Tai Sang Kung Ltd. v. Paraking Ltd. and Another
Read the full judgment text of HCA 2503/1998 on BabelCite. This High Court CFI judgment was delivered on 25 August 2001.
1. This action arose out of the sale and purchase of a shop known as Shop A, Ground Floor, No. 118 Sha Tsui Road, Tsuen Wan, New Territories (" the suit property "). The plaintiff was the purchaser and the 1st defendant (" D1 ") was the owner. The 2nd defendant (" D2 ") was the estate agent which introduced the suit property to the plaintiff.
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HCA002503/1998 HCA 2503/1998 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO. 2503 OF 1998 ____________
____________ Coram: Hon Chung J in Court Dates of Hearing: 3 and 4 July 2001 Date of Handing Down Judgment: 25 August 2001 _______________ J U D G M E N T _______________ Introduction 1.This action arose out of the sale and purchase of a shop known as Shop A, Ground Floor, No. 118 Sha Tsui Road, Tsuen Wan, New Territories ("the suit property"). The plaintiff was the purchaser and the 1st defendant ("D1") was the owner. The 2nd defendant ("D2") was the estate agent which introduced the suit property to the plaintiff. 2.The plaintiff complains that:-
The defendants contend that there is no substance in these complaints. Misrepresentation 3.The provisional sale and purchase agreement was entered into by the parties on 29 October 1997. The plaintiff learnt of the suit property in about the end of October 1997. The alleged misrepresentation occurred during that period. The 2 witnesses called by the plaintiff regarding this aspect were Mr. Chan Tat Yuen Julian ("Chan") and Mr. Lee Chun Wah ("Lee") who dealt with the defendants during that period on the plaintiff's behalf. 4.It is undisputed that the plaintiff's original shop was resumed for redevelopment purpose and the plaintiff was informed that it would be paid compensation in the region of $7 million. The plaintiff has to look for another shop to carry on its business of selling spare parts and accessories of motor vehicles. 5.Although there is a hint of misrepresentation regarding D2's advertisements published in the newspaper and the placard placed at D2's premises to the effect that the suit property was a 800-square foot shop, this does not appear to form the plaintiff's primary case (if at all, albeit it was referred to in the plaintiff's final submissions). In any event, I find that these advertisements and placard were only a summary of the offer for sale and that the plaintiff has not placed any reliance on them. 6.The plaintiff's primary case is based on the events said to have occurred during the plaintiff's inspection of the suit property on 28 October 1997 and 29 October 1997. 7.Chan inspected the suit property for the plaintiff after work in the evening of 28 October. According to his witness statement, Mr. Chong (D2's staff) told Chan that "according to the estimate of the ... owner, [the suit property's] area should be about 800 square feet". Under cross-examination, Chan testified as follows. He saw a wall which partitioned the suit property into 2 parts. He asked Chong if the suit property was really 800 square feet to which Chong said the shop was 400 square feet and another 400 square feet were common area lawfully occupied ("合法佔用的公家地方"). Chong said the common area had been occupied for 20 odd years. Chan testified that he was suspicious of that and understood Chong to be saying that there would be no title documents for the occupied common area. Chan testified that Chong's said statements were repeated when Chan and Lee inspected the suit property again on 29 October. 8.Further, according to Chan's witness statement, after the inspection on 29 October, Chan and Lee went to D2's office. Ms Yau (D2's supervisor) showed a sketch plan to them. The suit property was depicted in 2 parts, one shaded and another unshaded. Ms Yau said the unshaded part was "the common area legally occupied and owned by [D1] ... Yau further explained to [Lee] and [Chan] that all other owners of the shops on the ground floor of the building had already partitioned other common areas for their own use as of right". 9.Lee's witness statement is essentially the same as Chan's regarding the above matters. Under cross-examination, Lee testified that Chong told Lee the owner of the suit property occupied it for over 20 years ("霸左超過二十年"). Lee further testified that Chong told him the owner had title documents from the Government about this. 10.The account of the events given by Chan and Lee has not been seriously challenged by the defence save Lee's assertion that D2 had stated there would be title documents regarding the occupation of the suit property for over 20 years. I do not accept this part of Lee's testimony because:-
11.The defence case regarding this aspect can be found in the following passages of the witnesses who testified at trial, namely, Mr. Wong Nga Ming ("Wong") and Ms Yau Kam Ha ("Yau"). Wong was D2's staff and his statement states that:-
