Eldo Trading Company Limited v. Thorogood Estates Limited
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1. These actions which have been tried together arise out of two sale and purchase agreements between Eldo Trading Co. Ltd. (Eldo) and Thorogood Estates Ltd. (Thorogood), each dated 3rd February 1981.
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HCMP002009A/1982
MISCELLANEOUS PROCEEDINGS BETWEEN
HIGH COURT ACTION BETWEEN
Coram: Mantell J. Dates of hearing: 15th - 19th & 22nd-26th April, 7th & 16th May, 1985 Date of delivery of judgment: 7th June, 1985 ___________ JUDGMENT ___________ 1. These actions which have been tried together arise out of two sale and purchase agreements between Eldo Trading Co. Ltd. (Eldo) and Thorogood Estates Ltd. (Thorogood), each dated 3rd February 1981. 2. In late 1980 Thorogood was proposing to develop a site at Hok Yuen Street, Hung Hom. The idea was to build a shopping podium, on top of which would be two tower blocks. The podium was to consist of ground, 1st and 2nd floors, and each tower block was to have a further 11 storeys. That is as high as it was permitted to build because of the proximity of Kai Tak Airport. 3. Thorogood is owned by Cheung Kong (Holdings) Ltd. (Cheung Kong) of which Mr. George Zang is a director and senior executive. Cheung Kong, through Mr. Zang, was acting as the project manager and sales agent for the scheme. Previously Mr. Zang had done property deals with a Mr. Ho Sau-ki. There is an issue, not important, as to who approached whom, but in about mid-December 1980 Mr. Zang and Mr. Ho did meet to discuss the possibility of Mr. Ho acquiring one of the tower blocks. The one he was interested in was Tower B. His intention was to acquire it, if at all, through a shelf company, Eldo. 4. In this case Mr. Ho's truthfulness has been called in question. It is a fact that there are differences between the evidence of Mr. Ho and that of Mr. Zang, and indeed between Mr. Ho and other witnesses called for the defendants, which cannot be explained in terms of failed recollection. But I found Mr. Ho to be a satisfactory witness, straightforward and, within the limits of his recollection, accurate. I regret that I cannot say the same for Mr. Zang or his assistant, Mr. Chow. So it is Mr. Ho's version, where it differs materially from that of Mr. Zang or of Mr. Chow that I accept. Nevertheless in pursuing the history of this matter I shall try to indicate where the chief areas of conflict arise. 5. Mr. Ho told me, and this is common ground, that he met Mr. Zang in Mr. Zang's office, on or before 17th December 1980. Mr. Zang showed him a plan describing itself as a design feasibility for a proposed commercial development. On one sheet it displays a typical floor plan for the 4th to 13th floors, divided up into rooms by dotted lines. Although Mr. Ho was very interested in buying the block he wanted it to be as separate as possible from the rest of the development. In particular, he wanted a separate entrance, independent lifts, independent air-conditioning and the right to manage and name the block. He was told that the externall appearance of the building would resemble that of St. George's Building in Central. That pleased him. He also wanted 25 car parking spaces to be provided nearby. And there were other matters mentioned which have not troubled the parties and need not trouble me. The price mentioned was $1 100 per sq. ft., to be calculated on an estimated floor area of 300,000 sq. ft. subject to adjustment to accord with the actual floor area on completion of the building. On Mr. Ho's version Mr. Zang did not raise any objection to any of the matters raised and even expressed the view that none of them would prove a difficulty. Mr. Zang, on the other hand, said that his attitude was discouraging particularly with regard to the question of managing and naming the block. However it is not in dispute that the meeting ended with the suggestion from Mr. Zang that Mr. Ho should put his terms in a written offer addressed to the chairman of Cheung Kong. This Mr. Ho did by a letter dated 17th December 1980 in which he offered to buy Tower Block B at the price mentioned and on the terms to which I have referred. The letter concludes "If your Company agrees the above terms we will pay 20% deposit". The letter was delivered not to Mr. Li. Ka-shing but to Mr. Zang. There is a question, I think unimportant, as to whether it was opened and read in Mr. Ho's presence or whether it was discussed over the telephone, but there is a real issue as to whether Mr. Zang objected to any of the proposals or not. Mr. Zang says that he told Mr. Ho that he could not agree to Mr. Ho having the right to manage or name the building and that he was not prepared to say that an independent air-conditioning system could be provided. He also told me that he was not prepared to commit Thorogood to providing a building which looked exactly like St. George's but that he was only prepared to offer a building with a tinted curtain wall. In the event the building does have a similar appearance to St. George's. In the event, also an independent air-conditioning system was provided so that what was said between Mr. Zang and Mr. Ho about air-conditioning has assumed little or no importance in the case. Mr. Ho's recollection of the conversation about the external appearance of the building is this:
