KWANG QIAN WEN MARIE v. KWAN KIT YUK also known as AMY KWAN

DCCJ 3555/2013

CIVIL ACTION NO. 3555 OF 2013

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J U D G M E N T
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1.  This dispute arose from a failed joint investment by the plaintiff (“Marie”) and the defendant (“Amy”) in an uncompleted unit (“Property”) in a residential development in Causeway Bay (“Development”) with a view to sub-selling the Property prior to completion. Both Marie and Amy contributed to the deposit and part payment for the Property. The intended sub-sale did not materialize and Amy proceeded to complete the purchase of the Property on her own. Marie now asks for return of her contribution but Amy says she is entitled to keep the same.

Background

2.  The following facts are not in dispute.

3.  Marie is a consultant in the telecommunications industry while Amy is in the real estate business and is a partner of a real estate consultant business.  The parties got to know each other and became friends in late 2009.

4.  On or about 11 March 2010, Amy informed Marie of the Development.  The next day the two met at the sales exhibition of the Development whereupon an oral agreement (“1^st Agreement”) was reached between them to purchase the Property in equal shares.  Each of them was to and did contribute 50% of the payment required prior to completion (“Pre-completion Payment”).  The Property was to be purchased in Amy’s name with Amy holding the Property on trust for Marie and Amy in equal shares.  Amy would be responsible for managing all affairs pertaining to the Property and for finding a sub-purchaser for the Property.  

5.  At the material time, Amy’s family had also invested in the Development and had purchased, inter alia, the unit immediately next to the Property.  It is said the two units can be conjoined to form a larger unit.

6.  Pursuant to the 1^st Agreement, Amy entered into a provisional and then a formal sale and purchase agreement with the developer.  As her contribution to the Pre-completion Payment, Marie paid a total of HK$685,200 (“Marie’s Contribution”).

7.  On 15 March 2010 and at Marie’s instance, Amy executed a declaration of trust whereby she declared that she held all her estate right title and interest in the provisional and formal agreements for sale and purchase of the Property and the assignment to be entered into thereunder and the Property in trust for herself and for Marie as tenants in common in equal shares (“Declaration of Trust”).

8.  In the next two years, however, Amy was unable to find a sub-purchaser and completion was closing in.  From June 2012 onward, Marie and Amy discussed as to which of them was to complete the purchase of the Property on her own and related issues, obviously on the assumption that no sub-sale of the Property could be secured prior to completion. 

9.  On 21 November 2012, Amy proceeded to complete the purchase of the Property on her own. Further exchange of correspondence took place between the parties on how to deal with Marie’s Contribution.  No agreement was reached, hence the present action.

Marie’s case

10.  Marie’s case is that it is an implied term of the 1^st Agreement that upon failure to find a sub-purchaser for the Property prior to completion, one party, to be agreed should such failure arise, would complete the purchase of the Property on her own, with that party returning to the other the latter’s contribution towards the Pre-completion Payment (“Marie’s Implied Term”). 

11.  Marie further avers that in or about July 2012, she and Amy agreed that (i) one of them was to complete the purchase of the Property alone and become the sole beneficial owner of the Property; (ii) that party would return to the other party that part of the Pre-completion Payment paid by that other party and would be responsible for all fees involved in the completion of the purchase; and (iii) Amy would be the party completing the purchase alone and would become the sole beneficial owner of the Property (“2^nd Agreement”).

12.  By her email of 13 November 2012 (“13 November Email”), however, Amy reneged on the 2^nd Agreement by requiring Marie to provide funding to meet 50% of the balance of the purchase price of the Property.  Eventually and without prior notice to Marie, Amy decided to and did on 21 November 2012 complete the purchase of the Property on her own.

13.  By virtue of the 1^st Agreement and the 2^nd Agreement, Marie is under no duty to provide finance for completion of the purchase of the Property.  In any event, Amy had never sought to pursue against Marie for the alleged loss and damages set out in her counterclaim herein before commencement of these proceedings.

14.  In failing to return Marie’s Contribution, Amy is in breach of the 1^st Agreement and/or the 2^nd Agreement and/or fiduciary duties arising from her capacity as Marie’s agent in relation to all affairs pertaining to the Property and/or from the trust and confidence Marie reposed in her regarding the investment in the Property.  Marie’s claim is also put up as one for money had and received by Amy when the consideration for the provision of Marie’s Contribution has wholly failed. 

15.  Mr Kam, counsel for Marie, confirms that Marie is only claiming for return of her half share of the Pre-completion Payment and does not claim 10% of the value of the Property by virtue of Marie’s Contribution.

