RICACORP PROPERTIES LTD v. CHEUNG WAI LUN

DCCJ 2323/2014

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 2323 OF 2014

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JUDGMENT

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Introduction

1.  At the material times, the plaintiff was a company carrying on estate agency business in Hong Kong.  In this action, the plaintiff claims against the intended purchaser for liquidated damages for the sum of $86,000 under a provisional agreement for sale and purchase dated 19 September 2013 (“PASP”), which represents the agency commission of both the purchaser and vendors in respect of the sale and purchase of property known as Flat F on 6^th Floor of Block 14, Laguna City, Kwun Tong, Kowloon (“Property”).

2.  The defendant denies the plaintiff’s claim but counterclaims $50,000 being the initial deposit paid by the defendant which was forfeited by the vendors, as he did not proceed to pay further deposit in accordance with the PASP.

Background

3.  In or about 2013, the defendant and his wife planned to buy a residential property in Laguna City.  They tried to figure out what would have been required in so doing for a few months. 

4.  On 10 September 2013, the defendant’s wife (“Mrs Cheung”) come to visit the branch of the plaintiff at the Laguna Plaza, and met Yiu Pui Yin Annie (“Madam Yiu”), a registered estate agent working for the plaintiff.  Madam Yiu made arrangement for Mrs Cheung to view two properties, who was then accompanied by Mrs Cheung’s mother and Mrs Cheung’s daughter.  Madam Yiu asked Mrs Cheung to show her ID card for the signing of the agency agreement, Mrs Cheung said that she did not bring her HKID card and she asked her mother to sign the form with the estate agent for buying Hong Kong residential properties.  On that occasion, Mrs Cheung viewed two properties, including the Property.

5.  On 18 September 2013, Mrs Cheung sent a text message to Madam Yiu requesting to see the Property again, and her husband, the defendant, would accompany her.  Eventually, the defendant signed the agency agreement with the plaintiff on 18 September 2013 and view the Property with Madam Yiu. 

6.  On 19 September 2013, the defendant and Mrs Cheung went to visit the plaintiff’s shop at Laguna Plaza to meet Madam Yiu again.  From this point onwards there were remarkable difference on the plaintiff’s and the defendant’s case.

The plaintiff’s case – Madam Yiu

7.  According to Madam Yiu, on 10 September 2013 she encountered Mrs Cheung who was then watching the advertisement posted at the branch shop of the plaintiff.  She talked to Mrs Cheung and gathered that Mrs Cheung and her family were renting a property.  As her daughter was studying in Laguna City, she wished to purchase a property as a first-time buyer in Laguna City.  Mrs Cheung also told Madam Yiu that her husband was a merchant frequently travelling between Hong Kong and China.

8.  Madam Yiu was informed by Mrs Cheung that they had been looking for the right apartment with other estate agents in the area but had not found the right one.  Mrs Cheung asked Madam Yiu to introduce her to more units.  Madam Yiu suggested to Mrs Cheung to see a unit at Flat C, 5^th Floor, Block 13, Laguna City (“5C Unit”).  Madam Yiu arranged an agency agreement for Mrs Cheung to sign, who indicated that she did not have her Hong Kong Identity Card and she asked her mother, who was staying outside the branch office of the plaintiff looking after a little girl, to come in and sign the agency agreement.

9.  Madam Yiu took Mrs Cheung to view the 5C Unit.  Before going there, Mrs Cheung told her mother who sign the agency agreement to take her daughter back home and she asked Madam Yiu to take her see the 5C Unit alone.  When both of them were inside this unit, Mrs Cheung informed Madam Yiu that she had viewed this 5C Unit with another estate agent.  Madam Yiu indicated to Mrs Cheung that if she would prefer to purchase the 5C Unit, Madam Yiu could apply to the plaintiff for discount on agency commission, but Mrs Cheung would have to discuss her liability on agency commission with another estate agent.  Apart from the 5C Unit, Madam Yiu also took Mrs Cheung to visit the Property on 10 September 2013.

10.  On the same day, Madam Yiu introduced to Mrs Cheung another unit in Laguna City, namely Unit C, 6/F, Block 25 (“6C Unit”).  Madam Yiu said that the 6C Unit was occupied by tenant for the time being, and there would be no viewing.  If Mrs Cheung would like to have more details of the 6C Unit and wished to negotiate on price for the 6C Unit, she might do so after signing another agency agreement which specifically stated that there would be no viewing.  Mrs Cheung agreed and produced her Hong Kong Identity Card as if she had forgotten telling Madam Yiu that she did not have her Hong Kong Identity Card few moments ago.  Mrs Cheung eventually signed another agency agreement, and Madam Yiu provided the photos and information of 6C Unit to Mrs Cheung.

11.  According to Madam Yiu, on 18 September 2013 she received the text message from Mrs Cheung that she would like to revisit the Property which she viewed with Madam Yiu on 10 September 2013.  Mrs Cheung mentioned that she would like to bring her husband, ie the defendant, to view the Property.

