MAK YUK LIN AND ANOTHER v. WONG KIU NGOR

HCA 1590/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1590 OF 1998

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J U D G M E N T

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1. This dispute arose out of property transactions in 1997 when the market was still quite "optimistic" and it has a twisted history.

2. The property in issue was a shop premises known as Ground Floor, No. 6F, Nelson Street, Kowloon (the shop premises).

3. The 2nd named plaintiff Talisgold Industrial Limited (Talisgold) was set up in May 1991. The 1st named plaintiff Ma Yuk Lin (Ma) was its director and major shareholder, holding 9,999 shares out 10,000. The only other director and shareholder was her husband, Mr. Kwok.

4. On 4 March 1997 Talisgold acting through Ma executed a sub-sale agreement to purchase the shop premises from Turbo Rise Ltd. (Turbo Rise) for $22 million with completion date scheduled on 28 January 1998. A deposit of $6.24 million was paid. Turbo Rise was not the registered owner of the shop premises; it was selling as "confirmor".

5. On 5 June 1997 Ma purportedly executed another sale and purchase agreement (the Agreement) to sell the shop premises to the defendant Wong Kiu Ngor (Wong) for $24 million and the date for completion was also 28 January 1998. Between 5 June and 4 October 1997, Wong paid a deposit of $6 million by 4 installments. The deposit was paid into the account of Talisgold on the instruction of Ma.

6. Wong subsequently refused to complete the Agreement on the basis that Ma had no title to sell the shop premises and that they were subject to a building order Memorial No. 5667035 (the Order) arising out of certain unauthorized structures on the rooftop. The suggestion was that the shop premises were not free from all encumbrances.

7. The refusal of Wong to complete had a chain reaction and Talisgold was unable to compete the agreement with Turbo Rise.

8. In February 1998, Ma and Talisgold commenced the present proceedings against Ma claiming inter alia, the right to forfeit the $6 million deposit paid by Wong and damages for failure to complete the transaction. Their case then was that Ma executed the Agreement in her personal capacity and as the director and major shareholder of Talisgold, Ma had the ability to compel Talisgold to complete the sale of the shop premises to Wong.

9. Wong resisted the claim and counterclaimed for the return of the $6 million deposit and damages. It was Wong's case that there was a breach of the Agreement when Ma had no title to the shop premises and they were not free from encumbrances because of the Order.

10. Wong also suggested that Ma was in breach of the warranties that she either owned interest in the shop premises or had been authorized by the owner to enter into the Agreement.

11. Although Wong also counterclaimed against Talisgold, the basis of such counterclaim was not apparent from the originally Defence and Counterclaim.

12. In August 1998, the dispute went before Godfrey JA (as he then was) on an Order 14 and an Order 14A application. Godfrey JA found against Ma and Talisgold on the basis that the shop premises were not free from encumbrances because of the Order. But Wong's suggestion that Ma had no title to sell was rejected. Godfrey JA dealt with the issues as follows:

"(The position of the plaintiffs (Ma and Talisgold) as between themselves does not create any difficulty for the present purposes. At law, 'A' may contract to sell to 'B' any defined subject matter and can enforce the contract if by the time when he is obliged to do so he can compel other interested parties to concur in the sale: see Elliott v Pierson [1948] Ch 452, per Harman J at p. 455. This will not give rise to any difficulty unless one or other of the plaintiffs is insolvent, a matter I do not at this stage have to consider.)"

Godfrey JA then made the following orders:

" (1) Wong was entitled to rescind and had rescind the Agreement;

(2) There be a trial of the issue as to whether it was Ma or Talisgold or both who are liable for the repayment of the deposits of $6 million to Wong and other incidental issues.

13. Ma and Talisgold had appealed against the orders of Godfrey JA. The appeal was dismissed by the Court of Appeal on 25 March 1999.

14. The present hearing was scheduled to deal with the issues referred to in paragraph 2 of the orders of Godfrey JA.

15. It is worth mentioning that the hearing was originally scheduled in May 2001. Both Ma and Talisgold were absent and default judgment was entered against them jointly for $6 million with interest and costs. Ma successfully applied to have the default judgment set aside. Talisgold made no application and the judgment against it stands.

16. Subsequent to the decisions of Godfrey JA and the Court of Appeal, Ma's case changed drastically. In affirmations and witness statements filed by her, Ma suggested that at all material times, she was acting as the agent of Talisgold and therefore assumed no personal responsibility towards Wong. She suggested that Wong was at all material times aware of such position.

17. On the first day of the hearing, Ma successfully applied to amend the Statement of Claim and Reply and Defence to Counterclaim to reflect her changed position.

