Shing Chun Ping and Others v. Daikaco Company Limited and Others

HCA009869/1994

1994, A9869

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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Coram: the Hon Mr Justice Findlay, in Court.

Dates of hearing: 22, 23, 24, 28, 29, 30, 31 October 1996, 1, 4, 5, 6, 7, 8, 11, 12, 13, 14, 15 November 1996, and 18 December 1996.

Date of handing down of judgment: 24 December 1996

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JUDGMENT

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The Background and the Plaintiffs' Case

1. The story starts back in 1987. At that time, the third plaintiff (HS Wong) and the Wong Chi Hung, Roger (Roger), who was the fourth defendant in this action, but against whom the plaintiffs are no longer proceeding, were directors of, and equal shareholders in, a company called Viewlac Investment Limited (Viewlac).

2. Viewlac then owned a plot of agricultural land known as Lot 162 of Demarcation District 239. The land had been purchased for investment purposes, but there was little that could be done to realise the potential of the investment without the assistance of indigenous villagers in the New Territories. Indigenous villagers, known colloquially as Tings, have a special privilege. In essence, Tings may, under certain conditions, build residences on land that is not open to such development by others. This land is sometimes known as Ting land.

3. An agreement was reached with the first two plaintiffs (CP Shing and KC Shing) under which their privileges as Tings could be used to exploit the land owned by Viewlac. Although, it is admitted by the plaintiffs, the land was owned by Viewlac, the plaintiffs say that this agreement was entered into between CP Shing and KC Shing, on the one hand, and HS Wong, on the other. The plaintiffs say that this agreement was entered into in the presence of Roger, and "was subsequently evidenced in writing in a memorandum dated 28 October 1991"(the October agreement).

4. It was agreed, the plaintiffs say, that HS Wong "would cause Viewlac to transfer" the land to the Tings. Once this was done, the agreement was, it is said by the plaintiffs, that the Tings would apply for permission to build on the land, HS Wong would be responsible for the cost of building, that, when the building was complete, the Tings would transfer their interest to HS Wong, that HS Wong would pay the required government premium and that the Tings would be paid $100,000 each.

5. In due course, the land was transferred to the Tings, CP Sing holding Lot 372 and KC Sing holding Lot 371, and they obtained permission to build.

6. The plaintiffs say that HS Wong built one three storey building at a cost of about $650,00 on each of the lots, and that this work was "substantively completed" in or about 1992. HS Wong paid to the Tings an additional $60,000 each, in recognition, it is said, of the increase in the value of the land.

7. The Tings did not transfer the properties to HS Wong. They were, in the eyes of the uninformed world, the legal owners of the land, although, according to the plaintiffs, this was subject to an unregistered equitable interest in favour of HS Wong.

8. The plaintiffs say that for "a period of time between 1993 and 1994" the Tings "were unable to contact" HS Wong, "who was at all material times - or during the greater part thereof - in Canada".

9. The plaintiffs then plead that, on 12 August 1994, the Tings, relying on misrepresentations by Roger, sold the land and buildings to the defendants for a total price of $11,080,000 . One of the documents signed by the Tings on this occasion authorised the solicitors to pay from the proceeds of sale the government premium of $2,523,800 and $1 million to the first defendant (Daikaco) and Ms Michelle Yim, who, at one time, had been the fifth defendant. The Tings acknowledged that they had received the balance of the purchase price from the defendants directly, but this was not so.

10. The plaintiffs plead that, in order to induce the Tings to sell, Roger paid to them $120,000 each and fraudulently represented to them that HS Wong had been adjudged bankrupt, was wanted by the police, had escaped overseas, would never return to Hong Kong, had authorised him (Roger) to deal with the land on his behalf and would ensure that the interests of HS Wong were protected. The Tings discovered that what Roger had told them was untrue when HS Wong told them so on or about 26 August 1994.

11. The plaintiffs say that Roger was acting as agent for the second and third defendants in making the misrepresentations, and that by "reason of the matters aforesaid" Daikaco was the "real purchaser" of the land from the Tings, the defendants were not bona fide purchasers, and the sales were based on the fraudulent misrepresentations of Roger "as agent or representative" of Daikaco.

12. It is said that by relying on the misrepresentations the plaintiffs have suffered loss and damage being $7,862,200, which sum is reached by deducting the sum of $3,217,800 - which is the sum the plaintiffs say was paid by the defendants - although it does not seem to knit with earlier allegations - from the total sale price of $11,080,000.

