HONG KONG PROPERTY SERVICES (AGENCY) LTD v. ZOU JIFENG

HCA 701/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 701 OF 2015

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JUDGMENT

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I.  INTRODUCTION

1.  The plaintiff (“P”) was/is a licensed estate agent pursuant to the Estate Agents Ordinance Cap 511 (“EAO”).

2.  P claimed that pursuant to sections 45-46 of the EAO, P and the defendant (“D”) signed an estate agency agreement (Form 4) dated 20 October 2012 (“Form 4”). By the Form 4, D engaged P as his estate agent for the period from 20 October 2012 to 19 January 2013. The following were express terms and conditions of the Form 4:

Clause	Description
1	代理的委任及本協議的有效期 本人/我們, ZOU JIFENG (“買方”)現按照本協議的條款並在該等條款的規則下就擬購買本協議附表1所列物業(“物業”)一事委任[P](“代理”)為本人/我們的代理。本協議由2012年10月20日起生效, 並於2013年1月19日屆滿(首尾兩天包括在內)(“有效期”)。......
3	佣金 本協議適用於買方須向代理支付佣金的規定,列於本協議附表1、3及5內。
......

附表1

物業

物業	視察日期 ......	買方放棄收取物業資料表格(包括賣方的陳述)的權利 ......	代理關係 ......	賣方所須支付的佣金(如適用的話)的數額或收費率	買方所須支付的佣金的數額或收費率	買方的簽署
(a) 金巴倫道21號	2012年10月20日	是否	......有可能代表雙方的代理	1%	1%	[簽名]
(b) 金巴倫道23號	2012年10月20日	是否	......有可能代表雙方的代理	1%	1%	[簽名]

......
	附表3 買方須支付的佣金
1	......,如買方在有效期內經由代理與賣方就一項或多於項物業訂立具約束力的買賣協議,則買方須於: ......þ買賣協議指明的物業交易完成時,向代理支付佣金。
......
4	如代理為購買任何一項或多於一項物業的目的而與其他地產代理合作,則買方無須向該等其他地產代理支付任何佣金。[1]

3.  It was P’s case that on 20 October 2012, P introduced to D a property known as Nos 21 and 23 Cumberland Road, Kowloon (“Property”) and arranged for D to inspect the Property on the same day. D agreed to pay P 1% of the purchase price of the Property as commission. P further claimed that as a result of P’s services as estate agent and according to the terms/ conditions of a provisional agreement for sale and purchase dated 20 October 2012 made by Foo Tak Development Company Limited (“Foo Tak”) as vendor, D as purchaser and P as estate agent (“PASP”), Foo Tak agreed to sell and D agreed to purchase the Property (“Transaction”).

4.  The copy PASP as disclosed by P was in P’s standard pre-printed form with (a) P’s logo and estate agent (company) licence number at top left of the 1^st page, (b) date and names of Foo Tak and D completed in manuscript, (c) P’s pre-printed name, business registration number, estate agent (company) licence number at the top of the 1^st page, and (d) the following express terms and conditions:

Clause	Description
2	The purchase price of the Property shall be HK$348,888,000.00 which shall be paid by [D] to [Foo Tak]  in the manner as follows: (a) initial deposit shall be paid upon signing [the PASP] in the sum of HK$17,500,000.00, (b) upon signing of the Formal Agreement for Sale and Purchase on or before 2nd Nov, 2012 further deposit shall be paid in the sum of HK$17,388,800.00, (c) balance of the purchase price shall be paid upon completion on or before 15 January 2013 at [Foo Tak’s] solicitors in the sum of HK$313,999,200.00.
......
9a	In consideration of the services rendered by [P], [P] shall be entitled to receive HK$3,488,800.00 from [Foo Tak] and HK$3,488,800.00 from [D] as commission (respectively the “Vendor Commission” and the “Purchaser Commission”).
9b	The Vendor Commission and the Purchaser Commission shall be paid not later than 15 Jan, 2013.
......
10a	If in any case either [Foo Tak] or [D] fails to complete the sale or purchase in the manner herein contained, the defaulting party shall compensate at once [P] HK$6,977,600.00 as agreed damages.
......
12	This Agreement supersedes all prior negotiations, representation, understanding and agreements of the parties hereto.
......
16	It is hereby declared that [P] is the Agent for both [Foo Tak] and [D].

Notice to the Purchaser and Vendor

Save And Except those mentioned in [the PASP], any staff of [P] ranking below branch manager has no authority to give or make any promise, warranty or representation for and on behalf of [P].

The PASP was signed by Yu Pang Lin for and on behalf of Foo Tak, D, and “Calvin Lam” (estate agent (individual) with licence no E067013) (“Lam”)[2] for and on behalf of P. The PASP was registered in the Land Registry by memorial no 12111902210010.

5.  Pursuant to the PASP, Foo Tak and D entered into a formal agreement for sale and purchase dated 15 January 2013 (“FASP”). Part II of Schedule 4 of the FASP specified the completion date for the Transaction to be on/before 15 March 2013 (ie the completion date had been extended). The following were express terms/conditions of the FASP:

Provision		Description
Schedule 7 Clause (f) “Information included for the purposes of s.29B(1) of the Stamp Duty Ordinance (Cap117)”		Date of any preceding unwritten sale agreement or agreement for sale made between the same parties on the same terms: The 20th day of October 2012[3]
Schedule 1 Clause 1 “Special Conditions”		Notwithstanding anything herein contained to the contrary, the parties hereto agree that if the sale and purchase of the Property shall not be completed by reason of the default of either party after signing thereof, the defaulting party shall be responsible to pay or (as the case may be) reimburse to the other party all estate agent’s commission paid or payable in connection with this transaction and all stamp duty paid or payable under [the FASP] and/or the Precedent Agreement.

P signed the FASP in the presence of solicitor Cheung Wai Man (“Cheung”) of his former solicitors Deacons (“Deacons”). Cheung also signed on the FASP to confirm he had interpreted it to D.

6.  According to the Recitals (“Recitals”) of a Cancellation Agreement made on 31 December 2014 between Foo Tak as vendor and D as purchaser more particularly described in paragraph 8 below (“Cancellation Agreement”),

(a)  the completion date for the Transaction was further extended to 22 March 2013 (Recital (B));

(b)  D paid to Foo Tak a total sum of $66,888,800.00 as deposit and part payment (Recital (C));

(c)  D did not complete the purchase of the Property on 22 March 2013 consequent upon which Foo Tak purported to terminate the FASP and forfeit the deposit (Recital (D));

(d)  by a writ of summons in HCA1009/2013, D sued Foo Tak for inter alia specific performance and/or damages in lieu on the basis that the termination was invalid (Recital (E));

(e)  by a deed of settlement dated 3 June 2014 (“Settlement Deed”), Foo Tak and D settled HCA1009/2013 and such claims/ disputes arising from the FASP (Recital (E));

(f)  pursuant to the Settlement Deed, Foo Tak and D agreed to proceed with the FASP whereupon D would complete the purchase of the Property on 3 December 2014 by paying the balance of the purchase price, failing which it was irrevocably agreed that Foo Tak would be entitled to forfeit 10% of the purchase price in the sum of $34,888,800.00 from the deposit, and the balance of the deposit in the sum of $32,000,000.00 would be returned to D free of interest (Recital (F));

(g)  the completion date for the Transaction was further extended to 31 December 2014 but the other terms of the FASP and Settlement Deed remained unchanged (Recital (G));

(h)  by letter dated 30 December 2014, D’s present solicitors Liau, Ho & Chan (“LHC”) confirmed to Foo Tak’s solicitors (i) D was unable to complete the purchase of the Property on 31 December 2014 due to his financial inability and (ii) pursuant to the Settlement Deed Foo Tak shall be absolutely entitled to forfeit $34,888,800.00 from the deposit and shall return the balance of $32,000,000.00 to D (Recitals (H)).

