CENTALINE PROPERTY AGENCY LTD v. YIP YUK FAI

DCCJ 5321/2009

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 5321 OF 2009

____________

J U D G M E N T

1.  The Plaintiff (“Centaline”) claims against the Defendant (“Yip”) for liquidated damages upon Yip’s default in completing the sale and purchase of a property that he agreed to through Centaline as his estate agent in 2009. Yip resists the claim on the basis that Centaline was in breach of its duties as his estate agent. Yip used to have legal representation up to and including the pre-trial review. He acted in person in the trial.

The transaction

2.  In July 2009, Yip was desirous of acquiring a property.  He consulted the website of Centaline and then enquired about a property listed for sale, namely, Flat F, 15^th Floor (with Roof), Block 7, Grand Palisades, Tai Po (“the Property”).  The price listed was HK$2.88 million.  Yip got in touch with Paurey Lee (“Lee”) of Centaline’s branch at Tai Wo Centre, Tai Po.  Lee referred the enquiry to Szeto Kai Fai (“Szeto”) of the Uptown Plaza branch to follow up.  This happened on 31 July.

3.  On the same day, Szeto and Yip arranged to meet and to view the Property together with 2 other properties in the same estate.  An estate agency agreement in Chinese was entered into between Yip and Szeto (for and on behalf of Centaline) in respect of the introduction of the 3 properties (“the 1^st Agency Agreement”).  Upon enquiry, Szeto indicated that the vendor of the Property was currently asking for a price of HK$3.3 million.

4.  On the following day, 1 August 2009, Yip contacted Szeto and expressed his interest in the Property. During the meeting between them at Szeto’s branch later that day, another estate agency agreement in Chinese was entered into between Szeto (on behalf of Centaline) and Yip, this time in respect of the Property only (“the 2^nd Agency Agreement”).

5.  With a view to facilitating negotiation with the vendor, Szeto prepared a Preliminary Sale and Purchase Agreement (“the Preliminary Agreement”) with the unknown terms such as the price, payment terms, completion date and the agent’s commission left blank.  Besides signing the Preliminary Agreement, Yip drew a cheque for the sum of HK$100,000 payable to the solicitors for the vendor to be identified as the initial deposit for the intended purchase of the Property.  Yip signed a Letter of Authorisation, authorising Centaline to commit to a price not exceeding HK$3.28 million (“the Authorisation Letter”).  In that event, the Preliminary Agreement could be handed over to the vendor for signature and the cheque handed over to the vendor for payment for the initial deposit.

6.  The branch manager of Centaline, Irene Chiu (“Chiu”) then contacted the vendor.  After negotiation, Chiu and Szeto concluded the deal for the sale and purchase of the Property at HK$3.275 million, i.e., HK$5,000 below the maximum set by Yip in the Authorisation Letter.  The vendor signed the Preliminary Agreement.  Szeto informed Yip of the same accordingly.  Yip also collected the copy of the Preliminary Agreement from Szeto’s branch on the following day.

7.  On 4 August 2009, Szeto and Yip met again so that amendment to the name of the payee of Yip’s cheque could be made and initialled by Yip.  At the request of Yip, Szeto recommended Messrs Wong & Poon, solicitors, who were supposed to contact Szeto in respect of handling the conveyancing of the Property for Yip.

8.  On 6 August 2009, Yip telephoned Chiu and complained about what he read from the press release of Centaline in its website and similar report in a couple of local Chinese newspapers about this transaction.  On 10 August 2009, Yip contacted Szeto and questioned about the same.

9.  By letter to Centaline dated 11 August 2009, Yip requested for copies of the Authorisation Letter, his cheque and confirmation as to whether there was any conflict of interest between the agents of Centaline and him in relation to the deal in respect of the Property.  Correspondence between the parties ensued.

10.  Meanwhile, Yip entered into another preliminary agreement dated 11 August 2009 for the purchase of another residential property at Kornhill, Quarry Bay, apparently subject to tenancy at the price of HK$3.345 million through the introduction of another estate agency.

11.  Pursuant to the Preliminary Agreement, the formal sale and purchase agreement should be signed; and the further deposit for the purchase of the Property be payable on or before 14 August 2009.  By letter on the same day, Yip informed Messrs Wong & Poon that he would not proceed with the completion of the sale and purchase of the Property.  Yip let the vendor forfeit his initial deposit paid pursuant to the Preliminary Agreement.

12.  Later in the year, Yip lodged with the Estate Agents Authority (“EAA”) his complaint against Szeto, Chiu and Centaline.

13.  The above background is not in dispute; and on the evidence, I find the same to the facts in any event.

The claim

14.  Except for the properties recorded, the 1^st and the 2^nd Agency Agreements contained identical terms.  Clause 3 and Schedule 1 of the agreements stipulated the commission payable by Yip to Centaline should be 1% of the purchase price.  Schedule 2 of the agreements contained the following provisions:

Section 1

“除本附表第2及5條另有規定外，如買方在有效期内經由代理與賣方就一項或多於一項物業訂立具約束力的買賣協議，則買方須於買賣協議指明的物業交易完成時，向代理支付佣金。”

Section 2

“附本附表第3條另有規定外，如非因買方犯錯而令物業交易未能完成，則買方沒有責任向代理支付任何佣金 ……。”

Section 3

“如買賣雙方非基於有關物業的買賣協議的條文而共同取消該具約束力的買賣協議，則買方須向代理支付佣金。”

15.  Essentially, Yip would be obliged to pay the 1% commission upon completion of the sale and purchase of the Property or alternatively, upon cancellation of the deal by agreement between Yip and the vendor rather than pursuant to the terms of the sale and purchase agreement.  Yip was not obliged to pay the commission if the deal fell through out of no fault on his part.

