satisfied that the state of the Yellow Area at the time of the Viewings was sufficient to constitute the Misrepresentation.  At most, it might have contributed to Mega Well’s belief in it.  I believe that a reasonable person would have made enquiry about the roof which formed part of Duplex B, as Cheng did, despite the impression that it might be part of the show flat.  I bear in mind that there was no partition at the Roof. 

Declaration and Clause 10(2) of the SPA

111.  Next, I shall deal with 2 remaining arguments of Bright Gold.  I regret to say that they have no merits. 

112.  Firstly, Bright Gold relied upon the Declaration as constituting a contractual estoppel.  However, the document did not in anywhere suggest that it had anything to do with Mega Well.  Clause 1 of that document (see para 22 above), on which Bright Gold sought to rely to exclude its liability for any misrepresentation made by Centaline was poorly drafted in that it purported to refer to a state of affairs (there was an absence of any responsibility on Henderson Agency’s part (“或存在任何「恒代」須承擔之責任”) but it was not clear how that state of affairs was to be applied.  It was not a matter of the absence of a punctuation in the sentence.  The document was provided by Henderson Agency, and it must be construed contra proferentum and any ambiguity in a document of such nature cannot be resolved against Mega Well.

113.  Both these points were raised by the court with Bright Gold at the beginning of the trial but there was a total failure to address them in Bright Gold’s final submissions.

114.  Secondly, there is a short paragraph in Bright Gold’s final submissions relying on Clause 10(2) of the SPA to limit Mega Well’s right to cancel the agreement or seek compensation for misrepresentation.  Clause 10 was about error, mis-statement or mis-description in the Government Grant.  The point is hopelessly unmeritorious.  It should not have been made, certainly not in the throwaway manner in which it was advanced.      

Case between Mega Well and WKLL

115.  It is not in dispute that WKLL, as Mega Well’s solicitors for the purchase of Duplex B owed a duty of care to it both in contract and in tort: see Hondon Development Ltd & Anr v Powerise Investments Ltd & Ors [2005] 3 HKLRD 605, CA, §48.

116.  As regards the nature and standard of that duty of care, I again respectfully adopt the lucid dicta of DHCJ To in the first instance judgment of Hondon Development[15], §§75 to 77 :

“75. There can hardly be any doubt that a solicitor owes a duty of care towards his client the moment he begins communication with his client or prospective client in his professional capacity as a solicitor in tort or upon being engaged under his retainer in contract. In general, the content of his duty is as follows. His foremost and basic duty is to understand the terms of his retainer and the purpose for which he is retained. If in doubt, he should seek clarification or instruction from his client. He shall act in accordance with his retainer. He shall advise his client on all matters relevant to his retainer, so far as may be reasonably necessary. He shall carry out his instructions by all proper means. He shall consult with his client on all questions of doubts which do not fall within the express or implied discretion given to him under his retainer. He shall keep his client informed to such an extent as may be reasonably necessary. He shall generally protect his client's interest. He is under a duty to exercise the care and skill to be expected from a normally competent and careful practitioner.

76. In the context of a solicitor acting for the purchaser in a conveyancing transaction, the content of a solicitor’s duty includes the following specific duties. Firstly, in order to understand the terms of his retainer and the purpose for which he was retained, a solicitor is under a duty to ascertain what is the subject matter of the sale and purchase in the mind of his client and, if in doubt, to seek clarification or instruction from his client. He has to ensure the parcels clause of the formal agreement or assignment adequately describes the property to be purchased. He has to scrutinise plans closely to ensure that the limits of the property accord with what is supposed to be purchased and conveyed. If there are discrepancies between the plans used in the course of the negotiation, for example, plans annexed to the provisional agreement on the one hand and the plans annexed to the formal agreement or the assignment on the other as to suggest that the latter plans may not adequately reflect the understanding of his client as to the subject matter of the purchase, he should draw that to his client’s attention. In case of doubt, he should consult with his client. Any plan identifying or describing the property to be purchased in the Formal Agreement, the Assignment and the Deed of Mutual Covenant must be shown to the client. Secondly, his duty to protect his client's interest is specifically extended to protect his client’s interest in the transaction and to protect his client against possible future hazards. Thus, a solicitor has to protect his client’s interest by duly registering the provisional sale and purchase agreement so that his client’s interest will not be deferred to any later competing interest over the property. He has to ensure that the vendor can show a good legal title free from adverse interests of the property to be conveyed. For that purpose, he is obliged to make the customary enquiries and searches and to do so with care. He shall not hand over the purchase money unless satisfied that his client will acquire a good title. Also, he has a duty to warn his client of risks which are obvious to the solicitor but which are not so to the lay client. He has a duty to explain the documents which give effect to the transaction and make sure that his client understands their content before appending his signature to the documents.