7.  Recital (D) stated that clause 10a of the PASP was encapsulated in clause 1 of Schedule 1 of the FASP, which meant the Precedent Agreement in the latter clause and “the preceding ...... agreement for sale made between the same parties” dated 20 October 2012 referred to the PASP.

8.  By the Cancellation Agreement, D admitted he was in default for the purpose of clause 10a of the PASP. Choi Lai Shan (clerk to LHC) signed the Cancellation Agreement to confirm its contents had been interpreted to D in putonghua, and D signed such agreement in the presence of LHC’s solicitor Kelvin KY Li. The Cancellation Agreement expressly stated as follows:

Provision	Description
Recital (A)	By a [PASP] dated 20 October 2012 entered into between [Foo Tak], [D] and [P] (“the Agent”) (registered in the Land Registry by Memorial No 12111902210010), [Foo Tak] agreed to sell and [D] agreed to purchase [the Property] ...... for HK$348,888,000 whereas the date for the completion of the sale and purchase ...... was scheduled on 15 January 2013 (“the Provisional  ASP”).
......
Recital (D)	...... Clause 10a of the Provisional ASP [ie the PASP] provides that if in any case either [Foo Tak] or [D] fails to complete the sale and purchase, the defaulting party shall compensate the Agent [ie P] for a sum equivalent to the total of the commission payable by [Foo Tak] and [D]. Clause 10a of the Provisional ASP [ie PASP] was further encapsulated in Clause 1 of Schedule of the [FASP] which provides that shall any party default in the completion, the defaulting party shall be responsible to pay or reimburse to the other party all estate agent’s commission paid or payable in connection with the transaction.
......
Clause 1	[D’s] failure to complete on 31 December 2014 amounts to default for the purpose of Clause 10a of the Provisional ASP [ie the PASP] and repudiation of the [FASP] and the [Settlement Deed] which [Foo Tak] accepts so that the [FASP] (as modified by the Mutual Agreement, the [Settlement Deed] and the Time Extension Proposal) is forthwith terminated and cancelled with no further force or effect whatsoever as between the parties hereto for the purpose of completion of the [Property] but without prejudice to such rights reserved under Clause 1 to Schedule 1 of the [FASP].
Clause 2	[Foo Tak] is entitled to and hereby do forfeit HK$34,888,800 from the Deposit. The balance of the Deposit in the sum of HK$32,000,000 is hereby returned by [Foo Tak] to [D] (the receipt of which is hereby acknowledged by [D]).

9.  On the express terms of the PASP, FASP and Cancellation Agreement,[4] it was plain that:

(a)  P (defined as the Agent in both the PASP and Cancellation Agreement) was the estate agent for both Foo Tak and D in respect of the Transaction;[5]

(b)  each of Foo Tak and D agreed to pay 1% of the sale/purchase price of the Property to P for its services in respect of the Transaction (“Vendor Commission” and “Purchaser Commission”);[6]

(c)  if D failed to complete the Transaction, he shall at once compensate “the Agent” by a sum equivalent to (i) 2% of the sale/purchase price or (ii) the combined Vendor and Purchaser Commission as agreed damages;[7]

(d)  the Agent in (c) above was expressly identified to be P;[8]

(e)  D failed to complete the purchase of the Property;[9]

(f)  D’s failure in (e) above amounted to (i) default for the purpose of clause 10(a) of the PASP and (ii) repudiation of the FASP and the Settlement Deed;[10]

(g)  the Cancellation Agreement was without prejudice to rights reserved under clause 1 of Schedule 1 of the FASP that encapsulated clause 10a of the PASP, ie D as defaulting party was responsible to pay all estate agent’s commission payable in connection with the Transaction under the Precedent Agreement being the PASP.

10.  Thus, on 30 March 2015, P commenced the present action against D to claim agreed damages under clause 10a of the PASP in the sum of $6,977,600.00 with interest and costs.

11.  Mr Chu, counsel for D, submitted it was all along D’s case that (a) D did sign the PASP dated 20 October 2012 (and he would not disown his signature thereon), and (b) D’s estate agent in respect of the Transaction was Yancy Personal Affairs HK Limited (因私赴港服務有限公司, “Yancy”) and not P. But D did not specifically plead (a)-(b) above in his Defence (see paragraph 13 below).

12.  On 22 February 2016, LHC wrote to P’s solicitors Tony Kan & Co (“TKC”) for production of the PASP referred to in the Statement of Claim (“SoC”) for inspection/copies (“22/2/16 1^st Letter”). On 24 February 2016, TKC replied that P was unable to produce the original PASP as it had been submitted to Deacons for registration (“24/2/16 1^st Letter”). On 22 February 2016, LHC also wrote to TKC to enquire whether P claimed (a) it was the agent for both Foo Tak and D in respect of the Transaction, (b) it was entitled to receive the Vendor and Purchaser Commission, (c) Yancy had no interest in P’s claim (“22/2/16 2^nd Letter”). On 24 February 2016, TKC declined to reply to such questions pending sight of D’s Defence (if any). There was no mention in the 22/2/16 1^st and 2^nd Letters of the matters in paragraph 11(a)-(b) above.

13.  On 28 February 2016, D filed his Defence. D admitted he signed “a provisional agreement” with Foo Tak, but denied he ever agreed to pay commission to P for the Transaction. There was no clear admission that D had entered into and executed the PASP as pleaded in the SoC, and no averment at all that Yancy was D’s estate agent in respect of the Transaction.

14.  On 11 May 2016, P filed its Amended SoC (“ASoC”). On 22 March 2016, P filed a summons pursuant to Order 14 rule 1 of the Rules of the High Court (“RHC”) for summary judgment of the amount claimed with interest and costs (including costs of the application)(“Summons”). On 22 March and 5 August 2016, P filed the affirmation of its senior associate director Lam (ie Lam Yee Hang also known as Calvin Lam[11]) (“Lam’s 1^st Aff”) and that of its solicitor Chan Kit Yin (“Chan’s Aff”) in support of the Summons and to verify the claim in the SoC. On 8 April 2016, D filed his own affirmation to oppose the Summons (“D’s 1^st Aff”).

