WELL PHASE GROUP LTD v. CONCORD STAR TRADING LTD

HCA 1022/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1022 OF 2007

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J U D G M E N T

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Introduction

1.  The plaintiff commenced this action in May 2007 seeking specific performance of a provisional sale and purchase agreement dated 24 January 2007 (“the S&P agreement”).  According to the terms of the S&P agreement, the plaintiff agrees to buy and the defendant agrees to sell a unit in Ashley Road, Kowloon (“the suit property”) for $3.6 million.

2.  The only defence to the claim is that the defendant, being the registered owner of the suit property, only agreed to sell the suit property to one Sino Rays Ltd. (“Sino Rays”) (and no one else).  Further, it was a condition Sino Rays must sign the S&P agreement and deliver the cheque for the initial deposit at or before noon on 27 January 2007.  Because of the substitution of the plaintiff for Sino Rays (without the defendant’s knowledge or authority), Sino Rays failed to do so and the S&P agreement (which was in effect only an offer) lapsed after 27 January 2007.

3.  The defendant counterclaims for vacating the registration of the S&P agreement from the Lands Registry (and other relief).

4.  The defendant also commenced a third party proceeding against the estate agent, Savills (Hong Kong) Ltd. (“Savills”) and its staff, a Ms Lee Cheuk Yiu Charlotte (formerly known as Lee Sau Ching) (“Lee”).  It is alleged that Lee wrongfully changed the purchaser’s name from Sino Rays to the plaintiff; Savills should be vicariously liable for her wrongful act.

Background

5.  The following background is undisputed.

6.  The defendant became the suit property’s owner in August 2005.

7.  Savills was engaged by the “parent” company of Sino Rays and the plaintiff (“CSI”) to acquire the building of which the suit property forms part (“21A Ashley Road”).  The acquisition was for the purpose of re-development.

8.  On 19 January 2007, Savills sent a letter to the owners of 21A Ashley Road (including the defendant) informing them of a briefing session regarding the collective sale of 21A Ashley Road (“the Savills letter”).

9.  After having received the Savills letter, the defendant faxed a copy of its own advertisement for the sale of the suit property to Savills on 23 January 2007 (“the defendant’s fax”).  The price of $3.5 million was stated in the defendant’s fax.  Mr Henry Cheung was named as the contact person.

10.  After a brief telephone discussion between Lee and Mr Cheung Chi Keung (“Cheung”), on 24 January 2007 Lee brought along a pro forma provisional sale and purchase agreement (“the pro forma agreement”) to meet Cheung.  The pro forma agreement has typed on it the following terms which are of importance to this action:-

(a) “Sino Rays Limited” as the purchaser;

(b) $3.5 million as the purchase price.

The pro forma agreement later became the S&P agreement (see below for details).

11.  When Lee went to meet Cheung, she also has with her a printed copy of an extract from the Law List available on the Internet.  The extract contains (among other things) the name, address and telephone and fax numbers of the solicitors firm usually engaged by the defendant (“Lee’s printed extract”).  Lee learnt of the firm’s name from her brief discussion with Cheung over the telephone.

12.  After further discussion at the meeting on 24 January 2007, Cheung signed the S&P agreement for the defendant.  He also initialled the following changes:-

(1) the price was changed to $3.6 million;

(2) the completion date was changed to 7 March 2007 (instead of 9 March 2007);

(3) clause 4 was crossed-out;

(4) the commission was changed to $36,000;

(5) the condition referred to in para. 2 above was added.

13.  Cheung also wrote on Lee’s printed extract the name of a clerk working with the defendant’s solicitors and the clerk’s telephone number.

14.  On the same day, Lee brought the S&P agreement to the office of Mr Kan Sze Man (“Kan”) for his execution for the purchaser.  Kan was the executive director and general counsel of CSI.  Upon seeing Sino Rays was used as the purchaser, Kan asked Lee to change the name to the plaintiff’s.

15.  Lee telephoned Cheung from Kan’s office on 24 January 2007 (“the post-signature telephone conversation”).

The Post-Signature Telephone Conversation

16.  The post-signature telephone conversation is undisputed.  What is disputed is whether Lee has sought Cheung’s consent (on the defendant’s behalf) for changing the purchaser’s name.

17.  The case of the plaintiff and the third parties is in gist that when Lee asked Cheung if there was objection to the change of name, Cheung said there was none.  Cheung further declined Lee’s suggestion to bring back the S&P agreement to him for initialling and requested Lee to do so for the defendant.  Lee did so.

