WONG WAI LIN LANA v. HEUNG WAH WING

HCA5083/1992

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.5083 OF 1992

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J U D G M E N T

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1. The plaintiff claims against the defendant for $500,000.00, being the price of goods sold and delivered. The case arises because in 1992, when the plaintiff agreed to sell her house to the defendant, the parties made a collateral agreement for the sale and purchase of the "fixtures, fittings and furnitures" in the house, which I will call "the house contents", at a price of $500,000.00. It is the plaintiff's case that when the defendant got possession of the house, all the contents were in it but he failed to pay her the agreed price for them. It is the defendant's case that when he took possession, all the contents had been removed; the plaintiff failed to provide him with any consideration for the payment by him of $500,000.00; he did not pay it then, and he is not liable for it now.

Background

2. The plaintiff was the registered owner of premises at House E2, Marina Cove Stage II, Sai Kung. In fact she also, at the relevant time, owned House E3 in Stage II and House 21 in Stage 1. She had leased House E2 fully furnished to a foreign pilot, whose lease expired about the end of 1991 or the beginning of 1992. About that time she agreed to sell House E2 to the defendant. At that time they were friends.

3. The parties entered into a collateral agreement in respect of the contents of House E2. Its terms were set out in a memorandum ("the Memorandum") signed by both parties and dated 20 February 1992, as follows :

"Pursuant to an Agreement for Sale and Purchase made on the 20th day of February, 1992 between Wong Wai Lin Lana as the Vendor of the one part and Heung Wah Wing as the Purchaser in respect of the property known as House No.E2, Marina Cove, Stage II, Sai Kung, New Territories, Hong Kong the parties herein agree that the Purchaser shall pay a sum of HK$500,000.00 to the Vendor upon completion as price for all the existing fixtures, fittings and furnitures in the said property."

4. In fact the house was sold to one Saheki (H.K.) Ltd, a company of which the defendant's friend Mr Ko Saheki is a director. According to the defendant and Mr Ko, this was done so that the defendant could take advantage of a favourable interest rate offered to Mr Ko and his company by a Japanese lender. In any event, on 4 March 1992 the plaintiff entered into a formal Sale and Purchase Agreement for the sale of the house at a price of $5,500,000.00 to Saheki (H.K.) Ltd. Completion took place on 30 April 1992. On the same day Saheki (H.K.) Ltd leased the house to Win Dragon Enterprises Ltd, of which the defendant was a director.

5. On about 16 April 1992, the defendant lent the plaintiff $300,000.00 in the form of cheques drawn by other persons. The plaintiff gave the defendant a signed but undated cheque for $312,000.00 by way of security for the loan and agreed interest. In fact the loan and interest were paid off from the proceeds of the sale at the time of completion; the plaintiff instructed her solicitors to request the defendant's solicitors to deduct $312,000.00 from the final balance due on completion.

6. The plaintiff through her solicitors wrote to the defendant on 20 July 1992 demanding payment of $500,000.00 being the price for all the "fixtures, fittings and furnitures" in House E2. The defendant through his solicitors replied on 24 July 1992 to the effect that the defendant denied owing that sum, or that the plaintiff had ever delivered the "fixtures, fittings and furnitures" to him. The plaintiff instituted proceedings by a Writ dated 29 July 1992. The defendant filed a defence of bare denial but this was amended on 10 March 1995. The defendant then admitted the agreement but claimed that the goods had never been delivered and that he had told the plaintiff on about 16 April 1992 that she was not entitled to any payment. He also pleaded the facts of the loan set out above. The case then went to sleep until the plaintiff filed a notice of intention to proceed on 2 June 2000.

Evidence

7. This case turns entirely on the credibility of the witnesses, so it will be necessary to set out their evidence in some detail. Unfortunately there are contradictions and inconsistencies on both sides.

8. In her evidence-in-chief the plaintiff said that she met the defendant one day in the street. They chatted and she told him that she was going to collect the keys of her house which had been rented to a foreigner who had already moved out. The defendant asked if she would sell the house, and to let him view it. This she did. Together they viewed the house, which the plaintiff had furnished in order to let it to the foreign pilot. They agreed that the defendant would buy all the contents of the house. This consisted of all the furniture, whether built in or not, carpets, curtains, air-conditioners, kitchen appliances, and so on, right down to the bowls and dishes. No list was made and the plaintiff was not able to be very specific in her evidence of what was to be sold. In any event, the parties both signed the Memorandum dated 20 February 1992 to record their agreement.

