Wong Sai Kit v. Fong Kwok Leung and Others
Read the full judgment text of HCA 1245/1966 on BabelCite. This High Court CFI judgment was delivered on 19 July 1968.
1. In 1960 land values in Hong Kong had been rising steadily for a number of years; and between 1960 and 11th February 1965 there was a great deal of speculative dealing in landed property. Purchasers found no difficulty in persuading certain banks and individuals to advance a very high percentage of the purchase price of land on a first mortgage; and a purchaser could hardly fail to make a profit on a resale. The only question facing a speculator was when to resell. Of course, larger profits co
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IN THE SUPREME COURT OF HONG KONG ORIGINAL JURISDICTION ACTION NO.1245 OF 1966 -----------------
----------------- Coram: Blair-kerr, J. Date of Judgment: 19 July 1968 ----------------- JUDGMENT ----------------- 1. In 1960 land values in Hong Kong had been rising steadily for a number of years; and between 1960 and 11th February 1965 there was a great deal of speculative dealing in landed property. Purchasers found no difficulty in persuading certain banks and individuals to advance a very high percentage of the purchase price of land on a first mortgage; and a purchaser could hardly fail to make a profit on a resale. The only question facing a speculator was when to resell. Of course, larger profits could be made by demolishing the existing building and erecting a multi-storey building on the land; but this entailed a bigger financial outlay; and if the existing building happened to be subject to the Landlord and Tenant Ordinance, it was essential to obtain an order from the Governor-in-Council exempting the premises from the further operation of the Ordinance. 2. If a Crown lease is due to expire in a few years time, a lessee may be faced with a problem. If his intention is to remain in possession, obviously he must apply to Government for a regrant of his lease. In 1960 Government was charging very high premia on renewal; and the conditions of regrant usually required the lessee to apply to the Tenanoy Tribunal with a view to obtaining an exemption order to enable him to demolish any existing 'old' building and to erect, within a specified period (usually 2 years), a new building of a certain minimum value. An exemption order would also be conditional upon the applicant compensating the sitting tenants to the extent specified in the order. The premium in respect of the regrant, coupled with the amounts which would be payable by way of compensation to tenants, might involve a large financial outlay on the part of any Crown lessee in an urban area; and in the case of 'old' property, redevelopment was essential in any case because of the high premium charged by Government. 3. In the case of a lease with only a few years to run, if a vendor is able to satisfy a prospective purchaser that the Building Authority has approved redevelopment plans this fact will enhance the existing value of the land to some extent; and once Government has approved and registered the conditions for regrant, subject to those conditions being complied with, a prospective lessee is in as good a position as if the lease itself had actually been signed. 4. On 11th February, 1965 there began a series of "runs" on certain banks in Hong Kong, including the Canton Trust and Commercial Bank Limited (now in liquidation). Public confidence was shaken to the core. The boom in land speculation ended. land values fell rapidly. Fortunes were lost. It is easy for us today to say that in 1963 a large number of people acted foolishly; but in judging them today we must be careful to do so in the light of the conditions then prevailing. 5. This is the background to the case which has been tried before this court during the last thirty days; and, before dealing with the issues, I might say a few words about the personalities involved. The third party is, of course, a firm of solicitors which was established in June 1960 by Mr. Wong Pei Tak who is known to the legal profession, and generally, as Peter Wong: and I shall refer to him as such in this decision. He is 48 years of age. He said in evidence that his residential address was 11 Tak Hing Street, 5th floor. Between 1949 and 1954 he was employed by Wilkinson and Grist, Solicitors, as a stenographer. In 1954, he became an articled clerk in F. Zimmern & Co., Solicitors; and he was enrolled as a solicitor in Hong Kong on 2nd January, 1960. Peter Wong appears to have built up a considerable conveyancing practice; and, when he entered into partnership with Stephen Lo on 1st April 1962, and the firm then became Wong & Lo, he remained in charge of the conveyancing side of the business. His partner was in charge of the litigation side. The third party had banking accounts with the Canton Trust & Commercial Bank Ltd.; and they acted as solicitors for that bank. 6. The third defendant gave his residential address as 26 Leighton Road, 1st floor. He is 45 years of age. He was educated at Lingnam University Canton where he studied commerce for two and half years. He appears to have come from a fairly well-to-do family; he inherited land in Hennessy Road and took part in its redevelopment. One of his brothers Robert Yung was a partner in F. Zimmern & Co. in 1960. The third defendant met Peter Wong when the latter was an articled clerk; and Peter Wong acted as his solicitor in a number of conveyancing matters after he had established his own firm. Since 1963 the third defendant has been sub-manager of the United Chinese Bank. 7. As in the case of many other firms of solicitors in the Far East, Peter Wong employed a number of persons who have been variously described as clerks, interpreters, and canvassers. When he established his firm in June 1960, he employed the third defendant's elder brother, Yung Kwok Yew, with whom he had also become acquainted when articled to F. Zimmern & Co. Yung Kwok Yew is 58 years of age. He gave his address as 26 Leighton Road, 3rd floor. From 1945 to 1957 he was in the motion picture business. From 1957 to 1960 he was a real estate broker. He was employed by Peter Wong from June 1960 to October 1964 at a salary of $200 per month plus 30% commission on all fees earned by the firm on the business which he introduced. He resigned from the third party at the end of October 1964; and as from 1st November 1964 he was employed by his son Michael Yung who, on that date, established his own firm, K.C.Yung & Co., Solicitors. 8. Peter Wong's younger brother, Wong Shing Tak, became an employee of the third party as from June 1960. He is 43 years of age; and he gave his residential address as 1501 Sincere Building, Argyle Street, Kowloon. In 1941 he was living in Cheung Chau. He appears to have married shortly before the outbreak of the Pacific War when he was 16 years of age. He has had very little education. Peter Wong said in evidence that Wong Shing Tak did not even have enough education to be a clerk; and when this evidence was put to Wong Shing Tak himself, he, rather surprisingly, agreed with this estimate of his academic attainments. As in the case of many other witnesses, I am satisfied that he knows far more English than he is prepared to admit to; but I am also satisfied that he is incapable of translating from English to Chinese legal documents of any complexity; and he did not allege that he is so capable. He had no steady employment of any sort prior to his being employed by the third party; and there was no evidence that he had had any training or experience in the real property business. His brother said that his salary was $1,000 per month; and there was no evidence that he received any commission over and above this. About ten years ago he was seriously ill with inflammation of the kidney; and he has been sick for considerable periods since. 9. Other clerks/interpreters/canvassers in the employment of the third party included Wong Yan Lung, Tai Kam Cheung, Kam Shek Wing, Ma Bing Kuen and Leung Pui-chiu. Wong Yan Lung said that Peter Wong paid him 40% of all fees earned on business introduced by him. He resigned from the third party in October, 1964; and since 1st November, 1964, he has been employed by K.C. Yung & Co. Ma Bing Kuen was, at all material times, the clerk in charge of the conveyancing section of the third party. He left the employment of the third party this year and he now runs an import/export business. Leung Pui Chiu, who is Peter Wong's brother-in-law, was, at all material times, chief accountant of the firm. 10. The name by which the first defendant is generally known is Fong Sze Ming or Fong Ming. So far as the evidence goes, he never used the name Fong Kwok Leung prior to the transactions involved in this case. The residential address which he gave to the court was Block A, 5th floor, Tsui Ming Mansions, So Kwong Chuen Road, Kowloon, which was also the address of the only business which he said he was now associated with, namely: Ming Sheung Land Investment and Construction Co. Ltd. He said he had moved recently to Tsui Ming Mansions; that, prior to that, he had lived for one year at Flat E, 1st floor, 23 Robinson Road; that prior to that he had lived at Fung Ming Building, Lee Garden Road, and at Wong Koon Building, 321F King's Road; Wong Shing Tak said that the first defendant could also be found at 28 Connaught Road Central. But the first defendant did not give that as one of his addresses. 11. The first defendant has known Peter Wong since 1954. Not only did he employ Peter Wong as his solicitor; but he said that after the third party was established he used to visit the firm almost every day. He said that he hardly knew Wong Shing Tak prior to June, 1960; but that after that date he met him frequently. The first defendant was described by Yung Kwok Yew as a property speculator. 12. The second defendant is the wife of Wong Shing Tak. She said in evidence that she was also known as To Ping and To Shuk Kuen. She is 41 years. She was a child bride having been married in 1941 at the age of 14. She is the daughter of a fisherman in Cheung Chau. She has had four years primary education. Apart from the transactions involved in this case, there was no evidence that she has ever had any property registered in her name, or that she has had any training or experience in the real property business. She and her husband lived in Cheung Chau till December, 1964, when they moved to the 3-room flat in Sincere Building, Kowloon. But, according to her evidence and that of her husband, even after they took the Kowloon flat, she frequently returned to Cheung Chau to reside with her husband's, and her own, parents. 13. Michael Yung is 30 years of age; and he resides at 26 Leighton Road, 3rd floor with his father, Yung Kwok Yew. He was an articled clerk with Deacons; and in June, 1962, he went to England to continue his law studies. He passed the final solicitors examination in London in August, 1963. and he then returned to Hong Kong on 25th October, 1963. He completed his articles with Deacons; and joined the third party on 1st December, 1963. He was admitted as a solicitor on 7th December, 1963. During the 11 months he was in the employment of the third party, he was mainly concerned with assisting Stephen Lo on the litigation side. So far as the evidence goes, he was given little or no experience on the conveyancing side. 14. Finally, there is the plaintiff. He has known Tai Kam Cheung for 10 years. Prior to January, 1965, he had, on three occasions, lent money on mortgage; and he told the court that on each of these three occasions Tai Kam Cheung was involved and that the conveyancing documents had been signed at the offices of the third party. 15. The property involved in this case is some 1800 square feet of land which in 1960 was registered in the Land Office as Kowloon Inland Lots 2881 and 2882, together with the buildings thereon, namely 2 and 4 Cheong Lok Street, Kowloon. The Crown lessee was a teacher named Wai Po Yam. The Crown leases under which the lots were held were due to expire on 25the December, 1963; and on 27th June, 1960, Wai Po Yam had applied to Government for their renewal for a further term of 75 years. 16. On 24th January, 1961, three documents were executed in the offices of the third party. The first document was an assignment by Wai Po Yam of his interest in the property to the first defendant, the purchase price being $180,000. The second document was a declaration of trust by the first defendant in which it was recited that the purchase money paid to Wai Po Yam had been provided by the second and third defendants and himself in equal shares and that he therefore stood possessed of a one-third undivided share of the property upon trust for the second defendant and of a one-third undivided share of the property upon trust for the third defendant. In fact the first defendant had contributed only $20,000 of the purchase money; the third defendant and his brother, Yung Kwok Yew, had each contributed $10,000 (although he share of the Yung brothers was in the name of the third defendant). The third document executed on 24th January, 1961, was a mortgage of the property in favour of one Cheng Leung Kwan to secure a loan by him of $120,000. It is very much in dispute as to who contributed the remaining $20,000 of the purchase price. This is a matter on which I shall have more to say in dealing with the claim by the third defendant against the third party. 17. On 7th February 1961, Peter Wong began corresponding with Government in connection with the renewal of the Crown leases; and on 2nd November 1962 he received letters from the Registrar General enclosing Conditions of Regrant and Deeds of Surrender in respect of the old lots for execution by the defendants. The letter contained this paragraph:-
These documents were executed by the three defendants and they were returned by Peter Wong to the Registrar General by letter dated 30th November 1962. 18. CHENG Leung Kwan appears to have been persuaded to reassign this mortgage on the 15th December 1962, despite the fact that he had not been repaid the $120,000 loaned by him. CHENG was given a letter dated 28th December 1962 which had been drafted in the office of the third party and which had been signed by the three defendants. This letter read in part:-
19. For various reasons Government required a fresh Memorandum of Agreement to the Conditions of Regrant and amended Deeds of Surrender to be executed; and these documents were signed by the defendants on 13th March 1963. 20. Condition 3(a) of the Conditions of Regrant reads in part:-
