GAINVIEW LTD v. CHOW CHI MAN

HCA 1779/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1779 OF 2010

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HCA 1780/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1780 OF 2010

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(Heard together)

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JUDGMENT

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1.  This is a judgment of two actions that have been tried together.

The claims

2.  The first action HCA 1779/2010 arose out of a Chinese sale and purchase agreement dated 16 July 2010 and made between the plaintiff, Gainview Ltd (“Gainview”) as the vendor and the defendant, Chow Chi Man (“Chow”) as the purchaser (“the 1st agreement”).  This agreement covered all the subsections in sections A, B and C of Lot 723 in DD 137 save and except subsections B 80 and B 137.  The consideration was HK$7,000,000.  A deposit of HK$500,000 had been paid and the balance of HK$6,500,000 was payable upon completion scheduled on 27 September 2010.  The following were the conditions of sale:

“(i) After the signing of the agreement, the plaintiff and the defendant shall be obliged to complete the sale and purchase of the property;

(ii) If either the plaintiff or the defendant should breach the agreement, the other party may claim damages of not less than HK$5,000,000.00;

(iii) Within 60 days after the signing of the agreement, the defendant shall complete the purchase of the property on an ‘as is’ basis and shall pay the balance of the purchase price to the plaintiff;

(iv) The defendant shall complete this agreement with Gainview Limited on the same completion date in conjunction with another agreement with Wong Yau Tai〔黃有娣〕regarding the sale and purchase of the Remaining Portion of Lot No. 723 in Demarcation District 137; and

(v) Upon the execution of the assignment, the defendant may choose to purchase the property by using his name or by nominating a company.”

There are two further remarks as follows:

“(1) A: A corpse was mistakenly buried by an indigenous villager at Lot No. A 195. The Lands Department had been notified of this matter. The vendor and purchaser are aware of this matter. The purchaser shall not rely on this matter as the reason to cancel this transaction.

(2) B: Lots No. B 80 and B 137 have already been sold.  The purchaser shall not be entitled to pursue any claim on the sale price and the right to use these Lots.”

3.  The second action HCA 1780/2010 arose out of another Chinese sale and purchase agreement also dated 16 July 2010 and made between Madam Wong Yau Tai (“Wong”) as the vendor and Chow as the purchaser (“the 2nd agreement”). It covered the Remaining Portion of Lot 723 in DD 137 (“Lot 723 RP” or “the RP”). The consideration was HK$8,300,000.  A deposit of HK$500,000 had been paid and the balance of HK$7,800,000 was payable upon completion also scheduled on 27 September 2010.  It has similar conditions as in the 1st agreement and required completion to take place on the same date as the 1st agreement.  It also provided that an enclosing wall, a retaining wall, some stairs and iron railings had been built on the lot and completion of the purchase would be on an “as is” basis.

4.  All the subsections in the 1st agreement plus subsections B 80, B 137 and Lot 723 RP together constitute Lot 723.

5.  Regarding the condition in each of the agreements stipulating that damages should be no less than HK$5,000,000, the plaintiffs pleaded that when the parties negotiated the price for the properties, they knew that the government was going to implement a licensing scheme for private columbaria. If Lot 723 should be placed under Table A of the scheme, it could be used lawfully for a private columbarium and its value would be greatly enhanced.  However, if the lot should be placed under Table B, it could not be so used unless and until a government approval has been obtained.  Its worth would then be very much smaller. 

6.  The parties did not know under which table of the scheme Lot 723 would be placed.  They therefore agreed a price for the lot which was between the higher estimate if put under Table A and the lower estimate if put under Table B.  In this way, the benefit if the lot should be put under Table A and the disadvantage if it should be put under Table B were split between the two parties.

7.  Chow did not complete the agreements on 27 September 2010.  The plaintiffs then sued him in these actions for HK$5,000,000 liquidated damages under each agreement or alternatively for damages to be assessed.  They give credit to Chow for the two deposits of HK$500,000 each.

8.  The government put Lot 723 under Table B in December 2010.

The defences

9.  Chow defends the claims on the ground of misrepresentations. He pleaded in his amended defence and counterclaim in each action that he entered into the two agreements because he relied on the misrepresentations of the agent of the plaintiffs one Lau Law Tai also known as Ah Chiu (“Lau”). 

10.  Chow alleged that Lau had told him that the subsections or plots in the 1st agreement were intended and fit for the burial of ashes and/or other items of deceased persons.  The RP was the common area for access to the individual plots.  A boundary wall had been erected to enclose all the plots and the RP.  The enclosed place was called “龍福山紀念花園” (Lung Fok Mountain Memorial Garden) (“the Memorial Garden”) which name was clearly depicted at its entrance gate.

11.  Chow further alleged that Lau also told him that the plaintiffs were going to provide maintenance services to the future owners of the plots for a fee and the Memorial Garden would have potential to produce good regular income.

