Great Power Investment Ltd v. Chan Yiu Kai and Another
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DCCJ 3773/2007 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION CIVIL ACTION NO. 3773 OF 2007 ---------------------- BETWEEN
---------------------- Coram : Her Honour Judge Mimmie Chan in Court Dates of hearing : 8 - 9 December, 2008 & 19 January, 2009 Date of handing down Judgment : 6 March, 2009 ---------------------- J U D G M E N T ---------------------- Background 1.These proceedings are commenced by the Plaintiff ("Great Power") against the 1st and 2nd Defendants ("Mr. & Mrs. Chan"), for rescission of a provisional agreement and the formal agreement for Mr. and Mrs. Chan's sale to Great Power of Unit No. 7, 9th floor, Po Hong Centre, 2 Wang Tung Street in Kowloon ("Property") on the basis of the alleged fraudulent misrepresentation on the part of Mr. and Mrs. Chan. Great Power further seeks recovery of the deposit of $90,500 paid under the agreements, and damages. 2.On 12 May 2007, Mr. Shiu, a director of Great Power, was accompanied by Miss Wong, an estate agent from Midland Realty, to see the Property at about 11:30 a.m. for a prospective purchase. Mr. Shiu was informed by Miss Wong that the owners of the Property were seeking a purchase price of $910,000 for the Property. Mr. Shiu expressed interest in the purchase, but asked Miss Wong to try and negotiate a reduction of $50,000 in the purchase price. Negotiations were made by Miss Wong in the course of the afternoon, and a deal was eventually struck at $905,000. On the same day, a provisional sale and purchase agreement was signed by Mr. Shiu and Mr. and Mrs. Chan, with an initial deposit of $50,000 paid by Mr. Shiu. 3.It is Mr. Shiu's claim that prior to the signing of the provisional agreement on 12 May 2007 and the formal sale and purchase agreement by Great Power subsequently on 25 May 2007, he had made it clear to Miss Wong that he would not purchase any property if death involving murder or suicide (凶案) had taken place within the Property, and had specifically instructed Miss Wong to ascertain from the owners of the Property whether there had been any murder or suicide which had taken place in the Property. Mr. Shiu claims that prior to his signing the provisional agreement, he had been assured by Miss Wong that the owners of the Property had confirmed that no such incidents had taken place on the Property. Mr. Shiu further claims that on 29 June 2007, in the course of an inspection of the Property, Mr. Chan had represented to him that no homicide case had occurred within the Property. 4.Mr. Shiu and Great Power claim that the provisional agreement and the formal agreement were induced by fraudulent misrepresentations made by Mr. and Mrs. Chan, as a case of death by suicide had in fact occurred within the Property on 13 May 1997. They claim that Great Power is entitled to rescind the agreements as a result. 5.By way of defence, Mr. and Mrs. Chan claim that prior to the signing of the provisional and formal agreements for sale and purchase, no one had ever inquired from them as to whether any homicide such as murder or suicide had taken place within the Property. Mr. Chan further denies that he had made any fraudulent misrepresentation at the time of the inspection of the Property on 29 June 2007. Mr. and Mrs. Chan deny that the agreements were induced by any fraud or deceit on their part. 6.The Statement of Claim, which was filed in the name of Great Power, had made general references to deceit. However, from submissions made by Counsel for Great Power at trial, it became clear that Great Power relies only upon misrepresentation as a cause of action. Issues 7.It is not in dispute that prior to the signing of the provisional and formal agreements, there was no direct communication between Mr. Shiu on the one part, and Mr. and Mrs. Chan on the other part. All negotiations on the price and conditions for the sale and purchase were negotiated through Miss Wong, acting as agent for both the vendors and the purchaser. 8.It should also be made clear at the outset that Mr. and Mrs. Chan have not at any time taken issue as to whether the meaning of the inquiry made by Miss Wong on behalf of Mr. Shiu was at any time or in any way unclear. Nor has counsel for Mr. and Mrs. Chan at any point argued that by virtue of any uncertainty in the inquiry made by Mr. Shiu or Miss Wong, there was any misunderstanding between the parties as to the nature of the inquiry and the responses made by Mr. or Mrs. Chan. The parties' evidence show that there is no dispute that the inquiry made by Mr. Shiu through Miss Wong was whether any death resulting from homicide or suicide had occurred within the Property, and that the limited or qualified response received on 29 June 2007 was that there was no such occurrence. The dispute turns on whether and when the inquiry and response were made, and whether the response made constitutes a misrepresentation. 9.As the parties have not sought to rely on any difference in meaning or effect of suicide and murder, and the dispute does not turn on the meaning of the words "凶案" (case of murder or violent death) used by the parties, for consistency and ease of reference, I will use the phrase "death by homicide" when referring to "凶案" whenever such term was used by the parties. 10.Accordingly, the issues which arose for determination at trial in these proceedings are:
11.As the Statement of Claim pleads that the provisional and formal agreements for sale and purchase of the Property were induced by fraudulent misrepresentations, any operative representation made by Mr. and Mrs. Chan must be shown to have been made prior to the signing of these agreements on 12 and 25 May 2007 respectively, such that Mr. Shiu could have been said to have relied on such representation in entering into the agreements. Counsel for Great Power has not made any submissions as to how any representation made after 12 and 25 May 2007 would be operative on the facts of this case, as neither the preliminary nor formal agreement contained any term whereby Great Power would have the right not to complete the purchase on the basis of any incidence of death by homicide within the Property. What representation (if any) was made by Mr. and Mrs. Chan to Miss Wong in relation to the Property, and when such representation was made 12.Mr. Shiu is experienced in property dealings. He claims that for many years, before making payment of any deposit for purchase of any property, he would inquire with the estate agent whether any "unclean business" had occurred within the property. He explained that by this, he meant whether any death by homicide （凶案） had occurred, and that death by homicide meant any murder or suicide (謀殺、自殺). 13.Mr. Shiu's evidence is that after his first visit to the Property at 11:30 a.m. on 12 May 2007, he drove Miss Wong back to her office and in the process, he instructed Miss Wong to negotiate with the owners for a reduction of $50,000 in the purchase price. Miss Wong persuaded Mr. Shiu to provisionally sign on a standard form provisional agreement, and to deposit with Miss Wong a cheque for the sum of $50,000, which can be given to the owners to demonstrate Mr. Shiu’s sincerity in the purchase of the Property. Mr. Shiu agreed to this, and waited in the car outside Miss Wong’s office whilst Miss Wong returned to her office to prepare the provisional agreement. When Miss Wong returned to Mr. Shiu's car with the provisional agreement, Mr. Shiu signed it and gave a signed cheque for $50,000 to Miss Wong. Mr. Shiu’s evidence is that he informed Miss Wong that he would not purchase any property where death by homicide had occurred. He said Miss Wong acknowledged this, and then left. 14.According to Mr. Shiu, he received a telephone call from Miss Wong at about 1 p.m., saying that the owners were not agreeable to any reduction in the purchase price. Mr. Shiu then asked Miss Wong to negotiate for a token discount, and Miss Wong said that she would be going to the owners' place to negotiate. 15.On Mr. Shiu's evidence, he received another call from Miss Wong at about 3:30 p.m., when Miss Wong asked him if he would like to speak directly to the owners. Mr. Shiu declined, asking Miss Wong to do her best and also to inquire if there had been any homicides on the Property. According to Mr. Shiu, Miss Wong telephoned him half an hour later to report that the purchase price had been reduced to $905,000 with a token discount of $5,000, and that the provisional agreement had been signed by the owners. An appointment was made for Mr. Shiu to collect the signed provisional agreement from Miss Wong at 5 p.m.. At the meeting, Mr. Shiu asked Miss Wong again if there had been death by homicide in the Property. Miss Wong informed Mr. Shiu that she had asked the owners if there had been any death by homicide during the period of their purchase, and the owners had confirmed to her that there was none. 16.Mr. & Mrs. Chan claim that before the provisional agreement and the formal agreement for sale and purchase were signed, they had not made any representation to Miss Wong as to whether any death, or death by homicide, had occurred within the Property. 