IAN HAYDN REED v. CHAN SUK FUN the administratrix of the estate of WAN LAI HA, the administratrix of the estate of CHAN SHUK CHING PINKY (Deceased)

DCCJ 4560/2007

[2019] HKDC 385

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 4560 OF 2007

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JUDGMENT

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1.  This is a claim for specific performance of a contract for sale of land.

2.  There was a written agreement (“the Agreement”) between the plaintiff and Madam Chan Shuk Ching Pinky (“the Deceased”) dated 18 May 2006. In the Agreement, the Deceased had agreed to sell to the plaintiff 3 properties, namely No. 13, 13A and 13 B Tai Shan West, Ko Long Tsuen, Lamma Island, New Territories (respectively referred to as “the Property”, “the 2^nd Property” and “the 3^rd Property” below)

Background

3.  The plaintiff and his family has been living at the Property since 2006 and he has been a tenant of the Deceased.

4.  After the signing of the Agreement, the Deceased travelled to China where she died, apparently in a fire at her home in China, on 26 June 2006.

5.  It was not in dispute that the Deceased had a long history of bipolar disorder, but it was also self-evident that she had been a successful businesswoman who had been buying and selling properties both in Hong Kong and the PRC.

6.  On 22 January 2007, Madam Wan Lai Ha (“Madam Wan”), the mother of the Deceased, became the administratrix of the Deceased’s estate. Madam Wan died in early 2009 and on 1 December 2011, the defendant, who is the sister of the Deceased, obtained the Letters of Administration de bonis non of the Deceased’s estate.

7.  The plaintiff, either by himself or via his solicitors, had been contacting the defendant’s side trying to arrange to complete the sales and purchase but this did not proceed due to disputes raised by the defendant’s side. The defendant’s side has been seeking the plaintiff to continue to pay rent which the plaintiff had refused.

8.  The issue of dispute is the validity and / or enforceability of the Agreement, in particular, whether the Deceased had the mental capacity to enter into the Agreement at the time of its execution.

The authenticity of the Agreement

9.  The defendant did not raise any serious dispute regarding the authenticity of the Agreement.

10.  Although the defendant pleaded “it is not admitted that the Agreement was signed by the Deceased and the plaintiff is put to strict proof thereof” (paragraph 3 of the Re-Amended Defence and Counterclaim, page 28 of Trial Bundle A), she did not agree to the plaintiff’s application to instruct hand-writing experts in the interlocutory stage.

11.  Despite this, the plaintiff was put under intense cross-examination as to the circumstances of the negotiation and signing of the Agreement. The plaintiff was very upfront in providing all the minute details (and even volunteered more), and these evidence stood up well. For example, the plaintiff has clarified that the Agreement was signed in the first week of May 2006 and not on 18 May 2006. This was because the tenancy agreement would expire on 17 June 2006 but the Deceased would need to travel to PRC around that time to deal with her PRC properties. The date that the tenancy agreement ran out and the travel plans of the Deceased were supported by evidence and not in dispute.

12.  Further, the plaintiff pointed out that the Deceased was rather superstitious and liked to have her contracts dated on the 18^th day of the month and he was able to show examples of such behaviour in previous tenancy agreements.

13.  In fact, records showed that the Deceased left Hong Kong on 19 May 2006 so the plaintiff could have insisted that the Agreement was signed on 18 May 2006 without any fear of inconsistency. The fact that he volunteered the evidence showing the slightly confusing circumstances of the signing of the Agreement was clearly because the plaintiff wished to tell the truth.

14.  I would therefore accept the plaintiff’s evidence and find nothing here that would raise question on the authenticity of the Agreement.

15.  On the other hand, all the evidence from the defendant was a comment made in court by Mr. Chan Cheuk Wah Ricuen (“Mr. Chan”), the son of the defendant, that “the signature does not look right”. The defendant’s own counsel, Mr. Ernest Koo, did not pursue this further.

16.  Further, I agree with the plaintiff’s counsel, Mr. Dicky Cheung, that O.27, r.4(1)(2) Rules of District Court provides that, in short, a party having been served a list of documents describing original documents shall be deemed to admit to the authenticity of such documents unless the party denies such in his pleading. As the defendant has pleaded “no admission” instead of a “denial”, thus has failed to put forward a “positive” case nor adduce any relevant forensic expert evidence. I would hold her to have admitted to the authenticity of the Agreement under this rule.