Clarification of the Plaintiffs' Case

13. During Mr Hingorani's opening, I asked him if the Shings expected to recover money in this action. I said: "They don't have a claim to money." He replied: "No, they don't." They are in the action, it seems, to assist HS Wong, and, indeed, it emerged during the evidence that HS Wong was financing their proceedings.

14. Also during Mr Hingorani's opening, I asked if the plaintiffs' case stood or fell on the allegation that Roger was the defendants' agent. He said that it did not, but that the plaintiffs alleged that the defendants were not bona fide purchasers. In that case, I said, the plaintiffs' reliance on the "matters aforesaid" was somewhat vague. I invited him to make the plaintiffs' case more specific in this regard. In response, Mr Hingorani drafted a proposed amendment in which it is alleged that the defendants were not bona fide purchasers "and/or ought to have known or suspected or been put on enquiry of the interest of other parties in the said houses" because -

• the payments by the defendants did not reflect the market value of the property nor the stated purchase price of $11,080,000;

• the defendants knew or ought to have known that money had been expended on building the houses in respect of which the defendant made no payment, and that water and electricity meters had been installed and the houses contained personal belongings indicating the interest of third parties; and

• only after the execution of the assignments did the Shings execute declarations as to loss of the title deeds, was a waiver of Law Society Guidelines as to the Deed of Mutual Covenant granted and was payment of the government premium made by uncertified cheques.

15. After argument, I allowed this amendment, and a short adjournment to enable Mr Aiken to deal with it.

The Defence

16. The defence is, understandably on the basis of a case that they did not know what happened before 12 August 1994, a series on non-admissions as to those events. They say that the conveyancing documents were explained to the Shings on 12 August 1994, and they said nothing about the alleged interest of HS Wong. The defendants say that the Sings well knew that they were not going to receive the stated purchase price, and never asked for it. The Shings received both the original $100,000 each and an additional $120,000 each, which was more than they had bargained for. The defendants deny that Roger was their agent. They say that they were bona fide purchasers without any notice of the alleged interest. In particular, the allegations in the amendment are denied.

17. The defendants say that Daikaco, through its director IM Wong, first learned about the property from Viewlac acting through Roger. Viewlac said that the property was registered in the names of the Shings, that Viewlac was not in a financial position to complete the development, that a premium of about $1.26 million was payable in respect of each lot, that the deadline for payment of the premium was 12 August 1994 in respect of one lot and 15 August 1994 in respect of the other, that the Shings were not in a financial position to complete the development, that Viewlac had, by letters dated 27 March 1992 to the Shings, waived all rights to the property and had said, in essence, that the Shings could do as they wished, that the property was dilapidated and required substantial renovation and that the Shings were anxious to sell to someone capable of completing the development and paying the premium.

18. The defendants say that, at no time, did the Shings or their agent, Roger, inform Daikaco of the interest of any third party, including HS Wong, and that they were bona fide purchasers without notice.

19. As to the execution of the declarations of loss of deeds, the defendants say that the Shings were entitled to and did produce certified copies of the deeds and the defendants were bound to accept these as proof of title, and that the declarations were not executed at the request of, or with the knowledge of, the defendants and have not been registered. These declarations, the defendants say, were produced only during discovery.

20. Regarding the deeds of mutual covenants, the defendants say that these were prepared by the Shings solicitors without consulting the defendants.

21. As to payment of the premium, the defendants say that the assignments were executed in escrow pending payment of the premium and that the premium was paid by solicitors' cheques, which are generally, and were in this case, accepted by the government.

22. The defendants go on to allege that the interest of any third party contained in or evidenced by an instrument in writing, and not registered, is null and void against the defendants being subsequent bona fide purchasers for value, notwithstanding any notice of the unregistered instrument. The defendants also allege that the Shings are estopped from asserting that the property is subject to a third party interest. Further, it is said by the defendants that the property was assigned by Viewlac to the Shings as beneficial owners, and this assignment was executed by HS Wong. Therefore, the plaintiffs are estopped from asserting the property was subject to a third party interest, and HS Wong is estopped from asserting that he has an interest.

The Counterclaim

23. The defendants have a counterclaim. They allege that the plaintiffs caused their agent to obstruct the resale of the property by a poster campaign and other acts. They also claim, that if the property was subject to a third party interest, the Shings are in breach of contract.

The Reply

24. It their reply, the plaintiffs aver that, in July 1994, Roger was an undischarged bankrupt and unable to act as a director of Viewlac.