17.The parties do agree, however, that after the formal sale and purchase agreement was signed, an inspection of the Property took place on 29 June 2007. Mr. Shiu claims that at this inspection, he had asked Mr. Chan directly whether any case of death by homicide had occurred within the Property during the period of Mr. and Mrs. Chan's ownership, and Mr. Chan had said that there was none. This was admitted in the Defence, although it was denied that Mr. Chan had any intention to withhold the truth when this representation was made. However, according to the witness Statement made by Mr. Chan on 26 May 2008, he alleges that the statement made by him to Mr. Shiu on 29 June 2007 was that he did not have knowledge as to whether any death had occurred within the Property, because he was not present. He explained that for that reason, he had not made the statement with any intention to withhold the truth from Mr. Shiu. 18.Much turns on the evidence of Miss Wong, as to whether and what she had asked Mr. and Mrs. Chan in relation to the Property, the answers given by Mr. and Mrs. Chan to her questions, when the answers were given, what she relayed to Mr. Shiu, and when she relayed the answers to Mr. Shiu. 19.On 16 July 2007, Miss Wong had signed a document ("Confirmation") to confirm that she had witnessed the owners of the Property representing that "during their period of ownership of the Property, no suicide or homicide had taken place" (上述單位在擁有期間並沒有發生自殺命案及兇殺命案). On 2 December 2008, a witness statement was made by Miss Wong and filed in these proceedings on behalf of Mr. Shiu. Miss Wong also gave evidence at trial. 20.Much has been said by Counsel for Mr. and Mrs. Chan in relation to the inconsistencies in Miss Wong's evidence. In assessing her credibility, I bear in mind the fact that the events in question took place about 19 months before the trial and the filing of her statement shortly before trial. Her job as an estate agent inevitably involved her showing properties to potential clients and negotiating the price between buyers and sellers. I appreciate that she would not be able to recall the detailed times of her telephone calls with her clients, or the sequence of her calls. 21.However, Miss Wong was adamant in her evidence that after Mr. Shiu's first visit to the Property, he had clearly informed her that he would not be purchasing any property where death by homicide (凶案) had occurred, and had instructed her to inquire with the owners of the Property whether there had been any such death by homicide. She was not certain whether this was before, or after, they were both in Mr. Shiu's car on the way to her office. Her evidence is that she had said to Mr. Shiu that she would make the inquiries. Miss Wong was also clear that when she gave the provisional agreement to Mr. Shiu to sign in the car, he had reiterated that he would not purchase any property where death by homicide had occurred. 22.Miss Wong's testimony in court was that when she returned to her office, she had telephoned Mrs. Chan in the course of negotiating the purchase price with her. During these negotiations, Mrs. Chan was not prepared to agree to any discount in the price, which she considered to be very reasonable, and Miss Wong said that she then asked Mrs. Chan if any death by homicide had occurred in the Property during the period of her purchase, to which Mrs. Chan had said, "No". 23.There was some uncertainty in Miss Wong's testimony as to whether she herself had spoken to Mrs. Chan on the telephone when she was in the office preparing the provisional agreement for Mr. Shiu to sign, or whether she only spoke to Mrs. Chan later when she returned to her office after Mr. Shiu had signed the provisional agreement in the car, or whether she had telephoned Mrs. Chan on both occasions. Nevertheless, Miss Wong maintained that before 1 p.m. on 12 May 2007, she had definitely spoken to Mrs. Chan on the telephone, and had asked her whether death by homicide had occurred in the Property, and that Mrs. Chan had answered, "No". She was certain that before her meeting with Mr. and Mrs. Chan near their home at McDonald's, which the parties agreed took place after 3 p.m. on 12 May 2007, she had made the relevant inquiry with Mrs. Chan more than two times on the telephone, and that she had answered in the negative on both occasions. 24.According to Miss Wong's recollection, she had spoken to both Mr. Chan and Mrs. Chan on the telephone in connection with her inquiry, and both had represented to her that no death had occurred within the Property. Her evidence is that in relation to the negotiations on the sale of the Property, she had mainly spoken with Mrs. Chan. 25.The Confirmation stated that, according to Miss Wong, "the owners (vendors)" (業主(賣方)) had declared that during the period of their ownership of the Property, no case of suicide or homicide had occurred. In her testimony, Miss Wong explained that the Confirmation was given by her to Mr. Shiu at the latter's request prior to Great Power's institution of proceedings. She stated that the specific query she had put to the owners at the material time was whether any death by homicide had occurred, and because the question had been asked more than once, she had inquired both as to whether any death by homicide had occurred, and whether any death by homicide had occurred during the period of Mr. and Mrs. Chan's ownership. According to Miss Wong, because the negative answer given by the owners to both her questions had been in no uncertain terms, she was herself satisfied and sure that no death by homicide had ever occurred. 