CENTALINE PROPERTY AGENCY LTD v. LAI YUK CHUN

HCA 18369/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 18369 OF 1999

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J U D G M E N T

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Introduction:

1. The Defendant was at the material time the owner of a property at Flat 9B & Parking Space No. 21 on G/F of Pearl Court in Kowloon Tong (hereinafter called "the Property"). The Plaintiff is and was an estate agency. By these proceedings, the Plaintiff claims against the Defendant agency commission for introducing the sale of the Property. The defence is that the Plaintiff was in breach of the Defendant's instruction not to sell the Property for less than $13 million to her neighbours and the Defendant counterclaims for damages for the loss of the chance to sell to her neighbours at a higher price.

2. The Defendant bought the Property in September 1987. Since moving in, she had some discord with Mr Wong Senior, the owner of the flat immediately below. In 1993, she migrated to Canada and was desirous to sell the Property. In the summer of 1995, a watchman of Pearl Court told her that Mr Wong Senior was interested in buying the Property and asked about her selling price. She told the watchman that she would sell the Property for $15 million. Later the watchman came back with a response from Mr Wong Senior that the price was too high and that the Property was not worth that price. Mr Wong Senior did not make any counter offer.

3. In 1996, the Defendant instructed East Asia Property Management Limited (hereinafter called "East Asia") to manage and sell the Property. In the summer of the same year, she was told by East Asia that Mr Wong Senior would like to buy the Property. She replied that she would sell for $17 million. East Asia reverted to her that Mr Wong Senior said the asking price was too high.

4. Then in the summer of 1998, the Defendant instructed the Plaintiff to sell the Property. She was attended by Mr Philip Ng, an estate agent of the Plaintiff. In early 1999, she contacted Ng about the progress. She told Ng that her bottom line was $15 million. Nothing eventful occurred until the Defendant returned to Hong Kong in summer when, as a result of further discussion with the Plaintiff, the Defendant agreed to reduce her asking price to $13 million because of the down turn in the property market.

5. Between 8 and 10 July 1999, another watchman of Pearl Court told the Defendant that Mr Wong Senior wanted to buy the Property for his grand-daughter who would be back from overseas to Hong Kong soon. In view of Mr Wong Senior's previous comments, she told the watchman that she had given Mr Wong Senior the price already and if he really wanted to buy, he should make an offer. Upon further insistence by the watchman, she told him that she would sell for $13 million.

Defendant's case:

6. A week later, on 16 July 1999, Mr Paul Yip of the Plaintiff accompanied a woman to view the Property. They had a casual look and stayed for about 5 minutes. The Defendant thought that was unusual.

7. When Yip telephoned the Defendant on 19 July 1999, the Defendant asked Yip why the woman viewed the Property so briefly and whether she had viewed the Property before in April. Yip explained that she was familiar with Pearl Court as she knew someone living there. Yip asked if the Defendant would reduce her asking price. The Defendant stood firm on her price of $13 million.

8. The next day, Yip telephoned again to negotiate the price. The Defendant repeated her inquiry whether the purchaser was living in Pearl Court. Yip replied that the purchaser was living in the building next to Pearl Court. The Defendant asked if it was Vista Panorama, but he replied it was on the other side. The Defendant kept on asking if the purchaser was living in Eastbourne Road. Yip did not reply but asked why she had such questions and whether where the purchaser lived would make any difference to the sale. The Defendant told him that she would not sell the Property to her neighbours living in Pearl Court for personal reasons. Yip replied that if she was to sell the Property, it did not matter to whom it would be sold. The Defendant said if the purchaser was her neighbour she would definitely not reduce her asking price. Then they changed subject and eventually the Defendant agreed to reduce her asking price to $12 million on condition that the purchaser was not her neighbour.

