TANG WAI v. KWOK YEE WAN

1987 No. A3621

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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JUDGMENT

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1. On the evening of 3rd March 1987, the plaintiff and the defendant reached agreement for the sale by the defendant to the plaintiff of certain property. The plaintiff and the defendant there and then reduced the agreement, or at least part thereof, into writing. The plaintiff's part reads :

 

"         I, KWOK YEE WAN, being the landlord of Flat D on the 25th Floor of Seaview Garden, Cloudview Road, now agree to sell Flat D, 25th Floor, Seaview Garden to Tang Wai. The selling price is Hong Kong Dollars Nine Hundred Seventy Thousand exactly. (I) agree to give vacant possession of the property before 30th April. If by that time (I) have not moved out, will pay rent $8,000.00 per month, but the giving of vacant possession of the property will not be later than 30th July 1987.

       

        Now both parties agree to go to solicitors office to pay and receive deposit money of Hong Kong Dollars Ninety Four Thousand exactly before 17th March 1987. Also agree to complete (transaction) before 30th April. Balance of money being Eight Hundred and Seventy Three Thousand Dollars to pay to the landlord on that day. If any one party is in breach of this Agreement, will have to compensate double of the deposit (Three Thousand Dollars exactly).

 

        Hereby received Hong Kong Dollars Three Thousand exactly.

 

2. The defendant's part is similar save that it is dated 3rd March 1987 and contains one alteration which may be relevant as to credibility but which does not affect meaning of the agreement.

3. The plaintiff's case is that the oral agreement which preceded the written agreement included Carpark No. 51 and certain fixtures and fittings. The plaintiff, therefore, seeks rectification of the agreement and specific performance of the agreement so rectified.

4. The defendant hardly surprisingly refuted this allegation and maintains that there was an oral agreement for the sale of the flat, the carpark and a motor car for a total price of HK$1. 17 million. In her defence, the defendant avers that the written agreement is not a sufficient memorandum to satisfy the action and, in effect, that the plaintiff repudiated the agreement.

5. Towards the end of 1986, the plaintiff was looking for a flat to purchase. He had two reasons for this. First, the lease on the flat which he was then occupying was due to expire on 3rd February 1987. Second, Digital Equipment Corporation, for which the plaintiff was then working as Financial Operations Manager and New Ventures Controller, Far East Region, had recently introduced for its employees a Home Purchase Plan. This plan made available mortgage loans of up to HK$1 million at 3.25% less than the standard mortgage rate when the standard mortgage rate was above 6%. The loan would be provided by Chase Manhattan Bank. Digital would pay the Bank the additional interest.

6. After viewing a number of flats, the plaintiff decided that he wanted to purchase a flat in Seaview Garden Cloudview Road, because prices were reasonable, being about HK$950 a sq.ft. including carpark, the location was good and he had friends in the neighbourhood. The plaintiff wanted a C or D Flat on a higher floor with a sea view. These flats measured about 1,027 sq.ft. compared with the A and B Flats on each floor, measuring 1,200 sq.ft.

7. As nothing was forthcoming from any estate agent, the plaintiff decided to take an active role in finding a flat. He put a note in the mail-boxes of Flats C and D on the higher floors. That note reads :

"I urgently require a unit at Cloudview Road with sea view. If someone wants to sell please phone ... "

The plaintiff did not specify Seaview Garden itself because that would have reduced his bargaining power.

8. The defendant responded to one of these notes. She telephoned the plaintiff and in the conversation with him, told the plaintiff she was looking for "$900,000 plus" including a carpark. The plaintiff was, however, unable to make an appointment to see the flat. Chinese New Year was by then approaching. The defendant said she  was too busy. The plaintiff thought that the defendant seemed not keen on selling the flat and did not call her again.

9. On 17th February, a Mr Tai called the plaintiff and advised him that he was selling Flat 20D at $1,000 per sq.ft. including a carpark. The plaintiff said he was not interested because that was above the market price. He took Mr Tai's phone number in case future contact night be necessary. A few days later, however, an agent called the plaintiff to say he had a flat at Seaview Garden for $970,000. The plaintiff went with the agent to see the flat and discovered it was Mr Tai's. A note on the door of the flat, however, said the asking price was $1. 05 million. Although it was being renovated, the plaintiff still felt that the price was too high.

