CHEUNG WAI LEUNG v. SIEN YOUI CHONG WILLIAM, the executor of the estate of LOK PUI KEE BETTY, DECEASED

CACV231/2016

[2019] HKCA 1260

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 231 OF 2016

(ON APPEAL FROM HCA NO 1486 OF 2007)

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REASONS FOR JUDGMENT

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Hon L Chan J (giving the reasons for judgment of the court):

1.  This is the plaintiff’s appeal against the judgment of Deputy High Court Judge Seagroatt given on 31 October 2016 dismissing his claims against the defendant with costs and making certain orders in favour of the defendant. We dismissed the appeal at the end of the hearing and ordered costs against him. We said we would give reasons for judgment and determine the basis of costs. These are the reasons and our decision on the basis of costs.

2.  The plaintiff (“Mr Cheung”) claimed a declaration that he had terminated the agreement he made with the defendant (“Madam Lok”) on 29 December 2004 (“the agreement”), a further declaration that he had forfeited Madam Lok’s deposits paid under the agreement and an order that Madam Lok do deliver up to him vacant possession of a village house he had agreed to sell to Madam Lok in the agreement.  

3.  Madam Lok passed away in January 2015 before the action came on for trial.  Her estate is represented by the executor who was her husband Mr William Sien.

THE BACKGROUND AND DOCUMENTARY EVIDENCE

4.  Mr Cheung is the owner of a three-storey village house in Sai Kung, the New Territories which he built in 1999/2000 (“the building”).  Mr Cheung was not required to pay any premium to the government for putting up the building because he is an indigenous villager of the New Territories.  However, if he should be desirous of disposing of the interest in the building, premium had to be assessed and paid to the government prior to the disposal of his interest. The amount of premium was to be assessed as and when Mr Cheung should request for an assessment.

5.  Under the agreement, Madam Lok agreed to purchase the building from Mr Cheung for HK$6.3 million payable in four installments.  The purchase price was to include the premium payable to the government up to HK$3.5 million.  It in effect provided that if the premium should be assessed by the government at HK$3.5 million, Mr Cheung would receive a net purchase price of HK$2.8 million.  If the premium should be assessed at below HK$3.5 million, Mr Cheung’s net purchase price would be above HK$2.8 million.  If the premium should be over HK$3.5 million, Mr Cheung would still receive HK$2.8 million and Madam Lok had to bear the extra premium over HK$3.5 million.

6.  The four instalments of purchase price were payable as follows:

(a)    The 1st instalment was the initial deposit of HK$250,000 and was to be paid upon the signing of the agreement;

(b)    The 2nd instalment was HK$1.35 million and was to be paid on or before 17 January 2005.  Mr Cheung had to provide Madam Lok with a letter written by him to his tenants of the building notifying them of the termination of their tenancies before he was entitled to be paid this sum.  This clause also provided that he had to discharge his mortgage (should be a legal charge) debt, arrange for the removal of the legal charge from the Lands Registry, and apply forthwith through his solicitors to the District Lands Office (“DL Office”) for assessment of the premium;

(c)    The 3rd instalment was HK$700,000 and was to be paid on or before 1 May 2005 and upon Mr Cheung giving Madam Lok vacant possession and the keys to the property; and

(d)    The final instalment was HK$4 million and was to be paid within 28 days of Mr Cheung’s notifying Madam Lok of the government’s notice of assessment of premium for the building, and ownership should be transferred to Madam Lok forthwith upon payment.  Mr Cheung also agreed in this clause that the completion of payment of premium and transfer of ownership should take place within 12 months from his application for assessment of premium.

7.  In addition to the agreement, there is a decoration agreement also dated 29 December 2004 (“the decoration agreement”).  It was signed by Madam Lok as the purchaser of the building.  The other signatory was the estate agent Mr Chan.  Madam Lok said in evidence that Mr Chan signed on behalf of Mr Cheung.  This agreement recited that Mr Cheung borrowed from Madam Lok a total of HK$1.38 million as renovation fees.  HK$380,000 was to be paid upon signing of this agreement.  The remaining HK$1 million was to be paid together with the 2nd installment of purchase price of HK$1,35 million in the agreement.  The total sum to be paid was HK$2.35 million and it was payable to the existing legal chargee one Freeway Finance Co Ltd (“Freeway Finance”) to discharge all the moneys due to the finance company.

8.  There are copy cheques evidencing the payment of HK$380,000 to one B M C Decoration Ltd (“BMC”) and the same sum by BMC to Mr Cheung.  There is also a letter dated 17 January 2005 from Madam Lok’s solicitors to Mr Cheung’s solicitors enclosing three cheques for the total sum of HK$2.35 million as deposit and part payment of the purchase price of the building.  Two of the cheques for a total of HK$2,345,394 were for the discharge of the money due under the legal charge calculated up to 17 January.  The cheque for the balance of HK$4,606 was paid to Mr Cheung’s solicitors.

9.  Though Madam Lok had paid the 2nd installment on 17 January 2005 per the agreement and the legal charge was then discharged, Mr Cheung only applied through his solicitors to the government for assessment of premium on 22 February 2005.

10.  Madam Lok paid the 3rd installment of HK$700,000 on 1 March 2005 and was given possession of the building.

11.  As Mr Cheung had in fact charged the building to Freeway Finance without the approval of the District Lands Officer (“DLO”), the DLO demanded from him on 20 June 2005 a penalty and other charges totalling HK$14,150.  Madam Lok advanced this sum to him at his request out of the balance of the purchase price.

12.  Madam Lok further advanced to Mr Cheung at his request in August 2005 a total of HK$5,165.52 for him to pay the DL Office the administrative fee for removal of the non-assignment clause and the arrears of government rates due for 1 April 2004 to 25 February 2005.

