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HCA1746/2005
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
ACTION NO. 1746 OF 2005
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BETWEEN
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TIU SUM FAT |
1st Plaintiff |
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NG KIT PING |
2nd Plaintiff |
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LAW WUN CHEONG |
3rd Plaintiff |
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and |
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SHUN SING DEVELOPMENT LIMITED |
1st Defendant |
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LEE WAI KWAN |
2nd Defendant |
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Before : Deputy High Court Judge H. Wong SC in Court
Dates of Hearing : 14, 17–20 and 24 November 2008
Date of Judgment : 28 December 2009
THE DISPUTE
1. The dispute involved in this action relates to a “small house” which, at the time of the relevant agreements, was intended to be built on a piece of land in the New Territories. The action raises certain interesting questions relating to the Government’s New Territories Small House Policy (“Small House Policy”).
2. By a Chinese Agreement dated 2 June 1997 (“the 1st Agreement”) signed between the 1st defendant (as Party A) and the 1st and 2nd plaintiffs (as Party B), it was provided, inter alia, that:
(a) the 1st defendant was the agent (代理人) in respect of a piece of land in Tai Po, New Territories known as Lot 208RP DD14 (“the Land”);
(b) an application was being made to the District Land Office (“DLO”) to erect on the Land a house (“the House”) with 3 storeys, each having an area of about 700 sq. ft;
(c) the 1st and 2nd plaintiffs agreed to purchase the 2nd floor (with roof) of the House (“the 1st Property”) at the price of HK$2,250,000, to be paid as follows:
(a) HK$50,000 to be paid upon the signing of the 1st Agreement.
(b) HK$175,000 to be paid on or before 16 June 1997.
(c) HK$225,000 to be paid within 7 days after commencement of building work.
(d) HK$225,000 to be paid before the delivery of the keys.
(e) The balance of the purchase price in the sum of HK$1,575,000 to be paid within 14 days to Party A after Party A shall have obtained the land premium notice letter (補地價紙通知信) issued by the Hong Kong Government.
(d) Party A would be responsible for the costs of construction, the land premium and the administration expenses of the Government.
(e) The parties agreed that in the event of the death of the building licence owner (建屋牌照业权人), the 1st Agreement would be immediately cancelled. Party A would return to Party B all amounts that had been paid by it without interest, and the parties would not be responsible to each other for any expenses or legal liability.
(f) Party B undertook and warranted that until Party A obtained from the Hong Kong Government the land premium notice (補地價紙), it would not make any addition or renovation to the garden or the roof.
3. By another Chinese agreement dated 25 September 1997 (“the 2nd Agreement”) and signed between the 1st defendant (as Party A) and the 1st, 2nd and 3rd plaintiffs (as Party B), the 1st, 2nd and 3rd plaintiffs agreed to purchase the 1st floor of the House (“the 2nd Property”) at the price of HK$1,800,0000, to be paid as follows:
(a) HK$50,000 to be paid upon the signing of the 1st Agreement.
(b) HK$175,000 to be paid on or before 16 June 1997.
(c) HK$225,000 to be paid within 7 days after commencement of building work.
(d) HK$225,000 to be paid before the delivery of the keys.
(e) The balance of the purchase price in the sum of HK$1,575,000 to be paid within 14 days to Party A within 14 days after Party A shall have obtained the land premium notice letter (補地價紙通知信) issued by the Hong Kong Government.
4. Other terms of the 2nd Agreement are essentially the same as the 1st Agreement. In particular, the terms of the 1st Agreement set out in paragraph 2(a), (b), (d), (e) and (f) above are also included in the 2nd Agreement as part of its terms. When the 1st Agreement and 2nd Agreement are collectively referred to below, I shall refer to them either as “the 1st and 2nd Agreements”, or simply as “the said Agreements”. It is not in dispute that it was a Madam Lee Yin Ho (“Conly Lee”) of an estate agent company called Hing Lung Property Agency (“Hing Lung”) who introduced the plaintiffs to the 1st defendant. It is also not in dispute that a Mr Wan Hok Lim and his son, Mr Wan Hang Ping, were at all material times the partners of Hing Lung. They were also the directors and shareholders of a limited company called “Hing Lung Holdings Limited” (“Hing Lung Holdings”). Both Hing Lung and Hing Lung Holdings had their registered address at No. 8, G/F, Fook On Building, Wan Tau Street, Tai Po.