10. Towards the end of February, the plaintiff became interested in a flat at Provident Centre, North Point. The owner of this flat was asking $1.02 million.  The plaintiff hoped to get it for $950,000, but the owner would not move his price. The plaintiff thought that if he was going to pay $1M, he might try negotiating with Mr Tai. On 3rd March, he telephoned Mr Tai but discovered that he was out of Hong Kong. Because his heart was still at Seaview Garden, as he put it, the plaintiff tried calling the defendant again. The plaintiff finally contacted her sometime after 10 p.m. on 3rd March. The defendant said that she was still interested in selling her flat at $900,000 plus. It was arranged that the plaintiff should go straight to the flat.

11. At the flat, the plaintiff found the defendant, her husband and daughter. The plaintiff and the defendant's husband, Mr Kwan, exchanged name cards. Mr Kwan observed that the plaintiff was working for a big company and must have a housing allowance. The plaintiff explained that he did not have a housing allowance but that there was a Housing Loan Programme. Before seeing round the flat, the parties sat chatting. The plaintiff enquired what they were going to do if they sold the flat. He was told that they were going to apply to immigrate. He was also told that they had other properties in Hong Kong which they would sell one by one. In the meantime, there was a flat at Braemar Hill where the lease was soon to expire. The defendant and her family intended recovering  this flat into which they would move.

12. The plaintiff then looked around the flat. He was taken to the balcony from where the defendant tried to indicate the carpark. The plaintiff could not see it. Mr Kwan said he would show it to the plaintiff when he left.

13. After some discussion about furniture and fittings, the parties began to negotiate a price. The defendant asked the plaintiff to make an offer. The plaintiff said that his study of the market showed that the asking price for flats on the higher floors was between $960,000 and $980,000. He offered $940,000. The defendant said the offer should be at least $980,000. Eventually the plaintiff offered $970,000 which the defendant accepted. During this negotiation, Mr Kwan simply sat and listened. He said that the flat belonged to the defendant and he wanted the plaintiff to negotiate direct with the defendant.

14. After the price was agreed, Mr Kwan asked the plaintiff whether he would like to buy a car to go with the carpark. The plaintiff said he was not interested in buying a car at that time.

15. The plaintiff then asked the defendant how much deposit she wanted. The defendant asked for $3,000. The plaintiff wrote out a cheque for that sum. He also said that they should write down an agreement. They moved to a table. There they discussed what should be written and each wrote out their part of the agreement sentence by sentence as the terms were agreed. When they had finished, the plaintiff found his part to be messy, so copied it out again on a fresh piece of paper. Agreements were then exchanged for review and signed, with Mr Kwan acting as witness.

16. Because of possible difficulties in negotiating with the Defendant's tenant at Braemar Hill, it was agreed that the final date for the defendant to move out of the flat would be 30th July. The final sentence relating to compensation (the compensation clause) was included in the agreement at the insistence of the defendant. The plaintiff was not comfortable with this and emphasised that in no event would he accept compensation but rather the transaction would have to be completed in accordance with the agreement.

17. There was discussion about curtains, lightings, air-conditioners and cupboards. The defendant indicated that these would be left in the flat. The plaintiff wanted these included in the written agreement. Mr Kwan said it was not necessary because they would not be moving them out. The plaintiff did not insist on their inclusion because they were not critical to his decision to purchase the flat. As he put it, he just wanted the place.

18. The plaintiff did not remark upon the absence of reference to the carpark in the written agreement. He simply assumed that it went with the flat. When he first spoke to the defendant in January, he had been told that a carpark was included. During his inspection of the flat, the defendant had tried to indicate the carpark from the balcony. Mr Kwan had tried to sell him a car to go with the carpark, and indeed, showed the plaintiff the carpark and the car when the plaintiff was leaving.

19. During the following week, the plaintiff spoke to the defendant on two or three occasions to discover how negotiations were going with the tenant at Braemar Hill. After about a week, the defendant said that the tenant wanted to renew the lease. She was going to talk to other tenants and asked for an extension of two weeks before going to solicitors to sign a formal agreement in accordance with the written agreement. The plaintiff agreed to this and told the defendant that he planned his next overseas business trip on 18th March, returning about 29th March so that they could sign the formal agreement during the week following 30th March. In the meantime the plaintiff said he was ready to sign the formal agreement at any time if the defendant could find another flat.

20. The plaintiff kept in touch with the defendant who was unable to sign a formal agreement before the plaintiff went away. While the plaintiff was away, he tried calling the defendant and left a message with her daughter. When he returned to Hong Kong on 29th March, he immediately called the defendant. He discovered that the defendant was still having difficulties with her tenant. After negotiation, the plaintiff agreed to a final extension until 16th April for signing a formal agreement. The defendant told the plaintiff not to call her so often and said that she would call when she was ready to sign. The plaintiff, however, continued to try and contact the defendant. He was unable to contact either the defendant or Mr Kwan, even when he tried calling them at mid-night.

