KO WING LIN JOHNNY v. CHAN PUI TONG

DCCJ 5455/2020

[2025] HKDC 516

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 5455 OF 2020

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JUDGMENT

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Introduction

1.  This action concerns a failed sale and purchase transaction in respect of a ground floor property of a 3-storey house of No 46 San Lee Uk Tsuen, Ha Tsuen, Yuen Long (“House”), which was erected on Section A of Lot No 1944 in DD 124 (“1944SA”) together with respective portions of Section A of Lot No 1940 in DD 124 (“1940SA”) and the Remaining Portion of Lot No 1940 in DD 124(“1940RP”) (collectively the “Subject Property”). 1940SA and 1940RP are open space area outside the House which were referred by parties as ‘car entrance / garden’ (入車花園) on the provisional agreement for sale and purchase (“PSPA”).

2.  The prospective purchaser of the Subject Property was the Plaintiff (“P”) whereas the Defendant (“D”) is and was the owner of the Subject Property, who also owned Section B of Lot No 1940 in DD 124, Yuen Long (“1940SB”). The parties entered into a PSPA dated 30 June 2020 in respect of the Subject Property where D agreed to sell and P agreed to buy at the price of HK$6,380,000.00 (“Transaction Price”). An initial deposit of HK$600,000.00 (“First Deposit”) was paid upon the signing of the PSPA with a further deposit of HK$38,000.00 (“Second Deposit”) paid by P to D on 13 July 2020. The balance of the Transaction Price in the sum of HK$5,742,000.00 was to be paid on or before the date of completion, which was stipulated in the PSPA to be 18 September 2020 (“Completion Date”).

3.  For reasons that are addressed below, the sale was never completed.

Relevant provisions of the PSPA

4.  It is indisputable that D’s sister Chan Shui Fun (“CSF”) represented D to enter into the PSPA which contained Annex 1 and Annex 2. Both of these annexures were stipulated under the ‘Remarks’ in Clause 17 of the PSPA where it stated: 雙方同意：此合約連同附件 <一>及「建屋平面圖」附件<二> 共叄頁紙。 (“the Clause 17”).

5.  Annex 1 is a 2-page document written in Chinese bearing inter alia, the parties’ names, address of the Subject Property and 6 terms said to be incorporated into the PSPA. The relevant provision that led to the failure of transaction, and thus current dispute is clause 3 which read as follow:

“3. 雙方同意：賣方保證上述該物業之是次交易，連同以下地段DD 124 Lot 1940 RP、DD 124 Lot 1940 SB、DD 124 Lot 1944 RP、DD 124 Lot 1944 SB RP、DD 124 Lot 1939 & DD 124 Lot 1938 RP的車輛通道之「永久使用權」售予買方，使該物業日後可使用車輛經由地段DD 124 Lot 1940 RP、DD 124 Lot 1940 SB、DD 124 Lot 1944 RP、DD 124 Lot 1944 SB RP、DD 124 Lot 1939 & DD 124 Lot 1938 RP進出該物業及洪水橋田心路，實際範圍及面積以測量為準。” (“A1C3”)

6.  Hence, A1C3 was a clause intended to assign a ‘perpetual easement’ to P for vehicle access on and over the Lots mentioned hereinabove (“PE”). It is pertinent to note that none of the Lots mentioned in A1C3 were owned by D but 1940 RP, 1940 SB, 1944 RP and 1944 SB RP were owned by CSF (collectively the “CSF’s Lots”), whereas a Tang Wing Ki Tso owns Lot 1938RP and Lam Yuk Shu Tso owns Lot 1939 (collectively the “Tso’s Lots”).

7.  Prior to the Completion Date, a letter from the D’s solicitors Leung Kin & Co (“LKC”) dated 29 July 2020 informed P’s former solicitors Shum Wong & Co (“SWC”) that D was unable to grant the PE as stipulated under A1C3, which was read as follows:

“We write to advise that our client has just found out that our client is not in a position to grant any right of way on the said 2 Lots to your client as the said 2 Lots do not belong to our client.

… we shall be obliged if you would kindly take instructions from your client as to whether your client still intends to proceed with the purchase of the said property despite there is defect of title and that our client is unable to grant a right of way on the said 2 Lots or alternatively to enter into a cancellation of the said Agreement with our client…”

8.  The “said 2 Lots” referred therein were the Tso’s Lots. SWC reverted on 11 August 2020 agreeing to a cancellation agreement of the PSPA with a condition of a return of the First Deposit and Second Deposit together with a further sum of HK$638,000 as liquidated damages pursuant to Clause 8 of the PSPA. Such proposal was rejected by LKC on a letter dated 13 August 2020. And on P’s instruction, SWC wrote to LKC by a letter dated 24 August 2020 confirming P’s acceptance of D’s anticipatory breach of the PSPA.

9.  It goes without saying that completion did not happen on the Completion Date, and it is not disputed that the First and Second Deposit in the sum of HK$638,000.00 was returned to the P on 29 September 2020. The D denies liability in compensating the P under the PSPA.

10.  It is convenient at this juncture to mention that LKC never returned an engrossment of the Formal Agreement for Sale and Purchase (“FSPA”) in accordance with the deadline stipulated in Clause 2(b) of the PSPA.

