SHAH MIHIR RAMESHCHANDRA v. WARPICON ENTERPRISES LTD

DCCJ 2704/2018

[2021] HKDC 680

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 2704 OF 2018

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BETWEEN

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JUDGMENT

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1.  This case concerns a dispute over the sale of a unit in a small development project in which the owner of an entire floor of an existing industrial building partitioned the floor into a number of small units and sold the same.

2.  The plaintiff, acting in person, now claims for either the replacement of the unit he purchased with another unit of similar size and price in the same development project or for cancellation of the sale and refund.

3.  The plaintiff and his friend Ms Anamika Chhawal (“Chhawal”) gave evidence for the plaintiff’s case and Mr Danny Yuen (“Yuen”) gave evidence for the defendant’s.  The defendant was represented by Ms Prisca Cheung of counsel.

The backgrounds and events

4.  The following background, events and matters are either common ground or not seriously disputed, unless otherwise stated.

5.  The defendant was the registered owner entitling to the exclusive possession of the entire 4^th Floor of an industrial building on Man Yue Street in Hung Hom known as Kaiser Estate 2^nd Phase.  By a Deed Poll dated 8 November 2017, it partitioned the floor into 38 small units with certain common areas with an intention to sell them.  In due course, these units were marketed together as the “De Cosmo” project.

6.  The plaintiff became a permanent resident of Hong Kong in February 2018.  This was the first time he purchased real property in Hong Kong. Chhawal was his school friend who, according to her, was an investment consultant in Hong Kong dealing in international real estate.

7.  The plaintiff and Chhawal separately learned of the De Cosmo project. They talked about it on 25 February 2018.  A visit to De Cosmo was arranged by Chhawal.  She contacted one Keith Lam (“Lam”), an estate agent of Midland Realty.  Chhawal, the plaintiff and Lam then met up on 26 February 2018 at about 10:45am at the sale office on the 4^th Floor of Kaiser Estate 2^nd Phase.

8.  It is common ground that the physical partitioning of the units and the relating construction works in De Cosmo were not finished at the time, such that a substantial part of the 4^th Floor was enclosed and cordoned off by wooden planks.

9.  There, Lam handed to the plaintiff hardcopies of a brochure in Chinese (“the Sale Brochure”), a layout plan (“the AP Plan”) and, a promotion brochure (“the Promotion Brochure”)(together, “the Sale Materials”).  I need to describe the Sale Materials in more detail:-

(a) The Sale Brochure[1] was a black-and-white one-page flyer in A4 size.  Its upper half showed a table with 5 columns respectively listing (a) the unit number of the last 10 units available for sale, (b) their discounted price (each unit discounted by HK$100,000), (c) their original price, (d) the “Saleable area”, and (e) “Gross area”.  The lower half depicted a plan which was essentially a reduced version of the AP Plan without most of the original descriptions, but added thereon the number in large fonts identifying each of the available units or a cross in bold type over those units that were unavailable for sale (“the Sale Brochure Plan”).

(b) The AP Plan[2] was a coloured plan.  It was in fact the exact plan attached to the said Deed Poll.  It was a layout plan prepared by an Authorized Person.  His signature could be seen appended at the lower right corner.  It was a 1:150 scale plan containing measurements, which were stated therein to be in millimeters.  The 38 units were coloured in pink while the corridors and lavatories were coloured in green.

(c) The Promotion Brochure, according to the plaintiff, was shown to him, but he was not given a copy to keep.  A copy was only proffered by the plaintiff during final submissions.  He said he could only get hold of a copy the day before.  Ms Cheung very fairly did not object to its late discovery or admissibility and I have allowed it to be admitted.  It was a 2-page promotional brochure in colours apparently professionally prepared by a design studio[3]. Among others, it contained two short passages in Chinese introducing the project and its environment and location.  It also contained 4 small pictures, in the form of an artist’s impressions, showing respectively the lift lobby, a corridor inside De Cosmo and the interiors of a fully furnished unit.  There was also a small layout plan of De Cosmo in colours, the general layout of which was very similar to the AP Plan, and in which certain desks and chairs were drawn inside some of the units, giving an impression of how the furniture could be arranged inside those units (“the Promotion Brochure Plan”).