Yau's statement is essentially the same regarding the aforesaid matters. 12.Defence counsel informed me at the beginning of his final submissions that it is accepted that D2 was acting as D1's agent for the purpose of the sale and purchase. D1 should therefore be vicariously liable for D2's representations. According to the testimony of the plaintiff's witnesses (save Lee's testimony regarding the alleged reference to title documents, which I reject), the representation made by D2 was in essence that part of the suit property was common area and the common area portion had been occupied by its owner(s) for over 20 years. 13.The plaintiff's testimony regarding the defendants' representation is thus quite different from what has been pleaded in the Statement of Claim:-
(para. 4H thereof). 14.More importantly, this means that the plaintiff's said pleaded case is not supported by evidence. Plaintiff's counsel fairly accepts that the burden of proving the falsity of the defendants' representation falls on the plaintiff. 15.I find that the only representations were that:-
I do not find that there is evidence to establish the alleged representation that D1 had title over the common area portion of the suit property. There is no evidence to show that any representations set out in (a) to (d) above were false. 16.Accordingly, this part of the plaintiff's case fails. Requisitions on Title and Related Matters 17.The plaintiff contends that a number of requisitions on (or matters relating to) title have not been, or have not satisfactorily been, answered (or resolved) and remain outstanding. By the time of closing submissions, the plaintiff relies on 4 such matters:-
These will be discussed further in different sub-headings below. (1): Certified Copy of Survey Plan and Letter 18.This was raised in the plaintiff's letter of 22 November 1997:-
D1 considered the requisition to be too vague and abstract. The plaintiff repeated this requisition in its letter of 27 November 1997 as follows:-
D1 responded by its letter dated 28 November 1997:-
The plaintiff did not desist in the requisition and wrote again on 5 December 1997:-
There is no need to go into the details of the ensuing correspondence save to say that the parties' view continued to differ. Rather emotional words were used in some of the correspondence but that does not affect the substance of the matter. Finally on 23 January 1998, D1 wrote:-
19.In the plaintiff's letter dated 21 January 1998 (which probably should have been dated 27 January 1998), the plaintiff said:-
D1's response to this on 6 February 1998 was essentially that it was under no obligation to produce the plan or the letter as they both pre-dated the intermediate root of title. D1 further stated in effect that the plaintiff had not found evidence of matters affecting title although it is (theoretically) possible for the plaintiff to do so. 20.The plaintiff's pleaded case complains that D1 failed to produce a certified copy of the Grant Plan No. GP148-S and a copy of the letter dated 7 January 1969 which was referred to in the said plan: see para. 10B(k) of the Amended Statement of Claim. 21.Clause 14(a) of the formal sale and purchase agreement dated 14 November 1997 ("the agreement") provided that:-
Clause 14(b) of the agreement reads:-
22."Survey Plan No. GP148-S" giving rise to this requisition and the related line of correspondence was referred to in the land search record of the Tsuen Wan Land Registry (in the form of a computer printout). As is common with such computer printouts, the land search record is divided into the following parts:-
The "REMARKS" to "PROPERTY PARTICULARS" state that:-
23.The letter dated 7 January 1969 was referred to in a plastic chop appearing on Survey Plan No. GP148-S itself (which states that the plan was to accompany the said letter). 24.Relying on the definition of "government lease" in s. 3 of the Interpretation and General Clauses Ordinance, Cap. 1, the plaintiff contends that the said 2 documents were (or were parts of) Government lease. The relevant part of s. 3 of Cap. 1 reads:-
The plaintiff argues that D1 has breached clause 14 of the agreement by failing to furnish the said 2 documents. 25.I disagree with the plaintiff's arguments. There is no proper basis for thinking that either document has extended the term of the Government lease, or varied its provisions. Nothing whatsoever was known about the purport or content of the letter dated 7 January 1969 (save that it was accompanied by the survey plan). The only thing known about the survey plan is that it may affect the boundaries and area of the lot. The word "may" indicates at most a possibility but even if the plan does affect the boundaries and area of the lot (which is nothing more than an assumption), it still does not "extend" the term of the Government lease or "vary" its provisions. Further, for the same reasons, I do not consider the plaintiff to have established that they were title documents either. 26.By reason of the above matters, I disagree with the plaintiff's arguments and agree with the defence that there is no substance in this complaint. (2): Allocation of Shares in Control Card 27.The suit property was described in the 2nd Schedule of the agreement as follows:-
28.The DMC does not identify the number of shares allocated to the units in the building (including the suit property), save that the First Schedule states:-
and
29.The plaintiff wrote the following on 22 November 1997:-
D1 replied on 25 November 1997:-