So there is really very little difference between Mr. Zang and Mr. Ho as to that. There is, however, a clear difference in the two accounts as to what was said about management and naming. Mr. Ho says both matters were conceded. Mr. Zang says not. I accept Mr. Ho. The letter was accompanied by an earnest in the form of a cheque for $2 million which was cashed. It seems to be a matter of principle with Mr. Zang that he never puts anything into writing but it would have been the simplest thing in the world to record the terms upon which that not insubstantial sum of money was accepted. It is common ground that by the time of this second conversation Mr. Zang was prepared to agree on behalf of Thorogood that there should be a separate entrance to Tower Block B and an independent lift system as shown by a free-hand alteration to the design feasibility study. It is also common ground that neither at the first meeting; nor in the conversation following delivery of the letter of 17th December nor indeed at any other time did Mr. Zang or anyone else say that the 13th or top floor would have the same amount of useful floor space as those below. It may well have been an impression which Mr. Ho shared with Mr. Zang that there would be 11 floors of roughly similar floor area available for office use but it was an impression which Mr. ho derived from looking at the design feasibility drawings and not from anything that was said. 6. If there had been an out and out rejection of Mr. Ho's request to be given the right to manage and name the building, it is difficult to see how the negotiations proceeded to the next stage in which by a letter of 30th December 1980, Mr. Ho sent four post-dated cheques to cover the balance of the deposit of 20% and reiterated, inter alia, the conditions that Eldo should be responsible for the management of the building and for providing its name. That letter too was not answered, in writing at any rate, and in due course the cheques or replacements for them were banked. It is significant, however, that in that letter Mr. Ho dropped his request that the building should resemble St. George's. The terms of the proposed agreement that the purchaser should have the right to manage the building and to name it were again mentioned in a letter of 7th January 1981 from solicitors for Mr. Ho to solicitors for Thorogood Once again there is no disavowal in writing. 7. Whereas Mr. Ho and perhaps Mr. Zang were under the impression that the top floor of Tower Block B would be much the same as each lof the lower storeys down to the 4th, that was not in fact the case. The architect's working drawings as opposed to the design feasibility drawings would have disclosed that the air-conditioning plant, be it solely for Tower Block B or Tower Block B and the podium beneath, was to be sited on the top floor and would take about half of the available space. Moreover not all the air-conditioning plant was to be covered over so that the roof of the top floor would be somewhat less in at a than would otherwise have been the case. Also scrutiny of the figures upon which the gross floor area was calculated in arriving at a price for the building, subject to adjustment, would have revealed that the whole of the ton floor was not to be available for office use. There is evidence from a Mr. Albert Chow, Mr. Zang's assistant, that a heated exchange took place between him and Mr. Ho over the calculation in which the difference between the top floor and the others was brought directly to Mr. Ho's notice. Mr. Ho denies the meeting and says that his impression that the top floor was a full floor of offices remained with him until he was disabused in August 1982. Mr. Chow's account is circumstantial. He says the meeting took place in early January 1981 and he gave me what was almost a verbatim account of the conversation. That was a not unimpressive feat because he could not have been asked to recall the conversation until, at the earliest, some 20 months later. He had no note or memorandum of any kind to assist him. It was, I thought, too good to be true. On the other hand, it is a fact, as I fund, that in February 1982 Mr. Ho was purporting to sell the tower block on the basis that the top floor had the same area, as the others and that, at a time long before any change in market conditions might have caused him to act in anticipation of these proceedings. That transaction has been attacked but for reasons which I will come to I have no reason to doubt its genuineness and it is quite inconceivable that Mr. Ho would have entered into such a bargain with his sub-purchaser if the conversation related by Mr. Chow had taken place. 8. As remarked, by 7th January 1981 the matter had been put in the hands of solicitors and between then and 3rd February, drafts of the proposed sale and purchase agreement were passed between them. None of the drafts made any provision for the purchaser's right to manage and name the building. Also the vendor's draft reserved to the vendor's solicitors the right to settle the terms of any deed of mutual covenant. The matter was being handled for Mr. Ho by Mr. Vincent Cheung of Philip K.H. Wong & Co. He was concerned that the agreement did not make any provision for management or naming, particularly since the terms of the deed of mutual covenant would not be for him to settle. Therefore he spoke to Mr. Sat of Woo, Kwan, Lee & Lo who referred him to Mr. Zang. In fact it was Mr. Zang who telephoned Mr. Cheung. This is Mr. Cheung's evidence as to the conversation which according to his file note took place on 31st January 1981:
Later Mr. Cheung said:
The file note reads:
Mr. Cheung also told me that but for Mr. Zang's assurance he would have insisted on a clause giving management and naming rights being inserted in the sale and purchase agreement and/or that Philip K.H. Wong & Co/ should have the right to draft the deed of mutual covenant. It was put to Mr. Cheung in cross-examination that it would be Mr. Zang's evidence that he just could not believe that in a seller's market he would have said any such thing. However when Mr. Zang came to give evidence the contradiction was more direct. His evidence was that he told Mr. Cheung that Mr. Ho had already asked about these two points and he had not agreed to them. He said, "Let us leave the matter for the time being and Leave it to be discussed in the future. I cannot promise anything now." This was a serious conflict and cannot be resolved on the basis of misrecollection. It is exacerbated because Mr. Cheung told me that, even after the exchange of the sale and purchase agreement, on the 23rd