General Condition 8 stipulated that if the grantee failed to comply with any of the Conditions of the Agreement, the Crown had the right to forfeit any premium paid and to re-enter. 21. The Conditions of Regrant were duly registered in the Land Office and forwarded by Government to the third party. On 27th March 1963 and on 27th April 1963, the third party received demand notes for $162,734, being the premia due in respect of the regrant of the new lots which were now renumbered K.I.L. 8528 and 8563. 22. On 8th May 1963, Peter Wong wrote to Government stating that his clients had insufficient funds to pay the premia and seeking an extension of two months. On 27th June 1963, Government wrote to the third party stating that if the premia were not paid within 14 days, consideration would have to be given to the enforcement of the Crown's rights under General Condition 8 - which was, in effect, a threat of re-entry. 23. On 9th July, 1963, the Tai Yau Bank Limited advanced $300,000. This was secured by a first mortgage on the property executed by the defendants in favour of the bank. Part of this loan was used to repay to CHENG Leung Kwan the $120,000 which he had advanced on 24th January 1961 and to pay the premia due to Government. The payment to Government was made on 10th July 1963. 24. In the summer of 1963, there was a difference of opinion. It is sufficient to say at this stage that Yung Kwok Yew and his brother decided to retire from the joint venture altogether and sell their undivided one-third share in the property. An oral agreement was reached and instructions were given to Ma Bing Kuen to prepare a draft purchase and sale agreement. 25. On 10th September 1963, the third party filed in the Tenancy Tribunal notices of application for exemption of the premises 2 and 4 Cheong Lok Street. The notices purported to indicate that the application would be made on behalf of the third defendant as well as the first and second defendants. 26. Some time later Yung Kwok Yew was handed a draft purchase and sale agreement consisting of 14 clauses. This draft recited that the defendants were in possession of the property; and that they were entitled to new Crown Leases subject to the Conditions of Regrant. The draft made reference to the Tai Yau Bank mortgage, and proceeded thus:-
Clause I provided for the sale by the third defendant to the first defendant of his (the third defendant's) undivided one-third interest in the property. Clause 3 provided that the purchase price should be $70,000-$25,000 being payable upon execution of the agreement and the balance of $45,000 being payable by instalments viz. $10,000 being payable on or before 31st December 1963, $20,000 on or before 31st January 1964, and the remaining $15,000 on or before 29th February 1964. Clause 5 provided for completion on or before 29th February 1964 or on the expiration of two months from the date of the exclusion order pursuant to the Tenancy Tribunal applications, whichever should be the later but there was a proviso that even if an exclusion order was not granted, completion should take place in any event at the end of December 1964. Clause 14 read as follows:-
27. On 28th December 1963, the third defendant executed a purchase and sale agreement in the offices of the third party. The circumstances in which he did so are very much in dispute. It is sufficient to say at this stage that as regards the recitals and the first fourteen clauses, this agreement was identical with the draft which had been handed to Yung Kwok Yew; but there was an additional clause (clause 15) which reads:- "15. For the purpose of perfecting this agreement the vendor" (namely the third defendant) "shall simultaneously with the signing of this agreement irrevocably appoint the purchaser" (namely the first defendant) "his attorney giving the purchaser full power to manage, mortgage, charge demise, reassign, transfer, assign, sell or otherwise dispose of the said premises as if the purchaser is the absolute owner thereof and the (vendor) hereby declares that the said power of attorney is an irrevocable power of attorney and shall be binding on the (vendor) his executors and administrators at all times hereafter." 28. On the same day, the third defendant signed a power of attorney in the offices of the third party. Again, the circumstances in which this document was executed are very much in dispute. It is sufficient to say at this stage that the document made no reference to the fact that the third defendant had sold, or had agreed to sell, his one-third share in the property. But it stated that the third defendant was desirous of appointing an attorney in the Colony of Hong Kong to act for him in all matters in relation to his one-third share; and it reads:-
It would be difficult to imagine a more comprehensive power of attorney. Clause 1 reads:- Clause 1 reads:-
Clause 2 reads:-
The things specified in the schedule included these:-
29. Upon his signing the purchase and sale agreement, the third defendant received $35,000 from the third party, being the first two instalments of the purchase price of $70,000 in respect of his one-third share. He received a further $15,000 in the offices of the third party on 4th February, 1964. The remaining $20,000, being the balance of the purchase price, was paid to Yung Kwok Yew in the offices of the third party; but not until September 1964. 30. In December 1963 the Tai Yau Bank Limited agreed to lend a further $100,000 on the security of the property; and a further charge was executed in the offices of the third party. It is very much in dispute as to the circumstances in which this document was executed. At this stage, I would merely say that it was executed by the first defendant purporting to act as attorney for the third defendant; and it was received by Lau, Chan and Ko, solicitors for the Tai Yau Bank, together with a copy of the power of attorney by letter from the third party dated 2nd January, 1964. It was Lau, Chan and Ko who actually inserted the date, 27th December, 1963. Presumably it was thought by someone in Lau, Chan and Ko that the document had been executed on that date. 31. The rate of interest on both the $300,000 and $100,000 borrowed from the Tai Yau Bank was 1.2% per month. 32. On 5th March, 1964, a document which purported to be an agreement between the defendants was signed by the first and second defendants in the presence of Peter WONG. The first defendant purported to sign as attorney for the third defendant. One of the recitals to this agreement reads:-
Clause 2 of the agreement reads:-
Clause 3 of the agreement reads:-
33. On 6th March, 1964, Peter Wong appeared before the Tenancy Tribunal and conducted the exemption application, purporting to act on behalf of all three defendants. On the recommendation of the Tenancy Tribunal the Governon-in-Council ordered, subject to certain conditions, that the premises be excluded from the further application of the Landlord and Tenant Ordinance. The conditions provided, inter alia, that work on the site should be completed within twenty-eight months and that $91,160 compensation should be paid to the tenants in the old buildings. Fifty per cent of this compensation was payable upon the gazetting of the order (the order was in fact gazetted as G.N. 1859 on 10th July, 1964) and the remainder of the compensation was payable before the end of August, 1964. 34. In July 1964 the Gar Chew Land Investment Company Limited agreed to advance the sum of $550,000 at 1.2% per month interest on the security of the property; and on 11th July, 1964 a mortgage was executed in their favour. In this document the names of all three defendants are given as the mortgagors. The first defendant executed the document as attorney for the third defendant. Part of the mortgage money was utilised in paying off the $400,000 owing to the Tai Yau Bank Limited on the mortgage and further charge and the $91,160 compensation due to the tenants of Nos.2 and 4 Cheong Lok Street. 35. In September 1964, the Canton Trust and Commercial Bank Limited agreed to lend $170,000 at 1.2% per month interest on the security of the property and the personal guarantee of one guarantor. A building second mortgage dated 28th September, 1964 was executed in their favour in the offices of the third party. In this document the names of all three defendants are given as mortgagors. The first defendant signed as attorney for the third defendant. The guarantor was "Wong Hung" whose address in the guarantee was given as 62B, Leighton Road, 7th floor. It is common ground that "Wong Hung" was Peter Wong and that Peter Wong signed the guarantee. So far as the evidence goes, he had never used this name on any official document prior to this. He was certainly not generally known by that name; and he had never lived at 62B, Leighton Road, 7th floor. 36. In accordance with the terms of the building second mortgage, the Canton Trust and Commercial Bank advanced the first instalment of the mortgage loan (namely $50,000) upon the execution of the agreement. The remaining instalments which, by the terms of the building mortgage, were due to be advanced as the erection of the new six-storey building progressed, were never in fact advanced. 37. All mortgages, assignments, agreements and other documents relating to the Cheong Lok Street property were prepared in the offices of the third party; and Peter Wong's name appears on the documents as a witness to the execution of the various documents by the parties concerned. It is also a fact that during the years 1960/65 nearly all letters written by the third party concerning the Cheong Lok Street property were either drafted by Peter Wong or approved by him and bore the initial "P.W.". 38. In the Tai Yau Bank mortgage and the Gar Chew Land Investment Company Limited mortgage the address of the first and second defendants was given as 66 Tung Lo Wan Road, 2nd floor. So far as the evidence goes, that was a false address. Neither the first defendant nor the second defendant had ever resided at that address. However, the address of the third defendant (62 Leighton Road, first floor) was correctly stated in these documents. 39. On 15th January 1965 the plaintiff knew nothing at all about the previous history of the Cheong Lok Street property. In evidence, he said that on that day he received a telephone call from Tai Kam Cheung, the interpreter/clerk employed by the third party, as a result of which he arranged to meet Tai in a hotel. The plaintiff's understanding of the proposition put to him by Tai was that he was being asked to lend $550,000 on the security of the property but that he would be stepping into the shoes of an existing mortgagee and that there would be a transfer of that mortgage to him. He visited the site; and he subsequently spoke to Peter Wong. According to the plaintiff he was made aware of the fact that one of the three mortgagors was a certain Yung Kwok Tong who was a senior official of the United Chinese Bank and that this fact influenced him considerably in deciding to lend $550,000. The plaintiff also said that Peter Wong told him that he would be required to advance a further $20,000 for expenses, and that he agreed to advance this sum. 40. On 29th January 1965 he brought his cheque for $570,000 and handed it to Peter Wong. He said that Ma Bing Kuen brought in certain documents; that the transfer of the mortgage by The Gar Chew Land Investment Company Limited to himself was briefly explained to him and that he was asked to sign. He also said that he saw the mortgage itself; that he noticed that it had not been signed by Yung Kwok Tong, the United Chinese Bank official; and that he asked Peter Wong the reason for this; that Peter Wong explained to him that the third defendant had signed by his attorney; and the plaintiff said that he was shown the original power of attorney dated 28th December 1963 by the third defendant appointing the first defendant as his attorney. He was then handed a promissory note for $20,000 dated 30th January 1965 signed by the first and second defendants. He said he was also shown another document in the form of a letter dated 30th January 1965 signed by the first and second defendants for themselves and purporting to be signed by the first defendant as attorney for the third defendant. This letter read in part:-
41. The plaintiff said that Tai Kam Cheung was present throughout this whole interview with Peter Wong. 42. Subsequently Tai Kam Cheung handed the plaintiff a cheque for $6,600 being interest on the $550,000 at the rate of 1.2% per month in respect of the month of February 1965. No further interest was paid to the plaintiff and he asked the third party to press for payment. On 15th October 1965 the third party appears to have sent a letter to the first and second defendants, and to the first defendant as attorney for the third defendant, addressed to 321F King's Road, 13th floor, North Point, Hong Kong. It read:- "We act for Mr. Wong Sai Kit who is the mortgagee of the above properties under an indenture of transfer of mortgage dated 30th January 1965 ........ whereby the principal sum of $550,000 together with interest and all the full benefit of the covenants, powers of sale and other powers remedies and provisions contained in the indenture of mortgage dated 11th day of July 1964 given by you in favour of Messrs. Gar Chew Land Investment Co. Ltd. and registered in the Land Office by memorial No.445973 were transferred to our client. A copy of this letter was sent by the third party to the Official Receiver on 25th October 1965 in view of the fact that the mortgagees in the building second mortgage were now in liquidation. The letter concluded thus:-
43. The plaintiff received no further interest. He therefore changed his solicitors and instructed Edmund Cheung & Young to act for him. On 21st December 1965, this firm, who obviously had been given a copy of the letter sent by the third party on the 15th October 1965, sent another letter addressed similarly to the first and second defendants, the first defendant being described as attorney for the third defendant. This letter included the statement:
and the letter proceeded to demand payment of arrears of interest failing which the plaintiff would sell the property by public auction. 44. As there was no response from the defendants to this letter, Edmund Cheung & Young inserted an advertisement in the press to the effect that the plaintiff proposed to exercise his powers of sale. The third defendant then instructed Lau, Chan & Ko to act for him; and on the 11th February 1966, they wrote to the third party as follows:- "We act for Mr. Yung Kwok Tong who was at one time an interested party in a joint venture with your Mr. Peter Wong and Mr. Fong Kwok Leung for the re-development of the above property.
