Tong Kwok Cheong v. Tong Wai Lin

HCA 1939/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1939 OF 2007

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BETWEEN

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Before : Deputy High Court Judge Mayo in Court

Dates of Hearing : 8, 9, 10, 11 and 12 October 2012

Date of Handing Down Judgment : 5 November 2012

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J U D G M E N T

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Introduction

1.The plaintiff is suing the defendant for breach of contract and is seeking specific performance on an Agreement whereby it is claimed that the defendant agreed to sell and he agreed to purchase shop premises at 87, Prince Edward Road, Kowloon.  According to him, the defendant also agreed to transfer to him all the beneficial interest she may have in their mother’s (“the mother”) estate.

2.The defendant is the eldest daughter and the plaintiff is the 3^rd son in a family which conducted a metal business, Sam Hing Metal Company (“Sam Hing”) from the suit premises (“the suit premises”) and other premises.

3.The defendant who has resided in the United States of America since 1971 claims that she did not intend to be bound by the said Agreement.

4.She also contended that the Agreement was an unconscionable Agreement.  The consideration stated in the Agreement was far less than the value of the property and of her potential interest in their mother’s estate.

5.The Agreement was in this form:

“有關香港九龍旺角太子道87號地下鋪位以26萬美元買賣轉讓事宜. USD 260,000.xx

現賣方: 湯惠蓮(簡稱大姊)及買方: 湯國祥(簡稱三弟)雙方達成以下二點協議:

I. 完成以上物業法律轉讓日期 (A)以母親百年歸老去世後三個月內或 (B)大姊因病危或遇意外去世後三個月內或 (C)由此文件日期計算，三年內經雙方同意在任何時間可完成以上正式交易。

II 在此，大姊承諾放棄，一旦母親去世後, 其大姊所享有任何遺產及權益的承繼權及並交由其三弟全權處理分配。

賣方簽名: (湯惠蓮) NOV 18, 05 見證人

買方簽名: (湯國祥) NOV 18, 05 見證人

The Agreement can be translated as follow: -

AGREEMENT

Concerning the sale and purchase and transfer of Ground Floor Shop at 87 Prince Edward Road, Mongkok, Kowloon for USD 260,000.

Now the Seller Tong Wai Lin (hereinafter referred to simply as “Big Sister”) and the Purchaser Tong Kwok Cheung (hereinafter referred to simply as “3^rd Younger Brother”) both sides reached the following two points of agreement:-

I. Completion of legal transfer of the above property (A) within 3 months after mother passed away naturally, or (B) within 3 months of Big Sister’s death by illness or accident, or (C) within 3 years from the date of this document, upon mutual agreement of the parties.

II. Big Sister hereby promises to give up, in case/when mother passes away, her inheritance or interests in mother’s estate and give the same to 3^rd Younger Brother to dispose of.

Vendor’s signature : (Tong Wai Lin)

NOV 18,05 Witness:

Purchaser’s signature : (Tong Kwok Cheong) NOV 18,05  Witness: ”

The evidence

6.Two witnesses gave evidence for the plaintiff.  They were himself and his wife.

7.The plaintiff who is presently in his sixties gave evidence that he has been involved in the activities of Sam Hing nearly all of his life.

8.He graduated from the Baptist College and subsequently worked as an Accountant. 

9.Sam Hing was founded by his father in the 1950’s.  It had always been his wish that his family should participate in the business and that it should continue to operate for as long as possible.  This wish was also shared by the mother.

10.It was the father’s practice when purchasing properties to put the property in the name or name by his wife and children as the case may be.

11.Although he provided the purchase moneys for the suit premises the defendant was named as the legal owner of the property.

12.No rent was ever paid by Sam Hing for its occupation of the suit premises to the defendant.

13.The mother during her lifetime had been concerned about the fact that the suit premises which were the main premises out of which Sam Hing operated were in the name of the defendant.  Her fear was that if anything untoward were to happen to the defendant the suit premises may cease to be in the control of the family and it might therefore prejudice the interests of the company.