16.  Centaline was a party to the Preliminary Agreement, which contained, among others, the following terms:

Clause 11

“In consideration of the service rendered by the Agent, the Agent shall after this Agreement be entitled to receive …… HK$32,750.00 from the Purchaser as commission such commission shall be paid not later than 30 September 2009.”

Clause 12

“If in any case either the Vendor or the Purchaser fails to complete the sale and purchase in the manner herein contained, the defaulting party shall compensate at one the Agent HK$65,500.00 as liquidated damages……”

17.  Due to the failure of Yip to complete the sale and purchase of the Property pursuant to the Preliminary Agreement, Centaline now claims against Yip for the sum of HK$65,500 being the liquidated damages.

The defence

18.  In defence, Yip alleges that Centaline, through Szeto and Chiu, has deliberately violated the Estate Agents Ordinance, Cap.511 (“EAO”) and numerous provisions of the Estate Agents Practice (General Duties and Hong Kong Residential Properties) Regulations, Cap.511C (“EAPR”).  Szeto is also said to have deliberately misrepresented the legal documents to him.  Yip alleges that Centaline has been in breach of its fiduciary duty to protect his interest.

19.  Yip claims an equitable right to back out of the deal.  He contends that he should not be liable to pay the commission or the liquidated damages claimed by Centaline.

Issues

20.  The parties have filed their agreed list of issues in dispute.  But in broad terms, the disputes lies in: (i) whether any of the alleged breaches on the part of Centaline is proved; and (ii) whether any of the alleged breaches, if proved, disentitles Centaline from claiming the liquidated damages.

The advertisement of the Property

21.  Yip complains that whilst the asking price by the vendor was HK$3.4 million, the Property was advertised in Centaline’s website at the time to be HK$2.88 million.  This, according to Yip, was false and misleading.

22.  Yip relies on section 9 of the EAPR, which provides that:

“Advertising

(1) A licensed estate agent shall not cause or permit to be issued an advertisement wholly or partly relating to his estate agency business which includes any statement or particular that is false and misleading in a material particular.

(2) A licensed estate agent shall obtain a vendor’s written consent prior to the issue of an advertisement in respect of the vendor’s residential property.

(3) A licensed estate agent shall not cause or permit to be advertised a residential property in respect of which he is acting as such agent at a price or rental or on terms different from that instructed by the client concerned.

(4) ……

(5)   ……”

23.  The listed price of the Property, in my view, must be a material particular.  Centaline’s case is that it had obtained the written consent of the vendor to list the Property for sale at HK$2.88 million prior to the issue of the advertisement in the website.

24.  The vendor had entered into 2 Estate Agency Agreements with Centaline.  The first agreement dated 10 March 2008 was valid until 10 March 2009; and the asking price was HK$3.68 million.  The second agreement was dated 28 June 2009 and the asking price was reduced to HK$3.3 million.  In both agreements, there was the following specific term endorsed by the vendor:

“賣方同意代理可按放盤價的20%上下限幅度作出建議還價刊登廣告。”

25.  Essentially, the vendor expressly authorised Centaline to propose counter-offer and advertisement on the basis of the asking price stipulated in the agreement within the range of plus/minus 20%.

26.  Lee explained that before advertising the Property at the price of HK$2.88 million, he had referred to a recent transaction dated 26 June 2009 in respect of the sale of Flat 6B of the same Block at the price of HK$2.6 million.  Considering their similar size but the higher level with a roof, Lee believed that the Property should fetch a higher price and hence it was listed at HK$2.88 million in the electronic advertisement.  The price was within the range as authorised by the vendor.  I accept his evidence in this respect.

27.  In the circumstances, I find no breach of sections 9(1), (2) or (3) of the EAPR.

28.  Yip complains that it was unethical for Centaline to lure him to become its client by the misleading advertisement of the price of the Property.  The suggestion seems to be that he would not have approached or engaged Centaline, had he known the actual asking price was in fact higher than HK$2.88 million.

29.  However there is no dispute that after viewing the Property, Szeto did disclose to Yip that the vendor indeed was asking for HK$3.3 to HK$3.4 million.  Yip did not seek to back out at that point.  Even according to his own case (though disputed by Szeto), Yip chose to proceed to sign the 1^st Agency Agreement; and on the basis of the actual asking price proceeded to consider whether to negotiate with the vendor.

30.  In my judgment, even assuming that it was the advertised price of the Property that attracted Yip to approach Centaline in the first place, the effect of the advertised price had ceased as soon as Yip became aware of the actual asking price of the Property. Yip decided to commit himself to offering to buy only afterwards.

Inspection of the Property

31.  The complaint about the inspection of the Property has 2 aspects.  First there is the allegation that the inspection was incomplete.

32.  Yip relies on section 10 of the EAPR which provides that:

“Property inspection and viewing, etc.