Amy’s case

16.  It is Amy’s case that an estate agent recommended the Development to her and she in turn invited Marie to the sales exhibition when the estate agent repeated the same recommendation to Marie before the latter indicated interest in investing in the Development provided that Amy would join in the purchase on a 50/50 share basis.  Both Marie and Amy were optimistic that they would be able to sub-sell the Property prior to completion at a profit.  They therefore entered into a partnership agreement for purchase of the Property with all associated costs and expenses including stamp duty to be borne by the two of them in equal shares.

17.  It is a term of the partnership agreementthat in the event that a sub-sale did not materialize, the parties had to provide finance for completion of the purchase of the Property in the sole name of Amy who would hold a 50% interest in the Property in trust for Marie.

18.  In or about June 2012, when neither party managed to find a sub-purchaser, Marie requested that she be released from the partnership agreement on the basis that Amy would take over the entire ownership of the Property and that Marie would receive a refund of Marie’s Contribution.  Amy would agree to the takeover proposal on the basis that Marie was to bear “all legal fees in relation to the alteration of the Declaration of Trust, and remain responsible for half of all expenses and other legal fees up to completion, except stamp duty payable on completion.” 

19.  Marie did not accept Amy’s proposed terms of takeover and made a counter-offer on 18 September 2012 to purchase Amy’s share in the Property on her own terms, which terms Amy did not accept.  By 13 November 2012, no agreement had been reached on the takeover proposal and Amy emailed Marie to remind the latter of the need to prepare money for completion on 21 November 2012. 

20.  By 20 November 2012, Marie continued to fail to come up with the necessary finance for completion and therefore had evinced an intention not to perform her obligation under the partnership agreement in anticipatory breach thereof.  On or shortly before 21 November 2012, Amy accepted Marie’s anticipatory breach by proceeding to procure mortgage finance for the whole balance of the purchase price and to complete the purchase of the Property alone by making payment of the whole (balance) of the purchase price, stamp duty and all related expenses.  In the premises, Marie is not entitled to the return of Marie’s Contribution. 

21.  Amy further counterclaims for 50% of the stamp duty for the Property and the legal fees for completion totaling HK$136,061.  As an alternative, Amy seeks a declaration that she “now holds the Property in trust for both the Plaintiff and herself in equal shares as Tenants in Common with damages to be assessed.”

Late application for re-amendment of Amy’s defence and counterclaim

22.  At trial, Amy sought leave to re-amend her defence to insert new paragraphs 16A and 16B pleading an implied term that upon any party breaching, withdrawing or exiting from the partnership agreement without the consent and agreement of the other, the monies paid as deposit would not be returnable because, inter alia, the terms of the provisional and formal sale and purchase agreements give rise to an irresistible inference that the parties intended such an implied term and that the implied term is necessary to give the contract business efficacy (“Amy’s Implied Term”).

23.  Mr Deng, counsel for Amy, gave indication of Amy’s intention to apply for leave to re-amend her defence but he managed to make an application orally with a draft amendment only after Marie finished giving evidence.  Mr Kam raised strong objections to the application on grounds of merits as well as prejudice. 

24.  Clearly this is a very late application.  Mr Deng admitted that this was made in light of my query raised at the beginning of the trial regarding the legal basis for Amy to hold onto Marie’s Contribution. 

25.  In a recent decision in Dr Chan Hin Keung Henry v Apple Daily Ltd & Ors (CACV 100/2015), unrep, 7December 2015, the Court of Appeal summaries the relevant principles in the following terms:

“ 30.…applying general principles, the amendments should be allowed. These principles were stated by the House of Lords in Ketteman and Others v Hansel Properties Ltd [1987] 1 AC 189, at 212 as follows:

“First, all such amendments should be made as are necessary to enable the real questions in controversy between the parties to be decided. Secondly, amendments should not be refused solely because they have been made necessary by the honest fault or mistake of the party applying for leave to make them: it is not the function of the court to punish parties for mistakes which they have made in the conduct of their cases by deciding otherwise than in accordance with their rights. Thirdly, however blameworthy (short of bad faith) may have been a party’s failure to plead the subject matter of a proposed amendment earlier, and however late the application for leave to make such amendment may have been, the application should, in general, be allowed, provided that allowing it will not prejudice the other party. Fourthly, there is no injustice to the other party if he can be compensated by appropriate orders as to costs”. (Emphasis added).