14.The plaintiff said that the mother had attempted to persuade the defendant to sell the property back to the family to forestall this.

15.The mother had offered to buy the property back from the defendant for US$80,000.  This offer had been rejected and was a cause of friction between the mother and the defendant.

16.Some time around September 2005 when the mother’s health had been deteriorating he, the plaintiff, had had a long distance telephone conversation with the defendant.

17.The original purpose of the call was to discuss the mother’s health.

18.However, the defendant had expressed her dissatisfaction with the Tong family and had said that she wished to become dissociated from it.

19.She then enquired whether he, the plaintiff would consider purchasing the suit premises and any interest she may have in the mother’s estate.

20.The plaintiff said that he was interested.  They then went on to discuss what might be a suitable purchase price.

21.Both parties had agreed that the appropriate price should be such as to accord with the wishes of their late father.

22.He had in his lifetime said that it was his wish that family members should enjoy a comfortable living and should be able to live in a property which was free from mortgage payments.

23.The plaintiff asked the defendant whether any mortgage was outstanding on the house she and her husband lived in Sacramento California and she replied that the amount then remaining outstanding on the property is US$260,000. It was then agreed that this would be an appropriate amount for the purchase of the suit premises and also to cover any interest the defendant may have in the mother’s estate.

24.The plaintiff said that he did not know what the value of the mother’s estate would be as obviously there were many imponderables as to what expenses might be incurred in the future in relation to her medical condition or whether she might give or bequeath her estate to other people.

25.The defendant visited HK in November 2005.  The main reason for this visit was to see the mother who had not been well.

26.On or about the 15 November, the plaintiff had suggested a meeting with the defendant.  This took place at a café in the vicinity of Prince Edward Road.

27.The main matter which was discussed was when the Agreement which they had made over the telephone would come into effect.

28.It was agreed that it would be either 3 months from the death of the mother or 3 months from her, the defendant’s death.  The time could be varied by the mutual agreement of the parties.

29.The defendant agreed to this and requested him to draft a suitable document.  He had agreed to do this.

30.The plaintiff drafted the document earlier cited in this judgment and signed it and placed it in the book containing the medical records of the mother at her flat.  The document was prepared in duplicate.

31.He then telephoned the plaintiff informing her of this.  He told her that there was no hurry and that if she agreed to it she could sign it and keep one of the copies.  No deadline was set.

32.The plaintiff gave evidence that the defendant was highly educated and was literate in both Chinese and English.  Her husband and daughters were also highly educated.  Her husband had a PHD and one daughter was a Medical Doctor another a lawyer and the third a veterinary surgeon.  She was undoubtedly in a position to obtain any advice or assistance in respect to the agreement had she wished to do so.

33.The defendant had departed from HK in the morning of the 19 November. The plaintiff’s wife had gone across to Kowloon to see the defendant off.  She had only gone to the Airport bus stop with the defendant and had not gone to the Airport.

34.The defendant made several visit to HK prior to the mother’s death in June 2007.  At no time during these visits did the defendant ever make reference to the Agreement.

35.After the mother’s death, the plaintiff called upon the defendant to honour the Agreement.  He sent her a letter accompanied by a Banker’s draft for US$260,000.

36.By a letter to the plaintiff’s solicitors, the defendant stated that she had had no intention of entering into any binding agreement to sell the property and that as there was no consideration for the agreement she did not consider herself to be bound by it.

37.The plaintiff commenced the present proceedings in September 2007. In the defence and counterclaim the defendant for the first time raised the defence that the Agreement was an unconscionable bargain.

38.Shortly after this, the defendant commenced HCMP 1186/2008 against the company and the other siblings including himself.

39.In this action the defendant claimed an account of rent payable by the company for the use of the suit premises and also in an affidavit claimed an account for her share of the partnership profits.

40.The plaintiff learnt subsequently that the defendant entered into a memorandum of compromise with his siblings whereby the defendant was to get possession of the suit promises and also receive rent from Sam Hing from 31 May 2008 to 31 October 2008, and the action was discontinued.