12.  According to her witness statement, Madam Yiu arranged Mrs Cheung and the defendant to view the Property on 19 September 2013, which was the date to celebrate the Mid-Autumn Festival. Madam Yiu informed them that the owners of the Property were selling this unit in the sum of $4,500,000.  Madam Yiu stated that the defendant and Mrs Cheung indicated that they were interested in purchasing the Property for the consideration of not more than $4,320,000.

13.  Madam Yiu tried but failed to ask the vendors to attend the office of the plaintiff in order to negotiate terms with the defendant and Mrs Cheung directly as it was the Mid-Autumn Festival. Madam Yiu arranged the defendant and Mrs Cheung to attend the plaintiff’s branch office to discuss the terms of the provisional agreement for sale and purchase and for issuing a cheque in order to pay the initial deposit.

14.  According to Madam Yiu, after they were in the plaintiff’s branch office, Madam Yiu asked for the Hong Kong Identity Card of Mrs Cheung for making photocopy.  When Madam Yiu was on her way to make photocopy, the defendant came forward and told Madam Yiu that he would be the purchaser and he handed over his Hong Kong Identity Card for making photocopy, and he asked for the return of Mrs Cheung’s Hong Kong Identity Card.

15.  Madam Yiu stated that she began to fill in the information on a standard form provisional agreement for sale and purchase.  She filled in the name of the purchaser and address according to the information given by the defendant.  She explained to them that the terms and conditions in the provisional agreement for sale and purchase.  The price was left blank, as she would then fill in the purchase price once this was agreed.  She was aware of her instructions of concluding the sale at no more than $4,320,000.

16.  The defendant further indicated to Madam Yiu that he was prepared to pay the sum of $50,000 as initial deposit.  Madam Yiu advised that the defendant would have to pay for the further deposit amounting to 10% of the purchase price.  As the purchase price was not fixed, she would not fill in such information.  Further, Madam Yiu also explained to the defendant that in usual circumstances, the date for signing formal agreement for sale and purchase and paying further deposit up to 10% of purchase price would be within 14 days from the date of signing the provisional agreement for sale and purchase, and the date for completion and paying the final purchase price would usually be within 45 days of signing the provisional agreement for sale and purchase.  Madam Yiu stated that both the defendant and Mrs Cheung said that this was acceptable.  Madam Yiu told the defendant that she would discuss with the owners on those dates, and would fill in the dates for payment of further deposit and completion on the provisional agreement for sale and purchase.  According to Madam Yiu, the defendant made no objection to this arrangement. 

17.  Madam Yiu stated that she told the defendant that the agency commission would be 1% of the purchase price, and if there was any default, the defaulting party would have to pay the total of the agency commission of both the purchaser and the vendors.  As the agency commission would have to make reference to the purchase price, this would be filled in the provisional agreement for sale and purchase when the purchase price was fixed.  It is commonplace that clause 12(a) of the PASP provides that:-

“無論在任何況下，若賣方或買方未能履行本合約之條款賣出或買入該物業，則悔約的一方須立刻根據上述第11條賠償買賣雙方各自應付之代理佣金數目之總和予代理作為算定賠償。

If in any case, either the Vendor or the Purchaser fails to complete the sale or purchase in the manner herein contained, the defaulting party shall forthwith compensate the Agent the total of the commission payable by the Vendor and the Purchaser to the Agent respectively pursuant to Clause 11 hereinabove as liquidated damages.”

18.  Madam Yiu stated that the defendant signed a personal cheque and handed it over to her.  It was for the sum of $50,000 made in favour of the vendors of Property for the payment of initial deposit.  Madam Yiu made a copy of this cheque and the defendant’s Hong Kong Identity Card.  When she returned a copy of this to the defendant, Mrs Cheung stated that they would like to impose one condition, that the offer for the sum of HK$4,320,000 for the purchase of the Property was only valid for 5 days from the date of offer on 19 September 2013.  Mrs Cheung put down the following on the copy of the cheque kept by Madam Yiu as follows:-

“Remark: 此票及提出價HK$432,000，只在提出日期19/9/2013起五天內有效＂.

19.  Madam Yiu agreed that one digit “0” was missing in the amount of offer in the above remarks (See: page 116, Trial Bundle C).  However, she was not paying attention to this, as she was listening to what Mrs Cheung was saying at that time.

20.  Up to this point on 19 September 2013, Madam Yiu averred that:-

(1) Neither Mrs Cheung nor the defendant ever mentioned to her that they had viewed the Property with another estate agent.

(2) The defendant never mentioned to her that he intended to put forward an offer for the purchase of the Property at $4,100,000.

(3) The offer of not more than the sum of $4,320,000 was the idea of the defendant.  Madam Yiu denied that she had ever advised the defendant to make an offer at $4,320,000.

(4) The defendant instructed Madam Yiu that he would be the purchaser.  Madam Yiu was not aware that the defendant was a co-owner of another residential property as she was not told about this.

(5) The defendant never told her that he would leave Hong Kong for 6 days (the defendant rectified in the course of giving evidence that his overseas trip was for 5 days), who would only be back to Hong Kong on 1 October 2013.

(6) The defendant never told her that he was a self-employed person, and he had difficulties to apply for loans from the financial institutions.

