TANG KWAI CHEUNG v. YEUNG SZE TING

HCMP 1287/2020

[2022] HKCFI 3329

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1287 OF 2020

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BETWEEN

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J U D G M E N T

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A. INTRODUCTION

1.  These proceedings, which were commenced by an Originating Summons dated 24 August 2020 under section 12 of the Conveyancing and Property Ordinance[1] but converted into a writ action by order of Au-Yeung J on 12 May 2021, concern a piece of land in Yuen Long, namely Lot No 417 in Demarcation District 125.[2]

2.  The parties have agreed a “Statement of Agreed Facts in Narrative Form” dated 18 July 2022 (“SAF”). I find the matters stated in the SAF as facts and I adopt the abbreviations used therein. I set out the SAF in full:

“1. On 26.3.1968, Tang Shiu-Wan (‘Deceased’) became a registered half­share (1/2) owner of Lot 417 in Demarcation District 125 (‘Property’). The other half share owner was one ‘Tang Yuet Nam’.

2. On 21.5.1992, the Deceased executed a will (the ‘Will’) appointing ‘Tang Cheung’ as his executor. The Will did not deal with the Property.

3. On 10.8.2002, the Deceased passed away partially intestate with the Will as his last will. After his death, the ownership of the Property became vested in his estate until present.

4. On 2.12.2005, grant of Probate of the estate of the Deceased was issued to Mr Tang Cheung in HCAG010330/2005.

5. With effect from 18.9.2017, compensation rate for land resumption of agricultural land in the New Territories under GN7291 was $1,200 per sq. foot for New Town area.

6. On 27.10.2017, Ms Ng Ka Yin (‘NKY’) of Messrs Leung Kin & Co (‘LK’) gave written instructions to ‘Kerry’ concerning the drafting of a sale and purchase agreement in respect of the Property. NKY also gave written instructions to ‘Sara’ concerning the application for letters of administration in respect of the Deceased’s estate.

7. On 30.10.2017, Mr Tang Chok Lam (‘TCL’), the husband of the Defendant, drew a cheque in favour of LK in the sum of HK$317,000, being HK$300,000 as deposit, HK$15,000 as stamp duty, and HK$2,000 as legal fees.

8. On 2.11.2017, LK drew a cheque in favour of the Plaintiff in the sum of HK$300,000.

9. The Plaintiff as vendor (in his capacity as intended administrator[3] of the Deceased’s estate) and the Defendant as purchaser entered into an agreement for the sale and purchase of the Property dated 3.11.2017 at a consideration of HK$1 million (‘SPA’). LK represented both the vendor and purchaser in the SPA. Since then, LK also represented the Plaintiff in applying for letters of administration of the Deceased’s estate.

10. In early 1.2019, Mr Tang Wai Kee (‘TWK’), son of the Plaintiff, contacted TCL for payment of further deposit of HK$100,000.

11. On 7.1.2019, LK drew a cheque in favour of the Plaintiff in the sum of HK$100,000 as further deposit.

12. Sometime in 2019, LK (acting on behalf of the Plaintiff) applied for letters of administration of the Deceased’s estate in HCAG012886/19.

13. On 29.8.2019, in HCAG012886/19, the Probate Registry informed LK that Grant of Probate of the estate of the Deceased had already been issued on 2.12.2005 in HCAG010330/2005 in favour of another person, who was later discovered to be ‘Tang Cheung’. It transpired that ‘Tang Cheung’ was another client of LK, in HCAG010330/2005.

14. From around 12.12.2019 to 24.7.2020, LK (acting on behalf of Tang Cheung in HCAG010330/2005) was in correspondence with the Probate Registry to obtain a duplicate Grant.

15. On 1.6.2020, LK (acting on behalf of the Plaintiff in HCAG 012886/19) sought leave to withdraw HCAG012886/2019.

16. On 4.6.2020, leave was granted by the Probate Registry to withdraw HCAG012886/2019.

17. The land resumption compensation of the Property under GN 4205 dated 23.7.2020 was at 1,348.80 per sq. foot.

18. On 4.8.2020, the Plaintiff’s solicitors, Messrs Tung, Ng, Tse Lam (‘TNTL’), wrote to LK and purported to rescind the SPA with reference to and by virtue of Clause 35(b)-(c) of the SPA.

19. On 11.8.2020, Messrs Wong Hui & Co (‘WH’) wrote to TNTL, inter alia, stating that Clauses 35(b)-(c) of the SPA ‘were spent and of no effect’, and contended that the Plaintiff had acted in wrongful repudiation of the SPA.

20. On 24.8.2020, the Originating Summons herein was issued.”

3.  In addition to the facts stated in the SAF, I should mention that following the withdrawal of his application for letters of administration of the estate of the Deceased (“the Estate”) (SAF [16]), the plaintiff, who was the Deceased’s son, commenced proceedings[4] on 5 March 2021 seeking the removal of Tang Cheung as the executor of the Estate, which was granted by B Chu J by order dated 28 April 2021. By the same order, the plaintiff was appointed the administrator of the Estate. However, no formal grant of letters of administration by the Probate Registry has been made.

4.  A portion of the Property was resumed by the Government on 24 October 2020. The total area resumed is 5,035 square feet, at HK$1,348.80 per square foot. The total sum for the resumption of the half share of the part of the Property resumed is HK$3,395,604.[5] The unresumed part of the Property is 1,934.6 square feet, with the Estate owning half of it.

5.  The SPA, which is stated at Schedule 1 to be made between “TANG KWAI CHEUNG (鄧桂長), the intending administrator of the estate of TANG SIU WAN (鄧紹穩), deceased” as the Vendor and the defendant as the Purchaser, contains a clause 35 as follows:

“(a) The completion of the sale and purchase of the Property is conditional upon the relevant Letters of Administration of TANG SIU WAN (鄧紹穩) deceased having been granted by the High Court of the Hong Kong Special Administrative Region;

(b) The completion shall take place within 30 days from the date of the Letters of Administration of TANG SIU WAN (鄧紹穩) deceased having been granted by the High Court of the Hong Kong Special Administrative Region; and

(c) If for whatever reasons the Vendor shall fail to obtain the Letters of Administration of TANG SIU WAN (鄧紹穩) deceased from the Court of First Instance of the High Court of the Hong Kong Special Administrative Region within 9 months from the date of signing of the Formal Agreement of Sale and Purchase, the completion shall be extended for not more than 3 months and if the Letters of Administration is not granted within the extended period, the Vendor shall have a right to rescind the Formal Agreement whereupon the deposit paid hereunder shall be returned to the Purchaser by the Vendor in full but without compensation interest (if such return is made within 3 working days from such rescission) or costs and neither party shall have any claim against the other and the parties shall enter into and cause to be registered at the Land Registry an Agreement for Cancellation”.

6.  On the SPA, it was stated that it was interpreted to the vendor (i.e. the plaintiff), and to the purchaser (i.e. the defendant), by NKY, whose signatures in relation thereto were verified by a solicitor of LK.

7.  The SPA contains the following schedules:

(1) Schedule 1, naming the plaintiff (as the intending administrator of the Estate) as the vendor and the defendant as the purchaser.

(2) Schedule 2, describing the property to be sold, being the half share of the Property.

(3) Schedule 3, part I of which refers to the purchase price (HK$1,000,000), with HK$300,000 being the deposit and part payment of the purchase price already paid, and HK$700,000 on or before completion. Part II, headed “The Completion Date”, states:

“Within 30 days from the date of the Letters of Administration of the estate of Tang Siu Wan, deceased has been granted by the Court of First Instance of the High Court of the Hong Kong Special Administrative Region”.

(4) Schedule 4, containing information for the purposes of section 29B(1) of the Stamp Duty Ordinance,[6] paragraph (G) of which states:

“The date of the Conveyance on Sale:-

The parties have agreed the Completion Date specified in Part II of Schedule 3 as the agreed date for the conveyance on sale pursuant to this Agreement”.

