AMY SO v. TONY CHIU YUN KAN and Others

IN THE COURT OF APPEAL

1994, No. 212
(Civil)

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J U D G M E N T

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Godfrey, J.A. :

1. This is an appeal from an order of Liu, J. made on 24 October 1994 (after a 6-day trial) in a purchaser's action for specific performance of a contract for the sale and purchase of Flat B, 3/F, Village Terrace, Happy Valley, at a price of $1,940,000. The contract is said to have been made on 28 August 1991 between (1) Tony Chiu Yun Kan ("Tony") and Leslie Au Moon Choi ("Leslie"), as vendors, and (2) Amy So ("Amy"), as purchaser.

2. The contract was made in writing, on the standard form of provisional sale and purchase agreement used for such transactions by an agent or broker called Ong's Properties Co., who, through one Simon Ng ("Simon"), had represented Amy in the negotiations for her purchase of the flat. The contract was duly signed by Amy. However, it was not signed by Tony or Leslie. It was signed by one Fung Po Chun Goldie ("Goldie"), an agent or broker trading with another under the name of Excel Land Properties Consultant Co., who claimed to have instructions to represent Tony and Leslie in the negotiations and to have their authority to make the contract on their behalf.

3. The judge decided that Amy was entitled to specific performance of the contract. He can only have done so on the footing that both Tony and Leslie had indeed instructed Goldie to represent them in the negotiations and to make the contract on their behalf. Tony, who appeared in person before us, and, not surprisingly, did not contribute to the argument (although he expressed some severe criticisms of Goldie's conduct) has not appealed against the judge's order. Leslie, however, has appealed against that order.

4. Leslie's appeal is based on a challenge to the judge's finding (an express finding) that he, Leslie, had authorised Goldie "to act on his behalf in the sale of the suit premises", a finding which must be taken in the circumstances as meaning that he, Leslie, had authorised Goldie to sign the contract for him, something which Leslie has from first to last strenuously denied.

5. We, in this court, have not had the benefit of seeing the witnesses and hearing their evidence. The judge had to resolve an irreconcilable conflict between Leslie's testimony and Goldie's testimony. The demeanour and manner of these two, seen and heard as they were by the judge, were material and indeed important elements in his consideration of whose evidence was to be preferred. Nevertheless, it is our duty to reconsider all the materials before the judge and to make up our own minds, not disregarding the judgment below but carefully weighing and considering it, and not shrinking from overruling it, if on full consideration we come to the conclusion that his finding on this point was wrong. We cannot excuse ourselves from the task of weighing the conflicting evidence, and drawing our own conclusions upon it; but, in doing so, we must be careful to make due allowance for the disadvantage under which we labour in that we, unlike the judge, have neither seen nor heard the witnesses.

6. In the present case, I have, with considerable reluctance, come to the conclusion that the judge here did indeed go wrong on this point .

7. Although we, for our part, have only the transcripts of the evidence to go on, I am myself satisfied, on a careful consideration of the evidence, that Leslie's story has the ring of truth and that Goldie's does not; indeed, I consider Goldie's story to be, in the highest degree, improbable. The judge found Goldie "an impressive witness". But he appears to have come to her evidence pre-disposed to disbelieve Leslie's story for reasons which, in my judgment, are not sustainable.

8. I shall review the whole matter in a moment, to make this good; but before doing so, I should mention that the judge did not have the benefit, which we had, of having cited to him the relevant authorities on the question whether an agent or broker, even on the hypothesis that he has been instructed to negotiate a sale, has, by virtue of that fact, authority in addition to make the contract. No doubt, in some cases, a clear instruction to an agent, for example, a written instruction "to sell", may well carry with it an authority to make the contract: see Rosenbaum v. Belson [1900] 2 Ch. 267. However, as Buckley J. pointed out in that case, there is a substantial difference between an instruction to an agent "to sell" and an instruction to an agent to "find a purchaser". Authorising a man to sell means, as the judge says, an authority to conclude a sale; authorising him to find a purchaser means less than that - it means to find a man willing to become a purchaser, not to find him and also make him a purchaser. It follows that when a problem of the sort which has arisen here falls for consideration, it is of central importance to ascertain precisely and exactly what were the instructions given to the agent. In Wragg v. Lovett [1948] 2 All ER 968, Lord Greene, M.R., observed that, when a vendor merely authorises a house agent to sell at a stated price, he must not be taken to be authorising the agent to do more than agree a price with an intending purchaser. The making of a contract, said Lord Greene (at p.969), is no part of an estate agent's business, and, although, on the facts of an individual case, the principal may authorise him to make a contract, such an authorisation is not lightly to be inferred from vague or ambiguous language. I venture to think that, if the judge had had the benefit of having these authorities cited to him, and had therefore been able to approach the issue which he had to decide with those authorities in mind, he would have found himself bound to determine the crucial point in this case the other way.

