CHAO SAN SAN AND ANOTHER v. WORLDPART INDUSTRIAL LTD

HCA 14189/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 14189 OF 1998

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J U D G M E N T

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INTRODUCTION

1. The 1st Plaintiffs in the two consolidated actions are sisters (The 1st Plaintiff in High Court Action No. 14189 of 1998 is hereinafter called "the Elder Sister" and the 1st Plaintiff in High Court Action No. 15561 of 1998 is hereinafter called "the Younger Sister"). The 2nd Plaintiffs in the two actions are respectively their son and husband. The Defendant in both actions was the developer of a real estate project in Fanling called Regency Court. Through an estate agency, Treasure Palace Property Agency (hereinafter called "Treasure Palace"), the Plaintiffs in each action bought a unit in Regency Court on 16 May 1997. That was at a time when the property market was at its peak. They duly paid the first three instalments totalling 30% of the purchase price. When the units were due for completion 15 months later, the Plaintiffs did not complete the purchase. They allege the Defendant of fraudulent misrepresentation and seek rescission of the agreements of 16 May 1997 and damages for breach of contract.

PLAINTIFFS' CASE

The representation by Treasure Palace

2. The Plaintiffs were attracted by newspaper and magazine advertisements, which described Regency Court as being near completion and that Treasure Palace was the sole agent of the developer. On 3 May 1997, the Plaintiffs visited the site. A number of blocks of three storey houses were already erected on the site. There were big boards bearing the name of the Defendant as developer, Treasure Palace as their sole agent and that 90% financing would be obtainable from banks. They went to the sales office of Treasure Palace, where they were attended by a Miss Law. They were given a Brochure and a Pamphlet. Law told them that Treasure Palace was the sole agent. She showed them around the site which was still under construction and identified to them the locations where the various amenities would be built in future, namely: a swimming pool, golf practising course, car parks and children's playground. She showed them copies of "Instructions to Sales" stating that there would be a swimming pool, a children's pool, a golf practising course and car parking areas. Law said that the project had the support of the Chinese banks and guaranteed that the Fanling Branch of Nanyang Bank would provide loan up to 90% of the selling price (70% of the selling price in the form of mortgage facility and 20% as a decoration loan). Law showed them Block K, which they were interested to purchase and said it would be completed in two months. Law assured them that they could move into their respective units in July 1997, that completion of the sale and purchase would take place in about six months and by 1998 the estate would have 24 hours security service.

3. The Plaintiffs were very impressed and the Elder Sister described the property as "love at first sight". The Elder Sister chose a ground floor unit in Block K while the Younger Sister chose a first floor unit in the same block. Because of Law's representation, they signed a document titled "Letter of Promise" on the same day, agreeing to purchase the respective units, to sign a Property Purchase Subscription Letter (hereinafter called "Subscription Letter") and to pay Treasure Palace 1% of the purchase price as commission upon signing the Subscription Letter.

4. On the following day, the Plaintiffs paid Treasure Palace $5,000 by cheque at the office of Treasure Palace. There they were re-assured again that they could obtain mortgage from Nanyang Bank, could move into their respective units in two months and that the occupation permit would be issued in January 1998 before the Chinese New Year. When the Elder Sister queried whether water and electricity could be provided in two months, they were told that when they moved into their respective units in July, they could use the water and electricity supply in the site until they were properly provided with the utilities. Within a week, the Plaintiffs paid Treasure Palace $45,000 by cheque making up the initial deposit of $50,000 as required.

Representation by the Defendant and signing of the Subscription Letter

5. On 16 May 1997, the Plaintiffs went to the Defendant's office to sign what they thought were sale and purchase agreement. They were received by a manager of the Defendant. The Elder Sister raised the question about mortgage which she was particularly concerned. The manager told them the mortgage would be provided as stated in the brochure, that the Defendant was negotiating with other banks as well and that if they could not obtain sufficient mortgage loan, the Defendant would offer them a loan to make up the deficiency. He assured them that they could move into the units in July 1997 and that the Defendant would provide them with water and electricity from the site. He told them that the completion of their respective units would be in six months and the occupation permit for Block K would be issued in January 1998 as the occupation permit for Block A was then being issued at the time. She asked whether it was necessary to have the stated amenities written down in the Subscription Letter. The manager told them it was not necessary and the Defendant would honour what was described in the Brochure. With all these assurance, they signed the Subscription Letter and paid the balance of the first instalment of 10% of the purchase price. They were not told that they were buying units built under the Government's small houses policy for indigenous villagers, which are commonly known as "Ting houses". Had they been told that the houses in Regency Court were Ting houses, they would not have bought. The Subscription Letter provided as follows:

(a) that the initial deposit of $50,000 had been paid;

(b) that the first instalment of 10% of the purchase price be paid before 16 May 1997;

(c) that the second instalment of 10% of the purchase price be paid within 2 months of signing the Subscription Letter;

(d) that the third instalment of 10% of the purchase price be paid within 10 days after the issuance of the occupation permit;

(e) that upon settlement of the third instalment, the purchaser would be allowed to move in and decorate the premises;

(f) that the balance of purchase price to be paid within 1 month upon written notice by the Defendant;

(g) that if the Defendant failed to complete the procedure for settling the land premium within 3 years after the date of signing the Subscription Letter, the Defendant shall refund all moneys paid to the Plaintiffs; and

(h) that if occupation permit is not issued within 24 months after the date of signing of the Subscription Letter, the Plaintiffs have the right to cancel the Subscription Letter and be refunded all payments made with interest at the rate of 7%.

Events leading to the date of completion

6. The Plaintiffs visited the site once every two weeks thereafter, but there was little progress. In about mid July 1997, they paid the second instalment as required but were not informed when their units would be ready. They inquired repeatedly from both Treasure Palace and the Defendant and were told that completion of the sale and purchase would take place soon.

7. On 11 May 1998, the Defendant informed the Plaintiffs that the occupation permit had been issued and demanded for payment of the third instalment. The Plaintiffs went to the Defendant company and asked for the occupation permit, but were told it was not available. The Defendant's staff was very evasive. At the time, the amenities were not yet built. Despite their protest about the lack of amenities and the occupation permit, no one from the Defendant paid heed to their complaint. Nevertheless, the Plaintiffs settled the third instalment on 11 May 1998.

8. Keys to the respective units were handed over to the Plaintiffs on 14 May 1998. The amenities were not yet built. When the Elder Sister asked for the occupation permit, the staff told her that he did not have the permit and could not tell her when it would be available.

9. On 15 May 1998, the Defendant wrote to the Plaintiffs informing them that notice for payment of land premium would be issued by the Government shortly when the Defendant would demand payment of the balance of the purchase price within one month. It suggested the Plaintiffs to arrange mortgage as soon as possible with their own bank or with the Sin Hua Bank, Nanyang Bank or the Bank of China suggested by the Defendant. The Defendant also provided the names and telephone numbers of the respective bank officers to be contacted.

10. By that time, the property market has fallen by more than 50%. The Elder Sister approached the three banks suggested by the Defendant, but none of them entertained her application for mortgage or for mortgage loan up to 70% of the purchase price in 1997. Other banks also refused to provide mortgage loan. The Elder Sister, through her solicitors, wrote to the Defendant alleging that as the three banks suggested by the Defendant refused to provide a mortgage loan of 70% of the purchase price, the Defendant was in breach of contract and she accepted the Defendant's breach as repudiation by the Defendant of the Subscription Letter. She demanded refund of the instalments paid. That was refused by the Defendant. On 22 July 1998, her solicitors offered to cancel the Subscription Letter and to enter into a new sale and purchase agreement for the unit at a reduced price of $2 million with credit being given to the instalments she had paid. On 15 August 1998, the Defendant wrote to the Elder Sister informing her that the notice for payment of land premium had been issued and demanded payment of the balance of the purchase price. On 22 August 1998, the Elder Sister commenced the present action against the Defendant.

11. The Younger Sister also received a similar letter dated 15 August 1998 from the Defendant. On 22 August 1998, she responded by a letter alleging breach on the part of the Defendant. She demanded refund of the instalments paid or reduction in price, or a second mortgage by the Defendant in the amount of $600,000 or delay in completion until all amenities were completed and a mortgage for the entire outstanding price. The Defendant did not respond. On 12 September 1998, the Younger Sister instituted the present action. However, for fear of litigation, she instructed her solicitors to proceed with preparing the sale and purchase agreement. But later, she decided not to complete.