21. Finally, the plaintiff contacted Mr Kwan through his pager. Mr Kwan told the plaintiff that they were not going to sell the flat yet and told the plaintiff to sue them.

22. The plaintiff then consulted his solicitors who, on his behalf, wrote to the defendant by letter dated 10th April, in which the solicitors asked the defendant to provide the title deeds so that the formal agreement for sale and purchase could be drawn up. That letter referred only to Flat D, 25. A further letter dated 14th April, correcting an error in the previous letter, again referred only to Flat D, 25. A final letter to the defendant dated 23rd April referred, for the first time, to the carpark, required the defendant to provide the title deeds by 27th April and advised her that the written agreement had been registered with the Land Office. The defendant, through her solicitors, finally replied to the plaintiff's solicitors by letter dated 5th May, denying the plaintiff's allegations.

23. The defendant gave evidence on her own behalf. She said that she and her husband owned only one flat, namely, the flat in which they were then and are now living. At the beginning of 1987, she thought of selling the flat in order to obtain a larger flat in which they could accommodate a maid. She approached two estate agents, J. Wilhurn and Hilton Property Management. A Mr Robert Li of Hilton told her she could ask $1. 05 million for the flat and carpark and more, if a buyer liked it. The defendant asked Mr Li to help in selling the flat. Mr Li said that Chinese New Year was approaching at the end of January and the market would be quiet then.

24. Towards the end of February, the defendant found the plaintiff's note in her mail box. She telephoned him. The plaintiff simply asked for her address and telephone number but did not asked about the price. The plaintiff phoned her again on 3rd March and shortly after, came to inspect the flat at about 10 p.m.

25. The defendant showed the plaintiff over the flat. The plaintiff said it suited him and asked for the price. The defendant said $1.15 million including the carpark. The plaintiff said it was a little bit high.

26. The defendant, Mr Kwan and the plaintiff then chatted together. After some discussion about what items would be left in the flat, the plaintiff raised his offer to $1.17 million. The defendant consulted Mr Kwan who told her to make the decision herself. The defendant accepted the plaintiff's offer. She was very happy about the price because she could sell the car at the same time.

27. The defendant asked the Plaintiff for a deposit. The plaintiff wrote out a cheque for $3,000 and said that they should prepare a temporary agreement but that the price should be limited to $970,000 as he had to raise a loan from his company which should not be in execs of $1 million. When the defendant hesitated, the plaintiff said that if the carpark and car were not included in the written agreement, it would be a good guarantee for the defendant because the flat without a carpark would be no use. The plaintiff said he would pay a 10% deposit on the $970,000 and cash of $200,000 upon execution of the formal agreement.

28. After agreeing the various dates and amount of rent, the plaintiff wrote out the agreement on paper supplied by the defendant. The defendant read it through but thought that there should be provision for compensation should either of them fail to observe the agreement. The plaintiff accepted this. Accordingly, the compensation clause was inserted.

29. The defendant then wrote out her part of the agreement. She said she had a rough idea of the wording and wrote sentence by sentence. After she had finished, she altered some characters in the 11th line of the agreement, that is to say in the compensation clause, so that it reads "either party" instead of "both parties".  She did this at the request of the plaintiff. She did not notice that the plaintiff's copy contained no date.

30. It was agreed to use the plaintiff's lawyer in order to save fees. The defendant told the plaintiff that her flat was under mortgage to Citibank and asked him to approach the Bank for the deeds. The plaintiff agreed.

31. During the next few days, the defendant tried to contact the plaintiff without success. On 13th March, she finally spoke to him at his office. The plaintiff informed her that he could not carry out the transaction before 17th March as he could not pay any money. The plaintiff asked for an extension of time for one month. The defendant refused. The plaintiff said "Your flat could not be sold within a short period". The defendant felt that plaintiff was trying to delay or was unwilling to carry out the transaction.

32. The defendant tried to contact the plaintiff on the 16th, 17th and 18th March without success. On 17th March, she was told by the plaintiff's secretary that the plaintiff was out of Hong Kong. The defendant said that the plaintiff had made no effort to contact her. The first communication she received from him was his solicitor's letter dated 10th April. The defendant thought the letter was scandalous and took no action. She was disturbed by the following letter of 14th April but before she took it to her own lawyer she received the letter dated 23rd April. She then put the matter in the hands of her solicitors.

33. As Miss Kwan for the plaintiff said, there is no room for mistake in this case. One of the parties is lying. At first blush, the plaintiff's story seems to me to be more likely, which suggests that the defendant was not telling the truth. The defendant was, however, supported by two witnesses, Mr Kwan and Mr Li.

