Chan Yau v. Chan Calvin and Another
Read the full judgment text of HCA 666/2007 on BabelCite. This High Court CFI judgment was delivered on 5 September 2014.
1. In this action, the plaintiff claims against the 1 st and 2 nd defendants damages for breach of contract, alternatively various sums in restitution, arising from their agreement for the joint development of certain land in Tai Po in Demarcation District No 32. The agreement involved using the 2 nd defendant’s entitlement to build a house under the Government’s Small House Policy.
Cited by 14 cases · Cites 11 cases
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HCA 666/2007 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO 666 OF 2007 ____________
_______________ J U D G M E N T _______________ I. INTRODUCTION 1.In this action, the plaintiff claims against the 1st and 2nd defendants damages for breach of contract, alternatively various sums in restitution, arising from their agreement for the joint development of certain land in Tai Po in Demarcation District No 32. The agreement involved using the 2nd defendant’s entitlement to build a house under the Government’s Small House Policy. 2.The Small House Policy is a policy of the Government under which an adult male indigenous villager in the New Territories (being a descendant in the male line from a resident in 1898 of a recognised village) is entitled, once in his lifetime, to build a small house, up to 700 sq ft in area and 3-storey high, in his village for himself on a piece of land owned by him or assigned to him by the Government at a concessionary rate. 3.The defendants say that the final agreement between the parties was such that the plaintiff had no further part to play in developing the land in question. They further contend that even if the agreement contended for by the plaintiff existed, it was unenforceable on the ground of illegality. The plaintiff denies there was any illegality, but contends that even if the agreement fails for illegality, he is entitled to restitution in respect of the sums he paid for the implementation of the agreement. The 2nd defendant counterclaims against the plaintiff for an order to vacate the lis pendens and for damages for slander of title. II. FACTUAL BACKGROUND 4.There is a hotly contested issue of fact about the 4th agreement (as defined below) entered into in December 2000, but otherwise much of the factual background is not seriously in dispute and may be summarised as follows. 5.The plaintiff and the 1st and 2nd defendants are all indigenous villagers of the Ha Wong Yi Au Village in Tai Po. The 1st and 2nd defendants are half-brothers. While the plaintiff shares a distant common ancestor with the defendants, they do not regard him as their relative. 6.The 1st defendant inherited certain parcels of land from his grandfather, who died in 1986, including Lot 554 and the Remaining Portion of Lot 660 (all the lot numbers referred to below are in Demarcation District No. 32 unless otherwise specified). They became vested in the 1st defendant in 1992. Part of the land thus inherited is the land whose development is the subject matter of this action. 7.At that time, the 1st defendant conceived of the idea of using the 2nd defendant’s right to build a house under the Government’s Small House Policy to develop some of the land he had inherited. 8.Accordingly, on 22 July 1992, the 1st defendant caused a section, namely, Section E, to be carved out from the Remaining Portion of Lot 660 and to be assigned to the 2nd defendant. In other words, the original Remaining Portion of Lot 660 was partitioned into Section E and the new Remaining Portion of Lot 660 (which I shall call “Lot 660E” and “Lot 660RP” respectively). There was a house already erected on Lot 660RP whereas Lot 660E was vacant land. It is not in dispute that the 2nd defendant in reality took the assignment as nominee, holding Lot 660E thereafter on trust for the 1st defendant, though there was nothing in writing then signed by the 2nd defendant to that effect. 9.In around 1995, the plaintiff was introduced to the 1st defendant as someone who could help the 1st defendant build small houses on his land. 10.On 22 February 1995, they signed a development agreement relating to Lot 554 (which was divided into 554A and 554RP) and later a supplemental agreement dated 23 May 1995. It appears that this venture did not result in the successful development of the land. Nothing however turns on this. 11.Later, at one stage, the 1st defendant asked one Wong Dai Keung to help him develop Lot 660E, which as stated above was held in the 2nd defendant’s name. The 1st defendant had agreed to pay the 2nd defendant $300,000 to utilise the 2nd defendant’s right to build a small village house on that land. Of this agreed sum of $300,000, the 1st defendant had paid the 2nd defendant $100,000. 12.In 1997, the 1st defendant sold Lot 660RP and the house thereon to a company owned by the plaintiff, for $3.7 million. The plaintiff then began to live in that house. 13.There was also discussion between the plaintiff and the 1st defendant concerning the development of Lot 660E and, in particular, for the 1st defendant to develop it jointly with the plaintiff instead of Wong Dai Keung. Towards the end of 1997, the plaintiff and the 1st defendant reached agreement on an arrangement to develop Lot 660E. Within less than a month they signed three documents, one of which was also signed by the 2nd defendant. 14.Thus, on 25 November 1997, the plaintiff and the 1st defendant signed a document handwritten in Chinese by the plaintiff (“1st agreement”), which, as translated, reads as follows:
15.On 9 December 1997, the plaintiff and the 1st defendant signed another document in Chinese (“2nd agreement”). The terms of this document were prepared by a solicitor but the document was handwritten. It provided as follows:
16.On 15 December 1997, the plaintiff and the 1st defendant of one part, and the 2nd defendant of the other part, signed an agreement typewritten in Chinese (“3rd agreement”). It was a document drafted by the solicitors firm Messrs Raymond Hung & Co (though it did not bear a front sheet or backsheet stating the firm’s name, nor was it witnessed by any solicitor) and provided as follows:
17.It is not in dispute that the 1st to 3rd agreements are to be read together and formed the basis of one single scheme of development. The broad outline of this scheme was that the 1st defendant would provide Lot 660E as the land on which a small village house would be erected. The plaintiff would pay HK$600,000 to the defendants: i.e. HK$400,000 to the 1st defendant, and HK$200,000 to the 2nd defendant for using his entitlement to build a house. (This sum of HK$200,000 together with the sum of HK$100,000 already paid by the 1st defendant to the 2nd defendant means that the 2nd defendant would obtain a total sum of HK$300,000 in return for allowing his entitlement under the Small House Policy to be used in that way.) The development cost would be shared equally between the plaintiff and the 1st defendant. After the building was completed, the plaintiff would be entitled to the G/F and the land at G/F, the 1st defendant would be entitled to the 1/F, and the plaintiff and 1st defendant would together in equal shares be entitled to the 2/F and Roof. 18.Pursuant to the 1st, 2nd and 3rd agreements, the plaintiff paid the 1st defendant a total sum of $400,000 in three tranches within two months of 16 December 1997. 19.Also pursuant to those agreements, on 14 December 1999, the 2nd defendant made a statutory declaration at the Tai Po District Lands Office for the purpose of applying for permission to build a small village house on Lot 660E. The terms of the declaration are as follows:
20.In around January 2000, it occurred to the plaintiff that Lot 660E might be large enough to allow two houses to be built on it. He therefore engaged a surveyor to prepare plans for dividing the land, and proposed to the 1st defendant that the land should be partitioned so that two houses could be built there instead of one. 21.Eventually, on 4 December 2000, the plaintiff and the 1st defendant reached a further agreement (“4th agreement”). It is the terms and effect of this agreement which are in dispute in this action. A written agreement was signed by the plaintiff and the 1st defendant but on both parties’ cases it does not contain the entire agreement between them. This is what the document provided:
22.There is no dispute that the plaintiff and the 1st defendant agreed that Lot 660E would be partitioned into a Subsection 1 and the Remaining Portion, respectively, of Section E of Lot 660, so that a small village house could be erected on each of these two lots. I shall call them Lot 660E1 and Lot 660ERP respectively. Nor is there any dispute that the plaintiff was to have the right to build a small village house on Lot 660ERP to which he would be solely entitled. A sum of $200,000 was to be paid by the plaintiff to the 1st defendant. 23.What is in dispute, crucially, is whether (as the plaintiff contends) it was agreed that the 1st to 3rd agreements were to continue with respect to Lot 660E1 instead of Lot 660E, so that the house to be erected thereon would remain a joint development between the plaintiff and the 1st defendant on the terms previously agreed, or (as the 1st defendant contends) it was agreed that the 1st to 3rd agreements came to an end and the 1st defendant would be solely entitled to the small village house to be built on Lot 660E1. This is the primary factual issue in the case which I shall address in greater detail below. 24.None of the 1st to 4th agreements was stamped or registered in the Land Registry. 25.On 18 December 2000, the 2nd defendant, as directed by the 1st defendant, executed a deed poll to partition Lot 660E into Lot 660E1 (with an area of approximately 50 sq m) and Lot 660ERP (with an area of approximately 145 sq m). On the same day, Lot 660ERP was assigned by the 2nd defendant to the plaintiff absolutely. 26.As Lot 660E1 has an area of only about 50 sq m, which was insufficient for building a small village house, steps were taken to apply for the grant of Government land abutting the lot to augment the site. The application was finally approved in 2005. On 22 July 2005, the Government and the 2nd defendant agreed to a set of conditions of exchange, whereby the Government granted Lot 745 (which has an approximate area of 65.03 sq m and includes the site of Lot 660E1) to the 2nd defendant upon the surrender of Lot 660E1 and payment of $7,920 as premium. 27.The building licence had apparently been issued by the Government in 2003 though no copy has been produced in evidence. In accordance with clause 3 of the 3rd agreement, the plaintiff paid the 2nd defendant a total sum of $100,000 in 2003. (The 2nd defendant admitted receipt of $100,000 and gave no evidence that it related to anything else.) 28.In October 2005, the plaintiff engaged a consultant engineer to apply for further necessary permits from the District Lands Office to enable building works to commence on Lot 745. 29.On 20 April 2006, pursuant to the Small House Policy, the District Lands Office issued the requisite certificates of exemption (for site formation works, building works, and drainage works) to the 2nd defendant in relation to Lot 745, exempting the proposed small house development thereon from the relevant provisions of the Buildings Ordinance (Cap 123). 30.It appears that the parties’ relationship turned sour in around mid-2006. Thus, while the plaintiff took steps to have Lot 745 jointly developed, the 1st defendant proceeded to try to develop the lot himself. On 16 May 2006, the 1st defendant sent a letter in the name of the 2nd defendant to the District Lands Office, terminating the plaintiff’s authority to act on his behalf in relation to Lot 745. There is nothing to indicate that the plaintiff knew about the letter. 31.In late June 2006, the plaintiff signed a contract with building contractor called Shun Hing for the development of Lot 745, naming himself and the 1st defendant as the developer. The plaintiff said he signed it with the 1st defendant’s consent and asked the 1st defendant to sign it as well, though eventually the 1st defendant did not do so. I find it unlikely that the 1st defendant would have consented, though it may be that he had not openly and clearly stated his position to the plaintiff yet. 32.There is a copy of a power of attorney produced in evidence which is dated 18 July 2006, whereby the 2nd defendant appointed the plaintiff as his attorney in relation to the development of Lot 745. In my view, the power of attorney is likely to be one of the documents signed in escrow by the 2nd defendant in the early stages and subsequently dated. It is possible that the page referring to the property as Lot 745 was also subsequently added, as the exchange was not formalised until 2005. 33.On 26 July 2006, the defendants, in the 2nd defendant’s name, entered into a different building contract with their own contractor called Kwong Kee to erect a village house on Lot 745. Matters eventually came to a head on 25 August 2006, when a dispute and scuffle occurred between the parties on the land. The plaintiff accused the 1st defendant of assaulting him and police was called to the site. 34.Thereafter the plaintiff was excluded from Lot 745. The defendants made it clear that they did not regard the plaintiff as having any interest in the land. The plaintiff issued the writ of summons in this action in April 2007 and thereby, on his case, accepted the defendants’ repudiation of the agreements. He claims damages for loss based on the value of the property he would have acquired if the agreements had been performed, taking into account the cost of the development. The writ has been registered in the Land Registry against Lot 745. 35.The defendants deny that the plaintiff is entitled to any damages. In addition, the 2nd defendant counterclaims for an order to vacate the registration of the lis pendens against Lot 745 and for damages for slander of his title to Lot 745. The plaintiff replies that even if the agreements involve illegality, he is entitled to the restitution in respect of all his investments in Lot 660E1. 36.As between the two defendants, a dispute has since emerged as to who the beneficial owner of Lot 745 is. The 2nd defendant accepts that he had held Lot 660E1 and, after the exchange, Lot 745, on trust for the 1st defendant, but contends that he had subsequently paid the 1st defendant the sum of $270,000 whereupon, by agreement, he became the beneficial owner of Lot 745. The 1st defendant denies that the beneficial interest shifted and maintains that he is still the beneficial owner of Lot 745. On 13 November 2013, the first day of the trial of the present action, he issued a writ of summons in HCA 2163/2013 against the 2nd defendant for a declaration that the 2nd defendant holds Lot 745 on trust for him. Nothing I say in this judgment is intended to deal with that dispute between the defendants. III. THE ISSUES 37.Against the above background, two principal issues arise. The first issue is: what was the true agreement between the parties in relation to Lot 660E1? 38.If the plaintiff succeeds on this factual issue, the defendants argue that the action nevertheless fails for illegality, because the implementation of the agreements necessarily involved the making of a false declaration by the 2nd defendant to the District Lands Office. The second issue therefore arises, as to whether there is such illegality involved that the court should refuse to enforce the agreements in question. IV. THE FACTUAL ISSUE – WHAT WAS THE TRUE AGREEMENT IN RELATION TO LOT 660E1 39.Having carefully evaluated all the evidence, I find that the parties’ agreement, reached in December 2000, was that the joint development agreement enshrined in the 1st to 3rd agreements would continue to apply to Lot 660E1. In other words, on this question, I accept the plaintiff’s version of the facts. I explain the principal reasons for this conclusion below. 40.In my view, two important connected pieces of documentary evidence are (i) the plaintiff’s handwritten note of the expenses that the 1st defendant should pay in respect of the joint development of Lot 660E1; and (ii) a receipt prepared by the 1st defendant and signed by him and the plaintiff dated 18 August 2005. 41.The plaintiff’s handwritten note was headed “Amount Calvin [i.e. the 1st defendant] should pay” and set out various amounts and their nature. It is common ground that this note was shown by the plaintiff to the 1st defendant in around August 2005, when he requested the 1st defendant to pay his share of the expenses of the development. 42.This prompted the 1st defendant to type a receipt in Chinese, which, as translated, read as follows:
This receipt was signed by both the plaintiff and the 1st defendant on 18 August 2005. 43.In my opinion, despite that “660E” was mentioned, it is quite clear, for the following reasons, that this receipt refers to the joint development of Lot 660E1 (which was subsequently exchanged for Lot 745):
44.Apart from the above documentary evidence, there is the plaintiff’s evidence. While I have reservations on the plaintiff’s testimony concerning his experience and knowledge, on this question of what was agreed with the 1st defendant, the plaintiff gave evidence which was in my view consistent and coherent overall and which I accept. He said that the idea of partitioning Lot 660E was proposed by him, as he wanted to see if an additional house could be built on the site. He pointed to the fact that under the 1st to 3rd agreements he was already entitled to the G/F land. He recognised, however, he needed the 1st defendant’s consent for the partition and assignment. Thus he asked for his consent and the 1st defendant named the price of $200,000. The plaintiff said that at the time of the agreement, the 1st defendant agreed that the plaintiff should take the eastern portion after the partition as that portion abuts Lot 660RP which the plaintiff had acquired since 1997. He was not clear when exactly a partition plan was shown to the 1st defendant but believed a plan was shown to the 1st defendant before the partition deed was executed. 45.The plaintiff also said that the 1st defendant knew that the other portion had an area of less than 700 sq ft and would require the grant of additional Government land before a village house could be built on it. This is credible and is consistent with the fact that the 1st defendant made no complaint about the plaintiff taking the larger portion. Nor was there any complaint in August 2005 when the 1st defendant was asked to contribute to the payment of premium and fees for the land exchange, which was necessary only because Lot 660E1 had an area of less than 700 sq ft. 46.On this crucial issue of fact, the 1st defendant’s evidence is opposite to that of the plaintiff. In my view, there are various aspects of his evidence that are highly unsatisfactory and not credible. 47.It is notable that the 4th agreement expressly provided for what was to happen to Lot 660ERP, but made no provision at all for what was to happen to Lot 660E1. The whole tenor of the 4th agreement suggests that it was simply an agreement to carve out Lot 660ERP from Lot 660E, to confirm that Lot 660ERP would be transferred to the plaintiff and that he could build a village house on it. 48.Nevertheless, both the plaintiff and the 1st defendant said – as is inherently probable – they discussed the remaining land (i.e. Lot 660E1) as well. In my view, if their agreement was that the remainder, i.e. Lot 660E1, was to be wholly allocated to the 1st defendant for his own benefit despite the 1st to 3rd agreements, it would be highly surprising that this was not mentioned in the 4th agreement at all. The 1st defendant’s case is that there was to be an agreed partition of the co-owned land, whereupon one side of the land would belong absolutely to the plaintiff and the other side to himself. On this basis, it is very difficult to understand how the parties would have drawn up a written agreement stating only that the plaintiff was to have one side of the land. 49.It is in my view more probable that they made no written reference to the arrangement for Lot 660E1 because they intended that the 4th agreement simply carved out Lot 660ERP from Lot 660E, leaving Lot 660E1 as the subject matter of the extant 1st to 3rd agreements. The absence of any express written agreement relating to Lot 660E1 is more consistent with the plaintiff’s case than with the 1st defendant’s case. 50.When the 1st defendant was asked in cross-examination why what he said was orally agreed was not put in writing, he first said he did not see the need as he was not worried that the plaintiff would object to the 1st defendant building a house for himself on Lot 660E1. It was the plaintiff who was worried that the 1st defendant would object to the building of a house for himself on Lot 660ERP. A little later, however, the 1st defendant said he had in fact noted the need to put it in writing, and had actually asked the plaintiff to do so, but the plaintiff did not. The 1st defendant said he felt it did not matter and so he did not follow it up further after chasing the plaintiff a few times. To my mind, that evidence is not credible. 51.The 1st defendant also said it was agreed that after the partition of Lot 660E into two lots, the plaintiff would continue to be responsible for doing all the work for the development of both lots. When asked why that was not put in writing, the 1st defendant was unable to give any satisfactory answer. In my view, it would also be very odd that, if the plaintiff was to be responsible for assisting the 1st defendant to develop Lot 660E1 after the partition, there was no written provision to that effect at all. 52.The 1st defendant’s evidence as to how much he knew about the details of the partition of Lot 660E is also highly unsatisfactory. At first, he claims to have had almost no idea. But it would be inherently improbable that the 1st defendant did not know broadly how the partition was to be done, if he and the plaintiff were to acquire each of the two partitioned lots respectively. The 1st defendant himself had experience of partitioning land back in 1992, in relation to the original Lot 660RP. Again I find his evidence not credible. 53.In cross-examination, the 1st defendant said he expected the plaintiff’s portion after the partition to be slightly larger than his portion because he knew the plaintiff wanted to have a big garden. This contradicts paragraph 37 of his witness statement which stated the plaintiff had told the 1st defendant that the 1st defendant would get the larger portion, and that the 1st defendant readily agreed to the partition proposal as he trusted he would have the larger portion. The 1st defendant then explained that when he signed the 4th agreement on 4 December 2000, he thought he would get the larger portion, but by the time the 2nd defendant executed the partition deed on 18 December 2000, the 1st defendant surmised that the plaintiff would not be so generous and would take the larger portion instead. Such inconsistency in his evidence only serves to undermine its credibility. 54.In the end, I have found the 1st defendant’s evidence on what was agreed regarding Lot 660E1 to be wholly unreliable. 