The hearsay evidence from Ian Gregory Saunders

17.  Ian Gregory Saunders (“Mr. Saunders”) was the plaintiff’s witness but he unfortunately passed away before the trial.

18.  As such, Mr. Saunders’ evidence would be treated as hearsay evidence and although his evidence generally supported the plaintiff’s case, the court finds that it does not require such evidence to determine the authenticity of the Agreement or the circumstances under which it was made.

19.  The defendant raised a possible inconsistency in that Mr. Saunders claimed that he stayed in Hong Kong with the Deceased until 5 May 2006. As such, it was submitted that he could not have witnessed the signing of the Agreement (as claimed by the plaintiff) on 18 May 2006. However, very little weight should be placed upon Mr. Saunders’ evidence on the exact date he left Hong Kong as this evidence (and his memory) could not be tested in court. In any case, I accept the plaintiff’s explanation that the Agreement has been signed in the first week of May and not on 18 May 2006.

Mental capacity of the Deceased to enter into the Agreement

20.  It is not in dispute that the Deceased had a long history of bipolar disorder and the respective psychiatric experts all agree that one feature of this disease is that a patient can have mood swings between episodes of depression, episodes of mania and, at others time, mentally stable. The Deceased had history of multiple hospital admissions during her manic episodes.

21.  It is also clear that the Deceased must have been able to operate a successful investment business in properties. It is not in dispute between the experts that one feature of mania is that the patient might “make foolish business investments”. The question before the court is whether the Deceased had the mental capacity when she entered into the Agreement.

22.  According to Dr. Stephen Ng (in his Medical / Expert report dated 4 September 2008, and acting both as the Deceased’s treating doctor and an expert instructed by the defendant), her last manic episode was in March 2006. Dr. Ng also noted that her mood was stable during the consultations on 18 April, 28 April and 16 May 2006.

23.  However, the Deceased subsequently went to China and was hospitalised from 29 May until 9 June 2006 due to relapse of her illness. She died from burn injuries in her flat on 26 June 2006 and Dr. Ng’s opinion was that “it was quite likely that she was either under the influence of her illness or use of illicit drugs”.

24.  Dr. Ng opined in his report that “…her mental capacity could possibly be affected by her mental condition on or around 18 May 2006 which was just eleven days before her hospitalisation. According to the hospital notes in China, Ms. Chan was being mentally abnormal recently before her admission. During the period of relapse, she would not have the requisite mental capacity to understand any legal document.” (page 179, Trial Bundle B2)

25.  However, Dr. Ng opinion was based on the assumption that the Agreement was signed on 18 May 2006 and not, as the court finds, around the first week of May. Crucially, Dr. Ng saw the Deceased on 18 April, 28 April and 16 May 2006. These dates spanned the date of the signing and, as stated above, Dr. Ng found the Deceased’s mood to be stable during all three consultations.

26.  Both Dr. Ng and the plaintiff’s psychiatric expert, Dr. Chow Lok Yee (“Dr. Chow”), agreed that the course of the illness would generally be unpredictable and could change quickly (e.g. lapsing from stable to mania episodes) and, of course, no doctors / experts examined the Deceased during the first week of May 2006.

27.  Dr. Ng agreed that since he did not see the Deceased during those days, he could not say whether the Deceased mood was more likely to manic or normal.

28.  However, both psychiatric experts also agreed that one could assess objective evidence, for example, whether the Deceased had made any “foolish business investment” as evidence of whether her judgment was affected by her illness or not: thus, if she made a bad business deal in the Agreement (or “doing something with potentially painful consequences” as opined by Dr. Chow), this would be evidence that the Deceased’s mental capacity was affected, but if she made a reasonable business deal, this would be evidence showing otherwise.

29.  As such, it would be down to the evidence of the valuation experts for the court to see if the Deceased had made a “reasonable” or “foolish” business deal.

30.  Mr. Lucas Lau, the plaintiff’s valuation expert, made a valuation of the property at 18 May 2006 at HK$520,000 whilst Mr. Hui Wai Chun, the defendant’s valuation expert, put the figure at HK$770,000. The difference was down to the valuation methodology: Mr. Lau valued it on the basis of “existing use” and Mr. Hui valued it on the basis of “re-development”.

31.  Both experts have explained their methodology in court and I need not go into details here, but I am more inclined to accept Mr. Lau’s methodology being more applicable in this situation as the plaintiff is clearly not re-developing the property and has been living in it as an “existing user”.

