Cheung King Sum v. Bright Lamp Industries Ltd

DCCJ519/2003

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 519 OF 2003

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BETWEEN

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DCCJ520/2003

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 520 OF 2003

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BETWEEN

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DCCJ521/2003

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 521 OF 2003

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BETWEEN

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DCCJ522/2003

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 522 OF 2003

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BETWEEN

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DCCJ523/2003

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 523 OF 2003

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BETWEEN

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DCCJ747/2003

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 747 OF 2003

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BETWEEN

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Before: Her Honour District Judge Marlene Ng in Court

Dates of Hearing: 29th and 30th November, 1st, 2nd and 3^rd December 2004, 11th, 12th and 13th January and 7th March 2005

Date of Handing Down Decision: 24th August 2005

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J U D G M E N T

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I. Introduction

1.The Plaintiffs (“Ps”) in the 6 actions (“Actions”) were proprietors of businesses and licensees of market stall spaces (“Stalls”) at the market (“Market”) in Po Tin Shopping Centre at Po Tin Interim Housing (“Estate”) as follows :

2.The Defendant (“D”) was the tenant of the Hong Kong Housing Authority (“HA”) under a tenancy agreement dated 26^th June 2002 in respect of Market(“Tenancy Agreement”) with a right to grant non-exclusive licences for the use of Stalls (“Licences”).

II. Ps’ claims

3.Ps claimed that during negotiations for Licences, D’s representatives orally represented to them and gave/showed them an advertising pamphlet (“Pamphlet”) and tender regulations and application form for Market (“Tender Document”) containing inter alia the following representations (“Representations”) :

(a)	about half of the units of Estate (“Units”) had been changed to public rental housing (“1st Representation”);
(b)	the occupancy rate of Estate (“Occupancy Rate”) was more than 90% (“2nd Representation”);
(c)	more than 5,000 out of 8,736 Units had been changed to public rental housing (“3rd Representation”); and
(d)	5 out of 9 blocks of Estate had been changed to public rental housing (“4th Representation”).

4.Ps relied on and were induced by such fraudulent or negligent Representations to enterinto Licences. Representations were in fact false because Estate had never been changed to public rental housing. Alternatively, Ps relied on section 3 of the Misrepresentation Ordinance Cap.284 (“Ordinance”). Ps therefore rescinded Licences and claimed for inter alia (a) declarations that Licences had been validly rescinded or, alternatively, their rescission and (b) loss and damages arising from D’s misrepresentations.

III. D’s defence and counterclaims

5.D averred that Estate was initially for disaster victims “pending final allotment of public housing”. But in around mid-2001, HA let some Units to applicants for public housing whose names were registered on the public housing waiting roster (公屋輪候冊, “Roster”) (“Roster Applicants”). HA put up a newspaper advertisement to such effect (“HA Advertisement”).

6.Despite D’s denial in the pleadings, Mr Siu, counsel for D, conceded at the commencement of trial that D prepared Pamphlet. However, D maintained it did not distribute Pamphlet or make verbal Representations to Ps. D averred that Tender Document was only for interested candidates who wished to tender for Stalls.

7.D obtained from HA background information about the nature of Estate’s housing and Occupancy Rate as stated in Pamphlet and in the preamble of Tender Document (“TD Preamble”). In/about April 2002 during negotiations for Tenancy Agreement HA verbally informed D inter alia that Occupancy Rate was above 85% and more than half of Units were to be let as public housing for Roster Applicants. HA’s records showed Occupancy Rate reached 90% “at the time when [Market] was opened to business”. D claimed there was no misrepresentation or alternatively, such Representations were true at the time when Tender Document was issued and Licences were entered into.

8.Further or alternatively, if D made the alleged Representations, they were immaterial and D had no intention to use them to induce P to enter into Licences. In any event, Ps’ businesses were affected by their own management and the general economic downturn and not by whether Estate was public rental housing or not.

9.Further or alternatively, if D made the alleged Representations, D claimed Ps did not rely on them, but entered into Licences, paid the deposits and set up their businesses at Stalls pursuant to their own commercial decisions. 

10.Still further or alternatively, if D made the alleged Representations and they were untrue, D claimed they were made innocently.

11.D therefore claimed that Ps were not entitled to rescind Licences (since they had been in possession and used/enjoyed Stalls for several months) or claim for loss and damages. On the other hand, D averred that Ps repudiated Licences by unilaterally abandoning Stalls and surrendering the keys to D. D formally accepted such repudiation and attempted to re-license the relevant Stalls to mitigate loss. So D counterclaimed against Ps for arrears of licence fee and outgoings.

IV. Issues

12.The following are the issues :

(a)	the meaning and the parties’ understanding of the different categories of HA housing;
(b)	whether D made Representations and if so, whether Ps were the representees;
(c)	if so, whether Representations were false;
(d)	if so, whether Representations were made fraudulently, negligently or innocently;
(e)	if so, whether D intended to induce Ps to enter into Licences by Representations;
(f)	if so, whether Ps relied on and were induced by Representations to enter into Licences;
(g)	if so, whether Ps suffered any loss and damages as a result of Representations;
(h)	if so, whether Ps were entitled to rescind Licences;
(i)	if so, whether damages should not be granted having regard to all the circumstances or whether damages should be awarded in lieu of rescission;
(j)	if Representations were made innocently, whether the court should exercise its discretion not to grant Ps any relief.

V. The lawon misrepresentation

13.The usual elements are (a) a false representation/statement made to the representee by or on behalf of the representor, (b) the representor intended the representee to act on it and (c) the representation was an inducement to the representee’s action as a result of which he suffered the loss claimed.

14.Fraudulent misrepresentation  The representee must show that the representor did not honestly believe his representation was true or that his representation was made “recklessly, careless whether it be true or false”. The representee may rescind the contract and/or claim damages (Chitty on Contract 29^th ed (2004) Vol.1 para.6-042 at pp.452-453).

15.Negligent or statutory misrepresentation  Such misrepresentation is made carelessly or without reasonable grounds for believing it to be true. Under section 3(1) of Ordinance, it is unnecessary to show a “special relation” between the representor and representee that gives rise to a duty of care (Chitty on Contracts (supra) para.6-067 at pp.463-464). “Once the representee proves that the statement was in fact false, the burden under the subsection shifts to the representor to prove that he had reasonable ground to believe and did believe up to the time the contract was made that the facts represented were true” (Chitty on Contracts (supra) para.6-074 at p.467).

16.Innocent misrepresentation  Where the representation is not fraudulent or negligent, as a general rule no damages will lie. Section 3(2) of Ordinance gives the court discretion to uphold a contract made pursuant to an innocent misrepresentation (William Sindall plc v Cambridgeshire County Council [1994] 1 WLR 1016, 1036-1037).

VI. Overall impression of the witnesses

17.Actions turn substantially on an assessment of the credibility of witness testimony. All Ps gave evidence. D called Lam Kwok Leung Peter (“Lam”, D’s director/shareholder), Li Choi Wing (“Li”, D’s leasing manager)and Wong Leung Cheung (“Wong”, D’s market manager) to give evidence. I warn myself that the demeanour of witnesses may not necessarily be indicative, particularly when they have different backgrounds and work experiences.  

18.Ps operated small businesses. They were not sophisticated entrepreneurs. Despite some discrepancies in their evidence, I find them to be straightforward and credible witnesses who honestly tried to recall events as they have occurred. There are certainly limitations to their recollections, but they were not shaken on the material aspects of their evidence despite vigorous cross-examination. Where I reject any aspect of Ps’ evidence, it has no material impact on the other parts of their evidence that I accept.

19.On the other hand, I am persuaded that D’s witnesses have been economical with the truth, particularly as to their understanding of the various categories of HA housing and as to whether D made Representations to Ps. I am also not convinced that HA supplied the information which D claims formed the basis for various Representations in Pamphlet and Tender Document.

20.In coming to my analysis/conclusions below, I have considered the totality of the evidence and submissions by counsel.

VII. Categories or nature ofgovernmenthousing

21.There are three categories of HA housing relevant here :

(a)	public housing (公屋) or public rental housing (出租公屋) (“Public Rental Housing”);
(b)	interim housing (中轉屋) (“Interim Housing”);
(c)	housing for Roster Applicants pending the final allocation of public housing (“Roster Housing”).

(a) Ps’ case

22.Ps understood each category as follows :

(a)	Public Rental Housing tenants were Hong Kong residents with low income or from the middle or lower levels of society. Applicants for Public Rental Housing had to be wait-listed and investigated by HA. When they satisfied HA’s requirements, they would be allotted Public Rental Housing. Public Rental Housing tenants were long-term occupants (some until they passed away) and would rarely move out. Hence, the population of Public Rental Housing was more stable and had higher purchasing power.
(b)	Interim Housing was short-term or temporary housing for disaster victims, so its occupancy rate would fluctuate. The occupancy rate was also kept low because some units had to be left vacant to cater for emergencies. The occupants would not have substantial household furniture/equipment and/or would not acquire large quantities of daily necessities or household goods, so their purchasing power was low.
(c)	Roster Housing was transitional in nature and its occupancy rate fluctuated monthly. Its occupants were not considered to be Public Rental Housing tenants because they had not yet moved into Public Rental Housing (上樓) or satisfied HA’s criteria for living in public housing. They would eventually move to Public Rental Housing although the timing could not be predicted.

(b) D’s case

23.All HA’s residential housing was called public rental housing or public housing. To be allotted Public Rental Housing units (“PRH Units”), the applicants had to register their names on Roster, pass HA’s investigations and satisfy HA’s requirements. Each successful applicant was permitted 3 refusals of allotted PRH Units (“Refusal Right”).

24.Lam claimed that Public Rental Housing occupants included qualified applicants (ie whom HA had investigated and granted approval for living in public housing) whose names were registered on Roster (公屋輪候冊合資格人士) prior to the allotment of PRH Units. But he was unable to say whether they would cease to have their names registered on Roster when they were allotted Public Rental Housing.

25.Lam/Li agreed Interim Housing was emergency housing for disaster victims. But Lam claimed ignorance as to whether such housing was temporary or permanent in character or whether the occupants were required to pay for their occupation.

(c) Analysis

26.There is no dispute that (a) Estate was originally designated for Interim Housing and (b) some (not all) Units have been changed to Roster Housing. For reasons explained below, I agree with P’s stance that Interim and Roster Housing are not Public Rental Housing.

27.Public Rental Housing  When successful Roster Applicants have completed their waiting period on Roster (“Waiting Period”) and passed HA’s investigations, and are finally allotted PRH Units by HA after they satisfy HA’s criteria for public housing, they become Public Rental Housing tenants when (subject to Refusal Right) they move into their allotted PRH Units. I accept Ps’ evidence that Public Rental Housing estates generally have stable population because the tenants are long-term occupants. MK Wong is a relevant illustration. Since he started primary education, he lived with his family in public housing estate until he moved out to live with friends at Kin Sang Estate in 2000. His family still lived in public housing estate.

28.Interim Housing  Interim Housing is for settling people requiring emergency housing due to natural and other disasters, clearance of homes (清拆) and urban redevelopment (重建), so some units have to be left vacant to cater for emergencies. I reject Lam’s stretched interpretation of Public Rental Housing to cover Interim Housing. In fact, D admits in its pleadings that Interim Housing is “pending” final allotment of public housing, so D must have known that Interim Housing occupants do not yet live in public housing. Plainly, their occupancy is transitional and will terminate upon “final allotment of public housing”.

29.This is confirmed in HA’s press release dated 11^th February 2003 (“HA 1^st Press Release”). In answer to questions raised by Legislative Councillor Tam Yiu-chung (“YC Tam”), the Secretary for Housing, Planning and Lands said inter alia that “中轉房屋主要是為一些未能即時入住租住公屋而又有迫切住屋需要的家庭而設，主要用作短期安置，所以居民的流動性較高”. The minutes of the 2^nd meeting between the operators of Stalls at Market (“Stall Owners”) and HA’s representatives on 13^th January 2003 (“HA 2^nd Meeting” – see below) prepared by HA (“2^nd Minutes”) also note that “有關解釋『中轉屋』的用途，麥經理指出中轉屋是讓受天災、清拆、重建等影響，但現時不符合入住公共房屋的人士暫時棲身，以待日後透過輪候冊申請入住公屋。故此，中轉房屋基本是一種過渡性而非永久性公共房屋，亦並非為輪候冊家庭而設” (my emphasis). It is plain that Interim Housing is not Public Rental or Roster Housing.

30.Roster Housing  Roster Applicants can apply to live in HA-designated Roster Housing pending final allotment of public housing. But, in my view, once Waiting Period is over, Roster Applicants will move away from Roster Housing. If they succeed in their applications for public housing, they will move into Public Rental Housing. Therefore, Roster Housing is also not Public Rental Housing. Estate Conversion Arrangement (see below), a form of Roster Housing, is an illustration (see discussion below). Although some Ps say Interim Housing includes Roster Housing, I find it is only a reflection of their common transitional nature. In any event, such issue is not the crux of the dispute here.

