Tsang, Hin Ming Johnny v. Tsang, Hin Kei Joseph and Another

HCA 994/2015

[2018] HKCFI 1186

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 994 OF 2015

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J U D G M E N T

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Introduction

1.The plaintiff commenced this action in May 2015.  It concerns a dispute relating to the ground floor level of a 3-storey village house in Shatin, built under the so-called “Small House Policy” (“the suit property”).  The plaintiff and the 1^st defendant (“the defendant”) are natural brothers.  The plaintiff seeks to recover the suit property whereas the defendant claims that the suit property has already been sold by the plaintiff to him.

2.The 2^nd defendant (“Tak Shun Koon”) is a grocery store business which operates from, and occupies, the suit property.  It is run by the some of the plaintiff’s siblings (including the defendant).

Background

3.Both brothers are male indigenous villagers of Tsang Tai Uk, Shatin.

4.The defendant went to the UK to seek work in early 1960’s and returned to Hong Kong with his wife in late 1970’s.  He and his wife resided in a flat in “City One Shatin” in early 1980’s (“the City One flat”).  The City One flat was registered in the plaintiff’s name (the identity of its beneficiary owner will be discussed in para 19 to 23 below).  It was conveyed to the defendant and his wife in 1992.

5.The plaintiff was laid off by his former (bank) employer in 2000.  He suffered a stroke in 2003.  The defendant paid the plaintiff $3,000 every month beginning in May 2004.  The said payment ceased when the brothers’ relationship turned sour in mid-2014.

6.The brothers (and other villagers) submitted their applications to build village houses under the “Small House Policy”. Because the plaintiff did not have sufficient funds to build the house, he sought financial assistance from the defendant.

Main disputes

7.The main factual dispute is, when the plaintiff sought financial assistance from the defendant, was the agreement:

(a)   one which provided that the defendant was to be repaid by setting off against the rents to be collected from the village house (the plaintiff’s contention);

(b)   one which provided that the plaintiff was in effect to (sell and) convey the suit property to the defendant (the defendants’ contention).

8.Closely related to the above main dispute is whether the plaintiff has only signed a piece of blank paper, which the defendant (perhaps together with other individuals) has wrongly used to forge a sale and purchase agreement dated 8 January 2009 (which is the document relied upon to found the defence and counterclaim) (“the subject agreement”).

9.In the event the court should find against the plaintiff on the above main dispute, the plaintiff further contends that the subject agreement is void for uncertainty.  Specifically, the following essential terms are (allegedly) uncertain:

(1)   there is no agreed date of completion;

(2)   there is no agreement regarding which party was to pay the premium payable to government;

(3)   there is no agreed time for the plaintiff to apply to government to pay the premium.

Witnesses’ credibility and findings of fact

10.The following witnesses testified at trial:

(a)   the plaintiff;

(b)   Law Shue Sang, a village house builder/contractor, who has signed the subject agreement as a witness (“Law”);

(c)   HW Tsang, the 4^th brother;

(d)   the defendant.

11.The approach adopted by the courts for assessing credibility has been set out in some of my earlier decisions.  See, for example, the decisions in Chiu Chi Tong v Lau Chong Sai & Another, HCA 765/2002 (para 28); Yu Ming Investment Ltd v Peng Ru Chuan, Richard, HCA 814/2002 (para 13); 林傳龍對謝巧玩, HCA 1443/2011 (19 December 2014) (para 15) and Star Glory Investment Ltd v Kai Tuo (HK) Technology Co Ltd and Others, HCA 3523/2002 (13 August 2005) (para 12).  See also what appears to be a similar approach in Esquire (Electronics) Ltd v Hong Kong and Shanghai Banking Corporation Ltd [2007] 3 HKLRD 439, para 135.  The above will be adopted in this action.

12.In short, I find the defence witnesses to be truthful and reliable (subject to what will be said below about the defendant), but do not consider the plaintiff’s testimony to be credible or reliable.

13.According to the plaintiff’s case, the piece of blank paper was signed under the following circumstances:

(1)   since about September 2007, he has been asking the defendant to help him pay all the expenses for building the village house. He suggested to the defendant to lend him the necessary fund, which could be repaid by the income from renting out the village house.  The defendant refused the suggestion;

(2)   on the day when he signed the piece of blank paper, the plaintiff met up with the defendant and Law.  When they were inside Law’s car (parked in the vicinity of Tsang Tai Uk), the plaintiff yet again raised his earlier suggestion about the loan;

(3)   it was under such circumstance the plaintiff signed on a piece of blank paper, which was later used to forge the subject agreement.

