Wong Jack Keung Victor and Another v. Wai Ping Luen and Another
Read the full judgment text of DCCJ 2539/2005 on BabelCite. This District Court judgment.
1. The Defendants were/are the owners of a property known as Unit 1 on the 6 th Floor of Block 40, Heng Fa Chuen, No.100 Shing Tai Road, Hong Kong (the “ Property ”). The following facts are not disputed.
Cited by 1 case · Cites 5 cases
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DCCJ2539/2005 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION CIVIL ACTION NO. 2539 OF 2005 ____________ BETWEEN
____________ Before: Her Honour District Judge Marlene Ng in Chambers (Open to Public) Date of Hearing: 6th December, 2005 Date of Handing Down Judgment: 19th December, 2005 _______________ J U D G M E N T _______________ Introduction 1.The Defendants were/are the owners of a property known as Unit 1 on the 6th Floor of Block 40, Heng Fa Chuen, No.100 Shing Tai Road, Hong Kong (the “Property”). The following facts are not disputed. 2.The Provisional Agreement for Sale and Purchase dated 19th February 2005 on its face states that it was made by the Defendants as vendors and the Plaintiffs as purchasers (the “Agreement”) and that the Defendants agreed to sell and the Plaintiffs agreed to purchase the Property for the price of HK$5,080,000.00. On the same day, the Plaintiffs paid to the Defendants a cheque in the sum of HK$160,000.00 as initial deposit and part payment of the purchase price (the “Cheque”). 3.The Agreement provides as follows :
4.By a letter dated 21st February 2005 to the Defendants’ solicitors, the Plaintiffs’ solicitors stated they act for the intended purchasers of the Property (ie the Plaintiffs) and “understand that you act for the Vendors thereof”. They enclosed a copy of the Agreement and asked for the Defendants’ solicitors’ draft Formal Agreement for Sale and Purchase and all the title deeds and documents for their approval and perusal on behalf of the Defendants. 5.By a letter dated 4th March 2005 to the Defendants’ solicitors and pursuant to clause 2(b) of the Agreement, the Plaintiffs’ solicitors sent their cheque in the sum of HK$348,000.00 being the further deposit and part payment of the purchase price of the Property in favour of the Defendants’ solicitors as stakeholder. 6.By a letter in reply on the same day, the Defendants’ solicitors said they were instructed by “the Vendor” (referred to in the caption of the letter as the 1st and 2nd-named Defendants) that “the Vendor” would not proceed with and complete the sale of the Property under the Agreement “and the same be cancelled”. The Defendants’ solicitors also returned the cheque for the sum of HK$348,000.00. 7.By a letter dated 8th March 2005 to the Defendants’ solicitors, the Plaintiffs’ solicitors claimed that the Defendants’ failure to proceed with and complete the sale of the Property amounted to a repudiation of the Agreement and the Plaintiffs thereby accepted such repudiation. The Plaintiffs’ solicitors then demanded payment in the sum of double deposit pursuant to clause 7 of the Agreement and requested the Defendants’ solicitors to tender their draft Cancellation Agreement for approval. 8.By a letter dated 14th April 2005 to the Defendants’ solicitors, the Plaintiffs’ solicitors demanded the return of the Cheque forthwith. 9.By a letter dated 21st October 2005 (ie after the Plaintiffs issued the present summary judgment application) to the Plaintiffs’ solicitors, the Defendants’ solicitors stated that the Defendants had just found the Cheque and they were instructed to forward it to the Plaintiffs’ solicitors for return to the Plaintiffs. The present proceedings 10.The Plaintiffs claims that the Defendants have wrongfully repudiated the Agreement and the Plaintiffs are entitled to the sum of HK$160,000.00 as liquidated damages pursuant to clause 7 of the Agreement. By a summons dated 30th September 2005, the Plaintiffs apply for summary judgment. 11.Apart from verifying the Plaintiffs’ claim as aforesaid, the 1st-named Plaintiff in his affirmation dated 29th September 2005 confirms that the 2nd-named Plaintiff is his wife and that he met the 1st-named Defendant twice at the Property. The first time was on/about 16th February 2005 when through the service rendered by the estate agent Mr Tin Wai Kong (“Mr Tin”) the 1st-named Defendant was introduced to the Plaintiffs as the intended purchaser of the Property. The second time was on 19th February 2005 when the Plaintiffs met the 1st-named Defendant again in Mr Tin’s presence during inspection of the Property prior to signing the Agreement. 12.The Defendants filed their Defence on 2nd July 2005. They filed the affirmation of the 1st-named Defendant to oppose the summary judgment application. The Defendants rely on the following defences : (a) misrepresentation by Mr Tin as the Plaintiffs’ agent, (b) non est factum and (c) the stipulated sum in clause 7 of the Agreement is not a genuine pre-estimate of loss at the time of contract. The 2nd-named Defendant further claims she has not authorised the 1st-named Defendant to enter into the Agreement. Mr Ng, counsel for the Defendants, abandons the defence of collateral contract at the hearing. The Plaintiffs has not filed any affirmation in reply. Law on summary judgment applications 13.There is no dispute as to the relevant principles for summary judgment applications. A plaintiff may invoke the procedure under Order 14 of the Rules of the District Court where there is no valid defence to his claim or otherwise a triable issue. The rationale is set out in Hong Kong Civil Procedure 2004 Vol.1, para.14/4/1 at p.159 as follows :
14.In Ng Shou Chun v Hung Chun San [1994] 1 HKC 155, Godfrey J noted that it was not appropriate to embark on a mini-trial of the action on affidavit evidence. The court should ask itself the question whether what the defendant says is credible or believable. If so, he must have leave to defend; if not, the plaintiff is entitled to summary judgment. Misrepresentation defence (a) Defence and relevant affirmation evidence 15.The Defendants claim as follows :
16.Although the Defendants in their Defence claim that they have never met the Plaintiffs nor have any contact, discussion or correspondence with the Plaintiffs and that they “totally did not know the Plaintiffs”, the 1st-named Defendant in his affirmation accepts he met the 1st-named Plaintiff on 19th February 2005. Although there is some conflict between the parties as to the number of occasions they met, there is no evidence of any direct negotiations or discussions between the parties. (b) Issues 17.The Defendants argue that since the 1st-named Defendant was induced by the misrepresentations of Mr Tin, the Plaintiffs’ agent, to sign and initial the Agreement, there is no binding contract between the parties or alternatively the Agreement ought to be rescinded. 18.Mr Ng and Ms Wong, counsel for the Plaintiffs, agree the misrepresentation defence raises the following issues :
