LIN MAN YUAN v. KIN MING HOLDINGS INTERNATIONAL LTD AND ANOTHER

HCA 216/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 216 OF 2008

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JUDGMENT
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1. This is a dispute arising out of a contract to develop a piece of land in the city of Xiamen, the Fujian Province in the Mainland.

2. At the material time, the 1^st Defendant in the Main Action, Kin Ming Holdings International Limited (建明集團國際有限公司)(“Kin Ming”) was entitled to develop a certain area in a piece of land in Xiamen.  On 16 April 2004, the Plaintiff in the Main Action, Madam Lin Man Yuan (林满园)(“Madam Lin”), entered into a contract with Kin Ming (“the Contract”) whereby the latter agreed to sell the right to develop that particular area in the land to Madam Lin.

3. After the making of the Contract, the Municipal Government of Xiamen (“the Xiamen Government”) changed the term of the land grant and altered the area entitled to be developed by Kin Ming.  It is the case of Kin Ming that the Contract ceased to have effect after the land exchange and the Contract did not apply to the new piece of land re-granted by the Xiamen Government.  Madam Lin disputes that and claims that the Contract would still be binding on the parties irrespective of such land exchange.

4. By reason of such dispute, Madam Lin commenced the present proceedings against Kin Ming to claim for a sum of RMB 2.42 billion, which she claims is the amount of profit that should have been earned by her if she was allowed to develop the land under the Contract.  Kin Ming claims that the quantum of the claim is a gross exaggeration because, inter alia, even if Kin Ming was in breach of the Contract, Madam Lin has not taken into account the substantial amount of tax that would have to be paid by the developer of the land to the Government in assessing the damages.

5. After the commencement of the Main Action, Madam Lin and her husband, Mr Huang Rui-fu (黄瑞福) who is the 2^nd Defendant in the Counterclaim, appointed someone to negotiate the dispute with Kin Ming on their behalf.  One of the directors of Kin Ming, Mr Jose Kho (許明宏, formerly known as 許明良)(“Mr Kho), who is the 2^nd Defendant in the Main Action and the 2^nd Plaintiff in the Counterclaim, alleges that he had been intimidated and harassed by these agents appointed by Madam Lin and Mr Huang Rui-fu, to the extent that he suffered serious mental distress, causing Kin Ming and him to lose various business opportunities.  Kin Ming and Mr Kho therefore counterclaim against Madam Lin and Mr Huang Rui-fu for damages totalling US$1,100 million.

6. Prior to the trial, the parties have agreed that I only need to deal with the issue of liability in the Main Action in this trial.  As the determination of the quantum of the claim in the Main Action will be a complicated process involving discovery of voluminous documents and arguments on Mainland laws, the parties agree that, in the event liability is established in the Main Action, there would be a separate hearing on assessment of damages.  For the Counterclaim, I have to resolve both the issues of liability and quantum in this trial.

BACKGROUND AND THE MAIN FACTUAL DISPUTES

(i)   Events leading to the making of the Contract

7. The background of this case is as follows.

8. On 9 May 1998, a company known as “香港昌明國際投資有限公司” (“Chang Ming (HK)”) entered into a contract[1] (“the 1998 Strait City Land Contract”) with the Xiamen Government to acquire the land use right over a piece of land in 前埔片區 (Qianpu-pain District) in Xiamen with a total lot area of about 888,000 square metres[2] (“the Land”) and with a plot ratio of no more than 1.6[3] at a price of RMB 300 per square metre[4].

9. Under the 1998 Strait City Land Contract, Chang Ming (HK) had to develop the Land into a residential-commercial complex development to be named as “Strait City” (海峽城) in accordance with the planning requirements to be specified by the Town Planning Department of the Xiamen Government.

10. On 28 August 1998, the Town Planning Department approved the land use of the Land for the development of commercial and residential units.  The gross area of the Land was 872,757.273 square metres, and the land fee was therefore RMB 261,827,181.90 (872,757,273 x 300).

11. On 29 September 1998, the Xiamen Government officially approved the grant of the Land pursuant to the 1998 Strait City Land Contract.

12. On 14 October 1998, the Xiamen Government approved to change the grantee of the Land under the 1998 Strait City Land Contract from Chang Ming (HK) to “厦門昌明建設發展有限公司” (“Chang Ming (Xiamen)”).

13. As shown in the board minutes of Chang Ming (Xiamen) dated 6 July 1999, it is apparent that, back in 1998, Kin Ming owned 50% of Chang Ming (HK), and Kin Ming (Xiamen) Land Development Company (建明(厦門)房地產有限公司) (“Kin Ming (Xiamen)”), which was a subsidiary of Kin Ming in Xiamen, owned 50% of Chang Ming (Xiamen).  A director and legal representative of Chang Ming (HK) was the well-known Mr Lai Chang Xing (赖昌星) (“Mr Lai”).

14. Mr Hsu Ming Chi (許明棋)(“Mr Hsu”) is the elder brother of Mr Kho.  They were the 2 directors and shareholders of Kin Ming. From the said board minutes, it appears that Mr Kho was also a director of Chang Ming (Xiamen).

15. The Kho’s brothers are Filipino Chinese who had various business interests in the Philippines and the Mainland.  Their family had made donations to several universities in Fujian.  Mr Kho became a member of the Fujian Committee of the Chinese People’s Political Consultative Conference (“CPPCC”) since 1993, and a member of the National Committee of CPPCC since 1998.

16. One can see from the above that Strait City was a land development project involving both Mr Lai and the Kho’s brothers.  Chang Ming (HK) and Chang Ming (Xiamen) were companies controlled by Mr Lai, whereas Kin Ming and Kin Ming (Xiamen) were companies controlled by the Kho’s brothers.

17. In the summer of 1999, the Mainland Central Government and the Xiamen Government began the investigation of the well known “Yuanhua smuggling case” (遠華走私案) (“the Smuggling Case”) involving Mr Lai.

18. By reason of such investigation, the Kho’s brothers wanted to disassociate themselves from Mr Lai in respect of the development of the Strait City project.  The parties therefore agreed to divide the Land into different lots for separate development.  According to the board minutes of Chang Ming (Xiamen) dated 6 July 1999, the directors of Chang Ming (Xiamen) agreed to divide the Land into 4 lots, with Lots A1 and A4 to be developed by Kin Ming (Xiamen), and Lots A2 and A3 to be kept by Chang Ming (Xiamen). Despite such division of the Land, the planning of the whole Land had to be submitted to the Town Planning Department of the Xiamen Government for approval.

19. It is common ground that Lot A4 was a prime site fronting the sea.  Lots A1 and A2 had no sea-facing fronts.

20. On 21 July 1999, the Xiamen Government issued land title certificates for the respective Lots A1 and A4 to Kin Ming (Xiamen), endorsed with a notice to the effect that these certificates were subject to the requirements of the 1998 Strait City Land Contract. The area of Lot A4 was 209,495.10 square metres with a plot ratio of 1.6, yielding a total building area of 335,192.16 square metres.

21. On 23 July 1999, the Xiamen Government approved the change of the developer of the Land from Chang Ming (Xiamen) alone to Chang Ming (Xiamen) and Kin Ming (Xiamen).

22. On 26 July 1999, the Xiamen Government entered into a supplemental agreement to change the grantee of the Land to Chang Ming (Xiamen) and Kin Ming (Xiamen) each holding 50% of the Land.  Under the supplemental agreement, each of Chang Ming (Xiamen) and Kin Ming (Xiamen) was to share in the rights and responsibilities in the 1998 Strait City Land Contract.

23. On 10 August 1999, Kin Ming (Xiamen) and a state enterprise known as “Lianfa Group Company Limited” (the former name was “厦門聯合發展(集團)有限公司”)(“Lianfa”) entered into a joint development agreement to develop Lot A1 into a project to be named as “濱海新城” by dividing Lot A1 into 2 lots, namely Lot A1-01 for Kin Ming (Xiamen) and Lot A1-02 for Lianfa.  The formal land transfer agreement under which Kin Ming (Xiamen) assigned Lot A1-02 to Lianfa was entered on 2 September 1999.

24. Approval for the joint development of Lot A1 by Kin Ming (Xiamen) and Lianfa was granted on 11 August 1999.  A joint land ownership certificate for Lot A1, together with individual land title certificates for Lot A1-01 to Kin Ming (Xiamen) and Lot A1-02 to Lianfa, were issued on 19 August 1999.  These land title certificates were endorsed with the same notice that the terms of the 1998 Strait City Land Contract had to be observed.

25. By September 1999, Kin Ming (Xiamen) had paid in excess of RMB 85 million to the Xiamen Government as land fees for Lots A1 and A4.

26. After further investigation of the Smuggling Case, the Central Government or the Xiamen Government confiscated Lots A2 and A3 as a result of Mr Lai’s involvement in Chang Ming (Xiamen) and Chang Ming (HK).

27. Because of the investigation into the Smuggling Case, the development of Lots A1 and A4 was put on hold given that both lots were “frozen” (查控審查) by the Central Government or the Xiamen Government.

28. By reason of his business association with Mr Lai, Mr Kho was also investigated by the authorities.  Mr Kho was arrested in early 2000, and he was stripped of his positions in the National Committee and the Fujian Committee of CPPCC.  As one of his companies was alleged to have evaded tax, Mr Kho, being the person responsible for the company, was sentenced to 3 years’ imprisonment.  Mr Kho was released in early 2002.

29. Earlier on 6 August 2001, the Xiamen Government released Lots A1 and A4 back to Kin Ming (Xiamen).  Despite the various letters written by Kin Ming (Xiamen) to the Xiamen Government and the various government officials to request for the continuation of the development of Lots A1 and A4 (including the ones dated 12 September 2001, 12 November 2001, 25 February 2002, 26 March and 11 May 2003), the Xiamen Government had not issued to Kin Ming (Xiamen) the requisite notice to pay the remaining land fees for Lots A1 and A4 so as to enable it to continue with the development of these 2 lots.  Apparently, this was the result from the uncertainty and complication arising from the confiscation of the neighbouring lots, i.e. Lots A2 and A3.  In a number of letters from the Xiamen Government to Kin Ming (Xiamen), in particular the one dated 12 April 2004, the Xiamen Government stated that, by reason of the earlier partition of the Land, the planning and the building of various public facilities in the Land had remained unresolved, and as a result the Xiamen Government could not deal with the payment of the balance of the land fees or give approval for the development of Lots A1 and A4 to proceed.

30. Furthermore, the Xiamen Government had already built an exhibition centre in an adjacent piece of land.  In early 2004, there were some reports in the news that the Xiamen Government might use some area in the Land to build a conference centre or other supporting facilities for the adjacent exhibition centre.  As a result, there might be changes in the planning of the development in the Land.

(ii)  The making of the Contract on 16 April 2004

31. With such background, I turn to the making of the Contract on 16 April 2004.

32. Mr Kho considered himself innocent and so he suffered considerable mental pain for being arrested and detained because of his business association with Mr Lai.  By reason of such bitter experience, he wanted to reduce the scale of his business in the Mainland.

33. Mr Huang Wei (黄惟) was a staff employed by Kin Ming (Xiamen).  One of his duties was to explore business opportunities for Kin Ming, including finding suitable business partners or purchasers of the various business interests owned by Kin Ming and Kin Ming (Xiamen) in the Mainland. 

34. Mr Huang Rui-fu and Madam Lin, who are husband and wife, are property developers and investors in the Mainland and they run a company known as “Xiamen Fu Man Holdings Limited” (厦門福满集團有限公司)(“Fu Man”), the name of which is a combination of the one character from each of their names.

35. It is not disputed that Mr Huang Wei, through the introduction of a common friend, approached Mr Huang Rui-fu in early 2004 to discuss the prospect of business cooperation relating to the development of Strait City.  They met a couple of times.  Madam Lin were present on at least one of such occasions.  Mr Hsu testifies that he had met Mr Huang Rui-fu once in Xiamen, but Mr Huang Rui-fu maintains that he had not met any of the Kho’s brothers before the meeting on 16 April 2004.

36. There are 2 main factual disputes about the contents of the discussions between the parties at that time.

37. Firstly, it is the evidence of Kin Ming that the discussion was about Lot A4 only.  According to Mr Hsu, Fu Man was only interested to acquire the development rights in Lot A4, which was a prime site with sea-facing front.  However, Mr Huang Rui-fu claims that the parties only had a general discussion about the cooperation opportunity relating to Strait City with no specific mention of any particular area therein.  In a site visit attended by Mr Huang Rui-fu and Madam Lin, Mr Huang Wei only pointed out to them that there were 2 plots of land diagonally positioned to each other in Strait City belonging to Kin Ming.  However, Mr Huang Wei did not specify which portion of the Land was offered to Fu Man for cooperation.

38. Secondly, there is a dispute between the parties as to whether they had mentioned or agreed a purchase price of RMB 500 million in Xiamen.  According to Mr Hsu, after a few discussions, Madam Lin and Mr Huang Rui-fu agreed, at least provisionally, for a purchase price of RMB 500 million roughly based on a unit price of RMB 1,500 per square metre and about 330,000 square metres in building space.  On the other hand, Madam Lin and Mr Huang Rui-fu emphasised that, by that time, they did not know which portion of the Land was offered by Kin Ming, and so they would not have been able to agree a purchase price with Kin Ming.

39. Subsequently, Madam Lin and Mr Huang Rui-fu were invited to meet Mr Kho and Mr Hsu in the office of Kin Ming in Hong Kong on 16 April 2004 to have a further discussion on the proposed business cooperation. After lengthy  negotiation lasting for most of the day, Madam Lin signed a written contract with Kin Ming under which Kin Ming agreed to sell the development rights in Lot A4 (held by Kin Ming (Xiamen)) to Madam Lin for a total consideration of RMB 495 million (“the Written Contract”).  The Written Contract was witnessed by 2 Hong Kong solicitors, namely Mr Raymond Wu of Jesse H Y Kwok & Co for Madam Lin and Mr Simon Si of Simon Si & Co for Kin Ming.

40. There is a dispute between the parties as to whether the Written Contract contained all the terms of the contractual arrangement between the parties.  To differentiate between the two, I would use the term “the Contract” to refer to the whole Contract made between the parties on 16 April 2004 relating to the development project, and the term “the Written Contract” to refer to the specific written document signed by the parties on the same day.

41. Under the Written Contract:

(i) Madam Lin should pay Kin Ming a total of RMB 495 million, inclusive of tax and fees, by stages to acquire the development rights of Kin Ming in respect of Lot A4;

(ii) there was an exact description of Lot A4 in clause 2-1, which tallied with the particulars set out in the land title certificate for Lot A4;

(iii) Kin Ming would deal with the Xiamen Government and be responsible for the development of the project under the Written Contract (“the Project”), and in particular, Kin Ming should unconditionally coordinate with Madam Lin to develop the Project (clauses 4 and 5);

(iv) the units developed in the Project, built in accordance with the Total Building Area under clause 2-2, would ultimately be transferred to Madam Lin (clause 3-5);

(v) Madam Lin might apply to the Xiamen Government to effect planning changes and Kin Ming had to coordinate with Madam Lin for that purpose (clause 5-2(c));

(vi) it was possible to have adjustment of the Total Building Area with corresponding adjustment in the total fees payable by Madam Lin to Kin Ming, i.e. reduction in price of RMB 1,500 for every square metre of building area reduced (clause 2-2); and

(vii) apart from the above, any loss or profit in the Project would be borne by Madam Lin and had nothing to do with Kin Ming (clause 2-2).