10.  It is the plaintiff’s case and evidence that during the visit, the plaintiff and Chhawal were all along served by Lam only and that there was no conversation between them and any representative or employee of the defendant. After consideration, the plaintiff favoured the unit then known as “D36”.  The plaintiff and Chhawal then left.

11.  At about 5:00 pm the same day, the plaintiff, his wife and one other friend met up with Chhawal and Lam at the sale office again.  Lam went over the project and some details again so that the plaintiff’s wife and the friend would get to know them as well.  The plaintiff and the defendant then signed a provisional agreement for the sale and purchase of the unit then known as “D36” (“the PA”) and the plaintiff left with Lam his cheque for the payment of the initial deposit of HK$60,000.  Attached to and forming part of the PA was a scale plan on which D36 was coloured pink (“the PA Plan”) [4]. I particularly note that the parties initialled at the lower right hand corner of the PA Plan.

12.  Regarding this late afternoon occasion, the plaintiff also has not mentioned about any conversation between him and the representative(s) of the defendant.

13.  The subject unit was identified as “D36” in the Sale Brochure and the PA.  It was later known and identified as “K36”, but nothing at all turns on it.  From now on, I will refer to the subject unit as “K36”.

14.  The plaintiff claimed, which was seriously disputed by the defendant, that at no time on 26 February 2018 had he been made aware of the existence of a pillar inside K36 by Lam, by the Sale Materials, or by other means howsoever.

15.  On 8 March 2018, the plaintiff signed the formal sale and purchase agreement (“the S&P”) for K36 at the office of Messrs Lau, Chan & Ko (“LCK”), the solicitors acting for him in the purchase. Attached to and forming part of the S&P was a layout plan (“the S&P Plan”) which was in fact the AP Plan.

16.  I pause to note, importantly and as a matter much relied on by the defendant, that invariably in all the aforementioned plans, namely (a) the Sale Brochure Plan, (b) the AP Plan, (c) the Promotion Brochure Plan, (d) the PA Plan, and (e) the S&P Plan, there were depicted 17 black solid rectangles, arranged in 3 rows equidistant from each other, and 12 of the 17 of them, in 2 rows, 6 in a row, and one of each was depicted respectively inside unit K1, K3, K6, K9, K12, the female lavatory, the lift lobby, K27, K36, K25, the male lavatory and the stairwell, while the remaining 5 of them were depicted to be situated along and attached to the external wall on the lower side of the plan.

17.  On 24 May 2018, which was one day before the completion date, the plaintiff and his friend visited De Cosmo and “understood things were not as we were explained and showed at the time of purchase”[5], that “There was this huge pillar occupying the unit space owing to which the unit looked smaller compared to what we expected”[6].

18.  A number of emails were then exchanged between Chhawal, on behalf of the plaintiff, and LCK on 24 and 25 May 2018.  On 25 May 2018, several rounds of correspondence were also exchanged between LCK and Messrs Kok & Ha (“KH”), solicitors for the defendant in the sale, in which LCK related the plaintiff’s complaint over the pillar, requested a replacement or cancellation and refund, and later also a postponement of the completion date, which were all refused by KH.

19.  The upshot was that the plaintiff completed the sale on 25 May 2018.

20.  On 20 June 2018, the plaintiff commenced this action.

The plaintiff’s case

21.  The Statement of Claim consists of 9 pages.  The paragraphs in it are not numbered.  In it, the plaintiff complained generally that this was a “misinformed sales [sic] based on the gross and saleable area sheet” and that there was “misguided sales material”, there were “mistakes of architectural design and saleable area discrepancy”.

22.  The actual matters complained of are:-

(a) That he had not been made aware that there would be a pillar inside K36.

(b) “[T]hat the saleable area as per Hong Kong real estate definition is the area that is enclosed within the walls”[7], and that according to his measurements (a plan and calculations were set out at p.8 of the Statement of Claim), the total net area not including the pillar was 71 square feet and including the pillar was 78.7 square feet, while the Sale Materials said saleable area was 85 square feet.  There was thus a “significant different [sic] with a deviation of around 16.5% between the said sale brochures and the actual measurement”[8].

