MONTRIO LTD AND ANOTHER v. TSE PING SHUN DAVID

HCA757/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.757 OF 2009

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BETWEEN

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J U D G M E N T

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1.  This is a conveyancing dispute concerning Workshop Unit 6C and Unit 6D, G/F, Hoi Luen Industrial Centre, No.55 Hoi Yuen Road, Kowloon. I will refer to them as “Unit 6C” and “Unit 6D” respectively and “the Units” collectively below. The plaintiffs were the vendors, the defendant the purchaser. In a nutshell, the core dispute is whether the defendant could rescind the sales of the Units on the ground of misrepresentation by the plaintiffs, through its agent, relating to the gross area of the Units (“the Gross Area”).

A.  BACKGROUND

2.  The 1^st and 2^nd plaintiffs are corporate vehicles of Mr Wong Hon Hing (“Mr Wong”) and his wife.  Each of the plaintiffs held Unit 6C and Unit 6D as the respective registered owner.  Mr Wong has a machinery import business.  The defendant runs a restaurant business under the name King of the King Group.  Both Mr Wong and the defendant are experienced property investors.  The parties made no contact throughout the negotiations leading to the disputed transactions, which were all along handled by Ms Ada Lam (“Ms Lam”), estate agent, whose service both parties had used for some time before the present proceedings arose.

3.  Ms Lam used to work of Centaline (C.I.S.) Property Agency (“Centaline”).  Between 10 October 2007 and 18 February 2008, the plaintiffs appointed Centaline as sole agent for the Units.  Auction was contemplated but no sale was concluded.  In early May 2008, Ms Lam was transferred to Ricacorp Properties Limited (“Ricacorp”), a company within the Centaline Group.  It was after the transfer that the parties entered into the disputed transactions with Ricacorp as the estate agent.

4.  The plaintiffs and the defendant made two provisional sale and purchase agreements dated 7 May 2008 (“the Provisional Agreements”) concerning the Unit 6C and Unit 6D separately for the respective sale price of HK$19 million and HK$12 million.  The parties then made two formal sale and purchase agreements dated 21 May 2008 (“the Formal Agreements”).  The defendant had paid 10% of the respective sale price as deposits, totaling HK$3.1 million (“the Deposits”).  Completion of the sales was to take place on 6 November 2008.

5.  In June and July of 2008, requisitions were raised and answered.  The title deeds were returned to the plaintiffs’ solicitors on 4 August 2008.

6.  On 30 October 2008, the defendant’s solicitors wrote to the plaintiffs’, alleging for the first time in the correspondence that the plaintiffs had through their agents represented to the defendant that the Gross Area was 12,254 square feet when the defendant’s recent investigation showed that they were in fact only 9,556 square feet, resulting in a reduction of habitable area by some 28%.  By letter dated 3 November 2008, the plaintiffs’ solicitors denied the plaintiffs had authorized any agent to make any representation about the Gross Area.  They further alleged that the defendant had been advised by Ms Lam to do his own measurement of the Units.

7.  Further correspondence between the solicitors ensued but the dispute over the Gross Area was not resolved.  In the end, completion did not take place and the transactions fell through.  The plaintiffs then forfeited the Deposits.

B.  PROCEEDINGS

8.  In March 2009, the plaintiffs commenced the present action.

9.  On 30 September 2009, they sold Unit 6C and Unit 6D at the respective price of HK$13.6 million and HK$11.4 million.  They now claimed against the defendant for a declaration that they are entitled to forfeit the Deposits, damages or alternatively the shortfall arising from the resale and the incidental expenses amounting to HK$5,700,450 for the 1^st plaintiff and HK$853,750 for the 2^nd plaintiff.

10.  The defendant pleaded misrepresentation as the only defence.  He counterclaimed for a declaration on rescission, return of the Deposits and damages.  On damages, the only particularized item is wasted conveyancing costs of HK$32,885.

11.  At the trial, Mr Wong and the defendant gave evidence.  The parties’ joint expert, Mr Ivan Ho, architect, gave evidence on the Gross Area and the value of the Units.

C.  LEAFLETS

12.  Central to the disputes is three leaflets for promoting the Units.  Two were prepared by Centaline dated 24 February 2007 and 10 March 2008 (“the 2007 Centaline Leaflet” and “the 2008 Centaline Leaflet” respectively).  The third was prepared by Ricacorp dated 3 May 2008 (“the Ricacorp Leaflet”).  They are collectively referred to as “the Leaflets” below.

