TU PUI LEUNG v. LAM KAI ON and Another

IN THE COURT OF APPEAL

1993, No. 137
(Civil)

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J U D G M E N T

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Bokhary, J.A. :

1. We need not trouble you to reply, Mr. Mumford. I will ask my brother Godfrey to give the first judgment.

Godfrey, J.A. :

2. This is an appeal from an order of Stock J, made on 28 June 1993, for the specific performance of a contract for the sale of land made in Chinese writing on 16 March 1991, on a broker's form of "provisional agreement". The party signing the contract as vendor was one Lam Lai Sum, the 2nd defendant in the action. The party signing the contract as purchaser was Tu Pui Leung, the plaintiff in the action. The agreement was brought about under the auspices of the broker, Cheung Lung Estate & Decoration Co., acting by a Mr Wong. The 1st defendant in the action was one Lam Kai On; he was a necessary defendant to the plaintiff's claim for specific performance, because he was the owner of the property which the 2nd defendant had purported to sell, but in which she had in fact no interest. The property was House 7, 7th Street, Section F, Fairview Park, Yuen Long, New Territories, Hong Kong, and the price at which it was expressed to be sold was HK$1.285m.

3. For the purposes of this appeal the material facts may be summarised quite shortly.

4. The 1st defendant, the owner of the house, was at the material time living there with the 2nd defendant. He was married to another but his wife was living in the United States of America, to which he travelled frequently. In 1991, he was considering exchanging the house for a smaller property in the same area; and in mid-February 1991, he approached Mr Wong about selling it. He told Mr Wong he wanted about HK$1.3m for it. He told Mr Wong that he intended to go to the United States of America in the near future; and that, if there were any prospective buyers, Mr Wong could telephone the 2nd defendant. He did go to the United States of America, leaving the 2nd defendant to deal with Mr Wong and with prospective purchasers, and to negotiate a price with them. The plaintiff, looking for a house like this one, approached Mr Wong. On 16 March 1991, Mr Wong made arrangements for the plaintiff to inspect the house. At the house, Mr Wong told the plaintiff that the house was on sale for HK$1.3m. The plaintiff offered HK$1.25m. The 2nd defendant rejected the offer. After some bargaining, the plaintiff offered HK$1.285m. The 2nd defendant said she needed to think the matter over (or something to that effect).

5. At this stage in the history there arises a conflict between the parties, resolved by the judge in favour of the plaintiff, and crucial to the outcome of this appeal as it was crucial to the outcome of the trial, that is to say, whether, before the 2nd defendant signed the contract (as she ultimately did) the 1st defendant had authorised her to do so, an allegation made by the plaintiff but denied by both defendants. Upon that issue, the plaintiff, not surprisingly, was unable to give any relevant evidence. One would not have expected the plaintiff to be privy to the arrangements made between the 1st defendant and the 2nd defendant as to the scope of the latter's authority and plainly the plaintiff was not. Mr Wong might have been privy to those arrangements; and indeed one would have expected that he would have been, in that one would have expected the 1st defendant to have told Mr Wong, if it were to be the case, that, in his absence, the 2nd defendant was authorised by him to enter into a contract for sale of the house on his behalf. However, Mr Wong did not give any evidence to that effect. The only direct evidence before the judge upon the crucial issue was the evidence given by the 1st defendant and the 2nd defendant. In examination in chief of the 1st defendant the following question and answers are recorded:-

"Q. Before you left on 25th February tell girlfriend she could sell house?

A. Absolutely nothing of that kind."

6. In cross-examination the following questions and answers are recorded:-

"Q. Did you tell Wong that what he'd have to do was to contact D2?

A. In beginning of February 1991 when Wong came to inspect premises - I said : Whenever Mr Wong brings a client to inspect the flat, Ms Wong would open the door so to speak to let the customers in to inspect the flat. I did not mean she had the right to sell flat on my behalf." [Emphasis added]

7. The following questions and answers are also recorded:-

"Q. You left Hong Kong and you say you'd not authorised D2 to sell the house?

A. Right.

Q. You authorised your girlfriend to sell flat on behalf of you.

A. The fact is that's your wrong accusation."

8. That was the evidence of the 1st defendant.

9. The 2nd defendant also gave evidence. The following questions and answers are relevant:-

"A. ...... Wong said 'Well, sorry to trouble you. Please come to my company to sign the agreement.'