The Issues

25. It seems to me that the issues that have to be resolved are -

1. Who acquired rights under the agreement with the Shings? Was it HS Wong or Viewlac?

2. Did Roger make the misrepresentations to the Shings as alleged by the plaintiffs?

3. Was Roger acting for the defendants in making those misrepresentations?

4. Were the defendants bona fide purchasers "and/or ought [they] to have known or suspected or been put on enquiry of the interest of other parties"?

The Credibility of the Main Witnesses

26. The evidence as to the central events was given by the two Shings, Wong Yat Wing (the building contractor) and HS Wong for the plaintiffs, and IM Wong and Roger for the defendants.

27. As I told counsel at the hearing on 18 December 1996, I was not impressed with any of them as witnesses. Generally, I find myself reluctant to accept what was said by any of them in relation to disputed matters, unless their evidence is supported by the probabilities or acceptable contemporaneous documents, or is against their own interests.

Who Acquired Rights under the Original Agreement with the Shings?

28. HS Wong claims in these proceedings rights in respect of the property, which, he says, he acquired from the Shings under the agreement with them in 1987 and reduced to writing in the memorandum dated 28 October 1991.

29. At the time the original agreement was entered into, the land was owned by Viewlac. In this event, how did it come about that HS Wong acquired rights in the property? In summary, the evidence about this is as follows.

Evidence on this Issue

30. HS Wong told me that Viewlac had only two shareholders and directors; himself and Roger. Mr Hingorani said, in a written submission, that "Viewlac was, on the credible evidence before the Court, financed entirely by" HS Wong. This is not what HS Wong himself says. His evidence was as follows -

Q. Did Roger make his contribution of a hundred thousand dollars?

A. He paid the decoration fee instead.

Q. That was equal to a hundred thousand dollars, was it?

A. I should be responsible for paying the decoration fee but then he should be responsible for paying up the capital, but he introduced someone to do the decoration work and then he suggested to make some deduction concerning the hundred thousand dollars.

Q. My concern is simply what did Roger put into the company when it was established, whether by paying a third party or into the company?

A. Indirectly I did not receive the capital directly from him but he paid for part of the decoration fee.

Q. About how much was that?

A. $110,000 to $120,000.

Q. What did you put into the company please?

A. A hundred thousand dollars.

31. After the company was registered, it bought about three pieces of land. HS Wong says he paid for the land directly, not through Viewlac. Viewlac purchased a piece of land for about $1 million for the purpose of developing houses. This is the piece of land concerned in this case. He paid $30,000 to each of the Shings directly, not through Viewlac. He, he said, was the developer of the land. The only role to be played by Viewlac was as property agent. He contracted with Fu Wing to build the houses. He drafted the October agreement. Construction work started a few months before this. The delay was because there was a delay in approving plans for construction. He appointed an architect - KSL International - and he paid them. He entered into agreements for the sale of the flats - some in 1987, some in 1988. Viewlac offered the units for sale. He signed the agreements in the "capacity as a director of the company as an agent".

32. He was asked "What status did the company have to sell the units of the two Shings?" He answered - "Well, the position was rather ambiguous at that time because we were not the owner."

33. After the original agreements for the sale of the units were entered into, replacement agreements were executed because the value of the houses had gone up. The original agreements were in Chinese and "home-made". On these agreements, Viewlac is shown as a party, with Viewlac Property Agency, which was a department of Viewlac, as the agent and witness. It bears the chop of "Viewlac Investments Limited" with a signature of a person described as "Manager". It is identical to the chop on the Viewlac letter. The replacements agreements were drawn by a solicitor. In these the vendor is HS Wong signing under powers of attorney from the Shings. These agreements are not dated but HS Wong says they were signed in March 1993.

34. HS Wong said he held the view that, although Roger held 50% of the shares in Viewlac, he, HS Wong, had control of the company. I did not understand his reasoning for saying this. He agreed that land purchased was put in the name of Viewlac and that Viewlac owned this property. Viewlac assigned the relevant property to the two Shings. The land was never sold or assigned to him. He says he had a personal interest in the land because he paid the price.

35. The witness's explanation for the Chinese agreements being entered into, and signed, by Viewlac as vendor is that he instructed Viewlac to sign on his behalf. In desperation, it seems, he suggested that the signature was not that of Viewlac because Viewlac should have signed with two signatures.