42. By that time, there was some uncertainty with the development of the Project because the Xiamen Government did not allow Kin Ming to pay the balance of the land fees.  The Written Contract therefore provided:

(i) if by 30 June 2004, Kin Ming failed to obtain the requisite notice to pay the land fees of the Project from the Xiamen Government, Kin Ming shall within 15 working days thereafter return to Madam Lin the sum of RMB 100 million that had been paid by her to Kin Ming, and the Contract would cease to have effect (clause 6-2);

(ii) within 2 years after Kin Ming had returned Madam Lin her funds, if Kin Ming was in a position to obtain the right to develop the Project, Kin Ming had to co-operate with Madam Lin again as per the terms of the Written Contract, but Madam Lin had to refund any interest paid by Kin Ming (clause 7-1).

43. Clause 8 of the Written Contract also stated that anything which had not been completely dealt with in the Written Contract and any amendment and addition thereto should be further signed as a supplemental contract upon the parties’ negotiation.

44. There is a serious dispute between the parties as to whether the Written Contract contained all the agreed terms between the parties relating to the transaction.  It is Madam Lin’s case that near the end of the negotiation, Mr Kho told him about the possible land exchange plan, under which the Xiamen Government might exchange Lot A4 with another portion of the land within Strait City.  Because of such possibility, Madam Lin claims that the parties had agreed on an oral revival term which was not expressly stipulated in the Written Contract (“the Oral Revival Term”).  Under the Oral Revival Term, the Contract would still be binding between the parties even if there was such a land exchange.

45. The contents of the Oral Revival Term are pleaded in §8(g) of the Re-Amended Statement of Claim as follows:

“Within two years after [Kin Ming] had returned to [Madam Lin] the said funds, if Kin Ming (Xiamen) was in a position to obtain against the Development Rights over the Land, whether on the portion of the Land identified as Lot A4, or on any other portion thereon (the “re-granted lot or lots”), [Kin Ming] must co-operate with [Madam Lin] to develop the same by building commercial and/or residential units thereon to the extent of the Total Building Area in accordance with the terms of the Agreement.”

46. Madam Lin claims that she had tried to insist to include the Oral Revival Term in the Written Contract.  However, Mr Kho was unhappy with such suggestion, and instead he asked Madam Lin not to create further trouble in the execution of the Written Contract.  Madam Lin yielded to the pressure and signed the Written Contract without the inclusion of the Oral Revival Term.

47. Kin Ming seriously disputes the existence of such term.  Further, if the parties had agreed on the Oral Revival Term, it would actually be in the business interest of Kin Ming to include such term in the Written Contract.  According to Mr Kho, Madam Lin was a sophisticated businesswoman who played an important and dominating role in the negotiation of the terms of the Contract, and so no one could have pressured her to sign the Written Contract which involved a multi-million dollars transaction.

48. This is one of the main factual disputes that I have to resolve in this trial.

(iii)  The land exchange imposed by the Xiamen Government

49. After the making of the Written Contract, it is common ground that Madam Lin made the following payments to Kin Ming under the Written Contract:

(i) under clause 3-1 of the Written Contract, a deposit of RMB 5 million on 20 April 2004; and

(ii) under clause 3-2 of the Written Contract, a further sum of RMB 95 million on 28 April 2004.

50. Madam Lin claims that Kin Ming was in financial difficulty, and so Kin Ming used such money to pay for the outstanding land fees to the Xiamen Government.  Kin Ming denies that it was in financial difficulty by that time.  In fact, Kin Ming (Xiamen) had all along offered to make such payment to the Xiamen Government but all such offers were rejected.

51. On about 30 April 2004, Kin Ming (Xiamen) made a payment of RMB 41,830,135.57 to a notarial office in Xiamen as being the balance of the land fees for Lots A1 and A4.  The notarial office then issued a notice to the Xiamen Government asking the latter to accept the payment.

52. The Xiamen Government did not issue the notice for payment of land fees by 30 June 2004.

53. At around the same time, the Xiamen Government proposed to effect planning changes inside the Land.  On 16 July 2004, Kin Ming’s representatives met the officials of the Xiamen Government, and Kin Ming was informed that the planning of Lot A4 would have to be changed so as to provide supporting facilities for the exhibition centre built on the adjacent site.  According to Kin Ming, the Xiamen Government initially proposed to exchange Lot A4 with another piece of land outside Strait City.  Kin Ming (Xiamen) counter-proposed that the exchanged land should be within Strait City, which was accepted by the Xiamen Government.  Later, Kin Ming (Xiamen) was made to sign a memorandum on 21 July 2004 agreeing that there should be planning changes or land exchange within the Land.  By that time, Kin Ming only knew that the Xiamen Government would use the waterfront side of the Land to build a conference centre and associated supporting facilities.  For such purpose, Kin Ming (Xiamen) would be re-granted another lot in the Land, though not fronting the sea, with the same user, area and total building area as before.  Apart from such information, the details of the land exchange, including the exact location of the exchanged land, were unknown at that stage.

54. Mr Kho called Mr Huang Rui-fu by phone on 16 July 2004 and informed him about the land exchange proposed by the Xiamen Government.  According to Mr Huang Rui-fu, they made an agreement or reached an understanding by that time that the Contract would still be effective despite the land exchange.  It is therefore Madam Lin’s case that, if the Contract made on 16 April 2004 did not contain the Oral Revival Term, the terms of the Contract had been varied by the parties to the effect that the land referred to in the Contract would cover Lot A4 or any land to be exchanged by the Xiamen Government for Lot A4.  I refer this oral agreement as “the 1^st Variation” of the Contract.

55. According to Mr Huang Rui-fu, Mr Kho called him again on 26 July 2004, telling him that the Xiamen Government had already made a decision to exchange Lot A4 with another piece of land near to the original Lot A2.  Since the exchanged land was not fronting the sea, Mr Kho even asked Mr Huang Rui-fu whether Fu Man would request for a reduction of the contract price.  As the property market in Xiamen had risen since the making of the Contract, Mr Huang Rui-fu was happy with the then existing price and terms of the Contract, and they reached an agreement or understanding that the Contract would still be effective despite the land exchange.  I refer this oral agreement on 26 July 2004 as “the 2^nd Variation” of the Contract.

56. Apart from informing Mr Huang Rui-fu about the land exchange plan proposed by the Xiamen Government, Mr Kho denies that he had made any agreement or reached any understanding with Mr Huang Rui-fu that the Contract would still be effective after the land exchange.  Instead, Fu Man was very keen to get the prime site of Lot A4 under the Contract, and Mr Huang Rui-fu told Mr Kho that he would use his contact to persuade the Xiamen Government to allow Kin Ming to develop Lot A4 as per the original plan.

57. It is common ground that Madam Lin made a further payment of RMB 30 million to Kin Ming on 17 August 2004.  Clause 3-3 of the Written Contract stipulated that, if the Xiamen Government issued the notice for payment of land fees by 30 June 2004, Madam Lin had to make a further payment of RMB 50 million to Kin Ming on or before 30 June 2004 and pay another RMB 50 million on or before 30 July 2004.  Since the Xiamen Government had not issued the notice for payment of land fees, Madam Lin was not obliged to make further payments to Kin Ming under the terms of the Written Contract.

58. Again, there is serious dispute between the parties as to why Madam Lin made such further payment to Kin Ming.  According to Madam Lin, Mr Kho told her that Kin Ming was in need of cash, and so despite the non-issuance of the notice for payment of land fees, he requested her to make a further payment to Kin Ming under the Contract.  Madam Lin agreed and made the payment.  Madam Lin also testifies that, if the Contract did not cover the land re-granted by the Xiamen Government after the land exchange, there was simply no need for her to make such further payment to Kin Ming.

59. Mr Kho provides a different account.  He testifies that Madam Lin paid the said RMB 30 million, not as a payment under the Contract, but as gesture of sincerity so as to give more time to Madam Lin to try to persuade the Xiamen Government to keep alive the original development of Lot A4 and not to adjust the land.  By that time, Madam Lin was very keen to keep the original Lot A4 for development because of its prime location.  However, if Kin Ming did not accept the land exchange proposed by the Xiamen Government, it was certain that Kin Ming and Lianfa would not be allowed to proceed with the development of the original Lot A1.  This might delay the development plan and cause tremendous losses to Kin Ming and Lianfa.  Hence, in order to show sincerity to Kin Ming, Madam Lin made a further payment to Kin Ming.  To differentiate such additional payment with the 2 previous payments which were obliged to be made under the Written Contract, Mr Huang Wei described the payment as “合作款” in the receipt, as opposed to the words “合同[訂]金” (deposit under the contract) and “合作合同第一筆款” (1^st payment under the cooperation contract) used in the receipts for the 2 previous payments.

60. The matter dragged on without much progress.  According to Mr Huang Rui-fu, he met Mr Kho on 3 occasions in Hong Kong in the period from February to October 2005.  On each of such occasions, Mr Kho demanded Madam Lin or Fu Man to increase the contract price for the acquisition of the development rights under the Project.  Mr Huang Rui-fu refused.

61. Mr Kho agreed that he had met Mr Huang Rui-fu on some of these occasions, but he did not ask Madam Lin or Fu Man to increase the purchase price under the Contract.  On these occasions, Mr Huang Rui-fu kept on asking Kin Ming to persuade the Xiamen Government to allow it to continue with the development of the original Lot A4.  That was the reason why Kin Ming, on 3 May 2005, wrote to the Xiamen Government requesting that the planning of the Land should remain unchanged and Kin Ming should be allowed to continue with the development of the original Lot A4.

62. On 30 May 2005, the Xiamen Government replied to Kin Ming stating that the land exchange had to go ahead and that it did not recognise any agreement made between Kin Ming and any third party, i.e. Madam Lin, for the development of the Land.

63. On 2 June 2005, Kin Ming wrote again to the Xiamen Government asking for permission to develop Lot A4 in accordance with the original plan.

64. On 4 July 2005, the Xiamen Government replied to Kin Ming (Xiamen) again denying the request.  The Xiamen Government also demanded Kin Ming (Xiamen) to execute the land exchange agreement on or before 10 July 2005.

65. On 13 July 2005, Kin Ming (Xiamen) entered into an agreement with the Lands Development Company of Xiamen City relating to the land exchange.

66. On 3 November 2005, the Xiamen Government approved Kin Ming (Xiamen) to be the party responsible to remove existing structures for the development of the Land.

67. On 18 November 2005, Kin Ming (Xiamen) sought a legal opinion from Fujian Xiamen Yinghe Law Office, in which the Mainland lawyers opined that:

(i) the Contract was unenforceable because it contravened the planning laws and regulations in the Mainland;

(ii) since the Xiamen Government by administrative decision changed the planning use of Lot A4, the objective of the Contract could no longer be fulfilled and the Contract was therefore unenforceable; and

(iii) the proper course for Kin Ming (Xiamen) was to return the monies paid under the Contract to Madam Lin.

(iv) The commencement of various legal proceedings

68. According to Kin Ming, after it was apparent that the land exchange was unavoidable, it had on numerous occasions tried to return the payments made by Madam Lin but she refused to accept the refund.

69. On 22 November 2005, Kin Ming commenced HCA No 2350 of 2005 against Madam Lin seeking declarations to the effect that the Contract was frustrated and terminated (“the Default Judgment Proceedings”). Kin Ming obtained default judgment before DHCJ L Chan (as he then was) on 27 January 2006 (“the Default Judgment”), who declared the following:

(i) the agreement dated 16 April 2004 between Kin Ming and Madam Lin was terminated but without prejudice to its possible revival pursuant to clause 7-1 therein;

(ii) subject to the above, both Kin Ming and Madam Lin were discharged from further performance of the said agreement; and

(iii) Kin Ming was at liberty to deduct from RMB 130 million (the total sum received from Madam Lin) the costs of the Default Judgment Proceedings and to refund the rest to Madam Lin.

70. Madam Lin is and was at all material times a Mainland resident.  With the papers serving on Madam Lin’s last known address in Hong Kong, Madam Lin claimed that she knew nothing about the Default Judgment Proceedings until a much later stage.

71. On 28 April 2006, Kin Ming deposited RMB 125 million, being the amount of RMB 130 million to be refunded less the sum of RMB 5 million being Kin Ming’s costs of the Default Judgment Proceedings pending taxation, with the Notary Office of the Luijiang District in Xiamen for Madam Lin’s collection.  Madam Lin eventually obtained the payment on 15 July 2011.

72. On the other hand, the Xiamen Government resumed Lots A1 and A4 from Kin Ming (Xiamen) and Lianfa and, in return, re-granted various new lots in the Land (“the New Lots”) to them.

73. For easy reference, I enclose a map showing that the original Lots A1 to A4 in Appendix 1 of this Judgment.  In Appendix 2, I enclose another map which shows the areas of the New Lots (consisting of new Lots A1, A2, B1, B2, B3, B4, C, D1, D2, E1, E2 and E3) that were ultimately re-granted to Kin Ming and Lianfa after the land exchange.  From these maps, one can readily see that the New Lots covered the bulk of the original Lot A1, the whole of the original Lot A2, and about one quarter of the original Lot A4 but without any part fronting the sea.  The size of the New Lots was bigger than that of the original Lot A4 but smaller than the total size of the original Lots A1 and A4 combined.

74. On 2 September 2006, the Xiamen Government confirmed the new land grant to Kin Ming (Xiamen) and Lianfa (“the 2006 Grant”) with the specific New Lots granted to each of them in a number of different land title certificates.

75. On 15 September 2006, the Xiamen Government entered into a new land contract with Kin Ming (Xiamen) and Lianfa to confirm the terms of the 2006 Grant with a new plot ratio of no more than 1.78.  Clause 41 of the new contract stated that the 1998 Strait City Land Contract was cancelled by the making of the said new contract.

76. With the land exchange, Kin Ming took the view that the Contract ceased to have effect and proceeded to develop the New Lots with Lianfa.

77. Despite the legal proceedings taken out by Kin Ming, Madam Lin did not apply to set aside the Default Judgment.  Instead, on 17 October 2006, Madam Lin commenced an action in the Higher People’s Court of the Fujian Province (“the Mainland Proceedings”) seeking for an order that Kin Ming and Kin Ming (Xiamen) do continue to perform the Written Contract, alleging that they were in breach of the Written Contract by demanding a high payment from Madam Lin before they would continue with the performance of their obligations under the Written Contract.