These remain the court’s guiding principles post-CJR: see Topwell Corporation Ltd v Kwan CACV88/2013, 21 May 2013, where Hon Kwan JA held (para. 39):

“The principles in Ketteman v Hansel Properties ... on the exercise of discretion to allow or refuse an amendment of pleadings remain good law after the CJR ... Having said that, in the exercise of discretion, the court must of course have regard to the underlying objectives in Order 1A of the RHC or of the RDC, so it cannot be assumed that once the principles in Ketteman are satisfied, the amendment would be allowed. The court would need to balance all relevant factors to decide how its discretion should be exercised, if the application is made in circumstances offending one or more of the underlying objectives. In this particular case, a pertinent consideration in giving effect to the underlying objectives is that the court ‘shall always recognise that the primary aim in exercising the powers of the Court is to secure the just resolution of disputes in accordance with the substantive rights of the parties’ (Order 1A rule 2(2) of the RDC)”. (Emphasis added).”

26.  Upon hearing submissions, I was satisfied that allowing the late application would cause no prejudice to Marie provided that no further evidence in any form would be or have to be adduced by either party. Despite Mr Kam’s submission to the contrary, I took the view that the proposed amendment to bring in Amy’s Implied Term would not and should not oblige any further investigation on Marie’s part into the factual background to the 1^st Agreement, which should have been fully revealed by both parties.  The application was granted upon Mr Deng’s confirmation that there would be no further evidence from Amy.  Amy was ordered to pay Marie’s costs of and occasioned by the re-amendment including all costs thrown away as a result of the re-amendment (including the 3.5 hours wasted on the second day of trial) in any event. 

27.  The following issues fall for determination:

(1) What were the express and implied terms of the 1^st Agreement including whether the Declaration of Trust constitutes a written agreement between Marie and Amy or merely evidences their oral agreement.

(2) Whether Amy served as Marie’s agent in relation to all affairs pertaining to the Property and/or whether Marie reposed trust in Amy such that Amy owed Marie fiduciary duties regarding the latter’s investment in the Property.

(3) Whether there was the 2^nd Agreement.

(4) Whether Amy is in breach of the 1^st Agreement and/or the 2^nd Agreement and/or fiduciary duties owed to Marie and/or has received money belonging to Marie without justification.

What were the express and implied terms of the 1^st Agreement

28.  By and large, the parties have no dispute as to the express terms set out in paragraph 4 above. 

29.  The defence’s position regarding the nature of the Declaration of Trust is equivocal.  At paragraphs 15 to 16 of the re-amended defence and counterclaim, reference is made to the contents of the Declaration of Trust (or the preamble thereto) before it is averred that it was a term of the partnership agreement that the parties had to provide finance for completion of the purchase of the Property. In his opening submission, Mr Deng states that this is a case of oral agreement evidenced by the Declaration of Trust. 

30.  In his closing submission, however, Mr Deng submits that the oral agreement made on 12 March 2010 is not the entire agreement between the parties but that the terms of the Declaration of Trust as well as those of the provisional and formal sale and purchase agreements (between Amy and the developer) are incorporated as the express terms of their partnership agreement so that the agreement between the parties is partly oral and partly in writing.

31.  This latter position is not pleaded.  In any event, the defence’s position as revealed in the opening submission better reflects the status of the Declaration of Trust, it being undisputable that the trust arrangement by way of execution of a declaration of trust was not featured in the oral agreement concluded between the parties on 12 March 2010 and was subsequently made at Marie’s instance and, as Amy fairly accepts, for the purpose of providing security to Marie when the Property was held in Amy’s sole name. 

32.  Indeed, Mr Kam submits, and I agree, that the document is only evidence of the existence of an oral agreement between the parties rather than evidence of any particular term of the same agreement.

33.  Neither has Amy pleaded incorporation of the terms of the provisional and formal sale and purchase agreements she signed with the developer.  Nor is Mr Deng suggesting that the mere reference in the preamble to the Declaration of Trust to these agreements would carry the effect of incorporating the provisions thereof into the oral agreement of the parties.  Insofar as the defence argues that the terms of the provisional and formal sale and purchase agreements constitute express terms of the oral agreement, the same is rejected.

34.  As it turns out, what assumes importance is the question as to whether any term should be implied to deal with the scenario of a sub-sale not materializing before the due date for completion of the purchase of the Property, there being no dispute that on 12 March 2010 Marie and Amy did not discuss what would happen in that event.

35.  The legal principle for implying a term into an agreement is hardly in dispute.  The term:

(i) must be reasonable and equitable;

(ii) must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it;

(iii) must be so obvious that ‘it goes without saying’;

(iv) must be capable of clear expression; and

(v) must not contradict any express term of the contract.