13.  Mr Cheung executed a power of attorney (“PoA”) in favor of Madam Lok which was dated 1 October 2005.  It gave Madam Lok a number of powers including one for her to raise objections and negotiate with the relevant government department on the amount of premium payable. 

14.  The DLO sent Mr Cheung a notice on 24 October 2005 saying that the premium assessed for the building was HK$6,810,600.  Through his solicitors Mr Cheung notified the same to Madam Lok’s solicitors on 4 November 2005.  Mr Cheung’s solicitors also advised Madam Lok’s solicitors in the letter that Mr Cheung should be paid at completion the balance of purchase price at about HK$500,000 (balance of HK$4 million less HK$3.5 million for payment of part of the premium) less the outgoings previously paid by Madam Lok.  The outgoings paid by Madam Lok are the sums of HK$14,150 and HK$5,165.52 (or a total of HK$19,315.52) referred to above.

15.  Madam Lok sent the DL Office on 7 November 2005 a letter on behalf of Mr Cheung objecting to the amount of premium as assessed. 

16.  Her solicitors advised Mr Cheung’s solicitors on 10 November that she had liaised with the DL Office on the amount of premium. 

17.  Madam Lok advised the DL Office on 15 November that she had instructed a firm of chartered surveyors to make a market valuation and assess the premium payable for removal of the non-assignment restrictions of the building.

18.  The DLO replied on 17 November to Mr Cheung via Madam Lok that if an appeal against the premium assessed should be pursued, a valuation report with market evidence in support had to be submitted by 17 December 2005.

19.  Madam Lok’s chartered surveyors prepared a valuation and assessment report on 17 November assessing the premium at HK$4,389,100 and Madam Lok sent the same to the DL Office on 18 November.

20.  The DLO sent a letter dated 9 December to Mr Cheung via Madam Lok confirming that the appeal was being processed and that he would be informed of the result in due course.

21.  After being notified by Madam Lok’s solicitors on 10 November that Madam Lok had liaised with the DL Office on the amount of premium, Mr Cheung’s solicitors replied on 11 November that according to the agreement, completion should take place on 21 November 2005, namely 28 days from the date when Madam Lok was notified of the amount of premium.

22.  However, the letters produced showed that Mr Cheung’s solicitors only notified Madam Lok’s solicitors of the amount of premium on 4 November. Completion should thus take place on 2 December.  This problem was purportedly explained by Mr Cheung in his letter dated 3 March 2006 sent directly to Madam Lok.  He said in that letter that he had given Madam Lok the notice of premium on 24 October through the estate agent.  I will refer to this letter below.  Nevertheless, the trial judge held it was impractical and mistaken for Mr Cheung’s solicitors to demand completion on 21 November as they had not answered all the requisitions on title by that day.  I will refer below to the then outstanding title documents.  Mr Cheung’s solicitors in this letter also did not refer to the loan of HK$1.38 million advanced by Madam Lok to Mr Cheung under the decoration agreement.

23.  Madam Lok’s solicitors replied on 14 November saying that Madam Lok had filed on 4 November (should be 7 November) on Mr Cheung’s behalf with the DL Office an opposition to the amount of premium payable.  Completion should therefore be postponed to a later date after the receipt of the reply from the DL Office on the re-assessment of premium.  They further asked Mr Cheung’s solicitors how the total amount payable to Mr Cheung should be split on completion.  They also did not refer to the loan of HK$1.38 million.

24.  Mr Cheung’s solicitors replied on 15 November.  They advised Madam Lok’s solicitors that the balance payable to Mr Cheung on completion was HK$HK$480,684.48. This was arrived at by deducting HK$3.5 million and HK$19,315.52 from the balance of purchase price of HK$4 million.  They promised to give Madam Lok instructions on how to split the HK$480,684.48.

25.  By a further letter also dated 15 November, Mr Cheung’s solicitors advised Madam Lok’s solicitors that Mr Cheung did not agree to postpone the completion date.  Mr Cheung insisted that completion should take place on or before 21 November, being 28 days from the notification of the premium amount to Madam Lok.

26.  Madam Lok wrote Mr Cheung a letter dated 18 November 2005 saying that he had empowered her to protest to the government on the amount of premium.  She had filed an opposition under the PoA on his behalf to the DL Office and engaged a surveyor to sustain the protest.  She further said that it was an implied term under the agreement that she had the right to protest the amount of premium and the right to postpone the payment of the balance of the purchase price pending the re-assessment of the premium.

27.  Madam Lok’s solicitors wrote on Mr Cheung’s solicitors on 21 November and enclosed a cheque for HK$480,684.48 payable to them as stakeholder pending completion of the sale of the building.  Madam Lok’s solicitors also said that there were outstanding title documents for proving Mr Cheung’s title to the building.  They reserved the right to raise further requisitions and said that completion should be postponed to a later date within a reasonable time after all requisitions have been answered satisfactorily and Mr Cheung’s good title to the building proved.

28.  Madam Lok’s solicitors wrote again on 22 November and referred to the purchase price in the agreement as HK$7.3 million (instead of HK$6.3 million). They further said that the purchase price in the sale and purchase agreement had to include the amount of premium in excess of HK$3.5 million (which excess Madam Lok had to bear) and a sum of additional compensation to be paid upon completion or as agreed by Madam Lok and Mr Cheung.  This is the first time that such compensation was mentioned.  The letter also said that the stakeholder money of HK$480,648.48 could be released to Mr Cheung upon Madam Lok’s solicitors receiving an approval letter issued by the DL Office for opening side windows in the building (a title document) and a draft agreement for sale and purchase with the amount of purchase price set forth in the formula as described in this letter.  The letter also referred to a counter-offer by Mr Cheung on which the solicitors were taking instructions from Madam Lok.  This letter may thus be part of certain without prejudice negotiation between the parties though it is not marked “without prejudice”.

