Tsang Wing Man v. Chung on Ling

HCA 1826/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1826 OF 2012

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MISCELLANEOUS PROCEEDINGS NO 1609 OF 2012

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(CONSOLIDATED)

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J U D G M E N T

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1.This is a straightforward dispute over an agreement for sale dated 28 June 2011 between the plaintiff estate agent and the defendant Chinese medical practitioner.  The parties have known each other for many years which perhaps partly explains the homegrown nature of the agreement and its rather trusting terms.

2.There are in fact two actions I ordered to be consolidated some time ago in October 2012.

3.The first in time is the defendant’s action to vacate a charge registered against the subject property which began in August 2012, and the second is the plaintiff’s, begun in December 2012, seeking specific performance of the agreement for sale.

4.The property concerned is owned by the defendant and had been rented from him on a monthly basis by the plaintiff as business premises.  The plaintiff also owns a five‑storey building in Shenzhen which features in the agreement itself as well as the background to what eventually became the subject of this litigation. The defendant’s property is a first floor building with cockloft.

The agreement for sale

5.This is a Chinese document written by the defendant, the content emanating from the plaintiff.  It is signed by both of them with the defendant’s wife signing as a witness.  Each party retained a copy.

6.The contents are clear enough.

7.The purchase price was to be HK$9.8 million.  The completion date was to be within three days of completion of the sale of a property owned by the plaintiff on the mainland.  The plaintiff’s tenancy of the property in Hong Kong was to continue at the existing monthly rental until completion.  The property was being used for “non‑domestic purpose”, viz in connection with the plaintiff’s estate agency business.

8.No deposit was payable.  On the face of it, the document provided, at its highest, an option to purchase for which there was no real consideration.  It seemed to be extremely favourable to the plaintiff.

The plaintiff’s funds for the purchase

9.The property of the plaintiff on the mainland was to be the source of these, hence the reference to the completion timescale.  It appears from the plaintiff’s evidence that some limited form of negotiation had taken place between her cousin on her behalf, and a developer since 2005.  Up to the date of this agreement nothing concrete had emerged save that the plaintiff believed it revolved around a price of RMB8 million or RMB9 million.  Apart from supplying a copy of the certificate of title of the mainland property to the developer via her cousin the plaintiff was quite unable to point to any realistic progress in this possible sale.  I have concluded from her evidence that the state of affairs in respect of this property was no more than a hope on her part that a sale would at some time in the future materialise.  If she thought that a contract for sale, at least, would result by the end of August 2011, that was not a reasonable one given the vague and non‑progressive interest by the developer on the mainland over several years.  I have concluded on the basis of her own evidence that by June 2011 the prospect of a sale of her mainland property was at best speculative.  The history since that date, with no information or documentation concerning that sale, shows that such expectation was unrealistic although she managed to convey to the defendant that it was highly likely and only completion stood in the way.  For a few weeks the defendant took this assurance on trust.  Yet the situation was very different from what the plaintiff hoped for, or wanted.

The extrinsic evidence

10.The provision for completion of the sale by the defendant to the plaintiff is obviously vague or open‑ended.  The completion date for the plaintiff’s sale to the mainland developer was unascertainable in late June 2011.  There did not then exist even a draft contract for sale or whatever passes for such in the PRC.  It would be hardly surprising if the defendant (vendor) wanted to have some idea of exactly when completion was likely to take place.  The agreement did, on its face, give the plaintiff (purchaser) considerable leeway in time whilst concurrently continuing a tenancy on the same terms.  If however the plaintiff thought that it was a permanent open offer that too was unrealistic.  However her evidence tended to suggest that she viewed it in this way.

11.The defendant had precipitated her interest in the form of the offer to purchase at HK$9.8 million by stating that he wanted vacant possession of the property as he had had an offer of HK$10 million to sell it.  This led to the plaintiff persuading him to sell it to her, at some stage for the HK$9.8 million price which featured in the agreement.  There was no challenge to the defendant’s evidence‑in‑chief to this effect.

