Hoie Sook Fong and Another v. Ismail Halima and Another

HCA 1974/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1974 OF 2006

____________

BETWEEN

____________

Before: Deputy High Court Judge To in Chambers (Open to Public)

Date of Hearing: 3 July 2007

Date of Decision: 3 July 2007

________________

D E C I S I O N

________________

Background

1.This is the Plaintiffs’ appeal against the order of Master de Souza made on 20 March 2007 striking out the Plaintiffs’ Statement of Claim against the 1^st Defendant pursuant to Order 18 rule 19 of the Rules of the High Court with costs. 

2.The Plaintiffs are intended joint purchasers of a property owned by the 1^st Defendant (the “Property”) at an auction held on 31 July 2006 conducted by the 2^nd Defendant as agent of the 1^st Defendant.  There is no dispute that the auction was conducted on the terms of the 2^nd Defendant’s standard terms contained in the General Conditions of Sale (“GCS”) and Special Conditions of Sale (“SCS”).  The Property was offered for bidding at $1,880,000 by the 2^nd Defendant.  The 1^st Plaintiff was the only bidder and the Property was knocked down to her at $1,880,000.  It then transpired that the 1^st Plaintiff was bidding on her own behalf as well as on behalf of her son, the 2^nd Plaintiff.  At the direction and request of the staff of the 2^nd Defendant, they signed the Memorandum of Agreement for the purchase of the Property (“MOA”).  The 1^st Plaintiff made out a cheque for $206,800 in favour of the 2^nd Defendant covering the deposit and the auctioneer’s commission, which was respectively 10% and 1% of the purchase price of the Property. 

3.The 1^st Defendant refused to complete the sale and purchase of the Property and the Plaintiffs took out the present proceedings for specific performance of the sale and purchase agreement against both Defendants.  On 26 October 2006, the 1^st Defendant took out a Summons seeking to strike out the Plaintiffs’ Statement of Claim under Order 18 rule 19 of the Rules of the High Court.  The 2^nd Defendant filed a defence but took no part in the striking out application or this appeal.  The striking out application was heard before Master de Souza on 20 March 2007 who granted the 1^st Defendant’s application.  The 1^st Defendant was represented by Mr Anthony Ismail at the striking out application.  At the appeal, the 1^st Defendant appeared in person.  She adopted the submission of her former counsel, Mr Ismail.  In addition, she filed her 1^st Affirmation in support of her striking out application.  In that affirmation, she adopted Mr Ismail’s submission before Master de Souza and averred to a few factual matters.  She advanced a new factual allegation and argument not presented by Mr Ismail in the Court below.  She alleged that the 2^nd Defendant exceeded its authority in receiving the Plaintiffs’ payment without her consent.  She produced an original copy of her auction agreement with the 2^nd Defendant.  This copy differs in one important respect from the duplicate copy produced by the Plaintiffs’ solicitors which was obtained from the 2^nd Defendant.  The Plaintiffs’ copy is a clean copy showing a sale price of $1,880,000.  The 1^st Defendant’s original copy shows an amendment revising the sale price to $1,980,000.  Against the objection of Mr Ling, counsel for the Plaintiffs, I allowed this affirmation to be used for the purpose of this appeal.

4.The legal principle applicable to a striking out application is well familiar.  It is only in plain and obvious cases that the court should exercise its summary powers to strike out the indorsement on any writ or any pleading under Order 18 rule 19 of the Rules of the High Court: see Hong Kong Civil Procedures 2007 paragraph 18/19/4.  There should be no trial upon affidavit.  Disputed facts were to be taken in favour of the party sought to be struck out.  Nor should the court decide difficult points of law in striking out proceedings.  The claim must be obviously unsustainable, the pleadings unarguably bad and it must be impossible, not just improbable, for the claim to succeed before the court will strike it out: see Ha Francesca v Tsai Kut Kan & Ors (No 1) [1982] 1 HKC 382, CA.  The burden is therefore on the 1^st Defendant to show that the Plaintiffs’ case is obviously unsustainable.

5.In the Court below, Mr Ismail advanced four grounds for striking out the Plaintiffs’ Statement of Claim.  Those grounds were: (1) the Plaintiffs failed to follow the sequential procedures laid down in the SCS and GCS; (2) the 2^nd Plaintiff had no contractual right to bid through an agent under the GCS; (3) the Plaintiffs and the 2^nd Defendant entered into a new oral agreement without the 1^st Defendant’s knowledge and consent; and (4) the sale and purchase agreement was not enforceable for want of writing or part performance.  In addition, today, the 1^st Defendant advanced a new argument that the 2^nd Defendant exceeded its authority in entering into the sale and purchase agreement below her reserve price.  As the 1^st Defendant is now unrepresented and she adopts the arguments of her counsel at the hearing before Master de Souza, I have to consider Mr Ismail’s argument before the master.  I shall deal with the five grounds one by one. 

