MARKLAND GLOBAL INVESTMENT LTD v. PANG LAM KWAI CHARLIE

HCA 2713/2016

[2019] HKCFI 214

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2713 OF 2016

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J U D G M E N T

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1.  This is a claim for the recovery of $3.1 million paid to the defendant as part of a vacant service fee which is alleged to be returnable by the defendant pursuant to the contract terms under which they were received by the defendant or alternatively on the restitutionary ground of unjust enrichment.  

2.  The defendant has not appeared to participate in the trial.  Since 1 August 2017, he has been representing himself and he failed to attend the last two interlocutory hearings in these proceedings held respectively on 26 July 2018 and 24 October 2018.  He was informed by letter by the solicitors for the plaintiff of the date set for the trial of the action.  He was also given notice of hearing by the court.  This letter and formal notice from the court was sent to the address which the court had been given for service of documents on the defendant.

3.  The court has before it an affirmation from a trainee solicitor employed by the plaintiff’s solicitors in which it is stated that on 3 January 2019, the deponent served the defendant with copies of bundles of pleadings, orders and a witness statement and a bundle of documents, both lodged on 3 January 2019 with a covering letter dated 3 January 2019, advising the defendant that the trial of the action would be held on 16 January 2019 at 10 am. The documents and covering letter were sent in a sealed envelope duly prepaid and properly addressed to the defendant by ordinary post to No. 65C San Fung Road, Ground Floor, Sheung Shui, New Territories, Hong Kong, being the usual and last known address of the defendant.

4.  It turns out that this address is a shop for use by an estate agency.  The deponent produces a photograph taken by a clerk from the firm of solicitors on 2 January 2019 showing the shop with a signboard installed below a canopy on the shopfront containing a Chinese name, the transliteration of which is Chung Shing.  The letter was returned to the solicitors’ office’s as dead post on 7 January 2019 and marked “no such person” on the envelope. 

5.  On 8 January 2019, the deponent served the defendant with copies of the opening submissions of the plaintiff, the chronology, a dramatis personae, payment records and a list of authorities that had all been lodged on 7 January 2019 and a copy of the tidied-up version of translated documents in respect of a number of documents which were identified.

6.  On 8 January 2019, the deponent sent to the defendant in a sealed envelope duly pre-paid insertions to be put into the bundles with a covering letter dated 8 January 2019 reminding the defendant that the trial hearing would be held on 16 January 2019 at 10 am.

7.  Then on Monday, 14 January 2019, the deponent served the defendant with copies of a revised bundle index and a further document which had been lodged that day. Also sent to the defendant on 14 January 2019 was a covering letter again reminding the defendant of the trial that was to be held on 16 January 2019 at 10 am.

8.  It is clear, in my judgment, that the defendant’s absence was knowingly deliberate or, at the very least, the result of being recklessly indifferent to when the trial was to take place.  I accordingly gave leave to the plaintiff to proceed with its claim in the absence of the defendant.

9.  The plaintiff is a limited company incorporated in Hong Kong.  Its directors and shareholders are Mr Liao Sung Sung and Mr Ho Ho.  The evidence in support of the claim was given by Mr Liao who went into the witness-box and was duly sworn.  I ruled that his witness statement could stand as his evidence-in-chief and gave leave to the plaintiff’s counsel to ask a number of supplementary questions designed to clarify various matters. 

10.  I accept Mr Liao’s evidence.  In my judgment it was truthful and reliable. He testified that he and Mr Ho Ho became aware in early September 2015 that the owner of several separate lots of land in Tsuen Wan in the New Territories was looking for a purchaser.  Mr Liao and Mr Ho Ho decided to negotiate for the purchase of these lots by the plaintiff on an “as is” and “where is” basis and were approached by the defendant, Mr Pang, who offered to assist in arranging the purchase and ensuring the various illegal occupiers of three lots - 792RP, 769 and 791 (“the occupiers”) - moved away, thereby giving the plaintiff vacant possession.