12.A crucial factor to some extent is the conflict between the parties over what was or was not said with reference to the completion date over and above that contained in the agreement itself.  The defendant contends that the plaintiff said completion would be at the end of August 2011 at the latest.

13.The plaintiff denies that there was any mention of this.  Of course it would have been sensible to have included this in the reference in the agreement to the completion date for this purchase being within three days of the completion date for the sale of the plaintiff’s mainland property.  Mr K M Chong, for the plaintiff, questioned the translation of the Chinese characters in the English version.  The official translation for the purposes of this trial reads:

“Completion date is within 3 days according to the sale and after completion of the property owned by the purchaser at … Shenzhen City, Guangdong.”

The modified translation provided by the lady court interpreter is:

“Completion date depending upon completion of the sale of the property owned by Tsang Wing Man [the purchaser] at … Shenzhen City, Guangdong thereafter within 3 days.”

14.There is a distinction without a difference.  The meaning is quite clear and it has not in any case, had other than an agreed meaning.

15.It is easy to see why the plaintiff does not accept this oral clarification of the time for completion; any time‑restraint would raise difficulties for her considering that this proposed sale of her property in Shenzhen had made no progress over more than five years.  A somewhat open‑ended period within which to exercise her chance to purchase the Hong Kong property suited her completely.

16.Conversely the defendant wanted some degree of precision and certainty given that he was turning down an offer of HK$10 million to give the plaintiff some discount on the purchase price based on past friendship, assistance and general goodwill.  Accordingly I am satisfied that he and his wife are wholly correct in their evidence about what the plaintiff said.  Common sense and logic also support their testimony.  The defendant was therefore certain to ask in August, as the promised completion date approached, what was the position regarding the plaintiff’s promise.

An analysis of the agreement

17.The plaintiff, as an estate agent of some years experience, well knew what the contents of such an agreement should contain.  Both parties seem to accept that this agreement was a provisional sale and purchase agreement.  I find it difficult to elevate this homemade document to such a status.  It is unarguably favouring the plaintiff throughout.

18.She is not required to pay any deposit.  There is no clause explaining why this is excluded.  She was to continue as tenant of the property until completion on the existing terms.  The provision for the completion date, as expressed in writing, without any extrinsic evidence, is so open‑ended that the hiatus until a completion date for the sale of the mainland property was ascertained could last for years.  The benefit of this agreement was so one‑sided with no consideration moving from the potential purchaser to the willing vendor.  This document is not a deed, its form having been described by me earlier.  It was even suggested by or on behalf of the plaintiff that the defendant had a benefit in that the plaintiff would not be charging him commission on the sale to her or commission would not be payable by him on sale to some other person.  This is nonsense.  Similarly the suggestion that there would not be the complication of sale with a sitting tenant (herself) for the defendant, whereas to another potential purchaser there would be.  These facile arguments are best ignored as is any suggestion that he had a benefit from the continuation of a tenancy with the agreed rent payable.  The tenancy agreement was a wholly separate arrangement.

19.I am satisfied that the plaintiff in effect dictated the content of this agreement and it was deliberately couched in its vague form as to completion in order to give her as much time as possible.  In that form however it is simply unenforceable — the lack of consideration and vagueness as to the completion date made it so.

20.But clearly the defendant wanted something more concrete in respect of the completion date and so the plaintiff committed hearsay to “by the end of August 2011”.  This extrinsic evidence lends more reality to the agreement — it is not surprising that the plaintiff denies it was said.  She was not telling the truth.

The extension of time

21.The plaintiff denies any contact in mid‑August or late August or the alleged extension to mid‑September 2011 for the sale to be completed.  

22.Since I am convinced that the plaintiff did promise completion by the end of August at the time of the agreement, it was quite logical and indeed, to be expected, that as that deadline approached the defendant as vendor, would want to know what was going on.  He had heard nothing nor received any written communication outlining the state of the transactions — neither his nor hers.