9. Any review of the case must start, of course, with the pleadings (which the judge did not notice in his judgment).

10. By paragraph 2 of his defence to the action, Leslie denied that he ever employed Goldie as his "lawful attorney" (as the plaintiff's statement of claim had described her) in the sale of the property. Tony and himself, he pleaded, only requested Goldie "to check the market price" of the property.

11. In paragraph 7 of Goldie's amended defence to the plaintiff's (alternative) claim against her for damages for breach of warranty of authority, she pleaded as follows:

"7. It is avered that the 2nd Defendant [Leslie] did expressly authorise the 3rd Defendant [Goldie] to sell the said property.

Particulars

At around 3 p.m. on the 28th August 1991, [Goldie] called [Leslie] at his mobile phone and informed him that an intended purchaser had offered to purchase the said property at price of $1,938,000.00. [Goldie] further informed him that [Tony] had asked her to confirm with him whether it was alright to accept the deposit from the purchaser. [Leslie] replied that it was alright but he wanted a completion date two months away. He further instructed [Goldie] to sort out any other matters with [Tony] because he was very busy that day and the battery on his mobile phone was running out. In accordance with the said specific instruction of [Leslie], and after obtaining the concurrence of [Tony], [Leslie] negotiated with [Amy] for completion to take place on 28th October 1991, which was agreed to by [Amy] and duly noted in the provisional agreement."

12. But, in its original form, paragraph 7 of Goldie's defence read as follows:

"Sometime in August which [Goldie] cannot recall the exact date, [Leslie] had confirmed to [Goldie] by telephone, his intention to sell the property and expressly or impliedly authorised [Goldie] to sell as his agent."

13. From this it is transparent that, when the original defence was put in, there was considerable uncertainty in Goldie's camp as to exactly what her instructions from Leslie were. Had she really been expressly authorised to make the contract on his behalf? Or was it her case that such authority arose only by implication? If only by implication, what were the facts and matters from which the authority was to be implied?

14. By the time the amendment was made, it appears that Goldie's memory had improved sufficiently to enable her to give instructions that she had been "expressly authorised" by Leslie to sell the flat; but even then she was unable to particularise anything which could properly be construed as constituting such an express authority. Before us, the best her Counsel could do was to say that such authority was to be implied from the confirmation allegedly given to her by Leslie that "it was alright to accept the deposit from the purchaser". He argued that an authority to accept a deposit from the purchaser carries with it an authority to make the contract on behalf of the vendor, because the purchaser will not hand over the deposit except against a contract signed by or on behalf of the vendor. But, for my part, I am not prepared to accept that an authority to accept a deposit from a purchaser, even if itself given in clear and express terms, ought to be regarded as authorising the agent, by necessary implication, to make the contract for the vendor. To treat an authority to accept the deposit as a clear and unambiguous expression of intention on the part of the vendor to authorise the agent to make the contract on the vendor's behalf is to go, in my judgment, far too far.

15. For these reasons, I would myself approach Goldie's evidence on the crucial point with a considerable degree of scepticism, bearing in mind that she assumed at the trial, by paragraph 7 of her amended defence, the burden of proving that she had been "expressly authorised" by Leslie to make an agreement on his behalf. It is in these circumstances that I now turn to the evidence given by Leslie and Goldie respectively, between whose conflicting stories the judge had to decide.