I bear in mind that at this stage it is sufficient to show an arguable or triable issue or, to put it in any way, a believable or credible case on the above issues. (c) Representation 19.Even on the affirmation evidence adduced by the Defendants, there is dispute between the parties as to what is the representation that led the Defendants to enter into the contract for the sale and purchase of the Property. 20.Mr Ng submits that the negotiations for the sale and purchase of the Property took place over a very short period. The 1st-named Defendant told Mr Tin about the Condition once in mid-February 2005 and twice on 19th February 2005, so Mr Tin must have known the Condition was the Defendants’ fundamental requirement. Mr Ng tries to explain why the Defendants imposed the Condition, but the affirmation evidence does not give further elaboration than it was for their personal reasons. Mr Ng submits that Mr Tin must have by (a) putting together the deal for the parties, (b) urging the 1st-named Defendant to sign the blank provisional agreement for sale and purchase without mentioning or explaining its terms, (c) promising to negotiate good terms for the Defendants in respect of the deal, (d) urging the 1st-named Defendant to initial the Agreement without explanation and (e) revealing the Cheque only after the 1st-named Defendant had initialled the Agreement made an implied representation that the Condition would be fulfilled and become part of the Agreement (the “Implied Representation”). 21.In support thereof, Mr Ng refers to Spice Girls Ltd v Aprilia World Service BV The Times, April 5, 2000, Ch D (reversed in part on other grounds [2002] EWCA Civ 15) cited in Chitty on Contracts 29th ed Vol.1 para.6-009 at p.433 as follows :
22.Ms Wong submits that the affirmation of the 1st-named Defendant does not support the Implied Representation. She argues that it would not have been necessary for the 1st-named Defendant to repeat the Condition to Mr Tin several times if the Implied Representation was the relevant representation that induced the Defendants to enter into the contract for the sale and purchase of the Property. 23.Ms Wong says that at best the affirmation evidence merely suggests that the 1st-named Defendant signed the blank provisional agreement for sale and purchase because Mr Tin allegedly made the 1st Representation. But to support a plea of misrepresentation, Ms Wong says the representation relied on must be a false statement of fact, past or present, made to the representor or his agent which operates on the representee’s mind to induce him to enter into a contract (Chitty on Contracts 29th ed. Vol.1 paras.6-004 and 6-031). It is said that here the 1st Representation is a mere promise by Mr Tin of a future event, so it cannot constitute any misrepresentation (Halsbury’s Laws of England 4th ed Vol.31 para.1009 at p.619). Ms Wong further submits that the Implied Representation is merely counsel’s submission, which is unsupported by evidence. 24.Mr Ng confirms at the hearing that the 1st Representation is merely background information and is not the representation the Defendants rely for their misrepresentation defence. In the circumstances, there is no need for me to consider whether the 1st Representation is arguably capable of supporting a plea of misrepresentation. I now turn to the Implied Representation. 25.It is true that the affirmation of the 1st-named Defendant states that he signed the provisional agreement for sale and purchase in blank in reliance of the 1st Representation and as a result of pressure from Mr Tin. Ms Wong seems to suggest such evidence means the 1st-named Defendant did not rely on the Implied Representation at the time it entered into the contract for the sale and purchase of the Property, so that I can safely ignore the Condition which the 1st-named Defendant told Mr Tin both before and after his signing thereon. 26.I bear in mind that for the purpose of the present application, the factual matters set out in the affirmation of the 1st-named Defendant are largely uncontroverted. I do not consider it is appropriate to adopt the narrow view of the affirmation evidence or of the Defence as contended by Ms Wong. The relevant time for consideration is the time when the contract was actually concluded or made (see Chitty on Contracts 29th ed Vol.1 para.6-018 at pp.439-440). At the time when the 1st-named Defendant signed the provisional agreement for sale and purchase in blank, the Plaintiffs had not yet signed such document. The 1st-named Defendant in signing such document is arguably making an offer and not a concluded contract for sale and purchase of the Property. The Plaintiffs then signed the Agreement, but they did not accept the terms of the Agreement in their entirety. It is arguable that they made a counter-offer by deleting and initialling some of the express provisions in the Agreement, so that the contract for the sale and purchase of the Property was only made or concluded when the 1st-named Defendant acknowledged such counter-offer by initialling the Agreement. In those circumstances, having regard to the material facts as pleaded in the Defence and deposed in the affirmation of the 1st-named Defendant, and the Defendants’ assertions in respect of the dealings that led up to the contract, I find the assertions in respect of the existence of the Implied Representation and that it amounts to a representation that is capable of supporting a plea of misrepresentation arguable. 27.I note also from the affirmation evidence that Mr Tin on 19th February 2005 assured the 1st-named Defendant he would ask the intended purchaser to fulfil the Condition (thereby implicitly to make it a term of the contract for the sale and purchase of the Property). The Defendants further claim that later on the same day, Mr Tin, knowing the Cheque was made payable to the Defendants’ solicitors despite the assurance he gave to the 1st-named Defendant, still asked the 1st-named Defendant to initial the Agreement already signed by the Plaintiffs without drawing the 1st-named Defendant’s attention to the stakeholder provision in clause 2 of the Agreement and/or the name of the payee of the Cheque. The 2nd Representation made by Mr Tin to the 1st-named Defendant (even though it was made after the latter initialled the Agreement) is arguably itself a representation made with a view to buttress the Defendants’ belief that they could get their hands on the initial deposit, which was the goal of the Condition. (d) Mr Tin’s authority 28.Since the Implied Representation and/or 2nd Representation were made by Mr Tin and not by the Plaintiffs directly to the 1st-named Defendant, establishing the existence of the above-mentioned representations cannot carry the Plaintiffs’ case very far unless it can also be shown that Mr Tin made those representations on behalf of the Plaintiffs. 29.The following propositions are not disputed :