32.  But in neither case, it is clear that the Deceased has made an exceptionally good deal in the Agreement: the sale price was to be HK$1,500,000 (with HK$500,000 paid as “Initial Payment” and the balance of HK$1,000,000 to be paid by 5 “Annual Payments” guaranteed by a life insurance policy taken out by the plaintiff, with the insurance company and policy number stated in the Agreement).

33.  This was clearly a very well thought-out business transaction between the Deceased and the plaintiff. It reflects the shrewd business sense that the Deceased must have possessed.

34.  There was no evidence that the Deceased committed suicide. Dr. Ng opined that it was “quite likely” that she died under the influence of her illness or illicit drugs. Thus, there was no evidence that the Deceased anticipated her death at the time of signing the Agreement. But if she died at some point, according to paragraph 8 of the Agreement, there was a chance that the plaintiff might only be paying HK$500,000. But even this amount should not be considered anywhere near being a “foolish business investment”. HK$500,000 is very much “in the ball park” according to Mr. Lau’s valuation and not so outrageously undervalued as to be considered “foolish” even if one accepts Mr. Hui’s valuation.

35.  As such, the court finds that the Deceased did have the requisite mental capacity to enter the Agreement at the time it was signed.

Events after the death of the Deceased

36.  What happened afterwards was in much disputes between the parties.

37.  However, I would say upfront that I have serious questions on the credibility of both the defendant and Mr. Chan. Much of their evidence were inconsistent and illogical. The plaintiff, on the other hand, was very open and forthright when giving his evidence.

38.  For example, regarding the situation of the defendant first visit to the Deceased house after her death, the defendant’s case (from her witness statement) was that she went there alone a few days after the death of the Deceased (paragraph 2 of her witness statement, page 153 of Trial Bundle B1) :

“When I arrived there, I found that the door leading to No. 13A had already been broken open. After I had open the door, I found the inside was in a mess. It appeared that the entire house had been searched by someone for valuables. All the valuables and jewelry including those kept inside a safe had been lost. The only thing that I was able to find was the title deeds and documents…which were kept inside the washroom area.”

39.  The defendant in her witness statement only mentioned this one occasion that she visited the Deceased’s house to take away items after the death of the Deceased.

40.  However, Mr. Chan’s witness statement stated (paragraph 10, page 159 of Trial Bundle B1) that a few days after the defendant’s first visit, Mr. Chan went to the Deceased’s house together with the defendant looking for “documents of the Deceased” and this was when they first met the plaintiff. Mr. Chan then stated that the plaintiff:

“…talked with us and claimed that all the Deceased’s documents were in his possession.”

41.  It is the defendant’s case that the plaintiff has broken into the house shortly after her death and removed personal belongings of the Deceased (including certain documents) (Paragraph 19 of the Re-Amended Defence and Counterclaim, page 36 of Trial Bundle A).

42.  This is a very serious accusation because it amounts to accusing another person of a crime, an allegation that no reasonable and decent person should make lightly and without proper basis.

43.  Under cross-examination, Mr. Koo, the defendant’s counsel, has repeatedly put this case to the plaintiff who has repeatedly denied it. The plaintiff further denied ever taking any documents from the Deceased’s house nor telling Mr. Chan that he did so.

44.  According to the plaintiff, shortly after the death of the Deceased, he was in his own house but saw the defendant and Mr. Chan inside the Deceased’s house, so he went around to talk to them. The plaintiff claimed that he had not enter the Deceased’s house since her death and only did so when the defendant and Mr. Chan were there. (The plaintiff stated that there were “other family members” in his witness statement (paragraph 12, page 6 of Trial Bundle B1) but, in court, he mentioned seeing the defendant and Mr. Chan “and perhaps another family member but probably just the two of them”.)

45.  In any case, the plaintiff saw the defendant and Mr. Chan sitting inside and confirmed that the house did not looked ransacked or searched. In fact, the Deceased had a trusted helper (called Leo) living on site to look after the house.

46.  The plaintiff said that neither the defendant nor Mr. Chan ever made any allegations against him breaking into the house or removing anything, and that these allegations were only raised (or hinted at) in the defendant’s witness statements (and in the subsequently amended pleadings). In fact, the plaintiff saw the defendant and Mr. Chan removing the Deceased’s valuables (including a flat-screen TV) and documents.

