CHIU KAM SHUM v. CHAK CHOI KWAN and Another

1992 No. A4895

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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JUDGEMENT

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1. This is an action by the plaintiff CHIU Kam-shun against the 1st defendant CHAK Choi-kwan for specific performance of a sales and purchase agreement of the property known as House No 63 on the 8th Street, River North of Fairview Park, Yuen Long New Territories. The plaintiff also claims against the 2nd defendant CHAK Chung-kwan for damages for breach of warranties that he was the authorized agent of the 1st defendant in the sale of the property. Against both defendants the plaintiff claims for rectification of the provisional sales and purchase agreement in respect of the aforementioned property.

2. The defendants counterclaim against the plaintiff for damages arising from the fraudulent acts of the plaintiff and or his agent in forging the provisional agreement.

Background

3. The 1st defendant is the registered owner of the property and at all material times he was residing in Taiwan. The 2nd defendant is the elder brother of the 1st defendant. By a Power of Attorney dated 9.2.1989 and registered in the Land Office on 6.3.1989 the 2nd defendant was entrusted with the day to day management of the property. In or about June 1991 the 2nd defendant instructed one Madam Lam who was an estate agent to put the property up for sale. Madam Lam was fully aware at all material times the 2nd defendant was not the registered owner of the property.

4. On 31.8.1991 the plaintiff met both Madam Lam and the 2nd defendant in a restaurant in Kowloon and agreed on the sale of the suit property at HK$1,915,000 of which $115,000 was the price for the furniture and fittings. Completion date was stated as 31.11.1991. Madam Lam was responsible for filling in the Provisional Sales and Purchase Agreement but when so doing she omitted to fill in the date and the address of the property. The 2nd defendant instead of the 1st was described as the vendor in that document.

5. The plaintiff paid a deposit of $50,000 by cheque to the 2nd defendant. Later in the same afternoon the party of three went to the 2nd defendant's home where the 2nd defendant handed an inventory list itemizing the furniture and fittings of the property to Madam Lam and the plaintiff. The inventory bore the address of the house, the signature of both the 2nd defendant and the then tenant.

6. In early September Madam Lam instructed Messes Boris Lui & Co., solicitors to prepare a formal Sales and Purchase Agreement based on the provisional agreement. On 5.9.1991 Boris Lui & Co., by letter, set out the terms of agreement between the parties to Messrs Tang, Wong, Cheung & Co. solicitors of the vendor.

7. Towards the end of October the 1st defendant returned to Hong Kong from Taiwan.

8. On 30.10.1991 the plaintiff signed the formal sales and purchase agreement at the office of Boris Lui & Co and tendered two cheques in the amounts of $130,000 and $115,000 payable respectively to the vendor's solicitors and the 1st defendant.

9. On the following day there was a meeting between the plaintiff and the two defendants with Madam Lam in attendance at the Yat Yat Sin Restaurant. There was a discussion, among other things, about the sitting tenant's reluctance to move out by 30.11, which is also the purported date of completion as stipulated in the formal agreement. Exactly what transpired at the meeting is not entirely clear as the evidence from the parties differed.

10. By a letter dated 4.12.1991 Messrs Tang, Wong and Cheung returned the two cheques to the plaintiff's solicitors and indicated that they have no further instructions from the vendor.

11. The initial deposit of $50,000 paid to the 2nd defendant was never returned.

12. On 30.12.1991 the 1st defendant had written a letter to the plaintiff from Taiwan. The contents of the letter will be referred to later in this judgment.

13. On 21.7.1992 the writ of summons was issued by the plaintiff.

Did the 2nd defendant have authority to sell the property?

14. On this issue it is the defence of the 1st defendant that the 2nd defendant never had authority from the 1st defendant to put the property up for sale or to enter into any form of agreement for sale on the 1st defendant's behalf. Both defendants relied on the Power of Attorney dated 9.2.1989 whereby the 2nd defendant was given extensive powers to let and manage the property but such powers did not include putting the property up for sale. It is not in dispute that Madam Lam was aware of the existence of the Power of Attorney. The plaintiff's case is that the 2nd defendant was the authorized agent of the 1st defendant and he entered into the provisional agreement as agent for the 1st defendant.

