WONG SHUEN SHUEN SUSAN v. CHAN CHAK KAU AND OTHERS

HCA 2302/2013

[2019] HKCFI 832

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CIVIL ACTION NO 2302 OF 2013

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(original claim)

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(counterclaim by the 1^st Defendant)

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(counterclaim by the 2^nd Defendant)

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JUDGMENT

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Overview

1.  The disputes among the parties in this action arose from the acquisition of a long-standing café business of Mr Chan (the 1^st defendant in the original action) by Madam Wong (the plaintiff in the original action) operated at a property owned by Polyroot Development Limited (“the Company”) (the 4^th defendant in the original action) located at G/F, 51 Tong Mi Road, Tai Kok Tsui, Kowloon (“the Property”) through the assistance of Mr Lau (the 3^rd defendant in the original action). To Madam Wong’s disappointment, her new business turned out to be short-lived and ended abruptly due to the eviction by the Company from the Property, leaving her business tools and food stock behind. Madam Wong commenced this action against Mr Chan, Mr Lau and his company HKIBB Century (Group) Holding Company Limited (“HKIBB Century”) and the Company for, primarily, damages due to the demise of her business and the eviction.

2.  Mr Chan counterclaims against Madam Wong for breach of the agreement by which he agreed to sell his café business to her. He also counterclaims against HKIBB Century for breach of fiduciary duties when acting as his agent.

3.  HKIBB Century has a counterclaim against both Madam Wong and Mr Chan. I need not go into any detail about it. Firstly, Madam Wong succeeded partially in her application for summary judgment against HKIBB Century in May 2015. Further, the Amended Defence and Counterclaim of both Mr Lau and the HKIBB Century was struck out and dismissed by reason of their failure to comply with an unless order made by Mr Registrar Lung on 14 September 2016.  They have not taken any step in these proceedings ever since then. Judgment on liability has been entered against them eventually.

Background facts

4.  I should first outline the essential background facts leading to the disputes among Madam Wong, Mr Chan and the Company. In doing so, I am greatly assisted by an agreed chronology prepared by Mr Edward Chan (“Mr E Chan”), for Madam Wong, Mr Wang, for Mr Chan and Mr Ngai, for the Company.

5.  Madam Wong is a Mainlander and a permanent resident of Hong Kong. She is a shareholder and director of a company incorporated in Hong Kong known as Shao Lin Group Limited (“Shao Lin”). Her friend Mr Li, a Taiwan national, is also a director of Shao Lin and assists her in her business venture. Both of them have received tertiary education.

6.  In or about April 2013, Madam Wong came to know Mr Lau through an advertisement on the internet in which Mr Lau offered to assist acquisitions of local businesses in Hong Kong.  In May 2013, Mr Li and Madam Wong went to his office located in Tsim Sha Shui (“the Office”) and entered into a written agreement known as Conditional Sale and Purchase Agreement numbered SP80009 dated 27 May 2013 (“the SP80009 Agreement”).

7.  By the SP80009 Agreement, Mr Li agreed to purchase from one Madam Ip her shares in a company known as Anms Company Limited in consideration of HK$330,000. The handover date was fixed on 14 June 2013.

8.  Madam Wong agreed that Mr Lau was entitled to a commission of HK$33,000 for the transaction.

9.  As a result, Mr Li paid a total sum of HK$363,000 (“the First Sum”) to Mr Lau and this payment was evidenced by a receipt issue by HKIBB Century.

10.  This transaction, however, fell through. Mr Lau confirmed in writing that the First Sum would be returned by way of a deposit to Madam Wong’s bank account. No such written confirmation has been produced to this court, nevertheless.

11.  As a replacement, Mr Lau suggested Madam Wong and Mr Li that they should consider acquiring the ongoing café business of Mr Chan. The café business of Mr Chan was operated by reference to the trade name “Mee Yee Lim Café” 「美而廉餐廳 」 and had been carried on in Mong Kok for almost half a century. Mr Chan relocated his café business at the Property in March 2012 with a lease granted by the former registered owner of the Property covering the period from March 2012 to March 2015 at a monthly rent of HK$78,000 (“the Lease”). The Company acquired the Property together with the Lease in May 2012 and became the landlord of Mr Chan under the Lease.

12.  Mr Chan, on 16 May 2013, entered into a written agreement known as listing agreement whereby Mr Chan engaged HKIBB Century as his sole and exclusive agent to find a potential buyer to purchase his café business (“the Listing Agreement”). In the Listing Agreement, it was expressly agreed that HKIBB Century would be the only business broker acting for Mr Chan.

13.  Eventually, on 19 June 2013, Madam Wong, Mr Li, Mr Chan and Mr Lau had a meeting (“the June Meeting”) in the Office and a written agreement was entered into by Mr Chan as vendor, Madam Wong as purchaser and HKIBB Century as witness known as the SP80010 Conditional Agreement (“the Agreement”).

14.  The Agreement is a printed form of contract of HKIBB Century. There are boxes to be ticked and spaces to be filled in. The following are the essential express terms of the Agreement:

(i) Madam Wong agrees to buy Mr Chan agrees to sell the entire ownership of the café business through HKIBB Century including renovation, furniture and equipment in consideration of HK$780,000 (“the Transaction Price”).

(ii) the Agreement shall be construed in accordance with the Chinese version.

(iii) The handover date was 12 July 2013 (“the Handover Date”) and it was expressly stipulated that any change of handover date has to be in writing issued by HKIBB Century; otherwise it would be considered invalid.

(iv) Under the heading of Payment Terms, there are two columns setting out the respective duties/entitlements of the parties. One is entitled “Buyer” and the other one “Vendor”.  For the Buyer column, it can be found the following three printed stipulations (collectively “the Buyer’s Payment Terms”):

(1) Buyer pays part of 30% or 30% of transaction price to HKIBB (Century) as agent of the Vendor upon signing of this Agreement.

(2) If Buyer pays part of 30% of transaction price to HKIBB (Century) upon signing of this Agreement, Buyer should pay the total balance of 30% of transaction price to HKIBB (Century) as agent of Vendor within 7 days from the date hereof.

(3) Buyer pays balance 70% to HKIBB (Century) as agent of Vendor 5 days before handover date.

(v) On the other hand, under the Vendor column, there are the following two printed provisions which were struck out entirely (“the Struck-out Terms”):

(1) HKIBB (Century) releases 70% off transaction price to Vendor on Handover Date.

(2) HKIBB (Century) releases Stakehold (30% balance of transaction price) to Vendor 3 months after Handover Date.

In their stead, the following hand-written provisions in Chinese (collectively “the Handwritten Terms”) were added as remarks:

(1) 簽約日後三天，先落10%成交價

(2) 簽租約日後三天內，再支付60%成交價

(3) 交收日支付餘額30%成交價

It is clear that these terms actually related to the obligations of Madam Wong and not Mr Chan as to how Madam Wong should pay the Transaction Price to Mr Chan.

(vi) If necessary, Mr Chan shall assist Madam Wong to transfer the existing relevant licenses.

(vii) If Madam Wong needs to sign a new lease with more than 35% increment in effective all-inclusive rents (including government rents rate and management fees and rent free period), the excess increment will be borne by Mr Chan; however, Mr Chan reserves the right to renegotiate the terms, conditions and price with Madam Wong in order to complete the transaction or cancel the Agreement. New lease shall be at least of two years terms.

(viii) After signing the Agreement, (a) if Mr Chan is not willing to complete the transaction, 30% of transaction price will be returned to Madam Wong plus additional equal amount as penalty to Madam Wong. Mr Chan is also liable to the commission of HKIBB Century from both sides – Clause G9(a) (“the Compensation Clause”). (b) if Madam Wong is not willing to complete the transaction, 30% of transaction price will be forfeited by Mr Chan and Madam Wong is liable to pay the same commission to HKIBB Century - Clause G9(b) (“the Forfeiture Clause”).

(ix) The Agreement supersedes oral representations of either of the parties. Amendment could only be made with the written consent of HKIBB Century.

15.  On 26 June 2013, Mr Chan received HK$78,000 from HKIBB Century as 10% of the Transaction Price pursuant to the Agreement.

16.  On 12 July 2013, the Handover Date, Mr Chan handed over his café business to Madam Wong and she started the business operation at the Property despite the absence of a new lease between the Company and her.

17.  On 23 August 2013, Madam Wong, Mr Chan and Mr Kong Yiu Wai (“Mr YW Kong”) of the Company met at the Property. They discussed about the possibility of a new lease to be entered into between Madam Wong and the Company.

18.  By a letter dated 26 August 2013 (“the 26/8 Letter”), the solicitors of the Company, Messrs. K Y Lo & Co (“KYL”) informed the solicitors of Madam Wong, Messrs. Michael Cheuk, Wong & Kee (“MCWK”) that the Company had no further intention to let the Property to Madam Wong. This position was reiterated in another letter dated 30 August 2013 (“the 30/8 Letter”) issued by KYL to MCWK.

19.  In view of the refusal of the Company to grant a new lease to Madam Wong, Mr Chan through his solicitors Messrs. K.B. Chau & Co. (“KBC”) by a letter dated 3 September 2013 to KYL (“the 3/9 Letter”) referred to a previous discussion between Mr Chan and the Company about the execution of a tenancy agreement to a new tenant upon Mr Chan’s surrender of the Lease. By the 3/9 Letter, Mr Chan reiterated his willingness to execute a surrender agreement.

20.  By another letter dated 11 September 2013 (“the 11/9 Letter”), KBC once again indicated the willingness of Mr Chan to surrender the Lease on condition that the Company should execute a new tenancy agreement with Madam Wong or her nominees.

21.  By a letter dated 13 September 2013 (“the 13/9 Letter”), KYL replied that they had no instruction to create or accept a new tenancy agreement with Madam Wong or her nominees.

22.  By a letter dated 19 September 2013 (“the 19/9 Letter”) issued to MCWK, KBC indicated that Mr Chan was willing to execute a surrender agreement with the Company on condition that Madam Wong managed to enter into a tenancy agreement with the Company simultaneously. However, since the Company had no intention to grant a lease to Madam Wong, KBC indicated that the Agreement could not be implemented and requested Madam Wong to vacate the Property and return the café business to Mr Chan and to settle all the rent and outgoings to Mr Chan on 22 September 2013.

23.  On 27 September 2013, Mr Chan and the Company executed a Deed of Surrender (“the Surrender Deed”) in respect of the Property wherein Mr Chan agreed to vacate the Property no later than 27 September 2013 and make full payments of any outstanding rents and expenses of the Property until the same date.