8.  While the SPA is dated 3 November 2017, it is the evidence of the plaintiff, the defendant and TCL that they attended the office of LK on 2 November 2017 to sign it. The defendant and TCL went together, while the plaintiff went separately. For the purpose of clause 35(c), the nine-month period for the plaintiff to obtain letters of administration of the Estate expired on 2 August 2018, and the extended period of three months expired on 2 November 2018. There is no dispute that by 3 November 2018, no letters of administration of the Estate had been granted to the plaintiff. The right of the plaintiff to rescind the SPA under clause 35(c) therefore arose on 3 November 2018.

9.  The plaintiff having purported to exercise the right to rescind the SPA by letter dated 4 August 2020, at a time when no letters of administration of the Estate had been granted, the primary question before me is whether the plaintiff was at that time entitled to rescind the SPA under clause 35(c). The defendant says he was not, by reason of the fact that after the extended deadline for completion (i.e. 2 November 2018), in January 2019, the plaintiff requested, and was paid, a sum of HK$100,000 as further deposit by the defendant (SAF [10]-[11]). Therefore, the defendant says, by such conduct, the plaintiff had waived his right under, or was estopped from enforcing, clause 35(c), or clause 35(c) was otherwise spent and no longer enforceable.

10.  The defendant also takes a prior point regarding clause 35(c). She says that LK, which acted for both the plaintiff and the defendant in the sale and purchase of the half share of the Property, wrongly included clause 35(c), as the parties had not discussed or agreed on a right of rescission and neither party gave LK instructions to include such a clause in the SPA. Further, neither party was aware of clause 35(c) as it was not interpreted to either of them before they executed the SPA. She counterclaims, inter alia, for an order that the SPA be rectified by deleting clause 35(c) therefrom. I note here that the defendant is not taking issue with the inclusion or validity of clause 35(a) and (b), or any other clauses in the SPA.

11.  In response, the plaintiff denies that clause 35(c) was wrongly included and he avers that it was interpreted to him before execution.

12.  The plaintiff further avers that any alleged agreement to amend or to waive the terms of the SAP, being a land contract, had to be in writing to be signed by both parties under section 3(1) of the C&PO. This was not done in case of clause 35(c). He also denies that clause 35(c) was otherwise spent or had become unenforceable.

13.  The parties have agreed that the following are the issues for resolution at this trial:

“P’s claim

1. Whether Clause 35(c) of the S&P was mistakenly or wrongly included by LK? Further and/or in particular:-

a. Whether and how were the written terms of the S&P prepared by LK?

b. Whether the existence, contents and/or effect of Cl. 35(c) of the S&P were discussed or agreed between P and D; or explained to P and/or D by the staff of LK before the S&P was signed?

c. Even if D (and P) was (or were) not aware of the inclusion of Cl.35(c) of the S&P at the time of its execution, whether Cl. 35(c) shall still be binding on the parties?

d. Whether the interpretation clause under the S&P estopped D from denying that the S&P (including Cl. 35(c)) had been duly interpreted and explained to her and/or P?

e. Whether D, by stating in writing that Cl. 35(c) was ‘spent and shall no longer have effect’ under paragraph 4 of the letter issued by Wong Hui & Co. on her behalf dated 1I^th August 2020, is estopped from denying that Cl. 35(c) was binding?

2. In the event that Cl. 35(c) was wrongly included by LK as alleged, whether the entire S&P should become ‘null and void’ as a result of mistake[7] or shall be rectified by deletion of Cl. 35(c)?

3. Whether P’s request for, and D’s payment of a sum of HKD 100,000 on 11^th August 2020 [sic] as a further 10% part-payment, precluded P from relying on Cl. 35(c) or contending that the S&P was null and void?

4. Whether Cl. 35(c) (if it was binding) was validly exercised by P and whether P shall be granted the relief sought under the Originating Summons (i.e. declaration, return of deposits and signing of cancellation agreement by D)?

D’s Counterclaim

5. Whether and how:-

(a) The alleged ‘implied terms and/or warranties’ or ‘implied agreement’ was created or became incorporated as pleaded under paragraphs 13 and 14 of the Defence and Counterclaim (the ‘Implied Terms’);

(b) If the Implied Terms are found to have been constituted by an oral agreement, whether they were legally binding and enforceable pursuant to Section 3 of the Conveyancing and Property Ordinance (Cap 219)?

(c) Whether Cl. 35(c) of the S&P remains binding and effective despite the Implied Terms (if found to have existed and enforceable)?

6. Whether P was in breach of the S&P and/or the Implied Terms (if so found to be in existence and enforceable), and if so when and how?

7. Whether D should be granted a decree of specific performance of the S&P against P (as relief sought in the counterclaim) in light of the circumstances including:-

a. The resumption of 5035 sq. ft of the subject Lot by Government Notice vide GN 4205 gazetted on 24 July 2020; and/or

b. The appointment of P as the administrator of the estate of the deceased former owner, one “Tang Siu Wan” by an order of the Court dated 28^th April 2021 under HCMP 286/2021.

8. Whether D has ‘suffered loss and damage’ as a result of P’s alleged breach and is therefore entitled to damages, and if so, how should it be assessed and in what amount? Considerations include but are not limited to:-

aa. Whether, had P used best endeavours and/or took all reasonable steps with due diligence, completion should have occurred, or there was a chance that completion would have occurred, before Government resumption?

ab. Even if the answer to paragraph 8(aa) is negative, whether D is nevertheless entitled to the payment sought in paragraph 3(a) of the prayer in the Amended Defence and Counterclaim?

a. Whether the subject Lot (or a major part of it) was already resumed by the Government before the completion date under the S&P (3 months after the grant of letter of administration), and if so, whether D would have acquired the subject Lot or any ‘rights to claim compensation’ from P (or the Estate) as alleged?

b. After the land was resumed, whether D would have instead relied upon Cl. 23 of the S&P to cancel the transaction whereupon no damages be claimed in addition to return of the deposits paid?

c. Whether D bought the Land with a view to profit on resumption at a later time? If so, whether the resumption of part of the subject Lot was at ‘D’s risk’ under Cl. 23 and Cl. 25 of the S&P so that D was precluded from claiming damages?

d. Whether and how would the grant of letters of administration in favour of P render the Estate to become ‘retrospectively’ bound by the terms of the S&P signed by P earlier as an ‘intended administrator’? If not, whether the beneficiaries of the Estate could and would have ‘ratified’ the terms of the S&P or otherwise permitted the sale to proceed?

9. Whether the Estate or its beneficiaries may object if the relief sought by D against P in the counterclaim is granted?”

14.  The implied terms or implied agreement referred to at [5(a)] of the list of issues are pleaded at [13]-[14] of the Re-Amended Defence and Counterclaim as follows:

“13 The Defendant avers that the following are implied terms and/or warranties of the Agreement:-

(a) that the Plaintiff had had authority of all the beneficiaries of the estate of the Deceased to sell the half share of the Lot to the Defendant; and

(b) that where the Plaintiff would be able to procure completion to take place by any alternative means other than obtaining grant of representation himself, he would use his best endeavours to do so.

14 Further and in addition to paragraph 6(b)(i) above, the Defendant avers that upon the Plaintiff having requested and accepted the further 10% part payment of the purchase price on 7 January 2019, there was an implied agreement between the Plaintiff and Defendant that the Plaintiff should thenceforth take all reasonable steps with due diligence to procure Letters of Administration of the estate of the Deceased to be granted to him as the administrator”.

15.  At the trial, the plaintiff gives evidence on his own behalf. For the defendant, apart from herself, she calls three other witnesses, namely her husband, TCL, and two clerks from LK, NKY (also known as Karen) and Leung Ka Ling (also known as Amy) (“LKL”).

B. DISCUSSION

B1. Should clause 35(c) be deleted?

16.  The first issue for me to decide is whether clause 35(c) is a term which was included in the SPA by mistake, so that it should be deleted by rectification.