23.  I note and would mention that at page 8 of the Statement of Claim, the plaintiff also said that he had measured other units in De Cosmo.  He then listed the “actual” areas of these units and their “saleable area” as stated in the Sale Brochure and said that “By far, D36/K36 as a unit has the largest disparity compared to others” and said that “If I knew the above facts and figure [sic], I would have selected unit D30/K30 and [not ?] D36/K36”.  While giving evidence, the plaintiff tried to make a similar complaint.  I take it that he was just airing his disappointment and was not making a formal claim from these matters.  Clearly, the fact that he feels (or indeed actually has) lost out because it occurs to him now, with hindsight, that other units were a better buy than that of K36 does not, of itself, discloses a cause of action known to law.

24.  I also need to mention here that on the first day of trial, the plaintiff confirmed that it was his case that the defendant would be liable for the words and acts of Lam, the estate agent of Midland Realty.  Ms Cheung objected to that as such was never part of the plaintiff’s case pleaded in the Statement of Claim, in which it was never alleged that Lam was the defendant’s agent in law or mentioned that the defendant now sought to make the defendant, as principal of Lam, liable for Lam’s words or actions; and therefore this action has never proceeded, and the defence case was never prepared, on that basis.  Such lack of pleading was confirmed by the plaintiff.  I ruled in the favour of the defendant’s objection with oral reasons given then.

The defendant’s case

25.  The defence case is this.

26.  Firstly, in the Sale Brochure, the AP Plan, the PA Plan, and the S&P Plan the existence of pillars generally was disclosed and indicated as black solid rectangles thereon and the existence of a pillar inside K36 was also so disclosed and indicated by a black solid rectangle depicted inside K36.

27.  Secondly, the “saleable area” of K36 as stated in the Sale Materials was measured according to the Code of Measuring Practice of the Hong Kong Institute of Surveyors (1^st edition March 1999) (“the Code”), which the defendant said was applicable.  Measured accordingly, the saleable area of K36 was 85.9 square feet.  Therefore, the saleable area of K36 stated in the Sales Materials (85 square feet) was not only correct, but was 0.9 square foot less than the actual saleable area.  In other words, there was no material falsity in the Sale Materials.

28.  There was thus no misrepresentation.

29.  Thirdly, and as a fallback, the defendant’s case is that no warranty has been given on the physical state and condition of K36 and any representation made, even if made, would have been withdrawn or deemed to be withdrawn, relying on the following clauses in the S&P, namely

a. Clause 14:-

“… No warranty is given by the Vendor on any of the following matters, namely :-

(a) The physical state and condition, quality or fitness of the fittings and finishes or the installations and appliances (if any) incorporated in the Property or in the building of which the property form part (“the said Building”); and/or

(b) The physical state and condition of the property or of the said Building.”

b. Clause 20:-

“This Agreement sets out the full agreement between the parties hereto and supersedes any other representations, commitments, agreements or understandings, written or verbal, that the parties hereto may have had with respect to the subject matter of this Agreement. Without prejudice to the generality of the foregoing, no warranties or representations express or implied are or have been made or given by the Vendor or anybody on his behalf relating to the Property … and if any warranty or representation express or implied has been made the same is withdrawn or deemed to have been withdrawn immediately before the parties entered into this Agreement.”

30.  Fourthly, not only is the plaintiff not entitled to any relief generally, specifically, the plaintiff is not entitled to rescission as he had affirmed the PA and S&P by completing the sale on 25 May 2018 after he had already known the matters he said would entitle him to the relief of rescission.

General principles on misrepresentation

31.  The core general principles have been conveniently summarized by DHCJ Alexander Stock SC in Joytex Development Limited v Super Homes Ltd[9] thus:-

“(1) Generally, an actionable misrepresentation requires a false statement of past or present fact, as distinct from a statement of opinion or intention; though a statement of opinion/intention or as to the future may entail an implied statement of fact.

(2) Where there is a dispute as to the meaning conveyed, the court interprets the relevant words or conduct. The approach is objective, viewing the communication from the perspective of a reasonable person in the position of the representee. The test is whether: (a) the words or conduct in fact led the representee to believe the alleged false fact; and (b) it was reasonable for the representee to believe it from the words or conduct as he perceived them. In applying the test, the characteristics of the representee, including level of sophistication, are taken into account.