The first ground: the procedural sequence

6.I was told that this ground was the main thrust of the 1^st Defendant’s argument before the master.  Mr Ismail’s submission was that the Property was not sold in accordance with clauses (1), (3), (30) and (31) of the GCS and clauses (1)(a) and (b) of the SCS.  For convenience, those clauses are set out below:

“General Conditions of Sale:

(1)	The Property is sold according to the General Conditions  of Sale as provided herein and further subject to the Special Conditions, if any, where applicable.  In the event of conflict between any of the Special Conditions of Sale with the General Conditions of Sale, the Special Conditions of Sale shall prevail.
(3)	The Vendor reserves the right:-
	(a)	To bid generally by himself or his agent or the   Auctioneer; and
	(b)	To withdraw the sale of the Property any time before the same is actually sold without declaring the reserve price.
(30)	This Memorandum of Agreement comprises all the terms agreed between the parties hereto and no warranty or representation whether express or implied is or has been made or given by the Vendor or by anybody on his behalf relating to the Property prior to the signing hereof and if any such warranty or representation whether express or implied, has been made, the same is withdrawn or deemed to have been withdrawn immediately before the parties enter into this Agreement.
(31)	These Particulars and Conditions are printed in English and Chinese, and in case any difference or dispute shall arise as to the construction thereof the English text only shall apply and prevail.

Special Conditions of Sale:

(1)	The Purchaser shall immediately on fall of the hammer:-
	(a)	Pay to AA Property Auctioneers Ltd. (“the Agent”) a deposit equivalent to ten per cent (10%) of the purchase money (“deposit”) in cash or by cashier order or cheque and sign the Memorandum of Agreement in the form at the foot hereof to complete the purchase according to the General Conditions of Sale and Special Conditions of Sale; and
	(b)	Pay to the Agent a commission equivalent to one per cent (1%) of the purchase money (subject to a minimum charge of HK$10,000.00) in cash or by cashier order or cheque.”

7.Based on clause (1) of the GCS, it was Mr Ismail’s argument that the Property should be sold according to the GCS and subject to the SCS which stipulated the following procedural sequence: (1) paying of the deposit to the 2^nd Defendant; (2) signing of the MOA; and (3) paying of the commission to the 2^nd Defendant.  He further argued that this sequence was also established from the following words of the MOA:

“ …   THAT I/WE have paid the sum of HK$188,000 by way of deposit to AA Property Auctioneers Limited for the Vendor and I/We hereby agree to pay the balance of the said Purchase Price and complete the sale and purchase in accordance with the terms and conditions of the aforesaid General and Special Conditions of Sale.”

8.Mr Ismail then referred to the 1^st Plaintiff’s affirmation in which she averred that following the direction of a staff of the 2^nd Defendant, the 1^st and 2^nd Plaintiffs signed the MOA and paid one cheque for the total sum of $206,800 representing the 10% deposit and 1% commission.  He then submitted that the Plaintiffs had no contractual right to follow the direction of the 2^nd Defendant to sign the MOA first and to pay by one cheque instead of following the sequence of “pay, sign and pay”.  Thus, Mr Ismail’s argument was that the Plaintiffs made two mistakes.  First, they signed the MOA before they paid the deposit.  Second, they paid the auctioneer’s commission at the same time when they were supposed to pay the commission after signing the MOA.  It was Mr Ismail’s argument before the master that the sequence was important because it ensured that the 1^st Defendant was paid the deposit before the purchase is completed by the signing of the MOA and that the 2^nd Defendant was not paid its commission unless and until the deposit was paid and the purchase so completed.  He argued that hence the procedural sequence was a matter of substance and if there was any ambiguity, the contra proferentem rule applies.  I am told by Mr Ling that this argument found favour with the master.  

9.Mr Ismail’s argument which was premised on the ground that the purchase would be completed by the signing of the MOA is flawed as a matter of law.  A sale and purchase of land is only completed when the conveyance giving title to the land was delivered to the purchaser with all the title documents and not by the signing of the sale and purchase agreement.  The true position in a sale and purchase of land by auction is that the contract is formed upon the fall of the hammer: the offer of the bidder is accepted by the auctioneer as agent of the vendor.  But because of section 3 of the Conveyancing and Property Ordinance, Cap 219, the contract is not enforceable unless it is reduced into writing or unless there is sufficient act of part performance.  I also fail to see how the contra proferentem rule would resolve in favour of the 1^st Defendant in this case.  But these are not my major criticisms of Mr Ismail’s submission. 