13.  In the 2007 Centaline Leaflet, the Gross Area and the net area of the Units were stated to be 12,254 square feet approximately and 7,815 square feet approximately.  The asking price was stated to be calculated on the basis of the Gross Area at HK$2,757 per square foot.  Appearing at the bottom is this remark (“the Remark”) : 

“The property is offered subject to contract and availability. Interested parties should satisfy themselves as to the accuracy of the particulars contained herein which are provided by us for information only. No warranty for accuracy is given or implied by the owners or us. Meanwhile interested parties should be aware that we are also acting as agent for the owners.”

14.  In both the 2008 Centaline Leaflet and the Ricacorp Leaflet, the Gross Area was stated to be 12,254 square feet approximately (“the Statement”).  No reference was made to the net area.  The asking price was HK$3,101 for the 2008 Centaline Leaflet and HK$3,003 for the Ricacorp Leaflet per square foot respectively.  The Remark also appeared at the bottom of the document.

15.  All the Leaflets directed inquiries from interested parties to Ms Lam.

D.  OVERVIEW OF THE PARTIES’ CASE

D.1.   The defendant’s

16.  In his Re-Amended Defence and Counterclaim, the defendant relied on written representations in the Leaflets and oral representation by Ms Lam on or about 6 May 2008 as well.  He alleged that they were all made with the plaintiffs’ knowledge, consent, authority and/or acquiescence in order to induce him to purchase the Units.

17.  On the written representations, the defendant first pleaded that since late 2007 the plaintiffs had advertised for sale through their agent, Centaline, the sale of the Units.  In the sale leaflet published by Centaline, the Gross Area was stated to be 12,254 square feet approximately and the asking price was stated to be calculated on the basis of the Gross Area at HK$3,101 per square foot.

18.  This plea can be swiftly disposed of because it is simply not supported by evidence.  At a first glance, it would appear that the defendant was referring to the 2007 Centaline Leaflet because it was the only leaflet that existed at the time.  However, upon a closer look, it can be readily seen that it could not have been his case.  For the asking price stated in the 2007 Centaline Leaflet was HK$2,757 per square foot, and not HK$3,101. In any event, any reliance on the 2007 Centaline Leaflet is wholly misplaced. It is the defendant’s own evidence that the first leaflet concerning the Units that he had ever received was the 2008 Centaline Leaflet that Ms Lam faxed to him on or about 10 March 2008.  He could not have relied on any representation in the 2007 Centaline Leaflet at all.  In his closing submissions, Mr Ho, SC, for the defendant, did not press this plea any further.

19.  The defendant next pleaded that on or about March 2008, Ms Lam faxed to him the 2008 Centaline Leaflet with a view to persuading him to purchase the Units.  In about May 2008, the plaintiffs advertised for sale through Ricacorp by the Ricacorp Leaflet, which Ms Lam sent him on or about 3 May 2008 again with a view to persuading him to buy the Units.  She further orally confirmed to the defendant that the asking price for the Units was HK$36,800,000 and about HK$3,000 per square foot, which was consistent with the written representation that the Gross Area was approximately 12,254 square feet.

20.  As to the oral representation, the defendant pleaded that on or about 6 May 2008, Ms Lam told him that the Gross Area was 12,254 square feet (“the Oral Representation”) when they went to Hoi Luen Industrial Centre to inspect the Units.

21.  I pause to note two points.  First, this is the only plea based on oral representation. Second, the Oral Representation differs from the alleged written representations in the Leaflets in that it stated the Gross Area to be 12,254 square feet, as opposed to 12,254 square feet approximately.

22.  The defendant went on to plead that he acted upon both the written and oral representations when he entered into the Provisional Agreements and the Formal Agreements.  The representations were however false in that the Gross Area was not approximately 12,254 square feet but were only about 9,556 square feet or alternatively 11,300 square feet.  He discovered the falsity of the representations thus.

23.  When on or about 15 July 2008, the defendant received a leaflet from Khemco Properties Limited (“the Khemco Leaflet”) in which it was stated that the Gross Area was 9,556 square feet.  He then confronted Ms Lam over the phone.  Ms Lam said she had to make inquiry.  A few days later, Ms Lam gave the defendant a plan (‘the Plan”) showing that the net area of the Units was 8,917 square feet.  She agreed to follow up with the plaintiffs.  On 25 October 2008, the defendant made enquiry with the management office of Hoi Luen Industrial Centre.  The staff there told him that the gross area of Unit 6C and Unit 6D was 5,228 and 4,328 square feet respectively, totaling 9,556 square feet.