     See Kensland Realty Ltd v Whale View Investment Ltd (2001) 4 HKCFAR 381 at 391J-392C per Ribeiro PJ citing Lord Simon in B.P. Refinery (Westernport) Pty Ltd v President, Councillors and Ratepayers of the Shire of Hastings (1978) 52 ALJR 20 at p26.  See also Chitty on Contracts, 31^st ed at §§13-004 & 13-010.

36.  Mr Kam identifies 4 possible outcomes of a sub-sale not materializing before completion, two of which being what Marie and Amy would not have agreed to, namely, (a) the parties not completing thereby forfeiting the Pre-completion Payment to the developer or (b) the parties selling the Property at a loss prior to completion.  The other two would be (c) one party taking over the Property alone upon completion or (d) both parties completing the purchase together, each holding 50% of the beneficial interest in the Property.

37.  Mr Kam goes on to submit that outcome (c), which is what Marie’s Implied Term envisages, is what a reasonable bystander with knowledge of the background to the 1^st Agreement would say Marie and Amy had intended to govern their relationship.  In support of this argument, Mr Kam refers to the fact that the parties had come to know each other for only 3 months and could not have committed to an indefinite joint ownership of a flat worth about HK$7 million; that it would make eminent sense for Amy who was in the real estate business, instead of Marie who would frequently stay away from Hong Kong for extended periods, to take over the Property by herself; and that their age and the absence of particular relationship between them would have made it difficult for them to secure a mortgage together.

38.  These arguments, however, hardly come near to explaining why Marie’s Implied Term is necessary to give business efficacy to the 1^st Agreement or that it is so obvious that ‘it goes without saying’.  Indeed, the fact that there is more than one possible outcome as proffered by Mr Kam himself suggests that the 1^st Agreement might well be effective without Marie’s Implied Term.

39.  In this regard, Mr Deng submits, and I agree, that Marie’s Implied Term fails, inter alia, to take into consideration the market situation or market price of the Property at completion in requiring one of the parties to return to the other the latter’s contribution towards the Pre-completion Payment.  It is simple logic, for instance, that if the market price falls below the purchase price, none of them would want to take up the Property alone and incur an instant loss on top of post-completion expenses.  On the other hand, if the market price has gone up by a large margin at completion, then both would be keen to complete alone or at least hold onto the 50% stake under the 1^st Agreement.  In either scenario, it would be quite impossible for the parties to agree on who is to go ahead with completion alone.

40.  One will recall that outcome (d) is practically what Amy pleads as a term of the partnership agreement, obviously in reliance of paragraph (3) of the preamble to the Declaration of Trust which cites the fact of Amy having entered into the provisional agreement for sale and purchase of the Property “wherefore (Amy) shall hold all (her) estate right title and interest in the Provisional Agreement, the assignment to be entered in pursuance of the Agreement and All That the Property in trust for (herself) and (Marie) as Tenants in common in equal shares” (“Preamble”).  In her witness statement in support of her case, however, Amy speaks in terms that suggest the Declaration of Trust merely evidences the parties’ oral agreement:

“ the Declaration of Trust reflects the Partnership Agreement, our common intention and understanding that both of us were responsible to come up with finance for payment of the balance of the purchase price at completion in the event of a failure to produce a sub-sale because the document clearly acknowledges the Plaintiff’s beneficial interest in the assignment to be entered pursuant to the Provisional Sale and Purchase Agreement as well as the nature of our respective interests in the form of tenancy in common.”

41.  In light of my analysis of the nature of the Declaration of Trust above, insofar as Amy’s argument runs on the basis that outcome (d) is an express term of her agreement with Marie, the same must be rejected. 

42.  On the other hand, had it been her case that outcome (d) is a term that should be implied into the same agreement, it will stand a chance of being accepted by the court.  In this connection, I accept that this is a joint venture to speculate in the property market and the common intention was to sub-sell the Property, hopefully at a profit, within the 2 years prior to the due date for completion.  Before me, Marie was emphatic that she never intended to hold the Property jointly with Amy on a long term basis. However, back in March 2010, no one could guarantee that a sub-sale would take place prior to completion, not to mention a sub-sale at a profit.  Whatever Amy might have said about the chance of a profitable sub-sale would amount to nothing more than an expression of confidence for the future. 

43.  In any event, the parties always had a choice not to sell especially if not at a profit or even at a loss.  In the absence of a sub-sale prior to completion, it would not be inconsistent with the 1^st Agreement for the parties to jointly complete the purchase of the Property in order to buy some more time to procure a sub-sale, hopefully at a profit. 