12.  Chow also said that in a meeting in the beginning of June 2010 Lau gave him an article to induce him to enter into the two agreements.  The article was published by the plaintiffs in the Apple Daily on 27 April 2010 to promote the Memorial Garden.  It referred to various services offered to purchasers of the plots.

13.  Chow further alleged that about a week after the said meeting, Lau took him to inspect the Memorial Garden and pointed to the presence of some graves therein.  Lau then allegedly said to him that the presence of the graves confirmed the government’s permission for the Memorial Garden to be used as burial or quasi-burial ground for burying ashes and/or articles of deceased persons. Lau also showed him a sub-division plan of the plots and said that some subsections had been sold and some purchasers were interested in the sale and purchase of some plots.

14.  Chow also alleged that during their discussions he had told Lau that, after purchasing the Memorial Garden, he intended to form a company to manage it.  Lau then allegedly assured him that Lau himself would invest cash of no less than 20% of the proceeds of sale of the Memorial Garden into this company.

15.  Chow then alleged that he, in reliance of Lau’s representations above, entered into the two agreements and paid the two deposits.

16.  After having entered into two agreements, Chow instructed solicitors to help him complete the purchases in the two agreements.  He then realized that each and every of Lau’s representations referred to above was false.  He referred to the Memorandum of Agreement by which Lot 723 was leased from the government which restricted the user of the lot to agricultural use.  Hence, he said the contents of the article published in the Apple Daily in April 2010 about the Memorial Garden were false.

17.  He further pleaded that when Lau executed the 1st agreement for Gainview, Lau was not authorized by Gainview to do so.  Hence, the 1st agreement was unenforceable.

18.  He also pleaded in the 2nd action that Lau had told him that Lau’s mother Wong had authorized Lau to sign the 2nd agreement on her behalf. However, Lau signed the 2nd agreement and affixed the rubber chop of Gainview next to his signature.  Chow pleaded that Wong had not authorized Gainview to execute this agreement on her behalf and Gainview had not authorized Lau to execute this agreement in Gainview’s name.  Hence, Lau signed the 2nd agreement without authority and the agreement was null and void ab initio. 

19.  Since both agreements required completion to take place on the same date, but either the 1st agreement is unenforceable or the 2nd agreement is null and void, they could not be enforced.

20.  Chow also took a stamp duty point.  But that was an erroneous point which was not pursued by Mr Fan, counsel for Chow at the trial.

The replies

21.  The plaintiffs in their amended replies pleaded that Lau and Chow had their first meeting in about June 2010 in which Chow told Lau that he intended to purchase Lot 723 to develop a columbarium business.  Chow produced a plan in the meeting showing the plots in Lot 723.  Chow said he had obtained it from the Land Registry. 

22.  The plaintiffs also pleaded that Lau had told Chow in the meeting that he was a son of Wong and a brother of a shareholder and director of Gainview.  Lau also told Chow that he had the authority to represent Wong and Gainview to handle the intended sale of the Lot 723.

23.  The plaintiffs admitted that they intended to use Lot 723 to conduct a business in the name of the Memorial Garden for burial or keeping of the properties of deceased persons.  But they denied that Lau had represented to Chow about the fitness for purpose of the lot or their intended business in the lot.  They in particular denied that Lau had expressly told Chow that they were going to provide maintenance service to future owners of the plots for a fee.  They pleaded that all their services and charges were printed in pamphlets that were available to the public.

24.  They also denied that Lau had discussed the article in the Apple Daily with Chow.  They further pleaded that the only document Lau had provided to Chow was a copy of the Memorandum of Agreement.

25.  They agreed that Lau had told Chow that several plots had already been sold, but denied that Lau had said that some purchasers were interested in the purchase of some plots.

26.  They further pleaded that even if Lau had told Chow about the plaintiffs’ business or intended business on the lot, Chow had not relied on it as Chow intended to use the lot for a private columbarium whilst the plaintiffs’ use of the Memorial Garden was only for keeping the properties of deceased persons and not their ashes.

27.  They also pleaded that Chow would not have relied on the other alleged representations by Lau because Chow was experienced in developing properties for use as columbarium and had been involved in one such business called Nam On Yuen Co Ltd (“Nam On Yuen”).  Chow thus knew what type of land could be used for a columbarium.  Furthermore, the government had given wide publicity in June and July 2010 to the fact that not all lands could be used lawfully for a private columbarium.

The plaintiffs’ evidence

28.  Lau is the only witness for the plaintiffs.  He made a witness statement in December 2013.  His evidence is in line with the pleadings of the plaintiffs. 

29.  He said that he had been in the business of developing small village houses in the New Territories for about 30 years.