A licensee shall

(a) assist in making arrangements for the inspection and viewing by a purchaser of a residential property (including a car parking space and common areas if applicable) and accompany the purchaser for such inspection and viewing unless otherwise instructed by the purchaser;

(b) not arrange an inspection and viewing by any person of a residential property without the prior consent of the vendor of the property;

(c)  before the signing of an agreement for sale and purchase or a lease, establish what is to be included in the disposition of the residential property concerned and prepare a written inventory thereof.”

33.  There is no dispute that Szeto arranged and accompanied Yip to view 3 properties in the same estate including the Property on 31 July 2009.  Only the flat but not the roof of the Property could be viewed.  Szeto and Yip gave slightly different accounts; but one way or the other, the effect was that access through the door to the roof was not possible at the time.

34.  Szeto added that through the window of the door, he could view the entire roof area.  He also asked if Yip would like him to ask the security guard to assist in gaining access to the roof; but Yip allegedly replied in the negative.

35.  Whilst there is dispute as to whether Szeto had ever offered to make further arrangement to view the roof on the day, there is no suggestion that Szeto or Centaline would have refused to make such arrangement if requested.  Yip admitted in court that he did not request Szeto to seek to unlock the roof door thereafter.

36.  Nothing prevented Yip from requesting further arrangement to be made for viewing the roof.  But the fact was that no such request was made at any time prior to instructing Centaline to negotiate with the vendor for the purchase of the Property.

37.  It is unclear whether and, if yes, how the lack of viewing of the roof was material to Yip’s decision to agree to purchase the Property.  There is certainly no suggestion or evidence of any discrepancy between the description and the actual size or state of the roof.  Even when Yip decided not to proceed with the deal, he had still never viewed the roof.

38.  Further, Yip was interested in the Property in Tai Po partly because it came with a roof.  However, acquiring a property that came with a roof was apparently not an absolute must, provided that it was the right property.  Shortly after deciding to back out of the deal, Yip acquired another property in Kornhill, Quarry Bay.  According to the relevant sale and purchase agreement, the property does not come with a roof.

39.  As Miss Leung for Centaline submitted, the complaint about failure to view the roof of the Property is neither here nor there for the purpose of determining his liability to the claim in the present case.

The Agency Agreements

40.  The other aspect of Yip’s complaint about inspection of the Property is its timing.

41.  Yip relies on section 6(2) of the EAPR which provides that:

“A licensed estate agent who acts for a purchaser shall enter into an estate agency agreement with the purchaser prior to –

(a) arranging an inspection of the residential property concerned by the purchaser; or

(b) signing an agreement for sale and purchase or a lease of the property,

whichever is the earlier.”

42.  According to Yip, the 3 properties were viewed on 31 July 2009 before the 1^st Agency Agreement was signed.  On the contrary, Szeto said that he and Yip arrived at Block 8 of the estate for viewing the 2 properties there first.  They signed the 1^st Agency Agreement at the lobby of Block 8 prior to setting out to view the properties.

43.  Considering the evidence of Szeto and Yip, I see equal probability that the 1^st Agency Agreement was signed either immediately prior to or immediately after viewing the properties.  Nevertheless, assuming what Yip said were the fact, I do not see how that as between the estate agent and Yip affected whether and how the deal was subsequently concluded.  Whether the viewing of the properties should have taken place only after the signing of the 1^st Agency Agreement did not have any material bearing the question of Centaline’s entitlement to commission that would have been payable upon the conclusion of the deal.

44.  The relatively more important complaints about the 1^st Agency Agreement are that: (i) Szeto had not provided explanation and advice in respect of the terms and effect of the agreement; and (ii) Szeto had wilfully misrepresented the terms and effect of the agreement.

45.  Yip refers to section 6(3) of the EAPR which provides that:

“A licensee shall, before a person who is not legally represented enters into an estate agency agreement in relation to a residential property –

(a) explain to the person the different types of agency appointment in the agreement and their respective implications and effects on the person;

(b) explain to the person every term and condition set out in the agreement to ensure that the person is made aware of his rights and obligations under the agreement; and

(c)  recommend that the person seek legal advice if the person does not understand any part of the explanation given under paragraph (a) and (b).”

46.  At this juncture, I should perhaps give an account of Yip’s background.  According to Yip in court, his previous experience in purchasing real property in Hong Kong was limited to the one occasion in 1997.  Then it was his father who handled the conveyancing.  However, also revealed in court was that Yip was a University graduate with a Master degree.  He used to be a graduate member of Hong Kong Society of Engineers.  He is the managing director of an information technology company; and the Chairman of certain internet supply society.  His language ability is beyond doubt; and in fact all documents from him were written in English.

47.  Yip complains that Szeto never explained to him the terms of the 1^st Agency Agreement except for the commission rates, the date, the addresses of the properties, the interest clause and the date of payment of the commission.  Szeto also allegedly never explained to him the agency relationship so that even up to the date of this action, he had no idea whether Centaline represented the vendor as well. Szeto also never advised him to seek legal advice in respect of the interpretation of the terms of the agreement.  On the contrary, Szeto insisted that he explained to Yip all the terms of the 1^st Agency Agreement before Yip signed the document.

48.  I do not rule out the probability that not each and every clause of the 1^st Agency Agreement was explained other than in a cursory manner to Yip on 29 July 2009. But considering the following circumstances of this case, I am not satisfied that Yip can fairly claim that he could not understand the essential terms of the 1^st Agency Agreement.