24.  On 29 September 2013, the contractor engaged by the Company for the restoration of the Property to a bare shell condition had a confrontation with Mr Li, who was then operating the café business there. The police was called and both Mr Li and Mr YW Kong went to the police station.

25.  On 9 October 2013, the Company evicted Madam Wong from the Property.

26.  Now I should summarise the allegations of both Madam Wong and Mr Chan against Mr Lau and HKIBB Century before I turn to the respective pleaded cases of the parties. As mentioned, Madam Wong succeeded in proving part of her claim against them and interlocutory judgment has been entered against them. They have adduced no further evidence to rebut the remaining allegations. Indeed, most of such allegations are evidenced by documentary evidence not in dispute.

27.  First, Madam Wong alleges that at the June Meeting, Mr Lau suggested to her that the First Sum could be treated as part payment under the Agreement. Madam Wong agreed to this suggestion.

28.  On or about 20 June 2013, at the request of Mr Lau, Madam Wong agreed to borrow from HKIBB Century a total sum of HK$302,000 (“the Loan”) for the purpose of paying the Transaction Price (“the Loan Agreement”). This Loan Agreement is evidenced by a written loan confirmation dated 20 June 2013 signed by Madam Wong setting out a repayment schedule (“Loan Confirmation”). It was stipulated in the Loan Confirmation that the Loan was extended for the exclusive purpose of Madam Wong’s purchase of business through HKIBB Century. It, however, did not refer to Mr Chan or his café business. According to the repayment schedule, Madam Wong was to repay the loan in four instalments of HK$78,000 each on the 11^th day of August to November 2013.

29.  Madam Wong made the first repayment of the Loan in a sum of HK$78,000 in cash (“the Repayment”) to Mr Lau and Mr Lau issued a receipt to Shao Lin dated 11 August 2013.

30.  On 22 June 2013, HKIBB Century issued a cheque of HK$78,000 to Mr Chan but it was dishonoured.

31.  On or about 25 June 2013, Madam Wong made a payment of HK$416,000 in cash (“the Cash Payment”) to HKIBB Century and Mr Lau issued an official receipt on behalf of HKIBB Century. The Cash Payment was made pursuant to the request of Mr Lau for the payment to the Company as rental deposit and the rent of the first month in anticipation of a new lease to be executed.

32.  Mr Lau did not give any breakdown of the said sum. Mr Lau represented to Madam Wong that the Company had not yet decided whether the new rent should be HK$78,000 or HK$89,000 and hence the necessary rental deposit and the amount of the first month rent could not be ascertained. Mr Lau impressed upon Madam Wong that the Cash Payment was required also to pay legal fees, stamp duty, miscellaneous charges and the balance of the Transaction Price.  He further assured Madam Wong that if the amount of HK$416,000 turned out to be more than enough, he would refund the balance to her and if it was insufficient, he would inform Madam Wong.

33.  On or about 11 July 2013, Madam Wong paid a further sum of HK$170,000 in cash to Mr Lau or HKIBB Century as deposits for various utilities and food stock (“the Deposit Monies”). HKIBB Century issued a written receipt dated 18 July 2013 to Madam Wong.

34.  On or about the same day, HKIBB Century paid Mr Chan a sum of HK$25,721 in cash for food stock and a cheque of HK$702,000 dated 13 July 2013. The cheque was however subsequently dishonoured.

35.  Thus, none of the cheques issued by HKIBB Century handed over to Mr Chan by Mr Lau was honoured.

36.  On 19 July 2013, Mr Chan went to the Office to chase after payment. As a result, Mr Lau gave Mr Chan a sum of HK$107,000 in cash. In total, Mr Chan has received HK$185,000 (HK$78,000 + 107,000) (“the Received Sum”) from Mr Lau for the purpose of the Agreement only.

37.  With these background facts, I can now turn to the respective pleaded cases of the parties.

Parties’ pleaded cases

Madam Wong’s case

38.  Madam Wong demands that Mr Chan should return to her a total sum of HK$1,027,000 which she has paid to HKIBB Century as his agent. The said sum consists of the First Sum, the Cash Payment, the Deposit Monies and the Repayment.

39.  This claim for the refund of HK$1,027,000 (“the Refund Claim”) is based on the not so controversial fact that she has made such payments to HKIBB Century. Her pleaded case is that it is an implied term of the Agreement by way of business efficacy and/or necessary and/or the obvious presumed intention of Madam Wong and Mr Chan that all the money paid by Madam Chan pursuant to the Buyer’s Payment Terms to HKIBB Century as the agent of Mr Chan should be stakeheld by HKIBB Century and that it should release the stakeheld money to Mr Chan pursuant to the Handwritten Terms (“the Implied Payment Term”).

40.  Madam Wong further demands compensation in the amount of HK$234,000 (“the Compensation Sum”) being 30% of the Transaction Price pursuant to the Compensation Clause by reason of his alleged breaches of both the express and implied terms of the Agreement (“the Compensation Claim”).

41.  Such breaches include Mr Chan’s revocation of his application to the Food and Environmental Hygiene Department for a transfer of the restaurant licencse in respect of the café business at the Property to Madam Wong in breach of Clause G(5) of the Agreement on 15 October 2013 (“the Revocation”).

42.  More fundamentally, Mr Chan is alleged to have breached Clause G(7) of the Agreement in that he executed the Surrender Deed.

43.  Apart from the said two express provisions, Madam Wong in her pleaded case alleges that her rights under the Agreement were thereby violated by the breaches. She also claims that Mr Chan was in breach of certain implied terms of the Agreement. The pleaded implied terms[1] are alleged to have been incorporated in the Agreement by way of business efficacy and/or necessary and/or the obvious presumed intention of Madam Wong and Mr Chan (collectively “the Implied Terms”). They are as follows:

(1) that Mr Chan would, prior to the Handover Date, procure the Company:

(i) to execute a new tenancy agreement with Madam Wong in respect of the Property for a term of not less than two years and rent of not more than amount of monthly rent being paid by Mr Chan to the Company under the Lease (“the New Terms”).

(ii) to secure the agreement of the Company to assign or sublet the Lease to Madam Wong on the same terms (“the Current Terms”).

(2)   that as from the date of the Agreement, Mr Chan would not enter into any negotiations to sell and/or would not agree to sell the café business to any party other than Madam Wong or her nominee pursuant to the Agreement (“Implied No-Transfer Term”).

(3)   that as from the date of the Agreement, Mr Chan would not induce and would not persuade the Company to enter into a new tenancy agreement in respect of the Property with a party other than Madam Wong or her nominee; and

(4)   that if the Company refuses to execute a new tenancy agreement with Madam Wong in respect of the Property on the same terms or alternatively refuses to assign or sublet the Lease to Madam Wong on the same term and Madam Wong ceases to continue the café business at the Property, Mr Chan would compensate Madam Wong for all the loss and damages suffered by Madam Wong during the period from the Handover Date, i.e. 12 July 2013, to the date of the cessation of her café business irrespective of Mr Chan’s liability to Madam Wong under Clause G9(a) of the Agreement (“the Implied Compensation Term”).

44.  Before I turn to the tortious claim of Madam Wong, I should add that Madam Wong has made an averment that the Agreement was an agreement subject to a condition precedent to be fulfilled, i.e. that the Company would enter into a new tenancy agreement with Madam Wong in respect of the Property or alternatively the Company would assign or sublet the Lease to Madam Wong on the Current Terms before the Handover Date. She, however, does not plead the basis of such an averment.

45.  Lastly, Madam Wong claims the sum of HK$670,792 (“the Conversion Damages”) for her loss of chattels allegedly converted to his own use by Mr Chan without her authorization after the eviction from the Property on 9 October 2013 (“the Eviction”) and her loss of profit from 27 September 2013 to 9 October 2013 (“the Conversion Claim”). Madam Wong also relies on the alleged breaches of the Implied Terms on the part of Mr Chan for this claim.

46.  The Conversion Damages is composed of the following claims:

Kitchen utensils	HK$152,282
Furniture and fittings	HK$329,260
Cash	HK$4,000
Frozen food and other stock	HK$80,000
Advertisement	HK$5,250
Loss of profit
(from 27 September to 9 October 2013)	HK$100,000
Total:	HK$670,792

47.  Madam Wong mounts her Conversion Claim against the Company for the Conversion Damages as well. She alleges that the Company consented to the operation of her café business at the Property by either making representations through another Mr Kong in July or granting an oral licence to carry on her café business at the Property.

48.  This is only my broad outline of the pleaded case of Madam Wong. Her pleadings are quite lengthy and convoluted containing a number of other allegations. I should now summarise the positions taken by Mr Chan and the Company vis-a-vis the claims of Madam Wong and their respective counterclaims.

Mr Chan’s pleaded case

49.  For the Refund Claim, Mr Chan’s position is that HKIBB Century was not just his agent. It was also the agent of Madam Wong. He claims that it was the double agent and acted as the stakeholder of all of the monies paid by Madam Wong.

50.  It is also contended by Mr Chan that none of the monies received by Mr Lau and/or HKIBB Century was valid payment for the Transaction Price pursuant to the Agreement save the Received Sum. Hence, he is not obliged to make the refund demanded.

51.  As regards the alleged breaches of the Agreement underpinning the Compensation Claim, Mr Chan denies any breach of the Agreement. He further denies the existence of any of the Implied Terms except the Implied No-Transfer Term, which bears no relevance in any event in the absence of any particularized breach of the same.

52.  For the Conversion Claim, Mr Chan contends that Madam Wong should have returned the café business to him after the termination of the Agreement. He, nevertheless, accepts that he took possession of certain equipment and articles left at the Property and sold them at the price of HK$100,000 (“the Sale Proceeds”) on 7 December 2013.

53.  Mr Chan agrees that the Agreement was subject to a condition precedent that a new lease should be entered into by Madam Wong and the Company. He avers that if this condition is not fulfilled, the sale would be cancelled and the parties should be reverted to their respective original positions before the signing of the Agreement (“the Condition Precedent”). He first says that this is a term of a collateral contract concluded orally before the signing of the Agreement (“the Collateral Contract”) and alternatively it is an implied term of the Agreement.[2]

54.  Mr Chan has a counterclaim against Madam Wong consisting of a monetary claim of HK$922,597 (“the Alleged Damages”) having given credit for the Received Sum and the Sale Proceeds. First, Mr Chan relies on the Collateral Contract. In addition to the Condition Precedent, his case is that the Collateral Contract also included a term to the effect that Madam Wong would be responsible for all the expenses of the café business including but not limited to the rent of the Property, costs of stock, salaries of employees, utility bills such as gas, electricity and water after the Handover Date (“the Post-Handover Obligations”). Alternatively, Mr Chan says that the Post-Handover Obligations should be imposed on Madam Wong as an implied term of the Agreement though he does not specify the basis of the incorporation of such an implied term.[3]

55.  It is noteworthy that Madam Wong admits the Post-Handover Obligations as a term of the Collateral Contract albeit not as an implied term of the Agreement.