30.  In 2009, he saw a thriving demand for niches for funeral urns.  He was desirous of developing a columbarium business.  His father then owned Lot 723.  He partnered with a friend Wong Ming Leung to develop this lot.  But neither of them had any experience in developing or running a private columbarium.  In the middle of 2009, they carried out some basic constructions on the lot.  On 23 October 2009 they purchased the lot in the name of Gainview.  They intended to use Gainview to develop the lot and their business.  The shareholders and directors of Gainview are Lau’s elder brother and Wong Ming Leung’s mother. But the shareholders and directors took no part in the business.  The business was managed and developed by Lau and Wong Ming Leung.

31.  At that time, there were a lot of controversies in the community about private columbaria.  The government intended to regulate such business.  In the light of that, Lau and Wong Ming Leung decided to develop on the lot a business of letting people keep the properties of their deceased relatives for memorial purpose rather than the ashes of deceased persons.  They would wait for the government’s clarification on the control scheme before considering whether to change the business to a columbarium.  They regarded their business as a new concept and an alternative to a columbarium.

32.  In December 2009, they divided the lot into sections A, B, C and RP and further sub-divided sections A, B and C into subsections.  There were over 500 subsections or plots.  They were (save and except subsection A 195) for sale to customers for the said memorial purpose.  Subsection A 195 could not be sold because a deceased indigenous villager had been buried there erroneously. For Lot 723 RP, it was used as the common area and for access to the plots.  The RP was assigned to Lau’s mother Wong to facilitate management.  But Wong played no part in the business.  They also engaged a fung shui consultant company to promote the sale of the plots.  Their pamphlets and catalogues, which were available to the public at the lot, stated clearly that the plots were for keeping of properties of deceased persons and not their ashes.  However, the sale of the plots did not meet their expectation.

33.  In the beginning of 2010, the demand of the community for government control of columbarium was particularly strong.  In the middle of the year, the government indicated that it would classify private columbaria into two categories: Tables A and B.  For those in Table A, they were in compliance with the government regulations and could continue to operate.  For those in Table B, their operators had to obtain government approval before they could continue with the business.  Such classification would affect greatly the price of land that could be used for a columbarium.  Though Lot 723 was not used as a columbarium, Lau also applied for classification by the government.

34.  In about June 2010, Lau was introduced to Chow by a mutual friend one Lau Kwok Ming in a café of a container yard.  The yard was operated by Chow.  It was only a few minutes’ walk from Lot 723.  Chow intended to purchase Lot 723.  Since the government’s policy on private columbarium was unclear, Lau was willing to consider selling the lot. 

35.  Chow told Lau that he was very experienced in developing columbarium.  His successful cases included Nam On Yuen.  He intended to purchase Lot 723 to develop a private columbarium.  He also told Lau that he had been apprised of the then usage of the lot.  Since Chow did not make any enquiry, Lau also did not explain to him the then or intended use of the lot, nor did he comment on Chow’s intended development thereon.

36.  Chow produced a plan showing the plots of Lot 723. Lau then explained that Gainview was the owner of the plots and he was authorized by both Gainview and Wong to negotiate the sale.  They then agreed to discuss the details of the deal in the next meeting.

37.  The next meeting was in the office of the container yard.  Lau brought along the Memorandum of Agreement to the meeting for Chow’s reference. Chow said that he was very familiar with the relevant terms of the land deed and the procedure for applying approval for columbarium. 

38.  Lau told Chow that several plots in the lot had been sold and would not be included in the sale.  He also said that there were the remains of a deceased indigenous villager in subsection A 195 and Chow would have to deal with that by himself.  He further said in oral evidence that the villager was buried there some five to six years before his first meeting with Chow.

39.  Regarding the negotiation for price, they were of the view that if the government should place Lot 723 in Table A, then its value would soar to HK$30,000,000.  However, if it should be placed in Table B, its value would only be a few million dollars.  They therefore agreed the purchase price at HK$15,300,000 with HK$7,000,000 allocated to the plots and HK$8,300,000 allocated to the RP of the lot.

40.  They had their 3rd meeting at the office of the plaintiffs’ solicitors but the solicitors took no part.  They met there because the title deeds of Lot 723 were kept there and Lau had to show them to Chow.  They discussed the terms of the draft agreements prepared by Lau.  The terms in the drafts were as agreed in the 2nd meeting.

41.  In the course of the meeting, Chow expressed the worry that the plaintiffs might decline to complete if the government should classify Lot 723 under Table A before completion.  He therefore asked for the damages to be increased to HK$10,000,000 in the event of the plaintiffs’ refusal to complete. Lau said he had similar worries.  For reciprocity, Lau agreed that the compensation should be increased to no less than HK$10,000,000 with HK$5,000,000 for each agreement. Chow then suggested the wording for the damages for inclusion into the agreements.

