方燕卿 v. 方坤培, By His Guardian Ad Litem Fong Wing Yee
Read the full judgment text of HCA 1964/2011 on BabelCite. This High Court CFI judgment was delivered on 30 March 2016.
1. This is an action for specific performance of an oral agreement for sale and purchase of a property in Kennedy Town (“the Property”) commenced by the plaintiff purchaser (the “Plaintiff”) against her brother as vendor (the “Defendant”). The Plaintiff’s primary case is based on an oral agreement made in May 2006 (the “Oral Agreement”) evidenced by a memorandum in writing dated 1 July 2006 (“the Memorandum”). Her alternative case is based on the Memorandum alone.
Cited by 4 cases · Cites 3 cases
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HCA 1964/2011
IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO 1964 OF 2011 __________________ BETWEEN
__________________ Before : Hon To J in Court Dates of Hearing : 1 and 4 December 2015 Date of Judgment : 30 March 2016 ______________ J U D G M E N T ______________ Introduction 1.This is an action for specific performance of an oral agreement for sale and purchase of a property in Kennedy Town (“the Property”) commenced by the plaintiff purchaser (the “Plaintiff”) against her brother as vendor (the “Defendant”). The Plaintiff’s primary case is based on an oral agreement made in May 2006 (the “Oral Agreement”) evidenced by a memorandum in writing dated 1 July 2006 (“the Memorandum”). Her alternative case is based on the Memorandum alone. 2.The defences are, firstly, the Oral Agreement was subject to the mother’s consent and the consent was not forthcoming. Secondly, the Memorandum is not a sufficient memorandum evidencing the Oral Agreement as required by section 3 of the Conveyancing and Property Ordinance (Cap 219) (the “Ordinance”). Thirdly, the Oral Agreement was entered into as result of undue influence. Initially, there was a plea of misrepresentation. But, by the Defendant’s solicitors’ letter dated 23 October 2015, that defence was abandoned. However, misrepresentation remains as one of the basis of the defence of undue influence. 3.The issues raised in this action are:
The background 4.The Plaintiff and the Defendant came from a family of eight siblings, consisting of three sons and five daughters. The Plaintiff is the youngest and the Defendant is the eldest among the siblings. Both of them are now elderly. 5.The Plaintiff is now in her early fifties. She was educated in the United States. She is single and is living alone in a roof top accommodation in Cheung Sha Wan provided by the father’s ex-employer. Her mother used to live there with her before migrating to the United States. At least until the present dispute, the Plaintiff had regular dinners in the Defendant’s home about twice a month. 6.The Defendant received primary school education. He was a driver in the Food and Environmental Hygiene Department before he retired in October 2004. Then he worked as a watchman until 2011. The Oral Agreement was allegedly made in May 2006 while he was employed as a watchman. During the course of these proceedings the Defendant was diagnosed as a mentally incapacitated person within the meaning of the Mental Health Ordinance (Cap 136). His daughter (the “daughter”) was appointed as his guardian ad litem. 7.The siblings’ father died intestate in July 1998, leaving behind the Property and about $200,000 cash in his bank account. By a deed of family arrangement and deed of assent dated 8 March 2005, their mother as administratrix assigned the Property to herself and the Defendant as joint tenants and distributed the cash in the bank account to the five daughters. Then the mother migrated to the United States to live with her third son in April 2005. She passed away in May 2007. 8.Since 1995, the Plaintiff assisted the father and, after his death, the mother in managing and collecting rent from the Property. The Property had been partitioned and rented out to separate tenants. Until April 2006, the rental income was paid into a joint account of the mother and her third son for the use of the mother. Credibility of witnesses 9.Only the Plaintiff and the Defendant’s daughter testified. 10.The Defendant’s daughter impressed me as an honest and credible witness. However, she was not in any position to dispute the Plaintiff’s evidence as she was not present during the alleged discussions about the sale and purchase of the Property or when the Memorandum was signed. Her evidence, insofar as it supports the Defendant’s case is just hearsay. I give little weight to her evidence. 11.The Defendant did not testify due to his mental condition. He adduced no evidence to contradict the Plaintiff’s case. His wife who was allegedly present during the discussions leading to the making of the Oral Agreement and signing of the Memorandum could have been called to testify but was not called. The daughter explained that the Defendant’s wife was not called because she was nearly 65 years of age, was in poor health and suffering from insomnia. I draw no adverse inference against the Defendant for not calling his wife to testify, but that does not cure the deficiency caused by his own failure to testify. 12.The Plaintiff testified and produced the Memorandum and other supporting documents. Without the benefit of the Defendant’s or his wife’s evidence, Mr Lau, counsel for the Defendant, seeks to challenge the Plaintiff’s credibility and the inherent improbability of her case. Given the above limitation, I can only assess the Plaintiff’s credibility by testing her evidence against the Defendant’s pleaded case, the evidence of his daughter and inherent probability of her case. The Plaintiff gave evidence in a direct manner. Having so tested her credibility, I am satisfied that she is a simple and unsophisticated person of average education. Though part of her evidence is difficult to explain, however, having so tested her evidence, I am satisfied that she is a credible witness and accept most of her evidence. The Plaintiff’s case 13.According to the Plaintiff, the Property was in a dilapidated condition when the last tenant moved out on 16 April 2006, and required substantial renovation. At the time, she had just had an operation on her leg and it was inconvenient for her to travel from Cheung Sha Wan to Kennedy Town to manage the Property. On a date in April 2006 when she had dinner with the Defendant, she returned the key of the Property to him and declined to continue managing the Property. She suggested that as the Property was old and dilapidated, the Defendant should take the opportunity to have it renovated. 14.During another dinner meeting two to three weeks later, the Defendant told the Plaintiff that he did not wish to incur expenses to renovate the Property or to manage it. He suggested the Plaintiff to buy the Property and have it renovated at her own expense. Then, holding the key of the Property in his hand and in the presence of his wife, he asked the Plaintiff to buy the Property as he was worried that one day she might be forced to vacate the roof top accommodation. He urged her to prudently consider his suggestion. 15.After a few days, the Plaintiff made a long distance telephone call to her mother to seek her opinion. Her mother said that she felt the Defendant had never liked the Property because of its dilapidated condition and had never attended to it; and since she did not wish the Property to be sold to outsiders, she agreed to the sale to the Plaintiff. 16.On an occasion in May 2006, the Plaintiff discussed the sale with the Defendant after dinner. She asked the Defendant about the price. The Defendant replied “$200,000 odd”, but without giving an exact figure. When pressed further, the Defendant quoted a price of $260,000. She then asked the Defendant and his wife who was present whether they knew the price was very much below market price and whether they had consulted the members of their family. The Defendant replied in the affirmative and the Oral Agreement was reached. According to paragraph 5 of the Plaintiff’s statement of claim, the Oral Agreement contains the following three terms:
The Defendant also handed back the key of the Property to the Plaintiff. 17.Between May and July 2006, the Plaintiff carried out renovation work on the Property and incurred $110,000. 18.In June 2006, the Defendant requested the Plaintiff to pay the purchase price in full（找埋條數）. As their mother was still living at the time, they agreed to complete the formality in a solicitor’s office after the mother’s death and the Plaintiff would first pay a deposit of $30,000 on 1 July 2006 when she next came for dinner. There was no express agreement on payment of the balance of $230,000, but it was the unexpressed intention of the Plaintiff to pay the balance on completion. 19.Then the Plaintiff prepared the Memorandum at home and dated it “1 July 2006”. However, subsequently the dinner was postponed to 29 July 2006. In the meantime, she reviewed the Memorandum and added the phrase that “the parties agree they must buy and must sell” the Property (且同意必買必賣) (the “ ‘must buy and must sell’ provision”). The Memorandum contains two paragraphs as follows:
20.Before going to the dinner, the Plaintiff prepared a cheque dated 29 July 2006 for $30,000 naming the Defendant as the payee. As advised by her estate agent, she also prepared a letter of authorisation for the Defendant’s signature authorising her to lease out the Property on his behalf (“the authorisation”). 21.After dinner on 29 July 2006, the Plaintiff gave the Memorandum and the authorisation to the Defendant in the presence of his wife for signature. She reminded the Defendant to read the terms of the Memorandum carefully before signing. The Defendant signed the Memorandum. As the Plaintiff was handing over the cheque to him, he also completed signing the authorisation. She told the Defendant not to present the cheque until she told him to as she did not have enough funds in her account. On 1 August 2006, she deposited money in her account and informed the Defendant. The cheque was presented and cleared on 5 August 2006. 22.The mother died on 18 May 2007. At a family gathering in September 2007, the Defendant suddenly told the Plaintiff that he would not sell the Property. 23.On 28 September 2007, the Plaintiff learned from her estate agent that the Defendant and another woman, whom she believed to be one of her sisters instructed the estate agent to sell the Property. 