12. The Plaintiffs did not complete the purchase and the Defendant resold their two units at a reduced price.

THE DEFENDANT'S CASE

13. No evidence was called by the Defendant to contradict the Plaintiffs' evidence of misrepresentation either by Law of Treasure Palace or by its manager. It relies on the inherent improbability of the Plaintiffs' case and says that the Plaintiffs failed to discharge their burden of proof. It called its manager, Mr So, to explain the reason for the delay in completing the amenities and the procedure for financing purchase of Ting houses.

14. Regency Court is a development consisting of Ting houses. In 1994, the Defendant agreed with villagers of various lots of land there to develop them into a residential project. The development was near completion in 1997 and the flats could be assigned subject to payment of premium.

15. In respect of the individual block, the development procedures involved the application by the owner of the building lot who was an indigenous villager or the "Ting" for a building licence and for three certificates of exemption, exempting the building from complying with certain requirements as to submission and approval of building plan, drainage and foundation works. Once the licence and certificates have been issued, building works may commence. The building would take about 150 days to complete. The Defendant would put the units up for sale usually three months after construction works have begun. Upon completion of the building works and satisfactory inspection, the District Lands Officer would issue a certificate of compliance, which is conveniently called "occupation permit". Once that is issued, the building would be available for occupation. If by that stage the purchaser has paid a total of 30% of the purchase price, the Defendant would allow the purchaser to move into the unit. Up to that stage, the building lot was still registered in the name of the Ting and may not be alienated or sold. The Ting would then apply for consent to assign the lot. Upon consent being given by the District Lands Officer and upon payment of premium, the units in the building on the lot may be freely assignable to purchasers. A formal sale and purchase agreement would be entered into between the Ting and the purchaser, which would then be followed by completion upon payment of the purchase price.

16. The Defendant had liaised with Sin Hua Bank, Nanyang Bank and the Bank of China for provision of mortgage facilities to purchasers of Regency Court. It had introduced the project to the bank officers who were familiar with sale and mortgage of Ting houses. Purchasers would be requested to contact the named bank officers and to produce their Subscription Letters and proof of income for processing their mortgage applications. The bank would make its own valuation of the unit to be bought and decide the amount of loan. If the valuation, amount of loan and terms of the mortgage were acceptable to the purchaser, the purchaser's solicitors would proceed with the documentation.

17. Because of the fall in the property market, based on its own valuation of the units, the banks would not provide mortgage loan up to 70% of the purchase price. Hence on 2 June 1998, the Defendant offered a loan of up to $500,000 to enable purchasers to complete the purchase on condition that the purchaser would provide a second mortgage on the unit or would provide two guarantors.

18. In April 1997, the Defendant appointed Centaline and Treasure Palace as its agent. In May 1997, in addition, it appointed Century 21, Kwong On, Chi Fung and Lung Fung which were agents in Luen Wo Market. At no time was Treasure Palace the Defendant's sole agent. In fact, in the Instruction to Sales, it was printed that Centaline was the agent for the units in four of the nine blocks listed for sale therein. On the copy produced in court, these nine blocks and reference to Centaline were deleted and amended by hand to read "Treasure Palace to act as agent for all units". But it should be noted that on that copy, Block K was not listing for sale.

19. In respect of Block K, the owner of the lot was Tang Shing Tse. The building licence was obtained on 15 June 1994. The certificates of compliance were issued on 14 April 1998. On 31 July 1998, the District Lands Officer gave consent to Tang to assign the lot subject to payment of premium. On 15 August 1998, the Defendant informed the Plaintiffs that their respective units could be sold to them and requested them to sign the formal sale and purchase agreement for their units and to complete the purchase of the same. The premium was duly paid by the Defendant on 10 September 1998.

20. As for the amenities, So says that it was the Defendant's intention to provide the amenities. The Defendant's swimming pool contractor had applied for constructing the pool in 1996 and obtained building approval on 27 January 1998. The process was delayed because the District Lands Officer required the Defendant to obtain a short term waiver in respect of the user of the land. The golf practising course was set up in October 1998 but after moving in, it was turned into car parking space at the request of the residents. Other amenities were completed by October 1998.