February he had a further telephone conversation with Mr. Zang, again noted in his file, in which Mr. Zang promised that he would send the letter of confirmation Mr. Sat of Woo, Kwan, Lee & Lo. And more than 12 months later on 27th March 1982 a letter from Philip K.H. Wong & Co to Cheung Kong requesting confirmation of the agreement to allow Eldo to name and manage the building, as is the pattern in this case, remained unanswered. I believe Mr. Cheung. I disbelieve Mr. Zang. The view that I take of this evidence has played its part in helping me to resolve conflicts between Mr. Zang and Mr. Ho. Since I am on the point of credibility I might mention by way of aside the obvious fact that the property market which was still rising in February 1981 had taken a downturn by the middle of 1982. That could mean that buyers who had entered into contracts when tie going was good might by mid-1982 or later be wanting to find a way out. Such a buyer, it is suggested, might be less indulgent of minor breaches of agreement than in former times and might even feel constrained to tell lies. In assessing the witnesses in this case I have borne in mind that suggestion. 9. I have run ahead somewhat. On 3rd February 1981 the two agreements, which have been called the office agreement and the car parking agreement, were entered into. The office agreement between Thorogood and Eldo recites that:
By the parcels clause it was agreed that:
Clause 2 sets the purchase price at $1,100 per sq. ft.:
Clause 3 provides for manner of payment, both as to the deposit and to the balance of the purchase money. Clause 5 provides:
Clause 7 includes the provision that:
Clause 11 gives the vendor the right to rescind the sale and re-sell in the event of the purchaser failing to observe or comply with any of the conditions contained in the agreement but preserves the vendor's right to sue for damages. By Clause 14, the vendor declared and the purchaser acknowledged:
Clause 18 confers upon the vendor's solicitors the right to settle the terms of a deed of mutual covenant and requires the purchaser either to enter into such a deed or accept an assignment subject to it. The only restriction placed upon the vendor's solicitors in preparing the deed is the provision that it shall contain "such clauses as at present adopted by them for commercial buildings (with such modifications as are necessary to meet the circumstances." Under clause 27:
Clause 28 contains express warranties on the part of the vendor, inter alia, that the premises would have 1. curtain wall with tinted glass for the external walls and 2. central air-conditioning throughout the Tower B. The car parking agreement was very similar in form and it is not necessary to refer specifically to any of its terms. It is agreed for the purposes of this litigation that the two agreements are interdependent and stand or fall together. 10. I now come to two questions which occupied a great deal of time during the hearing, disproportionately so perhaps, The first concerns some artists' impressions of the proposed development which Mr. Ho says were given to him in February 1981 as confirmation of the agreement as to the colour of the building when finished. The defence case is that he could not have got them before July 1981 and when he did it was at his request and for some purpose of his own. I really do not think it matters which is right save in so far as it reflects upon Mr. Ho's credibility. I do take the view that he must be mistaken as to the date, but since the completed building, which I visited, seems to correspond pretty closely in appearance to the artist's impression of what it would look like, the purpose for which the drawings were given would not seem to be important. The other question is on what date, assuming that Mr. Ho was not told by Albert Chow in advance of the sale and purchase agreement, did he discover that the top floor of this office block was to be used partly as a machine floor. He says that it only became known to him in August 1982 when he was taken to task over it by his sub-purchaser. The defence case is that on a number of occasions prior to that, even as early as mid-1981, he had sight of building plans which must have brought to his attention the fact that the top floor was hot going to have the same potential layout as the others. There is no question that from the end of 1980 onwards there were in existent plans which would have shown the true position. The evidence that such plans were given to Mr. Ho comes from Mr. Chow, Mr. James Lee and a Miss Hung. Mr. Ho says the only plans which he was sent or received were similar to the design feasibility drawings which he had seen at the very beginning. The documents are inconclusive. Mr. Thomas makes a very powerful submission on the facts which he has reduced to writing. He says that the resolution of the conflict goes to two matters:
In view of my ultimate finding the first contention is not important to Mr. Thomas but the second may be. I have already said that I do not think that Mr. Ho would have entered into a sub-sale agreement in February 1982 in the terms in which he did had he known that the top floor was not to be wholly available for office use. I have also said that I found Mr. Ho to be a satisfactory and staightforward witness. The burden here is upon Mr. Thomas and I can only say that on the evidence which I have heard and seen I am not satisfied that Mr. Ho ever saw a plan of the 13th floor as it was to be before August 1982. I appreciate that my finding reflects upon the evidence of the three witnesses whose names I have mentioned. In particular it reflects on the evidence they gave with regard to the circumstances surrounding a letter sent to Eldo dated 2nd November 1981, the first paragraph of which reads:
It is said by all three witnesses that notwithstanding the wording of that letter what was enclosed were plans and not a sketch and, that they differentiated between the 13th floor and the others. The evidence which was given, with Mr. Chow dictating the letter, Miss Hung typing it, Mr. Lee providing the plans and Miss Hung collecting and enclosing them, fits together, it would be true to say, like a jigsaw puzzle. Miss Hung said that she was not asked to recall the incident for some 12 to 15 months, and it must be true of the others. It had to me every appearance of being the result of witnesses putting their heads together and I entertain the gravest suspicion of that account which in turn colours my view of James Lee on other matters and in no way diminishes my respect for Mr. Ho as a witness of truth. 11. Negotiations between Eldo and Thorogood over the partitioning of Tower B came about because Mr. Ho had found a buyer for the block in the person of Chan Wu-cheong who was anxious to get rather more offices to the floor than had been shown in the design feasibility drawings. In fact, he wanted between 22 and 25. Regardless of what was to happen on the top floor it was not possible for all the other floors to carry as much partitioning as that. Nevertheless on 9th February 1982 Eldo entered into a sub-sale agreement for the tower block with Mr. Chan Wu-cheong with the following terms included:
12. In at least two respects that agreement did not mirror Eldo's own with Thorogood in that it has never been alleged that Thorogood either represented or agreed that each floor would be capable of division into not less than 22 units and that by the terms of the written agreement all that was contracted for was a tinted curtain wall. Those discrepancies have been the occasion for an attack upon the genuineness of the agreement with Mr. Chan and even now I think Mr. Thomas believes me naive for accepting it as such. I understood the suggestion in cross-examination to be that the agreement had been invented with the object of bolstering a claim for damages. If that is so it must on the evidence of the documents have been invented at some date before 16th August 1982 long before any disagreement between Eldo and Thorogood had come about when solicitors acting for Mr. Chan wrote referring to the agreement in terms. It can be said, of course, that the fact that Mr. Ho was prepared to include terms which were not part of his agreement with Thoroughgood as to the number of units per floor and the colour of the building detracts from the strength of any inference as to his state of mind to be drawn from the fact that he was offering a complete top floor. But in February 1982 Mr. Ho would have had no knowledge of the engineering considerations which prevented partitioning on that scale and in the light of his conversation with Mr. Zang he might readily have presumed that the colour of the building was to be gold. It seems to me that the question of how much space would be available on the top floor is a horse of a different colour and I do accept that the agreement was made between Mr. Ho and Mr. Chan on the date it bears and that it was a genuine agreement. 13. In August 1982 Mr. Chan Wu-cheong saw the approved building plans for the first time. They made it quite plain that about half of the top floor of the tower was to be used to accommodate air-conditioning plans, and therefore would not be available for commercial use. The plans also showed the other, floors partitioned into fewer than 22 units. Solicitors for Mr. Chan wrote to complain on 16th August 1982. On 15th October 1982 they wrote again to ask for a reply to that earlier letter and to take the further point, which would have become apparent as the building neared completion, that the colour of its exterior was not as agreed. There never was any reply to that letter either, but the evidence has been, which I accept, that between 15th October 1982 and the commencement of the first action Mr. Chan Wu-cheong asked for his deposit back and, although he did not get it, it is not being contended by Eldo that the sub-sale and purchase agreement remained alive after that time. It is important to note, and I do, that the right to manage and to name the building had nothing whatsoever to do with the agreement between Eldo and Mr. Chan Wu-cheong breaking down. 14. By this time alive to the question, on 17th September 1982 Eldo wrote to Thorogood and Cheung Kong raising the question of the use to which the top floor was to be put and seeking an assurance that the roof of the block would be the same size as each of the lower floors. The question of partitioning was also touched upon. Thorogood's reply of 28th September 1982 was uncompromising. It made reference to the terms of the sale and purchase agreement to which I have referred and dismissed the charge that the building did not in all respects comply with the contract. 15. On 8th November 1982 the first step in this litigation was taken when Eldo issued an Originating Summons claiming the following declarations against Thoroughgood:
In the event of any one of the declarations being made Eldo claimed repayment of the deposit of HK$66,685,960. 16. On 3rd December 1982 the action was ordered to be continued as if begun by writ. A Statement of Claim served at the beginning of December claimed similar relief to that sought in the originating Summons save that the 3rd declaration was by now asked for on the basis of a breach of a collateral agreement between the parties that the curtain wall to be provided should comply with the mode of finish depicted in the coloured sketch furnished by Thorogood to Eldo. It was averred by the Statement of Claim that prior to entering into the agreement of 3rd February 1981 Mr. Zang had represented to Mr. Ho that the tower block to be acquired would have 11 storeys of offices and a gold-coloured curtain wall and that Eldo had entered into the written agreement in reliance upon those representations. Paragraph 4 of the Amended Statement of Claim does not accurately reproduce the original pleading which goes on to allege a collateral agreement as to the provision of the gold curtain wall. A defence to that Statement of Claim denied the making of any of the alleged representations and the existence of any collateral agreement. 