24.On 29 October 2008, the Plaintiff had the Memorandum stamped. On 11 November 2008, she registered the Memorandum against the Property in the land registry. On 4 December 2008, the Defendant’s solicitors demanded the Plaintiff to return the key to the Property. On 11 December 2008, the Plaintiff, through her solicitors, demanded the Defendant to complete the sale and purchase. The Plaintiff did not return the key and the Defendant did not complete the agreement. The Plaintiff commenced this action on 16 November 2011. The Defendant’s case 25.The Defendant denies there were discussions about the sale and purchase of the Property in April to July 2006. His pleaded case is that on 2 August 2006, the Plaintiff misrepresented to him during dinner that she was told to vacate her roof top accommodation and would become homeless. She pleaded the Defendant to sell the Property to her for $260,000. At the Plaintiff’s behest, he agreed in principle to the sale subject to the mother’s consent. At once, the Plaintiff tore a page from an exercise book in the Defendant’s home and wrote out the Memorandum and pressed for his signature. The Defendant was in a hurry to go to work and did not have time to consider. He signed the Memorandum as result of the misrepresentation and undue influence exerted on him by the Plaintiff. The Plaintiff left behind a cheque in the amount of $30,000. 26.Then sometime later in August 2006, the Defendant telephoned his mother to seek her consent, but the mother refused to sell the Property to the Plaintiff. In response to the Plaintiff’s demand for transfer of the Property in 2007, the Defendant reiterated that he would not sell the Property to her. 27.The particulars pleaded by the Defendant are quite scanty. He adopted a rather ambivalent position in relation to the Memorandum. While not disputing his signature on the Memorandum, he disputes the authenticity of the Memorandum and puts the Plaintiff to strict proof of its authenticity. His case is that the document he signed on 2 August 2006 only contained reference to sale and purchase of the Property at the price of $260,000. It did not contain the ‘must buy and must sell’ provision and the second paragraph about completion after the mother’s death and acknowledgment of receipt of the deposit. In other words, his case is that the Memorandum is either not the same document which he signed or that it is the document which he signed but with something added on afterwards. But no evidence to either effect was adduced at trial. 28.The Defendant also pleads, in the absence of any context, that their mother told the Plaintiff to renovate the Property and to reimburse herself from the rental income and subsequently the Plaintiff reported to her that the renovation expenses amounted to $70,000. 29.Limited by the Defendant’s inability to testify, Mr Lau seeks to challenge the Plaintiff’s case of the Oral Agreement on the basis of inherently improbability. The thrust of his attack is that it was a sale at gross under value; that the price was agreed in a curious manner; and that there was no need or motive to sell the Property at a low price. I shall first deal with the mother’s consent and then the various attacks on the Plaintiff’s case. The mother’s consent 30.There is no dispute that the Oral Agreement was subject to the mother’s consent. According to the Plaintiff, she telephoned the mother who agreed to the sale and purchase. The Defendant’s pleaded case is otherwise. Again, in the absence of evidence from the Defendant, Mr Lau seeks to argue that the Plaintiff’s evidence is, on balance, difficult to believe. His main criticism is that if the mother had consented, there was no reason why the transfer did not take place forthwith but the parties had to agree to wait till after the mother’s death. He reinforces his argument on the basis that execution of assignment and other documents by the mother in the United States would not be difficult. He submits that the agreement that transfer to take place after the mother’s death is self evident that the mother’s consent had not been obtained. 31.I think Mr Lau’s arguments are neither here nor there. The Oral Agreement has to be viewed as an agreement between close family members with the elder brother acting out of love and concern for the younger sister. This is amply demonstrated by the fact that the sale was at gross under value. There was no reason for the Plaintiff to be unduly cautious. She has all along been managing the Property. She would be collecting rent. Her interest, at least in respect of the renovation expenses, was secured. Completion after the mother’s death would be straight forward, convenient and would leave the mother with a feeling of security. But these considerations are not determinative. 32.On the other hand, the Defendant offered no evidence that the mother had withheld her consent. He is stuck with the state of the evidence. More fatally for the Defendant is that, on his own case, he had learned about the mother’s disapproval in August 2006, yet he presented the Plaintiff’s cheque for the deposit on 5 August 2006. In a sale subject to a third party’s consent, one would not expect the vendor would cash the deposit without having first obtained the consent of the third party. Even assuming that the Defendant learned of the disapproval only after he had presented the cheque, one would expect he would have immediately informed the Plaintiff of the mother’s disapproval and returned the deposit and/or offered terms to compensate or reimburse the Plaintiff for the renovation expenses she incurred on the Property. There is not the slightest pleading to that effect, not to mention a total lack of evidence even in his witness statement which was not tendered. He never attempted to return the deposit or offered to compensate the Plaintiff for the renovation expenses. The first indication of his reneging from the Oral Agreement was given during a family gathering in September 2007, more than a year after the mother’s alleged disapproval. That evidence only came from the Plaintiff. The Defendant’s first formal demand for return of the key of the Property was only made by his solicitors two years and four months after the mother’s alleged disapproval. When the Defendant’s case is tested against such incontrovertible evidence, it is manifestly clear that the Defendant’s case is incapable of belief. When balancing the Plaintiff’s evidence against the Defendant’s pleaded case, it is difficult not to accept the Plaintiff’s evidence as credible. 33.Mr Lau argues that it is incredible that the mother would have consented to the sale and was not concerned about the selling price of the Property as she was a joint tenant and had all along been receiving the rental income as her maintenance. The mother’s position must be viewed against the objective circumstances at the time. The mother was living with her third son in the United States and was apparently well looked after. She died about twelve months after consenting to the sale according to the Plaintiff, or nine months after objecting to the sale according to the Defendant. She was aging and not in good health. She must have appreciated that before long she would have no need for the Property. Upon her death, the Property would be the Defendant’s to dispose of. The sale was to the benefit of her unmarried daughter who had no family support. I ask rhetorically, why would the mother object, if her son was happy to sell to the benefit of her daughter who was in need of some kind of support? On the state of the evidence, I am satisfied that the mother had given her blessing to the sale. The absence of a need or motive to sell the Property at a low price 34.Mr Lau argues that there was no need for the Defendant to offer to sell the Property at a low price. He could have sold it somewhat below the then market price with a discount for its old and dilapidated condition or continued to rent it out at a lower rental. 35.The Plaintiff gave the following explanation for the Defendant’s motive. She said that the Defendant had never liked the Property because it was old and he had never attended to it. He was only a joint owner with the mother and could not sell it in the open market. At the time, the Property was a liability as it required substantial renovation. The Defendant was not prepared to pay the renovation expenses. It was against those circumstances and out of his concern for her well-being that the Defendant proposed to sell her the Property at a low price. These background circumstances provided a motive for the sale and a reason for the low price. 36.As for Mr Lau’s suggestion of sale at market price after discounting for the dilapidated condition of the Property, an obvious and insurmountable difficulty is that the Defendant’s joint interest in the Property as such is not marketable. He would have to obtain the mother’s consent first. Even if he were to convert his interest in the Property into a tenancy in common with the mother, that interest could not command a good price. There are problems about the marketability of such an interest. Even in the absence of expert evidence, I can confidently say that such a sale, if there was a willing buyer, could command no better price than half of the market value for the entire interest in the Property after a discount for its age and dilapidated condition and a further substantial discount for the fact that the interest was held in common with another co-owner. On a wild guess, speculative of course, the Defendant could, at best, get a price not much higher $260,000. 37.Mr Lau argues that the Defendant could have continued to rent Property out at a lower rent without renovation. He could well do so. However, not only that a dilapidated property is unlikely to fetch a good rent, it is also unlikely to fetch good tenants. More importantly, it is the Plaintiff’s evidence that the Defendant was not interested in managing the Property. There is also no dispute that the Defendant had never managed it at all. 38.Furthermore, on the objective facts, the Defendant had been a good brother caring for his youngest and unmarried sister and having regular dinners with her. He has a settled and well to do family with children, some of whom are in gainful employment and he has a pension; whereas the Plaintiff is unmarried and living in roof top accommodation at the pleasure of their deceased father’s ex-employer. Her right to continue to live in that accommodation is precarious. It might well be that the Defendant considered himself singularly lucky being the only siblings given a landed Property from the father’s estate and might wish to share part of the bounty with this sister. In the circumstances, it is not surprising that out of love and affection the Defendant would have offered or agreed to sell the Property to her at a low price so as to secure a stable livelihood for his sister in future, though two and half years down in time he regretted his generosity. I do not have to speculate the reason why he agreed to sell at that price because the evidence is undisputed. What is in dispute is whether there was the Oral Agreement, the terms of that agreement and whether it was vitiated by undue influence. Inconsistencies between the Plaintiff’s evidence and her pleading 39.Mr Lau’s second line of attack is on the inconsistencies between the Plaintiff’s evidence and her pleading. He argues that the Plaintiff’s pleaded case about the sale at a low price was premised on the Property being thirty years old and was in need of major renovation. He submits that on the one hand the Plaintiff mentioned nothing in her evidence about the Defendant’s offer to sell at a low price; but on the other, the pleaded reasons regarding the age of the Property and the need for renovation were not mentioned in her evidence. He further argues that, viewed objectively, as the Plaintiff was living at the roof top accommodation alone after the mother migrated to the United States, it is more likely that she would have used the pretext of a threatened eviction to induce the Defendant to sell the Property to her at a low price. Mr Lau therefore submits that the offer to sell at a low price is such an important theme in the Plaintiff case that there is no reason why she would have forgotten to mention it in her witness statement and evidence. 