24.  Further, on or about 6 January 2009 the plaintiffs advertised for sale of the Units through Midland Industrial (“Midland”).  The leaflet published by Midland stated that the Gross Area was about 11,300 square feet.

25.  Finally, in the sales brochure produced by the developer of Hoi Luen Industrial Centre in about 1985 (“the Sales Brochure”), it was stated that the gross area of Unit 6 on the ground floor of the Centre was 21,021 square feet.  In about November 1986, Unit 6 was subdivided into four units, that is, Units 6A, 6B, 6C and 6D.  On the basis of the gross area of Unit 6 being 21,021 square feet and a proportionate apportionment of the four units, the Gross Area can only be about 10,000 square feet.

26.  In sum, the defendant’s pleaded case on the actual size of the Gross Area ranges from 9,556 square feet, about 10,000 square feet to about 11,300 square feet.

27.  The defendant then alleged that the plaintiffs made the representations fraudulently in that they knew they were false or reckless, not caring whether they were true or not.  Further or alternatively, if, contrary to his primary case, the representations were not made fraudulently, he will rely on section 3 of the Misrepresentation Ordinance as entitling him to the relief claimed.

D.2.   The plaintiffs’

28.  The plaintiffs first pleaded in their Amended Reply and Defence to Re-Amended Counterclaim that they did not know the area of the Units, be it gross, gross floor or saleable area.

29.  The plaintiffs then alleged that they did not engage Centaline to sell the Units.  Mr Wong was only shown the 2007 Centaline Leaflet in late February 2007.  But he did not instruct or authorize Centaline to prepare or distribute the 2007 Centaline Leaflet or make any representation on the area of the Units.  He was assured by Ms Lam that the areas stated in the 2007 Centaline Leaflet were for reference only and no warranty as to their accuracy was given.  The plaintiffs were not aware of the 2008 Centaline Leaflet.  They had not retained Ricacorp to sell the Units and had no knowledge of the Ricacorp Leaflet.   Any alleged representation made by Ms Lam about the Gross Area was not authorized by the plaintiffs but was made by Ricacorp on its own as broker in the transactions.

30.  The plaintiffs denied that the defendant had relied on the alleged representations because Ms Lam had on 6 March 2008 shown him the building plans and he did measure the Units from the plans and came to a view that the Gross Area was over 12,000 square feet.

31.  Further, the plaintiffs alleged that it was unreasonable for the defendant to rely on the representations because of the Remark in the Leaflets.  As an experienced property investor, he knew that leaflets published by estate agents would be for marketing only and the information would not be accurate.  And he had inspected the Units and could have measured them.

32.  The plaintiffs also contended that the representation was only a matter of opinion as there was no clear meaning and measurement of the term “gross area”.

33.  They further relied on Clause 14 of the of the Provisional Agreements :

“This agreement supersedes all prior negotiations, representation, understanding and agreements of the parties hereto.”

34.  Dealing with the defendant’s case on the alleged discovery of falsity, the plaintiffs said they had no knowledge of the Khemco Leaflet; that they never authorized Midland to make any representation about the Gross Area and the leaflets published by Midland were without their knowledge or consent; that they did not admit the accuracy of the Sales Brochure.

35.  Finally, the defendant had affirmed the Formal Agreements by reason of only raising the alleged representation on 30 October 2008 when he should know about the measurements much earlier and had taken steps in the conveyancing process by raising requisitions.  It was his own case that he knew about the alleged problem with the Gross Area as early as July 2008.

E.      SEVEN PRINCIPAL ISSUES

36.  The parties have filed their respective list of issues.  From the lists, I distill seven principles issues which, I believe, are essential to and sufficient for determination of the parties’ competing claims.  They are :

(1) Was the Statement in the 2008 Centaline Leaflet and the Ricacorp Leaflet made on behalf of the plaintiffs? 

(2) If yes, did the Statement constitute an actionable representation?

(3) Did Ms Lam make the Oral Representation to the defendant on 6 May 2008?

(4) If yes, did Ms Lam make the Oral Representation on behalf of the plaintiffs?