56.  In reliance of the Post-Handover Obligations, Mr Chan claims the sum of HK$254,865 for the reimbursement of the rent and other expenses paid to the Company for the operation of the café’s business of Madam Wong after the Handover Date.

57.  He further claims the sum of HK$66,732.31 as the gas expense charged by the Town Gas Company (“the Gas Company”).

58.  He also claims damages for loss of profit of the café business over a period of six months in the sum of HK$30,000 for each month and a sum of HK$706,000 for the equipment and decoration of the café business.

59.  Remarkably, on the other hand, Mr Chan pleads that the Condition Precedent was not satisfied and the Agreement was liable to be cancelled.  He goes on to say that Madam Wong is liable to return the café business to him on 22 September 2013 and pay damages to him.  He prays an order that the café business be returned to him.

60.  Mr Chan further asserts that he is entitled to forfeit 30% of the Transaction price, i.e. HK$234,000 pursuant to the Forfeiture Clause and Madam Wong is liable to pay the commission of HKIBB Century from both sides.

61.  Mr Chan alleges that Madam Wong was in breach of the payment conditions and the Post-Handover Obligations and so he accepted her repudiatory breaches and terminated the Agreement by the 17/9 Letter.

62.  On the other hand, Mr Chan also has a counterclaim against HKIBB Century for its breach of fiduciary duties as his agent including his duty to act in good faith in his best interests, his duty not to place itself in a position where there would be a conflict of interest and his duty to truthfully report to him on the progress of the implementation of the Agreement on a timely basis. He alleges that HKIBB Century was in breach of such duties in that it failed to truthfully report to him that Madam Wong failed to pay the Transaction Price and instead misled him into thinking that she had done so and issued two dishonoured cheques to him.

63.  Therefore, Mr Chan claims against HKIBB Century for the Alleged Damages. As mentioned above, the defence of HKIBB Century to the claim of Mr Chan has been struck out and dismissed. HKIBB Century should be regarded as not having filed any defence and has not started to contest the claim of Mr Chan. Mr Chan has not applied for default judgment against HKIBB Century. In this trial, this court still has to consider the merit of his claim and determine whether the evidence is sufficient to prove his allegations to the requisite standard.

The Company’s pleaded case

64.  In the pleading of the Company, an account of the negotiation between Shao Lin and the Company through their respective solicitors about the new lease from August to September 2013 is given. Whilst Shao Lin was eager to have a new lease, by the 26/8 Letter, the Company indicated its unequivocal intention not to grant any lease with Madam Wong and/or Shao Lin.

65.  The Company goes on to plead an account of the negotiation with Mr Chan concerning a surrender of the Lease, which led to the execution of the Surrender Deed after his payment of the sum of HK$156,000 as the rent for the period between 15 July to 14 September 2013 pursuant to the Lease. The Surrender Deed was registered in the Land Registry on or about 30 September 2013. By the Surrender Deed, Mr Chan agreed to deliver vacant possession of the Property to the Company on or about 27 September 2013.

66.  The Company denies having granted any oral lease or licence to Madam Wong to occupy the Property and Madam Wong was in wrongful occupation of the Property from 27 September 2013 onwards until the Eviction as a trespasser. Its fallback position is that if there was any licence given to Madam Wong, such licence was terminated upon Mr Chan’s delivery of vacant possession of the Property to the Company on 27 September 2013 otherwise upon the Eviction.

67.  The Company denies having had in its possession any chattels of Madam Wong. It further mounts a counterclaim against Madam Wong in the tort of trespass and nuisance for the period between 28 September 2013 to 9 October 2013 (“the Trespass Claim”). It claims the sum of HK$30,444 as mesne profits. Mr Ngai confirms with this court that this is the only claim against Madam Wong and the other heads of damages would not be pursued.

Witnesses

68.  Madam Wong and Mr Li testified and were vigourously cross-examined. Mr Chan testified for himself and Mr YW Kong for the Company. Mr YW Kong is one of the shareholders and directors of the Company. So is his younger brother Mr Kong Yiu Wing (“Mr Kong Jr”) but he did not testify despite the allegations made against him.

Discussion

69.  I decide to adopt my own approach to resolve the disputes of the parties without adhering to their pleadings, though at the end I should be able to dispose of the material allegations in support of their respective cases.

70.  In my view, I should first decide the nature of the Agreement and in particular whether there was a condition precedent and the consequence of its non-fulfilment. I shall then decide on the question as to whether Madam Wong’s payments of various sums to HKIBB Century constituted valid payments of the Transaction Price to Mr Chan. The validity of the allegations of breaches of the Agreement made by both Madam Wong and Mr Chan will be looked into. Whether Madam Wong had any legal right to occupy the Property and whether Mr Chan and/or the Company converted any chattels of Madam Wong left at the Property to their own use will be determined.

71.  As the printed title of the Agreement suggests, the Agreement was a conditional agreement. There is a section with the title of condition precedent but it related to the financial records of the café business only.

72.  Both parties agree that the grant of a new lease to Madam Wong was a condition precedent despite their minor differences in its formulation. In my judgment, it was clearly within the contemplation of the parties that the café business, if ever taken over by Madam Wong, was to be operated at the Property with the consent of the Company. It was expressly provided in the Agreement that the assets purchased by Madam Wong included the renovation of the Property, which could not possibly be movable.

73.  Further, it was expressly provided that a new lease of no less than two years would be negotiated and if the new rent was more than 35% of the existing rent, Mr Ch an had the right to renegotiate the terms including the Transaction Price of the Agreement and even had the right to cancel the Agreement: see Clause G7.

74.  If the new rent under the new lease could not meet the approval of Mr Chan, he would have the right to cancel the Agreement, there is no reason why the parties could not cancel the Agreement if the new lease did not exist at all.

75.  In fact, it is the pleaded case of Madam Wong that before the signing of the Agreement, Mr Chan had made an oral representation and/or warranty, among other matters, to her that if the Company did not sign a new tenancy agreement with Madam Wong, the Agreement would be cancelled and all the money paid to Mr Chan or HKIBB Century would be returned to Madam Wong (“the said representation and/or warranty”).[4] I notice that in the witness statements of both Madam Wong and Mr Li, however, they allege that the said representation and/or warranty was in fact made by Mr Lau and not Mr Chan.[5]

76.  In light of this, this court should accept the unchallenged evidence of Mr Chan that the parties orally agreed that the signing of a new lease would be the Condition Precedent and if it cannot be fulfilled, the transaction will be terminated and the parties must be restored to their original positions prior to the Agreement.

77.  I do not accept the case of Madam Wong that the condition precedent included as an alternative to a new lease, the Company would assign or sublet the Lease to Madam Wong on the same terms. It does not appear to me to be a viable option at all. Nor can I accept that it was an implied term that Mr Chan should secure the Company to do so. There is simply no basis for such an implied term. There is no allegation that Mr Chan ever made any representation to such an effect to Madam Wong. The Lease expressly provided that Mr Chan should not assign or sublet the Property or any part thereof. There is no room for the incorporation of an implied term that Mr Chan could, however, secure the Company to do so.

78.  It is the pleaded case of Madam Wong that the condition precedent had to be fulfilled before the Handover Date. She, however, does not specify the basis of such a condition precedent including the time stipulation. Mr Chan denies this and he avers that if there was such a time stipulation for the Condition Precedent, the violation of this requirement was waived by Madam Wong by reason of the lack of mention let alone any complaint when she took over the café business on the Handover Date.[6]

79.  I have heard no debate about this difference at trial. There is no allegation that the time stipulation was ever mentioned prior to the signing of the Agreement even in the evidence of Madam Wong and Mr Li. It was not so suggested to Mr Chan in his cross-examination. It is also not pleaded that such a time stipulation should be implied into any condition precedent.

80.  I do not think whether there was such a time stipulation is of any significance. There is no accusation that the Agreement should have been terminated on the Handover Date there and then for want of a new lease and either parties was at fault. As rightly pointed out by Mr Wang, Madam Wong only started her negotiation of a new lease with the Company after the Handover Date. The parties clearly kept the Agreement alive after the Handover Date in the hope that the Company would grant Madam Wong a new lease.

81.  In the circumstances, I accept the pleaded case of Mr Chan that the Collateral Contract was created orally and it contained the Condition Precedent.

82.  Alternatively, I accept that the Condition Precedent was incorporated into the Agreement as an implied term by way of business efficacy, necessity and obvious intention of the parties.

83.  In my judgment, the 26/8 Letter is a piece of incontrovertible evidence that the Condition Precedent could never be fulfilled. After the date of the 26/8 Letter, the Company had not conducted itself to give any hope to Madam Wong or Mr Chan that it might retract its position. Given the unequivocal stance stated in the 26/8 Letter, it must be clear to Madam Wong and Mr Chan that they could never proceed to complete the transaction and they had no alternative but to terminate the Agreement pursuant to the Condition Precedent.

84.  I note that Mr Li alleges that on 27 August 2013, after the receipt of the 26/8 Letter, Mr YW Kong telephoned him and asked him to deliver a new tenancy agreement with cheques on the following day. MCWK did so on his behalf purportedly pursuant to the request on the next day. I cannot accept his evidence of the alleged telephone conversation. By the 30/8 Letter, this allegation was categorically denied and the Company reiterated its refusal to enter into any tenancy agreement with Madam Wong or any of her nominees. I have also read the transcript of their telephone conversation and I cannot discern such a request. There is no clear and convincing evidence that despite the 26/8 Letter, the Company continued to negotiate with Madam Wong or Mr Li about the new lease behind the back of their solicitors.

85.  Therefore, as at the date of the 26/8 Letter, the Agreement should be terminated. Even if the Company continued the negotiation thereafter over the phone as alleged, by the 30/8 Letter, the position of the Company must be final. This makes no practical difference as they were only a few days apart.

