Leung Wai Ming v. Chan Yuk Ming and Another

HCA 1980/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1980 OF 2012

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(By Original Action)

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(By Counterclaim)

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J U D G M E N T

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Findings of relevant background facts

1.Leung Wai Ming (梁偉明) is the plaintiff in the original action and the 1^st defendant in the counterclaim (“the plaintiff”).

2.Chan Yuk Ming (陳玉明) is the 1^st defendant in the original action and the 1^st plaintiff in the counterclaim (“1^st defendant”).

3.Lui David (呂大衛) is the 2^nd defendant in the original action and the 2^nd plaintiff in the counterclaim (“2^nd defendant”).

4.Leung Wai Yin Glynson (梁偉賢) is the 2^nd defendant in the counterclaim (“the Brother”).  He is an elder brother of the plaintiff.

5.Leung Cho Yeung (梁灶養) is the 3^rd defendant in the counterclaim (“the Father”).  He is the father of the plaintiff.

6.This Action is about Lot No 742 in DD No 230, Sai Kung (“the Lot”) and the house to be constructed and built thereon.

7.The plaintiff alleged that there was a loan agreement (“Loan Agreement”).  The defendants alleged that there was a sale and purchase agreement of the House, yet to be constructed and built on the Lot (“Sale and Purchase Agreement”).

8.The plaintiff was born on 1 December 1964.  He would not reach the age of majority[1] until 1 December 1985.

9.(1) By New Grant No 6902 dated 22 May 1985, the Lot was granted to the plaintiff with the Father as the Trustee at the premium of $7,120 and annual rental of $20.

(2) General Condition clause 4(a) required the grantee to develop the lot by the erection on the Lot of a building within 30 months at a cost of not less than $45,000.

(3) Clauses 2 and 4 of the Special Conditions are non-alienation clauses.

(4) Clause 5(b) of the Special Conditions provides that:

“ The grantee … shall not, except with the prior written consent of the District Lands Officer and on such conditions as may be imposed by him (including the payment of such fee as may be required by him) assign, mortgage, charge, underlet (other than at a rack rent without taking a fine and for a term not exceeding five years without any option for renewal), part with the possession of the lot or any part thereof or any building or buildings thereon or any interest therein or enter into any agreement so to do and then only in favour of

(i) …

(ii) any person other than a person referred to sub-clause (b)(i) of this Special Condition subject always to the payment by the grantee to the Government of Hong Kong of an addition premium equivalent to the difference between the amount of premium (if any) paid by the grantee to the Government at the date of this grant and the full market value of thee lot at the date of the application to the said District Lands Officer for consent …

10.On 1 December 1985, the plaintiff became an adult.

11.On 28 September 1987, the construction of a house (“House”) on the Lot had been completed and the Certificate of Compliance was issued to the plaintiff.

12.By a Vesting Assignment dated 15 May 1989, the Father assigned the Lot to the plaintiff.

13.From 1988 to 1993, the plaintiff studied in Australia.

14.Sometime in 1993, the occupier of the 2^nd floor and the roof of the House, Chan Hung Kei (陳鴻基) (“Chan”) vacated the 2^nd floor and the roof and the plaintiff obtained possession of the 2^nd floor and the roof.

15.On 16 May 2011, the District Lands Officer assessed the additional premium payable for a modification of Special Conditions 2, 3, 4 and 5 at $5,630,800.

16.By letters dated 22 May 2012, from Messrs C K Mok & Co (the plaintiff’s then solicitors) to the 1^st and 2^nd defendants, Messrs C K Mok & Co, gave “notice of termination of [their] licence to occupy” and that the 1^st and 2^nd defendants:

“ are required to quit and deliver up vacant possession of the captioned premises to [the plaintiff] within one month from the date of this letter or latest on the 15^th day of June2012 [emphasis added] …

Our client would repay the outstanding loan of HK$130,000.00 to you upon delivery of vacant possession of the captioned premises …”

17.By letter dated 18 September 2012 from Messrs C K Mok & Co to Messrs T C Lau & Co, the defendants’ then solicitors, Messrs C K Mok & Co enclosed the following cheques:

(1) drawn by the plaintiff in favour of the 1^st defendant in the sum of $130,000; and

(2) drawn by the plaintiff in favour of the 2^nd defendant in the sum of $130,000.

18.Under cover of their letter dated 20 September 2012, Messrs T C Lau & Co returned the 2 cheques alleging that:

“ the assertion of loans is a fabrication on the part of [the plaintiff]. The amount of the cheques were payments for the acquisition of the subject premises.”

The action — dismissal

19.The plaintiff issued the writ against the 1^st and 2^nd defendants on 24 October 2012.