40.I think these are very trivial departures which, in the light of the totality of the evidence, are insufficient to discredit the Plaintiff. There is no dispute that the Property was sold at a gross under value. The Plaintiff has mentioned about asking the Defendant and his wife whether they appreciated the price was very much below market price and whether they had consulted the members of their family. Her failure to specifically mention the Defendant’s offer to sell at a low price is, at the highest, a minor omission. As for the age of the Property and the need for renovation, the Plaintiff has repeatedly said that the Property had never been renovated, was in a dilapidated state and required renovation. Mr Lau’s criticisms could not dent her credibility. 41.Mr Lau also criticises the inconsistency in the expressions used by the Plaintiff when describing the Defendant’s demand for payment of the purchase price. The expressions used by the Plaintiff were: “畀埋條數 (pay the amount owing)”; “畀埋條尾數 (pay the balance)”; and “找清尾數 (pay off the balance)”. This criticism is partly founded on his construction of the word “deposit” in the second pleaded term of the Oral Agreement as meaning a security payment deductible against the purchase price. Hence, in that context, the words “尾數 (the balance)” means the outstanding amount owing net of deposit; whereas the words “條數 (the amount owing)” simply means the amount owing without reference to any deposit. While this is a possible distinction between the two terms, I do not think the meaning of the words “尾數 (the balance)” is so restrictive and could not have the wider meaning as “條數 (the amount owing)” in the present context. It is important that on my finding, the word “deposit” as used in the second pleaded term does not have its ordinary meaning as mentioned above: see paragraphs 47 to 52 below. Hence, when the parties were discussing about payment of purchase price in the context that no deposit had been paid, these expressions are clearly interchangeable, especially when used in the course of a loose oral exchange. In my view, these expressions mean the same thing in the present context. The inconsistency is being blown out of all proportion. 42.Mr Lau next attacks an inconsistency between the Plaintiff’s evidence and her pleaded case about her entitlement to the rental income after renovation. In her supplemental witness statement, the Plaintiff said she would pay the renovation expenses and would give the rental income to the mother as her maintenance. This is inconsistent with her pleading under the Oral Agreement that she would collect and keep all the rental income. In fact, none of the documentary evidence produced by her indicates that the rental income after renovation had been transferred to the mother. It was ambiguous whether there was any agreement by the mother for the Plaintiff to reimburse herself the renovation expenses from the rental income. The Defendant’s pleaded case is that the mother had so agreed. This aspect of the Plaintiff’s evidence may be unsatisfactory. But even if she had wrongfully retained the rental income as against the mother, in the totality of the evidence this does not affect the credibility of her case as to the existence of the Oral Agreement. The Plaintiff’s professed lack of knowledge of the then market price 43.Mr Lau says it is amazing that when it was put to the Plaintiff that the price was grossly below the then market price, she replied she did not know. He suggests it is unbelievable that the Plaintiff would have come to the discussion without knowing the market price and agreed to the purchase price. There is a distinction between knowing quantitatively the market price in terms of dollars and cents and knowing qualitatively that the purchase price offered was grossly below market price. There is no dispute that the sale was at gross under value. The Plaintiff certainly knew it was a good buy and the price was below market price. Whether she considered that grossly below market price is very subjective; and whether she knew what the market price was is an entirely different matter. I do not consider that line of cross-examination has gone deep enough as to discredit the Plaintiff. Incredibility in the way the price was agreed 44.Mr Lau argues that the setting of the purchase price at $260,000 in the manner as alleged by the Plaintiff is hard to believe. The Plaintiff’s evidence is that the Defendant began with proposing a price of $200,000 odd. When asked by the Plaintiff more precisely as to how much, he proposed $260,000. I take note that the defence case is that the discussion in May 2006 never took place. However, in the defence, the Defendant pleaded that it was the Plaintiff who requested him to sell the Property to her for $260,000. Whatever adverse inference that could be drawn against the Plaintiff from the grossly under-valued price, there is no dispute that that price was agreed as reflected by the Memorandum or, according to the Defendant’s case, another document signed by him without the ‘must buy and must sell’ provision and the second paragraph. Thus, insofar as the setting of the price is concerned, whoever first proposed the price and the fact that the price was grossly below market price are neither here nor there. 45.Mr Lau then argues that, on the Plaintiff’s evidence, as the price of $260,000 was only agreed during the discussion, it is incredible that the Plaintiff would have asked the Defendant there and then whether the price had been agreed by all members of his family and the Defendant would have answered that in the affirmative. There is some force in that argument. However, on the Plaintiff’s evidence, the sale had been proposed by the Defendant a month ago. On a previous dinner occasion, the Defendant had offered to sell the Property and urged the Plaintiff to prudently consider his suggestion. I cannot rule out the possibility that the Defendant had first discussed the sale with his family members and reached consensus on a price before making the offer. He did not quote the price of $260,000 when he began the discussion, but mentioned a rough figure of “$200,000 odd”. That, in my view, was just to test the water or to see if the Plaintiff had any price or consideration in mind which would render further discussion futile. If the Plaintiff did ask the question, I do not consider the Defendant’s reply in the affirmative incredible. 46.Mr Lau criticises the Plaintiff for not personally enquiring from or verifying with the Defendant’s daughter whether she had agreed to the price if the Plaintiff was so concerned about the family members’ agreement to the sale. I think such suggestion unrealistic. The criticism is frivolous and is neither here nor there. The second term of the Oral Agreement as pleaded: its true construction 47.Perhaps, the strongest of Mr Lau’s criticism is the inherent improbability of the second of the pleaded term of the Oral Agreement that the renovation expenses be treated as deposit. On the face, the word “deposit” means a security payment which is to be deducted from the purchase price. Mr Lau submits that the Plaintiff could not have ascribed a different meaning to that word because that word was obviously used in the Memorandum precisely with that meaning. On such a construction, the term would put the Defendant in an extremely disadvantageous position. He would not and could not have known how much would be spent on renovation. He would not have known how much he was to receive in the end. More importantly, on that construction, the term would be absolutely illogical because the Plaintiff would receive a double benefit. She would be entitled to reimburse herself the renovation expenses from the rental income and to set them off a second time against the purchase price. The more the Plaintiff spent in renovating the Property, the more she would be enhancing the value of the Property, but at the same time the less she would have to pay the Defendant. Based on the rent at which the Property was subsequently leased after renovation, the Plaintiff could have recovered the renovation expenses and paid the balance of the purchase price from the rental income within less than three years and acquired the Property for free. 48.The Plaintiff’s immediate and adamant response when cross-examined on this issue was that the renovation expenses were not deductible against the purchase price and the outstanding balance of purchase price was $230,000. I have no doubt this is what the Plaintiff genuinely understood to be the effect of the word “deposit” in the context of renovation expenses. This is because as the evidence unfolds, the Plaintiff mentioned about the discussion in June 2006 and the execution of the Memorandum (see paragraph 18). In that discussion, she agreed to pay a deposit of $30,000 on 1 July 2006 and acknowledged that the balance of the purchase price was $260,000. This agreement is reflected in the Memorandum. There was no mention of the renovation expenses or their deduction from the purchase price. This is contemporaneous evidence of the Plaintiff’s acceptance that the renovation expenses were not deductible from the purchase price. 49.The Plaintiff was unable to explain why what she expressly stated as “deposit” in her statement of claim and in her evidence is not deductible against the purchase price. In my view, it is explicable on the basis that she ascribed a different meaning to the word “deposit” used in her pleading from what was actually agreed during the discussion leading to the conclusion of the Oral Agreement. Though she is legally represented at trial, her statement of claim was not drafted by solicitors, but by herself. If the word “deposit” is given its ordinary or dictionary meaning, the effect of that clause would be to give the Plaintiff a double benefit resulting in her obtaining the Property for free after three years. According to her testimony, that certainly was not her intention. That construction is so illogical that it could not have been the true intention of the Defendant either. 50.It would be timely to remind myself of the following principles of construction of document as stated by Lord Hoffmann in Investors Compensation Scheme Ltd and West Bromwich Building Society[1]:
51.Principles (4) and (5) are particularly pertinent. A reasonable reader with knowledge of the factual matrix in this case and of the illogical and unintended effect the term would have if the word “deposit” is given its ordinary meaning, would understand the word “deposit” to mean an upfront payment for renovation of the Property which was also a security payment to secure the performance of that obligation in exchange for the right to be reimbursed the same and/or to receive the surplus from the rental income. The reasonable reader would not construe the word as a deposit for the purpose of the sale and purchase of the Property. This is not an impossible interpretation. This construction ties in well with the Defendant’s case that their mother suggested the Plaintiff to pay the renovation expenses upfront and then reimburse herself from the rental income to be received. This is a typical case of a layman choosing an inappropriate word, the ordinary meaning of which does not correctly reflect the parties’ common intention. I am satisfied that the word “deposit” in that pleaded term means the security and consideration for the Plaintiff’s right to receive the rental income. I would not treat the Plaintiff’s failure in explaining the meaning of the word “deposit” against her. This is a typical case of an honest witness having no difficulties telling the truth but having difficulties explaining it. 52.Viewed in this light, the term about payment of renovation expenses and collecting rental income thereafter is not a term of the agreement for sale and purchase of the Property and therefore does not form part of the Oral Agreement. It is an independent agreement made for a different purpose wholly unrelated to the sale and purchase of the Property. It stands on its own and is supported by consideration moving from both parties to that agreement. Thus, although the Plaintiff pleaded three terms under the Oral Agreement, I find that the Oral Agreement contains only two terms: first, the sale and purchase of the Property at the price of $260,000 and, second, completion after the mother’s death. The payment of deposit and signing of the Memorandum 53.After having entered into the Oral Agreement on the above terms, the Plaintiff commenced renovation work which was completed in July 2006. She also made arrangement with an estate agent for leasing out the Property. Then there was a new development in the case which the Plaintiff pleaded occurred in July 2006. But in her evidence, she said that that event occurred in June 2006. I have summarized the parties’ case and the Plaintiff’s evidence on the Memorandum in paragraphs 18 to 21 above. In gist, the Plaintiff says that while renovation work was on-going, the Defendant asked her to pay the purchase price in full. After some negotiation, the parties reached agreement that she shall pay a deposit of $30,000 on 1 July 2006 when she next came for dinner. She prepared the Memorandum at home and dated it 1 July 2006. However the dinner was postponed to 29 July 2006 when she paid the deposit and the Defendant signed the Memorandum. Except for the inclusion of an agreement for payment of deposit of $30,000, all the terms of the Oral Agreement (containing two terms only) remained the same. 54.I have summarised the Defendant’s pleaded case in paragraphs 25 to 29 above. The Defendant disputes the Plaintiff’s case about the events leading to the signing of the Memorandum. In gist, his pleaded case is that on 2 August 2006 the Plaintiff misrepresented to him that she would be evicted from her roof top accommodation and pleaded him to sell the Property to her for $260,000. He signed a document agreeing to the sale of the Property, but that document did not contain the ‘must buy and must sell’ provision and the second paragraph about completion and receipt of deposit. The Plaintiff then left a cheque in the amount of $30,000. He was not given a copy of that document. The Memorandum produced in court by the Plaintiff is either a different document from the one which he signed or the document which he signed with terms added on afterwards without his consent or knowledge. There are disputes as to whether the Memorandum was signed by the Defendant, when it was signed; whether it contained the ‘must buy and must sell’ provision; and whether it contained the second paragraph that completion was to take place after the mother’s death and acknowledgement of receipt of the deposit. 55.For reasons as given below when analysing the Plaintiff’s evidence and the Defendant’s case, I accept the Plaintiff’s evidence about the negotiation in June 2006 and that the Memorandum was written and signed under circumstances as she alleged in her evidence. Authenticity of the Defendant’s signature on the Memorandum 56.While challenging the authenticity of the Memorandum, the Defendant does not formally dispute the authenticity of his purported signature on the Memorandum by tendering handwriting expert evidence. According to the Defendant’s daughter, the Defendant had been provided with a copy of the Memorandum in December 2008. For three years before commencement of this action and for more than three years before the filing of his defence and counterclaim, the Defendant never pleaded that the signature on the Memorandum was not his. Given the value of the Property, the nature of his allegation and the impact his allegation would have on this litigation, it is implausible that no such inquiries or complaint had been made to protect his interest if there is any substance in his allegation. 57.Mr Lau argues that the Plaintiff bears the burden of proving the authenticity of the Memorandum and has failed to discharge that burden. He asks me to compare the Defendant’s signatures on the Memorandum with those on some other documents produced in court in which the authenticity of the Defendant’s signatures is not in dispute. He relies on the dissimilarity in a stroke in one component of the third character of the Defendant’s name. In my view, though the dissimilarity is obvious, it is very minor. It is trite that no two signatures are identical. It is usual to find variations between undisputed signatures. Hence a good sample of control signatures should be made up of undisputed signatures containing variations. Indeed, every often it is the variation or dissimilarities among a sample containing sufficient number of control signatures which confirm the authenticity of a questioned signature. The signature in question has to be viewed against a sample containing sufficient number of control signatures. Mr Lau only referred me to a few undisputed signatures. From my experience in other cases involving handwriting expert evidence, I can say that the sample size is too small to be representative. The Defendant adduced no expert evidence explaining the significance of the dissimilarity. Against the testimony of the Plaintiff and the similarities between the undisputed signatures and the signature in question, I am satisfied that the Plaintiff has adduced sufficient prima facie evidence of the authenticity of the signature. The Defendant has not even begun to have adduced sufficient evidence to discharge his evidential burden of shifting the legal burden of proof to the Plaintiff. I am satisfied on a balance of probability that the signature on the Memorandum purporting to be the Defendant’s is genuine. Authenticity of the Memorandum 58.The Defendant’s pleaded case is that the document he signed on 2 August 2006 did not contain the ‘must buy and must sell’ provision and the second paragraph as appearing in the Memorandum. Having satisfied myself that the Defendant’s signature on the Memorandum is authentic, I must consider the parties’ case on the basis that the document and the Memorandum are the same document. The questions then are: whether it was signed on 29 July or 2 August 2006; and whether the disputed parts were added in after the Defendant had signed the Memorandum. 59.When precisely was the Memorandum signed is not of much significance, except that it reflects the credibility of the Plaintiff and the inherent probability of her case. The Plaintiff’s account is that she prepared the Memorandum intending it to be signed at a pre-scheduled dinner on 1 July 2006 and she dated it with that date. The dinner was postponed to 29 July 2006. On that day, she produced the Memorandum and the authorisation to the Defendant for signature. She also tendered her cheque dated 29 July 2006 in the amount of $30,000 in payment of the deposit. As she did not have funds in the account, she told the Defendant not to cash the cheque until after hearing from her. Then she put funds into the account on 1 August 2006. That payment-in was documented and is beyond dispute. If the payment of the deposit had not been agreed at a prior discussion and she just left her cheque with the Defendant on 2 August 2006 as alleged by the Defendant, how could the Plaintiff have anticipated the need to put funds in her account on 1 August 2006 before attending the dinner meeting on 2 August 2006? There is, of course, a possibility that the Plaintiff proceeded to the dinner on 2 August 2006 armed with the cheque after having put her account in funds and with a premeditated plan to force the sale and purchase on the Defendant. That would have been a very bold plan and part of that plan includes fine detail as ante-dating the cheque as well as the authorisation on 29 July 2006. On balance, I find it more likely than not that the Defendant’s case is an afterthought and the Plaintiff’s case closer to the truth. 60.On the Defendant’s pleaded case, the Memorandum would have been written without prior negotiation and on the spot by the Plaintiff tearing out a piece of paper from an exercise book in the Defendant’s home. Under those circumstances, the Plaintiff must have naturally dated it 2 August 2006. Why would she have dated it “1 July 2006”? She could not have planted this evidence in anticipation of such a defence raised by the Defendant five years afterward. It is manifestly obvious that there was prior negotiation in June which led the Plaintiff to prepare the Memorandum and date it “1 July 2006” and to bring along her cheque to the meeting, be it 29 July or 2 August 2006. 61.Mr Lau refers to indications on the Memorandum that the date had been over-written on. I have carefully examined the date on the Memorandum. The date had in fact been over-written on. But it appears to me that that was because the ink was fading out when the date was first written. The over-writing followed the original date very closely. No adverse inference could be drawn from the over-writing. 