86.  Despite the 26/8 Letter and the 30/8 Letter, both Mr Chan and Madam Wong refused to accept the non-fulfilment of the Condition Precedent as a fait accompli and instead made their best efforts to secure a new tenancy with the Company. Eventually, given the intransigent position of the Company, very properly by the 19/9 Letter, Mr Chan indicated to Madam Wong that the Agreement could not be proceeded with and 22 September 2013 was set to be the deadline for Madam Wong to vacate the Property and return the café business to him.

87.  In my judgment, the Agreement was terminated by the 26/8 Letter. The Company’s position stated therein, reiterated in the 30/8 Letter, indicated that there was no chance that the Condition Precedent could be fulfilled. Thus, the Agreement should be terminated there and then. The continued effort of the parties to solicit a new tenancy from the Company did not change a thing. The termination of the Agreement due to non-fulfillment of the Condition Precedent required neither further consent of the parties nor any notice of termination to be given to the other side under the Collateral Contract or the Agreement. Indeed Mr Wang in his opening submissions accepts as an alternative case that the Agreement was terminated “by automatic cancellation by reason of the failure of the Condition Precedent”.

88.  I am thus unable to accept that the Agreement was only terminated on 22 September 2013, which is the pleaded case of Mr Chan. As a matter of fact, the 19/9 Letter did not really set the termination date of the Agreement to be 22 September 2013. After the termination of the Agreement, the parties were left with their respective obligations to effect restoration of their original positions including Madam Wong’s delivery of possession of the Property to Mr Chan on 22 September 2013.

89.  I am aware that there are allegations of breaches of the Agreement made by both sides. Mr Chan in particular has an alternative case that the Agreement was repudiated by Madam Wong in that she failed to honour the payment obligations. I should deal with them such alleged breaches later.

90.  Having reached the conclusion that the parties should be restored to their original positions upon the termination of the Agreement, I have to determine what the parties should be obliged to perform to bring about the restoration. I should first consider the Refund Claim of Madam Wong first.

91.  I note that the Refund Claim is based on the said representation and/or warranty and is not made in the context of the Condition Precedent. I shall nevertheless consider whether any refund should be made to Madam Wong by Mr Chan upon the termination of the Agreement pursuant to the Condition Precedent.

92.  This issue involves a debate about the role played by HKIBB Century in the performance of the Agreement, the actual payment terms of the Agreement and the validity of the purported payments made by Madam Wong to HKIBB Century.

The Role of HKIBB Century

93.  Given the express terms that Madam Wong should pay the Transaction Price to HKIBB Century as agent of Mr Chan, it is clear to me that, as submitted by Mr E Chan, HKIBB Century is the agent of Mr Chan insofar as the receipt of the money for the purpose of the Agreement is concerned.

94.  Mr Wang submits that that the Listing Agreement confined the role of HKIBB Century to location of potential buyers and does not include any authority to receive payment on behalf of Mr Chan. I am unable to accept this submission.

95.  First of all, the Listing Agreement did not set such a limit to the authority of HKIBB Century to act on behalf of Mr Chan at all. To say the least, it was expressly provided that after signing of a conditional sale and purchase agreement, all communication with the buyer should be conducted through HKIBB Century and Mr Chan agreed to authorize HKIBB Century in writing to handle any procedure relating to the handover process.

96.  More fundamentally, nothing in the Listing Agreement could retract the express authority given to HKIBB Century to receive the payment of the Transaction Price from Madam Wong by instalments on the behalf of Mr Chan.

97.  Mr Wang further points to the actual services rendered to Madam Wong by HKIBB Century as her agent. He prays in aid a document known as Confidentiality and Service Agreement signed between Madam Wong and HKIBB Century. Madam Wong says that she has never been given a copy of the said agreement after signing of the same and she has forgotten its terms. Mr Wang submits that pursuant to the said agreement, certain agency services such as payment of utility deposits were provided to Madam Wong.

98.  I do not think this is relevant. The fact that HKIBB Century provided services to Madam Wong as her agent in other respects cannot in any way strip HKIBB Century of the authority to receive the Transaction Price on behalf of Mr Chan.

Payment terms

99.  Mr Wang next argues that HKIBB Century was only a stakeholder who would receive payments according to the terms of the Agreement.

100.  In a way, his argument was echoed by Mr E Chan. Madam Wong’s pleaded case is that it is an implied term that all the money paid by her to HKIBB Century pursuant to the Buyer’s Payment Terms should be stakeheld by HKIBB Century as the agent of Mr Chan and HKIBB Century should release the stakeheld money to Mr Chan pursuant to the Handwritten Terms.[7]

101.  Mr E Chan submits that in accordance with the principle of interpretation of contracts, in case of inconsistencies between clauses in a contract, the latter clause should be read as qualifying rather than destroying the earlier clause so that the two clauses could be read together and effect given to both. He refers to Lewison: The Interpretation of Contracts, 6^th ed., §9.08 at pp.519-522.

102.  I cannot agree to the analysis of both parties. When the Buyer’s Payment Terms are read in conjunction with the Struck-out Terms, HKIBB Century indeed acted as a stakeholder holding the payments of the buyer and could only release 70% of the transaction price to the vendor on the handover date and the balance of 30% 3 months after the handover date. Nevertheless, these are not the applicable payment terms in the present case.

103.  In my view, the Buyer’s Payment Terms are not compatible with the Handwritten Terms at all and they provide for two altogether different payment schedules. The latter is unable to qualify the former. According to the former, Madam Wong was only required to pay an unspecified portion of the 30% of the Transaction Price to HKIBB Century as agent of Mr Chan upon signing of the Agreement. She had to pay the balance to make up the 30% within 7 days of the signing of the Agreement. The remaining 70% of the Transaction Price was to be paid to HKIBB Century 5 days before the Handover Date.

104.  Even if Madam Wong made payments in accordance with the Buyer’s Payment Terms, Mr Chan might not be able to receive payments in accordance with the Handwritten Terms. The following scenario can illustrate the incompatibility of the two payment schedules. Madam Wong could pay to HKIBB Century less than 10% of the Transaction Price, say 5%, upon signing of the Agreement and pay the balance of 25% within 7 days after the signing of the Agreement. In such a case, HKIBB Century could not be stakeholding 10% of the Transaction Price and release the same 3 days after the signing of the Agreement to Mr Chan.

105.  According to the Handwritten Terms, payment of 60% of the Transaction Price should be made 3 days after the signing of a new lease whereas the Buyer’s Payment Terms only required Madam Wong to pay the balance of 70% to HKIBB Century 5 days before the Handover Date. The parties did not stipulate how many days prior to the Handover Date that a new lease had to be signed or when a new lease should be signed. If a new lease was signed just the day before the Handover Date, pursuant to the Buyer’s Payment Terms, Madam Wong was only required to pay the balance of 70% of the Transaction Price to HKIBB Century 5 days before the Handover Date. HKIBB Century could not possibly pay to Mr Chan 60% within 3 days after the signing of a new lease pursuant to the Handwritten Terms.

106.  To resolve the inconsistencies between the Buyer’s Payment Terms and the Handwritten Terms and to ascertain the true construction of the payment terms, I should pay particular attention to the nature of the Handwritten Terms and they should indeed take precedence over the printed terms.

107.  I find assistance in the dissenting judgment of Rix L.J.. in Homburg Houtimport BV v Agrosin Private Ltd (The Starsin) [2001] 1 Lloyd’s Rep. 437, which was approved by the House of Lords [2004] 1 AC 715, applied by DHCJ L Chan (as he then was) in Ha Sau Mei Winnie v Ng Wai Wing & Anor., unreported, HCA 1472/2009, 2.11.2011. 

108.  Rix L.J. said this:

“the well known maxim of construction that written, stemmed or typed words which are inconsistent with printed terms usually take effect by superseding the latter.”

109.  Lord Bingham approved the judgment of Rix L.J. and this to say,

“it is common sense that greater weight should attach to terms which the particular contracting parties have chosen to include in the contract then to pre-printed terms probably devised to cover very mainly situations in which the particular contracting parties have never addressed their minds.”

110.  Applying this principle of construction, I believe the true construction should be that Madam Wong should only pay HKIBB Century as the agent of Mr Chan in accordance with the three terms of the Handwritten Terms and not the Buyer’s Payment Terms. The parties specifically agreed to add the Handwritten Terms to cover the event of the signing of a new lease, which was not mentioned in the pre-printed terms. They did contemplate that a new lease would be granted to Madam Wong prior to the Handover Date. In the Buyer’s Payment Terms, there was no reference to a new lease at all.

111.  In the Struck-out Clauses, the role of HKIBB Century as stakeholder was made clear and the triggering events for the release of payments to Mr Chan were specified. However, in the Handwritten Terms, HKIBB Century has no such role to play. They stipulated the payment obligation of Madam Wong rather than the obligation to release money to Mr Chan. The Chinese words 「落」 and 「支付」 were referrable to the payment obligation of Madam Wong rather than the money release obligation of HKIBB Century.

112.  Thus, Madam Wong should make payment of the Transaction Price to HKIBB Century in three instalments as the agent of Mr Chan pursuant to the Handwritten Terms. Upon the non-fulfilment of the Condition Precedent and hence the termination of the Agreement, any such payments should be returned to Madam Wong.

113.  That brings me to the Refund Claim. I should consider whether any of the First Sum, the Cash Payment, the Deposit Monies and the Repayment are valid payments made to HKIBB Century as agent of Mr Chan pursuant to the Agreement so that they would be liable to be refunded upon the termination of the Agreement.

Any Payments validly made by Madam Wong?

114.  At trial, Madam Wong agreed that the Deposit Monies were not payments of the Transaction Price. It should not be included in the Refund Claim to begin with.

115.  I should first determine the nature of the First Sum and the Repayment as both of them involved the dealings between Madam Wong and HKIBB Century to which Mr Chan was not privy.

116.  I have already explained the First Sum and the Loan Agreement. Their existence is not rebutted by contrary evidence. It is not alleged in her pleadings that Mr Chan approved her agreement that the First Sum and the Loan Agreement could be applied to settle the payments of the Transaction Price. It is alleged by Madam Wong that at the June Meeting Mr Lau suggested to Mr Li and her that the First Sum could be treated as part payment and they accepted his suggestion in the presence of Mr Chan prior to her signing of the Agreement.  

117.  I do not accept this allegation and I prefer Mr Chan’s evidence. If this matter was indeed canvassed at the June Meeting, there is no reason why the parties did not mention this purported receipt of such a big sum, which was close to half of the Transaction Price, by Mr Chan in the Agreement and instead they agreed on the payment obligations in the Handwritten Terms, which did not reflect the reality.

