NG YING TAT v. EVERFRIST DEVELOPMENT LTD

1991 No. A9605

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

------------------

-----------------------

J U D G M E N T

-----------------------

    (For distribution with consent of the parties)

1. The plaintiff's claim against the defendant is for specific performance of a Memorandum for Sale dated 19th September 1991, damages, interests and costs. Alternatively, the plaintiff claims a declaration that he be discharged from any further obligation to perform the said Memorandum, the return of the purchase price paid, damages in lieu of specific performance; interests and costs. The plaintiff further claims, in the same alternative, a declaration that he is entitled to, in the interim, a commensurate lien over the property so purchased pending the repayment of the purchase price together with damages, interests and costs.

2. It is the plaintiff's case that he and Mr Lung had secured an offer for the sale of. Flat A on the Ground floor of Sun Wah Building for $3.3 million. A Memorandum for Sale in the Chinese language dated 19th September 1991 was signed. And it is on this Memorandum for Sale that the plaintiff's claims, in those alternatives, are sought to be grounded.

3. The plaintiff duly took out a summons under 0.86 of the Rules of Supreme Court for summary judgment in terms of specific performance of the said Memorandum for Sale. The Master granted the plaintiff's summons in terms of the Minute of Order submitted. The defendant feels aggrieved and now appeals.

4. The Statement of Claim of the Amended Writ contains no plea of estoppel. But the plaintiff's contention before the Master-was two-fold, namely, (1) estoppel and (2) the defendant's failure to discharge the "threshold onus" of disclosing any bona fide defence. The estoppel contention is rerun before me on appeal. It is not an estoppel stemming from any alleged ostensible authority on the part of Sun Lun Land Development Company Limited. I shall call it "Sun Lun". The plaintiff maintains that Sun Lun was an authorised agent of the defendant, but that if in truth Sun Lun had no authority to sell Shop A on the Ground floor of Sun Wah Building, upon the defendant's discovery of the said Memorandum for Sale, a duty would arise on the part of the defendant to inform the plaintiff of the fact. The defendant's failure so to warn the plaintiff is said to have led to his detriments in terms of solicitors and agency costs and expenses incurred. Thus, the defendant should not be permitted to rely on the alleged lack of authority of Sun Lun as in the case of Spiro v. Lintern and Others [1973] 3 AER 319 at 0.326 letter h.

5. The estoppel contention can be disposed of briefly :-

1. The application of the principle propunded in Spiro is debatable, particularly in the light of the undefined perimeters of a case yet to be pleaded;

2. No point being taken on "ostensible authority" the alleged agency of Sun Lun must in itself be an issue that has all the more to go to trial.

3. The defence is that in all the suspicious circumstances the plaintiff must himself or ought to have known that Sun Lun lacked authority to sign any memorandum for sale. Knowledge of the truth would bar the Spiro type of estoppel.

6. The plaintiff's case is : a day or two before the signing of the said Memorandum for Sale dated 19th September 1991, he and Mr Lung happened to stroll past the construction site of Sun Wah Building. From a Sales Brochure, it was noted that Messrs. Memfus Wong Surveyors Limited was the sales agent. From the available Price List, they noticed the listing of the suit premises against a quoted price. Next day, the plaintiff returned to the construction site where the sales office was situated and spoke to one Wong Hoi Kwun. Mr Wong Hoi Kwun introducing himself as the brother of Memfus Wong. The plaintiff made an offer to purchase the suit premises for $3.3 million and thereupon Wong Hoi Kwun took instructions over the telephone. Wong Hoi Kwun had given the plaintiff a name card of himself with the address, logo and name of Memfus Wong Surveyors Limited printed on it. After the telephone call, Wong Hoi Kwun accepted the offer and asked the plaintiff to pay a deposit of $70,000 by cashier order. He intimated that his company's agency fee would be 1/2% and that a provisional agreement had to be signed.

7. On 19th September 1991, i.e. the day following, the plaintiff paid Wong Hoi Kwun $70,000 in a cashier order, and Wong Hoi Kwun took the plaintiff to the office of Sun Lun, which was also the defendant's office, for signing the said Memorandum for Sale.