29.  Madam Lok’s solicitors sent Mr Cheung’s solicitors on the same date another letter of the same content as the last letter except that the purchase price was changed from HK$7.3 million to HK$6.3 million.  As I said in the last paragraph, this letter appeared to be part of a chain of negotiation correspondence.  Mr Cheung did not admit this letter, but I cannot see any basis for his refusal to admit it.  There is also no letter from his solicitors seeking to argue that the purchase price should be HK$7.3 million.

30.  Mr Cheung’s solicitors returned to Madam Lok’s solicitors the stakeholder cheque for HK$480,684.48 on 22 November.  They said that the cheque was returned because completion could not be proceeded with on 21 November.  They further said that they were taking instructions from Mr Cheung as to the latest arrangement of the matter.  They also enclosed the certificate of compliance (of the obligations of the building license for putting up the building).  This is a title document which should have been sent to Madam Lok’s solicitors on or before 21 November if completion were to take place on 21 November.  Hence, regardless of whether Mr Cheung had the right to demand completion on 21 November, he was not ready to do so on that day as he had not supplied all relevant title documents to Madam Lok’s solicitors on or before that date.  His solicitors also did not complain that Madam Lok had breached the agreement in failing to complete the transaction on 21 November.

31.  Mr Cheung’s solicitors further sent on 5 December 2005 a certified copy of an approval letter from the DLO for opening side windows in the building. This is also a title document which should be provided to Madam Lok’s solicitor for proving title before completion.  Furthermore, the approval letter related to the building exclusively and the original should have be provided to Madam Lok as part of the title documents.  Madam Lok’s solicitors duly asked on 16 December for the original of the letter or a statutory declaration by Mr Cheung on its loss.  Mr Cheung’s solicitors only provided the statutory declaration of loss on 23 December.

32.  Though the appeal on the amount of premium was in progress as confirmed by DLO’s letter of 9 December to Mr Cheung via Madam Lok, Mr Cheung on 22 December sent his personal notification to the DLO withdrawing the appeal.

33.  The withdrawal of the appeal by Mr Cheung was confirmed by the DLO’s letter dated 6 January 2006.  The DLO said in the letter that Mr Cheung had to apply again if he should be desirous of proceeding to remove the non-assignment clause in the land grant.

34.  Finally, Mr Cheung sent a letter dated 3 March 2006 to Madam Lok personally.  He referred to the agreement with purchase price at HK$6.3 million inclusive of HK$3.5 million for payment of premium.  He said the agreement provided that the completion date was within 28 days from his notifying Madam Lok of the premium notification from the government.  Completion of the transaction should take place within 12 months from his application for premium assessment. His solicitors had applied for premium assessment on 22 February 2005.  He had also delivered vacant possession of the building to Madam Lok on 1 March 2005. The balance of purchase price at HK$4 million less HK$3.5 million should be payable to him upon completion.

35.  He further said that he had given Madam Lok notice of the assessment of premium at HK$6,810,600 on 24 October 2005 through her estate agent.  He had also through his solicitors notified Madam Lok’s solicitors that payment of premium and completion should take place on 21 November 2005.  However, Madam Lok objected to the premium assessment and asked for re-assessment without his consent thereby making completion on 21 November not feasible.

36.  He further alleged that Madam Lok was uncooperative in that her solicitors only raised requisitions a few days before the scheduled completion when the title deeds and documents had been supplied to her solicitors long ago.  She thus caused it to appear that he was not in a position to complete for failing to satisfy her on his title to the building.  She did this to gain time for re-assessment of premium and then to decide whether to complete after the re-assessment. Her action was contrary to the agreement.

37.  He also alleged that the agreement had lost its effect because Madam Lok had breached a number of its conditions.  He also reserved his right to claim all loss and damage.  He also said that Madam Lok’s right to occupy the building had ceased on 21 November 2005 as she could not complete the transaction on that date.  He demanded her to deliver up vacant possession of the building within 10 days from her receipt of the letter.

      Did Mr Cheung notified Madam Lok on 24 October 2005 of the premium notice or was he ready to complete on 21 November?

38.  On the question of whether he had notified Madam Lok on 24 October 2005 about the notice of premium through the estate agent, his solicitors had not mentioned the same in the letters though they did say that completion should be on 21 November.  Madam Lok’s solicitors also did not dispute that completion should be on 21 November (subject to the provision of title deeds and documents and proof of title by Mr Cheung and the postponement because of re-assessment of premium).

39.  Mr Cheung pleaded in §10 of his statement of claim that he had informed Madam Lok of the premium notice on 24 October.  Madam Lok dealt with this paragraph in §19 of her re-re-amended defence and counterclaim.  However, she did not expressly plead to whether Mr Cheung had on 24 October 2005 notified her through the estate agent the premium notice or that completion should not be on 21 November but should be on 2 December (subject to proof of title by Mr Cheung and the postponement because of re-assessment of premium).  This issue was also not dealt with in her deposition.  However, whether completion should have been on 21 November or 2 December is not a matter of importance as Mr Cheung’s solicitors had not proved his title to the building on either date.  As shown below, they only did so on 23 December on 23 December.

40.  Mr Cheung alleged in his letter of 3 March 2006 that Madam Lok had been late in raising requisitions.  But his solicitors had not made such complaint.  They provided Madam Lok’s solicitors with the title deeds and documents on 13 January 2005.  Madam Lok’s solicitors then raised requisitions on 18 February 2005.  They specifically asked for DLO’s approval for the opening of side windows.  Mr Cheung’s solicitors in turn asked the DLO on 22 February 2005 for a certified copy of the approval letter.  The DLO replied on 11 March that he was processing the application for opening of side window.  This matter then went to rest until 4 November when Mr Cheung’s solicitors repeated their request to the DLO.  Madam Lok’s solicitors repeated their request for the original of the approval letter in their letter dated 17 November.  Mr Cheung’s solicitors advised them on 19 November that they would deal with this matter in due course.  Madam Lok’s solicitors reiterated on 21 November that there were outstanding title documents one of which was the approval letter.  They referred to the approval letter again in their letter of 22 November.  The certified copy of DLO’s approval letter was then provided to them on 5 December.  However, Mr Cheung’s statutory declaration of loss of the original approval letter was only provided on 23 December 2006.