(7) The defendant never told her that he would require at least 3 months for completion.

(8) The defendant never informed Madam Yiu on his financial position and he required long completion in order to apply for mortgage or other loans.

(9) The defendant could only pay further deposit on or after 3 October 2013.

21.  Madam Yiu stated that she met the vendors of the Property in the evening on 19 September 2013.  As she put forward the defendant’s offer to the vendors, she said that the vendors were not satisfied with the terms offered by the defendant.  Initially, the vendors were not happy that the amount for initial deposit was in the sum of $50,000 as it was too small an amount for initial deposit.  Madam Yiu had to make a phone call to the defendant in order to find out whether the defendant was prepared to increase the initial deposit. 

22.  Later, in lieu of raising deposits, the vendors would require a short period to pay further deposit within 14 days, and to complete the transaction within 45 days.  Madam Yiu would need to phone the defendant in order to confirm whether these terms were acceptable. 

23.  Thereafter, Madam Yiu telephoned the defendant again, informing him that the purchase price was agreed at $4,300,000.  Madam Yiu finalised the terms of the PASP with the vendors and informed the defendant what those terms were, and the defendant replied to her “OK啦，照去啦”, or in English “It’s okay, proceed”.  According to the PASP, the payment of further deposit would take place on 2 October 2013, and completion would take place on 1 November 2013.

24.  Later, Madam Yiu called the defendant again in which she congratulated the defendant that he made the purchase, and the purchase price was below the amount which she was instructed to liaise.  She also wanted to fix an appointment with the defendant, so that she could pass the original signed PASP to the defendant.

25.  Madam Yiu stated that after she concluded the transaction with the vendors on 19 September 2013, she intended to send a copy of the PASP to the defendant by text message, but it was accidentally sent to Mrs Cheung instead.  In any event, she made an appointment with the defendant at or around 11:00 am on 20 September 2013 at Telford Garden, Kowloon Bay where the defendant lived.  When they met, Madam Yiu once again pointed out to the defendant that the purchase price was $4,300,000, and the need for the defendant to pay $380,000 as further deposit on 2 October 2013, and to pay $3,870,000 on 1 November 2013 for completion.  The defendant would have to arrange mortgage as soon as possible.  The original signed PASP was handed over to the defendant.

26.  According to Madam Yiu, when she met the defendant on 20 September 2013, the defendant informed her that after he sent the PASP to his solicitor, he was advised that completion within 45 days might be too short.  Madam Yiu told the defendant that completion within 45 days would not cause any problems.  She promised to the defendant that she would introduce the defendant to some lawyers who would be more familiar with conveyancing matters for his reference, amongst other things. This she eventually did.

27.  On 22 September 2013, Madam Yiu contacted the defendant again asking him to confirm the solicitors firm which would represent him.  For the first time, the defendant asked her to seek postponement with the vendors.  The defendant indicated to Madam Yiu that he had financial issues, and that his family would have an overseas trip as he would only be returned on 1 October 2013.  The defendant requested Madam Yiu to contact the vendors to postpone both the date for payment of further deposit and date for completion until 19 December 2013.

28.  Madam Yiu duly obliged and discussed with the vendors.  However, the vendors would only agree to postpone the completion date to 19 November 2013.  They refused to postpone the date for payment of further deposit.  Madam Yiu reported her discussion with the vendors to the defendant, and she urged the defendant to confirm the solicitors firm which would act for him, as the postponement of the completion date would have to be confirmed by solicitors’ letter.  The defendant did not respond to this at all.

29.  On 23 September 2013, the defendant informed Madam Yiu for the first time that he was the owner of a property in Tai Po, and he would have to pay double stamp duty if he was to buy the Property. The defendant blamed Madam Yiu for not reminding him that if he was the owner of an existing property, he would be liable to pay double stamp duty.  Madam Yiu replied to the defendant that neither the defendant nor Mrs Cheung indicated to her before that the defendant was the owner of another property.

30.  Further, the defendant also informed Madam Yiu that as Mrs Cheung viewed the Property with another estate agent before, they were chased by another estate agent for agency commission.  The defendant blamed Madam Yiu for not warning them that they were exposed to the liability of paying agency commission to another estate agent.  Madam Yiu replied that she was never informed by the defendant or Mrs Cheung that they had viewed the Property with another estate agent before.

31.  On 23 September 2013 the defendant required Madam Yiu to pass the phone number of her supervisor to him. Madam Yiu sent a text message to the defendant, informing him of the telephone contact of Mr Samuel Kwok (“Mr Kwok”).  Madam Yiu said that all along during the negotiation of PASP, up to the defendant’s unwillingness to proceed to pay further deposit and completion, Mr Kwok was fully briefed.  Madam Yiu consulted Mr Kwok, who was the regional manager of the plaintiff, for advice on negotiations in this matter.

Mr Kwok

32.  According to Mr Kwok, who also gave evidence in court on behalf of the plaintiff, he confirmed that in this transaction, Madam Yiu did report to him from time to time, and he did also give advice to Madam Yiu whenever she asked for his opinion.  He received Madam Yiu’s telephone call on 23 September 2013, who informed him that the defendant would lodge complaint to him against her, and she provided the background information to Mr Kwok.