8. On 25th September 1991, he attended the office of Messrs. C.L. Chow & Co., solicitors, and signed the formal Agreement for Sale and Purchase. He was, under that Agreement for Sale and Purchase as he was under the said Memorandum for Sale, required to pay only $330,000 on or before 25th September 1991, but he chose to pay the balance in full. Thus, the plaintiff offered to and did pay $2,970,00 more.

9. The defendant's version is wholly different. A director of the defendant and the Managing Director of Sun Lun have both come forward on affirmation with the statement that the defendant had never authorised Sun Lun to sell any commercial space on the Ground - 2nd floors of its Sun Wah Building. In fact, the defendant has caused to be made a more sweeping statement viz. Sun Lun was never authorised to sell. The defendant is the owner of Sun Wah Building and Sun Lun is the developer. It seems to be generally accepted now that the defendant, Sun Lun, Wide Enough Industries Limited and Mr He Guanxions are all closely associated with and in one commercial Group controlled by the Shunde Municipality, Guangdong, PRC.

10. The defendant claims that apart from the 3rd - 18th floors, the commercial portions of Sun Wah Building have deliberately been retained for use within the Group. The domestic portions of Sun Wan Building, from 3rd - 18th floors inclusive, were put in the charge of Messrs. First Honest Company and Messrs. Yiu Pui Investment Company linked to Ms Wu Yau under an Option Agreement dated 17th April 1991. Messrs. First Honest Company and Messrs. Yiu Pui Investment Company were able to sub-sell units on these 3rd - 18th floors.

11. Messrs. Kin Wah Property Agency Company was initially the appointed sales agent for these option purchases in respect to the 3rd - 18th floors of Sun Wah Building. Three days or soon thereafter, Kin Wah were replaced by Memfus Wong Surveyors Limited.

12. The Managing Director of Sun Lun has deposed to the fact that a few days before 19th September 1991 the Financial Controller of Sun Lun had approached him with an enquiry as to whether Shop A, i.e. the suit premises, could be made available to an interested party. Sun Lun's Managing Director was urged by his Financial Controller, Mr Lui, to consult the defendant with a view to releasing the suit premises for an intended sale. Sun Lun's Managing Director abruptly put an end to the enquiry by telling Mr Lui that the defendant would not part company with any of the first three floors of Sun Wah Building.

13. On 19th September, the Financial Controller Mr Lui resigned for reasons undisclosed in these proceedings. Ms Monita Mak, the account clerk, also resigned a little later. After the resignation of the Financial Controller, the Managing Director of Sun Lun discovered the said Memorandum for Sale. Thereupon, he immediately instructed Messrs. C.L. Chow & Co. not to accept any further deposit and return the $70,000. Mr C.L. Chow's response was difficult to fathom. It is claimed by the Managing Director of Sun Lun that Mr C.L. Chow declined to act on instructions under the pretext that he was also acting for the purchaser, the plaintiff. The Managing Director of Sun Lun, and presumably the defendant, had no knowledge of the Agreement for Sale and. Purchase signed by the plaintiff on 25th September, nor the fact of the payment of the whole of the purchaser price, until the plaintiff's affirmation filed on 18th March 1992.

14. Basically, it is submitted on behalf of the plaintiff that there is no evidence as to why Memfus Wong Surveyors Limited would see fit to charge a 1/2% commission and why Messrs. C.L. Chow & Co. would choose to proceed with the Agreement for Sale and Purchase and charge registration and other fees. Mr Chan, leading counsel for the plaintiff, also draws the Court's attention to the inclusion of the suit premises in the Price List which was available to the plaintiff from the inception. The defendant, so contended Mr Chan for the plaintiff, must have been minded to sell the suit premises. It has also been suggested, at one time, that the Managing Director of Sun Lun could not possibly have testified to the defendant's intention not to sell the commercial portions of Sun Wah Building unless Sun Lun had had some authority over the property.