P’s Case

11.  A Writ of Summons together with a Statement of Claim (“SOC”) was filed on 9 October 2020. P’s case is simple and straightforward. He averred that D has failed to show good title to the Subject Property by failing to grant the PE as stipulated under A1C3 and thus was in breach of the PSPA. D is therefore liable to a liquidated sum which was equivalent to the amount of the deposit as stipulated under Clause 8 of the PSPA.

D’s Case against P

12.  D filed a Defence and Counterclaim (“DCC”) on 21 December 2020 and an Amended Defence and Counterclaim was filed on 25 June 2024 (“ADCC”). D also filed a Statement of Claim against the first Third Party (“TP1”) on 18 December 2020 and an Amended version was filed on 25 June 2024 (“ASOC/TP1”). On 5 July 2022, D filed a Statement of Claim against the second Third Party (“TP2”).

13.  D averred no valid agreement was formed between P and D based on (i) mistake and/or (ii) uncertainty and/or (iii) fraud.

(i)  Mistake

14.  Paragraphs 3.1 to 3.8 of the DCC dealt with D’s pleaded case on mistake. In gist, D averred she never instructed TP2, who was an agent and/or employee of Starlite Property Management (HK) Limited, the TP1 to sell other rights, including the PE to P, but gave specific instructions to TP2 that she would only sell the Subject Property. She therefore averred there was a fundamental mistake between the parties as A1C3 did not reflect her real intention.

(ii)  Uncertainty

15.  D further averred in paragraph 3.8 of her pleading that A1C3 was drafted with an intention to confuse D and CSF and it was impossible for parties to agree to the selling and purchasing of the PE because (a) no documents were ever provided to CSF to identify the area of the PE, and (b) not only Annex 2 was not shown to CSF until after the commencement of the current proceedings, but (c) the portions of the land for the PE referred to in Annex 2 was different from those showing on Annex 1.

16.  For easy reference, the said paragraph 3.8 is stated as follows: (“the 3.8 Pleading”)

“Further and/or alternatively, the defendant avers that Clause 3 of the 附件<一> was drafted to confuse CSF and/or the Defendant and/or the Plaintiff. At all material times, CSF and/or the Defendant and/or the Plaintiff was never provided with a map and/or a lot index plan to identify where the Perpetual Easement was. Hence, it was impossible for the parties to identify and/or agree to the selling and purchasing of the Perpetual Easement. As shown in the Witness Statement of Chan Shui Fun dated 20 January 2022, 附件 <1> and 附件 <2> (that was signed by the Plaintiff and was disclosed to the Defendant only during the exchange of documents after the commencements of the legal proceedings) both referred to different portions of the land for the perpetual easement/right of way. Thus, it is averred that if 附件<2> was included in the PSPA, it would be contradictory to 附件<1>.” (italic being the amended part)

Pleading in respect of ‘uncertainty’

17.  Although the word ‘uncertain’ was not pleaded from the relevant paragraphs in the pleadings, P’s counsels Mr Ng conceded ‘uncertainty’ was one of the D’s pleaded case but only restricted to uncertainty arise from the contradiction between Annex 1 and Annex 2.

18.  I view such concession from P’s counsels is correct, if not lenient. I must confess that I found paragraph 3.8 devoid of legal substance when I was reading it; it is trite that pleadings are served to define the issues in dispute, and the absence of a specific legal consequence left me in wonder if those facts cited therein were to be read as part of the ‘mistake’ allegation or it was trying to plead something entirely different. It would also be a convenient time to remind legal professions that only facts, not evidence should be put into pleadings according to Order 18 rule 7(1) of the Rules of the District Court, Cap 336H. The reference to the contents of witness statement as shown in the 3.8 Pleading is simply not permissible.

The pleading of Incomplete Contract

19.  It is apparent from D’s Counsel Mr Tsang’s submissions that he saw paragraph 3.8 played as a conduit to a wider scope of defence than what was pleaded. In paragraph 9 of his opening submissions, he raised the ‘incomplete contract point’ with reference to the particulars given under the fraud allegation, but the 7-page long pleadings of fraud (spanned from paragraph 3.9 to 3.9.11A) did not contain any averment to the effect that ‘the PSPA was void because Annex 2 was missing, and thus it was an incomplete contract’. In fact, the word ‘incomplete’ was not even used once in the entire ADCC. Indeed, there were factual assertions that D did not receive the Annex 2 (paragraphs 3.9.6 and 3.9.10) where paragraphs 3.9.11A (h) and (i) stated the missing Annex 2 was alleged to be ‘a deliberate omission by TP1 and/or TP2 to ensure that the only document which identified the PE would be Annex 1’. However, one must bear in mind that these factual issues were raised in support of the fraud allegation but not in the context of mistake. In support of D’s submission, Mr Tsang stated that first, only material facts, rather than law, must be pleaded. Secondly, since D’s position has clearly spelt out in paragraph 3 of the pleading that ‘it is denied that a valid agreement was ever formed between P and D’, the Court should therefore make a fact finding as to what has happened to Annex 2 in any event based on D’s ‘case theory’, and thus to decide ‘whether there was a valid contract in the first place’ (paragraph 37 of D’s closing submissions).

20.  I cannot agree with Mr Tsang’s argument for the following reasons.

Only facts to be pleaded?

