JOINT LINK ENTERPRISES LTD. v. DENSELAND LTD.

HCMP4398/97

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO.4398 OF 1997

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J U D G M E N T

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1. The Originating Summons was by order of Madam Justice Yuen in January, under O.28, r.8 that the matter continues as if by writ. The dispute arises over the sale of property which is No.A13, Fullway Garden, Sai Kung.

2. The plaintiff, which is a company formed as a holding company and has as its directors, Hung Po and her husband. They live together with their family, a maid, their twins and an elderly relative in a very small flat and they wanted to buy a much larger house to live in. They liked this part of Sai Kung in Fullway Garden and they had been looking for a property there and they knew a man by the name of Jimmy Wong, who is an estate agent. The defendant is another holding company run by a Mr Fan.

3. In so far as a number of witnesses who have given evidence in this case are concerned, and my findings on them, I can say this quite briefly. I do not understand Chinese but I have had many years of looking at witnesses giving evidence in Chinese. I thought Mrs Hung Po was an impressive witness. She seemed to me to be a perfectly respectable young married woman who knew precisely what she wanted. I accept her evidence. As far as Mr Jimmy Wong, her estate agent, is concerned, as I will demonstrate I do not accept his evidence on a variety of matters nor indeed do I accept that of Mr Fan.

4. What happened was that the plaintiff wife got Mr Jimmy Wong and they looked at the property, A13, where there was a tenant in, a Japanese. Mr Jimmy Wong knew this man because he had arranged the tenancy, and he knew all about the property. He told her that he would be leaving about the middle of 1998. There was some discussion over the purchase price and there was a meeting on 8 November when discussion took place about the completion date, which was March, and Mr Jimmy Wong made it clear to the plaintiff that there would not be any difficulty or any problem about getting vacant possession in March. Whether he was taking a calculated risk, I am not sure. But on 8 November, he produced a variety of documents such as some building orders, and he produced a standard form of his firm called Everrich Property Consultants which he had just joined, of a provisional sale and purchase agreement which as I said, is in relative standard form. Then on 9 November, the memorandum of sale and purchase was completed and the purchase price, although the vendor originally had wanted $13 million, the purchaser offered $12.5 million and the document was completed. There is no doubt at all that she initialled at paragraph 4 which is crossed out in an unusual way, but I have no doubt at all that it meant, as Mr Chan has submitted, that she was initialling the paragraph which said that the premises are sold with the benefit of the existing tenancy and not with vacant possession. She had spoken to Jimmy Wong, he said there should not be any problem at all about this matter.

5. The purchase price, as one can see from the document, was altered. Her account is that he phoned her presumably when he was with Mr Fan and said the price had to be increased to $12.6 million because they have got to get rid of the tenant to vacate and the owner has to compensate the tenant $100,000. Jimmy Wong denied this. I accept the evidence of the plaintiff on this matter. For the reasons, first of all, I think she was a completely honest witness. I cannot see any possibility of her making up a story such as this. The probabilities are that an estate agent of Mr Jimmy Wong's experience, as he obviously is a very experienced property estate agent, is that he would not have filled up this form for $12.15 million had that not been the price to which the parties had agreed. It seems to be highly improbable that he would cause that figure to be put in and also to take a cheque of $380,000 if the vendor was not going to accept it. It was put to him by Mr Whitehead that he could have phoned up if he had wanted when there was any problem about the purchase price. I think it is highly improbable that he would not have done this. He seeks to put forward a reason that it was in some way to show good faith on the part of the purchaser. I do not accept that, it was altered to $12.6 million. Again another reason is that according to him, the owner had wanted $12.8 million. But I have no doubt in my mind that what transpired between Jimmy Wong, who it is accepted, was the authorized agent for the owner, was that the plaintiff was told that an extra $100,000 had to be added in order for her to get vacant possession on 9 March. She, of course, wanted the premises. This is not a speculative type of acquisition, she wanted the premises for her own purposes and that of her family. In my judgment, the account which she gives is far more probable that the extra $100,000 which then appears in the alterations on the document was solely caused by Jimmy Wong putting forward a proposition that the tenant would be compensated.

6. One of the unusual features of the case is that later on when the parties went into the premises, Jimmy Wong would not go in. He was asked, I think by me and by Mr Whitehead, why this did not happen. He said he did not want to make the tenant think that they wanted possession and an answer which escaped from his lips was that "he thought the tenant would be greedy". In my judgment, he and the owner were intending all along to buy, if necessary, the tenant out.

7. I accept from Mr Chan that the property market was decreasing this year, I am not quite sure what it was like toward the end of November. But in my judgment, the sole reason for the acquisition of this house by the plaintiff was for their own use and occupation and that the plaintiff did want vacant possession to be given to them on 9 March. That is what Mr Jimmy Wong led them to believe would indeed occur. As I said I do not accept his evidence when he suggested that the $100,000 was because the owner wanted to increase the price. The probabilities are that everyone had agreed on $12.5 million and this was an additional sum of money that someone was going to have to ensure the tenant could be got out.

8. The matter becomes even more unusual because the provisional sale and purchase agreement called for a formal agreement to be made. The correspondence speaks for itself. On 14 November, the defendant's solicitors then sent a draft agreement for sale and purchase in duplicate and said this :

"If the draft meet with your approval, please treat it as an engrossment and attend your client's execution thereof and then return the same to us together with a cashier order for $880,000."

And then they said at the bottom :

"Please note this letter and the enclosure hereto shall not be construed as a note or memorandum of agreement for sale and purchase ..."