15. Mr Chan of counsel complains that the allegation of Sun Lun never having any authority to sell is a grossly misleading statement because by the time the Managing Director of Sun Lun made his affirmation in 1992, the suit premises had been transferred through Sun Lun to Wide Enough Industries Limited. That was on 22nd November 1991. On 4th November 1991, there were also sales of offices A & B on the 2nd floor to Mr He Guanxions although it is unknown whether there was any broker/agent involved. Whilst all these transfers are said to be internal re-distribution within the same Group under the control of Shunde municipality, there is no explanation before me as to why Sun Lun's standard Memorandum for Sale was used or why Sun Lun itself was involved, on the face of it, in the transfer to Wide Enough. Whilst Messrs. Memfus Wong Surveyors Limited would probably have found it out of order to levey a charge of 35% as commission unless they had authority to sell, another professional firm Messrs. C.L. Chow & Co., the solicitors, would also have been most imprudent, if lacking in authority, to prepare an Agreement for Sale and Purchase and allow the same to be signed by the plaintiff, and subsequently dispatch a bill of costs including the registration fee.

16. Lastly, it is complained that the defendant's allegation of lack of authority to sell by Sun Lun was never disclosed until very late in the day and only in an affiramtion of its director Mr Yip Sun Kwan filed herein on 4th May 1992. Such alleged lack of authority was, not even specifically raised in the letter of Messrs. C.L. Chow & Co. dated 1st November 1991 giving notice to the plaintiff that the defendant was not prepared "to proceed with the sale of the said property" as "the terms and conditions contained in the said Memorandum for Sale are not acceptable".

17. But a few days before 19th September, the enquiry of Mr Lui, the Financial Controller of Sun Lun, was firmly met with a rebuff. He tendered his resignation on 19th September when the said Memorandum for Sale was purportedly signed for the defendant. When the said Memorandum for Sale came to light, Sun Lun's Managing Director immediately contacted Messrs. C.Y. Chow & Co. with the instructions not to accept any further deposit and to return the $70,000. Messrs. C.Y. Chow & Co. allegedly gave an answer which could only be said to be somewhat perplexing. According to the Managing Director of Sun Lun, Mr C.Y. Chow explained that he could not withhold putting through the transaction as he was also representing the plaintiff. In the meantime, Sun Lun's alleged signatory to the said Memorandum for Sale also resigned.

18. Mr Wong Hoi Kwun is said to have contacted someone. over the telephone for the plaintiff's offer, but the Court has not been assisted on the identity of the personality with whom he had so purportedly consulted. Acting apparently on the information of Wong Hoi Kwun, it is not difficult to appreciate why Memfus Wong Surveyors Limited would feel justified in charging their 1/2% commission. These are all matters to be investigated.

19. The inclusion of the suit premises and the other commercial portions in the Price List has been explained on behalf of the defendant. It was to give the appearance of an orderly presentation to the prospective buyers of domestic units. The Managing Director of Sun Lun has now been, I believe, accepted as having a close relationship with the Shunde Municipality Group through, at least, Messrs. Richfirm Industries Limited. Richfirm Industries Limited is a substantial concern which owns $325,000 of the $500,000 paid-up capital of Sun Lun. This is at least a plausible explanation as to how the Managing Director of Sun Lun could have gained such an insight into the defendant's affairs as regards the Sun Wah Building.

20. The use of the standard Memorandum for Sale of Sun Lun in the transfer of the suit premises to Wide Enough on 22nd November 1991 cannot be conclusive evidence that Sun Lun was then acting in the capacity of an agent. After all, it was an internal re-distribution of properties within the Group controlled by the Shunde Municipality, and it stands to reason that no service of a broker or agent would be needed. The use of a subsidiary for giving instructions for a transfer would not have, in these circumstances, the effect of converting Sun Lun into an agent or vesting it with the authority to sell. The other sales of A & B offices do the 2nd floor on 4th November 1991 to Mr He Guanxions who is a known personality within the same Group, have also been explained as being yet another internal re-distribution. There is, however, no explanation given for the use of the standard form of Sun Lun in the transfer to Wide Enough on 22nd November 1991, but that is not a matter which would militate against the defendant's basic assertions. With the attitude of Messrs. C.L. Chows & Co as given by the Managing Director of Sun Lun, the validity of the defendant's version cannot be said to have been truly undermined by these solicitors processing an Agreement for Sale and Purchase, procuring the signing of it by the plaintiff and endeavouring to collect expenses including the registration fee. Similarly, the terms in which the letter of Messrs. C.L. Chow & Co. dated 1st November 1991 was couched cannot, in my view, demolish the factual averments advanced on behalf of the defendant. The defendant's alleged lack of authority was caused to be captured in words at a late stage; so were its crucial affirmations submitted late from hearing to hearing. But such delay, involving a large commercial Group, cannot be a cardinal sin. After all, the primary duty to ensure the filing of affirmations well in time lay with the solicitors. Therefore, charges of devious manipulation and culpable delay are not well substantiated. I have admitted the late affirmation of Mr Yip Sun Kuen dated 30th September 1992.