21.  This is only correct when the pleadings is sufficiently clear to allow the court and the other side to understand the legal consequence from the pleaded facts, as discussed in Mui So Bing v Wan Chi Shing and others [2019] HKCA 1341where Hon Lam VP (as he then was) said the follows:

“23.1 In any event, it is clear that legal practice has changed… the notion that a legally qualified pleader may plead only the facts (or plead the facts with a specific legal consequence), leaving his opponent and the court to have to second-guess what legal consequence (or what other legal consequences) he may choose to argue at trial or on appeal, is in my view inimical to the underlying objectives of the Civil Justice Reform…

23.2 The earlier the case is more thoroughly thought-out and unambiguously articulated, the more cost-effective the proceedings would be for the parties, and the fewer the cases where an appellate court would be required to undertake the “state of the evidence bar” exercise which requires it to hypothesize, if not speculate, whether there is “no reasonable possibility that the state of the evidence relevant to the point would have been materially more favourable to the other side if the point had been taken at the trial”.

23.3 As was noted in paragraphs 205-6 of the Civil Justice Reform final report, “a reference [in the pleadings] to the legal point helpfully conveys the nature of the party’s case”… it seems to me to be high time that consideration should be given to requiring legal representatives to plead not only material facts, but also all the legal consequences to which those facts validly lead, with the effect that the parties would be barred from contending different legal consequences on appeal.”

22.  While it is clear that pleading legal consequences is not a rule per se, it is certainly encouraged. Coming back to the present case, I find that the argument based on ‘unenforceable contract due to incompleteness’ was inadequately pleaded — in the context of incomplete contract, legal issues such as identification of the essential terms in Annex 2, the importance of Annex 2 played in the contract as a whole, the state of minds of parties in relation to Annex 2 etc are material considerations, and should be pleaded. However, nothing in the rest of the ADCC was even remotely sufficient to raise such case D sought to argue before this Court.

The Court’s duty to investigate on unpleaded matters?

23.  Mr Tsang argued that the Court nonetheless has the duty to investigate if the contract was valid if Annex 2 was not signed and/or omitted. D said the allegation of missing Annex 2, and thus the ‘incomplete contract argument’ cannot be brushed aside on the assumption that “D had admitted’ there was a valid PSPA as there was no such admissions in the ADCC. With respect, the value of pleadings would be diminished should this logic stand. The functions of well particularised pleadings that was helpfully summarised by Bokhary J A (as he then was) in Aktieselskabet Dansk Skibsfinansiering v Wheelock Marden & Co Ltd [1994] 2 HKC at 264 paragraphs 269E-270E is trite and I shall not repeat herein, save that the objective is to fairly inform the other side and the Court of a party’s case, identifying the issues and the true extent of the dispute between the parties. It is apparent that a general denial of valid agreement has little legal value, but particulars must always be given in the pleadings showing in what respects the agreement was unenforceable. The Court only has the duty to investigate on issues within the framework the parties have pleaded, and since D never defined the legal issues as to ‘incomplete contract’ in her pleadings, the Court has to accept that it was never D or CSF’s intention to argue that the missing of Annex 2 would render the contract void based on incompleteness.

(iii)  Fraud

24.  In gist, there were three acts involved. D averred that first, the Tso’s Lots were fraudulently and/or maliciously inserted in the A1C3 contrary to D or CSF’s instructions. Secondly, Annex 2 was deliberately omitted in the PSPA to ensure that the only document which identified the PE would be Annex 1. D averred such omission was to induce D and/or CSF into committing a mistake by signing the PSPA. Lastly, the unusual large amount of initial deposit, the First Deposit and Second Deposit made by P (almost 10% instead of 5% of the Transaction Price) was a conspiracy with TP1 and/or TP2 to raise the amount of the liquidated damage payable by D to P. (“the Scheme”).

25.  It follows, so it seems to me, that the questions for decision in this case can be summed up as follows:

(a)  Whether there were mistakes as to the terms of PSPA as D never had any intention of selling the PE, and A1C3 was not in accord with her belief;

(b)  Whether there are any inconsistent terms under Annex 1 and Annex 2, which could amount as uncertainty;

(c)  Whether D and/or TP1 and/or TP2 devised the Scheme thereby committed fraud against D with a view to obtaining damages; and

(d)  Whether the PSPA be null and void should any of these questions be answered positively.

MISTAKE

26.  D relied on the fact that P was actually aware of, or ought to have known D’s mistake, that such knowledge can be inferred from the surrounding circumstances. D contends that the effect of the CSF’s mistake was a fundamental mistake as to an essential term of the agreement, such that the agreement should be set aside as being void ab initio.

27.  It is not in dispute that the alleged mistake as to the sale of PE was a unilateral mistake made by CSF and only discovered by D on 9 July 2020. For such unilateral mistake to have any effect on the PSPA, the law is clear. A party to a contract is bound even though he may have made a mistake in entering into the contract, his real intention, understanding of or motive in making the contract being irrelevant to the question of whether a valid contract had come into effect. The only exception is when the other party either knows that the offer made was wrongly expressed or cannot reasonably have supposed that the offer contained the offeror’s real intention. It is incumbent on D to prove that (i) CSF was mistaken as to the fundamental terms of the PSPA and Annex 1 and (ii) P either had actual or constructive knowledge of D’s mistake.