34. In the final analysis, Mr Li's evidence was less helpful to the defendant than she would like. I have no doubt that Mr Li was an honest witness, but he did not appear as a particularly impressive estate agent. It was his evidence in cross-examination that before advising a client of a price, he will make enquiries of three or four banks. That hardly suggests that he is able to form an independent judgment based upon his own knowledge and experience.

35. Mr Li said he told the defendant that her flat was worth about $1,000 per sq.ft. not including the carpark. He said that a carpark was worth $70,000 to $100, 000. In cross-examination, he said that if he had advertised the property, he would have put a price of $l.05 million to $1.1 million without the carpark. With the carpark, he would have asked $1.12 million to $1.18 million. It was the defendant's evidence that Mr Li told her she could ask for $1. 05 million including the caspark she did not mention being told $1,000 per sq.ft.

36. Sales of three comparable flats in Seaview Garden were put to Mr Li. By agreement dated 29th April 1987, Flat D 20 and Carpark (Mr Tai's flat) were sold for $1.024 million. Flat D 17 and carpark were sold in January 1988 for $950,000. Flat C 26 and carpark were sold in February 1987 for $1.03 million. Mr Li was unable to make any useful comment on these comparables which suggest that his estimate of the value of the defendant's flat in January 1987 was rather more than flats on the higher floors of Seaview Garden were fetching at the time or, indeed, since.

37. Mr Kwan's evidence broadly supported that of the defendant. There was, however, a number of material discrepancies. Mr Kwan said he gave his card to the plaintiff while they were chatting soon after the plaintiff's arrival. That accords with the evidence of the plaintiff. The defendant, however, said that Mr Kwan did not give his card to the plaintiff until the end of his visit when it was given for future contact. Apart from the obvious discrepancy, it was Mr Kwan's evidence that his business at the time was not in operation and, indeed, closed later in the year. Mr Kwan said he visited the office only occasionally at the time. There seems to have been little point in handing  over the card in such circumstances.

38. Mr Kwan's evidence suggested that the defendant offered the flat, carpark and car for $1.2 million after Mr Kwan and the plaintiff had returned from their inspection of the car. The defendant's evidence was quite clear. She suggested a price of $1.2 million before the plaintiff had been to see the car.

39. Mr Kwan said that when the plaintiff offered $1.17 million, he told the defendant that that was acceptable and she should leave the matter there. The defendant said that Mr Kwan left her to make up her own mind.

40. Mr Kwan's evidence was that the plaintiff and defendant were discussing the terms of the agreement as they wrote it out. Mr Kwan said that the plaintiff used several different sheets which he tore up before the final draft. That is certainly in accordance with the plaintiff's evidence and would explain why the plaintiff's part of the agreement is neat and tidy. The defendant, however, said that apart from the compensation clause, all the terms of the agreement had been settled before the plaintiff put pen to paper, and the plaintiff made only one copy.

41. Mr Kwan said that when he saw the plaintiff writing $970,000, he enquired why. For her part, the defendant said that the plaintiff told her, before he started writing, that he would only put in $970,000.

42. The somewhat unusual compensation clause which appears in the agreement was, according to both the defendant and plaintiff, suggested by the defendant. Mr Kwan, however, said that it was proposed by the plaintiff.

43. In cross-examination, Mr Kwan was asked if he knew whether the plaintiff contacted the defendant after 3rd March. He said he had no time to care for that kind of thing. I find that surprising in view of his evidence about lack of any business for his company. Indeed, I formed a less than favourable view of Mr Kwan. I had the impression he was endeavouring to say in evidence what was expected rather than what he recalled.

44. As far as the defendant herself is concerned, I find a number of strange things about her evidence. She said that the plaintiff made no enquiry about the price of her flat during the telephone calls prior to his visit. Yet, it is clear that the plaintiff was interested in price. He took the trouble to ask Mr Tai, the other person who responded to his notice, and because he thought Mr Tai's price too high, did not at the time followed up the purchase of Mr Tai's flat.

45. The defendant said that up to the receipt of the second solicitor's letter, she thought that if the plaintiff could pay $1.17 million, she would still sell the flat, car and carpark to him. She was happy with the deal. It seems odd that she took no steps to try and complete the transaction if there really was an oral agreement at a price of $1.17 million.