17. In the meantime the building had been completed and an Occupation Permit issued on 9th December 1982. On 17th March 1983 solicitors for Thorogood purporting to act under Clause 5 of the Sale and Purchase Agreement served a Notice to Complete within 14 days and requiring the payment of the balance of the purchase price. On 22nd March 1983 solicitors for Eldo asked to be allowed to inspect the premises without prejudice to Eldo's claim in the current action. The reply of 23rd March 1983 gave permission for inspection but only on the oasis of the Notice to Complete. On 29th March 1983 solicitors for Eldo wrote challenging Thorogood's right to serve the Notice to Complete before the conclusion of the proceedings and indicated an intention to amend the Statement of Claim to include further allegations relating to the 13th floor, the arrangements for air conditioning and Thorogood's refusal to allow Eldo to name and manage the building. Eldo did not comply with the terms of the notice on 6th April 1983 Thorogood a purported to rescind the sale under Clause 11 and forfeit the deposit. Within a relatively short time after that Thorogood resold the tower block to another party at a substantially lower price than that agreed with Eldo. 18. On 18th July 1983 Eldo served an Amended Statement of Claim. Paragraph 4(a) adverts to the meetings between Mr. Ho and Mr. Zang in middle and late December 1980 at which Mr. Zang indicated to Mr. Ho that it was proposed by a member of the Cheung Kong Group to redevelop the site at Hok Yuen Street and the following oral representations by Mr. Zang are alleged:
Paragraph 4(b) avers that Mr. Zang further represented that in the event of Mr. Ho acquiring the 3rd to 13th floors together with the roof of the tower as one composite unit, Mr. Ho would be given the right to manage those floors and to name the tower in question. Paragraph 5(a) alleges that in reliance upon those oral representations the plaintiff entered into the written agreement of the 3rd February 1981. Paragraph 5(c) alleges that it was an implied term of the Sale and Purchase Agreement that the roof would be of the same size as the 3rd to 13th floors and reasonable access to the roof of the 13th floor would be provided. Paragraph 6 sets up what is called an agreement collateral to the Sale and purchase Agreement made between solicitors acting for Eldo and solicitors acting for Thorogood on or about 31st January 1981 by which it was agreed between the parties that in consideration of the plaintiff executing the Sale and Purchase Agreement the defendant would confirm by letter the plaintiff's right to manage the 3rd to 13th floors and to name the tower. The alleged collateral agreement relating to the provision of a gold-coloured curtain wall became paragraph 7 of the Amended Statement of Claim and paragraph 8 sets up the sub-sale to Chan Wu-cheong. Paragraph 9 alleges a breach of the collateral agreement by which Eldo was to manage and name the tower in the advertising of the tower (as had been done some time previously) as the Hung Hom Commercial Centre. Paragraph 10 contains the following averments:
Paragraph 11(a) alleges material errors and/or mis-statements and/or misdescriptions in relation to the subject matter of the sale "in that the premises as constructed is not 11 storeys of offices nor is there any roof such as should have been provided". Paragraph 111(b) alleges that the oral representations pleaded were untrue and mad negligently by Mr. Zang in that ho failed to take any step or any reasonable step to ascertain or to acquaint himself with the precise redevelopment contemplated. Paragraph 11(c) alleges breaches of the collateral agreements relating to management and naming and to the curtain wall. Paragraph 13 pleads the loss on re-sale to Mr. Chan and the prayer is amended to bring the relief claimed into line, so it is considered, with the allegations made, and most importantly, to include a clans for damages. 19. On 4th August 1983 solicitors for Thorogood gave notice to Eldo to complete the Car-park Agreement with which Eldo did not comply and on 15th October 1983 solicitors for Thorogood wrote purporting to rescind that agreement also and to forfeit the deposit paid under it. 20. On 27th September 1983 Eldo issued its Writ in action no. 11995/1983 against Thorogood and Cheung Kong. I make the comment that the presence of Cheung Kong in either action seems to be an unnecessary complication. The Statement of Claim in the second action brought up the terms of the Car-parking Agreement, pleads that the "office agreement" and the "car-parking agreement" are "part of one integral transaction" so that rescission of one must lead to rescission of the other. The averment that it was a necessarily implied term of the office Agreement that the roof should be of the same size as the 3rd to 13th floors is repeated and it is pleaded that the Notice to Complete followed by the purported rescission by the 1st defendant amounted to a wrongful repudiation of the contract which the plaintiff had accepted on or about the 24th April 1983. That plea is made, of course, on the basis that the agreement had not been previously terminated by acceptance of breach. The prayer of the Statement of Claim in the second action differs from the prayer in the first in that this time it asks for the return of the $750,000 deposit under the Car-park Agreement. The defence puts in issue the question of representations and breach and the making of any collateral agreement. It also raises the defence of affirmation and there is a counterclaim for loss of profit on re-sale of the office block amounting to $137,674,040. There is also a claim for loss of profit on re-sale of the car-parking spaces, but that has not been pursued. 