62.Mr Lau raises many other queries which remain unanswered by the Plaintiff. He submits that the addition of the ‘must buy and must sell’ provision reflects the Plaintiff was concealing something suspicious. I think that is highly speculative. He queries why the Plaintiff was unable to explain why she did not change the date on the Memorandum, if she had taken care to add the ‘must buy and must sell’ provision to fortify its content（以充分其內容）for fear that the Defendant would, in future, refuse to sell. He queries why, if the Memorandum was allegedly signed on 29 July 2006, it was only mentioned for the first time in the Plaintiff’s solicitors’ letter dated 11 December 2008 in response to the Defendant’s solicitors’ letter dated 4 December 2008 demanding return of the key of the Property. In that vein, Mr Lau may also add that the Memorandum was only stamped on 29 October 2008 with stamp duty after more than two years of its execution. He argues that the only document which supports the Plaintiff’s assertion of her right under the Oral Agreement is an e-mail dated 3 January 2008 allegedly sent to the Defendant’s son. The name of the Defendant’s son was incorrectly written and the receipt of that e-mail is denied by the Defendant’s daughter. In my view, these are very trivial points against the Defendant’s admission that he had signed a document agreeing to the sale of the Property in July or August 2006. Furthermore, the Plaintiff’s cheque dated 29 July 2006 and her depositing funds into her account on 1 August 2006 strongly support the Plaintiff’s case. 63.On the other hand, the Defendant’s case about the content of the document which he signed is inherently improbable. The second paragraph of the Memorandum consists of four lines written on double line spacing. If the Defendant’s pleaded case were true, when he signed the Memorandum, the Memorandum would only have five lines written on double line spacing with an enormous empty space of nine lines between the last written line and the signatures. That does not strike me as credible. 64.In conclusion, I accept the Plaintiff’s evidence about the negotiation in June 2006 and the signing of the Memorandum on 29 July 2006. I find that the Memorandum and the document admittedly signed by the Defendant are one and the same document. I am satisfied with the authenticity of the Memorandum and that what purports to be the Defendant’s signature on the Memorandum is genuinely his. The terms of the Oral Agreement 65.I accept the entirety of the Plaintiff’s case about the making of the Oral Agreement as varied in June 2006 and the signing of the Memorandum. I find that the parties reached two agreements in May 2006: one in relation to renovation of the Property and one relating to its sale and purchase. The latter agreement is the “Oral Agreement” pleaded in the statement of claim. Then the Defendant sought to re-negotiate in June 2006 resulting in the Plaintiff agreeing to pay a deposit of $30,000 on 1 July 2006. However, the meeting on 1 July 2006 was postponed to 29 July 2006. By consent, the date of payment of the deposit was changed to 29 July 2006 when the Memorandum was signed and the deposit paid. 66.I do not regard the variation agreed in June 2006 as a new agreement which replaced the Oral Agreement. The subject matter, the purchase price and completion date remained the same. The agreement to pay the deposit of $30,000 is something agreed in furtherance of the Oral Agreement. It is an agreed variation to the Oral Agreement. As with the terms of the Oral Agreement reached in May 2006, there was also no express agreement as to when to pay the balance of the purchase price. The un-expressed intention of the Plaintiff was to pay upon completion. That is entirely reasonable and goes without saying. Such a term was necessary and could be readily implied. I do not regard that by not mentioning the deduction of the renovation expenses from the purchase price there was any intention to increase the purchase price because the agreement about payment of renovation expenses was, as I have found, a separate and independent agreement. It is not part of the Oral Agreement and should not have been pleaded as a term of the Oral Agreement. 67.Thus, the terms of the Oral Agreement as varied in June 2006 are:
68.I think it is appropriate at this stage to point out that the statement of claim is defective. On a strict reading, it appears that the Plaintiff’s claim is founded on the Oral Agreement entered in May 2006, containing three terms: the sale and purchase of the property; the renovation of the Property and completion of the transaction after the mother’s death. On my finding, the agreement about renovation of the Property was a separate agreement and did not form part of the Oral Agreement. The Plaintiff’s claim would not necessarily be defeated by her failure to prove a pleaded term which did not form part of the Oral Agreement. I consider no amendment to the statement of claim by deleting that term necessary. 69.According to paragraph 5 of the statement of claim, the Plaintiff’s claim is based on an oral agreement entered into in May 2006, which she defined as the “Oral Agreement”. However she also pleaded in paragraph 7 of the statement of claim an agreement to pay the deposit in July 2006, which on the evidence turned out to have been made in June 2006 while the actual payment was made on 29 July 2006. She did not expressly plead this agreement as a variation of the Oral Agreement, nor did she plead that her claim is founded on the Oral Agreement as varied in June 2006. However, it is obvious that her claim is founded on the Oral Agreement as varied in June 2006 which is evidenced by the Memorandum. Though her statement of claim could have been better pleaded, the issues are nevertheless clearly identified and the Defendant has not been in any way misled or prejudiced. Allowance must be given to the fact that the statement of claim was drafted by the Plaintiff personally, a layman. 70.Even if the statement of claim were to be amended to reflect this variation and the fact of payment, the Defendant could only plead a denial and repeat paragraphs 7 to 13 of his defence. All facts which could have been pleaded have been pleaded. All legal arguments which could have been advanced have been advanced. Nothing significant to the defence could turn on this variation of the Oral Agreement in June 2006. To require an amendment at this stage would only result in an unnecessary waste of time and costs. That would be contrary to the underlying objectives as stated in Order 1A rule 1(a), (b) and (c) of the Rules of the High Court of increasing the cost-effectiveness of any practice and procedure, ensuring expeditious disposal of a case, and promoting a sense of reasonable proportion and procedural economy in the conduct of proceedings. I shall deem the term “Oral Agreement” in paragraph 5 of the statement of claim as meaning the “Oral Agreement as varied in June 2006 under the circumstances as pleaded in paragraph 7 of the statement of claim”. No amendment to the statement of claim is necessary. Thus, depending on the context, the term “Oral Agreement” should be construed as the Oral Agreement entered in May 2006 or that agreement as varied in June 2006. While the statement of claim was drafted by the Plaintiff, her solicitors cannot escape from blame for not tidying it up when they took over the conduct of these proceedings. Whether the Memorandum is a sufficient memorandum – the principles 71.Under section 5 of the Ordinance, no equitable interest in land can be created or disposed of except by writing signed by the person creating or disposing of the same. Section 3 of the Ordinance provides that no action shall be brought upon any contract for the sale or other disposition of land unless the agreement upon which such action is brought or some memorandum or note thereof, is in writing and signed by the party to be charged or by some other person lawfully authorized by him for that purpose. Section 3 of the Ordinance does not require the terms of an oral agreement be word for word reproduced or reflected in the memorandum. What is required is that all the terms are evidenced in the memorandum. 72.For the purpose of section 3, the memorandum must have been brought into existence before commencement of the action. It must specify the parties, the property and the price and all other terms expressly agreed. See: Peirce v Corf[2]; and Beckett v Nurse[3]. If the memorandum is not in accordance with the true contract, it is a bad memorandum. The omission of a single term, even though a subsidiary one is fatal; for then the contract evidenced by the memorandum is different from the contract actually made. See: Rishton v Whatmore[4]; Johnson v Humphrey;[5] Hawkins v Price[6]; and Burgess v Cox[7]. These principles have been repeated by the Court of Final Appeal recently in Kwan Siu Man v Yaacov Ozer[8]. 73.To succeed in her claim, the Plaintiff has to prove not only that the Oral Agreement as varied in June 2006 contains all the essential terms of a contract for sale and purchase of the Property, but also all its terms are evidenced by the Memorandum signed by the Defendant. These are different issues and should be considered in that order. 74.However, no argument has been advanced by Mr Lau as to whether the Oral Agreement is a sufficient agreement for sale and purchase of any interest in landed property. The focus of Mr Lau’s submission in respect of the Memorandum is that as a contract document it does not contain all essential terms to constitute an enforceable contract. These arguments apply equally to the sufficiency of the Oral Agreement. His other argument is that the terms of the Memorandum do not correspond to the terms of the Oral Agreement. Whether the Oral Agreement or the Memorandum are sufficient agreements for sale and purchase of landed property 75.Mr Lau quotes the judgment of Litton PJ in Kwan Siu Man and makes two points. First, he argues that the in these days of volatile property market, the court should be slow to find an “open contract” for sale and purchase of property. Second, he argues that the date of completion is an essential term without which the contract is void for uncertainty. He relies on the absence of any provision in the Memorandum specifying (i) the completion date; (ii) the payment of the balance of the purchase price and the date of such payment; and (iii) whether the Property is sold with vacant possession or subject to tenancy. These terms are also missing in the Oral Agreement. 76.The parties in Kwan Siu Man were the landlord and tenant of a leased property who were engaged in litigation in the Lands Tribunal. One day, they met in the lift lobby of the leased property and discussed, inter alia, the Lands Tribunal proceedings and the sale of the leased property at the price of $4.25 million. A few days later, the landlord’s solicitors wrote to the tenant’s solicitors, in a “without prejudice” letter, stating that the parties had reached settlement in relation to the Lands Tribunal proceedings on terms, inter alia, that the tenant was to purchase and the landlord to sell the leased property at the price of $4.25 million; and payment of an initial deposit on signing of the formal sale and purchase agreement and the balance on completion date. The payment terms and the completion date had never been discussed between the landlord and the tenant during the discussion at the lift lobby. Later, the landlord called off the sale. At first instance, the court held that the “without prejudice” letter was a sufficient memorandum and ordered specific performance. The decision was affirmed by the Court of Appeal. The landlord appealed to the Court of Final Appeal. 77.In reversing the decision of the Court of Appeal, Litton PJ said[9]:
78.Bokhary PJ was of the same opinion. He said[11]:
79.I think neither Litton PJ nor Bokhary PJ was of the view that it is not possible to make an open contract for sale and purchase of property under the volatile market condition in Hong Kong. They only warned against too readily coming to a conclusion that an open contract has been made. An open contract is a contract where only the essential terms required have been expressly agreed, leaving the other terms to be implied by the general law. The simplest possible open contract is one in which only the parties, property and price are specified. This does not mean that when consensus on these matters is reached there is an open contract. Equally, it does not mean an open contract could not have been concluded only on these terms but leaving the other terms to be implied by the general law or statute where applicable. In my opinion, the test is one of intention, ie have the parties reached a binding contract for the sale and purchase of that property at that price. If they have, then the other terms can be implied. It is, for example, implied that the vendor must show a good title within a reasonable time and then execute a proper conveyance to the purchaser against payment of the purchase price. It is for the purchaser to prepare the draft conveyance for the vendor to execute, and to pay his own solicitor’s costs, but most other expenses fall on the vendor. Given the volatility of the Hong Kong property market, this intention should not be too readily inferred. 80.While the Court of Final Appeal was of the view that completion date is an essential term and that there is no practice in the ordinary course of business in Hong Kong of treating it as a subsequent matter simply to be left to legal advisers to settle, it never held that absence agreement on the completion date, there could be no concluded contract. Indeed, the preponderance of English authorities, subject to there being a finding of a concluded contract, is that where no date for completion is fixed by the contract the parties are obliged to complete within a reasonable time of the conclusion of the contract. See: Behzadi v Shaftesbury Hotels Ltd[12]. When there is a failure to complete within a reasonable time, a breach of the contract occurs. The innocent party may issue a notice fixing a new completion date and making time of the essence. In a later decision of the Court of Final Appeal, Lau Suk Ching Peggy v Ma Hing Lam[13], Lord Millett NPJ, with whom Bokhary PJ agreed, adopted the English Court of Appeal decision in Behzadi v Shaftesbury Hotels Ltd. 81.So, Mr Lau’s argument boils down to the question of whether on the facts, the parties had intended to make a binding agreement. This question has to be answered by looking at all the circumstances. Hereunder are the salient facts which I have found. Two or three weeks after handling over the Property and the key to the Defendant, the Defendant proposed to sell the Property to the Plaintiff. Not only did he express his intention to sell by words, he was actually holding the key of the Property as if he were handing over possession of the Property to the Plaintiff. The Defendant’s intention to sell could not be doubted. Then the Plaintiff consulted their mother who was the joint owner of the Property and the mother consented to the sale. It is also the Defendant’s case that he consulted their mother, though according to his case the mother disapproved. The undisputed fact remains that the parties treated the offer seriously and consulted their mother. Then the price and completion after the mother’s death were agreed, but not the date of payment of the purchase price. The Plaintiff, at least, anticipated payment and completion to take place together after the mother’s death. A month or so later, the Defendant raised the issue of payment in full. Payment of deposit was agreed. A cheque in the sum of $30,000 was given to the Defendant on 29 July 2006 which he presented and was paid on 5 August 2006. The Defendant’s demand for a deposit evinces his intention to make a binding agreement. That intention is confirmed by his presenting the cheque for payment. On the above facts, even in the absence of an agreement as to completion date, the parties’ intention to form a binding contract cannot be any clearer. 82.Mr Lau refers to the case of Tam King Hang v Yuen Lei Gwun[14] in which the principle in Kwan Siu Man was applied. In that case, the vendor landlord signed a Chinese document agreeing to sell her property which was then under litigation to the plaintiff. The agreement was that upon her obtaining judgment in that litigation, she would sell the property to the plaintiff on terms that the plaintiff would pay a deposit and enter into a formal ‘must buy and must sell’ agreement within three months with completion within a further three months. Deputy High Court Judge Chu (as she then was) held that the agreement was void for uncertainty as it was impossible to ascertain a definite date on which the litigation would end or when the landlord would obtain title and hence there was lack of certainty as to the completion date. 83.Though when litigation would end is as much an uncertainty as the mother’s death, each case depends on its own facts. It also appears to me that the absence of a concluded agreement is very obvious in Tam King Hang because what the parties agreed was an agreement to enter into a sale and purchase agreement. It was only an agreement to agree. The present case is clearly distinguishable from Tam King Hang in that the mother’s death is a certainty, whereas the vendor’s obtaining judgment is an uncertainty, not only in terms of time, but also in terms of eventuality. The present case is not a case of a total absence of essential completion provision. The parties agreed that they shall process transfer of the Property to the Plaintiff after the mother died. Though no exact completion date has been specified, an identifiable event certain to take place in future was agreed. Given the background of the sale, in particular that the Property was renovated for letting out purpose, that the Plaintiff is entitled to rental income from the Property and that the sale was one between closed members of the family, the precise date of completion is not of importance and time is not of essence of the agreement. It can be readily implied that completion will take place within a reasonable time of the mother’s death. 84.As for payment of the balance of the purchase price and the date of payment, such provision could be readily implied. These must necessarily take place on completion with payment against delivery of title deeds of the Property. As for vacant possession or otherwise, there is no dispute that the Property had all along been held as a rental property. It was renovated for letting out purpose. It goes without saying that this state of affair will continue until the mother’s death when completion would take place. It must be implied that the sale is subject to any tenancy if existing, otherwise it would be with vacant possession. Vacant possession or otherwise is not a term of the Oral Agreement. There is no issue of uncertainty whether in the terms of the Oral Agreement as varied in June 2006 or the Memorandum. Whether the Memorandum corresponds to the Oral Agreement 85.Next, Mr Lau refers to Kwan Siu Man[15] in which Litton PJ said that for an oral contract for sale and purchase of property “to be legally enforceable, there must be a memorandum evidencing the contract and nothing else”. He submits that as the two paragraphs in the Memorandum do not correspond to the three pleaded terms in the Oral Agreement, the Memorandum does not meet the requirement of section 3. He then sets out to compare the three terms of the Oral Agreement as pleaded with the two paragraphs in the Memorandum. For convenience, the three pleaded terms of the Oral Agreement are reproduced hereunder:
It should be noted that on my finding, there are only two terms under the Oral Agreement entered in May 2006, ie the first and third pleaded terms. The second pleaded term is not part of the Oral Agreement. 86.Mr Lau argues that transfer of “all of his interest in the Property” under the first term of Oral Agreement as pleaded is not reflected in the first paragraph of the Memorandum which only refers to the sale and purchase of the Property. He submits that because at the material time the Property was held by the Defendant and the mother under a joint tenancy, it is unclear as to what the Defendant was actually selling, whether he was selling his half share in the interest by severing the joint tenancy or the entire interest. This is a matter of construction of the Oral Agreement and the Memorandum. 87.The Oral Agreement has to be construed as a whole. By agreeing that “the transfer of the Property shall be processed after the decease of the mother” under the third pleaded term, it is obvious that the intention of the parties was to transfer the entire interest of the Property which the Defendant would be entitled to as result of the death of the mother. Thus, “all his interest in the Property” under the first pleaded term means the entire interest in the Property which the Defendant would acquire upon the mother’s death. 88.A similar conclusion can also be reached by reading the Memorandum as a whole. The interest in the “building unit” to be sold under the first paragraph of the Memorandum must be the same interest to be transferred by the Defendant after the mother’s death when he would become the “independent owner” under the second paragraph of the Memorandum. As the Property was held in joint names, upon the mother’s death, the Defendant would acquire the entire interest in the Property. Thus, it is all too obvious that the “building unit” to be sold under the first paragraph of the Memorandum means the entire interest in the Property which the Defendant would acquire upon the mother’s death. 89.Thus, in the factual context that the Property was held in joint names and upon the mother’s death the Defendant would become the owner of the entire interest in the Property, however one reads the Memorandum and the terms of the Oral Agreement, the inescapable conclusion is that the subject matter of sale under the two documents is the same, ie the entire interest in the Property which the Defendant would acquire upon the mother’s death. I am therefore well satisfied that the first term of the Oral Agreement as pleaded is in substance evidenced by the first and second paragraphs of the Memorandum read together. 90.There is no dispute that the second term of the Oral Agreement as pleaded does not appear in the Memorandum. But on my finding, despite the pleading, that term is not part of the agreement for sale and purchase of the Property. It is a separate agreement. I have also found on the true construction of that term, the word “deposit” does not mean security payment in the context of an agreement for sale and purchase of property which is deductible from the purchase price. That this second pleaded term is not evidenced in the Memorandum is not fatal to the Plaintiff’s claim. 