20.By §3 of the Amended Statement of Claim, the plaintiff alleged the following agreement:

“ Upon the said approval of the land grant and the said land lot being set out on the ground an oral agreement was made between:-

(a) the plaintiffs elder brother, Leung Wai Yin, Glynson (梁偉賢), in his capacity as the agent of the plaintiff’s father, the guardian of the plaintiff during the latter’s minority; and

(b) one Chan Hung Kei (陳鴻基) for and on behalf of himself and the 1^st and 2^nd defendants:

and in consideration of a loan of $390,000 to be advanced by the said Chan and by each of the defendants, to the plaintiff for the express purpose of enabling the latter to build and construct a village type house on the said land lot, the plaintiff’s father, through the plaintiff’s said elder brother and for and on behalf of the plaintiff, agreed to allow the said Chan, the 1^st defendant and the 2^nd defendant to use (i) the 2^nd Floor and Roof, (ii) the 1^st Floor, and (iii) the Ground Floor of a village type house to be built and constructed thereat respectively, rent-free until each of the said loans was repaid (hereinafter called ‘the loan agreement’).” (emphasis added)

21.It is plain that the plaintiff’s pleaded case is obviously unsustainable and is bound to fail, irrespective of how the numerous issues raised by the parties are resolved.  The decisive reasons are:

(1) The permission to use the Ground and 1^st Floors “rent-free” would last “until each of the said loans was repaid”.  The plaintiff could not revoke the licence to occupy before “each of the said loans was repaid”.  Thus the plaintiff was not entitled to give “notice of termination” on 22 May 2012 without repayment or tender of repayment.  There was neither repayment nor tender of repayment by 22 May 2012.

(2) In any event, the 22 May 2012 notice of termination gave 2 inconsistent dates and was invalid for this reason.  The notice of termination required delivery up of vacant possession “within one month from the date of this letter or latest on the 15th day of June 2012”. 22 June 2012 was “one month from the date of this letter”.  Thus, it is confusing to give 2 inconsistent dates, ie 15 June 2012 and 22 June 2012.

(3) The purported tender by cheques sent under cover of by letter dated 18 September 2012 was clearly invalid.  As Hunter JA said in Camberra Investment Limited v Chan Wai Tak, CACV 75/1988, 13 December 1988:

“ The plaintiff tried to tender and failed. The cheque constituted at most conditional payment and not the full payment required. An effective tender required cash or its equivalent, neither of which was available that Saturday afternoon.” (emphasis added)

Dismissal of the original action

22.In my judgment, the plaintiff’s original action fails and will be dismissed.

The counterclaim — dismissal

23.I turn now to the counterclaim.

24.The counterclaim is intellectually challenging. It alleges representations and then an agreement of sale and purchase.  It counterclaims damages for breaches of warranty of authority, assurance and/or misrepresentation and seeks various declarations.  The counterclaim is, with respect, convoluted and displays confusion in thought and misunderstanding of various legal concepts.

25.So far as breach of agreement is concerned, it is clear from the defendants’ pleaded case and evidence that:

(1) the agreement was made by Chan and the 2^nd defendant on the one part, and

(2) transfer of legal title to the House was “subject to the payment of premium as required by the Government and that to “effect such transfer, the 1^st defendant, the 2^nd defendant and [Chan] would be responsible for the payment of the said premium”.

(3) The defendants’ pleaded case in the Re-Amended Defence and Counterclaim of the defendants (“Counterclaim”) contains the following allegations, emphasis added:

(i) “…the 1^st defendant had suggested that [Chan] (ie a common friend of the 1^st defendant and [the Brother]) and [the 2^nd defendant] could jointly acquire the said small village house so that each could use and occupy each floor of the said house” — §6 of the Counterclaim.

(ii) “After the 1^st defendant, the 2^nd defendant and [Chan] had been living in the said small village house for over several years (ie about 5 years), the plaintiff would transfer the legal title of the said small village house to them upon their demand, and subject to the payment of premium as required by the Government” — §9(i) of the Counterclaim.

(iii) “To effect such transfer, the 1^st defendant, the 2^nd defendant and [Chan] would be responsible for the payment of the said premium” - §9(j) of the Counterclaim.

(iv) “… Hence an agreement was reached on the sale and purchase of the 2^nd Floor, the 1^st Floor and G/F of the house on such terms as pleaded above between the plaintiff, [Chan], the 1^st defendant and the 2^nd defendant” — §10 of the Counterclaim.

(v) “… pursuant to the agreement as pleaded in paragraph 10 above” - §11 of the Counterclaim.

(vi) The 1^st defendant gave evidence to the effect that at the end of 1984, the Brother and the Father and the 3 of them reached agreement - §12 of the 1^st defendant’s witness statement.

Absence of Chan as a party

26.According to §6 of the Counterclaim, the Sale and Purchase Agreement was made by Chan and the 2^nd defendant jointly, but not the 1^st defendant who was mentioned as a friend of Chan. According to §10 of the Counterclaim, the Sale and Purchase Agreement was made by the defendants and Chan with the plaintiff.

