Pang Ketian Sally v. Tam Yuk Hung Annie
Read the full judgment text of HCA 298/2012 on BabelCite. This High Court CFI judgment was delivered on 11 June 2013.
1. The plaintiff, the defendant and a Madam Fung all used to be friends. There was also a quasi family relationship in that the plaintiff’s father-in-law was the boyfriend of the defendant. Those relationships have not survived the matters giving rise to these proceedings.
Cited by 6 cases · Cites 1 case
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HCA 298/2012 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO 298 OF 2012 (TRANSFERRED FROM DCCJ NO 3090 OF 2010) ______________________
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_______________ J U D G M E N T _______________ Introduction 1.The plaintiff, the defendant and a Madam Fung all used to be friends. There was also a quasi family relationship in that the plaintiff’s father-in-law was the boyfriend of the defendant. Those relationships have not survived the matters giving rise to these proceedings. 2.In October 2007 the plaintiff, the defendant and Madam Fung agreed to join together (“the original agreement”) to make an investment into a property in a new development called Island Lodge in Java Road, Hong Kong (“the property”). In broad terms, the agreement between the three of them was that each would contribute one-third of the 15 per cent deposit and conveyancing fees for the purchase of the property and, although legal title would be in the name of the defendant alone, each of them would hold one-third of the rights and interest in the property. 3.Further, the investment was intended to be for the short term only so that there would be a resale of the property as confirmor before the date for completion. As the development would not be finished for 18 months or so, it was anticipated that the period before completion would allow the property to appreciate in value so that it could be sold at a profit. Selling the property before completion would mean that none of the investors would be required to inject any further funds into the investment. 4.Unfortunately, in the period before the date for completion, the property market in Hong Kong dropped at least in part as a result of the global financial crisis in 2008. There is unchallenged expert opinion evidence from the appointed single joint expert that as at the date for completion in April 2009, the market value of the property was in the region of $7.1 million, somewhat lower than the agreed purchase price of $8.143 million. Though giving such a market value assumes a willing buyer, the evidence at trial identified that there were in fact very few buyers in the market for apartments like the property. 5.Two estate agents who gave evidence described that fact and the transaction records show that only two subsales were achieved for units in the development prior to the date of completion of the property and both of those were in the early part of 2008 before the main effects of the global financial crisis. 6.The parties to the original agreement therefore faced a dilemma. If they were able to find a buyer they would have to sell at a substantial loss. If they failed to complete the purchase they would lose their deposits and may well face a claim by the developer for the difference between the deposit and the full purchase price. If they were to complete that would require a further substantial deposit and the need for a mortgage loan which would have to be repaid in monthly instalments. 7.In the end, no buyer could be found, the purchase was not repudiated, but rather the purchase was completed with responsibility for the further deposit and the necessary mortgage loan being assumed only by the defendant and Madam Fung. It is not in dispute that the plaintiff has never made any further contribution to the investment beyond her original contribution to the deposit. 8.It is against these circumstances that the current claim is brought. The plaintiff is represented by Mr Tim Wong, of counsel, and the defendant by Mr Christopher Chain, of counsel. 9.The plaintiff claims that she is still the beneficial owner of one-third of the rights, title, benefit and interest in the property and seeks a declaration to that effect. She asks that it be declared that the property is held by the defendant as trustee for the plaintiff, the defendant and Madam Fung as tenants in common. She seeks an order for sale of the property and an order that the proceeds be divided between the plaintiff, the defendant and Madam Fung in equal shares after certain deductions, essentially to account for sums paid over the time since completion of the purchase to which the plaintiff has made no contribution. She also claims damages and interest. 10.On the other hand, the defendant says, and Madam Fung supports her in saying, that the plaintiff decided not to proceed with the completion and not to have anything further to do with the property surrendering her interest so as to crystallise and cap her loss. The plaintiff’s surrender of her interest in the property is said to have been made at a meeting in Festival Walk between the plaintiff, the defendant and Madam Fung, in the presence of an intended neutral witness, Madam Yau, who, unbeknownst to the other participants, recorded a substantial portion of their conversation and discussions and of which there is a transcript. The Original Agreement 11.The original agreement was made orally. Though there is some dispute as to its precise terms, there is a substantial measure of agreement between the parties. It is clear that it was intended that each of the plaintiff, the defendant and Madam Fung would be equal participants in the investment. I find that it was because they were to contribute equally to the investment that they were to have equal interests in the investment. It seems obvious, and I find as a fact, that had the original agreement provided for unequal contributions, the interests held by the parties would have been proportionately unequal. That this was the basis of the intended sharing of ownership interest will be relevant to a consideration of the case that the plaintiff now runs that: (a) the original intention of the participants in the investment never changed; and (b) she is entitled to a one-third interest absolutely. 