Sunny Square Ltd. v. Artsland Properties Investment Ltd. and Another

CACV000035A/1999

CACV 34 & 35/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NOS. 34 & 35 OF 1999

(ON APPEAL FROM HCA 9897 AND 10428 OF 1998)

BETWEEN
	Sunny Square Limited	Plaintiff
	AND
	Artsland Properties Investment Limited	1st Defendant
	Sun Hung Kai Real Estate Agency Limited	2nd Defendant
	Jones Lang Wootton	3rd Defendant

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Coram : Godfrey, Mayo & Leong, JJ.A.

Date of Hearing : 20 May 1999

Date of Judgment : 4 June 1999

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J U D G M E N T

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Godfrey, J.A. :

Introduction

1. On 23 December 1998, Yam J. struck out the statements of claim in two actions brought by Sunny Square Limited ("the purchaser") against (1) Artsland Properties Limited ("the vendor"), a company in the Sun Hung Kai group of companies; (2) Sun Hung Kai Real Estate Agency Limited ("the sales agent"), another company in the group; and (3) Jones Lang Wootton ("the estate agent"), an independent firm. These actions arose out of the purchase by the purchaser of two flats in Royal Court, 3 Kennedy Road, Hong Kong. The first action concerned 22B; the second, 18A. The purchaser, having contracted to buy these two flats, has purported to rescind both contracts. It complains of misrepresentations, on the basis of which it says it was induced to contract, made to it by the sales agent and the estate agent (against whom, as well as against the vendor, it seeks relief). The judge held that the case of the purchaser based on the alleged misrepresentations was a myth, which had no solid foundation, and consisted of a tissue of improbabilities which ought not to be sent to proof. The purchaser now appeals, asserting that there is sufficient substance in its case to warrant that case being allowed to go for trial, and that the judge was wrong to strike out its claims. We have to decide whether the judge was, or was not, entitled to do so.

Background

2. It is convenient to start the story in 1949, when the land on which Royal Court now stands was vested in the Zetland Hall Trustees (a body corporate) by an Ordinance (No. 20 of 1949) in pursuance of which the land was expressed to be assigned to the Zetland Hall Trustees by an assignment dated 19 May 1951.

3. By a statutory declaration made on 12 January 1988, the makers of this statutory declaration (three of the Zetland Hall Trustees) declared that this assignment had been lost and could not be found. They exhibited a copy of the assignment to their declaration.

4. In 1998, the sales agent, in marketing flats in Royal Court for the vendor, put out a sales pamphlet, including a price list for the flats, which described both 22B and 18A as being units with a "net usable area" (an expression which was not defined) of 1,157 square feet. The purchaser, by a director one Sunny Yam Wing Yin ("Mr. Yam"), who was experienced in property transactions, expressed interest in both these flats. It is sufficient to relate what transpired in relation to 22B, as to which Mr. Yam was invited to sign a form of memorandum of sale, an attachment I to which contained an acknowledgement by the purchaser thereunder that the 19 May 1951 assignment was lost; that the vendor would not be required to produce either the original or a certified copy of it; and that the purchaser would accept the copy exhibited to the statutory declaration of 12 January 1988 as sufficient proof of the contents thereof. The memorandum provided for the signature by the purchaser of a formal sale and purchase agreement. It also contained an agreement on the part of the purchaser that "the Agreement shall strictly follow the form of the Agreement for Sale and Purchase annexed hereto" and an acknowledgement by the purchaser "that he has perused the same and understands the contents and legal effect thereof before signing the Memorandum for Sale." In fact, no form of Agreement for Sale and Purchase was attached to the Memorandum. The Memorandum referred to the "Saleable Area" of the flat (again an expression which was not defined) as being 1,157 square feet.

5. On 18 February 1998, Mr. Yam signed the Memorandum for Sale as it stood (his request to endorse the attachment I "subject to my lawyers' approval" was rejected). The purchaser's case is that Mr. Yam did so on the faith of representations made to him by a salesperson to the effect (1) that the title was good and marketable; (2) that the absence of the 19 May 1951 assignment had been remedied by a "court declaration"; (3) that the attachment to the Memorandum for Sale was redundant and of no legal effect and would not affect title; (4) that the prices mentioned in the sales pamphlet would not be reduced; (5) that the "net usable area" mentioned (not by the salesperson but in the sales pamphlet) was equivalent to the internal floor area and that accordingly the latter was an area of 1,157 square feet, whereas in fact it was only 984 square feet.