15.  It was only on 20 May 2016 that LHC wrote to TKC (“20/5/16 Letter”) to assert he had appointed Yancy’s Regan Shum (also known as Shum Chun Wai, “Shum”) as his agent to deal with his personal affairs in Hong Kong and that he did not engage P for any service, so P did not provide any service for him and was not entitled to any damages. By the 20/5/16 Letter, LHC invited P to produce the original PASP for inspection and also to reply to the questions raised in the 22/2/16 2^nd Letter.

16.  Yancy’s company search records showed it changed its name to Prince Foster Property Agency Limited (“Prince Foster”) on 12 October 2015. Before such change of name, Yancy’s directors were Ng Chan Man and Yancy International Limited, and the latter was its sole shareholder. After such change of name, its directors were Chan Pui Shuen, Shum and Li Hoi Wing, and they also became its shareholders. The Estate Agents Authority records showed Yancy (later known as Prince Foster) held a license as estate agent (company) since 25 July 2011 valid up until to 24 July 2017.

17.  On 22 July 2016, D filed a summons to seek leave to file/serve further affirmation to oppose the Summons (“Aff Summons”). On 25 July 2016, D filed his 2^nd affirmation (“D’s 2^nd Aff”). On 5 August 2016, P filed Lam’s 2^nd affirmation (“Lam’s 2^nd Aff”) and Shum’s affirmation (“Shum’s Aff”). At the hearing of the Aff Summons and the Summons on 10 August 2016 (“Master Hearing”), Master Ho granted leave for the parties to file/serve these new affirmations with costs to P, and also granted judgment in favour of P against D in the sum of $6,977,600 with interest at prime rate plus 1% (ie 6%pa) from 31 December 2014 to the date thereof and thereafter at judgment rate until full payment and with costs of the action (including the Order 14 application) summarily assessed at $140,000 with certificate for counsel (“Master Order”).

18.  On 12 August 2016, P filed Lam’s 3^rd affirmation to verify the ASoC pursuant to P’s undertaking to Master Ho at the Master Hearing.

19.  On 23 August 2016, D filed Notice of Appeal to set aside the Master Order and to seek an order that costs of the Summons and appeal be to D to be taxed if not agreed (“Appeal”). The hearing of the Appeal came before me on 17 January 2017 (“Appeal Hearing”).

II.  AFFIDAVIT EVDIENCE

(a)  1^st round of affidavit evidence

20.  D claimed (a) he did not engage P to be his agent or otherwise separately agreed with P to pay any commission, and (b) although he understood the PASP was a preliminary agreement for his intended purchase of the Property from Foo Tak, no one explained to him the terms or effect of the clauses when he signed it.

21.  D further claimed P and D had not entered into or executed any estate agency agreement as required under section 46 of the EAO and/or section 6 of the Estate Agents Practice (General Duties and Hong Kong Residential Properties) Regulation Cap 511 (“Regulations”) and/or Form 3 of the Regulations (and the PASP did not meet such requirement in form and substance), so by virtue of section 45 of the EAO P was not entitled to make the present claim which was essentially for commission payable to an estate agent. On the other hand, P claimed P and D did enter into or execute the Form 4 dated 20 October 2012, and Form 3 of the Regulations was irrelevant as it only applied to the vendor of property transaction.

(b) 2^nd round of affidavit evidence

22.  D suggested the 24/2/16 1^st Letter was “illogical in the sense that the burden of proof was unreasonably shifted to [D] ......”, and P should have a stamped original copy of the PASP.[12] D expressed surprise that P could not produce the original PASP, and complained of its non-reply to the 20/5/16 Letter. But the Lam 2^nd Aff queried why such complaint was not raised in D’s Defence and/or D’s 1^st Aff (when the 22/2/16 1^st Letter was sent before the Defence was filed), but raised less than 3 weeks before the Master Hearing by way of D’s 2^nd Aff. Anyway, Lam explained P’s standard-form provisional agreement (adopted for the PASP) consisted of 3 layers, ie top layer in white paper and 2 layers below in carbon paper, and the practice of P (and other estate agents in Hong Kong) was to retain the top paper copy of the completed/signed provisional agreement and to give a carbon copy to each of the vendor and purchaser. P retained the PASP’s top paper copy, but upon D’s subsequent request P gave it to Deacons for registration purpose.[13] This was the original because a carbon copy would be described as such in the land registration records,[14] which explained why the 24/2/16 1^st Letter stated the original PASP (ie top paper layer) was delivered to Deacons for registration. D did not refer to or deny such explanation in D’s 2^nd Aff.

23.  D next claimed there were not quite legible Chinese characters  “因私赴港服務有限公司” in manuscript alongside clause 9a in the copy PASP exhibited to Lam’s 1^st Aff. D claimed that all along he understood Shum and/or his company (now known to be Yancy) to be the middleman for the Transaction, and P was not his agent, and that he did not (a) have business relationship/dealings with P or (b) know any of P’s agents including Lam (whom D thought was an unlicensed Alvin Lam) mentioned in the PASP or Hui King Yee (“Hui”) mentioned in the Form 4. D said his impression of the strangers he met “in the purported day” (presumably 20 October 2012) was that they were Shum’s fellow colleagues as he only agreed to instruct Shum in relation to his personal investment in Hong Kong (and Shum did a lot of things for his business in Hong Kong), but P did not provide any service to him so P’s claim must fail for want of consideration.

24.  Lam’s 2^nd Aff suggested that on D’s case D must have known Yancy was his agent for the Transaction and could have so averred (but he did not so aver) in the Defence and/or D’s 1^st Aff, and D did not offer any explanation for such omission until he filed D’s 2^nd Aff less than 3 weeks before the Master Hearing. Anyway, Lam said (1) his name was “Calvin Lam” and not “Alvin Lam”, (2) he was the estate agent who signed the PASP on P’s behalf, and (3) D knew/agreed to engage P as his estate agent in the Transaction. Lam further explained that:

(a)  Yancy’s Shum approached/told Lam (i) Yancy acted for D in his application under the Capital Investment Entrant Scheme (“Scheme”), and (ii) D was looking for a luxury property in Hong Kong for such application;

(b)  Shum told Lam Yancy was a licensed estate agent but its primary business was to service clients’ applications under the Scheme, and proposed a commission-sharing arrangement with P whereby (i) Yancy would refer D to P, (ii) P would introduce suitable properties to D, (iii) P would receive and collect commission from D upon completion of purchase of any property so introduced to D by P, and (iv) P would pay to Yancy the commission paid by D in consideration of (i) above[15] (collectively, “Commission Arrangement”);

(c)  Hui (who was Lam’s subordinate) informed Lam that before the PASP was signed she had arranged for and accompanied D to view a number of 1^st/2^nd-hand properties and D eventually chose the Property, and indeed Lam himself accompanied D to view the Property before D signed the PASP;

(d)  when D signed the PASP, Shum, Hui and Lam were present, and Lam explained the PASP’s terms/conditions to D;

(e)  the Commission Arrangement was common in estate agency business, and was duly disclosed to and agreed by D, which explained why (i) the PASP was signed by P (and not Yancy) and (ii) (when Lam came to his explanation of clause 9a of the PASP) he wrote “因私赴港服務有限公司” alongside the amount of the Purchaser Commission to indicate that such commission payable by D to P would eventually be shared with Yancy.