118.  Mr Chan says he had no knowledge about the First Sum and the Loan Agreement at all. I accept his evidence. Madam Wong does not allege that Mr Chan was aware of the Loan Agreement. Mr Li made a lame attempt to fix Mr Chan with the knowledge of the Loan Agreement by an audio-recording of a telephone conversation between Mr Chan and him on 28^th of August 2013. The transcript of the telephone conversation is made available to this court.

119.  I have read the transcript. I accept Mr Chan’s evidence that that the conversation did not relate to the Loan Agreement at all[8]. There was no mention about the Loan or any loan extended by Mr Lau or HKIBB Century. Mr Li could not argue against the transcript.

120.  Mr Li in cross-examination alleged for the first time that at the June Meeting, the Loan Agreement was mentioned and impliedly consented to by Mr Chan. I have no hesitation in rejecting his evidence. This allegation if true should have been included in the Agreement, the Loan Confirmation, the pleadings and the witness statements. The Loan Confirmation was only executed after the June Meeting.

121.  I am aware that Madam Wong makes it clear that she does not claim refund of the amount of the Loan. She merely asks for the refund of the Repayment. If the Loan could not be regarded as a valid payment under the Agreement, there is no reason why the Repayment can be.

122.  With these factual findings, I turn to the relevant legal principles. First, in Pearson v Scott (1878) 9 Ch.D. 198, Fry J considered a similar question. There, the executors instructed their solicitor to sell certain stock in an estate. Their solicitor then instructed a stockbroker to sell the stock. The stockbroker completed the sale and sent to the solicitor a cheque for part of the purchase money for the stock and carried the balance on the transaction to the credit of the solicitor in the usual account between them, which account was afterwards settled by a payment made to the stockbroker. Subsequently, the solicitor absconded and had since been adjudicated bankrupt. The executors sued the stockbroker for the balance of the sale proceeds not paid by cheque to the solicitor.

123.  Fry J held that the authority of the agent could not go beyond to receive in money (or its equivalent) on behalf of its principal and so the stockbroker was still liable to pay the executors the balance. Fry J had this to say,

“… it appears to me that a long series of cases has in fact laid down the proposition that the payer who knows he is paying an agent must pay in such a manner as to facilitate and encourage the agent to pay it to his principal - at any rate, that the payer cannot pay it to the agent by a settlement of account between himself and the agent. And for this short reason in morals, that money which is paid to the agent ought to find its way to the principal, and that if you intercept that money in order to pay the debt which the agent owes to the payer, you diminish the probability of the money finding its way from the agent to the ultimate payee.”

124.  One of the cases that Fry J referred to in his judgment is Bartlett v Pentland, 10 B. & C. 760. He cited with approval the following dictum of Mr Justice Bayley (at p.769):

“If instead of making the payment in that way - that was, by payment to the order of the principal - they make the payments to the broker in a manner which gives the latter an opportunity of misapplying the money; then, as the broker was not authorized to receive payment in that way, it was done at the peril of the underwriters.”

125.  Romer J reached a similar conclusion in Crossley v Magniac [1893] 1 Ch. 594. There, the London agent of a country stockbroker in England sold the stock of the plaintiff but it did not pay to the plaintiff the sale proceeds through the country stockbroker.  Instead, it applied the sale proceeds to settle the account between the country and themselves. It was held that the London agent had not discharged their duty to the plaintiff by paying the sale proceeds to the agent authorized by him to receive it and therefore was still liable to pay the plaintiff.

126.  I agree to the holdings in these authorities and they appear to make perfect sense to me.  Unless with the consent of the principal, a payer should make payment to his agent only in cash or its equivalent and not anything else in accordance with the payment terms. Any deviation from this general rule may give rise to an additional and unwelcome risk that the principal may not be paid by his agent in the end. There is no reason why the principal should be exposed to such a risk.

127.  In the present case, it cannot be within the authority of HKIBB Century given by Mr Chan to convert the First Sum and the Loan to valid payments of the Transaction Price. This is not the pleaded case of Madam Wong. The private agreement between Madam Wong and HKIBB Century in respect of the First Sum and the Loan could neither facilitate nor encourage HKIBB Century to make payments of the Transaction Price to Mr Chan. Quite on the contrary, it merely diminished Mr Chan’s chance of receiving such payments in that it rendered his receipt dependent on not only the integrity but also the financial soundness of HKIBB Century.

128.  Whilst accepting that it is an ancient rule that an agent who is authorised to receive payments of money has prima facie no authority to receive payment other than in cash or its equivalent, Mr E Chan submits that this rule is conditioned by general principles as to the authority of the agents under which agents are normally authorised to do whatever is usual in the course of business.

129.  Of course, it boils down to the extent of the agency of HKIBB Century for Mr Chan. There is no such allegations or evidence that Mr Chan ever gave HKIBB Century such authority, express or ostensible, to reach the private agreement with Madam Wong.  Nor can it be said that such a private agreement is usual in the course of business in the absence of any supportive evidence.

130.  Mr E Chan tries to distinguish the present case from the said two authorities. He submits that the agents in those cases acted to the detriment of their principals but HKIBB Century here actually facilitated the transaction by offering the First Sum and the Loan to settle the Transaction Price.

131.  For the reasons given, I cannot accept this submission. Whilst I do not accept that HKIBB Century had such a benevolent motive, its subjective intention is irrelevant and the key question remains whether he had the authority to receive payment other than in cash or its equivalent on behalf of Mr Chan.

132.  As regards the Cash Payment, it is noteworthy that Madam Wong succeeded in her summary judgment application against HKIBB Century in respect of the entire amount of the Cash Payment by consent. The allegation that the Cash Payment was made was not challenged at trial.

133.  The sizeable amount was stated to be paid in cash but the payment method stipulated in the official receipt issued by HKIBB Century was by cheque and (in) cash. No other supporting documentary evidence to prove payment is adduced. I also note that Madam Wong through MCWK sent to KYL some cheques for the rental deposits and the rent for the first two months on 5 September 2013 despite the Cash Payment.  Not without reluctance, I accept that the Cash Payment was indeed paid to HKIBB Century.

134.  Even on the pleaded case of Madam Wong, the Cash Payment was paid to HKIBB Century to enable Mr Lau to make payments for her own purposes in addition to payment of the balance of the Transaction Price. Such payments included three months’ rent as rental deposits and the rent for the first month of the new lease and these payments had to be made to the Company and not Mr Chan in order that the Company would execute a tenancy agreement in her favour. Madam Wong was not sure whether the new rent would be HK$78,000 or HK$89,000.

135.  If the latter was the new rent, HK$356,000 out of the Cash Payment would be payable to the Company. There would be HK$60,000 left for all other expenses, the total amount of which was yet to be ascertained.  I opine that Madam Wong could not even tell whether or not there would be anything left to pay Mr Chan the balance of the Transaction Price after payments for all such expenses.

136.  I cannot accept that any part of the Cash Payment can be regarded as Madam Wong’s payment of the balance of the Transaction Price, without being so earmarked. I cannot accept that the Cash Payment was a payment to HKIBB Century as agent of Mr Chan to fulfill Madam Wong’s payment obligations under the Agreement.

137.  In the premises, I come to the conclusion that Madam Wong did not make any payments to Mr Chan through HKIBB Century by way of the First Sum, the Loan (and the Repayment) and/or the Cash Payment pursuant to the Agreement at all. The Refund Claim must fail.

Cause of Termination of the Agreement – Alleged Breaches

138.  Now I assess the merit of the Compensation Claim. I should first observe that in her pleading, Madam Wong only alleges that Mr Chan is in breach of two express terms relating to the obligation to transfer the licence and the Surrender Deed and certain implied terms.  Madam Wong claims a specific sum of HK$234,000 as damages purportedly pursuant to the Compensation Clause.

139.  I have already set out my reasons for my conclusion that the Agreement was terminated due to the non-fulfillment of the Condition Precedent by the 26/8 Letter. I refuse to accept that there were repudiatory breaches as alleged by both sides.

140.  First, I deal with the alleged breaches of Mr Chan in the pleaded case of Madam Wong. Mr Chan proceeded with the execution of the Surrender Deed and the Revocation long after the issue of the 26/8 and 30/8 Letters. In the latter case, it was made even after the Eviction. Mr Chan could not be held to be in breach of the Agreement by such acts after the termination of the Agreement.

141.  Madam Wong has not clearly pleaded which and how the Implied Terms were breached by Mr Chan. She first avers that the Condition Precedent was not fulfilled and the Company did not grant a  new lease to her.[9]

142.  Madam Wong next avers that in breach of the Implied Terms, Mr Chan is obliged to compensate to her, curiously enough, not the Compensation Sum but the Conversion Damages.[10]

143.  I can only assume that Madam Wong again relies on the Revocation and the Surrender Deed. The only relevant allegation among the Implied Terms would be Mr Chan’s obligation to procure the agreement of the Company to grant a new lease to Madam Wong on the New Terms.  

144.  I accept the evidence of Mr Chan that prior to the Agreement, he had indicated to Madam Wong the preliminary view of the Company that it had in principle no objection to allow the purchaser of his café business to continue to operate the business at the Property subject to a new lease to be executed. He had a discussion about the intended sale of business with Mr YW Kong in late 2012 long before Madam Wong had come into the picture. However, it cannot be treated as a promise that he would take on the legal obligation to procure the grant of a new lease on the New Terms.

145.  The relevant Implied Term is hardly necessary or reflective of the obvious or presumed intention of the parties. It is indeed inconsistent with the express term of the Agreement, viz, Clause 7. I cannot accept incorporation of the said implied term.

146.  In any event, the clear evidence is that the negotiation of the new lease was conducted between Madam Wong and the Company through their respective legal representatives in August 2013. On the indisputable documentary evidence, the Company made a genuine effort to reach an agreement with Madam Wong.

147.  I note that Mr Li alleges that on 3 September 2013, Mr YW Kong told him that the Company refused to sign a new tenancy agreement with Madam Wong because Mr Chan had failed to surrender the Lease to the Company. The Company did not deal with this specific allegation in its pleading nor in the evidence of Mr YW Kong. I do not find this allegation to be credible, nevertheless. The alleged position of Mr Chan is not supported by any evidence. There is simply no reason why Mr Chan would allow the Agreement to be aborted by refusing to surrender the Lease. This is actually contrary to his position stated in the 3/9 and 11/9 Letters. It cannot be the real reason why the Company did not grant a new lease to Madam Wong even if Mr YW Kong told Mr Li so. The Company could have every reason not to grant a lease to Madam Wong. It simply did not have to give Madam Wong or Mr Li any explanation.