6. On 20 February 1998, the vendor's solicitors, Winston Chu & Co., sent to the purchaser's then solicitors, Ip Kwan & Co., a draft Agreement for Sale and Purchase. This referred to "the saleable area" of the flat as 107.49 square metres (it is common ground that this may be taken, for present purposes, as being as near as may be to 1,157 square feet). The expression "saleable area" was comprehensively defined in the draft (the details of this definition are immaterial).

7. The draft contained the following clauses 12(a) and (b) and 28 :

"12.(a) Subject to Sub-Clauses (b), (c) and (d) hereof, the Vendor shall at his own expense show and give a good title to the Property in accordance with Section 13 of the Conveyancing and Property Ordinance Chapter 219 of the Laws of Hong Kong and produce to the Purchaser for his perusal such original or certified copies of any deeds or documents of title, wills and matters of public record as may be necessary to complete such title. The costs of verifying the title, including search fees, shall be borne by the Purchaser who shall also, if he requires certified copies of any documents in the Vendor's possession relating to other property retained by the Vendor as well as to the Property, pay the cost of such certified copies.

(b) The Purchaser hereby acknowledges that the Assignment dated 19th May 1951 by The Hongkong and Shanghai Bank Hongkong (Trustee) Limited and Emma Raymond to The Zetland Hall Trustees in respect of Inland Lot No. 1875 (copy whereof is exhibited to a Statutory Declaration dated 12th January 1988) was lost. The Purchaser hereby expressly agrees that, notwithstanding anything contained in this Agreement and despite Section 13 of the Conveyancing and Property Ordinance, the Vendor shall not be required to produce the original or a certified copy of the said Assignment to prove the Vendor's title and the Purchaser shall accept a copy of the said Assignment exhibited to the said Statutory Declaration as sufficient proof of the contents thereof.

28.(a) This Agreement contains the whole and the only agreement between the parties regarding the subject matter of this Agreement and supersedes and extinguishes any prior drafts, agreements, understandings, undertakings, representations, warranties or arrangements or any nature whatsoever between them, whether oral or in writing.

(b) Each party acknowledges that in entering into this Agreement on the terms set out in this Agreement it is not relying upon any representation, warranty, promise or assurance made or given by any other party or any other person, whether or not in writing, at any time prior to the execution of this agreement which is not expressly set out herein."

8. On 23 February 1998, the purchaser's solicitors returned the draft to the vendor's solicitors, proposing certain amendments, including an amendment to clause 12(b) which would have inserted the following introductory words :

"Subject to the representations by the Vendor to the Purchaser made at the time of signing the Memorandum of Sale on 19th February 1998 that the Vendor will use its best endeavours to verify the title defects herein and to procure a declaration from a court of Hong Kong with competent jurisdiction that such title defects will not affect the title of the Property and that such declaration will be obtained within a reasonable period of time, the ....."

9. On 28 February 1998, Mr. Yam signed the Agreement for Sale and Purchase. It did not contain the amendment to clause 12(b) which the purchaser's solicitors had put forward. It contained clauses 12(a) and (b) and clause 28 as set out above.

(After it was too late, on 2 March 1998, the purchaser's solicitors raised a number of requisitions including the following :

"7. In respect of the Assignment dated 19th May 1951 from the Hong Kong and Shanghai Bank Hong Kong (Trustees) Ltd and Emma Raymond to The Zetland Hall Trustees, we note that the same has not even been registered at the Land Office. The production of the Statutory Declaration dated 12th January 1988 is not sufficient for the purpose of section 13 of Conveyancing and Property Ordinance. We are instructed that the provision as set out in the Attachment I to the Memorandum of Sale on 18th February 1998 has never been explained to our client when he executed the Memorandum for Sale. We are instructed that our client did not understand the legal implication of the attachment I and he had on the contrary been assured that rectification work (including making an Application to Court for a Declaration) would be made by your client to make good the defect in title. Such has been reflected in the amendments made by us to your draft Sale and Purchase Agreement. We are further instructed to give you notice that our client does not consent to the insertion of clause 12(b) of the draft Sale and Purchase Agreement and therefore, your client should delete the clause from the agreement when they execute it.")

10. Mr. Yam subsequently attempted thereafter to negotiate with the vendor an arrangement under which the purchaser would complete its contract to purchase one of the flats if it were allowed to withdraw from its contract to purchase the other; but he did not succeed in achieving this objective.

11. On 25 March 1998, the purchaser gave notice to the vendor, under a provision in that behalf contained in the Agreement for Sale and Purchase, to postpone completion of the transaction until 24 August 1998.