(3) Where an implied representation is alleged, the question is what a reasonable person would have inferred was being impliedly represented by the representor’s words and conduct in their context.

(4) The statement must have the character of one upon which the representee was intended and entitled to rely.

(5) The representee must have in fact relied on the statement; though this can sometimes be inferred.  The representation need not be the only or main cause of the decision to contract.  It is generally sufficient that it be a cause (in other words, a material inducement).”

32.  Moreover,

“The general rule is that mere non-disclosure does not constitute misrepresentation, for there is, in general, no duty on the parties to a contract to disclose material facts to each other … . But there are exceptions to the general … First, there are many statutory exceptions. Secondly, there are exceptions in common law where in particular type of contract there has been held to be a duty of disclosure (often categorised as contract uberrimae fidei). These include cases where there is a fiduciary relationship between the parties and where the relationship between the parties is one of trust and confidence. There may also be a duty to disclose where failure to disclose some fact distorts a positive representation …” (§7-018 Chitty on Contracts 33^rd Ed. Vol. 1)

Discussion – the plaintiff’s complaint that he was not made aware of the existence of a pillar inside K36

33.  I find no substance at all in the plaintiff’s such complaint.

34.  I have set out and described in detail in paragraph 16 above that each and every one of the plans involved in advertising, promoting and executing this sale, namely the 3 plans in the Sale Materials, and the 2 plans respectively attached to the PA and the S&P, all depicted very conspicuously these 17 black solid rectangles equidistant between them spreading in a rectangular pattern covering the entire 4^th Floor.

35.  There is no question that the plaintiff had received and reviewed the Sale Materials before he signed the PA.  He confirmed in evidence that the PA Plan was attached to the PA before he signed it.  Indeed and as have mentioned, he initialled on the PA Plan.

36.  The plaintiff explained in evidence that at the time he thought these black solid rectangles represented furniture in the form of a cabinet (I do not accept that at all and my reasons are given below).  However, as set out in paragraph 31(2) above, the approach the court adopts is an objective one, namely, the communication would be viewed from the perspective of a reasonable person in the position of the plaintiff.  Adopting this approach and so viewed, and looking at these 5 plans not with hindsight or examining them meticulously, but in the degree of interest and care and in the manner a reasonable potential purchaser of De Cosmo reasonably would, I have no doubt in my mind, and hold, that such reasonable person in the position of the plaintiff – namely a prospective purchaser of a unit in De Cosmo – would have understood that (a) these black solid rectangles represented pillars, and (b) importantly, that the black solid rectangle inside K36 represented the fact that there would be a pillar inside K36.

37.  Having so held, I also find that there is no substance, and I reject it as a mere disingenuous excuse, the plaintiff’s point that he did (or could) not understand from the said plans that there were pillars on the 4^th Floor, and one inside K36, because the word “pillar” was not expressly printed on the plans.

38.  As said, I do not accept his evidence that he understood these black solid rectangles to represent cabinets.  He claimed he so understood because he saw furniture depicted in the small pictures of the Promotion Brochure depicting an artist impression of the fully furnished interior of a unit.  I find his such evidence completely defies belief.  If a reasonable potential purchaser suspected those black solid rectangles represented cabinets, he had to wonder why such were depicted intermittently in some units, and not in others, and why in a regular pattern across the entire floor, and why was a cabinet represented and placed respectively in the lift lobby, in the lavatories, in the stairwell and even 5 of them equally spaced along an external wall!  These simple queries would lead any reasonable purchaser to seriously wonder, if not conclude, that they did not represent cabinets.  Yet, it is the plaintiff’s own evidence that he had not even asked about them; but instead, according to him, he was convinced by the 2 small pictures, which clearly were an artist’s impression as De Cosmo was still under construction, that the black solid rectangle depicted in K36 in the plans was a cabinet.  His such evidence clearly was a very disingenuous lie.

39.  I also have regard to what Chhawal said when she was pressed hard in cross-examination about what she understood those black solid rectangles depicted on the plans represented, she said more than once that they had not paid attention to them at the time.