41.The plaintiff only learnt of this compromise when the defendant commenced proceedings in 2011 for a Professional Administrator to be appointed to administer the mother’s estate.

42.The plaintiff was cross examined at some length by Mr Miu.

43.While it is true to say that the plaintiff was at times somewhat muddled over dates and times his evidence as a whole was unshaken.  I was satisfied that essentially he was a truthful and honest witness.

44.The plaintiff’s wife Cheung Wai Fong’s (“Ms Cheung”) evidence was confined to a narrow compass.  It related to what happened when she went over to Kowloon to see the defendant off on the 19 November 2005.

45.Ms Cheung’s evidence was rather surprising.  She and her husband live at Heng Fa Chuen which is on the HK side.

46.As the time of the defendant’s flight back to the US was at approximately 11am she must have made an early start from her home.  All of this was just to meet the defendant at the Playing Field Road flat where she was staying and then accompanying her to the Airport bus stop.  She had on her evidence seen the defendant on the previous evening.

47.Notwithstanding her evidence, I am satisfied that it is more probable that her purpose in going over to say goodbye was to ensure that she obtained a signed copy of the Agreement.

48.This however would not impinge to any large extent upon the evidence as a whole in these proceedings.

The defence evidence

49.The defendant was the only person to give evidence for the defence.

50.She is now aged 72 and is the eldest child in the Tong family.  She claimed to be very close to her parents.  She obtained a BA degree from a university in Taiwan and a master degree in the US.

51.Although clearly fluent in spoken English as was her right she opted to give evidence in Cantonese.  She is literate in Chinese and English although she claimed that her Chinese was now rather “rusty”.

52.One thing she was very sure of was that she had the interests of Sam Hing at heart and would not do anything to the detriment to the company. Also she was anxious that anything she did would accord with what she believed would have been the wishes by her parents even after their death.

53.She gave evidence that the mother had said in her lifetime that the plaintiff was the one amongst her brothers who could be trusted.  It was for this reason that she had been prepared to repose a large measure of trust in him.

54.Her description of the circumstances under which she signed the Agreement are almost completely at variance with the evidence given by the plaintiff.

55.She denied that there had ever been a telephone conversation when there had been any discussion concerning the suit premises or her agreement to transfer her share in the mother’s estate to the plaintiff.

56.She even denied that there had been any meaningful discussion at the café meeting referred to by the plaintiff.

57.She claimed that the purpose of the meeting was just to have a casual family chat.  Her husband was also present but as he spoke Mandarin and was not familiar with Cantonese he had not taken part in the discussion.

58.To her surprise the plaintiff had suggested to her that she should sell the suit premises to him.  He suggested that the purchase price should be US$260,000.  He supported the suggestion by saying that if I were to pass away prematurely the property might pass to a third party which might create problems for the continued operation by Sam Hing.  This was the first time that this topic had ever been broached.

59.On the 17 November, she received a telephone call from the plaintiff.  He told her that he had drafted an Agreement and placed it with the Medicine Book used for the mother.  He requested her to read it and if she agreed the contents sign it and he would collect it.

60.At this time she was suffering physical and mental stress consequential upon looking after the mother for 17 days.

61.She did not at first read the document as she needed to attend to the mother.

62.After about an hour she did cursurily read the document and sign it.

63.She had no idea that it was a document having legal consequences and she thought that all that might be achieved by signing it would be to assist Sam Hing.

64.The defendant was cross examined at some depth on this topic by Mr Chain who was representing the plaintiff.

65.What cleanly emerged from this cross examination was that the defendant was fully aware of the significance of the document she was signing.

66.Mr Chain took her through the document sentence by sentence and although her answers were evasive there can be no doubt that she fully understood the salient facts namely that there was a purchaser and a vendor, a price was given and the suit premises were described.  There was also reference to the Agreement coming into effect 3 months following the mother or her death.

67.Equally it was clear that she fully understood Clause II which provided for the transfer of her interest in the mother’s estate to the plaintiff.