21. The only other matters which I believe I need mention by way of background relate to the condition of Tower B at the date of the Notice to Complete. It is now agreed that at that date Tower B was equipped with an independent air-conditioning system which served Tower B alone. It is also the case that in order to comply with building regulations at that date and ever since quite substantial areas on each floor have had to be partitioned off as sample or filing rooms thus reducing the area available for office accommodation. 22. Leaving aside the effect of the Notice to Complete and the purported rescission of the agreement by Thorogood, were either of the defendants in repudiatory breach of the office agreement? I should say that in dealing with this question as with others I have acceded to the proposition that it turns on construction and first principle and, therefore, it should not be wondered at that I make no reference to authority. 23. Both agreements of 3rd February 1983 appear as formal contracts for the sale of an interest in land. You would expect them to contain all the terms of the agreements between the parties. The provisions of the office agreement apart, therefore, it would be difficult to contend for the implication of some term relating to the size of the roof or access to it, but in my view the effect of Clause 27 is to make the proposition unarguable What were the express terms? The agreement was for the sale and purchase of equal undivided shares in the site and the right and privilege "to hold, use, occupy and enjoy all that Tower B consisting of 11 storeys and roof (from 3rd to 13th floors and main roof, inclusive". The recitals, to which I think it is proper to look in aid of construction, describe the 11 storeys as being "of offices". Here Thorogood built a tower of 11 storeys on each of which the available area was predominantly for use as offices. In my judgment the building as erected complied with the written terms of the contract. If I were to be wrong about that, I would certainly hold that there had been substantial compliance with the terms of the contract within the principle laid down in the various authorities cited to me by Mr. Ching and, in any event, hearing in mind the vendor's right under Clause 14 to reduce the area within Tower B subject to the approval or consent of the building authority and the provisions for the adjustment of the purchase price under Clause 2, that any error, mis-statement or misdescription is not such as materially affects the description or value of the premises. It is no longer contended that there has been any breach of the written agreement with regard to the curtain wall or as to the provision of an independent air-conditioning system. I find, therefore, no breach of any express or implied terra such as would have entitled the plaintiff to treat the contract as repudiated. 24. Notwithstanding Clause 27 the effect of Section 4 of the Misrepresentation Ordinance will be to allow reliance upon a misrepresentation to claim rescission and/or damages unless in the circumstances of the case it is fair and reasonable to have regard to the exclusion clause. Paragraph (a) in each action sets out the oral representations relied upon. The first, namely, that the redevelopment would consist of the erection of two tower blocks on the lot to be known as Tower A and Tower B was unquestionably made and true. The second, that both towers would be provided with a gold curtain wall was a representation made by Mr. Zang at one time, as I find, in derogation of the earlier representation or agreement that the building should resemble St. George's in Central. But having regard to Mr. Ho's evidence I cannot find that he entered into the written agreement of 3rd of February in reliance upon that representation. It was a matter of indifference to Mr. Ho at that stage whether the building was gold-coloured or, as it turned out, bronze. Moreover the agreement itself provides merely for the provision of a tinted curtain wall and that has been done. The third representation alleged is that it was said by Mr. Zang that the ground, 1st and 2nd floors of Tower B would be used as a podium for shopping - that much was true - and the rest of the tower would be made up of storeys of offices. I do not find the second part of the representation to be untrue either and even if it were inaccurate to a degree I would hold it fair and reasonable for the defendant to rely on Clause 27 in the circumstances of this case, which include the right of the vendor under the agreement to reduce the area of Tower B, and for the adjustment of price to accord with the actual area available upon completion. The 4th representation relied upon is that each of 11 storeys would be capable of being partitioned into 15 offices as depicted in the sketch plans described as design feasibility no. 2 and design feasibility no. 3. That is pleaded as an oral representation but there is no evidence that anything of the sort was ever said by Mr. Zang. I accept the proposition that the sketch plans were shown by way of indication only. They were not working drawings. It was quite plain that they or for that matter any working drawings based on them would be subject to building authority approval and in my judgment the dotted lines shown on those pages could not be taken as any representation as to the detailed arrangement of rooms on completion of the building. In any event, if necessary, I would hold that it would be fair and reasonable in the circumstances of the case previously mentioned to permit the defendant to rely upon Clause 27 to exclude the effect of any representation which it may be possible to conjure out of those facts. The 5th representation alleged, namely that the tower would have its own air-conditioning unit which would not be used for the podium now turns out to be true. The 6th representation alleged is that Mr. Ho, or rather Eldo, would be given the right to manage and name the tower should he acquire the whole of the 3rd to 13th floors. Now I have found as a fact that the promise was made. And I find that in entering into the agreement of 3rd February 1981 in the terms in which that agreement was drafted Eldo did rely upon that promise and further upon the promise which Mr. Zang made to Mr. Cheung that the right to manage and name the building would be confirmed in writing. In the event neither promises was honoured. But there is a difficulty. It is not pleaded nor has it been alleged or argued that Mr. Zang never intended to honour his promise. So it is not said to have been a represontation as to existing fact. It does not give the right to rescind. And if the plaintiff's first case is well founded they had rightly or wrongly brought this contract to an end without reference to Thoroughgood's failure to fulfill the particular obligation. Nevertheless that promise and the consequences of it not being kept are matters to which I shall have to return. 