10.With the greatest respect to Mr Ismail, there is nothing in clause (1) of the SCS or in reading the entire SCS as a whole to suggest that the three acts stated in clause (1) of the SCS have to be performed in any sequence.  Thus, to advance that sort of argument contended by Mr Ismail, and now adopted by the 1^st Defendant, the 1^st Defendant has to show that it is plainly obvious or beyond argument that on a proper construction of the GCS and SCS, those procedures stated therein have to be followed in strictly sequential order.  It is trite law that construction of a document is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract: see Investors Compensation Scheme Ltd and West Bromwich Building Society [1998] 1 WLR 897 at 912-913, per Lord Hoffmann.  The parties were dealing with each other through an auctioneer in an auction with nothing more than the GCS and SCS.  Given the factual matrix of the present case, it is arguable that the meaning which those documents would convey to the reasonable man is that the three acts which need to be done on the fall of the hammer do not have to be performed in any sequence but so long as they are performed on the occasion when the Property was knocked down to the Plaintiffs.  This is sale of land by auction.  The whole purpose of signing the MOA and paying deposit is to reduce a contract entered into by conduct into a written contract required by the Conveyancing and Property Ordinance so that it is enforceable in the courts of law.  In addition to the written MOA, the 1^st Defendant’s interest as vendor is protected by the payment of the usual deposit.  The Plaintiffs’ interest as purchasers is equally protected by that act of part performance.  So long as those three acts are performed, the sequence in which they are performed is of no significance.

11.It was also argued by Mr Ismail that the Plaintiffs should have paid the deposit and commission by two separate cheques instead of one.  I can find no merit in that argument.  Under clause 1(a) of the SCS, the deposit was to be paid to the 2^nd Defendant as agent of the 1^st Defendant.  I failed to see how the 1^st Defendant’s interest would be prejudiced if the Plaintiffs paid the deposit as soon as they signed the MOA, or her protection enhanced if the payment of the 2^nd Defendant’s commission was delayed for a few moments until after signing of the MOA.  I also fail to see the difference it would make to the 1^st Defendant if the Plaintiffs paid by one cheque instead of two.  The 1^st Defendant had received her deposit, why should she be concerned that the 2^nd Defendant received its commission a moment too early before signing of the MOA? 

12.I think Mr Ismail’s argument on this point, and so too the 1^st Defendant’s, is very artificial.  Anyway, this is not an occasion for me to decide difficult points of law or questions of construction.  Striking out is only for plain and obvious cases and where the claim must be obviously unsustainable or impossible to succeed.  I think neither Mr Ismail before the master nor the 1^st Defendant before me has discharged the burden of proving that the very peculiar construction of clause (1) of the SCS relied upon by them is the only true and proper construction.  Putting it in another way, they have failed to show it is wholly unarguable that clause (1) of the SCS admits of a construction that the three acts to be performed thereunder may be performed in any sequence but so long as they are performed on the occasion of the fall of the hammer. 

The second ground: the 2^nd Plaintiff’s right to bid through an agent

13.It was Mr Ismail’s argument before the master that the 2^nd Defendant’s power and authority were restricted by the GCS and SCS but it exceeded that authority by allowing the 2^nd Plaintiff to bid through his agent, namely his mother, the 1^st Plaintiff.  As a matter of law, Mr Ismail is correct that if an agent acted outside the scope of his authority, whether actual or ostensible, his act is not binding upon his principal.  But there is simply nothing to support his argument that there was any restriction in the 2^nd Defendant’s authority to accept bids through an agent.  Mr Ismail relied on clause (3)(a) of the GCS as imposing that limit on the 2^nd Defendant’s authority.  But that clause only reserves unto the 1^st Defendant the right to bid by herself or through an agent at the auction.  It is wholly silent as to whether the 2^nd Defendant may accept bids from an agent or undisclosed principal or whether any intended purchaser may not bid through an agent.  I am unable to find any restriction in the GCS or SCS against any intended purchaser bidding through an agent.  I have asked the 1^st Defendant specifically about this and she agreed that there was no such provision in the GCS or SCS.  I am surprised to hear such argument being advanced by counsel.  The fallacy of counsel’s argument is plain to see.  The 2^nd Plaintiff needed no express provision in the contract to enable him to bid through an agent.  He has the ability to do so under the general principles of the law of agency. 