21. On the other hand, there are many peculiar aspects in this case, which I have already alluded to. In addition, the property in suit was sold for allegedly $1.4 million lower than the market price, and $53,500 below the list price. The plaintiff offered to pay almost $3m more: on 25th September 1991. Both under the draft Agreement for Sale and Purchase and the said Memorandum for Sale, the plaintiff needed to pay merely a further $260,000, but he volunteered $2,970,000 more, which was not due until 9th October 1991. Paying such a large amount two weeks in advance was sought to be explained by the plaintiff's imminent departure for Denmark. That, in itself, must defy the general notion of common sense in our business sector. The odd behaviour of Sun Lun's staff, the uncooperative response from the solicitors, the one-sided implementation of the Agreement for Sale and Purchase in haste and the eagerness to pay the full purchase price are all matters for proper evaluation. In conclusion, there would seem to be more searching questions concerning the transaction and the conduct of the plaintiff than what are said to be the critical activities of the defendant and its professional sales agent and legal advisers.

22. It cannot be fairly said that there are any inherent inconsistencies in the defendant's case; less could it be said that inherent inconsistencies if any, in the defendant's case have not all been plausibly explained. Mr Chan, leading counsel for the plaintiff, cites Bhagwandas Kewaleram Murjani and Others v. Bank of India [1990] 1 HKLR 586, in which much reliance was placed on Bremar Holdings Limited v. de Roth reported in the issue of The Times dated 22nd February 1984. In particular, the obiter of Beldam J. was overwhelmingly received. Beldam J. held that there was no defence disclosed. The Times Newspaper Report quoted him as having expressed a gratuitous view that "he would have held that the affidavit statements were not sufficiently credible to raise an issue or question in dispute which ought to be tried". In the earlier part of The Timed Report, the learned judge was reported as having stated thus : "... the plaintiff's documentary evidence cast such doubt upon the validity of the defendant's documents and affidavit statements in support of the third suggested defence, that his Lordship found the affidavit incredible, or almost incredible, by reason of its inherent implausibility or inconsistency with the documents."

23. I am not troubled by the reported reference made to "inherent implausibility or inconsistency" but by the reported obiter of the judge, which seems to be in direct conflict with the views so consistently held and recently echoed in the English courts. The position can best be highlighted by setting out a passage at p.151 of Vol.1 1993, the Supreme Court Practice :-

"The affidavit showing cause against summary judgment or any evidence contained in it should be rejected only if it is inherently unreliable because it is self-contradictory or inadmissible or irrelevant or where there is affirmative evidence admitted or unchallengeable by the defendant which is unequivocally inconsistent with his own evidence, without any plausible explanation given of the inconsistency, for in such a case the Court could, but would necessarily conclude that not even a faint possibility of a defence existed, but the Court should not reject the defendant's evidence if, merely because of its inherent implausibility or its inconsistency with other evidence, it finds it incredible or almost so, though in such a case the Court may consider granting conditional leave (per Webster J. in Paclantic Financing Co. Inc. v. Moscow Narodny Bank Ltd. [1983] 1 W.L.R. 1063, affirmed [1984] 1 W.L.R. 930 C.A. but with reservations about categorising the circumstances for rejecting such affidavit evidence). See also per Lord Lindley in Codd v. Delap (1905) 92 L.T. 510 : 'Unless it is obvious that the allegation of fraud (impeaching the foreign judgment sued on) is frivolous and practically moonshine, order XIV ought not to be applied.' As a matter of law, the Court does not have to treat every affidavit filed in Order 14 proceedings as truthful and at face value when perhaps every probability and circumstance might point to the contrary (Famous Ltd. v. Ge Inn Ex Italia SRL, The Times, August 3, 1987, C.A.)." (Emphasis supplied).