9. The plaintiff said that she let the defendant have the keys to the house at a very early stage, so that he could redecorate it. She said that this was done when they agreed on the sale and purchase of the house contents. By the time the "last contract" was signed the defendant had had possession of the house for two months. Later she said that she had given him the keys in December 1991 or January 1992.

10. She said that the defendant was supposed to pay her the $500,000.00 at the date of completion but he claimed to have no money and said that he would pay later. The plaintiff agreed to this but wanted proof of the debt; and she said that at the office of defendant's solicitor, where the agreement was signed, she asked him to write the Memorandum dated 20 February as proof of the debt. This was two months after she had let him have the keys.

11. From cross-examination it appeared that the plaintiff was unclear about when she had let the plaintiff have possession of the house. The time varied from December 1991 to the Lunar New Year 1992 which fell on 4 February, to two months before completion which took place on 30 April 1992. In any event, it was before she signed the Sale and Purchase Agreement on 4 March.

12. The plaintiff was also quite unclear about the extent of what was to be sold. She had attached a list to her witness statement, but this included all kinds of things like the staircase, floor tiles and windows which she well knew would normally go with the house and not be the subject of any separate agreement. Curiously enough she said that the decorative teak floor tiles, which she had had laid, were covered with wall-to-wall carpets; but in her list there was no mention of any carpets. She did not agree that the contents included two suites of furniture in the antique French style; she said in effect that the furniture was just what she had put in for the tenant.

13. As to the loan from the defendant to herself, the plaintiff was unable to give any explanation why, if the defendant owed her $500,000.00 at the time of completion, she had paid back the $312,000.00 to him without any question of set-off.

14. The plaintiff was also asked about the Memorandum. This it appears was written by the defendant's solicitor but she was not clear as to when. On the one hand the plaintiff seems to have admitted that it was written on or around the date it bears; on the other hand she said that this was done when everything was completed, and that it was "probably backdated but I do not know". I asked her if it was her evidence that she signed it on the date of completion, and she confirmed that.

15. The defendant said that, having seen the house and its contents, he reached a verbal agreement with the plaintiff for the purchase of both on about 20 January 1992. However the Memorandum was signed only after the discussion of everything was over and the parties had met two or three times. It was done at the office of the solicitor, whose clerk drafted the Memorandum and the defendant "supposed" that it had been signed on or about 20 February 1992. He also "supposed" that he had not signed any other document at the same time.

16. The defendant said that he obtained the keys of the house some 8 or 10 days after the signing of the Sale and Purchase Agreement on 4 March 1992. He was to have been given them before that, but the plaintiff went to Macau for a few days, and she only handed them over after her return. He went to the house the next day with his friend Mr Lau Yiu Ming, and found that it had been completely stripped of all its contents including the fitted wardrobes; the walls were damaged where these had been removed.

17. The defendant said that he had been willing to pay $500,000.00 for the house contents particularly because among them he had seen two suites of furniture in the antique French style and two oil paintings. He particularly liked the suites, and he knew that he would pay $200,000.00 or $300,000.00 for each of them if he had to buy it new. He had not said anything in particular about them to the plaintiff, or made any specific offer for them, although he was not particularly interested in anything else, for fear that she would realise his interest and put the price up.

18. On finding the house stripped bare, according to the defendant he made many attempts over the next few days to contact the plaintiff. When he eventually succeeded she told him that she could not sell the house contents to him, because they were for "commemorating purpose" (I presume that means that they had sentimental value to her). So they should simply forget about the Memorandum. The defendant agreed to this because he had not paid anything and had suffered no loss. They simply went ahead with arrangements for completion of the sale of the house. The defendant was surprised when he got the letter of claim from the plaintiff's solicitor; he said that before this she had never made any direct demand to him for payment. He had simply left the matter up to his own solicitor.

19. Under cross-examination the defendant was also rather uncertain about time. He said that he had got the keys in mid-February; and then at the end of February; and then, after all the documents had been signed. Later he returned to the original account that they had been handed over in mid-March. It was put to him that he had received them when the verbal agreement to buy house and contents had been reached; but he said that the plaintiff had told him that he could not have them for a few days, because she had to speak to the management office and account for the previous tenant's indebtedness, or else the management would not allow the renovation workers to come in.

20. It was put to the defendant that the plaintiff had visited him a number of times to press for payment. His answer was that she had come two or three times, once at 11 p.m., to ask "what the progress of the renovation was, and whether it was good enough".