Peter Wong did not reply to this letter, nor make any attempt to refute the charges made on behalf of the third defendant until he filed his defence to the third defendant's statement of claim on 17th February, 1968. 45. On 14th February, 1966, Lau, Chan & Ko on behalf of the third defendant wrote to the plaintiff's solicitors. The letter reads in part:- "We act for Mr. Yung Kwok Tong who has consulted us with regard to an advertisement inserted by you in the press concerning the sale of the above properties by public auction ......................................................................................................................... 46. On 17th February the plaintiff's solicitors wrote to Lau Chan & Ko acknowledging their letter of 14th February and stating inter alia:-
The property was in fact sold on 23rd March, 1966 for $311,000; and an assignment was executed on 4th April 1966 by the plaintiff in favour of the successful bidder. 47. The plaintiff's claim is a very simple one. He does not seek to recover, as against the third defendant, the $20,000 secured by the promissory note signed by the first and second defendants. But he sues all three defendants on their personal covenant contained in the Gar Chew Land Investment Co. Ltd. mortgage dated 11th July 1964, and the deed of assignment dated 30th January 1965, which contained these words:-
48. The claim is for the sum of $338,716.80, made up as follows:-
49. The first and second defendants did not enter an appearance or file a defence to the plaintiff's claim. The third defendant filed his defence on 31st October 1966 and issued a third party notice on 6th October 1966; and, upon a summons for directions on 14th January 1967, it was ordered that:-
The plaintiff's action against the third defendant was heard on the 6th, 7th, 8th and 9th of May 1968. The plaintiff gave evidence; but he did not call any witnesses. His counsel (Mr. Bernacchi) opened on the basis that Tai Kam Cheung would be called; but after the plaintiff's evidence was completed, Mr. Bernacchi informed the court that he had received a second proof of this man's evidence; and that having compared the second proof with the first proof he could no longer put Tai Kam Cheung forward as a witness of truth. Tai Kam Cheung was not called by either side. The third defendant called no witnesses. 50. On 9th May 1968, I gave judgment for the plaintiff for the sum of $338,716.80 and interest thereon at the rate of 1.2% per month from 5th April 1966 to date of judgment and at the rate of 8% per annum from the date of judgment to date of payment, and costs. In giving judgment I indicated that I would give reasons later; and, as the proceedings by the third defendant against the Third Party have now been completed, it is convenient to include both decisions in one judgment. 51. The only question of fact raised in the third defendant's defence is set out in paragraph 8. In this paragraph he avers that immediately prior to the execution by the plaintiff of the assignment to him of the Gar Chew Land Investment Co. Ltd. mortgage, Peter Wong informed him that the third defendant had no longer any interest in the said property; and that the plaintiff thereupon verbally agreed to look to the property as sole security for the said loan and agreed not to enforce any covenant as against the third defendant. 52. The plaintiff denied these allegations. No evidence was called in support of them by the third defendant; and my view was that there was not a word of truth in them. No reference was made to this aspect of the defence by counsel for the third defendant in his closing submission. 53. In paragraph I of his defence the third defendant pleaded that the purported authority to the first defendant to execute the mortgage on the third defendant's behalf was procured fraudulently; that the first defendant was not acting bona fide; and that the third defendant was therefore not bound by the deed. 54. In his Reply to this paragraph the plaintiff pleaded:-
55. As I read paragraph 1 of the third defendant's defence, he does not suggest that the power of attorney was not wide enough to enable the first defendant to execute a mortgage; but that because his signature to the power of attorney was "procured fraudulently", he is not bound by his attorney's signature on the mortgage deed. 56. Mr. Bernacchi cited Carlisle & Cumberland Banking Co. v. Bragg(1) as the leading case on the principle of non est factum. However, I agree with Mr. Bernacchi that that case has no application to the facts of the present case. The third defendant's signature to the power of attorney was not forged; and he knew that he was signing a power of attorney. His case is that it was falsely represented to him that the power was for a limited purpose and that he accepted this false representation and signed the document. 57. This would have been no defence to an action against the third defendant by the Gar Chew Land Investment Co. Ltd., and, in my view, it is no defence to the plaintiff's action. In Bryant, Powis and Bryant v. Quebec Bank(2) Lord Macnaughten (p.180) quotes with approval the following well-known passage from the judgment of the Court of Appeal of the State of New York in President etc. of the Westfield Bank v. Cornen(3):-
58. In paragraph 2 of the defence it is pleaded that if the first defendant's execution of the mortgage did bind the third defendant, no legal right to the mortgage debt passed to the plaintiff because express notice in writing of the assignment had not been given to the third defendant. 59. Section 7(1) of the Law Amendment (Miscellaneous Provisions) Ordinance reads in part:-
60. As Mr. Bernacchi pointed out, the section does not say "from the date of the assignment", but "from the date of such notice"; and in the statement of claim it is pleaded that the letter dated 21st December 1965 from Edmond Cheung & Young addressed to the first and second defendants at 321F King's Road, 13th floor, was adequate notice in writing; but Mr. Bernacchi also relied upon the letter dated 17th February 1966 from Edmond Cheung & Young written in reply to Lau Chan & Ko's letter of 14th February 1966 in which Lau Chan & Ko (writing on behalf of the third defendant) made specific reference to the assignment of the mortgage and to the press notice regarding the auctioning of the property. 61. In his closing address, counsel for the third defendant argued that the letter of 21st December 1965 was inadequate notice because it was not addressed to the third defendant's address and because no evidence had been adduced that the occupant of 321F King's Road had communicated the contents of the letter to the third defendant; that the first notice which the third defendant received of the fact that the plaintiff was the transferee was the newspaper advertisement; that this was not express notice in writing to the third defendant; that by Lau Chan & Ko's letter of 14th February 1966 the plaintiff was made aware of the sale and purchase agreement of 28th December 1963; that his solicitor's letter of 17th February in reply, being subsequent to the plaintiff's knowledge of the sale and purchase agreement, must be regarded as ineffective notice as against the third defendant. 62. This highly technical argument was a brave attempt to retrieve a hopeless position. In my view the letter of 21st December 1965 was prima facie express notice in writing to all three defendants, and the onus was upon the third defendant to show that the letter was never received by him. No objection was raised by the third defendant as to the sufficiency of the power of attorney; and I do not think it is open to him to argue, as against the plaintiff, that notice to his attorney was not notice to him. But, in any event, having regard to the decision in Bateman v. Hunt(4). I do not think that the plaintiff is precluded in equity from bringing this action against the third defendant, even if it could be argued successfully that no express notice of the transfer was given. 63. In paragraph 6 of the defence it is pleaded that by the sale and purchase agreement dated 28th December 1963, the third defendant "divested himself of his interest as co-owner of the said property to the first defendant", the implication being, I presume, that the mortgage was null and void and of no effect as against him. 64. What the third defendant signed on 28th December 1963 was a purchase and sale agreement, not an assignment. The purchase price was payable by instalments; and the last instalment was not in fact paid till 24th September 1964. Prior to that date, as an unpaid seller he was still legal and beneficial owner of his undivided one-third share of the property. As from 24th September 1964 he held the legal estate on bare trust for the first defendant, the purchaser. Prior to that date he was not a bare trustee; and the mortgage in favour of the Gar Chew Land Investment Co. Ltd. was signed on 11th July 1964. 65. But, in any event, as against the Gar Chew Land Investment Co. Ltd. and the plaintiff, the sale and purchase agreement of 28th December 1963 was absolutely null and void because it had not been registered in the Land Office. Section 2(1) of the Land Registration Ordinance Cap.128 states that all instruments in writing by which premises in Hong Kong may be affected may be registered in the Land Office; and section 3(2) reads:-
The sale and purchase agreement was an instrument affecting the third defendant's undivided one-third share of the property. As it was not registered it was absolutely null and void as against the mortgagees of that undivided one-third share and the plaintiff to whom they subsequently transferred their rights. Even if the plaintiff had had direct notice of the purchase and sale agreement (which he did not have), in the absence of fraud on his part, the agreement, being unregistered, could not have affected in any way his rights under the mortgage. 66. It is clear from the decisions in Kwok Siu Lau v. Kan Yang Chi(5) and Li Tam Toi Hing v. Chun Yam Om and others(6) that the doctrine enunciated in Le Neve v. Le Neve(7) has no application in cases under the Land Registration Ordinance. 67. In paragraph 7 of his defence the third defendant pleaded that:
The purchase and sale agreement was executed on 28th December 1963; the mortgage was executed on 11th July, 1964; and the transfer thereof was executed at the end of January 1965. The doctrine of constructive knowledge has no application when the transactions are not contemporaneous. But, in any case, the whole defence of the third defendant is one long allegation of fraud, or at least misfeasance, against Peter Wong and the third party. That in itself precludes any suggestion that the doctrine of constructive notice has any application in these proceedings. Mr. Bernacchi summed it up in this way:-
With that submission I was in full agreement; and for these reasons I gave judgment to the plaintiff against all three defendants. 68. I acceded to an application by Mr. Litton, counsel for the third defendant, that the plaintiff's evidence-in-chief in his claim against the defendants be treated as evidence in the third defendant's claim against the third party. Mr. Litton did not examine the plaintiff further. Mr. Swaine, who had not cross-examined the plaintiff in the proceedings against the third defendant, cross-examined the plaintiff briefly. 69. In the third party proceedings, the third defendant gave evidence. He said: That towards the end of 1960 his brother, Yung Kwok Yew, told him that he (Yung Kwok Yew), Peter Wong, and a person named Fong wanted to purchase 2 and 4 Cheong Lok Street; that his brother asked him if he was interested in taking a share; that his (Yung Kwok Yew's) share was to be one-third, and that if he (the third defendant) was interested he would let him have half of that one-third share; that his brother asked him to agree to the one-third share being in his (the third defendant's) name; that, as land values in Hong Kong were appreciating during this period, he was confident that the property could be sold later at a profit; and that he agreed to his brother's proposal and paid $10,000 to the third party in part payment of their share; that the first occasion he went to the offices of the third party in connection with the property was to sign a mortgage in favour of one Cheng Leung Kwan; that later in the offices of the third party he signed the mortgage for $300,000 in favour of The Tai Yau Bank Ltd.; that about the time when plans were being made to file an application for exemption in the Tenancy Tribunal, his brother informed him of this; that he said to his brother that he was 'no longer concerned with exemption proceedings'; that later he was told by his brother that 'the other two landlords' (whom he understood to be the man Fong and Peter Wong) would purchase his share; that the purchase price would be paid to him by instalments; that he attended the offices of the third party to sign the sale and purchase agreement for the sale of his and his brother's share of the property to 'these other two landlords', but found that Fong's name only appeared on the agreement; that he first signed the purchase and sale agreement before Ma Bing Kuen; that Ma then went into Peter Wong's private office; that later Ma returned with a cheque in his favour for $35,000 and another document which he recognized as a power of attorney; that at Ma's request he signed this power of attorney; that at the beginning of February, 1964, he again attended the offices of Wong & Lo and received a further $15,000 towards the purchase price of $70,000; that on this occasion he signed not only a receipt endorsed on the sale and purchase agreement for this sum but, at his brother's request, he also signed a receipt for $20,000 being the last instalment which was not paid to him, but which, he learned later, was ultimately paid to his brother in September, 1964; that prior to the commencement of these proceedings against him by the plaintiff, he had no knowledge whatsoever of the further charge for $100,000 in favour of the Tai Yau Bank or of the purported agreement of the 5th March, 1964 or the mortgage favour of The Canton Trust & Commercial Bank, or the letter of the 30th January 1965, addressed to the plaintiff; that he had never at any time had any direct dealings with the first defendant; in fact, he said, he could not recall ever having seen him; that, from the beginning he was not concerned with re-developing the land; that he was concerned only with making a quick profit on a resale; that he understood from his brother that there were offers to purchase the property; that on a number of occasions he urged Peter Wong and his brother to sell; and that Peter Wong had indicated to him that this would be done. 70. He was questioned further about his attitude towards the signing of documents; and the procedure adopted in the offices of the third party whenever he was asked to sign any document. The substance of his evidence was: That he did not concern himself with the contents of any of the documents which he was asked to sign; that he frequently received telephone calls from the offices of the third party to come over at short notice and sign some document or other; and that he always did so. At one stage in his evidence he said:
Continuing, he said: That Ma did not interpret any of these documents to him; that the mortgage in favour of Cheng Leung Kwan was only briefly explained; that, as regards the Tai Yau Bank mortgage for $300,000, Ma simply asked him to sign the document saying that the mortgage money would be used to pay the premium for the new Crown lease; that, as regards the purchase and sale agreement, Ma said: "You have sold the property, you are making a profit on it, please sign"; and that, when he expressed to Ma his surprise at having to sign a power of attorney, Ma's explanation was that the power of attorney was necessary to enable "the other two landlords" to institute proceedings before the Tenancy Tribunal for the purpose of evicting the sitting tenants and obtaining vacant possession; and that he then signed the power of attorney thinking that it was required. in some way or other, for this limited purpose and for nothing else; that the power of attorney, as in the case of all other documents which he signed at the offices of the third party, was not read by him or explained to him; and that he virtually signed every document blind. 71. The third defendant called his brother, Yung Kwok Yew, as a witness and the substance of his evidence was this:- That at the end of 1960 Peter Wong suggested to him that he, the first defendant, and Peter Wong himself should, together, purchase the Cheong Lok Street property; that they knew that the Crown lease had only three years to run; that Peter Wong said that he could not use his name in the transaction, and that he (Yung Kwok Yew) felt that he also could not use his name; that he (Yung Kwok Yew) therefore asked the third defendant to take over half of the one-third share agreed upon and to agree to the use of his name as the holder of that one-third share; that it was decided that Peter Wong, the first defendant, and the Yung brothers should each contribute $20,000; that he (Yung Kwok Yew) paid his $10,000; that he and Peter Wong were both acquainted with one Cheng Leung Kwan and that they got him to agree to lend $120,000 on a mortgage of the property; that the interest of $1,200 per month on this mortgage was shared, the first defendant paying $400, Peter Wong $400, and himself and his brother each paying $200 per month; that he sometimes collected the $400 from Peter Wong; and, if Peter Wong happened to be busy, he would sometimes ask Wong Shing Tak to advance the $400 on Peter Wong's behalf; that at the outset all three partners wanted to sell and that the desire to do so was motivated by a report from Kam Shek Wing that the Liu Chong Hing Bank had bought 8 buildings adjoining 2 and 4 Cheong Lok Street and that the bank were interested in developing the whole site; that Kam passed on to them offers which commenced at $340,000 and rose to $400,000; that there were a number of meetings between Kam on the one hand and Peter Wong, the first defendant and himself on the other before the conditions of regrant had been received from the Crown and that at these discussions a condition was that the purchaser would pay the Government premium of $162,734; that Kam said land in Nathan Road was worth $700 per square foot, and Peter Wong said it was worth more and that Peter Wong refused to sell the property; that four or five months after this a client of the firm named Chan So said there had been a change of landlords in the case of the 8 buildings and asked if they were prepared to sell the Cheong Lok Street property for $400,000; that Peter Wong was not willing to sell at that figure, but was prepared to sell at $440,000; that Chan So raised his offer to $440,000, but Peter Wong then raised the price to $480,000; that Chan So, first defendant and he spoke to Peter Wong and requested him to prepare what he called "a three-day order" for the sale of the property for $480,000, the purchaser to pay the premium to Government; that Peter Wong seemed to feel that they were forcing him to sell; and that as Peter Wong was his boss and the first defendant his friend, the negotiations fell through; that after the conditions of regrant had been finalised, there were discussions between Peter Wong, first defendant and himself as to how the Government premium was to be paid; and that he discussed the matter with the third defendant. My note of his evidence at this point reads:-
In fact, the third defendant did sign the mortgage for $300,000; and there is no suggestion that he did so under protest . However Peter Wong said in evidence that the Yung brothers would not pay interest on the Tai Yau mortgage; and the first defendant said that in negotiating the $100,000 loan in December, the Tai Yau Bank made it a condition that the five months arrears of interest on the existing mortgage ($18,000) should be repaid first; and that he borrowed this $18,000 from Wong Shing Tak. 72. Yung Kwok Yew's evidence continues thus: That shortly after the signing of the Tai Yau Bank mortgage for $300,000 on 9th July 1963, Ma Bing Kuen said that a client was interested in the property; that there were discussions about this in the general office of the third party and that Peter Wong sometimes joined in; that the initial offer was $510,000 and that this was gradually raised to $540,000 but a condition of the offer was that the vendors should pay the Government premium [of course, the premium had already been paid on 10th July 1963 out of the mortgage money received from the Tai Yau Bank]; that the reason this offer was lower than previous offers was that the owners of the 8 houses now had no use for 2 and 4 Cheong Lok Street. My note of the witness's evidence at this point reads:-
His evidence continues thus: That he had conveyed to the third defendant in general terms the various offers to purchase which had been received; that 3 days after the quarrel with Peter Wong, a series of discussions began in connection with the sale of the one-third share in the joint venture held by him (Yung Kwok Yew) and the third defendant; that these discussions were sometimes between himself and first defendant and sometimes between himself, first defendant and Peter Wong; that it was finally agreed between him, the first defendant and Peter Wong that either the first defendant or Peter Wong or both would purchase the one-third share for $70,000; that the Yung brothers would have no further liability under the Tai Yau Bank mortgage, and that the Yung brothers would forfeit their right to any share of the rents of the property (all of which had been collected by the first defendant) and to any part of the $300,000 loaned by the Tai Yau Bank; that neither the first defendant nor Peter Wong said anything to him as to how they were going to raise the $70,000 to pay for the one-third share; that Peter Wong said that he did not have enough money to pay the $70,000 and that the purchase price would have to be paid by instalments; that after all the terms had been agreed orally, Peter Wong then instructed Ma Bing Kuen to prepare a written agreement embodying those terms; that he was afterwards told by Ma that an exemption application had been filed in the Tenancy Tribunal; that he was not aware until then that exemption proceedings were in contemplation; that sometime in September 1963 he (Yung Kwok Yew) received from Ma a draft of the agreement and that he saw in this draft a reference to the exemption proceedings; that his brother, the third defendant took no part in any discussions of any sort at any time, and that he could not think of any occasion when the third defendant could have met the first defendant; that he (Yung Kwok Yew) was not present when his brother signed the sale and purchase agreement on 28th December 1963; that during the prior discussions there was never any mention by the first defendant or by Peter Wong of a power of attorney; and that his brother told him after wards that he had signed such a document because he was told that this was necessary to enable Peter Wong and the first defendant to obtain vacant possession of the premises; that he (YUNG Kwok Yew) subsequently asked the first defendant why he had purchased the one-third share; and that the first defendant had said that Peter Wong had told him to do this: that in March 1964 when the last instalment of $20,000 was overdue, the first defendant told him that he had already paid his $35,000, and that he (YUNG Kwok Yew) should not press him for any further payment; that, until the commencement of these proceedings, he (YUNG Kwok Yew) had no knowledge of the further charge for $100,000 dated 27th December 1963 in favour of the Tai Yau Bank, or of the purported agreement between the first, second and third defendants dated 5th March 1964, or of the Gar Chew Land Investment Co. Ltd. mortgage for $550,000, or of the transfer of that mortgage to the plaintiff, or of the building second mortgage for $170,000. 73. Wong Yan Lung gave evidence. He was obviously a truthful and reliable witness. He said that it was he who, through certain brokers, first learned that the Cheong Lok Street property was for sale, and that the prospective purchaser was a Mr. Kwan Kim Shing. Wong Yan Lung "introduced" the sale and purchase to the third party; and a ledger account was in fact opened by the solicitors in the name of Kwan Kim Shing. Relevant entries in this account read:-
74. It is common ground that the vendor (WAI Po Yam) was prepared to sell the property for $180,000; and it would appear from the above entries that he was demanding an initial deposit of 20% ($36,000), and that this sum was paid to him by the third party on 5th November 1960. On the other hand, the prospective purchaser (KWAN Kim Shing) had paid to the third party $25,000 only; and at the close of business on 5th November 1960, the ledger account was in debit to the extent of $11,000. Peter Wong admitted in evidence that on 5th November 1960 this $36,000.00 was paid to Wai Po Yam by a cheque drawn for this amount by him on his No.2 Account with the Canton Trust and Commercial Bank. In other words, on 5th November Peter Wong paid Wai Po Yam $11,000 which was money held in trust by him for his other clients. For some reason or other, KWAN Kim Shing changed his mind during the next few days and decided not to purchase the property at all. We do not know why; he did not give evidence. 75. The first defendant testified that he had been frequenting the offices of the third party practically every day since the firm had started; that he learned from Wong Yan Lung that Kwan Kim Shing was no longer interested in purchasing the Cheong Lok Street property and that he therefore spoke to Peter Wong who told him that the initial deposit required was $36,000. On 8th November, Peter Wong sent a letter to KWAN Kim Shing by special messenger. It reads in part:-
Whether or not this was written on the instructions of Wai Po Yam is not known. 76. It appears therefore that by 4 p.m. on 8th November, Peter Wong knew that the sale of the property to KWAN Kim Shing had fallen through; and that he was still in the position of having paid out to Wai Po Yam $11,000 belonging to his other clients. 77. The accountant, LEUNG Pui-chiu testified that on 8th November, in Peter Wong's office, and in his presence, the first defendant handed him (LEUNG) a cheque for $20,000 and "instructed" him to issue a receipt in the name of "Fong Kwok Leung and another"; and that he did so. The receipt reads:
It is not known whether thistook place before or after 4 p.m. on 8th November 1960. On the assumption that it was after 4 p.m., it would appear that Peter Wong, knowing that the initial deposit to Wai Po Yam was $36,000, and knowing that KWAN Kim Shing would be calling for the return of his deposit of $25,000, accepted the first defendant's cheque for $20,000, which meant, of course, that unless by 9th November he received further contributions equal to or in excess of the balanceoof the initial deposit, he would have paid $16,000 of other clients' money to WAI Po Yam. 78. Peter Wong said in evidence that on 8th November the first defendant told him that he intended to purchase the whole property himself; and in evidence the first defendant said that this was his initial intention. I did not believe that the first defendant so intended; and I did not believe that he said anything which could have led Peter Wong to think that this was his intention on the 8th November or at any other time. Never, from the beginning, did the first defendant have any intention of purchasing this property himself. 79. On the morning of 9th November, the accountant saw Peter Wong and the first defendant in Peter Wong's office. According to the accountant, Peter Wong cashed a cheque for $17,000 drawn on his own personal bank account and gave the accountant $16,000 in cash. Peter Wong said in evidence that his intention was to make up the deficiency in his No.2 Trust Account caused by his paying Wai Po Yam the initial deposit of $36,000 at a time when there was insufficient funds in is No.2 Account to justify this payment. Why he did not simply draw a cheque on his personal account in favour of his No.2 account and pay the cheque into his No.2 account with the bank is not clear. 80. It was after receiving this $16,000 in cash from Peter Wong that the accountant wrote up the ledger accounts, namely the above account in the name of KWAN Kim Shing and a new account in the name of "Fong Kwok Leung and another". Throughout these proceedings, this latter ledger account has been referred to as "the joint venture account". 81. Mr. Peter Wong was cross-examined as to who "the other" person was in the name of this ledger account; and he was forced to admit that it was himself; and indeed on 9th November 1960 it could have been no one else. 82. The ledger account opened in the name of Fong Kwok Leung and another reads in part:-