25.  Lam added D could not say he did not know P acted as his agent because (a) clause 16 of the PASP clearly provided P was the agent for both the vendor and purchaser, (b) D confirmed under clause (f) of Schedule 7 of the FASP that the Precedent Agreement was dated 20 October 2012 (ie the PASP), (c) Recital (A) of the Cancellation Agreement confirmed P was the Agent under the PASP, and (d) by clause 1 of the Cancellation Agreement D agreed his failure to complete the purchase of the Property amounted to default for the purpose of clause 10a of the PASP upon which P’s claim was premised.

26.  By Shum’s Aff, Shum as director of Prince Foster (formerly known as Yancy) confirmed (a) the matters in paragraph 24 above insofar as they concerned Yancy/Shum, (b) prior to making the PASP it was P who provided estate agency services to D, including sorting out properties that met D’s requirements, providing D with information on properties, accompanying D to view properties (including the Property), and negotiating with Foo Tak over the terms of sale/purchase of the Property without which Foo Tak and D would not have entered into the PASP.

27.  D’s 2^nd Aff further suggested P had displayed a hostile/ unhelpful stance and had not been full and frank despite LHC’s 22/2/16 1^st and 2^nd Letters and 20/5/16 Letter, which showed P failed to discharge its evidentiary burden even for an Order 14 application. D complained P essentially relied on “one piece of disputable and inadmissible document [ie the PASP] asking for a judgment sum of over $6 million”. D further claimed he was entitled to discovery and inspection.

III.  LEGAL PRINCIPLES: APPEAL FROM MASTER’s DECISION

28.  It is trite that an appeal from the master to judge in chambers is dealt with by an actual rehearing of the application which led to the order under appeal, and the judge treats the matter as though it came before him for the first time. The judge will give the weight it deserves to the previous decision of the master; but he is in no way bound by it.[16]

IV.  LEGAL PRINCIPLES: SUMMARY JUDGMENT

29.  Both Mr Lam, counsel for P, and Mr Chu had no essential quarrel over the applicable legal principles. A plaintiff may invoke the procedure under Order 14 of the RHC where there is no valid defence to his claim or otherwise a triable issue. The rationale is set out in Hong Kong Civil Procedure 2017:[17]

“ ...... The underlying policy of the summary procedure is to prevent a defendant from delaying the plaintiff from obtaining judgment in case in which the defendant clearly has no defence to the plaintiff's claim: Man Earn Ltd v Wing Ting Fong [1996] 1 HKC 225.

“Order 14 proceedings for summary judgment when there is no defence to a claim are an important feature of the legal process. It enables plaintiffs in cases where there is no defence to obtain expeditious summary judgment to avoid unnecessary delay. When applied for, it is for the defendant to show that there is a triable issue or an arguable defence if he is to be allowed his day in court. To deny him his day in court, if he shows a triable issue or an arguable defence, is indeed a fearful injustice. On the other hand, if he has no defence and he obtains leave to defence, equally, there is injustice to the plaintiff” (Manciple Ltd v Chan On Man [1995] 3 H.K.C. 459 at 466, per Mortimer JA).

The machinery of O.14 works on the basis that if the plaintiff's application is properly constituted, he is prima facie entitled to judgment unless the defendant shows cause to the contrary or the application is dismissed. ......”

30.  In Ng Shou Chun v Hung Chun San,[18] Godfrey J noted it was not appropriate to embark on a mini‑trial of the action on affidavit evidence. The court should ask itself the question whether what the defendant says is credible or believable. If so, he must have leave to defend; if not, the plaintiff is entitled to summary judgment. Hong Kong Civil Procedure 2017 goes on to say that:[19]

“...... ‘In considering whether there are triable issues the Court will, of course, not take the alleged defence on its face value but test it against the evidence disclosed in the affidavit including matters such as contemporaneous documents, whether the alleged defence is inconsistent with the defence previously put forward or whether the defence is only recently raised despite opportunity being given to the defendant to respond earlier. The Court will also consider the inherent probability of the defence. But what the Court should not do is to conduct a mini‑trial on complicated factual issues.’ in Paul Y Management Ltd v. Eternal Unity Development Ltd (unrep., CACV16/2008, [2008] H.K.E.C. 1359 at [19] per Cheung J.A.

......

...... The defence set up need only show that there is a triable issue or question or that for other reason there ought to be a trial; and leave to defend ought to be given unless there is clearly no defence in law such as could have been raised on the former demurrer to the plea and no possibility of a real defence on the question of fact (Jacobs v. Booth’s Distillery Co (1901) 85 L T 262; Runnacles v. Mesquita (1876) 1 Q.B.D. 416). Where there are unexplained features of both the claim and the defence which are disturbing because they bear the appearance of falsity and disreputable business dealings and questionable conduct, the court should not make tentative assessments of the respective chances of success of the parties or the relative strengths of their good and bad faith, and should not on such an examination grant the defendant conditional leave to defend, but should give unconditional leave to defend: (Billion Silver Development Ltd v. All Wide Investments Ltd [2000] 2 H.K.C. 262 applying Extraktionstechnik Gesellschaft für Anlagenbau Gmbh v Oskar (1984) 128 S J 417 ......”

31.  But to raise a triable issue or arguable defence, the defendant cannot be sparing of the particulars of his defence, and then claim that as a result of his own parsimony in details there is an obscurity which must await trial for illumination.[20] Further, “‘[a] desire to investigate alleged obscurities and a hope that something will turn up on the investigation cannot, separately or together, amount to a sufficient reason for refusing to enter judgment for the plaintiff. You do not get leave to defend by putting forward a case that is all surmise and Micawberism’ (per Megarry V.-C. in Lady Anne Tennant v. Associated Newspapers Group Ltd [1979] F.S.R. 298)”.[21]

V.  DISCUSSION

32.  Mr Chu’s written submissions raised wide-ranging contentions. But in the course of his oral submissions it transpired (a) D would not pursue some matters for the Appeal and (b) some matters were just different ways of making the same point. I deal first with a number of matters which had turned into non-issues.