VIII. Estate Conversion Arrangement

31.HA Advertisement advertised HA’s policy of permitting Roster Applicants to apply to live under licence at Units (“Estate Conversion Arrangement”) as follows :

“	公屋輪候冊
	輪候冊申請人入住寶田中轉房屋
	(申請日期﹕7.5.2001-28.5.2001)
	為儘量有效地運用公屋資源，房屋委員會已通過騰出部份屯門區寶田中轉房屋的單位，以許可証形式出租給公屋輪候冊申請人，以解決他們在輪候公屋編配期間的住屋需要。……”

32.The 18^th August 2001 issue of Sing Pao (“Sing Pao Report”) reported on HA’s policy as follows :

“	中轉屋申請超額2.5倍
	……房署將入住率只得三成的屯門寶田中轉房屋開放予公屋輪候冊人士申請，截至七月中期限，房署接獲約一萬份申請表，超額申請二點五倍。配屋程序於本月中已經展開﹔而單位亦可供即時入住，此舉既可減輕申請人輪候公屋時的租樓財政負擔，亦解決了中轉屋「養老鼠」的空置問題。……
	……屯門寶田中轉屋的空置情況最為嚴重，入住率低至只得三成，即有六千個單位丟空。……房署於今年四月將三千個寶田中轉屋的空置單位騰出，讓新登記甚或輪候公屋多年但未到調查階段的人士申請入住，直至成功獲配公屋為止。……”

33.The 25^th August 2001 issue of Oriental Daily News (“Oriental Report”) also reported as follows :

“	公屋輪候者爭住屯門中轉屋
	……但房屋署自四月撥出約三千個寶田中轉房屋單位供公屋輪候冊家庭申請暫租，卻錄得二點五倍超額申請……
	寶田中轉房屋……入住率只有三成，為解決中轉屋「養老鼠」的情況，房署發信邀請七萬多名尚未進行調查的公屋輪候冊家庭申請暫租，上月中截止時共有一萬零五百户申請。
	房署總房屋事務經理(申請)何仲昌形容計劃反應良好，可讓等候入住公屋的市民多一個安居選擇，獲准暫租者可在成功獲配公屋時才搬出，但若經調查後不符合住公屋的資格，暫租者要在一年內搬走。……”

(a) D’s case

34.Lam understood from HA Advertisement (a copy of which he retained for D’s records) that qualified applicants (ie whom HA had investigated and granted approval for living in public housing) whose names were registered on Roster could apply to live in Units designated for Estate Conversion Arrangement during Waiting Period pending final allotment of PRH Units. Lam did not know whether such occupancy was temporary or not. He disagreed that the occupants of such designated Units would have to move out upon final allotment of public housing. He did not know whether any of such occupants had already been allotted public housing (已上樓).

35.Li knew from HA Advertisement that Estate Conversion Arrangement was to enable Roster Applicants with urgent residential needs to apply and be given priority to live in designated Units pending final allotment of public housing. The other Units remained as Interim Housing. The occupants of designated Units under Estate Conversion Arrangement were long-term occupants otherwise they would not have applied to live there. When successful Roster Applicants completed Waiting Period and were finally allotted public housing, those already living at Estate under Estate Conversion Arrangement could continue to live there. Li was unsure whether they would be allotted other choices of PRH Units.

(b) Analysis

36.Was part of Estate ever Public Rental Housing?  In my view, despite HA’s Estate Conversion Arrangement policy in May 2001, Estate has not been changed to Public Rental Housing (出租公屋) in 2002-2003. This is amply established by the response of HA’s representative(s) at HA 2^nd Meeting as noted in 2^nd Minutes : “對於投訴承辦商光亮實業有限公司所提供的招標書內容失實一事，查房署沒有將寶田中轉房屋5,000個單位轉為出租公屋單位，所以對是項投訴無法評論” (my emphasis).

37.The evidence before me suggests that Estate was only changed to Public Rental Housing in 2004. This can be seen from HA’s press release dated 2^nd June 2004 (“HA 2^nd Press Release”) as follows :

“	善用房屋資源 部份中轉房屋改作公屋 ……
	……
	房屋委員會轄下資助房屋小組委員會今日(6月2日)通過，把入住率僅半的屯門寶田中轉房屋內約4 100個現時空置的單位改為出租住公屋，以善用公屋資源。……
	[資助房屋小組委員會主席]吳水麗又說，由於措施旨在為公屋輪候冊申請人提供額外多一個選擇，故此，如申請人拒絕接受寶田公屋，不會被視為無理拒絕﹔申請人所享有的三次編配機會不受影響。……
	吳水麗解釋說:「現有寶田中轉房屋暫准證持有人士，如其公屋輪候冊申請書到期配房且資格已核實，會獲配其選擇地區內的其他屋邨或寶田公屋的適當單位﹔公屋輪候冊申請尚未到期配屋的現在暫准證持有人士，則可繼續住在中轉房屋單位內，等候到期配屋﹔持證人士搬出後騰空的單位，會作公屋單位出租。」”

HA Advertisement, 2^nd Minutes and HA 2^nd Press Release draw careful distinction between Estate Conversion Arrangement/Roster Housing and Public Rental Housing, so that former capacity ceases before the latter capacity can arise. Such HA documents are sufficient by themselves to show Estate Conversion Arrangement or Roster Housing is not Public Rental Housing.

38.There is no objective basis to suggest Estate Conversion Arrangement implemented in 2001 is Public Rental Housing. HA Advertisement does not mention Public Rental Housing. Sing Pao and Oriental Reports suggest that (a) Estate Conversion Arrangement is not for qualified applicants but for Roster Applicants who have not yet been investigated by HA and (b) such Roster Applicants will have to vacate Units licensed under Estate Conversion Arrangement upon final allotment of public housing or when HA decides they do not satisfy its criteria for living in public housing. The 26^th June 2001 issue of Ming Pao Daily News (“Ming Pao Report”) reported that District Councillor Ip Sun-hing (“SH Ip”) said the following at the opening ceremony of his office at Estate : “要求房署修定中轉房屋政策，而第二期的寶田中轉房屋將改為公屋，葉議員認為此舉可縮短居民輪候公屋的時間……”. This suggests that as at June 2001 Estate was not Public Rental Housing.

39.Mr Siu asked me not to place weight on the above news reports. However, they are consistent with HA Advertisement and there is no evidence to suggest that their contents are incorrect. I have also considered the factors in section 49 of the Evidence Ordinance Cap.8 on assessing hearsay evidence. Further, it was Li who obtained such news reports from the Hong Kong Central Library (“Library”) in late December 2002 and he has not questioned their contents. I see no reason to disregard such news reports which are consistent with the HA documents.

40.D’s asserted belief  I find on balance that D at the material time (a) did not honestly believe Estate Conversion Arrangement is Public Rental Housing or (b) was reckless in not caring whether such assertion was correct or not. Even if I am wrong, D at the very least had no reasonable ground for believing that Estate Conversion Arrangement is Public Rental Housing.

41.D’s business is sub-contracting and managing markets in public rental and Home Ownership Scheme housing estates. Lam’s duties include inter alia administration and liaison with HA. Li is responsible for licensing market stalls to operators. Wong looks after the daily management of Fu Tai Market and Market (when it opened for business). In such circumstances, D should have and I find at the material time it had a fairly good understanding of the different categories of HA housing. Lam was interested enough to read/retain HA Advertisement and he shared such information with Li.

42.Other than HA Information discussed below, D’s witnesses only refer to HA Advertisement as the source of their knowledge about Estate Conversation Arrangement. In my view, Lam/Li cannot have understood from reading HA Advertisement that Estate Conversion Arrangement means Public Rental Housing. As said above, there is no mention in HA Advertisement of Public Rental Housing or public housing. Any doubt is removed by the express statement that Estate Conversion Arrangement is for : “…解決他們在輪候公屋編配期間的住屋需要”. The nature of Estate Conversion Arrangement described in HA Advertisement is plainly Roster Housing as I have interpreted above.

43.D’s witnesses have not identified any discernible basis for saying that (a) the occupants under Estate Conversion Arrangement can continue to live at Estate after Waiting Period or the final allotment of public housing and (b) HA describes all its residential housing as Public Rental Housing or public housing. Quite plainly, Estate Conversion Arrangement is only a transitional measure to provide housing to Roster Applicants during but not beyond Waiting Period, which is the period pending final allotment of public housing. I do not see how (as D claims) Roster Applicants living in Estate under Estate Conversion Arrangement who have not yet been allotted “public housing” are already living in “public housing”.

44.I am unimpressed by Li’s claim that he only realised when he was cross-examined that there was some difference between what has been reported in Sing Pao Report (paragraph 32 above) and his own understanding, but he did not realise so when he read such news report in December 2002 (even though, according to Li, the sole purpose for obtaining such news report was to show Stall Owners the fallacy of their complaints).

45.Although D pleaded the truth of Representations as an alternative defence and further it must be plain that HA is best positioned to clarify the nature of Estate’s housing in 2002-2003, strangely there is no evidence (or explanation) from D of any attempt to seek clarification from HA, particularly in light of the plain wording of HA Advertisement, HA 2^nd Press Release, 2^nd Minutes and the aforesaid news reports.

46.I also refer to my discussions on HA Information (see below), Pamphlet and Tender Document below.

IX. Preparation and distribution of Pamphlet

(a) Undisputed facts

47.By a newspaper advertisement published in mid-May 2002 (“D Advertisement”), D invited tender applications for the licensing of Stalls. D’s Pamphlet was extracted as follows :

“寶田冷氣街市 【快將開幕】
[floor plan of Market with Stalls marked up with different trades]
寶田街市位於屯門於寶田邨寶田商場地下。共有8,736户家庭，其中約五千餘户單位已改為出租公屋 [“P 1st Phrase”]，入伙率更高達九成以上 [“P 2nd Phrase”]，而鄰近有多個屋苑(如盈豐園、寶怡花園、海麗花園、建生邨等)，上述之總家庭户數合共13,338户，人口約三萬多人，人流極旺。而且寶田商場配套設施完善，設有停車場、巴士總站及的士站，另有學校等，交通四通八達。此外商場更設有酒樓、超級市場及各式零售行業，方便居民日常購物，不假外求。
檔位有限，如有意者請從速電8200 2063	李先生洽
承包商 : 光亮實業有限公司
現正招租  把握良機” *

*  style of presentation of Pamphlet shown here is only approximate

(b) D’s case

48.In March 2002, D submitted a tender application for leasing Market. In March/April (according to Li) or May 2002 (according to Lam), HA informed D it made the top bid, which still fell short of HA’s requirements. After some negotiations, D signed HA’s offer letter (“HA Offer Letter”) in mid-May 2002 and the formal Tenancy Agreement on 26^th June 2002.

49.Lam believed some Units had been changed to Public Rental Housing because he had (a) read HA Advertisement in 2001 and (b) been so informed by HA in 2002 (“HA Information”). During a casual chat with HA’s staff (whose name he could not remember) in the course of negotiations for leasing Market in April/May 2002, Lam was told (i) over half of Units had been allotted and licensed to qualified applicants whose names were registered on Roster and (ii) Occupancy Rate at that time exceeded 85%. There was no express mention of Public Rental Housing. Lam found no difference between HA Advertisement and HA Information.

50.In the latter half or end of May 2002, Lam instructed Li to design Pamphlet, the purpose of which was to let the public know that Market was about to open for business. Li prepared Pamphlet from information obtained from Lam and HA and from his own observations of Market’s environment :

(a)	HA The floor plan came from HA but D marked up Stalls with suggested trades. The total number of Units and details of Estate’s amenities were extracted from HA’s tender document.
(b)	Li Li made his own observations of Market’s surrounding environment. He also checked the number of units of nearby housing estates from the Post Office and gave an auspicious approximate figure.
(c)	Lam Lam said he told Li that during negotiations for Tenancy Agreement HA said about half of Estate had been designated for Roster Applicants and Occupancy Rate was above 85%. Lam believed that as Estate gradually became more occupied, Occupancy Rate would reach 90% by the time Market opened for business. Lam said (although he did not remember this clearly) he did not expressly tell Li some Units had been changed to Public Rental Housing. Li said Lam told him HA said about 5,000 odd Units had been made available for qualified applicants whose names were registered on Roster and Occupancy Rate was as high as 90%. So Li drafted Pamphlet to state “改為出租公屋” (changed to Public Rental Housing).

51.Lam noticed “出租公屋” (Public Rental Housing) in P 1^st Phrase in Li’s draft of Pamphlet. It was different from what he told Li. Lam did not see this as a big problem because he considered Estate Conversion Arrangement to be in the same category as Public Rental Housing. After Lam approved the draft, Pamphlet was printed by early June 2002 and distributed at different markets in mid-June 2002. Wong distributed Pamphlet at markets in the Yuen Long area. Li said stall operators in other markets would be mainly interested in the fact that a new market was about to open for business and they would not read the advertising literature. He further said they would prefer to visit the new market to check it out.

52.Lam said that on Market’s Open Day at the end of June or early July 2002 (“Open Day”) Pamphlets were posted up to improve the atmosphere. But Wong (who visited Market daily from July to September 2002) did not see such posting up of Pamphlets. Li/Wong both said Pamphlets were not distributed at Market because it was then the tender period and visitors who came to Market on Open Day (and who perhaps also had discussions with Li) would have read D Advertisement already.

53.At the end of his evidence Li disclosed that D had prepared another advertising pamphlet similar in form and contents to Pamphlet except Occupancy Rate was stated to be above 80% and not 90% (“2^nd Pamphlet”). D all along liaised with HA on Occupancy Rate. When it was changed to 80%, D amended Pamphlet and printed 2^nd Pamphlet for distribution in mid-June 2002 (Li at first said early June 2002 but corrected himself). 2^nd Pamphlet was not discovered in these proceedings nor produced at the trial.

X.         Preparation and distribution of Tender Document

(a) Undisputed facts

54.TD Preamble read as follows :

“	招標物業章程
	寶田街市位於新界屯門寶田中心地帶，現已落成啓用，寶田邨共9座樓宇，共提供約8,736個出租單位，其中約 半數 房屋單位已改為出租公屋 [“TD 1st Phrase”]，入伙更高達九成以上[“TD 2nd Phrase”]，另鄰近多個屋苑﹕(如盈豐園、寶怡花園、海麗花園、建生邨等)，容納人口約3萬多人。『以上部份資料由房署提供』[“TD 3rd Phrase”] ……”

55.Tender Document further stated inter alia that the deadline for submitting tender applications was 6:00 pm on 26^th July 2002 (“TD Deadline”).

(b) D’s case

56.In mid-June 2002, Lam instructed Li to prepare Tender Document by setting out inter alia the licensing requirements, TD Deadline and some introductory information about Estate and its surroundings (which Li did in TD Preamble). Li concluded from his observations on visits to Estate and his study of maps that the population in nearby housing estates was about 30,000. He prepared Tender Document by modifying D’s previous tender documents and using information obtained from Lam (eg HA told Lam that about half of Units had been changed to Public Rental Housing and Occupancy Rate was above 90%) and other information obtained from HA (eg the number of blocks and Units of Estate as extracted from HA’s tender documents). Li drafted TD 3^rd Phrase so that readers would know they could make enquiries with HA.