15. The 1st defendant is a medical practitioner in Taiwan. He impressed me as a meticulous person who is very careful and cautious in handling his daily affairs. Indeed the Power of Attorney in favour of the 2nd defendant entrusting him with the daily management of the property supports my view. I think it is unlikely that he would have allowed the 2nd defendant to have a free hand in negotiating for the sale of the property or to enter into any form of agreement on his behalf. As between the 1st defendant and the 2nd defendant I find that on 31.8. when the 2nd defendant appended his signature on the provisional agreement he had done so without the authority from the 1st defendant and he was not acting in the capacity as the agent of the 1st defendant. The 2nd defendant must have been motivated by greed when he signed and received the cheque of $50,000 which amount he had since pocketed.

16. Without going into the validity of the provisional agreement at this stage, I think it was only after the document was signed that the 2nd defendant had made the fact known to his brother in Taiwan that he had secured a purchaser for him and then tried to convince him that it was a good deal at the price of $1,915,000.

Was there any subsequent affirmation of the transaction by the 1st defendant?

17. The plaintiff contends that even if the provisional agreement was not initially binding on the 1st defendant, his subsequent conduct at the meeting in the Yat Yat Sin Restaurant and his letter of 30.12.1991 was such that he had affirmed the transaction.

18. The plaintiff relies firstly on the letter by Messrs Tang, Wong & Cheung, solicitors dated 18.10.1991 indicating that they had prepared a formal Sales and Purchase Agreement in respect of the property and asking for the plaintiff's solicitors approval. It was also requested that Boris Lui & Co., should obtain the plaintiff's signature. This the plaintiff duly complied with and the balance of the deposit by way of two cheques together with the signed agreement were returned to Tang Wong & Cheung on 30.10.1991. In the 2nd defendant's affirmation dated 30.9.1992 he deposed that he was responsible for giving instructions to the firm of Tang, Wong & Cheung to prepare the agreement. He made no reference that he had done so with the consent or knowledge of the 1st defendant. I find that at no time did the 1st defendant give instruction either by himself or through anyone else to Tang, Wong & Cheung, solicitors to prepare the agreement.

19. The plaintiff and the defendants' account of the meeting at Yat Yat differs as to what exactly was discussed between the parties. But one thing appears to be consistent as between them: there is no suggestion by the 1st defendant that there is no contract between the plaintiff and the 1st defendant. Instead there is undisputed evidence from the parties that the discussion was focused around the problem of the sitting tenant refusing to vacate the premises at the end of November and about a possible extension of time for delivery of vacant possession. If the 1st defendant was adamant that the contract was invalid or that he had not given the 2nd defendant authority to sell the property on his behalf it would have been most unlikely that the discussion had centered around the subject of vacant possession. Having said that I am unable however to find unequivocal evidence that the 1st defendant had expressly affirmed the contract at the meeting or at any time thereafter. The evidence suggests that the 1st defendant was aware of the contract but there is nothing before me to indicate that the 1st defendant had affirmed it or had rectified the 2nd defendant's otherwise unauthorized acts.

20. By 1.11 the 1st defendant left Hong Kong and returned to Taiwan. He left without signing the formal agreement.

21. The plaintiff also relies on the 1st defendant's letter dated 30.12.1991 as evidence of affirming the contract. The letter reads:

"...please write to me in respect of your account numbers, your name, the amount agreed by us last time and the intention of cancelling the contract and send it to Taiwan immediately."

22. Miss Wong for the plaintiff argues that the word "contract" used in this context could be evidence for the court to find that the 1st defendant had affirmed the contract and treated it as binding on him. But it is not apparent in the wording as to whose intention it was. It could well have been the plaintiff's intention to cancel. I am not persuaded that this letter can be construed as evidence to support the plaintiff's contention that the 1st defendant had affirmed the contract.

Was there a sufficient memorandum of the contract?

23. It is common ground that the copy of the Provisional Sales Agreement retained by the plaintiff and defendants had the description of the property and the date of the instrument left blank. I accept Madam Lam's evidence that it was due to her oversight that she had forgotten to copy the address of the property onto the pro forma agreement. The agreement however refereed to the purchasing price of $1,915,000 is inclusive of:

"$115,000 to be the cost of fixtures and fitting"

In the same afternoon the 2nd defendant gave a schedule listing the furniture and fittings to Madam Lam and the plaintiff. On the top of the schedule there is a description of the address of the property in question.