9. Yip telephoned the Defendant on the following day. As the Defendant felt Yip was evading her question the night before, she pressed him again for an answer. Yip replied that initially the purchaser wished to look for flats in Sky Lodge but since the purchaser's father was living near Pearl Court, so the purchaser chose Pearl Court. She asked where the purchaser's father lived. Yip replied that he was living in Beacon Hill Court and that after viewing other properties with the purchaser, he accompanied the purchaser to her home in Beacon Hill Court. For what she was told, the Defendant believed that the purchaser was not her neighbour.

10. On 22 July 1999, Yip again requested a further reduction in price as it was difficult to find a purchaser and that the purchaser could not afford unless she reduced her asking price. Eventually, she reduced her asking price to $11.5 million. Later that evening, Yip called again asking for further reduction. She refused.

11. On the following day, Yip telephoned the Defendant and asked for further reduction. The Defendant refused. Then Yip said as she had previously had telephone conversation with his supervisor Mr Ng but had never met Ng before, he suggested her to meet Ng to discuss the matter. She refused but agreed to speak to Ng over the phone. When Ng spoke, he tried to persuade the Defendant to reduce her asking price. The Defendant refused and reiterated that she would not sell the Property to her neighbours for less than $13 million. Later that day, Ng called the Defendant again and she eventually agreed to reduce to $11.48 million, a lucky figure in Chinese term.

12. At 10 p.m. on the following day, i.e. 24 July 1999, Ng called her and said the purchaser wanted to view the Property again. She refused as it was too late. She thought the purchaser wanted to view the night scene and suggested to make alternative arrangement, but Ng surprisingly told her that he had declined the request for viewing as he did not wish to trouble her. Later at 11:30 p.m. Ng called again and said the purchaser was willing to buy without viewing the Property and asked her to sign a provisional agreement. The Defendant refused as it was too late and she had to consult her solicitors. As it was a Saturday, she suggested to sign the agreement on Monday. Ng said he was afraid that the purchaser might change his mind. Then she agreed to see Ng on Sunday.

13. On Sunday 25 July 1999 at 10 a.m., Ng visited the Defendant and gave her a copy of the provisional agreement signed by a Mr Wong Ying Ming (hereinafter called "Wong") of a factory address. She asked why the purchaser did not put down his residential address. Ng said it was not unusual. The Defendant repeated her question if the purchaser was living at Pearl Court. To that Ng replied, "if the purchaser was living here, that would be great." The Defendant took that as his assurance that the purchaser was not residing at Pearl Court. The Defendant insisted that she would not sign until she had consulted her solicitors and suggested Ng to leave the agreement behind. Ng declined.

14. On 26 July 1999, Ng faxed a copy of the provisional agreement to the Defendant's solicitor as suggested by the Defendant. Her solicitor suggested some amendments to a clause excluding her liability under a Building Order. After having had legal advice, she signed the agreement and received a deposit for $390,000.

15. Feeling suspicious about the identity of the purchaser, the Defendant telephoned Ng on 28 July 1999 and asked whether the purchaser was the owner of the floor immediately below hers. Ng replied that the owner of the floor below was a limited company. She asked whether the purchaser was living there. Ng replied that he would find it out and let her know later. She then discussed with her solicitor who agreed to conduct a land search for her. Later, she approached the watchman and learned that Wong was in fact living in the floor immediately below.

16. On or about 1 August 1999, Ng telephoned the Defendant. The Defendant was furious and blamed him for telling her that the purchaser was living in Beacon Hill Court. To that Ng replied that being an estate agent he had to say something "artificial". She lodged a complaint to the Plaintiff through her solicitor on 4 August 1999. Nevertheless, on the advice of her solicitor, she completed the sale.

Plaintiff's case:

17. The Defendant first contacted the Plaintiff's Kowloon Tong Branch office by phone in August 1997 about the sale of the Property. On 4 August 1998, she telephoned the Plaintiff asking to speak to the manager. Yip then passed the phone to Ng. Ng briefed her about the market condition and she said her asking price was $15 million. On or about 24 May 1999, the Defendant told Ng that she would be returning to Hong Kong and would reside in the Property for three months and agreed to reduce her asking price to $13 million. The above background accords with the Defendant's account.