44.  While I do not accept that the Preamble represents an express term of the 1^st Agreement, I do agree that it reflects the contingency of a sub-sale not materializing before completion.  The Declaration of Trust might have been drawn up by Marie’s solicitor in terms not entirely consistent with Marie’s intention but Marie must be taken to have endorsed the contents thereof in requiring Amy to execute the same.

45.  Having said that, I need not decide if a term in terms of outcome (d) should be implied because Amy argues that it is Amy’s Implied Term that should be implied into the 1^st Agreement to which I shall now turn.

46.  Mr Deng’s argument for Amy’s Implied Terms runs as thus: it is necessary because the 1^st Agreement, the Declaration of Trust and the sale and purchase documents are part and parcel of the same transaction.  The Pre-completion Payment would be forfeited upon failure to complete under a forfeiture clause which Marie accepts as common in conveyancing transactions.  Without the term, the withdrawing party would suffer no harm and be entitled to withdraw at any stage, whereas the innocent party would have to top up the 10% deposit originally paid by the withdrawing party.  This was not the intention of the parties at the material time.

47.  Relying on Damon v Hapag [1984] 1 WLR 435, Mr Deng goes on to argue that even if Amy’s Implied Term is not to be implied into the 1^st Agreement, the damages in the present case should be an amount identical to Marie’s Contribution. 

48.  Mr Deng’s argument is problematic.  There is no dispute that the sale and purchase agreements signed by Amy contain a forfeiture clause and I am prepared to accept that this is a common feature of conveyancing contracts.  However, one can hardly see any necessity for transposing the forfeiture clause into the private agreement for joint investment here to govern a situation which both parties are able to suggest different ways to handle so that the agreement clearly can do without a “forfeiture clause”. 

49.  Nor can one see why such a term is reasonable and equitable or is otherwise so obvious as to go without saying when the innocent party can always sue for damages for breach of contract which, applying the usual measure of damages and if proven, can either exceed or fall below the defaulting party’s contribution. 

50.  I agree with Mr Kam that such a clause may well constitute a penalty clause that courts would not enforce, and for the present purposes, I need not go into the details of his argument in reliance of Ployset Ltd v Panhandat Ltd (2002) 5 HKCFAR 234 against implying such a term other than noting that the same appears to be sound.

51.  As to Mr Deng’s further argument in reliance of Damon, supra, I do not propose to deal with the same other than observing that Damon concerns the proper measure of damages for breach of a specific contract term whereby the defendant was obliged (but failed) to pay a deposit for purchase of certain ships and hardly supports an argument for awarding damages of an amount identical to Marie’s Contribution. 

52.  I therefore come to the conclusion that neither Marie’s Implied Term nor Amy’s Implied Term should be implied into the agreement between Marie and Amy.

Whether Amy owed Marie fiduciary duties regarding the latter’s investment in the Property

53.  Marie’s case in this regard is founded on the premise that Amy served as Marie’s agent in relation to all affairs pertaining to the Property and/or that Marie reposed trust and confidence in Amy as regards her investment in the Property.  All Marie has identified in her statement of claim as constituting breaches of fiduciary duties on Amy’s part are Amy’s inability to secure a sub-purchaser before completion, Amy’s completion of the purchase on her own without prior notice to Marie and her subsequent failure to return Marie’s Contribution.

54.  Marie’s argument in this regard has practically been abandoned as no mention of the same is made in Mr Kam’s closing submissions.

55.  Suffice it to say, having heard evidence from both Marie and Amy and despite each counsel’s attempts to show otherwise through cross-examination, I am left with nothing but the impression that both Marie and Amy are able businesswomen capable of making independent decisions. 

56.  Notwithstanding the fact that Amy is herself in the real estate business, the evidence unfolded before me, particularly the many spontaneous answers Amy gave in cross-examination, clearly suggests that Amy was one of those potential buyers persuaded by the estate agents appointed by the developer to invest in the Development and had together with her family already purchased 2 units plus a carpark before inviting Marie to come to the exhibition.  Mr Deng submits, and I agree, that nothing turns in the present case on Amy’s relative experience as a real estate agent herself and indeed she might not be as good a real estate agent as Marie seems to suggest. 

57.  Both Marie and Amy say it was the other party who first proposed to jointly purchase one of the residential units, or more specifically, the Property.  In my view, whatever the true position may be, the fact remains that it was a joint venture into which two interested buyers freely entered.  Amy might owe Marie fiduciary duties as a trustee under the trust arrangement but there is no allegation of her breach as such. 

58.  That Marie independently made the decision to invest in the Property is amply demonstrated by her acknowledgement during cross-examination that she was interested by the idea of merging the Property with the adjacent flat already purchased by Amy and her family, which idea should be readily appreciable to any lay persons. The fact that the trust arrangement was initiated by Marie further negates any suggestion to the contrary. 