41.  The trial judge ‌held that there were no last minute requisitions. The fact was that Mr Cheung’s solicitors had been dilatory in obtaining information to answer the requisition that was made in time.  They only proved Mr Cheung’s title to the building on 23 December.  Hence, Mr Cheung was not ready to complete the transaction on 21 November (or 2 December) 2005.

THE JUDGMENT

  Mr Cheung’s alleged oral agreement to increase the purchase price to HK$7.3 million 

42.  Mr Cheung pleaded in §6 of his statement of claim and alleged in evidence that there was a further oral agreement by which Madam Lok agreed to pay him an extra HK$1 million to assist him to pay off the legal charge and to redecorate the building.  The learned deputy judge pointed out that his solicitors had not at any time suggested that the purchase price was higher than HK$6.3 million as provided in the agreement.  He held that Mr Cheung’s evidence was contrary to the documents and commonsense.  He further held that Mr Cheung’s allegation was a fabrication and did not believe Mr Cheung.  The He decided that the additional HK$1 million was part of the loan or advance of HK$1.38 million made by Madam Lok to him under the decoration agreement.  I also refer to Mr Cheung’s letter dated 3 March 2006 to Madam Lok personally wherein he said the purchase price of the building was HK$6.3 million inclusive of premium up to HK$3.5 million.  He did not suggest in the letter that there was an extra HK$1 million or that the purchase price had been varied to HK$7.3 million by a verbal agreement.  The deputy judge was absolutely right in rejecting this allegation of oral agreement.

  The PoA given by Mr Cheung to Madam Lok

43.  I have referred above to the PoA executed by Mr Cheung in favor of Madam Lok and dated 1 October 2005.  Paragraph 21 of the PoA enabled Madam Lok to raise objections and negotiate with the relevant government department on the amount of premium payable.  It in effect authorized Madam Lok to appeal in Mr Cheung’s name against the premium assessment.

44.  Mr Cheung admitted that he had signed the PoA, but claimed that he had no recollection or understanding of it.  He pleaded in §5 of his re-re-amended reply and gave evidence that it was one of the documents put before him to sign by the estate agent Mrs Chan in her office on 29 December 2004.  But the PoA was dated 1 October 2005.  He had previously signed a similar PoA in May 1990 (together with another person) giving such power to a third person.  The deputy judge found his explanation for the PoA he gave Madam Lok disingenuous.  The deputy judge held that he well knew what a PoA was and his facile attempt to suggest he knew nothing about this PoA was an example of his inability to be truthful.

45.  Madam Lok referred to the PoA in her letter to him dated 18 November 2005.  I have referred to this letter above.  She said that it was an implied term under the agreement that she had the right to protest the amount of premium and the right to postpone the payment of the balance of the purchase price pending the re-assessment of the premium.

46.  Madam Lok also pleaded in §§8 and 10 of her re-re-amended defence and counterclaim that there was a collateral agreement to the agreement which was constituted partly by the decoration agreement and partly by an oral agreement or alternatively there was a composite agreement partly constituted by the agreement and decoration agreement.  She further pleaded in §§9(c), 12 and 12A that the PoA was made pursuant to the agreement, collateral agreement or composite agreement and Mr Cheung was estopped from denying her right to rely on it to appeal against the premium assessed by the government.  Alternatively, she pleaded in §13 that the agreement was varied by the terms of the PoA.

47.  She also said in her deposition that she had written to Mr Cheung the letter dated 18 November 2005 pointing out that Mr Cheung had empowered her to protest to the government on the amount of premium and she filed the opposition on Mr Cheung’s behalf under the PoA.  She also said in her deposition that she and Mr Cheung shared an understanding that the process of reassessment of premium would take time.

48.  The deputy judge held that the PoA was in effect a collateral agreement to ensure that the process of establishing the premium assessment was determined in the interests of both parties.  Madam Lok relied on the PoA when she filed on 7 November 2005 the objection on behalf of Mr Cheung to the premium assessed.  She was exercising her right to appeal the assessment under the PoA.

49.  The deputy judge also held that when Mr Cheung wrote to the DLO on 22 December 2005 withdrawing the appeal, he well knew that Madam Lok had applied for re-assessment of the premium in accordance with the PoA given by him but he chose to ignore it.  His withdrawal was an irrational interference with Madam Lok’s right under the PoA.  In doing so, he was in breach of the express and implied terms of the agreement and the PoA.

The order made against Mr Cheung

50.  The deputy judge gave the judgment on 31 October 2016 and revised his order on 30 November 2016.  He ordered Mr Cheung to repay Madam Lok the HK$1.38 million advanced to him under the decoration agreement less the net purchase price payable to him under the agreement with interest (after deduction of HK$3.5 million).  He also ordered Mr Cheung to apply to the DLO within 7 days for re-assessment of premium.  In the event that the re-assessed premium should exceed HK$6,810,600 (as assessed on 24 November 2005), Mr Cheung had to pay the extra premium within 7 days upon notification of the fresh premium by the government.  Madam Lok was given the liberty to pay the extra premium on behalf of Mr Cheung with a right of indemnification from him with interest.  Mr Cheung had to transfer the building to Madam Lok within 7 days after consent was given by the DLO.  Mr Cheung was also ordered to pay the costs of the action to Madam Lok.  The costs included the costs for appealing the premium and the costs of the surveyors’ report.

MR CHEUNG’S APPLICATION TO ADDUCE FURTHER EVIDENCE ON APPEAL

51.  Mr Cheung filed a summons on 3 September 2018 to adduce further evidence on appeal.  He also filed his 3rd affirmation in support of the application on the same day.