57.The preparation of Tender Document took a few days. After Lam approved Li’s draft, Tender Document was sent for printing, which was completed close to but before Open Day. A floor plan (“Floor Plan”) and an application form were attached to Tender Document, copies of which were placed for collection at the temporary leasing station at Market’s entrance during the tender period. After TD Deadline, the remaining copies were taken to D’s offices and destroyed.

XI.       Analysis in relation to Pamphlet and Tender Document

58.Overall impression  On balance I am not satisfied that Lam received HA Information from HA’s staff or that P and TD 1^st and 2^nd Phrases originated from HA. Although (a) Lam was all along responsible for giving instructions on D’s behalf to D’s solicitors (“CPC”) and (b) D has expressly pleaded inter alia that “the information in respect of the category of the public housing and occupancy rate was obtained from [HA] ……”, Lam never told CPC about HA Information until trial when his witness statement was prepared. There is no satisfactory explanation for such omission.

59.Further, I find on balance that D’s evidence concerning the preparation and distribution of Pamphlet and Tender Document is unreliable. Mr Dawes questioned the veracity of such evidence given D’s late admission at the trial as to the preparation/ distribution of Pamphlet. Lam said he initially instructed CPC to deny that D prepared the “advertising pamphlet” because he did not know Ps were referring to Pamphlet in their pleadings. Even so, Li has not clarified the preparation and distribution of Pamphlet in his witness statement, which was prepared after discovery. D’s witness statements also do not say where Pamphlet and/or Tender Document were distributed.

60.The law on materiality and inducement  A misrepresentation must be material. A representation is material when its natural and probable result is to induce the representee to act on the faith of it in the kind of way in which he is proved to have in fact acted. The burden of proof is on the representee and is usually discharged by comparing the terms of the representation with the proved or admitted facts of the case. If materiality is shown, the fact that the representor does not at the time regard it as such cannot make it otherwise (Halsbury’s Laws of Hong Kong Vol.19(1) paras.[275.074-275.075] and [275.077] at pp.241 and 243).

61.A misrepresentation must be intended to and actually influence the mind of the representee so as to affect his conduct (Halsbury’s (supra) para.[275.065] at p.235). Such intention should be separately established (Halsbury’s (supra) para.[275.070] at p.238). However, “[it] is sufficient if the representation is made to a third person to be communicated to the plaintiff, or to be communicated to a class of persons of whom the plaintiff is one, or even if it is made to the public generally with a view to its being acted on and the plaintiff, as one of the public, acts on its and suffers damage thereby” (Goff and Jones, The Law of Restitution 6^th ed (2002) para.9-020 at pp.259-260).

62.But the misrepresentation need not be the sole inducing cause (Halsbury’s (supra) para.[275.071] at p.239). “It is, moreover, immaterial that the representee failed to take an available opportunity to investigate the truth of the representor’s statements. The effect of a deceitful representation is not dispelled by the fact that the representee was negligent in failing to discover the falsity of the representation. …… But where the misrepresentation is of such a kind as to induce a reasonable man to enter into the contract, the onus of proving that the representee was not so induced is firmly on the representor” (The Law of Restitution (supra) para.9-021 at pp.260-261).

63.Materiality and intention to induce  D claims that Pamphlet is merely intended to let readers know that Market was about to open for business, to kick-start negotiations by inviting them to telephone Li and to give them some usual information about Market and its environment. D further claims that Tender Document is only intended to be read by tender applicants and not by Ps (other than SM Lam) who entered into Licences by agreement.

64.I find on balance that D has downplayed the purpose/effect of Pamphlet and Tender Document. In my view, they are D’s promotional literature in respect of Market for persuading the readers that Market was commercially attractive and for inviting tender applications and/or negotiations from interested parties to license Stalls.

65.Pamphlet is not mere sales puff. Li has spent substantial efforts to combine information from various sources to produce Pamphlet. Had D really thought the recipients of Pamphlet would only be interested in the single fact that Market would soon open for business and would not read the information in Pamphlet, a simple advertising pamphlet incorporating only the slogans at the top and bottom of Pamphlet (which D claims to be the key messages) would have sufficed. I make the following further observations :

(a)	D chose to mark Stalls on Pamphlet’s floor plan with different proposed trades. I believe it was done to excite interest from different kinds of stall operators and to promote Market as a full service market.
(b)	The statements in Pamphlet on the number of blocks and Units of Estate, P 1st and 2nd Phrases, the descriptions of the nearby housing estates and the information on the population in the vicinity all serve to emphasise “人流極旺” (extremely good flow of people) that is suggestive of a substantial customer base for Market.
(c)	The statements as to Estate’s amenities and its transport infrastructure underlie the assertion in Pamphlet of “方便居民日常購物，不假外求”, which suggests the presence of a captive pool of shoppers.
(d)	The references to “檔位有限” and “有意…從速” clearly urge readers to act quickly to license Stalls.

In my view, P 1^st and 2^nd Phrases are objectively and within D’s contemplation to be material representations, the natural and probable result is to (and they will) induce reasonable persons to act on them to enter into Licences. 

66.TD Preamble contains statements as to the number of blocks and Units of Estate, TD 1^st and 2^nd Phrases, description of the nearby housing estates and information on their population. Plainly the purpose is to outline the special features of Market that are conducive to business. Tender Document also sets out detailed terms/requirements for licensing Stalls (借用條件). I do not agree with Mr Siu that it was pointless to give Ps Tender Document after the tender period. I find that D gave out Tender Document as general advertising literature with a view to persuade Ps to license Stalls. There is no suggestion that the licensing terms/requirements or the information about Estate in TD Preamble will change with different modes of contract. Hence, some of the information in Tender Document is still relevant for potential licensees even after the tender period. In my view, TD 1^st and 2^nd Phrases are objectively and within D’s contemplation material representations, the natural and probable result of which is to induce readers to act on them to license Stalls.

67.Mr Siu next argued any materiality would be spent when Li/Wong clarified and cured Representations during negotiations with Ps. I disagree (see analysis below).

68.The design of Pamphlet and Tender Document is also corroborative. D adopted formatting techniques such as different sized fonts, underline and italics to highlight and to capture the readers’ quick attention on the key attractions of Market, including the nature of Estate’s housing and its Occupancy Rate. I find that such techniques are not (as D claims) just for making the contents clear and readable. This adds weight to the fact that P and TD 1^st and 2^nd Phrases are material Representations. Li claimed he had to use different sized fonts otherwise the readers would not be interested enough to read the whole Pamphlet. But this suggestion does not sit well with his claim that the recipients would not really read Pamphlet. I find D’s evidence in this respect unconvincing.

69.The nature of P and TD 1^st and 2^nd Phrases (ie 1^st to 3^rd Representations) and the above analysis also show that D intends by such Representations to induce Ps to license Stalls.

70.Occupancy Rate in P and TD 2^nd Phrases (2^nd Representation)  Although Lam said HA told him Occupancy Rate was above 85%, he did not question P and TD 2^nd Phrases which say Occupancy Rate was above 90% when he reviewed draft Pamphlet and Tender Document. His explanation that Occupancy Rate must have increased as Estate became gradually more occupied does not appear in his witness statement, which was prepared as late as on the first day of trial. Moreover, Li contradicted Lam by saying Lam told him Occupancy Rate was above 90%, so he drafted P and TD 2^nd Phrases as they are.

71.Li said D continued to liaise with HA over Occupancy Rate. He claimed that when Lam informed him Occupancy Rate was changed to 80%, he created 2^nd Pamphlet by modifying P 2^nd Phrase in Pamphlet. Yet Lam never mentioned such continued liaison with HA or 2^nd Pamphlet. This raises doubts as to the veracity of D’s witnesses and of Lam’s asserted belief as to Occupancy Rate. I find it uncertain even on D’s case what was Occupancy Rate in mid-June 2002, ie the time when D says both Pamphlet and 2^nd Pamphlet were distributed. On balance I do not think D believed in Occupancy Rate as stated in P and TD 2^nd Phrases; in any event, D was reckless, not caring whether 2^nd Representation on Occupancy Rate was true or not. Even if I am wrong, there is no reasonable ground to support D’s alleged belief.

72.The next question is whether P and TD 2^nd Phrases were true when Pamphlet and/or Tender Document were given to Ps and when Ps entered into Licences. D has pleaded that HA records will show Occupancy Rate reached 90% when Market opened for business, but none was produced. Conversely, information from HA does not indicate Occupancy Rate anywhere near 90%. First, at HA 2^nd Meeting HA’s representative said the records showed that up to December 2002, there were 5,183 occupied Units and the average Occupancy Rate was above 66% (paragraph 5i) of 2^nd Minutes). Secondly, HA 1^st Press Release states that “ ……位於屯門的寶田中轉房屋共有八千七百三十六個單位，過去三年，每年的空置單位數目及空置率詳例附件一。……

			附件一
寶田中轉房屋空置情況
年份	空置單位數目	空置率
(以12月31日計)
2001	1663	19%
2002	3131	36%
2003	3599	41%”

Thirdly, HA’s 2^nd Press Release in mid-2004 states that Occupancy Rate was about half and there were about 4,100 vacant Units. The tenor of the above information from HA, which I accept, suggests that Occupancy Rate never reached the high point of 90%, which is consistent with the results of Ps’ informal enquiries, the reduced flow of customers at Market and Li’s evidence in respect of 2^nd Pamphlet (see below).

73.I do not accept Lam’s assertion that Occupancy Rate must have been over 90% because D paid full rent without any rebate to HA in 2002. I find Lam’s evidence in this respect unreliable. Lam said HA had a rent rebate policy for new public housing estate markets (including Market) for the first three years (“2002 Rebate Policy”) that would be applicable if Occupancy Rate fell below 90%. Lam did not mention 2002 Rebate Policy in his witness statement prepared on the first day of trial and, other than Lam’s assertion, there is no evidence on the amount of rent D paid to HA in 2002 even though such information must be well within D’s knowledge.

74.Mr Dawes doubted the veracity of Lam’s assertions in relation to 2002 Rebate Policy because (a) there is no objective evidence of such policy and (b) HA 1^st Press Release only describes a special rent rebate arrangement for Market that commenced from January 2003 due to the low Occupancy Rate (“2003 Rebate Policy”). Lam tried to explain that 2003 Rebate Policy was more favourable than 2002 Rebate Policy and that HA had to promulgate 2003 Rebate Policy because 2002 Rebate Policy ceased to be applicable to Market once Occupancy Rate hit 90% (which it did in 2002) irrespective of any subsequent drop in Occupancy Rate.

75.For the reasons discussed above, I find Lam’s evidence in this respect unreliable. Further, Tenancy Agreement provides for a three-month rent-free period from 1^st July 2002 or from 1^st July 2002 to the commencement of business at Market, whichever was shorter. Since Market commenced business on 30^th September 2002, the rent-free period was from 1^st July to 30^th September 2002. In the circumstances, Lam’s assertions as to 2002 Rebate Policy would not in any event have come into play prior to 30^th September 2002 and the rent D paid in 2002 cannot establish whether P and TD 2^nd Phrases were true at the time prior to 30^th September 2002 when Ps received Pamphlet/Tender Document or entered into Licences.

76.I conclude on balance that 2^nd Representation (also P and TD 2^nd Phrases) on Occupancy Rate was untrue at the time it was made to Ps or when Ps entered into Licences.

77.Public Rental Housing in P and TD 1^st Phrases (1^st and 3^rd Representations)  Lam said HA’s staff only referred to Roster Housing when he gave HA Information to Lam. Lam/Li claimed Lam only expressly referred to Roster Housing when he repeated HA Information to Li. Li said although P and TD 1^st Phrases were adopted in Pamphlet and Tender Document respectively, he explained Estate Conversion Arrangement in some detail (and never mentioned Public Rental Housing) to those Ps who asked him what Interim Housing meant. However, such distancing from Public Rental Housing does not sit well with Li’s choice of using “Public Rental Housing” in both P and TD 1st Phrases, and Lam’s failure to correct these statements when he reviewed the drafts of Pamphlet and Tender Document.

78.Besides, Li himself was registered on Roster for 4-5 years before he abandoned his application for public housing. He confirmed that he received a letter from HA saying that he could apply to live at Estate under Estate Conversion Arrangement. Such letter from HA was not produced in evidence, but given HA’s explanation of Estate Conversion Arrangement in HA Advertisement, I do not think Li would conclude from such letter that Estate Conversion Arrangement was Public Rental Housing.

79.Indeed, Lam/Li conceded that if a reader of Pamphlet or Tender Document had not read HA Advertisement or been told of HA Information, such reader would not have known of Estate Conversion Arrangement and would have understood “出租公屋” to mean housing for persons who had actually been allotted PRH Units. Lam also admitted that Estate Conversion Arrangement could have been explained more clearly. He justified the brevity of the descriptions in Pamphlet and Tender Document on lack of space. I do not agree that it is practically impossible to include the few Chinese characters required to succinctly describe Roster Housing or Estate Conversion Arrangement in Pamphlet or TD Preamble, particularly as Tender Document runs for 3 full pages.

80.D tries to shift responsibility to the recipients by saying that they should liaise/enquire with Li or HA or other government department(s) for clarification if they were interested in licensing Stalls, particularly as they must have known that D is not an entity under HA. Mr Siu argued that in failing to do so Ps could not have reasonably relied on Representations.

81.First, such argument is irrelevant at least in the case of fraudulent misrepresentation (see paragraph 62 above and Chitty on Contracts (supra) para.6-039 at p.451). Secondly, I find that 1^st and 3^rd Representations in P and TD 1^st Phrases are material representations of a kind that will induce a reasonable person to enter into Licences, and in my analysis below D has failed to show Ps have not been so induced. Thirdly, even if Ps carry the burden of proof, there is simply no ambiguity on the face of Pamphlet and Tender Document (which do not mention Roster Housing or Estate Conversion Arrangement at all) to alert Ps of any need to make enquiries with D or HA as to the nature of Estate’s housing and Occupancy Rate. There is no cause arising from Pamphlet and Tender Document or from discussions with Li/Wong (see below) for mistrust or disbelief of P and TD 1^st and 2^nd Phrases. Further, Ps knew D leased Market from HA and TD 3^rd Phrase assured them that information in TD Preamble came from a most reliable source, ie HA.