59.  More importantly, there is simply no evidence to show the failure to secure a sub-purchaser before completion was due to any fault on Amy’s part.  Nor can one see why Marie is entitled to hold Amy solely liable for the failure to procure a sub-sale when Marie as an equal partner could have and had in fact made an effort to find a sub-purchaser, albeit without success on her part either.

60.  Amy’s completion of the purchase on her own, even if without prior notice to Marie, is neutral even on Marie’s case or is otherwise envisaged by the parties’ agreement. Amy’s subsequent failure to return Marie’s Contribution can be a breach of the parties’ agreement as discussed below but, in light of the analysis above, not a breach of fiduciary duties.

61.  All in all, I am satisfied that Marie and Amy were at arm’s length when reaching an agreement to purchase the Property and there is no question of Amy owing Marie any fiduciary duties either as the latter’s agent or by reason of any trust or confidence Marie reposed in her.

Whether there was the 2^nd Agreement and whether Amy is in breach thereof  

62.  Determination of this issue requires a detailed examination of a series of emails exchanged between Marie and Amy and, where appropriate, quotation therefrom sic erat scriptum.

63.  It is not in dispute that since mid 2012 the parties had been talking about what was to happen if there be no sub-sale prior to the due date for completion.  By 28 August 2012, the solicitor engaged by Amy (“Kent”) had come up with a proposal for revoking the trust with a view to avoiding imposition of stamp duty.  At this junctice, Kent somehow suggested that Marie could “counter offer” to Amy to take over the Property alone and Marie did so accordingly on 18 September 2012 but Amy declined the same. 

64.  In this connection, Marie refers to her affirmation filed in her earlier application for summary judgment where she deposed to the fact that after Amy turned down her counter offer, the ownership of the Property was an issue that had yet to be resolved. Marie says this statement is incorrect insofar as it fails to recognize there was in fact an agreement for dealing with the ownership of the Property subsisting at the time of the counter offer and which continued to subsist after Amy turned down the counter offer.  This has attracted no counter argument from the defence.

65.  On 7 November 2012, the developer notified Amy of the due date for completion, namely, 21 November 2012.  On or about the same day, Marie says, Amy confirmed over the phone that she would take over the Property alone and would refund Marie’s Contribution.  On 9 November 2012, Kent sent to Amy at the latter’s request a draft document for rectification of the Declaration of Trust.

66.  On 12 November 2012, however, Amy wrote to inform Marie that on the basis of the opinion she obtained from tax lawyers who did not think Kent’s proposal would work and who were “120% sure IRD will penalize” Amy, she would not go forward with Kent’s proposal.  In the same email, Amy revealed her inability to obtain mortgage in the meantime.   

67.  Marie does not recall any telephone conversation with Amy in the course of the day and before Amy wrote back via the 13 November Email asking Marie, quite out of the blue, to prepare HK$2,875,900 by the following Monday.

68.  Marie wrote back within the next hour to refer to their mutual agreement for either of them to take over the Property and the fact that Amy had indicated her choice to Kent that she would take over the Property and that Amy had as of the preceding week “agreed to close and refund deposit to” Marie.

69.  Amy wrote back on 14 November 2012 to state that:

“my bottom line is to prevent I’m liable for your 50% stamp duty since you have a trust in place. I can go forward with 100% ownership or I can sell my shares to you with the right price…OR I would return all your deposit minus all the costs as since as I can ease these two concerns…Your deposit will refund fully minus any costs once all legal matters has been satisfy…Pls also offer a price to purchase (the Property) if you are consider.”

70.  Marie wrote back within minutes to say:

“…As you have stated for a long time now that you want to take over the entire share of the property, have been waiting for months to settle refund, minus any and all reasonable expenses.

   It is fair and reasonable in what you said…please advise what is the fair price of purchase between us.”  

71.  On 15 November 2012, Marie wrote to Amy:

“…Please make a decision this week if you are going to take the property, refundmy share of the deposit, I will be responsible for all the expenses incurred on my part…”

72.  Later on the same day, Amy wrote back to say she was still trying to get mortgage and continued:

“…My position if I take over, you will revoke your 50% trust to deliver the clean title to me. You will need to pay your 50% share of all fee, expenses, and stamp duty. All deposit minus all fee, cost, and expenses, stamp duty will refund to you…”

73.  Marie wrote in reply:

“ As such, will proceed legally, hope to resolve efficiently and amicably in the hands of professionals.”