33.  There were three conversations between Mr Kwok and the defendant:-

(1) On 23 September 2013, telephone conversation between Mr Kwok and the defendant, lasted for 1 hour 5 minutes.

(2) On 25 September 2013, meeting between Mr Kwok, the defendant and Mrs Cheung.  Lasted for 1 hour 3 minutes.

(3) On 25 September 2013, telephone conversation between Mr Kwok and the defendant.  Lasted 7 minutes.

34.  On the above three occasions, Mr Kwok recorded all of the conversations unnoticed and unannounced.  The transcript of these conversations were produced in the trial bundles (see: pages 160-298, Trial Bundle C).  Ms Yang, counsel for the defendant, confirmed that the accuracy and admissibility of the transcript are not challenged.  The defendant has been thoroughly cross-examined on the transcript of these three conversations with Mr Kwok.  Certain aspects of these conversations are highlighted as follows:-

(1) The 3 conversations were made between 23 September 2013 to 25 September 2013.  That was the time after the PASP was signed, but before the time for payment of further deposit was due.

(2) According to Mr Kwok, the defendant only asked Madam Yiu and Mr Kwok to try to postpone the date for payment of further deposit, but the defendant did not state a date on which he preferred to make payment.

(3) The defendant asked Mr Kwok to help him salvage the transaction by extending the time for paying further deposit and completion.

(4) Mr Kwok explained to the defendant that if he failed to pay further deposit, the initial deposit would be forfeited, and the defendant would have to pay agency fees of both sides.  According to Mr Kwok, the defendant indicated to him that he understood.

(5) The defendant would ask for discount on agency commission.  Mr Kwok was unable to agree to this as he would have to seek approval from his superior.

The defendant’s case

35.  Mrs Cheung, the wife of the defendant, has been heavily featured in the entire transaction.  On some occasions, she was the only person who communicated with Madam Yiu.  On some other occasions, she was in meeting with Madam Yiu and the defendant, and she was in the meeting with Mr Kwok and the defendant.  However, she was not one of the witnesses to give evidence for the defendant in trial.  Some unusual features in the evidence raised by other plaintiff’s witnesses has remained unanswered as Mrs Cheung was not a witness, and the defendant could not speak on Mrs Cheung’s behalf as he was not there.

36.  The defendant gave evidence in court saying that he all along insisted on the three conditions for the sale and purchase of the Property, namely:-

(1) Purchase price should be no more than $4,320,000 (“Condition One”) (this was an upward revision from $4,100,000 on recommendation by Madam Yiu);

(2) the defendant had to pay further deposit on or after 3 October 2013, as he had overseas travel plan with his family (“Condition Two”); and

(3) the defendant would need at least 3 months to complete the sale and purchase (“Condition Three”).

(These are collectively referred to below as “defendant’s 3 Conditions”)

37.  In cross-examination, the defendant was asked when the defendant’s 3 Conditions were communicated to the plaintiff. The defendant stated that when he and Mrs Cheung were in the plaintiff’s branch office on 19 September 2013, initially Madam Yiu informed him that the opening offer from the vendors was $4,500,000.  He put forward his ideal purchase price of $4,100,000, but this was commented by Madam Yiu as too low.  The defendant said that Madam Yiu recommended to him that a sum of not more than $4,320,000 should be set as the purchase price. 

38.  The defendant confirmed that during the meeting at the branch office of the plaintiff, he mentioned to Madam Yiu that he had the overseas trip with the family and would only return to Hong Kong on 1 October 2013.  As they were the first time buyer, they would like to go through the process personally, including the payment of further deposit. He therefore required Madam Yiu to state in the PSAP that the date for paying further deposit should be on or after 3 October 2013.  When the defendant was asked that payment of further deposit was not required to be done by himself, as it was done through his solicitors, he said he had nothing to supplement.

39.  When asked in what circumstances the defendant informed Madam Yiu that he was a self-employed person and he would need 3 months to complete the sale and purchase for time to arrange finance, the defendant said that he informed Madam Yiu when they were walking across the Laguna Park when viewing properties on 18 September 2013. He said that he would expect Madam Yiu to have memory of this important information.

40.  The defendant said that he gave clear and unequivocal instructions of the sale and purchase, namely, the defendant’s 3 Conditions, to Madam Yiu.  They were misled by Madam Yiu that it was the usual trade practice for the intended purchaser to sign in blank form of the PASP first, so that if and when the purchase price can be finalised with the vendors, the other information including the defendant’s 3 Conditions can be filled in on his behalf.

41.  The defendant was persuaded to pull out his cheque and made the cheque in favour of vendors for the sum of $50,000 as payment for initial deposit.  After Madam Yiu made a copy of this cheque together with the defendant’s Hong Kong Identity Card, the defendant and Mrs Cheung came to the idea of adding the instructions: “Remark: 此票及提出價HK$432,000._／只在提出日期起五天內有效.” (See: page 116 of Trial Bundle C).  The intention was to give instructions to Madam Yiu that the defendant’s offer was $4,320,000 (albeit it was mistakenly stated as $432,000), which was valid for 5 days.