12.It is common ground that the equality of interest in the investment would mean that the parties should share equally in any profit or loss made. Nevertheless, I find that the parties had not seriously considered that the investment might make a loss, and indeed had they done so they would probably not have invested at that time. At the time, the long period for completion of the purchase of the property appeared to provide the opportunity to take advantage of appreciation of property prices in a rising market. In this context I note that it is not part of the plaintiff’s pleaded claim that there was an express consideration of what might occur in the situation of a loss. That is why the plaintiff refers to the pleading of the defendant, which states that there was a mutual understanding that the parties to the original agreement would share the deposits, costs and expenses and profits/loss in equal shares. 13.I accept that there was some evidence from the parties that there may have been express consideration of the possibility of the loss. Nevertheless, I remain of the view that the parties had certainly not anticipated that the property market would drop significantly in the period before completion so that if the property were to be sold before that time a real loss would be made by them. 14.It is common ground that the parties did not intend to complete the purchase of the property but rather would sell prior to completion. However, the plaintiff goes further and suggests that it was an expressly agreed term that the purchase would not be completed. This is not admitted by the defendant. Though I am not sure it matters in the final analysis, I find that there was no express term to that effect. 15.As part of what seems to me to be a similar point, the plaintiff also suggests that it was an express term of the original agreement that no mortgage shall be taken out in relation to the property. Again, whilst I acknowledge that the parties to the original agreement had certainly not intended that a mortgage would be taken out, for the plan was to sell before completion, I do not accept that there was an express agreement that such a mortgage would not be taken out under any circumstances. Again, this may not matter in the final analysis. 16.There is an issue as to whether it was expressly agreed that the defendant would be responsible for instructing an estate agent to sell the property. But in light of the fact that the defendant was to be the registered owner of the property, it seems to be more likely than not that this term was agreed. Nevertheless, I do not think that that would have released the plaintiff and/or Madam Fung from any involvement in seeking to sell the property through an agent or agents or, for example, in assisting the defendant in identifying suitable agents with whom the property might be placed. On the evidence, Madam Fung assisted in just that way. Property Purchase 17.Once the particular property in the development had been identified the defendant, as purchaser, entered into a memorandum for sale dated 2 November 2007. The purchase price was $8.143 million and an initial deposit of $407,150, 5 per cent, was made on the same day. Subsequently, two further deposits of $407,150, each a further 5 per cent, were made on 6 December 2007 and 5 January 2008. This left a balance of the purchase price of $6,921,550 payable upon completion. 18.Each of the plaintiff, the defendant and Madam Fung, contributed approximately $408,000 towards the deposit costs, the slight difference of a few dollars between each of the contribution amounts being immaterial. In other words, each contributed an equal 5 per cent of the purchase price to make up the total 15 per cent deposit required before completion. Property Marketing 19.As it was anticipated that a sale as confirmor would still require payment of some stamp duty and other fees totalling around $400,000, the property would have had to have been sold for about $8.55 million for the investment to break even. Obviously, if any profit were to be made, as was no doubt intended and originally anticipated, a higher price still would have had to have been achieved. With this in mind the property was first placed on the market at the highest asking price of $9.11 million. It seems that it stayed at that asking price for approximately the first six months after the purchase in November 2007. 20.There is an issue between the parties as to whether more than one estate agent was instructed by the defendant, even though strictly the plaintiff’s pleaded case is that it was agreed that the defendant would instruct an estate agent, namely one. In any event, I am satisfied that more than one estate agent was instructed though probably not to start with. 21.I heard evidence from two agents, a Ms Yung of Loyalty Property Agents, and a Ms Wong of Expert Property Agents, who both stated they, or their companies, had been instructed by the defendant to offer the property for sale. Further, as the date for completion of the property loomed, it seems more likely than not that the defendant instructed several agents with a view to increasing the chances of finding a buyer. 22.There was perhaps an issue as to when the agents were instructed. Ms Wong was able to provide a copy of a formal form of instruction dated October 2008. Whilst the defendant suggested that there may have been a similar prior document, I accept that the October 2008 document was the only document of that nature signed between the defendant and Ms Wong. On the other hand, I also accept the evidence of Madam Fung and Ms Wong that there had been at least some form of informal dealing between them whereby Ms Wong was notified that Madam Fung and friend had an interest in this property and would be looking to sell it before the intended and anticipated date for completion of the purchase contract. 