14.This account is unbelievable for the following reasons:

(a)   according to the plaintiff’s testimony, without prompting by anyone, he spontaneously asked for a piece of blank paper, signed on it and gave it to the defendant;

(b)   there was no previous discussion about the plaintiff signing any document (it was not even mentioned);

(c)   the defendant did not say anything, or ask any question about the piece of blank paper with the plaintiff’s signature, after the plaintiff gave it to him;

(d)   according to the plaintiff’s testimony, it was not proper for him (in effect as the representative of the village house applicants) to sign any document; hence, he merely signed a piece of blank paper.  However, he cannot explain what that was intended for (except vaguely that it was to make the defendant trust him).

The above account is inherently implausible.  Not knowing what was the purpose of the plaintiff’s above action, it was highly unlikely for the defendant not to ask for an explanation, but simply to accept it (and to agree to the plaintiff’s suggestion (to use the rental income for repayment) as a result).

15.Further, there are inconsistencies, or discrepancies, between the plaintiff’s testimony and the related parts of his witness statements about this event:

(1)   in the witness statement, the plaintiff claimed that it was the defendant who asked him to sign on a piece of blank paper, but the plaintiff effectively disowned that in his testimony (para 14(a) and (b) above);

(2)   in the witness statement, the plaintiff claimed that he signed because he was under (financial) pressure to do so; his testimony (summarized in para 14 above) does not support this;

(3)   the plaintiff testified that, when the defendant still refused to accept his suggestion and tried to alight from Law’s car, the plaintiff threatened to disown him and put an end to their brotherhood relationship; the defendant changed his mind upon hearing this.  However, such an important exchange was not mentioned in the witness statement at all.

16.In the witness statement, the plaintiff only accepted there was a signature on the subject agreement which is very similar to the way he signs.  But he further conceded in cross-examination that the signature on the subject agreement was in fact the same signature (which he allegedly put onto the piece of blank paper).

17.Similar to para 22 below (in relation to the defendant’s testimony), I do not regard para 16 above by itself can be regarded as being adverse to the plaintiff’s credibility, but it does have an important impact on the burden of proof (see para 30 below).

18.Finally, the summary given in para 14 above cannot stand together with the related parts of the testimony of the defendant and Law.  As will be discussed below, I accept the version testified to by the defendant and Law (subject to what will be said below about the defendant).

19.The defendant’s testimony about the City One flat departs from what he said in the witness statement.  He effectively accepts that the plaintiff owned the City One flat (whereas in the witness statement he said the plaintiff was only a “nominal” owner (in order to obtain a more favourable mortgage loan from the plaintiff’s (then) employer)).

20.The plaintiff submits that the defendant’s above change in his case reflects badly on the defendant’s credibility.

21.The plaintiff has not specified whether the account given in the defendant’s witness statement should be accepted as truthful, or whether that given in his testimony should be so accepted.  But because the plaintiff contends that the defendant’s testimony “clearly [supports the plaintiff’s] version of events (para 9, plaintiff’s closing submissions)”, I infer that the plaintiff must be contending that his testimony should be accepted as truthful.

22.That being the case, in submitting that the defendant is thereby to be regarded as an untruthful witness, the plaintiff is in effect arguing that the defendant made up an untruthful account in his witness statement, only to correct it in his testimony.  It is noted that the defendant’s testimony in this regard was in effect “volunteered” (it was not “forced” out of him, say, by inconsistent evidence).  Such a case is quite unlikely.

23.The defendant has suffered a stroke at some time before trial.  However, even that cannot satisfactorily explain the summary given in para 19 above.  I therefore conclude that the defendant’s testimony summarized in para 19 above can affect his reliability, and this has been taken into account when assessing the defendant’s testimony regarding the main factual dispute (the testimony regarding the City One flat is only background information regarding the parties’ past dealings and relationship).

24.The defendant is also criticized for giving rather confusing testimony regarding whether a business proposal for Tak Shun Koon (dated 11 December 2010) (“the Dec 2010 proposal”) has been given to the plaintiff (apart from other concerned siblings) (the plaintiff’s case is that this document has been given to him).  There is clearly a discrepancy between this part of the defendant’s testimony and the letter of his solicitors dated 7 January 2015. However, similar to para 22 (and 23) above, I do not consider this to materially affect his reliability or credibility regarding the main factual dispute.