82.Mr Siu next submitted that Ps should have been alerted by Estate’s name-plate describing it as Interim Housing at the entrance when they visited Market. In my view, there is no reason for alarm since P and TD 1^st Phrases only say part and not all of Estate has been changed to Public Rental Housing. It is therefore implicit that part of Estate remains as Interim Housing. There is no reason why Estate should not retain its name.

83.I have already concluded that Estate was not changed to Public Rental Housing in 2002-2003. I find on balance that D did not believe in the reference to “Public Rental Housing” in P and TD 1^st Phrases (ie 1^st and 3^rd Representations) or that it was reckless in not caring whether or not it was true. Even if I am wrong, D did not have any reasonable ground to believe that such Representations were correct. I am of the view D adopted such Representations in Pamphlet and Tender Document for its more persuasive impact on the recipients.

84.Distribution of Pamphlet and Tender Document  There is inconsistency in D’s case on the timing of distribution of Pamphlet and Tender Document. D claimed Pamphlet was distributed in mid-June 2002 and Tender Document was completed just before Open Day. But Li said 2^nd Pamphlet (created after Pamphlet) was distributed in early (later corrected to mid-) June 2002. I therefore find it uncertain even on D’s case whether Pamphlet was in fact distributed in mid-June 2002 or earlier. In my view, Li’s assertions in relation to 2^nd Pamphlet undermine D’s case on the distribution of Pamphlet.

85.I also do not accept Tender Document was prepared just before Open Day and the tender period. By the time D signed HA Offer Letter in mid-May 2002, it knew it would be the tenant of Market. Even on D’s case, Pamphlet and Tender Document were prepared before D signed Tenancy Agreement. D’s witnesses acknowledged it only took a few days to draft Pamphlet and Tender Document. I find it commercial and probable that D proceeded with the preparation and distribution of such promotional/ advertising literature as soon as possible after signing HA Offer Letter in order to generate wider interest in licensing Stalls well before the tender period.

86.Mr Siu next submitted that D would not have given Tender Document to Ps after the tender period had closed. Some Stall Owners licensed Stalls by agreement during the period after expiry of the tender period until September 2002. Li said he had discussions with over 100 persons who expressed interest in licensingStalls and most of such discussions took place at Market. But on D’s case Pamphlet was never distributed at Market and Tender Document was never given out after the tender period. Given the brevity of D Advertisement (which does not even identify Market by name), it is uncommercial and improbable that after having discussions with persons who visited Market and who expressed potential interest in licensing Stalls, Li/Wong would allow such persons to leave empty-handed. I find it more probable that Pamphlet/Tender Document were given to such visitors (including Ps) as general promotional literature that introduced the key features of Market, its layout/trades and the licensing requirements. I prefer Ps’ evidence in this respect (see below).

87.Wong’s evidence contradicts Li’s as to whether Pamphlet was posted up at Market on Open Day. It lends doubt as to the veracity of the testimony of D’s witnesses on how D dealt with Pamphlet and Tender Document. I am not persuaded by Wong’s assertion that he missed observing Pamphlets that were posted up because he generally ignored licensing matters. It also strikes me as odd that Pamphlets that encouraged licensing of Stalls were posted up at Market but none was available for distribution.

XII Licences and Representations – overall views

88.I have found 1^st to 3^rd Representations material but untrue. Given 4^th Representation’s wording and for the same reasons applied mutatis mutandis, I come to the same conclusion. I further find that D intended to induce Ps to enter into Licences by 4^th Representation. The requirements of materiality and intention to induce are satisfied in respect of each Representation and each Representation constitutes a misrepresentation.

89.I accept that D made one or more Representations to each P. While there are some discrepancies in Ps’ evidence and they might have forgotten or were confused about the details of some events that happened about two years ago, they are credible and reliable witnesses. I had the impression they were telling the truth as best as they recollected. The criticisms levelled at their evidence are largely in relation to the timing and details of disclosed events and not on completely fresh incidents.

90.I reject Li’s/Wong’s evidence as regards their discussions with Ps. It is Li’s duty as D’s licensing manager to market/license as many Stalls as he can. If D’s approach to materiality is as reflected by the tenor of Li’s evidence, namely, that he never gave out Pamphlet or Tender Document to Ps, that he never clarified with them whether they received Pamphlet or 2^nd Pamphlet or at all, and that he would not even mention/clarify the nature of Estate’s housing or Occupancy Rate unless he was specifically questioned, the attractions of Estate as described in Pamphlet and TD Preamble would have been redundant. In my view, their contents including P and TD 1^st and 2^nd Phrases are the key attractions of Market and Li/Wong would have raised those matters with Ps in their discussions.

91.I also find Ps were induced by Representations to enter into Licences. Mr Siu submitted that Ps’ narrow focus on the 5 blocks of Estate that had been changed to Public Rental Housing when they knew the remaining 4 blocks were still Interim Housing was unbelievable. I do not find Ps’ stance incredulous. They considered that 5 blocks of Public Rental Housing at Estate would be sufficient to provide an adequate customer base with reliable spending power to support their businesses.

92.Mr Siu next submitted that Ps had been less than frank when they failed in their evidence-in-chief to refer to the other considerations (eg the population the vicinity, the location of Market, Estate’s facilities and the transport infrastructure) that influenced them in entering into Licences. He suggested that all businessmen would have considered these factors. Whilst I accept that Ps (some more than others) also considered some of theseother factors, D’s Representations were the prime considerations that persuaded Ps to enter into Licences. A misrepresentation need not be the sole inducing cause provided that it materially contributed to the representee entering into the contract. I am not with Mr Siu on this submission.

93.Each of Ps’ case is analysed below. I find that Representations were made fraudulently in that D did not believe in them or was reckless in not caring whether they were true or false. Even if I am wrong, Representations were at the very least made negligently. Ps suffered loss by entering into Licences and making payments thereunder.

XIII. Licence and Representations – 519 Action(Stalls 35-37)

94.After reading D Advertisement, KS Cheung met Li on 25^th May 2002 inter alia for Li to understand his experience/business.They met again at D’s offices on 28^th May 2002 to discuss the fee and terms for licensing Stalls 35-37. KS Cheung signed the provisionallicence agreements (“PLA”) and paid HK$80,000.00 as deposit. On 29^th July 2002, he attended CPC’s offices to sign the formal licence agreements (“FLA”) and paid a further sum of HK$191,035.00 as well aslegal costs of HK$11,170.00.

(a) KS Cheung’s case

95.KS Cheung had 30 years’ experience in operating street and public housing market stalls, but preferred the latter because business was more stable. On 25^th May 2002, Li gave Pamphlet and Tender Document and made 4^th Representation to KS Cheung. Li also told him of Estate’s surrounding environment and the nearby housing estates. KS Cheung and his wife visited Estate on the same day. He also read Pamphlet/Tender Document and understood therefrom that about half of Units had been changed to public housing. KS Cheung told his wife there would be stable business to support their investment in light of 3^rd and 4^th Representations. He visited Market again on 27^th May 2002 and on Open Day.

96.KS Cheung decided to license Stalls. He was familiar with and had assessed Market’s business environment, but they were secondary considerations because (a) there were other markets in the area (eg in Kin Sang and Leung King Estates) that competed with Market and (b) the flow of customers between the nearby estates and Market was two-way because the distance and transport factors were quite even. KS Cheung’s main consideration was the anticipated stable customer base that would come from about half of (or 5,000 odd) Units that had been changed to Public Rental Housing. Otherwise, he would not have licensed Stalls 35-37. At the meeting on 28^th May 2002, Li orally explained to KS Cheung again that Estate had been changed to public housing.

(b) D’s case

97.When KS Cheung telephoned Li to enquire about Stalls, he expressed an interest in selling fruit at Market. On 25^th May 2002, KS Cheung told Li he operated meat/fruit stalls. Li showed him Floor Plan and they discussed the nearby housing estates as well as the licence fee and outgoings. Li did not give KS Cheung Pamphlet or Tender Document or represent to him about the nature of Estate’s housing or Occupancy Rate. KS Cheung was interested in licensing both fruit Stalls to monopolise the fruit-selling business at Market.Li invited KS Cheung to sign PLA and pay the deposits, but KS Cheung wanted to visit Estate first.

98.On 28^th May 2002, KS Cheung told Li he had visited Estate, hadseen the restaurant there which was quite full with a waiting queue and had observed people going from nearby housing estates to Leung King Estate to buy food. He believed Market could capture part of such custom when it opened for business. KS Cheung thought selling fruit at Market would be a viable business and asked whether he could license 2Stalls. Li again invited him to sign PLA and pay the deposits. Since KS Cheung was confident and ready to license Stalls, Li did not say a lot about Estate.

(c) Analysis

99.On balance I prefer KS Cheung’s evidence and accept that Li made 4^th Representation and gave Pamphlet and Tender Document to him in late May 2002 prior to his decision to license Stalls 35-37. It is improbable for Li to just show Floor Plan to KS Cheung without giving him any marketing literature summarising the key features of Estate/Market and the location of Stalls 35-37 (ie the designated fruit Stalls) when he expressed an interest in licensing fruit Stalls and an intention to visit Estate on his own. I find that 1^st to 3^rd Representations in Pamphlet and Tender Document and Li’s 4^th Representation are material to KS Cheung’s belief there would be a stable customer base for operating fruit Stalls and they led to his decision to license Stalls. Other factors are secondary considerations that do not detract from KS Cheung’s reliance on Representations.

XIV. Licence and Representations – 520 Action(Stall 44)

100.On 13^th September 2002, TY Cheung and her husband Keung Kam Fu (“Keung”) met Wong at D’s offices and paid a deposit of HK$30,000.00 for licensing Stall 43 (later replaced by Stall 44). She signed FLA on 18^th September 2002 at CPC’s offices and paid a further sum of HK$46,906.50 and legal costs of HK$3,256.00.

(a) TY Cheung’s case

101.TY Cheung received Pamphlet which was distributed at the North Kwai Chung Market at Shek Yum Estate (public housing estate) where TY Cheung/Keung operated a seafood market stall for 10 odd years. Keung heard D was licensing Stalls and visited Market with some friends. In September 2002, TY Cheung’s/Keung’s seafood stall licence at the North Kwai Chung Market was abruptly terminated.

102.After readingD Advertisement, Keung arranged a meeting with D’s Mr Lam. TY Cheung/Keung visited Market on 12^th September 2002 and saw that Pamphlets were posted up. Someone distributed a “small booklet” (小冊子, ie Pamphlet and Tender Document) to TY Cheung/Keung. They ran into an old friend Wong Chor Ng (“CN Wong”) who was then D’s management officer. CN Wong showed them around Market. TY Cheung took note of the shopping arcade and the nearby street. CN Wong telephoned Wong and Keung spoke with Wong to arrange a meeting at D’s offices the following day to discuss licensing matters. Wong reminded Keung to bring a cheque for paying the deposit. Neither CN Wong nor Wong made any misrepresentation during such visit.

103.TY Cheung read Pamphlet and Tender Document. On 13^th September 2002, Wong made 4^th Representation to them. TY Cheung believed in Representations made to them. She would not have licensed Stall 44 if no part of Estate had been changed to Public Rental Housing. The low occupancy of Interim Housing would adversely affect business.

(b) D’s case

104.In mid-September 2002, CN Wong (Wong’ subordinate) telephoned Wong to say that a friend wanted to license Stall to sell fresh frozen seafood. Li was unavailable, so Wong went to Market to meet with TY Cheung/Keung and to answer their enquiries on inter alia the location and number of available seafood Stalls and their licence fees. Wong said the monthly licence fee for a seafood Stall was about HK$20,000.00 and Keung counter-suggested an all-inclusive monthly fee of HK$15,000.00. After consideration Li agreed to such counter-proposal. Wong informed TY Cheung/Keung and they arranged to meet at D’s offices to sign PLA and pay the deposit. On 13^th September 2002, TY Cheung told Wong she would only sell fresh frozen seafood at first. D hoped she would also sell fresh seafood in future.Wong did not give Pamphlet or Tender Document to TY Cheung/Keung or make 4^th Representation to them or told them about the nature of Estate’s housing or Occupancy Rate. 

(c) Analysis

105.There is a fundamental conflict as to whether TY Cheung/Keung and Wong met at Market on 12^th September 2002. On balance I prefer TY Cheung’s version of events despite some discrepancies in other respects of her evidence. TY Cheung is consistent in her evidence about her visit to Market on 12^th September 2002, her meeting with CN Wong and Keung’s telephone conversation with Wong. She impressed me as earnest, credible and unsophisticated. On the other hand, Wong did not in his witness statement mention about CN Wong at all or explain that the reason he had to go over to Market was because Li was unavailable. In my view, there is no need for Wong to go to Market because TY Cheung/Keung were already being served by CN Wong who had shown them around Market. It is more plausible (and I accept) that Wong spoke with Keung by telephone and they arranged to meet the following day.

106.TY Cheung’s pleadings and witness statement state Pamphlet was distributed to them at Market on 12^th September 2002, which is consistent with her evidence. Her pleadings and witness statement do not mention receipt of Pamphlet at the North Kwai Chung Market. But TY Cheung’s evidence in this respect is entirely consistent with D’s case that Pamphlet was distributed to stall operators at other nearby markets. D’s position was only elicited from D’s witnesses after TY Cheung has given evidence. I am satisfied that TY Cheung received Pamphlet as she said and 2^nd and 3^rd Representations therein (ie P 1^st and 2^nd Phrases) were material and did induce her to license Stall.