42.  Chow then signed the agreements in his own right and Lau signed them on behalf of Gainview and Wong respectively.

43.  Afterwards, the government had several public consultation meetings on private columbaria.  The government was inclined to control the use of land for such purpose through the Lands Department and the Planning Department. Lau thought that such control would reduce the chance of Lot 723 being place in Table A.

44.  On 20 September 2010, Chow told Lau that the land owned by Nam On Yuen, which was used for a private columbarium, was being repossessed by the government.

45.  On 27 September 2010, Lau learnt from the plaintiffs’ solicitors that Chow had refused to complete the agreements. 

46.  The plaintiffs’ solicitors sent two letters dated 28 September 2010 on behalf of each of the plaintiffs to Chow’s solicitors forfeiting the deposits under the two agreements.  They further sent two letters dated 14 October 2010 to Chow’s solicitors demanding payment to the plaintiffs of compensation at HK$5,000,000 under each of the agreements.  Chow’s solicitors did not respond to any of these letters.  The plaintiffs then issued these two actions against Chow.

47.  Lau in his witness statement in particular denied that he had told Chow that Lot 723 was being used for keeping ashes of deceased persons, that the government had approved the use of the lot for keeping ashes; or that Lau would invest 20% of the proceeds of sale into a new company to be set up by Chow to develop the lot.

48.  Lau also reiterated that Chow had not enquired him on the then use of Lot 723.  On the contrary, Chow expressed that he had already learnt of how the lot was being used.

49.  Lau also denied that he had shown Chow or discussed with Chow about any newspapers advertisement.

50.  Lau also produced some company documents about Nam On Yuen and another company called Lung Shan Yuen Development Co Ltd (“Lung Shan Yuen”) to show Chow’s interests in them.  Nam On Yuen was in the business of a private columbarium.  Lung Shan Yuen was established with a view to manage the Memorial Garden.

51.  Lau also produced a number of newspaper articles and other documents to show that there were a lot of discussions in the media on control of private columbaria. 

52.  The government classified Lot 723 under Table B on 10 December 2010.

53.  Lau was unshaken in cross-examination.  He was firm that he had not taken Chow to the lot.  But he had told Chow in a meeting that the remains of an indigenous villager had been buried erroneously in the lot and he had reported the same to the government.  Hence, the first remark was made in the 1st agreement.

The defendant’s evidence

54.  Chow is the only witness for the defence.  He made a witness statement in December 2013. 

55.  He came from a fishing family.  He had education up to Form 1 level and then came out to work.  He said in his witness statement that he had been running his businesses for 12 to 13 years.  His businesses are in the Tuen Mun area.  From time to time, there were people offering him investment opportunities either directly or through his friends.

56.  He agreed in cross-examination that he was aware that there were many people who wanted to buy niches for funeral urns in 2009 and 2010.  There were then many private columbaria and such business was profitable. He also knew that in 2009 to 2010 there were voices in the community asking the government to control private columbaria.  He had heard of the government’s consultation of the public on this matter.  He was aware of the government’s proposal to place private columbaria under Tables A and B with those under A being lawful and those under B needed approval, but he was not clear about the time of the government’s consultation on it.   

57.  He said in his witness statement that he had been invited to invest in Nam On Yuen by the directors and shareholders of this company.  This company had a piece of land of about 26,000 sq metres that could be developed to provide 10,000 niches for funeral urns.  (He bought 20% of the shares of the company from a previous shareholder on 7 April 2010 (A 169) and was made a director of the company.)  When he invested in the company, the construction of niches on the company’s land was in progress.  He was not involved in the initial planning and management of the company’s business.  He was only a passive investor.

58.  He said in cross-examination that when he invested in Nam On Yuen, he had absolutely no idea of the columbarium business.  He happened to have a friend who asked him to chip in to the investment.  He also did not know that government permission was required for Nam On Yuen to conduct such business.  He had not thought of the need for such permission.  He was only investing in the company.

59.  He also said in cross-examination that he was unaware of the government’s accusation against Nam On Yuen in July 2010 that Nam On Yuen had breached the government lease.  But he knew that the government had re-entered the land in mid-September 2010.

60.  He had rented a piece of land near Lot 723 and ran a container storage business there since 2008 or 2009. 

61.  He was introduced to Lau by their mutual friend Lau Kwok Ming in May 2009.  Lau proposed to sell him Lot 723.  He agreed in cross-examination that Lau had told him that Lau was authorized to represent the plaintiffs and he believed in that.

62.  His container yard was only a few minutes’ walk from Lot 723.  But he said in cross-examination that he had never gone over to have a look at it even when Lau approached him and offered to sell it to him.

63.  Lau told him that the Lands Department had approved of the lot to be used as a burial ground.  The lot had already been sub-divided into over 500 plots for sale to the public.  The potential purchasers were those who would use the plots to keep the ashes or properties of their deceased relatives. He said in cross-examination that he trusted Lau and did not think that Lau would cheat him.  He had also told Lau that he intended to use the lot for a columbarium.