18. Ma then applied to have Wong's case against her dismissed as Wong had obtained judgment against Talisgold on the basis that Ma was its agent. In the circumstances, it was no longer open to Wong to claim against Ma. The application was refused because of the circumstances in which judgment was granted against Talisgold and that the liability of Ma and Talisgold could be a joint liability. It was also not clear that the judgment against Talisgold was granted on the basis that Ma was its agent.

19. Through her counsel, Wong limited her counterclaim to the deposit of $6 million.

20. It was against the aforesaid background that the court considered the issues defined in the order of Godfrey JA.

21. According to Ma, since the establishment of Talisgold, she carried out all of her property transactions through Talisgold and both Wong and her husband, Cheung Wing Man were aware of it.

22. Since 1994, Ma had on a number of occasions had joint ventures with Mr. Cheung and his relatives/friends on property speculations. On such occasions, someone else's names would be used as the purchasers instead of the investors. After the properties were sold, profits/loss would be shared amongst the investors.

23. In 1994 Ma, acting as the agent of Talisgold had sold a property to Profit Rise Investment Co. Ltd. represented by Mr. Cheung for $15 million. In July 1997, Ma, Wong and another had acquired a shell company as a vehicle to invest in properties.

24. Ma therefore suggested that Wong at all material times was aware of the fact that she was acting as the agent of Talisgold. As they were on very friendly relationship and had trust for one another, they would be carrying out transactions rather informally without the assistance of lawyers or estate agents.

25. She said she was in a hurry at the execution of the Agreement and she did not pay too much attention to the formality. When she tried to affix the company chop of Talisgold on the Agreement, Wong said it was not necessary. She gave a reason for fixing the dates for the payment of the deposit installment. Such reason, however turned out to be incorrect and she then said she was unable to remember clearly.

26. Ma was adamant that before the execution of the Agreement, she made it clear to Wong that it was Talisgold that brought the shop premises and it was also Talisgold that sold it otherwise there might be problem with the Inland Revenue Department. When she was asked why her lawyers would present a different version and why she stated in her previous affirmations that she acted on her own behalf, she put the blame on her lawyers and suggested that they failed to properly take instructions from her.

27. To strengthen her case, Ma called a witness Ms Szeto Yuk Kee who claimed to have witnessed the execution of the Agreement. Ms Szeto said she clearly heard Ma telling Wong that it was Talisgold that purchased the shop premises and it was Talisgold that sold it. Ma also said in order to avoid difficulty from the Inland Revenue Department, Wong should pay the deposits into the account of Talisgold. Ms Szeto also confirmed the evidence of Ma that when she indicated to Wong that she would go upstairs to get the company chop of Talisgold to put on the Agreement, Wong said there was no need as they should trust each other.

28. Ma's assertion was easy to make but such assertion was clearly inconsistent with the Agreement.

29. The Agreement stated that the Vendor was Ma Yuk Lin and the name Talisgold did not appear on the document at all. Ma's assertion was therefore contradictory to the terms of the Agreement. While it was sometimes possible to receive extrinsic evidence to add to the terms of a written contract if it was shown that the document was not intended to express the entire agreement of the parties, adding terms that contradict the written terms was a different matter. (see Mercantile Bank of Sydney v Taylor [1893] AC 317)

30. If she considered it so important that Wong must be told that Talisgold was the vendor as it was Talisgold that acquired the shop premises from Turbo Rise, she could simply have put down Talisgold as the vendor in the Agreement. There were no convincing reasons why she failed to do that but instead used her name as the Vendor.

31. Before the commencement of the present proceedings, Ma's position was ambiguous as demonstrated in her solicitors' letter dated 22 January 1998 addressed to Wong's solicitors. On the one hand, it was suggested that Ma was acting as agent for Talisgold. On the other hand, it was suggested that Ma was able to procure Talisgold to assign and confirm the shop premises to Wong on completion.

32. In the original Statement of Claim, Ma expressly stated the following:

"4. ........the first named Plaintiff (Ma) agreed to sell and the Defendant (Wong) agreed to buy.........

6(b) the first-named Plaintiff shall complete her purchase........and therefore, the Defendant shall also complete the purchase on that day.

10. The first named Plaintiff entered into the Agreement in her own capacity. The first named Plaintiff was at all material time able and willing to procure the second named Plaintiff and Turbo Rice Limited to assign the Property to the Defendant on the completion of the sale and purchase of the Property."

33. In an affirmation in support of her Order 14 application, Ma said the following on oath:

"I entered into the Agreement in my own capacity. I was at all material times able and willing to procure the second-named Plaintiff and Turbo Rice Limited to assign the Property to the Defendant on the completion of the sale and purchase of the Property."

34. It must not be ignored that at all material time, Ma was legally represented and in both the hearings before Godfrey JA and the Court of Appeal, she had senior counsel arguing her case. The decisions of Godfrey JA and the Court of Appeal were made on the basis of her then case.