23.The precise dates upon which any agent was instructed do not seem to me to be material where the allegation of breach is ultimately one that there should have been a sale prior to completion, that is, by April 2009. Undoubtedly, more than one agent had been instructed some considerable time prior to that date. 24.Another issue arises between the parties as to the price at which the property was offered for sale. The plaintiff says that the property was never offered at less than $8 million even by early 2009 by which time the market price was known to have fallen substantially and was probably around the $7 million-odd mark. She relies on a passage in the transcript of the meeting held at Festival Walk where, after the defendant stated that she had placed the property in a number of different agencies, the plaintiff stated that they had still not proposed a figure that starts with “7” hoping to generate inquiries, to which the defendant responded, “You can do it but it’s really ‑‑ it’s really ‑‑ I tell you the chance is very slim”. The plaintiff suggests that this was a recognition that the defendant had not yet marketed the property below $8 million but I consider that there is a danger in reading the transcript as though it were some statute and drawing too much from a reading of just part of the actual words used. I am satisfied that the evidence as a whole identifies that the defendant sought to place the property with agencies at a price that started with “7” and the problem was simply that there were no real buyers for the property or others in the development so that the chances of selling, even at a significantly lower price, were indeed slim. This was the point being made by the defendant in the relevant passage. 25.I accept that the property was being marketed or offered for sale and the prices that various agents may have varied but that whatever was the precise asking price, clear instructions had been given to the agents that the price was very negotiable. There is no doubt that the parties did not wish to complete the purchase so any offer that was forthcoming might have been considered the nearer the anticipated date for completion came. But, as I have already accepted, the problem was that there was simply few, if any, buyers interested in the property or ones similar to it. 26.One other point needs to be addressed in the context of the offering of the property for sale. The plaintiff says that there was an offer of $8.2 million made which she had been insistent should be accepted but which the defendant had rejected on the basis that it was only $50,000 or so above the purchase price, so was too low. The defendant says that there was not a formal offer made but an expression of interest by an inquiry as to whether that price might be acceptable. Though she did not think it was a price which the property should be sold at, at the time (which time is not entirely clear but seems to have been some considerable period before the anticipated date for completion), there was, in any event, no follow-up to the inquiry. 27.I tend to prefer the evidence of the defendant on this point but it does not seem to me to matter to any central issue I have to decide. The term of the original agreement relied on by the plaintiff is that there had to be a sale before completion of the purchase of the property so that there would not have been any breach of that term until the actual date for completion arrived without the property having been sold. Therefore, even if a formal offer had been made and rejected, that does not seem to lead anywhere on the claim as formulated. The Festival Walk Meeting 28.As the anticipated date for completion in April 2009 approached, the parties’ concern as to an inability to have sold the property obviously increased. All of the plaintiff, the defendant and Madam Fung were patently aware that the property market had more or less collapsed by early 2009 and that the value of their investment had significantly depreciated. At least the possibility of completing the purchase came into mind. I accept as a fact that the plaintiff, the defendant and Madam Fung went together to a mortgage broker to make inquiries as to the possibility of obtaining a mortgage to permit completion of the purchase if that decision were to be made. I find that the plaintiff was present at the meeting and heard, or at least was told after the event, that the bank valuation of the property was in the range of $6.8 million to $7.1 million. 29.One meeting was held between the plaintiff, the defendant and Madam Fung at the latter’s home. It seems that no consensus was reached at that meeting as to what should happen. Therefore, a further meeting was arranged to take place at Festival Walk in around late February or March 2009. At the invitation of the defendant, Madam Yau attended the meeting because, for a reason that has not been fully explained to me, it was thought that it might be helpful to have a neutral witness to the discussions. This at least suggests that the previous harmony amongst the friends was starting to fray. As it happens, Madam Yau decided of her own volition to record the meeting and to do so on a device that she kept concealed from the participants at the meeting. She did not tell any of the plaintiff, the defendant or Madam Fung that she was recording the discussions. That the meeting, or part of it, had been recorded only emerged later, after the dispute between the parties had arisen. Madam Yau gave the recording to the plaintiff but not the other two. 30.Mr Chain invites me to find that fact identifies that Madam Yau has lost her neutrality and that, together with the way in which she gave her evidence, I should find she has turned into an advocate for the plaintiff and her cause. There is something in the point when Madam Yau started to give evidence according to her personal perceptions, at times in effect to seek to challenge what she had actually seen and heard and recorded. But because I have available a transcript of what was recorded I do not think I need to concern myself with whether or not Madam Yau has lost the intended neutrality. In any event, some of her answers seemed rather helpful to the defendant’s case. 31.It is of course unfortunate that the recording of the Festival Walk meeting ended before the actual conclusion of the meeting, apparently because the batteries on the recording device failed. Nevertheless, the transcript is useful to identify the mood and concerns of the various parties as the date for completion of the purchase of the property grew nearer in the then still falling market. 32.It seems to me a number of points can fairly be made about the transcript as a whole.
