Tin Wan Tung v. Wong See Yin and Others
Read the full judgment text of HCA 167/2011 on BabelCite. This High Court CFI judgment was delivered on 25 May 2018.
1. At the trial, Mr Michael Liu appeared for Mr Tin Wan Tung (田運棟) (“ Tin ”), the plaintiff in HCA 167/2011. Mr Jeremy Cheung appeared for Full Pacific Development Limited (富廣發展有限公司) (“ Full Pacific ”), the plaintiff in HCA 1801/2010. The 1 st defendant in both actions, Mr Wong See Yin (黃斯彥) (“ Wong ”) appeared in person. The Provisional and Joint Liquidators of Matrix Wealth Limited (宏策有限公司) (“ Matrix Wealth ”), the 2 nd defendant in both actions, and the Official Receiver on behalf of Fully
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[2018] HKCFI 1143 HCA 167/2011 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO 167 OF 2011 ___________________
___________________ AND HCA 1801/2010 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO 1801 OF 2010 ___________________
Before: Hon Wilson Chan J in Court Dates of Hearing: 9 to 12, 15 to 19, 22 to 26 and 29 January 2018; 6 April 2018 Date of Judgment: 25 May 2018 ___________________ J U D G M E N T ___________________ A. INTRODUCTION 1.At the trial, Mr Michael Liu appeared for Mr Tin Wan Tung (田運棟) (“Tin”), the plaintiff in HCA 167/2011. Mr Jeremy Cheung appeared for Full Pacific Development Limited (富廣發展有限公司) (“Full Pacific”), the plaintiff in HCA 1801/2010. The 1st defendant in both actions, Mr Wong See Yin (黃斯彥) (“Wong”) appeared in person. The Provisional and Joint Liquidators of Matrix Wealth Limited (宏策有限公司) (“Matrix Wealth”), the 2nd defendant in both actions, and the Official Receiver on behalf of Fully Fortune (Asia) Limited (富豐(亞洲)有限公司) (“Fully Fortune”), the 3rd defendant in both actions, confirmed that they would not participate in nor defend these proceedings. B. THE PARTIES AND OTHER RELEVANT PERSONS/ENTITIES 2.The following persons and companies have featured prominently during the course of the trial: –
C. SUMMARY OF THE PLAINTIFFS’ CASE 3.Tin is and was the occupier and owner of Tin’s Property, which was at all material times free of any mortgage loan encumbrances. 4.Tin’s friend, Pong, is and was the occupier of Pong’s Property. Pong’s Property was at all material times registered in the name of Full Pacific, which is a company owned and controlled by So (Pong’s wife) and Wing Shan (Pong’s daughter). Pong’s Property was at all material times free of any mortgage loan encumbrances. 5.Wong is a Certified Public Accountant. He is also a director, shareholder and the person in control of Matrix Wealth and Fully Fortune, which appear to be Wong’s shelf companies and are not entities of substance. 6.Tin came to know Wong in or about 2003 and had sought professional advice from Wong on several occasions in relation to the financing of certain construction projects of Tin and Pong in Mainland China. 7.As a result of certain false representations made to Tin and Pong by Wong fraudulently or recklessly or negligently on 3 occasions during the period between the end of December 2007 and 24 January 2008 (namely, (i) end of December 2007, (ii) on or about 9 January 2008, and (iii) on or about 24 January 2008), Tin transferred Tin’s Property and Pong also caused Full Pacific to transfer Pong’s Property to Matrix Wealth and/or Fully Fortune in around mid-March 2008 in accordance with the arrangements made and instructions given by Wong. 8.Representations made by Wong to Tin and Pong include: –
9.Tin did not receive any purchase price for the transfer of Tin’s Property, though it was stated in the relevant document that Tin sold Tin’s Property to Matrix Wealth for HK$800,000.00 and that Matrix Wealth sub-sold Tin’s Property to Fully Fortune for HK$990,000.00. Neither did Pong or Full Pacific receive any purchase price for the transfer of Pong’s Property to Matrix Wealth and/or Fully Fortune. 10.All the parties involved in the transfer of Tin’s Property and Pong’s Property were represented by the same firm of solicitors, namely Messrs Damien Shea & Co (“DSC”), as arranged by Wong. 11.Unbeknown to Tin and Pong at the material time, even before the 2 properties were transferred to Fully Fortune on 17 March 2008, Wong acting on behalf of Fully Fortune had already arranged with HSBC to borrow a mortgage loan in the sum of HK$1,600,000.00 and to set up overdraft facilities for HK$800,000.00 by using Tin’s Property and Pong’s Property as security as early as on 12 February 2008. A mortgage deed for the HSBC mortgage were subsequently signed on 13 June 2008. Later, Wong also arranged Fully Fortune to borrow mortgage loans from the Wing Lung Bank on or about 9 November 2009, and Dah Sing Bank on or about 2 August 2010, by using Tin’s Property and Pong’s Property as security whilst Tin and his family and Pong and his family continue to reside respectively in Tin’s Property and Pong’s Property until now. 12.No asset management company has been set up by Wong up to now, though unbeknown to Tin and Pong, Wong had purportedly transferred from his own name and into the name of Tin 16 shares in Matrix Wealth, which is equivalent to an 8% shareholding of Matrix Wealth, on or about 15 July 2008. Also unbeknown to Tin at the material time, on or about 20 August 2009, Wong swapped the 8% shareholding in Matrix Wealth registered under the name of Tin for an 8% shareholding in Mega City which is and was under the control of Wong. 13.In September 2008, each of Tin and Pong signed