107.Mr Siu next complained that TY Cheung’s assertion that she received Tender Document was unreliable because her pleadings had been specifically amended to delete such plea. There is admittedly some confusion. TY Cheung explained she received Pamphlet and Tender Document as a “small booklet” on 12^th September 2002 and described it as such, but her solicitors distinguished Pamphlet and Tender Document as separate documents. I also accept that TY Cheung was unaware of the aforesaid amendment to the pleadings by her solicitors. Having considered the totality of TY Cheung’s evidence, I do not consider she has embellished her evidence, but in the absence of any express plea in relation to Tender Document, TY Cheung is not entitled to rely on 1^st Representation.

108.TY Cheung frankly accepted in her evidence that CN Wong/Wong did not make any misrepresentation on 12^th September 2002 although the contrary was averred in her pleadings. I note, however, that her witness statement made as early as December 2003 is consistent with her evidence. She is also consistent in saying (and I accept) Wong made 4^th Representation on 13^th September 2002. It is not implausible that Wong made 4^th Representation to emphasise the attractions of Market/Estate during his first meeting with TY Cheung/Keung. The confusion in the pleadings does not detract from TY Cheung’s veracity. I find Wong’s verbal 4^th Representation material and it induced TY Cheung to license Stall.

XV. Licence and Representations – 521 Action(Stall 51)

109.On 22^nd or 23^rd September 2002, Li and Ip agreed on the fee and terms for licensing Stall 51. Ip signed PLA at D’s offices and his partner 羅麗英 (“Lo”) paid the deposit of HK$45,000.00 on his behalf. On 25^th September 2002, Ip attended CPC’s offices to sign FLA and paid legal costs of HK$2,301.00.

(a) Ip’s case

110.Ip sold clothes for about a year at 啓豐商場 in Tuen Mun. In August 2002, Ip/Lo passed by Estate and saw a banner welcoming tender applications for the use of Stalls. Li brought Ip/Lo around when they visited Market and gave themPamphlet and Tender Document. Ipregarded Pamphlet and Tender Document as an advertising booklet (推廣小冊子) in respect of Market. Ip/Lo read Pamphlet and Tender Document. Ipnoted inter alia TD 1^st Phrase, but failed to notice TD Deadline.

111.In mid-September 2002, Li telephoned Lo to ask whether she was interested in licensing Stall at Market. Ip/Lo went to Market again and Li took them to inspect some vacant Stalls and made 4^th Representation to them. Ip/Lo then decided to license Stall. They believed there would be business if 5 blocks of Estate had been changed to public housing. It was mainly 4^th Representation and P 1^st and 2^nd Phrases (ie 2^nd and 3^rd Representations) that led Ip to license Stall 51 and the nearby housing estates were not his main consideration.  On/about 20^th/21^st September 2002, Lo telephoned Li to arrange another meeting at Market on 22^nd September 2002. At that meeting, Li again made 4^th Representation to Ip/Lo and further said to them their investment would have no problem because of the strong flow of customers. 

(b) D’s case

112.Ip/Lo came to Market in early September 2002 to enquire about available Stalls. When Ip asked what Interim Housing meant, Li explained it was for persons who required emergency housing as a result of natural/other disasters or demolition of homes (清拆), but HA had changed about half of Units to Roster Housing. Ip did not have any further follow up question and turned to ask about the licence fee and outgoings. Li did not give Tender Document to Ip/Lo since the tender period had expired. A few days later, Li telephoned Ip and several days afterwards Ip/Lo came to Market. The background about Estate did not feature in their discussions with Li. Ip said he was thinking about licensing Stall and Li urged him to act quickly. A few days later, Li saw Ip/Lo at Market again. Ip asked for and Li offered a lower licence fee, but Ip still wanted to think about it. There was no discussion on the nature of Estate’s housing orOccupancy Rate. On 23^rd September 2002, Ip/Lo came to Market to ask Li for further reduction of the licence fee to which Li refused. After some negotiations, they eventually agreed on the licence fee. Li did not make 2^nd or 4^th Representation to Ip/Lo.

(c) Analysis

113.On balance I prefer Ip’s evidence on what transpired at the first meeting with Li, including the fact that Li gave Tender Document and Pamphlet to Ip/Lo even though it was after the tender period. It is true that Ip’s pleadings and witness statement did not say he received Tender Document. But Ip has explained that he received a document of 5 pages stapled together comprising Tender Document and Pamphlet, which he described variously as advertising booklet (推廣小冊子) or tender document (招標書). He also could not remember how his solicitors described the document referred to in his witness statement when it was translated to him for signature. I accept the above contributed to the confusion. Having considered the totality of Ip’s evidence, I do not consider that he tailored his evidence to suit his case. But since Ip did not plead any reliance of Tender Document, he is not entitled to rely on 1^st Representation (ie TD 1^st Phrase) therein.

114.On the other hand, I find Li’s evidence unreliable, particularly in relation to his alleged explanation of Interim Housing. Given my conclusions above on the meaning of Interim and Roster Housing and Li’s state of knowledge at the material time, I reject his evidence, which undermines the overall veracity of his discussions with Ip/Lo.

115.It is true that Ip did not mention in his witness statement that Li made 4^th Representation at the last meeting on 22^nd September 2002. Ip said he might have forgotten to do so. But the fact that Li made 4^th Representation was referred to in his pleadings and witness statement. Ip was not a sophisticated entrepreneur and the business carried on at Stall 51 was small-scale. Although Ip visited Market with Lo, it is plain that Lo was the key player in the negotiations with Li who mainly liaised with her. In such context, I do not think the discrepancy in Ip’s evidence bode of anything sinister or detracts from his overall veracity. I accept on balance that in the course of negotiations Li made 4^th Representation to Ip/Lo and said there would be a strong flow of customers. I find that he said so in order to emphasise the attractive business environment and to reassure them on their intended investment.

116.I accept that Li’s 4^th Representation and P 1^st and 2^nd Phrases (ie 2^nd and 3^rd Representations) as to the nature of Estate’s housing and Occupancy Rate were material to Ip’s/Lo’s deliberations and Ip relied on such Representations when he decided to enter into Licence. The other factors (eg nearby housing estates) were only secondary considerations.

XVI. Licence and Representations – 522 Action(Stall 52)

117.Stall 52 was in fact half a Stall. On reading D Advertisement, Kwok’s partner Tam Yee Wah (“Tam”) liaised with Li. Li invited Tam to visit Market during the tender period in June/July 2002. Eventually Tam paid the deposit of HK$7,200.00. On 21^st August 2002 Kwok signed FLA at CPC’s offices and paid a further sum of HK$31,572.50 and legal costs of HK$2,251.00.

(a) Kwok’s case

118.Tam went to Market at/about end of June and early July 2002 and met Li who made 4^th Representation to her. Pamphlet (described by Kwok as a “small booklet” (小冊子)) was posted on the walls of Market. Tam took Pamphlet home for Kwok to read. Later, when Kwok and Tam visited Market, Li gave them information about Estate and repeated 4^th Representation. They left without making any decision. There was some liaison with Li in July/August 2002 and Tam went to see Li who showed her Tender Document and explained its contents. He repeated 4^th Representation to her.

119.Kwok/Tam eventually decided to license Stall. They believed that there would be business if there were 5 blocks of public housing at Estate, otherwise Kwok would not have licensed Stall 52. Kwok said Tam told him that in mid-July 2002 (he might have remembered the date wrongly) or about half a month before he signed FLA, Li collected the deposit of HK$7,200.00 from Tam for licensing Stall 52, but Kwok did not know whether Tam signed any document. Kwok did not know the details of Tam’s negotiations. He thought (but was not sure) he licensed Stall 52 by tender. He did not know whether Stall 52 was only half Stall.

(b) D’s case

120.Li only liaised with Tam and had never heard of or seen Kwok before the signing of FLA.

121.During Tam’s first telephone conversation with Li in June 2002, they discussed briefly the nature of Estate’s housing and Occupancy Rate. Upon Tam’s enquiry on Interim Housing (although Li felt she knew what it meant),Li explained that Estate was originally designated as emergency housing for natural or other disasters or demolition of homes, but as a result of a change in HA’s policy, about half of Units had been changed to Roster Housing. Tam had no further follow up question and they then discussed which Stall had the lowest licence fee and whether she could immediately inspect such Stall. Li told her there was no Stall with the licence fee she wanted and promised to notify her of the upcoming Open Day. 

122.In mid-July 2002, Tam went to Market. She was interested in licensing Stall for about HK$4,000.00 per month to sell children’s clothes. But since the lowest monthly licence fee for dry goods Stall was HK$9,000.00, Li suggested to Tam to license half Stall. She was very interested and vigorously bargained with Li over the licence fee. No agreement was reached at that meeting. Shortly after mid-July 2002, Tam came to Market for the second time to discuss the licence fee. Li gave in and reduced the licence fee, but still Tam wanted to think about it. When she finally decided to license Stall 52, Tam and Li met after mid-July 2002 for the third time for signing PLAand paying the deposit.

123.Before signing FLA at CPC, Tam telephoned Li to say that Kwok would sign Licence. Li later knew Kwok attended CPC to sign FLA. Li had given Floor Plan to Tam during the negotiations but not Tender Document or Pamphlet.

(c) Analysis

124.There is a fundamental conflict as to whether Li has met Kwok and this goes to the core of their veracity. Mr Siu submitted that Kwok was unclear about the negotiations for licensing Stall 52 and Tam had not been called to give evidence. However, on considering the totality of Kwok’s evidence, I find him credible and reliable in saying (and I accept) he visited Market and had discussions with Li. There are some discrepancies in his evidence and undoubtedly the fact that most negotiations with Li were done through Tam must have contributed to the confusion. However, I find it implausible that Kwok would have entered into Licence and assumed legal responsibility under FLA without even having visited Market to meet Li at all.

125.As in the case of Ip and for the same reasons applied mutatis mutandis, I do not accept that Li explained to Tam the meaning of Interim Housing as he claimed and that undermines the overall veracity of Li’s evidence. Although there is some discrepancy between Kwok’s pleadings and his evidence as to whether he (a) went to Market once or twice or (b) bargained for a lower licence fee when he visited Market, I still prefer Kwok’s evidence. I do not consider such discrepancies and confusion as to the timing and details materially affect his credibility. The fact that he was not (but Tam was) the key player in the negotiations must have contributed to the confusion.

126.Kwok has been consistent in asserting Pamphlet was given on Tam’s first meeting with Li and Tender Document was given at her meeting with Li before the occasion she paid the deposit. Tam visited Market and negotiated with Li several times. Given Tam’s concern over the carrying on of business at Market (as reflected in the number of her visits to Market and her efforts in negotiations over the licence fee) and her expressed interest in licensing Stall, it is likely (and I accept) that she was given advertising literature being Pamphlet and Tender Document. I further accept Kwok has read such documents. Since I have found that Kwok/Tam have together met Li to discuss about licensing Stall, Li must have known that they were business partners. I find that D should reasonably (and it did) contemplate Tam would show Pamphlet and Tender Document to Kwok and thereby communicate P and TD 1^st and 2^nd Phrases (ie 1^st to 3^rd Representations) to Kwok. I find such Representations to be material and they did induce Kwok/Tam to enter into Licence for Stall 52. Whilst I am convinced of Kwok’s veracity, I need not consider 4^th Representation because Kwok did not plead the same.

XVII. Licence and Representations – 523 Action(Stall 14)

(a) MK Wong’s case

127.In/about end of June or early July 2002, MK Wong saw a banner and advertisement posters at Market advising that Market would be open for business soon and inviting the public to tender for the use of Stalls. He met Li at Market and Li introduced Market’s layout and the surrounding area to him. Li also made 2^nd and 4^th Representations and said there would be a strong flow of customers at Market. He also gave Pamphlet (which MK Wong regarded as an important document) to MK Wong and briefly explained its contents.

128.MK Wong then had a discussion with his partner Ho Tsz Wing (“Ho”). In early July 2002 MK Wong visited Market for the second time and met Li who again gave him Pamphlet. He believed P 1^st Phrase and was prepared to license Stall on the basis that about half of Estate had been changed to Public Rental Housing. The nearby housing estates were secondary considerations. After all, Kin Sang Estate where MK Wong lived had its own shopping centre and market ran by HA.

129.On 7^th July 2002, MK Wong and Ho visited Market. Li again distributed Pamphlet to them and explained its contents. Li repeated 4^th Representation. He further said Occupancy Rate was very high and the remaining 4 blocks of Estate would also be changed to public housing in future. MK Wong and Ho negotiated with Li on the licence fee and terms. MK Wong paid the deposit of HK$13,000.00. He signed FLA on 21^st August 2002 for Stall 14 at CPC’s offices and paid a further sum of HK$39,680.00 and legal costs of HK$2,775.00.

(b) D’s case

130.Li had previously seen MK Wong working as a delivery worker delivering goods at Estate. In July 2002, MK Wong came to Market. Li answered his queries as to when Market would open for business and which area was for dry goods. There was no mention of the nature of Estate’s housing. Li saw MK Wong again in July 2002 when MK Wong asked whether VCD business was allowed. Li replied in the affirmative and offered 2-3 Stalls for his consideration. But MK Wong wanted the first Stall at the entrance. MK Wong admitted to Li that he worked close by and was familiar with the area, so he declined Li’s offer to provide him with some general information about Estate. They mainly discussed about the licence fee but no agreement was reached.

131.In July 2002 MK Wong came to Estate for the third and fourth time to negotiate with Li on the licence fee. MK Wong asked for a reduction of the deposit sums or a waiver of some charges. At the fourth meeting, D agreed to reduce the deposit sums. MK Wong signedPLA. Li did not make any verbal misrepresentation or say that the remaining 4 blocks of Estate would be changed to Public Rental Housing.

(c) Analysis

132.I prefer on balance the evidence of MK Wong and accept that Li told him the remaining 4 blocks of Estate would be changed to Public Rental Housing in future. Li had seen MK Wong working around Estate and knew MK Wong would be quite familiar with the neighbourhood. It is not improbable that Li would wish to emphasise to him the prospects of Estate to highlight the attractions of Market. After all, I have found that Li has not been shy to embellish Roster Housing as Public Rental Housing.