42.  After meeting with the defendant and Mrs Cheung, and retaining the defendant’s cheque of $50,000, Madam Yiu made an appointment to meet the vendors and discussed terms with them.  According to the telephone records between Madam Yiu and the defendant which were produced in the agreed trial bundles, both of them recorded four calls between them on 19 September 2013, all of them were made by Madam Yiu to the defendant, as follows:-

Hours	Duration (mins)
20:56:58	0.90
21:17:18	1.80
22:36:24	2.70
23:10:24	2.70

43.  The defendant’s case was that in the first call Madam Yiu had already congratulated him that the deal was concluded as the vendors agreed to sell at the price of $4,300,000, which was $20,000 cheaper than the price according to Condition One of the defendant’s 3 Conditions.  The defendant was very pleased with the purchase price and assumed that Madam Yiu also successfully negotiated the Condition Two and Condition Three of the defendant’s 3 Conditions for him.  Madam Yiu was adamant to deliver the original PASP to the defendant and she made a number of calls later in order to pass the original signed PASP to him.  The defendant stated that he was celebrating Mid-Autumn Festival with his family and was not convenient. But Madam Yiu insisted and tried to call him three more times.  Nevertheless, the defendant finally agreed to meet Madam Yiu in Kowloon Bay the next morning.

Credibility

44.  Madam Yiu gave evidence on behalf of the plaintiff.  She impressed me as a very straightforward person, and she gave evidence in a very affirmative and unequivocal manner.  Apart from one typographical error in her witness statement which she corrected in the course of giving evidence, basically there is nothing inconsistent in her version of events both in the witness statement and what she said in court. Further, Madam Yiu’s oral evidence is fully supported by the documentary evidence. 

45.  As to Mr Kwok, he was the listener to Madam Yiu throughout as according to Madam Yiu, on 19 September 2013 she had to report to Mr Kwok verbally on the progress made by her.  She might need Mr Kwok’s advice on communication with vendors and the defendant, and the negotiation techniques in order to close the deal.  The main crux of his evidence would be in his conversations on three separate occasions with the defendant (alone for 2 times on the phone), and the defendant and his wife (once is a tripartite meeting).  Mr Kwok did not appear to be a very eloquent speaker, as the transcript in the three conversations left an impression that Mr Kwok stuttered quite seriously.  Nevertheless, in the transcript as well as giving evidence in court, Mr Kwok came across as a truthful and convincing witness.

46.  Where the defendant was under cross-examination on some specific matters, the defendant simply could not give suitable or adequate answers:-

(1) The defendant was referred to the hand-written instructions to Madam Yiu which was written on a copy of the cheque for initial deposit.  If the offer up to $4,320,000 (mis-stated as $432,000) which was valid for 5 days from the day of offer, was a condition which was clearly in writing and given to Madam Yiu, why Condition Two and Condition Three were not put down on the same piece of paper at the same time, if they were also in existence?  The defendant said that he had the gut feelings that as long as there was a framework （框架）in place, he was sufficiently covered.  He believed in Madam Yiu’s professional judgment at that time.  It was Madam Yiu’s professional duty, not his.  He believed that if Madam Yiu delivered, there would be a framework in place.  In my view, the defendant simply did not answer the question. If he and his wife placed so much trust on Madam Yiu, they would not need to write down the remarks as instructions to Madam Yiu on a piece of paper in the first place.  If Condition Two and Condition Three were in existence, there is no reason why these were not stated on the same piece of paper together with the remarks.

(2) There were 4 telephone calls which was made by Madam Yiu to the defendant on 19 September 2013.  It was not in dispute that the first call was made around 8:00 pm, and the last call was made after 11:00 pm.  The defendant stated that in the first call Madam Yiu already secured the signed PASP, and he was congratulated by her.  The next of the telephone calls were chasing his whereabouts as Madam Yiu was adamant to pass a copy of the signed original PASP to him.  These four calls lasted for 1 to 2.7 minutes.  If these calls were to chase the defendant’s whereabouts in order to pass the signed PASP to him, the defendant failed to explain why he would need to spend 1 to 2.7 minutes for these four calls.

(3) The defendant tried to impress that he was the first time buyer and he was very anxious in ensuring that the whole transaction would go through.  On the other hand, when Madam Yiu tried to pass to him the original signed copy of the PASP, he did not appear to be keen to receive it.  Indeed, when Madam Yiu sent in a text message a copy of the PASP to Mrs Cheung on 19 September 2013 by mistake, and the original of the PASP to the defendant on 20 September 2013, the defendant gave evidence that he did not read the contents in detail at all.  This lukewarm response was inconsistent with the image of a keen purchaser, who just concluded a big money deal as a first-time property buyer.

(4) After the defendant received the PASP, as a keen purchaser it would have expected that the defendant would read the PASP, instruct lawyer, apply mortgage, and prepare payment of further deposit.  The defendant should have found out that the contents of the PASP were not in accordance with Condition Two and Condition Three and he should have responded immediately.  He did not contact Madam Yiu until 22 September 2013, without credible explanation.