83. On the right hand side (the receipts side) there is shown the first defendant's deposit of $20,000 on 8th November; and there is recorded the receipt of $16,000 on 9th November from "Wong Fai Hung". Peter Wong told the accountant to enter this name in the ledger account; and he admitted in evidence that "Wong Fai Hung" was himself. He said that prior to November 1960 he had never been known by this name, nor had he used this name himself either on official documents or otherwise. Clearly it was a false name; and his only explanation for using it was. "It was just a name I used for accounting purposes." 84. According to the first defendant, he and WAI Po Yam signed an agreement for the purchase and sale of the property on 9th November; but that document (if it exists) was not exhibited in evidence. 85. According to the ledger, no further money was received until 9th December 1960 when the third defendant and YUNG Kwok Yew ("KYY" in the ledger account) are shown as having paid in $10,000 each. But there is another entry showing the receipt of $120,000 from a David Cheng. He gave evidence. He said that the first defendant asked him to join him in the purchase of the Cheong Lok Street property. It is not known precisely when this interview took place; but it is reasonable to assume that it was shortly before the 9th December. There is no doubt that David Cheng (or Chang as his name was recorded in evidence) did pay to the third party $120,000 by cheque on 9th December and he received a receipt which states that this sum was a payment on account of the purchase price of the Cheong Lok Street property. He said that the initial arrangement made by him with the first defendant was that he (David Cheng) was to have a two-third share and that the first defendant and his associates (whoever they might be) were to have a one-third share. 86. From David Cheng's evidence, it was clear to me that when he made the initial arrangement with the first defendant he had not given this matter a great deal of thought. For one thing, he was not told that the property was pre-war property and that the Crown Lease had only three years to run-which, in his view, necessitated spending a considerable sum on Crown premium, obtaining vacant possession and redeveloping. Furthermore, he said in evidence that the first defendant was "always short of money" even on those days. 87. The part which David Cheng played in this whole matter was far from clear. Wai Po Yam's solicitors, Lo & Lo, were paid the balance of the purchase price by the third party on 17th December; and David Cheng's money was used to do so. It may be that he found out that the purchase and sale agreement had in fact been signed by the first defendant; and that he suspected something in view of the fact that he had not been asked to be a party to that agreement and that he was putting up two-thirds of the purchase price. It may be that he realised that if he went on with this deal he would have to be responsible for the major share of the expenditure involved in redevelopment; and that he therefore decided to withdraw. 88. The first defendant's evidence about what happened after he had signed the sale and purchase agreement with Wai Po Yam may be summarised thus:- That he was unable to pay the balance of the initial deposit; that four or five days after he paid the $20,000 he asked Wong Shing Tak if he would "take over that share worth $16,000"; that Wong Shing Tak said to him: "I have no money", that he (the first defendant) suggested to Wong Shing Tak that he (Wong Shing Tak) should "borrow" this $16,000 which Peter Wong had paid into the joint venture; that they put this proposition to Peter Wong and that Peter Wong agreed that the $16,000 which he had paid into the joint venture should be treated as a loan to Wong Shing Tak; that after David Cheng dropped out, Yung Kwok Yew contacted Cheng Leung Kwan with a view to his lending $120,000 in order to pay off David Cheng; that during the next two or three years he (the first defendant), Yung Kwok Yew and Wong Shing Tak had discussions with various people with a view to selling the property, but that all such negotiations fell through; that it was necessary to mortgage the property to the Tai Yau Bank to pay the Government premium for the new Crown Leases; that after this mortgage had been executed, Yung Kwok Yew became uneasy about the expenditure involved in the payment of mortgage interest and that he wanted to sell the property, but that no buyer could be found; that Yung Kwok Yew then requested him to buy the Yung brothers' one-third share; and that negotiations for the sale of the Yung brothers' one-third share commenced about the beginning of August 1963; that he (the first defendant) explained to Yung Kwok Yew that this would cause some difficulty because the property was encumbered, that exemption proceedings were pending, that the property had to be developed, and that if he bought the Yung brothers' share he would not have enough money to develop the property; that a sale of the Yung brothers' share would necessitate a fresh application to the Tenancy Tribunal and that this would delay the re-development of the property by ten months and that a great deal of mortgage interest would have to be paid in the meantime; that Yung Kwok Yew then suggested that he (the first defendant) pay for the one-third share by instalments; that he told Yung Kwok Yew that the purchase by him of the one-third share must not hinder his plans for re-development and that payment of the purchase price of $70,000 was conditional on his being able to raise this sum by further mortgaging the property; that they eventually reached an oral agreement, the terms of which were that the purchase price of the one-third share should be $70,000, $25,000 to be paid on the signing of the purchase and sale agreement, $10,000 by the 31st December 1963, $20,000 by the 31st January 1964; and the balance to be paid by 29th February 1964; that completion was to take place on 29th February 1964; or two months after the Gazetting of the exemption order, but in any event not later than December 1964, and that the last instalment of the purchase price had in any event to be paid before 29th February 1964; that all stamp duties and other charges were to be paid by the first defendant; that the third defendant's liabilities under the Tai Yau mortgage for $300,000 and all his other liabilities in regard to the premises were to be taken over by the first defendant. who was likewise to take over all the third defendant's rights in the joint venture; that the third defendant should cease to be a partner in the joint venture; that the purchase and sale agreement should contain a clause to the effect that Yung Kwok Tong undertook to execute a full power of attorney in favour of the first defendant to enable the first defendant to take all necessary action with a view to re-development of the property; that following this oral agreement Yung Kwok Yew instructed Ma Bing Kuen to prepare the necessary documents; that a few days later Ma handed him and Yung Kwok Yew a draft sale and purchase agreement; that Ma said that his purpose in doing so was to enable him (the first defendant) and Yung Kwok Yew to consult other solicitors; that he (the first defendant) showed the draft agreement to some interpreters in other legal firms; that he also noticed that this draft agreement did not contain a clause whereby the third defendant undertook to sign a power of attorney as had been orally agreed between them; that he, the third defendant and Yung Kwok Yew then spoke to Peter Wong and told him the terms of their oral agreement; that Peter Wong then explained to them the implications of such a power of attorney as the parties had agreed upon; that the Yung brothers said they understood; that Ma, on Peter Wong's instructions, then prepared a further draft purchase and sale agreement and gave him (first defendant) and Yung Kwok Yew each a copy; that he showed the new draft to his interpreter friends in other legal firms to make sure that the provision about the third defendant undertaking to sign a power of attorney had been added; that he then asked Peter Wong to have the draft engrossed; that the Tai Yau Bank were prepared to lend a further $100,000 provided some $18,000 arrears of interest on the existing mortgage of $300,000 were first paid to them; that he borrowed this $18,000 from Wong Shing Tak and paid the bank; that the bank sent the mortgage money to Wong & Lo through their solicitors, Lau Chan & Ko, on 27th December; that an appointment was made for the third defendant, Yung Kwok Yew, To Yan Wing, Wong Shing Tak and himself to attend Peter Wong's office on 28th December to sign the purchase and sale agreement, the power of attorney and the further charge for $100,000 in favour of the Tai Yau Bank; that Mr. Ma interpreted each of these three documents clause by clause to all present, that after the interpretation by Ma, Peter Wong explained the important points in the documents and that the parties then signed the documents in the presence of Peter Wong; that he (the first defendant) and Yung Kwok Yew had previously agreed that, in order that the re-development plans should not be hindered, the sale and purchase agreement should not be registered in the Land Office and that they informed Peter Wong of their wishes in the matter after the execution of the document and gave him instructions not to register it in the Land Office; that the $20,000 instalment was not paid on 31st January 1964 as agreed and that they could only afford to pay $15,000 on 4th February; that after the Gar Chew Land Investment Co. mortgage had been executed, Yung Kwok Yew pressed him for payment of the balance of $20,000; that he approached the Canton Trust & Commercial bank and asked them to lend a further $170,000 on the security of a building second mortgage, that they agreed to do so provided he also produced a guarantor; that he discussed the matter with Yung Kwok Yew, who was anxious that the bank should make this further advance because he wished to be paid the balance of $20,000; that they all discussed the matter with Peter Wong and persuaded him to be guarantor, using the name "Wong Hung"; that the building second mortgage was executed before Michael Yung; that the Canton Trust & Commercial Bank paid the first instalment of $50,000 on this mortgage; and that out of this sum the third party paid YUNG Kwok Yew the last instalment of $20,000. According to the evidence of the first defendant, he and YUNG Kwok Yew did not seek any legal advice from Peter Wong or any other legally qualified person prior to making this alleged oral agreement; that Peter Wong did not say that the sale of the third defendant's one-third share might cause delay in the exemption proceedings or give him any advice as to how such delay might be avoided, and that it was entirely his idea that the third defendant should give him a power of attorney. 89. As regards the further charge for $100,000, the bank's solicitors, Lau Chan & Ko forwarded a draft of this document to the third party on 24th December 1963. The execution clause was amended by Ma Bing Kuen so as to read:-
The draft as amended was approved by Peter Wong who then returned it to Lau, Chan & Ko for engrossment. It was returned to the third party on 27th December 1963, it was then signed by the first and second defendants for themselves and by the first defendant as attorney for the third defendant; and it was then returned by the third party together with the executed power of attorney on 2nd January 1964. 90. The case for the third party is that this further charge was executed on 28th December at the same time as the purchase and sale agreement and the power of attorney. That is not the evidence of the third defendant; and it was not even put to him in cross-examination that it was signed on 28th December in his presence. All the third defendant can say is that the further charge must have been executed without his knowledge some time prior to 2nd January 1964. 91. The case for the third party being that the third defendant had agreed to the execution of this further charge to enable the first defendant to raise money to pay him (the third defendant) the purchase price of his own one-third share, and that all these documents (sale and purchase agreement, power of attorney, and further charge) were signed at the same time in the presence of the third defendant, the first defendant was asked in cross-examination why the third defendant was not asked to sign the further charge himself instead of sitting in Peter Wong's office and watching his attorney sign this document for him. The answer given by the first defendant (which sounded rather more ridiculous than a number of his other answers) was this:
The first defendant was asked if he had any legal qualifications, and he said he had none. One thing is certain: some one put him up to give this answer. 92. When the first defendant was being cross-examined as to why money was borrowed from The Tai Yau Bank in July 1963 to pay the Government premia instead of the partners in the joint venture paying the premium from their own resources, he gave the following answers:-
93. He was then questioned about a letter addressed to him dated 5th March 1964 signed by two officials of the Canton Trust and Commercial Bank, one of whom was Shum Cheong Kong, the Manager, with whom the first defendant and Peter Wong were well acquainted. The first defendant, having been called by Peter Wong as a witness in the Tenancy Tribunal proceedings, produced this certificate in evidence. It reads:- "Current Account 2595 94. The third party did not call Shum Cheong Kong or any other official of the bank as a witness in these proceedings. The first defendant admitted in evidence that this was a false certificate; and his attitude to the production of evidence before a judicial tribunal may be illustrated by some of his answers. In regard to this false certificate he said:-
He also produced to the Tenancy Tribunal a statement in which he said that it was the intention of the third defendant, as well as himself and Madam To, to pull down the existing premises and erect a six-storey building; and that:
Before the Tenancy Tribunal he said:-
It was not suggested in cross-examination to the Yung brothers or to Wong Shing Tak or to Peter Wong that the money in this account was theirs either in whole or in part, or that they knew anything about this certificate. In regard to both the bank certificate and this statement the first defendant said in evidence:- "............. I was only wanting to develop the property.