18. On the other hand, in July 1998, Wong passed by the Plaintiff's branch office in Yau Yat Chuen and was approached by a woman staff of the Plaintiff. He told her that he was desirous of buying a property in Kowloon Tong or Beacon Hill area and she referred him to Yip. Yip showed him some properties in the area, but Wong was not interested. In early 1999, Yip contacted Wong again, but Wong showed no interest. Nothing further developed until July 1999.

19. In July 1999, Wong's wife (hereinafter called "Mrs Wong") returned from Canada and they planned to look for properties in Kowloon Tong and Beacon Hill areas again as Wong's father lives in Beacon Hill and their daughter lives in Dynastic Heights in Kowloon Tong. Wong contacted Yip again and asked Yip to show his wife some properties.

20. Yip then arranged for Mrs Wong to view the Property. After the inspection, the Defendant asked Yip over the phone if the purchaser was residing in Pearl Court and Yip replied he had no knowledge.

21. Wong considered the asking price too high. So Ng obtained two verbal valuations of the then market value of the Property from the Standard Chartered Bank and Kincheng Bank Limited. The Standard Chartered Bank gave a higher valuation of $9.8 million. Wong then made an offer at $9.8 million. That was rejected by the Defendant. A series of offers and counter offers progressed with Wong increasing his offer to $10.5 million and then $11 million which were rejected by the Defendant who counter offered at $12 million and later $11.5 million.

22. On 24 July 1999, Wong gave Yip a final bid of $11.48 million which he said was very definitive and that he would not negotiate further if rejected. Yip reported to Ng who instructed him to ask Wong to sign a provisional agreement and to give the Plaintiff a cheque for the initial deposit to be delivered to the Defendant as a final offer. Yip then arranged to meet Wong in Regent Hotel where Wong and his wife were having tea. Wong signed the provisional agreement and gave him a cheque for $390,000 as the initial deposit. Thereafter, the transaction took the usual course.

23. Apart from the very casual mention by the Defendant following the viewing by Mrs Wong, Ng and Yip denied having had any other conversation with the Defendant as to where the purchaser lived and that she would not sell to her neighbours or would not sell to her neighbours with any reduction from her asking price of $13 million.

Credibility:

24. This case stands or falls on my finding of credibility of the witnesses of the parties.

25. Mr Yin for the Plaintiff submits that the Defendant is not credible. Counsel says that the alleged stipulation by the Defendant that she would not reduce her asking price if the purchaser lived in Pearl Court was peculiar. It might be understandable if the intention was to obtain a higher price by reason of the special interest or connection such a purchaser might have. But that motive was expressly disavowed by the Defendant, who insisted that the only reason for the stipulation was that she had been feuding with one particular neighbour, i.e. the owner of the flat immediately below. He attacks her credibility on the basis that it defies common sense and logic for the Defendant to exclude all her neighbours from Pearl Court the benefit of a reduction in the asking price just because of her reluctance to sell to a particular neighbour. He says in view of her deep-seated resentment against Wong, she could have simply refused to sell to Wong.

26. I am satisfied that the Defendant and Wong had a long history of discord arising out of Wong's complaint against her when she first moved into Pearl Court, the nuisance Mr Wong Senior's canopy caused, her refusal to rent her car park to Mr Wong Senior at a lower rent, Mr Wong Senior's insincerity in not making any counter offer and generally about Mr Wong Senior's attitude. Without going into the merit of their dispute, suffice it is for me to find that the Defendant had a deep-seated resentment against Mr Wong Senior. She was dissatisfied with his attitude in making inquiries indirectly through the watchman and was insincere in rejecting her asking price twice by saying the Property was not worth the price but without giving any counter offer. As a fact, she simply did not like Mr Wong Senior and did not like to sell the Property to him thereby giving him the benefit of living close to his family members. In that light, her attitude is wholly understandable. She did not wish to make known her intention not to sell to Mr Wong Senior because she did not wish to be embarrassed if the Property could not be sold and she had to continue living there. As she had previously made offer to sell to him at $13 million, she did not wish to withdraw the offer against him. In view of the above background, I find her explanation credible.