36. The deposits paid by the purchasers were paid to Viewlac and then to HS Wong.

37. It appeared from various documents that Viewlac entered into a construction contract with a company called BMC for site work. Viewlac paid $100,000 to BMC. HS Wong sued BMC in the District Court to recover this sum. Viewlac also sued BMC in the High Court in respect of BMC's failure to carry out a building contract. The statement of claim alleges that a substitute contractor Zuki Engineering Company was engaged to complete the work.

38. In cross-examination, HS Wong admitted that Viewlac had entered into a contract with BMC to do the building work on the land concerned. When asked why he had denied that there had been another contractor before Fu Wing, he said that "engaging signing a contract doesn't mean that I really have them as my builder, because they never did the job". HS Wong said that he paid the contract sum to BMC, but when it was pointed out to him that the statement of claim in the action against BMC alleged that Viewlac had paid the money, the witness said "I can represent Viewlac". When he was asked why he did not mention Zuki Engineering when he was asked if another contractor was employed, he said "My understanding of your question was you were asking me if anybody actually built the house for me and that you were not talking about negotiating, talking about doing the job."

39. I said to HS Wong - "You say that Viewlac engaged BMC. Viewlac engaged Zuki, but Viewlac didn't engage Fu Wing; is that what you're telling me?" The answer to this was - "Correct." I asked - "Can you give me any explanation for that? It sounds odd to me. Can you explain it to me?" He answered - "Because Viewlac did not operate any more and I was the one who paid. Actually in '89 the company, Viewlac, did not exist in a sense that it did not - it was not operating any more."

40. Mr Hingorani has a better explanation. He says that Viewlac contracted with BMC because the contract was entered into before Viewlac assigned the land to the Shings. But this is not what HS Wong said.

41. The contractor, Wong Yat Wing, gave evidence about entering into the written agreement of 28 October 1991. The work started some six months before so the oral contract was entered into earlier than this. He said that he had never heard of Viewlac.

42. Under cross-examination, YW Wong agreed that it was normal to submit a quotation for work - "we work according to the quotation". But there was never any quotation or written job description for this work. HS Wong did not require him to submit a quotation. "I just told him how much I would ask for building those houses, then he gave me the job. When it was put to him that this was far too vague - "with a building contract, you must identify the items of work you are responsible for" - he disagreed.

43. He could not say precisely when he started work. He employed sub-contractors, but he had no records at all. He could not say when he completed the work. His attention was drawn to a letter dated 5 November 1991 applying for a certificate of compliance, and it was put to him that he must have told the solicitors or the architect when he had finished, he agreed that he would have told the architect. He could not remember if he told the architect about completion in November 1991. When asked why he waited until the work was virtually complete before entering into a written agreement, he said that it was because HS Wong had to go to Canada frequently. When he entered into the oral agreement, there was no written specification of the work to be done. There was nothing in writing at all; not even notes, it was all kept in the head. Although the October 1991 agreement refers to a plan, there was no plan attached and he does not have it now.

44. When it was first pointed out to this witness that the October 1991 agreement was on paper with his company's letter-head, he said this was because "he [HS Wong] didn't have any company's paper, he asked me to give him one. . . . he doesn't have any paper with the company's heading." The witness wriggled a bit about this later, but his initial recollection seemed to be that HS Wong said something about a company's letter paper, and this company could only have been Viewlac.

45. He built a third house for HS Wong. This took about a year to build from late 1989. There was no written document in connection with this house. There was nothing like the October 1991 agreement here. When asked why this was, he said he was not the one who asked for the agreement to be made. When HS Wong negotiated the contract for the houses concerned, he did not indicate there was any difference compared with the contracts he had entered into before. In regard to this contract, HS Wong just said "that he was going back to Canada. He feared that just in case that the two Tings would cause disturbance in the course of work or other people would cause disturbance in the course of work, and therefore he wanted a written document."

46. CP Sing said that his understanding was that buildings financed by HS Wong would be erected on the land and the land would then be reassigned to HS Wong, although he seems to have known that it was Viewlac's land that would be transferred to them.

47. He knew that the land was owned by Viewlac, and he knew that HS Wong and Roger were directors of that company. When HS Wong spoke to him, he did not specify the capacity in which he was dealing. He was not aware of letters concerning the development addressed to Viewlac.

48. When questioned about the authenticity of the October 1991 document, he said that it bore his signature, although he had told a solicitor that he could not remember when and where the document was signed. He did not remember he had signed such a document on 12 August 1994. HS Wong reminded him of the occasion afterwards, and he then remembered it. When he signed the documents on 12 August 1994 disposing of his interests a second time, he had not only forgotten about the document of October 1991, but also the oral agreement under which he had disposed of his interests.