33.  First, notwithstanding the complaints raised in the 22/2/16 1^st Letter and 20/5/16 Letter, which complaints were reiterated even in D’s 2^nd Aff filed shortly before the Master Hearing, Mr Chu confirmed at the Appeal Hearing (a) D as purchaser signed the PASP and (b) D would not disown his signature thereon. I further note D did not suggest the copy PASP exhibited to Lam’s 1^st Aff was in any way different from the PASP he actually signed. Indeed, such copy PASP was identical to the original PASP registered in the Land Registry. Further, although D’s 2^nd Aff suggested “each party” to an executed standard-form provisional agreement in triplicate “...... should have retained one copy”, D as purchaser never explained (i) where his copy of the PASP was, and (ii) whether and if so how his copy was different from the copy PASP exhibited to Lam’s 1^st Aff. That being the case (and given P’s explanations in the 24/2/16 1^st Letter and in Lam’s 2^nd Aff in paragraphs 12 and 22 above), Mr Chu confirmed D no longer maintained the complaint that P failed/refused to produce the original PASP for inspection/copying.

34.  Secondly, Mr Chu also did not dispute D signed the Form 4. In the circumstances, D no longer maintained the complaint that P was in breach of sections 45-46 of the EAO and/or it was not entitled to sue D for commission and/or agreed damages under the PASP by reason of such breach (see paragraph 21 above).

35.  Thirdly, there was clear and cogent evidence that D entered into and executed the FASP and Cancellation Agreement, and Mr Chu did not suggest otherwise. Still further, as Mr Lam reminded, the Form 4, PASP, FASP and Cancellation Agreement contained a number of signatures that appeared to be D’s signatures, and in D’s 1^st and 2^nd Affs D did not deny those signatures were his.

36.  Fourthly, Mr Chu’s written submissions suggested the Form 4 and PASP were “inadmissible” for being unstamped. I cannot see why Form 4 would require stamping since it was not a document chargeable with stamp duty as specified in the First Schedule of the Stamp Duty Ordinance Cap 117.[22] As regards the PASP, it was properly stamped as arranged by Deacons (see paragraph 22 above). There is no merit to such contention, and at the Appeal Hearing Mr Chu confirmed D would abandon such argument.

37.  Fifthly, D’s suggestion that the estate agent who signed the PASP on P’s behalf was not licensed was probably a misunderstanding. Since (a) Lam explained he was the “Calvin Lam” (not “Alvin Lam”) who signed the PASP (see paragraphs 4 and 24 above), and (b) D accepted Lam was a licensed estate agent (see footnote 2 above), Mr Chu confirmed would no longer maintain the above argument.

38.  In light of the above, the starting point must be the undisputed and/or indisputable fact that D entered into and executed the Form 4, PASP, FASP and Cancellation Agreement. What was the legal effect of D having signed all these agreements? For the PASP, all D said was he understood it was a preliminary agreement for his intended purchase of the Property from Foo Tak, but no one explained the terms or effect of its clauses to him. Even though a copy of the Form 4 was exhibited to Chan’s Aff, in the subsequent D’s 2^nd Aff D did not say he did not read/know/understand its contents. Actually, D’s 2^nd Aff did not mention the Form 4 at all. For the FASP and Cancellation Agreement, D must have understood their contents since they had been interpreted to him respectively by his former and present solicitors.

39.  In my view, D’s allegation that no one explained the terms or effect of the PASP’s clauses to him was not a triable issue or arguable defence. As a matter of law, a person who signed a document, even if he did not care to read its contents, would still be bound by it unless there were specific vitiating factors recognised by law such as non est factum, undue influence or misrepresentation. In Bank of China (Hong Kong) Ltd v Fung Chin Kan & anor, Litton PJ said:[23]

“...... the fundamental principle that, generally speaking, when a person signs a legal document, he or she is bound by the act of signature: As a matter of general law, it is no defence to say that he or she did not understand the contents of a legal document; that person takes the chance of being bound by its terms, as he or she can take the simple precaution of not signing until its contents have been fully explained and understood. ......”

A few years later, Ribeiro PJ in Ming Shiu Chung & ors v Ming Shiu Sum & ors explained as follows:[24]

“84. ...... It is in law highly immaterial to ask how or why the father nevertheless signed the documents. Reliance is universally placed on signatures appended to documents by persons of full age and understanding as signifying the signatory’s assent or adherence to what that document states. Where such a person has signed a document which purports to have legal effect, the law has never regarded it as enough to show that he signed without knowing its contents for the document to be disavowed. It is an everyday occurrence that people sign documents without reading the small (or even the large) print and therefore sign without actually knowing the terms (or all the terms) of the document signed. But they are held to the documents which they have chosen to sign unless there is shown to be a recognized legal basis for concluding that their apparent consent has been in some way vitiated or that reliance on that document by some other person falls into some category of unconscionable conduct justifying relief in equity.

......

87. The vitiating factors at common law include fraud, mistake, misrepresentation, non est factum, duress, undue influence and lack of mental capacity: ......”

40.  Mr Chu in his oral submissions was unable to identify any vitiating factor. He made a half-hearted suggestion that when D signed the PASP he was under the mistaken belief that the PASP referred to Yancy and not P as his estate agent. I reject such argument. First, as Mr Chu conceded at the Appeal Hearing, there was no such averment in the Defence and no such evidence in D’s 1^st/2^nd Affs. I am unable to, as Mr Chu would have me do, draw such inference as the PASP clearly described P as “the Agent” for Foo Tak and D, and displayed P’s name/logo prominently on the 1^st page. Secondly, it was for D to raise any defence of mistake, and it behoved D to condescend upon the particulars of any arguable defence or triable issue. Thirdly, unilateral mistake as to the terms of the contract may affect the contract if known to the other party.[25] There was simply no evidence P was aware D labored under any mistake.

41.  Thus, the only matter Mr Chu could rely on was D’s allegation that he had not been explained the terms/effect of the clauses in the PASP, but the authorities in paragraph 39 above clearly showed this would not detract from the binding effect of the Form 4, PASP, FASP and Cancellation Agreement. That being the case, the meaning/effect of the express terms of such legal documents would be as set out in paragraph 9 above. On such basis, P had plainly established a prima facie case for its claim that P was D’s estate agent for the purpose of the Transaction, and that D was liable to pay the Agent (ie P) agreed damages of $6,977,600.00 pursuant to clause 10a of the PASP.

42.  Further, as a matter of fact, it lied ill in D’s mouth to say he did not engage P as his estate agent and/or he did not agree to pay commission to P:

(a)  The PASP was in both English/Chinese languages, and recited P’s name in full as “the Agent” both at the top of the 1^st page where the parties were described and at the bottom of the 2^nd page where the parties appended their signatures. The PASP also bore P’s logo, and in clause 16 clearly described P as “the Agent” for both Foo Tak and D. There was no suggestion D had not read the PASP when he signed it.

(b)  P signed at various places in the body of the PASP including alongside clauses 8, 9a, 14 and 16, and clause 16 expressly provided that “[it] is hereby declared that the Agent is the Agent for both the Vendor and the Purchaser / for the Vendor only / for the Purchaser only”.