55.Mr Ko submits on behalf of the 1st defendant that the plaintiff’s case does not make commercial sense. He submits that the value of the 1st defendant’s interest in the house to be jointly developed on Lot 660E (i.e. the whole of 1/F and half of 2/F and Roof) would be greatly reduced if Lot 660ERP is to be carved out and another house built on it. He submits that the deal was too favourable to the plaintiff to be true. 56.I do not share his view of the commercial realities. First, clause 4 of the 2nd agreement provides that the land at the G/F level belongs to the plaintiff. Even if one interprets that clause as referring only to exclusive possession, the 1st defendant would not have the benefit of the unbuilt-on land in Lot 660E anyway. By entering into the 4th agreement, agreeing to the partition and giving consent for the plaintiff to build another village house on the lot carved out, the 1st defendant would obtain an additional sum of $200,000 (in 2000) with little additional cost to himself. Indeed, the wording of the 4th agreement suggests that the sum of $200,000 was paid for the 1st defendant’s consent for the construction of the village house. 57.Secondly, Mr Ko’s assertion that the value of the 1st defendant’s interest in the house on Lot 660E1 would be greatly reduced by the erection of a village house on Lot 660ERP is not based on any evidence. Nor is it so obvious as can be assumed. 58.Further, Mr Ko submits that it is inconceivable that the 1st defendant would have agreed for the plaintiff to take Lot 660ERP and for Lot 660E1 to be jointly developed, because Lot 660E1 could not be developed without the grant of additional Government land, and there could be delays in the process and objections raised by others so that the 1st defendant might end up with nothing. However, on the 1st defendant’s own case, he was to take Lot 660E1 while the plaintiff would take Lot 660ERP. On that basis, Lot 660E1 would still become useless if there were delays in and objections to the grant of additional Government land so that no village house could be built on it. The only difference is that, on the 1st defendant’s case, he would have got the entirety, and not only a half share, of a useless piece of land. V. ILLEGALITY 59.The defendants contend that even if the 1st to 3rd agreements continued in existence with respect to Lot 660E1 (and, after the exchange, Lot 745) as a matter of fact, the action must fail because those agreements are unenforceable by reason of illegality. (A) The legal principles 60.The common law on the effect of illegality on contracts is a large and evolving subject. The uncertainty and complexity of the existing law has been pointed out in Part 3 of the UK Law Commission’s Consultation Paper No. 189 (2009) “The Illegality Defence – A Consultative Report”. It is, however, unnecessary to undertake a general survey of the law of illegality here since, in my view, this case, which concerns a contract for the development of a small village house, is covered by authorities. 61.In Chung Mui Teck v Hang Tak Buddhist Hall Association Ltd [2001] 2 HKLRD 471 (CA), the first defendant was the registered owner of various lots of land in Shatin. On 31 January 2000, the first defendant entered into a deed of joint development with the second defendant to develop the land by erecting small houses for resale. By the deed, the first defendant agreed to carve up the land into sections; the second defendant undertook to procure indigenous villagers eligible for a grant under the Small House Policy to take assignment of the sections and to apply to the Government for permission to build the small houses. As Le Pichon JA pointed out at 475B:
On 20 April 2000, however, certain directors of the first defendant brought an action against the defendants for a declaration that the deed was unlawful and unenforceable. 62.The Court of Appeal noted that, on the evidence, as part of the process of the application, the villagers would have to make a declaration to the Government in this form:
The court held that since the deed involved a private arrangement, the declaration to be made by the applicants would necessarily be false. It follows that the deed could not be performed according to its terms without the commission of an illegal act. As an additional ground, the court held that the application would involve a misrepresentation to the Government as to the legal and beneficial ownership of the land concerned and hence the deed could not be performed without the commission of a civil wrong against the Government. In the result, the court held the deed to be unenforceable and gave summary judgment for the plaintiffs. 63.It seems to me the decision is authority that a contract for the development of small houses that necessarily involves the indigenous villager making a false declaration to the Government regarding his ownership of the land in question or the absence of arrangement with third parties is unenforceable. 64.In Best Sheen Development Ltd v Official Receiver [2001] 1 HKLRD 866, the plaintiff, who owned certain land, agreed on a development scheme with an indigenous villager. Pursuant to their agreement, the plaintiff assigned the land to the villager in 1993 purportedly for a consideration of $250,000, which was in fact never paid. At the same time, the villager signed a declaration of trust in respect of the land in favour of the plaintiff. The villager thereupon applied to the Government under the Small House Policy for a land exchange and for a licence to build a small house. Meanwhile, in 1997, the villager was adjudged bankrupt. The plaintiff accordingly issued an originating summons against the Official Receiver, as the villager’s trustee in bankruptcy, for a declaration that the land registered in the name of the villager beneficially belonged to the plaintiff. 65.Yuen J (as she then was) held that, because it was clear from the evidence that the permission to build a small house was to be granted by the Government on the basis that an applicant was both the legal and beneficial owner of the land in question, the villager’s application would involve a misrepresentation to the Government that he was the legal and beneficial owner of the land, and not merely a nominee of the plaintiff (p 873B). On the facts of that case, the misrepresentation was made with knowledge that it was false because, as the judge found, “the parties were themselves aware that the revelation of the Plaintiff’s beneficial ownership of the Land would jeopardize the grant of the Building Licence under the Small House Policy” (p 873C). The judge said that the contract would be illegal under common law and it would be against public policy for the court to lend its aid to its performance. While this could be said to be obiter, because the judge held that the plaintiff could nevertheless assert his beneficial interest in the land under a resulting trust without relying on the development scheme, the decision has been followed as authority for the proposition that a contract for small house development that necessarily involves a fraudulent misrepresentation to the Government with regard to the beneficial ownership of land is unenforceable in the courts: see e.g. Chung Mui Teck (supra); Lau Ting Tai v Chung Chun Kwong [2010] 3 HKC 352; Tang Teng Hong Tso v Cheung Tin Wah (HCA 729/2011; 14 April 2014). 66.In Tiu Sum Fat v Shun Sing Development Ltd [2010] 1 HKLRD 553, there was again a development scheme for small houses. In December 1996, the second defendant, who was an indigenous villager, applied to the Government for permission to build a small house on the land in question. He made a statutory declaration dated 17 December 1996 that he was the “sole owner” of the land. In fact, the land was only registered in his name on 8 January 1997. Nor was he ever the beneficial owner of the land. He had agreed to take the assignment of land and make the application to the Government in return for a fee. The beneficial owner of the land then was one Mr Wan. In March 1997, Mr Wan sold the land together with all development rights (including the arrangement entered into with the second defendant) to the first defendant. In June and September 1997 respectively, the plaintiffs jointly entered into two agreements with the first defendant to purchase parts of the small house to be built on the land. By an action brought in 2002, the plaintiffs sought recovery of the deposits they had paid totalling $405,000. 