or caused to be signed a tenancy agreement in respect of each of Tin’s Property and Pong’s Property under pressure from Wong on the pretext that such tenancy agreements were for complying with accounting requirements and in order to make it easier for Wong and his companies to obtain finance for the construction projects of Tin and Pong. 14.In early December 2008, Fully Fortune claimed to be the owner of Tin’s Property and Pong’s Property and demanded Tin to pay certain alleged outstanding management fees and rent for Tin’s Property for the months of November and December 2008. Similar demand letters were sent again in April 2009 but were ignored by Tin because such demands were inconsistent with the right of Tin to occupy Tin’s Property rent free. 15.It is Tin’s and Pong’s case that the transfer of Tin’s Property and Pong’s Property were procured by fraud and/or misrepresentation on the part of the defendants (namely, Wong, Matrix Wealth and Fully Fortune) and that the consideration for the transfer of Tin’s Property and Pong’s Property have wholly failed. Further or alternatively, Wong and his two companies have been unjustly enriched by the transfer of Tin’s Property and Pong’s Property. Hence, Tin is entitled to have Tin’s Property transferred back to him, and Full Pacific is entitled to have Pong’s Property transferred back to it free from any encumbrances and at the costs of the defendants. Tin and Full Pacific also claim against the defendants for the loss and damage suffered by them. 16.It can be seen from the Statement of Claim filed in the 2 actions that Tin and Full Pacific rely on the following causes of action in their claims against Wong, Matrix Wealth and Fully Fortune: –
D. THE ISSUES 17.At the trial, the major issues to be tried between Tin and Full Pacific on the one hand and the defendants on the other include: –
E. GENERAL OBSERVATIONS OF THE WITNESSES E.1 Plaintiffs’ witnesses Tin 18.Tin is a dreamer, as accepted by Wong. As such, everything surrounds the dream of listing an “asset management company” on the Singapore Stock Exchange (“SGX”) with net asset value of HK$10 million (“AMC”). All the other minor details were irrelevant to Tin. 19.There were facts that Tin does not remember well due to the lapse of time. However, I agree that Tin did give a truthful account as to what he remembers, and his evidence as a whole should be accepted. 20.Wong attacked Tin for ‘lying’ to the Social Welfare Department about his assets in order to claim Comprehensive Social Security Assistance (“CSSA”) in order to dent Tin’s credibility. However, I agree that Tin’s answer is reasonable – Tin had in fact told the Social Welfare Department that he would report to them once the AMC was incorporated; however, no such AMC was ever incorporated. Furthermore, Wong had complained about Tin to the Social Welfare Department, and after investigation, Tin still continued to receive CSSA. Chan 21.I agree that overall, Chan is a truthful witness, and his evidence should be accepted.
Pong 22.Pong is the head of his family, and the shadow director and controller of Full Pacific, instructing Madam So, his wife, and Wing Shan, his daughter, to sign various documents on behalf of Full Pacific. 23.Pong seems to be very forthcoming and straightforward. I agree that he is a credible witness and can be relied upon when recounting events that occurred with Tin and Wong. It is noted, however, that his understanding of the transaction was somewhat different as he admits that there was a sale and purchase of Pong’s Property. So 24.Graduated from high school, Madam So has very limited English ability, and does not have much experience in business. She speaks softly and seems quite timid. From her evidence, So will do whatever Pong tells her to do – ie, to sign any document Pong tells her to sign, even when she does not understand the contents. 25.I note that some of her evidence is inconsistent, but I agree that this is probably due to lapse of time and her lack of understanding as to the significance of the events. Even so, her habit of keeping a ‘diary of events’ on her wall calendar is useful for recollecting what happened in 2007 and 2008. When Wong cross-examined her to find her birthday celebration for 2007 and 2008, So managed to easily find the relevant dates with her written notes. 26.I agree that generally, So appears to be truthful, but unfortunately, it seems that a lot of her memory has faded during these last 10 or so years. Wing Shan 27.The role Wing Shan played in the overall scheme of things was very limited, as her consistent evidence is that she signed documents on the instructions of Pong, her father, despite not fully understanding the contents. E.2 Wong 28.Wong was a defensive and evasive witness who very often would not respond directly to questions put to him. The following are some examples which show that Wong is not a credible witness: –
29.Wong also tried to flatly avoid dealing with some of the obvious evidence when it was inconvenient for him to do so. The most obvious example was when he was cross-examined on the documents contained within the conveyancing file provided by DSC (the “DSC Conveyancing File”).
30.I agree with the plaintiffs’ submissions that Wong’s evidence is often confusing, contradictory, and always changing; so little weight should be given. E.3 Wu 31.I agree that Wu’s evidence is quite unbelievable, and her evidence should not be given weight.