33.At the point the recording and the transcript ends, it is probably correct to say that there is no common intention evidenced as having been reached by the parties although the respective stance of the parties was tolerably clear. But the defendant says, supported by the evidence of Madam Fung, that the discussion continued for a short time after the recording ceased and that a common intention was reached between the parties that the plaintiff would exit the investment leaving the defendant and Madam Fung to complete the purchase with a mortgage if they could, which they would have to achieve between themselves alone. 34.In supplemental witness statements filed, adopted as part of their evidence at trial, the defendant and Madam Fung expressed their recollection of the words that were used by the plaintiff towards the end of the meeting to communicate her surrender of the interest in the property as follows:
35.The plaintiff and Madam Yau denied in evidence that these words were spoken by them. Indeed, it is their case that the meeting actually ended very shortly after the cessation of the recorded part of it, that no consensus or common intention was ever reached but rather the idea was the defendant would speak to Mr Chong. 36.There is no dispute that no subsequent meeting took place between the plaintiff, the defendant and Madam Fung prior to the date for completion of the purchase of the property. Further, there was apparently no attempt by the defendant to speak to Mr Chong nor was there any evidence of any attempt by the plaintiff to follow up on anything from the meeting prior to the anticipated date for completion. Completion of Purchase of the Property 37.When the developer called for completion of the purchase of the property on the 14 days’ notice provided for in the sale and purchase agreement, the defendant did complete the purchase albeit that she did so a few days late, which incurred a late fee because of the time taken by her in organising the necessary finance to commit to completion. The defendant took out a loan against an existing property she owned and used that to pay a further 15 per cent deposit as well as some expenses. The balance of the purchase price was facilitated by her taking a loan from a finance company, probably at a higher rate of interest than might have been obtained through a mortgage with a bank. 38.The defendant says that Madam Fung agreed to bear responsibility for part of the additional deposit and that she has contributed half of the mortgage repayments, or at least half of any shortfall arising from the rental receipts which did not cover the mortgage instalments. In effect, the defendant lent Madam Fung a share of the further deposit which will be repaid with interest out of the proceeds of sale whenever the property might be sold in future. 39.The defendant did not look to the plaintiff for any form of contribution towards the deposit, the expenses of purchase such as stamp duty, or the balance of the purchase price. Since completion the defendant has continued to hold the property, she says, on trust for herself and Madam Fung in the proportion of two‑thirds to one-third respectively. The property has been rented out and the rental receipts have been used towards the mortgage instalments. Although previously there was a shortfall, it seems that a newly agreed rent now covers those instalments. May and June 2009 40.In May 2009 the plaintiff telephoned the defendant. It is common ground that prior to that telephone call the defendant had not notified the plaintiff of the completion of the purchase of the property. As a result, in the telephone call the plaintiff complained that the defendant had acted in breach of the original agreement by completing and had completed in secret. It is also common ground that the reaction of the defendant was to scold the plaintiff and to ask her why she was complaining. But the defendant also accepted in evidence that the plaintiff probably made the call because all along it had been her wish that if the mortgage were to be obtained she could retain a 5 per cent interest in the property. 41.After discussion with Madam Fung the defendant approached a lawyer for help and a solicitor’s letter was sent to the plaintiff on 20 June 2009. That letter set out the defendant’s version of events. It refers to the original agreement and to the problems which arose because no real potential buyer for a subsale before completion could be identified. That led to meetings and discussions as to the disposition of the property. The letter sets out the options or alternatives discussed including both not completing and proceeding with completion. The letter also states that the plaintiff expressly indicated that she insisted and decided not to proceed with completion which would require further payment of monies and would be subject to a potential risk of further loss in the investment, that she rejected the defendant’s proposal to find financial resources to enable completion on condition that the plaintiff contributed to the monthly mortgage loan and that the plaintiff agreed to surrender her interest in the investment by treating her contribution as losses, leaving the defendant and Madam Fung to proceed with completion. 42.At the end of the letter, in a passage relied upon by Mr Wong for the plaintiff, there is an assertion that the plaintiff had wrongly repudiated the original agreement which repudiation was accepted but which caused loss and damage to the defendant and Madam Fung for which they would be entitled to claim against the plaintiff. I find this statement difficult to reconcile with the remainder of the letter. 