49.  The 1^st Agency Agreement was printed in Chinese in line with the prescribed form.  Clause 2 provided for the parties’ agreement in respect of the agency relationship and the duties of the agent.  Subparagraph (a) provided for the choice of the description of the agency relationship applicable to the present case, namely: “單邊代理” (sole agency), “雙邊代理” (dual agency) or “有可能代表雙方的代理” (potentially dual agency).  The first 2 options were specifically crossed out; and Yip acknowledged the choice of the last description by initialling next to it.  The same choice was repeated in Schedule 1 to the agreement in respect of each of the 3 properties viewed on that day. Yip acknowledged that by signing next to each of these entries.  Chances are that these were done as directed and, I find, explained by Szeto.

50.  Yip alleges that Szeto waived his right under the 1^st Agency Agreement to receive the Property Information Form (or “物業資料表格”) without his knowledge or consent.  This, according to him, amounted to wilful misrepresentation with the intent to mislead him.  Szeto denied that.  He explained that he did ask Yip whether Yip required the form; and Yip replied in the negative.

51.  Schedule 1 of the 1^st Agency Agreement expressly provided for the buyer’s choice of whether to waive the receipt the form in respect of any of the properties viewed.  The boxes indicating the waiver in respect of the 3 properties viewed on that day were all ticked.  By signing next to the entry in respect of each of the 3 properties in the Schedule, Yip acknowledged and confirmed each of these entries.    The wordings in Chinese were simple and straightforward.  As to whether he managed to read those wordings, if he cared to, when he put down his initial next to each of those entries, Yip’s evidence in court was evasive and incredible.

52.  This is not the kind of case where an uneducated or unsophisticated buyer entered into an estate agency agreement; and immediately followed by committing to buy the property being introduced by the estate agent.  In such a case, there might not be reasonable opportunity for the buyer to study the terms of the agreement.

53.  There is no dispute that Yip was provided with a carbon copy of the 1^st Agency Agreement signed on 31 July 2009.  It was on the following day when Yip took the initiative to contact Szeto to express his interest in buying the Property.  As mentioned, Yip did so notwithstanding that he had not viewed the roof of the Property.  He also did so after he had ample opportunity to study the copy of the 1^st Agency Agreement overnight.

54.  The fact was that on 1 August 2009, Yip visited the office of Szeto after, according to his pleaded case, a day of consideration.  Besides given a copy of the land search in respect of the Property, Yip signed the 2^nd Agency Agreement at the request of Szeto on that occasion.  Save that only the Property was recorded, this second agreement contained identical terms as those in the 1^st Agency Agreement.  Yip signed and initialled next to the relevant parts of this agreement as he did to the 1^st Agency Agreement.  No question was raised at all about the terms of the 1^st or the 2^nd Agency Agreement before he proceeded to sign the Authorisation Letter and the Preliminary Agreement as well as issued the cheque for initial deposit on the same occasion for the purpose of commencing negotiation with the vendor.

55.  Worth noting is that Clause (5) of the Authorisation Letter, according to the standard form produced, expressly stipulated that the buyer agreed to pay 1% commission to Centaline and acknowledged that Centaline would also receive commission from the vendor.  Likewise, as mentioned, clause 11 of the Preliminary Agreement, in English and Chinese, provided that Centaline would be entitled to receive 1% commission from both the vendor and Yip.  Even Yip indicated in his pleading that he could “guessed” from the fact that Centaline would receive commission from both him and the vendor of the Property that Centaline was agent for both parties to the sale and purchase.

56.  There is no dispute that Szeto never advised Yip to seek legal advice on the interpretation of the terms of the 1^st or the 2^nd Agency Agreement.  In view of the circumstances discussed above, there was never indication by Yip to Szeto that he did not understand any part of the explanation of the terms of the agreements given by Szeto.  The need for Szeto to recommend that Yip should solicit legal advice pursuant to section 6(3)(c) of the EAPR did not arise.

57.  In my judgment, there is no merit in the allegation that Szeto had misrepresented or failed to explain the terms of the 1^st or the 2^nd Agency Agreement.  Nor is there merit in the allegation that Centaline was in breach of section 6(3) of the EAPR.  The alleged lack of understanding that Centaline acted as agent of both parties to the property deal must be rejected in the circumstances.

The Property Information Form

58.  Yip also takes issue as to the authenticity of the Property Information Form in respect of the Property subsequently produced by Centaline.  The form also came in the prescribed form.

59.  Christine Shum (“Shum”) was the licensed agent of Centaline partly responsible for preparing the Property Information Form for the vendor.  According to her, she had contacted the vendor reminding him of the expiry of the last estate agency agreement dated 10 March 2008.  It was not until 28 June 2009 did the vendor turned up at her branch.  Together with Chiu, she attended to the signing of the new estate agency agreement with the vendor.

60.  Shum explained that because the vendor turned up without prior appointment, they had not obtained the up to date land search in advance.  Therefore the up to date Property Information Form for the vendor was signed and dated, though the information about the Property under Section B of Part 1of the form was yet to be filled in.  It was suggested that he would collect the form some other day.  Later in the day, Shum managed to fill in the section in accordance with the up to date land search in respect of the Property.  As the vendor was yet to receive the form, the acknowledgement of receipt contained in last page of the form was left blank.