23.Despite her denials she said the defendant had contacted her to relate that he had received an offer of HK$11.5 million for the property.  That must mean, at the very least, that he was putting some pressure on her to make some progress and she must have realized this.  This was followed, she said, by the defendant’s wife telephoning her, also, mentioning the HK$11.5 million offer and saying that she needed money urgently.  The implications of these two calls to her were stark: When are you going to complete?

24.But the reality was much clearer.  I do not believe the plaintiff.  I accept the defendant’s evidence, and that of his wife, on all material aspects.  The plaintiff said that she did not tell the defendant of her difficulties in getting the mainland developer to sign the contract. She added that she simply relied upon the agreement with the defendant.  If that part of her evidence has truth in it, and on the very general basis, I accept that that reflected her attitude, she was trying to “string the defendant along” when she well knew that the prospect of a sale of her own property was vague and had not proved to be a realistic proposition for several years.  It was close to being “pie‑in‑the‑sky” and she was at the very least being reckless in any reassurance given by her to the defendant about any completion date.

25.When mid‑September 2011 passed by, she was clearly in breach of the term as to completion.  Even if she had not given a promise as to the completion date at the end of August and there had been no extension until mid‑September, and one was left simply with the written provision for completion, there never was any serious possibility of a completion date for the sale of the mainland property and she was clinging to some unreasonable hope and yet prepared to rely on past goodwill, friendship and cooperation to allow her to treat the agreement as a continuing option.  That was, however, not the situation.  She was in breach of the oral promise, and failed to complete at the end of the extension period.  I am quite satisfied that if the plaintiff had been wholly candid and truthful about the state of the so‑called “sale to a mainland developer”, the defendant would not have extended the completion to mid‑September.  In fact had he known the real situation on this on 28 June 2011 I think it highly likely that he would not have entered into the agreement.  The stipulated completion date would have been at best an uncertainty.

26.She stated that she told the defendant “I was in the process of selling my property”.  It is difficult if not impossible to give an extended meaning to the expression “in the process of selling” so as to cover an alleged interest or prospect which had made no advance over five or six years.  There was no process in train.

The aftermath

27.What followed thereafter is essentially set out in the agreed statement of facts.  In May 2012, the parties met and the defendant informed her that he had a potential purchaser prepared to pay in the region of HK$12.5 million and he asked her to vacate the property.

28.Very shortly after that the plaintiff registered the agreement as a charge on the property thereby inhibiting the defendant from such a sale.  On 2 August 2012, the defendant commenced proceedings to vacate the registered charge.  

29.Shortly after that the plaintiff gave notice of her intention to enforce the agreement at the stipulated price of HK$9.8 million and commenced proceedings to that end on 4 December 2012.  By that time, it was still clear that she had not sold the mainland property.  In fact, she has admitted that it is still unsold and there has been no progress to that end over the intervening years.

The witnesses

30.The plaintiff was unimpressive.  She was at time evasive and on many occasions unwilling or unable to answer a straightforward question.  As an experienced estate agent, she well knew what a proper sale and purchase agreement, preliminary or otherwise should contain.  She could so easily have provided a proper one which had regard to the defendant’s interests as well as her own.  Instead she traded on her past relationship with the defendant and his wife to secure an agreement intended by her to provide as much advantage for herself as possible.  She was utterly unreliable as a witness.

31.By contrast, the defendant and his wife were good witnesses who had come to the conclusion, as expressed by their attitude that their friendship and goodwill had been taken advantage of.  They eventually became aware of the plaintiff’s playing for time and dilatoriness.  I believed both of them.

The peripheral issues

32.There has been much discussion about the implied terms.  Since I have found that there was an express oral promise by the plaintiff to complete the subject transaction by the end of August 2011, it is not necessary to consider any implied term concerning the completion date as expressed in the agreement.  As a matter of common, and commercial sense, in the absence of the extrinsic oral promise, there would have been implied into the completion clause that it was completed within a reasonable time.  Not to do so would have simply left completion open‑ended for some vague unforeseeable date, and that is wholly unreasonable.  It is furthermore not sensible.