(5) Were the Statement (if actionable) and the Oral Representation (if made), on the basis that they had been made on behalf of the plaintiffs, false?

(6) If the Statement and the Oral Representation were false, did the defendant rely on them in entering the Provisional and Formal Agreements?

(7) If yes, was it reasonable for the defendant to do so?

37.  Issues 1 and 4 are really determinative in the sense that if they are answered in the negative, the defendant’s case must fail irrespective of how the other issues are resolved.  So to them I first turn.

F.  ISSUES 1 AND 4 – AGENCY?

F.1. Legal principles

38.  In Hong Kong, an estate agent acts as a broker usually taking commission from both the vendor and the purchaser. Whether or not the agent acted as an agent when he made a representation during the course of negotiations depends on the particular circumstances of the case.  See Cheng Kwok Fai v Mok Yiu Wah, Peter and Another [1990] 2 HKLR 440, per Godfrey J (as he then was) at p.445E-I; Welltech Investment Ltd v Easy Fair Industries Ltd [1996] 4 HKC 711, per Le Pichon J (as she then was) at p.719E-H; Tai Sang Kung Ltd v Paraking Ltd and Another [2001] 4 HKC 61, per Chung J at p.77D-F.  As aptly summarized by Kwan J (as she then was) in Yili Concepts (HKG) Ltd v Lee Wai Chuen and Another, HCA12911/1997, unreported, 29 September 2000, at p.21 :

“It is a question of fact in each case whether an estate agent is authorized by and therefore acting for a particular party in providing information relating to a property to another party. Although an estate agent in Hong Kong usually acts as a broker taking commission from both sides, he may assume different roles at different stages of the negotiation leading to the transaction.”

39.  What are the facts pertaining to the question of agency?

F.2.  Mr Wong’s evidence

40.  The burden rests on the defendant to prove agency.  But he is unable to give any evidence in this regard because he was simply not privy to the interactions between Ms Lam and Mr Wong.  Ms Lam was not called.  What remains is Mr Wong’s evidence, which may be summarized as follows.

41.  Mr Wong first said he did not know what the Gross Area was.  When he purchased Unit 6D, he was told that it had a gross area of about 5,000 square feet.  But he did not know if it was true or not.  No document was produced to show what the gross area was.  The gross area stated by the vendor was not important to him because he had seen the Unit and found that it was suitable for his purpose in terms of, among other things, area.  He therefore bought the Unit based on what he actually saw.  He bought Unit 6C at an auction.  The auctioneer did produce some documents describing the Unit in which its area was given.  He, however, did not pay much attention to the stated area because he had inspected the Unit and found that it was suitable for his purpose.  Again, he bought it based on what he saw.  He could not remember what its gross area was.

42.  Mr Wong then said he came to know Ms Lam in 2005.  She was then working for Centaline.  She acted as his estate agent in the leasing of properties owned by him.

43.  During a casual conversation in early 2007, Mr Wong told Ms Lam that he was considering selling the Units as much of his business had moved to the Mainland.  He told her that he was selling for about HK$28 to 29 million. He was not in a hurry to sell the Units as he was still using part of them for his own purpose and the tenancy of the parts which had been let out was still ongoing.  He had no intention to actively market the Units until he was ready. However, if in the meantime a very attractive offer came about, he would not refuse to sell.  Ms Lam then asked Mr Wong what the area of the Units was.  She needed the information for marketing purposes.  Mr Wong said he did not know.

44.  Mr Wong said he had given no firm instruction to Ms Lam to proceed to sell the Units for him.  He gathered that she had on her own accord started to market the Units, which was quite usual for estate agents to do.  Whenever they knew that an owner was open to the idea of selling his property, the estate agents would go ahead to market the property and they could secure an interested purchaser, they could always start the negotiation process.  This gave them the chance to do a deal successfully.  After all, that would not cost them much.

45.  Mr Wong knew that Ms Lam had proceeded to market the Units because she showed him the 2007 Centaline Leaflet at the end of February 2007. However, he had instructed neither Ms Lam nor Centaline to prepare the 2007 Centaline Leaflet or to market the Units at the stated price of HK$33,784,278, which is an odd figure.  He was only asking for HK$28 to 29 million. Nor had he instructed Ms Lam or Centaline to represent that the Gross Area was about 12,254 square feet as he himself did not know what they were. He simply had no information to confirm the size of the Gross Area.