26.Miss Wong therefore explained that when she learned from Mr. Shiu, before the inspection took place on 29 June 2007, that according to Mr. Shiu's research, a death had occurred within the Property, she was very surprised and disbelieving. Miss Wong claimed that for this reason, she called Mrs. Chan again to ask if any death by homicide had occurred within the Property, and Mrs. Chan still denied that any death by homicide had taken place in the Property. 27.On the whole, I accept Miss Wong's evidence as more inherently probable. Despite being cross-examined as to the events of 12 May 2007, Miss Wong maintained her evidence that she had spoken to Mrs. Chan on at least two occasions before 1 p.m.. From Mr. Chan's evidence, it may be that Miss Wong's recollection of her telephone call with Mr. Chan might have been mistaken, as Mr. Chan claims that such call only took place after the agreements were signed, and before the inspection on 29 June 2007. Even if Mr. Chan was to be believed in this regard, I do not consider the reliability of Miss Wong's overall evidence to be affected, for the reasons set out in paragraph 20 above. 28.Miss Wong was unwavering in her evidence that Mr. Shiu had asked her to inquire with the owners as to whether any death by homicide had occurred within the Property, and I believe that such specific inquiry and Mr. Shiu's apparent insistence would have had an impact on her, and that she would make the inquiry with Mr. or Mrs. Chan before they signed the provisional agreement. I also accept that the nature of such an inquiry will have a more significant impact on Miss Wong's memory 19 months after the event, as compared with other things such as the exact timing of her telephone calls and the sequence of the calls. 29.On the other hand, Mr. and Mrs. Chan simply deny that Miss Wong had ever asked them if any death had occurred within the Property. I find their evidence to be inconsistent and evasive in general. 30.Mr. Chan accepts in his testimony that he was very apprehensive about the suicide which had in fact taken place in the Property shortly after he had purchased the Property in March 1997. He maintains that if anyone would ask him whether anyone had died within the Property, his answer would be : No - so far as he was personally involved (我本人經手冇), and to the extent that he was not present (我不在場). 31.The original stance, as adopted in the Defence, was that the Defendants, i.e. Mr. and Mrs. Chan, had given a " No" response when Mr. Shiu made the inquiry with them directly at the inspection of the Property on 29 June 2007. It was claimed in the Defence that such response was given "subconsciously" (下意識), "without any intention to withhold the truth" (並不是存心隱瞞事實), and that it was the first time that the inquiry was made. 32.On cross-examination, Mr. Chan denied the averment made in his Defence that that he had given the "No" answer, and that such answer had been given subconsciously on 29 June 2007. He claims that he had never given any direct “No” answer. 33.According to Mr. Chan's witness Statements, his evidence is that after the formal agreement for sale and purchase had been signed, he received a call from Miss Wong who inquired about whether anyone had died within the Property. He claims that the answer he gave was that: he was not present at the time (我本人當時不在場). In his oral testimony in court, Mr. Chan further claims that Miss Wong had called him on her own accord, and not for the purchaser. 34.Although representations, if any, made by Mr. and Mrs. Chan after the signing of the preliminary and formal agreements for sale and purchase may not have induced Great Power's purchase of the Property, the parties' evidence on the circumstances of the inspection on 29 June 2007 is relevant to my assessment of their general credibility. 35.Mr. Chan claimed in his Statement that during the inspection on 29 June 2007, when Mr. Shiu asked him whether anyone had died within the Property, Mr. Chan's answer was that he was not present at the time, and hence did not know (本人當時不在現場，所以不知道). When he was cross-examined in court, Mr. Chan claims that his answer was that no death had occurred, and also that he was not present (又冇，又不在現場). He claims that not being involved (我本人經手冇) and not being present (不在場) meant the same thing. Mr. Chan explained that he had given such an answer because he did not want there to be further complications in the sale (節外生枝), that he was taken by surprise by the question asked of him, and that the answer was given by him very casually (好隨便). 