61.  In court, Yip confirmed that he did not dispute the evidence of Shum.  In my judgment, there can be no real issue of authenticity of at least the first 2 pages of the form prepared by Shum.  Indeed what Yip questions is the last page of the form.

62.  Szeto admitted that it was he who was responsible for filling in the last page of the Property Information Form.  By the time when he asked whether Yip would waive the receipt of the Property Information Form in respect of the Property on 31 July 2009, even the vendor had yet to receive the form.  Szeto explained that upon closing of the deal with the vendor on 1 August 2009, he and Chiu finalised the paper work including the form.  The vendor received the form on the same day; and Szeto filled in the acknowledgement of receipt on the last page of the form.  According to him, he made a mistake by putting down the name of Yip instead of the vendor; but he corrected the mistake immediately.  The vendor indeed signed the form and initialled next to the correction of his name. Szeto also filled in the date of receipt as 28 June 2009 by mistake; and he admitted that he should have filled in 1 August 2009 instead.

63.  Szeto’s evidence in this respect is not inherently improbable.  There is no contradictory evidence. I accept his evidence in this respect.

64.  In my judgment, the issue of authenticity of the Property Information Form is mere red herring.

The Preliminary Agreement

65.  Yip makes similar complaint that Szeto had not explained to him the terms and the effect of the Preliminary Agreement.  He relies on section 13(1) of the EAPR:

“A licensee shall, before a client of the licensee who is not legally represented enters into an agreement for sale and purchase or a lease of a residential property –

(a) explain to the client the meaning of each clause of the agreement or lease, as the case may be, and draw to his attention the meaning of any essential terms and provisions thereof; and

(b)recommend that the client seek legal advice if the client does not understand any part of the explanation given under paragraph (a).”

66.  There is no dispute that for reason mentioned above, the payment terms under clause 2 (except for the initial deposit), the completion date under clause 3, the amount and date of payment of commission under clause 11 and the amount of the liquidated damages under clause 12 of the agreement were left blank when Yip signed it on 31 July 2009.  Nevertheless, the other terms were attended to; and wherever any parts were crossed out for being inapplicable or were added, Yip initialled next to them.  It must be Szeto who directed Yip to do so.  Chances of Szeto refraining from explaining the terms to Yip in the course of that, in my judgment, were low.

67.  More importantly, the agreement was printed in both Chinese and English language.  The additions made were also written in Chinese by Szeto.  Yip was capable of understanding what the clauses say.  Yip’s evidence in court in this respect was again evasive and incredible.

68.  As there is no suggestion that Yip ever indicated at the time that he did not understand any part of the explanation, the duty to recommend the seeking of legal advice pursuant to section 13(1)(b) of the EAPR again did not arise.

69.  After being informed of the conclusion of the deal with the vendor, Yip went to Szeto’s branch to collect the Preliminary Agreement on 2 August 2009.  Due to mistake in respect of the name of the payee on Yip’s cheque for the initial deposit, arrangement was made so that Szeto and Yip met on 4 August 2009.  The mistake on Yip’s cheque was corrected and Yip initialled next to the correction.  On the same occasion, Szeto gave Yip a copy of the Property Information Form in respect of the Property mentioned above as requested.  Szeto also gave Yip the business card of Messrs Wong & Poon, whom Yip might consider instructing to handle the conveyancing.

70.  The above sequence of events since the Preliminary Agreement was collected on 2 August 2009 does not suggest that Yip was in any way surprised by the terms of the agreement. Whether Yip cared to read the agreement, of course, is quite another matter and more importantly, not the basis for attributing any blame to Centaline.  If necessary, the often cited case of Saunders v Anglia Building Society (1971) AC 1004 (at 1019B-D) and the Hong Kong case of Wong Jack Keuung Victor & Anor v Wai Ping Luen & Anor, DCCJ 2539/2005 (19 December 2005) (at para.56) are the authorities in support.

71.  Yip also questioned the propriety of putting forward the Preliminary Agreement with the abovementioned essential terms left in blank together with the cheque for the initial deposit to the vendor for negotiation.  He argues that this constituted breach of sections 13(1) of the EAPR.  I do not see how.

72.  Further, there is no dispute that Centaline managed to proceed to negotiate with the vendor in this manner only upon Yip’s written instruction by the Authorisation Letter.  The real complaint of Yip is not really the conclusion of the Preliminary Agreement in such manner; but his subsequent scepticism about the purchase price.

Negotiate for the best price

73.  Following from the above, I accept the evidence of Szeto that the form of the Authorisation Letter signed by Yip on 1 August 2009 was no different from the standard form disclosed by Centaline.  As mentioned, the document in Chinese provided that in the event that a deal could be concluded with the vendor at a price not exceeding the maximum as instructed by the purchaser, the estate agent was authorised to hand over the cheque for initial deposit together with the preliminary sale and purchase agreement for the vendor’s signature.  In any other event, the agent would have to contact the purchaser for confirmation prior to making any commitment with the vendor.

74.  The purchase price was agreed at HK$3.275 million which was within the range stipulated by Yip in the Authorisation Letter.  What triggered Yip’s scepticism about the purchase price, though within his range, was apparently the press release about this transaction a couple of days later.