49. KC Shing gave evidence to much the same effect. He was worried "a bit" about his liability to HS Wong under the October 1991 agreement to pay $2.6 million, but he also said he had forgotten about October 1991 agreement. He identified his signature, but could not remember when it was made. He said "I have doubted the authenticity, but I have never told anybody that I doubted it." When asked by me to clarify this, he said "I mean I don't remember when I have signed this document, and I also wonder if I had really signed this document." When asked if he was worried that someone else might have forged his signature, he said "A bit".

50. The Shings received an extra $60,000 from HS Wong. This was paid by him, apparently, without any request, pressure or expectation. It was paid, I was told, because there had been a delay and they had to go to different offices to sign documents.

51. As is customary in developing Ting land, the Shings gave powers of attorney in favour of HS Wong, and executed wills in his favour.

52. Roger said, in essence, that the agreement with the Shings was with Viewlac. He knew nothing about the October 1991 agreement.

53. All contemporaneous documents, other than the powers of attorney, the wills and the agreement of October 1991, indicate that it was Viewlac that was the developer of the property. The consent to commencement of building works dated 27 November 1989 is addressed to Viewlac. The contract with BMC dated 30 October 1987 is addressed to Viewlac and is signed on behalf of Viewlac. A letter by the architect, KLS International, dated 20 October 1988 is addressed to Viewlac. A fee note by solicitors dated 21 October 1987 is addressed to Viewlac.

Assessment of this Evidence.

54. The plaintiffs attempt to prove that HS Wong was entitled to the rights under the agreement with the Shings must fail. This is on the basis of the evidence adduced by them and the contemporaneous documents. I take no account of the evidence of Roger in this assessment. He was a thoroughly unreliable witness who was prepared to deceive anyone at the drop of a hat.

55. There is no basis on the plaintiffs' pleaded case to explain how it came about that Viewlac was the owner of the property, but somehow lost these rights, and they emerged again in the hands of HS Wong. In evidence, the only bases on which HS Wong seems to argue that he, rather than Viewlac, was entitled to those rights are that he paid the money, that he was in control of Viewlac and that Viewlac was no longer in business.

56. The fact that he paid money towards the acquisition and development of the property would, ordinarily, be construed as advances by a director to a company. It may, conceivably in some circumstances, create some kind of case in equity as between him and Viewlac, but this is not pleaded, and it cannot effect the fact that the agreement by the Shings was clearly with the owner of the property, which was Viewlac.

57. HS Wong did not, of course, have control of Viewlac, but, even if he did, this cannot, in itself, convey rights from Viewlac to HS Wong.

58. The fact that Viewlac may not have been conducting any active business is also irrelevant to the issue.

59. The evidence that the Shings executed powers of attorney and wills in favour of HS Wong cannot give to HS Wong an interest in the land. The land was owned by Viewlac. Viewlac assigned the land to the Shings. Clearly, this was done only for the purpose of enabling Viewlac to use the Ting privileges of the Shings. It was not intended that the Shings should have any ultimate beneficial interest in the land. They held it for Viewlac. They were not able to give any interest to HS Wong, and I do not believe that they intended to do so.

60. The October 1991 agreement cannot have the effect of divesting Viewlac of its rights. In any event, I have grave doubts about what I have been told about this agreement. It is improbable that a client and a contractor would enter into a completely oral agreement for a project of this size, and then, some six months later, enter into a written contract because, apparently, HS Wong had some worries about "disturbance". One of the Shings, at least, had doubts about the agreement. I do not think the defendants have proved on the probabilities that this is a genuine agreement.

Did Roger make the misrepresentations to the Shings as alleged by the plaintiffs.

61. As to this issue, CP Shing says that around March or April 1993, he and his cousin met Roger at the request of Roger. Roger handed to them a letter written in English (the Viewlac letter). The letter is dated 27 March 1992, although it was not given to them on that date. The letter referred to an "oral agreement on about May 1988", and said that HS Wong, one director of Viewlac, had "run away to Canada" and that Roger was "given to understand that he is no further interest in the said development". The letter went on to say that Viewlac was in financial difficulties, and that "In the circumstances, we are happy to know and no objection that you are prepared to build the property by your own arrangement. It concluded by saying "We hereby take that the oral agreement has been terminated by mutual agreement and our company was waived all the Estate Right and Interest of and in the oral agreement said land and also waived our right to claim damages and loss with you." The letter purported to be signed by Roger as manager of Viewlac.