Evidence of the existence of unauthorized building works in the building

52.  The 1st relief in the summons is for an order that Mr Cheung be allowed to adduce a number of documents to show the existence of unauthorized building works (“UBWs”) in the building.

53.  Of the documents on the UBWs in the building, there are two reports made by Savills Project Consultancy Ltd for Mr Cheung and dated 24 August and 31 May 2018 (revised on 8 June 2018).  The report dated 24 August is said to show that there was no UBWs in April 2005 after Mr Cheung had delivered vacant possession of the building to Madam Lok on 1 March 2005.  The report dated 31 May (revised on 8 June) is said to show UBWs in the building on 23 May 2018 when the surveyors inspected the building.

54.  Mr Cheung wanted to show that Madam Lok had constructed UBWs in the building after he had delivered vacant possession of the building to her.  Mr Perry Chan and Mr Anthony Chow, counsel for Mr Cheung, submitted that Madam Lok by constructing the UBWs had breached the agreement and the government’s land grant.  Hence, there would be no prospect of obtaining consent from the DLO for Mr Cheung to transfer the building to Madam Lok.  The breach of the land grant also provided the government the right of re-entry to the land.  Madam Lok’s breach of the agreement also amounted to her repudiation of it which allowed Mr Cheung the right to put an end to it.

55.  In order to adduce fresh evidence on appeal, Mr Cheung has to satisfy the three conditions in Ladd v Marshall [1954] 1 WLR 1489 at 1491 (see also King Policy Development Ltd v Wan Kin Shing [2019] HKCA 1094 at §5) by showing that:

(a)  the evidence could not have been obtained with reasonable diligence for use at the trial;

(b)  the evidence would, or might, if believed, have an important influence on the outcome, though not necessarily decisive, and

(c)  the evidence would probably be accepted as truthful.

56.  Mr Cheung has made three affirmations wherein he referred to the UBWs. The 1^st and 2^nd affirmations were filed on 27 July 2018 and 3 September 2018 respectively for another application made by the executor of Madam Lok’s estate on 26 June 2018 after the trial of the action.  The 3^rd affirmation is in support of this application and also filed on 3 September 2018.  However, he did not mention in any of the three affirmations anything which can satisfy the first condition in Ladd v Marshall.  He did not say a word on whether the UBWs were in existence before or after the trial or why he would have suddenly engaged the surveyors to inspect the building on 23 May 2018 for UBWs.  He also did not say anything on whether the evidence of the UBWs could or could not have been discovered with due diligence for use at the trial.  There is no evidence of his due diligence at all.

57.  Mr Chong and Mr Chow then submitted that they were not relying on Ladd v Marshall.  They were relying on an exception discussed in §59/10/8 (ii) of the Hong Kong Civil Procedure 2018.  The exception relates to matters which have occurred after the date of the trial or hearing.  However, this exception does not cover evidence coming to light after trial as to matters which occurred before trial (§§59/10/8 (ii) and 59/10/13 of the Hong Kong Civil Procedure 2018).

58.  In order to get into this exception, Mr Chan and Mr Chow referred to §4 of Mr Cheung’s 3^rd affirmation wherein he said:

“4. As noted above, the materials referred to in paragraphs 3(a) to 3(i) above relate to the presence of then UBWs at the (building) and its implications. All those materials came into being after the trial in HCA 1486/2007 which took place in October 2016. …”

59.  The materials referred to by Mr Cheung are the documentary evidence that he seeks to adduce on this appeal to show the existence of the UBWs.  They are evidence coming to light after trial as to UBWs which could have come into existence either before or after the trial.  He made no attempt to say when did the UBWs come into existence.  He thus cannot get into the exception to the Ladd v Marshall requirements.

New English translation of the agreement

60.  Mr Cheung also wanted to adduce a fresh English translation of the agreement.  Mr Chong and Mr Chow argued that the new translation is correct and can show that the time for Madam Lok to pay the 4^th instalment of purchase price was 28 days from the notification of premium by the government.  The new translation in fact has no material difference on this point.  There is no basis to admit the fresh translation.

Decision on the application to adduce further evidence

61.  Mr Cheung could not satisfy the Ladd v Marshall conditions and was unable to get into any exception to the Ladd v Marshall requirements for adducing the documents relating to the UBWs.  His new translation of the agreement also has no material difference on the point in issue.  We therefore dismissed his application to adduce further evidence at the hearing of the appeal with costs against him to be taxed on indemnity basis and with certificate for two counsel.

THE APPEAL

62.  Mr Cheung made some grounds of appeal by himself in his notice of appeal filed on 16 December 2016.  His counsel did not rely on these grounds but on the grounds set out in a supplemental notice of appeal filed on 18 August 2017.

Entitlement to specific performance

63.  Mr Cheung’s 1st ground of appeal is that the deputy judge had erred in acceding to Madam Lok’s re-re-amended counterclaim and ordering Mr Cheung to specifically perform the agreement.  The attack is that the deputy judge had erred in law and/or fact and/or in the exercise of his discretion in making the order when Madam Lok did not have clean hands and was never ready, willing and able to pay the 4th installment of the purchase price.  Alternatively, it says that the decree of specific performance would compel Mr Cheung to breach or continue to breach the government’s land grant, requires constant supervision by the court, and may involve an impossibility.  It says that damages would be a more appropriate remedy.

64.  Mr Cheung pleaded his defence to Madam Lok’s counterclaim for specific performance in §§1 to 16 of the re-re-amended reply and defence to counterclaim.  But none of the points in the 1st ground can be found in his pleaded case.  He only raised these points for the first time on this appeal.