E.4 Tsang 32.In essence, Tsang has no independent recollection of what happened around 10 years ago. All his answers are deduced from the documents at hand. He does note that dates stated on any conveyancing documents may not mean that they were in fact signed on those dates. E.5 Cheng 33.Cheng seemed to be quite truthful as to the events recounted from his memory; however, the information in his witness statement has to be taken with a pinch of salt as it was not drafted by him. He said that he found a lawyer, who is a friend of a friend, to help him look at his witness statement so that it would look more legalistic. However, he could not remember the name of this lawyer. E.6 Hoi Yin E.6.1 Adverse inference due to Hoi Yin’s unexplained absence (i) Relevant legal principles 34.No adequate explanation has been given for the absence of Hoi Yin as a witness, and adverse inference should be drawn for matters at issue to be discussed below. 35.There is no inflexible rule that whenever a party fails to call a witness who might be expected to give material evidence on an issue adverse inference should be drawn against him. It depends on the actual circumstances of the case. [see: Ip Man Shan Henry & Anor v Ching Hing Construction Co Ltd & Ors (No 2) [2003] 1 HKC 256, [2003] HKCFI 916 at paragraph 155 per Deputy Judge Lam (as he then was), which has been applied in DBS Bank (Hong Kong) Ltd v Sit Pan Jit [2016] 5 HKC 104, [2016] HKCA 246]. 36.During trial, Wong confirmed that Hoi Yin is his younger sister. 37.On the last day of trial, Hoi Yin failed to appear to give evidence due to a “502-neck injury”, for which the doctor gave her 1-day sick leave. Originally, Wong decided not to call Hoi Yin to give evidence; however, when warned by the court about the possibility of drawing adverse inference from such decision, Wong agreed to an adjournment to the following Monday to seek further information of Hoi Yin’s injury. 38.On the following Monday, Wong provided another medical chit from another doctor stating that Hoi Yin had “head and neck injury”, giving her 5-day sick leave, and an X-Ray report. Wong continued to tell the court that he did not know anything other than the fact that Hoi Yin had hurt herself falling out of bed, and did not know the seriousness of the injury. 39.Despite given the opportunity to apply to adjourn the case to call Hoi Yin and again warned of possible adverse inference, Wong confirmed that he closed his case. 40.The circumstances surrounding the ‘disappearance’ of Hoi Yin is highly suspicious, and appropriate adverse inference should be drawn. (ii) The land registry search of Chan’s Property 41.Wu did not print out the land registry search of Tin’s Property or Chan’s Property, and neither did Wong. Thus, the question of whether Hoi Yin completed a land search of Chan’s Property and on a date as early as 8 January 2008 could only be answered by her. However, she was not called as a witness. 42.This is especially so as the document name (as a footer) of the land registry search of Tin’s Property and Pong’s Property is “file://C:\Documents and Settings\Joan\My Documents\WHYJOAN\JOAN W...”. Wu confirmed that this was Hoi Yin’s computer, and Hoi Yin is also known as Joan Wong. (iii) The 24 Jan 2008 PSPA, the 29 Feb 2008 Fax, the 3 March 2008 Instructions Letter, and the Post-It Sticker 43.Evidence was given that the 24 Jan 2008 PSPA, the 3 March 2008 Instructions Letter and the Post-It Sticker may have been typed / written by Hoi Yin. Wong alleges that he does not know if the instructions on the Post-It Sticker were his intentions as they were not written by him. Hoi Yin would have been able to explain the Post-It Sticker if she was called to give evidence. 44.Similarly, Hoi Yin might have been able to explain the 29 Feb 2008 Fax. 45.Tsang did not help much in this area as he did not have any independent recollection. (iv) Witness statements of Wu, Hoi Yin and Cheng 46.When put to Wu that someone may have drafted her witness statement, she replied in the negative. Yet she could not explain why her witness statement was so similar to Hoi Yin’s witness statement. However, Wu gave evidence that it was Hoi Yin who typed her witness statement upon her oral instructions. 47.Cheng also gave evidence that Hoi Yin was the one who typed his witness statement, and his ‘lawyer friend’ would revise and edit it. F. WHAT REPRESENTATIONS WERE MADE BY WONG TO TIN/PONG? 48.The representations allegedly made by Wong to Tin (and Pong) are set out at paragraph 8 above. F.1 Wong denies meeting Tin, Pong and Chan at the end of December2007 49.Wong denies having made any representation at the end of December 2007, as he denies meeting Tin, Pong and Chan in “Italiano”, an Italian restaurant in Sai Kung. 50.However, I agree that such denial should be rejected as there is evidence from So’s calendar [Exhibit P1] and Chan’s oral evidence where he stated that the dinner meeting took place at the end of December, after Christmas, but before the New Year. 51.It is the case of Tin (and Pong) that at the meeting in December 2007, Wong advised them to obtain TransUnion credit reports. If Wong’s case were true, then there would be no reason for Tin, Pong and Chan to get their respective TransUnion credit reports. All three of them are clear in their evidence that it was Wong who requested them to obtain TransUnion credit reports. In fact, Wong admits to meeting Tin and Pong on 9 January 2008, which is the date on their TransUnion credit reports. It was highly unlikely that Tin, Pong and Chan would have known of TransUnion, let alone to get a credit report from TransUnion, other than for the purpose of assisting Wong in deciding whether to accept them as an investor in the AMC. 52.Chan also confirmed that Wong advised them to obtain TransUnion credit reports during that meeting. 53.Although Wu stated that Wong did not attend such a meeting in her witness statement, she confirmed during cross-examination that she in fact did not know if the lunch occurred. F.2 Wong would set up the AMC 54.There was uncertainty as to the precise definition of the AMC, and how the AMC would run its business. However, Wong did discuss the concept of the AMC and setting it up (no matter how illusory it was) with various parties.