(5) As contained in the transcripts for the three conversations between Mr Kwok and the defendant (including one meeting with the presence of Mrs Cheung) the defendant did not mention Condition Two (that the further deposit had not be paid on or after 3 October 2013) and Condition Three (that the completion could only take place 3 months after the signing of PASP) throughout these 3 conversations.  The defendant was unable to explain why this was so, as his answers to this line of questioning were “No comment”.

(6) The defendant pushed the blame to Madam Yiu for not advising him and Mrs Cheung of the risks of payment of agency commission to another estate agent.  He initially stated that Mrs Cheung was very upset about this.  When the defendant was asked the time when the first demand by the estate agent was made for payment of agency commission, he said that he was feared that one day, the estate agent would have chased for such agency commission.  He confirmed that no other estate agency except the plaintiff has ever made any demand for agency commission.

(7) Once the defendant found out that the terms in the PASP were inconsistent with the defendant’s 3 Conditions, the defendant should have raised his objection to Madam Yiu and Mr Kwok.  The transcript of the three conversations between the defendant and Mr Kwok did not record any objection with reference to Condition Two and Condition Three.

47.  There are other aspects of the defendant’s case which could not be explained.  It seems that the plaintiff instructed a law firm to issue a letter of demand claiming the sum of $86,000 being liquidated damages of the PASP.  Unfortunately a copy of this letter was not featured in the trial bundle and the above was deduced from the reply letter sent by the defendant, which was undated but in purported reply to the sender of the letter of demand dated 5 December 2013.  In this letter from the defendant, it was for the first time that he presented the idea that has given instructions to Madam Yiu as follows:-

“On [19^th] September 2013, when I was interested to purchase of the property, I have specifically told your client’s Ms Yiu Pui Yin that I would only to purchase the Property on condition that:-

(1) for the price of $4,100,000;

(2) more time to pay the further deposit but no earlier than 2October 2013 and further; and

(3) need at least three months to complete the sale and purchase.

...... Ms Yiu said my offer price was too low and would help me to negotiate with the vendor if he would agree the price of $4.33 million.”

48.  If these conditions set out in the preceding paragraph are compared to the defendant’s 3 Conditions more particularly set out in §36 above,  there were some differences on the price offered by the defendant, and the date for making further deposit.  The amount to be offered to the vendors as recommended by Madam Yiu also differed to the remarks set out in §41 above.

49.  The defendant did not impress me as a credible witness.  In cross-examination, he intended to side-step questions when he found it difficult to give convincing or any answers.  “No Comment” or even “Next Question” were some of his standard answers under cross-examination.  I am not able to accept that the defendant was giving evidence in whole truth.

50.  To conclude on credibility, I prefer the evidence given by Madam Yiu and Mr Kwok and whenever there are contradictions with the evidence given by the defendant, I prefer the evidence of Madam Yiu and Mr Kwok.

Complaint to EAA

51.  After the defendant failed to pay for further deposit in accordance with the PASP, he made complaints against Madam Yiu for the various alleged shortcomings in the dealings with him to the Estate Agents Authority (“EAA”).  EAA replied that they made one finding against Madam Yiu, for her failure to put down the particulars of sale and purchase in the PASP before she asked the defendant to sign in blank.  EAA’s letter (see: page 147, Trial Bundle C) confirmed that Madam Yiu was sanctioned.

52.  However, I do not think this complaint is pivotal in the analysis of the present claim, which I shall come to below.

Findings

53.  I make the following findings:-

(1) Through the introduction of Madam Yiu, the defendant intended to purchase the Property.  On 19 September 2013, the defendant was urged by Madam Yiu to sign the PASP in blank.  He passed to her a cheque for the sum of $50,000 made in favour of the vendors of the Property as initial deposit.

(2) On 19 September 2013, the defendant gave instructions to Madam Yiu (see: page 116 of the Trial Bundle C) that the offer on purchase price should be no more than $4,320,000 (mis-stated at $432,000) and this offer was only valid for 5 days as from 19 September 2013.   This was the only condition imposed on Madam Yiu by the defendant.

(3) On 19 September 2013, when Madam Yiu explained the terms of the draft PASP, she did explain to the defendant that she would have to negotiate with the vendors on the purchase price, date for payment of initial deposit and signing formal agreement for sale and purchase, and date of completion.  Certain parts of the draft PASP were left blank.

(4) Madam Yiu explained to the defendant when referring to the proposed terms of the PASP that the normal time for paying further deposit was 14 days and completion for 45 days, both from the date of signing the PASP.  The defendant did not voice any objection.

(5) The defendant agreed to pay 1% agency commission, and if there is any party in default, the defaulting party would have to pay agency commission of both sides as liquidated damages.

(6) Madam Yiu also indicated to the defendant that she would gave a call to the defendant when she had the chance to discuss terms with the vendors and to report to the defendant.