11.  In contemplation that what would be agreed orally would be reduced to a written agreement, the defendant and Mr Liao, acting on behalf of the plaintiff, orally agreed that the defendant would be paid:

   (i)   a vacant possession service fee of $4 million payable by a first instalment of $800,000 on the signing of the purchase contract and a second instalment of $3.2 million within five days of delivery of vacant possession of the three lots;

   (ii)   an introductory commission of HK$2 million for introducing the plaintiff to the opportunity of purchasing the lots;

   (iii)   a bonus of HK$3 million payable after delivery of vacant possession of the three lots upon confirmation by the plaintiff’s surveyor that there was no structural encroachment on the lots and no iron fences along the boundary.

12.  It was also agreed that:

   (a)   The plaintiff would issue two cheques, one for HK$600,000 and the other for HK$800,000, and hand them to Messrs Choi, Leung & Associates, the law firm designated by the defendant, for safe custody.  The cheque for HK$600,000 was to stand as deposit for the purchase of the property, and the other cheque for $800,000 was to be payable when the written agreement between the parties was signed, this to be part payment of the vacant possession service fee of HK$4 million.

   (b)   The defendant should sign removal agreements with all the occupiers or tenants of the properties within one month upon the signing of the written agreement.

   (c)   The cheque for HK$600,000 should be released by Messrs Choi, Leung & Associates to the vendor upon verification of the removal agreements. 

   (d)   In the event that the defendant failed to procure removal agreements with all occupiers or tenants within one month upon the signing of the written agreement, the defendant was to return the HK$800,000 vacant possession service fee, together with interest thereon at the rate of 1.5 per cent per month and the HK$600,000 deposit paid for the purchase of the properties.

   (e)   The defendant undertook to arrange delivery of vacant possession of the lots to the plaintiff within three months of receipt of the HK$800,000, whereupon the plaintiff would pay the balance of the vacant possession service fee of $3.2 million to the defendant within five days.

   (f)   In the event that the defendant failed to deliver vacant possession within the prescribed time limit, the defendant had to return the HK$800,000 vacant possession service fee together with interest thereon at the rate of 1.5 per cent per month and also the sum of $600,000 paid by the plaintiff to the owner as the deposit.

   (f)   The purchase transaction must proceed to completion on the signing of the vacant possession agreements by the illegal occupiers and the delivery of vacant possession.

   (g)   In the event that the defendant failed to deliver up vacant possession of the properties to the plaintiff within three months after receipt of the HK$800,000, the plaintiff should have the right to continue to purchase the property but it would not be liable to pay to the defendant the balance of the vacant possession service fee in the sum of HK$3.2 million.

13.  It was agreed that the terms in respect of the $2 million commission and the HK$3 million bonus were not to be incorporated into the contemplated written agreement because the defendant did not have a property agent’s licence.

14.  After the oral agreement had been reached, Mr Liao did not meet the defendant again prior to the signing of the contemplated written agreement at the office of Messrs Choi, Leung & Associates on 15 October 2015.  It was the defendant who was responsible for informing Choi, Leung & Associates of the contents of what had been orally agreed so that it could be reduced to a written agreement. 

15.  The agreement signed on 15 October 2015 was written in Chinese.  A copy was exhibited to Mr Liao’s witness statement.  It captured what had been agreed orally.  It contemplates performance in two phases.  Under phase 1, the plaintiff is to deposit with Choi, Leung & Associates two cheques, one for HK$600,000 and one for $800,000.  The cheque for $800,000 is to be released to the defendant upon his signing the agreement, and the defendant personally guarantees that all existing occupiers and tenants of the lots will sign a vacant possession agreement with the plaintiff within one month.  The cheque for $600,000 is to be released as a deposit to the vendor upon verification that there were no issues with vacant possession agreements signed by the illegal occupiers.  If such agreements have not been signed within one month, the sum of $800,000 is to be returned to the plaintiff by the defendant together with interest thereon at 1.5 per cent and the transaction will no longer proceed.