43.  The suggestion that D did not engage P as his estate agent and/or he did not agree to pay commission to P was even more incredible given D’s own confirmations in the FASP and Cancellation Agreement, both of which were interpreted to him by and signed in the presence of his former and present solicitors. Hence, P must have known from the terms of the FASP set out in paragraph 5 above that if he failed to complete the purchase of the Property, he would be responsible to pay or reimburse all estate agent’s commission payable under the PASP. For the Cancellation Agreement (interpreted to him by D’s present solicitors LHC), it expressly recited the PASP, the full name of P as the Agent named in the PASP, D’s obligation under clause 10a of the PASP as encapsulated in clause 1 of Schedule 1 of the FASP to “compensate the Agent [ie P] for a sum equivalent to the total commission payable by [Foo Tak] and [D]”, and D’s default for the purpose of clause 10a of the PASP by reason of his failure to complete the Transaction (see paragraph 8 above). Since the FASP and Cancellation Agreement had been interpreted to D, he must have understood the effect of the PASP, FASP and Cancellation Agreement explained in paragraph 9 above. In my view, any suggestion otherwise would be incredible and/or unbelievable, especially when D never even hinted he did not understand the contents of the FASP and Cancellation Agreement. It was even more telling that D shied away from giving any explanation at all as to why he signed the Cancellation Agreement when it was interpreted to him that (a) it was P and not Yancy that was the named Agent who entered into and executed the PASP with Foo Tak and D (Recital (A)), (b) clause 10a of the PASP provided for the defaulting vendor/purchaser to compensate the named Agent (ie P and not Yancy) for a sum equivalent to the total Vendor and Purchaser Commission payable by the defaulting party which provision was encapsulated in the clause 1 of Schedule 1 of the FASP (Recital (D)), and (c) D was such defaulting party. In my view, the silence was loud and strongly militated against D’s contention that Yancy was D’s estate agent for the Transaction.

44.  I now turn to the heart of Mr Chu’s submissions. Mr Chu argued that the Commission Arrangement revealed in Lam’s 2^nd Aff and Shum’s Aff (see paragraphs 24 and 26 above) cast doubt on P’s case, and raised triable issues and arguable defence as to (a) who (ie P and/or Yancy) actually was D’s estate agent in respect of the Transaction, (b) what services were provided by such agent to D,[26] (c) who (ie P and/or Yancy) was entitled to commission and/or agreed damages under clauses 9a and 10a of the PASP and for how much (or, to put it in another way, how was the total commission and/or agreed damages of $6,977,600.00 to be apportioned by P and/or Yancy). Mr Chu submitted such “uncertainties” about the PASP could only be resolved at trial, and hence unconditional leave to defend should be given.

45.  Mr Chu next submitted that P’s case on the Commission Arrangement disclosed in Lam’s 2^nd Aff and Shum’s Aff was materially different from P’s case as pleaded in the ASoC, and by reason of such departure P’s Order 14 application must fail.[27] Such contention rested on Mr Chu’s reading of Lam’s/Shum’s explanation of the Commission Arrangement as follows: (a) the sharing of commission between P and Yancy/Shum under the Commission Arrangement was a “unilateral variation of contract [presumably the PASP] ...... done behind D’s back”, (b) Yancy itself was a licensed estate agent and could have entered into and executed an estate agency agreement (statutory Form 4 of the Regulations) and/or a contract to pay commission to D (eg standard-form provisional agreement for sale and purchase), (c) there was no evidence Yancy and D entered into and executed any statutory Form 4 of the Regulations or any provisional agreement for sale and purchase or other contract for payment of commission to Yancy, (d) Yancy was not a party to the Form 4 and PASP so they were “incomplete”, (e) by reason of (b)-(d) above and sections 45-46 of the EAO[28] Yancy could not rely on the “incomplete” Form 4 and PASP to sue D for commission or agreed damages in respect of the Transaction,[29] (f) although P could sue for commission and/or agreed damages since P and D did enter into and execute the Form 4 and PASP, P could not rely on the “incomplete” Form 4 and PASP to sue for commission and/or agreed damages for and on behalf of Yancy who was not a party to such agreements, especially when there was uncertainty as to the apportionment of the agreed damages to which P itself was entitled and/or could sue for. Mr Chu submitted the above contentions raised arguable questions of mixed fact and law that could only be resolved at trial.

46.  For the present purpose, I am prepared to assume that (a) Yancy did not enter into or execute any statutory Form 4 of the Regulations, and (b) Yancy could not sue or claim against D for commission or agreed damages under the PASP. Nevertheless, I am not persuaded by Mr Chu’s contentions.

47.  In light of paragraphs 38-45 above, D’s suggestion that he only engaged Yancy/Shum to be his agent for the Transaction and did not engage P who did not provide any service for him was incredible as being contrary to the contemporaneous legal documents (ie the Form 4, PASP, FASP and Cancellation Agreement). It was especially telling that D did not offer any explanation (when it was for him to show triable issues and arguable defences) as to (a) why he signed those documents when the Form 4, PASP and the Cancellation Agreement expressly referred to P as the Agent but did not mention Yancy at all and when the Cancellation Agreement expressly recited P’s full name as the Agent named in the PASP and expressly confirmed D’s default in completing the Transaction that triggered his obligation to pay agreed damages equivalent to the total amount of Vendor and Purchaser Commission under clause 10a of the PASP, and/or (b) why he did not read/understand those documents.

48.  As Mr Lam submitted, even on the face of the PASP, the procurement of P and D to sign the PASP itself was already sufficient consideration to support D’s promise to pay commission and/or agreed damages to P under clauses 9a and 10a of the PASP. But here Lam’s 2^nd Aff and Shum’s Aff went further to make clear that although it was Yancy who referred D to P it was P who carried out estate agency work for D (see paragraph 26 above), which in my view explained why (a) P was named as the Agent and signed as such in the PASP, (b) Foo Tak and D contracted to pay and P contracted to receive from them the Vendor Commission and Purchaser Commission under clause 9a, (c) Foo Tak and D contracted for the defaulting party to pay agreed damages to P in a sum equivalent to the Vendor and Purchaser Commission under clause 10a, and (d) the contracting parties for the PASP were Foo Tak, D and P. This represented the 1^st contractual relationship in respect of which Yancy was not a party (“1^st Contract”). For this 1^st Contract, Yancy’s referral of D to P was merely a background matter that led to the Form 4 (between P and D) and PASP (among Foo Tak, D and P) and not a contractual feature as between P and D.

49.  However, Yancy’s referral of D to P was a contractual feature in respect of a separate and distinct contractual relationship being the Commission Arrangement between Yancy and P of which D was not a party (“2^nd Contract”). For this 2^nd Contract, in consideration of Yancy’s referral of D to P, P agreed to pay over to Yancy the Purchaser Commission it would receive from D upon completion of the Transaction (under the 1^st Contract). This was a matter of referral fee as between P and Yancy which did not concern D.