25. So as I find there has been no breach of the terms of the agreement or least no such breach as would give the right to rescind., and there has been no misrepresentation upon which the plaintiff can rely for its right to rescind either. 26. There are also pleaded two, so-called, collateral agreements - the Gold Curtain Wall Agreement and the Management and Naming Agreement. I have not found that there was any Gold Curtain Wall Agreement, collateral or otherwise but have found that there was an agreement that Eldo would be allowed to manage and name the building and that the right would be confirmed by letter for which the consideration was the entering into the Sale and Purchase Agreement of 3rd February 1981 for Tower B and the car-park spaces the concession that there should be no explicit reference to management or naming in the Office Agreement, and the foregoing of any claim to be entitled through solicitors to settle the terms of the deed of mutual convenant. 27. Both Statements of Claim, the first by amendment, plead the "management agreement" in narrower terms than I have found the agreement to be. In each case it is averred that:
Both Statements of Claim allege a breach of the agreement but only the first condescends to particulars in paragraph 9 by which it is said that by a letter of 27th March 1982 the plaintiff sought confirmation from the defendant as to its right to manage and name the tower in question, and that in breach of the agreement and without the knowledge or consent of the plaintiff, the defendant advertised the tower as Hung Hom Commercial Centre. The first Statement of Claim, but not the second, seeks a declaration in the prayer that the plaintiff is entitled to rescind the office agreement inter alia by virtue of the breach of the management agreement. 28. It is not pleaded that performance of the management agreement was a condition precedent to Thorogood's right to enforce the office agreement. At most, as a breach of a purely collateral agreement, the breach would give rise to an independent claim for damages, or equitable relief aimed at remedying the breach itself. And even if it could be shown that the management agreement as pleaded was part of the office agreement, I would not be able to find that so insubstantial a breach as alleged gave the right to rescind. 29. Nevertheless the 1st defendant's failure to perform the agreement as I have found it to be, and which I take the view can properly be described as collateral to the office agreement of 3rd February 1981, has troubled me more than a little. If it had been a term of the written office agreement, for example, that the plaintiff should be given the right under the deed of mutual covenant to manage and name the building and it was considered to be of importance, a breach of that term may well have entitled the plaintiff to rescind or, at least, resist a notice to complete until such time as the breach was remedied. But on the pleadings as they stand it has not been possible to contend that it was a term of the agreement, and indeed any such contention would run into the difficulty that this being an agreement for the sale of an interest in land, the term contended for would lack the necessary written support. But in this case it was Thoroughgood's promise made by Mr. Zang which led to the proposed term being left out of the written contract, so might it not be argued that a promise which had that effect ought to be fulfilled before. Thorogood can require the plaintiff to complete. I wondered at one time if subject to the matter being raised in the pleadings it might be possible to argue that the collateral agreement which I have found, as opposed to the one pleaded, could be said to give rise to a condition, the performance of which was prerequisite to the 1st defendant's right to enforce its contractual rights under the office agreement. But I am persuaded for the reason to which I have already alluded, namely that the remedies for breach of contract are interior and may only vititate external contractual relations incidentally as may be the case where an injunction is obtained restraining an anticipated breach that the argument is not available. I so hold notwithstanding the concession that the office and car-parking agreements of 3rd February 1981, clearly collateral to each other stand or fall together. Even so I was and remain by no means sure that the plaintiff would not have been entitled to rely on the promises made by way of estoppel. Would not the Court, I ask rhetorically, refuse to allow the 1st defendant to act inconsistently with its promise and might it have been open to the plaintiff to say that the 1st defendant was estoppel from relying upon its contractual position under the written agreement unless and until the promise had been fulfilled. The result of such an argument, if successful, might well be that, able to disregard the notice to complete, the plaintiff could say that the 1st defendant's letter of 6th April 1983 purporting to rescind became in itself a repudiatory breach. 