ISSUES

21. Counsel spent much time arguing whether Treasure Palace was the sole agent of the Defendant, whether Law of Treasure Palace made the representations as agent of the Defendant and whether they were binding on the Defendant. On the evidence of the Plaintiffs, the same representations were repeated or adopted by the Defendant's manager on 16 May 1997 when the Plaintiffs signed the Subscription Letter. No witness has been called by the Defendant to contradict the evidence of the Plaintiffs. In the circumstances, I do not find it necessary to consider the more complicated issue whether an estate agent is an agent of the developer for the purpose of making the representations and whether Treasure Palace was the sole agent of the Defendant. So far as the representations are concerned, the issue is a factual one: what representations were made by the Defendant's staff on 16 May 1997? The other issues are: secondly, whether the representations formed part of the agreement contained in the Subscription Letter; thirdly, whether the representations were calculated to mislead and induce the Plaintiffs to enter into the agreement in the Subscription Letter; fourthly, whether the Plaintiffs are entitled to rescind the agreement by reason of the Defendant's misrepresentation.

Representation

22. In essence, according to the Plaintiffs, the representations which induced them to enter into the agreement in the Subscription Letter were:

(1) the units would be ready for possession and the Plaintiffs could move into the units in July 1997;

(2) completion of the sale and purchase of the units would take place in January 1998;

(3) the suggested banks would provide mortgage loan up to 70% of the purchase price and

(4) the development would be provided with the various amenities as stated in the Brochure.

In addition, they allege that the Defendant concealed the fact that the units they agreed to purchase were units in a Ting house. Had they known that these representations were untrue or that the units were units in a Ting house, they would not have entered into the agreement.

23. On the state of the evidence and in the absence of evidence from the Defendant to contradict the Plaintiffs', it would be most tempting to adopt the evidence of the Plaintiffs wholesale. However, there are at least two aspects of their evidence which are inherently incredible. These are the representations that they could move into the units in July 1997 and that the sale and purchase would complete in January 1998. Even according to the Plaintiffs, they were told that the occupation permit for Block K would be issued before the Chinese New Year. The Pamphlet also stated that the occupation permit for Block K would be issued in January 1998. According to the Subscription Letter, it is only upon the issue of the occupation permit and upon the purchaser having paid up to 30% of the purchase price that they may move into the premises. It is also a matter of common sense as well. Thus, the Plaintiffs' evidence that they were told they could move into the units in July 1997 is self conflicting and inconsistent with the contents of the documents. The Plaintiffs' evidence could not be due to a mistake in perception or in recollection as they fortified their evidence by saying that the Defendant's staff told them that they could use the water and electricity from the Defendant's construction site. It is inherently improbable that the Defendant's staff would have told the Plaintiffs that they could move into the units without occupation permit in a construction site in which construction work was in progress. I reject this aspect of the Plaintiffs' evidence. This has no significant bearing on the Plaintiffs' case in view of the other representations, except that the Plaintiffs have put their credibility in doubt.

24. Secondly, as for the date of completion of the sale and purchase agreement, it was also the Plaintiffs' evidence that what was represented was that the occupation permit would be issued before Chinese New Year or in January 1998 and not that the sale and purchase would be completed in January 1998. Again, the Plaintiffs' allegation is inconsistent with the Subscription Letter which shows unambiguously that the issue of occupation permit and completion were two separate events. The Defendant represented through its staff and the Pamphlet that the occupation permit would be issued in January 1998. There was no representation by the Defendant as to when completion would take place. According to the Subscription Letter and the Pamphlet, completion depended on when premium would be paid, and according to Clause 8 of the Subscription Letter, if the premium were not paid within three years, all deposits would be refunded. Thus, there was never any representation that completion would take place at a time certain, let alone in January 1998.

25. I have no doubt that the Defendant had not represented, through its staff, to the Plaintiffs that they could move into the units in July 1997 and the sale and purchase would be completed in January 1998. Whatever the Plaintiffs allege had been represented to them by Law of Treasure Palace were superseded by what the Defendant's staff told them on 16 May 1997. I have no doubt that the Defendant's staff had represented to the Plaintiffs that the occupation permit would be issued in January 1998 and about provision of the various amenities contained in the Brochure and about 70% financing by the suggested banks.

Whether representations form part of the contract

26. None of these pre-contract representations were made a term of the Subscription Letter nor was there any evidence that the Defendant's staff represented to the Plaintiffs that the units were not units in a Ting house. On the contrary, there is clear evidence that the Plaintiffs knew what they were agreeing to purchase. It should also be noted that even according to the Plaintiffs, when they sought clarification about these representations, the manager told them that everything would be in accordance with the provision in the Brochure, which must include the Pamphlet as well.