F.3 If Tin did not have sufficient money to invest in the AMC, he could inject Tin’s Property into the AMC at a nominal value of HK$800,000 in return for 8% shareholding of the AMC 55.Wong continued to deny that he made such representation as he took the position that none of the agreements included such clause, and that all representations made were noted in writing. He specifically denies that Tin’s Property would be injected into the AMC and Tin would receive 8% shareholding of the AMC. 56.Chan’s evidence in this regard plays a significant role as he has nothing to gain from these proceedings. He clearly supports the case of Tin (and Pong) in this aspect, as he himself also considered injecting Chan’s Property into the AMC for a nominal value of HK$800,000 in return for an 8% shareholding. The reason that he did not do so was because he had already mortgaged Chan’s Property, so Wong did not want him to be an investor. F.4 If Tin injected Tin’s Property into the AMC, he and his family could continue to reside in Tin’s Property without rent 57.Again, this is supported by the evidence of Chan and Pong. Both of them gave evidence that Wong made such representation at the end of December 2007. 58.This representation is based on the understanding that Tin would need to pay only the management fees, rates and government rent and maintenance fee in respect of Tin’s Property. 59.Furthermore, Pong was certain that during the 9 January 2008 dinner meeting, he noticed that there was no such clause in his agreement with Wong; however, he was assured by Wong that the document which So signed that evening (the “9 Jan 2008 Chinese Document”) were only for formality, and that Pong and his family could continue living in Pong’s Property rent free. 60.Pong was also very adamant, and I accept, that there was no way he would have signed the 9 Jan 2008 Chinese Documents (or instructed So and/or Wing Shan to sign the 9 Jan 2008 Chinese Documents) if there was no agreement in relation to living in Pong’s Property rent free. Furthermore, he confirmed during re-examination that he would not have gone to DSC’s Office on 17 March 2008 to sign the 7 March 2008 SPA or the assignment dated 17 March 2008 (the “17 March 2008 Assignment”). F.5 By injecting Tin’s Property and Pong’s Property into the AMC, it would facilitate the AMC to raise money from banks for financing the construction projects and facilitate the AMC to be publicly listed on the SGX 61.Tin gave evidence at paragraph 10 of his witness statement that Wong made this representation, which is supported by Pong. G. DID TIN/PONG MAKE ANY REPRESENTATION TO WONG AS ALLEGED BY THE LATTER? 62.Wong made allegations that Tin made various representations to him. G.1 In or around the 2nd quarter of 2007, Tin did not represent to Wong that he was a rich man with substantial experience and high qualification proposing construction projects of over RMB100 million in Mainland China with the partners in Hong Kong and the partners from Mainland China 63.Wong alleges that Tin and Pong represented to him that they had purportedly been running a business with assets of over RMB100 million together with their partners in Mainland China, and had shown a number of documents to Wong in an effort to persuade Wong into lending Tin and Pong money. 64.The documents Wong relied on as evidence included the following: –
65.Wong claimed that the TransUnion credit report showed that Tin was wealthy. However, this cannot be seen from the TransUnion credit report, as the TransUnion credit report only shows the credit rating of Tin. It does not state Tin’s wealth or other assets. Furthermore, according to Tin, Pong and Chan, the TransUnion credit reports were only obtained by them upon Wong’s request. 66.According to Wong, the E-Pacific CV was given to him by Tin around the 2nd or 3rd quarter of 2007 to show their abundant experience in construction projects and the Mainland China projects, and the numerous Mainland China contacts. The evidence of Tin, Pong and Chan all say otherwise: –
67.In relation to the E-Pacific CV and one of the E-Pacific Emails, more specifically the e-mail dated 20 August 2007 from E-Pacific to Matrix Wealth, Wong took issue as to Feng’s qualifications and financial ability. However:
68.Wong was misconceived to claim that the E-Pacific Dec 2007 Bank Statement showed that E-Pacific had a business transaction of some HK$1.2 million.
69.Wong alleges that Tin (and Pong) must be rich with substantial experience and high qualification in order to propose Mainland China construction projects of over RMB100 million within the E-Pacific Emails. However, when asked by the court, Tin told the court that he found such large development projects because Wong had represented that he could find a lot of money as he knows many fund companies. 70.Wong has furiously attacked the fact that Tin lied about his financial background, especially the fact that he was receiving CSSA. However, Tin gave evidence that he never lied to CSSA: see paragraph 20 above.