17.  It is not in dispute that when the SPA was entered into, the factual context known to all concerned was that the half share of the Property was still registered in the name of the Deceased, and the plaintiff had not been granted representation of the Estate. Hence the express reference to the plaintiff being selling as the intending administrator of the Estate. Indeed, in his affirmation, TCL confirms that when he gave instructions to NKY for the transaction, he informed her[8] that the half share of the Property was still registered in the name of the Deceased “so completion could only take place after the vendor had obtained grant of representation to enable him to transfer the [half share]”. This is consistent with NKY’s evidence in this respect, as well as the written instructions she provided to her colleague, Kerry Tsang (“Kerry”), so as to prepare the SPA.

18.  The written instructions from NKY to Kerry, dated 27 October 2017, are as follows:

“Kerry,

Re: 1/2 share of and in Lot No.417 in D.D.125

Please prepare Agt (we act for both parties):-

Vendor: Tang Kwai Cheung, the intending administrator of the estate of Tang Siu Wan, deceased

Purchaser:

Purchase price: $1,000,000

Deposit : $300,000

Completion : Within 30 days from the date of Letters of Administration of the estate of Tang Siu Wan, deceased granted by the court”.

19.  It is not in dispute the plaintiff and the defendant (or TCL) had never met to negotiate or discuss the sale and purchase. On the plaintiff’s side, it was a nephew of his, Tang Yu Yeung (“TYY”), who had contact with TCL. On the other hand, on the purchasing side, it was TCL who negotiated and decided on all matters in relation to the sale and purchase, as well as giving instructions to and dealing with LK. TCL, however, decided to name his wife, i.e. the defendant, as the purchaser on the SPA. As stated by the defendant in her affirmation:

“It was [TCL] who dealt with the Vendor’s side and decided to purchase the [half share]. I entered into the Agreement as the purchaser at my husband’s request on the understanding that he would pay for it and in effect give it to me as a gift, to include compensation proceeds in the event of Government resumption”.

20.  It seems fair that the intention, knowledge and conduct of TCL in relation to the sale and purchase of the half share of the Property can and should be attributed to the defendant.

21.  According to the affirmations of TCL (which the defendant says accords with the factual situation as far as she is aware and which she adopts):

(1) In several telephone conversations with NKY, TCL informed her of the following:

“4.1 I had agreed to purchase the [half share of the Property] from the vendor at the price of $1,000,000 with a deposit of $300,000;

4.2 the vendor would instruct the said firm to act for him as well;

4.3 the [half share of the Property] was still registered in the name of the late father of the vendor so completion could only take place after the vendor had obtained grant of representation to enable him to transfer the [half share of the Property]; and

4.4 the purchase would be made in the name of my wife, that is the Defendant herein”.

(2) During his testimony, TCL says these were the only instructions he gave to NKY regarding the sale and purchase of the half share of the Property. However, TCL also says that he gave more instructions to NKY regarding the application for letters of administration of the Estate, including the fact that TYY had told him that the family members of the plaintiff had agreed to give the plaintiff the half share of the Property.

(3) When he and the defendant attended the office of LK on 2 November 2017 to sign the SPA, a female staff, who introduced herself as Sandy, briefly explained to them the essential terms thereof, namely:

“7.1 that the subject matter of sale and purchase was of the [half share of the Property];

7.2 that the price was $1,000,000;

7.3 that the deposit payable on signing of the Agreement was $300,000 and the balance payable on completion was $700,000;

7.4 that the vendor would apply for Letters of Administration of the estate of his deceased father/registered owner to enable completion to take place;

7.5 Sandy said once the vendor had obtained a Grant of Letters of Administration to the estate of the deceased registered owner, the purchaser would then have to complete the purchase within 30 days; and

7.6 when the vendor was ready to complete the sale, the purchaser would be notified”.

(4) In his testimony, TCL says that all the references to “Sandy” in his affirmation was wrong, and they should instead be references to “Karen”, i.e. NKY. That is, it was NKY who attended TCL and the defendant at the office of LK on 2 November 2017. His explanation for the error is that the defendant remembered incorrectly. This is most surprising given that TCL was also present at the time and he was in fact much more involved in the transaction than the defendant, who deferred to TCL in all aspects thereof. His memory of what happened ought to be much better than the defendant’s, as confirmed by her testimony when she is not able to recall many details of what happened on 2 November 2017. Further, given that TCL had, by his own evidence, by then dealt with NKY for more than ten years on a number of conveyancing transactions[9] and so he must be knowing her quite well, while the defendant does not seem to know NKY well (she does not even know, for example, that NKY is also called Karen), it is indeed odd, to say the least, that TCL would defer to, and in fact misled by, the defendant as to who it was that attended to them on 2 November 2017. The affirmation of TCL in fact says that the female staff “introduced” herself to them as Sandy, thereby suggesting that the person was previously unknown to TCL and the defendant, and not someone whom TCL had known for over ten years by then. Be that as it may, it does not seem to be seriously disputed that it was indeed NKY who attended to TCL and the defendant when the defendant executed the SPA, and I so find.

(5) In his testimony, TCL says that when NKY explained to him and the defendant the SPA, while NKY was holding the SPA, he did not notice how thick it was, and he did not read it.

(6) Further, in his testimony, apart from the aforesaid six matters, TCL says that NKY also explained to him and the defendant on 2 November 2017 that the half share was sold on an “as is” basis, and there would be delivery of vacant possession. Of the other matters which NKY says she had explained to them (see [24] below), TCL says she did not.

(7) He distinctly recalls no one from LK ever discussed or took instructions from him or the defendant on any timeline for the plaintiff to obtain representation or informed them that difficulty would be encountered, expected or anticipated in the plaintiff’s application therefor.

(8) He says that, “for illustration purposes”, clauses 22 (no notice of required works from the Government), 23 (resumption notice), 24 (illegal structures), 26 (that the subject matter was purchased by the plaintiff), and 32 (“as is”), which are all inapplicable, had not been explained to him and the defendant, and he would have pointed out their inapplicability had they been so explained. More importantly, he says, clause 35(c) was not explained:

“I was not informed by Sandy or anyone else that there would be difficulty or delay which would hinder the Plaintiff as vendor from acquiring proper title to deal with the [half share]. As I bought it with a view to obtaining Government resumption compensation, not to use it for any other purposes, I could well afford to wait. I would certainly not agree that the Plaintiff as vendor would be given an option to rescind; for if so, I would rather buy from someone else. Nor was the time limit of 9 months or extension thereof ever discussed, let alone agreed by me (or the Defendant), as part of the terms of sale and purchase”.

22.  The defendant reiterates in her affirmation that clause 35(c) was not explained to them by Sandy,^[10] and there was no way they would agree to it as it would defeat the purpose of the purchase of the half share of the Property. She asks for rectification of the SPA by deleting clause 35(c) therefrom.

23.  In her affirmation, NKY says she received instructions from TCL on about 4 October 2017 regarding the sale and purchase. She says that TCL told her that the registered owner of a half share of the Property had passed away, and under a family arrangement, the plaintiff was to inherit the half share. He asked LK to act for both sides in the transaction, as well as for the plaintiff in obtaining letters of administration of the Estate. Completion would take place within 30 days of grant of letters of administration.

24.  According to NKY, it was she who, on about 30 October 2017,[11] explained the essential terms of the SPA to the defendant and TCL at the office of LK. She says she did not explain each and every word or sentence to them, nor did she read the contents thereof in detail herself, as she was generally familiar with the contents of a sale and purchase agreement. What she did explain to them were that the defendant was purchasing a half share of the Property from the plaintiff; the price and terms of payment; completion to take place within 30 days of the plaintiff being granted representation of the Estate by the High Court; vacant possession to be delivered on completion; provisions on failure to complete by the plaintiff and by the defendant respectively; stamp duty; provision on resumption by the Government; and sale on an “as is” basis.

25.  NKY says she also explained the same matters to the plaintiff when he attended the office of LK on 2 November 2017.

26.  In particular, NKY says she did not notice, and therefore did not explain, clause 35 at all to the defendant, TCL and the plaintiff. During her testimony, she says she explained the completion date to them by reference to Part II of Schedule 3.

27.  NKY says that she had never received any instructions to include the one-year time limit for completion in the SPA. The inclusion of such a provision by her colleague was a mistake. No drafts or copies of the SPA had been provided to the parties before their execution thereof.