47.  During the trial, the defendant and Mr. Chan gave several versions of events of this first visit which were different from their witness statements, which, of course, were already inconsistent with each other.

48.  Under cross-examination by Mr. Cheung, the plaintiff’s counsel, the defendant said that she went to the Deceased’s house on 28 June 2006 to “check the situation of the house because her sister had passed away”. She did not have the key to the house (and had never possessed one). When asked how she planned to enter the house, she was very hesitant and evasive: at one point she claimed that there was a foreigner living there. But when it was put to her that she earlier gave evidence that she did not know the foreigner living with the Deceased, she then suggested that there was a Filipino helper there whom she had seen before (but whose name she did not know).

49.  However, on discovery of the situation of the house, she admitted (after some length of time of questioning) that she did not report to the police nor summoned help from the foreigner or the Filipino helper. Instead, she continued to search the house and took every documents she saw in the house (which amounted to a bundle about 8-9 inches thick) which she placed inside a big plastic bag.

50.  She also agreed with the plaintiff’s evidence that she took the flat-screen TV with her, and she did so by placing it on a travel trolley.

51.  This version of event immediately raised several queries: if the defendant’s purpose was to “check the situation of the house”, it appeared rather convenient that she had a big plastic bag and a travel trolley available for her to carry stuff away.

52.  Further, she was alone traveling all the way to Lamma Island (and, as she admitted, needing to walk a long way up a steep hill to reach the house) with no key, and no evidence was given that she had contacted anyone beforehand to arrange to open the door for her.

53.  More importantly, if her purpose was to “check the situation of the house”, and when she checked, she found that the front door was broken into with the interior ransacked, her case was that instead of immediately calling the police or seeking other help, she had entered the house, continued to search and remove further items.

54.  It would also be her case that afterwards, having secured her documents and flat screen TV, she lugged them down this steep hill and back home single-handedly, all along without seeking help from anyone.

55.  When cross-examined by Mr. Cheung as to why she did not report to the police, the defendant was very evasive and inconsistent: she insisted that she had found the house in the condition as stated in her witness statement, but then said that she was “in a bad mood and did not think that it was theft”, but then she admitted that “the house was so messy that someone must have entered to search.”

56.  And then the defendant admitted that Mr. Chan was with her at this first visit.

57.  This was entirely inconsistent with evidence in both her own and Mr. Chan’s witness statement (as stated in paragraphs 38 to 40 above).

58.  There were also other inconsistencies as to on which occasion the title deeds and rental documents related to the house was found and when the Deceased’s computer was found to be “missing”.

59.  It was also surprising that given that the defendant had found the front door to be broken, she did not seek anyone to repair the lock immediately or at least do something to block the door when she left the house (assuming that there were any valuables left).

60.  In any case, under Mr. Cheung’s cross-examination, the defendant substantially “walked back” from her accusation against the plaintiff and admitted that “she was not sure that the plaintiff did it (i.e. broke into the house and took items) but because he lived next door, it was convenient for him”.

61.  Mr. Chan, on the other hand, insisted that he only visited the house after the defendant came back from her first visit. The defendant asked him to look at the documents she took from the house but he found them to be useless. The defendant also told him about the suspected burglary. These were the reasons why he went back to the house with her. The documents related to the house was only discovered by him in a basket in the toilet on this second visit.

62.  This version was also problematic: if one of the purposes of Mr. Chan’s visit was to check if there was burglary, now that they checked and there were clear signs of burglary (for example, the broken front door and the Deceased’s missing computer), why would they not report to the police? What was the purpose of “checking for burglary” if one would not take any action even after the confirmation?

63.  Further, Mr. Chan said that they met the plaintiff on this occasion. If the plaintiff was a suspect of burglary (because “he lived next door and it was convenient for him” as stated by the defendant in court), they certainly did not confront him there and then, or at least asked him some questions as to the condition of the house. Instead, according to Mr. Chan, they were talking about the plaintiff being an “investment adviser of the Deceased” and about an invitation for the Deceased’s memorial service.

64.  In effect, whichever version of the defendant’s case was, the gist was that she (with or without Mr. Chan) went all the way to Lamma Island to “check the situation of the house”, and when there were obvious signs of burglary, instead of calling the police or seeking other help, she (with or without Mr. Chan) entered the house completely nonchalant to any danger, continued to search and took away documents and a flat screen TV (in a big plastic bag and a trolley which she conveniently had), all without any concern that she (with or without Mr. Chan) would now likely to be suspects of burglary if someone had called the police. And on a return visit (if any) to, amongst others, confirm any signs of burglary, they again failed to report to the police but instead chatted to one of the suspects (as they alleged) about unrelated matters.