28.  Mr Tsang submitted that since TP1, TP2 or Chow Cham Ming, an agent of TP1 (“Chow”) who liaised with P for this transaction were not present at trial, the Court should ‘fall back to the starting point’, and to have P bear the burden of proof of his instructions given to Chow which included the purchase of PE and the car park space. This submission cannot be accepted and no authority was provided to support it. As regards burden of proof, the principles stated in Phipson on Evidence, 20^th ed, §6-06 are relevant:

“So far as the persuasive burden is concerned, the burden of proof lies upon the party who substantially asserts the affirmative of the issue. Where a given allegation, whether affirmative or negative, forms an essential part of a party’s case, the proof of such allegations rests on that party. If, when all the evidence is adduced by all parties, the party who has this burden has not discharged it, the decision must be against him. This is an ancient rule founded on considerations of good sense and should not be departed from without strong reasons.

This rule is adopted principally because it is just that he who invokes the aid of the law should be the first to prove his case; and partly because, in the nature of things, a negative is more difficult to establish than an affirmative. The burden of proof is fixed at the beginning of the trial by the state of the pleadings, and it is settled as a question of law, remaining unchanged throughout the trial exactly where the pleadings place it, and never shifting.

In deciding which party asserts the affirmative, regard must be had to the substance of the issue and not merely to its grammatical form; the latter the pleader can frequently vary at will. Moreover, a negative allegation must not be confused with the mere traverse of an affirmative one. The true meaning of the rule is that where a given allegation, whether affirmative or negative, forms an essential part of a party’s case, the proof of such allegation rests on him. An alternative test, in this connection, is to strike out of the record the particular allegation in question, the onus lying upon the party who would fail if such a course were pursued.” (underlined added)

29.  As such, it is incumbent on D to prove P had the requisite knowledge of D’s mistake. In any event, quite apart from what Mr Tsang contended, I view there was no objective reason to suspect P, at the time of signing the PSPA, had any direct or constructive knowledge that the PE should not form part of the sale, or that the relevant PE clause was inserted by mistake. I bear in mind that P and CSF had never met nor communicated prior to the signing of the agreement, but each of them relied on Chow and TP2 as their respective middleman to correspond with each other. The fact that CSF entrusted TP2 throughout the material times prior to the transaction was no difference to the reliance P placed on Chow’s representations. Considering P as a layman without legal training, I did not see any objective basis for any reasonable person in the position of P to doubt what his agent represented to him, but would suppose that the easement should not formed part of the sale, or that the relevant PE clause was inserted by mistake.

30.  The fact that P knew D was not the owner of the Tso’s Lots does not imply D/CSF were not entitled to sell it, it was entirely possible for P to expect the issue of PE had or would be dealt with between CSF/D and the relevant Tsos before the Completion Date. Further, the argument that “P knew the PE would have to share with others living nearby, and thus P ought to know the PE would not be secured for his own use” did not make good sense to me. First, it was never P’s case that the PE was granted to him and him only. Secondly, a PE could be granted to more than just one person.

31.  Mr Tsang also invited the Court to draw adverse inference against the evidence P gave in respect of the conversation between Chow and him due to the absence of Chow’s evidence in this proceedings. Bearing in mind the principle of adverse inferences stated by Linda Chan J in Liao Zhiqiang and Others v Cheung Sin Ling Vickki and Others [2022] HKCFI 892 at paragraph 75:

“The court may be entitled to draw adverse inferences from the absence of a witness who was available to and might have been called by a party. However, the court does not usually do so, not least because there may be all sorts of reasons why a particular witness is not called and one usually cannot be confident to infer what the witness would actually have said. Further, in general it is for a party to choose which witness he wishes to call and there is no property in a witness, and in the case of a witness in the jurisdiction the opposing party can seek to compel a witness’s attendance by means of a witness summons.

It is in a comparatively small number of cases that it would be appropriate to draw an adverse inference, but where it is sought to do so, the party inviting the court to exercise such a discretion must:

(1) Set out clearly (a) the point on which the inference is sought and identifying the inference sought; (b) the reason why it is said that the missing witness would have material evidence to give on that issue; (c) why it is said that the party seeking to have the inference drawn has himself adduced relevant evidence on that issue; and (d) why the party seeking the inference could not himself be expected to call or witness summons the witness.

(2) Explain why such inference is justified on the basis of other evidence that is before the court.

It is then open to the other party to resist such an inference by giving a good reason why the witness is absent or silent. If he is able to do so, then no inference should be drawn. If there is some credible explanation given, even if not wholly satisfactory, the potentially detrimental effect of his absence or silence may be reduced or nullified.”

32.  There were no reasons provided by D to explain why she did not invite Chow as witness in the trial. And for the reasons explained in the following paragraphs, I found that D has failed to adduce evidence of sufficient cogency to prove her pleaded case of mistake at the prima facie level, accordingly, it would not be permissible to draw any adverse inference against P’s evidence by reason of absence of Chow (and the WhatsApp conversation between P and Chow).

