MAXBASE INVESTMENTS LTD v. CHAN CHUI PING AND ANOTHER

DCCJ808/2010

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 808 OF 2010

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BETWEEN

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JUDGMENT

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Background and Nature of the Plaintiff’s Claim

1.  At all material times, the Plaintiff was the owner of Flat A (“Flat A”) and Flat B (“Flat B”) on the 27^th Floor of Sunrise Villa, No. 33 Sung On Street, Kowloon (collectively referred to as “the Properties”).

2.  At all material times, the partition wall between Flat A and Flat B had been demolished, so that Flat A and Flat B together formed a single adjoining unit, and the Properties were offered for sale by the Plaintiff as such in late 2009.

3.  The 1^st and 2^nd Defendants are and were at all material times a married couple.

4.  In the evening of 16 December 2009, the Defendants through a Ms. Deng Su Tao (“Ms. Deng”) of Midland Realty offered to purchase the Properties at the total price of HK$7.1M, by having the 1^st Defendant to sign as purchaser a Preliminary Sale and Purchase Agreement for the sale and purchase of Flat A for a consideration of HK$3.6M (“Flat A Agreement”), and having the 2^nd Defendant to sign as purchaser a Preliminary Sale and Purchase Agreement for the sale and purchase of Flat B for the consideration of HK$3.5M (“Flat B Agreement”) (collectively referred to as “the Agreements”).

5.  At the same time, the 1^st Defendant also drew 2 cheques in favour of the Plaintiff for HK$100,000 each, Cheque No. 139535 dated 16 December 2009 for paying the initial deposit under the Flat A Agreement, and Cheque No. 139536 dated 16 December 2009 for paying the initial deposit under the Flat B Agreement (collectively referred to as “the Cheques”).  The Cheques were handed to Ms. Deng by the Defendants.

6.  Pursuant to the terms of the Agreements, the 1^st and 2^nd Defendants were each liable to pay the Plaintiff HK$100,000 as initial deposit under respectively the Flat A Agreement and the Flat B Agreement.  As is commonly the case, such initial deposits were liable to be forfeited by the Plaintiff should the Defendants failed to complete the purchases under the Agreements. 

7.  Mr. Kee Kai Fun, George (“Mr. Kee”), an authorized representative of Divine Century Group Limited, which in turn was and is a corporate director of the Plaintiff, was on 17 December 2009 only prepared to sell the Properties for the total sum of HK$7.15M.  On 17 December 2009, Mr. Kee spoke with Ms. Deng to tell her that if the Defendants were only willing to purchase the Properties at HK$7.1M and if Ms. Deng was eager to conclude the deal, Ms. Deng should consider reducing her commission to be charged on the Plaintiff.  Ms. Deng eventually agreed to waive about HK$50,000 of the commission to be charged on the Plaintiff by Midland Realty.  

8.  As a result, the Plaintiff accepted the Defendants’ offer for purchasing the Properties at HK$7.1M, by having Mr. Kee to sign on the Agreements for and on behalf of the Plaintiff.  After the signing of the Agreements by Mr. Kee, the Cheques were delivered to Mr. Kee by Ms. Deng. 

9.  On 18 December 2009 the Cheuqes were presented to the Wing Hang Bank for payment by the Plaintiff.

10.  On 21 December 2009, the Plaintiff was informed by the Wing Hang Bank that both Cheuqes were dishonoured by reason of “Payment countermanded by the drawer”. 

11.  Despite the Plaintiff‘s requests and demands, the Defendants failed and/or refused to pay the Plaintiff the total initial deposits of HK$200,000 under the Agreements.  It is the Plaintiff’s case that such conduct amounted to repudiation of the Agreements by the Defendants, and such repudiation was accepted by the Plaintiff by a letter from its solicitors dated 7 January 2010. 

12.  This action is brought by the Plaintiff against the 1^st Defendant for HK$200,000 under the Cheques of which payment had been countermanded, further or in the alternative, against the 1^st Defendant for HK$100,000 for repudiating the Flat A Agreement, and against the 2^nd Defendant for HK$100,000 for repudiating the Flat B Agreement.

The Telephone Conversation between Ms. Deng and the 2^nd Defendant on 17 December 2009

13.  The dispute between the parties is indeed very narrow.  It revolves around a telephone conversation between Ms. Deng and the 2^nd Defendant which took place in the afternoon of 17 December 2009, before the conversation between Mr. Kee and Ms. Deng referred to in paragraph 7 above.  It is the Defendants’ case that during this telephone conversation between Ms. Deng and the 2^nd Defendant, a counter-offer was made by Ms. Deng on behalf of the Plaintiff which had the effect of revoking the original offer by the Defendants to purchase the Properties at the price of HK$7.1M.  Further, it is also the Defendants’ case that during this telephone conversation between Ms. Deng and the 2^nd Defendant, the 2^nd Defendant (acting on behalf of himself and the 1^st Defendant) expressly withdrew or revoked the Defendants’ offer made on 16 December 2009, instructed Ms. Deng to stop further negotiations, and instructed Ms. Deng to return the Cheques to the Defendants. 