16.  Phase 2 kicks in if vacant possession agreements are concluded in accordance with the Phase 1 terms.  Under this part of the agreement, the defendant personally warrants that delivery of vacant possession of the lots would proceed smoothly within three months after completion of Phase 1, whereupon the plaintiff must pay $3.2 million to the defendant within five working days after the defendant has completed delivery of vacant possession.  In the event that vacant possession is not delivered within the prescribed time limit, the defendant must pay the plaintiff the sum of $800,000 together with interest thereon at 1.5 per cent and the sum of $600,000.  After delivery of vacant possession, the plaintiff and the vendor must complete the sale and purchase. In the event that the occupiers fail to provide vacant possession on the day set in the agreements to give possession, the plaintiff shall have the right to continue with the purchase of the lots but may retain the sum of $3.2 million.   

17.  Not that long after the signing of the agreement on 15 October 2015, the defendant told Mr Liao that he had already used up the $800,000 and requested a further payment towards his vacant possession service fee to enable him to pay the occupiers to achieve vacant possession.  The plaintiff agreed to this request, and a supplementary written agreement was signed on 19 November 2015 that provided that:

   (a)   The plaintiff would give a further sum of $800,000 to Messrs Choi, Leung & Associates for safe custody as part payment of the vacant possession service fee in the sum of $4 million payable to the defendant and was especially for the purpose of providing the defendant with money to pay the occupiers and tenants of the properties to obtain vacant possession.

   (b)   The time limit for the occupiers/tenants to deliver vacant possession should be extended by three months, ie to 19 February 2016 from the date of this agreement.   

18.  Pursuant to this variation agreement, the plaintiff deposited with Messrs Choi, Leung & Associates a further sum of $800,000, of which $450,000 was released to the defendant as part of the vacant possession service fee. 

19.  Thereafter, on 15 December 2016, the plaintiff signed a sale and purchase agreement and a deed of assignment with the vendor owner and completed the transaction by paying the balance of 5.4 million for the purchase of the property.  The plaintiff then used the remaining $350,000 held by Messrs Choi, Leung & Associates for payment of stamp duty on the deed of assignment, and the plaintiff paid a further vacant possession service fee of $530,000 to the defendant on 21 December 2015.

20.  On 21 December 2015, the parties signed a second supplementary agreement which provided that:

   (a)   the defendant admits that he had acknowledged receipt of a total sum of $1.78 million of vacant possession service fee at the time of signing this agreement; and

   (b)   all the occupiers shall move out of the properties by 21 June 2016, and non-compliance with this time period will be treated as a breach of the agreement between the defendant and the plaintiff by the defendant and the plaintiff shall not be required to pay the balance of the vacant possession service fee and the bonus of $3 million to the defendant.

21.  On 22 December 2015, pursuant to the parties’ original oral agreement, the plaintiff paid $2 million to the defendant as the agreed commission fee for introducing the plaintiff to the opportunity of purchasing the properties.

22.  Subsequently, at the defendant’s request, the plaintiff made to the defendant the following payments towards the vacant possession service fee:

   (a)   on 29 January 2016, the sum of $600,000 paid to Mr Siu Yuk-leung at the defendant’s request;

   (b)   on 15 March 2016, the sum of $200,000 to Mr Siu Yuk‑leung at the request of the defendant;

   (c)   on 12 May 2016, the sum of $200,000 to Mr Leung Wai-man at the request of the defendant;

   (d)   on 13 June 2016, the sum of $100,000 to the defendant; and

   (e)   on 16 June 2016, the plaintiff paid the sum of $220,000 by way of a cheque on which the payee was simply identified by the surname “Ng”. 

23.  In respect of this last cheque for $220,000, the defendant told Mr Liao that he did not know the full name of the occupier; he only knew the surname, and he therefore asked Mr Liao to put down the surname Ng as the payee of the cheque and he would complete the full name of the payee when he subsequently discovered what the full name was. 

