SUN SHUI WAN v. PUN KING TIM AND ANOTHER

HCA 5196/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 5196 OF 2001

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J U D G M E N T

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Circumstances leading to the claim of the Plaintiff

1. This action relates to Flat F, 18/F, Tsui Kung Mansion, Kam Tin Terrace in Taikoo Shing ("the Taikoo Shing Flat"). The Plaintiff is seeking to set aside various documents pertaining to the alleged transfers of interest in that flat.

2. By an agreement dated 29 July 1991, the Plaintiff and her husband Mr Ma Tin Man ("Mr Ma") purchased the Taikoo Shing Flat as joint tenants for $2,170,000. By notice dated 9 July 1997, Mr Ma severed the joint tenancy with the result that the Taikoo Shing Flat was held by the Plaintiff and Mr Ma as tenants in common.

3. Mr Ma made a will dated 6 December 1991. He appointed his brother Mr Robert Ma and his son joint executors under that will. By clause 4 he made a gift of $500,000 in favour of the Plaintiff. Mr Ma passed away on 19 January 1998.

4. By a Chinese agreement dated 5 April 2000, the Plaintiff appointed the 1st Defendant her agent with full authority to handle all matters pertaining to Mr Ma's estate. The Plaintiff agreed to pay the 1st Defendant $60,000 upon receipt of the $500,000 gift under the will of Mr Ma and the transfer to her of her half share in the Taikoo Shing Flat. In the event of any recovery over and above those two items, the Plaintiff agreed to share such additional recovery with the 1st Defendant on an equal basis. By a Chinese power of attorney also dated 5 April 2000, the 1st Defendant was duly authorised for the purpose aforesaid.

5. By a purported agreement dated 19 October 2000, the 1st Defendant allegedly sold to the Plaintiff Flat G, 23/F, Plum Court, Ocean Mansion, Macau ("the Macau Flat") for $1,000,000. The parties allegedly agreed to sign a formal sale and purchase agreement on or before 15 August 2001 and to complete the purchase on or before 15 November 2001. The Plaintiff was to pay an initial deposit of $300,000 with balance of $700,000 to be paid on completion.

6. The Plaintiff and the 1st Defendant allegedly entered into a second purported agreement also dated 19 October 2000. This second purported agreement referred to a third purported agreement of the same date whereby the Plaintiff agreed to sell her half interest in the Taikoo Shing Flat in favour of the 1st Defendant for $1,000,000 with $300,000 payable by way of deposit and $700,000 payable on completion. The second purported agreement also referred to the first purported agreement and provided for the mutual set-off of the payment obligations under the first and the third purported agreements.

7. By a letter of appointment dated 30 October 2000, the Plaintiff allegedly instructed Messrs David Ravenscroft & Co. as her solicitors to handle the sale of her half interest in the Taikoo Shing Flat. According to this letter of appointment, Messrs David Ravenscroft & Co. allegedly explained to her that the same firm could act for both the vendor and the purchaser as the value of the premises involved was below $1 million and that the firm was in conflict in view of the relationship between the purchaser and a staff member of that firm.

8. By an agreement dated 30 October 2000 and prepared by Messrs David Ravenscroft & Co., the Plaintiff allegedly sold her half share in the Taikoo Shing Flat in favour of the 1st Defendant for $1,000,000. An initial deposit of $300,000 was alleged to have been paid prior to the execution of this agreement. The balance of $700,000 was scheduled to be paid on completion on or before 15 November 2001.

9. The Plaintiff allegedly completed the sale of her half interest in the Taikoo Shing Flat in favour of the 1st Defendant by an assignment dated 1 December 2000. By this assignment the Plaintiff acknowledged receipt of the alleged payment of $1,000,000. By a Chinese declaration also dated 1 December 2000, the Plaintiff as vendor and the 1st Defendant as purchaser allegedly declared that they had fully settled with each other in cash and the 1st Defendant agreed to lend the Taikoo Shing Flat to the Plaintiff on condition that the Plaintiff had to defray all related outgoings.

10. By an assignment dated 19 December 2000, the 1st Defendant purported to assign his alleged half interest in the Taikoo Shing Flat in favour of his wife for $1,000,000.

11. The Plaintiff engaged a new firm of solicitor to act for her in 2001. She made a report of deception to the Police on 11 April 2001.

12. By letters dated 6 August and 16 November 2001, the 1st Defendant invited the Plaintiff to complete the purchase of the Macau Flat. These were ignored by the Plaintiff who instituted these proceedings on 3 December 2001.

