Wan Yung Hing v. Forever Grand Industrial Ltd

HCA 85/2021

[2023] HKCFI 3141

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 85 OF 2021

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JUDGMENT

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INTRODUCTION

1.This is a trial of the present action in which the plaintiff sues the defendant primarily for an order of specific performance of an agreement which was allegedly entered into between the parties in around late December 2014 / early January 2015.

THE UNDISPUTED/INDISPUTABLE BACKGROUND

2.Well Chance Properties Limited (“Well Chance Limited”) was incorporated by the plaintiff in Hong Kong on 6 October 2006 as a company vehicle holding a real property in the Mainland known as 深圳市南山區商業文化中心區海德道三道海岸大廈東座249 (“the Property”).

3.When Well Chance Limited was incorporated, the plaintiff was its sole director and sole shareholder (holding one share thereof)

4.On 31 October 2007, one share in Well Chance Limited was allotted to Lun Jin Hong (“Lun”)’s wife – Guo Li Sha (“Lun’s Wife”).

5.On 28 August 2008, Lun’s Wife transferred her one share in Well Chance Limited to the defendant.  Since then the plaintiff and the defendant have been the only two shareholders of Well Chance Limited, each holding 50% of its allotted shares (i.e. one share each).

6.Liang Jian Xin (“Liang”) had been the sole director and a shareholder of the defendant. 

7.Lun was the brother-in-law of Liang.

8.On 23 February 2015, the plaintiff paid the defendant a sum of $8 million.

9.On 30 March 2015, the plaintiff further paid the defendant a sum of $3 million.

10.In early April 2015, Lun was arrested by the police in Mainland China and was subsequently convicted for a criminal offence.  He has been kept in custody since then.

11.Liang resigned from the post of director on 9 December 2019, and was replaced by Guo Li Jun.

THE PLAINTIFF’S CASE

12.The plaintiff and Lun were friends.

13.At all material times, Lun had held out and/or was known to the plaintiff as the beneficial owner of the defendant and therefore he had the full authority to act on behalf of the defendant.

14.By an oral agreement made in around late December 2014 or early January 2015 (“the Oral Agreement”) between the plaintiff and Lun (on behalf of the defendant), the plaintiff agreed to purchase and the defendant agreed to sell one share in Well Chance Limited (“the Share”) at the price of $25 million.

15.The Oral Agreement had been confirmed orally by Liang in a telephone conversation which he had with the plaintiff in around mid-January 2015.

16.The Oral Agreement contains, inter alia, the following express terms:

(1)  The plaintiff shall first pay the defendant a sum of $11 million, leaving the balance of $14 million (“the Balance of $14 million”) to be due and payable after the transfer of the Share;

(2)  Upon the plaintiff’s payment of $11 million, the defendant shall forthwith execute all necessary documents transferring the Share to the plaintiff;

(3)  After the Share has been duly transferred to and registered in the name of the plaintiff, the Balance of $14 million shall become payable by the plaintiff upon the defendant’s subsequent request with reasonable notice.

17.The above payment arrangement was agreed so that the plaintiff could obtain a mortgage loan from his bank by utilising the Property as security.

18.Pursuant to the Oral Agreement, the plaintiff has paid the defendant the sum of $11 million in two instalments, on 23 February 2015 ($8 million) and 30 March 2015 ($3 million) respectively. 

19.After the plaintiff’s payment of $3 million, Lun told the plaintiff that he (Lun) was in urgent cash flow need, and therefore further requested the plaintiff to make an advance payment of $4 million to the defendant, to which the plaintiff agreed.

20.While the plaintiff was arranging such advance payment of $4 million to be paid to the defendant, Lun was arrested by the Mainland authority and was subsequently convicted for a criminal offence.

21.The plaintiff himself has also been detained in the Mainland for investigation purpose since about 13 April 2015 for around 3 years up to late March 2018.

22.Upon his release, the plaintiff had repeatedly requested the defendant to transfer the Share to him pursuant to the Oral Agreement, which the defendant refused to do so.

23.The plaintiff therefore claims against the defendant for a decree of specific performance of the Oral Agreement, or alternatively damages in lieu of specific performance. 

24.As a further alternative, the plaintiff claims for a return of the $11 million paid to the defendant pursuant to the Oral Agreement.

THE DEFENDANT’S CASE

The defendant’s pleaded case

25.The defendant’s pleaded case may be summarised as follows.

26.The defendant does not admit the existence of the Oral Agreement and has put the plaintiff to strict proof thereof.

27.It is also denied that Liang had ever confirmed the Oral Agreement as alleged.

28.Lun did not have any authority to enter into any agreement on the defendant’s behalf with the plaintiff.

29.Alternatively, the term of the Oral Agreement that the Balance of $14 million was only to be paid after the transfer of the Share is unfair and unconscionable.

30.As the plaintiff had failed to pay the additional $4 million, he was himself in breach of the alleged Oral Agreement.

31.The plaintiff is not entitled to claim for a decree of specific performance nor for the return of the sum of $11 million.

32.As the alleged Oral Agreement is unenforceable on the ground that the terms thereof are unfair and unconscionable, the defendant seeks a declaration to that effect, and an order that such an agreement be set aside.

The defendant’s case as set out in its Opening Submission

33.In Ms Ronald’s Opening Submissions, she informed the Court that the defendant will no longer rely on the argument that the terms of the alleged Oral Agreement are unfair and unconscionable.  She further confirmed in court that that means the defendant would no longer pursue its counterclaim against the plaintiff.

34.Apart from maintaining that the main issues of the trial are whether the plaintiff and Lun had indeed reached the Oral Agreement for the sale and purchase of the Share in late December 2014 or early January 2015, and whether Lun had the authority to do so on behalf of the defendant, Ms Ronald further submitted in her Opening Submissions that since some of the essential terms, in particular the time for completion and the time of payment of $11 million and the Balance of $14 million, are lacking in the Oral Agreement, such an agreement cannot be a binding agreement as such.

35.As Ms Ronald accepted, the above ground of defence had not been pleaded in the Defence at all.

36.In Kwok Chin Wing v 21 Holdings Ltd (2013) 16 HKCFAR 663, Chief Justice Ma had the following to say at [21]:

“It should by now really be quite unnecessary to issue yet another reminder on the rationale behind pleadings. The basic objective is fairly and precisely to inform the other party or parties in the litigation of the stance of the pleading party (in other words, that party’s case) so that proper preparation is made possible, and to ensure that time and effort are not expended unnecessarily on other issues:- Wing Hang Bank Limited v Crystal Jet International Limited [[2005] 2 HKLRD 795, at 799 [6(1)]]. It is the pleadings that will define the issues in a trial and dictate the course of proceedings both before and at trial. Where witnesses are involved, it will be the pleaded issues that define the scope of the evidence, and not the other way round. In other words, it will not be acceptable for unpleaded issues to be raised out of the evidence which is to be or has been adduced. As the Court of Appeal remarked in Wing Hang Bank Limited v Crystal Jet International Limited:

‘(2) In a trial, particularly where evidence is given by witnesses, it becomes extremely important that each side knows exactly what are the live issues. Where issues are sought to be introduced that have not been adequately or properly pleaded, amendments must be sought unless the consent of the other party or parties has been obtained. It will simply not do for unpleaded issues to be ‘slipped in’ when evidence is being given in the hope that the other side is not sufficiently alert to object.’ ”

37.The learned Chief Justice continued in [23]:

“The purpose of pleadings, in clearly and unambiguously setting out the true extent and nature of a dispute not just for the benefit of the parties but also for the Court in managing and trying cases, remains important under our system of civil justice. The retention of the old rules as to pleading as well as the introduction of new provisions over four years ago under the Civil Justice Reform, reinforce this.”

38.It is therefore clear that the defendant should not be allowed to rely on the said unpleaded line of defence.

39.To argue that the defendant should be allowed to rely on the aforesaid unpleaded ground of defence, Ms Ronald cited paragraph 18/8/4 of Hong Kong Civil Procedure 2023 Volume 1 and submitted that the Court is ultimately guided by what is fair and just in the circumstances.

40.In order to understand what the said paragraph 18/8/4 meant, it is necessary to set out the relevant part in full as follows:

“In an ordinary civil action, generally speaking, an issue that has not been pleaded is not an issue before the court. However, objections to unpleaded issues will lose its force where the parties have chosen to disregard the pleadings and conduct the hearing on some unpleaded basis. The court is ultimately guided by what is fair and just in the circumstances.” (emphasis added)

41.The above propositions were actually adopted by the editors of Hong Kong Civil Procedure 2023 from Wing Hang Bank Limited v Crystal Jet International Limited [2005] 2 HKLRD 795 at [7] (an authority which was also cited by Chief Justice Ma in Kwok Chin Wing (supra)).

42.It can therefore be seen that the above was said in the situation where the parties had decided to conduct the case on some unpleaded basis, which is clearly not the position here, as the plaintiff has, in my view justifiably, raised strong objections to the way that the defendant has run its unpleaded defence.

43.Furthermore, I have no hesitation to come to the conclusion that it is neither fair nor just for the defendant to run its unpleaded defence in the way it did, because the plaintiff simply did not know that he would be facing such a new ground of defence until he received the defendant’s Opening Submissions.  Indeed, when the defendant’s solicitors executed the “Agreed List of Issues” on 29 September 2023 (i.e. less than 3 weeks before the trial began), the new ground of defence was still not included therein.

44.The defendant argued that no prejudice would be caused to the plaintiff by allowing the defendant to rely on the alternative argument on “incompleteness of agreement” because the plaintiff had been given the opportunity to give evidence when he was cross-examined on the essential terms of the Oral Agreement.  With greatest respect, this is a very bold submission which must be rejected outright.  If the defendant is right, then that means any party can slip-in unpleaded issues by cross-examining witnesses on those issues.  That would defeat the purpose of pleadings.  That has also been held to be “unacceptable” by Chief Justice Ma in Kwok Chin Wing (at [21]).

45.Ms Ronald further argued that since trite principles of law need not be pleaded, there is no need for the defendant to plead that the Oral Agreement was incomplete and therefore not binding. 

46.In my view, the test for sufficiency of pleadings is whether the issue(s) which the defendant now attempts to raise has/have been identified adequately by the pleadings.  If the issue(s) has/have not been so identified, the other side would be caught by surprise at the trial (just like the plaintiff in the present case), and, as a matter of fairness, the Court should not allow this to happen.  Indeed, it has been held by the Court of Appeal in Kaefer A.G. v Winfield Marine Services Co., Ltd [2022] HKCA 807 (at [32]) that a party is not at liberty to run any defence based on the pleaded facts; otherwise, the other side and the court would be taken by surprise, which would go against the purpose of the rules of pleadings. 

47.Ms Ronald for the defendant further relied on the case of Ch’ng Poh v China Everbright Limited (CACV 3805/2001, unreported, 23 October 2002) and argued that the lack of certainty of terms is a point of law which the defendant is entitled to raise albeit unpleaded.  She had placed particular emphasis on what was stated by Le Pichon JA at [16] thereof as follows:

“[…] the question whether or not the absence of any agreement as to the completion date would render the oral agreement relied on by the plaintiff void for uncertainty, although not pleaded, appeared to have been a live issue at the hearing. In his judgment, the judge did not refer to the uncertainty point but considered the absence of any decision as to the time of the transfer of the shares as one of the unresolved "loose ends" the cumulative effect of which was consistent with the defendant's case. It is clear that the judge considered that no agreement had been reached regarding the completion date.” (emphasis added)

48.In that case, the plaintiff claimed for damages for breach of an oral agreement allegedly reached between him and the defendant therein (“China Everbright”) on 5 March 1994 for the sale and purchase of the shares of a wholly-owned subsidiary company of the defendant (“Keepmore Limited”) at the price of $20.52 million.  The only asset held by Keepmore Limited was a house situated at Jardines’ Lookout (“the House”).  The plaintiff relied on the board minutes of China Everbright dated 5 March 1994 as evidence of the alleged oral agreement.

49.The trial judge therein found that, among other things:

(1)  On a number of subsequent occasions, the plaintiff had referred to his having been “offered” or given “an option” to purchase the House or the shares of Keepmore Limited;

(2)  In response to a letter from China Everbright offering the plaintiff the House at $23.5 million (which was higher than the allegedly agreed price of $20.52 million), the plaintiff drafted a letter which did not contain any word of protest that China Everbright was reneging on its earlier oral agreement.  Instead, the plaintiff sent a note to China Everbright which effectively amounted to a counter-offer;

(3)  The plaintiff had not been frank with the court in attempting to explain his conduct, and his evidence was unreliable;

(4)  The content of the board minutes was consistent with China Everbright’s case, namely, that upon the plaintiff expressing a desire to purchase the shares in Keepmore Limited, China Everbright’s directors resolved to authorise such a sale which was to be entered into by one of the board members;

(5)  The cumulative effect of the unresolved “loose ends” – the date for transfer, the identity of the transferee and the mechanism to be adopted for the payment of the purchase price, whether it was to be the payment of a net sum or a higher price to reflect the net sum and a bonus of $2.8 million – was also consistent with China Everbright’s case;

(6)  There was no concluded agreement reached on 5 March 1994 as alleged by the plaintiff.

50.The plaintiff therein then appealed to the Court of Appeal, and sought to disturb the findings of primary fact made by the trial judge that no concluded oral agreement was reached on 5 March 1994.

51.Having considered various aspects of the evidence, Le Pichon JA held that the trial judge could not be faulted for approaching the matter in the way he did, and that he had correctly taken into account all the evidence adduced before him. 

52.To illustrate that the trial judge was justified in disbelieving the plaintiff, Le Pichon JA referred to the plaintiff’s viva voce evidence on completion date, and raised at the appeal hearing the question on completion date with the plaintiff’s counsel, who ended up by providing no less than four alternatives: that it was to be (1) at China Everbright’s sole discretion; (2) when called for by either party; (3) at the discretion of both parties; or (4) within a reasonable time.  It was in the above context that her Ladyship referred to the question of whether or not the absence of any agreement as to completion date would render the oral agreement relied on by the plaintiff void for uncertainty and expressed her view as quoted in [47] above.  In substance, the Court of Appeal was still considering the same issue which was a live issue at the trial, namely, whether an oral agreement had been reached on 5 March 1994 as alleged by the plaintiff therein.

53.I therefore hold the view that the said authority does not support the defendant’s argument that the defendant is at liberty to raise an unpleaded issue in the circumstances of the present case. In any event, insofar as the case of a Ch’ng Poh indeed has such an effect (which I do not agree), it should not be followed in light of the subsequent decision of the Court of Final Appeal in Kwok Chin Wing (supra).

54.Ms Ronald has further referred this Court to the case of Tsang Wing Man v Chung On Ling (CACV 129/2015, unreported, 4 October 2016) in support of her argument that questions of law are not required to be pleaded.  She has relied particularly on [53] and [56] thereof.  However, for the sake of completeness, it is necessary to quote [52] to [56] as follows:

“52. Many of the Mr Chong’s grounds of appeal rely on an argument that the pleadings do not just reveal and describe each party’s factual case and identify the factual issues for trial, but that they also act as blinkers upon the judge and prevent him from considering legal issues that he can identify as arising from the evidence but which neither party has expressly pleaded.

53. We have no hesitation in rejecting Mr Chong’s argument. None of the authorities to which Mr Chong has referred us support that proposition. His cases emphasise the importance of pleadings and explain the role they perform but that is as far as they go. We do not wish in any way to devalue the importance of pleadings but their role is, essentially, to set out the factual basis of each parties case and to narrow the factual issues in dispute. Pleadings are not generally required to identify the legal questions which may arise from the facts. They do not limit the legal issues the judge may consider when adjudicating on the legal rights of the parties on the evidence adduced before him.

54. Mr Chong’s submission requires that we determine what factual matters were raised by the pleadings. As we have set out earlier in this judgment, on the plaintiff’s case negotiations for the sale of her Shenzhen property had been on-going since 2005 and by May 2012 its sale had still not taken place. The plaintiff accepted that, as a matter of fact, the sale and purchase agreement lacked certainty as to the completion date but that certainty could be obtained by implying terms.

55. The Amended Defence made clear that the defendant signed a document purporting to be a sale and purchase agreement for land which was silent on a key term – namely the date for completion. The Amended Defence also made clear that the signing of the agreement took place as part of a process of negotiations during which the plaintiff orally represented to the defendant that the sale of her Mainland property “would be completed soon and in any event no later than 2 months’ time.”[1] These pleadings clearly raised, as a matter of fact, that the sale and purchase agreement lacked a date for completion and that this was presently unascertainable with any certainty and was subject to further representations from the plaintiff.

56. On these facts the judge was being asked to adjudicate the right of the plaintiff to have specific performance of the agreement. Inevitably, before the judge could grant the plaintiff the remedy she sought he would have to satisfy himself that, as matter of law, the agreement was enforceable. This was simply a legal issue that inevitably arose as a consequence of the facts contained in the pleadings. Furthermore, the legal nature of the sales agreement and whether it was an enforceable contract had been raised as issues by the defendant’s solicitors in correspondence and this correspondence was referred to in the pleadings. That it was an issue which would attract the attention of the judge could hardly come as a surprise to the parties.” (emphasis added)

55.The highlighted parts of the Court of Appeal Judgment show that the facts therein can clearly be distinguished from those in the present case.  Pleadings are not games of words.  The Court should consider whether the issues have been sufficiently identified by considering the entirety of the pleadings.  In Tsang Wing Man, the Court of Appeal had explained why it considered that the issues to be adjudicated by the Court had been so identified and that the other side was not taken by surprise at all in the circumstances therein.  However, the situation herein is totally different. As aforesaid, the new issue was not even seen in the Agreed List of Issues signed by the defendant’s solicitors shortly before the commencement of the trial.

56.Reference should also be made to the case of Mui So Bing v Wan Chi Shing & Others [2020] 1 HKC 85, [2019] HKCA 1341, in which what Yuen JA held that:

“23.1 […] the notion that a legally qualified pleader may plead only the facts (or plead the facts with a specific legal consequence), leaving his opponent and the court to have to second-guess what legal consequence (or what other legal consequences) he may choose to argue at trial or on appeal, is in my view inimical to the underlying objectives of the Civil Justice Reform. These objectives include ensuring that a case is dealt with as expeditiously as is reasonably practicable, to promote a sense of procedural economy in the conduct of proceedings, and most importantly, to ensure fairness between the parties.

23.2 The earlier the case is more thoroughly thought-out and unambiguously articulated, the more cost-effective the proceedings would be for the parties, and the fewer the cases where an appellate court would be required to undertake the ‘state of the evidence bar’ exercise which requires it to hypothesize, if not speculate, whether there is ‘no reasonable possibility that the state of the evidence relevant to the point would have been materially more favourable to the other side if the point had been taken at the trial’.

23.3 As was noted in paragraphs 205-6 of the Civil Justice Reform final report, ‘a reference [in the pleadings] to the legal point helpfully conveys the nature of the party’s case’.  The final report also noted the ‘pragmatic virtues’ of setting out the legal consequences so that the other side (and the court) would not be taken by surprise.  As the court’s primary aim in exercising its powers is to secure the just resolution of disputes in accordance with the substantive rights of the parties, and to further these objectives by actively managing cases, it seems to me to be high time that consideration should be given to requiring legal representatives to plead not only material facts, but also all the legal consequences to which those facts validly lead, with the effect that the parties would be barred from contending different legal consequences on appeal.”

57.I will therefore disregard the new issue raised by the defendant in its counsel’s Opening Submissions.

DISCUSSION

The issues

58.Parties agreed that this Court has to resolve the following issues:

(1)  Whether an oral agreement was reached between the plaintiff and the defendant in about the turn of year from 2014 to 2015, whereby the defendant agreed to sell to the plaintiff one share in Well Chance Limited at the price of $25 million;

(2)  Whether the said oral agreement was reached between the plaintiff and Lun on behalf of the defendant;

(3)  Whether Lun had the authority to act for and on behalf of the defendant to enter into the said oral agreement with the plaintiff;

(4)  If the Court finds that the said oral agreement was reached between the plaintiff and the defendant, whether it contained the following terms:

(a)  The plaintiff shall first pay the defendant a sum of $11 million only, being part payment of the purchase price;

(b)  Upon the plaintiff’s payment of $11 million to the defendant, the defendant shall forthwith execute all necessary documents for the purpose of transferring the Share to the plaintiff;

(c)  After the Share has been duly transferred to and registered under the plaintiff’s name, the Balance of $14 million shall then become payable by the plaintiff upon the defendant’s request with reasonable notice;

(5)  Whether the plaintiff paid the $11 million to the defendant pursuant to the terms of the Oral Agreement;

(6)  Whether the defendant, upon having received the $11 million from the plaintiff, was obligated but had failed to execute all necessary documents for the purpose of transferring the Share to the plaintiff, and as a result was in breach of the Oral Agreement;

(7)  Whether it was a term of the Oral Agreement that the plaintiff shall pay an additional $4 million before the defendant shall transfer the Share to the plaintiff, and whether the plaintiff was in breach of the Oral Agreement in failing to do so;

(8)  Whether the plaintiff is entitled to a decree of specific performance of the Oral Agreement;

(9)  Alternatively, whether the plaintiff is entitled to damages in lieu of specific performance;

(10)  Alternatively, whether the defendant is liable to return to the plaintiff the sum of $11 million being money had and received by the defendant to the plaintiff’s use pursuant to the principle of unjust enrichment and to pay interest thereon; if so, what should be the rate and period for the said interest.

The Oral Agreement

59.As the Oral Agreement was not evidenced by any documentary evidence, the merit of the plaintiff’s claim depends much on this Court’s assessment of the credibility of the plaintiff, who was the only witness called to give live evidence in Court in the present case.

60.When this Court assesses his evidence, I shall bear in mind the matters set out in Hu Lan v David Golden [2023] HKCFI 873 at [36] as follows:

“(a) Generally speaking, contemporaneous written documents and documents which came into existence before the problems in question emerged are of the greatest importance in assessing credibility;

(b) Importance should be attached to the inherent likelihood or unlikelihood of an event having happened, or the apparent logic of events;

(c) The court will also attach importance to the consistency of the witness’ evidence with undisputed or indisputable evidence, and the internal consistency of the witness’ evidence. The latter type of consistency is often tested by a comparison between the witness’ oral testimony and his or her witness statement;

(d) The court should consider a witness’ motive for deliberately not giving truthful testimony. For example, telling the truth may prejudice his interest, or a just determination of the litigation may affect his interest;

(e) It is essential to have regard to the entirety of a witness’ evidence. A witness can make mistakes, but the mistakes do not necessarily affect other parts of his evidence. Likewise, a witness may lie. However, lies themselves do not mean necessarily that the entirety of that witness’ evidence is to be rejected. A witness may lie in a stupid attempt to bolster his case, but the actual case nevertheless remains good irrespective of the lie;

(f) On the other hand, where it is shown that a witness has been discredited over one or more matters to which he has testified, this fact is relevant to the assessment of his overall credibility;

(g) While the court is entitled to take demeanour into account when assessing testimony, it should be borne in mind that demeanour can be deceptive and is therefore to be approached with care.”

61.Having considered the plaintiff’s evidence, parties’ submissions and all the circumstances of the case, I am of the view that the plaintiff’s evidence on the Oral Agreement should be accepted, for the following reasons.

62.First, it is undisputed that the plaintiff did pay the defendant the total sums of $8 million and $3 million on 23 February 2015 and 30 March 2015 respectively. Neither is it disputed that the plaintiff and the defendant did not have any other dealings between them at the material time.  There is therefore no reason that the plaintiff should pay the defendant such large amounts of money unless they had entered into the Oral Agreement.

63.Second, I do not accept Ms Ronald’s submission that the plaintiff is an unreliable or incredible witness, despite the fact that she had been able to point to certain inconsistencies in his evidence.  The plaintiff was giving evidence on matters which took place more than 8 years ago (some matters even dated back to 2006/2007).  The Court’s assessment should take this into account. 

64.Ms Ronald has specifically drawn this Court’s attention to the plaintiff’s evidence in his witness statement that while the plaintiff did mention that when he first sold his half share in the Property to Lun back in 2006/2007, Lun had paid the purchase price by instalments, and that the first instalment was in the sum of $3 million.  She alerted this Court that when the plaintiff gave evidence in court, he supplemented that the said sum of $3 million was in fact paid via Liang.  She therefore submitted that the plaintiff was not a truthful witness, because, it was said, there was no reason why the plaintiff would have omitted to mention Liang’s involvement in his witness statement if it were the truth.  On my part, I am of the view that the plaintiff’s evidence on Liang’s involvement not only did not cast doubt on the plaintiff’s credibility but in fact strengthened it.  This is because Liang’s involvement at that stage is, in my view, a matter which could be used to argue against the plaintiff’s own case.

65.Ms Ronald has also spent some effort to persuade this Court that the plaintiff had given inconsistent evidence on the agreed time to pay the 1^st instalment of $11 million (before Lunar New Year in 2017 vs by the end of March 2017).  The plaintiff had indeed given inconsistent evidence in this regard.  However, having considered the entirety of his evidence, I do not think his confusion in this regard should have any major adverse impact on his credibility.  Insofar as it is the submission of the defendant that the uncertainty in this aspect shows that there was no agreement reached, I am of the view that this argument cannot hold water because of the undisputed fact that the plaintiff had indeed paid the defendant the total sum of $11 million (see [62] above).

66.Third, I do not agree with the defendant’s submission that the plaintiff’s case is inherently improbable:

(1)  The defendant alleged that it is inherently improbable that the plaintiff and Lun would agree that the plaintiff could have the legal title of the Share transferred to him upon his payment of $11 million only, and that it was only upon Lun’s notice that the plaintiff would have to pay the Balance of $14 million to the defendant, because, it was said, there is no benefit to Lun or the defendant in such an arrangement.  I disagree.  As explained by the plaintiff (which I accept), Lun was in need of cash flow at the material time.  If Lun insisted that the legal title would only be transferred upon full payment of $25 million, the plaintiff could not have entered into any agreement with Lun, because the plaintiff did not have enough cash to pay Lun. The plaintiff therefore had to have the legal title of the Share transferred to him first so that he could obtain a mortgage loan from the bank to finance the payment of the Balance of $14 million. By agreeing to the payment arrangement, Lun would be able to sell the Share in exchange for some cash which he needed.  Therefore, the arrangement is beneficial to him;

(2)  Ms Ronald’s argument that the plaintiff and Lun would not have entered into the alleged agreement orally had disregarded the undisputed fact that the plaintiff had indeed paid the defendant the sum of $11 million, which could not be explained otherwise;

(3)  Ms Ronald’s submission that the agreed consideration of $25 million was fixed without reference to the market value of the Property and hence contrary to commercial sense is totally without basis. Although the plaintiff had accepted in Court that he did not obtain any valuation report for the purpose of this sale, that does not necessarily mean that the plaintiff had no idea as to what the market price was at the material time.  In the circumstances where the plaintiff was not cross-examined on his knowledge on the market price at the material time, it is unfair for the defendant to allege that the plaintiff had not made reference thereto.

67.Fourth, it is the plaintiff’s evidence that he had had a telephone conversation with Liang in around mid-January 2015, and that Liang had confirmed the Oral Agreement in that conversation.  Despite such evidence, Liang did not give evidence at the trial at all.  In fact, he had even failed to make any witness statement. Neither was there any explanation as to why he had failed to do so.

68.Furthermore, while it is undisputed that Lun is currently imprisoned in the Mainland, it may be assumed (and there is no evidence showing otherwise) that Lun’s Wife has been able to visit him. Therefore, Lun’s Wife (who is the sister of the defendant’s current director) should at least be able to give hearsay evidence of Lun’s version of events in relation to the Oral Agreement.   Moreover, as aforesaid, Lun’s Wife was involved when the Share was initially allotted to her back in October 2007. Therefore, she should be able to explain what happened at the material time. Hence, it is natural that the defendant would call her to give evidence herein. However, not only did Lun’s Wife not make any witness statement herein, the defendant had also failed to explain why she was not called to give evidence.

69.In Ip Man Shan Henry v. Ching Hing Construction Co Ltd (No 2) [2003] 1 HKC 256, Deputy High Court Judge Lam (as Lam PJ then was) had the following to say at [155]:

“Mr Yu relied on Cross & Tapper on Evidence, 9th Edn, p.36-38 and invited this court to draw adverse inference against Arnold. In my judgment, the relevant principles applicable to civil proceedings can be summarized as follows,

(a) if a prima facie case is made out, and if there are evidence available to the party against whom the case is established which could displace the prima facie case, and he omits to call such evidence, an inference could be drawn;

(b) however, the inference could be rebutted by a plausible explanation by the party who elected not to call the evidence;

(c) if an inference is to be drawn, it would be an inference that such available evidence, even if adduced, would not displace the prima facie case;

(d) it is also open to a tribunal of fact, upon the drawing of such an inference, to take it into account in respect of a matter with respect to which the person not called as a witness could have spoken,

i. in deciding whether to accept any particular evidence, which has in fact been given, either for or against that party;

ii. in deciding whether to draw inferences of fact, which are open to them upon evidence which has been given.”

70.In Tullett & Tokyo International Securities Ltd v APC Securities Co. Ltd. [2001] 2 HKLRD 356, Le Pichon JA followed the principle explained by Fuad JA in Hongkong and Shanghai Banking Corporation v Chan Yiu-wah and Another [1988] 1 HKLR 457 at 467 C – H:

“In relation to the fourth point above, Mr Huggins SC prayed in aid the maxim omnia praesumuntur contra spoliatorem ("the maxim") sometimes referred to as the principle in Armory v Delamirie (1722) 1 Str 505. Excerpts expounding that principle from Wigmore on Evidence (Chadbourn Revision) (1979) Vol. 2, at paras. 285 and 291 were quoted in the judgment of Fuad JA in Hongkong and Shanghai Banking Corporation v Chan Yiu-wah and Another [1988] 1 HKLR 457 at 467 C – H :

‘285. Failure to produce evidence, as indicating unfavorable tenor of evidence: (1) In general. ... The failure to bring before the tribunal some circumstance, document, or witness, when either the party himself or his opponent claims that the facts would thereby be elucidated, serves to indicate, as the most natural inference, that the party fears to do so; and this fear is some evidence that the circumstance or document or witness, if brought, would have exposed facts unfavorable to the party. These inferences, to be sure, cannot fairly be made except upon certain conditions; and they are also open always to explanation by circumstances which make some other hypothesis a more natural one than the party’s fear of exposure. But the propriety of such an inference in general is not doubted.

The non-production of evidence that would naturally have been produced by an honest and therefore fearless claimant permits the inference that its tenor is unfavorable to the party’s cause. Ever since the case of the Chimney Sweeper's Jewel [Armory v. Delamirie] this has been a recognised principle.

[…]”[2] (emphasis added)

71.In my view, there is no doubt that the plaintiff has made out a prima facie case that he had entered into the Oral Agreement with Lun who acted for and on behalf of the defendant and that the said agreement had been confirmed by Liang.

72.Apparently, the defendant could have called Liang and Lun’s Wife to give evidence in Court so as to establish a case which could displace the plaintiff’s prima facie case.  However, the defendant had not done so, and no explanation had been given.

73.In these circumstances, I take the view that this is an appropriate case where the Court should draw an adverse inference against the defendant. 

74.I therefore make the following findings of fact:

(1)  The Oral Agreement was reached between the plaintiff and Lun (who acted on behalf of the defendant) in about the turn of year from 2014 to 2015, whereby the defendant agreed to sell to the plaintiff the Share at the price of $25 million;

(2)  Since I accept the plaintiff’s evidence that Liang had confirmed the Oral Agreement in a telephone conversation with the plaintiff in around mid-January 2015, there is no doubt that Lun had the authority to enter into the Oral Agreement on behalf of the defendant;

(3)  The Oral Agreement indeed contained the following terms:

(a)  The plaintiff shall first pay the defendant a sum of $11 million only, being part payment of the purchase price;

(b)  Upon the plaintiff’s payment of $11 million to the defendant, the defendant shall forthwith execute all necessary documents for the purpose of transferring the Share to the plaintiff;

(c)  After the Share has been duly transferred to and registered under the plaintiff’s name, the Balance of $14 million shall then become payable by the plaintiff upon the defendant’s request with reasonable notice;

(4)  The plaintiff had paid the total sum of $11 million to the defendant pursuant to the terms of the Oral Agreement.

The additional $4 million

75.It is undisputed that:

(1)  After the plaintiff’s payment of $11 million to the defendant, Lun had requested the plaintiff to make an additional payment of $4 million as part payment of the Balance of $14 million;

(2)  The plaintiff has agreed to make such payment[3];

(3)  At the end of the day, the plaintiff has not made such a payment.

76.Ms Ronald argued that this subsequent agreement between the plaintiff and Lun constituted a variation of the terms of the Oral Agreement, and the plaintiff has breached this varied agreement in failing to make the additional payment of $4 million.

77.I accept the plaintiff’s evidence that he did not agree with Lun that the transfer of the Share was dependent on the payment of the additional sum of $4 million.  Such an agreement with Lun was not supported by any consideration and it did not constitute a term of the Oral Agreement.  It was just a gratuitous promise on the part of the plaintiff.

78.I therefore find that it was not a term of the Oral Agreement that the plaintiff shall pay an additional $4 million before the defendant was obliged to transfer the Share to the plaintiff.

79.It follows that, having received the $11 million from the plaintiff, the defendant was obligated but had failed to execute all necessary documents for the purpose of transferring the Share to the plaintiff, and as a result the defendant was in breach of the Oral Agreement.

Specific performance

80.The defendant submitted that even if it was in breach of the Oral Agreement, the Court should not grant the decree of specific performance because “the absence of any decision as to date/time of the payment of $14 million by the plaintiff would render it difficult to ensure that the unperformed obligation of the plaintiff will be perfectly performed”[4].

81.It was further submitted that it is unclear whether the plaintiff is prepared to prove that he is ready and willing to perform his unperformed obligation, given the mechanism of 2-stage payment of the purchase price under the Oral Agreement was agreed so as to allow the plaintiff to take out a mortgage loan and finance the payment of the same.

82.It was further said that if specific performance is ordered, the defendant should be entitled in equity to a lien on the Share so as to safeguard the defendant’s interest as an unpaid vendor.

83.I do not accept the defendant’s argument.  I am of the view that, contrary to the defendant’s submission, the terms of the Court order can be precisely drawn.  In any event, the plaintiff has told the Court that he is ready and willing to pay the Balance of $14 million at one go without the need to obtain a mortgage loan first.

84.The plaintiff has also indicated that he has no objection against the defendant’s suggestion that it will have a lien on the Share until full payment of the Balance of $14 million. 

85.In all the circumstances, I find that it is appropriate for the Court to order specific performance in the present case.

ORDER

86.By reasons of the aforesaid, I grant judgment in favour of the plaintiff and make the following orders[5]:

(1)  the Agreement be specifically performed, in that the defendant do execute all requisite documents to effectuate the transfer of the Share in Well Chance Limited to the plaintiff, and after the transfer of the Share to the plaintiff, the plaintiff shall pay the Balance (HK$14 million) to the defendant forthwith;

(2)  The defendant shall have an equitable lien on the Share which would not be lost as a result of the defendant’s transfer of the Share to the plaintiff until the plaintiff has made full payment of the Balance (HK$14 million) to the defendant.

COSTS

87.I make a costs order nisi that the defendant shall bear the plaintiff’s costs of the action (with all costs reserved), to be taxed if not agreed. 

88.The above order nisi shall become absolute in the absence of application to vary (which, if any, shall be made by letter, and will be disposed of on paper) within 14 days hereof.

Mr Ernest Koo, instructed by Cheung, Yeung & Lee, for the plaintiff

Ms Rachel Ronald, instructed by Bill Tong & Co, for the defendant