12. On 28 April 1998, the purchaser accepted a licence to go into possession.

13. On 4 May 1998, the purchaser wrote to Mr. Thomas Kwok, of Sung Hung Kai Properties Ltd. as follows :

"Re: 18A & 22B of Royal Court, No. 3 Kennedy Road

My name is Sunny Yam. I am the founder and Chairman of Sheraton Valuers Ltd. I am a good friend of Mr. Hugo Chan and I am also a member of the same church of Hugo. You may recall Hugo visited you at your office in March this year to put forward my proposal to seek your approval for cancelling the agreement of sale and purchase of one of the captioned properties at your choice and proceeding completion of sale and purchase of the remainder.

I think there is no need and I do not want to repeat the details of misconduct of the agent of Royal Court, Jones Lang and Wootton in which Hugo has conveyed to you. I have been advised by my solicitors that I have good grounds to rescind the two provisional Agreements for Sale and Purchase. However, for reasons I have not had the intention to litigate with Sun Hung Kai which Sheraton Valuers Ltd has good business relationship and my belief the matter should be resolved amicably in a Christian spirit. Hence, I have not taken legal action to rescind the Provisional Agreement. Nevertheless, there remains my worry of the future transactions of Royal Court which cannot be done in an ordinary way and a special caveat has to be attached to future provisional agreement for sale and purchase relating to the lost Assignment. No layman will understand the delicate point of law of the caveat and will not sign the provisional agreement for sale and purchase unless tricks of the kind by Jones Lang & Wootton are repeated. No solicitor will advise a client to accept the caveat until the solicitor has purued the title deeds and documents. One can appreciate the unusual feature of future transactions and the delay which naturally follows. The insertion of this caveat to provisional agreement for sale and purchase is both advised by your solicitors, Mr. Winston Chu & Co. and my solicitor, Johnston Stokes & Master.

With good will of having an amicable solution with Sun Hung Kai and avoiding adverse publicity coupled with the belief of Christianity you and I are convicted, few days before signing the formal sale and purchase agreements, I phoned your General Manager, Mr. Victor Lui proposing to cancel the Provisional Agreement of one property at your choice and proceeding with the other. I will bear the stamp duty of the cancelled transaction. At the same time, I requested Hugo to submit my proposal to you. This prompt civilized action manifests genuine and amicable intention on my part to sole my predicament.

Brother Thomas, please be advised that to act as business like as a businessman, I should start legal action but I do not because I believe in proverbs 10:12 of the Holy Bible 'Hatred stirs up dissension, but love covers over all wrongs'.

I have phoned your secretary, Priscilla, to ask for a 15 minutes meeting with you. You are too busy even to ask Priscilla to make a reply to me. I am not disappointed because ultimately there is no need for ink and paper, we will have plenty of time to talk face to face in future.

Brother Thomas, I am aggrieved by the unfairness of these transactions. You are a righteous Christian of highest integrity and perfect model to follow brothers and sisters. I wish you allow the proposal to cancel the completion of sale and purchase of one property at your choice and proceeding with the other and I will have no hesitation to donate part of the refund in the sum of HK$30,000,000.00 to Hugo's church for God's work. Alternatively, you may consider a reduction of my purchase prices to your present sale prices like other ethical esteem developers such as Cheong Kong and Overseas China when they sell at prices lower than previous sales.

I wish to end this letter by quoting proverbs 2: '... turning your ear to wisdom and applying your heart to understanding ... for he guards the course of the just and protects the way of his faithful ones. Then you will understand what is right and just and fair - every good path ..."

I look forward to your just reply.

God bless you!

Yours humble little brother"

14. On 6 May 1998, the purchaser's new solicitors, Johnson Stokes & Master, wrote to the vendor's solicitors as follows :

"Re : Flat A on 18th floor and Flat B on 22nd Floor of Royal Court 3 Kennedy Road, Hong Kong ("the Properties")

We refer to the captioned matter.

To our client's surprise, your client has, through Midland Realty and Jones Lang Wootton, offered to sell to the public the remaining unsold units of Royal Court at a much lower price per square feet than what our client has agreed to pay for the purchase of the Properties in February 1998. We are, therefore, instructed by our client to seek your client's confirmation as to whether your client would agree to adjust down the purchase price payable by our client in respect of the purchase of the said Properties so as to make the same in line with your client's latest offer to the public. Our client believe that your client would consider our client's appeal and an amicable solution could finally be reached."