91.In respect of the third term of the Oral Agreement, Mr Lau’s argument is that its content is not the same as that of the second paragraph of the Memorandum. The third term of the Oral Agreement states that the legal procedures for the transfer of the Property shall be processed after the death of the mother. In substance, this is the same as the second paragraph of the Memorandum, except that the Memorandum added reference to the Defendant becoming the “independent owner” of the Property after the mother’s death and used the phrase “formal legal procedures” instead of “relevant legal procedures” in relation to completion. For reasons as given in paragraphs 86 to 89, the Defendant’s interest as “independent owner” upon the mother’s death is nothing more and nothing less than all of the Defendant’s interest in the Property after the decease of the mother. In the context of a property transaction, “relevant legal procedures” cannot mean anything other than “formal legal procedures”. There is no substance in Mr Lau’s argument based on the use of the terms “formal legal procedures” and “independent owner” in the Memorandum and their absence in the Oral Agreement. I am satisfied that this term of the Oral Agreement is also evidenced in the Memorandum. 92.Next, Mr Lau argues that the reference to receipt of a deposit of $30,000 in the second paragraph of the Memorandum is something which is not mentioned in the Oral Agreement as pleaded. That is correct, however, the payment has been pleaded and is in the evidence. On my finding, this term about payment of deposit was agreed during the negotiation in June 2006 and formed part of the Oral Agreement as varied in June 2006. The obligation was performed by the Plaintiff on 29 July 2006. What appeared in the Memorandum is an acknowledgment of receipt of this payment. Thus, while the term as to payment of deposit has not been expressly pleaded as a term of the Oral Agreement entered in May 2006, the fact of the payment of deposit has been pleaded and is not in dispute. In paragraphs 67 to 69, I have explained that I shall deem the Plaintiff’s claim to be based on the Oral Agreement as varied in June 2006. Even if the statement of claim were to be amended to reflect this term and the fact of payment of the deposit pursuant to this term, it would make no difference to the defence. On the state of evidence, the Defendant could only deny the variation which he has already done and make an admission of receipt of the cheque which he has no dispute. Nothing significant to the defence could turn on this particular term. Despite the omission in the pleading, I do not consider it necessary to require an amendment to the statement of claim. To require an amendment at this stage would be contrary to the underlying objectives of Order 1A. With or without the amendment, this court is able to secure the just resolution of the disputes in accordance with the substantive rights of the parties. Insofar as it is a term of the Oral Agreement as varied in June 2006, the payment of the deposit is properly evidenced in the Memorandum. 93.Mr Lau’s attack on the Memorandum is premised on the Plaintiff’s case being founded on the Oral Agreement entered in May 2006. His argument is that the reference to the receipt in the second paragraph of the Memorandum offends the principle that a memorandum should contain only the terms of the agreement and “nothing else”. As I am treating the Plaintiff’s claim as being founded on the Oral Agreement as varied in June 2006, that argument is rendered irrelevant. I shall nevertheless deal with it to show that that argument cannot succeed even if I were to treat the Plaintiff’s claim as being founded on the Oral Agreement entered in May 2006. 94.Mr Lau’s argument is premised on his reading of Litton PJ’s dicta quoted above as meaning nothing else whatever other than the terms of the oral agreement may be included in the memorandum; and if the memorandum includes anything else, it is a bad memorandum. If that is the way he construes the dicta of Litton PJ, I would respectfully disagree. What Litton PJ said in Kwan Siu Man should be read in its entire context. His Lordship said[16]:
95.A memorandum in writing within the meaning of section 3 could not have been a written contract containing only the terms of that contract, otherwise there would be no need to enact all these statutory provisions to save an oral agreement. A memorandum includes letters[17], notes, diary[18], company’s minute book[19], auctioneer’s book[20], receipt[21], recital in a will[22], or anything of the sort which contains evidence of the terms of the oral agreement. These documents invariably contain reference to facts other than terms of the oral agreement in issue. There is no reason to doubt that Litton PJ did not have in mind these well established authorities. It would not be difficult to appreciate that the phrase “a memorandum evidencing the contract and nothing else” was used by Litton PJ in the context of certainty in the terms of the oral agreement and that the words “nothing else” meant terms which were not agreed under the oral agreement reached during the parties’ discussion at the lift lobby. In that context, what his Lordship was saying was that a memorandum should only contain evidence of the terms of the oral agreement and not other terms which do not form part of that oral agreement. His Lordship could not have meant that the memorandum may not contain literarily anything else, having regard to the variety in the nature of the documents which could constitute such a memorandum. 96.In the present case, the terms of the Oral Agreement entered into in May 2006 are about parties, the Property, the price and completion after the mother’s death. There was no term about payment of deposit. There was no obligation to pay a deposit under the Oral Agreement as entered in May 2006. The reference to the receipt in the Memorandum is just an acknowledgment of receipt. It is a statement of fact and not a statement of a term of the agreement. It does not fall within the term “nothing else” of Litton PJ’s dictum. If a written receipt in the cases I quoted above can constitute a memorandum, I am unable to see why an acknowledgement of receipt of a deposit paid and received at or about the time of the making of the Oral Agreement would render the memorandum ineffective. 97.For the above reasons, I am satisfied that Memorandum is a sufficient memorandum evidencing the Oral Agreement whether on terms as entered into in May 2006 or as varied in June 2006. The Oral Agreement in either version is legally enforceable. Undue influence 98.The parties have no dispute about the legal principles on undue influence applicable to the present case. A useful summary of these principles can be found in Snell’s Equity[23]. The burden is on the party seeking to set aside a transaction as having been obtained by undue influence to prove affirmatively that the wrongdoer exerted illegitimate pressure on him to cause him to enter into the impugned transaction. See: Bank of China (Hong Kong) Ltd v Wong King Sing[24]. The basis of this relief is not that the person subject to undue influence did not intend the impugned transaction, but how that intention was produced. The essential question is whether the weight and nature of the influence is so great that the consent to a particular transaction obtained from that person ought fairly not be treated as the expression of his free will. It is impossible to provide a precise test as to when the line is crossed between permissible and impermissible influence. All the circumstances must be taken into account. Previously, it had been common to divide cases of undue influence into categories and sub-categories, but the attempt to build up classes or categories may lead to confusion. 99.Undue influence consists of acts of a very wide spectrum. At one end of the spectrum is the product of specific threats or acts of coercion or breach of fiduciary duty by a person in dominant position exerting influence on the fiduciary to whom duty is owed and taking advantage of his known susceptibility by persuading him to act in a way that benefits the dominant party and contrary to the best interest of the fiduciary. At the other end of the spectrum is the more subtle influence arising out of a relationship of dependency or submission. The court must take account of all circumstances of the case, including the nature of the alleged undue influence, the personality of the parties, their relationship and the extent to which the transaction cannot readily be accounted for by the ordinary motives of ordinary person in that relationship. A relationship of influence can be established by proof that one placed trust and confidence in the other in relation to management of his financial affairs, but it would be a mistake to think that one must prove such trust and confidence existed specifically in relation to financial affairs or that the only relevant relationship are ones of trust and confidence. The question is one of influence, and a relationship of influence may be proved by, for example, a party’s dependency on the dominant party or his vulnerability. The existence of a relationship of influence shows that it is possible that one was subject to undue influence of the other when entering into a particular transaction. A presumption of undue influence will arise only if, in relation to that specific transaction, there is something more which calls for an explanation. Although sibling relationship is not a special class of established relationship of influence, it is still open to a party allegedly subjected to undue influence to prove a relationship of influence outside the special classes. 100.The Defendant relies on the sibling relationship and sale at gross under-value as the basis of his defence of undue influence. Mr Lau argues that the Defendant’s relationship with the Plaintiff is not as simple as two independent sibling families. He submits that there is plenty of evidence that the Defendant relied on the Plaintiff in managing the Property, taking care of all rental business including renewal and termination of tenancies of the Property. He was never involved in the management of the Property and relied on the Plaintiff from 2003 till April 2006 to handle issues in relation to the Property. He never received the rental income. Mr Lau emphasises on that dependency by referring to the Plaintiff’s evidence that when she returned the key to the Defendant, the Defendant still asked her to continue to look after the Property. 