D’s failure in proving mistake

33.  I have read the voluminous WhatsApp conversations between respective parties but will not analyse them in pedantic details in this judgment. Although I do not think it can be disputed that the issue of PE was never mentioned between CSF and TP2 at any time before the signing of the PSPA, I view there are insuperable difficulties for D to rescind from the PSPA on the ground of mistake for the following reasons:

One’s choice to be reckless

34.  Reliance is universally placed on signatures appended to documents by persons of full age and understanding as signifying the signatory’s assent or adherence to what that document states. They are held to the documents which they have chosen to sign unless there is shown to be a recognised legal basis for concluding that their apparent consent has been in some way vitiated or that reliance on that document by some other person falls into some category of unconscionable conduct justifying relief in equity. These vitiating factors at common law include fraud, mistake, misrepresentation, non est factum, duress, undue influence and lack of mental capacity.

35.  While D raised various issues to show CSF was ‘misled’ by way of discussions prior to signing the PSPA and Annex 1, the emphasis should be placed upon the circumstances at the decisive moment she signed the relevant agreements, and to establish that the document was signed in circumstances falling within a recognised legal or equitable doctrine capable of invalidating the transaction.

36.  In this case, the PSPA and Annex 1 were delivered to D’s solicitors LKC for her to append the signatures. While I am not certain if LKC held themselves as acting for D at the relevant time, it was certain that D did not sign the relevant documents under coercion or misrepresentation by P, TP1 and/or TP2. The PSPA was a standard form widely used by estate agents, and the reference to two annexes were clearly marked under Clause 17 of the PSPA. The Annex 2 contained 2 pages of terms, which were typed in Chinese. Despite CSF averred she received education up to primary level, it is plain that she was not illiterate and could read and understand Chinese. There was no evidence suggesting her ignorance about the concept of easement either. I consider the word 永久使用權 (pepertual easement) together with relevant Lots numbers were clearly typed out.

37.  CSF explained under cross-examination that she did not read the contract properly based on the trust she had on TP2, and it was a chaotic moment when signing the papers「當時好混亂」. She did not elaborate in detail why it was ‘chaotic’, but I gained an impression that was due to the three sets of agreements in respect of three different units of the House to be signed at the same time. While the number of agreements she needed to sign borne very little significance for her defence, it was most damaging when she averred under re-examination that there was no misunderstanding on her side of the contract「冇誤解」, but she signed them because she did not read the terms under A1C3 「佢叫我簽就簽，我冇咩點睇㗎喎。我䁽過眼，冇睇過晒。」. Her answers were most surprising. In a hypothetical situation that CSF did read A1C3, she would certainly not sign on it as she fully understood the contents of such did not accord her intention.

38.  Thus, in Bank of China (Hong Kong) Ltd v Fung Chin Kan and Lee Yuen Wah (2002) 5 HKCFAR 515 at paragraph 51, Litton NPJ acknowledged:

“…the fundamental principle that, generally speaking, when a person signs a legal document, he or she is bound by the act of signature : As a matter of general law, it is no defence to say that he or she did not understand the contents of a legal document; that person takes the chance of being bound by its terms, as he or she can take the simple precaution of not signing until its contents have been fully explained and understood.”

39.  The reason why CSF decided to sign the PSPA and Annex 1 was simply her choice of being reckless. It has been held that the degree of skill and care expected from estate agents in Hong Kong would not extend to legal matters on which estate agents received no training: Chiu Wai Ling v Chan Yau Chi & Anor (Centaline Property Agency, Third Party) [2002] 2 HKC 154, §30, HH Judge Lok. In such premise, no faults could be attributed to P, TP1 and/or TP2 who had no duties to explain to D as to the effect of the documents or other legal implications. After all, the PSPA and Annex 1 were signed at a law firm and D had the benefit of independent legal advice if she needed at the material times. If LKC was instructed at the relevant time, it would be her lawyers who owe her the duty to explain all the terms and legal consequences but certainly not the agent nor the prospective buyer.

40.  There were other points raised by D to support the defence under mistake which I found them to be futile. I would succinctly point out the reasons here:

No meeting of mind?

41.  Contrary to D’s suggestion, I do not see the issue of PE came as complete shock as both D and CSF admitted the necessity of a vehicular right of way over the neighbouring lots were discussed. Geographically speaking, the Tso’s Lots was the only path to reach the House driving from the main road and it was simply impossible to gain access to the House without trespassing on the Tso’s Lots. More importantly, D at all time knew and did not object to the phrase 「連地下入契入車花園」being part of the description of the premises sold under the PSPA. Should right of way attach much importance to her mind, it would be her own fault of not scrutinising the documents before signing it.

Amendment of Annex 1

42.  CSF used the words 好混亂 (very confusing/chaotic) to describe the situation or her thoughts at the time of signing the PSPA at LKC. D placed much reliance on the fact that the PSPA and Annex 1 were amended once after the parties signed it, thus CSF was required to sign again after amendment. D’s case was that the A1C3 was inserted in the amended version without informing CSF, and it would be a mistake induced by TP1 and/or TP2 that she was not aware of it.

43.  Although TP1 and TP2 may owe D duty of care under tort to bring her attention to the relevant amendments (which will be discussed under the ‘third party proceedings’ below), I have already explained it could not be P, TP1 or TP2’s fault in not informing CSF the legal implications of the agreement. Above all, the A1C3 could not be described as inserted ‘sneakily’ in a way that no reasonable person could be aware of. Bearing in mind such clause were included in all three transactions of the House, and taking up quarter of the page of Annex 1, I shall adopt Mr Ng’s words in paragraph 63.3 of his closing submissions that “It is incredible that her own lawyers who in CSF’s words, were responsible for the sale of the Subject Property, would not have advised her on the existence and scope of the PE.”