15. While the purchaser, and its solicitors, were trying to re-open the whole matter, as indicated in their letters of 4 May 1998 and 6 May 1998 respectively reproduced above, the purchaser caused an advertisement for sale of the two flats to be inserted in the Hong Kong Economic Daily which (in the English translation) reads as follows :

"SUN HUNG KAI REDUCE PRICE IN A SUDDEN, FORCED TO SELL AT A LOSS MONEY WANTED RATHER THAN THE PROPERTY, FORCED TO REDUCE PRICE FURTHER

ROYAL COURT No.3 Kennedy Road

Hotel style management, facing and enjoy the full view of the Hong Kong Zoological & Botanical Garden and the former Governor's House and the seaview

SOLD BY THE OWNER AT A LOSS OF $2,300,000 (not including stamp duty)

1,428 square feet

18A	Purchase Price subject to tenancy $14,860,000
	(monthly rent $69,000)
	NOW SELLING AT $13,760,000 (loss $1,100,000)
22B	Purchase Price with vacant possession $15,550,000
	NOW SELLING AT $14,350,000 (loss $1,200,000)

Selling at a first come first serve basis, with keys, no commission payable

Payment Method : 10% deposit, balance payable within two months

Please call within office hours : 2526-0267 or call 90187672 Mr. Wong, 94872499 Mr. Tang for negotiation.

Remark : As the Developer could not furnish one original Assignment of No. 3 Kennedy Road, the purchaser shall accept (Zetland Hall Trustees Incorporation (Amendment) Ordinance 1949 ("the Ordinance")) which has been registered with the Land Registry as root of the title and the Vendor shall only be required to furnish the purchaser with the certified true copy of the Ordinance in place of (his obligation under) Section 13 of the Conveyancing and Property Ordinance (Cap. 219). The purchaser shall not use it as an excuse to refuse to complete (due to defective title).

VENDOR : SUNNY SQUARE LIMITED"

16. On 29 May 1998, all this having come to nothing, the purchaser parted company with Johnson Stokes & Master, again instructing new solicitors, Hui & Lam, to write to the vendor's solicitors as follows :

"Re : Property : Suite 22B of Royal Court, 3 Kennedy Road Mid-levels, Hong Kong

Purchaser : Sunny Square Limited

NOTICE OF RESCISSION

We act for Sunny Square Limited, the Purchaser of the Property in place of its former solicitors, Messrs. Johnston, Stokes & Master, solicitors.

We appreciate that your firm is acting for Artsland Properties Investment Limited ("the Vendor") in respect of the sale and purchase of the Property.

We are instructed that a Memorandum for Sale dated 18 February 1998 ("the Memorandum"), which was followed by a subsequent Sale and Purchase Agreement dated 28 February 1998, was made between our client and the Vendor in respect of the Property.

We are further instructed that, on 18 February 1998, in order to induce our client to enter into the Memorandum, your client through its agents, Sun Hung Kai Real Estate Agency and Jones Lang Wootton ("the agents") had, prior to and/or at the time of signing the same, misrepresented to our client :-

(a) that the selling prices, including our client's purchase price, appeared on a price list that prepared and/or set by your client and showed to our client were at a favourable value in the sense that any subsequent released price list would contain much high selling prices;

(b) that the title of the Property was perfectly good and marketable, notwithstanding the fact that an Assignment dated 19 May 1951, a title document, was missing;

(c) that the missing of the aforementioned Assignment had been remedied by a Court Declaration;

(d) that the Attachment I of the Memorandum was redundant and of no legal effect which would not affect the title of the Property in any event; and

(e) that the net area of the Property was 1,157 square feet plus bay window of 32 square feet.

All the aforesaid matters are subsequently proved to be untrue or false. In the premises, we are of the view that our client has been unfairly and/or prejudicially induced to enter into the transaction in question.

Furthermore, we are instructed that our client would at no time agree to purchase the Property in any event but for the aforesaid actionable misrepresentation. We are also given to understand that our client's request to seek for legal advice and/or to insert a remark 'subject to my lawyer's approval' into Attachment I of the Memorandum at the time of signing the Memorandum was unfairly refused by the Vendor through its agents.

We are further given to understand no Agreement for Sale and Purchase was annexed to the Memorandum as alleged in Rider 3of the Memorandum nor our client was ever given a view of the same notwithstanding our client's request. Thus our client's right of subsequent independent and effective legal representation was unfairly deprived by the Vendor through its agents.

In the circumstances, notice is now hereby given that our client is exercising its right of rescission and considers the Memorandum and any subsequent agreement as no longer binding on our client and that nothing herein shall be construed as to waive our client's right to sue your client for damages for misrepresentation.

.........."

17. On 2 June 1999, the purchaser received a report from Wayfoong Property Limited, Valuation Department, which confirmed a "saleable area" for 22B of 1,126 square feet, plus bay window area of approximately 32 square feet and a flower box area of approximately 10 square feet (a total area of 1,169 square feet). It also confirmed an "internal floor area" (in respect of which, the report said, there was "no conscientious definition", whatever that means) of approximately 984 square feet.