133.Mr Siu next criticised the inconsistencies in MK Wong’s evidence. MK Wong gave evidence that Li did not make any misrepresentation on his second visit to Market with Ho, but his pleadings averred that D’s representative made 1^st Representation to them and further said that in about 3 months’ time, the percentage of Estate that would be changed to Public Rental Housing would be increased from 50% to 80%. MK Wong’s witness statement stated that Li made 4^th Representation on that occasion. MK Wong clarified in his evidence that such Representations were made on his third visit on 7^th July 2002 and he probably had not explained the timing clearly to his solicitors. I have considered the totality of MK Wong’s evidence and accept that the confusion related to the timing and not the fact that such Representations were made. However, as there is no pleaded reliance on 4^th Representation, I need not be concerned with the same. I accept that Li gave Pamphlet to MK Wong who regarded 2^nd and 3^rd Representations therein (ie P 1^st and 2^nd Phrases) as material and he was thereby induced to license Stall. The nearby housing estates are only a secondary consideration.

XVIII. Licence and Representations – 747 Action(Stall 14)

(a) SM Lam’s case

134.SM Lam and his wife operated a tofu market stall in Tin Shui Estate (public housing estate). In May 2002, upon reading D Advertisement SM Lam became interested and he visited Market in early July 2002 with his wife. Li promoted Market to himsaying that the business environment was good. He also made 2^nd and 4^th Representations, showed Pamphlet and gave Tender Document to SM Lam. SM Lam read Pamphlet but did not regard it as very important. He regarded Tender Document as important. SM Lam knew about the nearby housing estates, but only paid attention to the market at Leung King Estate because many occupants of the nearby housing estates would shop there due to its good centralised mix of stalls selling a variety of goods at competitive prices as a result of lower licence fees. For other surrounding housing estates, some had their own markets and some were too far away.

135.SM Lam considered it important for business to have a strong flow of people at Market. He had considered Market’s surrounding environment but would not have tendered for Stall 4 had he been aware that Estate had not been changed to public housing. On 25^th July 2002 he gave HK$12,200.00 as the tender deposit and submitted his tender bid for Stall 4. Li reiterated to him that there was a large population in the surrounding area and the business environment was good. Li further assured SM Lam on his investment in Stall. On 30^th July 2002, Lam attended CPC’s offices to sign FLA and pay a further sum of HK$49,080.00 and legal costs of HK$2,683.00.

(b) D’s case

136.Some time in early July 2002 SM Lam visited Market. SM Lam saidhe carried on business at Tin Shui Wai but wanted to sell Indonesian foods at Market. Li showed him a few Stalls and commented that it was good to sell Indonesian foods with so many private housing estates near to Estate. SM Lam would not have considered Market had it not been for the nearby housing estates. On SM Lam’s enquiry, Li confirmed Estate was originally Interim Housing for persons requiring emergency housing as a result of natural and other disasters and demolition of homes, but HA had changed its policy so that about half of Units were let to Roster Applicants. As it was during the tender period, Li did not consider it appropriate to discuss further with SM Lam but suggested he should take a copy of Tender Document if he were interested. Li did not personally give Pamphlet or Tender Document to SM Lam and did not make 2^nd or 4^th Representation to him. A few days after 20^th July 2002, Li saw SM Lam inserting his tender application into the tender box but they did not speak. Eventually Lam was successful in his tender bid for Stall 4. D’s staff informedSM Lam to attend CPC’s offices to sign FLA.

(c) Analysis

137.I prefer SM Lam’s evidence. For similar reasons explained above, I am not persuaded that Li explained Interim Housing to SM Lam as alleged. SM Lam has operated a market stall in a public housing estate for many years and must have been aware of the advantages of doing business at a public housing estate market. He regarded the stable population and hence a strong customer flow primarily important for his decision to tender for Stall 4. He knew but did not regard the nearby housing estates as important inducing causes. Some estates were too far away and he considered the market at Leung King Estate a competitor.

138.I find that SM Lam read both Pamphlet and Tender Document and was aware of 1^st to 3^rd Representations therein. However, since SM Lam fairly admitted he did not regard Pamphlet as very important but considered Tender Document important, I am persuaded that SM Lam relied on TD 1^st and 2^nd Phrases (ie 1^st and 2^nd Representations) which were material when he decided to submit his tender application and later enter into Licence for Stall 4. I also accept that Li made 4^th Representation to SM Lam.

XIX. Discovery of misrepresentation and causation of loss

139.On 30^th September 2002, Market and Ps’ Stalls opened for business. In October 2002 D provided free shuttle service for people from nearby housing estates to shop at Market (“Shuttle Service”). D also organised a lucky draw and 10% discount promotional scheme.

(a) 519 Action(Stalls 35-37)

140.KS Cheung’s case  The customer flow in October 2002 was average/normal, but it significantly decreased in November 2002. Li queried whether KS Cheung had a sufficient variety of fruits for sale and suggested that the two fruit Stalls should be made to appear as if they were under different management. But KS Cheung was already adopting such management approach with the two Stalls selling different types of fruits or the same type of fruit at different prices.

141.KS Cheung was surprised when his customer(s) told him there would be no business because few people lived at Estate. He found out that not even half of the upper floors of Estate were occupied and there were few lights on at Estate at night. He asked D’s staff whether Estate had been changed to Public Rental Housing but there was no reply. He had a meeting with Tsui King Fu (“Tsui”, D’s director/shareholder), Lam and Li. Tsui wanted to understand the situation, but he did not discuss how to improve it.

142.D’s case  Stalls 35-37 were not well managed. It was apparent even to the customers that both Stalls were singly owned (eg staff moved freely between the two Stalls), so they would feel there was only one choice. There were no oranges for sale at one Stall.Li raised these matters with KS Cheung in mid-October 2002 but there was no improvement. Tsui/Li met KS Cheung in/about the end of November or early December 2002 to urge him to improve Stalls. KS Cheung partially acknowledged his problems but also blamed the poor flow of people at Market. But thereafter there was still no improvement.

(b) 520 Action(Stall 44)

143.TY Cheung’s case  TY Cheung and Keung only used half of Stall 44 to sell fresh frozen seafood. In October 2002, Li/Wong told Keung there was too little fish on display. They also suggested/helped TY Cheung/Keung purchase a red plastic sheet to be used on the fish table to make the fish more attractive. Business was acceptable up to mid-October 2002, but deteriorated afterwards, particularly when Shuttle Service ceased. On 20^th October 2002, a fresh fish tank was installed and TY Cheung sub-licensed half Stall to a Mrs Sin (“Sin”) to sell fresh seafood. Sin left after about 2 months due to business loss as a result of the poor customer flow. Sin paid a total sum of HK$26,000.00 to TY Cheung. At first TY Cheung did not know why business was so bad. She later heard from Stall Owners that Estate had not been changed to Public Rental Housing.

144.D’s case   TY Cheung used half Stall to sell fresh frozen fish but the variety/quantity were inadequate. Keung wanted to try out the customers’ taste for seafood. Li said a trial period was unnecessary for a new market with a good flow of customers. He urged Keung to display more fish for sale but there was no improvement. When Keung complained about the level of business, Wong suggested he could use Styrofoam on the fish table to avoid unattractive dripping of melting ice. He also suggested using a red plastic sheet and in fact he helped purchase such red plastic sheet for Keung. Later Keung told Wong they found someone to sell fresh seafood at Stall 44. Wong reminded TY Cheung she was still responsible for Stall. In mid-November 2002, Wong noticed two women (one later known to be Sin) preparing to sell fresh seafood at Stall 44. A few days later, Sin told Wong business was good but the all-inclusive monthly fee of HK$13,000.00 she paid to TY Cheung was high. Wong later learned from his subordinate that Sin left Stall 44 on/about 10^th January 2003 due to frequent disputes with TY Cheung.

(c) 521 Action(Stall 51)

145.Ip’s case Business was acceptable for the first few days, but became bad (with a poor flow of customers) from mid-October 2002. Customers informed Ip’s staff that Estate had never been changed to public housing. In October 2002, Ip in several telephone conversations with Li asked why customer flow was so reduced and whether Estate had ever been changed to public housing, to which Li did not give a direct reply. Ip told Li he did not want to risk his investment with such poor flow of customers and bad business turnover. He requested to surrender Stall for refund of his deposit. Li promised to recommend Stall 51 to interested parties but would not guarantee success.

146.D’s case  Li noticed that Ip’s display of goods, pricing and business were good when Market opened for business. So he felt strange when Ip telephoned in late October 2002 to say he wanted to cease business, surrender Stall and seek a refund of the deposit because business was poor. Li said it would be a breach of contract and warned him of the legal consequences.He suggested that Ip find a replacement licensee and promised to introduce Stall 51 to potential licensees, to which Ip agreed. Ip/Lo chased Li in early November 2002, but Li urged them to be patient until after Chinese New Year when it would be easier to find a replacement. Ip threatened to cease business after Chinese New Year. Liurged them not to breach Licence. Li was unable to find a replacement licensee in the end.

(d) 522 Action(Stall 52)

147.Kwok’s case  In October 2002, the customer flow was average, business was slow and Kwok/Tam suffered a loss. The situation got worse in November 2002. By mid-November 2002 they decided to change their business to beauty services, but continued to sell clothes until January 2003 to clear the stock. They learned from other Stall Owners/customers that Estate had never been changed to Public Rental Housing.

148.D’s case  Li was worried and queried Kwok (whom Li first saw at Stall when Market opened for business) when he saw only 10 items of clothing on sale at Stall 52, but Kwok ignored him. In November 2002, Tam complained to Li they had no business. Tam did not deny when Li suggested there were too few goods on display and the goods were too upmarket, but she requested to change their business to beauty services. Li anticipated D would grant permission but queried whether Stall 52 was too small for such proposed trade. Tam started her new business at the end of November or early December 2002, but Li observed she did not do well with only one chair and no customer. With half of Stall still being used for selling children’s clothes, the beauty services did not look professional.

(e) 523 Action(Stall 14)

149.MK Wong’s case  In October 2002, business was not bad but it deteriorated thereafter. MK Wong’s income was persistently low and he suffered a loss. At about mid- or end of October 2002, MK Wong realised from an occupant of Estate who would soon move away to his allotted PRH Unit that Estate had never been changed to public housing. He also noted from otheroccupants that they had minimal household equipment and some did not evenhave television sets or VCD players. Further, neighbourhood security was not as good as in public housing. There were drug addicts outside Market and Stall Owners telephoned the police for help. 

150.D’s case  There was not a lot of merchandise on sale at Stall 14. Li saw MK Wong continuing to work as a delivery worker and only a young female worker was at Stall. But business should be acceptable for October 2002. At the end of October or early November 2002, Li received a telephone call from someone claiming to be MK Wong’s father, who said it was impossible to carry on a VCD rental business in a market and MK Wong’s business was in a bad way. He asked to change the business to sale of underwear. Li did not anticipate any problem in getting D’s approval but queried whether they had any experience in the proposed new trade. MK Wong’s father said they had a similar stall in Tuen Mun. In the end MK Wong did not change his type of business. In November 2002, MK Wong’s father telephoned Li again to say they would cease business altogether and asked for a refund of the deposit upon surrender of Stall 14. Li refused saying this would be a unilateral breach of Licence. He suggested to MK Wong’s father to find a replacement licensee, but MK Wong failed to do so.

(f) 747 Action(Stall 4)

151.SM Lam’s case  Business was quite normal in October 2002 but the customer flow slowed in November 2002 when Shuttle Service ceased. Business became poor and income dropped. Keung told SM Lam that Estate had never been changed to public housing. SM Lam became worried. Between November and 28^th December 2002, Stall Owners tried to liaise with D but D ignored them.

152.D’s case  When Market opened for business, Li suggested to SM Lam that his glass display cabinet was too high and it blocked sight of Stall and the staff. In October 2002, SM Lam told Li his business was average. 

(g) Analysis

153.Considerable effort was spent in cross-examining Ps on the way they operated their businesses and why they were not able to make a profit. Mr Siu submitted that the real reason was not that Estate was never Public Rental Housing or that Occupancy Rate was less than 90%, but because of Ps’ own inability to run Stalls properly.

154.Mr Siu referred to Halsbury’s (supra) para.[275.092] at p.256 as follows : “the damage must be shown to have been a natural and direct result of the misrepresentation believed and acted on or, where the representee is induced by fraudulent misrepresentation to believe a certain state of things to exist, of the misrepresentation being believed ……” However, Halsbury’s (supra) in the same paragraph says that “[the] representee is normally entitled to succeed if he is in a position to allege and prove that the representor in fact intended the precise kind of damage which resulted ……” In Bridgegrove Ltd v Smith & anor [1997] 2 EGLR 40, it was held that the representor was liable for losses directly flowing from the transaction which the representee was induced to enter by the misrepresentation. It was further held that so long as the misrepresentation effectively caused the losses, the fact that there might have been other causes did not enable the representor to escape from the consequences of the misrepresentation.

155.In my view, the poor customer flow and Ps’ poor business were mainly and materially caused by and are the natural and probable consequences of the falsity of Representations. Although there were some teething problems for Ps’ new businesses at Stalls, I accept the overall veracity of Ps’ evidence. I have found that Public Rental Housing has a more stable population and hence more secure customer base. By November 2002 (for some Ps in October 2002 as well), Ps have already reflected to Li/Tsui that the customer flow was poor and business was bad. Stall Owners reiterated at HA 2^nd Meeting that the business environment at Market was poor because Occupancy Rate was low and the customer flow was poor.

156.Even Li admitted to a noticeable decrease in the flow of customers in November 2002 but he attributed it to some Stall Owners’ poor business management in respect of the variety, quantity, price and quality of goods which he said had an adverse impact on the overall level of trade at Market. Li said he noticed shoppers carrying purchases of fruit and fish when they came to shop Market. When considered against the totality of the evidence, I do not accept Li’s views as to the cause of the poor customer flow. It should not be forgotten Stall 43 also sold fresh frozen seafood and there was a choice in respect of seafood at Market. Even on Li’s observation, it appears that although shoppers went elsewhere for fish and fruit, they were still prepared to shop to Market. I am not persuaded that other businesses (eg dry goods) would be affected.