65.  This is pure nonsense and the only reasonable inference the court can draw is that, all along, neither the defendant nor Mr. Chan has any concern that burglary or any crime has been committed (at least by other people). The accusation against the plaintiff was clearly drummed up at a later stage in the context of this action.

66.  Instead, they must have gone to the house together intending not just to “check the situation” but to help themselves to all the valuables of the Deceased that they could find. The defendant must have asked for the help of Mr. Chan to help to remove the valuables as she could not likely be able to lug the flat-screen TV and the big bag of documents alone. As such, one might suspect that they went well-prepared, perhaps already bringing with them the big plastic bag and trolley, ready to tackle the long walk and the steep hill. And they did this despite, as Mr. Chan admitted, “the death certificate had not been issued” so probate procedure had not commenced and, in effect, they had no authority to deal with the Deceased’s matter.

67.  Of course, this begs the question of how the defendant and Mr. Chan managed to gain entry to the house without any key: and the truth must be that the defendant had lied to the court: either she actually had the key, or that someone had helped them with the entry, or that they themselves had forced the front door open. The last scenario might perhaps explain why Mr. Chan was at pains to distance himself from the first visit because it might be likely that he, instead of the defendant (who was a middle-aged lady), broke open the front door. But this would be pure speculation and lend no weight to any decision in this judgment.

68.  Either way, all these illustrate that it is not below the defendant (and supported by Mr. Chan as it appeared) to lie to the court to raise a very serious and clearly false accusation in order to smear the plaintiff, all perhaps in an attempt to gain an advantage in this action. As stated above, this raises serious questions in my mind as to the credibility, integrity and not to mention the “common decency” of both the defendant and Mr. Chan.

69.  In any case, the court would accept the version of events from the plaintiff that he met both the defendant and Mr. Chan on just one occasion in the house before the memorial service. The house did not look ransacked and they had the conversation as recalled by the plaintiff, and the defendant and Mr. Chan took away the Deceased’s possession including the flat-screen TV. The plaintiff never broke into the house and took anything as alleged.

Discussions on the Agreement

70.  There was some dispute as to when the plaintiff first mentioned to Mr. Chan or the defendant about the Agreement. The plaintiff’s evidence was that it might be during the time they first met but in any case it was when Mr. Chan mentioned “pay us rent” at some point of time. This was the reason why the plaintiff mentioned the Agreement in the context that he would not pay rent because there was an agreement to buy the Property and he would like to complete the transaction. But Mr. Chan told him (something along the line) that the Deceased’s death certificate had not been issued so they were not yet the owners and had no authority to sell the Property.

71.  In her witness statement, the defendant made no mention of any meeting or conversation with the plaintiff in her two witness statements. In fact, the defendant did not mention any contact with the plaintiff until, as she stated, on about 23 November 2007 when she met a “foreign couple” occupying the Deceased’s house.

72.  In his witness statement, Mr. Chan did not mention any discussion with the plaintiff about the Agreement until the memorial service. He stated that the plaintiff mentioned the Agreement but “said that he felt the price was too expensive. He asked me if we were willing to sell the house...at a price of HK$400,000”.

73.  Much was made by this comment by Mr. Koo, submitting that this amounted to a rescinding of the Agreement. However, Mr. Chan alleged that the plaintiff said “if you agree to sell at HK$400,000, I will pay for the funeral.” At best, this might amount to an offer to vary the Agreement (or perhaps the payment method of the Agreement) and very far from any offer to rescind the Agreement. In any case, neither Mr. Chan nor the defendant had “obtained the Deceased’s Letters of Administration” and thus had no authority to deal with the Agreement so no acceptance was possible at that stage by Mr. Chan nor the defendant. This alleged offer was not raised again.

74.  It is the plaintiff’s case that he has mentioned the Agreement at the first time he met the defendant and Mr. Chan and also at the wake of the memorial service. But he thought these were not appropriate occasions to discuss such matters so he especially arranged a Dim Sum meal at “Man Fung” restaurant at Lamma Island. He invited Connie, a friend of the Deceased, who was to be the translator. According to the plaintiff, he had explained the full terms of the Agreement and had discussed various matters like payment and lawyers. The plaintiff understood that it was agreed with the defendant that when the probate was settled, the heir would contact him as soon as possible to settle the matter and that they were not legally authorised to remove the Deceased’s belongings.