18. On 17 June 1999, the purchaser instituted the proceedings with which we are now concerned, claiming rescission, the return of its deposits, damages, interest and costs against the vendor, with alternative claims for damages for breach of warranty of authority against the sales agent and the estate agent.

The law

19. It was common ground before us that each action here ought to be struck out only if it is perfectly clear that it is bound to fail. If not, it ought to be allowed to continue. It is on this basis (different from that adopted by the judge) that it is convenient to deal with the case.

Is the purchaser's action bound to fail?

20. The purchaser relies, as we have seen, on a number of "representations" which for present purposes it may be accepted were made to Mr. Yam before he signed the Memorandum of Sale on 18 February 1998. But on 28 February 1998, Mr. Yam signed the Agreement for Sale and Purchase, including clause 28. In my judgment, it is perfectly clear that clause 28 debars the purchaser from relying on any of the alleged "representations". The whole purpose of a clause such as clause 28 is to prevent purchasers from taking such points as are now taken by the purchaser here. A purchaser who wants to be able to rely on estate agents' "puff" should either (1) refuse to enter into a contract containing a clause such as clause 28 or (2) insist that the "representation" on which he wants to rely is written into the contract. (Indeed, the purchaser in our case attempted to do this in relation to the "representation" about the "court declaration" to be obtained as to the missing assignment of 12 May 1951; but it entered into the contract even though its attempt was rejected).

21. Sir John Swaine S.C., for the purchaser, submitted that even if clause 28 would otherwise operate to defeat the purchaser's claims, its provisions were unreasonable. That would raise an issue of fact which was fit to go to trial. I reject this argument, for in my judgment it is perfectly clear that an attempt to show that clause 28 was unreasonable would itself be bound to fail. A clause in an agreement for sale and purchase designed to ensure that parties are held to their bargain as recorded in writing, far from being unreasonable, is highly desirable.

22. That is sufficient to dispose of the case; but there is yet another reason here why these actions are bound to fail.

23. It is well-settled that a party to a contract is entitled, after discovering that false representations have been made to him, to call off the contract (in lawyer's language, to claim that the contract be rescinded ab initio). But he cannot blow hot and cold. He must elect whether to affirm or rescind the contract. If by his words or conduct he elects to affirm it, he cannot go back on that election. It is perfectly clear here that the purchaser, albeit reluctantly, affirmed the contract before it attempted to rescind it. It did do by seeking to postpone completion in accordance with the contract and later by trying to sell the two flats (as it did by its advertisement in the Hong Kong Economic Daily in early May). The purchaser has no answer to this (except perhaps as to the "representation" as to the size of the flat, a "representation" which it says it did not discover was false until it was told so by Wayfoong Property Limited at the end of May).

24. Lastly, I would add that the purchaser's grievances about the alleged "representations" even if (as I assume) they are genuine, are quite groundless. The problem of the missing assignment of 12 May 1951 was resolved, perfectly satisfactorily, by the 1988 Statutory Declaration; there is no justification whatever for the purchaser's belief that the title is otherwise than perfectly "good and marketable"; a piece of "puff" by a salesperson that a vendor will not reduce its prices is not a "representation", in the legal sense, at all; and there has never been any real question but that "the saleable area" of the flats as defined in the contract was 1,157 square feet, whatever figure might be thrown up by some other undefined and uncontractual calculation of that area.

Conclusion

25. There is no substance in the purchaser's case. It is bound to fail. The judge was right to strike out the purchaser's claims. I would dismiss this appeal.

Mayo, J.A. :

26. I agree. There is nothing I can usefully add.

Leong, J.A. :

27. For the reasons given by Godfrey, J.A., I agree that the appeal should be dismissed.

Godfrey, J.A. :

28. The appeal is accordingly dismissed. As to costs, we will order that the costs of the 1st defendant and the 2nd defendant, and the costs of the 3rd defendant, be taxed (if not agreed) and paid by the plaintiff, unless an application is made within 14 days after the date of this judgment for some other order as to costs.