16. Leslie's evidence in chief, and Goldie's evidence in chief, was given by way of witness statement ordered by the judge at the trial to stand as the witness's evidence in chief. (The same course was adopted for the evidence in chief of Tony, Simon and Amy.) This is a course which a judge is entitled in his discretion to take. But the most important factor for a judge to consider in deciding whether or not to take it is the extent to which the evidence of a particular witness is likely to be controversial, and his credibility put in issue. In these circumstances, the way in which the witness responds to the oral examination in chief may be of great importance; and, that being so, it is wrong in principle to make orders applying to all witness statements without regard to the extent to which the witness's evidence is likely to be controversial and go to the heart of the dispute: see Mercer v. Chief Constable of Lancashire [1991] 1 WLR 367, per Lord Donaldson of Lymington M.R. at p.371 H. By consenting to the course taken in the present case, the judge deprived himself of the advantage he would otherwise have had of seeing and hearing how Leslie and Goldie respectively responded to oral examination in chief. This was, in my judgment, most unfortunate. I have not overlooked para. 3 of the Practice Note [1995] 1 All ER 385 under which witness statements, in England and Wales, stand as evidence in chief unless otherwise ordered; but here I would venture to express the hope that, in future, when judges are faced with applications at the trial to allow witness statements to stand as the witness's evidence in chief, they will refuse such applications whenever the evidence of the witness is likely to be controversial and his credibility put in issue.

17. But, in the present case, we must do the best we can with the material that we have.

18. In his witness statement, Leslie said, after relating some earlier dealings he had had with Goldie, that she had asked him whether he was interested to sell the flat the subject of the action. He said this:

"I knew she wanted to persuade to sell the said property, but I was not interested to do so because we only purchased the same in February, that year, and had just finished the decoration on it in July. The whole thing was too much trouble for me and I did not want to do it all over again, so it was not really too much an attractive idea to me to sell the Property. Therefore, I just indicated to [Goldie] that I wanted to wait and see, and I did not authorise or instruct her to sell the said Property."

19. He continued:

"On or about the 28th day of August 1991, [Tony] called me saying that [Goldie] had an offer to purchase the said Property. I asked him why he wanted to sell the said Property, and I put it in a tone that I was not interested in the idea. He then said that in that case he would ask [Goldie] to phone me. Then on the same day at about 5:00 pm, [Goldie] called my mobile phone saying that someone wanted to buy the said Property and asking me whether I was interested. But before she carried on, my mobile phone ran out of battery, and we were cut off in the middle of our telephone conversation. She was not even able to tell me what the asking price was. As I did not want to sell the said Property at that time, I did not care about this call too much and did not attempt to contact her back. At that time (or at any time) I did not instruct or authorise her or anyone else to sell the said Property at all."

20. It is plain that, if Leslie's version of the conversation between himself and Goldie is correct, Goldie (whose case depends on what was then said) plainly had no authority to make the contract with Amy on Leslie's behalf. Leslie was, of course, cross-examined about this conversation; but a careful reading of the transcript has satisfied me that his evidence was in no way shaken in cross-examination.

21. In her own witness statement, Goldie said this:

"In about May of 1991, over a telephone conversation with [Tony], I was instructed by Tony to be his estate agent in selling the property known as Flat B on the 3rd Floor including the roof appurtenant thereto of 5 Village Terrace, Hong Kong ("the Property") at a price of HK$1,920,000.00. [Tony] also promised to remunerate me with a commission equivalent to 1% of the sale price of the Property if I could sell the Property at a price higher than HK$1,900,000.00.

In late June of 1991, [Tony] forwarded to me the keys to the Property so that I could view the Property with prospective purchasers. But up to that moment, [Tony] still did not disclose to me that [Leslie] was also one of the registered owners of the Property.

On or about 28th August 1991, I was informed by [Simon] .... that [Amy] intended to purchase the Property at a price of HK$1,938,000.00. I then telephoned [Tony] immediately for instructions who told me that was alright to him and asked me to consult [Leslie] for instructions.

At about 3 p.m. on 28th August 1991, I telephoned [Leslie] telling him that [Amy] offered HK$1,938,000.00 as the purchase price of the Property and asked him whether I should accept the initial deposit paid by [Amy]. [Leslie] answered in the affirmative but he wanted a completion date two months away. [Leslie] also instructed that he was busy at the time and that the battery of his mobile phone was running out, therefore I could sort out any other matters with [Tony].

I then telephoned [Tony] on the same day and communicated to him [Leslie's] reply."