24. Miss Wong relied on the Privy Council decision of Elias v George Sahely & Co. [1982] 3 WLR 956 in which the following passage by Russel J. in his judgement in Stokes v Wicher [1920] 1 CH 411 was approved:

" That there should be a document signed by the party to be charged which, while not containing all the necessary ingredients of the require memorandum. does contain some reference, express or implied, to some other document or transaction. Where any such references can be spelt out of a document so signed, then parole evidence may be given to identify the other document referred to, or as the case may be, to explain the other transaction, and to identify any document relating to it. If by this process a document is brought to light which contains in writing all the terms of the bargain so far as not contained in the document signed by the party to be charged, then the two documents can be read together so as to contain a sufficient memorandum...."

25. The furniture and fittings schedule in this case is a document which falls squarely into this category and I find both documents, when read together, constitute a sufficient memorandum within the meaning of s.3 of the Conveyancing and Property Ordinance.

The counterclaim of fraud

26. The defendants' pleaded case on counterclaim is that Madam Lam, in her capacity as agent of the plaintiff, forged the provisional agreement by inserting the address of the property and the 1st defendant's name into the original copy of the agreement after it was signed by the plaintiff and the 2nd defendant. Two copies of the same document, each retained by the plaintiff and the 2nd defendant, tend to show that the insertions were made on the top copy after the agreement was signed. In so far as the address of the property is concerned such insertion, whether by Madam Lam herself or as she claimed, by the clerk of Boris Lui & Co., is only a remedial act in trying to reflect the true intentions of parties. I do not think it is open to the 2nd defendant to argue that when he negotiated with the plaintiff and Madam Lam at the restaurant in the afternoon of 31.8.1991, the subject matter of discussion was anything else but the property in question.

27. As for the insertion of the 1st defendant's name "Chak Choi Kwan" next to the word "Vendor" on the top of the agreement, again I think this is an effort by Madam Lam or the clerk in question to specify the name of registered owner of the property the identity of whom has along been known to Madam Lam. This particular piece of evidence lends credence to the suggestion that the 2nd defendant must have held himself out to have authority from the 1st defendant to sell the property even though in fact he had none.

28. I find that there is an absence of intention to defraud whether on the part of the plaintiff or Madam Lam when the insertions were put onto the provisional agreement. I find the document was not forged in any sense as alleged by the defence. The counterclaim must therefore fail.

The position of the 2nd defendant

29. For the reasons given earlier I had already found that the 2nd defendant was acting without authority from the 1st defendant when he entered into the provisional agreement with the plaintiff in the afternoon of 31.8.1991. He told the court that in June his brother had only instructed him to sound out the property market. By his own admission, he informed the court that he had no authority to put the property up for sale. When asked if he knew what was the document he was signing his answer was that he thought he was only receiving a deposit for the flat. I find this answer to be most unconvincing. He is a serving police officer and as such one would expect that he would be very careful before he would append his signature on any document.

30. The document clearly states that it is a provisional agreement for sale and purchase in both the Chinese and English language and he had received a cheque of $50,000 at the same time from the plaintiff. The parties had been discussing for some time in the restaurant and I have no doubt that the subject matter was about the sale of the Fairview Park property. It could not have been clearer to him that under the circumstances he must have known that he was creating a legal relationship with the plaintiff for the sale of the property.

31. The 2nd defendant had entered into a contract for sale of land without his brother's knowledge or authority. This contract was not subsequently affirmed by the 1st defendant. The contract is one which the 2nd defendant could not perform. In this transaction the 1st defendant had always been an innocent party and the plaintiff's recourse lies solely with the 2nd defendant.

32. I would therefore dismiss plaintiff's claim against the 1st defendant Chak Choi Kwan is dismissed with costs.

33. I would give judgement for the plaintiff against the 2nd defendant CHAK Chung-kwan for breach of the Provisional Sales & Purchase Agreement with damages to be assessed with cost to the plaintiff against the 2nd defendant.

34. The defendants' counterclaim is dismissed with costs.

(K.K. Pang)

Deputy Judge of The High Court