68.As to the plaintiff’s claims that she was so tired that she was unable to fully understand the position she agreed that at the relevant time she had been consulting medical reference works in any endeavor to fully understand the mother’s medical condition.

69.It is also necessary to attempt to understand the context of this whole situation.

70.What the defendant is seeking the court to do is to believe that she would have been prepared to sign the Agreement when there had been virtually no previous discussions or negotiations.

71.Bearing in mind that the defendant is a highly educated and experienced person it is inconceivable that she would simply sign such an document on the basis of the alleged trust in the plaintiff.  Although he was her brother they had not seen much of each other since the defendant had gone to the US in 1971.

72.I hold on the balance of probabilities that there was indeed a prior telephone conversation between the plaintiff and the defendant and that the defendant did inform the plaintiff that she wished to distance herself from the Tong family and that it was at that juncture that the question of the sale of the suit premises and the transfer of the interest in the defendants interest in the mother’s estate was discussed.

73.The plaintiff’s version of the matter is also consistent with the discussions the café on 15 November which extended significantly beyond family chatter.

74.During the course of her cross examination the defendant did on several occasion revert back to what had transpired at the meeting and this strongly reinforced the impression that the defendant had agreed to sign the Agreement which encapsulated the verbal agreement reached by the parties.

75.In this connection it would appear to be incredible that the plaintiff would prepare an Agreement for signature by the defendant unless there had been prior discussions.

76.What also needs to be borne in mind is that the Agreement was a simple one the terms of which were stated on one page of Chinese characters.

77.The claim made by the defendant that she did not even see the clause relating to the transfer of the interest in the mother’s estate is likewise difficult to believe as even the most summary perusal of the document would have made in manifest that this was indeed a part of the document.

78.The defendant made reference to the present proceedings and the fact that she had issued the miscellaneous proceedings in an attempt to obtain from Sam Hing a statement of accounts as she had been a partner since 1975 and had received no payment of profits or rent.

79.It had proved to be possible to settle the action she had commenced against members of the family not including the plaintiff by entering into a memorandum of compromise.

80.Finally the defendant claimed that the Agreement should be set aside on the ground of it being an unconscionable bargain.

81.She referred to the very large disparity between the consideration of US$260,000 in the Agreement and the value of the suit premises and her interest in the mother’s estate.

82.What has to be borne in mind here is what the position was in November 2005.

83.So far as the suit premises are concerned Sam Hing had been operating the business out of the premises for the past 40 years.  At that time it would not have been known by the parties that Sam Hing would cease trading in 2008.

84.Indeed it was the evidence of both parties that it was within their contemplation that Sam Hing would continue operating for the foreseeable future and that whoever owned the property rent would not be forthcoming from Sam Hing.

85.It would almost inevitably be difficult in find a purchaser in such a situation and even then the purchase would be at a discount.

86.It is clear that even now there is a large measure of uncertainty as to the value of the mother’s estate.  It also appears likely that there will be further substantial delay before the mother’s affairs are finally resolved.

87.As against this the Agreement provided a relatively certain expeditions offer to the defendant which if accepted would enable the defendant to receive a substantial sum of money.

88.What also needs to be borne in mind is that according to the plaintiff’s evidence when the price was agreed over the telephone no attempt was made to fix the price to its then market value.  The value which was agreed was what members of the family thought their father would have considered reasonable bearing in mind his criteria that the end result should be a sufficient amount of money to enable the family member to have a comfortable life and own a mortgage free property.

89.I have attempted to shortly summarise the evidence of the witnesses within the parameters of the pleadings and the relevant law.

90.As indicated earlier, I found the plaintiff to be an honest and reliable witness.

91.I did not find the defendant to be a reliable and honest witness.  While she is undoubtedly a person of quite high intelligence, she strongly gave the impression of giving evidence which she thought would best serve her interests.

92.She was a very evasive witness who attempted to qualify many of the answers she gave during cross examination.

93.I did not find her to be a convincing witness and where there is variance between her evidence and the evidence of the plaintiff, I definitely prefer and place greater reliance upon the evidence of the latter.

94.I will now turn to the final matter of the law relating to this subject.