75.  There is no dispute that a short Chinese article reporting the recent conclusion of the deal in respect of the Property was published in the website of Centaline on 5 August 2009.  According to the article, this was issued by the Public Relations Department of Centaline and the source of information was Chiu.  Chiu explained that she made a routine report to the public relations Department of the transaction.  There is also no dispute that similar reports could be found in 2 other local Chinese newspapers dated 6 and 8 August 2009 respectively.  Upon reading them, Yip telephoned and complained to Chiu.

76.  The article reported the date when the vendor acquired the Property and its price.  It followed by reporting the obvious, namely “是次沽出單位大致平手離場，賬面獲微利6.8萬元” meaning that by the recent sale of the Property (to Yip), the vendor basically broke even with a modest profit of HK$68,000 on the book.  The article concluded by a report of the total sales of properties in the same estate in the month of July 2009 and the average price per square feet.  The above wordings were basically repeated by the 2 local newspapers in their report.

77.  Fairly read, the report was factual and neutral.  What made Yip feel uneasy was the headline of the article in one of the local newspapers, which read “大埔寶馬山摸頂貨 平手售出”.  The Property was described in the headline as a property at “mount top” price.

78.  However, Centaline was not responsible for setting the headline of that article published by the newspaper.  More importantly, what the headline referred to was the vendor who paid the so-called “mount top” price for the Property back in 1998.  That could not be understood to be a reference to Yip’s purchase of the Property in 2009.

79.  Yip seems to suggest that the purchase price in 2009 should not have reached the so-called “mount top” level in 1998.  He now questioned whether the asking price of HK$3.3 or 3.4 million was genuine.  He also questioned whether Centaline had negotiated with the vendor for the best price for him.

80.  As mentioned, before meeting Yip on 29 July 2009, Szeto first contacted the vendor for the up to date asking price and was told that the vendor considered the price of HK$3.4 million to be ideal.  According to Szeto, the vendor made reference to a recent transaction in respect of Flat C on the same floor of the same Block with a roof that was sold at HK$3.08 million.

81.  According to Szeto and Chiu, it was Chiu who was responsible for negotiating with the vendor upon receipt of the written authorisation by Yip.  According to Chiu, she started with an offer of HK$3.1 million, which was rejected by the vendor.  In court, she explained that she then adjusted the offer upwards to HK$3.15 million. After several rounds of exchange of offers, the margin gradually became narrow. Eventually the vendor agreed to sell at HK$3.275 million.

82.  Objectively, the data subsequently available from Centaline’s website as at 28 August 2009 confirmed that Flat C on the same floor as the Property mentioned above had indeed been sold at the price of HK$3.08 million.  At the size of 657 square feet, the average price per square feet was HK$4,688.  As reported in the press release, the size of the Property was 710 square feet.  At the price of HK$3.275 million, the average price per square feet of the Property was HK$4,613.  In other words, the Property was actually less expensive than Flat C in terms of the average price per square feet.

83.  Yip did not really produce any valuation evidence in support of his contention that the price he was committed to pay was so high that it could not reasonably be justified by reference to comparables.  In court, Yip resorted to suggest that it was his subjective belief that he had overpaid.

84.  Yip was incapable of contradicting what Szeto and Chiu said about the negotiation process.  I accept their evidence.  In my judgment, Yip fails to prove that the negotiation between Centaline and the vendor was not genuine; and that as result, he had committed to effectively overpaying for the Property.

85.  In his closing submissions, Yip argued that due to the misrepresentation of Centaline, he was misled to believe that most, if not all, the properties listed were advertised at a discounted price in the same manner as the Property.  As a result, he had allegedly forgone the consideration of other options, the listed prices of which might be the actual asking prices.  As Miss Leung pointed out, such argument was raised for the first time and was a change of focus from the pleaded case of overpayment for the Property.

86.  To begin with, Yip made enquiry about the Property only; and it was Szeto who took the initiative to propose 2 other properties in the same estate for Yip’s consideration.  Considering all the circumstances and the evidence of the witnesses, I do not accept that there was or could be such understanding as to the advertised prices of all the properties listed with Centaline as alleged by Yip.  I also reject the allegation that Yip was misled into forgoing his right to ask for introduction of other options before making any commitment.

Other complaints

Records and receipts

87.  Yip complains that he had not been given receipt for his cheque for initial deposit for negotiating the purchase of the Property.  Nor is Centaline able to produce copies of his cheque or the Authorisation Letter.  He relies on section 12 of the EAPR:

“Keeping of accounts and records

(1) (a) A licensed estate agent shall keep proper accounts as to moneys received or held, or paid by the agent, for or on account of clients.

......

(2) A licensed estate agent shall –

(a) issue a written receipt to a client immediately for any moneys received; and

(b) retain a copy of the receipt for not less than 3 years after it is issued.

(3) A licensed estate agent shall deposit all moneys received or held for or on account of a client in a trust account maintained at an authorised institution.

(4) A licensed estate agent shall retain a copy of the deposit slip of any moneys deposited into a trust account maintained under subsection (3) for not less than 3 years after the deposit was made.

……”

88.  Section 12(1) refers to the moneys received or held by the estate agent for and on account of clients. The cheque drawn by Yip on 1 August 2009 was made payable to the solicitors for the vendor to be confirmed.  Centaline was never meant to receive or to hold any money for or on account of Yip, let alone to have the same deposited into a trust account for and on account of Yip.  Therefore, section 12(1) to (4) of the EAPR relied on by Yip are strictly inapplicable.