28.  In his affirmation in reply, the plaintiff says that when NKY attended to him at the office of LK on 2 November 2017, she explained to him various terms of the SPA, including the terms of clause 35(c). He says that given that he was a layman with no experience in conveyancing, he was very cautious with the entering into of the SPA, and whether he had the right to sell the half share and the consequences of him not getting the letters of administration, and so he had a clear recollection of him being explained the contents of clause 35(c) before signing, and he would not have signed the SPA had clause 35(c) not be present.

29.  In his testimony before me, the plaintiff says:

(1) No draft of the SPA had been given to him, and no one mentioned or discussed clause 35(c) to or with him, before he went to the office of LK on 2 November 2017.

(2) When he attended the office of LK on 2 November 2017 as directed by TYY, a person calling herself Ms Ng, whom I presume to be NKY, explained the contents of the SPA to him page by page. He insists that on that date, NKY explained clause 35(c) to him. However, even though he says that NKY explained every page of the SPA to him, when asked specifically about clause 26, somehow the plaintiff says that that was not explained to him.

(3) Before his father passed away, there was already an oral arrangement between family members as to which member was to be entitled to which properties of the father when he passed away. The half share of the Property was to be given to the plaintiff.

(4) He decided to rescind the SPA in mid-2020 after he was told by LK that there were difficulties in obtaining letters of administration of the Estate for him, and he heard that the Government was going to resume some land (although he did not know if that would include the Property).

30.  In my judgment, clause 35(c) is a valid and binding provision between the plaintiff and the defendant, and the defendant’s claim that it was included by mistake must be rejected. I say so for the following reasons.

31.  The defendant’s case is that there was no discussion or agreement on such a provision between her (or TCL) and the plaintiff, and the same was not interpreted or explained to her, TCL or the plaintiff. I accept and find that there was no discussion or agreement, and therefore no express instructions given by either the plaintiff or the defendant (or TCL) to LK, on such a provision. But this, in my judgment, is not sufficient to establish a common or mutual mistake, as claimed by the defendant. The defendant is not relying on unilateral mistake.

32.  In a transaction for the sale and purchase of real property, as a general rule, and in the overwhelming majority of cases, there will be a formal agreement in writing signed by the parties setting out in detail the terms of sale.[12] The agreement usually contains detailed terms (such as those referred to in [21(8)] above) dealing with the rights and obligations of the parties which are of a legal and technical nature, which the vendor and purchaser, especially if they are both not qualified or trained in law, would not have agreed or discussed amongst themselves. They would generally agree on the “basic” terms, such as the subject matter, the price, terms of payment, and completion date, and then leave it to their solicitors to work out (and, if each side has his or her own solicitors acting, to agree on) the detailed terms of the agreement.

33.  In his affirmation, TCL says that he informed (and thus gave instructions to) NKY of four matters only ([21(1)] above), which NKY then asked Kerry to prepare the SPA accordingly ([18] above). NKY says she did not give Kerry any further instructions as to what were to be included or not included. Of course, the actual SPA contains many more provisions than what TCL told NKY, and what NKY told Kerry. This is because, as TCL confirms in cross-examination, he would leave it to LK to decide what were the terms to be included in the SPA, and he would not know about many of the terms of the SPA. He says that he was only concerned with the basic terms of the SPA, and did not care about the technical terms thereof.

34.  In his testimony, the plaintiff says that he trusted LK. He says that if LK said that it was alright to sign the SPA, then he would. It is clear that he also entrusted LK to prepare an agreement with provisions which LK considered appropriate.

35.  In her testimony, NKY also confirms that it was for LK, acting for both sides, to include terms which ought fairly to be included to deal with the rights and obligations of the parties. NKY confirms that it was Kerry who decided, when drafting the SPA on her instructions, to include clause 35(c), so it is at least Kerry’s view that clause 35(c) was a fair clause to be included. In my judgment, such a view cannot be said to be an unreasonable one to take, because without it the SPA arguably remains no matter how long the delay in the application process is (and leaving it as an implied term that a right to rescind arises after a reasonable time will just create uncertainty and dispute). NKY’s evidence is that she did not even bother to check the clauses of the SPA which Kerry had prepared, but just the Schedules.

36.  Having so entrusted the drafting of the SPA to LK (via TCL), unless the SPA contains something inconsistent with what was in fact agreed between the parties (such as the price: LK could not, of course, put in any figure other than HK$1,000,000 as the price), or otherwise with an express instruction given, in my judgment the defendant must be bound by the terms of the SPA so included. This is especially so as the defendant confirms in cross-examination that when she and TCL attended the office of LK to sign the SPA, she could see the SPA in front of her which contained many clauses, but only the most basic terms were explained to them by NKY. Neither the defendant nor TCL bothered to ask NKY to explain to them the other clauses. The defendant was happy to sign the SPA in such circumstances because she trusted the solicitors. In such circumstances, I do not see how the defendant is not bound by what she signed. As G Lam J (as he then was, giving the judgment of the Court of Appeal consisting also of Lam VP (as he then was) and Cheung JA) in Tsang Wing Kwai v The Personal Representative of the estate of Chan Chung Han, the Deceased:[13]

“31. In the closing submissions of Fai’s counsel at trial, the judge was invited to infer that the Declaration of Trust was never explained to Madam Chan, who must have signed it without knowing its contents and indeed under a serious misapprehension that it was to the opposite effect, ie that it was a document evidencing a trust over the 1 share in Kwai’s name in her favour, to be shown to the ICAC if necessary. It appears that Fai was seeking to invoke the equitable jurisdiction of the court to set aside a voluntary disposition on the ground of mistake: see Pitt v Holt [2013] 2 AC 108.

32. On that basis it was incumbent on Fai to prove a relevant and sufficient mistake that Madam Chan was labouring under when she signed the Declaration of Trust. Asserting that she signed it without knowing its contents was not enough for the estate to repudiate the document. As Ribeiro PJ said in Ming Shiu Chung at §84, ‘the law has never regarded it as enough to show that [a person of full age and understanding] signed without knowing its contents for the document to be disavowed’. See also Bank of China (Hong Kong) Ltd v Fung Chin Kan (2002) 5 HKCFAR 515, §51, per Litton NPJ.” [Emphasis added]

37.  In Bank of China (Hong Kong) Ltd v Fung Chin Kan,[14] referred to by G Lam J, Litton NPJ (with whom Bokhary PJ, Chan PJ, Mortimer NPJ and Lord Cooke of Thorndon NPJ agreed) said:

“In reaching, as the Court of Appeal did, the conclusion that the transaction here must be set aside, that court was in no way disturbing 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.” [Emphasis added]

38.  In Ming Shiu Chung v Ming Shui Sum,[15] also referred to by G Lam J, Ribeiro PJ (with whom Bokhary PJ, Chan PJ, Fuad NPJ and Sir Thomas Eichelbaum NPJ agreed) said:

“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. Where such a person has signed a document which purports to have legal effect, the law has never regarded it as enough to show that he signed without knowing its contents for the document to be disavowed. It is an everyday occurrence that people sign documents without reading the small (or even the large) print and therefore sign without actually knowing the terms (or all the terms) of the document signed. But they are held to the documents which they have chosen to sign unless there is shown to be a recognized 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.” [Emphasis added]

Mistake is one of the recognised vitiating factors.[16]

39.  In light of the evidence from the defendant, TCL and NKY that NKY did not interpret clause 35(c) to TCL and the defendant, and in particular this failure to interpret is against the interests of NKY and LK in that arguably NKY was failing to discharge her, and LK’s, duty of care in acting for the defendant by not reading through, and explaining and interpreting, the contents of the SPA save for those in the Schedules, I find that, on a balance of probabilities, NKY did not interpret clause 35(c) to the defendant and TCL on 2 November 2017, when the defendant signed the SPA at the office of LK. There is no suggestion or evidence that anyone (including NKY) did so at any other time.