65.  Mr Patrick Chong and Mr Felix Ng, counsel for Madam Lok, submitted that the points made by Mr Cheung in this ground are raised for the first time on appeal and Mr Cheung should not be permitted to do so.  They referred to Flywin Co. Ltd. v. Strong & Associates Ltd [2002] 2 HKLRD 485 at §§37 to 39 where Mr Justice Bokhary PJ said:

“37.   Mr Michael Thomas SC (who appeared for the Purchaser in the Court of Appeal as well as in this Court although not at the trial) cited The Tasmania (1890) 15 App Cas 223 in which Lord Herschell said this (at p. 225):

   “My Lords, I think that a point such as this, not taken at the trial, and presented for the first time in the Court of Appeal, ought to be most jealously scrutinised. The conduct of a cause at the trial is governed by, and the questions asked of the witnesses are directed to, the points then suggested. And it is obvious that no care is exercised in the elucidation of facts not material to them.

   It appears to me that under these circumstances a Court of Appeal ought only to decide in favour of an appellant on a ground there put forward for the first time, if it be satisfied beyond doubt, first, that it has before it all the facts bearing upon the new contention, as completely as would have been the case if the controversy had arisen at the trial; and next, that no satisfactory explanation could have been offered by those whose conduct is impugned if an opportunity for explanation had been afforded them when in the witness box.”

38.   Mr McDonnell submitted that what Lord Herschell said was confined to the circumstances of that case and how the Court of Appeal went about reversing the view of the facts taken by the trial judge sitting with nautical assessors.  I am unable to accept that submission. What is involved is a general principle.  Where a point is taken at the trial, the facts pertaining to it are open to full investigation at the evidence-taking stage of the litigation.  That is as it should be.  Therefore where a party has omitted to take a point at the trial and then seeks to raise that point on appeal, the position is as follows.  He will be barred from doing so unless there is no reasonable possibility that the state of the evidence relevant to the point would have been materially more favourable to the other side if the point had been taken at the trial. 

39.   Clearly the foundational imperative of the “state of the evidence” bar, as I propose to call it, is fairness.”

66.  Regarding the exercise of discretion by the court of first instance, Mr Chong and Mr Ng also referred to Cheng Wai Tao v Poon Ka Man Jason(2016) 19 HKCFAR 144 at §§134 and 136 where Mr Justice Spigelman NPJ said at §§134 and 136 as follows:

“134.   The Respondent makes a compelling case that the Appellant is not entitled to raise this discretionary matter for the first time in this Court. Discretionary refusal of relief must be fact based. As the Respondent contends, no such discretionary ground for refusing relief was pleaded and, accordingly, evidence was not directed to it. ...

…

136.   At the trial, the parties did not address themselves to this unpleaded case.  We do not have the benefit of any findings of fact.  This Court should not entertain an argument that relief should be denied on equitable grounds without taking the full range of relevant considerations into account, …”

67.  Mr Chan and Mr Chow did not in their submissions submit on whether the state of the evidence relevant to specific performance would have been materially more favourable to Madam Lok if this point should have been taken at the trial.  It is therefore unfair to Madam Lok to allow these points to be raised for the first time on appeal. They should also not be allowed to challenge the exercise of discretion by the court for the first time on appeal as this issue was not canvassed at the trial and the evidence was not directed to it.

68.  Specifically on the ground that Madam Lok was not ready, willing and able to perform the agreement by paying the 4^th instalment, Mr Chong and Mr Ng made the further point for Madam Lok that time for completion was at large after the completion date of 21 November or 2 December had expired.  The deputy judge held that completion date had not yet arrived as there were outstanding requisitions.  The correspondence show that when completion could not take place on 21 November, Mr Cheung’s solicitors advised Madam Lok’s solicitors on the same day that they were taking instructions from Mr Cheung as to the latest arrangement of the matter.  After they had proved the title on 23 December, they did not liaise with Madam Lok’s solicitors to fix a new completion date.  Time for completion was thus at large even without the postponement of completion by reason of Madam Lok’s exercise of her right under the PoA to seek re-assessment of premium.  Mr Cheung cannot argue that Madam Lok was not ready, willing and able to perform the agreement by paying the 4^th instalment on 21 November 2005.

69.  Regarding the argument that specific performance of the agreement would compel Mr Cheung to breach or continue to breach the government’s land grant, Mr Chan and Mr Chow referred to special condition 5(a) of the land grant.  It provides that unless the DLO has given his prior consent under special condition 5(d), Mr Cheung cannot assign any interest in the building and the land on which it stands.  They further referred to general condition 10 and 11 which provide that any failure on the part of Mr Cheung to comply with the conditions of the land grant shall be deemed to be a continuing breach of the land grant which entitles the government to re-enter upon and take back possession of the building and the land on which it stands.

70.  However, the government may or may not exercise the right of re-entry upon breach of the above conditions.  Previously when Mr Cheung breached a similar special condition no. 5(b) in charging the building to Freeway Finance without the prior written consent of the DLO, the DLO did not exercise the right to re-enter the building and land, but only imposed a penalty and related charges on Mr Cheung totalling HK$14,150.  

71.  Since this point was raised only on appeal and there is no evidence on what the government may do upon discovering the matter.  Mr Cheung should therefore not be allowed to raise it now. 

72.  Regarding the new point that specific performance of the agreement requires the constant supervision of the court and hence should not be made, Mr Chong and Mr Ng also referred to Hanbury & Martin on Modern Equity, 20^th ed., at §27-020 which states:

“Orders for the specific performance of contracts to create or convey a legal estate in land do not meet with this difficulty. All that the defendant needs to do to perform such a contract is to execute the document; and, as has been seen, if he refuses, he may be threatened with imprisonment for contempt; and if he still refuses, the court may nominate any person to effect the conveyance.”