24.  Mr Liao did what he was asked to do but subsequently discovered that the defendant put down his assistant’s name, Ng Shu-ching on the cheque instead of the name of the occupier.  It is clear that the cheque was deposited into Ng Shu-ching’s bank account.  Mr Liao regarded this conduct by the defendant to be dishonest to the point that he (Mr Liao) could no longer trust him.  Mr Liao therefore decided not to make any further payment to the defendant before delivery of vacant possession of the properties because it was uncertain whether the defendant would use the plaintiff’s further payment to arrange that the occupiers would deliver vacant possession of the lots.

25.  On 6 July 2016, the plaintiff received a letter from the defendant stating that if he was not paid the further sum of $750,000 that he had requested in May 2016, he would be unable to deliver vacant possession of the lots by 21 June 2016.  The plaintiff replied through its solicitors that no such request had been received and stated that the plaintiff was under no obligation to make any further payment of the vacant possession service fee.  Nonetheless, the Plaintiff would extend the deadline for vacant possession to 1 August 2016 and deposit a cheque for $900,000 with its solicitors to be released to the defendant within five working days after vacant possession was achieved within this deadline.

26.  This letter was met with a further request from the defendant for $430,000 which was refused by the plaintiff and vacant possession was not achieved by 1 August 2016 which remains the position to this day.

27.  In his defence, the defendant pleads that the parties orally agreed that the plaintiff would pay a vacant possession service charge of $5 million and would advance up to $4 million by way of that fee, and if the cost of achieving vacant possession exceeded $4 million, this would be deducted from the $5 million fee. The defendant further pleads that when attending to sign the agreement on 15 October 2015 he saw that the written agreement did not accord with the oral agreement but he signed it on the assurance from Mr Liao that Mr Liao would abide by the oral agreement. The defendant also pleads by way of denial that he has received any of the $3.1 million Mr Liao has testified was paid to the defendant. 

28.  The defendant did not appear to give evidence to support these allegations and I accept the evidence of Mr Liao.  I have been shown all the documentation evidencing eight payments to the defendant made on behalf of the plaintiff totalling $3.1 million and I have no hesitation in finding that these payments were indeed made to the defendant pursuant to the written agreement signed on 15 October 2015 as subsequently varied.

29.  By a letter dated 26 July 2016, the plaintiff accepted the defendant’s repudiation of the agreement. 

30.  The plaintiff’s claim is put both in contract and restitution.  In my judgment, the plaintiff has a right in contract to recover the $3.1 million which represented advance payments of the vacant possession service fee made within the framework of the first written agreement under which the plaintiff was to be under no obligation to pay $3.2 million of the service fee and was entitled to recover the $800,000 and the $600,000 if vacant possession was not achieved by the defendant within the stipulated deadline. 

31.  In short, the defendant warranted that he would achieve vacant possession within the stipulated time and his entitlement to retain advance payment of the service fee was conditional on compliance with that warranty.  In the alternative, the contract between the parties was akin to an entire contract, the defendant being obliged to deliver complete performance before becoming entitled to or to retain sums paid by way of vacant possession service fee. The defendant has failed so to deliver vacant possession and accordingly there has been a total failure of consideration entitling the plaintiff to recover the sums paid as money had been received, or on the basis that the defendant would otherwise be unjustly enriched. 

32.  The defendant, as already recorded, pleads that the agreed service fee was in the sum of $5 million and denies that he received any part of the $3.1 million.  He counterclaims for $5 million.

33.  In the result, I give judgment that the Defendant do pay the Plaintiff the sum of HK$3,100,000 together with interest thereon at the judgment rate from 26 July 2016 to the date of final payment.I also dismiss the defendant’s counterclaim. 

34.  In addition, I award the plaintiff its costs of the action, to be taxed if not agreed, on the standard basis, and order the defendant to make an interim payment on account of costs in the sum of $296,000 within14 days.