95. Wong Shing Tak gave some rather nebulous evidence that certain "fees" were paid to the bank officials to persuade them to issue this false certificate, and that the opening of the account was connected in some way with a cheque for $1,000 drawn by himself in favour of the first defendant. 96. I may say now that I do not propose to let this matter rest here; and the papers relating to the Tenancy Tribunal proceedings and the evidence given by the first defendant in this case will, in due course, be passed to the Attorney General to enable him to decide whether any person has been guilty of perjury or whether any person or persons have conspired to pervert the course of public justice, and, if so, whether any criminal charges should be preferred. 97. According to the first defendant the Cheong Lok Street property deal was his first venture in partnership with Wong Shing Tak; but he said that they collaborated subsequently in other property deals; that these included the purchase and sale of 1-11 Parkes Street, Kowloon; 10 Pratt Avenue, Kowloon; the formation of the Kwong Luen Land Investment Co.; and the erection of a multi-storey block named Choi Wan Mansions; the formation of the Ming Shing Building Construction & Land Investment Co. Ltd. and the purchase of land in the New Territories. He said that 1-11 Parkes Street was sold in 1964 for over $1,000,000; but that only a small profit was made on the whole venture; that the Kwong Luen Land Investment Co. failed because he and Wong Shing Tak were unable to repay a mortgage to the Liu Chong Hing Bank; and that they both lost all the money they had invested in this concern; that, as regards 10 Pratt Avenue, the mortgagee foreclosed because he, Wong Shing Tak and their associate were unable to repay the mortgage loan; that he and Wong Shing Tak each contributed $140,000 towards the capital of the Ming Shing Building Construction & Land Investment Co. Ltd. and that Wong Shing Tak subsequently sold his shares to some other person. 98. The remainder of Peter Wong's evidence may be summarised thus:- That he agreed to the suggestion that the $16,000 be treated as a loan to his brother Wong Shing Tak because he "wanted to get out of the transaction"; that about two weeks later Yung Kwok Yew said that he was interested in the property and that he told him to contact the first defendant and his brother; that later Yung Kwok Yew brought his brother, the third defendant, to speak to him; and that he (Peter Wong) referred them to the first defendant and his brother; that on 29th December, 1960 he did pay a further $4,000 into the joint venture, as recorded in the ledger account F-9; but that this was in fact money belonging to Wong Shing Tak and the accountant erroneously issued a receipt in the name of "Wong Fai Hung"; that the entry in the ledger purporting to show that "Wong Fai Hung" paid $1,200 into the joint venture on 21st March 1961 is erroneous in that it was his brother's wife, To Yan Wing, who paid in money belonging to his brother (Wong Shing Tak); but that the accountant correctly issued a receipt for this sum in the name of 'To Ping' which is one of the names used by Wong Shing Tak's wife; that the entry in the ledger purporting to show that on 30th March, 1961, "Wong Fai Hung" paid $3,000 into the joint venture is erroneous in that his brother, Wong Shing Tak, borrowed this sum from him for the purpose of paying it into the joint venture; that the accountant also erred in issuing a receipt in respect of this sum in the name of "Wong Fai Hung"; that there was a "running account" between himself and his brother (of which he kept no records); but that on 11th September, 1964 he owed his brother money; that on that day he repaid the sum of $6,600 to his brother, Wong Shing Tak; and that the ledger entry and the receipt issued by the accountant is in the name of Wong Shing Tak's wife (To Yan Wing); that he understood that the first defendant and the Yung brothers talked for quite a long time about the sale to the first defendant of the Yung brothers' one third share; and that commencing in July or August 1963, the first defendant, WONG Shing Tak, YUNG Kwok Yew and YUNG Kwok Tong came to see him occasionally and sought legal advice on various aspects of the proposed sale. My note of his answers when asked by his counsel what advice he gave reads:-
He then went on to say:- That he instructed MA to prepare a draft purchase and sale agreement; that he approved this draft and asked MA to give a copy to each of them to take away; that early in December YUNG Kwok Yew and the first defendant came to see him. My note of what he said happened on this occasion reads:-
In regard to the building second mortgage in favour of the Canton Trust and Commercial Bank, Peter Wong's evidence reads:-
As regards the transfer of the Gar Chew Land Investment Co. Ltd. mortgage to the plaintiff, he said in evidence:-
In giving judgment for the plaintiff I found that these allegations were untrue. Having heard Peter Wong give evidence, I see no reason to alter my finding. Peter Wong did not tell the plaintiff anything about the sale and purchase agreement of 28th December, 1963. 99. In cross-examination, Peter Wong said:
100. Paragraph 5 of the third party's statement of defence filed on 17th February, 1968, read :-
A few days before the trial of this action, paragraph 5 was amended by the deletion of the last sentence and the substitution therefor of these words:-
Interest for one month at 1.2% per month on $550,000 is $6,600; and the suggestion of the third party in this pleading is that, by sheer co-incidence, the balance of the alleged running account on 11th September 1964 was exactly the same sum as would enable Wong Shing Tak's wife (second defendant) to pay one month's interest on the Gar Chew Land Investment Co. Ltd. mortgage. As previously stated, there is an entry in respect of this amount in the joint venture account. The receipt which was issued in respect of this sum reads: 101. "Received from To Yan Wing a/c Fong Kwok Leung" Peter Wong kept no records of any sort regarding this alleged running account; and he could answer no questions concerning it. His attitude was: my brother will tell you all about it. 102. The only records kept by Wong Shing Tak consisted of certain words endorsed on the counterfoils of various cheques, some of which were drawn either in favour of cash or in favour of individuals other than Peter Wong himself; and none of those persons gave evidence. He produced a cheque for $3,000 dated 30th April, 1962. The stub was endorsed: "To P.W. for use to repay Tin Chu"; and in evidence he said:
What he meant by the words "debited" and "account" was not clear in view of the fact that no accounts of any sort were kept in respect of such alleged transactions. In any event one would have expected Peter Wong to have said that he asked his brother to discharge this debt allegedly due to Chan Tin Chu in the way described by Wong Shing Tak and that he and his brother agreed that such discharge was to be treated as part repayment of the $19,000 which he allegedly loaned to his brother. 103. Wong Shing Tak then produced a cheque for $5,000 dated 1st May 1963 in favour of one Yu Tak Man, the counterfoil of which bore the words: "To P.W. for repayment of loan made on behalf of Yu Tak Man", and he said in evidence: "This cheque was paid by me to Yu Tak Man on behalf of Peter Wong". Again, one might have expected that Peter Wong would have had something to say about this. 104. Wong Shing Tak then produced a cash cheque for $7,000 dated 13th May 1963, the counterfoil of which bore the words: "To P.W. for deposit in respect of 12 Hanoi Road, 4th floor". 105. The next cheque produced by him was for $2,264 dated 14th May 1963, the counterfoil of which was endorsed: "To P.W. for hand to Chan So"; and in evidence he said: "I don't know about this. I think it was my elder brother who asked me to pay Chan So on his behalf". 106. He then produced a cheque for $5,000 dated 10th July 1963 drawn in favour of Peter Wong; the counterfoil of this cheque bore the endorsement: "To Peter Wong for Hanoi Road price for flat." 107. The next cheque was one for $3,000 dated 26th July 1963. The counterfoil bore the endorsement: "To P.W. for cash"; and in evidence he said: "I do not remember what this was for". 108. The last of this group of cheques was a cash cheque for $1,000 dated 14th March 1964. The counterfoil was endorsed: "To P.W. to get cash"; and in evidence he said: "He got this money for his own use". 109. Of course, the court only had Wong Shing Tak's word for it that these endorsements were made at the time the cheques were drawn, and not after the commencement of these proceedings. But, apart from that, neither Peter Wong nor Wong Shing Tak could say that there existed an informal running account in respect of the alleged loan of $19,000 or in respect of the Cheong Lok Street transaction. In addition to the above cheques, they produced a number of others. In regard to a sum of $60,000, Peter Wong at first said that he had borrowed this sum from Wong Shing Tak to enable him to go on a world trip. But later he said that on 30th March 1962 he had loaned his brother $60,000 to enable him to buy some property in Prince Edward Road; that the property deal fell through; and that Wong Shing Tak had simply repaid the $60,000 to him by two cheques one drawn on the same day (30th March 1962) and the other on 31st March 1962. No independent evidence was given about this alleged property deal. 110. Peter Wong also said that he loaned Wong Shing Tak $12,000 to enable him to buy some land in Yuen Long; and various other cheques with endorsements on the counterfoils were produced by Wong Shing Tak. But no accounts. 111. For the second time in two years I have found myself in the unenviable position of having to decide, without the assistance of a jury, issues of fact which involve the professional integrity of an officer of this court. Not only that. The third defendant and Yung Kwok Yew on the one hand and Peter Wong and his witnesses on the other cannot both be right. They have given evidence on oath or affirmation; and witnesses on one side or the other have deliberately committed perjury. 112. Any fact in issue may be proved by the evidence of one witness; the fact that the contrary is sworn to by five witnesses does not mean that the latter must win the day. It is the quality of the evidence which counts, not the quantity. Five "well-schooled" liars will never win the day over one truthful witness. At the same time, a court of law must be ever on its guard in a situation of this kind; and the evidence of five witnesses, each corroborating the others, is not lightly dismissed in favour of one witness whose evidence, on vital issues, is uncorroborated. 113. In reaching its conclusions on the vital issues of a case, a court does not, of course, divide the evidence into water-tight compartments, although it may be necessary, in giving reasons, to deal with specific questions in that way. A court reaches each of its conclusions on the evidence as a whole; and I need hardly say that in reaching my decision in this case I have borne in mind not only the general impressions made upon me by the various witnesses (and these are strong and clear) but also the inherent probabilities of the case, and the very able submissions made to me by Mr. Litton and Mr. Swaine. 114. It is the third defendant's case that at the end of 1960 Peter Wong the first defendant and Yung Kwok Yew decided to embark on a joint venture by the purchase of the Cheong Lok Street property, each having a one-third interest, Peter Wong's share to be in the name of his brother's wife (the second defendant); and that the object of the joint venture was to make a profit. The pleading does not say what methods of making a profit the parties had in mind. 115. In giving evidence, the Yung brothers said that they were never interested in developing the Cheong Lok Street property at all, and that they were interested only in making a reasonable profit by resale on what was undoubtedly during those years a rising market. However, Yung Kwok Yew admitted that when the property was purchased in 1960 he knew that the Crown lease had only three years to run; whether he told the third defendant this is not known. The third defendant did rather leave everything to his brother; and I am satisfied that he did not take part in any negotiations of any sort with the first defendant. He may have seen him in the offices of the third party. But I accepted the-third defendant's evidence that he had no recollection of having done so. 116. There is no dispute about the fact that soon after the purchase, Peter Wong applied for a renewal of the Crown lease; and in October 1962 an architect was instructed to prepare plans for a six-storey block; and the plans were approved by the Building Authority in December 1962. 117. Peter Wong, of course, denies that he was ever a party to the joint venture; that the second defendant held a one-third share for the benefit of her husband Wong Shing Tak; and that it was agreed from the beginning that the question of re-developing the property was "on the cards". 