77. The standard of care in conveyancing is high, but it is not absolute. A solicitor is not expected to be faultless nor is he to be taken as his client’s insurer of any risk which the skill and care of a normally competent and careful practitioner cannot avoid. That a mistake was made by the solicitor is not conclusive of negligence. In determining whether a solicitor is guilty of negligence, the court has to apply what it perceives to be the standard of the normally competent solicitor. This is a finding of fact based on the particular circumstances of the case and authorities are unlikely to be decisive or helpful. Usually a solicitor will not be regarded as negligent if he makes a mistake as a result of acting in accordance with the general practice of the profession: see for example, Simmons v Pennington [1955] 1 WLR 183.

[emphasis added]

117.  I also take into account the following principles which Mr Fung SC, who appeared with Ms Lui for WKLL, had urged upon the court :

(1)  The onus of proving professional negligence over and above errors of judgment is a heavy one: see Foshan Hua Da Industrial Co v Johnson, Stokes & Master (a firm) [1999] 1 HKLRD 418 at 426E-F, per Stock J (as he then was), citing Rondel v Worsley [1969] 1 AC 191.

(2)  To discharge this onus of proving professional negligence, the plaintiff must prove that the defendant’s conduct fell short of the standard of “what the reasonably competent practitioner would do having regard to the standard normally adopted in his profession”: see Foshan, supra, at 425C-E, citing Midland Bank Trust Co Ltd v Hett, Stubbs & Kemp (a firm) [1979] 1 Ch 384 at 403B.

(3)  In order to establish its case against WKLL, Mega Well must prove that the latter had committed acts of gross ignorance which could not have been committed by any other ordinarily informed member of the profession: see Simmons v Pennington & Son [1955] 1 WLR 183 at 189 where Hodson LJ cited with approval the following dicta from Cooke v Falconer’s Representatives (1850) 13 D 157, 172:

“It is not enough, in order to recover damages from a professional man, to show that something which was committed to him to do, has not had the effect which was expected from it; he must show an act of gross ignorance, such as could not have been committed by any other ordinarily informed member of the profession.”

(4)  Hindsight is no touchstone of negligence, and the conduct of the professional must be judged and based on events as they occurred at the time: see Simmons v Pennington, supra, 186-187, per Denning LJ:

“The solicitors acted in accordance with the general practice of conveyancers. No ill consequences had ever been known to flow from an answer in this form. Now that the case has gone adversely to the vendor, we can see that it was a mistake, but it is so easy to be wise after the event. One has to try to put oneself in the position of the solicitors at the time and see whether they failed to come up to a reasonable standard of care and skill such as is rightfully required of an ordinary prudent solicitor.”

See also Duchess of Argyll v Beuselinck [1972] 2 Lloyd’s Rep 172 at 185, column 1 (Megarry J).

118.  In Mega Well’s closing submissions, Mr Chong had confirmed that Mega Well’s case against WKLL is essentially based on an alleged failure to ascertain the subject matter of the sale and purchase before Mega Well was asked to sign the SPA.

119.  First of all, I believe that WKLL (via Lau) had acted with diligence and expedition over the preparation of the SPA.  They received a copy of the PSPA on 17 August 2011, which constituted their instructions on the transaction.  On the same day, Wong called WKLL and spoke to Ho requesting that the SPA be signed 2 days later on 19 August 2011.  The draft SPA was provided to WKLL by FCLK on 18 August 2011.  The SPA was signed by Mega Well on 19 August 2011.

120.  Secondly, there is no dispute that Mega Well had never informed WKLL about the Yellow Area prior to signing the SPA.  Cheng’s evidence was that she believed that the plans would have been checked by the solicitors and she relied on them.

121.  Thirdly, there is no evidence before the court that there was a document which Lau should have checked in the course of approving the draft SPA and that document would have shown that the Roof Plan attached to the draft SPA was wrong. 

122.  At the highest, one may say that the SPA plans showed that C Roof was situated at a different wing of the building and not above Duplex B.  Lau was asked by the court about this point.  Her evidence was that she did address her mind to it.  Whilst unusual, she had previously come across such a situation in other cases, and she had in mind that the part of the roof not above Duplex B might be accessible by way of a cat ladder.

123.  I am unable to see anything wrong or any inadequacy in Lau asking Cheng to examine the plans with care to check that they accorded with what she had seen on inspection.  Unless Lau had been to the property (which was not the case) or she was instructed that the property came with any particular feature, I am unable to see a sound basis for Mega Well’s case.