78. On 1 March 2007, Madam Lin’s said claim in the Fujian Court was dismissed.  The court held that Madam Lin was seeking to re-litigate the same subject matter which had already been decided against her in the Default Judgement Proceedings, and so the court in the Mainland should not entertain a new claim by Madam Lin.  On 10 August 2007, her appeal was dismissed by the Supreme People’s Court in the Mainland.

79. On 6 February 2008, Madam Lin issued the Writ herein against Kin Ming.  By a summons dated 28 February 2008, Kin Ming applied to strike out Madam Lin’s claim.  Kin Ming’s application was first dismissed by DHCJ L Chan on 26 August 2008.  Kin Ming’s application for leave to appeal was dismissed by the learned judge on 18 March 2010, and eventually by the Court of Appeal on 5 May 2010.

80. In this action, Madam Lin relies heavily on the fact the parties, at the time of the making of the Contract, were aware of the possible land exchange or adjustment plan proposed by the Xiamen Government. Further, according to the correspondence between the Xiamen Government and Kin Ming (Xiamen), the former had insisted that the Land had to be developed as a whole (成片開發) and under a single master development plan (统一規劃).  In such circumstances, the conduct of the parties and the contents of the Written Contract have to be looked at and interpreted against such background.

81. It is Madam Lin’s primary case that she had made an oral agreement with Kin Ming in the meeting on 16 April 2004 containing the Oral Revival Term[5]. Further, the agreement relating to the Oral Revival Term was reduced into or evidenced in writing in the form of the Written Contract[6].  Alternatively, the expression “Lot A4” or “A4 plot” in the Written Contract had an extended meaning. It was understood or was intended by the parties to mean “any portion of the Land covering a building area commensurate with the Total Building Area over which Kin Ming (Xiamen) possessed or came to possess any of the Development Rights, including any of the re-granted lot or lots” (“the Extended Meaning”)[7].  In the further alternative, there was a variation of the Contract by consent of the parties on 16 July 2004 (i.e. the 1^st Variation) or 26 July 2004 (i.e. the 2^nd Variation) that the expression “Lot A4” or “A4 plot” in the Written Contract had the said Extended Meaning[8].

82. In addition to her primary case, Madam Lin argues that, even if the Contract was not intended by the parties to cover the re-granted land in exchange for Lot A4, the circumstances of the case imposed on Kin Ming a fiduciary duty to protect Madam Lin’s interest in its dealing with the Xiamen Government with regard to the land exchange, and Kin Ming was in breach of such duty.

83. Kin Ming filed the Defence on 2 November 2009 which was further amended on 27 July 2010.  It is Kin Ming’s case that:

(i) the Written Contract contained all the material terms of the agreement between the parties;

(ii) the parties had not agreed on the Oral Revival Term;

(iii) the expression “Lot A4” or “A4 plot” in the Written Contract did not carry the Extended Meaning as contended for by Madam Lin;

(iv) if the Oral Revival Term did exist, it was vague and unenforceable;

(v) there was no variation of the Contract whether on 16 or 26 July 2004;

(vi) Kin Ming did not owe any fiduciary duty to Madam Lin, and if such duty were to exist, there was no breach of such duty; and

(i) Madam Lin does not seek to overturn the Default Judgment and so she is bound per rem judicatem by the same.

84. Despite that there might be planning changes in the development of Strait City, it is Kin Ming’s case that Madam Lin, who was an experienced land developer, was keen to obtain the prime site of Lot A4 for development.  That was the reason why the parties had expressly stipulated Lot A4 as the subject of the Project in the Written Contract.  Further, as the parties were negotiating for a multi-million dollars deal, one would expect the parties to have put down all the material terms of the transaction in the Written Contract, and so Madam Lin’s case about the Oral Revival Term should not be believed.

(v) The dispute relating to the Counterclaim

85. As the litigation dragged on, one of the friends of Madam Lin and Mr Huang Rui-fu, Mr Lin Yu Kun (林钰锟)(“Mr Lin”), said he could offer assistance by helping the parties to reach a settlement.  On 28 July 2010, Madam Lin and Mr Huang Rui-fu signed 2 powers of attorney (“the 2 Powers of Attorney”) authorising Mr Lin’s “friends” to negotiate with Kin Ming so that Kin Ming would honour its obligation under the Contract.  When they signed these documents, the names of the agents were left in blank.  According to the express terms therein, the 2 Powers of Attorney would terminate in 3 months’ time on 28 October 2010.

86. Eventually, the persons authorised in the 2 Powers of Attorney were Mr Hung Kwok Wai (洪國偉)(“Mr Hung”) and Mr Tsoi Chun Yu (蔡振裕)(“Mr Tsoi”). According to the Madam Lin and Mr Huang Rui-fu, they did not know Mr Hung and Mr Tsoi personally and the latter were appointed solely on the strength of Mr Lin’s recommendation.

87. Mr Lin also introduced Mr Huang Rui-fu to another person known as Mr Zhuang Jin Xiang (莊金象)(“Mr Zhuang”).  By an agreement dated 28 July 2010, Mr Huang Rui-fu promised to pay Mr Zhuang a sum of RMB 60 million if he managed to get Kin Ming to transfer Lot A1, i.e. the lot subject to the joint development by Kin Ming and Lianfa, to Fu Man.

88. Starting from late July 2010, Mr Kho had kept on complaining that he had received various threatening calls demanding for Kin Ming to settle the claim by Madam Lin or Fu Man.  Mr Kho made a report to the police.  Mr Tsoi and Mr Hung also attended Kin Ming’s office in Hong Kong on a few occasions to discuss the dispute.  Despite these meetings, Mr Kho had kept on receiving threatening and intimidating telephone calls.

89. On 22 October 2010, Kin Ming applied successfully for an ex parte injunction against Madam Lin and Mr Huang Rui-fu restraining the making of further threats or intimidations.

90. On 26 October 2010, Kin Ming filed the Counterclaim against Madam Lin and Mr Huang Rui-fu claiming for, inter alia, injunctive relief and damages for harassment and intimidation.  Mr Kho was later joined as an additional plaintiff in the Counterclaim.

91. On 28 October 2010, Madam Lin and Mr Huang Rui-fu made an undertaking to the court in the same terms as per the ex parte injunction.

92. According to Madam Lin and Mr Huang Rui-fu, they contacted Mr Lin on 29 October 2010 and asked his friends to cease to have any further contacts with Kin Ming or Mr Kho.  They reaffirmed such instruction when they met Mr Lin on 3 November 2010.  They later lost contact with Mr Lin.

93. Mr Kho complains that the intimidation continued.  Mr Hung went to Kin Ming’s office 29 October 2010 and caused a lot of disturbance.  He also produced a copy of the Zhuang Agreement to Mr Kho. After that, Mr Kho continued to receive threatening and intimidating telephone calls.  On 29 November 2010, Kin Ming took out an originating summons seeking to commit Madam Lin and Mr Huang Rui-fu for contempt for breach of the terms of the undertaking.  The application was dismissed by Sakhrani J after trial on 11 September 2012 and the appeal was dismissed by the Court of Appeal on 4 October 2013.

94. Mr Kho also met Mr Lin in Manila on 6 January 2011.  Unknown to Mr Lin, the whole conversation was recorded by a staff of Kin Ming.  According to the conversation as shown in the transcript, Mr Lin denied his responsibility in harassing or intimidating Mr Kho.  He also denied knowing Mr Tsoi or Mr Hung.  Further, he said he was forced by Madam Lin and Mr Huang Rui-fu to sign the documents acknowledging that they had given instruction not to have any further contact with Mr Kho.  On the other hand, Madam Lin and Mr Huang Rui-fu claim that the meeting was a concerted and orchestrated attempt by Mr Kho and Mr Lin to discredit them.

95. Mr Kho claims that he had suffered serious mental distress as a result of the harassment and intimidation on the part of the agents of Madam Lin and Mr Huang Rui-fu.  Apart from Mr Kho’s claim for general and exemplary damages, he and Kin Ming also counterclaim substantial damages for business opportunities that were allegedly lost in the period when Mr Kho was suffering from mental distress and was unable to make business decisions relating to these opportunities.  The amount of such claim is in the region of US$1,100 million.

EVIDENCE AT THE TRIAL

96. With such background, I turn to the evidence adduced by the parties at the trial.

97. For the purpose of this Judgment, I do not think that it is necessary for me to set out the details of the evidence given by each individual witness.  In this part of the Judgment, I would just list out the witnesses giving evidence at the trial and their backgrounds.  I would also provide a general description of the nature of the evidence given by them.

98. Madam Lin and Mr Huang Rui-fu are the main witnesses in support of Madam Lin’s claim in the Main Action.  Their evidence covers the various matters listed out in the earlier part of this Judgment, including the details of the negotiation conducted in Xiamen, the making of the Contract on 16 April 2004 including the agreement on the Oral Revival Term, the alleged 1^st and 2^nd Variations of the Contract, the background leading to the payment of RMB 30 million in August 2004, the demands made by Mr Kho for the increase in the contract price in 2005 and their roles in seeking the assistance of Mr Lin’s friends in trying to resolve the dispute with Kin Ming.

99. Both Madam Lin and Mr Huang Rui-fu are Mainlanders.  According to Mr Huang Rui-fu, he came from a rural village and received very little education.  He left school when he was 11 and worked as a farmer.  He became a stonemason when he was 16, a carpenter when he was 20, and a contractor when he was 25.  Mr Huang Rui-fu and Madam Lin started their real estate development business in 1995.  They set up Fu Man to operate their business, and they were the main shareholders of Fu Man.

100. Usually, it would be Mr Huang Rui-fu who would be responsible for the negotiation of business deals, and Madam Lin would be responsible for the internal administration of Fu Man.  Between 1995 and 2004, Fu Man was involved in the development of about 5 real estate projects in the Mainland.  For these projects, Fu Man acquired the lands from the Government through negotiation and developed them into various residential or commercial and residential buildings.  As compared with the Project in Strait City, these projects were smaller in scale.

101. Mr Huang Rui-fu cannot come to Hong Kong to testify in person and so he gives his evidence through video-link facility.  Fu Man was involved in a project of building residential apartments in some “resettlement land”, which would be sold to the Government and the public upon completion. The Government alleges that the area built by Fu Man under the project exceeded the area originally allowed.  Because of the investigation carried out by the Government about such matter, Mr Huang Rui-fu is not allowed to travel outside the Mainland.

102. The Kho’s brothers are the main defence witnesses in the Main Action.

103. The younger Mr Kho received education in Fujian.  After graduating in about 1980, he became a teacher.  Because of his family connection, he then applied to emigrate to live in the Philippines.  After arriving there, he assisted his family in the operation of a few factories.  He later became the main person running the family business which also included mining and real estate businesses.

104. As a recognition for the various donations made by his family to different universities in Fujian, Mr Kho became a member of the Fujian Committee of CPPCC since 1993, and a member of the National Committee of CPPCC since 1998.  However, fate seemed to turn against him after the investigation of the Smuggling Case carried out by the Central Government.  One of his companies was accused to have evaded tax.  Being the person responsible for that company, he was detained by the Mainland authority from early 2000 to early 2002 and he was stripped of his positions in CPPCC.  Mr Kho considers himself innocent.  He even breaks down in tears when he is cross-examined about such bitter experience in the past.

105. His elder brother, Mr Hsu, also testifies at the trial.  Whilst Mr Kho would be mainly responsible for running the family business in other parts of the world, Mr Hsu was more devoted to take care of the business interests in the Mainland.  Mr Hsu is not a “hand-on” type of person, and he delegated a lot of works relating to the development project in Strait City to his staff, including liaising with the Xiamen Government for the payment of the balance of the land fees.

106. Although the major decisions of the family business had to be made by the two Kho’s brothers together, it is clear from the evidence that Mr Kho played a more dominant role in the running of the family business.  Undoubtedly, Mr Kho was the key person to negotiate the terms of the Contract with Madam Lin and Mr Huang Rui-fu on 16 April 2004.  Despite that, Mr Hsu was the main person running the family business when Mr Kho was detained in the period from 2000 to 2002, and he was also responsible for the initial negotiation of the Project conducted in Xiamen.

107. Mr Huang Wei, the business manager employed by Kin Ming (Xiamen), also testifies at the trial.  He joined Kin Ming (Xiamen) in 2003, and he was the person responsible for bringing together Fu Man and Kin Ming for the business cooperation under the Project.  He tells the court about the initial negotiation of the Project conducted in Xiamen.  He also attended the meeting on 16 April 2004, but he was not involved in the negotiation of the terms of the Contract.  On that day, he was mainly responsible for preparing tea and greeting various participants of the meeting.  During cross-examination, Mr Fung, SC, counsel for Madam Lin and Mr Huang Rui-fu, suggests to him that there was no point in flying him all the way from Xiamen just for these purposes, Mr Huang Wei explains that, being the person responsible for bringing the parties together, he need to be present at the meeting for the negotiation of the deal.  It was part of the business culture. Mr Huang Wei was also responsible for issuing the receipt for the payment of RMB 30 million by Madam Lin in August 2004.  Since such payment was not payment required to be made under the Contract, he described the payment as “合作款” (cooperation payment) in the receipt.

108. Mr Tsang Zi Yuan (曾子元)(“Mr Tsang”) is another witness in support of Kin Ming’s case.  He was a project manager employed by UAA Group Limited (“UAA”) which was owned and controlled by Mr Kho.  At the material time, he was responsible for a project of UAA in Papua New Guinea.  On 16 April 2004, he was instructed by Mr Kho to provide assistance in the preparation of a contractual document about the transfer of rights of a piece of land in the Mainland.  Because of his limited role, he was not directly involved in the negotiation of the terms of the Written Contract, but he assisted in the mechanical preparation of the various drafts of the Written Contract.

109. According to Mr Tsang, Madam Lin was actively involved in the negotiation of the terms of the Written Contract.  She did voice out different suggestions and opinions relating to the use of the wordings in the document.

110. Both parties have also arranged their respective solicitor witnessing the execution of the Written Contract, namely Mr Raymond Wu for Madam Lin and Mr Simon Si for Kin Ming, to testify at the trial.  From the outset, these witnesses had indicated to the parties that they were not in a position to give advice on Mainland law.  Since they were not involved in the negotiation process, I do not find that their evidence is helpful in resolving the various factual issues in this case.

111. Finally, Kin Ming and Mr Kho have also arranged some other witnesses to testify on various matters relating to the Counterclaim.  I will deal with their evidence in the latter part of this Judgment.

MERITS OF MADAM LIN’S CLAIM IN THE MAIN ACTION

112. The thrust of Madam Lin’s case is that the parties knew full well at the time of the making of the Contract that the Xiamen Government might effect planning changes in the development of Strait City which might involve land exchanges within the Land.  Given such background, the subject matter of the Contract must have been intended by the parties to cover any land to be exchanged for Lot A4, otherwise there was no point for Madam Lin to have entered into the Contract and made substantial part-payments under the Contract, including the payment of RMB 30 million made in August 2004.  Furthermore, if the Contract were not to cover any land to be exchanged for Lot A4, Kin Ming should have refunded the part-payments to Madam Lin after 30 June 2004 when the Xiamen Government did not issue the notice for payment of the balance of the land fees and made known its plan for land exchange in July 2004.  Yet, Kin Ming only agreed to make the refund in late 2005.  Madam Lin complains that Kin Ming was greedy and took advantage of her.  To ease its financial pressure, Kin Ming first obtained the part-payments from Madam Lin in order to pay the balance of the land fees to the Xiamen Government.  After the property market had risen in Xiamen, Kin Ming used the land exchange as an excuse to kick Madam Lin out of the Project.