46. The defendant said the plaintiff told her that the price of $970,000 was to be included in the written agreement, and the carpark excluded, because his loan should not exceed $1 million, and that the exclusion of the carpark would in fact act as a guarantee for the defendant because the flat was no use without a carpark. The defendant was, however, confused in her evidence as to whether the sum of $1 million represented the maximum loan or the maximum purchase price, for she expressly mentioned purchase price in cross-examination. It is a piece of evidence which I find very difficult to accept. There was no benefit to the plaintiff in omitting the carpark from the agreement. As events have now shown, the omission left him in a vulnerable position. Further, it meant that the plaintiff would have to find a much larger sum of cash from his own resources. If the agreement was for $1.17M, then payment of the usual 10% deposit represented a sum of $117,000. The defendant's evidence, however, was that in addition to the 10% deposit on $970,000, the plaintiff would pay an additional sum of $200,000 cash on the signing of the formal agreement, making a total of $297,000. It is hard to see why the plaintiff should have agreed to terms which meant that he would have to find an additional $180,000 in cash.

47. There also appears to be no reason why the plaintiff could not pay such a sum in March if indeed it was agreed. The plaintiff has put in evidence a copy of a certificate of deposit worth some US$69,000, maturing on 31st March 1987. As the plaintiff said he would have no difficulty in obtaining credit on the basis of such security.

48. I also find the compensation clause puzzling. It appears to suggest a compensation payment of $6,000. The defendant, however, said the words in brackets qualified the clause, so that only $3,000 was payable. If she was in breach, she would repay the plaintiff 's deposit; if the plaintiff was in breach, she would simply forfeit the deposit. If that is right, the clause hardly seems likely to exert any pressure or the plaintiff to complete a transaction worth $1.17m; rather, it seems to give the defendant an easy way out.

49. For the defendant, Mr Mayne pointed out that the plaintiff, who is an accountant by profession, is a careful planner. In particular, the plaintiff had very carefully examined the market conditions and interest rates, yet hisnote of his telephone conversation with Mr Tai, which contains several alterations of the details discussed, makes no reference to a carpark although the plaintiff said he had enquired about it. Only the third solicitor's letter includes a reference to the carpark. Further, the plaintiff said that his heart was in Seaview Garden. He would, therefore, be more likely to agree a higher price. According to the plaintiff, he only looked at the carpark when leaving the defendant's flat. It would be more natural for him to see it before agreeing to its purchases. Whilst none of these points are of major significance, Mr Mayne urges that, taken together, they tend to undermind the credibility of the plaintiff's evidence.

50. Following the signing of the written agreement, the plaintiff took no steps to contact his solicitors, and no steps to make available money for payment of the balance of the deposit. The plaintiff's explanation, of course, is that he was awaiting the outcome of the defendant's negotiations with a tenant. Nonetheless, I would have expected a buyer of a flat, particularly an anxious buyer like the plaintiff, to have taken some steps towards putting the agreement on a formal basis, as was his desire.

51. Mr Mayne also drew my attention to the defendant's solicitor's letter dated 5th May 1987 in which it is asserted that when the defendant tried to contact the plaintiff on 18th March, she was told that Mr Tang was not in Hong Kong. He asks how that assertion could confidently be made unless the defendant is telling the truth. He accepts that, if the plaintiff's evidence is to be believed, the plaintiff had earlier told the defendant that he would be out of Hong Kong after the 17th March. However, the defendant would be taking a risk in making such an assertion if plaintiff had in fact not left Hong Kong at the time.

52. I have taken into account all the matters urged upon me. As I said earlier, the plaintiff's account seems to be inherently more credible. An analysis of the evidence does not persuade me from that view. I am satisfied on the balance of probabilities that an oral agreement was concluded between the plaintiff and defendant for the sale of the flat and carpark at a price of $970,000.

53. Mr Mayne submits that rectification is not open. It is his contention that the written agreement contains no reference, expressed or implied, to the carpark. Not only is the carpark physically separate from the flat, but the Land Register shows that it is separate legally. Therefore, if reference to the carpark is inserted in the written agreement, Mr Mayne contends that rather than rectifying that agreement, a new agreement for the sale of the carpark will be written.

54. I am unable to accept that contention. It might have some merit if the oral agreement had included the carpark but at a separate price. The case here, however, is of a single agreement encompassing the flat and carpark at one inclusive price. I am satisfied that it is proper to rectify the agreement by including reference to carpark No. 51.

55. I am not prepared to rectify the agreement by including reference to various fixtures and fittings. The evidence was not wholly clear as to what was agreed upon. In any event, the plaintiff himself said that he was not concerned about these items.

56. Accordingly, there will be judgment for the plaintiff for the rectification of the written agreement by the inclusion of carpark No. 51, and for specific performance of the rectified agreement.