30.However, the parties dispute Mr Tin’s role in making the Implied Representation and/or the 2nd Representation. Mr Ng submits that Mr Tin was acting as the Plaintiffs’ agent. He points out there is no evidence of direct negotiations between the parties, so Mr Tin must have negotiated the sale of the Property on behalf of the Plaintiffs. Ms Wong submits that there is no sufficient evidence to support any arguable or triable case that Mr Tin was acting for the Plaintiffs when he made the Implied Representation and/or the 2nd Representation. 31.The authorities cited by both counsel illustrate that the role and authority of the estate agent in making any representation turn on the factual circumstances. 32.In Welltech Investment Ltd v Easy Fair Industries Ltd [1996] 4 KC 711, the purchaser sought to rescind the agreement for sale and purchase of the suit property on the ground that it was induced to enter into the contract by the vendor’s representation (through the estate agent) in relation to rights over the green area shown on the plan. The vendor contended that the estate agent was the purchaser’s agent and the representations were not within the scope of the estate agent’s authority as the vendor’s agent. The estate agent said (and it was not challenged) that whatever information and assurances she gave to the purchaser were made on the vendor’s instructions. It was held that the vendor chose to instruct the estate agent to offer the property for sale, so the estate agent was the vendor’s agent. It was further held that the estate agent made the representation within the scope of her authority, actual or ostensible, as the vendor’s agent. 33.In Cheng Kwok Fai’s case (supra), the estate agent gave the purchaser a sketch of the property produced from the estate agent’s own records and not from the vendor. The sketch misrepresented the area of the suit property. It was held that the representation was not made on the vendor’s behalf since the estate agent did not have actual or ostensible authority to supply the purchaser with the sketch from his own records. In doing so, the agent was acting on behalf of the purchaser. 34.In Green Park Properties Ltd v Dorku Ltd [2000] 1 HKLRD 400, the purchaser sought to rescind the agreement for sale and purchase of the suit property on the ground that the vendor misrepresented that the backyard was part of the suit property by conduct, by a tenancy plan shown by the estate agent and by breaching the duty of disclosure. The vendor argued that even if there were such misrepresentation, the estate agent did not make such representation on its behalf since inter alia it acted as broker for both parties. The court held that there was a misrepresentation and the estate agent acted as agent for the vendor at the inspections and the subsequent discussions. Whilst the estate agent might well have been acting for the purchaser in presenting the offer, it did not preclude it from being the vendor’s agent before that. 35.In Tai Sang Kung Ltd v Paraking Ltd & Anor [2001] 4 HKC 61, the purchaser failed to establish that the vendor and/or its estate agent misrepresented (a) the floor area of the suit property and (b) that part of the common area was owned by the vendor. Chung J endorsed the role of estate agents in Hong Kong as stated in Cheng Kwok Fai’s case (supra) and found that the subject estate agent to be nothing more than an introducer of the suit property. There the estate agent disclosed all the relevant facts to the purchaser and the decision whether to purchase the suit property and on what terms rested with the purchaser. 36.It is therefore necessary to turn to the factual evidence adduced by the Defendants to see whether there is any arguable or triable case on this issue to be left for trial. It is necessary to bear in mind that an estate agent may assume different roles at different stages of the negotiation leading to the transaction and the question of fact at hand is whether an estate agent was acting for a particular party at a particular stage of the negotiating process (Green Park Properties Ltd’s case (supra) and Yili Concepts (HKG) Limited v Lee Wai Chuen & anor HCA12911/1997 Deputy Judge S Kwan (as she then was) (unreported, 29th September 2000) at paras.47 and 51 as approved in Jopard Holdings Limited v Ladefaith Limited & anor HCA3775/2001 Recorder B Yu SC (unreported, 12th November 2004)). 37.Such approach is also echoed in Empire Trend Enterprises Ltd v Double Mind Co Ltd [2001] 1 HKC 302, a case cited by Ms Wong. In that case, the parties conducted preliminary inspections and negotiations through their respective estate agents (ie different staff members of the same estate agency company that represented both vendor and purchaser). An issue arose over some unauthorised structures. The vendor claimed there was a collateral agreement whereby the purchaser agreed to demolish the structures at its own expense, so the purchaser accepted the suit property with a defect in title. The negotiations mainly took place over one evening with the estate agents constantly receiving instructions by telephone from the purchaser’s director who finally agreed to the terms. The provisional agreement for sale and purchase was signed that evening. It was held that the purchaser’s director was unlikely to have been aware of the structures or their extent until after the agreement and that the estate agents were nothing more than a go-between to relay offers and proposed terms. 38.Deputy Judge Woolley said at pp.312-313 as follows :
39.Turning to the Defendants’ Defence and the affirmation of the 1st-named Defendant, there is no evidence of any actual authority granted by the Plaintiffs to Mr Tin to make the Implied Representation and/or 2nd Representation. Is there an arguable or triable case that Mr Tin had apparent or ostensible authority from the Plaintiffs in making those representations? I find there is no sufficient evidence to establish an arguable or triable case that the Plaintiffs have clothed Mr Tin with any such apparent or ostensible authority. The facts the Defendants rely on are that the Plaintiffs accompanied Mr Tin to inspect the Property on 19th February 2005 and that they signed the Agreement. Although Mr Ng says that Mr Tin must have negotiated the sale of the Property on behalf of the Plaintiffs, there is no evidence of to and fro negotiations on the price and other terms of the sale and purchase of the Property. 40.Neither counsel refers to the Estate Agents Ordinance Cap.511 or the Estate Agents Practice (General Duties and Hong Kong Residential Properties) Regulation. There is no evidence that the authority of Mr Tin and his estate agency company, purportedly licensed estate agents according to the licence numbers stated in the Agreement, went further than the statutorily prescribed Property Information Form and the Estate Agency Agreement for Sale of Residential Properties in Hong Kong to cover the Implied Representation and/or 2nd Representation. 41.I also note the printed stakeholder provision in clause 2 in the Agreement that was placed before the 1st-named Defendant for signing. He complained in his affirmation that he was not told or explained about the contents of the Agreement, but he did not expressly say he did not or was unable to read the document or clause 2 therein. Further, although the Plaintiffs have seen fit delete and initial certain printed provisions of the Agreement, they have not done so vis-à-vis the printed stakeholder provision, which remained intact when the Agreement signed by the Plaintiffs was again presented to the 1st-named Defendant for initialling. Again the 1st-named Defendant claimed in his affirmation that he was not told and explained the terms or the effect of his initials, but he did not expressly say he did not or was unable to read the document or clause 2 therein. 