27. The Defendant described how she had been approached by Mr Wong Senior twice through the watchman and once through East Asia for the purchase of the Property. The last approach was just a week before Yip and Ng became actively involved in pushing the sale. She must be mindful of this potential purchaser immediately below. In view of the circumstances, I find the caution she took in repeatedly asking Yip and Ng about the identity of the purchaser credible.

28. Not only that I find her credible, I also find her an impressive witness. She is cogent in her evidence and spontaneous in her response under cross-examination. I find her a credible witness and accept her evidence.

29. Yip was the estate agent who directly dealt with the Defendant and Wong. He said he had no knowledge of Wong's address and only contacted him through telephone. He said neither he nor the Plaintiff has any record at all of Wong. He said he wrote down particulars of his clients on pieces of stick on notes and stuck them on his computer. He never had Wong or his wife to sign any inspection record in respect of the properties he showed them during the year or two. He said Wong refused to sign, yet he continued to show them properties even at the risk of not being able to recover any commission. His explanation is that the market was poor and he was prepared to run the risk. The Plaintiff is a well established, respectable and sizeable estate agency. Given the size and scale of the Plaintiff's operation, I do not consider Yip's evidence credible.

30. What betrayed him is Wong's cheque of $390,000 as initial deposit under the provisional agreement. Yip said after obtaining Wong's final bid of $11.48 million, he was instructed to ask Wong to sign the provisional agreement and to collect an initial deposit from him. Initially his evidence was that he met Wong and his wife in Regent Hotel where he worked out the amount of deposit to be paid and Wong wrote him the cheque. The amount of deposit was calculated by rounding up or down from the amount of stamp duty payable. At the then applicable rate of 3.75%, the amount of stamp duty payable was $430,500. He was shown the cheque during cross-examination. The cheque was typed showing that it could not have been written out in Regent Hotel. He then corrected himself saying that he telephoned Wong the day before, calculated the amount of deposit during that telephone conversation and told Wong to prepare the cheque. He said he miscalculated the amount of deposit. Still he was unable to explain how the mistake came about. Mr Chain suggests that it was a nice 3% of the original asking price of $13 million. It certainly was but I am quite unable to draw any irresistible inference about any pre-existing conspiracy between Yip and Wong to deceive the Defendant into selling the Property to Wong below $13 million.

31. The cheque is only a collateral and not central issue in this case. Yip could have been honestly mistaken in his evidence about calculating the deposit in Regent Hotel and calculated the deposit wrongly. Both coincidences could have happened to him at the same time, however rare that may be. But the practice of demanding no less than the amount of stamp duty as initial deposit is a well established one. Even on his own evidence, he said he was acting on that practice. But he totally failed to give a convincing explanation as how that miscalculation came about. I do not have to find there was any conspiracy between him and Wong. I only have to determine if he is credible and I find he is not. I also bear in mind that he has been disadvantaged in being shown the cheque which has not been disclosed to the Plaintiff's solicitors in the course of discovery. Despite that, I consider his allegation of miscalculation is too convenient an excuse. There must be more that has happened between him and Wong than he was prepared to tell.

32. Ng's evidence corroborated with Yip's. As he was not the agent in direct contact with the Defendant and Wong, little turned on his evidence, except his denial that the Defendant had indicated to him that she would not sell the Property to her neighbours with a reduction in price and that he denied telling the Defendant that he had to be "artificial". Having regard to the totality of the evidence, I consider his evidence inherently incredible. I do not consider him credible and reject his evidence.

33. Wong also corroborated generally with Yip and Ng. He was living in the flat immediately below the Defendant's. He said he knew little about the discord between the Defendant and his father. He did not consider himself as resident in Hong Kong at the time of the purchase of the Property. At the time, he has at least returned and stayed in Hong Kong for more than a year and was running a business. I think there is an element of artificiality in his evidence.