18.  The defendant denies the above and claims that the post-signature telephone conversation was only about confirming the office address of the defendant’s solicitors.

The Issue in this Action

19.  The issue in this action is thus a relatively narrow one.  The parties agree that this issue can only be properly resolved by assessing the credibility of the witnesses’ testimony.  They are Kan, Lee and Cheung.  Their testimony supports the parties’ respective cases summarized in para. 17 and 18 above.

Credibility of Witnesses

20.  When assessing credibility, the following matters have been taken into account:-

(a) the facts summarized under the heading “Background” above;

(b)   generally, a contract for the sale of land does not have a personal quality; in other words, the purchaser’s identity is immaterial: Sihombing and Wilkinson: Hong Kong Conveyancing, para. 152; Dyster v. Randall & Sons [1926] Ch 932, 938; Wong Lai Fong v. But Cheung Yin, A3194/1991 (9 February 1993), para. 9.

In fact, Cheung’s own testimony confirms para. 20(b) above when he accepted during cross-examination that he would still have signed the S&P agreement if the plaintiff’s name had been used therein all along.

21.  I find the testimony of Kan and Lee to be truthful and reliable and accept it.  On the other hand, I reject Cheung’s testimony as untruthful insofar as it contradicts that given by Kan and Lee.

22.  The two objective yardsticks for assessing credibility are (1) the inherent plausibility (or implausibility) of a witness’ factual assertions, and (2) whether those assertions are contradicted materially by undisputed or indisputable evidence.

23.  Cheung’s testimony has failed to pass either of those yardsticks.

24.  Usually, a seller’s primary concern is to obtain the sale price.  He is not concerned with who in fact pays it.  In this action, Cheung knew practically nothing about either Sino Rays or the plaintiff.  In fact, he did not even know of CSI’s (indirect) involvement in the S&P agreement (though he might be able to infer Savills was acting for a developer).

25.  Both Kan and Lee must have also been under the impression the defendant did not consider the purchaser’s precise identity to be an important matter.  That must also have been what Cheung was thinking then.  With those in mind:-

(1) it is understandable why both Kan and Lee considered it acceptable for Lee to accede to Cheung’s request and initial the change of name for the defendant;

(2) it is also inherent plausible for Cheung to request Lee to do so at the time.

26.  For the same reason, there is no readily understandable reason why Lee wanted to conceal the change from the defendant.  I conclude Lee never did so.

27.  Cheung’s version of what was discussed during the post-signature telephone conversation is this: Lee only called to ask him for the address of the defendant’s solicitors.  This is unbelievable because, not only has Lee already obtained such information from the Internet, the name and telephone number of the clerk have also been written down by Cheung on Lee’s printed extract during the pre-signature meeting.

28.  During the closing submission, the defendant drew the court’s attention to the following documents:-

(a) para. 8, Lee’s witness statement;

(b) para. 1, JSM’s letter dated 8 February 2007 (written on behalf of the plaintiff).

It is asserted in both documents that, during the post-signature telephone conversation, Lee informed Cheung the purchaser’s name should be changed to the plaintiff’s.  The assertion is inconsistent with the testimony of Kan and Lee in that the plaintiff’s name was not expressly mentioned at that time.

29.  The criticism has not been raised during cross-examination (or in the defendant’s written closing submissions).  It is unfair to permit such criticism because neither Kan nor Lee has been given the opportunity to respond to it.  In any event, I consider the difference to be the result of drafting inaccuracy than a point of real substance.

Finding of Fact

30.  Based on the assessment made under the previous heading, I therefore find that Lee has in fact asked for, and obtained, Cheung’s approval to change the purchaser’s name in the S&P agreement.  I also find that Cheung was acting for the defendant when he did so.

31.  For the avoidance of doubt, the facts summarized under the heading “Background” are also found to be the facts of this action.

Conclusion

32.  Judgment is entered in the plaintiff’s favour.

33.  Both the counterclaim and the third party proceeding are dismissed.

Costs Order

34.  The parties agree that costs should follow the event.  There will accordingly be a costs order that:-

(1) the costs of the action (including any reserved costs) be paid by the defendant to the plaintiff to be taxed if not agreed;

(2) the costs of the third party proceeding (including any reserved costs) be paid by the defendant to the third parties to be taxed if not agreed.