42.The Plaintiffs’ conduct in (a) not deleting the stakeholder provision in the Agreement and returning such signed version of the Agreement to Mr Tin to show to the vendor and (b) issuing the Cheque on the same day making it payable to the Defendants’ solicitors and giving it to Mr Tin to forward to the vendor speak against the Plaintiffs having clothed Mr Tin with apparent or ostensible authority to make the Implied Representation and/or 2nd Representation to the 1st-named Defendant. There is also no evidence of conduct on the part of the Plaintiffs to ground any reasonable belief on the part of the 1st-named Defendant that the Plaintiffs have clothed Mr Tin with such authority. 43.For the above reasons, the evidence adduced by the Defendants at best shows, as Mr Ng suggests, that Mr Tin was authorised to go between the parties to put together the deal in respect of the Property. The Defendants have not begun to establish any arguable or triable case that the Plaintiffs have clothed Mr Tin with apparent or ostensible authority to make the Implied Representation and/or 2nd Representation. It is different in Welltech Investment Ltd’s case (supra) where there is uncontradicted evidence that the information and assurances given by the estate agent was on the instructions of the vendor and in Green Park Properties Ltd’s case (supra) where the vendor was aware that the tenancy plan might be misleading but it still allowed inspection of the suit property without disabusing the estate agent of the apparent impression that the yard was part of the suit property itself. 44.Ms Wong further submits that the Implied Representation and/or 2nd Representation are outside the scope of Mr Tin’s authority as an estate agent because the Condition (which removes the protection of the stakeholder clause) is detrimental to the Plaintiffs, so the Plaintiffs are not bound by such representations (Bowstead and Reynolds on Agency 17th ed paras.3-008 – 3-009 at pp.95-96). I need not consider this argument in detail, but suffice to say it lends strength to the above conclusion that there is no believable or credible evidence that Mr Tin has been clothed with apparent or ostensible authority from the Plaintiffs to make the Implied Representation and/or 2nd Representation. 45.Ms Wong further submits that the alleged misrepresentation defence is incredible. There is no mention of such defence in the correspondence between the parties’ solicitors prior to the filing of the Defence. There is also no explanation for such reticence. Even when the Defendants’ solicitors wrote on 4th March 2005 to say “the Vendor” would not proceed with and complete the sale of the Property under the Agreement, there was no reference of such misrepresentation defence. This must be considered in the context of the 1st-named Defendant’s assertions that he discovered the truth upon receiving legal advice on 20th February 2005 and that he even proceeded to cancel the Agreement by so informing Mr Tin on 22nd February 2005. There is also no protest even when the Plaintiffs’ solicitors by letter dated 8th March 2005 claimed that the Defendants repudiated the Agreement. These matters also lend strength to the conclusion that there is no credible or believable misrepresentation defence. (e) Inducement 46.Mr Ng submits that the evidence shows that the 1st-named Defendant relied on the Implied Representation (later shown to be false) when he signed and initialled the Agreement. When the 1st-named Defendant discovered such falsity upon taking legal advice, he immediately demanded a replacement cheque to be made payable to the Defendants and when informed that the Plaintiffs refused to do so, he immediately refused to sell the Property. However, given my conclusion above in respect of the scope of Mr Tin’s authority, there is no need to consider this issue. (f) Summary 47.In the circumstances, the Defendants have failed to establish any arguable or triable misrepresentation defence. Non est factum defence 48.The Defendants rely on the defence of non est factum. In the context of the present case, such defence raises two issues : (a) whether such plea is still maintainable where the Defendants understood the character and nature of the Agreement and (b) the effect of the 1st-named Defendant signing the provisional agreement for sale and purchase in blank. 49.Mr Ng submits that the 1st-named Defendant was misled into signing the blank provisional agreement for sale and purchase which was essentially different from what he intended to sign. He relies on the following passage from Chitty on Contracts 29th ed Vol.1 para.5-090 at pp.418-419 :
50.The 1st-named Defendant in his affirmation claims that he was not told or explained the terms of the blank provisional agreement for sale and purchase. Mr Ng submits that the 1st-named Defendant was given only a short time to sign the blank provisional agreement for sale and purchase and he was not given a chance to read it. There is, however, no direct evidence on these matters although the 1st-named Defendant claims Mr Tin pressed him to sign the document. The 1st-named Defendant claims that later on in the same evening, he was asked to initial the Agreement without being told or explained the terms (but again he did not expressly say he did not or was unable to read it). It was only after he signed/initialled the Agreement that he discovered the Cheque was made out to the Defendant’s solicitors in breach of the Condition. But he was persuaded to accept the Cheque by Mr Tin’s further misrepresentation, ie the 2nd Representation. 51.In essence, the complaint is that the payment terms of the Agreement (particularly in relation to the stakeholder provision) were materially different from the Condition imposed by the 1st-named Defendant. Mr Ng submits that in the absence of countervailing evidence on the above factual matters, it amounts to strong support for the Defendants’ contention that there was lack of intention on the part of the 1st-named Defendant to enter into the contract as shown by the Agreement. 52.In my view, the factual evidence relied by the Defendants are insufficient to raise a plea of non est factum. As is apparent from the italicised part of the extract from Chitty on Contracts (supra) referred to in paragraph 49 above and in para.5-089 at p.418, it must be shown that the party asserting such defence signed the document mistaking its true nature. Such defence is not available when the party knew the nature of the transaction he was entering into. Lord Reid in Saunders v Anglia Building Society [1971] AC 1004, 1016 said as follows :
Viscount Dilhorne also said at p.1022 as follows :