46.  Mr Wong asked Ms Lam how she arrived at the figures of 12,254 square feet for the Gross Area and 7,815 square feet for the net area.  She said she had obtained the building plans of the Units from the Buildings Department and she had asked the architectural draftsman of Centaline to calculate them, which he did.  Mr Wong did not protest about the figurers as he had no information to confirm or dispute their accuracy.  In any event, it was already too late for him to make any protest because advertisements by way of the 2007 Centaline Leaflet had already been made.  Ms Lam assured him that there was nothing to worry because, as the Remark made it very clearly, the figures were only mentioned as an indication for reference only and no warranty for accuracy was given or implied and the purchaser should satisfy himself as to the accuracy of the particulars contained therein.

47.  Turning to his appointing Centaline as sole agent for marketing the Units between 10 October 2007 and 18 February 2008, Mr Wong said he had not discussed with Centaline about the Gross Area.  In fact, no figure on the Gross Area was even mentioned in the appointment agreement.  He thought that Centaline would possibly provide 12,254 square feet to interested buyers as reference only.

48.  I pause here to mention two points.

49.  First, as noted, the defendant could not have relied on the 2007 Centaline Leaflet. So it is not necessary for me to make any finding if Mr Wong had instructed or authorized, expressly or otherwise, Ms Lam or Centaline to market the Units or to state the Gross Area to be about 12,254 square feet by way of the 2007 Centaline Leaflet or that such statement constituted any actionable representation.

50.  Second, although neither the 2007 Centaline Leaflet nor the appointment of Centaline as sole agent is strictly irrelevant to Issues 1 and 4, Mr Wong’s evidence summarized above sets the background leading to the 2008 Centaline Leaflet and the Ricacorp Leaflet and more crucially gives a clue to his state of mind at the material times, which may be relevant to the question of agency.

51.  Mr Wong went on to say that he had never seen the 2008 Centaline Leaflet at the time until it was disclosed by the defendant in these proceedings.  He had never authorized Centaline to prepare it.  The asking price of HK$37,999,654 was an odd figure which he would not have mentioned to Ms Lam.  He also pointed out that the 2008 Centaline Leaflet was only prepared after Centaline’s sole agency had expired.

52.  Under cross-examination, Mr Wong readily accepted that after the termination of the sole agency, Centaline might continue to market the Units.  That was something within his expectation.  Had he seen a leaflet like the 2008 Centaline Leaflet at the time, he would not be surprised.  That was also within his expectation.  As a broker, Centaline might need to give the market information about the area of the Units but it was something beyond his control.

53.  Mr Wong said he had never appointed Ricacorp as his agent to sell the Units.  What happened was that after her transfer to Ricacorp in April/May 2008, Ms Lam was aware that the Units were still on the market and she, for her own purpose, looked for purchasers.  Mr Wong never gave any instruction to Ricacorp as to the area of the Units or to represent to anyone about the area.  He had not seen the Ricacorp Leaflet until the defendant refused to complete the sales.  He did not know about the particulars stated therein at all.

54.  On 6 May 2008, Ms Lam called Mr Wong in the afternoon.  She told him that a purchaser was interested in the Units and they were discussing the terms in particular the price.  Mr Wong gave the bottom price of HK$32,800,000.  She asked Mr Wong if he could give her 2% commission if she was able to conclude the deal.  Nothing was mentioned about the area of the Units.  Ms Lam also told Mr Wong that the purchaser had already inspected the Units.

55.  At about 11 p.m. the same day, Ms Lam came to Mr Wong’s home, bringing with her the Provisional Agreements, which had already been signed by the defendant.  Mr Wong asked her if the defendant had inspected the Units.  She said he did.  She also said she brought to the defendant the plans of the Units from the Buildings Department.  The defendant then measured the Units himself and came to the conclusion that the usable area of the Units was about 9,000 square feet.  He then commented that based on a utility rate of 70%, the Gross Area was more than 12,000 square feet.

56.  Under cross-examination, Mr Wong denied the defendant’s version that he was unable to carry out actual inspection of the Units or that he had not carried out the measurement.  He said Ms Lam did tell him that the defendant did. He said in fact back in February 2007 he asked Ms Lam that the purchaser must measure the Units himself before concluding any deal.