The hearing before me

13. Although the 1st and the 2nd Defendants filed Defences on 7 February 2002 asserting the validity of the alleged exchange of the Macau Flat for half of the Taikoo Shing Flat, they did not appear at the trial of this action.

14. The Plaintiff gave evidence before me. She said the market value of the Taikoo Shing Flat at the date of her alleged transfer was about $3,500,000. Her half share therefore amounted to about $1,250,000. Her investigations in Macau revealed that the Macau Flat was purchased by the 1st Defendant on 3 October 2000 for MOP$615,280. It was mortgaged in favour of Banco Luso International for HK$450,000. She said she was induced by the 1st Defendant to transfer her half interest in his favour in order to cloth him with the authority to represent her when dealing with the executor of her husband's estate. She was told that the documents were all matters of form and various clauses were inserted for her protection. She signed the transfer documents in a hurry. She was told that the brother of the 1st Defendant was a solicitor and the documents had to be executed as soon as possible. She had not received a single cent from the 1st Defendant. The Macua Flat was put forward by the 1st Defendant in order to assure her that he could be trusted. The 1st Defendant was trying to force her to vacate the Taikoo Shing Flat on the basis that such was the wish of her husband's executor. She reported the matter to the Police.

15. The Plaintiff called Mr Robert Ma who told me that the 1st Defendant approached him for sale to him of a half share in the Taikoo Shing Flat for $1,400,000. He declined the 1st Defendant's offer. The 1st Defendant then suggested that he should acquire the half share that formed part of Mr Ma's estate. By a provisional agreement dated 13 March 2001, he sold the half sare belonging to the estate to the 2nd Defendant for $1,300,000. The 1st Defendant did not mention to him that he was representing the Plaintiff. The 1st Defendant did not discuss with him the payment of the $500,000 legacy in favour of the Plaintiff.

Findings and rulings of this Court

16. The Plaintiff is not a well educated lady with any degree of sophistication. She was obviously in need of help after the death of her husband. I accept her evidence that she reposed complete trust in the 1st Defendant as her agent and she was induced to part with her interest in the Taikoo Shing Flat as a result of the dishonest representation by the 1st Defendant that such transfer was a formality to empower him to recoup her interest from her husband's estate. The 1st Defendant abused his position of trust and acted in breach of his fiduciary duties as agent of the Plaintiff. In view of his negotiations with Mr Robert Ma, the market value of the half interest in the Taikoo Shing Flat was much more than $1 million. The $1 million figure was adopted with the sole purpose of ensuring that Messrs David Ravenscroft & Co. could act for both the vendor and the purchaser thereby depriving the Plaintiff separate independent advice before entering into the alleged sale. The Macau Flat was no more than a device in order to cloth his default with a measure of respectability. The Macau Flat was heavily mortgaged. The Plaintiff was induced to complete the disposal of her interest in the Taikoo Shing Flat well prior to any completion in respect of the Macau Flat. The evidence before me indicates that the half interest in the Taikoo Shing Flat was of much greater value than the Macau Flat. The Plaintiff was residing in the Taikoo Shing Flat. She would not have parted her interest in the Taikoo Shing Flat had it not been for the 1st Defendant's defaults. The evidence of Mr Robert Ma show that the 1st Defendant was advancing his own interest and paid scant attention to his mandate.

17. I further find the 2nd Defendant to be the agent or nominee of the 1st Defendant. She is the wife of the 1st Defendant and the Plaintiff's half share was assigned in her favour shortly after the Plaintiff's assignment. The 1st Defendant's negotiations with Mr Robert Ma suggests that he was dealing with his own interest held in the name of the 2nd Defendant.

18. For these reasons, I find in favour of the Plaintiff and make the following orders :

(a) I declare the agency agreement between the Plaintiff and the 1st Defendant dated 5 April 2000 terminated by the 1st Defendant's fundamental breach and the 1st Defendant is not entitled to any payment thereunder.

(b) I set aside the three agreements dated 19 October 2000 between the Plaintiff and the 1st Defendant.

(c) I set aside the 30 October 2000 agreement between the Plaintiff and the 1st Defendant.

(d) I set aside the assignment dated 1 December 2000 between the Plaintiff ad the 1st Defendant.

(e) I set aside the assignment dated 19 December 2000 between the 1st and the 2nd Defendants.

(f) I order costs against the 1st and the 2nd Defendants.

(g) There be liberty to the Plaintiff to apply in relation to any matter arising from any rulings herein.

19. This case was on the running list. The first day was wasted as the Plaintiff's solicitors failed to keep track on the progress of that list. The Plaintiff is not entitled to any costs from the Defendants in respect of that appearance.