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Ng Tung And Another v Chung Hing Transportation And Godown Co Ltd

Judgment Cited authorities 2 Cited in Precedent Map Related
Vincent
Judgment Date08 September 2006
Year2006
Judgement NumberHCA2676/2004
Subject MatterCivil Action
CourtHigh Court (Hong Kong)
HCA002676/2004 NG TUNG AND ANOTHER v. CHUNG HING TRANSPORTATION AND GODOWN CO LTD

HCA 2676/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2676 OF 2004

____________

BETWEEN

　 NG TUNG 1st Plaintiff
　 WONG YUET HO 2nd Plaintiff
　 and 　
　 CHUNG HING TRANSPORTATION Defendant
　 AND GODOWN COMPANY LIMITED 　

____________

Before: Mr Recorder A Chan, SC in Court

Dates of Hearing: 28 & 30 August 2006

Date of Judgment: 8 September 2006

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J U D G M E N T

_______________

1. This is an action by the Plaintiffs for specific performance of a pre-emption right in respect of the purchase of a property known as Unit 2, G/F, Wah Sing Industrial Building, Nos. 12-14 Wah Sing Street, Kwai Chung, New Territories (“the Property”). In the alternative, the Plaintiff seeks damages against the Defendant (“Chung Hing”). I should say at the outset that the claim for specific performance has now been abandoned due to the fact that the Property has already been sold. By reason of the oversight on the Plaintiffs’ side to adduce expert valuation evidence, I ordered at the beginning of this trial, inter alia, that this trial is to determine the issue of liability only.

2. The relevant facts of this case are quite simple. In 2003, four people co-operated in starting a restaurant business in Central called Prince Fusion Restaurant (“Prince Fusion”). Prince Fusion was owned by a company called Central F&B Management Co Ltd (“Central F&B”). These four people were the 1st Plaintiff (“Ng”), Mr Chan Sui Chung (“Chan”), Ng’s brother (Mr Ng Yiu Man (“YM”)) and one Mr Cheung (“Cheung”). Their shareholdings in Central F&B were, initially, as follows :

Ng 5,100 shares (51%)
Chan 3,000 shares (30%)
YM 1,000 shares (10%)
Cheung 900 shares ( 9%)

3.Prince Fusion was opened in June 2003. Hong Kong was struck by SARS at the time. Not long thereafter, disagreement surfaced between Chan and YM and as a result Chan purchased YM’s shares in Central F&B and became a 40% shareholder of that company.

4.For reasons which are irrelevant (there is no argument on that), Ng and Chan later decided to split up also. They entered into negotiations in February 2004 and by the 25th February 2005 had come to an agreement to achieve an amicable parting. The evidence on what was agreed is partly controversial. I shall therefore proceed to set out the evidence in more detail. One witness has been called by each of the parties, Ng for the Plaintiffs and Chan for Chung Hing.

5.Ng’s evidence is that on the 25th February 2004, he had reached an agreement with Chan to swap Chan’s 40% shares in Central F&B for his fast food business in Kwai Chung called Wah Tak Canteen (“Wah Tak”). Wah Tak was a profitable business started by Ng in 1981 and it was occupying the Property. In addition to the swap, Chan had agreed to “acknowledge the years of service” of Wah Tak’s staff and to be responsible for their long service payments. There is a homemade agreement dated 25th February 2004 (“the 25th Agreement”) which was written by Ng and signed by him and Chan to evidence their agreement [E/146]. There are some unimportant details in the agreement which I shall not refer to in this Judgment.

6.In addition to the above, Ng said he had also agreed with Chan that he would let the Property to him at a monthly rent of HK$26,000 for 10 years. Chan disagreed that there was ever such an agreement. His case is that on the 25th February 2004 he had a more extensive agreement with Ng. One of the most important constituents of the agreement is that Ng had agreed to sell the Property to his company, Chung Hing, at HK$950,000. Ng was taxed in cross-examination as to why the agreement on the lease of the Property was not written in the 25th Agreement. In answer, Ng said that he had not received any money from Chan at that time and if Chan changed his mind about renting the Property, he would not suffer much loss. I should add that when giving his evidence in-chief, Ng said that when he was drafting the 25th Agreement he thought that the agreement to lease the Property should be contained in a separate tenancy agreement.