H. WERE THE REPRESENTATIONS MADE BY WONG TO TIN/PONG TRUE? 71.The evidence emerged during the trial proves that the representations made by Wong were false, and the position as represented by Wong would have been likely to induce a reasonable person in the position of Tin (and Pong) to enter into the contracts (ie the 9 Jan 2008 Chinese Documents, the 24 Jan 2008 Chinese Documents, the 7 March 2008 SPA, and the 17 March 2008 Assignment). 72.The traditional rule is that a misrepresentation must be a false statement of fact, past or present, as distinct from a statement of opinion, a statement of intention or a mere commendatory statement. However, the distinction between a statement of fact on the one hand and a statement of opinion or intention on the other, is not clear cut. A statement of opinion or of intention may itself be a misrepresentation if the maker does not in fact hold the opinion or have the intention stated. Also a statement of opinion may amount to an implied representation that the maker has reasonable grounds for the opinion, and a statement of intention that he reasonably believes that he can carry out his intentions. In determining whether there has been an express representation, and to what effect, the court has to consider what a reasonable person would have understood from the words used in the context in which they were used. [see: Chitty on Contracts, 32nd ed, §7-006 at pp 646-7] 73.In certain circumstances a statement of opinion (or of intention) may be regarded as a statement of fact, and therefore as a ground for avoiding a contract if the statement is false. Thus, if it can be proved that the person who expressed the opinion did not hold it, or could not, as a reasonable man having his knowledge of the facts, honestly held it, the statement may be regarded as a statement of fact. If a person states as his opinion something which he does not in fact believe, or which given the facts known to him, he could not honestly hold, he makes a false statement of fact. [see: Chitty on Contracts, 32nd ed, §7-008 at p 648] H.1 Wong did not plan on setting up the AMC 74.It seems that Wong was planning on incorporating a company, but it would not be the AMC as represented, as it would not be fulfilling the requirements as stated above at paragraph 54(1): –
H.2 Wong did not plan to allow Tin and Pong to invest in the AMC and receive 8% shareholding in the AMC each 75.The strongest evidence is the way Wong drafted his agreements (either signed personally, or on behalf of Matrix Wealth): –
76.Although Wong stated that Matrix Wealth or Fully Fortune could have been the AMC, this is contrary to what he explained in his opening – for the case of Tin’s Property and Pong’s Property, he deliberately arranged it so that the shareholders would not hold shares in a company with any material assets. This is because he was afraid of shareholder disputes whereby the company would be sued by its shareholders, so the company cannot utilise its assets; therefore, Wong came up with the arrangement where Tin (and Pong) would receive 8% shares in a company appointed by Wong, but not in the AMC. 77.This is supported by Wong’s actions.
78.Furthermore, Cheng confirmed that he indeed incorporated an AMC with Wong in the Cayman Islands, one Leading Capital Limited, but it has not found any appropriate assets to purchase yet. The shareholding in the said Cayman Islands company is 49% for Cheng, 49% for Wong, and another 2% for Wong’s friend. This was never mentioned to Tin and/or Pong, confirming the fact that Wong did not want Tin (or Pong) to invest in the AMC. H.3 Wong did not plan on raising money for financing the construction projects of Tin and Pong in Mainland China and/or Hong Kong through the AMC 79.Wong made excuses that he did consider the Mainland China construction projects proposed by Tin and Pong. Despite knowing that there was a financial crisis, Wong kept asking Tin to find more projects, and only told Tin that it was not the appropriate time when he refused a project. 80.Furthermore, he claimed expenses for travelling to Mainland China to view the construction projects. However, the documentary evidence provided by him does not support his case.
81.Cheng confirmed that the AMC did not have to be related to the Mainland China construction projects. H.4 Wong did not plan on allowing Tin or Tin’s family to continue to reside in Tin’s Property rent free if Tin injected Tin’s Property into the AMC (or any of Wong’s companies) 82.Wong insisted that there were no oral representations or agreements, as the representations and agreements made were all written. So, turning to the written agreements between the parties, mostly drafted by Wong, it can be seen that Wong did not plan on allowing Tin or Tin’s family to continue to reside in Tin’s Property.
83.Clearly, Wong did not intend to allow Tin to live in Tin’s Property rent free. I. IF THE REPRESENTATIONS MADE BY WONG WERE FALSE, DID HE MAKE SUCH REPRESENTATIONS FRAUDULENTLY, RECKLESSLY OR NEGLIGENTLY? 84.The representations made by Wong were false, and I find that they were made fraudulently, as Wong clearly made the representations set out at Section F above knowingly, without belief in their truth. 85.Although the motive behind a misrepresentation is irrelevant in proving fraudulent misrepresentation, it seems that the whole arrangement created by Wong is so that he could obtain money by mortgaging Tin’s Property and the Pong’s Property. For example, through Fully Fortune, Wong obtained 3 mortgages on Tin’s Property and Pong’s Property from HSBC on 13 June 2008, Wing Lung Bank on 9 November 2009, and eventually the Dah Sing Bank. J. WHAT WERE THE CIRCUMSTANCES UNDER WHICH THE VARIOUS “HOME-MADE” DOCUMENTS WERE SIGNED? 86.The “home-made” documents refer to the 9 Jan 2008 Chinese Documents, the 24 Jan 2008 Chinese Documents, and the 24 Jan 2008 PSPA. 87.Both Wu and Wong claimed that drafts of the 9 Jan 2008 Chinese Documents were given to Tin (and Pong) prior to signing them. On the other hand, Tin (and Pong) gave evidence that they did not receive any drafts prior to the meeting on 9 January 2008.
88.During cross-examination, Pong explained that Wong has read out the contents of the 9 Jan 2008 Chinese Documents once during the meeting on 9 January 2008, and that Wong has said that the 9 Jan 2008 Chinese Documents were just a formality, so that the oral representation that Tin and Pong could live in their respective properties rent free never changed. Pong then confirmed, and I accept, that Tin and Pong would never have agreed to sign any agreement if they were unable to live in their respective properties rent free. 89.According to Tin, Wong read the 24 Jan 2008 Chinese Documents out loud during the dinner meeting that day, assuring all present that it was only for the purposes of reducing tax, so that the properties would be put into another company before putting it into the AMC later. Tin gave evidence that it was signed in Mongkok where there were dim lights.