62. The witness could not read this letter, but Roger explained that HS Wong had no money to develop the site - "He was unable to do it". Roger also said that HS Wong had committed an offence, was wanted by the police and was unable to come back to Hong Kong. When asked about the interest of HS Wong in the property, the witness said that he thought Roger would look after this. Then he said that Roger told them this. He believed what Roger had said and they went to the offices of solicitors, Messrs Chan, Lau and Wai (Chans) at which they had executed the original documents. Roger told them they had to get these documents back to cancel them, but the solicitors refused to hand them over without the consent of HS Wong. They went to the Lands Department to give instructions that documents were not to be sent to Chans in future, but to the Shings, who were then to hand them to Roger. Later, they went to other solicitors, Messrs King & Co (Kings) to authorise them to obtain the return of the documents from Chans. A few days before 12 August 1994, Roger contacted them again and arranged for them to go to the offices of Kings. When Roger spoke to them in early 1993, he said that they would be paid $120,000 each for their rights. They had said nothing to Kings about HS Wong or the development of the property.

63. KC Shing said much the same thing.

64. Roger, of course, denies that he said to the Shings what they say he said. He says he told them what was contained in the letter.

Assessment of this Evidence

65. In my view, the probabilities favour the Shings' version. The Viewlac letter itself says a great deal of what the Shings say Roger told them. Roger says that he believed that HS Wong had taken money from Viewlac and had run away with it. He says he believed HS Wong had committed a criminal offence. He took advice from a police friend about this, but he says he believed he did not have enough evidence to make a formal report. It seems to me that it is likely, having heard Roger give evidence, that he would seek to embroider what was in the letter in order to persuade the Shings to co-operate. He has shown, by his own evidence, that he is the sort of person who would not stop short of deception to further his ends.

Was Roger acting for the Defendants in making those Misrepresentations?

66. There is no evidence at all that Roger was in any way an agent for the second and third defendants in making those misrepresentations. Certainly, the third defendant had not even met Roger before 12 August 1994, and there is no evidence of any kind of contact between Roger and the second defendant.

67. Roger did have a relationship with IM Wong, and, therefore, the plaintiffs wish to infer, with Daikaco. This relationship was one of a property investor and a real estate agent. In particular, there was an earlier transaction in which Roger had been instrumental in a deal concerning other Ting land. This land had been transferred to the Tings there involved by HS Wong and Roger. IM Wong told me that he did not know that HS Wong had owned this land. If he had studied the deeds, he would have known this. IM Wong says that he did not study the deeds. This is in accord with the probabilities. It seems to me likely that the ordinary man would do what IM Wong says he did; leave the matter to the conveyancers.

68. There is no evidence that Roger was an agent for IM Wong or Daikaco in the sense that he was able to bind them by what he did. A real estate agent is not, of course, in the normal course, such an agent. The function of a real estate agent is to introduce, and, without specific authority, he has no power to bind either party in the transaction concerned. There is no evidence that Roger did anything other than introduce IM Wong to possible deals. He did ask Roger to perform specific tasks, such as paying for the utility connections and to negotiate the amount of the payment to the Shings, but there is nothing from which one could infer that Roger had any authority to make representations to the Shings to persuade them to enter into the deal. I believe Roger was acting in his own interests, hoping that he would make some money from the transaction.

Were the defendants bona fide purchasers "and/or ought [they] to have known or suspected or been put on enquiry of the interest of other parties"?

69. Again, there is no acceptable basis for suggesting that the second and third defendants were anything other than bona fide purchasers, without notice of any interest vested in others.

70. There was much evidence of the condition of the property in July 1994. As one might expect from the quality of witnesses in this case, opinions of that condition varied from "brand new" to "dilapidated".

71. The probability is that the property was in the condition that one would expect it to be after having been abandoned and neglected for a long time, and it would have given the appearance of having been abandoned and neglected for a long time. It would most certainly not have given a person viewing the property the impression that the property was inhabited and being cared for by an owner exercising his right of possession.

72. There was evidence that some of the flats in the buildings had odd bits of furniture and belongings in them. This may be so, but nevertheless the impression created would not have been one that would lead an ordinary person to wonder if the right of the person selling the property was subject to some other right such as that alleged in this case.

73. The only possible argument that could be used against the second and third defendants is that when the third defendant visited the property, and when the second defendant probably did the same, they should have suspected that someone other than the Shings had an interest in the property. What they saw would have been that they were being offered a property that was in a neglected state; one that needed substantial work done on it before it could be occupied. Why would that, without more, arouse anyone's suspicions? In my view, there was no reason at all why it should.