27.In any event, as the agreement was made by Chan and one or both defendants jointly, the question whether Chan was a necessary party arises.  I asked Mr Simon Lam whether the 1^st and 2^nd defendants could sue in their names alone without joining Chan.  Mr Simon Lam did not give any satisfactory answer and did not cite any authorities.  He made no attempt to argue that the Counterclaim could continue in the absence of Chan.   

28.Chan must be joined as a party.  The law on this point is stated in §15/4/2 of Hong Kong Civil Procedure 2017 as follows:

“ where two or more persons are entitled to any relief jointly, as where a contract is made with several persons jointly, all such persons must join the action as plaintiffs, or if any of them will not join as plaintiff, he must be made a defendant. The defendant may apply to compel the plaintiff to join his co-contractors either as a co-plaintiff, if he consents, or co-defendant, if he does not, and such application will usually be allowed, if the proposed new party is alive and within the jurisdiction (Pilly v Robinson (1987) 20 Q.B.D. 155, following Kendall v Hamilton (1879) 4 App. Cas. 504).”

29.The Counterclaim is not properly constituted for want of a necessary party.

Plaintiff a minor at the time of the Sale and Purchase Agreement

30.The Counterclaim and the defendants’ witness statements are conspicuous in the absence of any allegation of time.  By §12 of his witness statement, the 1^st defendant alleged that the Brother and the Father and the 3 of them reached a bilateral agreement.  In answer to a question by the court, the 1^st defendant said it was at the end of 1984.

31.The plaintiff who was born on 1 December 1964 was a minor at the end of 1984.

32.The Sale and Purchase Agreement was not binding on the plaintiff who was then a minor.

33.There is no allegation, whether in the Counterclaim or in any of the defendants’ witness statements of any ratification by the plaintiff of the Sale and Purchase Agreement on attaining majority, whether within a reasonable time on attaining majority or at all,

34.Incidentally, but as a separate point, according to §12 of the witness statement of the 1^st defendant which read as follows, the plaintiff was not alleged to be a party to the Sale and Purchase Agreement:

“這樣，梁偉賢和梁灶養和我們三人雙方達成協定…”

35.The above are decisive reasons why the Sale and Purchase Agreement was not binding on the plaintiff. 

Note or Memorandum

36.Section 3(1) of the Conveyancing and Property Ordinance provides that:

“ Subject to section 6(2), 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 other 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.”

37.The Sale and Purchase Agreement is not alleged to be in writing and no note or memorandum thereof is alleged.  There is no allegation on how the Sale and Purchase Agreement is binding on or enforceable against the plaintiff.

38.That is another reason why the counterclaim on the Sale and Purchase Agreement fails.

Payment of premium as required by the Government

39.According to §9(i) and §9(j) of the Counterclaim, any transfer of legal title by the plaintiff was “subject to the payment of premium as required by the Government” and “1^st defendant, the 2^nd defendant and [Chan] would be responsible for the payment of the said premium”.  “Premium” means the whole of the premium as required by the Government.  There is no provision for apportionment of the premium among the 3 floors of the House.  The defendants have not paid the premium as required by the Government.  Nor have they tendered payment.  This is another fatal objection against the defendants’ counterclaim premised upon the Sale and Purchase Agreement.

Other claims in the Counterclaim

40.At the trial, the defendants abandoned their counterclaim based on representations.

41.There was no allegation of any warranty of authority or assurance and more importantly, the plaintiff had never disclaimed any authority of or assurance of the Brother and the Father.  The dispute was on whether it was a loan agreement or a sale and purchase agreement.  Authority was never in issue.  The defendants’ counterclaim on breach of warranty of authority or assurance is wholly misconceived and fails in limine.

42.The defendants have not made out any case for any of the Declarations sought.

Dismissal of the counterclaim

43.In my judgment, the defendants’ counterclaim fails and will  be dismissed.

Orders made

44.(1) I dismiss the plaintiff’s original action.

(2) I dismiss the defendants’ counterclaim.

(3) I make an order nisi under Order 42, rule 5B(6) of the Rules of the High Court, Cap 4A, that the defendants’ costs of the original action be taxed (if not agreed) and paid by the plaintiff.

(4) I make an order nisi under Order 42, rule 5B(6) of the Rules of the High Court, Cap 4A, that the costs of the plaintiff, the Brother and the Father in the Counterclaim be taxed (if not agreed) and paid by the defendants.

Mr K M Chong and Ms Yvonne Yip, instructed by Yung, Yu, Yuen & Co, for the plaintiff (by original action) and the 1^st defendant (by counterclaim)

Mr Simon Lam, instructed by Ha & Ho, for the 1^st and 2^nd defendants (by original action) and the 1^st and 2^nd plaintiffs (by counterclaim)

Mr Aidan Tam, instructed by C O Chan & Co, for the 2^nd and 3^rd defendants (by counterclaim)