113. On the other hand, Kin Ming claims that Madam Lin and Fu Man had all along been interested in acquiring Lot A4 which was a prime site with sea-facing front, and that was why the land expressly referred to in the Written Contract was “Lot A4”.  At the time of the making of the Contract, there was rumour about possible planning changes, but Madam Lin and Mr Huang Rui-fu indicated that they would try to persuade the Xiamen Government not to effect any planning changes.  Later, the Xiamen Government forced Kin Ming (Xiamen) to accept the land exchange, to which Kin Ming did not have a choice.  If such event were to occur, the Contract would cease to have effect and the parties would have to renegotiate for a new deal, otherwise there would be a lot of uncertainties which had not been discussed during the making of the Contract, in particular Kin Ming had interests in other part of the Land which would be subject to the same development plan.  After the Xiamen Government had made known its plan for the land exchange, Mr Huang Rui-fu told Mr Kho that he would try to persuade the Xiamen Government to change its mind, and he also asked Mr Kho to write to the authority requesting for the right to develop the Project as per the original plan.  That was why Madam Lin did not demand for the immediate refund of the part-payments.

114. As agreed by the parties, the merits of Madam Lin’s claim are to be determined largely on the credibility of the witnesses.

115. Having carefully considered the evidence of the various witnesses, I prefer to accept Kin Ming’s case on the balance of probabilities.  Although the reasons set out below are all inter-related, for the sake of clarification, I will try to group these reasons under various sub-headings.

(i) The Written Contract should have contained all the material terms of the transaction

116. Firstly, if the parties had agreed on the Oral Revival Term as alleged by Madam Lin and Mr Huang Rui-fu, I find it incredible that such term was not included in the Written Contract itself.

117. The parties were negotiating for the transfer of rights of a land development project involving millions of dollars.  The fact that the parties discussed the terms in great length reflects that they, who did not know and had not dealt with each other before, wanted to safeguard their rights by having a proper record of what had been discussed and agreed between them.

118. The contents of the Written Contract also indicate that the terms contained therein were the product of serious negotiation between the parties.  The inclusion and the amendment of clause 2-2 show that the parties had thought about the possibility of the reduction of building space caused by any planning changes in Lot A4.  If there was such a term to cover that eventuality, why did the parties not include a term to deal with the possible land exchange if the parties had indeed discussed the matters as alleged by Madam Lin?

119. The inclusion of clause 3-4 also shows that Madam Lin was free to include terms in the Written Contract which were favourable to her, as such clause allowed her to use Lot A4 as security to raise money to finance the transaction after making part-payment of over RMB 200 million.  As pointed out by Mr Kho himself, Kin Ming was not happy when Madam Lin raised such subject at the initial stage of the discussion. It was certainly a concession on the part of Kin Ming that Madam Lin would be allowed to mortgage Lot A4 to raise fund to finance the transaction before the full payment of the contract price.  The inclusion of such term in the Written Contract does not sit well with Madam Lin’s contention that she had been forced to sign the Written Contract under pressure.  As shown by the logic in one of Mr Kho’s answers in his oral testimony, the Written Contract involved a deal of RMB 495 million, no one could force the other side to do anything against their will.

120. It is therefore strange that Madam Lin (or indeed Mr Huang Rui-fu) did not insist to put the alleged Oral Revival Term, which was obviously a term important to her, in the Written Contract.  In particular, she was dealing with the Kho’s brothers for the first time and, according to her, Mr Kho showed reluctance to include the Oral Revival Term in the Written Contract which should have raised some suspicion about the willingness of Kin Ming to honour such term.  As admitted by Madam Lin herself in her evidence, she was taking a lot of risks in the Project, and the omission of the alleged Oral Revival Term in the Written Contract cannot be explained by a mere suggestion that it was the parties’ style of doing business.

121. The evidence shows that Madam Lin had ample opportunities to add the Oral Revival Term or to extend the meaning of “Lot A4” in the Written Contract.  The drafts of the Written Contract had been amended a number of times, and Madam Lin was clearly involved in the process when the different drafts of the Written Contract were typed out and prepared.

122. Further, if the parties had agreed on the Oral Revival Term, it was unnecessary for Mr Kho to ask Mr Huang Rui-fu on 26 July 2004 as to whether Madam Lin wished to have any reduction in contract price because the Contract would still be binding on the parties[9].  Further, it would be very difficult to explain why Mr Kho was so accommodating to Madam Lin on that occasion, and yet only a few months later, Mr Kho demanded to increase the contract price before Kin Ming would transfer the development rights to Madam Lin.  In particular, Mr Huang Rui-fu claimed that the property market in Xiamen had risen shortly after the making of the Contract in April 2004.

123. In trying to explain away the non-inclusion of the Oral Revival Term in the Written Contract, Madam Lin says that she trusted Mr Kho because of his official positions.  However, she admits that she was taking a lot of risks in the Project given Kin Ming’s suspected involvement in the Smuggling Case and the imprisonment of Mr Kho.  She also knew that Mr Kho was stripped of his official positions.  In their cross-examination, both Madam Lin and Mr Huang Rui-fu cannot give a satisfactory explanation as to why they still trusted Mr Kho under such circumstances.

124. In support of Madam Lin’s claim, Mr Fung has placed much emphasis on the phrases “成片開發” (developed as a whole) and “统一規劃” (developed under a single master development plan) which appeared in a number of documents and correspondence between Kin Ming and the Xiamen Government[10].

125. According to Mr Fung, the use of these phrases shows that the Land known as Strait City would have to be developed as a whole.  Kin Ming was not allowed to develop Lots A1 and A4 on its own and it was therefore possible to have land adjustment or land exchange within Strait City.  Given such background, the parties could not have intended the Contract to cover just Lot A4, and the phrase “Lot A4” should be interpreted to cover any land to be exchanged for Lot A4.

126. Despite the able submission of Mr Fung, I cannot accept such argument.  In 1999, the Xiamen Government approved the partition of the Land and issued land title certificates to Kin Ming in respect of Lots A1 and A4.  Even Madam Lin accepts that, in the normal course of events, the issuance of the land title certificate is proof of ownership of the land in question. In other words, Kin Ming was the owner of Lots A1 and A4, and there was nothing to suggest otherwise.  In the subsequent correspondence, the Xiamen Government indicated to Kin Ming that the Land had to be planned and developed as a whole, but that did not indicate that Kin Ming was not the owner of Lots A1 and A4. As I see it, the Xiamen Government was just using the planning requirements as an excuse to defer the development of the Land.  This is quite understandable given the uncertainties and the complications resulting from the investigation of the Smuggling Case and the problem as to how to deal with the confiscated properties. 

127. Further, I accept the submission of Mr Neoh, SC, counsel for Kin Ming and Mr Kho, that the phrases “成片開發” (developed as a whole) or “统一規劃” (developed under a single master development plan) meant no more than the Land had to be planned as a whole.  This was a natural consequence from the fact that there was one planning permission covering the development of the whole Land back in 1998.  In such circumstances, there might be changes to matters such as the building of public facilities in the various lots of land within Strait City, which might affect the area allowed to be developed in a particular lot of land.  However, it did not suggest that there would have to be land adjustment or land exchange within the development project.

128. More importantly, I accept Mr Kho’s evidence that, if the parties had agreed the Oral Revival Term or had intended the Contract to cover any land to be exchanged for Lot A4, it would have been in the business interest of Kin Ming to include the Oral Revival Term in the Written Contract, or to expressly stipulate in the Written Contract that the phrase “Lot A4” was to cover any land to be exchanged for Lot A4.

129. It is common ground that Lot A4 was the best piece of land within Strait City.  If there was any land exchange within the Land, the exchanged land had to be inferior in quality as compared with Lot A4.  Under such circumstances, it would actually be in the business interest of Kin Ming, if the parties had the possible land exchange in mind, to include the Oral Revival Term (if that was agreed by the parties) in the Written Contract, or to extend the meaning of the land covered by the Contract to include any land to be exchanged for Lot A4.  The contract price for the transfer of the development right under the Contract was negotiated in arm’s length.  The property market might rise or fall after the making of the Contract.  If the Written Contract was only to include Lot A4 and nothing else, it would provide an excuse to Madam Lin to back out from the Contract in the case of any land exchange, particularly in the case of a falling market which was a possibility facing the parties at the time of the making of the Contract.  If that occurred, it would actually harm the interests of Kin Ming.

130. Based on the same reasoning, it does not make a lot of business sense that Mr Kho raised the issue of land exchange at such a late stage of the negotiation as alleged by Madam Lin.  According to her, when Mr Huang Wei left the conference room in the afternoon to type out the Written Contract, most of the terms had already been discussed and agreed between the parties.  It was only then Mr Kho talked about the plan of the Xiamen Government to adjust the land in Strait City.  Mr Kho even told her the details of the site that might be exchanged for Lot A4, which would be a site with no sea-facing front.  Again, if Mr Kho knew so much about the land exchange plan, which I do not accept it to the case, I wonder why  Mr Kho would not have insisted to put down the Oral Revival Term in the Written Contract, in particular when he knew for certain that the exchanged land had to be inferior in quality with no sea-facing front.  Further, it would not have been sensible for Mr Kho to raise such subject near the end of the negotiation.  Such matter would have a grave impact on the contract price and Madam Lin’s interest in the participation of the Project, and it would be desirable for the parties to reach consensus on such important issue before investing further time in the negotiation.

131. Mr Fung also submits that it is unbelievable Kin Ming had done nothing to find out the details of the planning changes when there was rumour about such plan prior to the making of the Contract, given that Lot A4 was a prime lot in Strait City.  Further, it could not have been the case that the Xiamen Government just implemented the land exchange plan suddenly in July 2004 without giving some prior notification or warning to Kin Ming.

132. Despite the able submission of Mr Fung, one has to understand the position facing Kin Ming at the relevant time.  The Xiamen Government had repeatedly refused Kin Ming’s request to pay the balance of the land fees with the effect of putting the development of Lots A1 and A4 on hold.  Kin Ming was in a very passive position, and one cannot therefore expect Kin Ming to do much in the circumstances.  Further, the evidence suggests that the Xiamen Government had not made the final decision about the land exchange in July 2004.  The Xiamen Government did not demand Kin Ming (Xiamen) to execute the land exchange documents until nearly a year later.

133. In trying to establish that the Written Contract had not been intended by the parties to include all the agreed terms, Madam Lin also relies on Kin Ming’s own pleaded case in the Default Judgment Proceedings. In the pleadings filed in that action, Kin Ming claimed that there was a collateral agreement contemporaneous with the Written Contract that both Madam Lin and Kin Ming would attempt to lobby the Xiamen Government to ensure that the future planning status of Lot A4 would revert back to that stated in the original planning permission[11]. According to Mr Fung, even Kin Ming itself acknowledged that the Written Contract did not contain all the agreed terms between the parties.

134. It is not just that Madam Lin is relying on something pleaded in earlier legal proceedings to discredit Kin Ming’s case, Kin Ming is seeking to do the same against Madam Lin.  According to the legal documents filed in the Mainland Proceedings, Madam Lin was making a claim against Kin Ming based on the terms of the Written Contract alone.  The claim did not contain any reference to the Oral Revival Term or any kind of oral agreement between the parties.

135. For myself, I would not attach a lot of weight to these arguments.  The averments made by the parties in the earlier proceedings were actually “lawyers’ pleas”.  In making decisions as to the contents of the pleas, the legal advisers would naturally focus on the objective of the legal proceedings in hand.  They might not have considered all the other aspects of the case, and they did not have first-hand knowledge about the whole facts leading to the making of the Contract.  In such circumstances, it would be dangerous for the court to rely on these “lawyers’ pleas” in considering the merits of the case.

136. Furthermore, the “oral agreement” pleaded by Kin Ming in the Default Judgment Proceedings is something quite different.  As stated by Mr Kho in his testimony, the “oral agreement” was no more than a mutual understanding between the parties at that time that they would work together to lobby the Xiamen Government so that Kin Ming could develop Lot A4 as per the original plan.  Quite naturally, the parties might decide not to record the mutual understanding in writing, in particular the parties did not know for certain whether the Xiamen Government was going to alter the plan for the development of Lot A4.  On the other hand, if Madam Lin’s account were to be believed, the Oral Revival Term was most important to the parties at the material time, and yet the Written Contract had expressly referred to the development right of Lot A4 only.  If the parties had intended the Written Contract to be binding on them even if the Xiamen Government were to exchange another piece of land with Lot A4, they should have included such an important term in the Written Contract.

137. For the above reasons, I reject the evidence of Madam Lin and Mr Huang Rui-fu about the existence of the Oral Revival Term.

(ii)  Uncertainties arising from the implementation of the Oral Revival Term

138. Secondly, the implementation of the Oral Revival Term might create considerable uncertainties, and I do not accept that experienced developers like Kin Ming and Fu Man would have agreed to such kind of term.

139. Even assuming that Kin Ming were to know about the land exchange plan of the Xiamen Government at the time of the making of the Contract, it was unclear by that time as to how the Xiamen Government would propose to execute the land exchange plan.  There was no certainty that the total building area claimed to be entitled by Madam Lin would fit in a particular portion or portions of the re-granted lot.  There were also the interests of the third party, i.e. Lianfa, involved in the re-granted land.  It made no commercial sense for any party, in particular Madam Lin, to blindly agree to get the aggregate total building area, however such building area was to be scattered across different parts or corners of the re-granted land.

140. At the time of the making of the Contract, no one could have predicted with any certainty as to how any land adjustment might be made in the future, and whether any party’s interest would be involved in the re-granted land.  As shown by the facts of the present case, the interests of Kin Ming and Lianfa were interlocked under the 2006 Grant.  In view of such uncertainties, no sensible party with any commercial sense would have committed itself in the development regardless of how Lot A4 was to be adjusted in the future, and got stuck with the same contract price of RMB 495 million.

141. In the course of giving evidence, Madam Lin herself takes the view that, in a hypothetical scenario, if the Xiamen Government were to confiscate Lot A4 and to re-grant another piece of land but with additional premium, Kin Ming would be solely responsible for the payment of such additional premium.  However, there is no basis to support such observation, in particular such payment was not within the contemplation of the parties at the time of the making of the Contract and they had not discussed the issue beforehand.  In my judgement, such uncertainty further highlights the problems that might be faced by the parties.  Hence, I do not believe the parties had intended the Contract to be binding irrespective of any land exchange imposed by the Xiamen Government.