The plaintiff wrote back on 27 November 1997 and requested for advice as to how the undivided shares of the suit property were divided and allocated and repeated the request for "evidence to prove the correct number of shares allocated". 30.The above line of correspondence continued until about 23 January 1998 D1 produced a plain copy of the Control Card maintained by the Tsuen Wan Land Registry in respect of the building in which the suit property is located. 31.In a letter dated 21 January 1998 (should probably have been 27 January 1998), the plaintiff said:-
32.There is no evidence as to the nature of the said control card or its purpose. I understand that this document is a record compiled and kept by the Land Registry for its own administrative purpose(s). The information appearing on it were not prepared by (although it was most probably based on) the parties to the conveyancing transactions. A perusal of the control card in question shows that:-
It is unknown what each of these numbers means and the aggregate of the typed numbers does not tally with the "Total no. of shares : 37". 33.In these circumstances, the line of correspondence between the plaintiff and D1 about the "discrepancy" between the aggregate of the handwritten numbers and the typed "Total no. of shares" is wholly misconceived as it is unknown who wrote these numbers onto the control card or what they mean. In any event, the Control Card clearly records that the total number of undivided shares is 37. 34.It is unclear whether by "shifting" the "requisition" on 21 January 1998 (probably should be 27 January 1998) to the "discrepancy" between the handwritten numbers on the control card the plaintiff has abandoned his earlier requisition about the alleged inconsistent allocation of shares in the DMC. But even if he has not, I consider there is no merit in that requisition. This is because that requisition, raised in the letter of 22 November 1997 (see above), was factually inaccurate. There is nothing in the DMC to support the statement that:-
35.Requisitions relating to the allocation of undivided shares were dealt with in at least the following 7 cases (in chronological order):-
36.The following principles can be distilled from the above cases:-
37.There is no suggestion that the DMC is not binding. There is no constraint in either the DMC (or other documents) prohibiting D1's predecessor(s)-in-title from allocating 2 shares to the suit property. Further, there has not been any inconsistency in the description of the number of shares in the title documents relating to the suit property. 38.Clause 4 of the DMC provided that the amount of Government Rent, rate, insurance premium, management fee and rebuilding or renovation costs payable is proportionate to the number of shares owned. By reason of the conclusion above, it is unnecessary to determine (even if there be any uncertainties in the amounts payable because of the inaccurate description of the number of undivided shares in title documents) whether the uncertainties are related to matters of conveyance rather than matters of title. 39.For the above reasons, I conclude that this was not a reasonable requisition. Even if it were, it has been satisfactorily answered. (3): Floor Area 40.When this complaint was raised in the letter dated 21 January 1998 from the plaintiff's solicitors, D1's solicitors denied that D1 had misrepresented the facts. Since I already dismissed the part of the plaintiff's case relating to the alleged misrepresentation, there is no substance in this requisition either. (4): Unauthorized Structures 41.On 21 January 1998 the plaintiff wrote:-
The request for information was repeated in the plaintiff's letter dated 6 February 1998. 42.D1 responded that it was up to the plaintiff to ascertain and establish the above matters and referred to clause 8 of the agreement. That clause provided in essence that the suit property was sold on "as is" basis and that the plaintiff was satisfied with and accepted the condition of the suit property. The plaintiff wrote on 11 February 1998 and stated that the initial burden of proving the legality of the alterations rested with D1 since it was D1's duty to prove good title to the suit property. 43.The ensuing line of correspondence on this subject continued and on 12 February 1998, the plaintiff asserted that the alterations and structures were unauthorized. On 16 February 1998, D1 enclosed an "Architect's Statement" dated 14 February 1998. That document was a document compiled by a Mr. Kwan who claimed to be an architect and he opined that all the structures appeared to be exempted works under s. 41(3) of the Building Ordinance. He further stated that 2 of the structures laid outside the boundaries of the suit property. The plaintiff replied by alleging that the said document may not be reliable and indicated it might engage another authorized person. The plaintiff then referred to the possible enforcement action of the manager or incorporated owners of the building for breach(es) of the DMC. 44.There is no need to elaborate on the "requisition" regarding the alterations or structures save to repeat what Litton, JA (as he then was) said in Active Keen Industries Ltd v. Fok Chi-keong [1994] 1 HKLR 396:-