40.  The way NKY handled the interpretation of the SPA, that is, she only explained and interpreted the basic terms, appears to be her modus operandi, as well as that of LKL, her colleague in LK. It would therefore appear to me that, on a balance of probabilities, NKY also did not interpret clause 35(c) to the plaintiff either. As stated, it would be surprising if she did, but then lies about it and thereby admitting to a possible breach of duty owed to the plaintiff which she did not commit.

41.  I also accept the submissions on behalf of the defendant that what happened on 27 July 2020 supports the finding that the plaintiff was not explained clause 35(c) on 2 November 2017. It is the plaintiff’s evidence that around that time, there was news that the Government would resume land in the area, and so he called LK and asked about his rights under the SPA, and he also sent TWK to get a copy of the SPA. Obviously, the plaintiff was ascertaining if he could get out of the SPA. The plaintiff says that TWK told him that at the office of LK, TWK was explained clause 23 of the SPA, which only gives the defendant (but not the plaintiff) a right to terminate on resumption. This largely accords with the evidence of NKY and LKL in this regard. As submitted, if, as the plaintiff says, he was explained clause 35(c) on 2 November 2017 and he remembers it so clearly even now in 2022, it would be odd if he needs to consult LY at all, or that clause 35(c) was not mentioned by the plaintiff with LK directly or through TWK (who was obviously not just going to the office of LK to get a copy of the SPA as he was explained clause 23) on 27 July 2020.

42.  In so finding, I have not overlooked the inconsistencies between the evidence of the defendant, TCL and NKY, in particular as to what happened when the former two met with the latter at the office of LK, which I have outlined above. However, I take into account the fact the transaction took place a few years ago and it is only natural that their respective memories on details may be different.

43.  The plaintiff also submits that as the defendant and TCL accept that they were explained clause 35(a) and (b), and so it is odd if they were not explained clause 35(c). However, their evidence is that NKY explained to them the completion date being within 30 days of the grant. I do not think they have expressly agreed that clause 35(a) and (b) were interpreted to them. On this, it is quite possible that they were in fact, as NKY says, being explained Part II of Schedule 3, rather than clause 35(a) and (b). It would be quite unlikely for them not just to recall what was explained, but the actual provision from which the explanation came from. I would not place much weight on these parts of their testimony.

44.  I have also taken into account the firm evidence of the plaintiff that NKY interpreted clause 35(c) to him and why he says he remembers clearly why that was so. However, in the light of the conflicting evidence I have to make a finding based on inherent probabilities, and for reasons above I find that that NKY did not interpret clause 35(c) to the plaintiff, the defendant and TCL is more likely than not to be the case.

45.  As for the interpretation clause in the SPA, which the plaintiff says estops the defendant from saying that clause 35(c) had not been interpreted to them, I note that the clause is a clause signed by NKY only. TCL’s evidence, which I have no reason to disbelieve, is that when the defendant signed the SPA, the interpretation clause on the same page, saying “INTERPRETED to the Purchaser by:-” had not been signed or stamped with the name of NKY. In such circumstances, whatever is the effect of this clause, I do not see why it should bind, or give to any estoppel against, the defendant.

46.  However, even if NKY did not explain and interpret clause 35(c) to the plaintiff, the defendant and TCL, that does not mean that clause 35(c) is included by mistake, or that it is not valid and binding. As LK was entrusted by both sides to prepare the SPA with terms which in LK’s judgment ought to be fairly included, both of them are bound by the terms put in by LK so entrusted unless the parties themselves have actually agreed not to include a particular provision (rather than simply not having agreed, dealt with or considered a matter themselves at all),[17] or agreed something different, neither of which was the case here. That is, there is no “outward expression of accord”[18] that something like clause 35(c) should not be included, or that something inconsistent with clause 35(c) should be included. The parties themselves simply had no common intention or agreement in relation to the subject of clause 35(c) at all. The case of the defendant that the common intention of the parties was that there should be a “simple sale” is not only unpleaded, but is entirely unclear as to what it entails sufficient to support a case of clear accord. Rather, clause 35(c) was properly included by someone entrusted and authorised by both parties to include whatever terms it considers fair to do so as long as they are not inconsistent with any express agreements or instructions, and they are bound by it by their signatures.

47.  NKY alleges in her testimony that she does not consider clause 35(c) to be a fair provision to be included, and would have deleted it had she known about it. However, the fact remains that she did not delete it, when the person entrusted by NKY to include whatever clause that ought to be fairly included (with NKY herself not bothering to check) clearly took the view that a clause like clause 35(c) ought to be fairly included, either by adopting the precedent in the tso context (according to NKY, LK had such a precedent in that context), or by drafting clause 35(c) herself (according to LKL, LK had no such precedent at all). Further, I do find NKY’s reasons for deletion, had she known about it, unconvincing. When asked by me for the reason, she first says that the period of twelve months in total is clearly insufficient for letters of administration to be obtained. When queried that that should mean that a longer period should be allowed rather than deleting it altogether (as without clause 35(c) that would mean that there is no express time limit at all for letters of administration to be obtained), she then says that to impose a time limit would allow a vendor who has subsequently received a better offer for the property to delay the application for letters of administration deliberately, so as to allow himself to rescind the transaction after the time limit has expired. This rapid change of reasoning is unconvincing and would be contrary to her own evidence that a clause such as clause 35(c) does appear in sale and purchase agreements from time to time and is in the precedents kept by LK, albeit in the context of sales by a tso, but if her second reason is valid then I do not see how that is fair in the tso context either.

48.  NKY also says that clause 35(c) is wrongly included as there were no instructions from the parties thereon. She, however, accepts that other clauses are valid and binding although there were no instructions from the parties either. She explains that that is because clause 35(c) is not a standard clause like the others. However, in my judgment, that cannot be correct. Instructions can be given at any time, including when the agreement is being interpreted to the parties just before execution. NKY’s view, if correct, would mean that the validity of a clause would ultimately depend on the view of the person involved, that is, it is for the person (in the position of NKY) to decide whether a clause is not standard enough to require interpretation, or specific instructions, with the result that the validity of the clause would depend on whether he or she is correct or not in making that decision. This cannot be correct as that is a recipe for dispute and litigation, at which the question will become whether a clause is “standard” enough to require specific instructions or interpretation. This is especially so if the person, as in the case of NKY, on her own admission, does not even bother to read the contents of the agreement (save for the Schedules containing the basic terms) to see if there are “non-standard” clauses which require instructions or interpretation.

49.  Indeed, in his cross-examination, TCL goes as far as saying that none of the clauses which had not been interpreted to him (including those referred to at [21(8)] above) and the defendant is binding. This is of course wrong as a matter of law, and is contradictory to his own evidence that he left it to LK to put in the terms, and the defendant’s own evidence that she did not ask NKY to interpret the other terms to them.

50.  Indeed, if the defendant, TCL and NKY are correct in that clause 35(c) was included by mistake and should not be binding, since on their case there was only agreement, instructions and interpretation on the basic terms, almost all (if not all) of the terms in the body of the SPA are similarly included by mistake and should not be binding. This cannot be correct.

51.  For these reasons, I see no basis to find that the inclusion of clause 35(c) was due to any mistake, or that there is any basis for rectification. It was included by LK (via Kerry) which was duly authorised by both the plaintiff and the defendant to do so. The question of whether there should be a time limit for the plaintiff to obtain the letters of administration was simply not in the minds of the plaintiff or the defendant (or TCL) at all, but clause 35(c) was put in by LK as their properly instructed solicitors entrusted with the preparation of a proper SPA with terms fair to both sides. Even if, as the defendant alleges, she signed without knowing about clause 35(c), she remains bound by it. And so is the plaintiff. I simply see no legal basis for me to delete it.

B2. Payment of the $100,000 and its effect on clause 35(c)

52.  The next issue is whether, by asking for and accepting the $100,000 as further deposit in about January 2019, when the time under clause 35(c) had expired and the plaintiff’s right to rescind had arisen, the plaintiff had somehow lost that right, so that the purported rescission of the SPA by the plaintiff by letter dated 4 August 2020 is of no effect.

53.  The facts surrounding this further payment are not really in dispute: see SAF [10]-[11]. I make the following findings as well from the evidence of the parties:

(1) In January 2019, the plaintiff needed money to pay for the month-old celebration of his grandson (the son of TWK).