UNCERTAINTY

44.  It is equally incredible that LKC did not find out the missing Annex 2 until late. As discussed earlier, the Court would not entertain the argument of incomplete contract due to missing Annex 2. The issue pleaded was one that Annex 2, if provided, would be contradictory to Annex 1 and thus the agreement would be void for uncertainty.

45.  As pointed out by Mr Ng, this argument is concerned with a hypothetical situation depending on whether the Court finds the Annex 2 was missing or not. If I conclude Annex 2 was never given to and signed by D, then there would be no uncertainty. The missing Annex 2 however could not void the agreement as first, the incomplete contract point was not pleaded, and secondly, even if it was pleaded, the Annex 2 did not in my view contain material terms to render the whole agreement meaningless, thus void.

46.  In fact, the averment of missing Annex 2 is hardly sustainable as evidence revealed that a photo of Annex 2 was given to CSF by TP2 over WhatsApp before parties signing the agreement. Again, it was her choice not to scrutinise the contents and raised queries if she had any. Hence, Annex 2 was brought to the notice of CSF before she signed the agreement, and I am satisfied that she had the knowledge of its contents (or the least its existence) at the time of signing.

Signature not appended on Annex 2

47.  D argued CSF did not sign on Annex 2, and thus lacking the element of acceptance. With respect, I disagree. It is trite that in determining the method of acceptance, the court would not void an agreement merely by an absence of signature, but to examine the intention of the parties if they evinced to be bound by the terms. Contrary to Lucy Michaels v Harbour Grand Hong Kong [2020] HKCA 705, the signature missing in that case was held ‘required’ because the signature was a condition to the agreement in dispute, which served to evince parties’ intention to be bound by the relevant terms on that particular page of that agreement. There was, however, no such express requirement in this present case that Annex 2 to be signed. As held in Maple Leaf Marco Volatility Master Fund v Rouvroy [2010] 2 All ER (Comm) 788, Smith J explained in cases where parties disputed over enforceability of a contract, Court is to examine (1) the parties’ conduct to determine if they evinced an intention to be bound contractually, and (2) whether the agreement was too uncertain to be a contract.

48.  In regard to parties’ conducts, there were plenty evidence to support that both parties intended to be bound by the agreement even in the absence of Annex 2. Foremost, P’s former solicitors SWC wrote to LKC twice after the PSPA signed asking for a copy of the Annex 2 but to no avail. One would expect LKC acting for D to take instructions from CSF as to the whereabouts of Annex 2, but D/CSF’s silence on this matter indicated how immaterial this document was to her. Worse still, LKC proceeded to send a draft FSPA in response to P’s request of Annex 2, and accepted the Second Deposit from D. Not until 17 days after the FSPA was due for signing, LKC wrote to SWC expressing D’s inability to grant PE and admitted the title defect. Against such background, the parties’ conducts to be bound by the PSPA and Annex 1 and Annex 2 are overwhelmingly clear.

49.  Once determined that the parties had the requisite intention to make a contractually binding agreement, the next question is to determine whether the agreement was too uncertain to be a contract. It was pleaded that Annex 1 and Annex 2 were contradictory because the area indicated to have the right of way on Annex 2 did not include the Tso’s Lots.

50.  But one must first understand the nature and use of this Annex 2 before considering if there were any contradictions. Annex 2 was titled 建屋平面圖, and the controversial wordings which averred to indicate right of way were stated 車輛通道 永久使用權 (車路路權). Besides this, there were demarcated sections for car parkings and areas circled with the words 車輛掉頭. It also consisted of various coloured sections but there were no map legends to define those features in the map. The WhatsApp conversation between TP2 and CSF in the context of parking revealed that TP2 or his staff were the makers of this plan and TP2 needed to go to the site to take measurements to design the car parking layout. While we did not have the opportunity to hear from the maker of Annex 2 to understand the meanings of those colors and words adopted therein, it would be useful to read Annex 1 and 2 together to learn the true purpose of Annex 2. First, unlike clause 1 and 2 in Annex 1, A1C3 did not make reference to Annex 2. Under clause 1 of Annex 1, Annex 2 was referred to indicate the demarcation of the demised garden and open space (雙方同意該物業的入契入車花園（面積約600平方呎）及OPEN SPACE等範圍以附件<二>「建屋平面圖」作土地分割方案…) Likewise, Annex 2 was referrred in clause 2 to indicate communal area (以下地段DD 124 Lot 1944 SA土地中部份面積（附件<2>「建屋平面圖」中黃色部份）劃作行人出入口上落樓梯之共用空間)

51.  The missing reference to Annex 2 in A1C3 implies such clause is to be understood on its own, and in isolation of Annex 2. In fact when reading A1C3 on its own, I view it is an unambiguous and clear statement citing the areas where the easement was granted and its purpose. I am therefore satisfied that there could be no uncertainty arising from the averred contradiction between Annex 1 and Annex 2. While the words 車輛通道 永久使用權 (車路路權) on Annex 2 were to describe the relevant coloured sections, it did not equate to the fact that other sections in Annex 2 were not prescribed with easement, The finality will be subject to the detailed descriptions in A1C3.

