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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
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CHAN YAU |
Plaintiff |
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and
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CHAN CALVIN |
1st Defendant |
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CHAN CHO WING JOE alias
CHAN CHO WING |
2nd Defendant |
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| Before: Hon G Lam J in Court |
| Dates of Hearing: 13-15, 18-19 & 22 November 2013 |
| Date of Judgment: 5 September 2014 |
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J U D G M E N T
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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:
“D.D 32 LOT 660E.
Application for a block of small house of 700 square feet
Chan Yau shall pay to Chan Calvin $600,000.00. $200,000.00 being the 1st instalment, thereafter $100,000.00 shall be paid in each subsequent month by 2 instalments. The total amount of payment shall be $400,000.00. In addition, the remaining balance of $200,000.00, being the costs for acquisition of the right to develop the small house, shall be paid by Chan Yau to Chan Cho Wing in 3 instalments according to the normal practice. Upon completion of the building work, Chan Yau shall be entitled to the Ground Floor and the garden; Chan Calvin shall be entitled to the 1st floor; Chan Yau and Chan Calvin shall each be entitled to 50% interest of the 2nd Floor and the roof. Both parties agree to execute the relevant documents in a solicitors’ office on or before 10 December 1997. This Agreement is to be signed and confirmed and thereby becomes irrevocable.”
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:
“Chan Calvin [LD. No. …] (hereinafter called “Party A”)
Chan Yau [LD. No. …] (hereinafter called “Party B”)
Party A and Party B now agree to jointly develop Lot No.660E in Demarcation District No.32 (hereinafter called “the Lot”).
1. Party A agrees to cancel the agreement between Chan Cho Wing and Wong Tai Keung in respect of the Lot forthwith.
2. The sum of Hong Kong Dollars Three Hundred Thousand to acquire the right of indigenous villager. One Hundred Thousand has been paid and the remaining two hundred thousand shall be paid by Chan Yau. (signature)
3. Party A and Party B shall each bear half of all the costs, including the costs of construction, the costs of the right of the indigenous villager, the additional premium payable to the Government and all other relevant costs for the development of the Lot.
4. Upon completion of the construction of the small house, the Ground Floor and its land shall be assigned to Party B, the 1st floor shall be assigned to Party A, the beneficial interest of the 2nd Floor and the roof shall be assigned to Party A and Party B jointly in equal share.
5. Party B shall pay Party A in the sum of Four Hundred Thousand Dollars: two hundred thousand dollars shall be paid upon signing of this agreement; one hundred thousand dollars shall be paid in January 1998 and one hundred thousand dollars shall be paid in February 1998.”
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:
“1. Party B shall be entitled to: The right to be issued by the District Lands Office to build the Small House in favour of Party A together with the Lot.
2. The benefit of Party A: Hong Kong Dollar Three Hundred Thousand Only (HK$300,000.00).
3. Payment method: Party B shall pay Party A the sum of Hong Kong Dollar One Hundred Thousand Only (HK$100,000.00) upon signing of this agreement. Hong Kong Dollar One Hundred Thousand Only (HK$100,000.00) being 2nd instalment shall be paid upon the District Lands Office issuing the Building Licence and giving consent for commencement of building works; and the remaining Hong Kong Dollar One Hundred Thousand Only (HK$100,000.00) shall be paid to Party B upon the District Lands Office issuing a Certificate of Compliance.
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6. Party A admitted that he shall hold the interest of the Small House and its land for Party B as a trustee. Party A shall not assign, mortgage, transfer by way of gift, bequeath or lease to any other person the Small House and its land.
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8. Transfer of title in respect of payment of a premium: Upon completion of the Small House, Party B shall pay a premium, stamp duty, legal costs and registration fee in respect of the transfer of the title to himself. Part B shall have the right to demand Party A to transfer the title directly to his purchaser or...
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