(Gerald Godfrey)	(Simon Mayo)	(Arthur Leong)
Justice of Appeal	Justice of Appeal	Justice of Appeal

Representation:

Sir John Swaine, S.C. and Mr. Victor So (M/s. Hui & Lam) for the Plaintiff

Mr. Denis Chang, S.C. and Mr. Mok Yeuk Chi (M/s. Winston Chu & Co.) for 1st and 2nd Defendants

Mr. Rimsky K.K. Yuen (M/s. Baker & McKenzie) for 3rd Defendant

CACV000035/1999

CACV 34 & 35/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 34 AND 35 OF 1999

(ON APPEAL FROM HCA 9897 AND 10428 OF 1998)

BETWEEN
	SUNNY SQUARE LIMITED	Plaintiff (Appellant)
	AND
	ARTSLAND PROPERTIES INVESTMENT LTD	1st Defendant (1st Respondent)
	SUN HUNG KAI REAL ESTATE AGENCY LTD	2nd Defendant (2nd Respondent)
	JONES LANG WOOTTON	3rd Defendant (3rd Respondent)

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Coram: Hon Nazareth V-P in Chambers

Date of Hearing: 12 May 1999

Date of handing down Judgment: 18 May 1999

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J U D G M E N T

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Nazareth V-P:

1. This is an application for leave to adduce additional evidence at the hearing of the above appeals due to take place on 20 May. My doubts about whether it should not have been made at the hearing of the appeals were progressively reinforced during the protracted hearing of the application in which more and more ground was covered that will undoubtedly have to be retraced at the hearing of the appeal. There was also the complication that the new evidence for which leave is sought is not irrelevant to a fresh ground of appeal for which leave will be sought at the hearing of the appeals. In the end because the court time allotted to the hearing of the application would be wasted if it were adjourned to the hearing of the appeal, I proceeded to hear the application.

2. It is common ground that the appeals, although concerned with two different sale and purchase agreements, and two different flats (albeit in the same building), are identical in all material respects. They were thus heard together in the same way that the judge dealt with the applications to strike out below. To avoid unnecessary cross-references and duplication, by agreement, reference is made only to and in respect of the application in CACV 34 of 1999, which concerns Flat 22B in Royal Court, 3 Kennedy Road.

3. The facts can be outlined in the following way. The 1st respondent ("the 1st defendant") is a company engaged in property development and investment. On 18 February 1998 it advertised and offered for sale Flat 22B. The 2nd respondent ("the 2nd defendant") was an associated company in the same group as the 1st defendant, and was given the task of handling sales. The 3rd respondent ("the 3rd defendant") was the principal estate agent employed by the 2nd defendant. On the same day, Mr Sunny Yam Wing Yin ("Yam"), a director of the appellant ("the plaintiff") went to Royal Court and there after speaking with employees of the 3rd defendant, agreed to purchase the flat for HK$15,505,000, paid an initial deposit of HK$500,000 and signed a memorandum for purchase. On 24 February 1998 the plaintiff signed a formal sale and purchase agreement and paid a further deposit of HK$2.472m. There then followed developments to which I shall return so far as necessary, of both the usual and an unusual nature. On 29 May 1998 new solicitors retained by the plaintiff issued notice of rescission of the sale and purchase agreement. On 17 June 1998 they took out a writ of summons complaining of two false representations. First, that although a title document, i.e. an assignment, was missing, the title to the flat was perfectly good and marketable as the absence of the assignment had been remedied by a court declaration. Second, that during the negotiations, the 1st defendant through its agent, the sales persons of the 2nd and/or 3rd defendant, falsely represented that the useable area of the flat was 1,157 sq.ft., a representation which also appeared on a sales pamphlet provided to Yam. The plaintiff claims a declaration that it had validly rescinded the agreement for sale and purchase, the, return of the deposits, and damages.

4. On 14 July 1998 the defendants applied to strike out the plaintiff's Statement of Claim. The applications came before Yam J on 3 December 1998 and on 23 December he gave judgment for the defendants and struck out the Statement of Claim.

5. The judge held that the claims against the 1st and 2nd defendants were not sustainable because, first, the plaintiff's case was a myth and had no solid foundation; and second, that the plaintiff had long since lost the right to rescind. As to the 3rd defendant, the judge held that the plaintiff had no independent action against the 3rd defendant unless the 3rd defendant had made the pleaded representations in breach of warranty of authority. Additionally, he held that the plaintiff's claim against the 3rd defendant for breach of its agency agreement with the plaintiff was bad and unsustainable.

6. The plaintiff then appealed to this Court and, as mentioned, the appeal is to be heard on 20 May. In the meantime the plaintiff lodged the present application for leave to adduce the following additional items of evidence:

(1) The affirmation of Cheuk Nga Yan ("Cheuk") dated 12 April 1999

(2) The affidavit of Hugo Sai Keung Chan ("Hugo Chan") dated 21 April 1999

(3) The affidavit of Yam dated 5 May 1999.

7. With reference to such applications O59 R10(2) of the Rules of the High Court provides that:

"(2) The Court of Appeal shall have power to receive further evidence on questions of fact, ..., but, in the case of an appeal from a judgment after trial or hearing of any cause or matter on the merits, no such further evidence (other than evidence as to matters which have occurred after the date of the trial or hearing) shall be admitted except on special grounds."