14.Mr Ismail also argued under this heading of the 2^nd Defendant’s lack of authority that by directing the 1^st and 2^nd Plaintiffs to sign the MOA and to pay the deposit and commission otherwise than in accordance with clause (1) of the SCS, the 2^nd Defendant acted outside its scope of authority.  Those arguments also fail with my conclusion under the first ground.

The third ground: the new oral agreement

15.It was contended by Mr Ismail that because of the alleged departures from the GCS and SCS, the agreement which was entered into by the Plaintiffs allegedly with the 1^st Defendant through the 2^nd Defendant was a new agreement which superceded the agreement containing the GCS and SCS and was not one which the 2^nd Defendant had authority to bind the 1^st Defendant.  Mr Ismail submitted that this new agreement was prohibited by clause (30) of the GCS.  This is just another way of arguing that the procedural sequence under the GCS and SCS had not been followed.  In fact, it never was the Plaintiffs’ intention to rely on any new agreement other than the one reached upon the fall of the hammer and as evidenced in writing by the MOA.  This ground for striking out also falls with my conclusion reached under the first ground.

The fourth ground: absence of writing or part performance

16.It was contended by Mr Ismail that the contract for sale and purchase of the Property was not enforceable because the MOA was not signed by the 1^st Defendant or by the 2^nd Defendant on her behalf.  He referred to section 3 of the Conveyancing and Property Ordinance, which provides as follows:

“(1)   … No action shall be brought upon any contract for the sale or other disposition of land unless the agreement upon which such action is brought, or some memorandum or note thereof, is in writing and signed by the party to be charged or by some other person lawfully authorized by him for that purpose.

(2)   This section applies to contracts or other dispositions whenever made and does not affect the law relating to part performance or sales by the court.”

The 1^st Defendant repeats Mr Ismail’s submission.  She argues that the MOA was neither signed by her nor was it signed by the 2^nd Defendant for and on her behalf.  She drew my attention to the MOA which only bore the 2^nd Defendant’s chop as a witness of the signature of the Plaintiffs.

17.The MOA reads as follows:

“I/We Hoie Sook Fong … Stokes, Jason Ka-wing … of ………..

DO HEREBY ACKNOWLEDGE that at the Sale by Auction held this day I/We was/were the highest bidder(s) thereof and was/were declared the Purchaser(s) of

Property: Flat B on 2^nd Floor, 15 Yuen Yuen Street, Hong Kong.

mentioned in the foregoing Particulars and Conditions of Sale at the Purchaser Price of HK$1,880,000 and THAT I/WE have paid the sum of HK$188,000 by way of deposit to AA Property Auctioneers Limited for the Vendor and I/WE hereby agree to pay the balance of the said Purchase Price and complete the sale and purchase in accordance with the terms and conditions of the aforesaid General and Special Conditions of Sale.

Dated this 31^st day of July, 2006

…

WITNESS:-

(Chop of 2nd Defendant)	(Signed by 1st and 2nd Defendants)
____________________	___________________________
	PURCHASER(S)”

18.I think the 1^st Defendant’s argument is only of superficial attraction.  Whether someone signed a document or not is a question of fact.  A signature may be created by writing, or by typing or by a chop.  The question is one of the intention of its maker.  The English Court of Appeal held in Good Challenger Navegante SA v Metalexportimport SA (The “Good Challenger”) [2004] 1 Lloyd’s Rep 67 at page 72:

“As a matter of general principle, in my view a document is signed by the maker of it when his name or mark is attached to it in a manner which indicates, objectively, his approval of the contents.  How this is done will depend upon the nature and format of the document.  Thus in the case of a formal contract which prints the names of the parties and leaves a space under each name for the parties to write their names, the document will not have been signed by a party until he writes his name in the space provided.  Conversely, with a telex, where there is no such facility, the typed name of the sender at the end of the telex not only identifies the maker but leads to the inference that he has approved the contents: the typed name, therefore constitutes his signature.  Thus in my judgment each of the telexes relied on by the Claimant was signed by the sender typing in its name, or his name, at the foot of the document.”

19.While the use of the word “witness” is strongly indicative that the person signing as a witness does not intend to be party to the agreement and does not necessarily approve or adopt the content of the document, but the fact that he is an intended party or a party to the agreement negatives the inference to be drawn by the use of that word.  The 2^nd Defendant is described as an agent for the vendor in the body of the MOA.  Even in the absence of the well known phrase “for and on behalf of”, it could be argued that prima facie the 2^nd Defendant was applying its company chop and therefore both signing and doing so as agent of the 1^st Defendant.  This is, of course, not conclusive, but it is at least arguable.  That is sufficient to resist the 1^st Defendant’s application.  The MOA contained all the essential terms required.  It described the Plaintiffs as purchasers, the 2^nd Defendant as agent of the vendor, the price and the Property.  It is therefore arguable that it is a sufficient memorandum in writing signed by the 2^nd Defendant on behalf of the 1^st Defendant.  In other words, the 1^st Defendant is unable to show that it is unarguable that the MOA is a sufficient memorandum for the purpose of section 3 of the Conveyancing and Property Ordinance.

