CHAN SIK HUNG AND ANOTHER v. KOO KIN MUN AND ANOTHER

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JUDGMENT

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1. This claim arises from an advertisement placed in the Sing Po Daily Newspaper on the 3rd October 1981. This advertisement read as follows:-

"Cheap transfer of business

Mongkok district. Rent $3,600. Complete equipment. Can start business now. Urgent transfer for $65,000 because of going overseas. If interested, telephone 3-954397."

The plaintiffs, who are husband and wife, were interested arid followed a telephone conversation with the defendant they met him at the restaurant. A discussion took place and eventually the plaintiffs agreed to buy the business for $60,000. Mr. Chan Sik Hung said that at the time there were two matters which concerned him. One was whether he could renew the Urban Council licence and the second was whether the owner of the shop premises was willing to continue to rent them to him at $3,600 per month. He said that the defendant assured him that the owner was so willing and they agreed that the money would be handed over when the licence had been transferred. Mr. Chan paid the defendant a cheque for $2,000 and in exchange was given a key for the premises and also a rent receipt. They agreed that on the following day they would go to a solicitor to finalise the matter. The following day they did go to the solicitors' firm where Mr. Chan and his wife were told that formalities would take about one month and that the money should be paid to the solicitors. The defendant was apparently unhappy with this and said that the plaintiffs would have to pay a lot of legal fees which they could save that if they trusted him. He also said that if this was not agreeable he would sell to somebody else. The defendant then went back to the restaurant together with Madam Tang Ywai Ying and Madam Tang's brother Tang Wing Fook. There the defendant telephoned a Mr. Lee Chi Lun, who the Tangs thought was the landlord. Lee, however, said that in fact the premises belonged to his sister, who lived in the United States of America but she had authorised him to look after the tenancy. There was a discussion as to a renewal of the tenancy which expired in December 1982 and therefore only had some 14 months to run. Mr. Lee said that would depend on market conditions.

2. Mr.Chan later joined them and he then paid the defendant the balance of $58,000. That was on the 7th October 1981. The licence was changed to the name of the plaintiffs and they commenced to re-decorate the premises. It was Mr. Char's evidence that this was done by friends but he had to pay one Mr. Lam Tse Chung a total of $20,000. He produced a receipt for this amount.

3. On the 19th October the business was opened by the plaintiffs, but shortly afterwards a lady came to collect the rent. She gave her name as Lee Nan. Mr. Chan gave her $3,000, but she said that he also had. to pay a proportion of the rates. This he declined to do until he had made inquiries from the defendant as to whether he was liable for it. On the 28th another lady came and gave her name as Lee See Po, and said, what she in fact was the landlord.  She was told that the business had been transferred to the plaintiff's. On the 21st she came back She said that she would not consent to the change of ownership of the business and that she would contact her lawyers in order to close the restaurant down. Mr. Chan said he begged her not to do so, but she refused. Having discussed the matter with his wife, he then went and made a report to the police at Mongkok. He said that shortly after that he telephoned the defendant who said it was not his concern. He said the landlord had previously agreed to transfer the business but that consent had been withdrawn because the plaintiffs had refused to pay the rates.

4. Following that, Mr. Chan said he received a lot of telephone calls and that the assistants working in the restaurant became scared and refused to come to work. Eventually on the 27th October he decided to shut down the restaurant. He left the plant such as refrigerators where it was and also some food.

5. Evidence was given by the 2nd plaintiff, Madam Tang Kwai Ying and also by her brother Mr. Tang Wing Fook I accepted their evidence and in particular that of Madam Tang as being truthful. She impressed me as being a reliable witness.

6. The defendant save evidence and said that he had operated the restaurant together with three other partners and that he had bought it originally in 1981 from a Mr. Chong. He discussed the tenancy when he purchased the restaurant business with the third party Lee Chi lun who had told him he was a brother of the landlord. The tenancy agreement was not transferred to him but was kept in the name of the restaurant. He said that during the time he was in charge of the restaurant.  He paid the rent in the normal way and there was no problem because of the transfer to him.

7. He decided to sell the business as the manager and cook wanted to go abroad and he put the advertisement in the paper as a result of which he met the plaintiffs. He said that he made no representations to them apart from saying that the tenancy was in the name of the restaurant that it would expire in 13 months' time and that if they continued paying the rent there should be no trouble. He also introduced them to Mr. Lee and Lee assured them that if the rent was paid then there would be no trouble and that the tenancy could remain in the name of the restaurant. The defendant emphasised however that the negotiations were made between the plaintiffs and Lee and that he played no part in them apart from making the introduction. The plaintiffs agreed to purchase the business, he received payment and as a result he transferred the business licence to them. There was difficulty because the plaintiffs refused to pay the rates and the landlady said they would have to get out. The plaintiffs complained to him but he maintained to them that it was up to them to deal with the landlady. However, he did phone Lee some three times in an effort to help them as he had introduced the plaintiffs to him.  He denied that at any time he told the plaintiffs that he would fix up the tenancy for them.

8. Evidence was given by Madam Poon Mui Ying, the wife of the defendant. Her reference was however only that she paid the rent to a woman by means of post-dated cheques.

9. I was in no doubt from the evidence that the defendant had made the representation to the plaintiffs that if they purchased the restaurant business he would be able to fix up the matter of the tenancy for them. I am quite satisfied everybody understood him to mean that he would see that they continued to run the restaurant undisturbed for the duration of the tenancy agreement, some 13 months. I am satisfied that as this condition has failed the plaintiffs are entitled to the return of the purchase price paid $60,000 less $1,500 the value of movable equipment supplied by the defendant which was left in the premises. The evidence given by the plaintiff as to the $20,000 he alleged had been spent in redecorating the premises I did not find satisfactory and no real evidence was called in support of that amount. The plaintiffs' claim for redecoration expenses fails.

10. The plaintiffs are entitled to interest on the sum of $58,000 at 12% from the 20th October 1981 to the date of payment

11. I am also satisfied that the representations made by the defendant were based on the assurances given to him by the third party who did not appear. I am satisfied that those assurances were knowingly false and the defendant is entitled to be indemnified as to damages and his costs by the third party.

12. The defendant is to pay the plaintiffs the cost of this action to be taxed if not agreed and the plaintiffs' own costs are to be taxed in accordance with the Legal Aid Regulations. The defendant is entitled to his costs as against the third party.