21. The defendant's witness Mr Lau Yiu Ming did not take the case much further. On his account, the defendant took him to see the house in mid-March, because his wife did house renovations and he had some knowledge of them. He found the house in a mess. It was old and lacked attention. There were a few worn-out ordinary chairs in the house, but that was all. Otherwise he could not remember much, save that there were no air-conditioners. But he did say that the defendant had been very angry as to why there was nothing in the house, and why it was in a mess.

22. The defendant also called Mr Hon Pui Kwan, who said that he had gone with the defendant to see the house on about 1 or 2 April 1992. At this time renovation was in progress and workers were in the house, working on it. There was nothing much in the garden or on the roof. He had no idea when the renovation had started, or if there had been any contents in it before; but he did see that parts of the walls had been damaged, as if something had been removed.

23. Mr Ko Saheki, the director of the company which actually bought the house, also gave evidence. He was rather more definite in his evidence. It appears that the defendant took him to look at the house in early February, just before the Lunar New Year holiday. They looked at the house from the outside and as a yachtsman Mr Ko was particularly interested in the jetty adjoining the garden. Then the defendant took him to the house again just after the holiday; perhaps on 7 or 8 February. This time, the defendant got the keys from the management office, and returned them there afterwards. They went into the house, and Mr Ko found that the interior was well renovated and full of many things, including antique-style sofas of high quality and some paintings on the walls. In the bedrooms there were fitted wardrobes, and in the kitchen and dining area there were cabinets and appliances. He thought the house was ready for occupation. The defendant had told him, before taking him to see the house, that he was negotiating a figure for the purchase of the furniture, but he did not know what the figure was at that time.

24. Mr Ko said that he had gone to the house again with the defendant, about two weeks after the signing of the Sale and Purchase Agreement. This time, the defendant himself had the keys. In the house, there was nothing at all; he did not see any furniture, air-conditioners, curtains or the like. All that was left was a heap of rubbish. The fitted wardrobes were gone, and the walls damaged. The defendant told him that he had agreed to buy the furniture and fittings, which he had liked very much; and he was a bit angry that the renovation had to be done all over again.

Evaluation and Findings

25. It is for the plaintiff to prove her case on the balance of probabilities. There is no dispute that the parties had a separate agreement for the sale and purchase of the house contents of House E2 for $500,000.00. There is equally no dispute that the defendant has never paid the plaintiff that sum. It is for the plaintiff to prove that when she let the defendant take possession of the house, the house contents were in it. The case depends entirely on credibility.

26. The plaintiff did not impress me very favourably. Her evidence of what was included in the house contents was vague, though one has to remember that the matter is 10 years old now. She has not helped matters with the list attached to her witness statement, which she now admits to contain various items that she well knew would be sold as part of the house and not part of the contents. The list is obviously completely unreliable, and made up to support her case. The plaintiff did not herself introduce it as evidence, but its unreliability does not help her credibility.

27. The plaintiff's evidence of when she let the defendant have the keys was inconsistent. The most consistent part of it was her estimate that this took place two months before completion. That would put it at about the beginning of February 1992, around the time of the Lunar New Year. Now it is true that on the evidence of Mr Ko the defendant was able to enter the house, by borrowing the key from the management office just after the holiday; but this was a mere visit after which the key was returned. Certainly by the beginning of April, there was no formal Sale and Purchase Agreement. No money had changed hands. The plaintiff, although she says that she is uneducated, is not unsophisticated; she owned other houses in Marina Cove, and she apparently had her own solicitor for the sale of this one. It is inherently unlikely that, even out of friendship for the defendant, she would have let him have the house without any kind written agreement.

28. The plaintiff's evidence that the Memorandum only came into being at the time of completion is difficult to believe. There is no dispute that it was drafted by a solicitor or a solicitor's clerk and one would have thought that if it was backdated it would be to the date of the Sale and Purchase Agreement. The tenor of the defendant's evidence, although he does not seem entirely certain of it, is that the document came into being on or about its date.

29. There is also the matter of the defendant's loan to the plaintiff. This was made on 16 April 1992 and repaid from the completion monies. The plaintiff's explanation that she simply treated this as a totally separate matter, instead of setting off the loan against what she says the defendant owed her, is difficult to accept though not impossible given that the loan was made by cheques drawn by persons other than the defendant, and that the defendant wrote a letter instructing his own solicitors to pay the $312,000.00 to one of them, Mr Leung Chi Wing.