64.  Lau also told him that Lot 723 had been divided into two parts with one part owned by Gainview and the other by Wong.  He had to purchase both parts at the same time.  Lau also said that he was authorized to represent Gainview and had a power of attorney from Wong to handle the sale of the lot.

65.  Lau also said that following the sale of the plots, Gainview and/or Wong would provide maintenance services to the owners for a fee. There would thus be substantial regular income.

66.  At or about the beginning of June 2010, Lau visited Chow at his office and produced some documents to him.  The documents included a publication of the Apple Daily dated 27 April 2009 entitled “福澤錦囊” (“the Publication”).  It gave advice on the options of funeral service and the final resting place for the deceased.  A promotion article of the Memorial Garden also appeared in the Publication.  Chow was very impressed by the article.

67.  About a week after the meeting in June, Lau took him to inspect Lot 723.  He saw the sign of the Memorial Garden posted at the entrance of the lot and on the enclosing wall.

68.  During that visit, Lau pointed to two graves in the lot and told Chow that their presence confirmed the government’s approval for the lot to be used as a burial and/or quasi burial ground for the placement in the plots of ashes and/or other items belonging to deceased persons.

69.  Lau also showed Chow the floor plan of the lot sub-divided into plots.  Lau told him that some plots had been sold and several purchasers were waiting to complete their purchases of some other plots.

70.  In the course of the negotiation for sale and purchase, Chow told Lau that he intended to form a service company to manage the plots and was minded to find investors or partners to join him.  Lau immediately said that Lau would be a shareholder of the company injecting cash equivalent to at least 20% of the sales price of the lot.  However, Chow confirmed in cross-examination that he only told Lau about such intention after he had signed the two agreements.  Hence, this allegation had not induced him to sign the agreements.

71.  Regarding the price, Chow said in cross-examination that it was negotiated through the middleman Lau Kwok Ming. The asking price was close to HK$17,000,000.  The price was agreed at the second meeting at HK$15,300,000.  He thought that it was a nice price as each plot could be sold for HK$100,000 or more.  He also agreed that if the lot should be placed under Table A, it would worth some HK$30,000,000.  If under Table B, it would only be worth several millions.  But he disagreed that the parties agreed the price at HK$15,300,000 because of the uncertainty of how the lot would be classified.

72.  Chow had a friend who had some legal knowledge. He advised Chow not to sign the agreements as Gainview and Wong had not shown good titles to the lot.

73.  However, a few days later Lau went to Chow’s office and persuaded Chow to execute the agreements with the inducement of Lau’s investment into Chow’s intended service company.  Chow clarified this evidence in cross-examination that Lau only made the proposal after he had signed the two agreements.  Hence, this investment proposal had not affected Chow in his decision to enter into the two agreements.

74.  Chow said he was persuaded by Lau’s representations and then executed the two sale and purchase agreements in his office.  Also at Lau’s request, he drew two cheques of HK$500,000 each and made payable to Gainview and Wong respectively.  However, Lau did not produce Gainview’s authorization letter or Wong’s power of attorney to him prior to signing the agreements.  Further, Lau had also not told him that Wong had authorized Gainview to sign her agreement on her behalf.

75.  Chow instructed solicitors to represent him to complete the sale and purchase.  He then discovered that there was no government permission for the lot to be used as a burial and/or quasi burial ground or to keep the articles left by deceased persons. 

76.  He said in cross-examination that he was surprised by such findings and thought that he had been misled into signing the agreements.  He did not ask his solicitors to complain to the plaintiffs but asked Lau Kwok Ming to talk to Lau. 

77.  Despite Chow’s allegation that he had signed the agreements in reliance on Lau’s misrepresentations, he did not explain in his witness statement why his solicitors did not raise the misrepresentations with the plaintiffs’ solicitors.  This was so even when the plaintiffs’ solicitors wrote them on 28 September 2010 to forfeit the deposits and on 14 October 2010 to demand the liquidated damages stipulated in the agreements.  Chow said in cross-examination that he had not told his solicitors that he had been deceived by Lau.  He also did not ask his solicitors to deal with the matter but asked Lau Kwok Ming to talk to the Lau to sort the matter out.  He was told by Lau Kwok Ming that the matter was settled by the plaintiffs’ forfeiture of his HK$10,000,000 deposit.

78.  Regarding his company Lung Shan Yuen which was set up in August 2010, he owned 95% of the shares and the remaining 5% was held in the name of the wife of Lau Kwok Ming.  

Documentary evidence

79.  Lau produced a resolution of the board of Gainview made on 26 February 2015 which confirmed and ratified Lau’s authority to enter into the two agreements dated 16 July 2010 to sell to Chow the plots held in the name of Gainview and Lot 723 RP held in the name of Wong (BE 536-538).