75.  On the other hand, the defendant’s evidence was that she herself organised lunch with Connie in “Man Fung” but the “foreigner”, that is, the plaintiff, simply came and sat down. She said she was eating on her own and only recalled the plaintiff speaking English to Connie. When asked whether the plaintiff discussed anything about the Agreement, the purchase of the Property, or removal of the Deceased’s belongings, the defendant simply said she could not remember.

76.  The defendant’s version is clearly not believable. I cannot imagine why the plaintiff would sit down on a table uninvited by the defendant (who claimed she organised the lunch) and that the defendant did not remember any conversation (including at least asking “why are you sitting on my table?”) and only that she was eating on her own. If the defendant was trying to give the impression that she was not aware of (or had no recollection of any discussion on) the Agreement all along, then it begs the question why she later told the court that “the price was too cheap” (see below). The defendant was simply lying in court.

77.  It is not in dispute that neither the defendant nor Mr. Chan contacted the plaintiff further even after the probate was completed. As stated above, Madam Wan became the administratrix on 22 January 2007.

78.  During cross-examination, the defendant said that she told Madam Wan to “wait until the probate is finished and then rent the Property”. The defendant said that they needed to wait until Madam Wan had authority before they rent the Property, but she later said that she and Mr. Chan passed by an estate agent called “Fook Ming” on the way to the pier after their visit to the Deceased’s house and they instructed the estate agent to rent out the Property. This would mean that they had attempted to rent out the Property very shortly after the death of the Deceased and not only after Madam Wan had obtained the Letters of Administration.

79.  More importantly, the defendant also admitted under cross-examination by Mr. Cheung that the fact the plaintiff had not paid the HK$500,000 was because she refused to accept the payment. The defendant explained that this was because “mother (Madam Wan) said the price was too cheap and the property should not be sold to him (the plaintiff)”.

80.  Mr. Cheung had very fairly drawn the defendant’s attention to her own pleadings under paragraph 4(a) of the Re-Amended Defence and Counterclaim (which stated “the plaintiff has never made or attempted to effect the alleged initial payment…to the estate of the Deceased”) (page 30 of Trial Bundle A) before asking the question so there could not be any dispute that the defendant was in any way confused or unclear. Mr. Cheung had repeated the question and the defendant confirmed that she had followed Madam Wan’s words not to sell the Property because “HK$500,000 was too cheap”.

81.  Significantly, the defendant then conceded that it was wrong to say that the plaintiff had never tried to pay her: she admitted that he had tried but that she refused because it was “too cheap”.

82.  Several observations can be drawn from such admissions:

i) the defendant and Madam Wan were aware of the Agreement even before the probate was completed on 22 January 2007;

ii) because Madam Wan (and possibly also the defendant) thought that HK$500,000 was too cheap, their decision was not to sell the Property to the plaintiff but to rent it out; and

iii) this was the real reason why the plaintiff had not paid HK$500,000 to complete the Agreement: he was not able to do so because Madam Wan and the defendant refused to accept.

83.  The plaintiff, having not heard from the defendant nor Mr. Chan, then observed in mid-January 2007 that a local young man came to the Property and started to throw everything out and took to taking down walls inside the Property. He tried to stop him and then went to the Citizens Advice Bureau which advised him to stamp and register the Agreement immediately, which he did on 18 January 2007.

84.  After this time, the plaintiff instructed a law firm, Messrs. Kao, Lee & Yip to handle the conveyance work for the Property. Having learnt that the Letters of Administration has been issued, Messrs. Kao, Lee & Yip had written to Madam Wan’s solicitors, Messrs. Christopher Li & Co., on 9 May 2007 making reference to the Agreement and calling upon Madam Wan to complete the sale and purchase of the Property in accordance with the terms of the Agreement “as soon as possible and no later than 18 June 2007”. The letter also enclosed a draft assignment for Madam Wan’s approval (pages 255 to 263 of Trial Bundle C2).

85.  Messrs. Christopher Li & Co. replied on 27 July 2007. There was no mention of the Agreement or comments on the draft assignment. Instead, the letter referred to the tenancy agreement between the plaintiff and the Deceased dated 18 March 2005 (which should have expired over a year ago in June 2006) and demanded the plaintiff to pay the rent arrears amounting to HK$120,000.