90.Wong put to Tin repeatedly that Tin had the right to find separate legal representation; however, Tin’s evidence is clear – Wong had already found a lawyer to represent them all, so Tin did not find another lawyer. 91.It is also Tin’s evidence that the 24 Jan 2008 PSPA was signed at the same time of signing the 24 Jan 2008 Chinese Documents, as there was a cheque of HK$10 dated 24 January 2008 from Matrix Wealth to Tin. Tin explained that he was given the cheque by Wong as proof that the 24 Jan 2008 PSPA was legal, so he kept it, and that is why he remembered that the 24 Jan 2008 PSPA was signed on 24 January 2008. 92.Tin’s evidence should be accepted as it seems more likely that the documents were signed by Tin on the dates on the agreement. I accept that Tin believed the words of Wong and did not pay much attention to the detailed contents of the 9 Jan 2008 Chinese Documents, the 24 Jan 2008 Chinese Documents and the 24 Jan 2008 PSPA. K. WHAT WERE THE CIRCUMSTANCES UNDER WHICH THE LEGAL DOCUMENTS PREPARED BY DSC WERE SIGNED IN MARCH 2008? 93.These legal documents include the 7 March 2008 SPA, the 17 March 2008 Statutory Declaration, and the 17 March 2008 Assignment. 94.Tin and Pong gave clear evidence that they went to DSC’s Office twice on respectively 15 March 2008 and 17 March 2008, but they only signed documents on 17 March 2008 because So did not attend the meeting on 15 March 2008 so no documents could be signed on behalf of Full Pacific, and the parties (ie Tin, Pong and Wong) went to Shenzhen for sauna instead. This is clearly supported by contemporaneous documents and witness evidence, including: –
95.As to when the documents were signed, Tsang confirmed that the date the document was signed did not have to be the date stated on the document. This was his practice. Therefore, it would not be a surprise if the documents were in fact all signed on 17 March 2008. 96.There is inconsistent evidence given by the parties as to whether Wong was present on the day of signing on 17 March 2008, and what was explained by Tsang to the parties. Tsang’s evidence was that he did not remember what happened as the events occurred so many years ago; however, it was consistent practice that he would interpret the documents (generally and not interpret line by line) to the clients.
97.All in all, the gist of Tsang’s evidence is that the documents were explained and signed rather quickly, including the time that Tin went to another law firm to sign the 17 March 2008 Statutory Declaration. I accept that the explanation of the documents could not have been thorough. L. DID THE DEFENDANTS OBTAIN ANY MORTGAGE LOAN BY USING TIN’S PROPERTY AND PONG’S PROPERTY AS SECURITY? 98.It is not disputed that Fully Fortune obtained mortgage loan using Tin’s Property and Pong’s Property as security from HSBC on 13 June 2008, Wing Lung Bank on 9 November 2009, and later the Dah Sing Bank. M. WHAT WERE THE CIRCUMSTANCES UNDER WHICH THE TENANCY AGREEMENTS IN RESPECT OF TIN’S PROPERTY AND PONG’S PROPERTY WERE SIGNED IN SEPTEMBER 2008? 99.Tin’s evidence was that Wong invited Tin and Pong for a lunch on around 3 September 2008, asking them to sign the 4 Sept 2008 Tenancy Agreement. This was initially refused by Tin and Pong; however, they were subsequently persuaded by Wong to go to Wong’s office on 4 September 2008 and signed their respective tenancy agreement in Wong’s office. He further said that according to Wong, if Tin and Pong did not sign their respective tenancy agreements, then the AMC could not be incorporated and could not borrow money; however, Wong repeated his oral representation that Tin and Pong in fact did not need to pay rent. 100.Pong gave similar evidence during his cross-examination. He stated that if he did not sign his tenancy agreement for Pong’s Property, then there would be financing issues and problems with listing the AMC. 101.Furthermore, Tin confirmed that he did not need to pay any deposit (despite clause 5 of the 4 Sept 2008 Tenancy Agreement) nor did Tin receive any keys from Fully Fortune of Tin’s Property (despite clause 9 of the 4 Sept 2008 Tenancy Agreement). 102.The 4 Sept 2008 Tenancy Agreement was signed with 2 other documents: an IOU of HK$800 from Tin to Wong dated 4 September 2008; and the 4 Sept 2008 Letter, referred to above, on the face of it seeking assistance from Matrix Wealth to pay rental expenses owed to Fully Fortune from 1 October 2008 to 30 September 2010. Tin does not remember exactly when these documents were signed. 103.During cross-examination, Wong’s account for these documents became illogical.