(7) Madam Yiu did make 4 phone calls to the defendant in the evening on 19 September 2013.  The first 3 phone calls related to the discussion on the increase of initial deposit, the date of paying further deposit, and the amount of purchase price and date for completion.  Madam Yiu had received the confirmation from the defendant that she may proceed to conclude the deal for the purchase of Property for the sum of not more than $4,300,000, further deposit to be paid on 2 October 2013, and completion on 1 November 2013.  The defendant also agreed to pay 1% of purchase price as agency commission.  Madam Yiu then proceeded to conclude the deal with the vendors and obtained their signatures on the PASP.

(8) Madam Yiu then made the last phone call to the defendant after 11 pm.  She congratulated the defendant to have purchased the Property within budget and fixed the appointment to pass the original PASP to the defendant the next day.

(9) On and up to 19 September 2013, the defendant did not inform Madam Yiu for the following matters:-

(i) The defendant would leave Hong Kong for 6 days (later rectified to 5 days) and he would only return to Hong Kong on 1 October 2013.

(ii) The defendant was self-employed person and he would have difficulties to borrow money from financial institutions.

(iii) The defendant would require 3 months in order to complete the transaction.

(iv) The financial position of the defendant.

(v) The defendant would require long completion so that he may arrange mortgage and loan.

(vi) Further deposit could have been paid on or after 3 October 2013.

(10) The defendant tried to seek extension of time through Madam Yiu on 22 September 2013, as he did not expect that Madam Yiu could be able to conclude the deal the same day on 19 September 2013 and within 3 hours at the price of not more than $4,320,000. 

(11) The defendant did not mention to Madam Yiu that he was an owner of another residential property before the PASP was signed on19 September 2013. 

(12) Except the plaintiff, neither Mrs Cheung nor the defendant was chased by estate agency for agency commission over the Property.

54.  Based on the above findings,

(1) I hold that Madam Yiu dutifully followed her instructions given by the defendant to seek to conclude the sale and purchase of the Property within the purchase price of not more than $4,320,000.

(2) I do not accept that the alleged Condition Two (that the defendant had to pay further deposit on or after 3 October 2013) and Condition Three (that the completion could only take place 3 months after the signing of PASP) were part of the instructions given by the defendant to Madam Yiu on 19 September 2013.

(3) I accept that Madam Yiu was sanctioned by the EAA for arranging the defendant to sign on the PASP where some material particulars were not completely filled in.  I also accept that Madam Yiu did discuss the contents of every material particulars with the defendant in details on 19 September 2013. When Madam Yiu was meeting with the vendors, she did obtain instructions from the defendant on the telephone before she filled in all material particulars in the PASP and asked the vendors to sign.  In so holding, Madam Yiu’s act must have been ratified by the defendant.  The alleged breaches of the EAA rules, if any, were non-consequential.

(4) I hold that conditions set out in the undated letter signed by the defendant in reply to the lawyers appointed by the plaintiff (see: page 313 of the Trial Bundle C), together with the 3 conditions set out in §(15)-(17) of the defendant’s witness statement dated 21 May 2016, were afterthought.  They were in stark contrast with and different from the defendant’s 3 Conditions.

(5) There were many reasons for the defendant not to pay further deposit in accordance with the PASP for the purchase of the Property.  Based on the above analysis, the alleged breach of duty on the part of Madam Yiu, and hence, the plaintiff, was not amongst those reasons.

(6) There is no justification for the defendant not to pay the liquidated damages for the sum of $86,000 in accordance with clause 12(a) of the PASP.

The defendant’s counterclaim

55.  The defendant’s counterclaim is premised on a number of issues.  Ms Yang, appearing for the defendant, has very sensibly withdrawn the defendant’s counterclaim on misrepresentation during her opening.

56.  The defendant relied on breach of the express and/or implied terms and conditions on the part of Madam Yiu, or alternatively breach of warranties and representations.  For the reasons given in §§ 53 and 54 above, I dismiss the defendant’s counterclaim under §§ 21-23 of the defence and counterclaim.

57.  The defendant alleges that the plaintiff was in breach of the following:-

(1) Under §24 of the Defence and Counterclaim dated 12 November 2014, by not explaining to the defendant who was not legally represented at the time when he placed his signature on initials on the agreement for sale and purchase, the meaning of each clause of the agreement for sale and purchase, the plaintiff and/or Madam Yiu was in breach of Section 13(1)(a) (mistyped as 13(a)) of the Estate Agents Practice (General Duties and Hong Kong Residential Properties) Regulations (Cap 511).

(2) Under §26 of the defence and counterclaim, a licensee shall not exercise undue influence on a vendor or a purchaser for the purpose of inducing him to enter into an agreement for sale and purchase or a lease.  The plaintiff/Madam Yiu was in breach of Section 11(c) of the Estate Agents Practice (General Duties and Hong Kong Residential Properties) Regulations (Cap 511).

(3) Under §27 of the defence and counterclaim, a licensee shall present an offer to a client for acceptance as soon as practicable after receiving it, the plaintiff/Madam Yiu was in breach of Section 11(e) of the Estate Agents Practice (General Duties and Hong Kong Residential Properties) Regulations (Cap 511).

(4) Under §28 of the defence and counterclaim, by failing to obey the defendant’s revised three conditions in concluding the Property transaction with the vendor, the plaintiff and/or Madam Yiu has breached paragraphs (c) and (d) of 附表2代理的責任of the Agency Agreement.