50.  In practical terms, if the Transaction had been completed, P would ultimately have retained half of the total commission paid in respect of the Transaction. But it was essential to understand the true nature of the contractual rights/entitlements for such result. Foo Tak and D were contractually obliged under the 1^st Contract (ie the PASP) to respectively pay P the Vendor and Purchaser Commission, and if D failed to pay P the Purchaser Commission, P could sue D for recovery of the same since P and D entered into and executed the Form 4 and PASP. This meant that vis-à-vis Foo Tak and D under the 1^st Contract (ie the PASP), P was contractually entitled to recover/keep the Vendor and Purchaser Commission. But by the 2^nd Contract between P and Yancy (ie the Commission Arrangement), P was contractually obliged vis-à-vis Yancy to pay over the Purchaser Commission so received to Yancy. On such basis, Mr Chu’s submission as to “uncertainties” as to the apportionment on commission in respect of the Transaction between P and Yancy was not understood. Indeed, Mr Chu’s own written submissions recognised that “in the event of no breach, Yancy is entitled to $3.48 million [ie the entire Purchaser Commission] and nothing goes to P”. In the course of his oral submissions, Mr Chu accepted this was the effect of the Commission Arrangement as explained by Lam and Shum. 

51.  The above was consistent with the fact that (a) it was P and not Yancy who entered into and signed the Form 4 and PASP with D, but (b) the name of Yancy (who did not directly contract with D) was written alongside the amount of the Purchaser Commission spelled out at clause 9a of the PASP. It is interesting to note that although D claimed Yancy to be his estate agent for the Transaction, he failed to condescend upon what services Shum/Yancy performed in respect of the Transaction except for a vague assertion that “Shum had done a lot of things for my business in Hong Kong”. However, the Transaction involved a private purchase of a luxurious residential property in D’s personal name.

52.  But P’s present claim was not for commission payable under clause 9a of the PASP but for agreed damages payable under clause 10a upon D’s default in completing the Transaction. Nothing in Lam’s/Shum’s description of the Commission Arrangement showed that the agreed damages payable by D under clause 10a of the PASP were to be shared or given to Yancy. Paragraph 22 of Lam’s 2^nd Aff only stated “Yancy would be entitled to receive the commission payable by [D] if [D] completed the purchase of any property introduced by [P] to [D]”. I also note Lam did not put down Yancy’s name next to clause 10a. Indeed, Mr Chu recognised as much in his written submissions which stated “[one] way of interpretation [of the Commission Arrangement] could be that in the event of breach, P is entitled to $6.9 million ......” Mr Chu suggested that “given the present state of the evidence, the Court could draw other inference of facts”, but he did not elaborate on what other possible inference could be drawn from Lam’s description of the Commission Arrangement (as agreed by Shum and explained in paragraphs 24 and 26 above.) In my view, since (a) Yancy did not come into the picture in relation to agreed damages under clause 10a of the PASP, and (b) P and D did enter into and execute the Form 4 and PASP in compliance with sections 45-46 of the EAO, P as principal was entitled to sue D for the whole sum of $6,977,600.00 as agreed damages. I am unable to see how the contentions in paragraphs 44-45 above premised on commission-sharing between P and Yancy would be of relevance or assistance.

53.  But in any event, even if the agreed damages were to be shared between P and Yancy, I still do not see any merit in D’s contentions in paragraphs 44-45 above. Mr Chu’s submissions that the commission- sharing between P and Yancy/Shum (ie the Commission Arrangement) was a “unilateral variation of contract [ie the PASP] by [P] and Yancy, done behind D’s back” amply demonstrated the fallacious conflation of the 1^st and 2^nd Contracts explained in paragraphs 48-51 above. The PASP was the only agreement that provided for commission payable by D (but Yancy was not a contracting party thereto), and there was no positive evidence D had any legal relationship/obligation to pay commission to Yancy upon successful completion of the Transaction or to pay the agreed damages upon default in completion. It is difficult to see how the Commission Arrangement being a contract between P and Yancy (that had nothing to do with D) could vary the PASP being a contract among Foo Tak, D and P (that had nothing to do with Yancy). In my view, it was plain and obvious that any claim by P for commission or agreed damages pursuant to the provisions in the PASP rested on the 1^st Contract which had nothing to do with the 2^nd Contract, so P made the present claim as principal in its own right and not as any “nominal plaintiff” or “quasi-nominal plaintiff” for and on behalf of Yancy. In the circumstances, it mattered not that Yancy did not enter into or execute the Form 4 and PASP, and there were no arguable “uncertainties” as to who was contractually entitled to commission and/or agreed damages under clauses 9a and 10a of the PASP and for how much. P’s claim against D was governed by the terms of the PASP, which was in no way dependent on or affected by its Commission Arrangement with Yancy.

54.  Mr Chu in his oral submissions conceded it was permissible for P to have separate agreement with its staff/employee to share the Purchaser Commission payable by D (ie such staff/employee would personally but not for and on behalf of P receive apportioned share of such commission) (“Staff Arrangement”), which would not have affected P’s right to sue D for the entire Purchaser Commission payable under clause 9a of the PASP. Mr Chu argued that P’s Commission Arrangement with Yancy was different, but he was unable to articulate the legal basis for such distinction given that both the staff/employee and Yancy were “outside parties” to the PASP and commission-sharing between P and such “outside parties” underlied both the Staff and Commission Arrangements. I am unable to accept Mr Chu’s vague reference to some common perception that staff/employees might share commission earned by the employer. Rather, I accept Mr Lam’s submission that how P wished to share the commission it received from D under the PASP (which then became P’s own income/monies) was its prerogative.

55.  On the aforesaid analysis, Mr Chu’s following arguments (which he accepted were different ways of putting the same points as set out in paragraphs 44-45 above) would also fall away:

(a)  Mr Chu submitted the ASoC “should be struck out since on P’s own case it is not the only beneficial party despite purportedly it has legal standing to sue thus placed P in a position of conflicts”.  Such submissions were less than illuminating, but if Mr Chu meant the Commission Arrangement showed Yancy and P were both entitled to the commission and/or agreed damages payable under the PASP, this again reflected conflation of the 1^st and 2^nd Contracts which was not P’s case at all. On such basis, the alleged conflict was not understood.

(b)  Mr Chu submitted Yancy and P were in breach of their fiduciary duties[30] in not telling D what was going on.[31] Since I have concluded the 1^st and 2^nd Contracts were separate and distinct, and D was contractually obliged to pay commission and/or agreed damages to P and not Yancy, it did not matter whether or not D knew of the Commission Arrangement. As Mr Lam submitted, it was not a defence that D did not know about it. But in any event, there was evidence that disclosure had been made to D not only from Lam’s 2^nd Aff but also from the contemporaneous PASP itself in which P signed as the named Agent but the name of Yancy (not a contracting party to the PASP) was placed alongside the amount of the Purchaser Commission in clause 9a.