N. CLAUSES 22 & 23 OF THE 24 JAN 2008 CHINESE DOCUMENTS 104.During the trial, Wong relied on clause 23 of the 24 Jan 2008 Chinese Documents, which provides as follows: “此契約取代甲乙雙方過往全部談判、聲稱、理解、協議、合約及於2008年1月9日簽訂的契約。” 105.With assistance of the court interpreter, clause 23 has been translated into English to read as follows: “This deed supersedes all past negotiations, statements/allegations, understandings, agreements, contracts of Party A and Party B, and the deed signed on 9 January 2008”. 106.I agree that Wong cannot rely on clause 23 to avoid his liability, because: –
107.Wong further relies on clause 22 of the 24 Jan 2008 Chinese Documents, which provides, inter alia, that “…契約參與方現確認完全清楚、瞭解及明白此契約全部內容”. 108.Wong relies on “contractual estoppel”, the essence of which has been summarised at paragraph 35 of Wong’s Closing Submissions as follows: “The parties to a contract may agree a state of affairs which is incompatible with the necessary factual elements of an action in misrepresentation”. Thus, Wong argues that by virtue of clause 22 of the 24 Jan 2008 Chinese Documents, Tin and Pong are estopped from claiming that they did not understand the contents of the document. 109.In my view, the doctrine of “contractual estoppel” does not assist Wong in the present case, for the reason that contractual statement that would otherwise raise contractual estoppel will not do so if the content or effect of that statement has been misrepresented to the party sought to be estopped. This limit on contractual estoppel was considered in Peekay Intermark Ltd v Australia and New Zealand Banking Group Ltd [2006] 2 Lloyd’s Rep 511 at paragraph 44:
110.In the present case, it is indeed part of Tin’s and Pong’s case, which I accept, that Wong had misrepresented the effect of the 24 Jan 2008 Chinese Documents [see: paragraph 15.1(e) of the Statements of Claim]. O. IS TIN ENTITLED TO HAVE TIN’S PROPERTY BACK, AND IS FULL PACIFIC ENTITLED TO HAVE PONG’S PROPERTY BACK? O.1 The 9 Jan 2008 Chinese Documents, the 24 Jan 2008 Chinese Documents, the 7 March 2008 SPA, and the 17 March 2008 Assignment should be rescinded 111.I agree that as a result of Wong’s fraudulent misrepresentations (see Sections F and H above), the 9 Jan 2008 Chinese Documents, the 24 Jan 2008 Chinese Documents, the 7 March 2008 SPA and the 17 March 2008 Assignment should be rescinded ab initio. 112.Wong is a director, shareholder and the person in control of both Matrix Wealth and Fully Fortune. Thus, his fraudulent misrepresentations also bind Matrix Wealth and Fully Fortune as an agent of Matrix Wealth and Fully Fortune: see Chitty on Contracts, 32nd ed, §7‑025 at p 660. In any case, Matrix Wealth and Fully Fortune would have had constructive notice that Tin entered into the 9 Jan 2008 Chinese Documents, the 24 Jan 2008 Chinese Documents, the 7 March 2008 SPA and the 17 March 2008 Assignment as a result of Wong’s misrepresentation and should be unable to enforce them: see Chitty on Contracts, §7-029 at p 663. O.2 The consideration for the transfer of Tin’s Property by Tin and the transfer of Pong’s Property by Full Pacific to Matrix Wealth and/or Fully Fortune has wholly failed, and Fully Fortune has been unjustly enriched 113.In cases of unjust enrichment,
See: Shanghai Tongji Science & Technology Industrial Co Ltd v Casil Clearing Ltd(2004) 7 HKCFAR 79, at paragraph 67 (Ribeiro PJ) and Yukio Takahashi v Cheng Zhen Shu(2011) 14 HKCFAR 558, at paragraph 26 (Ribeiro PJ).
114.I agree that in the present case, Tin’s and Pong’s claims are valid: –
O.3 The Defendants are holding Tin’s Property and Pong’s Property as bare trustees on resulting trust and/or constructive trust for respective Tin and Full Pacific 115.As a result of the rescission of the 9 Jan 2008 Chinese Documents, the 24 Jan 2008 Chinese Documents, the 7 March 2008 SPA and the 17 March 2008 Assignment, Wong, Matrix Wealth and/or Fully Fortune hold Tin’s Property on constructive trust for Tin, and Wong, Matrix Wealth and/or Fully Fortune hold Pong’s Property on constructive trust for Full Pacific: see Chitty on Contracts,§7-122 at p 714. 116.Further, as a result of the total failure of consideration, the defendants hold Tin’s Property on a resulting trust for Tin, and Pong’s Property on a resulting trust for Full Pacific. 117.The advantages of proprietary restitutionary claims include, first, that they may lie against an innocent recipient of the property, even where no personal claim, whether in tort, unjust enrichment, or equity, would lie against him; secondly, if the recipient of the property is insolvent, the true owner may, subject to statutory requirements in certain cases, claim specific property in priority to the claims of general creditors; thirdly, if the true owner traces his property into investments bearing interest, he will be entitled to claim the interest in addition. O.4 Tin was at all material times the sole legal and beneficial owner of Tin’s Property and in actual possession and occupation of Tin’s Property. The position regarding Pong/Full Pacific was the same 118.It is not in dispute that Tin was at all material times in actual possession and occupation of Tin’s Property. 