34. If he or his wife was told by Yip that Yip would be showing them a unit in Pearl Court, someone in his position living in Pearl Court would probably have asked why should he not contact the owner himself. Pearl Court is a small estate with 48 units, and only 24 of which matched the description of being large units with view of Kowloon Tong. It would not be difficult to identify the vendor through the watchman and there was no reason why one would wish to incur over $100,000 to have the Plaintiff's agent show him the Property in the same building. Just a few days ago, his father has contacted the Defendant through the watchman asking for the price. A direct purchase would also save the vendor from paying commission, thereby giving more room for price negotiation. Yet he seems to be wholly disinterested in approaching the vendor direct. He said he saw no need to conceal the fact that he was residing in the floor below. But on the other hand, he used his factory address on the provisional agreement. That to me is wholly artificial. I do not consider him a credible witness. I must add that my adverse finding of Wong's credibility does not assist the Defendant as counsel has not sought to prove any conspiracy between him and Yip or Ng.

35. There is another controversy between the Plaintiff's and the Defendant's cases as to who made the final offer of $11.48 million. Having found the Defendant credible and Yip and Ng incredible, I accept the Defendant's account.

Factual issue: Defendant's instruction and Plaintiff's misrepresentation:

36. The factual issues are what was the instruction the Defendant gave to the Plaintiff and what were the representations the Plaintiff made.

37. Having accepted the Defendant as a credible witness, I find that though she had not prohibited sale of the Property to her neighbours or anyone living in Pearl Court at the beginning, in the course of the subsequent negotiations, she gave clear instruction that she would not sell to her neighbours with any reduction from the asking price of $13 million. This I take as the instruction binding on the Plaintiff.

38. The Defendant had made known her concern of not selling to her neighbours at the reduced price. On the evidence as I accepted, both Yip and Ng were fully aware of that instruction and the Defendant's concern. During the telephone conversation on 21 July 1999, Yip told the Defendant that the purchaser lived in Beacon Hill Court and that he had accompanied the purchaser to her home there. On 23 July 1999, Yip repeated that the purchaser's family lived in Beacon Hill Court. When Ng took over the conversation from Yip, the Defendant repeated that she would not sell to her neighbours for less than $13 million. On these facts, I find that the Plaintiff represented to the Defendant through Yip that the purchaser was living in Beacon Hill Court and he did so knowing that whether the purchaser lived in Pearl Court was a material and relevant consideration for the Defendant. What Yip told the Defendant must be a misrepresentation of fact as the purchaser was in fact living in Pearl Court. Whether he did so knowingly or recklessly or negligently is immaterial. He must have done so at least recklessly regardless whether it was true or not.

Whether the Plaintiff was in breach of duty to follow instruction:

39. Mr Yin submits that even if the Defendant had given the instruction not to sell to her neighbours at the reduced price, it does not follow that the Plaintiff must do everything possible to see to it that the Defendant's wishes are effectively carried out. I find such proposition startling. His argument is as follows. The scope of the duty to follow instruction in any given case must be determined by reference to the nature and the surrounding circumstances of the contract. The Defendant was aware that the Plaintiff was acting for both the purchaser and the vendor. In the circumstances, the contract of agency between the Plaintiff and the Defendant could not have included a term requiring the Plaintiff to disclose information confidential to the purchaser. As the identity and address of the purchaser is information confidential to the purchaser, the Plaintiff could not have been under any duty towards the Defendant to ascertain such information and, a fortiori, the Plaintiff could not have been in breach of contract for failing to ascertain for the Defendant's benefit that which she had no right to find out.