67.Deputy Judge H Wong SC found that the first plaintiff was generally familiar with the procedures for small house development, and knew that the first defendant was the developer and the second defendant was not in fact the true owner of the land (see §40). Applying Chung Mui Teck and Best Sheen, the learned deputy judge held that since the performance of the agreements would necessarily entail the making or continuation of a misrepresentation to the Government, they were unenforceable. (B) Was a false declaration involved in this case? 68.There is no dispute that the performance of the 1st to 3rd agreements would necessarily involve the making of a declaration by the 2nd defendant to the Government. 69.As Yuen JA pointed out in Lau Kwai Kiu v Bian Xintian [2012] 2 HKLRD 954 (CA) at §9 and as demonstrated by the evidence before me, the form of the declaration required of an indigenous villager applicant has changed over the years. 70.The evidence shows that the approved form of declaration that was generally in use between October 1997 and June 2001 contained the following statements:
71.However, for reasons unknown, the declaration that the 2nd defendant signed in December 1999 was in the terms set out in paragraph 19 above. The main difference is that there is no statement as to the absence of any private arrangement for selling the villager’s rights under the Small House Policy – a declaration which was present in Chung Mui Teck (quoted above). In the present case I consider that I should proceed on the basis that the performance of the agreements in question would necessarily involve the making of the declaration that was actually eventually made by the 2nd defendant, which is similar to clause (d)(i) quoted in the preceding paragraph, without including clause (e). 72.The critical part of the declaration made by the 2nd defendant is the statement that he was the “sole owner” of the land in question. It did not contain a statement by the 2nd defendant that he had made no private arrangements to sell his rights under the Small House Policy to other parties. 73.Mr Kenneth Chan argues on behalf of the plaintiff that the declaration was not false because the 2nd defendant was indeed the sole registered owner of the land in question, albeit, as is common ground, he was not, whether solely or in part, a beneficial owner. This raises a question on the meaning of the declaration. 74.As Ribeiro PJ explained in Ming Shiu Chung v Ming Shiu Sum (2006) 9 HKCFAR 334 at §71, in ascertaining the meaning of a particular statement, the purpose or aim of that exercise must be kept in mind. Here, the purpose of construing the declaration is to determine whether it constituted a false declaration and the practice of deceit on the Government. In this context, two aspects of the proper legal approach in relation to deceit, which is well established by the authorities, are relevant. First, it has to be shown that the party making the representation intended it to be, or knew that it would be, understood in its untrue sense: see Akerhielm v De Mare [1959] AC 789, 805-806; Augus v Clifford [1891] 2 Ch 449, 466. Secondly, there is no fraud if the representee in fact took the representation in a sense in which it is true: Smith v Chadwick (1884) 9 App Cas 187; Arkwright v Newbold (1881) 17 Ch D 301, 324-325. 75.In the light of the first aspect of the applicable approach, the subjective intention of the 2nd defendant as the maker of the representation is relevant. There is, however, no direct evidence of such intention, because the 2nd defendant has chosen not to testify at the trial. 76.In my view, it would not be right to infer from the 2nd defendant’s decision not to give evidence, that he did not intend the declaration to be understood in the sense in which it was false. The 2nd defendant could not reasonably be expected to admit a crime in his evidence. Even if he had elected to give evidence, he would be entitled to claim privilege, in the way the plaintiff and the 1st defendant did, if cross-examined on his knowledge of the falsity of the declaration. The failure of the 2nd defendant to give evidence cannot, in this instance, found an inference that he did not know the declaration was false. Having regard to all the circumstances, I think the likelihood was that he was not concerned about the precise meaning of the declaration. It was a document that he was told by the 1st defendant to sign and knew he had to sign in order for the transaction to proceed and for the Government to grant permission for a village house to be built in his name. His interest was in the fee of $300,000, of which $200,000 had yet to be paid. 77.Since the whole purpose of the declaration was to obtain the necessary approval and enable the development to proceed, the proper inference in my view is that the 2nd defendant intended the declaration to have the meaning relevant to the Government’s consideration of the application. 78.This leads me to the second aspect of the applicable approach, where it is necessary to focus on the meaning ascribed by the Government to the declaration. 79.Starting with the objective ordinary meaning of the declaration, the declaration is, in my view, an unqualified statement that the 2nd defendant was the owner and that there was no other owner of the land. This cannot, without straining the language, be construed to refer only to registered ownership. Moreover, as stated in the Lands Department’s publication on how to apply for permission to build a small house, the Small House Policy was formulated “to allow an indigenous villager to apply for permission to erect for himself during his lifetime a small house …” (emphasis added). Although the version of the publication put in evidence by the parties mentioned a last revision date of 2005, it appears that the same publication with the same words quoted above was in use in the 1990s. Thus the part quoted above is identical to that in the publication examined by the court in Best Sheen, which concerned a development scheme entered into in 1993 and a building licence sought by an indigenous villager in December 1998. There, Yuen J said:
Similar statements were found in the publication adduced in evidence in Tiu Sum Fat v Shun Sing Development Ltd [2010] 1 HKLRD 553 (see §14) which concerned a development scheme entered into in 1996 or 1997. 80.In Tiu Sum Fat, Deputy Judge H Wong SC dealt with a similar declaration and concluded:
81.Mr Kenneth Chan seeks to distinguish that case and points out that the applicant there was not even the registered owner of the land when he made the statutory declaration in question in December 1996, and only became registered owner on 8 January 1997 (see §20). However, it is clear from paragraph 23 of the judgment that the learned deputy judge was focussing on beneficial ownership. Moreover, in paragraph 27, he stated that there was a continuing misrepresentation by the applicant which was not retracted. That must have been a reference to the representation about beneficial ownership, for shortly after the date of the statutory declaration, the applicant did become the registered owner, so that there was no continuing misrepresentation as to legal ownership. In other words, the deputy judge held that by asserting he was the sole owner, there was a misrepresentation by the applicant even though he was the registered owner, because he was only a nominee and not the beneficial owner. 