40.  I therefore find in favour of the defendant’s case that the existence of pillars generally and particularly that there was a pillar inside K36 had, by the said plans, been disclosed to the plaintiff in the Sales Materials and prior to the plaintiff signing the PA and the S&P.  I therefore hold that there was no misrepresentation on the part of the defendant that there would not be a pillar inside K36.

41.  My above finding is sufficient to dispose of this aspect of the plaintiff’s complaint.  However, for completeness I will deal briefly with the plaintiff’s complaint that he was not made aware of the existence of the pillar inside K36 because Lam did not expressly mention that to him, because he could not see any pillar in the “show units” in the sale office, because he could not see any pillar when Lam pointed to where the location of K36 would be when they were in De Cosmo, and because he did not see any pillar depicted in the pictures in the Promotion Brochure.

42.  Firstly, I have ruled that it is not part of the plaintiff’s pleaded case that the defendant is claimed to be responsible for the words or acts of Lam.  Therefore, the defendant is not responsible for Lam’s failure to advise him of the existence of the pillar, if that were in fact the case.  Secondly, it was made clear in the evidence, and I find, that the location of K36 was in fact cordoned off by wooden planks and Lam only pointed to the general direction where K36 would be, as the view to the location was blocked by the planks.  Thus, when the plaintiff said that he could not see any pillar when Lam pointed out where K36 would be, it was a misleading half-truth in that he should be seeing the wooden planks blocking the view to where K36 would be (therefore no pillars were seen) when Lam pointed at that direction.  Thirdly, the plaintiff accepted in evidence that the rooms erected in the sale office might had been so renovated that cabinets were erected next to the pillar such that the pillar would not be as visible and the space was put to better use. Fourthly, I do not find that the plaintiff’s claim that “he himself did not see any pillar” (whether in the sale office, the “show units” or in the pictures in the Promotion Brochure), by itself and even if true, but without anyone making any statement of fact that there would be no pillar in any of the units or in K36, could constitute a representation on the part of the defendant to that effect.

43.  I would also add a note that I find that it was clearly stated on the face of the AP Plan that it was a 1:150 scale plan, and find that the black solid rectangle inside K36 as depicted therein was proportional size-wise to the actual pillar inside K36.

Discussion – misrepresentation over the area of K36

44.  As have set out in paragraph 22(b) above, the basis of this aspect of the plaintiff’s claim is, and for ease of reference I quote again, “that the saleable area as per Hong Kong real estate definition is the area that is enclosed within the walls”^[10]. On the basis of this allegation and measuring only the net floor area inside K36 and excluding the pillar, the plaintiff arrived at 71 square feet and claimed that the defendant had thereby misrepresented in the Sale Materials that the “saleable area” of K36 would be 85 square feet.

45.  I note that there is no allegation by the plaintiff that the defendant has represented that “saleable area” equalled to or meant “net area”, or that the term “saleable area” in the Sale Materials meant that it was to be measured according the method he now claimed, or that the 85 square feet “saleable area” would not include the area covered by the pillar.

46.  The burden of proving the misrepresentation indisputably falls on the plaintiff.

47.  The plaintiff has not adduced any expert evidence from a surveyor or architect to prove his allegation that “saleable area” is defined or measured as “the area that is enclosed within the walls” and not including the area covered by the pillar or the walls.

48.  The only evidence adduced by the plaintiff, if such can be so called, was the bare assertions of him and Chhawal.  While the plaintiff in evidence asserted barely, pure and simple, Chhawal in evidence explained her assertion by further assertions, to the effect that, among others, in the sale of all real estates in Hong Kong, there were only 2 concepts for the definition of area: either “gross area” or all the others, which were the same, whether it be “saleable”, “net” and such.  I do not think I need to deal with her such evidence in any detail, suffice to say that I completely reject her such evidence as opinion evidence given by someone who not only was not a recognized or qualified expert in the relevant field, but also from one who admitted in evidence that this was the first real estate deal in Hong Kong she was involved in.

49.  When being shown and asked about the Code in cross-examination, both the plaintiff and Chhawal accepted that “saleable area” should be defined and measured as therein set out.