101.On the facts, the Plaintiff had been managing the Property for their father since 1995. After the father’s death, she continued to manage the Property on behalf of the mother as administratrix until March 2005 when the Defendant and mother became joint owners of the Property. Then she continued to manage the Property on behalf of the mother and the Defendant. All along, she collected rent and transferred them to the mother as her maintenance. This must be done with the consent of the family or the Defendant for the benefit of the mother at the relevant times. It was a service to the mother and not to the Defendant. Against that background, the Defendant may validly argue that he relied on the Plaintiff as to the choice of tenant, the amount of rent or the type of renovation work required or choice of renovation contractor. But these are beside the point. The Defendant was an adult and more senior in age and more experienced in life than the Plaintiff. There is nothing to suggest that he was under any mental disability at the material time. I am unable to attach any reliance or dependence on the Plaintiff by the Defendant which would materially affect or influence his decision to sell the Property to her at a gross under value. 102.Mr Lau argues that there is evidence showing the Defendant’s dominance over the Plaintiff. He refers to the Defendant’s education being only up to primary school level as compared with the Plaintiff who studied in the United States and was able to conduct the proceedings up till the close of the pleadings. He refers to the daughter’s evidence that the Defendant was afraid of the Plaintiff and always listened to the Plaintiff（好聽姑姐話）and that the Defendant told her that the Plaintiff was very fierce（姑姐好惡）. But it is not the daughter’s evidence that according to her experience the Plaintiff was fierce. On the state of the evidence, it is difficult to place much weight on what the daughter said about the Defendant’s subjective feeling. 103.Mr Lau argues that the Plaintiff has the motive for abusing her dominance over the Defendant, especially given the Defendant’s personality and vulnerability. He refers to the Defendant’s employment as a driver and later as a security guard and the fact that his memory started to deteriorate in 2004. I do not think there is any objective evidence in support of Mr Lau’s submission. The Defendant’s employment is not anything to be taken in the Defendant’s favour or against the Plaintiff. As for his alleged mental disability, there is no medical evidence that his memory was deteriorating in 2006. He was still in active employment then. He knew how to improve his position under the bargain by demanding for full payment. The evidence of deterioration in his mental ability only surfaced in October 2012, more than six years later. Until shortly before the appointment of the guardian ad litem, the Defendant was able to give instructions to his solicitors regarding the conduct of the defence. There is nothing to suggest that the Defendant was under a disability or of weak personality or was vulnerable to influence at the time of the making of the Oral Agreement. 104.As for Mr Lau’s argument about the Plaintiff’s motive in abusing her dominance over the Defendant, it is speculative to the extreme. The basis of his argument is that the Plaintiff and the mother used to live together in the roof top accommodation, she assisted the mother in taking care of the Property and collecting rent; there was a possibility that the father’s ex-employer would evict the Plaintiff from the roof top accommodation; the Plaintiff was in ready position to speak of the conditions of the Property while the Defendant has no experience in managing it; and she was aware of the Defendant’s weakness in not being able to sell the Property without the mother’s consent. The thrust of Mr Lau’s argument is that given the above background, it is not difficult for the Plaintiff to use her eviction as an excuse to influence the Defendant and to take advantage of the Defendant’s weakness in not being able to sell the Property without the mother’s consent to put undue pressure on him. Even if it would be easy for the Plaintiff to deploy that excuse and even if the Defendant would find it difficult to sell the Property without the consent of the mother, the question remains whether the inference could be reasonably drawn that therefore the Plaintiff did deploy that excuse and abuse her dominance over the Defendant and the Defendant submitted to that influence. On the state of the evidence, my answer is an emphatic “no”. According to the Plaintiff, it was the Defendant who offered to sell the Property to her out of his concern for her well-being. 105.Mr Lau argues that the transaction appeared to be done very secretly, which is a hallmark of undue influence. That allegation was denied by the Plaintiff. According to the Plaintiff, and there is no evidence to the contrary, the discussions about the sale of the Property were held after dinner and after the Defendant’s wife had finished washing the dishes and was free to engage in the discussions. The wife was not called to rebut the Plaintiff’s evidence. There was no evidence from the daughter, who was an adult of 30 years of age at the material time, that she had been deliberately excluded from any discussions between the Plaintiff and the Defendant. According to the Plaintiff, she had asked the Defendant if he had consulted his family members about the sale and if he and his wife realised that the price was very much below market price. I think there is no substance in Mr Lau’s suggestion that the sale was secretive as to raise any inference of undue influence. 106.The strongest of the Defendant’s argument is that the sale was at a gross under value. That is not disputed. But the mere fact that the sale was at a gross under value per se does not in itself invoke the doctrine of undue influence. It is only one of the circumstances to be taken into account. On the facts, the Plaintiff has offered an explanation. The Defendant had never liked the Property, had never attended to it or managed it, and could not sell it without the mother’s consent. He was suddenly faced with the reality that he had to look after the Property and to make a substantial upfront payment for its renovation. It was against that background and his concern for the precarious situation of the Plaintiff regarding her roof top accommodation that he offered to sell the Property to her. I have analysed the issue of the absence of a need or motive to sell the Property at a low price in paragraphs 34 to 36 above. The explanation offered by the Plaintiff is not an implausible explanation. 107.In conclusion, I am unable to draw any inference that the Oral Agreement was procured by undue influence exercised on the Defendant by the Plaintiff. Conclusion 108.The Defendant became the joint owner of the Property with the mother as result of the family arrangement. He never liked the Property because of its old and dilapidated condition and had never attended to its management. The Property had all along been managed by the Plaintiff. All rental income collected from the Property was paid over to the mother as her maintenance. In April 2006, after the last tenant moved out of the Property, the Plaintiff returned the key of the Property to the Defendant and declined to manage the Property because of her health condition. The Property was in a dilapidated condition and required renovation. Faced with the reality of having to manage the Property and to incur substantial payment for its renovation and partly out of his concern for the precarious situation the Plaintiff was in as regards her own accommodation needs, he offered to sell the Property to the Plaintiff. After having obtained the mother’s consent to the sale, the Plaintiff and the Defendant entered into the Oral Agreement in May 2006 for the sale and purchase of the Property. At the same time, they also entered into a separate agreement that the Plaintiff would provide funds for the renovation of the Property and then be entitled to its rental income. 109.The Oral Agreement was grossly disadvantageous to the Defendant. Apart from the fact that the sale was at gross under value, there was no provision as to when he would receive the price, and the Defendant was not entitled to receive rental income before completion of the sale and purchase. The parties then agreed to a variation of the Oral Agreement so that the Defendant was given a deposit of $30,000, while the other terms of the Oral Agreement remain unchanged. The agreement as varied is still grossly disadvantageous to the Defendant. After the mother’s death about a year later when completion was called for, the Defendant regretted his generosity and refused to complete the sale and purchase. The parties were in deadlock. After the tenant left, the Plaintiff could not lease out the Property without the Defendant’s authorisation and suffered loss in rental income. The parties ended in litigation. 110.The court has great sympathy for the Plaintiff for her loss of expectation of a good bargain and rental income. It also has no less sympathy for the Defendant for having made a very bad bargain out of love and concern for his younger sister. The Defendant’s regret for his generosity is understandable in view of the sale at gross under value which is exacerbated by a rocketing of property price in the urban area soon afterwards. As is not unusual, the path to litigation is paved with good intention. However, the court has to adjudicate in accordance with the substantive rights of the parties. 111.Having found that the Oral Agreement is a sufficient agreement for the sale and purchase of the Property evidenced by the Memorandum and has not been vitiated by undue influence, the Plaintiff is entitled to specific performance. In the alternative, the Memorandum on its own is a sufficient written agreement for sale and purchase of the Property. If the agreement is performed, there will be no need for the declaration sought. On the other hand, there are questions of the outstanding balance of the purchase price and damages. Accordingly, I enter judgment for the Plaintiff in respect of her claim for specific performance and invite the parties to seek directions for that purpose and for assessment of damages.
Ms Debora S Y Poon, instructed by Messrs Hobson & Ma, assigned by Director of Legal Aid, for the Plaintiff Mr Roy K Y Lau, instructed by Messrs Lee & So, assigned by Director of Legal Aid, for the Defendant [1] [1998] 1 WLR 896 at 912-913 [2] (1874) LR 9 QB 210 at 214 [3] [1948] 1 KB 535 [4] (1878) 8 Ch D 467 [5] (1946) 174 LT 324 [6] [1947] Ch 645 [7] [1951] Ch 383 [8] (1997-98) 1 HKCFAR 343 [9] Supra, at 355C-D [10] Supra, at 360E-F [11] Supra, at 362I to 3363C [12] [1992] Ch 1 (CA) 12 [13] [2010] 3 HKLRD 247, at 259, para 40 [14] HCA 490/2011, 16 April 2014 [15] at 360G [16] at 360G [17] See: Gibson v Holland (1865) LR 1 CP 1 [18] Re Hoyle [1893] 1 Ch 84 at 99; [19] Jones v Victoria Graving Dock Co (1877) 2 QBD 314 [20] Cohen v Roche [1927] 1 KB 169 [21] Evans v Prothero (1852) 1 De GM & G 572; Boun v Stroud (1870) 21 LT 695; Auerbach v Nelson [1919] 2 Ch 383 [22] Re Hoyle, supra [23] 33rd Ed [24] [2002] 1 HKLRD 358 at para 37-38, per Recorder Ma SC (as he then was) |
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