118. I do not think that the parties discussed the question of redevelopment at all at the time of purchase. No doubt the first defendant had the question of redevelopment in mind, that is to say if he could persuade someone with money to join him; but the evidence does strongly suggest that he was never in a position to redevelop the property by himself; and I am satisfied that he never had any intention of doing so by himself. There is no evidence acceptable to me that at the beginning the Yung brothers expressed any views on redevelopments. I accept the third defendant's evidence that he told Peter Wong on a number of occasions that his idea was that the property should be sold as soon as a satisfactory offer was received; but it is not clean when he expressed these view. The Yung brothers were paying $400 per month as their share of the interest on the Cheng Leung Kwan mortgage throughout 1961 and 1962; and there is no doubt that towards the end of 1962 Yung Kwok Yew must have known that, unless the property was sold the joint venture would be faced with an outlay of $162,000 in respect of the premia for the regrant of the Crown leases. 119. In my view, it was at this point that the first sign of disagreement between the parties occurred. The Yung brothers then made it clear that not only had they no intention of developing the property, but also that they did not wish to be saddled with the payment of large sums by way of interest on mortgages. The question of selling the property but making it a condition that the purchaser would pay the premium was what they had in mind. 120. I accept Yung Kwok Yew's evidence that offers to purchase the property were received and discussed with Peter Wong, all as described by him. No firm agreement was reached. The Government premia had to be paid; and then I think a real disagreement occurred as to the mode of payment. Obviously if the other two parties to the joint venture did not agree to put up their share of the premium, it meant the Yung brothers would have had to pay the whole $162,000. The first defendant arranged for the Tai Yau Bank mortgage for $300,000; and the third defendant signed the mortgage; but it is significant that the Yung brothers paid no interest on that mortgage; neither did their partners in the joint venture; and no interest was paid to the Tai Yau Bank until December 1963. Who paid the $18,000 arrears of interest due for the five months July/November 1963 is very much in issue; but it was certainly not the Yung brothers who did so. 121. The crux of the defence of the third party lies in the alleged oral agreement between the first defendant and Yung Kwok Yew. According to the first defendant, they reached agreement without any legal advice from anybody; and having then instructed Ma Bing Kuen to put their oral agreement into writing, they then discussed the whole matter with Peter Wong; the first defendant maintained in evidence that a condition precedent to his purchasing the Yung brothers' one-third share was that they agreed that redevelopment of the property should proceed; and that the third defendant would give the first defendant a power of attorney to facilitate redevelopment; that payment for the one-third share should be made from a loan obtained by a further charge on the property itself; and that the purchase and sale agreement would contain a clause whereby the third defendant undertook to sign a power of attorney at the same time as the purchase and sale agreement. He said the idea that the third defendant should give him a comprehensive power of attorney to do anything he liked in the third defendant's name in relation to the whole of the property was entirely his without any legal assistance from Peter Wong. 122. One might well ask why the third defendant should ever have contemplated giving the first defendant, as he alleges, a power of attorney. There was never any suggestion that the third defendant was going to be absent from Hongkong during 1964 or 1965; and if he really had agreed to the extraordinary terms which the first defendant allegedly put forward, there was no reason why he should not, as hitherto, have signed any necessary documents in relation to the property himself, at least untie the instalments of the purchase price had been paid. 123. But even more extraordinary is the fact that the draft purchase and sale agreement as handed to Yung Kwok Yew by Ma towards the end of September not only omitted to include an undertaking by the third defendant to execute such a power of attorney (and the first defendant said that this formed part of the alleged oral agreement) but the purchase and sale agreement made no reference whatsoever to the fact that the third defendant was to be paid out of moneys obtained by further charging of the property itself, much less that the further charge would contain a personal covenant (which, as events turned out, was not in fact invoked by the Tai Yau Bank) rendering the third defendant liable to repay to the bank the whole $100,000, part of which was to be used in the first place to pay him for his own one-third share. 124. The third party's witnesses endeavoured to get round the first of these objections by saying that there was a second draft produced with clause 15 inserted in it; and that the Yung brothers had adequate opportunity of studying this alleged second draft. But the third party's witnesses did not suggest that the second draft embodied the alleged oral agreement that the Yung brothers were to be paid out of moneys obtained by further charging the property. 125. The truth of the matter is that there was no second draft. There was only one draft; and it consisted of the first 14 clauses of the agreement which was in fact signed by the third defendant on the 28th December 1963. Those 14 clauses put into legal language what had been agreed to orally. I accept the third defendant's evidence that he never saw any draft. He left the matter entirely to his brother. So far as the oral agreement was concerned, it did not matter to the Yung brothers whether it was Peter Wong or the first defendant who purchased their one-third share so long as it was purchased and their rights and liabilities under the joint venture came to an end. They wanted to have nothing further to do with selling the property or redeveloping it. They realized that they could not be paid the full $70,000 upon execution of the agreement. Hence the provision for payment by instalments, the last instalment to be paid before 29th February 1964, and the stipulation that completion would take place, in any event, by the end of 1964. In my view there never was any discussion or oral agreement about a power of attorney or about the Yung brothers being paid by the further charging of the land or about whether the first defendant or anyone else, was or was not, going to develop the land. The Yung brothers simply wished to get out of the whole thing and to be paid for their share. 126. I come now to the circumstances in which the third defendant signed the purchase and sale agreement on 28th December 1963. In this connection, the evidence of Michael Yung is not without significance. He began to work in the offices of the third party on 1st December 1963. He said that in that office he frequently acceded to requests by Ma Bing Kuen and others to sign documents which had been signed by clients while he was in court. In other words, he was telling the court that those olients had not signed the documents in question in his presence; but that nevertheless he appended his signature purporting to show that they had done so. There was no evidence as to whether he was familiar with the signatures of those clients, or whether he simply trusted Ma Bing Kuen that the clients named in the document had in fact signed. 127. As regards the guarantee dated 28th September 1964 in favour of the Canton Trust & Commercial Bank he said that Peter Wong asked him to come into his room, that Peter Wong told him that he had signed the document as guarantor and that he could not witness his own signature; that Peter Wong asked him to sign it and that he did so; that he saw the name "Wong Hung" on the document; but that he did not ask any questions in regard to it; and that Peter Wong did not make any reference to it. 128. He said that Peter Wong then handed him the document which he identified in court as the building second mortgage in favour of the Canton Trust and Commercial Bank: and that Peter Wong asked him to sign that document as a witness; that it had already been signed; that he simply appended his signature as requested without even realising that it was a mortgage that he was signing or that the word "mortgagors" or that the name of his uncle (the third defendant) appeared a few inches above where he appended his signature; that the first time he heard that his father and uncle had had a share in 2 & 4 Cheong Lok Street was in 1965 when his uncle showed him a letter of demand from the Official Receiver who was liquidator of the Canton Trust and Commercial Bank in connection with the first instalment of $50,000 on the building second mortgage and that as far as he could recollect, he never saw Madam To in his life. 129. Ma Bing Kuen said in evidence that he had shown the draft mortgage in favour of the Gar Chew Land Investment Co. to Michael Yung and that he had approved it. The draft was before the court; and there was nothing on that document to indicate that it had been approved by Michael Yung; and I may say now that I rejected Ma Bing Kuen's evidence. Michael Yung never approved the draft mortgage. He never even saw it. 130. Counsel for the third party took the point that Peter Wong was taking a tremendous risk in asking Michael Yung to witness the Canton Trust & Commercial Bank mortgage. But everything depends on Michael Yung's state of knowledge at the time and in particular as to whether he knew that his father and uncle once had a share in the Cheong Lok Street property and that the first defendant had agreed to purchase that share on 28th December 1963. Michael Yung said he knew nothing about his father's and uncle's share in that property till 1965; and I accept his evidence. In those days, Michael Yung was young, inexperienced, and perhaps careless. But what reason had he to doubt the word of a fellow solicitor who was his employer? The one thing he did not do in the witness box was to lie about it - even although he did look, and must have felt, a little foolish by having to admit that in the early years of his practice he had signed quite a number of documents purporting to show that he had been a witness to the execution by the parties, whereas he was in fact trusting the word of Ma Bing Kuen. But he was a truthful witness; and I accepted his evidence. 131. According to Peter Wong, Wong Shing Tak and Ma Bing Kuen the general practice in Peter Wong's firm is that all conveyances, agreements and such like documents are interpreted to the clients clause by clause in Peter Wong's presence; that Peter Wong then goes over the document with the clients explaining the important points and that the document is then executed in his presence. 132. As regards the 28th December 1963, Peter Wong, Wong Shing Tak, Ma Bing Kuen, the first defendant and the second defendant all testified that they were present in Peter Wong's office together with Yung Kwok Yew and the third defendant when each of the three documents, namely the purchase and sale agreement, the power of attorney and the further charge for $100,000 in favour of the Tai Yau Bank were interpreted by Ma Bing Kuen sentence by sentence, that after the interpretation of each document, Peter Wong explained each document, and that each of the documents was then executed by the parties concerned. According to them the first defendant signed the further charge as attorney for the third defendant, although the third defendant was himself present. 133. When a solicitor signs as having witnessed that a client has executed a conveyance or agreement, he is merely signifying that the client has in fact executed the document in his presence. A careful solicitor would, in the case of a client with whom he was not personally acquainted, take the precaution of having the client identified by his clerk; but the must trust his clerk as to the identity of the person signing. He might also put such questions to the person who is about to sign so as to ensure, so far as possible, that no fraud was committed in his presence, and perhaps such general questions as: "Has this document which you are about to sign been interpreted to you, and do you understand its contents?" But it must be very rare that a solicitor insists that his interpreter brings the client into his own room and sits there listening while the interpreter translates every word of the document. 