74.  Behind all these niceties, Marie in fact saw Amy as reneging from the 2^nd Agreement as from 12 November 2012 and had in the meantime instructed solicitors to put forward proposals to Amy for settling the matter, which the solicitors did on 16 November 2012, followed by an exchange of communication between Marie’s solicitors and Amy.  For the present purpose, I need not go into the details of such proposals other than noting that on the face of them they marked a change of position on Marie’s part.

75.  One will recall that it is Amy’s case that there never was the 2^nd Agreement.  In his closing submission, however, Mr Deng has practically conceded on Amy’s behalf that Marie and Amy had reached an agreement in principle for Amy to take over the Property alone, subject, however, to the preconditions of revocation of the trust arrangement and payment by Marie of all costs pertaining to the revocation of trust (“Preconditions”).  He adds that the condition was for the Declaration of Trust to be revoked lawfully (and not in a way that would be unlawful and would visit upon Amy a penalty).  Indisputably, the Preconditions were not fulfilled.

76.  Needless to say, such concession represents a major deviation from Amy’s pleaded case.  In any event, whether Amy’s case is one of simple denial of there being the 2^nd Agreement or is varied to the extent of the said concession, I am satisfied in light of the communication between the parties that the parties had reached the 2^nd Agreement before Amy wrote the 13 November Email.

77.  I first observe that the language used by Amy is consistent with a prior agreement for Amy to take over the Property alone when she wrote she could “go forward with 100% ownership”.

78.  More pertinently, the communication between Marie and Amy from July through to mid November 2012 clearly shows that the parties’ focus was largely on revocation of the Declaration of Trust.  The fact that a solicitor was tasked to come up with a proposal demonstrates the seriousness of the parties to go about revoking the trust. Logically, the parties must have come to an agreement for one of them to take over the Property alone and to refund the other’s contribution towards the Pre-completion Payment before any serious thought need be given to revoking the trust that Amy had declared in Marie’s favour.

79.  The way Amy responded to Marie’s assertions about there being a mutual agreement for either of them to take over the Property and about Amy having indicated her wish to take over the Property alone further betrays her.  As Mr Kam submits, Marie’s assertion would clearly violate Amy’s understanding of what was to happen upon completion.  In none of her emails in reply, however, did Amy indicate any disagreement with such assertions.  Indeed, in cross-examination Amy accepted that she would have said something if Marie’s assertions were inconsistent with the agreement between them, that is, for them to complete the purchase of the Property on a 50/50 basis, or alternatively, for Amy to take over the Property subject to the Preconditions.

80.  I further agree with Mr Kam that Amy’s allegation about Marie being unwilling to bear the costs associated with the revocation of the Declaration of Trust is not borne out by the email correspondence between them.  True it is that Marie’s proposals via her solicitors after 16 November 2012 appear to be inconsistent with her avowed position on such costs but I accept Mr Kam’s submission that the same could be taken as a counter proposal to the 13 November Email whereby Amy had reneged on the 2^nd Agreement and would not affect the validity of the 2^nd Agreement.  By the same token, the parties’ discussion after the 13 November Email is of no consequence as they failed to reach any further agreement.

81.  In this connection, I find it pertinent to refer to the summary of the relevant principles by Lloyd LJ in Pagnan SpA v Feed Products Ltd [1987] 2 Lloyd’s Rep 601 at 619 which Lord Clarke cited with approval in RTS Ltd v Molkerei Alois Muller GmbH & Co KG (UK Production) [2010] UKSC 14 753 at 772G-773D, adding that the same principles apply where the question is whether a contract was concluded in correspondence as well as by oral communications and conduct:

“ (1) In order to determine whether a contract has been concluded in the course of correspondence, one must first look to the correspondence as a whole….(2) Even if the parties have reached agreement on all the terms of the proposed contract, nevertheless they may intend that the contract shall not become binding until some further condition has been fulfilled. That is the ordinary ‘subject to contract’ case. (3) Alternatively, they may intend that the contract shall not become binding until some further term or terms have been agreed….(4) Conversely, the parties may intend to be bound forthwith even though there are further terms still to be agreed or some further formality to be fulfilled….(5) If the parties fail to reach agreement on such further terms, the existing contract is not invalidated unless the failure to reach agreement on such further terms renders the contract as a whole unworkable or void for uncertainty. (6) It is sometimes said that the parties must agree on the essential terms and it is only matters of detail which can be left over. This may be misleading, since the word ‘essential’ in that context is ambiguous. If by ‘essential’ one means a term without which the contract cannot be enforced then the statement is true: the law cannot enforce an incomplete contract. If by ‘essential’ one means a term which the parties have agreed to be essential for the formation of a binding contract, then the statement is tautologous. If by ‘essential’ one means only a term which the Court regards as important as opposed to a term which the Court regards as less important or a matter of detail, the statement is untrue. It is for the parties to decide whether they wish to be bound and if so, by what terms, whether important or unimportant. It is the parties who are, in the memorable phrase coined by the Judge [at page 611] ‘the masters of their contractual fate.’ Of course the more important the term is the less likely it is that the parties will have left it for future decision. But there is no legal obstacle which stands in the way of the parties agreeing to be bound now while deferring important matters to be agreed later. It happens every day when parties enter into so-called ‘heads of agreement.’