124.  It might have been advisable for Lau to have asked Cheng if she could understand the plans given her observation about Cheng’s doubt over the plans and Cheng’s reliance on Wong to approve them.  In addition, (a) there was an unusual feature in that C Roof was situated at a different wing and (b) the interest of her client did not necessarily align with that of the estate agent.  However, this involves some benefit of hindsight, and is at most an error of judgment rather than an act of negligence.

125.  For these reasons, I am unable to agree with Mega Well’s case against WKLL. 

Rescission

126.  The primary relief sought by Mega Well is rescission of the SPA.  There is no argument that if the Misrepresentation is proven and that Bright Gold is found liable for the same, the SPA is liable to be rescinded.  The only argument, advanced by Bright Gold, is that Mega Well had affirmed the contract and therefore lost the right to rescission and is only entitled to damages. 

127.  Before dealing with Bright Gold’s argument, I should mention that there is a submission by Mega Well that the SPA is void ab initio because of the absence of consensus ad idem between it and Bright Gold over the sale.  The premise of the submission is that Bright Gold intended to sell Duplex B with only the Strip and B Upper Roof, whereas Mega Well intended to purchase that property with the Yellow Area.

128.  I am inclined to agree with Mr Ho that the submission is misconceived.  The authority of Frederick E Rose (London) Ld v William H Pim Jnr & Co Ltd [1953] 2 QB 450, per Denning LJ at 459-461 provides guidance to resolve this issue : 

“… It is quite clear on the evidence that the parties to the second and third contracts (though not to the first) were under a common mistake. …

What is the effect in law of this common mistake on the contract between the plaintiffs and the defendants? … I am clearly of the opinion that the contract was not a nullity. It is true that both parties were under a mistake, and that the mistake was of a fundamental character with regard to the subject-matter. The goods contracted for – horsebeans – were essentially different from what they were believed to be – “feveroles”. Nevertheless, the parties to all outward appearances were agreed. They had agreed with quite sufficient certainty on a contract for the sale of goods by description, namely, horsebeans. Once they had done that, nothing in their minds could make the contract a nullity from the beginning, though it might, to be sure, be a ground in some circumstances for setting the contract aside in equity. … Even a common mistake as to the subject-matter does not make it a nullity. Once the contract is outwardly complete, the contract is good unless and until it is set aside for failure of some condition on which the existence of the contract depends, or for fraud, or on some equitable ground … This mistake was induced by the innocent misrepresentation of the defendants made to the buyers and passed on to the sub-buyers. As soon as the buyers and sub-buyers discovered the mistake, they could, I think, have rejected the goods and asked for their money back.”

[emphasis added]

129.  Here, on the face of the SPA, the parties were in agreement.  The issue is whether Mega Well is entitled to have it set aside for misrepresentation.

130.  For completeness, I should mention that had the court rejected the claim of misrepresentation, it would accede to Bight Gold’s claim for rectification on the ground that there was a common mistake over the C Roof: see the judgments of the CA and CFA in Kowloon Development Finance Ltd v Pendex Industries Ltd at respectively [2012] 3 HKC 541, §§25 to 36 and (2013) 16 HKCFAR 336, §19 and 24.

131.  The court is unable to accept Bright Gold’s argument on affirmation of the SPA by Mega Well.  First and foremost, Bright Gold has conveniently overlooked the fact that the SPA is incapable of affirmation even on its own case.  Under that contract, Bright Gold is obliged to transfer C Roof to Mega Well.  It was and is in no position to do so as it formed part of Duplex C.

132.  Secondly, the unchallenged evidence does not support a case of affirmation on the part of Mega Well.  Upon possession of Duplex B, Mega Well strongly disputed with Bright Gold about the roof which formed part of that property.  Ms Cheng asked for the refund of the purchase price on the 13 August 2011.  Although there is no evidence of the many meetings between Mega Well and the management of Henderson to resolve the dispute, it would be foolhardy to believe that Mega Well had given up its claim that the property was purchased under misrepresentation and was content to accept it with no useable roof.  Bright Gold took the initiative to bring proceedings for rectification of the SPA on 22 December 2001. 

133.  I have mentioned in para 82 above the situation presented to Cheng and her husband when the writ was taken out by Bright Gold. Such evidence was not challenged.  I do not believe that the registration of the Assignment (without any plan attached) assists Bright Gold’s argument.  The lack of plan reflected the parties’ dispute over the roof.  Further, the registration was carried out upon WKLL’s advice to preserve Mega Well’s rights.  This was explained in Lau’s evidence, which was not disputed.

134.  As regards the use of Duplex B, Mega Well’s unchallenged evidence was that Cheng refused to move into the property. However, she was advised by Mega Well’s solicitors to do so in mitigation of damage.  She moved into the property on 29 July 2012 and had to return to her Kowloon Tong home in about September 2014 due to many quality issues, like water leakage and the fact that the water heater control was located on B Upper Roof.