The so-called "requisition" is nothing more than a dressed-up fishing expedition. It was initially posed by way of a query on the basic facts which may give rise to a requisition. The subsequent assertion that the structures were unauthorized was made without disclosing the basis in support. 45.Clause 8 of the DMC is referred to in the Amended Statement of Claim:-
There is however no evidence to show that the alterations or structures offend any of the provisions in clause 8 of the DMC, for example, they were structural in nature, or that they affect the supply of water and so on. 46.This "requisition" is therefore of no substance either. No Title to Convey 47.Neither the provisional sale and purchase agreement nor the formal sale and purchase agreement provided that the common area portion was to be conveyed by D1 to the plaintiff. There is therefore no merit in the plaintiff's arguments that the common area portion was intended to be included in the sale. Insofar as the plaintiff relies on the defendants' representations, this has already been dealt with under the heading "Misrepresentation" above. 48.Further, if for any reason it can be argued that the sale was intended to include the common area portion, I find that the parties were fully aware of the nature of D1's "title" or interest in the common area portion when they entered into the agreement. I therefore find further that it was the parties' intention that D1 was to convey such "title" or interest (for example, title arising from adverse possession) to the plaintiff. 49.I therefore also disagree with this part of the plaintiff's arguments. D2's Breach of Fiduciary Duty to Disclose 50.It is undisputed that the shareholders and directors of D1 and D2 were the same 2 individuals, namely, Mr. Lo Wing On and Mr. Lo Wing Hon. Para. 22 and 23 of the Amended Statement of Claim plead:-
PARTICULARS
PARTICULARS
51.I understand the alleged failure on D2's part "to disclose all the relevant information about the suit property" (para. 22(b) of the Amended Statement of Claim) to refer to the alleged mis-statement about the floor area, the ownership of the common area portion and the alleged unauthorized structures (see "Misrepresentation", "Floor Area", "Unauthorized Structures" and "No Title to Convey" above). In view of the conclusion above regarding these, this part of the plaintiff's case is not established. 52.It has not been pleaded that the plaintiff was entitled to, and did, avoid (or rescind) the agreement with D1 by reason of D2's alleged breach of duty. Neither was that stated in the witness statements of either Chan or Lee. In fact, when Chan and Lee testified regarding this aspect:-
53.The plaintiff relies on Bowstead and Reynolds on Agency (1996) 6th Ed., para. 6-060 and 6-062 (illustration (1)). The relevant parts state:-
There are, however, at least two problems with the plaintiff's arguments. It is to be noted that the plaintiff's complaint is not that D2 has received commission from both sides but that D2 introduced a seller who has a common shareholding and directorship without informing the plaintiff of this. 54.First, it has been decided that an estate agent in Hong Kong is not in the same position as an estate agent in England. In Hong Kong, he acts as a broker taking commission from both vendor and purchaser: Cheng Kwok-fai v. Mok Yiu-wah, Peter and Another [1990] 2 HKLR 440, 445. I consider this to be so in the present case. On the facts of this case, D2's role is nothing more than an introducer of the suit property. As I found above, it has disclosed all the relevant facts to the plaintiff. The decision whether to purchase the suit property, and if so on what terms, was not made by D2 but by the plaintiff. The plaintiff acted through its two directors, Chan and Lee, who were experienced businessmen. 55.Secondly, even if D2 can be said to have breached its fiduciary duty, the agreement was not void but only voidable. It has not been pleaded or proven that the agreement has been avoided. Even the testimony of Chan and Lee did not state that the agreement was avoided. 56.In any event, the rule has its roots in equity and is flexible: Snell's Equity (2000) 13th Ed., para. 11-68, text to nn. 94-98. In the circumstances of this case, I do not consider the non-disclosure of D2's association with D1 to justify avoiding the transaction. 57.For the above reasons, this part of the plaintiff's case also fails. Conclusion 58.By reason of the matters aforesaid, the plaintiff's claim is dismissed. Counterclaim 59.D1 counterclaims the plaintiff for breach of the agreement by failing to complete the transaction. 60.By reason of the above matters, I find that D1 has established its counterclaim. There is, however, no evidence to substantiate the loss allegedly suffered by D1 and there is no order for a split trial regarding quantum of damages. 61.Accordingly, I will enter judgment for nominal damages in D1's favour in the sum of $1,000. Costs 62.There is no apparent reason to depart from the normal rule that costs are to follow the event. The costs of this action are to be paid by the plaintiff to the defendants to be taxed if not agreed.
Representation: Mr Mathew Chong Chun Sang, instructed by Messrs Jackie Cheung & Co., for the Plaintiff Mr Hylas Chung, instructed by Messrs Richard Tai & Co., for the Defendants Remarks: |