40. He cited the following passage from Kelly v Cooper [1993] AC 205 at 213 to 215 as authority in support of his proposition:

" In the view of the Board the resolution of this case depends upon two fundamental propositions: first, agency is a contract made between principal and agent; second, like every other contract, the rights and duties of the principal and agent are dependent upon the terms of the contract between them, whether express or implied. It is not possible to say that all agents owe the same duties to their principals: it is always necessary to have regard to the express or implied terms of the contract. This fact is fully recognised in the introduction to chapter 5 of Bowstead on Agency, pp. 137-138: the rest of the chapter, including the proposition on which the judge relied, is dealing with the duties which will arise from the terms normally found in a contract of agency.

In a case where a principal instructs as selling agent for his property or goods a person who to his knowledge acts and intends to act for other principals selling property or goods of the same description, the terms to be implied into such agency contract must differ from those to be implied where an agent is not carrying on such general agency business. In the case of estate agents, it is their business to act for numerous principals: where properties are of a similar description, there will be a conflict of interest between the principals each of whom will be concerned to attract potential purchasers to their property rather than that of another. Yet, despite this conflict of interest, estate agents must be free to act for several competing principals otherwise they will be unable to perform their function. Yet it is normally said that it is a breach of an agent's duty to act for competing principals. In the course of acting for each of their principals, estate agents will acquire information confidential to that principal. It cannot be sensibly suggested that an estate agent is contractually bound to disclose to any one of his principals information which is confidential to another of his principals. The position as to confidentiality is even clearer in the case of stockbrokers who cannot be contractually bound to disclose to their private clients inside information disclosed to the brokers in confidence by a company for which they also act. Accordingly in such cases there must be an implied term of the contract with such an agent that he is entitled to act for other principals selling competing properties and to keep confidential the information obtained from each of his principals."

41. With respect, I think counsel has misunderstood the law, misinterpreted and misapplied Kelly v Cooper. At the very beginning of the passage cited by counsel, Lord Browne-Wilkinson said that like every other contract, the rights and duties of the principal and agent are dependent upon the terms of the contract between them, whether express or implied. Then Lord Browne-Wilkinson went on to analyse the contractual relationship between principal and agent acting for more than one principal. It was in that context that Lord Browne-Wilkinson implied into the contract of the agent a term that such an agent acting for other principals selling competing properties may keep confidential the information obtained from each of his principals. In that case, there was no express term requiring disclosure from the agent.

42. The fundamental principle is that the rights and obligations of the principal and agent are governed by the terms of their contract, whether those terms are expressed or implied. Terms are only implied into a contract under the Moorcock principle to give business efficacy to the contract. If there are express terms covering the situation, then there is no room to imply any term into the contract, especially if the term sought to be implied is inconsistent with the express term.

43. In the present case, the Defendant had given express instruction not to sell to her neighbours below $13 million. That instruction became part of the contract of agency. This distinguishes the present case from Kelly v. Cooper. It is not open to the agent to say I am at liberty to ignore that express term because the law implies into my contract a term that allows me to keep confidential the information of my other principal. In the present case, not only that the Plaintiff was in breach of the contract of agency, it was also guilty of misrepresentation.

44. If the instructions of both of his principals put the agent in a position of conflict, it is his duty to resolve the conflict or to cease to act, preferably for both principals. It is not up to the agent to choose to depart from his instruction, not at least without first informing his principal.

45. In the present case, Wong has not given instruction not to disclose his address. The Plaintiff's case is that Wong has not given them his address. Thus it is not the Plaintiff's case that it is relying on the implied term of secrecy. The defence is a creation of counsel.

46. Thus, if Yip knew Wong was a resident of Pearl Court, then he has to inform the Defendant. It would then be up to the Defendant to decide whether to sell with or without reduction in price or to adjust her pricing strategy. He cannot, with knowledge of its falsity, make a misrepresentation to the Defendant so as to facilitate the transaction. He cannot, as Ng admitted to the Defendant, be "artificial". On the other hand, if Yip did not know where Wong lived, he should make enquiry from Wong, because the Defendant considered that a material consideration. If Wong refused to disclose his residential address or if the address was communicated to the agent in confidence, then he had to inform the Defendant that he was under a duty of confidence to the purchaser not to disclose and left it to the Defendant to draw whatever inference she would and decide whether to proceed with further negotiation. He may not represent to the Defendant that the purchaser lived in Beacon Hill Court, reckless as to whether it is true or not. On either scenario, Yip and, through him, the Plaintiff, were in breach of an important term of the contract of agency.