80.  Lau also produced a Chinese declaration by Wong dated 26 February 2015 declaring that Wong had authorized Lau and Gainview or either of them to represent Wong to enter into the sale and purchase agreement dated 16 July 2010 with Chow (BE 539).

81.  Lau further produced some documents showing the community’s concern about the control of private columbaria.

82.  The first document is a news article published on 16 April 2010 in The Sun (BE 404-405).  It reported that the Food and Health Bureau had failed to clarify the legality of many private columbaria despite repeated demands by people who had relatives passed away and needed columbarium service. The Consumer Council therefore prepared a list of lawful columbaria for use by the public.  The article further reported on the many consumer complaints about malpractices of illegal columbaria.

83.  The next document is another news article published on 10 July 2010 in The Headline Daily (BE 445).  It reported a statement by the Deputy Secretary of the Food and Health Bureau that the government would publish in two to three months lists of lawful and unapproved private columbaria. For those columbaria classified as unapproved, their operators could apply to the Town Planning Department for approval.  The article also referred to the public consultation by the government on where to build columbaria.

84.  The 3rd document is a letter of representation dated 17 September 2010 from Nam On Yuen to the government in response to the government’s consultation on how to regulate private columbaria and to classify them in Tables A and B (BE 456-457).

85.  The 4th document is also a news article published on 17 December 2010 in The Apple Daily (BE 471).  It reported a litigation brought by Nam On Yuen against the government to claim back the land repossessed by the government.  The government repossessed the land on the ground that Nam On Yuen had used it to keep ashes of deceased person contrary to the terms of the government lease.

86.  The 5th document is a public consultation document published by the Food and Health Bureau in December 2011 on the control and regulation of private columbaria by licensing.  The document referred to the public consultation on 6 July 2010 on the review of the government’s policy on private columbaria.

87.  The last document produced by Lau is a pamphlet promoting the Memorial Garden (BE 543-544).  It said that there were 380 small plots which could be used as memorial gardens for keeping the properties of deceased relatives. It also said that there was maintenance service provided by a maintenance company.

88.  Chow also produced the article advertising the Memorial Garden and published on 27 April 2009 in The Apple Daily (BE 546).  The article said that it was the first memorial garden for keeping the properties of deceased relatives.

Decision on Lau’s authority

89.  Chow pleaded by way of amendment to his defences that Lau had no authority from Gainview and Wong to sign the two agreements on their behalf.  Hence, the 1st agreement was unenforceable and the 2nd null and void.  He, however, agreed in cross-examination that when he negotiated with Lau, he believed that Lau had authority from the owners to negotiate with him.

90.  Now in the light of the resolution of the board of Gainview and the declaration by Wong which were both made on 26 February 2015, even if Lau had no authority at the material time to enter into the two agreements for Gainview and Wong, the two agreements are now ratified by them.  Chow’s challenge to Lau’s authority thus fails.

Decision on misrepresentations

91.  Chow alleged that Lau had misrepresented to him that the Memorial Garden or the plots therein were intended for the burial of ashes and/or other items of deceased persons and that the government had given permission for the garden to be so used.  He further alleged that Lau had shown him newspaper articles on the intended use of the garden and also some graves in the garden as confirmation of the government’s permission.  Mr Fan, counsel for Chow also referred to the advertising pamphlet of the Memorial Garden which was distributed to the public at the garden to show the business undertaken by the plaintiffs or Lau thereat.

92.  Mr Fan focused on the caption of the pamphlet and two paragraphs therein as follows:

「香港首個私人紀念花園供擺放先人遺物。」

「此福地環抱綿延翠綠山頭，景色秀美，環境恬靜，人傑地靈，福澤後人，無數子孫友好亦為先人擇墓穴於此。

龍福山紀念花園於本年六月中旬竣工，提供極為罕有約380幅可作私人紀念花園的小地塊供擺放先人遺物，並由龍山投資管理有限公司提供專業之管理服務；而該等地塊均以賣地形式出售，提供地契，真正永久享用，一切手續在律師樓辦理，買賣合法，相比一般靈位買賣更有保障。」

“The First Private Memorial Garden for Keeping of Articles Belonging to Ancestors.”

“This blessed land is surrounded by a jade-green mountainous range. The scenery is beautiful and the surrounding is tranquil. A place propitious for giving birth to great men. A setting of blessing and beneficence to posterity. Countless of descendants and friends have chosen graves here for their forerunners.