74. Daikaco, through IM Wong, of course, knew somewhat more than could be gleaned from an inspection of the property. IM Wong was told by Roger that the buildings had been erected by Viewlac. He was told that Viewlac had run out of money, and could not proceed with the development. That was given credence by the fact that the property had obviously been abandoned for some considerable time.

75. IM Wong frankly admitted in evidence that he had some concern that Roger was not protecting the interests of the company of which he was a director and which he (IM Wong) thought had developed this property. But this concern was allayed when Roger showed him the Viewlac letter saying that the contract between the Tings and Viewlac had been dissolved.

76. Because of his previous experience, IM Wong knew that, when a developer develops Ting land, he usually takes a will, a power of attorney and the deeds from the Ting. His evidence as to why he did not inquire in this case of development of Ting land whether there was a will and a power of attorney in favour of Viewlac, and whether the deeds were lodged with Viewlac, was not satisfactory.

77. Roger says that he deliberately concealed some information from IM Wong. He did not read to him the first paragraph of the Viewlac letter to the effect that HS Wong had run away and no longer had any interest in the development. He just told him that Viewlac had given up its rights and the land had been given back to the Tings. He remembered this specifically because he didn't want IM Wong "to think too much". He said he had deliberately suppressed what he had written in the first paragraph. Roger did not tell him that the wills, the powers of attorney and the deeds were held by Chans and he couldn't get hold of them.

78. So, as I see it, we have a situation in which a reasonable person in the position of IM Wong would have been put on notice that Viewlac had some interest in the property. Would the concerns of a reasonable man have been allayed by being told by Roger, in essence, that Viewlac had abandoned that interest? He was also told, in effect, by the Shings and their solicitors that no one else had any interest. I think it probable that, in fact, IM Wong's concerns were put to rest. It is not likely that he would have outlayed some $3 million if he believed that Viewlac was still maintaining an interest in the property. Was this reasonable? I think so. The three important factors of -

• seeing a property that gave the appearance of being abandoned;

• being told by a director of Viewlac that the company had abandoned any interest; and

• having the assurance from the sellers and their solicitors that no other had any interest,

would, I believe, have induced a reasonable person to believe that Viewlac no longer wished to maintain an interest in the property.

79. Mr Hingorani says that Roger could not act as a director of Viewlac because he was bankrupt. This may be so, but I am concerned with the conduct of IM Wong, not what Roger was able to do. There is no evidence that IM Wong knew that Roger was bankrupt.

80. I must say that my mind is not entirely free form doubt on this issue, but it is for the plaintiffs to prove their case on the probabilities, and that doubt must be resolved in favour of the defendants.

The Specific Allegations

That the payments by the defendants did not reflect the market value of the property nor the stated purchase price of $11,080,000.

81. This allegation cannot be made good against the second and third defendants. There is no evidence that what they agreed to pay did not reflect the market value, and, of course, the stated purchase price as between the Shings and Daikaco had nothing to do with them.

82. What Daikaco was to pay did not reflect the market value, but what the Shings were being paid for was, essentially, the use of their names, and there is no evidence that they did not receive the going rate for this. The additional value was added by Viewlac, and I have already dealt with this aspect of the matter. Daikaco, on the information given to it, was in a good bargaining position. The deadline for the payment of the premium was nigh, and if this were not paid the Shings would go back to square one.

83. The stated purchase price as between the Shings and Daikaco was, it is agreed on all sides, completely fictitious. But the fiction was designed to fool those not involved in the transaction. It was not to mislead Viewlac, because, as far as Daikaco was concerned, Viewlac knew it was fictitious through its director, Roger. IM Wong says that the price was as shown in the documents for stamp duty purposes and to facilitate the obtaining of mortgages. I believe it was inflated more for the purpose of the latter, and for the purpose of misleading subsequent purchasers. Whatever the purpose, it does not seem to me that this assists the plaintiffs.

That the defendants knew or ought to have known that money had been expended on building the houses in respect of which the defendant made no payment.

84. Again, this allegation does not affect the second and third defendants. They did not need to inquire into the background to the erection of the buildings.

85. As far as Daikaco is concerned, I have already dealt with its position in relation to Viewlac.

That water and electricity meters had been installed.