Whether Defendant is liable to pay commission despite Plaintiff's breach:

47. Mr Yin submits that the Plaintiff has performed its part of the contract and the commission has been earned. He also argues that by completing the sale, the Defendant was adopting the agency contract and has not accepted the repudiation by the Plaintiff. In my view, the agency contract and the sale and purchase agreement are two independent contracts. Despite the wrongful act of the agent, the Defendant has entered into a valid and binding contract with a third party. She has no alternative but to perform her part of the sale and purchase agreement, otherwise she would be bringing another litigation on herself for which she has no defence. Her liability for breach of the sale and purchase agreement would be far greater than that for her breach of the agency contract. I do not think by completing the sale she was adopting the agency contract. She has also communicated her acceptance of the Plaintiff's repudiation through her solicitors' letter of complaint to the Plaintiff.

48. Mr Yin submits that even if the agent is in breach of contract, he does not automatically lose his right to commission, unless the breach goes to the whole of the contract rendering the work done entirely useless to his principal. He submits that once the transaction has been completed and the principal has had the benefit of the agent's work, he must pay the commission though the agent would be liable to compensate his principal for any loss caused by reason of his breach or neglect. In the present case, the Defendant was desirous of selling her flat and its sale at $11.48 million was on any view an advantageous transaction because of the continued down turn in the property market. Thus counsel submits, irrespective of any grievance which the Defendant might feel regarding the identity of the purchaser, the Plaintiff's work cannot be said to be useless to her and any injury to her feelings is not a recognised head of damage under the general law of contract.

49. I think the test for liability as submitted by Mr Yin is too narrow. 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, as Mr Yin submits, 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, where 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, as Mr Yin submits, goes to the whole of the contract, it falls within the serious breach category. But breaches short of such severety may also disqualify the agent from his 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 secret profit, purchasing the principal's property without proper disclosure, taking bribe and failure to disclose material facts are common examples of such repudiation.

50. In Heath v Parkinson (1927) 136 LT 128, the defendant held a lease of certain business premises subject to a restrictive covenant against carrying on any business there other than that of a music-seller. Unknown to the defendant, his estate agent was informed by the landlords that they would grant a licence for the carrying on of a tailoring business and then persuaded the defendant to accept a lower price for the purchase of the lease. Rowlatt J held that the agent has not earned his commission for he has taken advantage of the false position which he did his best to maintain.

51. In the present case, Yip knew the Defendant would not sell for less than $13 million to anyone living in Pearl Court. Whatever may have been her reason, that was her instruction and it is obvious that residents in Pearl Court may be more ready to offer a higher price for the Property if he should wish to buy a property in Pearl Court. No matter whether a sale could be effected to anyone in Pearl Court for $13 million, that remains the Defendant's choice. The agent may not cheat her out by deliberately withholding from her the truth that the purchaser was a resident of Pearl Court. Or in a less unfavourable light, the agent may not, regardless whether it is true or not, positively led the Defendant into the belief that the purchaser was not a resident of Pearl Court. Had Yip told the Defendant that he had no knowledge if the purchaser was a resident of Pearl Court, the Defendant could have made her enquiries whether through Yip or as she eventually managed through the watchman. Had she known that the purchaser was a resident of Pearl Court, she could have adjusted her pricing strategy. She may have stood firm on her asking price of $13 million, or may have made a better deal than $11.48 million by being firm, or may by reason of the stalemate end up with no deal and became worse off as a result of the falling market. Whatever would have been the situation, it is not for Yip to treat the Property as if it were his to sell and to make the decision for her. Obviously, when Ng told the Defendant that as estate agent he has to be "artificial", both Ng and Yip knew of the Defendant's instruction and both acted together to sell the Property as if it were theirs to sell in wanton disregard of the Defendant's instruction. Even if they have not conspired with Wong to deceive the Defendant into selling at a price she otherwise would not have agreed, they allowed their personal interest in earning commission to override their principal's interest. That is destructive of the substratum of the agency contract of good faith and fidelity as to amount to a repudiation of the contract of agency. Accordingly, I find that the Defendant is discharged of her obligation to pay commission.