20.Even if the MOA could not be so argued, the payment 10% of the purchase price as deposit and 1% of the purchase price as commission are sufficient acts of part performance.  Those acts, by themselves or with other documents such as the GCS and SCS, are referable to the oral agreement for the sale and purchase of an identified property on terms previously agreed between the Plaintiffs and the 1^st Defendant.  It is again arguable that there were sufficient acts of part performance as would render the oral agreement for the sale and purchase of the Property enforceable.    In other words, the 1^st Defendant is unable to show that it is unarguable that the payment of deposit and commission by the Plaintiffs were sufficient acts of part performance as would make the contract for the sale and purchase of the Property enforceable.  This ground for striking out also fails.

The fifth ground: sale below the reserved price

21.Lastly, I turn to the new argument advanced by the 1^st Defendant in her 1^st Affirmation.  She said that she had been advertising her Property for sale at $1,980,000 prior to engaging the services of the 2^nd Defendant.  She produced an original copy of the auction agreement which contained an amendment of the sale price of the Property from $1,880,000 to $1,980,000.  She therefore argues that the sale was subject to a reserve price of $1,980,000 and the 2^nd Defendant acted outside the scope of its authority by selling below that price.  Hence, she argues that the acts of the 2^nd Defendant is not binding on her. 

22.There is nothing in the GCS or SCS to suggest that the sale was subject to a reserve price.  There is also no evidence that the Plaintiffs were aware of such limitation imposed on the 2^nd Defendant’s authority to sell subject to a reserve price of $1,980,000.  As such the 2^nd Defendant had ostensible authority to accept the highest bid at the auction.  Furthermore, the copy of the auction agreement produced by the Plaintiffs shows that the reserved price was $1,880,000 and not $1,980,000.  Without even having to allege that the copy produced by the 1^st Defendant was a fabricated one, there is simply a triable issue of fact whether the auction was subject to a reserve price of $1,980,000.  It is trite law that in an application for striking out, disputed facts are to be taken in favour of the party sought to be struck out and there shall be no trial upon affidavit evidence.  Thus, this argument of the 1^st Defendant cannot even get off the ground.

23.Furthermore, I have this observation to make on this ground of striking out.  When asked to explain why she did not file her 1^st Affirmation or produce that copy of the auction agreement at the hearing before the master, the 1^st Defendant replied that it was counsel’s advice that the auction agreement was not relevant in the dispute between her and the Plaintiffs.  Thus, if what she said was true, the 1^st Defendant realised or had already been advised that this is not a valid ground for striking out.  If what she told me was not true, one wonders if this is a genuine ground for striking out the Plaintiffs’ Statement of Claim.

Conclusion

24.On the principal ground relied on by the 1^st Defendant for striking out the Plaintiff’s Statement of Claim, the 1^st Defendant has utterly failed to show that on a true construction of the GCS and SCS, the payment of deposit and commission and signing of the MOA had to be performed in the sequence she contended.  Conversely, she has failed to show that it is plainly impossible for the Plaintiffs to argue that those acts may be performed in any sequence but so long as they were performed on the occasion of the fall of the hammer.  On the other four grounds, the 1^st Defendant simply failed to establish any basis for striking out the Plaintiffs’ Statement of Claim.  She has failed to show that it is impossible for the Plaintiffs to succeed.  In fact some of those grounds fall together with the first ground.  Accordingly, I allow the Plaintiffs’ appeal and set aside the orders of the master. 

25.The sheer artificiality of the 1^st Defendant’s arguments deviates from commons sense to such an extent that one cannot but approach her application for striking out except with a strong sense of scepticism.  Bearing in mind that the burden was on the 1^st Defendant to show that the Plaintiffs’ Statement of Claim is unarguably bad and must be impossible to succeed, I am surprised that such arguments could have been advanced.  Not only that there was no grounds for the 1^st Defendant to make the application, the application was not made in good faith.  It is wasteful of the Plaintiffs’ costs.  Accordingly, I order that the Plaintiffs shall have the costs of the appeal and of the application before the master.  There shall be certificate for counsel.  The costs are to be taxed if not agreed and to be paid forthwith.

Mr. C. W. Ling, instructed by Messrs John M. Pickavant & Co., for the Plaintiffs/Appellants

The 1^st Defendant appearing in person