73.  Mr Cheung was ordered to apply to the DLO within 7 days of the order for re-assessment of premium.  That is not a matter that requires constant supervision of the court.  Madam Lok had attempted it in November to December 2005.  She did not appear to have encountered any difficulty.  It did not appear to be a complicated matter.  Mr Cheung may consider engaging a firm of surveyors to assist him in discharging the task as he has to provide the DLO with a valuation report with market evidence in support.  There is nothing to suggest that the performance of this task would require constant supervision of the court.

74.  Mr Cheung was also ordered to transfer the building to Madam Lok within 7 days after consent was given by the DLO.  This task is covered by the passage from Hanbury & Martin on Modern Equity quoted above.  It is not a task that would require the constant supervision of the court.

75.  The other obligations imposed by the order on Mr Cheung are to make payments to Madam Lok’s estate.  They not require the constant supervision of the court.

76.  The last new point in this ground raised only on appeal is whether damages are a more appropriate remedy than specific performance.  Mr Chong and Mr Chow submitted that Mr Cheung was in financial troubles.  He had to borrow money from Madam Lok under the decoration agreement to pay off the legal charge on the building.  He also needed loans from Madam Lok to pay off other debts like penalty and rates.  His conduct of the action was funded by legal aid.  Hence, damages could not have been an option for the court.  I agree with them.

77.  On the whole, none of the points in the 1st ground of appeal has merit and this ground is dismissed.

There is no genuine or valid PoA and the PoA and its implied term would not displace the agreement

78.  The 2nd ground of appeal says that the deputy judge erred in holding that the PoA was a genuine and/or valid instrument executed by Mr Cheung before a solicitor who acted for Madam Lok in the transaction on 1 October 2005, a public holiday, and that the PoA was a collateral agreement to the agreement.  The complaints are that there was no or no sufficient evidence concerning the execution and/or existence of the PoA, no original of the PoA was disclosed by the defendant, the terms of the PoA are inapplicable to the transaction thereby raising doubts as to its authenticity.  The defendant has also failed to call the relevant witnesses and/or otherwise discharge the burden of proof.

79.  The 2nd ground challenges the finding of fact made by the trial judge.  It is well settled law that the court of appeal can only interfere with such findings when it is satisfied that the findings by the primary judge is plainly wrong (see Ting Kwok Keung v Tam Dick Yuen & Ors, (2002) 5 HKCFAR 336, §§ 32 to 43 per Bokhary PJ; China gold Finance Ltd v CIL Holdings Ltd & Ors, CACV 11/2015, 27 November 2015, §§ 11 to 24; Yeung Cheung Chun v Wing Shing Caisson & Foundation Ltd & Anor, CACV 39/2015, 25 April 2016 at §35 and ZJW v SY, CACV 10/2017, 1 December 2017, §§ 26-34).

80.  Mr Cheung did not file any notice pursuant to Order 27 rule 4 of the RHC to dispute the authenticity of the PoA. This ground was also made in ignorance of Mr Cheung’s admission at the trial that he had executed the PoA though he made the excuse that it was one of the documents put before him to sign by the estate agent Mrs Chan in her office on 29 December 2004.  The deputy judge disbelieved his excuse as the PoA was not dated 29 December 2004 but 1 October 2005.  He also did not plead duress, non-est factum or lack of capacity so that the PoA should be without effect.  Hence, the authenticity and effect of the PoA cannot be disputed.  The challenge on authenticity of the PoW therefore fails.

81.  The 6th ground of appeal says that the deputy judge erred in law in holding that the PoW had altered the rights and obligations of the parties under the agreement so that Madam Lok had the right to apply for re-assessment of premium and thus to defer her payment of the 4^th instalment of the purchase price until after payment of the re-assessed premium and that Mr Cheung had no right to revoke the PoW or cancel the appeal for re-assessment.

82.  The PoW made on 1 October 2005 expressly authorized Madam Lok to negotiate with the government on the amount of premium.  Madam Lok said in her witness statement that she agreed to advance the loan to Mr Cheung in the decoration agreement because Mr Cheung agreed to give her the PoW to protect her on the amount of premium.  She also said in her deposition that she and Mr Cheung shared an understanding that the process of reassessment of premium would take time.  The deputy judge accepted her evidence.  The deputy judge held that the PoA was in effect a collateral agreement to ensure that the process of establishing the premium assessment was determined in the interests of both parties.  That is also obvious as otherwise §21 of the PoW would have no effect. 

83.  Premium had to be paid before the transfer of the building.  Since Madam Lok had the right to appeal and seek re-assessment of the premium, the date of completion had to be postponed as a matter of necessity upon her exercise of the right.  It would take place after the re-assessment.  Mr Chan and Mr Chow have only made an assertion but not advanced any valid argument to challenge this finding.  The 6th ground of appeal must fail.

The decoration agreement and the alleged loan/advances of HK$1,380,000

84.  The 3rd ground relates to the decoration agreement.  It says that the deputy judge had erred in fact in holding that the decoration agreement was a genuine and/or valid agreement signed by another person on behalf of and binding on Mr Cheung.  The points made in support of this ground are that there was no or no sufficient evidence concerning the signing of the document on 29 December 2004, proving Mr Cheung had authorized another person to sign it for him, and showing when exactly the document was signed on 29 December and why Mr Cheung could not have sign it by himself given that he had signed the agreement on the same day.  There are also arguments that the original of this document was never produced and the defendant had failed to call the relevant witnesses or otherwise to discharge the burden of proof at the trial.

85.  The 4th and 5th grounds challenge the deputy judge’s finding that the sum of HK$1.38 million was a loan advanced by Madam Lok to Mr Cheung.  They referred to the letters exchanged between the solicitors from 14 to 22 November 2005 where Madam Lok’s solicitors stated the purchase price to be HK$7.3 million.  They also say that Madam Lok’s solicitors had acknowledged that the HK$1.38 million was not a loan from Madam Lok to Mr Cheung by not deducting this sum from the outstanding purchase price of HK$480,684.48.