53.In Kincheng Banking Corp v Kao Yu Kuei [1986] HKC 242, the Court of Appeal held that whether the guarantor understood all the contents of the document was not relevant. The burden was on the guarantor to show that he thought he was signing a document of a different nature; it was not for the other party to establish that the guarantor did not know the contents of the document. In that case, the guarantor admitted that he was a guarantor and he had signed a guarantee. He claimed he did not know that a guarantor was liable to repay, but it was held he knew by the document that he was undertaking an obligation in relation to a liability of the principal debtor although he did not appreciate its full legal effect. Huggins VP held that the guarantor’s ignorance of the precise effect of the document was a very different thing from non est factum : it did not constitute a defence to the action. 54.In Chiu Kam Shum v Chak Choi Kwan and anor HCA4895/1992, Deputy Judge Pang (as he then was) (unreported, 8th December 1995), the attorney for the owner signed the provisional agreement for sale and purchase of the suit property. He claimed he thought the document was for receiving a deposit for the property, which assertion the court found to be unconvincing. The attorney was a serving police officer and was expected to be careful in appending his signature to any document. The document clearly stated it was a provisional agreement for sale and purchase in both Chinese and English languages and the attorney received a cheque of HK$50,000.00 at the same time. There were discussions about the sale of the property, so it would have been clear to the attorney that he was creating a legal relationship with the purchaser for the sale of the property. 55.Here, the 1st-named Defendant admits he was aware that he was signing and initialling a provisional agreement for the sale and purchase of the Property. The 1st-named Defendant plainly knew that the subject transaction handled by Mr Tin was for the sale of the Property. He said Mr Tin invited him to his office on 19th February 2005 for signing a provisional agreement for sale and purchase. The Agreement is titled “臨時買賣合約PROVISIONAL AGREEMENT FOR SALE AND PURCHASE” and there is no suggestion that the 1st-named Defendant is illiterate. Mr Tin even asked the 1st-named Defendant the name of the Defendants’ solicitors for handling the sale of the Property. These facts plainly show there could not have been any mistake on the part of the 1st-named Defendant as to the nature of the document. At best, the parties were not ad idiem on the payment terms and according to the above authorities, it is quite insufficient to support a plea of non est factum. 56.But assuming that the 1st-named Defendant did not read the provisional agreement for sale and purchase on the two occasions when he signed in blank and initialled it, the available facts before me suggest that he has been careless or negligent. The printed Agreement (even in blank form) contains the stakeholder provision in clause 2. Had the 1st-named Defendant read the Agreement, he would have realised there was the stakeholder provision and it had not been deleted. Ma J (as he then was) held in Wing Hang Bank Ltd v Liu Kam Ying & ors [2002] 2 HKC 57 that there was no reason why a man of full age and capacity should not be bound by the terms of the guarantee which clearly stated his liability on a personal basis when there was no allegation that he was unaware that what he was signing was a guarantee and he was negligent in not reading the terms. In Sun Hung Kai Credit Ltd v Szeto Yuk Mei & ors [1985] 1 HKC 345, it was held that although the guarantor was mistaken as to the nature of the document he was signing, he was not illiterate and was extremely careless in signing a blank form without looking at the rest of the document. Had he cast his eye over the other pages of the document, it would have alerted him to the fact that the document was not one that solely dealt with the transfer of ownership of the vehicle in question. The plea of non est factum failed in both of these cases. I find that the Defendants in the present proceedings have not discharged the onus of establishing an arguable or triable defence of non est factum. Rather the factual evidence before me suggest that the 1st-named Defendant has been careless or negligent in signing the Agreement in blank (Saunders’ case (supra) and Chitty on Contracts 29th ed. Vol.1 para.5-091 at p.419). 57.Both counsel refer to the case of Mercantile Credit Co Ltd v Hamblin [1965] 2 QB 242, which I do not find helpful in supporting a plea of non est factum in the context of the present case. 58.In that case, a motor dealer was supplied by a finance company with its standard hire purchase proposal forms. The defendant asked the motor dealer if he could obtain a loan on the security of her car. The motor dealer agreed to make enquiries and gave a blank cheque for her to fill in if she agreed to the terms of the proposed loan that he would inform her after his enquiries. He suggested that the necessary documents be signed first in order to avoid unnecessary delay. The defendant signed certain forms handed to her by the motor dealer’s wife in blank without reading them in the belief that they were mortgage documents and she left them with the motor dealer pending his enquiries. It turned out that they were hire-purchase documents and the motor dealer filled in the blank particulars on the forms to certify inter alia that he as supplier had absolute title to the car. The finance company accepted the hire purchase proposal and paid the defendant and the motor dealer for the purported sale. The defendant refused to pay the instalments. 59.It was held “[on] the peculiar facts of this case” (per Pearson LJ at p.275) or “in the special circumstances of this case” (per Salmon LJ at p.279) that the defendant was not negligent. The defendant was well acquainted with the motor dealer, who was apparently respectable, solvent and prosperous, and the blank cheque given to the defendant gave her confidence she could rely on his due performance of the arrangements they had made. The defendant had every reason to trust and not doubt the motor dealer. 60.I was referred to the judgment of Salmon LJ at pp.279-280 as follows :
It should be noted that Salmon LJ’s view, namely, that non est factum was inapplicable because it was only relevant when the supposed document as signed created some liability on the signatory and could not apply to documents signed in blank, was the minority view. Pearson LJ (whose judgment Sellers LJ endorsed) at pp.267-268 referred to Mushkam Finance Ltd’s case (supra), which drew a distinction between misrepresentation of the character and class of the document in question and misrepresentation simply as to its contents, the latter of which was insufficient to support a plea of non est factum. He held that there was no real misrepresentation in that case because the defendant did not have any positive belief that the documents she signed were mortgage documents, and that those documents were of the class and character which she had in mind, being documents capable of being used for raising money on the security of the car. 61.In the present circumstances, irrespective of whether the 1st-named Defendant by signing the provisional agreement for sale and purchase in blank authorised Mr Tin, either expressly or impliedly, to complete the document for him, there is no arguable or triable plea of non est factum since there is no evidence that the 1st-named Defendant misunderstood the class, nature or character of the Agreement. Genuine pre-estimate of loss at the time of contract 62.Although this has not been raised in either the Defence or in the affirmation of the 1st-named Defendant, Mr Ng alternatively argues that the sum fixed in clause 7 of the Agreement (ie HK$160,000.00 or 3.14% of the purchase price of the Property) is not a genuine pre-estimate of loss at the time of contract. He refers to Sihombing and Wilkinson, Hong Kong Conveyancing (2003) Vol.2(D) para.[61.7] at pp.XV 662-663 as follows :