86.  There were further correspondences between the parties’ lawyers and the plaintiff, via his assistant, had also contacted Mr. Chan to propose a meeting, which was turned down by Mr. Chan. Suffice to say, it would appear that each party maintained their positions: the plaintiff sought to complete the sales and purchase of the Property but the defendant was demanding rent.

87.  Such documents and the defendant’s admissions were entirely consistent with the plaintiff’s case. It was clear that he had tried his best to pay to complete the sales and purchase of the Property but Madam Wan and the defendant had all along refused (because the price was too low), and they wished to rent to the plaintiff instead. This was why they were stalling all attempts by the plaintiff.

88.  Mr. Koo also attempted to raise an argument that the plaintiff has been in fundamental breach of the Agreement because he failed to pay the initial payment of HK$500,000 “on or soon after 18 June 2006” since under the circumstances, it was trite that “time is usually regarded as of essence in a conveyancing transaction in Hong Kong”.

89.  I cannot see how I can give any serious consideration to this argument given the timing of the death of the Deceased and the admission by the defendant that the reason that the plaintiff could not make the payment was that the Administratrix and the defendant had refused to accept the payment (despite, in the ample evidence I found, that the plaintiff had tried his best to complete).

90.  To now hold the failure of the plaintiff’s payment as a ground for plaintiff’s breach of contract simply flies in the face of logic or justice. If Mr. Koo’s argument is right, then any vendor who wishes to go back on a sales contract can simply “render himself unavailable” at the time of payment, and then hold the buyer in breach of contract for failure to pay. By refusing to accept the payment, it was vendor who breached the contract first. It goes without saying that I totally agree with Mr. Cheung’s submission that the “prevention principle” must apply here, that a person is not permitted to take advantage of his own wrong (Kensland Realty Ltd. V Whale View Investment Ltd [(2001) 4 HKCFAR 381]).

The interpretation of paragraphs 4, 6 and 8 of the Agreement

91.  Paragraph 8 of the Agreement envisaged the possibility of the death of the seller after during the period of the “Annual Payments” from June 2007 to June 2011 (reading together with paragraph 6) to make up the total payment as stated in paragraph 4. However, the Deceased had passed away before this period, something that both parties, being not legally trained, clearly failed to foresee at the time of signing.

92.  There is no application before me that the Agreement would therefore be frustrated under the circumstances. In any case, I do not think it is: the death of the Deceased did not render the sale of the Property impossible.

93.  With no expressed term to deal with the situation that the seller passed before the period of “Annual Payment”, the court need to consider any implied terms to achieve the purpose of the Agreement and to achieve fairness. It is trite that the court would need to interpret the intention of the parties at the time of the Agreement.

94.  The plaintiff had given evidence that the intention of the Deceased was to sell the Property to the plaintiff so that she could enjoy the money for her retirement (and live in another house which would not require such a steep climb).

95.  Further, according to the plaintiff, the Deceased told him many times that she disliked her sister (the defendant) because: “She is very greedy and wants all my stuff. I do not want to give her any.”  According to the plaintiff, the Deceased did not want the defendant to benefit from the plaintiff’s annual payments so this was the reason why paragraph 8 of the Agreement was drafted such that “all outstanding annual payment shall cease” upon the death of the seller.

96.  This is a logical explanation which I accept, and I also find ample evidence (as stated above) to support the reasons why the Deceased disliked the defendant.

97.  Given the intention of the Deceased at the time of the Agreement, and giving consideration as to what is just and fair, I would hold that paragraphs 4, 6 and 8 could not be applied to the current situation, that is, the plaintiff would not be required to pay any “Annual Payment” to make up the “Total Payment” under paragraphs 4 and 6 of the Agreement.

98.  In other words, there must be an implied term in the Agreement that should the seller passed away before the period of the “Annual Payment”, the buyer would only need to pay the “Initial Payment” of HK$500,000 as the purchase price for Property in accordance with paragraph 5 of the Agreement without the need for any “Annual Payments” thereafter.

Order

99.  Accordingly, I would order specific performance of the Agreement under the implied term as stated above. I would also order that the defendant’s counter-claim be dismissed.

100.  There be an order nisi for costs of the action be to the plaintiff to be taxed if not agreed, with certificate for Counsel.