142. The uncertainty and the unreasonableness of the Oral Revival Term can also be demonstrated by one of the contentions made by Madam Lin herself.  In paragraphs 13 and 14 of Madam Lin’s witness statement dated 28 September 2011, Madam Lin mentioned that she and Mr Kho had agreed that, in the case of any land adjustment or land exchange, Kin Ming had to transfer the development rights of 335,192.16 square metres of building space in the Land to her.  Since the building areas enjoyed by Madam Lin and Kin Ming would be more or less the same, Madam Lin and Kin Ming would each be responsible for paying half of the costs in building the public facilities in the Land, and each of them would contribute half of the area for the construction of such public facilities.

143. This alleged oral term to equally share the costs for constructing public facilities is not compatible with or even conflicts with the other terms of the oral agreement mentioned in paragraph 14.  Since Kin Ming had to give Madam Lin a fixed total building area of 335,192.16 square metres and no more, it was possible that if the re-granted land was less than 666,000 square metres, Kin Ming’s land might be less than that of Madam Lin.  It was obviously against commercial sense and therefore not possible that Kin Ming would have agreed to contribute half of the building area and half of the building costs required by the Xiamen Government for the public facilities.  In an extreme scenario, if the re-granted lot was less than 335,192.16 square metres, that means Kin Ming had to contribute half of the costs for the public facilities and was liable for breach of failing to contribute half of building area for the public facilities while Madam Lin was still entitled to the reduction in price of RMB 1,500 per square metre.  This simply cannot be right.  Since both parties were developers of some experience, I do not accept that they would have agreed the Oral Revival Term in view of all these uncertainties.

144. In trying to reduce the uncertainties, Madam Lin explains for the first time at the trial that Mr Kho told her, near the end of the negotiation, that even if there was any land adjustment, the difference in area of Lots A1, A2, A3 and A4 would not be too great.  However, there was no guarantee that it would be the case, in particular the evidence suggests that Kin Ming would not be in a strong position to influence the decision of the Xiamen Government.  Furthermore, the fact that such allegation has not appeared in any of the previous pleadings or witness statements of Madam Lin certainty undermines the credibility of such allegation.

(iii)  Unlikelihood of Madam Lin’s version of the events as to what happened prior to the meeting on 16 April 2004

145. Thirdly, it is very difficult for me to accept the evidence of Madam Lin and Mr Huang Rui-fu that, prior to coming to Hong Kong for the meeting on 16 April 2004, they did not even know roughly which portion of the Land that Kin Ming was offering to co-operate with Fu Man. Obviously, Madam Lin and Mr Huang Rui-fu are trying to rely on such evidence to support their case that the Contract was not intended to cover Lot A4 only.

146. I do not accept Madam Lin’s account as to what actually happened before the making of the Contract on 16 April 2004.  In my judgment, it is most incredible that an experienced developer like Fu Man, or indeed any developers, would not try to find out precisely which piece of land was being offered for co-operation or ask for more details of the land from the land owner, or from the Xiamen Government, when Madam Lin claims that she was friendly with the government officials and knew them well over the years, and if she wanted any information in respect of any piece of land that Fu Man intended to develop she would be able to get the necessary information from them.  Obviously, these were natural enquires which would have been made in order to assess whether the potential deal was commercially viable or feasible.

147. What is more surprising is that Fu Man was nevertheless still able to make its own assessment and decided that the price they would be prepared to offer for the unidentified land in Strait City was RMB 2,000 per square metre, despite claiming not to know the size or precise location of the land that was put on offer, when Mr Huang Rui-fu at the same time admits that the position of the land was most important for the assessment of the purchase price, and the market price for a piece of land would depend on the particular angle or aspect of the land.  A sea-fronting lot (like Lot A4) plainly commanded a higher value than an inland lot, yet Mr Huang Rui-fu insists that Fu Man could work out the price to offer for each square metre of the building area without knowing the actual location of the land, its lot size or plot ratio.  This is wholly unbelievable.

148. To me, Kin Ming’s account makes much more sense.  By the time when Madam Lin and Mr Huang Rui-fu came to Hong Kong to discuss the matter with Kin Ming on 16 April 2004, the land on offer by Kin Ming was made known to Madam Lin and Mr Huang Rui-fu as Lot A4, and the price was provisionally agreed at RMB 500 million in Xiamen.  Mr Huang Rui-fu wanted Lot A4 because he took the view that the market price of the apartments built thereon would be higher, given Lot A4 was fronting the sea.

149. I also do not accept that there is any inconsistency in the evidence between Mr Hsu and Mr Huang Wei about the agreement of the purchase price of RMB 500 million in Xiamen before 16 April 2004. Obviously, there was no final agreement on the purchase price by that time.  It was only an assessment based on the purchase price of RMB 1,500 per square metre.  The parties went on to have further negotiation on the price, which was eventually reduced to RMB 495 million at the meeting.  To suggest that the parties did not have a rough idea or any discussion about the purchase price before Madam Lin and Mr Huang Rui-fu came to Hong Kong to finalise the deal is, in my judgment, against ordinary business sense.

150. Mr Fung submits that there could not have been any agreement on the purchase price in Xiamen.  Given the dominant role played by Mr Kho in the operation of the family business, Mr Hsu could not have agreed the purchase price with Mr Huang Rui-fu in Xiamen without first obtaining the consent of his brother.

151. Again I do not accept such argument.  One must realise that the parties use the term “agreement” on a very loose sense.  If the parties had made a binding agreement on the price in Xiamen, Madam Lin would not have been able to negotiate for a reduction of the contract price from RMB 500 million to RMB 495 million in the meeting.  In other words, the parties only had a general understanding on the approximate price subject to further negotiation in the face-to-face meeting in Hong Kong.

152. On the other hand, if Madam Lin and Mr Huang Rui-fu were to be believed, they knew very little about the exact subject matter of the Project prior to the meeting, and yet they were able to agree everything, including the important term about the purchase price, with Kin Ming in one single meeting on 16 April 2004.  Given that the parties were entering into a multi-million dollars deal, it is very difficult for me to accept the story of Madam Lin.

(iv)  Payment of RMB 30 million in August 2004

153. Fourthly, there was good reason, or at least it was not unreasonable, for Madam Lin to make a further payment of RMB 30 million to Kin Ming in August 2004 notwithstanding that the subject matter of the Project was only Lot A4.

154. I do not want to repeat Mr Kho’s evidence about the circumstances leading to the making of such payment.  Given that the development of Lot A1 had been held up because of the refusal or reluctance on the part of Kin Ming (Xiamen) to execute the land exchange documents, which adversely affected the interests of Kin Ming and Lianfa, it would have been sensible for Madam Lin to pay a further sum of sincerity money to Kin Ming, so as to buy time to persuade the Xiamen Government to change its mind about the development plan of Strait City.  With the making of such payment, it was also natural that Mr Kho felt he was under some kind of moral obligation to continue the Project despite that the Contract was only to cover Lot A4 and the Xiamen Government had not issued the notice for payment of land fees by 30 June 2004.

155. Further, there is evidence to suggest that such payment was not part-payment under the terms of the Contract.  Firstly, if Kin Ming was in financial difficulty, it could have asked for the next instalment under the Written Contract in the sum of RMB 50 million, and yet the payment made by Madam Lin was of a smaller amount.  Secondly, the payment of RMB 30 million was described as “合作款” (cooperation payment) in the receipt dated 17 August 2004, whereas the earlier part-payments were described as “合同[訂]金” (deposit under the contract) and “合作合同第一筆款” (1^st payment under the cooperation contract) in the 2 receipts issued in April 2004.  In my judgment, it was not mere coincidence that there was no reference to the Contract in the August receipt, and I accept the evidence of Mr Hsu and Mr Huang Wei that omission of the reference to the Contract in the August receipt was a deliberate attempt by Kin Ming to differentiate the August payment with the earlier payments.

156. There are also material inconsistencies in the evidence of Madam Lin and Mr Huang Rui-fu as to who and to whom the demand for the additional payment of RMB 30 million was made.  In paragraph 27 of Madam Lin’s statement dated 28 September 2011 (such account is confirmed by her oral testimony at trial), the demand was made by Mr Kho to her.  In paragraph 13 of Madam Lin’s affirmation filed on 29 March 2008 to oppose Kin Ming’s striking out application, Madam Lin said the demand was made by Mr Hsu to her.  At the trial, Madam Lin cannot offer a satisfactory explanation for such inconsistency.  On the other hand, Mr Huang Rui-fu stated in paragraph 13 of his witness statement dated 28 September 2011 that the demand was made by Mr Kho to him.  These obvious inconsistencies certainly throw doubt as to whether such a demand was in fact made by Kin Ming.

157. There is also a related issue as to whether Kin Ming was in financial difficulty when the Contract was made in April 2004.  According to Mr Huang Rui-fu, which he confirms was his “feeling” only, Kin Ming was eager to obtain the deposit of RMB 100 million from Madam Lin in order to pay the balance of the land fees to the Xiamen Government.  The fact that Kin Ming only made the payment of about RMB 41 million to the notarial office in the end of April 2004 for collection by the Xiamen Government could not, says Madam Lin, have been a coincidence.

158. I accept the evidence of Mr Kho that Kin Ming was not in financial difficulty by that time.  In fact, Kin Ming had been making offer to pay the balance of the land fees as early as 2001.  I agree with Mr Kho that such offer could not have been made lightly.  If the Xiamen Government accepted the offer, Kin Ming had to make the payment immediately.  Hence, Kin Ming could not have been in financial difficulty by that time.  Neither is there any evidence to suggest the Xiamen Government was pressing Kin Ming to pay the balance of the land fees.  In fact, the evidence suggests that the Xiamen Government was trying to delay such payment.  In such circumstances, there was no financial pressure on Kin Ming to obtain the payments from Madam Lin.

159. In fact, despite the previous refusals of the Xiamen Government to accept the balance of the land fees, Kin Ming made serious attempt in paying the land fees through the notarial office in the end of April 2004.  In my judgment, such conduct on its part shows that Kin Ming had been trying very hard to honour its obligations under the Contract.  The Contract might cease to have effect if the Xiamen Government did not issue the notice for payment of land fees by 30 June 2004, and so by making the attempt for payment through the notarial office, Kin Ming was putting pressure on the Xiamen Government to issue the notice as soon as possible, which would only facilitate the continuation of the Project under the Contract.

(v) Kin Ming’s effort to persuade the Xiamen Government to allow the development of Lot A4 as per the original plan

160. At the trial, Madam Lin suggests that it would actually be in the interest of Kin Ming to have a land exchange with the Xiamen Government.  As the property market in Xiamen had soared, Kin Ming, in the case of a land exchange, could use it as an excuse to justify the termination of the Contract and to get back the development rights of the land under the Project. Madam Lin even seems to suggest that Kin Ming had engineered the land exchange, or at least it did nothing to protect her interests under the Contract.

161. In my judgment, there is simply no evidence to show that Kin Ming had engineered the land exchange to get rid of Madam Lin so that it could develop the re-granted land by itself.  Although there was a mention of a report submitted by Kin Ming (Xiamen) in the letter by the Xiamen Government dated 26 July 2004 (“the Report”), which seemed to suggest that it was Kin Ming who initiated the land exchange, I accept the evidence of the Kho’s brothers that it was the original plan of the Xiamen Government to exchange Lot A4 with another piece of land outside Strait City.  It was only upon the counter-proposal made by Kin Ming, which might be made together with the submission of the Report, that the Xiamen Government agreed to use another portion of land inside Strait City to exchange for Lot A4.

162. Mr Fung makes a point about the non-disclosure of the Report on the part of Kin Ming.  Mr Fung makes a request for the discovery of the Report only at the trial but not before.  In reply, Kin Ming claims that it cannot locate the Report.

163. In my judgment, I do not accept that this is a deliberate attempt by Kin Ming to conceal the evidence.  The request for discovery is only made at the trial.  If the Report is such an important piece of document, I wonder why Madam Lin has not made the application earlier.  If she has done so, Kin Ming may have been able to obtain the Report from the Xiamen Government.  Further, given the close working relationship between Fu Man and the Xiamen Government, Fu Man may be able to obtain the Report or the related information directly from the Xiamen Government.  Hence, there is no point for Kin Ming to conceal such document.

164. Undoubtedly, Lot A4 was a prime site and it was the best piece of land in Kin Ming’s land reserve.  It simply defines any logic for Kin Ming to ask the Xiamen Government to effect any land exchange that might end up swapping Kin Ming’s best piece of land with another unknown piece of land which might be of inferior quality, and with its location unknown. With “Lot A4” expressly stipulated as the subject matter in the Written Contract, it would provide ample excuse for Madam Lin to back out from the Contract in the case of a land exchange, which would mean that Kin Ming was stuck with a possible inferior re-granted land.

165. To me, the evidence is clear that the Xiamen Government had engineered the land exchange, and it exerted pressure on Kin Ming to accept the land exchange so that it could obtain the best portion of the Land which was facing the sea.  As accepted by both parties at the trial, there was very little that a land developer could do facing such kind of pressure from the Government.

166. Further, it is also clear that Kin Ming had written at least twice to the Xiamen Government in May and June 2005 persuading the latter not to effect any land exchange, mentioning that Kin Ming had entered into a development contract with a third party, obviously referring to Madam Lin.  On both occasions, the Xiamen Government rejected Kin Ming’s request.  The Xiamen Government made it clear that it did not recognise any development contract made between Kin Ming and any third party, and it even demanded Kin Ming (through Kin Ming (Xiamen)) to proceed to sign the land exchange documents.  Without any concrete or even circumstantial evidence, it is not open for Madam Lin to argue that there was a concerted effort by Kin Ming and the Xiamen Government to put up a show with a view to kick Madam Lin out of the Project.  It is not suggested that there was anything Kin Ming could do to salvage Lot A4, and refusing to sign the land exchange documents would not change the outcome.

167. Again, the fact that Kin Ming had written twice to the Xiamen Government to change its mind does not sit well with the allegation of Mr Huang Rui-fu about the making of 3 separate demands by Kin Ming for increase in contract price in the period from February to October 2005. It makes no sense for Mr Kho to renege on his contractual promise and greedily demanded for additional sums to be paid by Fu Man, and yet on the other hand wrote twice to the Xiamen Government not to take back Lot A4 so as not to disrupt its contract with Madam Lin.  Hence, I do not accept the suggestion of Madam Lin that Kin Ming was greedy and used the land exchange as an excuse to kick her out of the Project.

(vi) The credibility of the witnesses

168. Based on the aforesaid analysis, the case of Kin Ming is more solid on logic and business sense, and so I prefer to accept the evidence of Kin Ming’s witnesses on the balance of probabilities and reject that of Madam Lin’s witnesses.  However, there are also some other reasons as to why I find that the evidence of Kin Ming’s witnesses is more credible.

169. Mr Kho is the key witness for Kin Ming’s case. I accept him to be a truthful and reliable witness.  Despite the vigorous cross-examination, he is able to provide straightforward answers without any evasion.  I accept that he is telling the truth.