36.Mrs. Chan supported her husband's evidence. She explained that she is a traditional Chinese woman who submits to the authority/instructions of her husband (夫權至上). Mr. Chan claims in his testimony that he had delegated the sale of the Property to his wife. 37.According to Mrs. Chan's Statement made on 4 December 2008, she did not give any "No" answer when Miss Wong asked Mr. and Mrs. Chan on 29 June 2007 whether any death by homicide had occurred within the Property during the period of their ownership. She also claims that she did not hear Mr. Chan give any "No" response. According to Mrs. Chan's Statement, when Mr. Shiu asked whether any death had occurred within the Property, Mr. Chan had not made any response. However, when cross-examined in court, Mrs. Chan claimed that Mr. Chan's response was that there was no such death to the extent that Mr. Chan was involved (經佢本人手，就冇). 38.It is clear that Mr. Chan was apprehensive of the fact of the suicide having taken place in his property. He also admits that Miss Wong had asked him questions about the matter in the course of a telephone call, although Mr. Chan maintained that this call took place after the preliminary and formal agreements had been signed and before the inspection on 29 June 2007. Therefore, on Mr. Chan's admission, when Mr. Shiu raised query with Mr. Chan directly on 29 June 2007, it was not the first time that the inquiry was made of him, as he so alleged in his Statement. 39.Considering the inconsistencies in the evidence given by Mr. and Mrs. Chan, I do not find their denials to be credible, and in so far as their evidence contradict that of Miss Wong, I prefer Miss Wong's evidence. In particular, I accept Miss Wong's evidence that before 1 p.m. on 12 May 2007 and before Mr. and Mrs. Chan had signed the preliminary agreement, she had asked Mrs. Chan both whether any death by homicide had occurred, and whether any death by homicide had occurred during the period of Mr. and Mrs. Chan's ownership, and had been told by Mrs. Chan that none had occurred. Was such representation repeated by Miss Wong to Mr. Shiu? 40.According to Miss Wong's evidence, she met with Mr. Shiu at about 5 p.m., for the purpose of asking him to initial some amendments and insertions made in the provisional agreement which Mr. and Mrs. Chan had signed at McDonald's, and to give him a copy of the signed agreement. Mr. Shiu had asked her at this meeting again whether any death by homicide had occurred within the Property, and she informed Mr. Shiu that she had already asked the owners, and that they had confirmed to her that no death by homicide had occurred. Was such representation untrue? 41.According to the inquiries made by Mr. Shiu after the provisional and formal agreements for sale and purchase were signed, a suicide by hanging, resulting in death, had taken place within the Property on 13 May 1997, about 2 months after Mr. Chan's purchase of the Property. Mr. and Mrs. Chan both had knowledge of this. 42.Counsel for Mr. and Mrs. Chan made the distinction that whereas Mr. Chan acquired the Property in March 1997 as tenant in common with his nephew, Mrs. Chan only took an assignment of the nephew's interest in 2000. Counsel argued that if Mrs. Chan had indeed made any representation that no death by homicide had occurred within the Property during the period of her ownership, such representation was not false as the suicide in question happened in May 1997. 43.Mr. Chan claims that he had delegated the sale of the Property to his son and to Mrs. Chan. Miss Wong also claims that she dealt mainly with Mrs. Chan, although it is her evidence that she had also spoken to Mr. Chan on the telephone. It is Miss Wong's case that she had made the relevant inquiry with Mrs. Chan on at least two occasions before 1 p.m. on 12 May 2007. I accept Miss Wong's evidence that she had asked Mrs. Chan whether any death by homicide had occurred in the Property, and that Mrs. Chan had answered this in the negative. This representation is not restricted to the period of Mrs. Chan's ownership. As it is not disputed that a death by suicide had taken place in the Property in May 1997, I find that Mrs. Chan's representation was untrue, and known by her to be untrue. 