148.  In the circumstances, Madam Wong’s allegations against Mr Chan in respect of the refusal of the Company to grant a new lease and hence the non-fulfilment of the Condition Precedent are simply groundless.

149.  I am unable to hold that Mr Chan was unwilling to complete the transaction. Quite on the contrary, he was most eager to do so. The Compensation Clause cannot be triggered and the liquidated damages thereunder cannot be available to Madam Wong. Given this conclusion, there is no need to deal with Mr Wang’s submission that the Compensation Clause is a penalty clause in nature and so is illegal and unenforceable.   

150.  In the premises, the Compensation Claim has no merit at all and must be rejected. I cannot accept that Mr Chan ever breached the Agreement in any manner.

151.  On the other hand, Mr Chan alleges Madam Wong repudiated the Agreement by her breaches of the payment conditions in accordance with the Buyer’s Payment Terms and her failure to perform the Post-Handover Obligations. He contends that by the 19/9 Letter, he accepted the repudiation.[11]

152.  I do not accept that the Post-Handover Obligations should be the subject matter of an implied term in the Agreement. There is no basis for such an incorporation at all. Mr Wang does not make submission on this. Whilst it sounds reasonable and necessary that Madam Wong should pay the rent and outgoing expenses after the Handover Date, it was a matter of negotiation as to the proportion that she was required to pay. The parties accept that the Post-Handover Obligations were orally agreed prior to the signing of the Agreement. The failure of Madam Wong to honour these obligations is a breach of the Collateral Contract rather than the Agreement. It could not be a repudiatory breach entitling Mr Chan to terminate the Agreement.

153.  I have already found that Madam Wong did not make any payment in accordance with the Agreement but I refer to her failure to comply with the Handwritten Terms rather than the Buyer’s Payment Terms. I do not accept Mr Chan’s pleaded case on breaches.

154.  More fundamentally, after Madam Wong failed to pay him the Transaction Price pursuant to the Handwritten Terms, Mr Chan did not threaten to terminate the Agreement and set a reasonable deadline for her to pay up all the outstanding monies including those due pursuant to the Post-Handover Obligations. Instead, he kept making efforts to complete the transaction and assisted in procuring a new lease for Madam Wong.

155.  When the 17/9 Letter, in which he purportedly accepted the repudiation of Madam Wong, was issued, the Agreement had already been terminated. It could not have been repudiated by then. I should add that there could be no loss and damage caused to Mr Chan by the failure of Madam Wong to pay the Transaction Price. Any such payments should be refunded to Madam Wong upon the termination of the Agreement in any event.

156.  In the premises, I hold that neither Madam Wong nor Mr Chan repudiated the Agreement and I dismiss the parties’ respective contractual claim for damages as a result of the alleged repudiatory breaches.

157.  Moreover, I dismiss the claim of Mr Chan in reliance of the Forfeiture Clause. It is against a wealth of evidence to say that Madam Wong was unwilling to complete the transaction. The Agreement was aborted plainly not for want of her willingness to complete.

Tortious Claims of Madam Wong and the Company

158.  I now turn to the Conversion Claim which is made against both Mr Chan and the Company. I also find it convenient to deal with the tortious claim of the Company against Madam Wong at the same time.

159.  Madam Wong’s case is that after the Eviction, her chattels left at the Property fell into the possession and control of Mr Chan and/or the Company. She has come up with two lists of such chattels. They were actually compiled by Mr Li, one in October 2013 (“the 2013 List”) and one in October 2016 (“the 2016 List”).

160.  She also includes in this claim a sum of HK$100,000 for her alleged loss of profit from 27 September 2013 to 9 October 2013, i.e. the date of the Eviction.

161.  Madam Wong in her pleading does not explain why the computation of her loss of profit should commence from 27 September 2013. It is the date when Mr Chan agreed to deliver vacant possession to the Company. Clause 5 of the Surrender Deed provided that Mr Chan agreed to pay to the Company all the reasonable expenses to restore the Property to a bare shell condition and such works should be undertaken by the Company.

162.  Both Mr Chan and the Company agree that vacant possession of the Property was given to the Company on 27 September 2013. I cannot make such a fact finding despite their agreement but I do not think this is relevant. Mr Chan in his pleading admitted that he gained access to the Property after the Company recovered possession of the Property and he sold some of the remaining equipment of the café business before the Company proceeded to reinstate the Property purportedly to mitigate his loss. He produced a receipt evidencing the sale of such equipment and articles including four ceiling air conditioners, one air conditioner, 3 refrigerators, ice cube maker and cooking utensils (collectively “the Sold Chattels”) to one Mr Yip dated 7 December 2013. He explained that Mr Yip was actually introduced to him by Mr YW Kong.

163.  Mr Li’s evidence is that on the day of the Eviction, Mr YW Kong made a report to the police and he had an interview in a police station. After the interview, he was denied access to the Property.

164.  On or about 16 October 2013, with the assistance of the police, Mr Li went into the Property and found that all the newly acquired cooking utensils had been removed and all the documents stored in the cashier area disappeared. The new television had also been taken away.

165.  Going back to the historical background, Madam Wong alleges that another Mr Kong paid a visit to the Property in July 2013 and he met Mr Li and her (“the July Visit”). He turned out to be Mr Kong Jr. He told them that they should pay the rent of the Property to him from then on. He also left his mobile phone number with them and asked them to contact him direct in case of any enquiry. Madam Wong contends that this conduct shows that the Company was aware that Mr Chan had assigned the Lease or sublet the Property on the Current Terms to Madam Wong that the Company had given consent to such an assignment or subletting.

166.  Alternatively, Madam Wong says that the Company by the representations of Mr Kong Jr during the July Visit effectively gave an oral licence to Madam Wong with the consent of Mr Chan to occupy the Property to carry on the café business from 12 July 2013 onwards on the Current Terms (“the Implied Licence”).[12]

167.  Madam Wong further says that the Company led her into believing that she was allowed to carry on her café business at the Property and that the Condition Precedent had been fulfilled[13]. Hence she acted in reliance of this and altered her position by carrying on her café business at the Property. She contends that the Company is estopped from evicting her from the Property (“the Estoppel Contention”).

168.  Mr E Chan did not make any submission on the Estoppel Contention throughout the trial. I believe that it can be taken as abandoned. In any event, the Estoppel Contention is inconsistent with the Implied Licence.  The Implied Licence could not be in way incapable of being revoked and once it was revoked, the Company could not be estopped from evicting its former licensee from the Property should he refuse to deliver vacant possession of the same.

169.  Mr Chan only agrees that the Company gave its consent or had knowledge of Madam Wong’s occupation of the Property.[14] On the other hand, curiously enough, the Company does not deal with the allegation of the July Visit save making a general denial. It was not covered by the evidence of Mr YW Kong, either. Mr Kong Jr must be in the best position to deal with such allegations but for no valid reason he did not make himself available to testify. Mr YW Kong merely explained that Mr Kong Jr travelled for fun most of the time.

170.  Concerning this factual dispute, I accept the evidence of Mr Li that the July Visit did take place and they met Mr Kong Jr. He was aware of the new café business then operated by Madam Wong at the Property. Madam Wong did manage to call Mr Kong with the number Mr Kong Jr left her. There is simply no contrary evidence to negative the occurrence of the July Visit and Mr Kong Jr inexplicably did not take any step to rebut the allegations.

171.  I should also mention that under cross-examination, Mr Kong agreed that there was a gathering among Mr Lau, Mr Chan and him at a restaurant at Olympic City, Kowloon on or about 28 June 2013 (“the June Gathering”). The June Gathering had not been previously mentioned in the evidence of Mr Chan and Mr Kong. Mr Chan’s evidence is that then he told Mr Kong that he had already signed the Agreement with Madam Wong to take over his business at the Property. Mr Kong said he could not recall whether he was so notified at the June Gathering.

172.  For the following reasons, I cannot accept Mr Li’s evidence as to what actually transpired during the July Visit and refused to find that the Implied Licence was granted to Madam Wong:

a.   I do not believe that Mr Kong Jr ever told Madam Wong and Mr Li to pay rent to him from then on. They had never paid him rent direct and Mr Kong Jr had never collected rent from them. I have not lost sight of the allegation that the Cash Payment (allegedly made in June) consisted of the rent for the first month already. There is no reason why Madam Wong did not tell Mr Kong Jr that she had already paid the rent for the first month if he had indeed asked them for rent.

b.   As pointed out, I do not accept that Mr Chan had ever assigned the Lease to or sublet the Property on the Current terms to Madam Wong. There is no question that the Company was aware of the alleged assignment or subletting.

c.   On the evidence of Mr Li, Mr Kong Jr told Madam Wong to contact his solicitors regarding the execution of a new tenancy agreement and so she instructed MCWK for that purpose. If Mr Chan had assigned to her the Lease or sublet to her on the Current Terms already, Mr Kong Jr would not have asked and Madam Wong should not have agreed to execute a tenancy agreement.

d.   The first documentary evidence relating to the negotiation of a new lease between Madam Wong and the Company is a letter of MCWK dated 8 August 2013. It made no mention about any assignment or subletting. Nor did it allege any licence previously given by the Company.

e.   Furthermore, I have read the draft tenancy agreements faxed from KYL to MCWK on 19 and 22 August 2013. I note that the commencement date of the intended new lease was changed from 15 August 2013 to 13 July 2013, i.e., the Handover Date whilst the termination date remained the same date as in the Lease. The new lease was intended to cover the period from the Handover Date to the expiry date of the Lease. In other words, it should cover the remainder of the Lease. This shows that the Company was all along aware of the occupation of the Property by Madam Wong since the Handover Date.

173.  Moreover, I accept that by the June Gathering and the July Visit, Mr Kong and Mr Kong Jr were aware of the occupation of the Property by Madam Wong and her takeover of Mr Chan’s café business. There is also evidence that Madam Wong called Mr Kong twice in July 2013 and told him about her acquisition.

174.  I must reject the oral evidence of Mr Kong that he and hence the Company only knew that Madam Wong had acquired the café business in late September 2013. Mr Kong was far from frank in the witness box.