63.I do not understand from Mr Ng’s submissions that the Defendants dispute the viability of a clause in the provisional agreement for sale and purchase of property similar to the formulation as clause 7 of the Agreement. In my view, this stance is correct (Wong Lai-fan v Lee Ha [1992] 1 HKLR 125 and Chiu Wai Ling v Chan Yau Chi & anor (Centaline Property Agency, third party) [2002] 2 HKC 154). It was held in Wong Lai-fan’s case (supra) that parties to a provisional agreement for sale and purchase of property might limit their damages for non-completion provided a correct formula for drafting was adopted. The Court of Appeal in that case further held that the true and proper construction of the relevant clause (similar to clause 7 of the Agreement) was that it provided the vendor with the option of immediately paying the amount stipulated instead of completing and upon doing so it was not open to the purchaser to take action either to claim damages or to seek specific performance. 64.Such practice of asking for compensation in the sum of double deposit is also referred to in Sung Wai Kiu and anor v Wong Mei Yin HCA3979/1994, Yeung J (as he then was) (unreported, 17th January 1997) as follows :
Such view was endorsed by Chan CJHC (as he then was) when he delivered the appeal judgment of the Court of Appeal (Li Pui Wan v Wong Mei Yin [1998] 1 HKLRD 84). 65.It appears that Mr Ng’s objection is that the quantum of the compensation or liquidated damages provided in clause 7 of the Agreement suggests that the clause is a penalty and not a genuine pre-estimate of loss. 66.Ms Wong submits that the first instance and appeal judgments in Sung Wai Kiu’s case (supra) suggest it was established common practice that forfeiture of a deposit or compensation that amounted to not more than 10% of the purchase price was not a penalty and was deemed reasonable. However, the facts of that case concerned the sale and purchase of New Territories small houses. The parties entered into an oral agreement whereby the vendor sold to the purchaser certain share in a property with the exclusive right, use and enjoyment of part of a small house to be erected on the property for the price of HK$500,000.00. The purchaser paid a total sum of HK$400,000.00 on 4 successive occasions as deposit. It was held that such sum was not a true deposit but a partial payment of the purchase price. 67.In that case, the provisional agreement did not provide for the signing of a formal agreement for sale and purchase, so it is not surprising that the court compared the compensation sum against the usual and reasonable practice of fixing the deposit at 10% of the purchase price (normally payable at the time of the signing of the formal agreement of sale and purchase). Further, the parties did not mention, let alone agree upon, how much either party should compensate the other in case of breach. Since the parties had no agreement as to setting the deposit at 10% of the purchase price nor did they agree to take 10% of the purchase price as reasonable liquidated damages, the purchaser’s claim for compensation in the sum of double deposit could not succeed. 68.I do not consider either the first instance or appeal judgments of Sung Wai Kiu’s case (supra) of assistance in the context of the present case save for the following guidance from Chan CJHC (as he then was) at p.92 :
After all, the Agreement in the present proceedings expressly provides for the payment of the initial deposit at the signing of the Agreement and for a further deposit (which together forms 10% of the purchase price) upon the signing of the formal agreement for sale and purchase 14 days after the date of the Agreement. The Agreement also expressly sets out the formulation for compensation in the event of default by either party. In such circumstances, I find Chiu Wai Ling’s case (supra) cited by Mr Ng more pertinent. 69.In Chiu Wai Ling’s case (supra), the vendors and purchaser entered into a provisional agreement for the sale and purchase of the suit property. Requisitions were not answered and the purchaser accepted the vendors’ repudiatory breach. The purchaser brought an action for inter alia the return of the deposit and liquidated damages under a clause similar to clause 7 of the Agreement. It was held that the sum fixed under the said clause being a sum equivalent to 10% of the purchase price was not a genuine pre-estimate of the loss at the time when the parties signed the provisional agreement. H H Judge Lok referred to Sung Wai Kiu’s case (supra) and held that the court would not blindly enforce a contractual term which required the defaulting party to pay a sum which was equivalent to 10% of the purchase price as liquidated damages. Ultimately, that remained a question of fact in each individual case, and the court had to inquire whether such sum was a genuine pre-estimate of the loss agreed by the parties. 70.In Chiu Wai Ling’s case (supra), the undisputed evidence of the estate agent clearly showed that it was customary to ask an intended purchaser to pay 1% to 3% (but not as high as 10%) of the purchase price as an initial deposit. This was because a formal sale and purchase agreement would usually be signed by the parties 7 to 14 days after the date of the provisional agreement and the clause gave an option to the parties to back out, so the sum fixed as “liquidated damages” would only have been intended by the parties to cover any fluctuation in value of the property during this short period of time. Further, there was no evidence that the parties had actually discussed the issue. 71.Here, there is express provision in the Agreement for agreed compensation in the sum of double deposit and the amount of the initial deposit is also expressly stipulated. The onus of proving that a stipulated sum is a penalty rather than liquidated damages is upon the party against whom the stipulated sum is claimed (McGregor on Damages 17th ed. para.13-012 at pp.424-425). 