The Law

95.Mr Miu for the defendant placed heavy reliance upon the fact that the transfer of the interest in the mother’s estate to the plaintiff was a transfer of a Reversionary Interest. 

96.He referred to a number of 19^th Century cases involving improvident expectant heirs who had charged or mortgaged their expectancies to usurers or moneylenders.

97.The law relating to these transactions was quite onerous upon those seeking to enforce their bargains and placed the burden of proof upon them.

98.See a passage at p 164 from the judgment of Sir John Romilly MR in Salter v Bradshaw (1858) 26 Beav 161:

“ Modern decisions have established this - that the burden of establishing that a full price has been given for a reversion lies upon the purchaser, and in order to maintain the validity of such a transaction, it is essential that he should preserve abundant evidence that, at the time he purchased the reversion, it was of the value, and of no greater value, than that which he gave for it. In the present case the purchaser has not only preserved no such evidence, but he has made it impossible that any such evidence should be obtained. It is out of the question to suppose that the Court can arrive at any [165] satisfactory conclusion from speculative opinions as to the probable value of the property at the time of the sale, derived from its value nine years previous, (2) or from its value at the present time. It is, as I have already observed, a perfectly bona fide case, but it is one in which the purchaser has not thought fit to preserve any evidence of its value when he bought it, nor in fact did he ascertain, at the time, what was its value, for that is very clearly shewn; and it is this circumstance, now, when it has fallen in, which has made it impossible to ascertain what the value was.”

99.This case was decided before the enactment of the Sales of Reversions Act 1858.

100.The Sales of Reversion Act was later replaced by s 174 of the Law of property Act 1925 which in turn is similar to s 59 of the Conveyancing and Property Ordinance, Cap 219 in Hong Kong.  This effectively abolished the rule that an undervalue of itself would allow the court to set aside the sale of a reversionary interest by an expectant heir.

101.This was on the basis that the transaction had been undertaken bona fide and without fraud.

102.However, Mr Miu submitted that it was clear from the judgment of Lord Selborne in Earl of Aylesford v Morris (1873) LR 8 Ch App 484, the provisions contained in this legislation did not materially affect the proceeding common law in some cases.  The passage in question is at p 490 and 491.

“ The usury laws, however, proved to be an inconvenient fetter upon the liberty of commercial transactions; and the arbitrary rule of equity as to sales of reversions was an impediment to fair and reasonable, as well as to unconscionable, bargains. Both have been abolished by the Legislature; but the abolition of the usury laws still leaves the nature of the bargain capable of being a note of fraud in the estimation of this Court; and the Act as to sales of reversions (31 Vict c4) is carefully limited to purchases ‘made bona fide and without fraud or unfair dealing,’ and leaves under-value still a material element in cases in which it is not the sole equitable ground for relief. These changes of the law have in no degree whatever altered the onus probandi in those cases, which, according to the language of Lord Hardwicke, raise ‘from the circumstances or conditions of the parties contracting - weakness on one side, usury on the other, or extortion, or advantage taken of that weakness’ - a presumption of fraud. Fraud does not here mean deceit or circumvention; it means an unconscientious use of the power arising out of these circumstances and conditions; and when the relative position of the parties is such as prima facie to raise this presumption, the transaction cannot stand unless the person claiming the benefit of it is able to repel the presumption by contrary evidence, proving it to have been in point of fact fair, just, and reasonable.”

103.The third case that Mr Miu relied upon in support of his contention that the burden lay upon the plaintiff to establish that the transaction should be upheld was a passage from the judgment of Kay J at 321 of Fry v Lane (1888) 15 Ch D 312.