27. The Plaintiffs were well educated people. The Elder Sister is an officer of the Education Department, entitled to the Government's Home Purchase Scheme and earning the equivalent of the top end of an Education Officer's salary scale. The Younger Sister works in the commercial field. The Elder Sister was particularly cautious before signing the Subscription Letter and asked a lot of questions and asked for a lot of assurances. They must have read the Subscription Letter carefully. The terms in the letter were clearly printed and nothing was in small print. They must be fully aware of the nature and the terms of the Subscription Letter. Clauses 8 and 9 are pertinent. These clauses provide as follows:

"8 If the Vendor, within 3 years from the date of this agreement, cannot finish the procedure of paying the premium of this property, then the Vendor shall refund to the Purchaser all deposits paid.

9 If, within 24 months from the date of this agreement, the Occupation Permit is not issued, the Purchaser has the right to revoke this agreement and the Vendor shall refund to the Purchaser all payment (with 7% interest on the amount paid)."

28. These two clauses show that the sale and purchase might take up to three years to complete and that there was the question of payment of premium within three years. These would be extremely unusual terms in the case of sale and purchase of property in the urban area. They were important terms about refund of instalments paid. These careful Plaintiffs could not have treated these two clauses lightly or ignored their significance. Even if these clauses did not make it explicit that the units to be purchased were units in a Ting house, they must negate the possibility that the date for delivery of possession in July 1997 and the date for completion in January 1998 were of the essence of the contract. The obligations to deliver possession and completion on the appointed dates were just the Defendant's expectation and were not terms of the agreement.

29. The payment terms provide that the third instalment shall be paid within 10 days after the issuance of the occupation permit. Upon payment of this instalment, vacant possession would be delivered to the purchaser. Issue of the occupation permit was not a matter within the control of the Defendant. This together with Clause 9 show that the date of delivery of possession was for indication only and not a term of the agreement. The payment terms were significant in that vacant possession would be delivered before formal completion. This is extremely unusual for sale and purchase agreement in urban area. When signing the Subscription Letter, these careful Plaintiffs must have known that they were not buying ordinary properties similar to those in the urban area. Similar provisions were also contained in the Chinese Pamphlet describing the property. Even though the Plaintiffs might not have been specifically told that they were purchasing units in a Ting house, they were fully informed about the nature of the transaction.

30. As for the representation that the three suggested banks would provide financing up to 70% of the purchase price, it was clear that the mortgage was to be provided by the banks and not by the Defendant or its subsidiary company. The Defendant was not an agent of the banks and had no authority to bind the banks. The inference is that such representation was at best a commercial puff or an indication of possibilities. Furthermore, paragraph 2.3 of the Pamphlet provides:

"After the occupation permit has been issued to the purchaser, he/she may apply for a mortgage loan with the seller's suggested bank, Nanyang Commercial Bank. The bank will approve the mortgage application depending on the substantive condition of the case."

Obviously, there was no warranty that 70% financing would be provided by the suggested bank. It all depended on the merits of the individual case, the most obvious consideration was, of course, the value of the property to be used as security, the applicant's means, his income as well as that of his family, the nature of his employment or business and his exposure to other financial obligation. I do not think any sensible reading of this paragraph could convey to its reader that the Defendant was offering a guarantee that the suggested banks would irrespective of the financial condition of the applicant provide 70% financing on the purchase price. This paragraph shows that what was represented was not a guarantee but at best an indication of a good possibility that 70% financing could be obtained from the suggested banks. In any event, this representation never formed part of the Subscription Letter.

31. As for the amenities, there was no mention about them in the Subscription Letter, but they were described in the Brochure and Pamphlet. The Defendant's manager had informed the Plaintiffs that everything would be in accordance with the Brochure and Pamphlet. The provisions in the Brochure and Pamphlet could therefore be incorporated into their agreement. At the end of the Brochure is a statement as follows:

"all information and photos provided in this brochure is for reference only, please kindly refer to the DMC, Approved building plans and Sales & Purchase Agreement, the full scripts of which are available upon request."

Thus the representation about the amenities was for reference only. When a piece of information or photograph is stated to be "for reference only", the information or representation contained in the photograph is just an indication of what the representor hopes or wishes or aims to achieve. There is no undertaking that the representation contained in the photograph will materialize or that the information is correct. They are just for indication only and do not form part of the contract.