It is not suggested that the evidence in any of the three affidavits is of matters which occurred after the hearing. The question then arises, which is in dispute, of whether there was a trial or hearing of the claim on the merits, which would decide whether the rigorous conditions in Ladd v Marshall [1954]1 WLR 1489 are to be applied in respect of these applications.

8. Sir John Swaine SC, who with Mr Victor So, appears for the plaintiff, contends that the hearing of the defendants' applications to strike out the Statement of Claim was not a hearing on the merits. However, that point was decided to the contrary in Langdale v Danby (HL(E)) [1982]1 WLR 1123 at 1132 where Lord Bridge, with whom the other members agreed, gave his reasons, leaving no doubt about the stance taken. Nonetheless, Sir John submits that the approach of a plaintiff to such an application is simply to demonstrate an arguable case and not to marshal all his evidence as would be done in a trial on the merits. That, he says, is reflected in the following passage taken from a later part of the same judgment of Lord Bridge at p.1133D:

"In the situation arising on an appeal to the Court of Appeal from a summary judgment, the application of these conditions and perhaps the conditions themselves will require some modification. It may well be that the standard of diligence required of a defendant preparing his case in opposition to a summons for summary judgment, especially if under pressure of time, will not be so high as that required in preparing for trial. The second and third conditions will no doubt be satisfied if the further evidence tendered is sufficient, according to the ordinary principles applied on applications for summary judgment, to raise a triable issue. But I can see no injustice at all in requiring a defendant to use such diligence as is reasonable in the circumstances to put before the judge on the hearing of the summons, albeit in summary form, all the evidence he relies on in defence, whereas it would be a great injustice to the plaintiff to allow the defendant to introduce for the first time on appeal evidence which was readily available at the hearing of the summons but was not produced."

9. I accept that the position of a plaintiff in seeking summary judgment under O14 or O86 is similar to that of a plaintiff here confronted with an application to strike out his Statement of Claim; that is contended for by Sir John and not disputed by Mr Denis Chang SC , who with Mr Mok Yeuk Chi, appears for the 1st and 2nd defendants, and Mr Rimsky Yuen who appears for the 3rd defendant. Sir John's submission, as I understand it, is that even if it is held against him that pursuant to Lord Bridge's dictum at p.1132, the hearing of the strike-out application must be regarded as a hearing on the merits which, in my view, must be the position, the Ladd v Marshall conditions should not apply in their full rigour to a plaintiff preparing his case in opposition to a summons to strike out his Statement of Claim. In particular the standard of diligence required of him should not be so high as that required in preparing for a trial. It can be seen from the foregoing citation from the judgment of Lord Bridge that he did not go so far as to say that a lesser standard of diligence would be acceptable but only that it may well be acceptable, especially under pressure of time. It is convenient to note here that I am unable to accept on the facts before me that the plaintiff was under pressure of time. Nonetheless, some consideration has to be given to whether a lesser standard of diligence might not be acceptable on the part of the plaintiff with reference to the second Ladd v Marshall condition.

10. I turn then to the first of the three items of evidence, i.e. the affirmation of Cheuk. It is sought to be used in the following context. Yam has already deposed in his earlier affidavits that Cheuk was the member of the 3rd defendant's staff who attended to him at the Royal Court building on 18 February. The thrust of her evidence is to confirm Yam's evidence of the representation she made that the useable area of the flat was 1,157 sq.ft. This, it is submitted, is of some importance as the judge held that the plaintiff's case was a myth because it was put forward for the first time when the plaintiff rescinded the sale on 29 May 1998; and that the only misrepresentation alleged before such rescission was the other pleaded, i.e. that the missing assignment would be remedied by a court declaration. Cheuk also deposes to having told Yam that the useable area of Flat 22C was 1,157 sq.ft. in Chinese. However, this feature and indeed the importance of her evidence has to be considered in the light of the fact that Yam had 20 years experience in the real estate agency business and was a director of the plaintiff. He may be thought unlikely to have been misled by Cheuk who does not appear to have had anything like his experience or position. Besides, he writes excellent English, which suggests that he is unlikely to have been misled by the different meanings given to "useable" and "saleable" areas in the English and Chinese texts of the sales pamphlet.

11. Turning then to the first Ladd v Marshall condition, i.e. that the evidence could not have been obtained with reasonable diligence for use at the trial, it is said that Cheuk left her employment with the 3rd defendant and was also out of Hong Kong for part of the material time, and that Yam wrote several letters to her address. Notwithstanding the lesser standard of diligence that may well be required of the plaintiff here, I do not think this can be regarded as a reasonable diligence, particularly as the reason that the additional evidence for which leave is now sought was not put in was that the then solicitors took the view that the evidence filed was sufficient to resist the strike-out application.