43.Whilst the defendant confirmed to Mr Wong in cross-examination that she had given instructions to write the letter in the terms in which it was sent, I doubt that she instructed the use of the legalese adopted in that particular part. In any event, that part is followed in the letter by an immediate alternative stating by virtue of the plaintiff’s surrender of her interest in the property she is not entitled to any future benefit of the property and not entitled to claim for any part of her contribution paid under the original agreement. June 2009 to August 2010 44.The plaintiff only instructed solicitors to respond to the defendant’s letter of 20 June 2009 in August 2010, some 14 months later. The response was by a letter dated 25 August 2010. Mr Chain says that is evidence of the fact that the June letter originally received by the plaintiff was understood by her to have set out the correct factual position. The change in the plaintiff’s stance, he says, arose more than one year later because the property market had risen in the interim. On the other hand, the plaintiff and her husband, Mr Chong, gave evidence that their reaction to the letter was to seek to discuss matters with the defendant through Mr Chong’s father, then boyfriend of the defendant. 45.Although there seemed to be no willingness at all on the part of the defendant to engage in a discussion with the plaintiff, she and Mr Chong retained the hope that they would be able to resolve matters without upsetting friendships and family harmony until they decided in August 2010 that they had no realistic option but to respond through lawyers. 46.The letter of 25 August 2010 sets out more or less the case which the plaintiff now pursues and threatens the immediate commencement of proceedings should the defendant not immediately agree that she holds the property as trustee and is liable to sell the property immediately and to pay one-third of the proceeds of sale to the plaintiff. (As an aside, I note in this context that there is no suggestion in the letter that there needed to be any accounting for the fact that only the defendant and Madam Fung had made any further contributions to financing the purchase of the property beyond the original deposits envisaged under the original agreement). 47.In the absence of an immediate response from the defendant, the plaintiff again threatened proceedings by letter of 3 September 2010. The defendant’s solicitors wrote on 6 September 2010 expressing surprise that the response to the June 2009 letter was so late and specifically denying any agreement for compulsory resale or that no mortgage would be taken out. The letter also doubted that any breach of the original agreement would entitle the plaintiff to one-third of the proceeds of sale of the property as the proper measure of damage. 48.The writ was issued the next day, 7 September 2010. Although the claim was originally brought in the District Court, the proceedings were subsequently transferred to the High Court on the plaintiff’s application premised on the fact that by reason of the appreciation of the value of the property her recovery could be supposed to be in excess of the District Court jurisdictional limit. The Claim, the Defence and the Core Issues 49.In the Statement of Claim the plaintiff has pleaded the single cause of action of breach of contract. Plainly, that claim could not give rise to a proprietary remedy of a one-third beneficial interest in the property. So the plaintiff has at trial asserted the existence of a trust. The thrust of the plaintiff’s case as presented now is that there was a common intention constructive trust that the plaintiff should have an absolute one-third beneficial interest in the property. Although this was not pleaded, Mr Chain, for the defendant, was content for the trial to be conducted on this basis. Mr Wong has not abandoned his claim for breach of contract and he pursues that as well. 50.The breaches pleaded include failing to instruct the estate agent of the property for sale at market price, taking out a mortgage on the property, completing the purchase of the property, and continuing to hold it after completion. I have already identified that the prayer for relief seeks declarations, an order for sale, division of the proceeds after certain deductions, damages and interest. 51.The thrust of the defendant’s case is that whatever were the terms of the original agreement, at the Festival Walk meeting the plaintiff indicated to the defendant and Madam Fung that she, the plaintiff, decided not to proceed with completion and not to have anything further to do with the property after completion. 52.In the circumstances, the core issue I have to decide is whether the plaintiff, the defendant and Madam Fung formed the common intention at the Festival Walk meeting that:
53.The issues in relation to the breach of contract claim include:
54.But as was, I think, common ground between Mr Wong and Mr Chain, an answer to the first core issue may render the subsequent questions unnecessary to be decided. That is because it is possible that, in any event, the parties would have reached a common intention that whatever their prior arrangements were they would be replaced. The prior arrangements would come to an end on the basis of new arrangements whereby the plaintiff would exit the investment at a capped loss, leaving the defendant and Madam Fung to continue with a different form of investment after completion. 55.In the context of the search for any common intention, Mr Chain reminds me that this is a case where each party has pleaded her claimed common intention and no alternative intention has been offered. Therefore, whilst I may not be bound to accept either one version or the other, as put forward by the plaintiff and the defendant respectively, where there is no compelling third alternative offered I am likely to accept either the plaintiff’s version of events or the defendant’s version of events. See Ide v ATV Sales Limited [2008] PIQR P13. The case starts at p251 and the passage is at 255. 56.In deciding the issues, I do not think I will be greatly assisted by any consideration of the demeanour of the witnesses. Instead, I shall focus primarily on inherent likelihoods or unlikelihoods and what can be tested against contemporaneous documents including the transcript of the Festival Walk meeting. 57.As to the principles for common intention construction trust, I have been referred by Mr Chain to the case of Chan Chui Mee v Mak Chi Choi [2009] 1 HKLRD 343. In that case Johnson Lam J, as he then was, considered and summarised the principles in paragraphs 16 and following. As I see it, a summary might be as follows:
58.Mr Wong has referred me to the decision of the House of Lords in Stack v Dowden [2007] UKHL 17, [2007] 2 AC 432. He has referred me to that case, amongst other things, to remind me that in the context of the search for a common intention constructive trust, an intention should not be imputed to the parties. Lord Neuberger of Abbotsbury said at:
59.I keep those principles firmly in mind. The Stack v Dowden case was also referred to by Johnson Lam J in the Chan Chui Mee case at paragraph 33 where the important distinction is drawn between a proprietary estoppel and a common intention constructive trust. The former typically consists of asserting an equitable claim against the conscience of the true owner and the claim in equity is satisfied by the minimum award necessary to do justice. The latter, by contrast, identifies the true beneficial owner or owners and the size of their beneficial interest. 60.In light of some of the submissions made by Mr Wong on behalf of the plaintiff, Mr Chain cautions me to keep hold of that distinction. 61.I also accept Mr Chain’s submission that the principles relating to resulting trusts are not applicable in this case. First, neither party alleges that there was a lack of common intention at any given point in time; secondly, no resort to a resulting trust has been raised by the pleadings. 62.Though there was some attempt at a departure by Mr Wong in closing submission, I think it was essentially common ground between him and Mr Chain that for the plaintiff to succeed she must show that there was a common intention for her to have a one-third beneficial interest in the property, absolutely, irrespective of the proportions of contribution or payments towards the property made by each of the plaintiff, the defendant and Madam Fung. Nevertheless, as I have already held, the intention of the parties at the time of the original agreement seems to me clearly to have been that each would have a beneficial interest proportionate to their contribution. They did not intend that each of them should have a one-third interest simply because there were three of them. Rather, it was because each was to contribute one-third of the initial deposit required that each would hold a corresponding one-third interest. Mr Wong has sought to identify that the plaintiff’s case arises because she had a defined interest but that simply begs the question as to what was defined. In my view, the definition of the interest was by reference to the proportion of contribution. 63.On the basis that the plaintiff’s case is that the common intention of the parties at the time of the original agreement was never changed, in the light of my finding as to what was that intention, she cannot succeed on her case that she had an absolute one-third beneficial interest. In any event, as the Festival Walk meeting was held after the original agreement, it is really the common intention that was reached at that meeting, if one was reached and if it was a change of intention, which is determinative. On the applicable test, whether a common intention is established, and if so what was that common intention, must be viewed against the totality of the circumstances and conduct. By that I do not mean that I am entitled to look at conduct subsequent to the Festival Walk meeting as part of the conduct which established the intention, but I am entitled to view the conduct after the meeting to assess whether or not it is consistent with any particular intention having been reached at the meeting. 64.I take into account the objective circumstances pertaining at the time of the meeting some of which are apparent from my summary of the transcript already given. For example, it was objectively clear that the value of the property had fallen sufficiently that the entirety of the deposits already paid were wholly lost and were the agreement to purchase to be repudiated, it was certainly possible if not likely that the parties would each lose a further $200,000 to $300,000. 65.Against these circumstances, for the plaintiff to exit the agreement at a loss limited to the amount of her initial deposit of $400,000-odd would have been obviously reasonable and desirable. I am conscious that the plaintiff herself and through her counsel has sought to stress that she has brought this claim to clarify her interest in the property, irrespective of whether that would ultimately give rise to a profit or a loss. Nevertheless, on her own case, she was prepared to bear a loss arising from either the sale of the property at a value lower than the purchase price, or by repudiating the agreement to purchase. Either of those scenarios would have resulted not just in a loss but, in the end, of any involvement by the plaintiff in the investment in the property. If she was prepared to act in either of those ways, at a loss, and to end further involvement with the property, I do not see why it is unreasonable to find that she would have been prepared simply to walk away from her contribution thereby crystallising and capping her loss and ending any further involvement with the property. 66.I also take into account that the firm position of the defendant and Madam Fung at the meeting was that whilst they would prefer not to have to complete and to take out a mortgage, they felt little practical option but to do so. But if they were to do so, the plaintiff either had to continue to bear responsibility and to contribute to the mortgage repayments or she would have to drop out altogether. They clearly did not consider it would be fair or appropriate that the plaintiff should try to retain some interest even if limited to a 5 per cent interest in the property, without making any further contribution at all. Such a stance on the part of the defendant and Madam Fung does not seem to me to be wholly unreasonable. At the time of the meeting and the relevant discussions, the investment was under water for all of them. 67.If the defendant and Madam Fung were to stick with the investment in the hope that they might salvage something from it and reduce their then apparent loss, they might well have thought it unreasonable for the plaintiff to seek to retain her full or partial interest without shouldering an equivalent burden or running an equivalent risk. I take into account that at the time the likely view of the market held by all of the plaintiff and the defendant and Madam Fung would have been, was in fact, pessimistic. 