170. I agree that Mr Kho, when he is cross-examined at the stand, has supplied the court with some new evidence which has not been disclosed before.  One of the examples is that, according to Mr Kho, due to the peculiar circumstances at that time, it was unlikely for the Xiamen Government to effect any land exchange within Strait City when the Contract was made in April 2004.

171. After the investigation of the Smuggling Case, Lots A2 and A3 (which were formerly owned by Chang Ming) were, in substance, confiscated by the Central Government.  It was possible for these 2 lots of land to be sold by the Central Government to some other third parties.  As the Xiamen Government had no control over Lots A2 and A3, it was unlikely that the Xiamen Government would use these 2 lots of land to exchange for Lots A1 and A4.  It was only in the later stage that the Xiamen Government acquired Lots A2 and A3 from the Central Government.  After that, the Xiamen Government was able to exert pressure on Kin Ming to complete the land exchange arrangement. According to Mr Kho, Madam Lin even mentioned to him that, if Kin Ming was not selling the prime Lot A4 to her, she would probably buy Lot A2 or A3 directly from the Government.

172. I accept such evidence.  According to Mr Kho, it was a well known fact that Lots A2 and A3 were in the control of the Central Government during the investigation of the Smuggling Case.  Mr Kho even invites the legal advisers of Madam Lin to verify such information themselves. As such kind of information is likely to be in the public domain, it would be very difficult for Mr Kho to make up such allegation himself.  Hence, there is some degree of truth in such evidence.

173. Another example of the “new revelation” is that, according to Mr Kho, when the relationship of the parties turned sour in September 2005, Mr Huang Rui-fu threatened him that if he did not cooperate with Fu Man and to let Fu Man to have a share in development of the re-granted land, he would make use of his contact in the Central Disciplinary Committee to create trouble for him.  He even supplies the name of that person, who according to Mr Kho, was subsequently arrested for other misconducts.  Mr Fung complains that there is no reason for Mr Kho not to mention such allegation earlier.

174. Again I do not doubt the genuineness of such allegation.  Because of the sensitive nature of the evidence, it is clear that Mr Kho has had no intention to supply such piece of information to the court. However, under the vigorous cross-examination by Mr Fung, Mr Kho has no choice but to reveal such new evidence to justify the truth of his allegation.

175. Mr Fung has all along tried to attack the credibility of the Kho’s brothers.  As they were influential and privileged people in Xiamen, they were able to make use of their authority to take advantage of Madam Lin and Mr Huang Rui-fu.

176. I reject these challenges. The evidence actually suggests the contrary.  Mr Kho was stripped of his positions in CPPCC.  Despite the repeated efforts made by Kin Ming (Xiamen), the Xiamen Government put the development plan of Strait City on hold.  Even worse, the Xiamen Government subsequently did not allow Kin Ming (Xiamen) to continue with the original plan to develop Lots A1 and A4.  This would not have been the case if the Kho’s brothers were powerful and influential people in Xiamen.

177. Because of the bitter experience of Mr Kho and the difficulty faced by Kin Ming (Xiamen) in developing Strait City, it was only natural that Kin Ming wanted to scale down its business in the Mainland.  In such case, it makes sense that Kin Ming sold the right to develop part of the land in Strait City to a third party who might be able to make use of its own contact to continue the development of the Project.

178. As I see it, the elder Mr Hsu is not an aggressive businessman.  He is not a “hand-on” type of person and he is quite happy for his staff to handle various matters for him.  For the younger Mr Kho, he has suffered considerably because of his imprisonment and the harassment and intimidation by the agents engaged by Madam Lin and Mr Huang Rui-fu.  He even breaks down in tears when he is asked to recollect his bitter experience relating to the investigation of the Smuggling Case.  In my judgment, all these observations do not sit well with Mr Fung’s suggestion that the Kho’s brothers are aggressive and greedy persons who tried to take advantage of Madam Lin and Mr Huang Rui-fu.  Even according to the evidence of Mr Huang Rui-fu, Mr Kho offered to reduce the contract price when he mentioned the land exchange plan to him in July 2004.  It does not make sense that Mr Kho suddenly changed his personality and extorted substantial sum of money from Madam Lin only a few months later, in particular according to Mr Huang Rui-fu, the property market had risen considerably soon after the making of the Contract in April 2004.

179. Further, I accept that Mr Kho is genuine when he says that he wanted to settle the claim with Madam Lin.  However, Mr Huang Rui-fu thought that Kin Ming had made huge profit with the project in Strait City, which was not the case according to Mr Kho, as Kin Ming had to pay substantial amount of tax to the Government.  Hence, I accept that it was not the greed of Kin Ming that closed the door of further cooperation between the parties.

180. I also accept the other witnesses of Kin Ming, Mr Huang Wei and Mr Tsang, to be honest and truthful witnesses.

181. Although Mr Huang Wei is still working for the Kho’s brothers.  There is nothing to suggest that he has fabricated his evidence in favour of his employer.  In particular, he has not exaggerated his role in the negotiation of the Written Contract in the meeting on 16 April 2004.  Further, I accept that it was part of the business culture in the Mainland that Mr Huang Wei, being the person bringing together the parties for the negotiation, had to be present in the meeting on 16 April 2004 as a matter of courtesy though he did not take any active part in the negotiation itself. 

182. Since Mr Tsang had left the employment of UAA, he is a more independent witness.  As he does not have anything to benefit from the outcome of the trial, I accept his evidence as the truth.  In particular, he clearly recollects that Madam Lin played an active part in the negotiation of the Written Contract.

183. In contrast to the evidence of the other witnesses, Mr Tsang testifies that Madam Lin and Mr Huang Rui-fu arrived at Kin Ming’s office in the afternoon and not the morning.  Although he may have made an immaterial mistake as to when “the Mainland guests” actually arrived at the office, that should not affect the credibility of his evidence.  In any event, he was only involved in the mechanical preparation of the Written Contract which occurred in the later part of the day.

184. In trying to attack the credibility of Kin Ming’s case, Mr Fung also relies on some inconsistencies in the evidence between Mr Huang Wei and Mr Tsang relating to the details of the mechanical preparation of the various drafts of the Written Contract.  In my judgment, one cannot expect these 2 witnesses to remember every detail such as who actually wrote on the manuscripts or who handed the manuscripts to Mr Tsang.  I do not find that such immaterial inconsistencies would affect the credibility of their evidence.

185. On the other hand, I have grave reservation about the credibility of the evidence of Madam Lin and Mr Huang Rui-fu.

186. At the trial, Mr Fung seems to portrait Madam Lin and Mr Huang Rui-fu to be simple and unsophisticated persons.  Given their humble background, Mr Fung submits that there were understandably susceptible to being influenced by the fact that Mr Kho was a prominent and well known figure in Xiamen.  There was also inequality in bargaining power between the parties in the negotiation.  Fu Man was only a developer with little experience.  As it was offered an attractive deal of cooperating in a real estate project in a prime location, Madam Lin and Mr Huang Rui-fu were eager to grasp the opportunity notwithstanding that the Oral Revival Term was not reduced to writing.  The fact that Fu Man did not bring along its Mainland lawyer or its company seal for the meeting further indicates that Fu Man and Madam Lin did not expect to enter into any contract on 16 April 2004.

187. Although Madam Lin and Mr Huang Rui-fu had not received a lot of education, it is clear to me that they are sophisticated businessman.  Without knowing how to protect their business interests, I do not believe that they would have been able to develop their real estate business in the Mainland in such a short period of time.  Although their previous projects might be of smaller scales, they are and were not inexperienced developers.  The final terms of the Written Contract also show that Madam Lin was keen to protect her interests in the transaction, and I do not accept that there was any inequality in the bargaining power.

188. As mentioned in the earlier part of this Judgement, Madam Lin and Mr Huang Rui-fu were negotiating for a multi-million dollars deal, and they were dealing with the Kho’s brothers for the first time.  In such circumstances, I do not accept that Madam Lin and Mr Huang Rui-fu would have been so naïve in trusting the words of Mr Kho in not putting the alleged Oral Revival Term in the Written Contract.

189. Although Mr Kho may have exaggerated his loss in the Counterclaim[12], the evidence of Mr Huang Rui-fu and Madam Lin on the Counterclaim is even worse. Madam Lin and Mr Huang Rui-fu are experienced businessman, and yet they did not verify the identities of the agents recommended by Mr Lin.  I cannot accept that they would have been so naïve in trusting that these agents were “innocent persons” with no connection with the underground world.

190. In fact, Mr Huang Rui-fu agreed to pay a substantial sum of RMB 60 million to Mr Zhuang if he could secure the right of Fu Man to develop Lot A1.  The amount of the reward speaks for itself.  It would certainly give enough incentive to Mr Zhuang to achieve the objective by whatever means.  Further, apart from the serious confusion in Mr Huang Rui-fu’s evidence as to when he actually signed the Zhuang Agreement, I find it extremely odd that Mr Huang Rui-fu had not told his wife about the Zhuang Agreement.  It is clear that Madam Lin played an important role in the operation of Fu Man. If Mr Huang Rui-fu was offering RMB 60 million to Mr Zhuang for the assistance in the resolution of the dispute, I find it unbelievable that he had not told Madam Lin about such arrangement.

191. For all these reasons, I do not find Madam Lin or Mr Huang Rui-fu to be honest or truthful witness.

 (vi) Conclusion

192. I therefore find as a matter of fact that: (i) the parties did not agree on the Oral Revival Term whether in the meeting on 16 April 2004 or at all; and (ii) the parties had not made any agreement or reached any understanding relating to the 1^st or 2^nd Variation of the Contract as alleged by Mr Huang Rui-fu.

193. Since the express phrase “Lot A4” has been used in the Written Contract and there is an exact description of “Lot A4” in the same document, there is no room for the court to rewrite the bargain between the parties so as to extend the subject matter of the Written Contract to cover any land to be exchanged for Lot A4.  One may perhaps sympathise with Madam Lin that, because of the rising property market in Xiamen, she is not able to get any benefit from the Contract despite making a substantial amount of part-payment. However, no one has a crystal ball about the future.  In some possible scenarios, it may actually be in the interest of Madam Lin that the Contract was to cover only Lot A4.  The court cannot rewrite a bargain simply because the end result may be unfair to a particular party.

194. I accept that the parties, at the time of the making of the Written Contract, might have known that there might be planning changes in Lot A4.  However, there was no detail of the planning changes available at that time.  As contemplated by the parties in the arrangement under clause 2-2, it might be the case that the planning changes would reduce the building area in Lot A4, and as a result the parties agreed for a corresponding reduction in the contract price.  It had nothing to do with any land exchange. In fact, Madam Lin had all along been interested in getting the prime site of Lot A4, and there is no basis for the court to extend the meaning of “Lot A4” in the Written Contract based on the background of the negotiation.

195. Whether Madam Lin knew about the presence of Lianfa at the time of the making of the Contract or not, she knew full well that Kin Ming had interests in other portion of the Land for development.  In the case of any land exchange, Kin Ming’s interests in the other portion of the Land might be adversely affected, and one cannot expect Kin Ming to protect Madam Lin’s interests at all cost.  At most, Kin Ming only had a duty to cooperate with Madam Lin for the development of the Project in Lot A4 (a duty which, to an extent, was expressly stipulated in the Written Contract[13]), but this is quite different from a fiduciary duty owed by Kin Ming to Madam Lin in the case of any land exchange imposed by the Xiamen Government.  Hence, there is no basis for the court to impose any fiduciary duty on Kin Ming.

196. Neither can Madam Lin argue that Kin Ming was holding the land in exchange for Lot A4 on trust for her.  As I have ruled in the earlier part of this Judgment, the subject matter of the Project is a matter of construction of contract.  If the court has already made a ruling that the subject matter of the Contract is only limited to Lot A4, there is no room to extend the fiduciary duty to cover any property which is not the subject matter of the Contract.

197. As pointed out by Mason J (as he then was) in Hospital Products Ltd v United States Surgical Corp[14], when the contractual and fiduciary relationships co-exist, any fiduciary duty must yield to the contractual terms[15]:

“That contractual and fiduciary relationships may co-exist between the same parties has never been doubted. Indeed, the existence of a basic contractual relationship has in many situations provided a foundation for the erection of a fiduciary relationship. In these situations it is the contractual foundation which is all important because it is the contract that regulates the basic rights and liabilities of the parties. The fiduciary relationship, if it is to exist at all, must accommodate itself to the terms of the contract so that it is consistent with, and conforms to, them. The fiduciary relationship cannot be superimposed upon the contract in such a way as to alter the operation which the contract was intended to have according to its true construction.”

198. Even if the court were to impose a fiduciary duty, there was no breach of such duty on the part of Kin Ming.  Both parties accept that if the government authority was demanding Kin Ming (Xiamen) to execute any land exchange in Strait City, there was nothing Kin Ming (Xiamen) could do but to comply with the demand.  They also accept that they could not, in practice, seek any relief against or to sue the government authority for imposing any land exchange.  Further, apart from speaking directly with the government official in September 2004, Kin Ming had written twice to the Xiamen Government in May and June 2005 begging for permission to develop Lot A4 as per the original plan.  In such circumstances, there was no breach of any duty.

199. Based on the aforesaid findings, it is not necessary for me to determine whether the Madam Lin is bound per rem judicatem by the Default Judgment.  In any event, both counsel have not put in a lot of effort in arguing this matter and so I do not propose to spend any more time on such academic issue.

200. For the above reasons, the Contract did not apply to any land exchanged for Lot A4 and Madam Lin’s claim in the Main Action must fail.

COUNTERCLAIM

(i) Liability

201. Mr Kho claims that from about late July 2010, Madam Lin and Mr Huang Rui-fu had engaged agents to harass and intimidate Kin Ming and Mr Kho into settling the Main Action with Madam Lin.  The wrongful acts of harassment and intimidation took the form of repeated and persistent telephone calls threatening to do harm to Mr Kho and his family members, and repeated and persistent unsolicited visits to Mr Kho’s office with an intimidating and threatening demeanour.  Mr Kho made a report to the police about these incidents.  For the safety of himself and his family, they even moved to live in a hotel in the end of August or early September 2010.  As I find Mr Kho to be a reliable witness, I accept his evidence about the harassment and intimidation as the truth.  In fact, there is no serious challenge to Mr Kho’s evidence in this regard.

202. There is no dispute that Madam Lin and Mr Huang Rui-fu had signed the 2 Powers of Attorney and the Zhuang Agreement.  Madam Lin and Mr Huang Rui-fu claim that they trusted his friend Mr Lin who was a fervent Buddhist and they believed that Mr Lin’s friends would render assistance in the resolution of the dispute with Kin Ming.  However, Mr Huang Rui-fu promised to give a substantial sum of RMB 60 million to Mr Zhuang to get the job done. Although no reward had been stated in the 2 Powers of Attorney, there is evidence to suggest that Mr Hung and Mr Zhuang were related.  According to Mr Kho, Mr Hung showed a copy of the Zhuang Agreement to Mr Kho when he caused disturbances at Kin Ming’s office on 29 October 2010.  In any event, one would not expect that these agents would do the job for free.