Ms. Deng’s evidence

14.  In the afternoon of 17 December 2009, Ms. Deng was informed by Mr. Kee that the Plaintiff was willing to sell the Properties for the total sum of HK$7.15M.  Ms. Deng telephoned the 2^nd Defendant shortly after 4 p.m. on the same day.  Ms. Deng told the 2^nd Defendant that the vendor was sincere in selling the Properties at HK$7.15M.  She told the 2^nd Defendant she was hoping that her commission would not be cut and she hoped that the buyers could offer a higher price. 

15.  The 2^nd Defendant responded by saying that they were only willing to buy the Properties at HK$7.1M.  According to Ms. Deng, the 2^nd Defendant spoke very fast and seemed to be busy at the time.  Ms. Deng disagreed with the suggestion put to her by the Defendants’ counsel that she had ignored the instructions of the 2^nd Defendant to stop further negotiations. According to Ms. Deng, the 2^nd Defendant wanted her to go on to negotiate with the vendor to sell the Properties at HK$7.1M.

The 2^nd Defendant’s evidence

16.  In the afternoon of 17 December 2009, the 2^nd Defendant received a telephone call from his wife (i.e. the 1^st Defendant).  The 1^st Defendant told him that Ms. Deng had said the owner “went back” regarding the price and asked for HK$7.2M.  After discussion between the 1^st and 2^nd Defendants, they decided not to buy the Properties at HK$7.2M. 

17.  Thereafter the 2^nd Defendant personally rang Ms. Deng.  Ms. Deng told him that the vendor wanted to raise the price a little bit and wanted HK$7.2M.  According to the 2^nd Defendant, he told Ms. Deng that he did not want the Properties if they were to be sold at HK$7.2M.  According to the 2^nd Defendant, he thereupon asked for the return of the Cheques.  Ms. Deng told him that the Cheques were not with her, they were with a Mr. Jeff Do (Ms. Deng’s superior in Midland Realty). 

18.  Ms. Deng told the 2^nd Defendant that the Defendants should at least give her 24 hours so that she could negotiate with the vendor on their behalf.  The 2^nd Defendant responded by saying: “I won’t talk to you anymore.  I have a lot of things to attend to”. 

Was the original offer by the Defendants terminated by the Plaintiff’s counter-offer?

19.  Counsel for the Defendants, Mr. Anson Wong submitted and I agree that no matter which version of the evidence this Court is to accept, there is no dispute that Ms. Deng did tell the 2^nd Defendant that the Plaintiff counter-offered HK$7.2M or HK$7.15M and asked the 2^nd Defendant to consider buying the Properties at that price.  The change in price is a fundamental change amounting to a counter-offer, as opposed to a mere enquiry. 

20.  The counter-offer made by Ms. Deng was either done with actual authority, implied authority, and/or ostensible authority.  As to actual authority, it is part of Ms. Deng’s evidence (which I accept) that Mr. Kee had initially told her to try to persuade the Defendants to buy the Properties at HK$7.2M.  As to implied authority, it is common ground of all parties that Ms. Deng was expressly authorised by both sides as the go-between on price negotiations. Ms. Deng, therefore, had implied authority to convey the counter-offer to the Defendants as something incidental to her actual authority.  As to ostensible authority, by using Ms. Deng as its only representative to conduct price negotiations, the Plaintiff clothed Ms. Deng with apparent authority on all matters relating to price negotiations, including the making of the counter-offer.

21.  In the premises, I hold that the Defendants’ original offer made on 16 December 2009 to buy the Properties at HK$7.1M was terminated on 17 December 2009 at the time when Ms. Deng invited the Defendants to consider buying the Properties at HK$7.2M or HK$7.15M.

Did the Defendants expressly revoke the original offer or did they put it back on the table?

22.  When one examines closely the conduct of the Defendants subsequent to the Defendants’ alleged express revocation, it is readily apparent that the Defendants’ conduct was wholly inconsistent with their allegation that they had revoked their original offer in the afternoon of 17 December 2009. 

(1)   There is unchallenged evidence that on the night of 17 December 2009, Ms. Deng immediately called the Defendants after Mr. Kee had signed the Agreements on behalf of the Plaintiff.  There is no evidence from the Defendants that at this time they raised any issues with Ms. Deng as to their alleged revocation of offers, nor any complaints concerning her alleged disobeying of the Defendants’ instructions not to proceed with the purchase.  This is clearly contrary to what a reasonable person would do under the circumstances.

(2)   On the same night of 17 December 2009, Ms. Deng visited the Defendants’ home on the 25^th Floor of Sunrise Villa to personally deliver to the Defendants the Agreements signed by Mr. Kee.  Again, there is no evidence of any complaints made by the Defendants to Ms. Deng. 

(3)   The 1^st Defendant in fact called the 2^nd Defendant to inform him that she had received the Agreements and confirmed that all signatures were in place.  Again, no complaints were made to Ms. Deng.