FRAUD

52.  It was most impossible to discern the alleged fraud from the ADCC, which prompted me to confirm with Mr Tsang during the trial that D’s pleaded case under fraud was based on conspiracy of P and TP1/TP2 to defraud D. I shall not copy the 7-page long pleadings of fraud here save that the Scheme as mentioned in paragraph 24 hereinabove was not pleaded with sufficient particularity.

53.  According to Jackson Xu Zhao Ze & Anor v Tsai Tim Yuen & Anor (unreported), CACV 117/2013, 10 April 2014, at paragraph 3.2, the party invoked the aid of law under fraud must plead the following elements:

(a)  The means of carrying out the agreement between two parties ie in this case P and TP1/TP2;

(b)  The intention to injure;

(c)  Acts that were carried out pursuant to the agreement and the stated intention;

(d)  Lastly, the damage caused to the ‘victim’.

Where is the Agreement?

54.  The Scheme, as explained in paragraph 24, involved three parts of acts, which included (1) malicious/ fraudulent insertion of A1C3, (2) deliberate omission of Annex 2 in the PSPA, and (3) unilateral raise of the initial deposit. To make this alleged Scheme work, it obviously requires P, TP1, TP2 and Chow’s joint agreement, namely their knowledge, consents and their respective roles in this conspiracy.

55.  But there was no pleading of such agreement. To take the D’s case at its highest, P was averred to commit fraud under two acts in the ADCC:

3.9.11A (k) The Plaintiff made a usually (sic) larger payment of the initial deposit (almost 10%) suggesting that he could be conspiring with the Third Paty (sic) and/or Tam to raise the deposit amount…

3.9.12 … the Defendant avers that the Plaintiff and/or the Agent (Chow), fraudulently inserted Clause 3 of the 附件<一>, knowing that the said Clause 3 was untrue and/or it was against the Representation…

56.  No agreement between P and TP1 was pleaded. How Chow’s acts are attributable to TP1 was not pleaded. The insertion of A1C3 and the omission of Annex 2 were not pleaded as being part of the conspiracy. In any event, the intention of TP1 and TP2 to insert A1C3 without D’s consents was not pleaded.

57.  After all, the agreement of such conspiracy and the means of carrying out such agreement did not set out in the pleadings. In an allegation of conspiracy, Hon Au-Yeung J in Chan Wai Keung Lawrence v Au Chi Man Albert [2021] HKCFI 2096 made the following observations at the following paragraphs:

“26. In relation to the 1^st element, conspiracies are usually concealed, so the existence of an agreed mechanism can only be inferred from overt acts. Nevertheless, the formulation of a party’s cause of action should clearly and cogently be made in the pleadings. It should not be left to an exercise of drawing inferences: Pido v Compass Technology

27. Although intention could be a matter of inference, the facts and circumstances must be examined to see what inferences could be drawn: Jackson Xu Zhao Ze

…

31. The origins of all conspiracies are concealed and it is usually quite impossible to establish when or where the initial agreement was made, or when or where other conspirators were recruited. It is not necessary that every overt act is done by every conspirator, but the act must be done pursuant to the conspiracy. Nor is it necessary for the conspirators to join the conspiracy at the same time, but the parties to it must be sufficiently aware of the surrounding circumstances and share the same object for it properly to be said that they were acting in concert at the time of the act complained of. In most cases, it will be necessary to scrutinise the acts relied upon in order to see what inferences can be drawn as to the existence or otherwise of the alleged conspiracy.”

58.  The absence of all these pleaded issues could be blamed for bad drafting, or simply because of the weakness of D’s case. It would be D’s wishful thinking that the Court be willing to make inferences from her evidence, but as Hon Au-Yeung J said at paragraph 34 in Chan Wai Keung Lawrence: “Speculations and conjectures are impermissible in pleadings as the bases upon which inferences are invited to be drawn.”

59.  Even if the Court accepts the “larger than usual initial deposit” as an overt act of the conspiracy, the allegation of fraud cannot get off the ground either. First, there was no rule about how much an initial deposit should be but depending on parties’ negotiations. Should CSF perceive the 10% deposit being unusual, she had every right to negotiate with P rather than accepting it. Secondly, for the foregoing reasons explained under mistake and uncertainty, the pleadings and evidence in this case is wholly inadequate for inferring an intention from any person, including TP1 and TP2 to injure CSF, and thus establishing fraud. As summarized by Lord Brightman in Hart v O'Connor [1985] AC 1000 at 1024:

“...historically a court of equity did not restrain a suit at law on the ground of 'unfairness' unless the conscience of the plaintiff was in some way affected. This might be because of actual fraud ... or constructive fraud, i.e. conduct which falls below the standards demanded by equity, traditionally considered under its more common manifestations of undue influence, abuse of confidence, unconscionable bargains and frauds on a power ... An unconscionable bargain in this context would be a bargain of an improvident character made by a poor or ignorant person acting without independent advice which cannot be shown to be a fair and reasonable transaction. 'Fraud' in its equitable context does not mean, or is not confined to, deceit; 'it means an unconscientious use of the power arising out of these circumstances and conditions' of the contracting parties : Earl of Aylsford v. Morris (1873) LR8 Ch. App. 484, 491. It is victimisation, which can consist either of the active extortion of a benefit or the passive acceptance of a benefit in unconscionable circumstances.”