32. Mr Wong referred to the case of Balchita Ltd v Kam Yuck Investment Co Ltd [1983] 2 HKC 333 in which a brochure was held to constitute an inducement to buy and the case of Shun Ying Hing Ellen v Far East Real Estate & Agency (HK) Ltd [1984] HKC 52 in which a purchaser was allowed to rescind a contract for the vendor's failure to complete the swimming pool and other amenities. Both authorities are clearly distinguishable from the present case. In Balchita Ltd, the representation relating to the ground floor of a building to be sold was a representation as to an existing fact as construction of the building had by the material time reached the first floor level. The representation in the present case is about the future. In Shun Ying Hing Ellen v Far East Real Estate & Agency (HK) Ltd, the contract was expressly for the purchase of property with the pool and amenities in accordance with the building plans. In the present case, the Brochure stated that the information was for reference only. I find that information in the Brochure did not form part of the contract.

33. As none of the representations form part of the agreement between the Plaintiffs and the Defendant, there was no breach of agreement contained in the Subscription Letter. Even if I were to find that the Defendant had represented to the Plaintiffs about being able to move into the units in July 1997 and to complete the sale and purchase in January 1998, those representations did not form part of the agreement.

Whether representations of fact

34. The representation about the date of issue of the occupation permit, completion, that the suggested banks would provide financing up to 70% of the purchase price and that the amenities would be provided were not statement of fact, whether of the past or present, but were mere statements of opinion or of intention as to what might happen in future. These representations of opinion or intention, though turned out to be untrue, cannot in law be treated as misrepresentation of fact, unless the Plaintiffs can show that the statement of opinion or intention was not genuinely held by the Defendant or could not, as a reasonable man having his knowledge of facts, have honestly held that opinion or that intention.

35. I have rejected the Plaintiffs' allegations that the Defendant's staff had represented to them that they could move into the units in July 1997 and that completion would take place in January 1998. As for the expected date of issue of the occupation permit, I have no doubt that it was an opinion genuinely and honestly held by the Defendant as expressed in the Pamphlet and by its staff. I accept So's evidence about the procedures in developing and selling Ting houses. His evidence accords with my understanding of the current practice in sale of Ting houses. In the case of Block K, building licence was issued on 15 June 1994. The Defendant had started building on the lot. When the Plaintiffs visited the site in May 1997, the concrete frame had been built. According to So, the construction works would take about 150 days and the Defendant would start marketing the units three months after commencement of building work. Thus it would take up to July or August 1997 for the building works for Block K to complete. Allowing for time for inspection and processing by the District Lands Officer, it was reasonable to expect the occupation permit would be issued in January 1998. The permit was eventually issued on 14 April 1998, late by three and half months. The Defendant's estimate might be over optimistic. But there is nothing to suggest the opinion as to the date of issuance of the occupation permit was not genuinely or honestly held by the Defendant. The Plaintiffs bear the burden of proof and, in my view, they have failed to discharge that burden. Even if I were to find that the Defendant's staff had represented that completion would take place within 6 months against the weight of the evidence contained in the Pamphlet, I would, for the same reason, reach the same conclusion that such opinion was honestly held.

36. As for the representation about 70% financing, the representation could not be considered in isolation of the surrounding circumstances. The Defendant had not undertaken to provide the mortgage itself. It could not guarantee that the suggested banks would provide the financing in all circumstances. The issue is whether the opinion was honestly held by the Defendant. On the fact, the Defendant had promoted Regency Court to the three suggested banks and a number of named bank officers had become familiar with and knowledgeable about the development. The Plaintiffs were invited to approach those officers. The evidence is not that none of the suggested banks would offer a loan, but that it would not offer a loan up to 70% of the purchase price and that processing might take a little bit longer. Sin Hua Bank, for example, did not refuse the Elder Sister's application, but said that the processing might take longer and suggested her to seek extension of time for completion from the Defendant.

37. Whether the banks would provide a mortgage loan up to 70% of the purchase price depended on a lot of factors. These include the personal circumstances of the borrower: his income as well as that of his family, the nature of his employment or business and his exposure to other financial obligation. In addition, it also depended very much on the bank's valuation of the market price of the unit to be bought and offered as security for the loan. The Plaintiffs purchased in May 1997 at the peak of the property market. The property market has since fallen by more than 30% so that no bank would offer a mortgage loan up to 70% of the original purchase price because such a loan would exceed the value of the unit to be used as security. This is commercial sense. The Asian financial crisis was not expected. The free fall of the property market was not expected. In the circumstances, in May 1997 when the Plaintiffs purchased, I have no doubt the statement that the suggested banks would offer mortgage loan up to 70% of the purchase price was an honestly held opinion. It was due to supervening events not within the power and control of the Defendant that the Defendant's opinion could not turn out right.