68.I also take into account that the plaintiff categorically would not put further funds into the investment. It seems to me that this was because she recognised that she could not do so because it would require the use of further family funds which she was wholly confident her husband would not permit to be used. I accept that there may be thought to be some inconsistency between the plaintiff stating on the one hand that she was prepared to bear the full loss that might flow from the repudiation of the agreement to purchase the property, whilst on the other hand not being prepared to put any further funds towards a further deposit or mortgage repayments. But the difference seems to me to be explained by the fact that one is an immediate payment whereas the other might be open ended, potentially a rather greater step into the unknown. 69.Mr Wong has reminded me that he elicited in cross-examination of Madam Fung an answer that the position of the plaintiff in the whole meeting was that she should retain her 5 per cent when the defendant and Madam Fung secured a mortgage. Indeed, it seems also to have been accepted that the plaintiff may have retained that wish and expressed it in the telephone call in May 2009 after completion of the purchase of the property. However, I think a fair assessment of the evidence as a whole, rather than focusing on any one individual answer, identifies that it may well have been the desire of the plaintiff, recognised by the defendant and Madam Fung, that she should retain some interest, say reflecting her 5 per cent contribution if the purchase were to go ahead. But she really had no option in the overall circumstances but to agree to walk away from the investment and to surrender her interest in it. 70.I take into account that there was no further meeting or discussions after the Festival Walk meeting which seems to me to be consistent with a consensus having been reached by the end of that meeting. That the recording ceased through the batteries having no power, pretty much precisely at the end of the discussions, seem to me to be too coincidental. 71.I accept the force in Mr Chain’s submission when he questions why the plaintiff would not herself have followed up had there been no resolution achieved when the deadline of the completion date was looming and well known to her. It is in part for that reason that I accept the evidence of the defendant and Madam Fung that words along the lines of those quoted by them were said by the plaintiff and Madam Yau towards the end of the meeting and after the recording device had failed for want of battery power. I do not agree with Mr Wong’s characterisation of those words. 72.Though the particular words were spoken just by the plaintiff and Madam Yau, they were spoken within the context of everything which had earlier happened in the meeting and in the presence of the defendant and Madam Fung, who had already made their own position plain. Nor do I think at all persuasive Mr Wong’s attempted textual analysis of the slightly different ways in which the defendant’s case has been phrased in the pleading and at different points in the witness statements or oral evidence. 73.Each of the slightly different phrasing seems to me to boil down to the same thing, namely that there was reached and expressed the common intention that the defendant and Madam Fung would be free to go through with the completion of the purchase of the property and to take out a mortgage in order to do so but that the plaintiff would make no further contribution and in return would surrender her interest in the property. That would mean that she would lose everything that she had so far put in, but she would risk nothing further. 74.Perhaps the strongest point argued by Mr Wong for the plaintiff is as respects the telephone call made by the plaintiff in May 2009 and in which she complained about the secret completion of the purchase. He says with some force that if the plaintiff was simply seeking to make a profit then she had no purpose in calling at that time when she knew that the property value was below the price paid for it. He also says that the making of this telephone call deals with any criticism of delay in responding to the solicitor’s letter the following month, June 2009. So, he says, the only possible conclusion is that the plaintiff made the call because she retained an interest in the property and was willing to bear the burden, if any, that came with that interest. Nevertheless, I do not think that this is the only possible conclusion. 75.First, I do not think the description of the completion as being in secret is necessarily fair. Of course, on the defendant’s case the plaintiff knew full well that the defendant and Madam Fung were intending to complete and that the plaintiff had no further interest in that. But, in any event, even if it was something done in secret, that is, as Mr Chain says, tantamount to an allegation of bad faith, but I do not see evidence of bad faith or even where such an allegation would, in practical terms, lead. 76.Secondly, I think the call can just as readily have been predicated by a desire on the part of the plaintiff to refloat her idea that she should retain some form of interest in the property. Indeed, it seems to be accepted that in the telephone call the defendant again made the offer which had been made at the Festival Walk meeting that the plaintiff could retain something so long as she was prepared to continue to contribute, in particular by reference to the mortgage instalments, but that offer was rejected. 