9. What then happened was that the formal agreement went between the solicitors on several occasions and on 18 November, the agreement was sent off to the vendor's solicitors. They replied on 19 November, making certain amendments. The plaintiff's solicitor, Anita Leung, gave evidence before me, again I whole-heartedly accept her evidence. She seemed to me a perfectly truthful and careful solicitor. When she got the formal sale and purchase agreement, she noticed that there appeared to be "an ambiguity" between the provisional sale and purchase and the formal sale and purchase. She noticed that the wording of the provisional sale and purchase was a bit unusual but at any rate, it indicated to her that that was providing for vacant possession not to be given; whereas the formal sale and purchase agreement made it abundantly clear that vacant possession would be given on completion. So she phoned up the plaintiff and spoke to her. What she was told, of course, does not prove the truth. Nevertheless, it is the first occasion that there is a record of what the plaintiff's account is and she was told that there was no problems about this and they would be given vacant possession, that the plaintiff had cleared this and there was no problem. The solicitor, Anita Leung, then proceeded to have an exchange of correspondence requiring a variety of amendments, each time it went backwards and forwards, but clause 24 remained in this document.

10. On 22 November, the plaintiff's solicitors put forward some slight amendments and said this at the end :

"We enclose the re-engrossed agreement for sale and purchase and duplicate for your further handling."

On 24th, the purchaser's solicitors wrote back saying :

"We send you herewith the agreement for sale and purchase in duplicate duly signed and attested and send a cashier order in the sum of $880,000 drawn in favour of your client."

And the last paragraph reads :

"Our cheque is sent you against your undertaking to return to us a counterpart of the agreement for sale and purchase duly executed by your client and attested by you for our registration within three days."

11. The solicitors acting for the vendor is C.K. Chan and Kan, Mr Kan has given evidence before me. I can see from the correspondence and the rather fractured English that has been used, that it may well not have been Mr Kan who dealt with this, indeed he said it was his secretary. Having seen what was happening here, it seems probably true that the secretary seems to be doing the work for the solicitor, although he did say that an assistant solicitor dealt with some matters. The cashier cheque came, Mr Fan who also gave evidence and whose evidence I found unacceptable on a number of matters, said that he went over to the solicitors' office. Mr Kan said precisely the opposite, he said someone came over and the cheque was handed over and later he was told that Mr Kan drew his attention to a tenancy agreement and indeed faxed it over to his solicitors. Again, I have no reason to doubt the solicitor's recollection of this matter. It is what happened. He wrote a letter later on seeking to explain, he called it a "blunder" in so far as it was contrary to his client's instructions, it was an error. And he said this in a letter of 29 November :

"Drafting of the formal agreement is an oversight in our part to take these points into account but the final version has not be signed."

The ungrammatical English would not appear to emanate from a solicitor but it had been signed. It had been sent to the client. I have looked at the original where there is some pencil mark which says "please sign this". The probabilities are that it was sent to the client and signed, and he cashed the cheque. There has never been any attempt to have this rectified or return the cheque. The defendant pocketed the money of the plaintiff and refused to give vacant possession on the date of completion.

12. As I said Mr Fan gave evidence and he said he heard Jimmy Wong say something on the telephone about the $100,000 because of the increase in capital price. I do not accept that evidence. It seems to me highly improbable that this would have happened. In my judgment, what had happened all along - whether people would take such a risk, I am not sure - but the plaintiff was clearly led to believe that they would get vacant possession on 9 March. Their solicitor, very properly, queried the matter and they were in no doubt at all that vacant possession was going to be given on 9 March because indeed that is what the formal sale and purchase said, which had been signed.

13. In so far as the issue of fact is concerned, I do find as a fact that these representations were made. In the last few months, I have tried a large number of property transactions, generally caused by the fall in the property market where representations are often relied upon by persons to get out of deals because the market has fallen so dramatically. I am in no doubt at all that that matter does not apply here. This was a genuine couple and their children who wanted this property and I have no doubt at all that they have told me the absolute truth of the matters that occurred. Whilst, therefore, it is clear, as Mr Chan pointed out, that the provisional sale and purchase agreement indicated that there was a tenant, I have no doubt at all that they were assured that vacant possession would be given and on that basis, I would make the appropriate declaration that they were entitled to rescind this contract, no formal sale and purchase agreement having been provided.

14. Further, in my judgment, the formal sale and purchase agreement signed by the purchasers was sent off and signed by the defendant who cashed the cheque. I accept Mr Chan's citation which he put forward, if I may say so, in a very clear manner, to overcome the problem that the solicitors put its clients in. Normally in contract, the offer is not accepted until it is communicated to the offeror. This, however, is somewhat different. Although this was a formal sale and purchase agreement, the essential matter here was whether vacant possession would be given. In my judgment, the plaintiff's solicitors understood that vacant possession would be given and they tendered their cheque on the basis that vacant possession would be given. As I said the cheque was sent with a request for an undertaking that the formal sale and purchase agreement would be returned. The cheque was cashed, how one wishes in law to describe this, in my judgment, it clearly binds the defendant. Estoppel generally is a shield and not a sword. But this was, on any view, a part payment and part performance of the contract which was entered into between the parties for vacant possession. I do not seek to split that from the sale of the property, but in my judgment, the parties bargained for the sale of the property with vacant possession. As I said, I do not accept Mr Fan's evidence. It may be that the solicitors have seriously led him down, whether he wishes to sue them in an action for negligence is a matter essentially for him and not for me.

15. In so far as this originating summons is concerned, I do find that the plaintiff is entitled to have repaid to it its deposit and subject to listening to both Counsel, I would make the appropriate declaration.

(R.A.W. Sears)

Judge of the Court of First Instance