5. It is the plaintiffs’ case that in making the said Agreements, the 1st defendant contracted on its own behalf and as agent for an undisclosed principal, namely, the 2nd defendant. This is denied by the 1st and 2nd defendants. It is the case of both the 1st and the 2nd defendants that the said Agreements were made by the 1st defendant on his own behalf, and that the 2nd defendant was never a party to the said Agreements.
6. I should also add, for completeness’ sake, that it is the plaintiffs’ case that the 2nd Agreement was first entered into on 25 September 2006 by the 1st and 2nd plaintiffs only, and that it was only a few days later the 2nd Agreement was varied by consent and the 3rd plaintiff was added as one of the purchasers. This is however not a matter that would affect any of the issues in this case (there being no dispute that the 3rd plaintiff was in fact a party to the 2nd Agreement) and there is no need for me to refer to the evidence that relate to the circumstances under which the 3rd plaintiff came to be joined as a party to the 2nd Agreement.
7. By April 2002, the 1st and 2nd plaintiffs had already paid a total amount of HK$225,000 to the 1st defendant pursuant to the terms of the 1st Agreement. Similarly, the 1st, 2nd and 3rd plaintiffs had already paid a total amount of HK$180,000 to the 1st defendant pursuant to the terms of the 2nd Agreement. However, construction of the House had not begun. The plaintiffs contend that it was an implied term of the 1st and 2nd Agreements that the 1st and 2nd defendants should proceed to apply for the building licence and to construct the House on the Land as soon as possible and/or within a reasonable time, and to complete the sale and purchase within a reasonable time. It is the plaintiffs’ case that in breach of the said implied term, the defendants had failed to construct the House and to complete the sale and purchase of the 1st and 2nd Properties within a reasonable time. By 2 letters both dated 11 April 2002 (“the letters of termination”) issued by Messrs Donald Yap, Cheung & Kong (acting on behalf of the 1st and 2nd plaintiffs in respect of the 1st Agreement, and the 1st, 2nd and 3rd plaintiffs in respect of the 2nd Agreement), the plaintiffs purportedly gave notice to the1st defendantthat they would accept the 1st defendant’s alleged repudiation of the 1st and 2nd Agreements and demanded for the return of the amounts that had been paid by the plaintiffs under the 1st and 2nd Agreements (collectively as “the Deposits”). By the letters of termination, the plaintiffs clearly indicated that they were putting an end to the 1st and 2nd Agreements.
8. I pause here to note that although it is the plaintiffs’ case that the said Agreements were made by the 1st defendant on its own behalf and as agent for the 2nd defendant, the letters of termination were addressed to the 1st defendant only. Indeed, on the evidence, prior to the commencement of the present proceedings, the plaintiffs had made no complaint or any demand at all against the 2nd defendant.
9. The present action was commenced on 5 June 2002 and the cause of action initially relied upon by the plaintiffs was solely based on the alleged breach of the implied term mentioned above. Subsequently, however, the Statement of Claim was substantially amended and the following claims were added by the plaintiffs:
(a) it is alleged that the performance of the 1st and 2nd Agreements necessarily involves a misrepresentation practised upon the Government by the 2nd defendant and accordingly the 1st and 2nd Agreements are illegal as against public policy and are unenforceable;
(b) it is alleged the 1st and/or the 2nd defendants have received the Deposits “for and to the use of” the plaintiffs and the plaintiffs are entitled to recover the same on the basis either that the illegal purpose of the 1st and 2nd Agreements had not been carried into effect, or alternatively that the plaintiffs were not in pari delicto with the 1st and/or the 2nd defendants;
(c) it is alleged alternatively that the plaintiffs paid the Deposits as a result of a mistake that the 1st and 2nd Agreements were valid and enforceable, and the plaintiffs are entitled to repayment of the same; and
(d) it is further alleged that it is an implied term of the 1st and 2nd Agreements that the defendants should convey a good title of the 1st and 2nd Properties to the plaintiffs. By reason of the illegality alleged, the documents of title to be granted by the Government in respect of the House and the 1st and 2nd Properties were or were to be obtained by misrepresentation of the 2nd defendant. Accordingly, the defendants would not have been able to give a good title to the 1st and 2nd Properties and were in anticipatory breach of their obligation to convey a good title to the plaintiffs.
10. By their Re-amended Statement of Claim, the plaintiffs claim for a declaration that the 1st and 2nd Agreements were illegal and unenforceable. They also seek the return of the Deposits. Although there is also a claim for damages to be assessed, the claim was not pursued at trial for it is plain that by the time when the plaintiffs terminated the said Agreements, the market had substantially fallen, and...
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