The construction of Lung Fok Mountain memorial Garden was completed in mid-June this year. It provides 380 extremely rare small private memorial garden plots for keeping the articles of ancestors. There will be professional management service provided by Lung Mountain Investment Management Limited. All the plots will be sold by assignment with real perpetual enjoyment. All the procedure will be processed at the office of solicitors. The sale and purchase is lawful. There is more protection than sale and purchase of tablet for worship of the spirit of the deceased.” (free translation)

93.  Mr Fan then referred to the article published in the Apple Daily on 27 April 2010.  He focused on the caption and a paragraph therein as follows:

「群山環抱給先人一個清靜地。」

「龍福山紀念花園負責人曾民愷表示：「現時不乏寺院、龕堂作擺放先人骨灰、可惜只能擺放在建築物內、或不能面對先人燃燒香燭，龍福山紀念花園正好給予機會後人買地祭祖。此外，紀念花園備有專業管理團隊，可確保福地安全，並能夠為買家定時淋水，保護已綠化的土地，讓後人可舒適祭祖，先人亦可清靜長眠。」」

“Surrounded by a Range of Mountains. To Give the Forerunners a Serene Place.”

“Tsang Man Hoi, the person in charge of Lung Fuk Memorial Garden expressed: ‘There is no lack of temples and columbaria for keeping the ashes of ancestors. Lamentably, (the ashes) can only be kept within buildings, or one cannot burn incense in front of the ancestor. Lung Fuk Memorial Garden just provides the opportunity for the descendants to buy a piece of land for ancestral worship. Furthermore, the memorial garden has a professional management team that can ensure the safety of the blessed land. The management team can regularly water the land for the buyer to protect the land with flora. This can ensure the comfort for the descendants in their ancestral worship and peace for the ancestors in their eternal rest.’” (free translation)

94.  Mr Fan submitted that nothing in these two articles said that the Memorial Garden was only to be used for keeping the articles of deceased persons. 

95.  He further submitted that even a cenotaph is a kind of grave and such could not be built in the Memorial Garden without consent from the District Officer.

96.  I dispose of the last point first.  I do not think the plaintiffs have ever suggested that cenotaphs can be built in the Memorial Garden.  They only said that the plots were for keeping the articles of deceased persons.  I do not think such user would infringe the prohibition in clause 15 of the Memorandum of Agreement for Lot 723.  That clause prohibited the making of graves or interring of human remains in the lot. 

97.  In any case, the dispute in this case is not on its permitted user.  Chow had raised no requisition on title relating to user.  The dispute is on whether Lau had made the misrepresentations to Chow as alleged by Chow and Chow had relied on them.

98.  I would say that the newspaper article does convey a meaning that the plots in the Memorial Garden can be used for niches for funeral urns.  That is certainly contrary to the Memorandum of Agreement.

99.  Regarding the advertising pamphlet, I think reading it as a whole, it would convey a meaning that the Memorial Garden is for keeping the articles of ancestors.  The statement saying that there are people choosing the place to make graves for their ancestors is a reference to the locality of the Memorial Garden and not the garden itself.

100.  Mr Fan then referred to Lau’s evidence on the burial of the villager in Lot 723 and Lau’s reporting of the matter to the District Officer and the Lands Department.  He submitted that Lau was fully aware that the Memorial Garden could not be used for burial or the business of a columbarium.  He further submitted that Lau had used the advertising pamphlet and the newspaper article to mislead the public including Chow into believing that the Memorial Garden could be or had the permission from the government to be used as a columbarium.

101.  Furthermore, since the plots in the garden were not selling well, there was no reason why Chow would suddenly have wanted to buy the garden.  Hence, Lau must have misrepresented the user of the garden to Chow and Chow must have relied on the same in committing to the two agreements.

102.  Mr Yeung, counsel for the plaintiffs however, asked me to consider the scenario prevailing at the time immediately before and when the parties entered into the two agreements.

103.  There is no dispute that there was then a public demand for government control of private columbaria.  Since Chow intended to purchase Lot 723 or the Memorial Garden to run a columbarium, he would have been concerned about the legality of using the garden for such business.  He indeed said that Lau had represented to him that there was government permission for the garden to be so used and he relied on that in entering into the agreements.  However, he did not ask Lau for a copy of the approval or to stipulate in the two agreements that Lau had warranted such approval.

104.  Furthermore, there is remark no. 1 in the agreement between Gainview and Chow which provided:

“(1) A: A corpse was mistakenly buried by an indigenous villager at Lot No. A 195. The Lands Department had been notified of this matter. The vendor and purchaser are aware of this matter. The purchaser shall not rely on this matter as the reason to cancel this transaction.”

105.  This remark shows that the burial of a corpse on a plot in the garden would cause problems and the remark was made in the agreement to prevent Chow from using the burial as a reason to cancel the agreement.  The remark thus negates Chow’s evidence that Lau had made the alleged representation that there was government permission for the garden to be used for burial purpose.

106.  Furthermore, it is Chow’s pleaded case and evidence that after entering into the two agreements, he instructed solicitors to represent him to complete the sale and purchase.  He then discovered that Lau’s representations were false.  He found that there was no government permission for Lot 723 to be used as a burial or quasi burial ground or for keeping the articles of deceased persons. 