82.  Immediately after the summary quoted above, Lloyd LJ in Pagnan, supra added that:

“ …the judge described the terms on which the parties had not yet agreed as “terms of economic significance to these buyers”.  If I am right in the propositions I have stated, and in particular propositions (4) and (6), the fact that the terms yet to be agreed were of economic significance would not prevent a contract coming into existence forthwith if that is what the parties intended…”

83.  It is my conclusion that the present case falls within proposition (4), that is, the parties intended to be bound forthwith even though there were further terms still to be agreed or some further formality to be fulfilled.  I find as a fact that Marie and Amy did enter into the 2^nd Agreement and that Amy is in breach of the same in failing to return Marie’s Contribution notwithstanding her completion of the purchase of the Property on her own, an act envisaged by the 2^nd Agreement. 

84.  Insofar as is necessary, I further hold that the 2^nd Agreement was not made subject to the Preconditions.  Rather, revocation of the Declaration of Trust, even if significant economically or otherwise, is what the parties agreed as something the 2^nd Agreement should entail and the parties had been trying, albeit without success, to agree on how to go about the same, with Marie having in the meantime agreed to bear the costs thereof. 

85.  The parties’ failure to agree on how to revoke the Declaration of Trust, however, would not render the 2^nd Agreement unworkable or void for uncertainty.  As a matter of fact, that the Declaration of Trust remained extant did not prevent Amy from proceeding to complete the purchase of the Property on her own and her sole ownership of the Property has never been challenged by Marie despite the commencement of the present action.

86.  In light of the above, it is unnecessary for me to canvass Marie’s alternative claim founded on money had and received.  Suffice it to say, had this been necessary, I would have granted Marie the relief sought on this alternative ground as I see no justification on Amy’s part to hold onto Marie’s Contribution.

87.  Nor do I see any need to deal with Mr Deng’s reference to the formalities required for disposal of an interest in land in common law or under the Conveyancing and Properties Ordinance, Cap 219, which havelittle bearing on the present dispute relating to a joint investment. 

Amy’s counterclaim

88.  There is a glaring absence of a positive claim in Amy’s counterclaim for entitlement to retain Marie’s Contribution.  The position remains the same despite Amy’s belated re-amendment of her defence to bring in Amy’s Implied Term to seek forfeiture of Marie’s Contribution, which I have found against Amy.

89.  In his closing submission, Mr Deng has not dealt with Amy’s claim for the sum of HK$136,061 being 50% of the stamp duty and legal fees she paid upon completion or her alternative claim for a declaration.  What is certain is that the said sum represents all Amy could identify herein as her loss and damage arising from the alleged breach of the partnership agreement on Marie’s part when no evidence is adduced to prove any other loss that could bring her total loss even remotely close to Marie’s Contribution.  There is therefore no occasion for assessment of damages beyond the said sum even if Amy manages to establish her counterclaim.

90.  As I have found in favour of Marie on the existence of the 2^nd Agreement and Amy’s breach thereof, Amy’s counterclaim cannot get off the ground.

Conclusion

91.  I find Marie to have established her claim for return of Marie’s Contribution.     

92.  While not pleaded, a declaration that the Declaration of Trust is of no effect or is void is sought by Mr Deng in his closing submissions.  In light of the result hereof, Mr Kam agrees that the Declaration of Trust should cease to have effect and it would be in order for this court to grant a declaration to that effect if I find in favour of Marie. 

93.  I therefore order that:

(1) Judgment be entered in favour of Marie in the sum of HK$685,200 together with interest thereon at 4% from the date of writ until judgment and thereafter at judgment rate until payment;

(2) Amy’s counterclaim be dismissed; and

(3) There be a declaration that the Declaration of Trust shall henceforth cease to have effect.

94.  I make an order nisi thatAmy do pay Marie costs of this action, to be taxed if not agreed.  The order nisi shall become absolute unless an application is made for variation of the same within 14 days from the date of judgment.

95.  Counsel’s assistance is appreciated.