86. The evidence about this is ambiguous. It seems that some meters were installed at the behest of the builder and some following action by Roger at the request of IM Wong. Whatever the position may be, it does not seem to me that a potential purchaser of a property should draw any particular inference from the fact that utility meters had been installed.

That the houses contained personal belongings indicating the interest of third parties.

87. I do not think that the defendants should have been put on their guard by what they might have seen at the property under this head. On any version of the facts, it does not appear that a reasonable person would, seeing what was said to be on the property, conclude that some persons were presently occupying the premises. One might have inferred that, at some time, someone had moved some bits and pieces onto the property, but the condition of the property would have told a reasonable person that any occupation had ceased.

That only after the execution of the assignments did the Shings execute declarations as to loss of the title deeds, was a waiver of Law Society Guidelines as to the Deed of Mutual Covenant granted and was payment of the government premium made by uncertified cheques.

88. I am at a loss to understand what it can possibly be said that a reasonable potential purchaser would infer from these facts. There is no evidence that any of the defendants knew of these technical matters. Even if they had been told of them, I think the reaction of the reasonable lay purchaser would have been to respond - "So? What's that got to do with me?". I have no doubt that the purchasers in this case, as would be done in most cases, relied entirely on their professional conveyancers to deal with, and sort out, technical matters of this nature.

89. Although specific allegations are not made that the haste with which the transactions were concluded should have raised suspicion in the minds of the purchasers, the plaintiffs' case is, to some extent, based on this factor.

90. In this connection, the plaintiffs adduced evidence from an expert conveyancer, Mr John David IP, the purpose of which seemed to be to show that the conveyancing transactions were conducted in an incompetent and unusual way. I do not know where this evidence takes us. It does seem that were some slipshod aspects to the professional work, but it does also seem that Mr Ip himself has done some of the things that he criticises. Whatever the position may be as to this, it can only help the plaintiffs is they can show that the defendants knew the facts, and there is no evidence whatsoever that they did. The attitude of IM Wong is that he left all those things to his professional advisers, and this is just how I would expect it to be. Lay people do not, I think, get involved in, or even understand, what is done to complete a property transaction. They sign what they are told to sign, do what they are told to do, and expect the professional conveyancers to get on with it.

91. The matter was completed in a hurry. The plaintiffs suggest that this was because IM Wong knew somehow that HS Wong was returning to the territory, and wanted the transaction sewn up before HS Wong could put a spoke in the wheel. This seems to me to be unlikely. Daikaco were expending a lot of money on this deal, albeit to secure a good bargain, and I do not think it probable that it would have done so with the knowledge that HS Wong might come along and claim rights in the property. It is much more likely, as IM Wong contends, that the transaction was rushed along because the deadline for the payment of the premium was looming up, and Daikaco was unwilling to pay the premium without, at the same time, acquiring ownership of the property.

The Result

92. I cannot find that the plaintiffs' claims are proved on the probabilities. Accordingly, they are dismissed.

The Counterclaim

93. The activities about which the defendants complain were, it seems, those of a shadowy figure named Cheung Man. Not surprisingly, he did not give evidence.

94. In order to find for the defendants on the counterclaim, I must find that the plaintiffs are responsible for the unlawful acts of Cheung Man.

95. HS Wong says that Cheung Man was a good friend of his. He complained to Cheung Man about what had happened to the property, and authorised him to deal with it.

96. Cheung Man did attempt to deal with it by triad methods, but it also seems that he was keen to make a large amount of money for himself.

97. I am suspicious of the protestations by the plaintiffs that they knew nothing of the illegal activities of Cheung Man, but there is not enough evidence to find that they are to be held responsible in law for them. I guess that, when HS Wong authorised Cheung Man to deal with the matter, he echoed the sentiments of Henry II when the king asked, "Will no one rid me of this turbulent priest?", but I must find that there is insufficient evidence on which I can hold the plaintiffs liable.

The Result on the Counterclaim

98. The counterclaim must also be dismissed.

The Costs

99. There seems no reason why the costs should not follow the events. Accordingly, I make orders nisi that the plaintiffs pay the costs of the claim, and the defendants the costs of the counterclaim. For guidance, I estimate that the counterclaim occupied only about 5 per cent of the trial time.

Representation:

Mr Hingorani and Ms G Samson, instructed by Messrs Paul Cheng & Co, for the plaintiffs.

Mr Kenneth Chow and Mr Kenny Lin (until 23 October 1996); Mr Nigel Aiken, QC, and Mr Kenny Lin (from 24 October 1996), instructed by Messrs Richard Tai & Co, for the defendants.