7.Ng said that the 25th Agreement was signed at about 6:00 pm at Prince Fusion. About two hours later, Chan returned and asked him to sell the Property to him. The reason given was that he was worried that Wah Tak would not be able to pay the rent. Ng was unwilling to sell the Property, but he was later persuaded by Chan to agree to do so. He described Chan as having “begged” him for a long time. He said that before he agreed Chan assured him that he was not interested in property speculation and promised to resell the Property back to Ng in one or two years if Wah Tak’s business was not sustainable (“the Pre-emption Right”). Ng was emphatic about the importance of the Pre-emption Right. They agreed on the price of HK$1.1m which Ng described as “super low”. Ng explained that the Property was purchased back in 1991 at HK$1.365m and maintained that the Property had increased in value since that time. Chan’s version of how the Pre-emption Right came about is quite different. In cross-examination, Ng explained that he was not keen to sell the Property, because at a monthly rent of HK$26,000, the agreed price of $1.1m was not much more than 3 years’ rental income. Ng said he agreed to sell the Property based on the promise to resell to him and the fact that the workers at Wah Tak could keep their jobs.

8.There is no controversy that the resale price was agreed at $1.38m. Ng said in cross-examination that the price contained an element of recoupment of the long service payments which Chan had agreed to assume. Save for suggesting that the resale price came from him, there is no challenge to that part of Ng’s evidence. There is a preliminary agreement dated 26th February 2004 (“the Preliminary Agreement”) and signed by the Plaintiffs, being the owners of the Property, and Chan which evidenced the sale [E/153]. The Preliminary Agreement was drafted by an estate agent, Mr Wong (“Wong”). Ng said that Wong was asked to incorporate the Pre-emption Right in the agreement, but Wong replied that he was unable to do so and a provision of that sort would have to be handled by a solicitor. There is no dispute that the Preliminary Agreement was prepared on the 25th February 2004, but it was only signed on the next day when an initial deposit of HK$50,000 was paid.

9.The purchase price stated on the Preliminary Agreement is HK$950,000. Ng explained that it was Chan’s idea that the document should state that sum and he would pay Ng the balance of HK$150,000 separately. Ng said that he did not know why Chan wanted to do that, but he was told that it was a matter of stamp duty. Chan denied that he had ever suggested understating the purchase price. It is common ground that on the 26th February 2004, in addition to the initial deposit, Chan had given a cheque in the sum of HK$150,000 to Ng (Chan’s case is that he gave Ng three sums of money in total – see below). Counsel before me have agreed that the stamp duty payable for a sale at HK$950,000 and one at HK$1.1m was respectively HK$100 and HK$8,250.

10.For completeness, in addition to the swap of the Chan’s shares in Central F&B for Wah Tak and the purchase of the Property which have been mentioned above, Chan and Ng had also agreed at about that time that a debt owed by Ng to Chan in the sum of HK$153,000 would be set off against the transfer of a van from Ng to Chan [see E/150].

11.Back to Ng’s case, he said that he had another meeting with Chan on the 28th February 2004, because he was worried about Chan changing his mind over the Pre-emption Right. At that meeting, they signed a document in, roughly, the following terms :

“I, Chan Sui Chung, identification card number … , undertake that when I sell [the Property] I should sell it back to [Ng] at a price of not more than the original price of HK$1.38m. Ordinary words cannot stand as proof, so this agreement is executed as proof.”.

12.Ng said that the document was also signed by an employee of Chan called Mr Mak Man Leung. A copy of that document together with a copy of the Preliminary Agreement were sent by facsimile to his solicitor, Ms Deca Lin, on the 1st March 2004. However, that document can no longer be found by either Ng or Ms Lin. Ng’s evidence of the 28th February 2004 meeting is disputed.

13. It can be seen from the documents that on the 3rd March 2004, Chan’s solicitors wrote to Ms Lin and asked for a draft of the formal sale and purchase agreement (“the Formal Agreement”). On the next day, Ms Lin replied and enclosed therewith a draft of the Formal Agreement. It is common ground that the Formal Agreement was subsequently executed. Clause 34 and Schedule 12 of the Formal Agreement are important and they are set out below :

Clause 34

“Notwithstanding any terms and conditions herein, the parties hereto expressly agree to the condition precedent set out in Schedule 12 which form(s) part of this Agreement and agree that the provisional agreement for sale and purchase and its attachment should be registered in the Land Registry by the Purchaser.

SCHEDULE 12

Condition precedent :-

After signing the provisional agreement for sale and purchase dated 26 February 2004 and its attachment, if the Purchaser shall sell the Property, the Vendor has priority to buy back the Property from the Purchaser at an agreed consideration of HK$1,380,000.00.”.

14. Ng said that he signed the Formal Agreement on the 10th March 2004 (it was dated 9th March 2004). On that day, Ng had also signed a document in Chinese headed “Additional Property Sale and Purchase Agreement” [E/195] (“the Additional Agreement”) which...

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