22. As it seems to me, even on Goldie's own evidence as contained in her witness statement, she fell far short of proving, as she had to do, that in the course of this telephone conversation (and she relies on nothing else) she was expressly authorised by Leslie to make a contract with Amy on Leslie's behalf. If that is right, then plainly the judge fell into error in granting Amy a decree of specific performance of the contract. But assuming for the moment that what Goldie herself said in her witness statement is capable of being construed as supporting her contention that she received in clear and ambiguous terms the express authority of Leslie to make the contract with Amy on his behalf, is her evidence to be accepted in preference that of Leslie?

23. When Goldie was cross-examined by counsel on behalf of the plaintiff, she embellished her story, always a dangerous thing for a witness to do. She was asked if Leslie was agreeable to the price of HK$1.938 million and had authorised her "to sign on his behalf". She replied:

"He agreed on price without any problem. He then asked me to go and sign the provisional sale and purchase agreement on that day. He only said that he was very busy that day. The battery of my mobile phone is getting low. Get hold of D1 to solve any matters and fix it with him. I took from his conversation that there were two instructions he had given, so I just follow them."

24. After an intervening question about "the two instructions" she was then asked this:

"Did you understand his instruction to be implicit that you were authorised to sign on his behalf?"

25. Her answer was:

"Yes, I agree."

26. It is unclear from this passage in her evidence whether Goldie was now claiming that she had express, or only implied, authority to sign the provisional sale and purchase agreement on Leslie's behalf. She is now indicating, never having heralded this previously (it is not suggested in her pleadings or in her witness statement), that she was relying on an express request by Leslie "to go and sign the provisional sale and purchase agreement on that day". This passage in her evidence on the crucial point, then, is plainly and profoundly unsatisfactory.

27. Goldie was then cross-examined on behalf of Leslie. She was referred to the material conversation and asked the following question:

"And even after that conversation, you still expect to get Tony to go and sign the same purchase agreement, didn't you?"

28. She replied:

"Yes."

29. She was then asked :

"You didn't expect to sign on Tony and Leslie's behalf?"

30. She replied:

"Right."

31. That, of course, completely contradicted her earlier testimony.

32. However impressive a witness the judge may have found Goldie to be, he does seem to me to have placed a far greater weight on this impression than it can possibly bear, having regard to the inconsistent and unsatisfactory nature of Goldie's answers in cross-examination which I have set out above. Those answers, as I think, plainly destroyed Goldie's case that, in the course of the telephone conversation on which she relied, Leslie had given her express authority to sign the contract on his behalf.

33. A great deal of evidence was placed before the judge as to events, presumably thought to be material, which took place both before the date and time of the crucial conversation, and afterwards. The judge reviewed all this material in his judgment. His view as to the credibility of Leslie and Goldie respectively may have been coloured by the conclusions he drew about these matters. That is unfortunate; none of them had any real bearing on the question which the judge had to decide, namely what was the precise authority, if any, given by Leslie to Goldie during the course of the conversation. For example, there was much evidence, and argument, about the fact that on previous occasions Tony, and perhaps Leslie, had had dealings with Goldie over the sale and purchase of properties, in relation to one of which she signed, or may have signed, an agreement for the sale and purchase on behalf of Tony and Leslie. Of course, in civil cases the courts will admit evidence of similar facts if it is logically probative, i.e. if it is logically relevant in determining the matter which is in issue; but facts which prove nothing more than likelihood of repetition, although logically relevant, should be rejected on grounds of fairness, since they tend to waste time, embarrass the inquiry with collateral issues, prejudice the parties with the fact finding tribunal, and encourage attacks without notice: see Attorney General v. Nottingham Corporation [1904] 1 Ch. 673. In his judgment in that case, Farwell, J. draws attention to the distinction between evidence having a direct relation to the principal question in dispute and evidence relating to collateral facts, which will, if established, tend to elucidate that question. As the judge points out, to make the latter admissible the party tendering the evidence must satisfy the court that the collateral fact which he proposes to prove will, when established, be capable of affording a reasonable presumption or inference as to the matter in dispute and also to satisfy the court that the evidence which he is prepared to adduce will be reasonably conclusive. As it seems to me, evidence that on some previous occasion Tony and Leslie authorised, or might have authorised, Goldie to make a contract on their behalf is of very little probative value in relation to the question whether Leslie gave express authority to Goldie to do so in the present instance.