86.  Mr Cheung in fact had not challenged the existence of the decoration agreement in the court below.  He had not served any notice under O 27 r 4 of the RHC to dispute the authenticity of this agreement.  When Madam Lok gave her deposition, counsel representing Mr Cheung only challenged her that Mr Chan did not sign the decoration agreement as a representative of Mr Cheung.  Mr Cheung therefore cannot challenge the genuineness of this agreement on appeal.

87.  Mr Cheung also agreed that he had borrowed a loan of HK$380,000, but he asserted that the lender was Mr Chan and not Madam Lok.  If that was the case, there was no reason why Mr Chan would have signed the decoration agreement which stated that this sum was part of the HK$1.38 million loan advanced by Madam Lok to Mr Cheung.  Mr Cheung had also received the sums of HK$380,000 and HK$1 million in line with the terms of the decoration agreement.

88.  Mr Chan and Mr Chow also relied on a letter dated 22 November 2005 from Madam Lok’s solicitors stating the purchase price at HK$7.3 million.  That letter was however replaced on the same day by another letter of the same content but with the purchase price changed to HK$6.3 million.

89.  Furthermore, Mr Cheung’s solicitors never said that the purchase price was HK$7.3 million.  Mr Cheung himself in his letter to Madam Lok dated 3 March 2006 also said that the purchase price for the building was HK$6.3 million. 

90.  Regarding the non-deduction of the HK$1.38 million from the balance of the purchase price, Madam Lok said in her witness statement that Mr Cheung had on 17 November denied having authorized her to negotiate the premium or that she had lent him money.  She was therefore prepared to pay Mr Cheung HK$480,684.48 so that he could not use the deduction of the HK$1.38 million as an excuse that she was unable to pay the 4^th instalment of purchase price and to terminate the agreement.  She was not challenged in her deposition.  Her evidence was accepted by the deputy judge.

91.  In the light of the above evidence, Mr Chan and Mr Chow cannot show that the deputy judge’s findings of fact that the purchase price of the building was HK$6.3 million and Madam Lok had advanced HK$1.38 million to Mr Cheung under the decoration agreement are plainly wrong.  The 3rd, 4th and 5th grounds of appeal must fail.

Was the agreement breached by Mr Cheung or by Madam Lok?

92.  The 7th to 12th grounds can be dealt with together.  One ground says that Mr Cheung was not in breach of the agreement and the other says that Madam Lok was in breach. 

93.  The 7th and 8th grounds argued that the deputy judge had erred in concluding that Mr Cheung had breached the agreement and failed to identify Mr Cheung’s breaches and their consequences and the reasons thereof. 

94.  Mr Chan and Mr Chow submitted that Mr Cheung was not in breach of the agreement by withdrawing the premium appeal on 22 December 2005.  Further, he validly rescinded the agreement by his letter to Madam Lok and dated 3 March 2006 and/or the agreement had been rescinded by lapse of time by July 2007.

95.  This last point that the agreement had been rescinded automatically by lapse of time is only mentioned for the first time in their submissions.  This is clearly impermissible.

96.  The 9th to 10th ground say that the agreement properly translated would require Madam Lok to pay the 4th instalment of the purchase price within 28 days from the date of the notification of premium by the government.  Since Madam Lok had failed to do so, Mr Cheung was entitled to forfeit her deposits and required her to deliver up vacant possession of the building.  The deputy judge thus erred in concluding that Madam Lok was not in breach of the agreement. 

97.  Mr Cheung argued that the clause of the agreement providing for the payment of the 4th instalment of purchase price should be translated to read:

“(Mr Cheung) should inform (Madam Lok) after receipt of the notice of payment of premium concerning (the building) from the Hong Kong Government, (Madam Lok) should pay the remaining balance of the purchase price within 28 days.”

98.  This translation does not assist Mr Cheung.  The clause has no time limit on when Mr Cheung should inform Madam Lok about the government’s notice. A reasonable interpretation must be that the last day for payment should be the 28^th day from the notification.  Otherwise, Mr Cheung could give notification to Madam Lok on the 28^th day from the date of the government’s notification and Madam Lok would be placed in an impossible situation.  Hence, the new English translation does not help Mr Cheung.

99.  The 11^th and 12^th grounds say alternatively that Madam Lok had in any event failed to pay the 4^th instalment within 28 days from her being notified of the government’s premium notice and Mr Cheung was entitled to forfeit her deposits and require her to deliver up vacant possession of the building.   

100.  All the points covered by these grounds have been discussed above.  The key points are that Mr Cheung had not proved his title until 23 December 2005. Hence, he could not have completed on either 21 November or 2 December.  His solicitors made no attempt to fix a new completion date after 23 December 2005.  Furthermore, Madam Lok was, by reason of the PoW, entitled to appeal against the premium assessed by the government and to seek a re-assessment. Her exercise of such right had by necessity postponed the completion date to after the re-assessment.  But her exercise of such right was wrongly interrupted by Mr Cheung on 22 December 2005.  Hence, Mr Cheung had breached the agreement and the date of completion was at large.  The time for Madam Lok to pay the 4th instalment has not arrived.  Hence, none of the 7th to 12th grounds of appeal has any merit.

JUDGMENT

101.  I have disposed of all the grounds of appeal as discussed in the submissions of Mr Chan and Mr Chow.  None of these grounds has any merit and we dismissed this appeal with costs at the end of the hearing. 

102.  We said we would determine the basis of costs in these reasons for judgment.  The defendant’s counsel sought costs of the appeal on an indemnity basis.  We have heard the opposing arguments of Mr Chan and Mr Chow.  The main challenges by Mr Cheung in this appeal are on the deputy judge’s findings of fact, but such challenges are totally groundless.  We therefore decide to make an order that Mr Cheung should pay the costs of the appeal to Madam Lok’s estate to be taxed on indemnity basis and with certificate for two counsel.