Happy Fish Co Ltd v. Tang Jeb Ming
Read the full judgment text of HCA 1209/2016 on BabelCite. This High Court CFI judgment was delivered on 16 December 2022.
1. In April 2007, O’Kane [1] and Happy Fish [2] each entered into a written sale and purchase agreement (“ Agreement ”) with Tang [3] for the sale to them respectively of Lot No.3059 (“ Lot 3059 ”) and Lot No.3060 (“ Lot 3060 ”) (collectively, the “ Lots ”) in Demarcation District No.316 on Lantau Island with a 3-storey village house to be erected on the Lots.
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HCA 1209/2016 and [2022] HKCFI 3767 HCA 1209/2016 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO 1209 OF 2016 _____________
_____________ AND HCA 1948/2016 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO 1948 OF 2016 _____________
_____________ Before: Deputy High Court Judge Jonathan Chang SC in Court Dates of Hearing: 5-9 and 16 September 2022 Date of Judgment: 16 December 2022 ________________ J U D G M E N T ________________ INTRODUCTION 1.In April 2007, O’Kane[1] and Happy Fish[2] each entered into a written sale and purchase agreement (“Agreement”) with Tang[3] for the sale to them respectively of Lot No.3059 (“Lot 3059”) and Lot No.3060 (“Lot 3060”) (collectively, the “Lots”) in Demarcation District No.316 on Lantau Island with a 3-storey village house to be erected on the Lots. 2.Tang would line up the indigenous villagers who own the Lots[4] to apply to the Lands Department for permission to build the village houses, arrange for and supervise their construction, and upon completion and after payment of premium, arrange for the transfer of ownership of the Lots (with the village houses erected thereon) to O’Kane and Happy Fish. 3.Construction of the two village houses was only completed in November 2013, and Certificate of Compliance was issued in April 2015. Premium was paid in April 2016. Rather than arranging for the transfer of the Lots to O’Kane and Happy Fish, Tang arranged for their transfer to one Wong Chun Fai Henry (“Wong”) in May 2016 at $9 million for each lot. 4.O’Kane and Happy Fish contended that Tang had repudiated their Agreements. Their main complaints are two-fold: (1) there was a significant delay in the construction of the village houses; and (2) Tang arranged for the transfer of the Lots to Wong when their Agreements were subsisting. Both acts evinced Tang’s intention not to honour their Agreements. O’Kane and Happy Fish accepted Tang’s repudiation and claimed damages against him. 5.Tang’s main defences are: (1) there was no delay given there was no express provision in the Agreements on the date of completion of the construction of the village houses; (2) the long time taken to build the village houses was caused by the request from O’Kane and Happy Fish to build a basement, and the remedial works required by the Government to be done to after the construction of the basement was abandoned; (3) Tang all along acted with reasonable diligence; (4) any breach arising from delay was waived or affirmed by O’Kane and Happy Fish and they were estopped from complaining; and (5) Wong was a personal friend of Tang who would be able to transfer the Lots as Tang directed as and when required. Tang’s pleaded defence based on illegality[5] was not pursued at trial. AGREEMENT WITH O’KANE 6.By late 2006, O’Kane was identifying a house to purchase in South Lantau for his family to reside in. He was an airline pilot and wished to live close to his work at the airport. His friends introduced him to Galy Wong (“Galy”) who is Tang’s wife. They had previously purchased a house in South Lantau through her. 7.O’Kane and his wife met Galy for the first time in March 2007 in South Lantau. Galy told them that Tang was an expert in building houses. She showed them several houses said to be built or renovated by Tang. She identified an empty plot of land and said Tang could build a village house for them. That plot was Lot 3059. 8.Later that month, O’Kane and his wife met Tang and Galy at their office. They were shown photographs of some houses that Tang had built or renovated and were impressed by his work. Tang said that he had built many houses with empty spaces (voids) underneath them which could be turned into a liveable basement for extra cost, and he said he could do a similar design for Lot 3059 for an extra price of $200,000. He said whilst it was illegal to build a house with a basement within the house, it was not illegal to build a void underneath a house, and he could turn the void into a liveable basement with the Buildings Department’s consent. 9.O’Kane said that he considered what Tang told him about the basement “dubious” and Tang was trying to take advantage of some “grey area” in the law to build a basement. He did not want to get involved in anything illegal given this would be against the conditions of the house purchase scheme offered by his company through which he planned to purchase the house, nor would he put his job at risk by involving himself in anything illegal. He made clear to Tang that he would not risk losing the house with anything illegal. He never made any request to Tang for a basement to be built in the village house on Lot 3059. 10.At this juncture, I note that Tang’s case is that the discussion with O’Kane about building a basement first took place only after O’Kane had signed his Agreement, and it was O’Kane who requested to build a basement after he knew that Tang was constructing one for Happy Fish on the neighboring Lot 3060. 11.O’Kane and his wife inspected Lot 3059 again in March 2007 with Tang and Galy, and they expressed interest to purchase the lot with the village house to be built on it. Galy said that the purchase price was $4.8 million inclusive of all construction costs, and the village house would be ready before Christmas in 2007 and in any event before Chinese New Year in 2008. She also suggested that O’Kane only needed to renew his lease for his serviced apartment where he was then residing until late January 2008. O’Kane agreed with the provisional terms discussed. 12.On 1 April 2007, O’Kane (as purchaser) and Tang (as vendor) signed the Agreement at Tang’s office. The key provisions are as follows:
13.There is no reference to any basement to be constructed in the village house on Lot 3059 either in the body of the Agreement or in the drawing attached to the Agreement. AGREEMENT WITH HAPPY FISH 14.Happy Fish was incorporated in April 2007 by Yukiko Nozaki (“Yuki”), her husband and their friends for the purpose of purchasing Lot 3060 for investment. Yuki’s husband and O’Kane are work colleagues. 15.In January 2007, Yuki was put in touch with Galy through the same friends of O’Kane who had introduced him to Galy. Later that month, Galy drove Yuki and her husband around South Lantau to view properties. Yuki told Galy that they were looking to purchase an investment property to lease out. Galy said her husband Tang was an experienced local builder and he had built all the village houses which she had shown them. She explained that the houses in the area were village houses which must be constructed in accordance with the restrictions set by the Government, but the interior layout could be built to their requirements. She also said that Tang already had the necessary permissions from the Government to build a brand-new village house. 16.In or about February 2007, Yuki called Galy and expressed an interest to purchase a brand-new village house in Lantau Island. A week or two later, Galy showed Yuki and her husband an empty plot of land and said Tang already had the permission to build a village house on it. That plot was Lot 3060. Galy said it would cost $5 million inclusive of kitchen and other internal fittings, and the village house would be ready for occupation by the end of the year. 17.On or about 14 February 2007, Galy sent Yuki and her husband an offer letter which reduced into writing the proposal she had previously pitched to them. The essential terms are as follows:
18.There is a handwritten annotation on the offer letter with a line drawn through “$4,800,000” and “5,000,000” written above it. Yuki could not recall who did that and when, but she maintained that it was not written by her nor anyone from Happy Fish since they would not raise the purchase price nor add to the original document prepared by Galy and Tang. Galy’s evidence is that the offer letter was all in type print when it was provided to Yuki. Her offer to Yuki at that time was at $4.8 million. The handwritten price was added in later but not by her or Tang, and they only became aware of the handwritten price in these proceedings. 19.In April 2007, Happy Fish was incorporated as the vehicle to purchase Lot 3060 for investment. After its incorporation, Yuki informed Galy that she would be purchasing Lot 3060 with some friends through a company. Galy arranged her to sign the Agreement at Tang’s office on 24 April 2007. The terms are identical to those in O’Kane’s Agreement, save that the purchase price is $5 million and there is an inventory list appended to it. There is no reference to any basement to be constructed in the Agreement or the inventory list. 20.Yuki and Galy gave different accounts as to how the purchase price of $5 million came about in Happy Fish’s Agreement:
21.Yuki’s evidence in this regard is not satisfactory:
22.Mr Damian Wong who appeared for Tang[6] invited me to find that Yuki was the one who made the handwritten price change in the offer letter to reflect (for record purpose) the new price which she had agreed with Galy following the agreement to build the basement in the village house. I do not believe it is necessary for me to come to a finding in this regard, when it appeared common ground that Galy did offer $4.8 million at one stage, which was increased to $5 million, albeit on different accounts of Yuki and Galy set out in [20] above. I do bear in mind the unsatisfactory nature of Yuki’s evidence highlighted above when I assess the overall credibility of the parties’ respective cases. WHETHER THERE WAS A REQUEST TO BUILD A BASEMENT 23.O’Kane’s evidence is that the suggestion to build a basement came from Tang in March 2007, which he did not take up. Yuki’s evidence is that there was never any discussion on building a basement and the price in Happy Fish’s Agreement did not factor that in. 24.The evidence[7] of Tang and Galy is that O’Kane approached them in around mid-April 2007 after he had signed his Agreement. He said he knew Tang was building a basement for Happy Fish in the neighboring Lot 3060 and he also wanted one for his village house. Tang said this could be done at an additional price of $200,000, but he (through Galy) reminded O’Kane that the construction of the basement was illegal. Mark insisted on its construction and agreed to pay the additional price. Further, given all of them knew that the building of a basement in the village house was illegal, they agreed to omit the basement from all the written documents, and it would be unnecessary for O’Kane to sign a new contract to include the basement. On one occasion at Tang’s office, Tang used a drawing to explain to O’Kane and his wife how the basement would be constructed. O’Kane and his wife even suggested that a cupboard could be used to hide the entrance to the basement if and when the officers from the Lands Department came for inspection. 25.As to Happy Fish, the evidence of Tang and Galy is that Yuki approached them in around early to mid-April 2007 and requested to build a basement for the village house on Lot 3060. Tang agreed to build it at an additional price of $200,000. Given the construction of a basement was illegal, Tang and Yuki to omit this from all the written documents, and for this reason Happy Fish’s Agreement made no mentioning of it. 26.As to how the construction of the basements was later abandoned, Tang’s case is as follows:
27.For the reasons set out below, I reject Tang’s case and find, on balance of probabilities, that O’Kane and Yuki never requested to build a basement for their respective village houses on the Lots. 28.As regards O’Kane:
29.As regards Happy Fish / Yuki:
30.It follows that I also reject Tang’s case that any delay in the construction of the village houses on the Lots was attributable to the construction of a basement or any resultant remedial works. Incidentally, Poon’s evidence is that the refusal of consent by the Government for the site formation works on the Lots did not relate to any basement works on the Lots, but related to retaining wall and slope works next to the Lots. The incident report and remedial proposals prepared by Poon for submissions to the Buildings Department did not refer to any remedial works for any “void” created on the Lots. This undermines Tang’s case that the delay in construction resulting from remedial works required to be done was related to the construction of a basement. CONSTRUCTION AND DELAY 31.After the Certificate of Exemption was revoked in July 2007, Poon submitted site formation proposal which, upon various revisions, was accepted by the Buildings Department in August 2008. In September 2009, Poon applied for consent to commence site formation works which, after a number of rejections by the Buildings Department, was granted in February 2011.[8] Permission to carry out works on Government land was given in April 2011. Site formation works on the Lots were completed in late 2011 and was acknowledged by the Buildings Department in July 2012. Construction of the village houses commenced in December 2012 and was completed in or around mid-November 2013. 32.Certificate of Compliance was issued in April 2015. In order for the Lots to be transferred to third parties, premium had to be paid to remove the alienation restriction clause imposed under the Small House Policy. In December 2015, the District Lands Office assessed the premium at $4,347,900 for each of Lot 3059 and Lot 3060. Tang engaged lawyers to appeal against the premium assessment on 11 January 2016. The appeal was eventually withdrawn on 4 March 2016, and the premium for both Lots was paid on 29 April 2016. 33.O’Kane and Happy Fish complained that there was substantial delay in the construction of the village houses, and Tang further delayed in completing the Agreement by unjustifiably appealing against the premium assessment. As a result, Tang breached the implied term to the Agreement to exercise due and reasonable diligence in procuring completion of the Agreement and not to unreasonably delay or obstruct its completion. 34.There are two obstacles which O’Kane and Happy Fish have not crossed to make good their complaint against Tang on delay. 35.First, there is no express provision in the Agreement on the date of completion of the village houses. There is no plea of an implied term as to the reasonable completion date in the circumstances of the case. Without a reference completion date, it would be impossible both on the facts and in law for any complaint on delay to be made out. 36.Mr Toby Brown appearing for Happy Fish drew my attention to the estimate of 5-month construction time in the offer letter: [17] above. That is no more than an estimate, and did not give rise to an agreement to complete the construction within 5 months, beyond which it could be said that there would be unreasonable delay. The same applies to what Galy may have told O’Kane and Yuki that the village houses would be built by the end of 2007 or Chinese New Year 2008. There is no plea that this gave rise to any agreement of a fixed completion date or period. 37.Further, I agree with Mr Wong that O’Kane and Happy Fish could not rely on the mere fact that the construction of the village houses took 6 years to complete to make out a case on delay, let alone repudiatory breach by Tang. They must specifically point out which period of time was the alleged unreasonable delay, and what Tang had done wrong to cause such delay. There is no relevant plea in the Statement of Claim. 38.Also, as Mr Wong submitted, a large part of the time during the 6-year period was taken up for applications for approval from the Government departments. The applications were handled by Poon. There is no plea as to how Tang had acted unreasonably in the process. 39.Second, it is clear from the evidence that O’Kane and Happy Fish had by words and conduct agreed to proceed with their Agreements notwithstanding any delay in the construction of the village houses. 40.As regards O’Kane:
41.As regards Happy Fish / Yuki:
42.I agree with Mr Wong that the above words and conduct on the part of O’Kane and Happy Fish showed that they were desirous to proceed with the Agreement despite any delay in the construction of their village houses, and had accordingly elected to treat their Agreements as continuing and thereby abandoned their inconsistent right to treat them as repudiated by reason of any delay. Whilst pleaded as a waiver generally, its true legal nature was one of waiver by election (or affirmation). Such waiver would not bar O’Kane and Happy Fish from claiming damages, nor alleging repudiation by Tang on grounds other than delay. 43.For the reasons set out above, I conclude that there was no repudiation by Tang for any delay in completing the construction of the village houses and transferring the Lots to O’Kane and Happy Fish. Even if there was any delay in completing the Agreements, O’Kane and Happy Fish had waived their right to terminate the Agreements on such basis. TRANSFER OF THE LOTS TO WONG 44.On Tang’s case, he caused the Lots to be transferred (from their owners) to Wong in May 2016 in the following circumstances:
45.Tang contended that he was able to complete the Agreement even though the Lots had been transferred to (or “parked” with) Wong for the time-being. There was no repudiation on his part. 46.I reject Tang’s case as being unbelievable:
47.I find on balance of probabilities that the transfer of the Lots to Wong in May 2016 was an outright sale; there was no agreement for Wong to transfer the Lots at any time to any party as Tang directed. By arranging for the Lots to be sold by the owners to Wong without recourse, Tang clearly evinced an intention not to perform his Agreements with O’Kane and Happy Fish, and as such had repudiated them.[10] 48.Mr Wong argued that it was O’Kane and Happy Fish which refused to complete their Agreements. O’Kane issued his termination letter on 20 July 2016 when on the same day Tang informed him by letter that he was ready to complete. Happy Fish issued its termination letter on 6 May 2016 without knowing of the transfer of Lot 3060 to Wong 3 days earlier. Given my rejection of Tang’s case that he had an agreement for Wong to transfer the Lots as and when Tang directed, it lies ill in Tang’s mouth to maintain that he was still able to complete the Agreements at any time, and that O’Kane and Happy Fish had somehow “jumped the gun” to terminate their respective Agreements. To put simply, Tang had no plans to cause the Lots to be transferred to O’Kane and Happy Fish at all. 49.Mr Wong further argued that O’Kane and Yuki appeared to “accept” that Tang retained control of the Lots after the sale to Wong:
50.I fail to see how any of the above assertions amounted to any acceptance by O’Kane and Happy Fish that Tang had in fact control over the Lots after their transfer to Wong. Their evidence reflects no more than their impression and inference drawn from surrounding circumstances. Nor could I see how that could further Tang’s case on whether as a matter of fact, there was an agreement between him and Wong for transfer of the Lots, which case I have rejected. RELIEF 51.The parties agreed that in the event that Tang is found liable for repudiation of the Agreement, the appropriate damages are the agreed value of the Lots[11] at the time when they should have been transferred to O’Kane and Happy Fish (namely, 13 June 2016 which was 45 days after payment of premium which triggered completion of the sale and purchase pursuant to clause 3 of the Agreement), less the unpaid balance of the contract price under the Agreement:[12]
52.In his closing submissions, Mr Brown also sought a lien over the Lots for the judgment and interest accrued. This was premised on his argument that Wong was holding the Lots for Tang and was therefore not a third party without notice of the rights of O’Kane and Happy Fish in the Lots. Given there was no agreement between Tang and Wong and the sale of the Lots to Wong was an outright sale, the claim for a lien does not get off the ground, and was sensibly not seriously pursued by Mr Brown. INTEREST 53.Mr Wong submitted that if the Court finds Tang to be liable to pay damages, the Court should disallow pre-judgment interest for the period from 10 July 2020 to 13 April 2021 or other appropriate period as the Court sees fit. The basis was that the Court would have been able to set down the Actions for trial on 10 July 2020, had O’Kane not sought leave to file his supplemental witness statement which was filed only on 11 January 2021 and was hardly referred to in the parties’ submissions, and as a result leave to set down was only given on 13 April 2021. 54.Unreasonable delay in pursuing or prosecuting a claim may be a ground in reducing the award of interest. This is because it would be wrong in principle that interest should accrue during a period when the claimant has kept out of the judgment sum by his own fault. The Court must apply a broad brush and realistic approach. It is not reasonable to expect a party to take every litigious step at the first possible moment, or to concentrate on litigation to the exclusion of all else. Delay should only be characterized as unreasonable on the question of interest when, making due allowance for the circumstances, it can be seen that the claimant has neglected or declined to pursue his claim for a significant period. The Court should also bear in mind that the defendant has had the use of money during that period of delay: China Agri-Products Exchange Limited v Wang Xiu Qun & Anor [2022] HKCFI 1533 at [9]-[10]. 55.Whilst O’Kane’s supplemental witness statement (which ran through 146 pages with 407 paragraphs, and set out extensive recitations from documents and arguments) provided no real value to the Court’s resolution of the disputes, it is part of the Court process and within O’Kane’s right for him to seek leave to file his supplemental witness statement and for such purpose applied for extensions of time to do so. Tang had made no application to expunge O’Kane’s supplemental witness statement on the ground of irrelevance. I do not see how the delay in setting the matter down for trial resulting from the filing of O’Kane’s supplemental witness statement could be characterized as unreasonable on the question of interest in that this showed that O’Kane had neglected or declined to pursue his claim during that period. 56.Interest on the judgment sum should run from 13 June 2016 (being the day when the Lots ought to have been transferred to O’Kane and Happy Fish pursuant to clause 3 of their Agreements) up to the date of this Judgment (16 December 2022) at the commercial rate (HSBC prime rate +1%) and thereafter at judgment rate until full payment. COSTS 57.Costs should follow the event. Tang should therefore pay the costs of O’Kane and Happy Fish in the Actions, to be taxed if not agreed. I decline to allow certificate for two counsel for O’Kane. 58.This is subject to this Court disallowing all the costs incurred for preparation of the trial bundles to mark the Court’s disapproval:[15]
59.In view of the poor preparation of the trial bundles, on Day 1 of the trial, I directed the solicitors for all parties to show cause as to why they should not personally bear the costs of preparing the trial bundles. Parties have a positive obligation to put their minds together and prepare the trial bundles in a manner that best assists the Court and facilitates the just and fair disposal of the case in a costs efficient and proportionate way. Only documents truly relevant to the Court’s determination of the dispute should be included. If in the course of trial any relevant document is found to have been left out, it can always be added back. Input from trial counsel should be sought, given they are best positioned to decide what are the key documents for the case. Trial counsel are expected to take a proactive step to assist in the preparation of trial bundles. 60.In the end, the solicitors for all parties gave an undertaking to the Court that they would not charge their clients the costs of preparation of the trial bundles regardless of the outcome of the case. I commend them for taking such a sensible approach. DISPOSITION 61.I enter judgment against Tang in favour of O’Kane for the sum of $6,265,000 and in favour of Happy Fish for the sum of $6,228,000, with interest at HSBC prime rate +1% from 13 June 2016 to 16 December 2022 and thereafter at judgment rate until full payment. 62.I make a costs order nisi that Tang do pay the costs of O’Kane and Happy Fish (including all costs reserved) in these Actions, to be taxed if not agreed, save that all the costs of preparation of the trial bundles are disallowed. The costs order nisi will be made absolute in the absence of any application for variation by way of inter partes summons within 28 days from the date of this Judgment.
Mr Toby Brown, instructed by Payne Clermont Velasco, for the Plaintiff in HCA 1209/2016 Mr Foster Yim and Mr Owen Kun, instructed by Payne Clermont Velasco, for the Plaintiff in HCA 1948/2016 Mr Damian Wong, Mr Andrew Tse and Mr Leon Guo, instructed by Rowdget W. Young & Co., for the Defendant in both Actions [1] Plaintiff in HCA 1948/2016. [2] Plaintiff in HCA 1209/2016. [3] Defendant in both Actions. [4] Ho Tak Kwong of Lot 3059, and Ho Che-kwong Lewes of Lot 3060. [5] Namely, construction of a basement in the village house was illegal as against the Small House Policy which permits the construction of a 3-storey village house only. [6] With Mr Andrew Tse and Mr Leon Guo. [7] In their supplemental witness statements. [8] Consent for commencement of site formation works was granted on 2 July 2010. An application was made for approval of proposals in respect of site formation amendment on 19 January 2011. Consent to the commencement of such works was granted on 16 February 2011. [9] Mr Brown invited me to draw adverse inference against Tang for not calling Wong as a witness. I do not believe it is necessary to do so for the resolution of the factual dispute, especially when Tang was not cross-examined as to why Wong did not come forward as a witness for him. It suffices for me to note that Tang’s assertion was not corroborated by any evidence from Wong. [10] Whilst there was evidence suggesting that Tang had sold the Lots to Wong in order to back out from his bad bargains with O’Kane and Happy Fish caused by the escalation in construction costs due to the long time for completion and the high premium assessed, I do not find it necessary to come to a conclusion in this regard. It suffices for the disposal of this case for me to find, on a balance of probabilities based on the evidence before me, that there was no alleged agreement between Tang and Wong. Why Tang had decided to sell to Wong is not a matter which I had to come to a conclusion. [11] This was initially subject to rival expert valuations from the parties but was agreed at trial in the sum of $10,105,000 with the experts dispensed from attendance. [12] McGregor on Damages (21st ed. 2021) at para 27-005. [13] $10,105,000 minus balance due under O’Kane’s Agreement at $3,840,000. [14] $10,105,000 minus balance due under Happy Fish’s Agreement (as varied by the price adjustment in August 2013) at $3,877,000. [15] I have also considered disallowing costs of O’Kane’s supplemental witness statement given the wholly unsatisfactory nature of its contents: see [55] above. On reflection I decided not to do so but to leave it for taxation. It is not for me to micro-manage what should go into a witness statement. | ||||||||||||||||||||||||||
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