12. As to the second condition, it does not seem to me that if Cheuk's evidence were given it would probably have an important influence on the result given the other evidence and relevant considerations. In any case, it simply duplicates Yam's own evidence and does not go to the more pertinent question whether he was a person who would be induced by such a representation.

13. The third condition, I think, would be met in that the evidence would be credible on its face, discounting the possible effect of cross-examination.

14. The second item of fresh evidence is the affidavit of Hugo Chan. He is a solicitor who Yam knew in a social context and asked to act as an intermediary with the 1st defendant. He affirms that in early March 1998, Yam complained to him that he had been misled by a salesperson of the 3rd defendant that the title of the two flats the plaintiff had purchased had been remedied by a court declaration obtained by the 1st defendant. It is submitted that his evidence is admissible under s.48(1)(b) of the Evidence Ordinance. Counsel for the respondents did not specifically concern themselves with this submission and I am content to proceed upon the assumption without deciding that the evidence is admissible. Hugo Chan's affidavit also supports the case of the plaintiff that it was seeking a compromise with the 1st defendant, but this is a factor that is somewhat equivocal in that a party to whom such a representation is made might possibly seek enforcement of his rights rather than a compromise. However, in another respect, the judge took the view that the plaintiff's action after its requisitions in respect of the title were unsatisfactorily answered in proceeding to execute the agreement for sale and purchase amounted to waiving its rights. In this respect, it is submitted on the plaintiff's behalf that its continuing quest for compromise was inconsistent with any waiver. Turning then to the Ladd v Marshall conditions, first, even if the lower standard mentioned is conceded, I cannot see why Hugo Chan's evidence could not have been obtained with reasonable diligence for use at the trial. On the contrary, it is accepted on behalf of the plaintiff that the reason why this evidence was not adduced below was because the legal advisers of the plaintiff considered that the detailed affirmations that had already been filed on behalf of the plaintiff were sufficient to raise triable issues. Second, equally I cannot see that Hugo Chan's evidence would have had an important influence on the result of the case. And third, while the evidence appears to be such as is presumably to be believed, this does not avail the plaintiff given a failure to meet the first two conditions.

15. I turn finally to the third item of evidence, i.e. Yam's further affidavit. This supplements and clarifies his earlier affidavits. Insofar as it relates to evidence of the false representation that the useable area was 1,157 sq.ft., it takes that matter very little further. It also offers an explanation as to why he signed the formal agreement. This being that he did not notice the definition of saleable area which effectively reduced the net useable area of the flat. Moreover, that the representations continued to operate on its mind and induced the plaintiff to execute the formal sale and purchase agreement. Coming from a director with 20 years estate agency experience, this might be considered of limited force, as would be his further evidence that he did not suspect the useable area of Flat 22B was less than 1,157 sq.ft. until after the plaintiff took possession of the flat.

16. Turning to the Ladd v Marshall conditions, I did not understand it to be suggested and I do not accept that the evidence could not have been obtained with reasonable diligence at the trial, even if the lower standard of diligence mentioned were applied; second, it is doubtful whether the further evidence is such that if given, it would probably have an importance influence on the result of the case. And third, it has to be said that it may be doubted that the evidence is such as is presumably to be believed.

17. In the result, it does not seem to me, that upon the Ladd v Marshall conditions, leave to adduce the three items of evidence should be granted. That is all the more so if regard is had to the principles of finality of litigation and that a successful litigant is not lightly to be deprived of his judgment.

18. Even if I were wrong in concluding that the hearing of the summons to strike out the plaintiff's Statement of Claim was a hearing on the merits, it does not seem to me that I could properly exercise my discretion in favour of granting leave, in the light of the foregoing; nor upon the basis that there were special circumstances here, e.g. in that the plaintiff's solicitors took the view that the affidavit evidence that had been put in was sufficient to establish a triable issue, and in the evidence of Cheuk being direct evidence.

19. The applications are accordingly refused.

20. As to costs, prima facie, I can see no good reason why the defendants should not have their costs. There will, accordingly, be an order nisi that the defendants are to have their costs of the applications.

	(G.P. Nazareth)
	Vice President

Representation:

Sir John Swaine SC and Mr Victor So (M/s Hui & Lam) for the Plaintiff

Mr Denis Chang SC and Mr Mok Yeuk Chi (M/s Winston Chu & Co) for 1st and 2nd Defendants

Mr Rimsky KK Yuen (M/s Baker & McKenzie) for 3rd Defendant