30. Having said all that, I also have to say that the defendant did not impress me favourably either. He too was vague about some of his dates though again the lapse of time must be taken into account. However I cannot believe his evidence that the main items of interest among the house contents were sofas and chairs in the antique French style. There is simply nothing about this in the correspondence, such as it is; nor in the defendant's witness statement. The house had been let furnished. There is no dispute about this, indeed the defendant says that he had to pay arrears of management fees payable by the tenant. It is most unlikely that any landlord would put expensive furniture of this sort in a rented house. I find the defendant's evidence on this inherently incredible. It seems to me that, as with the plaintiff's list of contents, it has been made up after the event to support the defendant's case.

31. It is true that Mr Ko supports the defendant's evidence about the furniture. He seemed to be quite a straightforward witness. At the same time I have to remember that Mr Ko is the defendant's friend and business partner. He is not independent and could be expected to support the defendant.

32. It is also true that both Mr Ko and Mr Lau support the defendant's evidence that he had the keys by the middle of March 1992. Of course they cannot say when it was that he received them. They also say that he was angry over the fact that the contents had been taken from the house. I have to say that the evidence of both of them, on this point, seemed to lack conviction. Neither of them seemed very impressed by the defendant's anger. One would have expected that if the defendant had really just discovered that he had been deprived of furniture that he particularly wanted, he would have been very angry indeed and his reaction would have made a stronger impression on anyone who was with him.

33. A further point which makes me suspect the veracity of the defendant is his answer to the suggestion that she had visited him several times to demand payment, which I have set out above. It is not credible that the plaintiff would have come to the defendant's house at 11 p.m. merely to find out what was the state of the renovation, which was no business of hers at all.

34. It will be seen from the above that I have misgivings about the credibility of both the plaintiff and the defendant. Both of them have made up evidence to support their original stories. I have felt throughout this case that neither side is telling the whole truth. This feeling is exacerbated by the terms of the Memorandum itself. While it refers to a Sale and Purchase Agreement of the same date, there was certainly no such agreement, at any rate in writing. Further I would have thought that prudence dictated to the draftsman of the Memorandum that there be an inventory of the "fixtures, fittings and furniture" especially considering the plethora of (often contradictory) decided cases on the question of what is a fixture and what is not. If the contents were not of sufficient importance that an inventory be made of them, and if the parties were such good friends as they claim to have been at the time, one wonders what need there was for a separate memorandum. I cannot speculate as to what financial or fiscal reason the parties may have had for dividing up the house and contents in this way, but I am certainly left wondering whether there was some other reason for it, of which they have not seen fit to tell me.

35. I conclude that, faced with unreliable evidence on both sides, I must go back to the inherent improbabilities in the case. If we look at the two stories from the viewpoint of stark simplicity, it is easy enough to imagine someone failing to pay for goods of which he has taken possession. This is very common and often gives rise to legal proceedings. It is easy to imagine a person who sells his house, with all its contents, having second thoughts and removing something which is easy to remove, such as a favourite chair or lamp. What is not easy to imagine is why a seller would strip the house of everything, including fitted wardrobes and kitchen cabinets. Such things are likely to be damaged when being removed, and in any event to have little resale value. Of course the seller might take fitted furniture if moving into an identical house where it could be easily refitted, though no doubt most people would rather have new furniture anyway, but there is no suggestion that that was done in this case. Or the seller might strip the house out of a grudge or in anger at being forced by other circumstances to sell cheap, but again there is no suggestion of anything like that here. In any event, it is not the sort of thing that a woman such as the plaintiff could do herself. It would require at least a team of labourers and that would itself cost money. The plaintiff's case is inherently more likely than the defendant's.

36. It is in my view inherently improbable that the Memorandum was backdated. It is more probable than not that it came into being about 20 February 1992. It is also inherently improbable that the plaintiff gave the defendant the keys at the beginning of February 1992; it is more probable than not that the he was given them some time in March, after the signing of the Sale and Purchase Agreement. It is inherently improbable that, having got the Memorandum and the Sale and Purchase Agreement signed, the plaintiff would go to the trouble of stripping the house bare. I do not believe that she did. I am satisfied on the balance of probabilities that the whole contents of the house were delivered to the defendant and that he has failed or refused to pay for them.

37. There will accordingly be judgment for the plaintiff in the sum of $500,000.00. In view of the long delay in this matter I will make no order for interest; the plaintiff, who was legally represented until mid-2000 and later by a different solicitor until quite recently, could and should have brought this case on many years ago and it is not right that the defendant should pay for her delay. The plaintiff is awarded costs (nisi) against the defendant, to be taxed if not agreed.