82.Mr Chan, however, seeks to argue that the Government in fact took the representation in a sense in which it was true, that is to say, the Government understood the 2nd defendant to be saying no more than that he was the sole registered owner. The main plank for this argument is the evidence of the plaintiff’s witness, Mr Christopher James Robinson, who was a solicitor in the Lands Department, retiring in December 2001 at the rank of Assistant Director of Lands (Legal) in the Legal Advisory and Conveyancing Office of the Lands Department. He gave evidence to the effect that the form of the statutory declaration required to be made by an applicant under the Small House Policy had varied over the years. The New Territories Administration and later the Director of Lands had long been aware of the practice of indigenous villagers to dispose of their small houses. From the mid-1980s, cooperation between indigenous villagers and land developers became a notorious fact. He referred to certain practices, of which the District Lands Office staff was well aware and which had been held by the Court of Appeal to be not illegal: Li Pui Wan v Wong Mei Yin [1998] 1 HKLRD 84. Notwithstanding the notoriety of those practices, prior to October 1997, an applicant was merely required to declare that he was the sole owner of the agricultural land on which the house was to be built, and was not required to declare that he had not entered into arrangements with a third party to sell his rights under the Small House Policy. He said that, up to that time, the reason for requiring a declaration of sole ownership was to ensure that the Government could, at any time, enforce the terms of the building licence against an indigenous villager who was the registered owner of the land. He concluded, therefore, that “sole owner” did not mean, so far as the Government was concerned, the legal and beneficial owner. It meant the only person registered in the Land Registry as the owner of the land. 83.According to Mr Robinson, there was a change of policy in 1997. In around September 1997, the Government decided to curb speculation in small house grants by requiring an indigenous villager to make a declaration to the effect that he was the sole owner of the land and had not made any private arrangement for his rights under the Small House Policy to be sold to a third party. Further, the declaration had to be made by the applicant at the time of the interview by the District Lands Officer rather than at the earlier stage of the submission of application. This new policy was put into practice in October 1997. The timing of the declaration was intended to avoid any claim that alienation of the indigenous villager’s rights took place only after the application was submitted and after the declaration was made. Under this procedure, an indigenous villager would have to remain the legal and beneficial owner at least until his declaration, which might be years after the application was submitted. 84.Mr Robinson said there was strident opposition from the Heung Yee Kuk to the procedure introduced in October 1997 and to the slightly amended version in 2001. The Kuk mounted a campaign throughout Hong Kong to persuade all indigenous villagers not to make the statutory declaration required. In August 2004, the Director of Lands advised the Kuk that the requirement for the statutory declaration in its then form had been temporarily suspended. The current form of declaration available from the website of the Lands Department merely requires the indigenous villager to declare that he is the sole legal and registered owner of the land in question. 85.There was no serious challenge against the credibility of Mr Robinson. Two points, however, may be made about that evidence. First, insofar as he said the phrase “sole owner” meant, from the point of view of the Government, only the person registered in the Land Registry as the owner of the land, that evidence was, as it seems to me, based on a process of reasoning and deduction, rather than on any actual knowledge and recollection of what every relevant official of the Government then thought. In particular, he considered that what was important to the Government at that time was to be able to enforce the terms of the building licence against a villager who was the registered owner. But in my view it does not follow as matter of logic that the Government was not concerned whether the villager was also the beneficial owner. Nor does it follow, in my view, that all relevant officials in the Government understood “sole owner” to mean “sole registered owner”. In fact, as Mr Robinson himself said, at that time (i.e. prior to 1997), the New Territories Administration did not draw a distinction between legal and beneficial ownership in land. On that basis it seems to me unlikely that the Government as a matter of fact took “sole owner” to mean “sole registered owner”. 86.Secondly, as Mr Robinson himself testified, a policy change occurred in around October 1997. The Government became concerned about speculation and wanted to ensure that the indigenous villager applicant remained the legal and beneficial owner of the land at least up to the time of his declaration. It seems to me that, on this basis, what Mr Robinson stated to be Government’s understanding of the meaning of the phrase “sole owner” prior to 1997 has no application on the facts of this case. Here the 1st agreement was entered into in November 1997, the 3rd agreement which involved the 2nd defendant as the indigenous villager was entered into in December 1997, and the statutory declaration was made by the 2nd defendant in December 1999. Rather, the relevant officials in the Government would be looking at the 2nd defendant’s application and statutory declaration with the then current policy in mind, which placed importance on the indigenous villager being the beneficial owner. I think it is more likely than not that the Government understood the 2nd defendant’s declaration to mean that he was the unqualified sole owner of the land in question, i.e. both legal and beneficial sole owner. 87.This conclusion is fortified by the terms of the Government’s grant of Lot 745 to the 2nd defendant. Special Condition 6 of the Conditions of Exchange provides as follows:
88.As Yuen J said in Best Sheen Development Ltd v Official Receiver [2001] 1 HKLRD 866 at 872I, these restrictions (which are materially the same as the restrictions in the building licence in that case) “would have no meaning or effect if the licensee needed only to be the legal owner of the land, and beneficial ownership could be divested and freely transferred to anyone at any time”. 89.It follows from the above that the requisite declaration in this case was necessarily false by reference to both the meaning that the 2nd defendant as representor intended it to have and the meaning ascribed to it by the Government as representee. (C) The parties’ knowledge 90.The evidence shows that it was an established requirement under the Small House Policy for the indigenous villager applicant to declare to the Government that he was the sole owner of the land in question. I am satisfied that this was known to the plaintiff and the 1st defendant, both of whom appeared to me to be reasonably familiar with the procedures for small house development, despite their protestations to the contrary. In particular, the plaintiff had, at least since 1988, carried on the business of property development and real estate agency in the New Territories through a company called Sweet Home Properties, which operated several branches in Tai Po. He was an experienced person to whom his fellow villagers would turn for assistance when they wished to develop village houses. The 1st defendant had himself made a declaration in a similar form, as an indigenous villager applicant under the Small House Policy, in relation to a different piece of land in 1996 and admittedly expected that the 2nd defendant would have to make a similar declaration. The 1st defendant and the plaintiff had also cooperated to develop another piece of land, namely, Lot 554, in the name of other indigenous villagers. It is also likely that the 1st defendant would have told the 2nd defendant, when procuring his agreement to the arrangement, that he would be required to make the declaration in question. 