25.Based on the above, I accept the defendant’s testimony to be credible and reliable (except the parts concerning the initial ownership of the City One flat).  In particular:

(i)   he and his wife paid the plaintiff about $900,000 in exchange for transferring the City One flat to the defendant and his wife;

(ii)   the plaintiff mis-managed his own finance resulting in the plaintiff having no funds to construct his own village house, and the defendant agreed to provide the plaintiff with funds to do so;

(iii)   the subject agreement was entered into in the above circumstances.

26.Law’s testimony is unshaken by cross-examination. He has nothing to gain from giving incorrect testimony about the signing of the subject agreement.  The suit property would be constructed (and Law would be paid in due course) whatever might have been the agreement reached between the plaintiff and the defendant concerning its construction.  It has not been suggested Law has other incentive (financial or not) to give incorrect testimony.  The testimony Law has given is logical, inherently plausible and clear.  His testimony supports the defendant’s case that the subject agreement is evidence of the plaintiff’s acknowledgement (and acceptance) of its contents.

27.Some criticism has been made arising out of:

(a)   clause 10, subject agreement, which mentioned there was a set of 3 copies, but Law’s witness statement did not mention this;

(b)   clause 10, subject agreement, which mentioned one of the 3 copies was to be given to the lawyer, but Law testified that one copy was given to (and kept by) him instead.

But the plaintiff has not explained how this can properly be regarded as materially affecting Law’s reliability or credibility.  I rather regard the omission to mention sub-para (a) above to be but a justifiable decision to leave out relatively minor details (in view of what the main factual dispute is).  I regard sub-para (b) above as a lack of attention to a contractual obligation, which has minimal importance in the context of this action.

28.The plaintiff also contends that the defendant’s use of the phrase “the owner of [the suit property]” (referring to the plaintiff) in the Dec 2010 proposal shows that, even by the end of 2010, the defendant admitted the plaintiff was the suit property’s true owner.

29.Having heard the defendant’s testimony in cross-examination regarding this aspect, I am satisfied that the plaintiff has quite some difficulty in distinguishing between a registered owner and a beneficial owner, and that he used the above phrase to refer to the plaintiff as the registered owner.  The defendant’s contemporaneous conduct, in occupying the suit property while not accounting to the plaintiff the amount of monthly rent ($5,000) (despite having set out such an expense item in the Dec 2010 proposal), is consistent with (if not actually supportive of) such conclusion.

30.Because the plaintiff has, at the time of trial, accepted that his signature appears on the document which the defendant relies on as the subject agreement, the burden of proof rests on him to “disown” the document (the plaintiff fairly accepted this burden during his closing submissions) (whereas if the plaintiff had maintained his case that the subject agreement only contains a signature similar to his, the defendant would have to prove that the signature on the subject agreement was in fact the plaintiff’s).

31.HW Tsang apparently holds a high opinion of the defendant but takes a bad view of the plaintiff.  Besides that, his testimony is not of much help to the determination of the main factual dispute.  I attach little weight to his testimony.

32.Based on the above (including the above assessment of the witnesses’ testimony) (and when considered together with the documentary evidence), I find that the defendant has established that the parties have entered into the subject agreement, and that the defendant has established his case summarized in para 7(b) above.

Validity of the subject agreement

33.As regards para 9(1) and (3) above, in what has sometimes been called an “open contract” (where there is no time stipulation for completion of the sale and purchase):

“[time] is not usually of the essence of a contract for the sale of land, and consequently a delay in completion will not usually amount to a repudiation of the contract. … Where the contract contains no such express provisions it is open to a party who is ready and willing to perform its obligations to give notice to a party in default under the contract, requiring the defaulting party to complete the contract within a reasonable time. … It is then a question of fact whether the time allowed by the notice is a reasonable time within which to complete … ” (Bullen & Leake & Jacob’s Precedents of Pleadings (2016) 18^th Ed, Vol 2, para 106-03).

34.Relying on the Hong Kong Court of Final Appeal decision in Kwan Siu Man v Yaacov Ozer (1997-98) 1 HKCFAR 343, the plaintiff argues that the subject agreement is void for uncertainty.  The following passages in the Yaacov decision are particularly emphasized by the plaintiff:

“… as is common knowledge in Hong Kong, the property market is highly volatile. Whatever might have been the position in England in the last century – when the concept of an ‘open contract’ was first developed in a climate of a stable pound sterling and no inflation – in the Hong Kong of today, the date of completion is an essential term of any contract for the sale and purchase of land: To the extent that in the case of a provisional agreement in the common form in use here, time for completion would normally be treated as of the essence of the agreement, even though no express provision to that effect is in the agreement … ” (p 355);

“In today’s Hong Kong the fixing of a date by when a contract for the sale of land must be completed is at least generally (if not inevitably) of at least considerable (if not vital) commercial importance. There is no practice in the ordinary course of business here of treating the date for completion as a subsequent matter simply to be left to legal advisers to settle.

So even assuming that an open contract can be made under our law, still our courts should always be slow to find that such a contract has indeed been made in any given case. The making of such a contract is not to be found just because there has been a meeting of minds as to parties, property and price … ” (pp 362-3).

(emphases supplied)

35.The plaintiff also refers to other decisions such as:

(1)   Chow Nap Man v Chung Wai Kwong CACV 137/2017 (2 May 2018);

(2)   Fong Yin Hing v Fong Kwan Pui [2016] 2 HKLRD 825;

(3)   Tam King Hang v Yuen Lei Gwun HCA 490/2011 (16 April 2014).

36.The plaintiff correctly accepts that the Yaacov decision did not decide that the concept of “open contract” does not exist in Hong Kong.  As has been pointed out in the Fong Yin Hing decision (which the court of appeal distinguished, but did not overrule, in the Chow Nap Man decision), the Yaacov decision only warned the courts against too readily finding that an “open contract” had been made (para 79 thereof).

37.The circumstances surrounding the subject agreement were far from the typical arms-length conveyancing between strangers:

(a)   the contracting parties were blood brothers;

(b)   by the subject agreement, the defendant intended to provide the plaintiff with funds to construct the plaintiff’s own village house;

(c)   things such as market volatility, inflation and the like could not have been matters which the parties were concerned with at the time of the subject agreement.

38.Further to the above, it is common ground that there was (and is) a need to obtain from the concerned authorities documents such as a certificate of compliance, and the payment of premium (the amount of which is to be determined by the authorities concerned).  These are not matters over which the parties have control.

39.In such circumstances, it is not surprising for the subject agreement to contain provisions such as:

(1)   the defendant should commence construction as soon as possible, and to apply for a certificate of compliance upon the completion of construction work (clause 7 thereof);

(2)   the parties were to handle the payment of premium on their own, after the properties were delivered (clause 2 thereof);

(3)   the defendant was to apply for the payment of premium within 3 years after the certificate of compliance had been issued (clause 9 thereof).

40.There are other provisions covering matters like the preparation of legal (and other) documentation (clauses 3 and 8 thereof), construction period and costs (clause 5 and 7 thereof), economic loss for breach of contract terms and/or construction delay (clauses 6 and 7 thereof).  Finally, clause 11 thereof provided that the subject agreement was to take effect upon execution (and a related stipulation that the parties were to strictly abide by the contractual terms).

41.Looking at the subject agreement in the round, it is very different from instances like a verbal discussion during a chance meeting (the Yaacov decision), or a brief note in Chinese (the Tam King Hang decision).

42.Thus, it is proper to infer that the parties intended that reasonable periods are part of the subject agreement insofar as no express time stipulation has been mentioned.

43.It is noted that the plaintiff has not put forth arguments to the effect that the subject agreement should not be enforced on the illegality (by way of evidence or submissions) or public policy (whether by way of pleading, evidence or submissions) grounds.

44.As regards para 9(2) above, I do not consider there to be any ambiguity as to who should bear the responsibility for paying the premium to government.

45.As stated in para 39(3) above, clause 9, subject agreement provided that the defendant was to apply for the payment of premium (with the plaintiff’s cooperation/assistance (clause 3 thereof (perhaps also clause 8 thereof))). In view of the conclusions reached above, I agree with the defendant’s arguments to the effect that:

(a)   it was for the defendant to apply for the payment of premium (with the plaintiff’s cooperation and/or assistance, if necessary) (para 39(3) above);

(b)   insofar as the defendant may also be liable to pay for the premium for the parts of the village house other than the suit property, the plaintiff should be liable to reimburse the defendant for the same (this is to be inferred from the language used by clause 2 thereof (para 39(2) above)).

46.The plaintiff also puts forth other arguments:

(1)   a contractual provision stipulating liability for damages should bar a claim for specific performance;

(2)   the subject agreement was conditional upon the consent of the authorities concerned;

(3)   proprietary estoppel.

These arguments are equally invalid: sub-para (1) above is unmeritorious because the language of the subject agreement does not justify a conclusion that such relief has been ousted; sub-para (2) is not (or at least insufficiently) pleaded, and there is no proper evidence to support it; sub-para (3) above is in truth a repeat of the “void for uncertainty” argument (para 9(1) and (3) above).

Conclusion

47.The plaintiff’s claim is dismissed.  There will be an order in terms of para (i) of the prayer for relief of the re-amended counterclaim (somehow numbered as para 52(i) thereof). Insofar as it may be necessary, the parties are to attempt within 21 days to agree to any related ancillary relief, such as the manner of conveyance of, and transfer of title to, the suit property to the defendant (if the plaintiff should fail to do so).

48.Should the parties fail to reach agreement regarding para 47 above, the parties are at liberty to lodge with court and serve written submissions thereon within 14 days thereafter.  Any such disagreement(s) will be determined without further hearing.

49.The parties have been able to agree on the monetary judgment which should be entered in the plaintiff’s favour in relation to the 1^stand 2^nd floor levels of the village house.  Accordingly, an order will be made (by consent) in terms set out in the letter dated 30 May 2018 (with amendment).

Other matters

50.The parties’ written submissions also mentioned various other points.  These have not been expressly set out or dealt with above.  This is so only because of the need to balance between the length of the judgment and its easier comprehension.  It does not mean those other points are thought to be irrelevant (or have been overlooked).  To avoid doubt, those other points have also been considered.

51.The Yaacov decision, being a decision from the highest legal tribunal in Hong Kong, is of course binding on this level of court (had it not been distinguishable on the relevant facts).

52.However, if this action should end up in the Hong Kong Court of Final Appeal, there may be room for raising interesting arguments (arising out of para 9 (especially para 9(1)) above) regarding how the reasons given for the Yaacov decision (see the passages quoted in para 34 above) may interact with various aspects of contract law.  These may include:

(a)   the notion of “freedom of contract” (Chitty, para 1-026 to 1-027) (especially in the commercial context);

(b)   contractual intention is to be ascertained by considering “not what one or other of the parties meant or understood by the words used but rather what a reasonable person in the position of the parties would have understood the words to mean”.  This would include looking at all the surrounding circumstances known at the time of contract (Chitty, para 13-043; Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896, 912) (such as market volatility, inflation and so on);

(c)   as a corollary to sub-para (a) above, it is for the contracting parties to allocate the risks (of loss) for themselves.  As a corollary to sub-para (b) above, how such risk is allocated is to be ascertained from the terms agreed to between them (whether it is for the buyer or the seller (or both) to bear the risk (be it related to market volatility or otherwise));

(d)   courts are “reluctant to hold void for uncertainty any provision that was intended to have legal effect” (Chitty, para 2-135 quoting from Brown v Gould [1972] Ch 53);

(e)   potential impact on other contracts (such as commercial contracts with regard to the sale of goods).  In this connection, some of the provisions of the Sale of Goods Ordinance (Cap 26) may be relevant; for example, s 12(1) (time of payment is not deemed to be of the essence of the contract), s 30 (payment and delivery are concurrent conditions) and s 31(2) (goods are to be sent within a reasonable time where no time for sending them has been fixed).

Costs order

53.The parties agree that the usual rule that costs should follow the event is applicable.  There will accordingly be a costs order that the costs of this action (for the avoidance of doubt, including the costs of the re-amended counterclaim) are to be paid by the plaintiff to the defendants, to be taxed if not agreed.  The plaintiff’s own costs are to be taxed in accordance with the Legal Aid Regulations (Cap 91A).

Mr Lawrence K F Ng, instructed by Rene Hout & Co, assigned by DLA, for the plaintiff

Mr Bruce C H Tse and Mr Billy K Y Kwan, instructed by Lo, Wong & Tsui, for the defendants