34. Of similarly little real significance were the events which took place after the conversation on which Goldie relies and on the authority of which she claims to have made the contract. Evidence of those events was tendered in support of a case that, even if Goldie had no prior authority to make the contract, nevertheless, her act in doing so had subsequently been ratified by Leslie. As to this, however, Amy did not plead it at all and Goldie pleaded only Leslie's conduct in failing "to raise any objections at the first opportunity, from which an acquiescence in [Goldie's] act can be implied": see paragraph 9 of Goldie's defence, asserting an estoppel, to the claim brought against her by Leslie. But the evidence fell far short of establishing that Leslie ever represented to Amy that he adopted or recognised the contract Goldie had purported to make for him and so fell equally far short of establishing any case of ratification by estoppel (on which indeed the judge made no clear finding). To succeed in such a plea of ratification Amy would have had to plead, and prove, a definite and unambiguous representation made to her by Leslie, by words or conduct, that he, Leslie, was adopting the contract; and that she, Amy, relying on that representation, subsequently acted upon it to her detriment. No such case was either pleaded or proved.

35. It is all too common that simple cases of this sort take days (and sometimes weeks) to try. This case could, and should, have been disposed of in a matter of hours. There was really only one issue in the case, namely whether Leslie had or had not expressly authorised Goldie to make the contract with Amy on his, Leslie's behalf, and that turned entirely on the content of one telephone conversation. For my part, I would encourage judges to resist being drawn into the sort of wide-ranging inquiry into irrelevant matters on which the judge was induced to embark here.

36. For the reasons I have given, I would allow this appeal; set aside the judge's order for specific performance; and direct an inquiry as to the damages suffered by Amy as a result of Goldie's breach of warranty of authority in purporting to make this contract on Leslie's behalf when she had no authority to do so. The truth of the case is that Goldie, over-eager to close the deal with Amy, gambled on Leslie's subsequently adopting the contract. Her gamble failed and she must pay the price.

Bokhary, J.A.:

37. I, too, would allow this appeal with those consequences.

38. They having been so referred to in the course of the hearing and in the preceding judgment, I will refer to Ms Goldie Fung and Mr Leslie Au by their first names.

39. I need not rehearse the evidence. My brother Godfrey has already done that.

40. Even on her own story, I do not think that Goldie was authorized to sign on Leslie's behalf. The judge did not perceive that deficiency. But I think that he might well have done so if the rival stories had unfolded before him by way of oral evidence-in-chief. As it happened, however, Goldie's evidence-in-chief, like that of all the other witnesses, was received in written statement form.

41. The foregoing, subject to the question of ratification, is sufficient to dispose of this appeal in Leslie's favour. But there is another basis for doing so. It is this. In any event, the judge's preference of Goldie's evidence over Leslie's evidence cannot be left undisturbed.

42. It is true that the judge described Goldie as an "impressive" witness. But in rejecting Leslie's evidence, the judge took the view that his story was inherently unlikely. That is a view which we can and must review. And reviewing it, I find it unsustainable. In my view, it is plain that Leslie's story is highly likely while Goldie's story is highly unlikely.

43. In finding Goldie impressive, the judge took her for someone telling a likely story when, in truth, her story was not only unlikely but highly unlikely. And his statement that she was impressive is a bare one. What was impressive about the manner of her evidence is not indicated. In all the circumstances, I think that our duty is to decide the issue on the inherent likelihood as we see it. And on that basis, I would reverse the judge's preference of Goldie's evidence over Leslie's evidence.

44. Here, too, I cannot help feeling that the judge's task was made more difficult and that he was ill-served by the total absence of oral evidence-in-chief. Such evidence would, I think, have helped him to see things far more clearly.

45. Sometimes the use of statements as evidence-in-chief saves time and costs and increases the judge's chances of arriving at the right result. Sometimes - perhaps far more often than not - such use, especially if wholesale, has the opposite effect. The present case is an example.

46. As far as ratification is concerned, I agree that no case of ratification has been pleaded or proved.

Nazareth, V.-P. :

47. I agree.

Because we are disagreeing with the judge below, I would add that the facts and considerations Godfrey J.A. has identified are so compelling, they leave this Court no option but to intervene. I would also concur in the order and direction proposed by Godfrey J.A.