72.With the above principles and onus of proof in mind, I now turn to the available pleadings and affirmation evidence before me. The sum of HK$160,000.00 amounts to 3.14% of the purchase price. What is clear from Chiu Wai Ling’s case (supra) is that an initial deposit close to 10% of the purchase price cannot be a genuine pre-estimate of loss unless there are special circumstances. But it does not say that a lesser sum will necessarily attract criticism of being a penalty. McGregor on Damages 17th ed. para.13-014 at pp.425-426 suggests that a realistic approach should be taken. So long as it is not extravagant, having regard to the range of losses that it could reasonably be anticipated it would have to cover at the time the contract was made, it can still be regarded as a genuine pre-estimate of loss. 73.There is no evidence that an initial deposit of slightly over 3% of the purchase price is out of the usual line in the market for sale of residential properties in about February 2005. In fact, it is roughly in line with the range of 1% to 3% contemplated in Chiu Wai Ling’s case (supra). Indeed, Wong Lai-fan’s case (supra) suggests the stipulated sum in the present case is not inappropriate. In that case, the purchase price of the suit property was HK$2,450,000.00 and the initial deposit paid upon the signing of the provisional agreement for sale and purchase was HK$80,000.00 (ie 3.27% of the purchase price). The vendor defaulted the agreement. The Court of Appeal upheld his conduct in forwarding a cheque for HK$160,000.00 to the purchaser in full and final settlement and refused specific performance. 74.Recent authorities also show it is not unknown to find stipulations for initial deposits in provisional agreements for sale and purchase of property of about or in excess of 3% (see Tak Cheong Electronics (Holdings) Co Ltd v Sun Dexiang (孫德香) DCCJ2483/2005 Deputy Judge J Ko (unreported, 29th November 2005), Poon Mee Kuen v Chan Kam Tim & ors HCMP1431, 1432 & 1433/2004 Sahkrani J (unreported, 18th January 2005) and Hondon Development Ltd & anor v Powerise Investments Ltd & anor (Centaline Property Agency Ltd & anor, third parties) [2005] 3 HKLRD 605 (the latter case being in respect of shop premises)). 75.The Defendants have not adduced evidence before me to arguably demonstrate that 3.14% of the purchase price cannot be a genuine estimate of loss. Mr Ng recognises the lack of such evidence as he submits there is an absence of information from Mr Tin and on the current status of the property market. I do not see how the current status of the property market is relevant. In fact, Mr Ng in paragraph 8 of his written supplemental submissions accepts that the relevant time for considering this issue is when the parties signed the Agreement. Further, there is no information that Mr Tin is unavailable or unwilling. Given that the onus is on the Defendants to adduce evidence to prove that the stipulated sum is a penalty and the burden is also on them to establish an arguable or triable defence in answer to the summary judgment application, the absence of such evidence does not diminish the strength of the Plaintiffs’ position. 76.Mr Ng reminds that the stipulated compensation of HK$160,000.00 should be considered in the context of the 1st-named Defendant being asked to sign the Agreement in blank and to initial it without being told or explained the terms. He submits this means that the 1st-named Defendant was not given the opportunity to consider whether such stipulated sum was a genuine pre-estimate of loss. I do not accept such suggestion. The 1st-named Defendant knew and accepted that the initial deposit was HK$160,000.00. When he was shown the Cheque, all he complained about was the payee. There was no complaint about the value of the Cheque and when he demanded a replacement cheque, he never asked for a different amount. A careful study of the 1st Defendant’s affirmation shows that whilst he claims Mr Tin has not told or explained to him the contents of the Agreement, he does not expressly say he did not or was unable to read the Agreement when it was presented to him to sign or initial (ie he had two occasions to read the printed Clause 7 of the Agreement if he had wished to do so). I note that the Defendants have not raised the penalty point even after the 1st-named Defendant obtained legal advice since 20th February 2005 and it does not feature in the Defence. Moreover, it has never been suggested in the affirmation of the 1st-named Defendant that he was previously unaware of the provision for compensation in the sum of double deposit and that he now wishes to resile from such provision since he has never agreed to it. In my view, to raise this argument now is incredible and unbelievable. 77.In the circumstances, I find the Defendants have not established any arguable or triable case that the stipulated sum in clause 7 of the Agreement is a penalty and not a genuine pre-estimate of loss. The authority of the 1st-named Defendant 78.There is no dispute that the 1st-named Defendant signed the Agreement on behalf of his wife, namely, the 2nd-named Defendant. There is no evidence before me that she dealt with Mr Tin or participated in the transaction at all. The 1st-named Defendant admits in his affirmation that he has not told the 2nd-named Defendant about the intended sale of the Property and the signing of the Agreement and that the 2nd-named Defendant never gave him any direction, authority, consent or agreement to sign the Agreement on her behalf. Mr Ng therefore suggests the Agreement is not binding on the 2nd-named Defendant. 79.This raises the question of whether there is any potential conflict of interest between the 1st-named and the 2nd-named Defendants and whether they can or should be represented by the same solicitors. Both counsel confirm to me at the hearing that they will not take such issue for the purpose of the summary judgment application. 80.Mr Ng draws my attention to Chiu Kam Shum’s case (supra). In that case, the 2nd defendant, an attorney of the owner of the suit property (the 1st defendant) pursuant to a power of attorney, put the suit property up for sale. The power of attorney did not include such powers. The purchaser entered into a provisional agreement for sale and purchase of the suit property. The sale fell through and the purchaser sued for specific performance. The court held that the 1st defendant did not authorise the 2nd defendant to effect a sale of the suit property and there was no unequivocal evidence that the 1st defendant expressly affirmed the contract or ratified the 2nd defendant’s otherwise unauthorised acts. 81.Mr Ng acknowledges that each case turns on its own facts, but argues the above case suggests that a determination on whether a purported agent has the requisite authority to bind his purported principal can only be made after a full trial upon examination of the witnesses and the surrounding factual circumstances. 82.On the affirmation evidence before me, there is an arguable case that the 2nd-named Defendant has not given any direct authority to the 1st-named Defendant to effect a sale of the Property on her behalf. Ms Wong informs me that for the purpose of the summary judgment application, the Plaintiffs do not intend to rely on any apparent or ostensible authority of the 1st-named Defendant. Ms Wong submits that, even assuming that the 1st-named Defendant did not have the requisite authority to bind the 2nd-named Defendant, the Defendants are still liable for the following reasons : (a) the 1st-named Defendant in purporting to act for the 2nd-named Defendant impliedly warranted that he had authority to do so, thus rendering him personally liability for any loss and damages suffered by the Plaintiffs (Young v Toynbee [1910] 1 KB 215 and Chiu Kam Shum’s case (supra)), and (b) the 2nd-named Defendant had ratified the unauthorised acts of the 1st-named Defendant as evidenced by the letter from the Defendants’ solicitors to the Plaintiffs’ solicitors dated 4th March 2005. 83.In respect of (a), I do not consider such argument carries the matter much further since I have concluded above that the 1st-named Defendant, having failed to establish any arguable defence or triable issue, is personally liable to the Plaintiffs. 84.In respect of (b), Ms Wong refers to the case of Gimex Development Ltd v Cua Wai tak & ors [2000] 1 HKC 241. In that case, the appellant acquired the suit property from the developer with a husband and wife couple as confirmors. The wife gave the husband a general power of attorney to enter into an agreement for the purchase of the property and to dispose of it on her behalf. The husband granted a similar power of attorney to a third party and entered into a deed of substitution appointing the third party to act for the wife in substitution for himself. Cheung J (as he then was) said at pp.253-254 that :