91.Accordingly I find that the plaintiff and the defendants knew that a declaration as to ownership would have to be made by the 2nd defendant as part of the requirement of the Small House Policy. The 2nd defendant was indifferent as to the meaning of the declaration and as to whether or not it was true in the meaning ascribed to it by the Government. In substance the 2nd defendant had to declare it was his land in relation to which he was applying for permission to build a village house. The parties all knew that although the application would be made in the name of the 2nd defendant as the sole owner of the land in question, he was in fact not the sole owner but a mere nominee. 92.It follows that the agreements in question would, to the knowledge of the parties, necessarily involve the 2nd defendant making a false declaration to the Government without an honest belief in its truth. On the basis of the principle established by the authorities above, the agreements are unenforceable on the ground of illegality. (D) Constitutional right 93.The plaintiff raises the point that the 2nd defendant has a right as an indigenous villager to build a small village house on his own land. Mr Kenneth Chan submits that this right is protected by Article 40 of the Basic Law, that the restrictions against alienation contained in the grant in respect of Lot 660E “may well be unconstitutional and void”, and therefore that the requirement for an indigenous villager to make a statutory declaration is also unconstitutional. 94.It is unnecessary to decide whether an indigenous villager has a “right” as such whether pursuant to the Small House Policy or otherwise and, if so, whether such right is protected by Article 40.[1] First, as Mr Chan himself submits, the right of the indigenous villager, if any, is a right to build “on his own private land”.[2] On this basis I fail to see how a requirement for the villager to confirm that it is indeed his own land on which the building is to be erected can be said to infringe any constitutional right. Secondly, Mr Chan does not go so far as to suggest that if an indigenous villager does not have enough land, he has a right to a concessionary grant of additional land for the purpose of building a small house. That being so, there was in any event in this case a deception of the Government in order to obtain Lot 745 for the purpose of carrying out the agreements. This argument based on constitutional right does not assist the plaintiff. Thirdly, Mr Chan is unable to show that the right extends to a situation such as this case where (i) the land is owned in reality by others; (ii) the house to be built is for the benefit of the real owners; and (iii) the indigenous villager will neither live in the house nor be entitled to its proceeds of sale. (E) The effect of illegality 95.Mr Kenneth Chan further argues that if the arrangement was illegal, it had already been agreed between the 1st and 2nd defendants in 1992 and that the plaintiff did no more than join in that agreement without requiring any further illegal act to be done. I do not think this argument assists the plaintiff. On the facts, the statutory declaration was clearly made by the 2nd defendant pursuant to the agreements with the plaintiff. Further, what the plaintiff is seeking to enforce is the defendants’ agreements with him, not the defendants’ agreement inter se. The plaintiff cannot escape from the consequence of illegality by saying that the defendants would in any event have performed the illegal act themselves, when that act was required for the performance of the contract with the plaintiff. 96.It is further submitted by Mr Kenneth Chan that if there was any illegality, the criminality was not serious. He submits that what was done was at most “jumping the gun”, and did not so seriously contravene public policy as to preclude enforcement of the contract. In support of this submission, he prays in aid the decision of the Court of Appeal in Li Pui Wan v Wong Mei Yin [1997] 1 HKLRD 1141; [1998] 1 HKLRD 84. In dealing with this argument, I can do no better than adopt, gratefully, what Yuen J said in Best Sheen, supra, at p 873E-J in distinguishing Li Pui Wan:
97.In this context, the present case is relevantly the same as Best Sheen in that the land in question was never the 2nd defendant’s to deal with. It was assigned to him as nominee, for no consideration, for the sole purpose of making an application in his name for permission to build a house pursuant to the Small House Policy. The 2nd defendant was to have no interest in the land or the house to be built on it. All he was to obtain was a fee of $300,000. 98.Mr Chan further submits that the practice of indigenous villagers lending their names for application under the Small House Policy was notorious and tolerated by the Government, and that it was therefore not against public policy to enforce the agreements in this case. I see no factual basis for this contention. The fact that the Government has issued a letter of compliance in March 2010 is neither here nor there, since there is no dispute that the agreements had been terminated in 2006 or 2007. The letter cannot therefore be regarded as approval of the agreements or of a development pursuant to those agreements. Further, since the correspondence or steps taken leading to the letter of compliance are not in evidence, it is not known on what factual basis the Government has issued that letter. So far as the courts are concerned, Mr Chan has been unable to point to any authority in which the kind of illegal agreement in question has been tolerated or endorsed by the courts by lending their aid to its enforcement. VI. SECTION 3 OF THE CONVEYANCING AND PROPERTY ORDINANCE 99.The defendants further argue that the plaintiff’s claim fails because the agreement he seeks to enforce does not comply with the requirement of writing in s 3 of the Conveyancing and Property Ordinance (Cap 219). In light of my conclusion above, this question does not arise. In any event, I think the argument fails. The plaintiff is seeking to enforce the 1st to 3rd agreements with respect to Lot 745 as modified by the 4th agreement. All four agreements are in writing and signed by the defendants (the 2nd defendant having signed only the 3rd agreement). The fact, as I have found, that when the 4th agreement was entered into, it was also orally agreed that the 1st to 3rd agreements would continue to apply with respect to Lot 660E1 (which was later exchanged for Lot 745) , does not mean there was no sufficient writing. VII. RECOVERY OF SUMS PAID 100.The plaintiff takes the position that even if his claim for damages for breach of contract fails on the ground of illegality, he should nevertheless be entitled to restitution of the sums paid by him being the sums of $381,145.25 and $146,911. He contends that he paid sums totalling $381,145.25 to or on behalf of the 1st defendant and sums totalling $146,911 to or on behalf of the 2nd defendant. 101.Mr Kenneth Chan refers to Tinsley v Milligan [1994] 1 AC 340 as applied in Lau Kwai Kiu v Bian Xintian [2012] 2 HKLRD 954 in support of this claim. The principle discussed in Lau Kwai Kiu is that the court may recognise and give effect to a party’s proprietary interests in certain assets even though they were acquired in the course of carrying out an illegal transaction, if that party does not need to rely on the illegal arrangement to establish those interests. This principle is in my opinion not relevant here, since it is not being suggested that the plaintiff retained any proprietary interest in the money paid. Mr Kenneth Chan confirmed when opening the case that the plaintiff was not advancing a proprietary claim. No trust in the money has been pleaded. Instead, the plaintiff seeks recovery of the sums by reason of total failure of consideration. 102.The correct analysis is that the plaintiff claims restitution on account of the benefit conferred by him on the defendants on the pleaded basis of total failure of consideration. The benefits conferred fall into two categories: first, the money paid by the plaintiff directly to the defendants, and, secondly, the money paid by the plaintiff to third parties in the implementation of the agreements, which indirectly conferred a benefit upon the defendants. 103.It is, however, an established principle that a defendant who receives benefits under an illegal contract can plead the illegality of the contract as a defence to a claim in unjust enrichment, provided that the parties were in pari delicto, i.e. provided that they were equally to blame for engaging in the transaction: Goff & Jones, The Law of Unjust Enrichment (8th ed), §35-01. The matter was stated in Tiu Sum Fat v Shun Sing Development Ltd, supra, at §32 as follows:
104.It follows from my finding above regarding the plaintiff’s knowledge that the plaintiff participated in the development scheme with knowledge of the circumstances giving rise to the illegality. Whether or not the plaintiff believed the arrangement was or was not illegal is not to the point, as ignorance of the law is generally irrelevant. The plaintiff was the driving force behind the agreements. He played an active role by drafting or procuring solicitors to draft the agreements, taking steps to liaise with the District Lands Office, paying the necessary administrative fees and employing surveyors and engineers. I consider he was at least equally to blame for his role in the transaction. On this basis his claim for restitution also fails. 105.In case I am wrong on this, I should mention that Mr William Hui, on behalf of the 2nd defendant, has raised the following issues with respect to the amounts claimed by the plaintiff:
106.If I am wrong in finding the parties to be in pari delicto, I would have ordered the 1st defendant to pay $381,145.25 and the 2nd defendant to pay $146,911 to the plaintiff in restitution. VIII. QUANTUM OF DAMAGES FOR BREACH OF CONTRACT 107.In case I am wrong in my conclusion on contractual liability and the agreements are in fact enforceable, I go on to deal with the quantum of damages. This is largely uncontroversial. There is no dispute that the measure of damages for breach of the agreements is (i) the value of what the plaintiff would have obtained if the agreements had been performed, less (ii) the estimated total amount the plaintiff would have had to pay out for obtaining that benefit. Nor have the defendants disputed the plaintiff’s calculations, which may be outlined as follows. 108.The value of (i) above is represented by the open market value of the Ground Floor and Garden and the open market value of a half share of the 2nd Floor and Roof, as at the date of the writ of summons herein (i.e. 2 April 2007). The valuation evidence is not challenged. The total is $3,639,000. 109.The total expenses that would have had to be incurred for the plaintiff to obtain that benefit, including the plaintiff’s half-share of the construction cost, additional premium payable to Government in respect of the plaintiff’s share in the property and other costs, are estimated to be $2,050,800. The plaintiff’s half-share is $1,025,400. 110.Against this, credit has to be given for the expenses the plaintiff had already actually paid. The plaintiff claims that these amount to $381,145.25 and $146,911. I have already dealt with the issues raised by Mr Hui on behalf of the 2nd defendant in relation to these sums above. 111.The damages would therefore be $3,141,656.25 (= $3,639,000 – $1,025,400 + $381,145.25 + $146,911). IX. THE 2ND DEFENDANT’S COUNTERCLAIM 112.The 2nd defendant counterclaims against the plaintiff for an order to vacate the registration of the lis pendens and for damages for slander of title. The argument is that the plaintiff has slandered his title to the land by causing the writ of summons herein to be registered against Lot 745 in the Land Registry. 113.Slander of title is a form of malicious falsehood. To succeed the 2nd defendant must establish malice. As I understand his position, Mr Hui submits that the plaintiff knew that he had no interest in Lot 745 or was reckless as to whether he did have an interest. He does not advance a case that the plaintiff acted for the purpose not of advancing his own interest but of injuring the 2nd defendant’s. 114.Mr Hui argues that since the plaintiff’s claim is for damages, he has no interest in the land and the registration of the writ must therefore necessarily be wrongful. However, it seems to me that in the circumstances of this case, if the plaintiff had a valid claim for recovery of money paid arising from the repudiation of the agreements, he would at least arguably also have an equitable lien on the land for his claim, similar to the lien in favour of a purchaser of land who has paid a deposit: Megarry and Wade, The Law of Real Property (8th ed), §15-056. 115.Mr Hui further submits that the plaintiff knew or was reckless as to whether the agreements were unenforceable for illegality. I am unable to accept this argument. Although unenforceability on the ground of illegality is the conclusion I have reached after hearing evidence and argument, there is nothing to suggest that the plaintiff should have himself arrived at this conclusion before he registered the action. In fact, the plea of illegality was not raised by the defendants in their original defences, but only by amendment in 2009. 116.In addition, the 2nd defendant has failed to plead or prove any damage caused by the registration of the lis pendens. Ordinarily, actual damage is a necessary ingredient of the cause of action. Mr Hui, however, prays in aid s. 24 of the Defamation Ordinance (Cap 21) which provides:
117.The words “calculated to” mean likely or probable in an objective sense: IBM v Web-Sphere Ltd [2004] FSR 39. I do not think that the registration of a writ of summons in the Land Registry against Lot 745, of which the 2nd defendant is registered owner, falls within s. 24. If the 2nd defendant was in a business of selling goods and the plaintiff had made false disparaging remarks about the goods to potential customers, I could understand the relevance of s. 24. But the registration of a writ simply tells others there is ongoing litigation regarding the land. I do not see how it can be said, without more, that registration alone is likely to cause pecuniary damage to the 2nd defendant. 118.The 2nd defendant faces an additional hurdle. He admitted in his pleading that he held Lot 660E on trust for the 1st defendant, and that by the agreements in question, he was to hold the house to be built on Lot 660E on trust for the plaintiff and the 1st defendant. Although he asserted in his witness statement that he had since acquired beneficial ownership from the 1st defendant, the statement was not admitted in evidence as the 2nd defendant elected not to give evidence. On the state of the 2nd defendant’s pleaded case, there is nothing to show how the 2nd defendant as a nominee holder of the land could have suffered any damage from the registration of the writ. 119.In my view, the 2nd defendant’s counterclaim for damages must therefore fail. Since the plaintiff’s action has failed, however, the the registration of the lis pendens must be vacated. X. CONCLUSIONS, ORDERS AND COSTS 120.It follows from the above that the plaintiff’s action and the 2nd defendant’s counterclaim are both to be dismissed except that there will be an order that the registration of the lis pendens be vacated. 121.I direct that the parties lodge their respective written submissions on costs within 28 days from the handing down of this judgment.
Mr Kenneth C.L. Chan and Mr Billy N.P. Ma, instructed by K.M. Lai & Li, for the plaintiff Mr Tony Ko, instructed by Kent Tam & Co., for the 1st defendant Mr William K.F. Hui, instructed by Gloria Chan & Co., for the 2nd defendant | |||||||||||||||||||||||||||||||||||||||||||
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