57.  Mr Wong was cross-examined on his knowledge about the size of the Gross Area by reference to management fees.  It is not in dispute that the management fees of the Units were calculated by reference to the Gross Area.  And Mr Wong had been a member of the management committee of the incorporated owners of Hoi Luen Industrial Centre since 2001 (according to a meeting minutes dated 25 October 2001) or 2003 (according to his memory).  But Mr Wong said he did not handle the management fees himself, which he tasked his accountant to do.

F.3  Findings

58.  I find Mr Wong an honest and truthful witness.  There is nothing to challenge Mr Wong’s evidence on his interactions with Ms Lam, save and except the defendant’s evidence that he was unable to carry out the inspection of the Units and that he did not make any measurement on 6 May 2008 as alleged.  These two points are irrelevant to the question of agency anyway.  For the discussion on Issues 1 and 4, I accept the uncontroverted parts of Mr Wong’s evidence in their entirety.  Based on Mr Wong’s evidence, I make the following findings.

59.  First, Mr Wong had not instructed or authorized Ms Lam or Centaline to be the plaintiffs’ estate agent in marketing the Units at all material times after Centaline’s sole agency expired on 18 February 2008.

60.  Second, Mr Wong had not instructed or authorized Ms Lam or Ricacorp to be the plaintiffs’ estate agent in marketing the Units at all material times at all.

61.  Third, Mr Wong had no knowledge of the 2008 Centaline Leaflet or the Ricacorp Leaflet at the time.  He did not know that Ms Lam or her then employer had marketed the Units by use of the relevant leaflet at the time.  He did not know that Ms Lam, whether she was with Centaline or Ricacorp, had sent the 2008 Centaline Leaflet or the Ricacorp Leaflet to the defendant in March or May 2008, as the case may be.  There is no factual basis whatsoever to suggest that Mr Wong had given instruction for, consented to or acquiesced in the preparation and general distribution of the two leaflets or more specifically Ms Lam’s sending the 2008 Centaline Leaflet or the Ricacorp Leaflet to the defendant.

62.  Fourth, Mr Wong had not authorized Ms Lam, Centaline or Ricacorp to publish the Statement in either the 2008 Centaline Leaflet or the Ricacorp Leaflet or to represent the same to the defendant.

63.  Mr Ho submitted that the 2008 Centaline Leaflet and the Ricacorp Leaflet were authorized by the plaintiffs, expressly or impliedly, or were alternatively published with their ostensible authority.  He took a number of points.  The 2008 Centaline Leaflet and the Ricacorp Leaflet was within Mr Wong’s expectation.  He never told Ms Lam, Centaline or Ricacorp not to disseminate the Statement or not to adopt the figure of 12,254 square feet or to recalculate the figure or seek his approval before disseminating the same to potential purchaser.  In both leaflets, it was stated that “[the agent was] also acting as agent for the owner”.  I disagree.

64.  It is important to bear in mind that after Centaline’s sole agency expired, Mr Wong had not instructed or authorized Ms Lam, Centaline or Ricacorp to market the Units for the plaintiffs.  He knew that Ms Lam would continue to look for interested buyers.  But that was clearly not done on the plaintiffs’ behalf.  He would be prepared to consider or even accept an attractive offer by an interested buyer procured by Ms Lam.  But it did not amount to any authorization, expressed or implied, or holding out Ms Lam or her employer at the time as the plaintiffs’ agent.

65.  As to how Ms Lam or her then employer were to market the Units, Mr Wong simply had no idea or control whatsoever.  It was entirely a matter for them as broker.  Mr Wong accepted that it was within his expectation that Ms Lam or her then employer might well use sale leaflets similar to the 2008 Centaline Leaflet or the Ricacorp Leaflet to market the Units and that Ms Lam might well state the Gross Area to be 12,254 square feet.  But such subjective expectation hardly amounts, objectively, to any authorization, expressed or implied, or holding them out as the plaintiffs’ agent.  Not even acquiescence in Ms Lam’s conduct in marketing the Units as contended by the defendant.

66.  The reliance on the statement that “[the agent was] also acting as agent for the owner” in both leaflets is misconceived.  It was how Ms Lam and her employers described their role.  Absent any knowledge, actual or otherwise, or acquiescence on Mr Wong’s part that they had so described themselves, Mr Wong had not hold them out as the plaintiffs’ agent.