I said 'I'm not the owner. Can I sign the agreement. Mr Lam has not left behind a signed document.'

Q. What mean by a signed document?

A. I mean the provisional Sale and Purchase Agreement. I wanted to know if I had the right to sign the Sale and Purchase Agreement or not. Mr Wong's response was that its alright. Have belief in you. I had suspicion as regards what he said as to whether I had right to sign Sale and Purchase or not. Wong said 'Its alright - please come to my office to study Sale and Purchase terms first.'"

10. She was cross-examined on behalf of the 1st defendant. The following question and answer are recorded:-

"Q. Did Lam at any time authorise you to sell house for him?

A. No."

11. She was also cross-examined on behalf of the plaintiff. The following question and answer are recorded:-

"Q. So you were not asked by Mr Lam to sell or to buy a house?

A. Right."

12. The following further questions and answers in that cross-examination are recorded:-

"Q. By the time you were in Wong's office - did you know you had no authority to sign?

A. I was aware of that. That's why I asked Wong if I had right to sign or not.

Q. Why not refuse in the first place to sign, instead of asking?

A. Before I went to Wong's office, I asked Wong whether I had right to sign or not because Lam not left behind any signed document. Wong said 'Never mind that. Come to my office to study the terms. I trust you.'"

13. That was the only evidence before the judge on the one crucial issue in the case, whether or not the 1st defendant had conferred authority on the 2nd defendant to enter into the contract on his behalf.

14. In the absence of any evidence the other way tendered on behalf of the plaintiff (whose only witnesses were the plaintiff and Mr Wong, neither of whom gave any relevant evidence) it is impossible to identify any conflict of testimony which the judge was called on to resolve.

15. For a judge to speculate on the inherent probabilities in the absence of any conflict of testimony is not a proper course for him to take. (He is, of course, entitled to take into account, when there is a conflict of testimony, where the inherent probabilities lie, and whether he prefers the evidence of the one side rather than the other.) Although, in the present case, the judge formed a more favourable view of the plaintiff and Mr Wong than he formed of the defendants, in the absence of any relevant conflict of testimony, it is difficult to see how this could have helped him to conclude whether, on the evidence before him, the case for the plaintiff, that the 2nd defendant been authorised to enter into the contract on behalf of the 1st defendant, had been established.

16. The plaintiff's case was very tersely pleaded. I refer to the Statement of Claim:-

"2. By an agreement in Chinese writing made between the Plaintiff as purchaser and the 2nd Defendant on behalf of the 1st Defendant as vendor on and dated 16th March 1991 (hereinafter called 'the Agreement'), the plaintiff agreed to purchase and defendants agreed to sell the Property at the price of HK$1,285,000.00."

17. The Statement of Claim contains no other allegation relating to the crucial issue of authority.

18. When it is sought to prove that an agent has actual authority to enter into a contract and the (undisclosed) principal against whom that allegation is made denies the authority, it is for the plaintiff to prove the authority. If he has to rely on oral evidence he must prove what were the words used, so that the court can determine whether or not those words did confer upon the agent the authority which the plaintiff has to prove that they did confer. It is difficult if not impossible to find that an undisclosed principal has conferred an authority on his agent at some unspecified time, in some unspecified manner, by some unspecified words, and to some unspecified extent.

19. Mr William Stone QC in an eloquent argument on behalf of the plaintiff sought to persuade us that (as the judge had in effect held) the relevant authority could be established by inference from the conduct of the parties both before and after the contract was made. It may in some circumstances be possible for a plaintiff to meet a denial of authority with proof that, by his conduct, the principal has estopped himself from asserting that want of authority. For example, if reference to the authority is made in front of the principal and he nods his head, or remains silent, such conduct might be held to estop him from denying the authority. But that was not suggested here. What was really suggested was that it ought to be inferred from the conduct of the 1st defendant that he must have conferred the necessary authority on the 2nd defendant, at some unspecified time and in some unspecified way.