50.  In the Code, it was stated that:-

(a) In the Preface at p 5[11], that “It is emphasized that “Saleable Area” remains the most appropriate measurement for property transaction …”;

(b) At p 9[12], that ““Saleable Area” has been the most widely used and accepted description of a premises for property transaction”;

(c) At p 11[13], that

“SALEABLE AREA

The Saleable area of a unit comprises the floor area exclusively allocated to that unit including balconies and other similar features but excluding common areas such as staircases, lift shafts, lobbies and communal toilets.  It shall be the area contained within the enclosing walls of the unit measured up to the exterior face of an external wall or the centre line of a separating wall between adjoining units, as the case may be.  Enclosing walls separating a unit from a lightwell, a Lift shaft or any similar vertical shaft, or a common area, shall be deemed an external wall and its full thickness shall be included.  All internal partitions and columns within the unit shall be included.”

51.  It is clear from the context of the Code, particularly in the section entitled “Application” where explanatory notes were given relating to measuring industrial premises (at p 18[14]) and in the “Appendices” which contained an illustrative plan showing how the “saleable area” of an industrial building was measured (at p 30[15]), that the Code applies to industrial buildings.

52.  Indeed, such a definition of “saleable area” (in gist, including the area covered by an internal column and some of the area covered by the walls) was adopted as part of the definition of “saleable area” under s  8 of the Residential Properties (First-hand Sales) Ordinance Cap 621 in respect of the first-hand sale of residential properties.

53.  I therefore accept the defendant’s case that the term “saleable area” as defined in, and measured according to, the Code was a widely used and accepted measurement for property transactions at all the times material to this action, and relevant and applicable to the present transaction.

54.  Adopting the definition according to the Code, Yuen measured the “saleable area” of K36 by measuring K36 as depicted in the AP Plan and multiplied the measurements by a factor of 150 and arrived at the result of 85.9 square feet[16].

55.  According to the plaintiff’s own measurements of the internal area of K36 as pleaded in p 8 of the Statement of Claim, the internal length of K36 was 10.35 feet and the internal width was 7.85 feet.  Using those measurements and adopting the definition of “saleable area” in the Code, the saleable area of K36 could be arrived at thus:-

(a) adding half of the width of the 2 walls separating K36 with K35 and K37 (say 2 inches each, totalling 4 inches) to the width as measured by the plaintiff, the width would be 8.18 feet;

(b) adding half of the width of the wall separating K36 and K20 (say, 2 inches) and the full width of the wall separating K36 and the corridor (say 4 inches) to the length as measured by the plaintiff, the resulting length would be 10.85 feet; and

(c) therefore, including the pillar within, the “saleable area” so calculated would be: 8.18 x 10.85 = 88.75 square feet.

56.  Therefore, the saleable area of K36 measured according to the Code, whether it be based on Yuen’s measurements, or the plaintiff’s own measurements, exceeds 85 square feet.

57.  Therefore, I hold that there was no material falsity in the statement in the Sale Materials that the saleable area of K36 would be 85 square feet.  In the premises, I hold that the plaintiff has failed to prove his claim that the defendant has misrepresented as alleged.

The plaintiff’s other complaint

58.  In his final submissions, the plaintiff was shifting his emphasis to complaining that no exact dimensions of K36, including the dimensions of the pillar, were given by the defendant.  I have indicated to the plaintiff and ruled, upon Ms Cheung’s objection, that this matter has not been pleaded in the Statement of Claim and the plaintiff is not entitled to pursue it now for the first time during final submissions.  In any case, the general rule of principle is that mere non-disclosure does not constitute misrepresentation.  I also note that while much complaint is made of it now, it is the plaintiff’s own evidence that he had not even asked about these dimensions prior to signing the PA.

The defendant’s fall back

59.  In light of my clear findings of the material primary facts, I do not think it necessary and do not propose to further deal with the defendant’s fall-back defence based on Clauses 14 and 20 of the S&P, and its specific objection to the granting of the relief of rescission.

Conclusion and disposal

60.  In the premises, I dismiss the plaintiff’s claim.  I order on a nisi basis that the plaintiff pays the defendant its costs of this action, including all costs reserved, if any, with certificate for counsel, to be taxed if not agreed.  This costs order nisi will become absolute within 14 days from today unless any party applies within that period for its variation.

61.  I thank counsel for her assistance.