(2) TWK sent a WhatsApp message on 3 January 2019 to TCL, whom TWK knew personally, asking if he could give $100,000 to the plaintiff for the New Year.[19] This was done with the knowledge of the plaintiff.

(3) On 4 January 2019, TWK sent further messages to TCL saying that the $100,000 could be deducted later.[20] In context, this clearly means that the $100,000 was to be deducted from the balance of the price to be paid on completion of the sale and purchase of the half share of the Property.

(4) TCL did not reply to TWK on WhatsApp. Instead, he asked TYY to inquire if the request was made with the knowledge of the plaintiff. Upon confirming that it was, TCL agreed to pay the $100,000. He sent a cheque to LK, which in turn paid the plaintiff that sum by a cheque dated 7 January 2019.[21] When he received the cheque, the plaintiff was told by LKL that the sum represented the defendant’s further deposit and as part payment of the purchase price in advance.

(5) Throughout, there was no discussion between the plaintiff and the defendant (or TWK, TYY and TCL on their respective behalves) on the terms and basis on which the $100,000 was to be paid and received, save for the WhatsApp messages from TWK, and the confirmation by TYY that TWK’s request was made with the knowledge of the plaintiff. TCL confirms in his testimony that there was no oral agreement at all about the $100,000.

54.  Both parties, in their pleadings, describe the $100,000 as “further deposit”.[22] This is also the description used in the SAF.

55.  The defendant’s case is that, by asking for and accepting the HK$100,000 as further deposit at a time when the right to rescind under clause 35(c) had arisen, the plaintiff had waived his right to rescind, or was otherwise estopped from relying thereon. Both estoppel by convention and estoppel by representation are relied upon.

56.  In my judgment, the defendant cannot rely on waiver or estoppel, given that, as I found above, the plaintiff, and, more importantly, the defendant herself and TCL (which is also her own case), were not explained or interpreted clause 35(c) when the SPA was executed. There is no evidence to suggest that any of those three persons had, after the SPA was executed but before the request for and payment of the further deposit, acquired knowledge of clause 35(c). On that basis, whatever was done in January 2019 regarding the HK$100,000 was done by the plaintiff, the defendant and TCL without any reference to, and in ignorance of, the existence of clause 35(c) and the plaintiff’s accrued right to rescind thereunder. TCL confirms in cross-examination that the payment of $100,000 had nothing to do with clause 35(c).

57.  As far as waiver is concerned, which in this case means an abandonment of a right by the plaintiff, there must be:

“an unequivocal representation by X in relation to the right allegedly being waived and at least knowledge by X of the facts which show that it has to choose between two inconsistent courses of conduct”.[23]

58.  On my finding, the plaintiff did not have knowledge of the facts, namely the existence of clause 35(c) giving him a right, after 2 November 2018, to rescind the SPA.

59.  As for estoppel by convention and estoppel by representation, the case of the defendant is put in her closing submissions as follows:

“It is submitted that P by requesting (through P’s son) and accepting on 8 January 2019 the further deposit of HKD100,000, impliedly represented, or alternatively that it was inferred that parties assented to the convention that, Cl. 35(c) (if it was once binding on the parties, which is denied), was no longer enforceable”.

60.  The difficulty for the defendant is that, on my findings, and indeed on her own case, clause 35(c) was not in the minds of the plaintiff or the defendant (or TCL) at all in January 2019. It is therefore hard to see how the acts of requesting and accepting the HK$100,000 by the plaintiff, and the payment of that sum by TCL on behalf of the defendant, can be construed or understood as giving rise to any assumption, representation or understanding by any person concerned as to the continued existence or enforceability or otherwise of clause 35(c), or that TCL or the defendant, in paying the HK$100,000, was acting under, or relying upon, any particular assumption or basis induced by any representation by words or conduct made by or on behalf of the plaintiff, in relation to clause 35(c).

61.  In the premises, the case for waiver or estoppel must be rejected. Clause 35(c) remained, after 7 January 2019, a right exercisable by the plaintiff.

B3. Did the plaintiff validly rescind the SPA on 4 August 2020?

62.  Clause 35(c) does not on its terms say when the plaintiff must exercise the right to rescind. It may be argued that: (i) the plaintiff must exercise the right within a reasonable period of time; and (ii) by 4 August 2020, the reasonable period time had expired. However, the aforesaid has not been pleaded.

63.  The defendant submits that she should be allowed to argue that the time for the plaintiff to exercise the right to rescind under clause 35(c) had expired by 4 August 2020, notwithstanding the fact that this point is not pleaded. I decline to do so, because, at least in relation to the question of what is a reasonable period of time, it is fact-sensitive, the answer to which depends on all the factual circumstances of the case, in relation to which the plaintiff is deprived of the opportunity to deal with in a focused manner.

64.  In the premises, there is no basis for me to find that by 4 August 2020, the plaintiff has lost his right to rescind the SPA under clause 35(c). That leaves the defendant’s point that the plaintiff did not, when purporting to rescind, tender HK$400,000 as a return of the deposit paid.

65.  The letter dated 4 August 2020 from TNTL materially states as follows:

“Given that up to the date hereof, the High Court has failed to grant the Letters of Administration to [the plaintiff], we are instructed that [the plaintiff] decides to rescind the S&P Agreement under the said Clauses 35(b) and (c) of the S&P Agreement. Please take [the defendant’s] instructions and revert to us within 7 days whether [the defendant] agrees to execute the Cancellation Agreement. If affirmative, we shall arrange [the plaintiff] to sign the Cancellation Agreement and return the Deposit for the sum of HK$400,000.00 (i.e. HK$300,000.00 + HK$100,000.00) to [the defendant] without any interests and costs”.

66.  The defendant’s case is that the letter of 4 August 2020 only constituted an “offer” by the plaintiff to rescind, and without an actual tendering of the payment of the sum of HK$400,000, and without paying of interest, that letter was not a proper exercise of the right to rescind. The defendant had rightly refused the offer.

67.  As far as I understand, the defendant is not saying that as a matter of law, a rescission of an agreement like the SPA must be accompanied by a tendering of the amount which is to be returned. It is a matter of interpretation of the agreement to see what is the scope of the right to terminate.[24]

68.  Thus, for example, in Looney v Trafigura Beheer BV,[25] the relevant clause read as follows:

“Early termination may only occur on written notice on the basis set out in the Financials. On Trafigura serving written notice and paying the early termination fee the Program will be discontinued and Trafigura and KLA will have no further obligations to the other in relation to the payment or delivery of the Program respectively …” [Emphasis added]

69.  In such a clause, the payment of the early termination fee is expressly made one of the two conditions (the other being the service of a written notice) that have to be fulfilled before the agreement is validly terminated. This is to be contrasted with clause 35(c), which, as far I can see, does not make the return of the deposit, or a tendering thereof, a condition to be fulfilled before the SPA is validly rescinded. The plaintiff has a right to rescind thereunder, whereupon, i.e. upon the rescission, the deposit paid is to be returned. That is, the return of the deposit is not a condition for rescission, but is a consequence upon valid rescission.

70.  Nor do I read the letter of 4 August 2020 as merely an “offer” to rescind. This does not make sense as the right to rescind is a unilateral right, not dependant upon the agreement or acceptance of the defendant. Nor is the 4 August 2020 couched in terms of an offer. The letter says that the plaintiff decides to rescind, not that the plaintiff decides to offer to rescind and asks for the acceptance of the defendant. The rest of the letter deals with what was to be done upon rescission.

B4. The implied term/agreement

71.  The defendant also pleads that, upon the payment of the further deposit of HK$100,000, there arise the implied terms or agreement as pleaded at [13]-[14] of the Re-Amended Defence and Counterclaim ([14] above), which the plaintiff has breached, causing her loss and damage.