33.Of course there are implied terms concerning the obligation upon a vendor to prove and provide documents of title.  However, consideration of this in this trial is not practical.  The defendant is a layman.  The parties had not instructed solicitors because, and I accept this evidence, the plaintiff said it was not yet necessary to instruct solicitors.  The defendant could reasonably assure that as the plaintiff was an experienced estate agent, she would set the “ball rolling”.  It would be quite pointless, in the circumstances of this case, to expect him to produce his evidence of title to the plaintiff.  Once solicitors had been instructed by both parties, the obligation could be met.  This situation never materialised.

34.There was also in the plaintiff’s argument much concentration on the allegations of misrepresentation and whether they were false or not.  There was, in my judgment, clearly a misrepresentation as to the position concerning the sale of the mainland property and the reality of the completion timetable. She was verging on the dishonest in these representations and was certainly reckless and misleading.  In the event this case turned on the content and nature of the document, the nature and value of the representations, and the failure to meet the revised completion date.

35.Mr KM Chong, for the plaintiff, spent time attempting to cross‑examine the defendant’s wife who was merely a witness to the signing of the agreement (though more importantly the person who made significant telephone contact with the plaintiff) on matters which were already the subject of agreed chronology and events, the agreement (to which she was not a party) and the alleged mutual benefits of the agreement.  There were also matters of law which, if tenable at all, were more appropriately dealt with in final submissions.

36.The same approach was adopted in relation to the defendant himself, and included attempts to delve into what he told his solicitors, so as to cause them to set out the defence’s contentions in answer to the plaintiff’s actions in their correspondence.

37.Those solicitors had set out in a letter dated 15 June 2012 their objection to the registration of the charge.  They also categorized the agreement as a Letter of Intent to purchase the property and an oral agreement that completion would be within two months of the signing of the document. Accordingly the time for completion of the purchase had lapsed.  The plaintiff was told to vacate the charge or face proceedings.  There was nothing in this letter or one in August 2012 which remotely justified any cross‑examination of the defendant.

The law and its application

38.Although I have been referred to a number of authorities, their application is of well recognised and honoured principles to a variety of circumstances.

39.Although I have concluded that this was not a properly constituted sale and purchase agreement, if a different opinion were to be held, it is clearly unenforceable for the reasons I have stated earlier.

40.As a simple agreement for sale, ignoring the absence of any consideration, there is no compliance by the plaintiff with the terms to enable the plaintiff to enforce it and seek specific performance.  She is clearly, on my findings, in breach of the provision for completion.  She failed to complete the transaction within the period allowed and she is therefore in breach.  The defendant is entitled to repudiate the agreement and be free to sell the property to an alternative purchaser.  Mr Fan’s final submissions admirably and succinctly identify the issues before me.

Summary

41.The plaintiff fails in her claim.  She is not entitled to specific performance.  The charge registered by her must be vacated forthwith. 

42.The defendant, who has been significantly handicapped by the plaintiff’s actions, is free to proceed to a legal purchase and sale arrangement with a genuine purchaser.

43.His heads of damage are as follows: he is entitled to the unpaid rent at the agreed rate of $38,500 per month from the date of the plaintiff’s vacating of the premises, or the date of the last payment of rent by her, whichever is the earlier, plus interest which the parties have agreed at $113,000.

44.He has lost the opportunity, or opportunities, of sale, since he gave notice of repudiation.  However, it is a fact of life that the value of the property has increased significantly since September 2011.  In view of this, it would be extremely difficult to assess a precise loss given the length of this uncertainty, and so the fairest, practical approach that I can adopt is to regard the gain in the value of the property over that intervening period as the most reliable form of compensation.

45.Subject to any clarification of certain heads of damage, the only outstanding matter is to order that the defendant should have an order for costs, to be taxed if not agreed, against the plaintiff for both actions, ie also the action in which he is the plaintiff suing Madame Tsang as the defendant.

Mr KM Chong and Mr Alvin Chong, instructed by Kenneth CC Man & Co, for the plaintiff

Mr Edward Fan, instructed by Cham & Co, for the defendant