175.  The Company did not raise any objection to the occupation of Madam Wong before the execution of the Surrender Deed.  I find that the Company gave its tacit approval for Madam Wong’s occupation during the period from the Handover Date to the date of the Surrender Deed.

176.  It is necessary to identify the true nature of her occupation during that period. I do not accept that the Company gave any kind of licence to Madam Wong. The Lease was at the material time still in force. The Company could not have granted any licence to Madam Wong on top of the Lease. It was Mr Chan who allowed Madam Wong to take over his business at the Property against the express restriction in the Lease.  The permission of Mr Chan was actually given so as to fulfil his contractual obligation to hand over his café business to Madam Wong on the Handover Date. Without the permission of Mr Chan, Madam Wong’s use of the Property must be a trespass on the Property and Mr Chan, being a tenant in possession of the Property under the Lease, and not the Company, could sue her for trespass. The licence which Madam Wong had obtained was from Mr Chan and not the Company. 

177.  The tacit approval of the Company for Madam Wong’s operation of her café business at the Property could only be regarded as a waiver or forbearance of the restriction in the Lease that Mr Chan could not sublet or party with the possession of the Property in my view.

178.  Further, this waiver or forbearance was not absolute or permanent. It was only made with a view to the execution of a new lease pursuant to the Agreement. When it became clear that such a new lease was not forthcoming pointing to the non-fulfilment of the Condition Precedent, the waiver or forbearance should be withdrawn. Mr Chan would not have any legal right to allow Madam Wong to carry on the café business at the Property and Madam Wong should no longer enjoy any licence or any legal right to remain at the Property. Indeed, the Agreement should be terminated and Mr Chan should not allow Madam Wong to stay at the Property as well.

179.  Thus, by the date of the Surrender Deed, Madam Wong should have ceased to have any right to stay at the Property in the absence of any consent of Mr Chan and the Company. She committed the tort of trespass by her continued occupation of the Property thereafter.

180.  Mr E Chan submits that Madam Wong was a licensee of the Company. He does not say that the licence was not revocable. He merely submits that as a matter of law even if she was a bare licensee, she would not become a trespasser until she had a reasonable time to withdraw. In this regard, he relies on a passage in Megarry & Wade’s Law of Real Property, 6^th Edn, §34-003.

181.  Mr Ngai actually relies on the same passage. Given my finding that the Agreement was terminated by the 26/8 Letter, the licence given by Mr Chan to Madam Wong to remain at the Property must be revoked and Madam Wong should vacate the Property with a reasonable time thereafter. Any further occupation would constitute a trespass on the Property.

182.  I find it convenient to give reasons at this juncture for the dismissal of the application of Madam Wong to file and serve a Re-re-amended Statement of Claim on the first day of the trial. By way of re-re-amendment, Madam Wong sought to add a plea that the Implied Licence was revoked by the execution of the Surrender Deed but the Company should have allowed Madam Wong a reasonable period of time to vacate the Property thereafter.

183.  In the first place, the application was made far too late without any explanation for the delay.  The major part of the proposed amendments also added nothing to the pleaded case. It did not introduce additional material facts and it merely stated a legal conclusion. I did not find the proposed amendments to be necessary. For these reasons, I disallowed the application.

184.  I need not resolve the question as to when Madam Wong became a trespasser of Mr Chan. Neither Madam Wong nor Mr Chan in their pleadings stated their position on this matter. Mr Chan did not make any trespass claim against Madam Wong.  

185.  The issue is when Madam Wong became a trespasser of the Company. By the 19/9 Letter, it must be abundantly clear to Madam Wong that any licence, be it given by Mr Chan or the Company, must be revoked by 22 September 2013.

186.  The Company alleges that Madam Wong had committed the tort of trespass since 28 September 2013 until the date of the Eviction. I find that this allegation is borne out by evidence.

187.  Madam Wong should have sufficient time to vacate the Property before 28 September 2013 upon receipt of the 19/9 Letter if she had decided to do so. She did not explain in her evidence any difficulties in vacating the Property. In cross-examination, Madam Wong and Mr Li could not satisfactorily explain the practical difficulties in ceasing the business and vacating the Property before 28 September 2013. All the long-term contracts Madam Wong had entered into for the purpose of her café business could not justify her trespass. She could not simply assume the Condition Precedent must be fulfilled. She could still use those contracts in another property in any event. Indeed, Madam Wong made no effort to do so and erroneously insisted on staying at the Property to carry on her café business. She even used her two electric generators to carry on the business after the power supply to the Property was cut off by the Company.

188.  I can well understand the frustration of Madam Wong. She had made her investment on her new business and the premature cessation must injure her financial interest. Though sounding unkind, I have little sympathy with her and she brought all these on herself.

189.  The Handwritten Terms showed that as a matter of sequence, the Handover Date should be after the date when a new lease was to be granted. It should be noted that after the completion date Madam Wong had to pay “the balance” of 30% meaning such a payment was supposed to be made only after the 60% of the Transaction Price had been paid 3 days after the grant of a new lease to Madam Wong.

190.  The wisdom of this sequence is obvious. If the Condition Precedent could not be fulfilled, there should be no handover. The Agreement would be terminated and it would be easy for the parties to deal with the aftermath.

191.  However, the parties proceeded to change hands on the Handover Date even before any negotiation of a new lease. Madam Wong only met Mr Kong Jr after she took over the café business at the Property. On her own evidence, she only waited until August 2013 to instruct MCWK to negotiate with KYL. Both Madam Wong and Mr Chan were just so eager to complete the transaction and worked on the assumption that the Company would certainly grant Madam Wong a new lease. It was a pure commercial decision. The risk that Madam Wong took was, nevertheless, as plain as a pikestaff.

192.  In the premises, I hold that Madam Wong had trespassed on the Property since 28 September 2013 and the Company must succeed in the Trespass Claim. Mr Ngai does not make submission on its nuisance claim and no evidence is adduced to prove actual damage. The Company is only asking for mense profits. I treat the nuisance claim as abandoned.

193.  The mense profits claimed covers the period from 28 September 2013 till the date of the Eviction, a total of 12 days. I accept that the Company is entitled to such a relief. I accept that on the basis of the monthly rent under the Lease, the mense profits for these 12 days should be HK$30,444.00. I have heard no debate about the duration and the quantum at all.

194.  Now I return to the Conversion Claim of Madam Wong. As mentioned, from the date of the 26/8 Letter or the 19/9 Letter to the date of the Eviction, Madam Wong had more than enough time to vacate the Property. Since the surrender of the Lease, the Company had taken steps to recover possession of the Property from Madam Wong. I accept the following pleaded facts to be borne out by the evidence of the Company.

195.  On 28 September 2013, the staff of Madam Wong at the Property prevented the Contractor from carrying out restoration works at the Property. The police intervened and Mr Kong and Mr Li went to the police station to assist investigation. Mr Kong made it clear to Mr Li and Madam Wong that they did not have any legal right to remain at the Property.

196.  On 9 October 2013, the police informed Mr Kong that Mr Li and his staff were occupying the Property and subsequently Mr Kong and Mr Li went to the police station again. The Property was vacated and the Contractor entered the Property and carried out restoration works. A new lock was applied to the Property and the Eviction was completed.

197.  I, however, cannot accept the allegation of Mr Kong that on or about 29 and 30 September 2013, the Company posted warning notices on the shop front and back door of the Property. This allegation is not supported by any collaborative evidence. Nor is any photocopy of the notices produced. I do not find Mr Kong’s evidence to be reliable.

198.  I refuse to accept the oral evidence of Mr Kong that he overheard that Mr Li told the police that Madam Wong left nothing at the Property. This was only raised for the first time in cross-examination. He should have mentioned this to resist the claim of Madam Wong in the pleading and his witness statement if the conversation had taken place.

199.  I further disbelieve the evidence of Mr Chan and Mr Kong to the effect that Mr Chan delivered vacant possession of the Property in a bare shell condition to the Company on 27 September 2013. This allegation is incredible. Clearly Madam Wong was still operating her café business at the Property then.

200.  I could well understand that Madam Wong’s continued possession of the Property seriously irritated both Mr Chan and the Company. It was both unreasonable and illegal. Emotions ran high. I believe Mr Chan simply washed his hands and let the Company step in and take charge of evicting Madam Wong from the Property.

201.  The evidence of Mr Chan was that on 10 October 2013, the day following the Eviction, he told Mr Kong that the majority of the chattels including equipment and furniture should be returned after the termination of the Agreement. On that basis, Mr Kong allowed him to pick out the Sold Chattels and sold them to Mr Yip. He claimed that he had no idea as to the whereabouts of all other chattels allegedly left at the Property by Madam Wong.

202.  After the Eviction, the Sold Chattels were in the possession of the Company. This can hardly be denied. I understand that the Company was not a party to the Agreement and Mr Chan’s claim of the ownership of the Sold Chattels could be confusing to the Company. Nevertheless, given the fact that Madam Wong was just expelled from the Property, the Company should have at the very least contacted Madam Wong to ascertain whether she had left anything at the Property.

203.  Even if Madam Wong was a trespasser, she should have been given a reasonable chance to retrieve her properties from the Property however bad their relationship was. The Company cannot possibly rely on the contents of the Surrender Deed to say that vacant possession was delivered on 27 September 2013 and so it would be entitled to dispose of all the chattels left behind at the Property.

204.  For present purpose, even if this court accepts that the Company genuinely believed that the Sold Chattels belonged to Mr Chan, it can still be guilty of conversion so long as it dealt with the Sold Chattels in a manner inconsistent with the rights of Madam Wong if she was their true owner. It is trite that for the tort of conversion, it is not necessary to show that the defendant knew of the claimant’s interest in the goods: Hollins v Fowler (1875) LR 7 HL 757.

205.  Here, the Company allowed Mr Chan to take possession of the Sold Chattels for sale purpose. In his pleading, Mr Chan merely makes a bare denial to the plea of conversion and he readily agrees to give credit for the Sale Proceeds in his claims.

206.  That said, I still have to decide on the ownership of the Sold Chattels for the purpose of the Conversion Claim. On this issue, I received very little evidence. Madam Wong makes an assertion in her witness statement that neither Mr Chan nor the Company had any right to sell the Sold Chattels without her consent and contrary to her will. Neither Madam Wong nor Mr Li expressly said that each of the Sold Chattels had been newly acquired by her in addition to those transferred to her under the Agreement.