119.If the 9 Jan 2008 Chinese Documents, the 24 Jan 2008 Chinese Documents, the 7 March 2008 SPA and the 17 March 2008 Assignment are rescinded ab initio, then Tin would be the sole legal and beneficial owner of Tin’s Property. The position regarding Pong/Full Pacific is the same. O.5 The Defendants should do all such necessary acts and execute such necessary documents so as to transfer the legal and beneficial title of Tin’s Property back to Tin and Pong’s Property back to Full Pacific free from any encumbrance 120.Currently, the defendants cannot transfer Tin’s Property directly back to Tin (or Pong’s Property back to Full Pacific) due to the Dah Sing Bank Mortgage, which has not been discharged. Dah Sing Bank has started proceedings against Fully Fortune and Wong, HCMP 78/2017 (the “Mortgagee Proceedings”), in which Tin and Full Pacific have intervened. Thus, Tin’s ability to obtain legal and beneficial title of Tin’s Property (and Full Pacific’s ability to obtain title to Pong’s Property) is still at risk. 121.As such, an order should be made against the defendants to do all such necessary acts and execute such necessary documents so as to transfer the legal and beneficial title of Tin’s Property back to Tin and Pong’s Property back to Full Pacific free from any encumbrance. P. ARE TIN AND FULL PACIFIC ENTITLED TO ANY DAMAGES? P.1 General principles 122.As Tin/Full Pacific were induced to enter into the 9 Jan 2008 Chinese Documents, the 24 Jan 2008 Chinese Documents, the 7 March 2008 SPA and the 17 March 2008 Assignment as a result of Wong’s fraudulent misrepresentation, they may rescind the contracts, claim damages or both. 123.To claim damages for fraud, Tin/Full Pacific would need to prove causation. In the present case, I accept that Tin/Full Pacific would not have entered into the 9 Jan 2008 Chinese Documents, the 24 Jan 2008 Chinese Documents, the 7 March 2008 SPA and the 17 March 2008 Assignment ‘but for’ Wong’s misrepresentations. 124.Generally, the damages would be to put Tin/Full Pacific in the position as if Wong did not make the misrepresentations. 125.There are essentially two types of loss and damage which Tin/Full Pacific are entitled to seek Wong to indemnify: (i) loss directly flowing from Wong’s wrongful acts; and (ii) costs of the litigation arising from Wong’s wrongful acts. P.2 Discharge the Dah Sing Bank Mortgage 126.Tin/Full Pacific primarily seeks the return of respectively Tin’s Property and Pong’s Property as their respective rightful legal and beneficial owners, free from any encumbrance (see Section O above). This as an order itself should not raise any issues. However, the issue lies with the Dah Sing Bank Mortgage, where it is more likely than not that Wong (or his companies) will not repay the said mortgage. Thus, Tin/Full Pacific seeks that Wong indemnifies Tin/Full Pacific for losses arising from the Dah Sing Bank Mortgage. P.3 Costs of the other satellite proceedings 127.The total costs of the other satellite proceedings are currently not assessable due to their ongoing nature. The other satellite proceedings (currently) include: –
128.Tin/Full Pacific do not propose to deal with them in the current trial, but proposes that they are to be assessed together when the other proceedings have been completed. Q. ARE THE DEFENDANTS ENTITLED TO THE RELIEF SOUGHT IN THE COUNTERCLAIM? Q.1 Counterclaim by Matrix Wealth and Fully Fortune should be dismissed 129.Both Matrix Wealth and Fully Fortune did not attend the trial.
130.In the circumstances, I agree that the counterclaim by Matrix Wealth and Fully Fortune should be dismissed. 131.In fact, nearly the entire counterclaim can be dismissed, except prayer for relief (2), whereby Wong seeks a “Declaration that the Deed signed 24th January 2008 is binding and in full force”, but that is, of course, on the basis that Tin/Full Pacific’s case on misrepresentation is not made out. Q.2 Wong is not entitled to his counterclaim 132.Since this court agrees that the 24 Jan 2008 Chinese Documents should be rescinded, Wong is clearly not entitled to a “Declaration that the Deed signed 24th January 2008 is binding and in full force”. 133.Similarly, Wong is not entitled to “Overdue mortgage loan repayments, building management fees and Government rent and rates plus interest and/or late charges in the sum of HK$138,377.20 as at 5th March 2012 and further sum of the repayment of mortgage instalments, building management fees, Government rent and rates and any other sum(s) or expense(s) in the future to be incurred according to the Chinese Deed dated 24th January 2008 and/or Tenancy Agreement dated 4th September 2008”. Further, Wong is not able to claim under the 4 Sept 2008 Tenancy Agreement as that was signed between Tin and Fully Fortune. 134.Wong’s claim for “Indemnity for legal fees incurred by the Defendants to be ascertained on indemnity basis” and “Further and/or other relief(s) and/or damages together with the specific performance(s) requested by the 1st Defendant, 2nd Defendant and 3rd Defendant if enforceable through the judgment(s) of the Court” should likewise be dismissed. R. CONCLUSION 135.For the reasons stated above, I grant the following relief in favour of Tin: –
136.Further, I grant the following relief in favour of Full Pacific: –
137.I further order that Wong do pay interest to Tin and Full Pacific on the sums found to be due at the judgment rate from the time when the said loss and damage was suffered and/or the said expenses and costs were incurred up to the date of payment. 138.Finally, I order that the defendants do pay the plaintiffs their costs of these consolidated proceedings. Such costs are to be taxed if not agreed. Tin’s own costs be taxed in accordance with the Legal Aid Regulations. 139.The above orders as to interest and costs are nisi and shall become absolute in the absence of any application within 14 days to vary the same.
Mr Michael Liu, instructed by Messrs Joseph Li & Co, assigned by Director of Legal Aid, for the plaintiff in HCA 167/2011 Mr Jeremy Cheung, instructed by Messrs Joseph Li & Co, for the plaintiff in HCA 1801/2010 The 1st defendant acted in person The 2nd and 3rd defendants were absent | ||||||||||||||||||||||||||||||||||||||||||||||||
Cases cited in this judgment
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Further hearings and rulings under HCA 167/2011