(5) Paragraph 29 of the defence and counterclaim

Classes 3.2.2, 3.3.1, 3.4.1, 3.5.1 of the Code of Ethics of Estate Agent Authority on the part of Madam Yiu and/or the plaintiff.

Breach of Statutory Duties

58.  §§ 53 and 54 above did not support the defendant’s allegations that Madam Yiu or the plaintiff were in breach of statutory duties as pleaded under §24, 27, 28 and 29 of the defendant’s defence and counterclaim.  I dismiss the defendant’s counterclaim based on breach of statutory duties.

Breach of Fiduciary Duties

59.  The defendant pleaded under §30 of the defence and counterclaim that Madam Yiu was in breach of fiduciary duties, in that Madam Yiu handed over the defendant’s cheque of $50,000 to the vendors, even when no agreement for sale and purchase was ever formed amongst the defendant, the plaintiff and the vendor.

60.  In Kao Lee & Yip v Koo Hoi Yan & Others [2003] 3 HKLRD 296, the headnote has explained very clear the basis of forming fiduciary relationship:-

“There were two types of fiduciary relationship, the partnership between P and D1, and the relationship of employer and employees between P and D2-6. Two fundamental obligations placed on the fiduciary were: (a) the duty not to place himself in a position where his interests would or might conflict with duties owed to the beneficiary; and (b) the duty not to make a profit from his position. How these duties applied in any given case depended on factors such as the contents of the relevant partnership deed or contract of employment, or the way in which the firm’s activities were carried out.”

61.  In the present case, the defendant did not plead his case that Madam Yiu and the defendant were in partnership, nor were they in employer and employee relationship.  To claim that Madam Yiu was in breach of fiduciary relationship was a non-starter.  Based on my findings under §§53-54, I hold that the defendant did not make out a case of breach of fiduciary duties.

Undue Influence

62.  Further, the defendant claims that, under §26 of the defence and counterclaim, Madam Yiu and the plaintiff had exercised undue influence as the defendant’s agent to enter into the PASP, to the defendant’s detriment.

63.  Ms Yang referred me to Barclays Bank Plc v O’Brien and Another [1993] QB 109.  Mr Ho, appearing for the plaintiff, referred me to Royal Bank of Scotland plc v Etridge (No 2) [2002] 2 AC 773, who contended that the principles in the O’Brien decision were replaced by the Etridge (No 2).  When I asked Ms Yang whether there are any cases, local or elsewhere, where undue influence has been held to be applicable in the relationship between the estate agent or the purchaser, she frankly replied to me that there was none. 

64.  The defendant’s argument on undue influence did not get off the ground.  Based on the findings under §§ 53 and 54 above, there is no evidence to suggest that the transaction between Madam Yiu and the defendant was not at arm’s length.  The defendant was fully briefed by Madam Yiu on 19 September 2013 on the contents of the PASP.  Madam Yiu kept calling the defendant by the phone when she was discussing the terms of the PASP with the vendors.  Madam Yiu had not influenced the defendant which was unduly exercised against the interest of the defendant.  Madam Yiu was only instructed and bound by Condition One which I hold that she dutifully fulfilled.  The defendant’s argument of undue influence was made on the footing that Madam Yiu failed to carry out his instructions based on Condition Two and Condition Three.   As I rule out the existence of Condition Two and Condition Three as of 19 September 2013, this claim is not substantiated.

65.  Based on my above findings under §§53-54, I am not persuaded that the defendant has made out a case of undue influence on the part of the plaintiff.    

Joint issues in dispute

66.  The parties filed the statement of joint issue in dispute on 15 August 2016.  Base on the findings above, I set out my answer to each of the issues in dispute by adopting the paragraph numbering thereof:-

(1) Whether the defendant has represented to the plaintiff that the defendant would only purchase the Property on the three conditions as set out in paragraphs 7(g) and (i) of the defence and counterclaim?

No

(2) Whether the plaintiff was in breach of any common law duties and/or practices and/or ordinances and/or regulations?

Yes in part, but it was non-consequential, as explained in paragraphs 53 and 54 above.

(3) Whether the signed agency agreement and the signed preliminary sale and purchase agreements are valid and binding on the defendant?

Yes

(4) Whether the defendant is in breach of the terms of the preliminary sale and purchase agreements?

Yes

(5) Whether the defendant is liable to pay the plaintiff the outstanding commission of $86,000?

Yes

(6) Whether the defendant is entitled to claim $50,000 against the plaintiff?

No

Conclusion

67.  I made the following orders:-

(1) Judgment be entered for the plaintiff in the sum of $86,000 together with interest at 1% above prime rate announced by the Hong Kong and Shanghai Banking Corporation from the date of Writ up to today, and thereafter at the judgment rate until payment;

(2) the defendant’s counterclaim be dismissed;

(3) there be order nisi that the defendant do pay the plaintiff’s costs on a party and party basis, including certificate for counsel and costs reserved, to be taxed if not agreed. In the absence of application to vary the same within 14 days, the costs order nisi shall become absolute.

68.  Lastly, I thank counsel for their assistance in this matter.