207.  I have studied the 2016 List and cannot find any specific reference to any of the Sold Chattels.

208.  On the other hand, Mr Chan told Mr Kong that the Sold Chattels should be returned to him after the termination of the Agreement and that they were his profit-generating equipment. His assertion is somehow supported by an inventory compiled by Mr Chan in May 2013. In the inventory, I can find references to those equipment included in the Sold Chattels. Under the Agreement, the Transaction Price included the price for the transfer of the equipment of Mr Chan’s café business.

209.  Thus, on the balance of probabilities, I accept that the Sold Chattels were actually included in the Agreement to be transferred to Madam Wong on the Handover Date. Upon the termination of the Agreement, they should be returned to Mr Chan and should become his properties again. It follows that Mr Chan was entirely entitled to dispose of them by way of sale to Mr Yip.

210.  I do not think the fact that Mr Chan in his pleading agrees to give credit for the Sale Proceeds for the computation of damages to him amounts to any admission as to the ownership of the Sold Proceeds. Mr Chan claims damages for his loss of equipment and decoration relating to his café business which Madam Wong refused to return to him upon the termination of the Agreement. He managed to recover the Sold Chattels from the Company and sold the same. Thus it is only reasonable for him to to deduct the Sale Proceeds from the amount he claims.

211.  Madam Wong alleges that there were other chattels of hers disposed of by the Company and Mr Chan in the Conversion Claim. She relies on the evidence of Mr Li in this regard. Mr Li confirms at trial that the 2016 List is more accurate than the 2013 List. The pleaded value of the kitchen utensils was HK$152,282 whilst in the 2016 List it was HK$59,152 only. For furniture and fittings, the pleaded value was HK$329,260 whilst in the 2016 List it was HK$179,800 only and the items set out therein even included “Air Conditioner Maintenance” of HK$5,000 worth and “Light Maintenance” of HK$50,000 worth. He alleges that a sum of HK$4,000 in cash and food stock of HK$80,000 worth remained at the Property.

212.  Though I am inclined to believe that there should be newly acquired equipment not liable to be returned to Mr Chan upon the termination of the Agreement, I accept the submission of Mr Ngai that Mr Li’s evidence cannot be relied on. The 2016 List is a handwritten inventory created by Mr Li in accordance with his memory only. There is no supporting documentary evidence of all. He could not satisfactorily explain the differences between the figures pleaded in the pleading and the 2016 List and the differences between the 2013 List and the 2016 List. This casts serious doubt on his credibility.

213.  I cannot be convinced that the chattels set out in the 2016 List included those newly acquired by Madam Wong not from Mr Chan. Mr Li did not identify such chattels. The total lack of documentary evidence is alarming and dents her case. I understand that the complaint of Madam Wong and Mr Li is that all the receipts and accounting documents of her café business were left at the Property and vanished after the Eviction. However, there is no reason why Madam Wong did not make any demand to the Company for the return of those documents or try to obtain documentary proof of the alleged acquisition of new chattels from the shops or her bank(s). She should have done better to amass evidence to support her Conversion Claim.

214.  Nor can I believe that there was a sum of HK$4,000 in cash left at the Property. Madam Wong did not make any demand for the return of the cash after the Eviction at all. It was an outright theft if the Company had appropriated the said sum without the authorization of Madam Wong. There is no reason why Mr Li did not report this to the police on 16 October 2013 when he obtained access to the Property with the police.

215.  Whilst I believe that there should be food stock including frozen food left at the Property, again there is no evidence that Madam Wong has ever made any demand for the return of such perishable properties within a reasonable time after the Eviction or at all. They should be treated as abandoned and could not have been converted to the own use by the Company.

216.  The claim for loss of advertisement is a non-starter. It even included a 2-year contract with Now TV of HK$34,000 worth, which is not a tangible chattel capable of being seized by the Company at all.

217.  The claim for loss of profit is equally hopeless. Madam Wong did not begin to prove with credible evidence that with her alleged lost chattels, she would have operated a business elsewhere and generated profits as claimed.

218.  In the premises, the Conversion Claim against Mr Chan and the Company must fail.

Other Claims of Mr Chan against Madam Wong

219.  I have disposed of Mr Chan’s claim against Madam Wong arising from the Agreement. Now I deal with his other claims against her premised on the Post-Handover Obligations.

220.  First, the breach of the Post-Handover Obligations was not actually debated at trial despite Madam Wong’s bare denial in her pleading. She does not suggest that she has made any payments to Mr Chan to comply with the Post-Handover Obligations. I just have to examine whether those alleged expenses had actually been incurred and paid by Mr Chan.

221.  I have studied the documentary evidence and I am satisfied that the claim for the sum of HK$254,865 as post-handover rent and expenses is well supported. Mr Chan should be entitled to recoup the same from Madam Wong.

222.  In his pleading, Mr Chan claims an amount of HK$66,732.31 as gas expenses. In his witness statement, he explains that the actual gas expense was HK$12,402.31 and the residual amount of HK$54,330 was the additional charge levied by the Gas Company for the early termination of an agreement.

223.  I have read the agreement between the Gas Company and Mr Chan dated 15 May 2012. It concerned the installation of several cooking utensils supplied by the Gas Company valued HK$54,330 in total. Under the agreement, Mr Chan agreed to use the cooking utensils free of charge in conjunction with the service of the Gas Company for not less than four years meaning the agreement was binding on Mr Chan even after the expiry of the Lease.

224.  Hence, it is not really an expense which Madam Wong agreed to pay after the Handover Date for the purpose of her café business. Upon the termination of the Agreement, Mr Chan could have recovered the possession from Madam Wong by legal means and resumed his café business. He, of course, was entitled to take another course including the premature surrender of the Lease but Madam Wong cannot be held responsible for the consequences of the early termination of the agreement with the Gas Company. I must reject Mr Chan’s claim for the amount of HK$54,330.

225.  Mr Chan further claims an amount of HK$180,000 being his loss of profit for six months from the Handover Date to 12 January 2014. I fail to understand the legal basis of this claim. Mr Chan’s evidence is that he wanted to retire because of his age and hence he sold his café business to Madam Wong. He let Madam Wong take over his café business on the Handover Date on the assumption that the Condition Precedent would be met. Upon the termination of the Agreement for want of the fulfilment of the Condition Precedent, Madam Wong should cease her café business at the Property and let Mr Chan resume possession of the Property.

226.  If this claim for loss of profit is based on the Post-Handover Obligations under the Collateral Contract, Mr Chan did not suffer such loss of profit after the Handover Date until the date of the termination of the Agreement. But even after the termination of the Agreement, Mr Chan allowed Madam Wong to remain in occupation of the Property until 22 September 2013, 5 days before the execution of the Surrender Deed (“the said 5 days”).

227.  Mr Chan did nothing to resume his café business at the Property after 22 September 2013. For example, there is no evidence that he had ever re-engaged any staff to operate his café business after 22 September 2013. There could be no loss of profit during the said 5 days. The surrender of the Lease was purely his commercial decision and he could not possibly recover any loss of profit from Madam Wong after the surrender. This claim is wholly unmeritorious.

228.  Mr Chan claims HK$706,000 for his loss of the equipment and decoration of the café business. The equipment and decoration of the café business should be returned to Mr Chan upon the termination of the Agreement as the Post-Handover Obligations under the Collateral Contract. There is no allegation that Madam Wong took away any such equipment before the Eviction. Nor is there any allegation that Madam Wong damaged any decoration of the Property before the Eviction. Mr Chan could not have suffered any loss of equipment and decoration during the said 5 days too for the reasons given. This claim must also fail and he can recover nothing for his alleged loss of equipment and decoration. It follows that Mr Chan does not have to give any credit for the Sale Proceeds since there is nothing to be deducted from.  

229.  Lastly, Mr Wang insists on the claim for a mandatory injunction that Madam Wong should return the café business to Mr Chan despite my expressed concern. Obviously, this claim, lacking in precision to start with, has long been taken over by events and is now an impossibility.  It must be dismissed.

Mr Chan’s claim against HKIBB Century

230.  Little submission has been made on this claim. I need no persuasion to hold that HKIBB Century owed Mr Chan the pleaded fiduciary duties.

231.  The pleaded breaches include its omission to report to Mr Chan about Madam Wong’s failure to pay the Transaction Price and the fact that it misled Mr Chan into thinking that Madam Wong had duly paid the Transaction Price pursuant to the Agreement. Further, it is complained that HKIBB Century failed to report to Mr Chan about Madam Wong’s breach of the Post-Handover Obligations.

232.  I have difficulties in accepting these allegations of breaches though I hold that Madam Wong did not make valid payments in accordance with the Agreement. There is no plea that HKIBB Century should know that none of the payments agreed by Madam Wong and Mr Lau could constitute valid payments to Mr Chan and so it should have duly informed him of the situation. I could not hold that HKIBB Century did not act in good faith in the best interest of Mr Chan by the alleged breaches.

233.  In any event, Mr Chan could not prove with credible evidence the causal link between these alleged breaches and the alleged loss and damage. He cannot be entitled to the Alleged Damages.

234.  Though I can think of some other valid complaints about HKIBB Century by Mr Chan, I am unable to accept his pleaded case and therefore I can only dismiss his claim against HKIBB Century.

Conclusion and Orders

235.  It is most unfortunate that whilst both Madam Wong and Mr Chan were desirous of completion of the Agreement from start to finish, they now find themselves in this bitter legal battle. The deceitful conduct of Mr Lau and hence HKIBB Century is of course one of the major causes of the present dispute. However, had Madam Wong insisted on making payments to Mr Chan in an ordinary manner pursuant to the Agreement and had the parties sensibly deferred the Handover Date pending the grant of a new tenancy by the Company to Madam Wong, they should have been able to avoid this saga.

236.  In summary, I dismiss all the claims of Madam Wong against Mr Chan and the Company. I allow Mr Chan’s claim against Madam Wong for the amounts of HK$254,865 and HK$12,402.31 but he has to give credit for the Received Sum. Thus, Madam Wong should pay Mr Chan the net amount of HK$82,267.31. I dismiss his other claims against Madam Wong arising from the Agreement and also his claim against HKIBB Century.

237.  The Company must succeed in the Trespass Claim against Madam Wong and is entitled to the sum of HK$30,444 as mense profits.

238.  Costs should follow the event. I make an order nisi that Madam Wong should pay the costs of both Mr Chan and the Company of this action including their respective counterclaims against her and all costs previously reserved, if any, to be taxed if not agreed. As between Mr Chan and HKIBB Century, I make no order as to costs.

239.  Lastly, I order that Madam Wong’s own costs be taxed in accordance with the Legal Aid Regulations.