107.  He said in cross-examination that he was surprised by these findings.  He thought he had been misled into signing the two agreements.  But he did not tell his solicitors that Lau had cheated him.  He also did not ask his solicitors to complain against the plaintiffs’ misrepresentations through Lau.  He said he had asked the mutual friend Lau Kwok Ming to talk to Lau to sort out the problem.  But I find this most surprising.

108.  The total consideration in the two agreements was at HK$15.3 million.  He had paid HK$1 million deposits.  If he did not complete the agreements and did not have proper reasons for not completing, he had the risk of being sued for liquidated damages at HK$10 million less the HK$1 million deposits.  I cannot see why he would not have instructed his solicitors to complain to the plaintiffs about the alleged misrepresentations, set aside the two agreements and get back the HK$1 million deposits.  Even if he should have preferred to sort out the problem with Lau through Lau Kwok Ming, there was still no reason for him not to have instructed his solicitors to lodge a complaint of misrepresentations with the plaintiffs.  Furthermore, he had not mentioned in his witness statement that he had asked Lau Kwok Ming to sort the matter out with Lau.

109.  When completion did not take place on 27 September, the plaintiffs’ solicitors sent letters on 28 September to Chow’s solicitors informing them of the forfeiture of the deposits.  Chow again did not instruct his solicitors to write back and ask for return of the deposits on the ground of Lau’s misrepresentations.  I cannot see any reason why Chow should keep quiet and not respond to the letters if Lau had indeed cheated him.  I think both Chow and his solicitors should also know that a lack of response from Chow to the letters of 28 September could be most damaging to Chow if the plaintiffs should sue him for damages later.  In the light of his defence of misrepresentation, his lack of response is most surprising.

110.  However, there was further surprise.  The plaintiffs’ solicitors sent two more letters dated 14 October demanding liquidated damages of HK$5 million under each of the two agreements or a total of HK$10 million. Chow still did not instruct his solicitors to complain against Lau’s misrepresentations. 

111.  He said in cross-examination that he had already settled the dispute with Lau by foregoing the HK$1 million deposits.  But I cannot see why he should have been contented in losing the HK$1 million when he was the victim of Lau’s deception. 

112.  Furthermore, if there was indeed a settlement, this should have been his defence to the actions.  But this is not a ground of his defence.  He also failed to mention this in his witness statement.

Decision on liability

113.  In the premises, I find Chow’s evidence most unreasonable.  I find that his case of misrepresentation is a fabrication that he had dreamed it up after the plaintiffs had commenced the actions. 

114.  I further find that his evidence in cross-examination that he had sent Lau Kwok Ming to negotiate with Lau and had secured a settlement with Lau is a lie.  He fabricated this lie when being cross-examined on why his solicitors did not respond to the letters from the plaintiffs’ solicitors.  The true reason for the lack of response can only be because there was no misrepresentation by Lau.  I hold that Chow had failed to establish his case of misrepresentation by Lau. 

115.  I therefore find that Lau had not made any of the misrepresentations as alleged by Chow.  I accept Lau’s evidence as a whole and reject Chow’s evidence whenever it is in conflict with Lau’s.  I hold that Chow had breached the two agreements in not completing the purchases.  Chow is liable to pay damages to the plaintiffs.

Decision on quantum of damages

116.  Since Chow was in breach of the two agreements, the plaintiffs were entitled to forfeit the HK$1 million deposits.  But Chow should be given credit for the deposits.

117.  Each of the two agreements has fixed the liquidated damages at HK$5 million.  Lau’s evidence is that because the value of Lot 723 could change very substantially depending on whether it would be placed under Table A or B in the government’s control scheme.  It was Chow who suggested raising the total damages for the two agreements to HK$10 million in the event of the plaintiffs’ refusal to complete upon the lot being placed in Table A as his loss would then be great.  Lau for reciprocity also asked to increase the total damages to HK$10 million if Chow should fail to complete when the lot is placed in Table B.  I have accepted Lau’s evidence of this.  I hold that the liquidated damages clauses in two agreements are the result of genuine pre-estimate of the loss that each party may suffer upon breach by the other. I therefore find that Chow should pay each of the plaintiffs HK$5 million less HK$500,000 deposit or HK$4.5 million each.

118.  If I should be wrong on this, the total amount of damages payable by Chow to the two plaintiffs together would be HK$10.3 million.  This is because the valuation by the joint expert of Lot 723 is at HK$4 million when placed in Table B.  The total contract sum of HK$15.3 million less the value of the lot at HK$4 million and the deposits at HK$1 million would give HK$10.3 million.

119.  I therefore order Chow to pay each of the plaintiffs HK$4.5 million or a total sum of HK$9 million with interest at 2.5% above the best lending rate of the Hong Kong Bank from the date of the writs to today.

120.  I also make a costs order nisi that Chow do pay the plaintiffs the costs of these actions.