38. Furthermore, I think the Defendant has lived up to its promise. On 2 June 1998, it offered a second mortgage on the unit or an unsecured loan of up to $500,000 if the purchaser could offer two guarantors. This would be almost enough to cover the shortfall in the bank mortgage that could be available. Though the Plaintiffs said they were not informed of the offer of the loan, they did receive a copy of the offer in August 1998. However, they never requested assistance from the Defendant, but instead they demanded refund of the instalments paid using various excuses and asked for reduction in price and other terms.

39. As for the amenities, on the strength of So's evidence, I have no doubt that it was the Defendant's intention to provide the amenities. The Defendant's swimming pool contractor had applied for building the pool in 1996 and obtained building approval on 27 January 1998. With the progress going in that direction, I have no doubt that in May 1997, the Defendant honestly believed the pool would be built with no problem. The process was delayed because the District Lands Officer required the Defendant to obtain a short term waiver in respect of the user of the land. The golf practicing course was set up in October 1998; but after moving in, it was turned into car parking spaces at the request of the residents. Though it was built late, it nevertheless reflected that the Defendant had a genuine intention to provide the golf practicing course back in May 1997. The car park, security guard kiosk and other amenities were completed by October 1998. I am satisfied that the Defendant did honestly hold the opinion that the amenities would be provided.

40. Accordingly, the Plaintiffs have failed to discharge the burden of proving that the representations were statement of fact and so far as the representations were statement of opinion or intention, the Plaintiffs have failed to prove that the same was not genuinely or honestly held. The Plaintiffs' claim to rescind the agreement contained in the Subscription Letter must fail.

COUNTERCLAIM

41. Having come to the above conclusion, I must find that the parties have entered into a valid and binding contract under the Subscription Letter. The Plaintiffs were in breach of that contract by failing to complete. The Defendant has duly discharged its duty of mitigation by reselling the two units. The Defendant seeks to forfeit the instalments and, in addition, to claim the difference between the sale price to the Plaintiffs and the resale price as damages. While a vendor is entitled to forfeit the instalments or deposits upon the purchaser's failure to complete the sale and purchase, if he elects to claim damages, he must give credit to the amount of instalments or deposits so forfeited; otherwise he would be gaining a double benefit and the purchaser would be suffering a double detriment. In any event, the instalments or deposits so forfeited must have reduced the amount of his loss on the re-sale.

42. Accordingly, I assess the damage suffered by the Defendant as the difference between the purchase price under the Subscription Letter and the resale price plus agency commission paid by the Defendant on the re-sale less the total amount of instalments forfeited. The damages assessed against the Plaintiffs in High Court Action No. 14189 of 1998 and the Plaintiffs in High Court Action No. 15561 of 1998 are assessed at $593,917.10 and $306,454.10 respectively, which are calculated as follows:

		HCA 14189/98		HCA 15561/98
	Original purchase price		$2,729,453.00		$2,672,363.00
Add:	Re-sale commission		$13,300.00		$15,800.00
	Sub-total:		$2,742,753.00		$2,688,163.00
Less:	Re-sale price		$1,330,000.00		$1,580,000.00
	Instalment forfeited		$818,835.90		$801,708.90
	Damages:		$593,917.10		$306,454.10

43. I consider an award of damages only appropriate and do not find it necessary to grant a declaration or other remedy sought.

CONCLUSION

44. In conclusion, I find that the representations, to the extent they were proved, do not form part of the agreement in the Subscription Letter. The Plaintiffs' claim for breach of contract must fail. The Plaintiffs also failed to prove that the representations were statement of fact. So far as the representations were representations of opinions or intention, the Plaintiffs also failed to discharge the burden of proving that those opinions or intentions were not genuinely or honestly held by the Defendant. The Plaintiffs' claim for rescission must also fail. Accordingly, the Plaintiffs' actions must be dismissed with costs to the Defendant.

45. I enter judgment in favour of the Defendant on its counterclaim against the Plaintiffs in High Court Action No. 14189 of 1998 in the amount of $593,917.10 with interest from 5 October 1998 and costs and against the Plaintiffs in High Court Action No. 15561 of 1998 in the amount of $306,454.10 with interest from 21 October 1998 and costs.