157.Further, Li accepted some Stall Owners operated their businesses more successfully than others and he had no complaints on how Ip, MK Wong and SM Lam ran their businesses. Yet Ip was quick to complain of poor business in mid-October 2002. I find that the commonality amongst Ps (who operated different businesses and had different business management skills) in respect of their poor business is the poor and unreliable customer flow due to the low occupancy and lack of stable public housing population at Estate. I find that in October 2002 Ps’ level of trade was in fact artificially bolstered by Shuttle Service, the lucky draw and the 10% discount promotion scheme. Ps consistently said that by November 2002 when these promotional efforts ceased, the customer flow and their businesses deteriorated.

158.Li claimed that the overall poor economic conditions in late 2002 affected not just Market but all public housing estate markets. There is no evidence before me as to how other markets have been faring and I am unable to accept such assertion.

XX. Subsequent events and rescission

(a) Strike

159.In December 2002, a group of Stall Owners (not Ps) planned a strike (“Strike”). D was forewarned the evening before Strike and made efforts to urge Stall Owners not to participate. On the following morning, most Stalls opened for business and Strike did not materialise.

160.Ps’ case  SM Lam said that in mid-December 2002 Stall Owners sought help from some Councillors who requested HA to reduce rent and Strike was planned to demand reduction of licence fees. On the other hand, KS Cheung and Kwok said Stall Owners felt they were deceived into entering into Licences and they wanted to use Strike to pressurise D to give an explanation. Ip was unsure of the purpose of Strike. KS Cheung and Ip never intended to ask for a reduction in licence fee through Strike or at all.

161.D’s case  After the unsuccessful Strike,Stall Owners met with D to request D to discuss with HA for reduction of licence fees. Li then became aware that the purpose of Strike was to urge D to reduce licence fees. Li claimed Stall Owners made such request for their own financial gain and not because of the falsity of Representations. Li refused such request but promised that if HA would reduce the rent payable by D, D would pass the benefit to Stall Owners.

(b) 1^st Meetingbetween Stall Owners and HA on 17^th December 2002 (“HA 1^st Meeting”)

162.The minutes of HA 1^st Meeting prepared by HA (“1^st Minutes”) noted that KS Cheung, Keung, Lo and SM Lam of Ps and other Stall Owners attended HA 1^st Meeting with inter alia (a) 温振聲 (“Wan”), 房屋署屯門西商場副房屋事務經理; (b) 陳文華, SH Ip議員辦事處行政主任 and (c) 陳秀雲, 民建聯YC Tam、SH Ip議員辦事處幹事.

163.1^st Minutes stated inter alia as follows :

“	(2)	與會者詢問寶田中轉房屋入住率，單身人士和家庭組合如何核實入住率的準確性，由於問題涉及户籍資料，所以已將它們轉介屋邨辦事處跟進。
	(3)	就租金問題，他們問及本署有否計劃監管承辦商所收個別檔位的租金水平，更希望本署能減免光亮實業有限公司的租金，然後便會與該公司商討如何減免各商販的租金。
		……
	(5)	……此外，他們要求本署能減少冷氣費的費用。
	(6)	有關終止各檔位的租約﹔本人已將此問題轉介光亮跟進。
		……
	(8)	有關光亮派發宣傳單張內，指出部份中轉居屋單位已改為出租公屋，是屬欺騙成份，希望本署要求光亮解釋此問題，藉此減少大家的疑慮。因為他們租貸該街市檔位，亦衡量該中轉房屋的出租情況。
		……
	分發名單﹕……光亮實業有限公司經理……”

164.Ps’ case  Stall Owners decided to make enquiries with HA to reflect their concerns and to ascertain whether Estate had been changed to Public Rental Housing. At HA 1^st Meeting, Wan clarified that according to information from HA, there had been no change to Public Rental Housing and HA had no plan to do so in the near future. Stall Owners felt deceived. Ps did not know D’s representatives were turned away from HA 1^st Meeting. Kwok (who might have remembered wrongly when he said in his witness statement that he attended HA 1^st Meeting) and MK Wong learnt of the results of HA 1^st Meeting from other Stall Owners and Ho respectively.

165.KS Cheung, TY Cheung and Ip agreed 1^st Minutes largely reflected what was discussed at HA 1^st Meeting. KS Cheung and Ip did not ask for reduction of licence fees. YC Tam who coordinated, organised and attended HA 1^st Meeting proposed a reduction of licence fees, but it did not reflect KS Cheung’s view or, according to KS Cheung, other Stall Owners’ view. TY Cheung and Ip did not hear Stall Owners asking for reduction of licence fees, but SM Lam said Stall Owners asked HA to reduce the rent payable by D so that D could reduce Stall Owners’ licence fees and air-conditioning charges.

166.D’s case  Stall Owners did not notify or extend any invitation to D to attend HA 1^st Meeting and they refused to allow D’s management officer to attend. Li first heard that some Stall Owners complained that Estate had not been changed to public housing at the time of Strike. Li strongly felt what HA told D (ie Estate had changed to Roster Housing) was right, but as HA did not give D any document, Li/Wong went to Library on 27^th December 2002 to seek documentary evidence to show Stall Owners. They found Ming Pao, Sing Pao and Oriental Reports which Li said were not materially different from what HA told D in 2002. But he conceded under cross-examination that the extract from Sing Pao Report in paragraph 32 above was different from his understanding.

167.Preliminary observations  Li explained they went to Library instead of making direct enquiry with HA because it was close to the weekend and Lam was not in Hong Kong. But strangely there is no evidence that D followed up with HA in order to verify and answer Stall Owners’ complaints or that D immediately showed the news reports to Stall Owners during D’s meeting with Stall Owners on the following day (see next paragraph). I find Li’s evidence in this respect unreliable. The probability is that Li discovered the news reports did not support D’s representation that Estate had been changed to Public Rental Housing and they therefore refused to give direct answers to Stall Owners’ queries (see next paragraph).

(c) Meeting with D

168.Ps’ case  After HA 1^st Meeting, KS Cheung, Keung, Ip, MK Wong and other Stall Owners attended a meeting with D’s representatives on 28^th December 2002. Kwok believed Tam attended the meeting as she reported to him what happened. Stall Owners wanted D’s representatives to confirm what Wan had told them, but they did not give a positive reply. Li only said HA gave D the information and D truthfully recounted it, and D would seek clarification from HA at an appropriate time.

(d) 6/1/03 Letter

169.On 6^th January 2003, Ps’ solicitors (“LCC”) then acting for Ps and numerous other Stall Owners wrote to D (“6/1/03 Letter”) complaining that D by its servants/agents had verbally, in writing and by conduct made 3^rd Representation, which was material in inducing Ps and the other Stall Owners to enter into Licences. LCC went on to say that they recently learnt from HA that it was a misrepresentation. LCC asserted that Ps and the other Stall Owners were entitled to rescind Licences and/or claim for loss and damages.

170.Ps’ case  Although 6/1/03 Letter did not mention Occupancy Rate, Ps had given LCC the relevant instructions and left LCC to decide how to present their complaints to D.

171.D’s case  Li was surprised by 6/1/03 Letter because he did not make 3^rd Representation to Stall Owners.He would not have referred to the number of Units as suggested in 3^rd Representation. He only said about half of Units had been changed to Roster Housing. Of Stall Owners who issued 6/1/03 Letter, only Ps took legal action and some of the others were still carrying on business at Market.

172.Preliminary observations  Mr Siu submitted that since 6/1/03 Letter did not refer Occupancy  Rate, P could not have relied on 2^nd Representation. I disagree and refer to my earlier analysis. I also bear in mind that LCC acted for 23 Stall Owners in issuing 6/1/03 Letter and 3^rd Representation was presented as a common wrong against them. 6/1/03 Letter was an initial shot across the bows. It is inappropriate to cloak it with the meaning Mr Siu suggested.

(e) HA 2^nd  Meeting

173.Stall Owners held HA 2^nd Meeting with HA’s representatives on 13^th January 2003. 2^nd Minutes noted KS Cheung, TY Cheung, Keung, Lo, Tam, MK Wong, Ho and SM Lam attended the meeting with other Stall Owners. The following were inter alia also present : (a) representatives of shop owners from 天盛商場 in Yuen Long, (b) HA’s 張建發(“KF Cheung”), 商業樓宇總經理(發展、租務及支援), (c) other representatives of HA and (d) YC Tam.

174.2^nd Minutes stated inter alia as follows :

“	商户代表、幹事及議員的意見和要求
	2.	屯門寶田街市商户代表和幹事普遍反映營商環境欠佳，人流低，生存空間狹窄，並聲稱在失實的招標書誤導情況下簽署租約，而且入伙率低，生意未如招標書中所述般理想，實在難以經營。要求房署整體地參照中轉屋過往入住率、居民的生活習慣、歸屬感和消費模式、房屋的臨時性質等因素，考慮寬減租金但必須保留追索力。
	3.	再者，他們質疑承辦商光亮實業有限公司所提供的招標書內容，指出寶田中轉房屋有5,000個單位已轉為出租公屋單位。他們認為這是失實聲明，因為寶田中轉房屋由始至終都沒有成為出租公屋，要求房署和承辦商交待事件始末。
		……
	房屋署代表回應
	5.	房屋署代表回應如下﹕……
		ii)	[KF Cheung]闡釋中轉屋的用途及其特色，署方必須預留部份中轉房屋單位對受天災、清拆、重建等影響人士臨時求棲身之所。相對於公共房屋入住的穩定性，中轉屋的入住和遷出情況比較波動，以至入伙率及遷出率在過往數個月較為起伏。基於這項因素，商業樓宇科會嘗試依據寶田中轉屋的入伙率變化，根據現行政策寬減租金，署方根據有關資料計算得結果後，會知會各商户及會與光亮實業有限公司商討將其獲得寬減的租金發還於街市商户，紓解民困，減低商户的經濟壓力。……
		iv)	對於投訴承辦商光亮實業有限公司所提供的招標書內容失實一事，查房署沒有將寶田中轉房屋5,000個單位轉為出租公屋單位，所以對是項投訴無法評論。但[KF Cheung]答允在較後時間再次聯絡承辦商，並將會上商户、幹事和議員提出的意見和理據充份表達，希望雙方能透過協商解決問題。”

175.Ps’ case  Since D did not give any satisfactory reply, Stall Owners had HA 2^nd Meeting with HA on 13^th January 2003 which was helpfully organised by the Councillors. The main purpose of HA 2^nd Meeting was to get HA to confirm whether Estate had been changed to Public Rental Housing. KF Cheung confirmed there had not been such change and there was no plan to do so in the near future. One of HA’s representatives confirmed that HA did not prepare Pamphlet and/or Tender Document and refused to comment on Representations. HA’s representatives explained that HA calculated Occupancy Rate by the distribution of keys to Units. Up to December 2002, the average Occupancy Rate was 66%.

176.Many persons at HA 2^nd Meeting expressed their opinions. KS Cheung said some Stall Owners might be thinking of reduction of licence fees. But he did not think it would resolve the fundamental problem. TY Cheung said it was the Councillors (and not Stall Owners) who discussed reduction of licence fees with KF Cheung. MK Wong also said Stall Owners did not ask for a reduction of licence fees but someone at HA 2^nd Meeting urged HA to adjust the licence fees by drawing a comparison with the usual occupancy rate of Interim Housing. After HA 2^nd Meeting, D refused to have a further meeting with Stall Owners.

177.D’s case  Li was aware of HA 2^nd Meeting but D was not invited. Li probably saw 2^nd Minutes after Chinese New Year. Lam said D did not request HA to reduce rent, but he understood that at HA 1^st and 2^nd Meetings Stall Owners through YC Tam requested HA to reduce the rent payable by D so that D could pass the benefit to Stall Owners. Subsequently, HA conducted a review and implemented 2003 Rebate Policy as from January 2003.

(f) Cessation of business and solicitors’ correspondence

178.By 5 letters dated 20^th January 2003, LCC informed D that Ps (except SM Lam) rescinded Licences due to the falsity of Representations and that they would move out of Stalls by 20^th and 24^th January 2003. By a letter dated 24^th January 2003, LCC gave notice of SM Lam’s rescission of Licence by reason of D’s misrepresentation and of his intention to move out of Stall 4 on 31^st January 2003.

179.By their reply dated 20^th January 2003, CPC stated inter alia that “it is [D’s] knowledge throughout that [Estate] has been changed partially from Public Interim Housing to Public Housing available to a defined category of public sector by [HA]. This is evidenced by [HA Advertisement]. According to the information provided by [HA], they have allotted more than 50% to cater for this category of public housing as advertised”. In my view, this echoed my earlier findings that D all along knew Estate had been partially changed to Roster Housing, yet D had chosen to dress it up as Public Rental Housing.

180.In January and February 2003 LCC sent the keys of Ps’ Stalls to CPC, but CPC returned the same to LCC and demanded that Ps re-open Stalls for business and pay the licence fees and outgoings. Finally in February and March 2003 D through CPC accepted Ps’ alleged repudiation and demanded the return of the keys for delivery of vacant possession.

(g) Analysis

181.The question is whether Ps are entitled to the equitable remedy of rescission.

182.Reduction in licence fees  Mr Siu submitted that the conduct of Stall Owners (including Ps) at HA 1^st and 2^nd Meetings seeking reduction of licence fees and air-conditioning charges was inconsistent with a claim for rescission. However, D has not pleaded the defences of affirmation of contract or of waiver/estoppel of the right of rescission. But I do not accede to this argument even if D were able to overcome the pleading point.

183.“If a party who has a right to rescind a contract elects, with knowledge of his rights as well as all the facts giving him that right, to affirm the contract, his election is final. He cannot subsequently change his mind and rescind the contract instead. Conversely “the party defrauded may keep the question open so long as he does nothing to affirm the contract.” The burden is on the representor to demonstrate that the representee has affirmed the contract” (The Law of Restitution (supra) para.9-032 at pp.267-268).