134. Be that as it may, I am convinced that that was not what happened on 28th December 1963 in the offices of the third party. Unquestionably, those five witnesses were telling a pack of lies. 135. Counsel for the third party submitted that no court should believe the third defendant when he said that he signed "blind" all documents at the offices of the third party simply because the clerk MA Bing Kuen asked him to do so. Mr. Swaine emphasized that the third defendant was an educated and experienced man of business who was not by any means ignorant of matters relating to real property and who held a responsible position in a bank. 136. I am very conscious of the force of that argument. But I am convinced that the third defendant never questioned the bona fides of anyone in the third party. They were his solicitors; and he had implicit faith in them. It was not as in he was signing something prepared by a competitor in business. He was signing documents in the office of his solicitor before a colleague of his own brother who also had a share in the property which he was selling. 137. In my view, there is no doubt at all that the purchase and sale agrement and the power of attorney were signed in the manner described by the third defendant. He was told by MA that the power of attorney was required by the first defendant and Peter Wong to enable them to carry on with the Tenancy Tribunal proceedings; and he signed it. It is easy to accuse him, in the light of after events, of being over-trusting, careless and so on. What matters to this Court is whether he was telling the truth, and he was. 138. Peter Wong's case is that he was a disinterested solicitor acting for the first defendant, his brother and the YUNG brothers. In the light of all the evidence, I am quite unable to accept that submission. From the beginning to the end of this story, one cannot help feeling the hand of Peter Wong. He was a friend of the first defendant who, I think, was well described by YUNG Kwok Yew as a property speculator. There is no doubt that in 1960 $180,000 for over 1800 square feet of land in the Tsim Sha Tsui district of Kowloon was a bargain; and I think that Peter Wong decided to take a share in it with the first defendant. On 9th November 1960 "FONG Kwok Leung and another" were the first defendant and Peter Wong. He used a false name (WONG Fai Hung) because he knew it was wrong to embark on a joint business venture with a client. 139. WONG Shing Tak, his brother, who was delicate in health and who, in Peter Wong's opinion, did not have enough education to be a clerk, was nevertheless employed by him as such at $1,000 per month. According to Wong Shing Tak himself he was not qualified to interpret a document. There was no evidence that WONG Shing Tak brought in any business to the firm. There was no evidence that he had any money or property of his own when he was first taken on the staff by Peter Wong. I cannot believe that a man such as the first defendant who at least was an experienced businessman and who obviously had quite a lot of ability, but who hardly knew WONG Shing Tak prior to June 1960, would choose him as a business partner in a property venture. Yet according to the first defendant and WONG Shing Tak, they had embarked on several joint ventures involving the purchase and sale of real property. 140. It was never seriously suggested by the third party's witnesses that the second defendant was more than a nominee; but in my view, she was Peter Wong's nominee, not her husband's nominee; and her husband was nothing but Peter Wong's lackey. Wong Shing Tak produced two pay-in books relating to what he described as his own personal current account with the Canton Trust & Commercial Bank. The first of these relates to the period 15th March to 5th June 1962. If one glances at the sums paid in, one is tempted to ask: How could WONG Shing Tak at a salary of $1,000 per month have managed to acquire such wealth? He tried to explain certain large sums ($45,000 and $15,000) as being "loans" from Peter Wong to enable him to purchase some unknown property in Prince Edward Road. Other sums in this pass book are as follows:-
Then there are the two cheques for $45,000 and $15,000 dated 30th March.
The other pay-in book relates to the period 25th February to16th September 1963. Sums shown as having been paid in to Wong Shing Tak's personal current account with The Canton Trust & Commercial Bank during that period are as follows:-
That is not the kind of current account which a person earning $1,000 per month keeps for purposes of private living. This is a business account of some kind; and I naturally ask myself: where did all the money come from? and what was it doing in Wong Shing Tak's personal current account? There was no evidence that he earned it; and, having seen him in court, I cannot believe that he was capable of earning it. 141. Counsel for the third defendant summed up the situation very well when he said that the finances of Peter Wong and Wong Shing Tak were so mixed up as to be indistinguishable one from the other; and that this situation was deliberately created so that Peter Wong could, in the event of any questions being asked, say: "This transaction has nothing to do with me: I simply loaned money to my brother to help him, or his wife, and carry through the deal". 142. It must have been clear to Peter Wong by the end of August 1963 that the Yung brothers had made up their minds to retire from the joint venture. Clause 14 of the first draft purchase and sale agreement made it abundantly clear that the third defendant had no longer any interest in the Cheong Lok Street property except to be paid the $70,000; and there is nothing in the agreement to suggest that the third defendant had authorised the first defendant to mortgage the name. Nevertheless Peter Wong personally signed, and caused to be filed in the Tenancy Tribunal, the notices of application for exemption in the names of all three defendants. 143. In my view, clause 15 was slipped into the final agreement without the knowledge of the third defendant, and he carelessly signed the document at the request of Ma Bing Kuen without reading it. He also accepted Ma Bing Kuen's story that the power of attorney was for the purpose of enabling the remaining landlords to obtain an exemption order without stopping to think whether this was really necessary. 144. Paragraph 9 of the third party's defence is to the effect that the first and third defendants agreed that the sale and purchase agreement should not be registered because:
According to the first defendant's evidence, just before he and the third defendant entered Peter Wong's office on 28th December, 1963 they suddenly thought of this matter and came to this agreement. 145. I simply do not accept this evidence. The first defendant, as in many other matters, was lying. Indeed, in giving evidence the first defendant sounded more like an advocate than a witness - an advocate who, by hook or by crook, was going to do his level best to whitewash Peter Wong. 146. The non-registration of this purchase and sale agreement was Peter Wong's idea. Of course it could not have been registered in the Land Office. Such registration would have given any prospective mortgagee notice of the true position. Furthermore I do not think that either the first defendant or Peter Wong believed that any change in the names of the applicants before the Tenancy Tribunal would cause any delay in the proceedings. After all, what was filed on 10th September 1963 was a series of notices addressed to various tenants of Nos.2 and 4 Cheong Lok Street to the effect that the three defendants intended to apply for an exemption order and that if the tenants wished to oppose the application they should give the Registrar of the Supreme Court 14 days' notice of that intention. The hearing of the application was fixed for the 6th March 1964. Supposing that on the morning of 6th March 1964 the third defendant had died and that Peter Wong had appeared before the Tribunal and said: "I appear for the first and second defendants only; the third defendant has died". Can one possibly believe that the President of the Tenancy Tribunal would have said: "That's too bad; I'm afraid you will have to start all over again by serving amended notices on the tenants, and it will be another 7 months before I can hear you on behalf of the first and second defendants." I do not believe that Peter Wong thought for one moment that the withdrawal of the third defendant would make the slightest difference to his application to the Tenancy Tribunal; nor do I believe that the first defendant thought this up by himself without assistance. But even if Peter Wong did think that the third defendant's withdrawal would delay the Tenancy Tribunal proceedings, by the end of September 1963 he could have been in no doubt about the third defendant's intention to withdraw from the joint venture; and amended notices could then have been filed. 147. In my view, all this evidence about delay in the Tenancy Tribunal and about the first defendant getting the third defendant to agree to give him a power of attorney and to mortgage the property in order to pay the $70,000 is all a story concocted in an attempt to give an innocent explanation for what was patently and obviously an undoubted fraud perpetrated upon the third defendant. 148. But even if Peter Wong did believe that the first defendant and Yung Kwok Yew had reached the extraordinary oral agreement now described by the first defendant, and even if Peter Wong had been so foolish as to think that the Tenancy Tribunal proceedings might be delayed, it was his duty to advise the first and third defendants to seek separate legal representation. 149. There was some evidence by Peter Wong and Ma Bing Kuen that they advised the first defendant and Yung Kwok Yew to seek separate legal representation, and that in order to save costs the first and third defendants decided to let Peter Wong act for both of them. The first defendant gave similar evidence. I entirely rejected all that evidence. There was not a word of truth in it. 150. In my view Peter Wong deliberately misled the Tenancy Tribunal. Neither the third defendant nor Yung Kwok Yew ever instructed him to apply to the Tenancy Tribunal on their behalf. But even if we assume that the filing of the notices on 10th September 1963 in the name of all those defendants was a genuine mistake, by 6th March 1964 Peter Wong Could have been in no doubt that the third defendant was no longer an applicant for exemption. Yet, he led the Tribunal to believe that the third defendant was an applicant; and that the third defendant was a person of standing. Peter Wong must have known that the agreement of 5th March 1964 executed by the first defendant as attorney for the third defendant contained statements in regard to the third defendant's intention to participate in the re-development of the property which were simply not true. 151. In paragraph 9 of the third defendant's statement of claim it is pleaded that Peter Wong should have:
In the result, of course, the Tai Yau Bank did not have to sue the third defendant on his personal covenant either under the mortgage of 10th July, 1963, or under the personal covenant in the further charge executed by the first defendant purportedly on his behalf; I agree, however, that Peter Wong failed in his professional duty to the third defendant in all four respects enumerated in paragraph 9. 152. Paragraph 14B of the third defendant's statement of claim reads:
These allegations have been proved up to the hilt. The third defendant should never have been made one of the mortgagors in the Gar Chew Land Investment Co. Ltd. mortgage; and Peter Wong was fully aware of this. The third defendant knew nothing about this mortgage or its transfer, as indeed he knew nothing about the further charge in favour of the Tai Yau Bank, or the purported agreement of 5th March 1964, or the building second mortgage in favour of the Canton Trust & Commercial Bank Ltd. In my view Peter Wong should never have acted professionally for either the first defendant or the third defendant in the matter of the Cheong Lok Street property. 153. The third defendant is fully entitled to the indemnity claimed by him. There will therefore be judgment to the third defendant against the third party for the sum of $338,716.80, together with interest thereon at the rate of 1.2% per month from 5th April 1966 to date of judgment (viz.9th May 1968) and at the rate of 8% per annum from the date of judgment to date of payment. The third party will further indemnify the third defendant in respect of the costs of the plaintiff's action against him and pay the third defendant his costs in respect of the third party proceedings.
19th July 1968. Representation: B. Bernacchi, Q.C., & A. Zimmern (Edmund Cheung & Young) for the Plaintiff H. Litton, (Lau Chan & Ko) for the 3rd Defendant. J. Swaine (Ngan & Wong) for the 3rd Party (1) (1911) 1 K.B. p.189 (2) (1893) A.C. 170 (3) 37 N.Y.R. (10 Tiff.) 322. (4) (1904) 2 K.B. 530 (5) (1913) 8 H.K.L.R. p.52 (6) (1954) 38 H.K.L.R. p.46 (7) 2 White and Tudor p.175 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||