77.Taking a holistic view of the evidence overall, I find no difficulty in reaching the conclusion that the plaintiff did agree at the Festival Walk meeting to surrender her interest in the property. Prepared to face a loss as she was, it was attractive for her to limit that loss to the amount already expended. It provided finality and within the originally envisaged timetable. In practical terms, the plaintiff also appears to have recognised, as I also find as a fact, that she had no real choice as she could not have continued to participate in an investment beyond the completion date. This intention was the shared intention of the plaintiff, the defendant and Madam Fung reached at the Festival Walk meeting. 78.In reaching my conclusion, I do not think I am greatly assisted by the solicitor’s letter in June 2009. I accept that it might be said to be a relatively contemporaneous record of a version of events which chimes with the version put forward with the defendant at this trial. But I do not think I need recourse to that for reaching my conclusion. Nor do I think I need to be assisted by the significant delay before any response to that letter came from the plaintiff’s solicitors. I accept that the June letter does broadly identify the defendant’s case and the method by which the plaintiff surrendered her interest in the property. I have already found that the first part of the peroration of the letter does not sit well with the bulk of the letter. If there was a violent disagreement with its content, it might be thought that the plaintiff would have instructed solicitors to make such a response. But it is not impossible that there was at least, in the first instance, a preference on the part of the plaintiff and Mr Chong to try to resolve matters through friendly or family contact. 79.I do not think that I need to consider any particular motive as to the timing of the commencement of these proceedings by reference to any suggested rise in the market price of the property. I consider the commencement of proceedings at too distant a point in time from the date of the Festival Walk meeting and therefore not helpful in seeking to divine whether a, and if so what, common intention was reached at that meeting. I acknowledge, but I place no particular weight in reaching my conclusion on Mr Chain’s submission that I am entitled to assess the likelihoods by reference to the way in which the plaintiff has formulated her claim and shifted in its formulation. Again, I think there is sufficient material relating to the circumstances surrounding and at the Festival Walk meeting for me to be able to reach a conclusion on that material as to what ultimately happened at that meeting. 80.In the light of my findings, there is no need to consider any middle ground between the competing claims to zero interest or one-third interest in the property. But I might add that I am not convinced that the raising of some middle ground alternative in the plaintiff’s amended reply is sufficient, nor that any proper legal basis for my approaching any middle ground has been identified or explained. Claim in Contract 81.I have already stated my finding that whilst the parties did not intend for the purchase of the property to complete, there was no specific agreement that it had to be sold at whatever was the market price prior to completion. I might also add that it seems to me to be unlikely that such a term of apparent inflexibility would have been discussed and agreed in that way. It would be much more likely that the parties would have intended that the property be sold at the maximum price that could be achieved. It might be said that that price would help to identify the market price, but not vice versa. Therefore, any claim predicated on a breach of such a term must fail. 82.In the circumstances, I do not need to go on to consider questions of frustration arising from a suggested impossibility of selling the property at the time, even at the then prevailing market price of $7.1 million. But I have already drawn attention to the evidence which identifies that there was really no interest in the market for any units in the development within poor market conditions overall flowing from the global financial crisis. I do not think this is a case which need turn on a consideration of the doctrine of frustration. 83.Had I found that there was such a term argued for by the plaintiff and that the defendant had acted in breach of it, I would nevertheless have accepted Mr Chain’s submissions that the plaintiff has not suffered any real loss from the property not being sold at that time. In his opening submissions, Mr Chain identified that selling at $7.1 million would actually have exposed the plaintiff to a greater loss than the loss said to have been suffered by her in losing her $400,000‑odd deposit through the so-called breach of the agreement. 84.He also made the point that the plaintiff would not have suffered any expectation loss, and that she is not entitled to assert any reliance loss because damages cannot place an innocent party in a better financial position than if the contract had been performed. None of these submissions were really addressed by Mr Wong and he has no answer to them. 85.I therefore would reject the plaintiff’s case, the only pleaded case ,based upon alleged breaches of contract. Conclusion 86.In conclusion, it seems to me that the plaintiff’s claim must fail and stands to be dismissed. I so order. Costs 87.In his closing submissions Mr Chain suggested that I might consider awarding costs, should his client prevail, to be payable by the plaintiff on the indemnity basis. During interaction between Bench and Bar, I suggested a preferable route might be to await my judgment and for the parties to see, in the light of my findings, what submissions on costs they think might properly be put forward. I remain of the view that the appropriate way to deal with costs is for me to reserve the question of costs to myself and I will deal with the question of costs having had submissions from the parties in writing. (Submissions on availability of transcript, time for costs submissions, citations and liberty to apply) 88.I will grant the parties liberty to apply.
Mr Tim Wong, instructed by Raymond Lam & Associates, for the plaintiff Mr Christopher Chain, instructed by Ivan Tang & Co, for the defendant Please refer to CACV147/2013 for the relevant appeal(s) to the Court of Appeal. | |||||||||||||||||||
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