44.From the available evidence, I also consider that at all material times, Mrs. Chan was acting on behalf of both Mr. Chan and herself in relation to all her dealings and negotiations with Miss Wong. It has not been suggested by Mr. Chan that Mrs. Chan was not authorized in any of such negotiations, or that Miss Wong was in any way put on notice that Mrs. Chan was only acting on her own behalf when negotiating any terms of the sale of the Property. When Miss Wong contacted Mrs. Chan and spoke to her in the negotiations on the price and other terms of the sale of the Property, she was obviously dealing with Mrs. Chan as the representative and agent of the registered owners of the Property. Mr. and Mrs. Chan obviously also knew and intended Miss Wong to treat Mrs. Chan as such. Any representation which Mrs. Chan had made in connection with the state of the Property would have been made in the scope of her authority as representative and agent of Mr. Chan. 45.Even if the inquiry made by Miss Wong to Mrs. Chan was whether any death by homicide had occurred "during the period of ownership of the Property", Mrs. Chan must have known that Miss Wong was inquiring as to Mr. Chan's period of ownership as well as Mrs. Chan's period of ownership. Her answer that there was no such death can only have been intended by Mrs. Chan to be understood, and reasonably and naturally understood, by Miss Wong to mean that there was no such death during both the period of Mr. Chan's ownership, as well as the period of Mrs. Chan's ownership. 46.To the extent that Mrs. Chan had represented that no death by homicide had occurred within the Property, such representation was false and she made such representation with knowledge of its falsity. To the extent that Mrs. Chan had represented that no death by homicide had occurred within the Property during the period of ownership of the current owners, i.e. Mr. Chan and herself, such representation was also false with reference to Mr. Chan’s period of ownership, and Mrs. Chan also knew that the representation was false. Was such representation made fraudulently? 47.I have found that Mrs. Chan had made the representations on 12 May 2007 with knowledge of their falsity. Her representations were accordingly made fraudulently. 48.On the evidence, I also find that the false representations were made by Mrs. Chan for herself and for Mr. Chan, in the scope of her authority as Mr. Chan’s agent. I therefore find that Mr. Chan is liable for Mrs. Chan’s fraudulent misrepresentations (para 6-051,Chitty on Contracts). Whether the provisional and/or formal sale and purchase agreement of the Property was/were induced by fraudulent misrepresentation 49.I accept Mr. Shiu’s evidence that he had signed the provisional and formal agreements in reliance on the owners' representation, made through Miss Wong, that no death by homicide had occurred within the Property. 50.Counsel for Mr. and Mrs. Chan has attacked Mr. Shiu’s credibility on the basis of the reliability of his evidence as to when he actually found out that a suicide by hanging had taken place in the Property. I do not see merit in this attack. According to Mr. Shiu, he was informed by estate agents after he had signed the agreements for the purchase of the Property that the Property had been vacant for over 10 years and that no agent would refer purchasers or tenants to the owners. This roused his suspicions, and after making inquiries with the management of the Property and with the police, Mr. Shiu claims that he was informed by a source in the police only of the fact that there was record of a police report of a suicide taking place in the Property on 13 May 1997, but Mr. Shiu was not given any further details. Mr. Shiu therefore had to make further inquiries with Mr. and Mrs. Chan's solicitors, and to do his own research in the public library before obtaining copies of newspaper reports of a death by hanging which took place in the Property at 8 a.m. on 13 May 1997. Only then was Mr. Shiu able to confirm that there was indeed a death by hanging at the Property. I accept his explanation, and do not regard the letters dated 27 June 2007 from Mr. Shiu's solicitors to management of the Property and to the police, with the date and the police report reference of the suicide case, to be contradictory to Mr. Shiu's evidence. Whether Great Power is entitled to the relief sought 51.On the evidence, I find that Great Power is entitled to rescind the provisional and formal agreements for sale and purchase of the Property on the basis of Mr. and Mrs. Chan's fraudulent misrepresentation. Mr. and Mrs. Chan are liable to make repayment to Great Power of the deposit of $90,500 paid under the agreements, together with interest at judgment rate from the date of the service of the Writ to the date of payment. No evidence has yet been adduced as to the solicitors' costs and agency fees paid under the preliminary and formal agreements, and I will give to Great Power liberty to apply to the Court for assessment of such further damages as may be established to have been sustained by Great Power under the rescinded agreements. The Counterclaim is dismissed. 52.I will further make an order nisi that Mr. and Mrs. Chan are to pay to Great Power the costs of the action (including the costs of the Counterclaim), to be taxed if not agreed, with certificate for counsel.
Mr. Edward Fan instructed by Messrs. C.P. Cheung & Co. for the Plaintiff Mr. Jerry Chung instructed by Messrs. Henry Chiu & Partners for the 1st and 2nd Defendants |