60.  In light of the above principle, there simply could not be fraud when the ‘insertion’ of A1C3 and the ‘omission’ of Annex 2 were wholly obvious and alarming to any reasonable person. CSF could hardly be described be put in an unconscionable circumstance considering her background and the availability of legal advice at the material times.

Third Party proceedings between D and TP1 and TP2

61.  Besides fraud as discussed in the foregoing paragraphs, D’s case against TP1 was that TP1 is vicariously liable for the actions done by TP2 in negligence and/or breach of the Estate Agent Ordinance and/or Code of Ethics issued by the Estate Agents Authority. D’s case against TP2 was based on the same factual allegations and D held TP2 liable as TP2 had ‘purported to act as an agent of TP1’.

62.  Both TP1 and TP2 did not appear at trial. TP1 has filed a defence and counterclaim, demanding D the service fees in relation to the transaction. It is clear that TP1’s counterclaim is dismissed due to his absence at trial.

63.  TP2 has never given notice to defend and Mr Tsang in his opening submissions invited the Court to deem TP2 as have admitted D’s claim pursuant to the Rules of the District Court O 16 r 5(1)(a) (“the Deeming Provision”), including those allegations in dispute between P and D. This cannot be right as the purpose of third party proceedings is to bind the third party by the decision between the plaintiff and defendant. It will be putting a cart before the horse should D’s liability is contingent on a third party’s absence. In fact logic dictates that the Deeming Provision can only operate on those admissions that are not disputed by P, and after the issues between P and D are resolved.

64.  In the discussions of D’s pleaded case against P, I have already (1) ruled out the possibility of conspiracy to defraud, (2) found no inconsistencies between Annex 1 and Annex 2, (3) and the alleged fundamental mistake was rejected as opportunities were given to her to read Annex 1 before signing. Nonetheless I bear in mind that at no times the easement of the Tso’s Lots were discussed between TP2 and CSF, and I am convinced that CSF has never given TP1 nor TP2 the instruction of including the easement in the agreement. This triggers the question as to whether TP1 and TP2 had acted in breach of their duties by not informing or alerting CSF the sales of Tso’s easement.

65.  TP1 averred in its defence that (1) they did not hold themselves as D’s agent in the transaction and had no direct contact of CSF and/or D at all material times; (2) TP2 worked with TP1 at the material times where TP1 agreed not to charge commission from the vendors introduced by TP2; (3) TP1 investigated the D’s plot of land and found out vehicle access to the House would be restricted by the Tso’s Lots; (4) they informed TP2 such issue and was warranted by TP2 that the PE to the House, including the Tso’s Lots will be granted to the purchaser.

66.  There was no positive evidence before me to rebut the assumption that TP1 was not acting as D’s agent. The so-called work arrangement between TP1 and TP2 is a classic agency arrangement where the agent (TP2) facilitates contracts between the principal (TP1) and a third party (D/CSF) by introducing the third party, soliciting orders from the third party or by concluding contracts with the third party on behalf of the principal.

67.  Although it could well be true that TP1 did not have direct contact of CSF, it is trite that a principal will be held liable for the tort committed by his agent. As stated in Murdoch, The Law of Estate Agency, 5^th ed:

“It is an agent’s fundamental obligation to comply with all the client’s express instructions. Thus, an estate agent … who disregards a specific prohibition imposed by the client, or who fails to honour an explicit undertaking given to the client, will be liable for any loss which is thereby caused” (at page 49)

“Less commonly, an estate agent may be able to bind a client to a contract of sale, perhaps by virtue of the doctrine of apparent authority; once again, assuming that the agent had no actual authority to conclude the deal, he or she will be liable to the client for breach of duty” (at page 50).”

68.  In light of the above, and given that TP2 has never given notice to defend, he shall be deemed to admit those allegations against him which were not in in dispute between P and D. As such, I find that TP2 breached his duties under paragraph 13 of the D’s Statement of Claim against the TP2. Likewise, I also view that TP1 has breached the duties under paragraph 18 of the D’s Statement of Claim against TP1.

DEPOSITIONS

69.  As discussed above, there is no merits in D’s case against P, and D is liable to pay P the damages in the same amount as the initial deposit of HK$600,000 as agreed liquidated damages pursuant to Clause 8 of the PSPA, with interest at half the judgment rate from the date of the writ to the date of judgment thereafter at judgment rate from the date of judgment until full payment.

70.  TP1 and TP2 are held to have breached their duties owing to D, but I do not find they should be held liable to indemnity D in full of the sums that D is liable to pay P. As discussed above, CSF was at fault in being reckless when endorsing her signature on Annex 1 without reading it. I consider a fair approach is to have TP1 and TP2 jointly and severally liable for 50% of the agreed damages without interests.

71.  TP1’s counterclaim is dismissed with costs to D.

72.  On a nisi basis, costs of the main proceeding and of the D’s counterclaim against P, including any costs reserved, with two counsel certificates, be to P and to be taxed if not agreed.

73.  In respect of the two Third Party Proceedings, since D did not win on all pleaded cases but only succeeded on the tortious claim, I order on a nisi basis, TP1 and TP2 do pay half of the costs in their respective case to D, with counsel certificate, to be taxed if not agreed.