“ It is obvious that the words ‘merely on the ground of under-value’ do not include the case of an undervalue so gross as to amount of itself to evidence of fraud, and in Earl of Aylesford v Morris (1) Lord Selborne said that this Act ‘leaves undervalue still a material element in cases in which it is not the sole equitable ground for relief. These changes of the law have in no degree whatever altered the onus probandi in those cases, which, according to the language of Lord Hardwicke, raise ‘from the circumstances or condition of the parties contracting - weakness on one side, usury on the other, or extortion, or advantage taken of that weakness’ - a presumption of fraud. Fraud,’ says Lord Selborne, ‘does not here mean deceit or circumvention; it means an unconscientious use of the power arising out of these circumstances and conditions; and when the relative position of the parties is such as prima facie to raise this presumption, the transaction cannot stand unless the person claiming the benefit of it is able to repel the presumption by contrary evidence, proving it to have been in point of fact fair, just, and reasonable.’

The most common case for the interference of a Court of Equity is that of an expectant heir, reversioner, or remainderman who is just of age, his youth being treated as an important circumstance.  Another analogous case is where the vendor is a poor man with imperfect education, as in Evans v Llewellin (2); Haygarth v Wearing (3).”

104.Mr Chain for the plaintiff submitted that these cases do not support Mr Miu’s contentions.

(1)  That the defendant need only show under value or lack of bona fides but not unconscionability for the written contract to be set aside.

(2)  Even if the defendant needs to show unconscionability because the defendant is an expectant heir the burden of proof is automatically reversed and that it is for the plaintiff to prove that the written contract is fair trust and reasonable.

105.I accept that Mr Chain’s interpretation of the cases cited is the correct one and that the usual legal principles are applicable in this case.

106.These principles were set out comprehensively by Mason J as he then was, in Commercial Bank of Australia Ltd v Amadio (1982-83) 151 CLR 447 at 461.

“ Historically, courts have exercised jurisdiction to set aside contracts and other dealings on a variety of equitable grounds. They include fraud, misrepresentation, breach of fiduciary duty, undue influence and unconscionable conduct. In one sense they all constitute species of unconscionable conduct on the part of a party who stands to receive a benefit under a transaction which, in the eye of equity, cannot be enforced because to do so would be inconsistent with equity and good conscience. But relief on the ground of ‘unconscionable conduct’ is usually taken to refer to the class of case in which a party makes unconscientious use of his superior position or bargaining power to the detriment of a party who suffers from some special disability or is placed in some special situation of disadvantage, eg, a catching bargain with an expectant heir or an unfair contract made by taking advantage of a person who is seriously affected by intoxicating drink. Although unconscionable conduct in this narrow sense bears some resemblance to the doctrine of undue influence, there is a difference between the two. In the latter the will of the innocent party is not independent and voluntary because it is overborne. In the former the will of the innocent party, even if independent and voluntary, is the result of the disadvantageous position in which he is placed and of the other party unconscientiously taking advantage of that position.

There is no reason for thinking that the two remedies are mutually exclusive in the sense that only one of them is available in a particular situation to the exclusion of the other.  Relief on the ground of unconscionable conduct will be granted when unconscientious advantage is taken of an innocent party whose will is overborne so that it is not independent and voluntary, just as it will be granted when such advantage is taken of an innocent party who, though not deprived of an independent and voluntary will, is unable to make a worthwhile judgment as to what is in his best interest.”

107.Waung J in Lo Wo & Others v Cheung Chan Ka & Another [2000] 2 HKLRD 370 at 380 referred to 5 propositions which had been laid down by the Privy Council in Boustany v Piggott (1995) 69 P & CR 298 at 303.

“(1) It is not sufficient to attract the jurisdiction of equity to prove that a bargain is hard, unreasonable or foolish; it must be proved to be unconscionable, in the sense that ‘one of the parties to it has imposed the objectionable terms in a morally reprehensible manner, that is to say, in a way which affects his conscience’ : Multiservice Bookbinding v Marden.

(2) ‘Unconscionable’ relates not merely to the terms of the bargain but to the behaviour of the stronger party, which must be characterized by some moral culpability or impropriety : Alec Lobb Garages Ltd v Total Oil Great Britain.

(3) Unequal bargaining power or objectively unreasonable terms provide no basis for equitable interference in the absence of unconscientious or extortionate abuse of power where exceptionally, and as a matter of common fairness, ‘it was not right that the strong should be allowed to push the weak to the wall’ : Alec Lobb Garages Ltd v Total Oil Great Britain.