203. Obviously, Madam Lin and Mr Huang Rui-fu turned a blind eye to the characters and backgrounds of these agents.  They made no attempt to find out any details of such persons including their contact details and the nature of their business.  They made no attempt to find out how their agents would undertake the task of getting Kin Ming to settle the dispute. They stuck a staggering RMB 60 million as reward to at least one of their agents.  A reward of such magnitude would certainly lure any agents to complete the task by whatever means necessary.  Being sophisticated businessmen and land developers, I do not accept that Madam Lin and Mr Huang Rui-fu were totally innocent when they appointed these agents to put pressure on Kin Ming to continue the development of the Project.

204. For the above reasons, I find that Mr Kho had been harassed and intimidated by the agents of Madam Lin and Mr Huang Rui-fu, and the latter are liable to Mr Kho for the wrongful acts of their agents.  

205. As outlined by Mr Neoh in his opening submissions, Kin Ming and Mr Kho are relying on 2 causes of action in the Counterclaim, namely the tort of intimidation and the tort of harassment.  Since Kin Ming and Mr Kho have not expressly pleaded nuisance in the Amended Counterclaim or relied on nuisance in the opening submissions, I will not deal with this particular cause of action.

206. There is some dispute between the parties as to: (i) whether Mr Kho has established all the ingredients of the tort of intimidation; and (ii) whether the tort of harassment exists in common law.  I will deal with these issues in turn.

207. There are 3 elements for a claim based on the tort of intimidation[16]:

(i) unlawful threat;

(ii) intention to cause harm to the claimant with the threat; and

(iii) damage to the claimant.

208. Based on Mr Kho’s evidence, I accept that he has established all these elements of the tort.  The agents of Madam Lin and Mr Huang Rui-fu had made unlawful threats to Mr Kho, meaning to harm Mr Kho and his family members.  There was certainly intention to cause harm to Mr Kho with such threats.  As Mr Kho had suffered mental distress as a result of the threats, all the 3 elements of the tort are present.

209. However, Mr Fung submits that there is an additional ingredient of the tort of intimidation that the person under threat must yield to the demand of the tortfeasor. In support of such contention, Mr Fung relies on the following passage in Clerk and Lindsell[17]:

“In the tort of intimidation, ‘it is essential to the cause of action that the person threatened should comply with the demand’.  If A says to B: ‘I will hit you unless you give me £5’, and B resisted saying: “you can do your worst.  I am not going to pay you £5’, at that point B has no cause of action for damages.”

210. Further, Mr Fung relies on the dicta of Lord Denning in Morgan v Fry[18] and Stratford v Lindley[19] in supporting such additional element of the tort.

211. In my judgment, these authorities show no more than the proposition that damage to the claimant is a necessary ingredient of the tort.  In some of the economic tort cases involving the making of unlawful threats, for example in the trade union cases like Morgan v Fry and Stratford v Lindley, if the claimant does not yield to the demand, that particular claimant has actually suffered no damage which would be a necessary ingredient of the tort.  In Stratford v Lindley, the defendant, being the trade union, was being sued by the plaintiff, a company that carried on the business of letting out barges on hire and as repairers of vessels, for the tort of intimidation by the defendant asking its trade union members not to continue to hire barges from the plaintiff.  In such circumstances, the plaintiff obviously would not have suffered any loss unless the union members or its customers yielded to the defendant’s demand.  In that particular context, Lord Denning observed that the party threatened must comply with the demand rather than risk the treat being carried into execution, in which case that the party damnified can sue for damages.

212. However, loss may be suffered by the mere infliction of a treat.  As long as damage is caused, an act of intimidation may be actionable regardless of the yielding to the demand.  In Rookes v Barnard, Lord Evershed said the following[20]:

“I take the case of A, engaged in some profession or business. I assume that B, from motives of intense personal dislike of A, uses threats of personal violence to A of real coercive force intended (and effective) to interfere with A’s business. If, as a result of B’s threats, A is compelled to abandon his business or profession he will, according to the view of the Court of Appeal as well as your Lordships, have a cause of action against B and such cause of action will be founded upon the tort of intimidation … … But clearly the damage to A might not be so confined – he might well, as a consequence of B’s intimidation, suffer in many ways including health, and if he did, then, as I conceive, his cause of action against B would be founded on the tort of intimidation and would not be confined, by reference to the damage suffered, to interference with his business.”

213. If Mr Fung’s proposition is right, in all debt-collector cases, in order to be actable under the tort of intimidation, the debt-collector must successfully have collected the debt before an action is maintainable.  This simply cannot be right.  In Chang Ming Fang Jacqueline v Zhang Zi Qiang[21], the defendant had a bad gambling habit and he kept on making unlawful threats to the plaintiff for money.  The plaintiff did not yield to the defendant’s demand but she suffered serious distress as a result.  Mr Recorder A Chan, SC (as he then was) concluded that the acts of the defendant clearly constituted assaults and intimidations.  In Wong Wai Hing v Hui Wei Lee[22], the debt-collector did not successfully recover the purported debt which the defendant claimed the plaintiff owed her, and yet the court held that the defendant was liable for assault and intimidation caused by the defendant’s debt-collector.

214. Hence, Mr Kho has made out a case of intimidation.

215. The second issue relating to liability under the Counterclaim is whether the tort of harassment exists in common law.  In view of my decision on tort of intimidation, this particular issue now becomes academic. However, since counsel have addressed me extensively on the issue, I feel obliged to give my view on such question of law.

216. There are conflicting decisions as to whether such tort exists:

(i) Lau Tat Wai v Yip Lai Kuen Joey[23], followed by DHCJ E Fung SC in Shen Xing v Li Jun[24], confirming that the tort of harassment exists under the law of Hong Kong;

(ii) Pong Seong Teresa & Ors v Chan Norman[25], in which DHJC Linda Chan SC held that no such tort exists under the law of Hong Kong;

(iii) at the Court of Appeal level, 朱祖永訴香港警務處[26], Yuen JA held that there is no tort of harassment under the common law; whereas in the later decision of Wong Tai Wai David v The Hong Kong SAR Government[27], A Cheung J (as he then was) and with whom Yuen JA agreed, observed that it is quite impossible to say that, given the present state of the law and its possible development in Hong Kong, the tort of harassment is unknown to the law as a cause of action.

217. The question as to whether the tort of harassment exists in common law has haunted the courts for many years.  The position in England has been governed by statute since the enactment of the Protection from Harassment Act in 1977.  In Hong Kong, there is no equivalent or similar legislation outside the spheres of sexual and disability harassment.  The position is therefore governed by common law.

218. If necessary, I would find that the tort of harassment exists as part of the common law in Hong Kong and Madam Lin and Mr Huang Rui-fu are liable to Mr Kho for the commission of such tort.

219. As I see it, DHCJ Linda Chan SC considered herself bound by the decision of the Court of Appeal in朱祖永[28], and that was why the learned judge ruled that no such tort exists in common law.  Despite the clear statement in 朱祖永that such tort does not exist, as observed by DHCJ Linda Chan SC in Pong Seong Teresa[29] and A Cheung J in Wong Tai Wai David[30], there were conflicting decisions in England and it is arguable that a tort of harassment per se, or as part of the tort of intentional (or reckless) infliction of injury (physical or mental), exists at common law.  In Wong Tai Wai David, A Cheung Jdid not rule out the existence of such tort.  As the Court of Appeal has not shut the door for the development of the tort of harassment, the existence of such tort remains an open question.  In particular, Yuen JA was sitting together A Cheung J in Wong Tai Wai David and they delivered a unanimous decision in refusing to strike out the plaintiff’s claim on harassment.

220. As to whether such tort should exist in common law, I agree with the reasoning of A Chan J in Lau Tat Wai that the tort of harassment should exist “to protect the people of Hong Kong who live in a small place and in a world where technological advances occur in leaps and bounds”[31]. In particular, intrusion on privacy is difficult to prevent and it is hard for the victim to escape harassment.  Further, a claimant in a claim for harassment has to establish the various ingredients of the tort as mentioned in the next paragraph, and I cannot see the reason as to why a person, who knows that his harassment would cause worry, emotional distress or annoyance to another person, or reckless as to whether the victim would suffer injury as a result of the harassment, should not be liable for damages caused to the victim as a result.  So long as there is intention to inflict harm on the victim, there should be no difference between damages caused by a physical act of violence or a series of harassing conducts.  Hence, if there is a need for Kin Ming or Mr Kho to rely on such cause of action, I accept that the tort of harassment exists as part of the common law in Hong Kong.

221. In Lau Tat Wai, A Chan J set out the principles and the elements of the tort of harassment as follows:

(i) “harassment” means a course of conduct by a person, whether by words or action, directly or through third parties, sufficiently repetitive in nature as would cause, and which he ought reasonably to know would cause worry, emotional distress or annoyance to another person[32];

(ii) the mental element required is reckless as to whether the victim would suffer injury from the defendant’s conduct[33]; and

(iii) the plaintiff must have suffered damage as a result of the harassment; anxiety would suffice, though the defendant must take the victim as he finds him; financial loss is also recoverable[34].

222. Again I find that these elements exist in the present case.  There were repeated and persistent telephone calls threatening to do harm to Mr Kho and his family members, and also repeated and persistent unsolicited visits by the agents to Mr Kho’s office with intimidating and threatening demeanour.  These conducts were sufficiently repetitive in nature, which Madam Lin and Mr Huang Rui-fu should have known would cause worry, emotional distress and annoyance to Mr Kho.  As a result of such harassment, Mr Kho had suffered mental distress.  Hence, Madam Lin and Mr Huang Rui-fu are also liable for damages for harassing Mr Kho.

223. Kin Ming, as a corporation, also claims for damages and injunctive relief against Madam Lin and Mr Huang Rui-fu for intimidation and harassment.  It is clear that the tort of intentional infliction of injury is regarded as a tort of trespass to person[35].  Harassment is a variant of the tort of intentional infliction of injury, and so I do not accept that Kin Ming, as a corporation, can sue Madam Lin and Mr Huang Rui-fu for such tort.

224. On the other hand, intimidation is sometimes regarded as an economic tort[36]. As a kind of economic tort, yielding to the demand is an essential ingredient of the tort.  However, the case of Rookes v Barnard shows that the tort of intimidation is not limited to interference with business[37].  If the intimidation has caused injury to a person including deterioration in health, that particular person can sue for damages for intimidation.  It is more akin to a tort of intentional infliction of injury on a person.  Since the intimidation and the unlawful threats in the present case were directed to Mr Kho and his family as persons and not to Kin Ming, I do not accept that Kin Ming, as a corporation, can sue Madam Lin and Mr Huang Rui-fu for the tort of intimidation.  This is the case even if Mr Kho is a director of Kin Ming. 

(ii) Quantum of damages and injunctive relief

225. There is a dispute between the parties as to whether Madam Lin and Mr Huang Rui-fu are liable for the harassment and intimidation caused by the “friends” of Mr Lin after 28 October 2010, which was the date of the termination of the appointment of the agents under the 2 Powers of Attorney and the Zhuang Agreement.

226. As I see it, such dispute would not materially affect the quantum of Mr Kho’s claim.  There were repeated harassment and intimidation on the part of the agents of Madam Lin and Mr Huang Rui-fu prior to 28 October 2010, and I do not consider that the further harassment and intimidation after the said date would add very much to the quantum of the claim.  However, since Sakhari J, after trial, had already exonerated Madam Lin and Mr Huang Rui-fu for contempt for causing further harassment or intimidation to Mr Kho after 28 October 2010, I do not find them to be liable for the harassment or intimidation caused to Mr Kho after the termination of the appointment of the agents.

227. Mr Kho had been examined by Professor Peter Lee, a clinical psychologist, in April 2013.  Based on the information supplied by Mr Kho and his son, Professor Lee is of the opinion that Mr Kho was suffering from posttraumatic stress disorder as a result of the threats and harassment.  Such disorder would have significant impairment in Mr Kho’s work and daily life functions.  His condition has improved.  But at present, Professor Lee is of the view that Mr Kho still suffers from adjustment disorder with mixed depressed mood and anxiety of a moderate intensity.

228. The expert for Madam Lin and Mr Huang Rui-fu is Professor Felice Lieh Mak who is a specialist in psychiatry.  Professor Lieh Mak has not examined Mr Kho, because she considers that such examination would be of limited value due to the long lapse of time after the incidents.  In her report, Professor Lieh Mak mainly criticizes that Professor Lee, being a clinical psychologist with no medical qualification, is not the appropriate person to assess the psychiatric and mental health condition of Mr Kho. Furthermore, the assessment made by Professor Lee is not reliable because, inter alia: (i) the assessment was made based on the subjective complaint of Mr Kho; and (ii) the examination was conducted a long time after the incidents.

229. Mr Kho had attended a number of consultations with a cardiologist, Dr Lau Chu Pak, in the period from August 2010 to March 2011 with respect to his heart condition.  According to Dr Lau, Mr Kho complained of tiredness in the consultation on 13 August 2010 for which no specific cause was found.  Dr Lau did not refer Mr Kho to see other specialist.

230. Since I believe the evidence of Mr Kho, I accept that the unlawful threats had caused him considerable mental distress, otherwise he would not have moved away from his home in order to avoid the intimidation and harassment.  The facts that he made a report to the police and applied for an ex parte injunction from the court also show that Mr Kho was very anxious and upset by that time, which also add weight to his complaint about the effect caused by the intimidation and harassment.

231. Although I have no doubt about the credibility of the evidence of Mr Kho, there may be some concern that Mr Kho has exaggerated the extent of the mental distress suffered by him.  Firstly, if Mr Kho was suffering any serious symptoms arising from the mental distress or depression, his cardiologist, Dr Lau, would have referred Mr Kho to see a psychiatrist in the end of 2010 or early 2011.  Yet no such referral was made.  Secondly, in his own police statement dated 13 January 2011, Mr Kho alleged that he was able to tend to his business in the Philippines in December 2010.  He was also able to meet Mr Lin for the first time in that month, who was the person claimed to be at least partly responsible for causing the harassment and intimidation.  Thirdly, the transcript of the meeting between Mr Lin and Mr Kho in Manila on 6 January 2011 shows that Mr Kho was apparently in command of his faculties, and he did not show any serious sign of mental illness during the whole conversation.

232. As I see it, the disgraceful treatment he received in Xiamen and the harassment and intimidation caused by the agents of Madam Lin and Mr Huang Rui-fu gave Mr Kho considerable mental pain.  He may become a little bit sensitive.  Further, in the case that his company had lost some business opportunities, instead of blaming himself for inaction, it would be tempting for Mr Kho to shift the responsibility to someone else like Madam Lin and Mr Huang Rui-fu.