184.In my view, Ps’ evidence as to the purpose of Strike and what transpired at HA 1^st and 2^nd Meetings showed that different Stall Owners had different views on how to resolve the problems caused by the falsity of Representations. It is unclear from the evidence whether the proposal to reduce licence fees and/or air-conditioning charges as a way out of the difficulty was made by the Councillors who tried to offer help or whether it represented the view of some Stall Owners. I accept, however, that Ps did not consider a reduction of licence fees would be helpful. For present purposes, I am prepared to assume that some Stall Owners (but not Ps) whether by themselves or with the help of the Councillors did in December 2002 and/or January 2003 request for reduction of the licence fees and/or air-conditioning charges.

185.I do not consider the fact that some Stall Owners explored the possibility of reduction of licence fees with HA/D barred the remedy of rescission. Any conduct that does so must be exercised in the plainest manner and communicated to the other party. Here Ps caught wind of the possible falsity of Representations in November 2002 through informal enquiries. It would not have been reasonable for them to act precipitately. It was prudent for them to consult with other Stall Owners and the Councillors and endeavour to seek clarification from HA. I accept that Ps did not like the prospects of remaining at Stalls if Representations were verified to be false, but I do not think they finally concluded at that stage they would definitely move out. Some Stall Owners made and/or were prepared to consider alternative suggestions (eg reduction of licence fees and/or air-conditioning charges) as to what to do. The proposal for reduction of licence fees and/or air-conditioning charges was a possibility, not a firm decision.

186.This was reflected in 1^st Minutes (which noted that Stall Owners also raised the issues of the nature of Estate’s housing and Occupancy Rate and of termination of Licences) and in 2^nd Minutes (which noted that Stall Owners raised again the issue of fraud and reserved their rights (“但必須保留追索力”)). I find there is no unequivocal affirmation of Licences. Further, HA 2^nd Meeting was held after the issuance of 6/1/03 Letter, so Ps could not have waived their rights to rescission then. Very shortly after HA 2^nd Meeting, LCC on 20^th and 24^th January 2003 wrote to inform CPC that Ps would move out of Stalls between 20^th and 31^st January 2003. Ps actually did so on those dates and commenced Actions on 27^th January and 10^th February 2003. It is quite impossible to say there is affirmation of Licences or other conduct that precluded Ps from having Licences rescinded.

187.Restitutio in intergrum  Mr Siu submitted that because Ps had occupied and used Stalls for several months, restitutio in intergrum was impossible. He cited no legal authority for such proposition. However, it appears that an executed lease is no bar to rescission (see Hill and Redman’s Law of Landlord and Tenant (2004) Vol.1 paras.[1390]-[1400] at pp.A437-438). Woodfall’s Law on Landlord and Tenant Vol.1 para.5.174 at p.5/69 has the following to say : “If a lease has been obtained by fraud or material misrepresentation or concealment, either on the part of the landlord or tenant, it may be set aside. “Supposing that in consequence of a misrepresentation as to the drainage of a house, I am induced to take a lease of the house and to occupy it, the misrepresentation is innocent, but I have the right to have the contract set aside.””

188.Lord Denning LJ in Solle v Butcher [1950] 1 KB 671, 695-686 said that the fact that the lease had been executed was no bar to rescission. He cited Cooper v Phibbs LR 2 HL 149 as showing that rescission was available even after an agreement of tenancy had been executed and partly performed. If otherwise, “[it] would mean that innocent people would be deprived of their right of rescission before they had the opportunity of knowing they had it.”

189.Ps’ Licences generally commenced on 1^st September 2002 but Ps’ Stalls and Market only commenced business on 30^th September 2002. TY Cheung’s and Ip’s Licences commenced on 21^st September and 1^st October 2002 respectively. The falsity of Representations was only confirmed by HA in late December 2002 and re-confirmed on 13^th January 2003.  Ps took prompt action to rescind Licences in January 2003. It does not seem to me that Ps’ payment of licence fees and other outgoings for the first few months of Licences before discovery of the falsity of Representations constitute any bar to rescission. In ordering restitution, the objective of the court is to restore the parties as closely as possible to their original position consequent upon cancelling a transaction which the law will not permit to stand. Relief will be granted even if the parties cannot be restored to their precise original positions since the court will look at all the circumstances and do what is fair and just in practical terms (Cheese v Thomas [1994] 1 All ER 35).

190.The question is whether restitutio in intergrum is substantially possible and whether rescission is just and fair. When Ps made their discovery of the falsity of Representations, it was clearly possible for Ps to effect substantial restitution. Licences for KS Cheung, Kwok, MK Wong and SM Lam had almost 20 months to run until 30^th June 2005. Even for TY Cheung and Ip, their Licences would not expire until 30^th September 2003 and 30^th September 2004 respectively. In all the circumstances, it would be unjust if Ps could not rescind.

191.Discretion  Here rescission had already taken place with the return of keys and vacant possession of Stalls. Indeed, D had accepted vacant possession in February/March 2003 (albeit allegedly on the basis of acceptance of repudiation). It is apparent from the schedule of agreed quantum of D’s counterclaims that all Ps’ former Stalls had been re-licensed to third parties in 2003 and 2004. Licences could no longer be revived by reason of such intervening events. How can it be equitable to declare Licences subsisting and/or award damages in lieu of rescission when it is already out of D’s power to carry out Licences? But even if it were still possible for Licences to be performed, the exercise of my discretion will not be different. Here the misrepresentation is not capable of being remedied for there was no change of the Estate to Public Rental Housing until mid-2004 and there is no evidence that Occupancy Rate ever reached 90% after January 2003.

192.I have found that Representations were made fraudulently. But if I were wrong, they are at the very least negligent. In those circumstances, section 3(2) of Ordinance gives the court discretion to award damages in lieu of rescission if it will be equitable to do so, having regard to the nature of the misrepresentation and weighing the loss to Ps by upholding Licences against the loss to D by rescinding them. The discretion is a broad one. In considering what will be equitable, events that have occurred in the interim prior to the date of the trial are also relevant. For the reasons explained above, it is inappropriate to exercise the discretion to award damages in lieu of rescission.

XXI.     Loss and damages

(a) Ps’ case

193.As a result of D’s misrepresentations, Ps claimed they suffered the following loss and damages :

194.Mr Siu informed the court that whilst the issues of liability and causation were in dispute, the aforesaid quantum is not (save and except for the items highlighted in bold and italics (“Disputed Items”)). Ps gave evidence and were cross-examined on Disputed Items. However, by reason of the analysis below, it is unnecessary to deal with such evidence.

(b) Analysis

195.Damages for fraudulent and negligent misrepresentation are awarded on the tortious basis, ie to put the representee in the position he would have been in had the misrepresentation not been made (see Chitty on Contracts (supra) paras.6-97 – 6-98 at p.479, Halsbury’s Laws of Hong Kong (supra) para.[275.106] at p.268 and Doyle v Olby (Ironmongers) Ltd [1969] 2 QB 158).

196.Mr Dawes suggested Ps were alternatively entitled to (a) all loss and damages or (b) items 1-4 as set out in paragraph 193 above or (c) item 1 as set out in paragraph 193 above. Ps’ claimed loss and damages can be broadly divided into (i) the paid licence fee deposit, (ii) capital/other expenses incurred prior to or at the commencement of Licences, (iii) licence fees and other outgoings paid to D prior to rescission, and (iv) workers’ salaries being recurring expenses incurred prior to rescission.

197.Deposits  This item causes no difficulty and D is liable for these sums. If the misrepresentation had not been made, Ps would not have entered into Licences and would not have paid these deposits. Mr Siu submitted that Ps did not adduce any evidence on the accounts of their businesses from 30^th September 2002 until their surrender of vacant possession of Stalls, so it was unknown whether they made a profit or a loss. He argued it would be unfair for Ds to bear the loss and damages claimed, including the return of the deposits, without looking also at the income side of the entire picture.

198.I cannot see how this argument is applicable to the licence fee deposits, which Ps paid to D as security for the due performance and observance of the terms/conditions of Licences on Ps’ part and which shall, subject to certain circumstances, be refunded at the expiry or sooner determination of Licences. This means the deposits are refundable irrespective of whether Ps made any profit or loss during the term. Given the nature of the deposits, I see no reason why D by reason of its own misrepresentation should have the windfall advantage of escaping liability for returning the deposits to Ps.

199.The correspondence between the parties’ respective solicitors show that TY Cheung, Ip, Kwok and MK Wong vacated their Stalls on 20^th January 2003, KS Cheung vacated his Stall on 24^th January 2003 and SM Lam vacated his Stall on 31^st January 2003. There is no dispute that Ps (other than SM Lam) did not pay the licence fee for January 2003. Other than non-payment of such licence fees, D has not been able to show any other breaches of Licences. My findings in Ps’ favour necessarily result in my rejection of D’s contention that Ps repudiated Licences. Apart from giving credit for licence fee calculation in ascertaining the quantum of the deposits to be refunded by D (see Bridgegrove Ltd’s case (supra) at p.43), D has not shown any or any sufficient basis for refusing refund of the deposits.

200.Other capital and recurring expenses “Expenses which the representee had incurred as a result of misrepresentation can be recovered” (Halsbury’s (supra) at para.[275.109] at p.270). In Yeung Mei Fun v Ling Leung Wah HCA No.8103/1994, Deputy Judge de Souza (unreported, 18^th August 1998), the learned judge found there was no misrepresentation. But had the tenant been successful on her claims for fraudulent or negligent misrepresentation which caused her to lease certain premises, she would have been able to recover the set-up costs or capital outlay for the restaurant she operated at the leased premises.

201.There is no dispute that no evidence has been led as to Ps’ income from 30^th September 2002 to their departure from Stalls in January 2003 (although SM Lam said he had a record book of his income). As Mr Siu pointed out, Ps only proved the “expenses” incurred by them. Mr Siu reminded that TY Cheung earned HK$26,000.00 from Sin and there is also evidence that TY Cheung still retained the usable refrigerator purchased for HK$20,000.00 and that SM Lam recouped HK$1,000.00 on the sale of his refrigerator. Mr Siu argued that there might be no loss after the capital/recurring expenses were set off against Ps’ income. On the other hand, Mr Dawes submitted that it was only logical to conclude that Ps made a loss and it would be improbable in all the circumstances to suggest that Ps made a profit.

202.I accept Ps suffered a loss in their businesses during the time they were in possession of Stalls. Some Ps complained of poor business as early as October 2002 and they all said there was a marked reduction of the flow of customers by November 2002. With such poor business turnover and Ps having incurred capital expenditure just shortly before Stalls opened for business, it is improbable that Ps made a profit. I accept that Ps were unable to sustain their businesses and they suffered loss. But Ps have not been able to establish the measure of such loss. The tortious measure of damages does not turn on whether the businesses were profitable or otherwise. It is succinctly summarised by Lord Denning MR in Doyle’s case (supra) at p. 167 as follows :

“	…… The object of damages is to put the plaintiff in as good a position, as far as money can do it, as if the promise had been performed. In fraud, the defendant has been guilty of a deliberate wrong by inducing the plaintiff to act to his detriment. The object of damages is to compensate the plaintiff for all the loss he has suffered, so far, again, as money can do it ……
	…… For instance, in this very case Mr. Doyle has not only lost the money which he paid for the business, which he would never have done if there had been no fraud: he put all that money in and lost it; but also he has been put to expense and loss in trying to run a business which has turned out to be a disaster for him. He is entitled to damages for all his loss, subject, of course to giving credit for any benefit he has received……” (my emphasis)

203.This need to bring into the equation the benefits received by the representee in assessing loss is affirmed by Lord Browne-Wilkinson in his seven principles for assessing damages for fraudulent misrepresentation in Smith New Court Securities Ltd v Scrimigeour Vickers (Asset Management) Ltd [1997] AC 254, 266-167 (Chitty on Contracts (supra) para.6-050 at pp.455-456). Since Ps have not led evidence on the benefits received by reason of Licences, namely, income generated by their businesses when they were in possession of Stalls, nothing more than nominal damages could now be awarded other than the return of deposits less unpaid licence fee and outgoings prior to rescission.

XXII. Conclusion

204.Rescission is the act of the parties. It has been said the remedy is not necessarily a judicial one and a representee is entitled to rescind for misrepresentation without invoking the assistance of the court at all. However, D in this case denied making any misrepresentation and disputed Ps’ acts of rescission. It went further to claim that Ps repudiated Licences and issued counterclaims on such basis. It is appropriate for Ps to issue Actions to seek declarations that Licences were validly rescinded and I grant such declaration in each of the 6 Actions.

205.In respect of 520, 521, 522 and 523 Actions, each P is entitled to a return of his/her respective licence fee deposit being item 1 of paragraph 193 above less the licence fee, management fee, air-conditioning charges and rates for their respective Stalls from 1^st to 20^th January 2003. In respect of 519 Action, KS Cheung is entitled to a return of the licence fee deposit being item 1 of paragraph 193 above less the licence fee, management fee, air-conditioning charges and rates for the relevant Stalls from 1^st to 24^th January 2003. In respect of 747 Action, SM Lam is entitled to a return of the licence fee deposit of HK$42,428.00. There will judgment for each P against D for the respective amounts referred to above in each Action with interest thereon at the rate of 8.245% pa from the date of the issuance of the writ of summons to the date hereof and thereafter at judgment rate until payment.

206.Since the parties do not dispute the amounts of the licence fee deposits and the monthly licence fee, management fee, air-conditioning charges and rates payable for each relevant Stall, I direct that Ps do within 14 days from the date hereof submit a draft order/judgment for the court’s approval together with a breakdown of the calculation of the aforesaid judgment sums. The draft order/judgment and breakdown are to be first served on D for their consideration of the arithmetical calculation before lodging for the court’s approval. There be liberty to apply.

207.In light of the aforesaid conclusions, D’s counterclaim in each Action is dismissed.

208.There is no reason why costs should not follow event. I therefore grant a costs order nisi that each P shall have costs of his/her respective Action (including costs of D’s counterclaim and all costs reserved, if any) to be taxed if not agreed with certificate for counsel.

Mr Victor Dawes instructed by Messrs Lee Chan Cheng for the Plaintiffs.

Mr Stanley Siu instructed by Messrs C P Cheung & Co for the Defendant.