30. I have searched the pleadings anxiously to see whether or not the argument adumbrated was open to the plaintiff. In paragraph 14 of the second Statement of Claim it is averred that "in the circumstances pleaded as aforesaid such purported rescission by the 1st defendant is wrongful". However as I read the Statement of Claim, and it has not been argued otherwise, the "circumstances pleaded as aforesaid" relate to the serving of a notice to complete at a time when proceedings were afoot. I find that it was not open to the plaintiff to argue estoppel on the pleadings as they stood and, in fairness, no such attempt was made. 31. Having heard argument and taken time to consider my judgment I restored the action to give the opportunity for an application to amend the pleadings to be made. I had in mind the possibility of the inclusion of an averment that performance of the written office agreement was conditional upon performance of the wider management agreement, and the pleading of a promissory estoppel. That would have involved amendments both to the Statement of Claim and to the Defence to Counterclaim. When the proposed amendment was put before me it was in terms sufficient to raise the first point but not, I think, the second. If allowed, however, it would have raised for the first time an allegation that the office agreement was partly in writing and partly oral so as to sustain the contention that the agreement with regard to managing and naming the building was a term of the agreement itself. 32. The application was resisted "with all the strength and vigour" at Mr. Thomas' command - which is not inconsiderable. He reminded me that this was about as late as it was possible to make such an application: that certainly the proposed amendment seeking to allege that the agreement was partly in writing and partly oral was a substantial departure from the case as pleaded and argued; and that it was a commercial case in which the plaintiff had had the benefit of leading counsel throughout. He remined me of several authorities which give guidance as to how the discretion of the Court should be exercised in such a case. But crucially, as I find, he told me that if the plaintiff's case has been presented from the beginning as envisaged by the proposed amendments his own approach would have been, not might have been, entirely different. In particular, he told me, that his approach to the evidence would not have been as it was and I think it follows that he would or might have explored areas which were left unexplored. I accept from Mr. Thomas that such would have been the case. It is only in exceptional circumstances that a Court should exercise its discretion to allow an important amendment after the close of the evidence. It will not do so where the result might be to prejudice the other party. Here there is no question of any conduct on the part of the defendants leading to the deficiency in the pleading, if there be any, the responsibility for which lies entirely with the plaintiff and its advisers. In the exercise of my discretion I refused the application. 33. The last matter I have to consider is whether or not there is relief to be found for the plaintiff in the proposition that Thorogood were wrong to serve a notice to complete at a time when proceedings were pending, regardless of the merits of the plaintiff's case at that time. Mr. Thomas submits that one only has to go back to the respective positions of the parties at the date of the notice to complete to see that the proposition is unarguable. As at that date the plaintiff had started proceedings based on allegations which in the event have proved groundless. How can it be said that the bringing of an unfounded claim should postpone the other party's contractual rights? But it is said that Thorogood were bound to give the right to inspection without prejudice to Eldo's claim in the current proceedings. I do not see why Thorogood was bound to give any more than was required of them by contract, namely the right to inspect on the basis of a notice to complete. In my judgment the plaintiff fails in all its claims in both actions. 34. Thorogood has a Counterclaim. It follows ineluctably that if Eldo could not resist the notice to complete without being in breach Thorogood was entitled to rescind under the contract, as it did, by the letter of 6th April. The loss on resale of the office block has not been challenged. There will be judgment for the 1st defendant in the seoond action on its Counterclaim in the sum of $137,674,084. 35. Following judgment Mr. Swaine for the defendants has made the expected application for costs and Mr. Wong, for the plaintiff, has submitted that some part of the costs should be disallowed on the basis that certain issues have been resolved in the plaintiff's favour. Each of the issues which he mentions is an issue of fact. There is some force with regard to one part of Mr. Wong's submission, I think, without any disrespect to the rest of his submission, namely with regard to the question of affirmation, of which I have said that it consumed a disproportionate length of time and in the event was resolved in the plaintiff's favour. Notwithstanding the discretion which I accept does reside in the Court with regard to apportionment of costs it must be only very rarely that the Court will do so where a defendant has succeeded completely in answering all the claims put forward by the plaintiff. I take the view that this is not one of the very exceptional cases where the Court should attempt to apportion costs which would require considerable scrutiny of the evidence and the time taken to receive it. Consequently there will be costs for the defendant in what I have called the first of the two actions. There will be costs for both defendants on the claim of the second action and the costs of the counterclaim in the second action will be the 1st defendant's.
Representation: Charles Ching, Q.C. & Ronny Wong; (Fan & Fan) for Plaintiff in both actions Neville Thomas, Q.C., John Swaine, Q.C. & Miss Gladys Li (Woo, Kwan, Lee & Lo) for Defendants in both actions. |