85.Cheung J (as he then was) held there was a clear case of ratification. He found the substitution understandable since the couple lived in the Philippines whereas the transaction was to take place in Hong Kong. Even if the wife had not authorised the third party to act on her behalf at all, she had not taken any steps to protect and assert her right. Keith JA held that the absence of any evidence that the wife knew how her husband had purported to divest her of her interest in the property should not prevent the doctrine of ratification from applying, provided that she knew that her husband had purported to dispose of her interest in the property. He further held that the wife had ratified the purported disposal of her interest in the property (even though she did not know it had been disposed of) when, having known that her husband had purported to dispose of it, she took no steps to disown the purported disposal. 86.It appears from the above that the crux that persuaded the court in Gimex Development Ltd’s case (supra) on the ratification issue was the general power of attorney giving the husband the right to dispose of the suit property on her behalf and the evidence that the wife knew the husband did purport to dispose her interest therein. It was in such circumstances that the inactivity on her part amounted to ratification of her husband’s unauthorised act. 87.Turning to the factual evidence before me, there is no direct evidence of similar knowledge on the part of the 2nd-named Defendant. But Ms Wong submits that the letter of the Defendants’ solicitors of 4th March 2005 provides good evidence in this respect. She points out that the caption of such letter describes inter alia the Property and “Vendor:- Wai Ping Luen & Wong Choy Kau” and the body of the letter states that they were “instructed by the Vendor”. Ms Wong argues that since the Defendants’ solicitors acted for “the Vendor” who must necessarily include the 2nd-named Defendant and the letter refers to “the sale of the Property under [the Agreement] in relation to the above Property”, the 2nd-named Defendant must be taken to have ratified the Agreement. 88.However, such submission ignores the reality that the letter clearly refers to the refusal by “the Vendor” to complete the sale of the Property and that the Agreement be “cancelled”. There is therefore at the very least an arguable case that such conduct amounts to disowning rather than endorsing the Agreement. In Bowstead and Reynolds on Agency 17th ed para.2-073 at p.70, it is said that “[express] ratification will however be comparatively rare, and a ratification will more often be implied from words or conduct. Such words or conduct must be unequivocal: they must not be such that they could be accounted for by other interpretations …… Such reasoning is necessary to protect the principal against too easily being held liable as having ratified ……” (my emphasis) 89.In the circumstances, I am of the view that the 2nd-named Defendant has established an arguable defence or triable issue on the basis of lack of authority and the issue of her liability in relation to the Plaintiffs’ claim should be left for trial. Some other reason for trial 90.Mr Ng submits that it is not fair and just to enter summary judgment against the Defendants without having the opportunity to cross-examine Mr Tin. It is said that Mr Tin is a vital witness and his evidence is pivotal, so that the factual dispute between the parties cannot be resolved without his testimony. Mr Ng submits that the Defendants shall endeavour to arrange for Mr Tin’s attendance at the trial as a witness, whether on a voluntary basis or under subpoena. 91.There is no evidence before me as to what attempts have been made so far to seek out Mr Tin or to ascertain how his evidence will assist the Defendants. Further, I do not understand Mr Ng’s submission in respect of the need to resolve factual disputes. Here, the Plaintiffs have not filed any affirmation in reply to dispute the factual evidence relied on by the Defendants and, indeed, the analysis above is largely made on the basis of the Defendants’ case and evidence. 92.It is for the Defendants to raise an arguable defence or a triable issue. In my view, there is no triable or arguable defence vis-à-vis the 1st-named Defendant requiring discovery or cross-examination of witnesses that ought to be left for trial. I refer to the wise words of Megarry V-C in Lady Anne Tennant v Associated Newspapers Group Ltd [1979] FSR 298 as cited in Hong Kong Civil Procedure 2004 para.14/4/3 at p.160 : “A desire to investigate alleged obscurities and a hope that something will turn up on the investigation cannot, separately or together, amount to a sufficient reason for refusing to enter judgment for the plaintiff. You do not get leave to defend by putting forward a case that is all surmise and Micawberism.” Conclusion 93.In the circumstances, I grant final judgment in favour of the Plaintiffs against the 1st-named Defendant in the sum of HK$160,000.00 and interest thereon at the rate of 9.234% pa from the date of the writ of summons to the date of judgment and thereafter at judgment rate until payment. There is no reason why costs should not follow event. I grant a costs order nisi that the 1st-named Defendant do pay to the Plaintiffs costs of this application and of the action against the 1st-named Defendant (including all costs reserved, if any) to be taxed if not agreed with certificate for counsel. 94.In respect of the Plaintiffs’ claim against the 2nd-named Defendant, I order that there be unconditional leave to defend. I also make the following further directions :
I also grant a costs order nisi that the costs of this application against the 2nd-named Defendant (including all costs reserved, if any) be costs in the cause with certificate for counsel. I note that although the 2nd-named Defendant has succeeded in resisting the summary judgment application, she has also failed in a number of defence arguments which took up time at the hearing. In my view, a fair and just order for costs would be for costs of the application to be in the cause.
Ms Emma Wong instructed by Messrs K M Lai & Li for the Plaintiff. Mr Benjamin Ng instructed by Messrs Benson Li & Co for the Defendant. | |||||||||||||||||||||||||||||||||||
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