72.  The law as to the implication of a term in a contract was reviewed by the Supreme Court of the United Kingdom in Marks and Spencer plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd.[26] I adopt the summary of Mr Adrian But,[27] counsel for the plaintiff:

“1. The starting point is to determine whether there is any provision in the agreement which expressly covers the point: only if there is not can the implication of a term be appropriate, for the jurisdiction to restore efficacy not improve that which, though not optimal, is workable. As Lord Neuberger puts it, ‘it is only after the process of construing the express terms is complete that the issue of an implied term falls to be considered”: §28;

2. The court must take into account the possibility that the parties deliberately decided not to include the term sought to be implied: it is tempting but wrong [to] interpolate a term simply to reflect the merits of the situation as they appear when the issue arises: §19;

3. The question whether a term is to be implied is to be judged at the date when the contract is made: §23;

4. The test is necessity, not reasonableness; whether without the term the contract would lack commercial coherence: §21; and

5. Although the process of construction and of implying terms both involve determining the scope and meaning of the contract, the process of implication involves a rather different exercise from that of construction, and calls for strict restraint: §29.”

73.  I would also add the following from the recent judgment of the Court of Appeal (Lam VP, Cheung and Barma JJA) in Lo Yuk Sui v Fubon Bank (Hong Kong) Ltd formerly known as International Bank of Asia Ltd:[28]

“30. In respect of the proper test for implication of term, Mr Jat referred us to the Court of Final Appeal’s judgment in Kensland Realty Ltd v Whale View Investment Ltd (2001) 4 HKCFAR 381 where the requirements identified by Lord Simon in BP Refinery v Shire of Hastings (1978) 52 ALJR 20 were adopted:

‘... for a term to be implied, the following conditions (which may overlap) must be satisfied: (1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that “it goes without saying”; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract.’

31. These requirements were commented upon by Lord Neuberger in Marks & Spencer plc v BNP Paribas Securities Services, supra at [21]:

‘I would add six comments on the summary given by Lord Simon in the BP Refinery case 180 CLR 266, 283 as extended by Bingham MR in the Philips case [1995] EMLR 472 and exemplified in the APJ Priti [1987] 2 Lloyd’s Rep 37. First, in Equitable Life Assurance Society v Hyman [2002] 1 AC 408, 459, Lord Steyn rightly observed that the implication of a term was “not critically dependent on proof of an actual intention of the parties” when negotiating the contract. If one approaches the question by reference to what the parties would have agreed, one is not strictly concerned with the hypothetical answer of the actual parties, but with that of notional reasonable people in the position of the parties at the time at which they were contracting. Secondly, a term should not be implied into a detailed commercial contract merely because it appears fair or merely because one considers that the parties would have agreed it if it had been suggested to them. Those are necessary but not sufficient grounds for including a term. However, and thirdly, it is questionable whether Lord Simon’s first requirement, reasonableness and equitableness, will usually, if ever, add anything: if a term satisfies the other requirements, it is hard to think that it would not be reasonable and equitable. Fourthly, as Lord Hoffmann I think suggested in Attorney General of Belize v Belize Telecom Ltd [2009] 1 WLR 1988, paragraph 27, although Lord Simon’s requirements are otherwise cumulative, I would accept that business necessity and obviousness, his second and third requirements, can be alternatives in the sense that only one of them needs to be satisfied, although I suspect that in practice it would be a rare case where only one of those two requirements would be satisfied. Fifthly, if one approaches the issue by reference to the officious bystander, it is “vital to formulate the question to be posed by [him] with the utmost care”, to quote from Lewison, The Interpretation of Contracts 5th ed (2011), p 300, paragraph 6.09. Sixthly, necessity for business efficacy involves a value judgment. It is rightly common ground on this appeal that the test is not one of “absolute necessity”, not least because the necessity is judged by reference to business efficacy. It may well be that a more helpful way of putting Lord Simon’s second requirement is, as suggested by Lord Sumption JSC in argument, that a term can only be implied if, without the term, the contract would lack commercial or practical coherence.’”

32. We respectfully agree with these comments. In the more recent decision of the Privy Council in Nazir Ali v Petroleum Company of Trinidad and Tobago [2017] UKPC 2, Lord Hughes (with whom Lord Neuberger, Lord Clarke and Lord Carnwath agreed) summarized the law at [7]:

‘It is enough to reiterate that the process of implying a term into the contract must not become the re-writing of the contract in a way which the court believes to be reasonable, or which the court prefers to the agreement which the parties have negotiated. A term is to be implied only if it is necessary to make the contract work, and this it may be if (i) it is so obvious that it goes without saying (and the parties, although they did not, ex hypothesi, apply their minds to the point, would have rounded on the notional officious bystander to say, and with one voice, ‘Oh, of course’) and/or (ii) it is necessary to give the contract business efficacy. Usually the outcome of either approach will be the same. The concept of necessity must not be watered down. Necessity is not established by showing that the contract would be improved by the addition. The fairness or equity of a suggested implied term is an essential but not a sufficient pre-condition for inclusion. And if there is an express term in the contract which is inconsistent with the proposed implied term, the latter cannot, by definition, meet these tests, since the parties have demonstrated that it is not their agreement.’”

74.  Regarding the alleged implied term referred to at [13(a)] of the Re-Amended Defence and Counterclaim, there is no allegation that it has been breached. I therefore fail to see its relevance whatsoever. Indeed, the defendant has sent notice of these proceedings to the siblings of the plaintiff, but none of them has indicated any intention or interest in joining these proceedings. If the defendant is of the view, or is advised, that their position regarding the sale by the plaintiff as the intended administrator ought to be clarified, and should be bound by the judgment herein, it is really for her to apply to join them as parties. Further, the alleged implied term does not make sense as it was known to all that as at the date of the SPA, the plaintiff did not have letters of administration granted to him, so it would not be right to suggest that the plaintiff had impliedly agreed or warranted that he had the beneficiaries’ authority to sell. The beneficiaries were not in a position at the time to authorise anything. On the other hand, the plaintiff did not need their authority as completion would take place only upon grant of representation to him, and he would then have the authority to sell as the administrator, such authority being derived from the letters of administration. This alleged implied term is absolutely without merit and utterly devoid of relevance herein.

75.  As for the alleged implied term under [13(b)] of the Re-Amended Defence and Counterclaim, I do not see how that can be implied. The SPA does not just provide for an end result, namely the assignment of the half share of the Property by the plaintiff to the defendant, leaving the manner of how it is to be achieved open. It prescribes the exact manner in which the completion of the sale and purchase is to be achieved: i.e. if and when the plaintiff obtains letters of administration of the Estate. Completion is conditional upon that event, as per clause 35(a). Further, clause 6 of the SPA expressly states that the plaintiff is to assign as personal representative. The alleged implied term suggests that if the plaintiff can work round the condition, and can somehow procure the assignment of the half share of the Property to the defendant, albeit without any grant of letters of administration and so he is not assigning as personal representative, he has a duty to do so. This is, in my judgment, rewriting the SPA, so as to render the condition not a condition at all. This may, arguably, improve the SPA for both parties, who were presumably, before the plaintiff rescinded the same, willing and eager to complete. But this is not what an implied term is supposed to do. Nor can one say that this term is necessary to make the SPA works by catering for the situation where the condition is not or cannot be fulfilled, as the SPA itself already provides for the scenario where the condition is not or cannot be fulfilled. It can also be said that the alleged implied term, by providing for completion by alternative means without the fulfilment of the express condition in clause 35(a), is inconsistent therewith, as well as clause 6.

76.  I am therefore of the view that the term stated in [13(b)] of the Re-Amended Defence and Counterclaim cannot be implied.

77.  As for the implied agreement alleged in [14] of the Re-Amended Defence and Counterclaim, it is to be noted that what is pleaded is not an implied term in the SPA, but a separate agreement arising upon the request for, and payment of, the further deposit, with the term as suggested. This is confirmed by Mr Ian Chau, counsel for the defendant.

78.  Leaving aside the question of formalities as required by section 3 of the C&PO, a point taken by the plaintiff, I do not see how an implied agreement on such a term can be considered to have arisen. I have set out the factual circumstances above, which are simple. The plaintiff, through TWK, requested TCL, on behalf of the defendant, to pay over a sum as further deposit for a sale and purchase transaction governed by an existing agreement. The defendant has to assert that a new agreement arose because if the payment of the further deposit for the existing sale and purchase, that is most probably a variation of the SPA which itself would require some writing when there is none.

