Leung Wai Cheung v. Octel Networks Ltd and Others

DCCJ 4454/2017

[2020] HKDC 220

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVL ACTION NO 4454 OF 2017

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BETWEEN

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J U D G M E N T

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INTRODUCTION

1.This case concerns the existence or otherwise of a tenancy for one year in an industrial building unit in Tuen Mun, New Territories.  One might think that such a case should be simple and the facts, “open and shut”.  But the Case was fought in Court for 6 days, partly due to the fact that two of the parties were not legally represented (only the Third Party was represented by Counsel) but also partly because of the rules of the Common Law relating to offer, counter-offer and acceptance.  While these rules are easily stated, they are not easy propositions to apply in the real world of written agreements and the intervention of estate agents. 

2.This is a case where the negotiation between the parties was conducted through an estate agent and a putative written agreement, using the estate agent’s standard form, was signed.  But the putative tenant did not think that a contract was concluded and backed out.  The putative landlord, on the other hand, did not agree and so, commenced this Action, suing on what he believed to be a concluded contract.  The putative tenant, now 1^st defendant together with the 2^nd defendant who signed the putative written agreement as guarantor, while defending the action, have drawn in the estate agent as Third Party, who aligning itself with the position of the plaintiff, also strenuously defended the accusations of the defendants.  This Case is a cautionary tale illustrating why, according to the Common Law, the signing of a written agreement does not necessarily give rise to a concluded contract.

THE EVIDENCE

3.The facts of this Case are not complicated.  The negotiations between the putative landlord and the putative tenant were conducted through the Third Party, an Estate Agent.  The Third Party acted through one Shirley Wong (“Shirley Wong”).  She did give evidence before the Court, as did the plaintiff, Mr Leung Wai Cheung (“Mr Leung”) and the 2^nd Defendant, Mr Mohammed Bava Divan Hassan (“2^nd Defendant”).  

4.The negotiations were partly done by telephone and partly through WhatsApp.  For the most part, the negotiations were reflected in a series of WhatsApp messages between Shirley Wong and Mr Leung (“Leung Series of WhatsApp Messages”[1]) and another series between Shirley Wong and the 2^nd Defendant (“Abrar Series of WhatsApp Messages” [2], so called because the 2^nd Defendant refers to himself as “Abrar” in this series of messages, perhaps in respectful reference to the prophet “Abraham”, commonly acknowledged by both the Judeo Christian and Islamic religions), and in fact his name card was included in a WhatsApp message to Shirley Wong sometimes around 12 July 2017 stating his name as “Divan Hassan (Abrar)”[3].

5.During the hearing, the 2^nd Defendant confirmed he was “Abrar” and did not dispute the authenticity of the Abrar Series of WhatsApp Messages, nor did he dispute the authenticity of the Leung Series of WhatsApp Messages.  In this Judgment, “Abrar” refers to the 2^nd Defendant. 

6.The two series of WhatsApp messages, referred to above, represent a record of contemporaneous communications between the parties through the intermediation of Shirley Wong and are, therefore, important sources of evidence before this Court.  In fact, much of the cross-examination taking up most of the time at trial involved the impact of various parts of these messages to the central issue before this Court, namely, whether there was a concluded tenancy contract between the Plaintiff and the 1^st Defendant.

7.The story began sometime in July 2017.  The 2^nd Defendant is sole director of the 1^st Defendant, a company engaged in the business of data hosting with computer servers.  He wished to look for premises in Tuen Mun to house the 1^st Defendant’s servers.  His requirements were simple, cosmetics were secondary, the Premises had to have good ventilation and a 100A three phase power supply.  Such requirements could only be found in industrial buildings.   He approached Shirley Wong, an estate agent working for the Third Party to find such Premises and she did find Premises belonging to the plaintiff for the consideration of the 2^nd Defendant.

8.The Plaintiff (“P”) is the owner of the property situated at Workshop Unit 6 & 7 on the 6^th Floor of Block B, Hang Wai Industrial Centre, No 6 Kin Tai Street, Tuen Mun, New Territories (“the Premises”).  These premises, while cosmetically not well appointed, had the functional characteristics required by the Defendants.  Shirley Wong indicated the availability of these Premises to the 2^nd Defendant and on 20 July 2017, the 2^nd Defendant inspected the Premises.  At the time of the inspection, the Premises were still occupied by an existing tenant and Shirley Wong informed the 2^nd Defendant that the tenant would move out on 15 August 2017.[4]

9.Liking the Premises, the 2^nd Defendant asked Shirley Wong to continue with negotiations, ending with an oral understanding on or about 25 July 2017, again through the intervention of Shirley Wong, that the 1^st Defendant would rent the Premises for 1 year, starting from 15 August 2017 with the 2^nd Defendant acting as guarantor (he being a Hong Kong resident) at the rent of HK$20,000, and rental would be paid by 12 post-dated cheques to be handed over in advance, and the tenant would pay the stamp duty for the tenancy agreement.

10.On 27 July 2017, the 2^nd Defendant indicated to Shirley Wong that he would be ready to sign the tenancy agreement.  Although Shirley Wong had completed the preparation of a tenancy agreement on 4 August 2017, it was not until 7 August 2017 that Shirley Wong managed to attend the offices of the 1^st Defendant and arranged for the 2^nd Defendant to sign the tenancy agreement for and on behalf of the 1^st Defendant and on behalf of himself as guarantor.

11.The tenancy agreement was a standard printed form generated by the Estate Agent (Third Party in these proceedings)[5], Shirley Wong’s employer.  It was signed by the 2^nd Defendant purporting to act for the tenant, affixing his signature under the statement, “Confirmed and Accepted all the terms and conditions contained herein by the Tenant”.  The 2^nd Defendant did not use the usual signature chop used by the 1^st Defendant, which contained the phrase “For and on behalf of Octel Networks Ltd”.

12.The 2^nd Defendant also signed as Guarantor in Schedule II to the agreement [6]. It was expressly stated in the tenancy agreement that the 1^st Defendant was the tenant.  However, the tenancy agreement did not contain the previous oral understanding to hand over 12 post-dated cheques for the monthly rent of HK$20,000.  Instead, it contained a term requiring payment of 2 months’ rent as deposit and one month’s advance rent for the first month to be paid immediately and for which the landlord would give acknowledgment of receipt and monthly rental thereafter would be paid in advance on the first day of each month. 

13.But, instead of a cheque of current date (which would be 7 August 2017), a Wing Lung Bank Cheque post-dated to 13 August 2017 for HK$ 60,000 (“the post-dated Cheque of HK$ 60,000”) (which comprised the payment of 1 month rental in the sum of HK$20,000 in advance and 2 months’ rental deposit in the sum of HK$ 40,000) was handed to Shirley Wong by the 2^nd Defendant [7]. 

14.At the same time, the 2^nd Defendant handed two more cheques post-dated to 8 August 2017, one for HK$ 17,400 made payable to the Third Party as agency commission (“the Cheque for Agency Commission”)[8] and HK$ 1,025 for stamp duty, made payable to the Hong Kong Government.  There is no dispute as to the handing over of these cheques.

15.The 2^nd Defendant explained in his Witness Statement[9] (which is in line with the Amended Third Party Statement of Claim at paragraph 5 therein) that the reason for the post-dating of the Cheque of HK$ 60,000 for the landlord to 13 August 2017 was that he could be assured by the Plaintiff that he would be able to give vacant possession of the Premises on 15^th August 2017.  He therefore needed the Plaintiff to confirm that he would accept the post-dated Cheque of HK$ 60,000 instead of immediate payment.  The 2^nd Defendant further explained that on the day of 7 August 2017, “I asked Shirley Wong again whether the 1^st Defendant could gain the possession of the said Premises on 15 August 2017 if the Plaintiff accepted the said offer.  Shirley Wong told me that the said Premises could be vacated on or after 15 August 2017 in her understanding.  I proposed to postdate the Cheque for Deposit and 1^st Month Rental to 15 August 2017.  However, Shirley Wong said that it was better to postdate the said Cheque for Deposit and 1^st Month Rental to 13 August 2017 which was supposed to be 2 days before the date of delivering vacant possession of the said Premises.”   The 2^nd Defendant also informed Shirley Wong that the Cheque for Agency Commission should not be paid in unless the Plaintiff confirmed acceptance of the post-dated cheque on his terms.  The evidence at trial showed that this Cheque for Agency Commission was banked in on 10 August 2017.  [10]

16.After the signatures by the 2^nd Defendant on the tenancy agreement were affixed, Shirley Wong later that evening (that is, the evening of 7^th August 2017), went to see the Plaintiff to hand over to him the tenancy agreement with the 2^nd Defendant’s signatures and the post-dated Cheque of HK$ 60,000 to him.  The Plaintiff in his Witness Statement said that he signed the tenancy agreement at 9 pm.  However, the Plaintiff was clearly not aware at the time that the Cheque of HK$ 60,000 was post-dated and he said so, during cross-examination.  Also, the Plaintiff signed it as authorised signatory of Metak Investment Management Company Limited (“Metak”) in the place where the Plaintiff himself was designated to sign.  Also, Metak purported to sign for the Plaintiff in accepting the terms of the tenancy agreement and acknowledgment of the payment of the deposit and the advance payment of the first month’s rent. 

17.It is pertinent to note that according to a “Management and Assignment Agreement” dated 28 December 2012 that the Plaintiff assigned all the properties, including the Premises (which was item 3 as listed in the Schedule I therein), for its management with effect from 1 January 2013 for 10 years. [11] Also, according to the Company Search of Metak dated 10 January 2017, the Plaintiff is the only shareholder of Metak and one of the two directors.  [12]

18.The next day, 8 August 2017, the Plaintiff must have complained to Shirley Wong about the post-dated Cheque, because within the Leung Series of WhatsApp Messages disclosed after an order for specific discovery, there was the following message from Shirley Wong to the Plaintiff:

“梁生，12 萬分抱歉冇提你睇支票嘅日期我見你有睇過張票，可能又怕你再減佣都唔夠膽提你睇個日子(卡通emoji) 請你食飯當補返呢幾日利息(卡通emoji) 玩笑歸還笑。呢個確係我失職。因為當時你又有第二個客傾，又有其他顧慮，我應該要講嘅嘢都唔記得晒....對唔起，欠你餐飯(卡通emoji)”[13]

19.Judging from the tenor of this message, the Plaintiff was clearly dis-satisfied with the post-dated Cheque and did not consider it acceptable.  The post-dated Cheque did not comply with the terms of the tenancy agreement, for which the Plaintiff was supposed to have acknowledged immediate payment of the deposit and first month’s advance rental. 

20.It is the Defence case, supported by the evidence of the 2^nd Defendant given in Court, that on 8 August 2017, that Shirley Wong said to the 2^nd Defendant that the Plaintiff wanted immediate payment of HK $60,000 and if that was not made, then the Plaintiff could only accept the offer on or after 13 August 2017 and would meanwhile be at liberty to rent the Premises to another tenant.  Paragraph 6 of the Amended Third Party Statement of Claim asserted as follows:

“On or about 8 August 2017, Shirley Wong called and told the 2^nd Defendant that the Plaintiff thought that the deposit should be paid on the same date of the tenancy agreement. Because the said Cheque for Deposit and 1^st Month Rental was post-dated 13 August 2017, he would only consider accepting the said Offer on or after 13 August 2017. Unless the 1^st Defendant agreed to pay the Deposit and 1^st Month Rental immediately, the Plaintiff would not reserve the said Premises for the 1^st Defendant and might still accept offer from any other interested tenant. Shirley Wong further suggested the 1^st Defendant transferring the deposit of HK$40,000 into the Plaintiff’s account first, then she would ask the Plaintiff to exchange the said Cheque for Deposit and 1^st Month Rental with another cheque in the sum of HK$ 20,000 for 1^st month rental or depositing totally HK $60,000 then she would ask the Plaintiff to exchange the said Cheque for Deposit and 1^st Month Rental with another cheque in sum of HK$20,000.00 for the 1^st month rental or depositing totally HK$60,000 then she would ask the Plaintiff to return the said Cheque for Deposit and 1^st Month Rental immediately. The 2^nd Defendant indicated that he needed some more time to consider her suggestion”.

21.In paragraph 7 of the Defence of the Third Party, the latter asserted as follows:

“ Paragraph 6 is denied. The Third Party avers that on 8^th August 2017, Shirley Wong advised the 2^nd Defendant that the rental deposit had to be paid on the same date of the Tenancy Agreement, i.e. 7^th August 2017, otherwise the Plaintiff might still accept other offers as he has not received the rental deposit. It was in these circumstances that Shirley Wong suggested the 2^nd Defendant to transfer to the Plaintiff HK$40,000, being the 2-month deposit, and exchange the Rent and Deposit Cheque with a cheque in the sum of HK$ 20,000”.

22.A message in the Abrar Series of WhatsApp Messages, takes this story further whereby Shirley Wong informed Abrar at 2:30 pm that:  

“The landlord found the date of the check on today. He blamed why didn’t I remind him yesterday. It is obviously my problem I knew, I didn’t want to make more trouble yesterday especially it was quite late. Anyway, please send me all checks and all your documentation copies as soon as possible. By the way, please also bring your company chop to stamp on the contract.”[14].

23.The post-dated cheque was clearly not acceptable as the following message, later that day (8 August 2017) at 6:21 pm, between Shirley Wong and the 2^nd Defendant in the Abrar Series of WhatsApp messages, shows:

“I am cleared by my manager, the deposit has to be paid on the same date of the contract, then the property is held, otherwise the landlord may still accept offers from another tenant because he has not got the payment. I suggest you TT his account 2 month deposit first, then I ask him exchange your 60000 checks with your another check with 20000. What do you think? ”[15]

24.The 2^nd Defendant replied at 6:24 pm “Ok Let me think.”  Shirley Wong promptly followed up this WhatsApp message at 6:27 pm with details of the bank account of the Plaintiff:

“His account number: Eastern Asian bank saving account: 015-165-68-00073-9 ” [16]

25.At 6:28 pm, the 2^nd Defendant asked for the name of the account holder and that was supplied by Shirley Wong, a minute later at 6:29 pm as “Metak Investment and Management Limited”[17].  In fact, at the same time at 6:28 pm, Shirley Wong made a suggestion: “Or you deposit totally $60,000 and I ask him to return your check.”[18].

26.The next day, 9 August 2017, Shirley Wong texted the 2^nd Defendant again, as the following exchanges in the Abrar Series of WhatsApp Messages show[19]:

Shirley:	Hello, did you make the transfer? Or you prefer to take a risk?	5:46pm
2nd Defendant:	Still not transfer yet and I see there is no risk in it	7:56pm

27.Two days later, late into the evening on 11 August 2017, the 2^nd Defendant inquired of Shirley Wong as to the position of the Plaintiff, and the following exchanges took place:

2nd Defendant:	Hi	9:18pm
	How are you Shirley.  Any update from the landlord	9:19pm
Shirley:	Hi I am having a holiday today! Nothing from the landlord.  Then I guess he will deposit the check on tomorrow.  You need to send me the missing documents….	10:01pm
2nd Defendant:	I am afraid he keep on changing mind	10:14pm
Shirley:	Not much change he can make at this stage.	10:15pm
2nd Defendant:	Let’s see, if he do some addition demand I cancel that	10:21pm
	For me no issues	10:21pm
Shirley:	Please don’t.  He didn’t come up anything so far	10:25pm
2nd Defendant:	I will give your commission don’t worry.	10:26pm
	Because I feel he give us trouble	10:26pm
Shirley:	Everything is settled after signed the contract, nothing will come up after that.  All parties bargain before the agreement to get the most, it is normal.	10:29pm
2nd Defendant:	I know that, but his attitude look different So I am afraid of it	10:30pm
Shirley:	I concern not only the commission, I also wish the 2 parties are happy with each other	10:30pm
2nd Defendant:	OK	10:30pm
Shirley:	Don’t worry, the contract is fair to each party, you are protected by the law if you don’t break anything	10:31pm

28.There were no communications until two days later, that is 13 August 2017, when the Defendants decided to pull out of the deal.  There were the following exchanges shown in the Abrar Series of WhatsApp Messages[20]:

2nd Defendant:	Hi Shirley.	3:32 pm
	Inform landlord, don’t deposit cheque.	4:58 pm
	We cancel it, we are not satisfied with him	4:58 pm
	And tell me how much you need, I pay you separately	4:58 pm 4:59 pm
	Send me your acc number	4:59 pm
Shirley:	Mr Abrar, you are kidding? It seems your problem not his!	5:44 pm
2nd Defendant:	This project is quite big, really not satisfied with his attitude.	5:46 pm
	So we are afraid of it.	5:46 pm
Shirley:	What I can see is that you cannot use it long, you wanted to terminate it in a short period but it seems not possible and now you decide to cancel it. You play around	5:48 pm
2nd Defendant:	Yes, I don’t want to use it long, may be 3-5 months max	5:48 pm
	But it’s not a issues	5:49 pm
	Issues is, I think he will give trouble	5:49 pm
	Shirley I pay you, what you are working for	5:49 pm
	So don’t worry.	5:49 pm
Shirley:	I am not only for money, I want it fair for both parties.  You can cancel but please compensate the money to the landlord as what you have paid by checks.	5:51 pm
	The landlord has turned down another offer and I said a lot of good things for you so that he picked you finally, then it comes totally different and I am really sorry to the landlord.	5:52pm
	I also made the termination letter to his current tenant So that you will get the unit on time, then the landlord not only lose a tenant but also his current tenant, it is a total loss.  You need to follow the contract and compensate for 1 year rental if you cancel.	5:57pm
2nd Defendant:	How can we compensate for 1 year It’s not possible.	6:12pm 6:12pm
	And he didn’t sign the contact yet.	6:12pm
	So it’s not yet valid yet	6:12pm
	If he sign the contract then I think about compensation.  He is very clever only think about his own, and as you told me earlier he have lot of offers so why he will lose	6:13pm
	He didn’t pay you anything nor he didn’t pay for stamp duty	6:14 pm
	He is not going lose single penny	6:14 pm
	I can say one thing he is loser because of his greedy.	6:14pm
	As your work I really appreciate.	6:15pm
	So what for you, I will do it.	6:15pm
	*so what ever for you, I will paid	6:15pm
Shirley:	He signed the contract, you need to fulfil the agreement.	9:12pm
	You cannot change now, otherwise you have to compensate for the year.	9:13pm
	My phone is running out of battery	9:13pm
	If you free call me, we can discuss and clear this in easy way.	10:07pm

29.The exchanges of WhatsApp messages set out in paragraph 28 above, appear to support paragraph 9 of the Amended Third Party Statement of Claim, which states:

“On or about 13 August 2017, the 2^nd Defendant on behalf of the 1^st Defendant decided to withdraw the said Offer and instructed Shirley Wong to inform the Plaintiff of such decision and ask the Plaintiff to return the said Cheque for Deposit and 1^st Month Rent immediately (“the said Instructions”).”

30.The Defendants also assert as follows in paragraphs 10 and 11 of their Amended Third Party Statement of Claim:

“10.  However, on or about 14 August 2017, Shirley Wong called and told the 2^nd Defendant that the 1^st Defendant could not withdraw the said Offer, otherwise, the Plaintiff threatened to use the 1^st Defendant and the 2^nd Defendant for breach of contract and claim for compensation equivalent to 1 year rental. The 2^nd Defendant considered such request unreasonable and asked Shirley Wong to handle the matter or arrange a meeting for the parties to discuss the matter face to face.

11.  On or about 14 August 2017, the 2^nd Defendant worried that the Plaintiff would present the said Cheque for Deposit and 1^st Month Rental without the 1^st Defendant’s consent, he instructed the bank to cancel the said Cheque for Deposit and 1^st Month Rental”

31.The Third Party however denies the assertions set out in paragraphs 10 and 11 of the Amended Third Party Statement of Claim and pleads as follows:

“10.  Save and except it is admitted that the Defendant instructed the bank to stop the Rent and Deposit Cheque, Paragraphs 9 to 12 are denied. The Third Party avers that:-

(1)  In the afternoon of 13^th August 2017, the 2^nd Defendant instructed Shirley Wong via Whatsapp to inform the Plaintiff not to deposit the Rent and Deposit Cheque as he was minded to cancel the Tenancy Agreement.

(2)  In proper discharge of her duty as the 1^st Defendant’s estate agent, Shirley Wong immediately advised the 2^nd Defendant that it would be a breach of the Tenancy Agreement on the part of the 1^st Defendant if he was minded to cancel the Tenancy Agreement. Shirley Wong also advised that the 1^st and/or 2^nd Defendants would have to compensate to the Plaintiff a sum equivalent to the rental of 1 year for the losses of the Plaintiff if the 2^nd Defendant decided to cancel the Tenancy Agreement as the Plaintiff had already terminated the existing tenancy and turned down another offer in favour of the 1^st Defendant.

(3)  On 14^th of August 2017, the 2^nd Defendant proposed that the 1^st Defendant would take up the Premises if the Plaintiff allowed payment of rental on a monthly basis.

(4)  After taking instructions from the Plaintiff, Shirley Wong informed the 2^nd Defendant via Whatsapp that despite the previous mutual understanding between the Plaintiff and the 2^nd Defendant that the 1^st Defendant would pay the rental by 11 post-dated cheques in advance, the Plaintiff acknowledged that this was not a term included in the Tenancy Agreement. Thus, the Plaintiff accepted that the 1^st Defendant could pay the rental on a monthly basis provided that the Plaintiff received HK$60,000 for the rental deposit and the rent of the first month by 4 pm of 15^th August 2017.

(5)  However, the 2^nd Defendant then replied that he had to discuss with his partner.

(6)  Despite the proper advice of Shirley Wong on the legal consequences of the breach of the Tenancy Agreement, the Defendants eventually decided to act in breach of the Tenancy Agreement by instructing his bank to stop the Rent and Deposit Cheque.”

32.The contemporaneous record of the WhatsApp exchanges of 14^th August 2017[21] between Shirley Wong and the 2^nd Defendant is as follows:

Shirley:	It was too late when I got home last night, please call me as soon as you wake up.  It is a signed contract, I tried to ask the landlord if he can lease it a half year, and suggested him cancel the agreement because I thought the tenant may not want to lease a full year.  He got very angry, saying he stopped other agents viewing the unit, he lost other tenants and he will sue if you don’t fulfil the tenancy agreement.  He of Ouse (course) signed the contract, otherwise he could not receive the cheques.  Please make sure he will get the money…..	9:35am
	Per contract, you have to give the whole year checks today the latest.	10:12am
	I am in Tst, let’s meet.	3:54pm
2nd Defendant:	If landlord contact you inform me immediately	5:43pm
2nd Defendant:	We go talk finish this issues.	5:43pm
2nd Defendant	I am trying to solve this problem in a mutual way.	5:43pm
Shirley:	OK, please have it finished the soonest, otherwise, I cannot focus my job as well because he gives me a lot of pressure.	5:44pm
	Thank you.	5:44pm
2nd Defendant	Yes I will	5:48pm
Shirley:	(Emoji that stands for thank you or praying)	5:49pm
	I guess no need 100000, but the check amount 60000, it is regarded as deposit, then you will lose the deposit if you cancel it before you take the keys.  This is just my thinking …	5:55pm
2nd Defendant:	Still it’s big money	5:56pm
Shirley:	My manager just called me, he says I should not involve it anymore because he worries I may mislead you as I am still new in this field, he will take this case from now on.	6:13pm
2nd Defendant:	OK no issues.	6:18pm

33.The critical parts of the two Series of WhatsApp Messages ended at this point.  The Manager did try to broker a resolution between the parties but was unsuccessful.   The Plaintiff thereafter commenced this Action against the Defendants who in turn commenced the Third Party Action in these proceedings suing the Third Party for failing to exercise reasonable care and skill to give effect to the 1^st Defendant’s instructions, and claiming an indemnity to the Defendants for the Plaintiff’s claim in the main action and the return of the stamp duty and the sum of HK$17,400 commission money.

34.The four days of Court time used in cross-examination of the witnesses unsurprisingly focused on whether the Defendants intended to be bound by the putative tenancy agreement signed and there were frequent references to the two Series of WhatsApp messages to extract from each witness what he or she was thinking or wanted to convey to the other party.  In the course of presenting his own case (as the Plaintiff acted in person) and giving evidence, the Plaintiff admitted that the Premises were let out to another party on 20 December 2017 at the same rent of HK$ 20,000 per month for 2 years.  It was also revealed that the Third Party did cause the putative tenancy agreement to be stamped on 15^th August 2017. [22]

35.The 2^nd Defendant sought to argue that as the putative tenancy agreement was only signed by him without explicit reference to the fact that he was acting for and behalf of the 1^st Defendant, the latter would not be bound.  The 1^st Defendant pointed to the fact that the Company Chop of the 1^st Defendant was not used.  He went on to argue that the placement of his signature in the space reserved for the 1^st Defendant did not bind the 1^st Defendant.  

36.The 2^nd Defendant also put forward an argument along these lines: namely, that the putative tenancy agreement that he had signed, albeit as guarantor for the 1^st Defendant, was just a preliminary “offer” to the Plaintiff for his confirmation of his interest in the unit, and he expected that a formal tenancy agreement would later be signed between the parties in due course, at which time, the company chop etc would be affixed therein to mark it as being the tenancy agreement.   In support of this contention, the 2^nd Defendant referred to the following extract from the Abrar Series of WhatsApp Messages of 27 July 2017[23]:

Shirley:	Yes, the provisional agreement is to receive the deposit.	3:44 pm
2nd Defendant:	When we make agreement on Aug 2, I will give them complete fund.	3:45 pm
	Right now I give him 5k $ just for confirmation.  …..	3:45 pm
Shirley Wong:	I understood, but we need to sign the documents for this.	3:49 pm
2nd Defendant:	What are the documents you needed from my side?	3:50 pm
Shirley Wong:	It named provisional tenancy agreement	3:51 pm
	You can then sign the formal tenancy agreement with full payment on Aug 2 or 3	3:51 pm
	I will have the document for you, you don’t have to prepare.  Please confirm then I prepare it immediately.	4:17 pm

37.On 4 August 2017, before the putative agreement was signed, Shirley Wong asked the 2^nd Defendant to prepare the rental cheques, company chop, Business Registration, copy of address proof as guarantor, his HKID copy etc.  The 2^nd Defendant also pointed out that when he signed the putative tenancy agreement on 7 August 2017, he did not use the company chop as he thought that was the preliminary agreement and it was after the 7 August 2017 that Shirley Wong asked him to send all cheques and company chop for the tenancy agreement to be stamped.

38.In the final analysis, it was the case and belief of the Plaintiff and the Third Party that in the factual circumstances of this case, the Defendants are bound by the tenancy agreement they signed. The Court will next proceed to consider whether in light of the evidence set out above (and other evidence in this case which, though not explicitly set out in this judgment, was also considered), they should prevail.

39.Shortly before the start of the hearing, the Court had to ascertain from the parties as to whether they had any objection for the Court to hear the case as some information regarding mediation had somehow slipped into the Court Bundles but which were later taken out with the consent of the parties.  They all stated that they had no objection to this Court hearing their case. 

DISCUSSION AND DETERMINATION

The Relevant principles of the Common Law

40.Although the parties (two of whom were laymen) all used the language of offer and acceptance, none placed before the Court the general principles of the Common Law for the formation of contracts, probably because such principles were considered too trite for explicit statement.  For a case which depends on whether a legally enforceable contract had been concluded, it is perhaps important that some of the fundamental principles developed by the Common Law Courts, should be re-stated, trite though these principles may be.

41.The Common Law regards a legally enforceable contract to have been concluded when the Court is convinced on a balance of probabilities that the parties have evinced a clear intention to enter into a legally binding agreement by fulfilling the following conditions[24]:

(1)  When an offer containing clear terms and conditions was communicated to the offeree;

(2)  When the offeree unequivocally expresses acceptance of that offer in all of its aspects; and

(3)  That unequivocal acceptance has been communicated or deemed to be communicated to the offeror; but

(4)  Before such acceptance is communicated or deemed to have been communicated, the offer may be withdrawn at any time.

42.The subjective thoughts of the parties as to whether any of these conditions are fulfilled is not to be taken into account by the Court in coming to its decision, as the law of contract exists to provide guidance to the world at large.  Thus, the evidence is to be assessed on the basis of an objective evaluation of what reasonable persons in the positions of the parties would behave in the factual circumstances faced by them.  In particular the effect of their communications is to be objectively evaluated as reasonable persons in their positions would understand them to be.

43.This is a case which was handled by an Estate Agent.  Neither party disputed that Shirley Wong, who worked for the Third Party, was fully empowered to represent them.  As Shirley Wong acted for both parties, whatever was communicated to her by one party intended for the other party, must be considered to be have been effectively communicated.  Conversely, each party must rely on her to communicate the response of the other party when an offer or acceptance is required to be communicated.

44.This is a case concerning a tenancy agreement, which involves an interest in land, and a concluded contract to be legally enforceable requires the contract to be evidenced in writing pursuant to section 3 of the Conveyancing and Property Ordinance.  Thus, perhaps much emphasis is placed on the signed putative agreement by both the Plaintiff and the Estate Agent.

Authority of the 2^nd Defendant to bind the 1^st Defendant

45.The 2^nd Defendant is known to Shirley Wong as the sole director of the 1^st Defendant and throughout the material time covered by this Case purported to give instructions to Shirley Wong for and on behalf of the 1^st Defendant.  In these circumstances, irrespective of whether the proper formalities were deployed in any corporate action, the 2^nd Defendant has been held out by the 1^st Defendant to act on its behalf, and was thereby invested with ostensible authority.  Thus, the fact that the 2^nd Defendant did not use the Company Chop in signing his name to the space reserved for the 1^st Defendant in the putative tenancy agreement, did not mean that it did not bind the 1^st Defendant, if indeed there was a concluded contract.  The 2^nd Defendant had ostensible authority to do so and so if indeed the putative tenancy agreement were a concluded contract, it would certainly bind the 1^st Defendant. The question here is whether there was a concluded contract.

Was there a concluded contract?

46.It is clear from the evidence that after the 2^nd Defendant signed the putative tenancy agreement for the 1^st Defendant and for himself as guarantor for the 1^st Defendant, he handed that over to Shirley Wong with a Cheque for HK $60,000 post-dated to 13^th August 2017, fully expecting that she would hand it over to the Plaintiff for signature and explaining why there was a post-dated Cheque.

47.Whether the tenancy agreement signed by the 2^nd Defendant was a preliminary contract which needs to be confirmed by a later contract, as the 2^nd Defendant had argued, is of no importance.  By signing the tenancy agreement and handing over the cheque intended for the Plaintiff, the Defendants were clearly making an offer to the Plaintiff.  If it had been accepted upon its precise terms, there would have been a concluded contract. 

48.But it must be noted that the cheque which was handed over by the 2^nd Defendant to Shirley Wong, was a post-dated Cheque and that represented a departure from the terms of putative tenancy agreement.  The 2^nd Defendant had explained to Shirley Wong why he had issued a post-dated Cheque, different to the terms to the tenancy agreement that was signed.  The terms have been changed so that the Plaintiff would not have his Deposit and the first month’s rent paid immediately but could only be paid on 13^th August 2017 upon confirmation of availability of vacant possession of the Premises to be let, despite what was written into the terms of the putative tenancy agreement.  Merely signing the tenancy would not have been sufficient to signify acceptance in light of this change of terms.  The handing over of the signed tenancy agreement by the Defendants to Shirley Wong was clearly attached with a condition that the acceptance must mean that the Plaintiff would have to acknowledge that indeed he accepted the post-dated cheque, contrary to the terms of the tenancy agreement.

49.The evidence of the 2^nd Defendant, and the Court believes him, was that he was uncertain that the Plaintiff could deliver vacant possession of the Premises, having seen a sitting tenant occupying the Premises when he (the 2^nd Defendant) inspected the Premises.  Accordingly, he and the 1^st Defendant wanted to wait until 13 August 2017 to see if indeed the Premises would be available.  Seen in this light, the offer was a conditional one, namely, that on the 13^th of August 2017, the Plaintiff would have to demonstrate on convincing evidence that the Premises would be ready for occupation by the 1^st Defendant.  The 2^nd Defendant also expressly explained this reasoning to Shirley Wong, who was also the Plaintiff’s agent.  Whether or not Shirley Wong explained this reasoning to the Plaintiff is not relevant.  Shirley Wong was agent for the Plaintiff.  Whatever she was told by the 2^nd Defendant, it must be presumed that the Plaintiff was so informed.  Thus, the offer made to Shirley Wong, the night of 7 August 2017, was a conditional offer made to the Plaintiff.

50.It would seem that Shirley had not explained the 2^nd Defendant’s reasoning to the Plaintiff, when she brought the tenancy agreement, signed by the 2^nd Defendant, to him.  Indeed, she did not even draw the Plaintiff’s attention to the post-dated Cheque.  Her WhatsApp message to the Plaintiff the following day, that is 8 August 2017, confirmed this (see: paragraph 18 above).

51.It is also clear that the Plaintiff did not accept the post-dated Cheque.  Her WhatsApp message to the 2^nd Defendant showed this (see: paragraph 22 above).  Indeed, she asked the 2^nd Defendant to transfer funds into the bank account of the Plaintiff in exchange the post-dated Cheque (see: paragraph 23 to 25 above). The 2^nd Defendant had also averred in the Defence that Shirley Wong informed him that if he did not make immediate payment of the Deposit and 1^st Month Rental, the Plaintiff might still accept other offers.  Shirley did not deny that, in fact, she did so remark to the 2^nd Defendant (see: paragraph 23). 

52.In the circumstances, the Plaintiff having been held out by Shirley Wong, his agent, that he could still accept other offers, plainly did not accept the offer of the 1^st Defendant.  Thus, the mere fact that the Plaintiff had signed the putative tenancy agreement is of no consequence.  He plainly, according to his agent, did not consider himself bound.  He clearly wanted immediate payment according to the terms of the tenancy agreement.  Three days later, Shirley Wong asked the 2^nd Defendant if he had wired the money into the Plaintiff’s account or he would prefer to take a risk (see paragraph 26 above).  As the Plaintiff’s agent, she was indicating to the 2^nd Defendant in no uncertain terms that the post-dated cheques were not accepted and that the 1^st Defendant was at risk of not having his tenancy.

53.It might be argued on the part of the Plaintiff (and in fact the Plaintiff has said in trial that the Defendants could have sued him if he failed to deliver vacant possession by 15 August 2017) that since the tenancy agreement promised vacant possession would be given, the 1^st Defendant can claim compensation, but that is not good enough in this case.  The 2^nd Defendant on 13 August 2017, said to Shirley Wong in the Abrar Series of WhatsApp Messages: “This project is quite big, really not satisfied with his attitude.  So we are afraid of it” (see: paragraph 28, message at 5:46 pm).  Prospective tenants look for premises for occupation for their businesses and often their losses might exceed losses claimable by legal action, such as client goodwill and an order for specific performance is of no use when there is a sitting tenant.  Such an order would in any event take time to procure by legal action, and such time lost could mean losses which cannot be recovered.  Thus, it is not unreasonable for someone in the position of the 2^nd Defendant to be cautious about getting actual possession on commencement of the intended tenancy.

54.Indeed, one can go further.  On the assumption that even if the 2^nd Defendant had not expressed his fear to Shirley Wong that the Premises might not be available for occupation and was therefore making an offer on condition that the Premises would actually be available for occupation, the mere signature of the putative tenancy agreement by the Plaintiff would still not have amounted to acceptance unless he knew that the Cheque was post-dated and he had communicated his acceptance of that to Shirley, as the 1^st Defendant’s agent.  However, the Plaintiff did not do so, he complained to Shirley Wong when he discovered that the cheque was post-dated and could not be immediately deposited in the bank as he had expected.

55.Faced with the post-dated Cheque which ran contrary to an express acknowledgment in the putative tenancy agreement that the payment of Deposit had been made, signing the agreement, would have been an ambiguous act if the Plaintiff did not acknowledge at the same time, that he was nonetheless taking the post-dated Cheque as fulfillment of the contradictory terms of the written instrument.  To qualify as an unequivocal act of acceptance, the Plaintiff would have had to say to Shirley, as his agent and agent for the 1^st Defendant, “Yes I noticed that the cheque is post-dated despite the acknowledgment of immediate payment in the tenancy agreement, please inform the 1^st Defendant that I accept these terms”.

56.Thus, following 7 August 2017, the conditional offer of the 1^st Defendant made to Shirley Wong, agent of the Plaintiff, had plainly not been accepted and the mere signing of the putative tenancy agreement by the Plaintiff, did not mean acceptance of the offer, given the surrounding circumstances.  Nonetheless the offer remained and was open to acceptance by the Plaintiff until withdrawn.

57.Following up on his anxiety to ensure that the Premises would be ready for occupation on the scheduled date on 15 August 2017, the 2^nd Defendant did make enquiries of Shirley Wong after 8 August 2017, as can be seen from the WhatsApp communications of 11 August 2017 between the 2^nd Defendant and Shirley.  But these conversations did not bring the matter further nor did these conversations indicate that the Plaintiff had accepted the 1^st Defendant’s offer in the terms made on 7 August 2017.  But the tone of the 2^nd Defendant was that he was suspicious of the Plaintiff and that he might cancel the deal, following Shirley Wong’s indication on 8 August 2017 that the Plaintiff could accept other offers (see: paragraph 23 above).

58.On 13 August 2017, not having heard from the Plaintiff that indeed the Premises would be ready, the 2^nd Defendant decided to pull out of the deal, in other words, withdraw the offer he made on behalf of the 1^st Defendant on 7 August 2017.  The opening message in the WhatsApp Exchanges of 13 August 2017 (see: paragraph 28 above), clearly announced that that the 1^st Defendant was cancelling.  In the technical terminology of the Common Law, the 1^st Defendant was withdrawing the offer, which it was entitled to do, in the absence of acceptance by the Plaintiff.

59.The reaction of Shirley Wong was one of incredulity.  Upon receiving the 2^nd Defendant’s cancellation message, she replied: “Mr Abrar, you are kidding?  It seems your problem, not his” (see: paragraph 28 above).  She believed that both parties having signed the tenancy agreement, the contract was concluded.  However, that was her subjective belief.  The law evaluates the evidence objectively.  An offer made by the 1^st Defendant had been withdrawn before acceptance and that spelt the end of the process of formation of any contract.

60.The Pleadings and the WhatsApp message exchanges of 14 August 2017 further supports the certainty of the withdrawal of the offer by the 1^st Defendant and the misconception on the part of Shirley Wong that the signing of the putative tenancy agreement by both parties resulted in a concluded contract.  A revised deal was proposed by Shirley Wong, but this appeared a last-ditched desperate effort to save the deal, which in the end failed.

61.In the circumstances, the evidence points to there being no acceptance of the offer made by the Defendants on 7 August 2017 and in the absence of any acceptance, the offer had been withdrawn, with the result that no concluded contract had been made and the Court so finds.

The Third Party Action

62.In Paragraph 5 of the Amended Third Party Statement of Claim the Defendants allege that two cheques, for the total sum of HK$18,605 were handed to Shirley Wong which may be used for payment of commission and stamp duty once the Plaintiff had accepted the Defendants’ offer made on 7^th August 2016.  In light of the foregoing findings, the Plaintiff had clearly not accepted the offer, and thus Shirley Wong should not have paid in her commission cheque.  However, the 2^nd Defendant had on two occasions indicated to Shirley Wong that he would pay her commission, as recorded in the Abrar Series of WhatsApp Messages[25].  Also, on 11 October 2019, Day 4 of the trial, soon after the morning break, at around noon, the 2^nd Defendant, speaking on behalf of the Defendants confirmed to this Court that the Defendants were not pursuing the return of the commission but would persist with the pursuit of the indemnity and the loss of the stamp duty payment under the Third Party Statement of Claim.  This act of keeping faith with the 2^nd Defendant’s prior promise frees the Court from having to decide whether the commission had to be returned.  It is also an act of magnanimity much in keeping with the traditions of the Faiths from which the 2^nd Defendant draws his name.

63.Paragraph 9 of the Amended Third Party Statement of Claim asserts as follows:

“On or about 13 August 2017, the 2^nd Defendant on behalf of the 1^st Defendant decided to withdraw the said Offer and instructed Shirley Wong to inform the Plaintiff of such decision and ask the Plaintiff to return the said Cheque for Deposit and 1^st Month Rent immediately (“the said Instructions).”  

64.Paragraph 15 of the Amended Third Party Statement of Claim asserts that that in the course of acting for the 1^st Defendant, the Third Party failed to exercise reasonable care and skill to give effect to the 1^st Defendant’s instructions with the following Particulars:

(a)  Failing to take any or any adequate or effective step to perform the said Instructions:

(b)  Permitting the Cheque for Stamp Duty and Commission to be presented without the 1^st Defendant’s instructions and/or with the knowledge that the said Offer had already been withdrawn by the 1^st Defendant;

(c)  Causing the alleged Tenancy Agreement to be stamped without the 1^st Defendant’s instructions and/or with the knowledge that the said Offer had already been withdrawn by the 1^st Defendant; and

(d)  In the premises, failing to exercise reasonable care and skill in the course of acting for the 1^st Defendant.

65.The Stamping date for the putative Tenancy Agreement was 15 August 2017[26], at which time the 1^st Defendant had indicated withdrawal of his offer.  Shirley Wong was acting for the 1^st Defendant, and as agent for the 1^st Defendant she must comply with the 1^st Defendant’s instructions that the Cheque for stamp duty should only be used if she could confirm that the Premises were available for occupation on the specific date of 15 August 2017.  On 13 August 2017, the 1^st Defendant had withdrawn his offer.  The corollary of this action must be that the Third Party should not have procured the stamping of the putative tenancy agreement.  The fact that Shirley Wong and the Plaintiff considered the signed putative tenancy agreement a concluded contact was merely their subjective opinions.  These subjective opinions did not change the objective picture that there was no concluded contract.

66.As to the other alleged breach of duty that Shirley did not take any or adequate step to perform the 1^st Defendant’s instructions given through the 2^nd Defendant, Shirley did inform the Plaintiff that the offer had been withdrawn.  The Plaintiff did not accept the 1^st Defendant’s offer.  She could do nothing about that.  That she took a different view as to the legal consequences of the signature of the putative tenancy agreement is of no consequence as that is an objective matter to be determined by the Court.  Whether her actions had contributed to the commencement of this action is a question that can be settled by an order of costs of this action but it did not otherwise cause loss to the 1^st Defendant.

67.As the stamp duty had been unnecessarily paid, that is clearly is a loss claimable by the 1^st Defendant.

68.In the circumstances, the only loss which is claimable and is claimed under the alleged breach of duty is the amount of stamp duty paid, namely the sum of HK$ 1,205.

DISPOSITION

69.In light of the determinations made above, the Plaintiff’s Action herein is dismissed.

70.In the Third Party Action, judgment is entered in favour of the 1^st Defendant against the Third Party in the sum of HK$1,205.  Such sum shall attract interest at the rate of 1% over the prime rate of any one of the note-issuing banks from 15 August 2017 (the date of payment of stamp duty), to be calculated to the date of Judgment.  Thereafter the sum of HK$1,205 plus interest so calculated shall as a global sum attract interest at the judgment rate until payment.

71.The Court would make an order nisi of costs in favour of the Defendants to be paid and shared equally between the Plaintiff and the Third Party.  Such costs if not agreed shall be submitted to taxation.  This order nisi will become absolute in 14 days, if no application for variation is made.

72.As the Defendants are unrepresented litigants, the Court draws their attention of Order 62 Rule 28A of the Rules of the District Court (enclosed as an Annexure to this Judgment).  The Defendants are invited to bear in mind the provisions of this Rule in estimating their costs.  The Court suggests that the Defendants write to the Plaintiff and Third Party with a schedule itemising their costs in order to attempt agreement.  If agreement becomes impossible, the Defendants should take out an appointment with the Registrar of the District Court for taxation.

CONCLUDING NOTE

73.This Case is an illustration that the signing of a tenancy agreement does not necessary result in a concluded contract.  Estate agents are well advised to ensure that parties signing tenancy agreements should, if possible, do so face to face so that all issues are well understood and thus ensure a concluded contract.  If it is not possible to arrange a face-to-face signing, care should be taken to ensure that the parties fully understood the terms and are completely of like mind in their understanding before the estate agent is satisfied that there was a concluded contract.

74.The Court would like to thank all parties and Counsel for their assistance.

75.But for the intervention of the unforeseen events of recent months, one after another including the worldwide coronavirus, the lives of all of us would not have been so disrupted.  As a result, this judgment could only be made available to the parties now despite its readiness for delivery some time before handing down today.  We are reminded, yet again, that whilst Man proposes, it is God Who finally disposes.  May all concerned be blessed with Good Health and Happiness for now and for the times ahead!

The plaintiff appeared in person

The 1^st defendant appeared in person, represented by its Director Mr Mohammed Bava Divan Hasan

The 2^nd defendant appeared in person

Mr Marco S P Tse, instructed by Cheung Fung & Hui for Third Party

Annexure

Order 62 Rule 28A of the District Court

28A.  Costs of a litigant in person (O. 62, r. 28A)

(1)  On a taxation of the costs of a litigant in person there may, subject to the provisions of this rule, be allowed such costs as would have been allowed if the work and disbursements to which the costs relate had been done or made by a solicitor on the litigant’s behalf.

(2)  The amount allowed in respect of any item shall be such sum as the taxing master thinks fit not exceeding, except in the case of a disbursement, two thirds of the sum which in the opinion of the taxing master would have been allowed in respect of that item if the litigant had been represented by a solicitor.

(3)  Where in the opinion of the taxing master the litigant has not suffered any pecuniary loss in doing any work to which the costs relate, he shall not be allowed in respect of the time reasonably spent by him on the work more than $200 an hour.

(4)  A litigant who is allowed costs in respect of attending Court to conduct his own case shall not be entitled to a witness allowance in addition.

(5)  Nothing in Order 6, rule 2(b), or rule 32(4) of this Order or Schedule 2 to this Order shall, unless otherwise specified therein, apply to the costs of a litigant in person.  (L.N. 153 of 2008)

(6)  For the purposes of this rule a litigant in person does not include a litigant who is a practicing solicitor but includes a company or other corporation which is acting without a legal representative.  (L.N. 153 of 2008)

(7)  This rule applies, with the necessary modifications, to a summary assessment under rules 9(4)(b), 9A(1)(a) and (b) and 11A(4), as it applies to the taxation of the costs of a litigant in person, if the party entitled to the sum is a litigant in person. (L.N. 153 of 2008)