233. In my judgment, although Mr Kho’s complaint about the anxiety and distress is genuine, he may have exaggerated the effect of such anxiety and distress on him.  If he was able to communicate properly with Mr Lin in early 2011, I doubt whether his condition was so worse to the extent that he was not able to make business decisions for Kin Ming.  In particular, there was no contemporaneous medical report supporting his condition at that time and the examination by Professor Lee was conducted much later after the incidents.  Further, Professor Lee opines that Mr Kho at present still suffers from adjustment disorder with mixed depressed mood and anxiety of a moderate intensity, and yet Mr Kho is able to answer all the questions put to him at the trial without difficulty.

234. Based on the aforesaid, I do not accept all the observations made in Professor Lee’s report on face value.  Whilst Mr Kho had suffered considerable distress and anxiety caused by the harassment and intimidation, I do not find that his medical condition was serious to the extent that he would not be able to make proper business decisions for Kin Ming.

235. In respect of general damages, Mr Neoh has asked for both aggravated and exemplary damages to be awarded to Mr Kho.  Aggravated damages are to compensate the victim for his suffering in his feelings, dignity and pride, for his mental discomfort and distress.  Exemplary damages, on the other hand, are punitive in nature and are awarded to teach the culprit that “tort does not pay” and to deter him and others from similar conduct[38].  Mr Neoh asks for the sums of $600,000 and $200,000 for the 2 kinds of damages respectively.

236. Due to the harassment and intimidation, Mr Kho had suffered mental distress resulting in deterioration of his health, insomnia and loss of appetite.

237. In Lau Tat Wai v Yip Lai Kuen Joey[39], the plaintiff and the defendant met in a language course and developed an intimate relationship, which the plaintiff ended after 4 months.  After the termination of the relationship, the defendant carried out a campaign of harassment and intimidation for the next 6 years.  The acts included making repeated telephone calls to the plaintiff, hacking into his email account and surveillance on him and his family.  These acts had the effect of forcing the plaintiff to switch jobs and to move from his home.  Aggravated damages and exemplary damages were awarded in the sums of $600,000 and $200,000 respectively.

238. In Mir v Mir[40], the defendant, in a domestic context, physically assaulted the plaintiff and caused physical injuries to her as a result.  Aggravated damages in the sum of $140,000 was awarded, which was not challenged upon appeal.

239. In Tangrorang v Chan Chau Wing[41], the defendant was convicted for 3 counts of indecent assault and 3 counts of criminal intimidation of the plaintiff who was a domestic helper.  After he was released from prison, he threatened the victim through a telephone call and was convicted with another count of criminal intimidation.  The victim suffered from posttraumatic stress disorder and required psychiatric treatment for 1 year.  The District Court awarded $30,000 as aggravated damages.

240. In Chang Ming Fang Jacqueline v Zhang Zi Qiang[42], damages in the sum of $200,000 was awarded to the plaintiff against the defendant, who was the plaintiff’s brother, for assault and intimidation for a period of about 1 year.  The court found that the defendant had made threatening telephone calls and messages, disturbed the plaintiff at her workplace, distributed posters relevant to the dispute to people near her workplace, and splashed paint at her workplace.

241. In the present case, the acts of harassment and intimidation lasted for a few months since late July 2010.  Although there was no actual act of violence leading to physical injuries, the threats were made by persons with dubious background which might cause real alarm to Mr Kho and his family.  Having considered all the facts of the present case and the cases cited to me by the parties, I award $300,000 as aggravated damages and $150,000 as exemplary damages.

242. A substantial part of the Counterclaim consists of the claim for the loss of business opportunities.  According to Mr Kho, he was unable to properly attend to his business in the Philippines between August 2010 and March 2011 which resulted in the loss of business opportunities in investing in a golf course project and a nickel ore project.

243. In respect of the claim for the loss of opportunity in investing in the golf course project, Mr Kho claims that the Philippines Air Force, in about early August 2000, offered to sell the Villamor Golf Course in Manila (“the Golf Course”) at Philippine Peso(₱)10,000 per square metre to Mr Kho, proposed to be developed into a multi-purposes resort, and asked Mr Kho to submit a development plan for its consideration.  By reason of the harassment and intimidation, Mr Kho could not attend to these matters.  The Air Force subsequently sold the right to develop the Golf Course to another party.

244. Mr Chen Jun Tao (陳君陶)(“Mr Chen”), manager of AAM-PHIL Natural Resources & Development Corporation (“AAM-PHIL”), testifies in court about the Golf Course project.  AAM-PHIL is a subsidiary company of UAA which is owned and controlled by Mr Kho.

245. Mr Chen worked as a restaurant waiter before joining AAM-PHIL.  He was responsible for entertaining a retired general in July 2010 who told him about the offer of the Golf Course for sale by the Philippines Air Force.  The retired general was the manger of the Golf Course. During the period from August 2010 to early 2011, the general had kept on chasing Mr Chen to supply the development plan for the project.  However, Mr Kho lost his concentration on his work and so no plan was submitted.  In February 2011, Mr Kho asked Mr Chen to follow-up on the project again.  In April 2011, the planning company engaged by AAM-PHIL conducted a site inspection of the Golf Course and AAM-PHIL submitted the development plan in May 2011.  Later in August 2011, he contacted the retired general who told him that the Air Force had already approved the development plan submitted by another company, and Mr Chen therefore assumed that the Golf Course had been sold to such company.  He knows nothing about the particulars of the sale.

246. Mr Autencio, the expert on real estate valuation engaged by Kin Ming and Mr Kho, opines that: (a) the 2010 market value of the Golf Course project was ₱11,000 per square metre; and (b) its 2012 market value was ₱58,000 per square metre.  The market value further raised to ₱70,000 to ₱80,000 per square metre as of May 2013.  Assuming a notional realisation of the Golf Course project in 2012, Kin Ming and Mr Kho claim for loss of profit in the region of ₱26 billion [(₱58,000 – ₱11,000) x 561,077 square metres], equivalent to about US$600 million.

247. On the other hand, Mr Frances Albert Ngo (“Mr Ngo”) testifies in support of the claim relating to the nickel ore project.  Mr Ngo is the president of AAM-PHIL.  He is responsible for the trading aspect of the mining business of AAM-PHIL but he himself has received no technical training in mining or metallurgy.

248. In March 2010, Mr Ngo learnt that there was 25 million tons of lateritic nickel ore tailing with Fe (Iron) content at 45% (“the Nickel Ore”) for sale and the price was US$4 per tonne.  He told Mr Kho who was interested to acquire the Nickel Ore.  Mr Kho gave instruction to do a feasibility test, and the result was positive.  Mr Ngo and Mr Kho therefore met some government officials who indicated their support for the project.  Since August 2010, the seller pressed Mr Kho for decision as to whether to acquire the Nickel Ore.  However, Mr Kho lost concentration on his work and the matter dragged on without much progress.  It was only in February 2011 that Mr Kho asked Mr Ngo to conduct a full examination of the Nickel Ore.  Mr Kho also visited the site in March 2011.  After that, Mr Ngo approached the seller but he told Mr Ngo that he had already found another buyer who offered US$12 per tonne for the Nickel Ore.  Mr Ngo is of the view that, had there been no delay, AAM-PHIL should have been able to acquire the Nickel Ore.

249. Mr Kho claims that he lost the chance to purchase the Nickel Ore, which was then in high demand in the Mainland, at US$4 per tonne, having spent considerable time in ascertaining the feasibility of such transaction.  When Mr Kho later recovered from the disorder and depression, he resumed contact with the vendor of the Nickel Ore.  By that time, the price of the Nickel Ore had risen to US$12 per tonne but the vendor had sold the Nickel Ore to another party.  Kin Ming and Mr Kho therefore claim for loss of profit from being able to acquire the Nickel Ore at a cost of US$23.5 per tonne (US$4 for the ore and US$19.5 for treatment costs and tax) and to resell and export the finished product at US$58 per tonne.  With a profit margin of US$34.5 per tonne and 14.375 million tonnes of refined nickel ore, the total loss is therefore about US$500 million.

250. According to Mr Neoh, the claim of Kin Ming and Mr Kho is one for loss of a chance in acquiring the Golf Course and the Nickel Ore. There is no need to prove on the balance of probabilities that the vendors would have acted in selling the Golf Course and the Nickel Ore to AAM-PHIL. All that Kin Ming and Mr Kho need to prove is that they had a real or substantial chance, as opposed to a speculative one, in acquiring the Golf Course and the Nickel Ore. In such circumstances, the court can assess the damages based on the loss of such chance.

251. I disallow the claim for the loss of business opportunities for the following reasons.

252. Firstly, as I have mentioned above, I have some doubt as to whether the distress or depression suffered by Mr Kho was serious to the extent that his ability to manage the affairs of Kin Ming was impaired.

253. Secondly, the issue of “loss of chance” only comes into play as a question of quantification of loss after causation has been proved.  The question of causation is one of historical fact.  The court has to determine on the balance of probabilities whether the defendant’s act caused the plaintiff’s loss[43]. Hence, before proving his chance of developing the Nickel Ore project and the Golf Course project, Kin Ming and Mr Kho must first show that the conduct of Madam Lin and Mr Huang Rui-fu caused the loss of businesses which would not have occurred but for the tortious act.

254. In this regard, the evidence presented by Kin Ming and Mr Kho in support of the claim relating to the Golf Course project is far from satisfactory.  There is no single piece of documentary evidence to support the allegation that an offer had in fact been made by the Philippines Air Force.  The “general” who allegedly made the offer to Mr Chen was actually the retired manager of the Golf Course, and Mr Chen did not know whether such “general” had the power to make decision on behalf of the Air Force in selling the right to develop the project to AAM-PHIL.  There is also no evidence about how many offers had been made and how many proposals had been received by the Air Force. Neither is there any evidence to prove that the Golf Course had in fact been sold to another party and the price offered by such party to acquire the Golf Course. Had there been such a sale, it is unimaginable that Kin Ming’s own valuation expert, Mr Autencio, would not use that figure to be the basis for assessing Kin Ming’s alleged loss.  Without knowing such information, the court is not able to assess the chance that Kin Ming would be able to purchase the Golf Course had Mr Kho not suffered the mental distress caused by the harassment and intimidation.

255. Further, the court would not be able to know whether the delay in the submission of the development plan was the sole reason, or indeed any one of the reasons, as to why AAM-PHIL could not acquire the development right of the Golf Course.  Even according to the evidence of Mr Chen, the “sale” did not take place until August 2011.  With ample time before the alleged sale, it seems that the inaction of Mr Kho was not the reason for the loss of such business opportunity.

256. Similarly, the evidence in support of the claim relating to the Nickel Ore project is also unsatisfactory.  Mr Ngo agrees that the price of the Nickel Ore might have gone up in the period from March to July 2010, and so it was uncertain whether AAM-PHIL could have acquired the Nickel Ore at US$4 per tonne.  Mr Ngo does not even know when the vendor sold the Nickel Ore to the purchaser and at what price.  In such circumstances, if AAM-PHIL did not raise the offer price, it might not be able to buy the Nickel Ore at all.  Mr Ngo also does not know the price offered by the other potential purchasers. With so many uncertainties, I doubt whether AAM-PHIL would have been able to buy the Nickel Ore even in the absence of the harassment and intimidation.

257. Further, for the project to be a successful, AAM-PHIL would need to build a plant to process the Nickel Ore.  Hugh capital would be required for the building of the plant, though Mr Ngo does not know the amount of the capital involved.  Mr Ngo also agrees that considerable time would be required to obtain the necessary permits.  Yet in 2010 and 2011, there was no land, no plan and no machine in existence for such purpose.  There is no dispute that it would take time to process the Nickel Ore, and the price of the Nickel Ore might fluctuate in the meantime.  Hence, there is no guarantee that, even if AAM-PHIL was able to acquire the Nickel Ore, it would have been able to make the profit as alleged by it.

258. For these reasons, I agree with Mr Fung that the alleged chance in acquiring the Golf Course and the Nickel Ore is fanciful and illusory, or at the very least, unsubstantiated with concrete evidence.

259. Thirdly, if there was any loss relating to these business opportunities, the alleged loss was that of AAM-PHIL, which apparently was a subsidiary company owned by Kin Ming or UAA.  In the absence of any evidence to show the exact relationship between Kin Ming and AAM-PHIL, Kin Ming cannot claim for the loss suffered by AAM-PHIL.  Even if AAM-PHIL is one of its wholly owned subsidiaries, Kin Ming cannot claim for any reflective loss which is actually suffered by its subsidiary company AAM-PHIL[44].  Neither can a shareholder of a company sue for the reflective loss suffered by his company[45], and so Mr Kho cannot claim for any loss of businesses suffered by Kin Ming or AAM-PHIL.  Coupled with my earlier ruling that Kin Ming, as a corporation, cannot sue Madam Lin or Mr Huang Rui-fu for harassment or intimidation, the claim by Kin Ming and Mr Kho for loss of business opportunities cannot possibly succeed.

260. Kin Ming and Mr Kho have also asked for injunctive relief to restrain Madam Lin and Mr Huang Rui-fu from causing further harassment and intimidation to them.  Since Kin Ming cannot sue Madam Lin or Mr Huang Rui-fu for harassment or intimidation, no injunctive relief will be granted in favour of Kin Ming.

261. Different considerations apply in the case of Mr Kho. Given the history of this case, in particular Madam Lin and Mr Huang Rui-fu were prepared to pay huge sum of reward to persons with dubious background to handle the dispute with Kin Ming, there is a likelihood that, unless restrained by the court, they may continue to do so in the future.  This is a case that damages are inadequate remedy and protection to Mr Kho, and I therefore grant a permanent injunction in his favour.

262. For the above reasons, I dismiss Madam Lin’s claim in the Main Action and grant judgment in favour of Mr Kho on the Counterclaim in the sum of $450,000.  Since the injunction will only cover the claim by Mr Kho, I direct the parties to submit the agreed terms of the permanent injunction to me for approval within 21 days.  The parties have not addressed the court on the issue of interest, and so they should also submit the agreed terms for the award of interest (if any) within the same 21 days.  If the parties cannot agree on the terms of the injunction and the question of interest, they are at liberty to apply to court to determine these issues.  Before the finalisation of the terms of the permanent injunction, I grant an interim injunction as per the terms of the undertaking previously given by Madam Lin and Mr Huang Rui-fu to the court.  I also dismiss the counterclaim by Kin Ming.

263. Mr Kho loses on the claim for loss of business opportunities which forms a significant part of the Counterclaim.  I therefore make the following costs order nisi:

(i) Madam Lin do pay to Kin Ming the costs of the Main Action;

(ii) Madam Lin and Mr Huang Rui-fu do pay to Mr Kho 60% of the costs of the Counterclaim;

(iii) there be no order as to costs between Kin Ming on the one part and Madam Lin and Mr Huang Rui-fu on the other in respect of the Counterclaim; and

(iv) there be certificate for 2 counsel for both the Main Action and the Counterclaim.

264. The order nisi shall be made absolute 21 days after the date of the handing down of this judgment.

265. Finally, I would like to express my gratitude to counsel for all the assistance that they have provided to this court.