35. Ma's evidence in court contradicted her previous case. Much of she said in court was also inconsistent with what she had said in her previous affirmations.

36. Clearly Ma was prepared to say whatever was necessary to enable her to escape from the predicament of having to return the $6 million deposit to Wong. Despite her denial, Ms Szeto was clearly a close friend of Ma and was prepared to assist her. For the past years, they remained in closed contact and there must have been frequent discussions about the dispute of Ma and Wong. Ms. Szeto's ability to have a clear recollection about the events on 5 June 1997 when the Agreement was executed but not on other more recent events also rendered her evidence highly suspicious. I do not accept their evidence as to what had happened when the Agreement was executed.

37. I do not wish to speculate why Ma decided to use her own name in the Agreement. It might be pure inadvertence. She might not see any difference between herself and Talisgold when she held its 9,999 shares out of 10,000.

38. Wong told the court that Ma had suggested to her to proceed with the Agreement by way of nominating her as the nominee purchaser directly from Turbo Rise. Ma said it was difficult to obtain mortgage loan if it was a confirmor sale. Ma also suggested that the profit of $2 million should be paid directly to her. Mr. Shipp suggested that Ma was trying to hide the Order and in the meantime tried to obtain the $2 million profit.

39. I do not find it necessary to make any finding on those issues.

40. Suffice it to say the case that Ma was acting as an agent for Talisgold in the execution of the Agreement had not been made out. I accept Wong's evidence that Ma never told her that the shop premises was acquired by Talisgold when the Agreement was executed.

41. Ma entered into the Agreement in her own capacity as she was able and willing to procure Talisgold to assign the shop premises to Wong on completion. She accepted the payment of the deposit and directed Wong to pay such deposit into the account of Talisgold by telling her that it was her own company.

42. Ma was liable to repay the deposit to Wong.

43. In deference to counsel's submission, I should also deal with another point raised by Mr. Wong, counsel for Ma.

44. It was Mr. Wong's submission that by applying and obtaining judgment against Talisgold, Wong had made an election and was no longer entitled to get judgment against Ma. Mr. Wong suggested that the only cause of action against Talisgold was that Ma was its agent and the liability of Talisgold and Ma was not a joint liability but an alternative one. Mr. Wong placed emphasis on paragraph 36 of the Defence and Counterclaim of Wong to the following effect:

"If, contrary to the Defendant's defence herein, the Agreement is found to be enforceable and the Defendant liable to perform there under, the first-named and/or the second-named Plaintiffs were in repudiatory breach thereof by reason of the matters mentioned in paragraphs 21 to 25 inclusive hereof as a consequence of which the Defendant has suffered loss and damages."

45. Quite apart from the fact that Godfrey JA had found that the Agreement was not enforceable and Wong was no longer liable to perform there under, the meaning and effect of paragraph 36 must be considered in the context of the entire Defence and Counterclaim of Wong.

46. It was never Wong's case that Ma was acting as the agent of Talisgold. In fact in paragraph 19 of the Defence and Counterclaim, Wong expressly asserted that Talisgold was not bound by the Agreement. This court had of course also found as a fact that Ma was not acting as the agent for Talisgold in entering the Agreement with Wong.

47. The cases relied on by Mr. Wong, such as Morel Brothers & Co. Ltd. v Earl of Westmorland [1904] AC 11, Moore v Flanagan [1920] 1 KB 919, Simon v O'Gorman Pty Ltd & another 27 ALR 619 all dealt with cases of principals and agents in which there was an alternative liability on the part of the principal or agent arising out of the same transaction.

48. In our case, the liability of Ma did not arise in her capacity as an agent. She entered into the Agreement in her own name and she was liable on her own. Whatever liability Talisgold had was a joint liability and not an alternative one.

49. I have observed that it was not clear what was in fact the cause of action in Wong's claim against Talisgold. Mr. Shipp was unable to assist the court. The facts of the case might support a claim for "money had and received" or "allowing Ma to represent herself as the owner of the shop premises." But those were not how Wong pleaded her case.

50. It was perhaps unsatisfactory to have the judgment against Talisgold to stand when Wong's cause of action against it was unclear. But that was neither justification nor excuse for exonerating Ma when clearly she was liable.

51. In our adversarial system, if a judgment against party A was considered to be inappropriate, party A had to apply to set aside the judgment. Party B could not take advantage of the position to escape from what was clearly his own liability.

52. In the circumstances, there must be judgment for Wong against Ma in the sum of $6 million and interest thereon at the rate of 6% p.a. from the date of the writ.

53. There will also be an order nisi for Ma to bear the costs of the action to be taxed if not agreed.

Remarks: