Citilite Properties Ltd. v. Innovative Development Co. Ltd.

CACV000098/1997

CACV98/1997

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 98 OF 1997

(ON APPEAL FROM HCA NO. A8407 OF 1992)

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Coram : Hon Chan, CJHC, Rogers, J.A. and Stone, J.

Dates of Hearing : 26 and 27 March 1998

Date of handing down of Judgment : 3 July 1998

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J U D G M E N T

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Chan, CJHC :

1. This is an appeal against the decision of Le Pichon J ordering the defendant to pay damages to the plaintiff for breach of a warranty contained in the sale and purchase agreement dated 25th August 1992 made between the parties in respect of a unit in the Convention Plaza in Wanchai ("the Agreement") and dismissing the defendant's counterclaim for rectification of the relevant warranty in the Agreement.

The issues in dispute

2. The plaintiff was the purchaser and the defendant the vendor of the property known as Unit 1402 on the 14th floor of Convention Plaza. The dispute arose out of Clause 14A of the Agreement which contained a warranty by the defendant that "the saleable area of the property is 7,864 square feet". It was common ground that the saleable area of the unit is not 7,864 square feet but 6,596.5 square feet. The plaintiff held the defendant liable for breach of this warranty and asked for damages which were represented by the difference in area times the agreed price of $6,170 per square foot.

3. The defendant alleged, and it was not seriously contended otherwise during the course of the trial in the court below, that they had made a mistake as to the meaning of "saleable area" as stated in this particular clause. It was said that they were labouring under the mistake that "saleable area" meant the same as "gross floor area" or the area to be sold. It was accepted that the defendant's mistake was a unilateral mistake. The issues in dispute at the trial were: what was the plaintiff's state of knowledge as to the defendant's mistake and what was the plaintiff's conduct relating to such mistake.

The trial judge's decision

4. In her reserved judgment, the trial judge examined the authorities on the principles upon which rectification would be granted by the court. It would seem that she accepted the view that the relief of rectification would only be granted where one party to an agreement knew of the mistake of the other and had conducted itself in such a way as would involve a degree of sharp practice. However, the trial judge was of the opinion that the defendant's mistake in the present case was not one of fact but only one of the legal effect of the warranty clause. She held that there was no evidence that the plaintiff actually knew or appreciated that the defendant and their solicitors did not understand the true meaning of saleable area. That, in the learned judge's view, had ruled out rectification. She also found that the plaintiff had in no way caused or contributed to the defendant's mistake. In those circumstances, the defendant were bound by the warranty and hence liable to pay damages to the plaintiff.

The defendant's primary contention

5. Mr Huggins SC for the defendant submitted that the trial judge had misdirected herself both in law and in fact. Whilst he accepted that in order to succeed, the defendant would have to show that the plaintiff had actual knowledge of their mistake, counsel argued that the question was what constitutes actual knowledge. He submitted that there was evidence from which the court could infer that the plaintiff must have known and would as a matter of law be treated as having had actual knowledge of the defendant's unilateral mistake. The judge, he said, was wrong on both this question of law and her conclusion on the facts.

6. On the question of what constitutes actual knowledge, counsel relied on the case of Commission for the New Towns v.Cooper (Great Britain) Limited [1995] Ch 295 in which Stuart-Smith LJ agreed with the analysis made by Peter Gibson J in Baden v. Societe Generale pour Favoriser le Developpement du Commerce et de l'Industrie en France SA (note) [1993] 1 WLR 509 as to the various forms of knowledge required for the relief of rectification. Peter Gibson J's analysis in the Baden case was summarized by Millett J in Agip (Africa) Limited v. Jackson [1990] Ch 265, 293 as follows:

" Knowledge may be provided affirmatively or inferred from circumstances. The various mental states which may be involved were analysed by Peter Gibson J. in Baden's case [1993] 1 WLR 509 as comprising: (i) actual knowledge; (ii) wilfully shutting one's eyes to the obvious; (iii) wilfully and recklessly failing to make such inquiries as an honest and reasonable man would make; (iv) knowledge of circumstances which would indicate the facts to an honest and reasonable man; and (v) knowledge of circumstances which would put an honest and reasonable man on inquiry. According to Peter Gibson J., a person in category (ii) or (iii) will be taken to have actual knowledge, while a person in categories (iv) or (v) has constructive notice only."

Millett J adopted such classification but had some reservations on categories (iv) and (v). He commented further on categories (ii) and (iii) as follows:

" I gratefully adopt the classification but warn against over refinement or a too ready assumption that categories (iv) or (v) are necessarily cases of constructive notice only. The true distinction is between honesty and dishonesty. It is essentially a jury question. If a man does not draw the obvious inferences or make the obvious inquiries, the question is: why not? If it is because , however foolishly, he did not suspect wrongdoing or, having suspected it, had his suspicions allayed, however unreasonably, that is one thing. But if he did suspect wrongdoing yet failed to make inquires because 'he did not want to know' (category(ii)) or because he regarded it as 'none of his business' (category (iii)), that is quite another. Such conduct is dishonest, and those who are guilty of it cannot complain if, for the purpose of civil liability , they are treated as if they had actual knowledge."

Stuart-Smith LJ in the Cooper case, agreeing with Peter Gibson J, took the view that apart from category (i), categories (ii) and (iii) also constituted actual knowledge in law for the purpose of obtaining the equitable relief of rectification.

7. Based on these authorities, counsel's primary contention was that the evidence was overwhelming to the effect that the plaintiff must have known of the defendant's mistake as to the meaning of the phrase "saleable area". In these circumstances, it would be unconscionable and inequitable to allow the plaintiff to rely on the correct legal construction of the warranty in Clause 14A of the Agreement if the plaintiff actually knew that the defendant understood the words in a quite different sense. It was submitted that the trial judge was wrong in failing to draw the conclusion that the plaintiff had knowledge of the defendant's mistake.

8. On the other hand, Miss Eu SC for the plaintiff, while not accepting Mr Huggins' proposition of law, sought to illustrate that the evidence clearly did not support the defendant's contention as to the plaintiff's knowledge. It is necessary therefore to examine the evidence which was relevant to the plaintiff's state of knowledge and to see whether the learned judge's finding which was challenged by the defendant was correct. For if Miss Eu was right, Mr Huggins' main contention would fail even if he might be correct in adopting the meaning of actual knowledge as analysed in the Baden case and adopted by Stuart-Smith LJ in the Cooper case.

9. Mr Huggins, with his usual fairness, accepted that the burden on the defendant in establishing his factual foundation was a heavy one, akin to "convincing proof", although probably not as high as "beyond reasonable doubt". He relied on Snell's Equity, 29th ed., p.632 and Thomas Bates v. Wyndhams Ltd. [1981] 1 WLR 505 and tried to distinguish Riverplate Properties v. Paul [1975] Ch 133. There is no dispute between the parties that this does not represent the correct standard of proof.

The plaintiff's state of knowledge

10. Counsel for the defendant submitted that the negotiations leading up to the signing of the Agreement indicated that the defendant did not understand there to be any difference between "gross floor area" and "saleable area". They had obtained the figure of 7,864 square feet from a letter dated 7 August 1992 from Kiu Lok and applied this figure to the warranty clause in place of the original figure of 8,620 square feet. Counsel submitted that the plaintiff had however all along been interested in the reason for inserting the figure of 7,864 square feet into the Agreement. They had actual knowledge or must have known of the defendant's mistake regarding the meaning of "saleable area". The defendant further relied on two other matters which they said showed that the plaintiff was aware of the defendant's mistake: first, at a meeting held on 11th August 1992, the plaintiff was shown by the defendant a letter dated 7th August 1992 from Kiu Lok which described the figure 7864 as the "approximate gross area"; and secondly, in any event, the plaintiff's solicitors were supplied with a copy of that letter by the defendant's solicitors prior to the signing of the Agreement.

11. Counsel for the plaintiff submitted that the plaintiff's state of knowledge must be considered in the light of all the circumstances of the case, including what the plaintiff originally intended to obtain out of the purchase, and the events which led to the inclusion of the warranty clause and its subsequent amendments. Counsel submitted that if one analyzed the relevant evidence, it was quite clear that the plaintiff did not know of the defendant's mistake. I shall now deal with such evidence and the judge's findings thereon.

(1) before the 11 August meeting

12. The plaintiff was originally interested in purchasing a unit on the 15th floor of the Convention Plaza. In July 1992, Mr Paul Wong of the plaintiff met Mr Anthony Au of the defendant for the purpose of viewing one of the units on that floor. Mr Peter Man, the Manager of Kiu Lok Service Management Co. Ltd. (which was the management company of the building) whose office was on that floor was also present. Mr Wong did not find any suitable units on that floor and was then taken to the 14th floor. It was not possible to inspect the units on that floor as the whole floor had been let out and so he was only shown the lift lobby area of that floor. Mr Wong said he asked Mr Man for the efficiency ratio of the building and was told that it was over 90%.

13. At a meeting in mid-July 1992 between the parties, Mr Wong was supplied with the plan of the 15th floor together with a rental information sheet. The area showing units 1507-13 was marked on the plan. The information sheet set out the gross area of the entire 14th floor and the gross area of units 1507-13 was shown to be 8,619 square feet. Mr Wong was told that there was a unit on the 14th floor which corresponded to units 1507-13 and was larger by one square foot. He therefore wrote down the figure of 8,620 on the plan of the 15th floor in the area which showed units 1507-13. He was originally interested in these units but since vacant possession could not be delivered until July 1994, he was interested in the corresponding unit on the 14th floor. At the same meeting, the parties discussed the price. According to Mr Wong, and this was disputed, he was told that the price of the unit on the 14th floor would be $6,150 per square foot for 8,620 square feet. It was then believed that the tenant of the 14th floor would not be renewing its lease and would vacate the premises soon.

14. On 25th July 1992, the defendant's solicitors wrote to the plaintiff's solicitors enclosing a plan of the 14th floor on which an area was shaded and which corresponded to units 1507-13 on the 15th floor. On 27th July 1992, his solicitors wrote to the defendant's solicitors offering to purchase the unit on the 14th floor represented by the shaded area of the plan. In that letter of offer, the price was stated to be "8,620 square feet x $6,150". On 3rd August 1992, the defendant's solicitors sent a draft sale and purchase agreement to the plaintiff's solicitors for approval. In that draft, the purchase price was stated as a lump sum, but it was clear that this figure was arrived at by multiplying $6,150 by 8,620. The plaintiff's solicitors, upon the instruction of Mr Wong, inserted a clause in the draft agreement asking for a warranty in the following terms :

"The Vendor warrants that the saleable area of the Property is 8620 square feet. The Vendor shall cause to produce a floor plan approved by an authorised person of the Property which location should resemble as closely as possible to the paper plan annexed to this Agreement. ..."

15. Pausing here, the evidence clearly showed that, at the beginning, it was indicated to the plaintiff that the gross area of the unit would be 8620 square feet. As Mr Paul Wong said, this was the plaintiff's understanding. After receipt of the plan of the 14th floor on 25th July 1992, he believed that the shaded area had a saleable area of 8,620 square feet. This was because the shaded area on the plan of the 14th floor appeared to be larger than the area shown on the plan of the 15th floor as units 1507-13, since the shaded area included part of the corridor and lift lobby. If units 1507-13 were said to have a gross area of 8619 square feet, then the saleable area of unit 1402 would, Mr Wong thought, be about 8620 bearing in mind the alleged efficiency ratio was 90%. Further, the figure of 8620 was also to be used as the basis upon which the purchase price was to be calculated. Since there was no actual inspection of the unit to be sold, it was not surprising that the plaintiff's solicitors wanted to include a warranty clause in respect of the saleable area in the Agreement. They obviously wanted to ensure that what they were paying for was a saleable area of 8620 square feet. Apparently the trial judge accepted this part of the plaintiff's evidence (see page 4 of her judgment). In my view, there is nothing to show that the judge was not entitled to come to that conclusion.

16. A few days later, the defendant's solicitors returned the draft with various amendments one of which was the warranty clause. The figure was changed from 8,620 to 7,864, but the words "saleable area" remained. This would have confirmed the belief of the plaintiff that the plaintiff indeed was buying and paying for the saleable area, and not gross area. The trial judge was entitled to say (at page 6 of her judgment) that this "left no room for doubt" on what the plaintiff's understanding or state of mind was.

(2)The meeting on 11th August and thereafter

17. The plaintiff requested the defendant to supply a floor plan of the 14th floor. Upon receipt of that plan on 10th August 1992, Mr Wong noticed a few differences between this plan and the one which he was sent in late July 1992. It is not necessary to refer to these differences in detail. Suffice it to say that there would then be a change in the area of the unit which would in turn affect the purchase price. There was a telephone conversation in which Mr Wong was informed by Mr Au of the defendant that the property would not be sold with vacant possession since the tenant now wished to renew the tenancy. Mr Wong requested a meeting which was arranged for on 11th August 1992. Mr Wong and his solicitors went to the office of the defendant's solicitors and met a Miss Judy Lee, a staff member of the solicitors' office, and a Mr Lam of the defendant. At that meeting, it soon became clear that Mr Lam of the defendant was anxious that the plaintiff should sign the Agreement on that day and Mr Wong was anxious to clarify some points with the defendant.

18. What happened at that meeting was seriously disputed. Broadly speaking two matters were in dispute: first, what were the queries raised by Mr Wong and his solicitor at the meeting, and second, whether they had more than a casual glance at a letter dated 7th August 1992 from Kiu Lok to the defendant.

19. On the first matter, Mr Wong said that at the meeting, he and his solicitor were more concerned about the rental matters apart from the reason for the change in the warranted area from 8,620 to 7,864 square feet. Miss Lee the solicitors clerk and Mr Lum of the defendant seemed to say that Mr Wong had asked very little apart from the reduction in the area of the unit. The trial judge found for Mr Wong. She said at page 17-18 of the judgment :

"The meeting dealt with a number of matters. As noted above, on 10 August Mr Wong was informed that the tenant was renewing its lease. This was a new development so far as Mr Wong was concerned. From the Plaintiff''s perspective it immediately gave rise to questions such as the amount of the new rental, its apportionment between the two landlords and the apportionment of management fees. Although Miss Lee appeared to suggest that hardly anything else was discussed other than the reduction in square footage, I reject that evidence. Even on Mr Lum's evidence, Mr Wong was asking question after question which Mr Lum took as evidence a lack of sincerity on the Plaintiff's part to purchase the property. It stands to reason that the new development would most naturally have given rise to those other questions. From Mr Wong's perspective, those matters would materially affect the rate of return and thus the decision whether or not to purchase the property as an investment. His subsequent conversation with Mr Au on 11 August leading to the latter supplying published rental data which was not challenged is consistent with what Mr Wong said were matters upon which he particularly focused."

I have no reason to doubt the logic of the learned judge's analysis of this part of the evidence. There is no ground to challenge this finding.

20. With regard to the second matter, according to Mr Wong, when he asked about the change in the warranted area, Miss Judy Lee waved a letter from a file and said that the figure came from the accounts from the management company regarding how the rental income was to be arrived at. Mr Wong and his solicitors did not have a clear look at that letter. On the other hand, Miss Lee said that Mr Wong and his solicitor were shown the letter and did have a look at it. It was submitted that Mr Wong of the plaintiff having been shown the letter from Kiu Lok dated 7th August 1992 at the meeting of 11th August 1992 must have noticed that the figure of 7,864 was referred to in that letter as "gross area". He must have realized that this was different from the description of this figure as "saleable area" in the draft Agreement and therefore knew or must have known that the defendant had made a mistake in this regard. The trial judge did not seek to resolve this conflict of evidence. At page 8 of her judgment, the trial judge said:

"There is no need to go into the differing versions of events now as it is accepted that a copy of that letter was faxed to (the plaintiff's solicitors) on 17 August."

21. Counsel for the defendant submitted that the trial judge was wrong to ignore the evidence and not to make a finding on it. In my view, it might have been better if the trial judge had made a specific finding on this part of the evidence. But it would seem that the evidence is relevant to the issue of the plaintiff's state of knowledge just as the receipt by the plaintiff of the copy letter on 17th August 1992. Mr Wong would have a better look at the document after he had received it than when it was merely shown to him. However, in view of the judge's finding regarding the plaintiff's state of knowledge even after the receipt of the copy letter as opposed to having only a look at it, be it casual or otherwise, at a meeting, it may be that the judge would have made a similar finding which would be favourable to the plaintiff. I am reinforced in taking this view because of the judge's earlier finding that Mr Wong did ask question after question on the rental position and was more concerned with that than the reduction in the area of the unit to be sold. Afterall, the purchase price was based on the footage area and if that was smaller, this would be reflected in the price. I do not think that the judge had ignored this part of the evidence and that her failure to make a finding would have affected her final conclusion on the issue of knowledge.

(3) the Kiu Lok letter

22. I now come to the receipt by the plaintiff's solicitors of a copy of the letter which was shown by Miss Lee to Mr Wong at the meeting on 11th August. It was received on 17th August which was before the signing of the Agreement . Counsel for the defendant submitted that even if the plaintiff did not know or was not aware of the defendant's mistake at the meeting on 11th August 1992, they would have known it when they read the copy letter after 17th August 1992. The judge dealt with this in the following manner:

"What 'knowledge' is to be attributed to the plaintiff by reason of the fact that Kiu Lok's letter was supplied to the plaintiff two days prior to its execution of the Agreement? The importance of Kiu Lok's letter from the plaintiff's perspective was plainly the allocation of undivided shares and management units which determined the apportionment of rental and management charges which directly affected the rate of return on capital. Whilst that was based on Kiu Lok's estimate of the approximate gross floor area of the two units, it was the allocation itself that would have been most material from a prospective purchaser's point of view. In so far as the letter contained a reference to 7,864 being the 'approximate gross area' of unit 1402, it is evident that this was a mere 'recommendation' on the part of the management company proffered on a 'without prejudice' basis. It is nowhere apparent how Kiu Lok arrived at that figure: it certainly did not purport to be the result of any actual measurements taken by surveyor.

It is not the responsibility of a property management company to ascertain floor area whether gross or saleable. That has to be a matter for a surveyor. This much is clear from Mr Man's evidence. No reasonable person would thus have relied on measurements taken by a management company as the basis for giving the warranty. Even Mr Au accepted that had he been told that the measurement was not done by a surveyor, he would not rely on it. In the circumstances, it would not be reasonable to attribute to the Plaintiff a belief that the vendor simply relied on Kiu Lok's letter and nothing else for the warranty. Had the letter not been from Kiu Lok but from a surveyor setting out his findings, it might be a different matter. But that was not what actually happened. "

23. It would seem that the trial judge had accepted the explanation of Mr Wong for the plaintiff that even after he had read it, he did not know or suspect that the defendant might have made a mistake regarding the warranted area. She held that no knowledge could be attributed to the plaintiff. The letter was written by the management company for a purpose other than convincing the reader that the figure which was described as "approximate" in this "without prejudice" letter was accurate and could be relied on. As the trial judge said, even Mr Au of the defendant would not have relied on the figures in that letter, let alone relying on it for the giving of a warranty. Mr Huggins submitted that the description of "gross area" of the figure of 7864 which appeared in the warranty clause as "saleable area" would not have escaped Mr Wong of the plaintiff who should have suspected that the defendant might have made a mistake. With respect, I do not think such a conclusion would have necessarily followed for the reasons given by the trial judge.

24. In the light of the various features in that letter, the judge's conclusion is not one which no reasonable court would have come to. It would not be appropriate for an appellate court to interfere with such a finding of fact.

25. Having had the relevant part of the evidence referred to us, I am not persuaded that there was overwhelming evidence from which the court could draw the inference that the plaintiff knew or must have known that the defendant had made a mistake in respect of the meaning of saleable area in the warranty clause. The defendant's primary contention therefore fails. That being the case, I do not find it necessary in the circumstances of this case to decide on the meaning of actual knowledge in connection with a claim for rectification. I would only add two observations. First, even accepting the defendant's submission on the meaning of actual knowledge, it cannot be said that the learned judge had clearly misdirected herself on the law. While she held on the authorities referred to her, particularly The "Nai Genova" [1984] 1 Ll.LR 353, that it is necessary to show there was actual knowledge of the existence of a mistake, she did consider all the evidence and ask herself the question "what knowledge is to be attributed to the plaintiff?". Secondly, if the situations in categories (ii) and (iii) as analysed by Peter Gibson J in the Baden case are intended as factors which the court may take into consideration in deciding whether a party has actual knowledge of the other's mistake, I would tend to agree with them. However, the principles on rectification are well established and I would be slow to expand the meaning of actual knowledge. I am reminded by counsel for the plaintiff that the court must be cautious in granting rectification since the effect of rectification is to rewrite an agreement which the parties had on the face of the document never intended or agreed to.

Amended Grounds of Appeal

26. There are 9 grounds of appeal. They emphasise on different aspects of counsel's main contentions with which I have dealt in the earlier part of this judgment. I shall now briefly discuss these grounds separately.

27. In Ground 1, it is argued that the trial judge was wrong to find that the defendant's mistake was not one of fact but one of the legal effect of the warranty in question. I do not agree. The evidence clearly shows that the defendant and their solicitors knew what was written in the warranty clause was "saleable area" and not "gross area". They just mistook the two terms to mean one and the same thing. The trial judge was clearly right to hold that it was a mistake of the legal effect of the term. This would have excluded the present case from the ambit of the doctrine of rectification.

28. Grounds 2 and 3 allege that the trial judge had misdirected herself on the issue of actual knowledge on the part of the plaintiff. For the reasons which I have given in the earlier part of this judgment, I do not agree. The defendant had simply failed to discharge, to the requisite standard as counsel suggested, the burden of showing that the plaintiff had actual knowledge of the defendant's unilateral mistake, whether this refers to the meaning as set out in category (i), (ii) or (iii) in the Baden case. As regard the judge's comment that it was pure surmise that the figure in the warranty clause came from the Kiu Lok letter, the fact is that there was no direct evidence from the defendant as to how this figure came to be inserted in the warranty clause. The judge's comment is neither here nor there.

29. Ground 4 submits that the trial judge had failed to appreciate that the plaintiff's knowledge and intention was such as to involve a degree of sharp practice or that their conduct was unconscionable and inequitable. This ground falls away in the light of the court's finding on the plaintiff's state of knowledge.

30. In Ground 5, it is alleged that the trial judge had failed to appreciate the real significance of the figure of 7864 and its description in the letter dated 7the August 1992 from Kiu Lok. As the trial judge found and I would respectfully agree, the letter did not in the circumstances of this case have the effect as contended for by the defendant and the plaintiff could not on the strength of this letter be held to have actual knowledge of the defendant's mistake.

31. In Ground 6, it is alleged that the trial judge had misdirected herself in finding that "it is accepted that Mr Wong raised a number of matters (at the meeting on 11th August) including ... why the warranted net area of 8620 sq ft was lessened to 7864 sq ft." when the defendant did not accept that at all. It may be that the trial judge had made an incorrect assumption. However, the evidence of the plaintiff on this point was before the court and the judge was entitled to take that into consideration.

32. Ground 7 deals with the trial judge's failure to make any finding in respect of the different versions of what happened at the meeting on 11th August. I have dealt with this in the earlier part of this judgment.

33. Ground 8 attacks the judge's comment or finding that the amendment introduced by the plaintiff in the 1st Amended Draft Sale and Purchase Agreement as leaving "no room for doubt". It was said that this finding was manifestly unreasonable because the defendant was not aware of the difference between gross area and saleable area. I do not think this is a valid criticism. The learned judge was there dealing with the plaintiff's state of mind at that stage of negotiation.

34. Ground 9 alleges that the judge's observation about Mr Wong's evidence regarding the plaintiff's instruction to their solicitors in respect of a subsale by the plaintiff to their subsidiary company. This is a piece of evidence which was relevant to the issue of whether the plaintiff knew of the defendant's mistake at that stage. The trial judge was entitled to take that into consideration. I do not think she can be criticised for that.

35. Finally, I should mention that during the course of this appeal, a point was raised as to whether it is possible to refuse rectification of the clause in question while at the same time deny the plaintiff damages for breach of warranty. I think it is fair to say that at the end of the arguments, it was clear that, at least insofar as this appeal is concerned, the plaintiff's claim for damages arising from the alleged breach of warranty and the defendant's claim to rectify such warranty amounted to the two sides of the same coin, and that the trial judge was correct in deciding that if the defendant ought not to be given relief in the form of rectification, it would follow that the plaintiff should be entitled to enforce the warranty and claim damages.

Conclusion

36. For the reasons which I have given above, I am not satisfied that the learned judge had misdirected herself on the law or on the facts. On the evidence, she was entitled to come to the conclusion which she did. In these circumstances, I would dismiss the appeal and make an order nisi that the defendant shall pay to the plaintiff the costs of this appeal.

Rogers, J.A.:

37. I agree.

Stone, J. :

38. I agree that this appeal should be dismissed for the reasons given by my lord Chan, CJHC.

39. I would wish to add only the following. The remedy of rectification arising from mistake attracts a heavy burden, possibly more onerous in instances of so-called unilateral mistake, wherein the conscious "snapping up" of the recognised error of the other party necessarily attracts overtones of sharp practice.

40. In the event, given our view that it was open to the learned Judge to make the findings that she did on the evidence, I agree with my lord the Chief Judge that it is not necessary in this case to grapple with the categories of knowledge analysed by Peter Gibson, J in Baden v. Societe Generale [1993] 1 WLR 509, although for my own part, in instances in which rectification of a formal agreement is sought, I should be hesitant in principle to find that the quality of knowledge required to be demonstrated to discharge the burden in a "snapping up" situation should extend beyond the first two categories within Peter Gibson, J's analysis, which formulation was conducted in the context of asset tracing and the imposition of constructive trusts.

41. Be that as it may. What in my view is essential in cases wherein unilateral mistake is asserted and the remedy of rectification sought as a consequence is that the material facts said to establish and underpin the requisite degree of knowledge be pleaded and particularised with the degree of precision usually required in cases involving fraudulent conduct. Which did not happen in this case. The Defendant's case on the pleadings appears to have been based upon common or mutual mistake, and what seems to have occurred at the outset of the trial, at least from the transcript, is that the Defendant's then counsel opted to conduct the case on the primary basis of unilateral mistake, the allegation being that the Plaintiff well knew that the Defendant understood 'saleable area' as being a reference to 'gross floor area', and sat silently.

42. It is fair to note that this change of forensic tack attracted no objection from opposing Senior Counsel, and whilst this approach may well have had been perceived to hold advantages for the Defendant's case, in the circumstances the learned Judge was not afforded the precision of pleaded allegation that otherwise could have been expected from a litigant seeking rectification of a formal Sale and Purchase Agreement on the basis of a unilateral mistake unconscionably "snapped up" to his advantage by the opposing party.

In any event, as my lord Chan, CJHC has found, and with which view I agree, the learned Judge below did not misdirect herself, either as a matter of law or of fact. In my judgment the findings of fact made by the learned Judge were open to her upon the totality of the evidence - in particular, I am quite unable to arrogate to the Kiu Lok letter the significance which has been urged upon us - and in my view such findings do not warrant interference by an appellate court. The decision below should be affirmed. I further concur with the costs order nisi which has been proposed.

Representation:

Mr Adrian Huggins, SC (instructed by Messrs Cheung, Tong & Rosa) for the Appellant (Defendant)

Ms Audrey Eu, SC leading Mr C Y Li (instructed by Messrs Tsang, Chang & Woo) for Respondent (Plaintiff)