(4)   In fact, under re-examination, the 2^nd Defendant said that on 17 December 2009 after Ms. Deng had brought the Agreements to the 1^st Defendant at their home, the 1^st Defendant informed him by telephone, and the 2^nd Defendant proceeded to first call Ms. Deng, who could not be reached, and then proceeded to call Mr. Jeff Do.  Instead of complaining to Mr. Jeff Do concerning Ms. Deng’s alleged disobeying of the Defendants’ express instructions not to proceed with the purchase and demanding for the return of the Cheques, the 2^nd Defendant proceeded to ask Mr. Jeff Do questions regarding whether the two units could be joined up and whether it was alright to sign two separate agreements in order to save stamp duty.  Again, this is totally contrary to what a reasonable person would have done after he had informed his estate agent not to proceed with the purchase of a property.

(5)   On 18 December 2009, the 2^nd Defendant telephoned Mr. Jeff Do to seek the Plaintiff’s confirmation as to whether certain electrical appliances inside the Properties would be handed over to the Defendants at the completion of the sale and purchase.  Such enquiries were clearly inconsistent with the Defendants’ allegation that they had revoked the offers to purchase.

(6)   Again, very significantly, in the correspondence from the Defendants’ solicitors to respectively Midland Realty, Midland Realty’s solicitors and the solicitors for the Plaintiffs during the period between 22 December 2009 and 3 February 2010, there was never any mentioning of the Defendants having expressly revoked the original offers or requested for the return of the Cheques on 17 December 2009.  This is particularly telling in that in the Defendants’ solicitors’ letter to Midland Realty dated 22 December 2009, a “condition precedent” of some sort was alleged, namely, “… but [Midland Realty’s] staff would not deliver the [Agreements] and the Cheques to the owner of the Flats before [Midland Realty’s] staff had find a purchaser to buy our clients’ property”.  In the circumstances, if the Defendants’ allegation regarding the revocation of the original offer were genuine, there is no conceivable reason why such allegation was never mentioned by the solicitors in correspondence.  Under cross-examination, the 2^nd Defendant was not able to offer any explanation as to why this was so. 

23.  For the reasons set out above, I have no hesitation in rejecting the 2^nd Defendant’s evidence regarding the all important telephone conversation that he had with Ms. Deng on 17 December 2009.  Further, on a balance of probabilities, I accept Ms. Deng’s evidence that the 2^nd Defendant told her that the Defendants were only willing to buy the Properties at HK$7.1M and that the Defendants wanted her to continue to negotiate with the vendor to try to get him to sell at the price of HK$7.1M.  I find it unlikely that Ms. Deng would have gone back to Mr. Kee, unless the Defendants (through the 2^nd Defendant) had put the original offer of HK$7.1M back on the table. 

24.  Mr. Anson Wong in his closing submissions on behalf of the Defendants made various criticisms on the evidence of Ms. Deng, including inconsistencies between her evidence and the evidence of Mr. Kee, self-contradictions in her evidence, inherent improbability of her evidence, and her evidence being inconsistent with the Plaintiff’s pleaded case.  I have carefully considered all the points made by Mr. Wong.  I am of the view that the criticisms made by Mr. Wong of Ms. Deng’s evidence paled into relative insignificance when compared to the very serious problems regarding the 2^nd Defendant’s evidence as outlined above.  Thus, on a balance of probabilities, I find the following facts established:-

(1)   During the telephone conversation between the 2nd Defendant and Ms. Deng on 17 December 2009, the Defendants did not expressly withdraw or revoke the original offer to buy the Properties at HK$7.1M. 

(2)   During the said telephone conversation, the Defendants did not request for the return of the Cheques.

(3)   During the said telephone conversation, the 2^nd Defendant did not walk away from the negotiations, rather, he put the original offer of HK$7.1M back on the table for acceptance by asking Ms. Deng to go on to negotiate with the vendor to try to get him to sell at HK$7.1M. 

Conclusion

25.  Accordingly, I hold that the Agreements were binding on respectively the 1^st Defendant and the 2^nd Defendant for the sale and purchase of the Properties.  In the premises, the Plaintiff’s claims under the Agreements and/or the Cheques should be allowed. 

Order

26.  I give judgment in favour of the Plaintiff against the 1^st Defendant for the sum of HK$200,000. 

27.  I give judgment in favour of the Plaintiff against the 2^nd Defendant for the sum of HK$100,000.

28.  For the avoidance of doubt, there is not to be any double recovery.  Accordingly, I further direct that if the Plaintiff is able to recover a sum exceeding HK$100,000 from the 1^st Defendant, such amount exceeding HK$100,000 should not be recoverable against the 2^nd Defendant.  Conversely, if the Plaintiff is able to recover any sum from the 2^nd Defendant, such sum shall be deducted from the amount recoverable from the 1^st Defendant. I give parties liberty to apply in case there is difficulty in working out this part of the Order. 

29.  Interest on the said sums shall be paid at the judgment rate from the date of writ until full payment. 

30.  The counterclaim by the Defendants is dismissed.

31.  The Plaintiff shall have the costs of this action against the 1^st and 2^nd Defendants, including any costs reserved (if any).  Costs shall be taxed, if not agreed, with Certificate for Counsel.  The costs order is nisi and shall become absolute in the absence of any application within 14 days to vary the same.