89.  There is no dispute that Centaline never keep a copy of Yip’s cheque drawn on 1 August 2009. Making a copy of the cheque might have been good practice.  Yet one way or the other, section 12 of the EAPR is inapplicable.  Further, according to Szeto, he did offer to make a copy of the cheque for Yip; but Yip declined as he was apparently hurried to leave.  Yip left with the carbon copy of the 2^nd Agency Agreement and the land search that day.

90.  I prefer Szeto’s evidence in this respect.  But irrespective of that, the fact that cheque was received, forwarded to the vendor and made payable to his solicitors is in fact never controversial.  The failure of Centaline to keep a copy of the cheque simply has no significance insofar its entitlement to receive, and Yip’s liability to pay, the commission is concerned.

91.  Probably the only valid complaint about Centaline’s failure to keep proper records relates to the Authorisation Letter.  Nevertheless, section 12, which concerns accounts and records of receipt and payment of money, still has no application.  But Yip admits by pleading that he signed the Authorisation Letter instructing and authorising Centaline to negotiate and to conclude the deal with the vendor subject to the maximum price of HK$3.28 million.  As far as the issue of his liability to pay the commission is concerned, the complaint about the lack of copy of the Authorisation Letter is also red herring.

Appointing solicitors

92.  Yip complains that Centaline appointed Messrs Wong & Poon as his solicitors in handling the conveyancing of the Property without his consent and contrary to his legal rights.

93.  Szeto admitted that he recommended Messrs Wong & Poon to Yip.  But he added that the recommendation was made at Yip’s request.  He said he would ask the firm to contact Yip directly.  The firm apparently contacted Yip.  By his letter to the firm dated 14 August 2009, Yip acknowledged that the firm had made telephone calls to him.  By the same letter, Yip indicated that he would not proceed with the deal in respect of the Property.  This was consistent with the understanding that Szeto obtained from the firm then.

94.  Estate agents normally are not clothed with the implied or apparent authority to instruct solicitors for and on behalf of clients.  Solicitors normally do not accept instruction in this manner.  There is no evidence that Messrs Wong & Poon had accepted and confirmed instruction to act for Yip in the conveyancing of the Property.  The allegation that Centaline had already appointed solicitors for and on his behalf without his consent or contrary to his intention or rights does not stand as a matter of fact.

News releases

95.  Yip complains that the press releases in Centaline’s website and similar reports by 2 local newspapers mentioned above were made without his consent and their contents were false and misleading.

96.  The basis for contending that publication of the article by Centaline in its website required Yip’s prior consent is actually unclear.  It should be noted that the identity of the parties to the transaction and the exact flat number of the Property were unidentified.

97.  As to the headline of the article in one of the local newspapers that allegedly caused Yip to suspect that he had overpaid for the Property, I refer to what was discussed above.

98.  Yip complains about the report that the purchaser (i.e., he) chose the Property in Tai Po as residence for convenience in travelling across the border on business.  Such report, he complains, was factually wrong.  However, according to Szeto, that was what he was given to understand during casual chat with Yip when they viewed the properties on 31 July 2009.  The source of such information, whether meant to be true or not, had to come from Yip.

99.  In my judgment, no material purpose would be served and therefore no motivation existed for Szeto or Centaline to fabricate such information in the report out of nothing.  Irrespective of whether the information was false, I do not see its materiality, relative to the other transaction data, to the general readers.  More importantly, I do not see how such report has any bearing on the issues of his liability to the vendor or his liability to pay commission to Centaline.

Centaline’s duty to comply with the EAO

100.  Yip refers to the general duty of an estate agent to comply with the EAO.  Section 15 of the EAPR provides that:

“Effective control

A licensed estate agent shall establish proper procedures or systems to supervise and manage his business of doing estate agency work to ensure that his employees or persons under his control comply with the provisions of the Ordinance.”

101.  Yip complains that Centaline even got the address of the Property wrong in its invoice to him for the liquidated damages now being claimed.  Indeed, it could be seen that various mistakes had been made when the agents filled in the particulars such as names or dates in Property Information Form, the 2^nd Agency Agreement and the cheque mentioned above.  Whilst mistake such as those ought to be avoided, that is not to be magnified to become the alleged breach of section 15 of the EAPR; and more importantly, a ground for disentitling the estate agent from commission.

Liability for the commission

102.  By letter dated 8 October 2009, Centaline demanded Yip to pay the sum of HK$65,500 as liquidated damages pursuant to clause 12 of the Preliminary Agreement.  By letter dated 22 October 2009, Yip replied and refused to pay the sum on the ground that Centaline, through Szeto and Chiu, had not delivered services to him in a manner fully complying with the EAPR.  Yip also lodged his complaint to the EAA.

103.  It should be noted that the letter from the EAA to Centaline dated 17 November 2009 recorded 3 major complaints by Yip, namely: (i) the allegedly misleading listed price of the Property in the website; (ii) failure to enter into the 1^st Agency Agreement until after the viewing of the properties on 31 July 2009; and (iii) the allegedly false account of Yip’s reason for choice of the Property reported in the press release on 5 August 2009.  Obviously, Yip has since then expanded his complaint substantially for the purpose of defending Centaline’s claim.

104.  Yip emphasized that he took no issue as to the forfeiture of his HK$100,000 initial deposit by the vendor when he called off the deal.  This, he submitted, shows that he is resisting Centaline’s claim for the sum of HK$65,500 as a matter of principle, rather than simply attempting to evade liability.  Nevertheless, the question for this court remains whether Yip succeeds in disputing liability.