67.  For the above reasons, Issues 1 and 4 must be answered in the negative.  I find that neither Ms Lam nor any of her then employers was the plaintiffs’ agent when Ms Lam sent the 2008 Centaline Leaflet and the Ricacorp Leaflet to the defendant or when she allegedly made the Oral Representation to him on 6 May 2008.  The Statement and the Oral Representation (if made) were all made by Ms Lam on behalf of her respective employer for the purpose of marketing the Units and no more.

68.  As I have observed above, the defendant’s defence on misrepresentation must fail on this ground alone without reference to other issues.  However, for completeness, I will deal with them briefly as follows.

G.  ISSUE 2 – STATEMENT ACTIONABLE?

69.  It is trite that only a representation of fact is actionable.

70.  Here, the Statement must be understood in the entire context of the 2008 Centaline Leaflet and the Ricacorp Leaflet.  And the Remark made it abundantly clear and in fact beyond any doubt that the Statement was for reference only and no warranty is given on its accuracy.  Properly understood, the Statement is simply not a representation of fact which can mount a case of misrepresentation.

71.  The defendant under cross-examination agreed that as an experienced investor, he had seen similar sale leaflets before and he knew that they were for marketing only and one could not take the information there to be accurate.  More importantly, he accepted that the information about the Gross Area contained in the Statement was for reference only.  In other words, he knew perfectly well that the Statement could not possibly amount to a representation of fact that the Gross Area was about 12,254 square feet.  That admission is really the end of his case on the question whether the Statement constituted an actionable representation.

72.  In re-examination, the defendant sought to salvage his position by answering a leading question from Mr Ho that he did not expect a difference as huge as 28% between the stated Gross Area and its actual size even if the Statement was for reference only.  I attach no weight to this answer as it was made in response to a leading question.  More importantly, it does not detract from the fact that he knew that the Statement was for reference only and that he must have known that no accuracy about the Gross Area is warranted at all.

73.  I answer Issue 2 in the negative.   The Statement is not a representation of fact.  It is not an actionable representation.

H.  ISSUE 3 – ORAL REPRESENTATION BY MS LAM?

74.  This issue is dependent on the credibility of defendant.  His evidence is briefly this.

75.  He said in March 2008, Ms Lam called him after faxing the 2008 Centaline Leaflet to him.  She told him that the Gross Area was 12,254 square feet.  This point was however not pleaded in his pleadings.  Absent a proper plea, he is not allowed to raise it in his evidence.

76.  The defendant next said that on 6 May 2008, Ms Lam and he went to Hoi Luen Industrial Centre, intending to have a site inspection of the Units.  They could not enter Unit 6C as it was tenanted.  They stayed in Unit 6D for about five minutes.  Before they left the Centre, Ms Lam told him that the Gross Area was 12,254 square feet.

77.  I reject the defendant’s evidence for three reasons.

78.  First, I find it hard to believe that Ms Lam would say that the Gross Area was 12,254 square feet exactly.  A more believable version would be that she said the Gross Area was about 12,254 square feet, which is consistent with the Statement in the 2008 Centaline Leaflet and the Ricacorp Leaflet.  In my view, the defendant made this up in order to embellish his case.

79.  Second, the defendant did not impress me to be a truthful or honest witness generally.  I will give two examples as illustration.  He said as early as in mid-July 2008 when he received the Khemco Leaflet, he became aware of the problem about the Gross Area.  He just asked Ms Lam to follow up with the plaintiffs and no reply was forthcoming.  However, he did not seek legal advice or ask his solicitors to raise requisitions there and then.  This is simply incredible.  He further said that on 23 December 2008, Ms Lam told him that as early as February 2007, the plaintiffs provided the figure of 12,254 square feet as the Gross Area.  This is again something not pleaded, which I am sure is yet another allegation made up by him to embellish his case.

80.  Third, Ms Lam is a key witness to help the defendant discharge his burden of proving that she made the Oral Representation as she did.  Yet inexplicably, he did not call her to give evidence, although he admitted that up to now, he has been in contact with her.  In the circumstances, I will draw the adverse inference against him that had she been called, her evidence would not assist him.

81.  I find that Ms Lam had not made the Oral Representation to the defendant on 6 May 2008.  Even if she did, as found above, Ms Lam did not do so on behalf of the plaintiffs.