(4) A contract cannot be set aside in equity as ‘an unconscionable bargain’ against a party innocent of actual or constructive fraud. Even if the terms of the contract are ‘unfair’ in the sense that they are more favourable to one party than the other (‘contractual imbalance’), equity will not provide relief unless the beneficiary is guilty of unconscionable conduct : Hart v O’ Connor applied in Nichols v Jessup.

(5) ‘In situations of this kind it is necessary for the plaintiff who seeks relief to establish unconscionable conduct, namely that unconscientious advantage has been taken of his disabling condition or circumstrances’ per Mason J in Commercial Bank of Australia Ltd v Amadio (1982-83) 151 CLR 447.”

108.These principles are applicable to the present case.

109.In her defence and evidence, the defendant advances five reasons why the Agreement was an unconscionable bargain.  I propose dealing with these in turn.

(1)  That when the defendant signed the contract she was mentally and physically exhausted.

As indicated when commenting upon her evidence this justification is without merit.  She gave evidence that at about that time she had referred to medical reference works in relation to the mother’s physical condition.  It would require greater mental acuity to do this than it would to read a one page document which did not contain any concepts which were difficult to understand.

(2)  The defendant lived overseas and was unfamiliar with the HK property market.

This contention also is without merit.  It is clear from the evidence that the plaintiff did not impose any time pressure upon the defendant.  It would have been an entirely simple matter for her to obtain professional advice which would place her in a similar or better position than the plaintiff.

(3)   The defendant only took a cursory look and did not read or consider the contents of the contract.

Again this was a matter which was dealt with in some detail during the defendant’s cross examination.

She was taken through the document sentence by sentence and it was apparent that it was obvious that it was a document dealing with the sale and purchase of the suit premises.  When this is taken in conjunction with the plaintiff’s evidence which I accept that there had been previous discussions and negotiations concerning this and the transfer of her interest in the mother’s estate, it is inconceivable that the defendant was not fully aware of the contents and meaning of the contract and that it would lead to legal consequences.

(4)  The defendant placed trust and confidence in the plaintiff.  The law in respect of this is conveniently set out in the judgment of Buxton LJ at p 423 & 4 of Irvani v Irvani (2000) 1 Lloyd’s Law Reports 412.

“Was the 1995 agreement unenforceable?

Although a number of other arguments were ventilated at earlier stages of the proceedings, before us Mr Gee advanced three submissions. Two of these appealed to familiar rules of the law of contract, the third had an element of novelty about it. They were (i) the 1995 agreement was entered into as a result of undue influence by Bahman and, probably also, Mrs Khosrowshahi; (ii) the 1995 agreement was entered into when Ali suffered from lack of contractual capacity; (iii) the contract should be set aside on grounds of equity.

I address the third of these first. Mr Gee explained that this was a head of relief allied to the law of unconscionable bargain, though he wished, first, to avoid any stipulation of necessary ingredients to found the former relief; and second, as the argument developed, to support by a general appeal to unconscionability some of the arguments adduced under the head of undue influence.

Mr Gee properly reminded us that in the latest edition of Chitty, Chitty on Contracts, 28^th ed, 1999, ‘undue influence’ and ‘unconscionable bargain’ are treated in separate sections. Although these two areas of the law have some similarities, I have no doubt that in the present state of the authorities Chitty is right in the taxonomy that it adopts. Undue influence is concerned with the prior relationship between the contracting parties, and with whether that was the motivation or reason for which the bargain was entered into. Unconscionable bargain is, as its title suggests, concerned with the nature and circumstances of the bargain itself, and can arise without there being any relationship, outside that of the immediate contract, between the parties. I consider that the limitations on the latter doctrine, significantly different from the circumstances of a case of undue influence, are accurately set out in para 7-078 of Chitty.