135.  In respect of any complaint that Mega Well had used the property, the court has to take into account that Bright Gold has kept and no doubt benefited from the use of purchase price since the 2 December 2011 (there is no claim by Mega Well that the purchase price should be refunded to it with interest upon rescission of contract).  At the meantime, the expenses for the property, eg, management fees, were all paid by Mega Well. 

136.  In the premises, I see no inhibition or unfairness to the grant of the relief of recession, and I do so.

137.  As regards Bright Gold’s argument that there should be, as a consequence of rescission, an account of mesne profit by Mega Well for the use of the property and depreciation, Bright Gold had adduced no evidence of such profit, and there is no order for a split trial. 

138.  As indicated above, Bright Gold has kept the purchase price whilst Mega Well has shouldered the responsibility of paying the mortgage interest.  Any accounting exercise will have to consider the benefit derived by Bright Gold with the use of the purchase price over the years.  By allowing Bright Gold to keep such benefit would, in these circumstances, do practical justice between the parties (see Chitty on Contracts, 33^rd edn, Vol 1, [7-125]).  Therefore, this court is not inclined to allow this matter to be dragged on any further. 

139.  Finally, it should not be overlooked that Bright Gold has never agreed to take back the property, and therefore cannot simply blame the situation on Mega Well.

Damages

140.  If this court were to refuse to order rescission of the SPA, Mega Well would be entitled to damages in lieu.  As between Mega Well and Bright Gold there is no issue on the amount of damages, being the difference in value of Duplex B with and without the Yellow Area, in the sum of HK$3,050,000 as assessed in the Report. 

141.  However, WKLL take issue with the damages claim firstly on the basis that Mega Well’s pleaded case was that it had lost the use of the Yellow Area and that such area, being common area, could never be enjoyed by Mega Well exclusively.  With respect, I see no merit in such technical argument.  In any case, the evidence of the joint expert had been in place for a long period of time and Mega Well had made clear in its written opening what its claim for damages was.  WKLL was unable to demonstrate to the court any prejudice it might have suffered by reason of the pleading of Mega Well. 

142.  WKLL also submitted that the amount of damages should be reduced by reason of the fact that the purchase price paid by Mega Well was below what was assessed by the expert as the market price of Duplex B with the Yellow Area.  Damages are not meant to achieve perfect compensation. In any case, the argument overlooked the position that Mega Well is saddled with a property which is worth HK$3.05 million less than what it should be.  I see no merit in this objection either.

143.  In respect of Centaline, it contended in its final submission that Mega Well had suffered no loss because Bright Gold had reimbursed the stamp duty paid by it in the transaction and therefore the net price paid for the property was less than the assessed market value of it with the Yellow Area. 

144.  Such argument should have been raised in a transparent manner in Centaline’s opening submissions, if not before.  Raising it in final submissions is not consonant with modern principle of litigation with cards faced up.  Indeed, the matter should have been raised with the expert because the properties used in his comparison approach were all from the same Development, and it is not clear whether the same “incentive” were given in those sales by Bright Gold.  Further, the argument suffered from the same flaw identified in para 143 above.  In the premises, I reject this argument.

145.  If the court were to award damages in this case, I would have awarded Mega Well the sum of HK$3,050,000.

Disposition

146.  On behalf of Bright Gold, Mr Ho had informed the court that there will be no difficulty in Bright Gold repaying the purchase price upon rescission of the SPA.  Therefore, Mr Chong had accepted that Mega Well would only be entitled to nominal damage against Centaline.

147.  I find for Mega Well and WKLL and order as follows:

(1)  Judgment in favour of Mega Well’s Counterclaim against Bright Gold and Centaline;

(2)  It be declared that Mega Well is entitled to rescind and has rescinded the PSPA and the SPA;

(3)  Bright Gold do pay to Mega Well the sum of HK$69.8 million within 14 days from today, with interest at judgment rate(s) from today until payment;

(4)  Upon payment of the said sum with interest, Mega Well do such necessary acts and execute such necessary documents as to transfer the legal and beneficial title of Duplex B to Bright Gold free from encumbrances with reasonable expedition;

(5)  There be liberty to apply;

(6)  Centaline do pay damages to Mega Well in the sum of HK$100;

(7)  Bright Gold’s action be dismissed;

(8)  Mega Well’s Counterclaim against WKLL be dismissed;

(9)  An order nisi that Mega Well’s costs, excluding the costs of its Counterclaim against WKLL, be paid by Bright Gold and Centaline jointly and severally, with a certificate for 2 counsel;

(10)  An order nisi that WKLL’s costs be paid by Mega Well, with a certificate for 2 counsel.

 

 

Annex I