Defendant's counterclaim for damages:

52. Mr Chain submits that had the Defendant known that the purchaser was Wong of the floor immediately below, she would not have agreed to sell at $11.48 million. Given the deep-seated resentment she has against Wong's father, I have no doubt that she would not have sold for $11.48 million. But what is her loss?

53. Mr Chain submits that the Defendant has lost a substantial chance of selling the Property for more, up to $13 million. He asks me to adopt the approach in Allied Maples Group Ltd v Simmons & Simmons [1995] 1 WLR 1612 and assess the chance as between 25% to 75% and then assess the damages accordingly. I have no doubt that the principle in Allied Maples Group Ltd v Simmons & Simmons is correct. In assessing the chance that was lost, I have to take into account all the circumstances of the case. The chance is the chance to sell to her neighbours, i.e. residents of Pearl Court. This is not a large class of people. Other than her unit, there were only 47 units. Even giving the word "residents" a wide meaning as to include members of the family not residing in Pearl Court, the number of such potential purchaser must be very limited. On the facts, apart from Wong, no other neighbour has indicated any interest to purchase at above $11.48 million. This apart, the property market at the time did not support a sale at $13 million. The higher of the two valuations obtained by the Plaintiff from two local banks was only $9.8 million. According to the Plaintiff's expert, the market value at the time was also $9.8 million. The Defendant's own expert gave a much lower valuation. Thus the price at which the Defendant sold was well above market price by 15 to 30%. Mr Wong Senior did not respond to the Defendant's asking price of $13 million, saying it was too high. According to Wong, his offer of $11.48 was final. He had other choices and would consider buying in Sky Lodge, which is closer to where his daughter lived and where his wife has a greater preference. Though I do not consider Wong a credible witness, I can have no doubt that his offer of $11.48 million was near final. That is almost $11.60 million inclusive of commission and is 15 to 30% above the then market price. If he was willing to offer a higher price, he would have entered into direct negotiation with the Defendant in the hope of getting about 10% reduction from her asking price of $13 million, without having to pay commission to the Plaintiff. The price of $11.48 million is also very much above the market price. There must be a limit one is prepared to go above the market price for the convenience of living near to one's parents. I do not think he would offer much more. On the other hand, given the deep-seated resentment between the Defendant and Wong, I do not think there was much room for reduction by the Defendant from her asking price of $13 million. The Defendant impressed me deeply that she was very determined not to sell for less than $13 million to Wong and that must include his family members also. In fact, she did not want to sell to Wong and she only gave the asking price upon the persisting insistence by the watchman. Thus, there was a gap of $1.52 million apart. Though human affairs are difficult to foretell and incapable of rationalisation, with Wong not willing to offer much more and with the Defendant not willing to sell for less or much less to Wong, the chance that they will strike a deal in between is unreal and non-existent. The chance of finding another purchaser from Pearl Court was equally remote. In view of the market condition then and that $11.48 million was already 15 to 30% above the market price, the chance of finding another purchaser from outside who would offer above $11.48 million was also non-existent. Thus the chance that the Defendant could sell above $11.48 million was not only speculative but also unreal and non-existent. This is a case of a nominal award to mark the recognition of the infringement of her rights and the Court's disapproval of the Plaintiff's conduct.

Conclusion:

54. The Plaintiff's claim for commission is dismissed. I enter judgment on the Defendant's counterclaim in the amount of $1. The Defendant shall have costs of the action against the Plaintiff. The security for costs paid into Court by the Defendant shall be released if no appeal is lodged by the Plaintiff within 28 days.