It is particularly important to keep these distinctions clear, because otherwise there may be a tendency to think that a case that has some elements of undue influence, but is not in law a case of undue influence; and which has some elements of unconscionable bargain, but which is not in law a case of unconscionable bargain; can by the combination of these different and inadequate claims be returned into a case that attracts relief on a vaguer basis of general equity.  It is also important to keep the distinctions clear when one of the circumstances claimed to attract relief is that one of the parties to the contract was suffering from mental incapacity, or addiction to drink or drugs.  It is doubtful whether that circumstance can, of itself, give rise to a claim of undue influence, a question to which I shall have to return.  Therefore, leaving aside the issue of contractual capacity, to which also I shall have to return, the intoxication of the contracting party is to be taken into account, if at all, as a matter of unconscionable bargain and not otherwise.”

The defendant’s evidence on this topic is very thin.  Although they were brother and sister, there had been very little contact between them since 1971.  It has not been pleaded that the plaintiff exercised undue influence and having regard to the overall circumstances this is not surprising.  The correct way of viewing this matter was that the brother and sister were trying to work out the solution to the problems which might arise in the event that the suit premises came into the hands of a third party. 

There is no merit in this complaint.

(5)  The purchase price of UD$260,000 under the contract was an undervaluation.

110.This goes back to the nature of the transaction.  According to the plaintiff whose evidence on this I accept what was being discussed was the endeavour to resolve a family matter according to the siblings’ understanding of what their parent’s wishes would have been.  It was not focused upon actual market values.  What the defendant was getting was a large measure of certainty.

111.On completion of the Agreement she would receive US$260,000.  This would in all likelihood be a sufficient amount to ensure that she would be able to enjoy a comfortable future.

112.Although according to the valuation which was obtained the value of the suit premises was HK$4,940,000 in 2005 the time when the Agreement was entered into there was every likelihood that Sam Hing would continue to occupy the suit premises for the foreseeable future.

113.Clearly this would have a negative impact upon the value of the property.

114.So far as the interest in the mother’s estate is concerned there was little reliable information concerning the value of the estate and even more uncertainty as to what the value would be at the time of the mother’s death.

115.Now with the wisdom of hindsight it is known that the administration of the estate is bogged down in uncertainty and it is by no means impossible that there will not be further protracted litigation.

116.It cannot be said that given all of the imponderables that a reasonable person in 2005 would not enter into the Agreement which was presented to the defendant for acceptance.

117.What can be said with certainty is that by no stretch of the imagination can it be said that anyone viewing the overall situation would feel a sense of outrage that an unconscionable bargain had been concluded or that the defendant had been exploited by the plaintiff.

118.In conclusion, we have a situation where a valid and binding Agreement has freely been entered into by the defendant.

119.The defendant’s refusal to complete the Agreement constitutes a breach of contract.

120.One of the remedies provided by the law in such a situation is an order for specific performance of the contract.

121.As indicated in this judgment none of the defences which the defendant has attempted to avail herself can be sustained.

122.It is not contested that the plaintiff is willing and able to perform his part of the contract.

123.This being the case the plaintiff will succeed in his claim for specific performance of the contract and the defendants counterclaim is hereby dismissed.  Also the defendant must transfer any interest she may have in the mother’s estate to the plaintiff.

124.Understandably, there have been no submissions concerning the details of how the Order which is being made will be implemented.

125.In these circumstances, I advised counsel that as the outcome of the case had not been determined I would simply order that in the event of the plaintiff’s claim being successful the legal representatives of the parties would be requested to attempt to agree a suitable order.  In the event of their being unable to do so there would be liberty to apply.

126.I make an order nisi that the plaintiff will have his costs which in the absence of Agreement are to be taxed.

127.I am grateful to counsel for the assistance they have given me.

Mr Christopher Chain, instructed by C Y Tsang & Co, for the plaintiff

Mr Nelson Miu, instructed by Liu, Choi & Chan, for the defendant

Please refer to CACV268/2012 for the relevant appeal(s) to the Court of Appeal.

Please refer to CACV268/2012 for the relevant appeal(s) to the Court of Appeal.

Please refer to CACV268/2012 for the relevant appeal(s) to the Court of Appeal.