105.  Section 36(4) of the EAO provides that where as regards a particular property a licensed estate agent fails to comply with any requirement in relation to information as regards the property under section 36(1) and because of such failure the client suffers loss or damage, such failure shall constitute a cause of action whereby damages or any other relief or remedy may be recovered or obtained in legal proceedings.  In the present case, the section was not relied on and more importantly Yip confirmed in court the absence of any counterclaim for damages or other relief.

106.  Section 56(3) of the EAO provides that any regulation made under this section or any other provision of this Ordinance may create offences in respect of contravention of any of the regulations and may provide for the imposition of a fine and imprisonment as well as specify defences that may be raised for such an offence.

107.  There is no provision in the EAO or EAPR to deprive the licensed estate agent of commission payable under contract on the ground of non-compliance.

108.  Both parties refer to Centaline Property Agency Limited v Lai Yuk Chun, HCA 18369/1999 (7 December 2001). There the vendor gave specific instruction to the estate agent not to sell to her neighbours below a certain price.  The court found that the agent represented to the vendor that that the purchaser was living at another address, knowing that whether the purchaser was a neighbour in the same estate was a material and relevant consideration for the vendor.  This, the court found, was a misrepresentation of fact as the purchaser was in fact a neighbour in the same estate.  Whether the agent did so knowingly or recklessly or negligently was considered by the court to be immaterial.  The misrepresentation had to be made at least recklessly regardless of whether it was true or not.  On that basis, the court found that the estate agent was in breach of the contract of agency and guilty of misrepresentation.

109.  The court had this to say (at para.49):

“…… The true position is that where an agent is in serious breach of his duty to his principal, the principal can refuse to pay commission in respect of the transaction as to which the agent is in breach. This is well established in Salomons v Pender (1865) H&C 639. The breach does not have to go …… to the whole of the contract thereby rendering the work done useless. So long as the breach is serious, or goes to the root of the contract, or otherwise justify the principal’s repudiation of the liability to pay, the principal is excused from paying commission. Whether the breach is of such a character is a question of fact for the Court. Usually the breach is repudiatory, or goes to the root of the contract, or render the performance of the contract wholly different from what was anticipated, or …… goes to the whole of the contract, it falls within the serious breach category. But breaches short of such severity may also disqualify the agent from this right to commission. An agency contract is built on good faith and fidelity. If the performance of the contract involves a destruction of this substratum, it is also a repudiation by the agent of his contract of agency and the principal is discharged of the obligation to pay commission. Dishonesty and taking profit, purchasing the principal’s property without proper disclosure, taking bribe and failure to disclose material facts are common examples of such repudiation.”

110.  The court held that the facts found as mentioned above were destructive of the substratum of the agency contract of good faith and fidelity as to amount to a repudiation of the contract of agency.  Hence the vendor was discharged from the obligation to pay commission.

111.  The court in Lai Yuk Chun summarised the principles of the duty of good faith and fundamental breach in the context of estate agency contract.  With respect, I agree.  However, as far as the facts are concerned, that case is clearly distinguishable from the present case.

112.  In view of the above findings in respect of the alleged breach on the part of Centaline in the present case, individually or cumulatively, I do not find that Centaline, through its agents, has been guilty of breach that goes to the root or whole of the estate agency contract.  Yip also fails to prove the sort of conduct on the part of Centaline or its agents that involved the destruction of the substratum of good faith and fidelity underlying the estate agency contract.

113.  Notwithstanding the complaint about impropriety in the performance of the estate agency contract including how the conclusion of the Preliminary Agreement was promoted, the Preliminary Agreement was indeed performed as a binding agreement between the vendor and Yip.  As far as Yip seeks to dispute that, the attempt must be rejected.  The fact, as mentioned, was that the vendor was allowed to forfeit the initial deposit pursuant to clause 8 of the Preliminary Agreement.  That was how Yip backed out of the deal.

114.  The Preliminary Agreement embodies an estate agency agreement among the parties to the sale and purchase of the Property and Centaline.  Indeed Centaline’s claim is for liquidated damages pursuant to clause 12 of the Preliminary Agreement.  Applying the considerations in Lai Yuk Chun to this as an agreement between Centaline and Yip, I arrive at the same conclusion as mentioned above.

Conclusion

115.  Obviously Yip changed his mind after committing to purchase the Property.  It might be that he had second thought about whether the bargain was good or wise.  But I am not convinced that that had to do with any alleged dishonesty or the alleged breach of professional practice on the part of Centaline or its agents.  In any event, the allegations are not substantiated as a matter of fact so that Yip can be excused from his liability as a matter of law.

116.  In my judgment, Centaline is entitled to the liquidated damages in the sum of HK$65,500 from Yip, being the party that failed to complete the sale and purchase of the Property according to clause 12 of the Preliminary Agreement.

Order

117.  I give judgment against Yip in the sum of HK$65,500 together with interest thereon at the HSBC prime rate plus 1% from the date of writ until today.  Interest from today runs at the judgment rate until payment.  I make a nisi order that Yip pays Centaline’s costs of this action, including any costs reserved.  I certify the engagement of counsel.  In the absence of application to vary within 14 days, the nisi costs order shall become absolute.