I. ISSUE 5 – FALSITY?

82.  To recap, the defendant relied on the Khemco Leaflet, the Plan, the information given by the staff of the management office, the leaflet published by Midland to support his allegation that the Statement and the Oral Representation were false.  But he had not adduced any evidence to prove the veracity of any of the figures referred to.  He also relied on the apportionment by reference to the gross area for Unit 6 as stated in the Sales Brochure (21,021 square feet).  But he had not adduced any evidence to show the apportionment or its basis is sound and correct.  These matters do not establish falsity.

83.  Mr Ivan Ho, the joint expert, dealt with the size of the Gross Area in his report.  His undisputed evidence is that there is no universal definition of gross area.  The developer is at liberty to define the gross area of a particular unit in the building as he sees fit.

84.  Mr Ho’s opinion is that the gross area for Unit 6C and Unit 6D are about 5,480 square feet and 4,488 square feet, totaling 9,968 square feet approximately.  He arrived at the figures by reference to the saleable areas of the Units obtained by measurement, the undivided shares allocated to the Units 6C and 6D and the common area of the Centre.  Mr Li tried to queried his calculation but I can see no substance in such attack.

85.  I accept Mr Ho’s evidence and find that the Gross Area is 9,968 square feet. Accordingly, the answer to Issue 5 is yes.

J. ISSUES 6 AND 7

86.  Given my finding on Issue 3, Issues 6 and 7 only concern the Statement in the 2008 Centaline Leaflet and the Ricacorp Leaflet.  They can be convenient dealt with them together.

87.  The defendant said he relied on the Statement when he entered into the Provisional Agreements and the Formal Agreements.  This is contrary to common sense when he knew that the Statement was no more than for reference only.  I reject his evidence and find that he did not rely on it.  Even if he did, it was unreasonable for him to do so with the full knowledge that the Statement was for reference only.

88.  For completeness, I do not think I need to make any positive finding on whether, as alleged by Mr Wong, Ms Lam told him that the defendant did inspect the Units and measure the Units on 6 May 2008.  If need be, I accept Mr Ho’s submission that the plaintiffs should call Ms Lam to testify on these matters.  Since she was not called, I would not attach any weight to Mr Wong’s hearsay evidence in this regard.

K.  CONCLUSIONS

89.  For the above reasons, the defendant’s defence of misrepresentation must fail, whether or not other issues arising from the pleadings are resolved in his favour.  In order not to overburden this judgment, I will not deal with them.

90.  In assessing the loss and damage suffered by the plaintiffs, the general rule is that a plaintiff is entitled to recover the difference in value, if any, between the contract price and the value of the property taken usually, but not invariably, at the time of the breach.  This later value is determined by the price obtained, or obtainable, on a resale within a reasonable time of the breach but excluding any inflated price which the property might fetch by nursing it.  Credit must be given for any deposit that has paid.  He can also claim the expense of the resale.  See generally Barnsley’s Conveyancing Law and Practice, 4^th edn, at p.654.

91.  Mr Li, for the plaintiffs, asked me to use the valuation of the Units at the time of breach (November 2008) as the basis for assessing the loss and damage.  They are HK$11,813,000 for Unit 6C and HK$10,073,000 for Unit 6D.  I prefer the prices obtained in the actual resale in September 2009 instead.  For they reflect the actual loss and damage suffered by the plaintiffs more accurately.  

92.  The relevant figures are not in dispute.  For Unit 6C, the resale price is HK$13,600,000.  Costs of the resale are HK$300,450.  The deposit is HK$1,900,000.  The loss and damage suffered by the 1^st plaintiff is accordingly HK$19,000,000 – HK$13,600,000 + HK$300,450 – HK$1,900,000 = HK$3,800,450.  For Unit 6D, the resale price is HK$11,400,000. Costs are HK$253,750.  The 2^nd plaintiff is entitled to HK$12,000,000 – HK$11,400,000 + HK$253,750 – HK$1,200,000 = - HK$346,250.  In other words, the 2^nd plaintiff has suffered no loss and damage.

93.  I therefore enter judgment for a declaration that the plaintiffs are entitled to forfeit the deposits of HK$1,900,000 and HK$1,200,000 respectively; and monetary judgment for the 1^st plaintiff in the sum of HK$3,800,450 with interest at the judgment rate from the date of writ until payment.

94.  The defendant’s counterclaim is dismissed.

95.  Costs should follow the event.  There will be an order nisi that the defendant do pay the plaintiffs costs of the entire action, including all costs reserved, to be taxed if not agreed.