24. I have searched for but failed to find any official judgment of Bremar Holdings Limited v. de Roth except for the, one in the New Law Journal vol.137 (1984) 550. The case was reported on a different aspect and Mr Justice Beldam was mis-reported as-"Belden J". Bremar has not made an appearance in any of the editions of the Whitebook since 1985. Evidently, no one, including our Court of Appeal has been shown an approved version of the judgment of Beldam J. and there is no means of ascertaining whether the Times Newspaper report is wholly accurate. It would seem to be debatable, therefore, whether the Court of Appeal decision in Bhagwandas Kewaleram Mavijani and Others v. Bank of India  was founded on what would appear to be an incorrectl statement of principle (though by way of obiter) governing summary judgment applications.

25. Leading counsel for the plaintiff, Mr Chan, submits that at each end of the spectrum either in "unequivocal inconsistencies" or "inherent implausibilities or inconsistencies" there must be some overlapping. It is, so leading counsel for the plaintiff argues, essentially a matter of degree, to be judged in the circumstances of each case. Counsel's submission seems to deprive considerable support from what was said by Robert Goff L.J., as he then was, for the English Court of Appeal in Paclantic Financing Company Inc. v. Moocow Narody Bank Limited [1984] 1 WLR 930 at p.939 Letter B : "We wish, however, to express our reservations about the statement which seeks to categorise, in exclusive terms, the circumstances in which such affidavit evidence can be rejected." The editors of the White Book take heed of this advice, as can be seen in a passage in its current 1993 Edition, Vol.1 at p.151.

26. There is nothing in the factual assertions of the defendant which can be properly stigmatised as an "unequivocal inconsistency" or one without any plausible explanation. The defendant's case is far from being inherently implausible. There is nothing incredible or almost so in any part of the defendant's version. Unconditional leave to defend must therefore be granted and the Master's order should be set aside.

27. There is an endorsement on the said Memorandum for Sale, which reads : "The Vendor reserves the right to rectify any errors or obmissions in calculating the purchase price above referred to and the amount of the purchase price shall be as stated in the Agreement for Sale and Purchase to be prepared by the aforesaid solicitor". The controversy was whether or not the said Memorandum for Sale was signed by an authorised agent of the defendant. It is fundamentally a dispute as to whe ther there was or was not a binding agreement purportedly signed for Sun Lun. Mr Mumford, leading counsel for the defendant, submits that the purchase price in the said Memorandum for Sale was liable to be re-adjusted in the formal sale and purchase agreement, hence it is unenforceable. There is no suggestion that the defendant had any reservation on the price, if indeed agreed as alleged. Nothing in the defendant's case would call for a rectification although there is an allegation that the purported sale was at a gross undervalue and below the list price. There must be an ascertained price for comparison even in the very making of that allegation. I find no substance in this suggested interpretation.

28. I would give directions for pleadings and if the parties are not satisfied with these directions, they are at liberty to apply for a variation.

29. As for costs, it would seem that unless the contentions mounted are totally separate, costs of this appeal should follow the event. Counsel may be assisted by In re Elgindata Limited reported in The Times Law Report, 18th June 1992. The general rule should not be displaced by some failed issues or allegations raised by the successful party unless there is a significant increase in the time consumed. Here the contended construction of the Memorandum for Sale did not seem to have taken up much of these proceedings. In the case of a separately disputed issue, the usual rule that costs are to follow the event may be justly departed from. See Nash and Others v. Eli Lilly & Co. and Others, 7th October 1992 Times Law Report. The construction argument in this case is not a truly separate issue. Judgments in these cases, if reported, should be consulted. I shall simply make an Order Nisi for costs.

I order -

(1) Appeal be allowed;

(2) Master's order be set aside;

(3) Subject to what I have said, costs of this appeal and before the Master be costs for the defendant against the plaintiff, certified fit for two counsel;

(4) Defence be filed within 21 days from today;

(5) Reply, if any, be filed by the plaintiff within 14 days thereafter;

(6) Lists of documents be exchanged within 14 days after close of pleadings;

(7) Inspection within 10 days thereafter;

(8) This action be thereafter set down for trial before a judge without a jury, estimated time to be supplied by both solicitors jointly;

(9) Parties be at liberty to apply to vary these directions.

30. The Order for costs made is as I have said, an order nisi.