79.  Assuming in favour of the defendant that there, as she has pleaded, arose a separate agreement by conduct, in my judgment that agreement was simply that the defendant agreed to pay the plaintiff HK$100,000 as further deposit, which is to be repaid later by deducting from the balance of the purchase price payable at completion of the SPA, if and when it takes place. A further necessary term of this implied agreement is that if completion of the SPA does not take place, the plaintiff is to return the HK$100,000 along with the HK$300,000 already paid.

80.  Apart from the aforesaid, I do not see how the alleged term of the plaintiff “thenceforth” taking all reasonable steps with due diligence to procure letters of administration of the Estate to be granted to him can be implied. The basis for implying such a term is absolutely unclear. It cannot have arisen from the bare circumstances I have outlined. If there is somehow some basis to imply such a term under the principles referred to by the authorities, that term ought to have been implied in the SPA itself, with the duty to take reasonable steps etc arising from the execution of the SPA. Yet no such term has been pleaded or said to have been breached.[29] In such circumstances, even if some implied agreement is considered to have arisen by reason of the request for, and payment of, the HK$100,000, I do not see how I am to imply such an obligation on the plaintiff, thenceforth, meaning that the obligation arose there and then. Either the plaintiff was already under such an obligation already under the SPA, in which case there is no basis to imply such a term in the implied agreement thenceforth, or there is no basis to imply such a term at all in either the SPA or the implied agreement. On either case, the implied agreement cannot contain such a term.

81.  I would add that I do not think that the defendant has shown that the plaintiff had breached this implied agreement in the terms as alleged, even if it exists. I do not think that there is sufficient evidence to show what should have been the time required, counting from 7 January 2019, to obtain a grant of letters of administration of the Estate for the plaintiff, in light of the complication that there was already a grant to Tang Cheung, who had lost the original grant. Of course, TNTL, when it took over around August 2020, managed to get the Order removing Tang Cheung and appointing the plaintiff in April 2021, but that was with the benefit of what LK had done before August 2020, and the question is whether the whole process could have been completed between 7 January 2019 and 4 August 2020 with the exercise of due diligence. I do not think that there is sufficient evidence for me to find one way or another. I note that apparently Kerry thought that twelve months is a fair period, given that that is the period she puts in at clause 35(c), but NKY disagrees, and that is on an application without particular complication, and in this regard the evidence, as far as it goes, is also in conflict. Further, there is evidence that LK did apply for estate duty clearance of the Estate sometime in 2019, and it is the evidence of NKY that this process takes time and cannot be expedited.

B5. The application to amend the Amended Defence and Counterclaim

82.  By Summons dated 23 August 2022, i.e. between the second and the third days of the trial, after all witnesses have given their evidence save for the defendant, she applies for leave to amend the Amended Defence and Counterclaim. I allowed some minor amendments which were not opposed, but disallowed the substantive amendments asked for, after hearing the parties on 29 August 2022. These are my reasons.

83.  The application is said to be prompted by the testimony given by the plaintiff, that by a family arrangement made before the death of the Deceased, he was given the half share of the Property. (I pause to note here that that there was an arrangement in the plaintiff’s family affecting the half share of the Property is not, according to the evidence of TCL and NKY, something unknown to TCL before the plaintiff’s testimony: see [21(2)] and [23] above). By reason of the family arrangement and the transfers of other properties to the plaintiff’s siblings pursuant thereto, the defendant now seeks to allege, by way of the proposed substantive amendments, that the plaintiff was and is the sole beneficial owner of the half share of the Property, and none of the siblings is entitled to apply for a grant of letters of administration of the Estate since they have no beneficial interest therein. In the premises, the SPA took effect as a sale of the half share of the Property by the plaintiff as the sole beneficial or absolute owner.

84.  This, in my judgment, is another attempt to rewrite the SPA which cannot be allowed:

(1) There is no evidence on the factual matters now sought to be relied upon by the defendant, for example, that the siblings had been transferred some assets of the Deceased as per the family arrangement during the Deceased’s lifetime, so as to support the defendant’s arguments on part performance and proprietary estoppel. There is no evidence, and no basis to assume or infer, that they were so transferred, because if they were so transferred, then why is it that the plaintiff was not transferred the half share of the Property? Further, the plaintiff's evidence is that the various properties were to be given to the children of the Deceased only upon his death ([29(3)] above): there is no basis to infer that there were transfers during the Deceased's lifetime.

(2) Even if the plaintiff was indeed, at the time of the making of the SPA, already the sole beneficial owner of the half share, and could have sold the half share in that capacity even without the grant of letters of administration to him, the fact remains that he did not do so. The SPA specifically provides, based indeed on the instructions given by TCL himself, for the capacity in which the plaintiff is selling, the condition to be fulfilled before completion is to take place (i.e. the plaintiff obtaining the letters of administration), and a right to rescind by the plaintiff if the condition is not fulfilled within twelve months. The fact that the parties, had they realised the true position (assuming the true position was and is that the plaintiff was by then the sole beneficial owner already), they could (and even would) have drafted and structured their bargain differently is no basis to ignore the actual bargain, and proceed on the bargain that may have been (but is not). This is not a case for rectification so as to reflect what the parties had actually agreed, as they did not agree on the basis of the plaintiff being an absolute beneficial owner at all, but is an attempt to ask the Court to proceed on the basis of what they might have agreed.

85.  The proposed substantive amendments are unarguable and leave to amend in relation to it is therefore declined.

86.  For the same reasons, all the submissions in the closing of the defendant on the consequences of the family arrangement being that the plaintiff was as at the date of the SPA the sole beneficial owner of the half share of the Property cannot in any event assist the defendant regarding the nature and effect of the SPA and the operation of clause 35(c). I shall not deal with them. I should point out that I do not understand why those submissions are made in the closing submissions of the defendant even though I have already dismissed the application to amend the Amended Defence and Counterclaim in that regard.

C. DISPOSITION

87.  For the above reasons, the plaintiff succeeds in his action, and the counterclaim is dismissed. I have dealt with all the issues on the Agreed List of Issues which I need to. Some issues do not arise as a result of my findings above, and I do not propose to deal with them.

88.  I make the following orders:

(1) There be a declaration that the plaintiff was entitled to, and did by letter dated 4 August 2020, rescind the Agreement for Sale and Purchase dated 3 November 2017 between the plaintiff and the defendant.

(2) The plaintiff do return the sum of HK$400,000 to the defendant within 28 days from the date of this Judgment, together with interest thereon at the rate of 1% above the best lending rate quoted by the Hongkong and Shanghai Banking Corporation from time to time, from 8 August 2020 to the date of this Judgment (both dates inclusive), and thereafter at the judgment rate from time to time, until full payment.

(3) The counterclaim is dismissed.

(4) Costs of the action and of the counterclaim, including all reserved costs (if any), be paid by the defendant to the plaintiff, to be taxed if not agreed. For the avoidance of doubt, there is no certificate for two counsel. The foregoing is on a nisi basis.

89.  The plaintiff also asks for an order that the parties do execute a cancellation agreement. I am not sure if a cancellation agreement is necessary given the declaration I make which is registrable at the Land Registry, but if the plaintiff deems it necessary for a cancellation agreement to be executed for whatever reason, I am willing to consider it if written submissions therefor are filed and served within 14 days of the date of this Judgment (and if so the defendant is to respond to the submissions (if so desired) by filing and serving written submissions within 14 days hereafter, and the plaintiff is to reply (if so desired) by filing and serving written submissions within 7 days hereafter).

90.  The plaintiff also asks for an order that the SPA be withdrawn from the register kept at the Land Registry. I am not sure if I have the jurisdiction to make such an order, even if the SPA is not in fact registered but is pending registration. In any event, I do not think that this is an appropriate order to be made. The effect of having the SPA on the register is to be undone by the declaration I make and, if necessary and appropriate, by a cancellation agreement, and not by removal.

91.  I thank counsel for their assistance.