20. The judge should have rejected this purely speculative approach to the case. But what he did was to review the whole history (including what had happened after the 2nd defendant has signed the agreement) and, having refused to accept the evidence of the defendants, to conclude that the 1st defendant must have conferred upon the 2nd defendant the authority which the plaintiff sought to set up.

21. In approaching the case in that way, the judge went wrong. His duty was simply to consider the evidence before him; to see whether the plaintiff had tendered any evidence in support of her pleaded case; and if so (but not otherwise) to test the conflict of testimony between her side's evidence, and the defendants' evidence, by reference to his impressions as to the inherent probabilities and the credibility of the witnesses.

22. The speculation upon which the judge engaged in order to support his conclusions was in my opinion unjustified. So far as the circumstantial evidence was concerned, if it pointed to anything relevant at all it pointed to a broker doing his best to get someone, no matter who, to enter into a contract as soon as possible so that he could get his hands on his commission. Regardless of the absence of the 1st defendant, the broker no doubt hoped that all would be well and that when the 1st defendant was told what the price was he would ratify what had been done. That, of course, will not do.

23. It does therefore seem to me that this is one of those rare cases in which this Court is entitled and bound to interfere with the findings of fact of the judge. I would hold that on the relevant evidence the plaintiff failed to establish its pleaded case that the 2nd defendant had been authorised by the 1st defendant to enter into this contract. The consequence will be that the plaintiff will have to rely, for what it is worth, on her remedy against the 2nd defendant for damages for breach of warranty of authority. But that is not a matter for us today.

24. For the reasons I have given, I would allow this appeal.

Rogers, J.:

25. I agree. I only wish to add a few brief words.

26. The learned judge rejected the 1st defendant's evidence. Our attention has been directed to parts of the 1st defendant's evidence. It is not necessary to set those out here as they are not directly relevant to this appeal. It is sufficient to say that those parts confirm that it would appear that there was ample justification for the judge's view of the 1st defendant's evidence. The learned judge also rejected the 2nd defendant's evidence. It is trite law of that rejection of evidence, particularly in circumstances as pertain in this case, does not prove that the contrary of what was said by the 1st and 2nd defendants is the truth. I have to say however that having read the evidence of the 1st and 2nd defendants, there is perhaps a cynical reflex reaction to query why that evidence was inaccurate.

27. The basis upon which it has been held that the 2nd defendant had authority to enter an agreement on behalf of the 1st defendant to sell a house, was an inference from the primary facts, namely the conduct of the defendants. I agree with the judgment which has just been given that the primary facts do not give rise to the conclusion that it should be inferred from those facts that the 1st defendant had given his authority.

28. Mr Stone, Q.C., on behalf of the plaintiff invited us not to dissect each of the factors referred to by the judge below and to subject these to a minute analysis but to look at the facts of the case as a whole. Even doing so, I regret that it is in my view not right to draw the inference that authority to enter the contract for sale had been given by the 1st defendant to the 2nd defendant.

Bokhary, J.A. :

29. It is not suggested that there is any direct evidence, whether oral or documentary, of actual authority.

30. Is there any circumstantial evidence on which a court can justifiably find such authority?

31. It is contended on the plaintiff's behalf that such evidence exists in the shape of the conduct of the two defendants supported by that of the broker.

32. What was the second defendant's conduct as the judge found? Here he said: "I find that the second defendant held herself out as having authority on her own behalf and on behalf of whomsoever had an interest in the house to enter upon the (second) agreement dated 16th March 1991." That does not sound like the natural conduct of someone who was authorised by a sole owner to sell on his behalf. Nor would her selling as if she were the sole owner herself, if that is what she did.

33. What was the conduct of the first defendant as the judge found? Essentially, it was that upon his return to Hong Kong, he simply said that he was not going to sell without indicating why. That strikes me as neutral in all the circumstances.

34. As far as the broker's conduct as found by the judge is concerned, I see nothing in it of any real assistance one way or the other on the question of actual authority.

35. The plaintiff (for whom Mr Stone leads before us but did not appear below) sought and obtained judgment solely on the basis of actual authority.

36. At the end of the day, there was simply no evidence, whether direct or circumstantial, on which a court could justifiably find such authority. That being so, the judgment must be reversed.

37. I, too, would allow the appeal; and it is unanimously allowed accordingly.