(c)  Mr Chu contended the “inhibited move” of commission-sharing “to get around the statutory bar” was “unenforceable due to illegality”, and it was “against public/court policy” for P (a mere nominal/quasi-nominal plaintiff) to employ “the Court machinery as a means to achieve a profit-sharing commercial objective”. I have explained why P sued D as principal for the agreed damages under clause 10a of the PASP and not as any nominal or quasi-nominal plaintiff (see paragraph 53 above). I am unable to see how the Commission Arrangement was illegal or contrary to public policy. Mr Chu made some feeble allusion to prohibited secret commission, but I see nothing “secret” about the Purchaser Commission. D was expressly informed by the Form 4 and PASP that the Purchaser Commission was 1% of the purchase price of the Property and he agreed to the same by entering into and executing those agreements, and the amount of the Purchaser Commission payable by D and the terms of payment remained unchanged notwithstanding the Commission Arrangement between P and Yancy. Quite simply, D was contractually obliged to pay the agreed commission (or the agreed damages) to P, but it had no contractual duty to pay Yancy at all. This was clearly reflected by clause 4 of Schedule 3 of the statutory Form 4 of the Regulations that provides as follows: “The Purchaser is not liable to pay any commission to other estate agents with whom the Agent co-operates for the purpose of purchasing any one or more of the Properties”. This provision in Schedule 3 titled “Commission to be paid by Purchaser” in the statutory form demonstrates 2 things: (i) the Regulations envisage the relevant estate agent (ie the agent who entered into and executed the statutory Form 4 with the purchaser client) may have to cooperate with other estate agents to effect the purchase of property(ies) for the purchaser client, but (ii) the purchaser client only has to pay commission for the relevant estate agent and did not have to pay any commission to other estate agents with whom such agent cooperates. This is precisely the present position in which D was contractually obliged to pay the Purchaser Commission to P, but the Commission Arrangement was a matter between P and Yancy that did not concern D who did not have to pay Yancy. The Commission Arrangement was not the mischief which the EAO sought to cure.

(d)  Mr Chu submitted the Commission Arrangement represented a departure from P’s case in the ASoC premised on P’s sole entitlement to the Purchaser Commission and/or agreed damages under the PASP to commission-sharing with Yancy/Shum under the Commission Arrangement that was not pleaded in the ASoC “and affronted by D”. This was again a conflation of the 1^st and 2^nd Contracts that misunderstood the true nature of P’s case against D that consistently relied on clause 10a of the PASP, and not the Commission Arrangement which Lam referred to merely to explain the notation of Yancy’s name alongside clause 9a of the PASP.

(e)  Mr Chu suggested “both the uncompleted Form 4 and the PASP do not bear weight as a ‘legal document’ vis-à-vis legal charge and share transfer documents ...... they are both uncertain contract which require extrinsic evidence [ie Lam’s 2^nd Aff and Shum’s Aff] to be adduced to supplement” P’s case but “P should not be allowed to adduce parol evidence intentionally to depart from the documentary record”.[32] But since D was contractually obliged to pay commission and/or agreed damages to P (who was D’s agent for the Transaction) and not to Yancy under the PASP, I am unable to see why the Form 4 and PASP were incomplete or uncertain. Further, as P relied on the terms of the PASP and not the Commission Arrangement or any parole agreement, the need for parole evidence was not understood. If it was suggested parole evidence was required to incorporate the Commission Arrangement into the PASP, this again reflected misunderstanding of P’s case and conflation of the 1^st and 2^nd Contracts which I disagree.

(f)  Mr Chu submitted (i) P and Yancy could not sue D as the PASP was not a properly executed contract due to defects under its clauses 9a and 10 in breach of section 45 of the EAO which provides that “the agent is not entitled to sue” if the relevant estate agency agreement and/or provisional agreement for sale and purchase are not properly executed, and (ii) the Summons was essentially a request for judgment in favour of Yancy who as a sub-agent without any valid statutory Form 4 required under section 45 of the EAO could not maintain the present claim. Such arguments assumed P was claiming agreed damages on behalf of Yancy, but in fact P sued D as principal under the PASP which was the true contract between P and D. Once it was understood that P’s claim was based on the PASP and not the Commission Arrangement, there would be no inconsistent claims and no breach of section 45 of EAO.

56.  Mr Chu next submitted that sharing of commission between P and Yancy under the Commission Agreement was not permitted under regulations 14(1)-(2) of the Regulations which provide as follows:

“(1)  A licensee who act as a sub-listing agent shall not demand payment of any commission from the client concerned of the principal agent.

(2)  A licensee shall not recommend to a client the use of services of any other person where a pecuniary or other beneficial interest may accrue to the licensee in consequences of the recommendation, or the use of the services by the client, without first disclosing that interest to the client at the time of the recommendation.

......” (my emphasis)

57.  In my view, there are no merits to such arguments. In respect of regulation 14(1) of the Regulations, I am unable to see how it could be said that P acted as sub-listing agent to demand payment of commission from D as the client concerned of Yancy as principal agent. Regulation 2 of the Regulations defined “sub-listing agent” as “a licensee who obtains an instruction from a principal agent in respect of the listing of a residential property”. As Mr Lam rightly pointed out, D did not list any property for sale or letting so neither P nor Yancy could have been a sub-listing agent.

58.  Mr Chu in his oral submissions suggested Foo Tak must have listed the Property for sale so this court should infer that P was a sub-listing agent who demanded commission from Foo Tak. Whilst Foo Tak did agree to pay the Vendor Commission to P under clause 9a of the PASP, there was not even a shred of evidence that P was a sub-listing agent for Foo Tak. Mr Chu submitted such inference could be drawn from the Commission Arrangement whereby inter alia “[P] would refer suitable properties to [D]”, but he did not explain why, if any inference was to be drawn at all, this court should infer P was Foo Tak’s sub-listing agent and not Foo Tak’s principal agent, and who was the principal agent if P was the sub-listing agent. The short answer was that there was simply no evidence at all. In any event, since P is now demanding agreed damages from D and not Foo Tak, I am unable to see the relevance of regulation 14(1) of the Regulations.

59.  In my view, regulation 14(2) of the Regulations is irrelevant here since P did not recommend D the use of services of Yancy. But more importantly, even if there was breach of regulations 14(1)-(2) of the Regulations, it was no defence to P’s claim because whilst breach of the Regulations might result in fines or other regulatory consequences, they did not affect the licensee’s or agent’s entitlement to commission. In Centaline Property Agency Limited v Yip Yuk Fai,[33] HHJ Leung said that:

“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 [the Regulations] to deprive the licensed estate agent of commission payable under contract on the ground of non-compliance.”

G Lam J in Liu Chung Man v Midland Realty International Ltd[34] cited such decision with approval. Mr Chu had no answer to these legal principles which I respectfully agree.

60.  Mr Chu submitted the PASP was a “sham” document in light of P’s case advanced in Lam’s 2^nd Aff and Shum’s Aff as it did not state what it meant, ie it did not reflect the full terms of the Commission Arrangement between P and Yancy. In his oral submissions, Shum confirmed he would not argue the PASP was a “sham” document, but suggested that by the above submissions he made the same point as set out in paragraphs 44-45 above. That being the case, such submissions again reflected misunderstanding of P’s case by conflating the 1^st and 2^nd Contracts. Actually, it was P’s consistent case that the PASP specified P (not Yancy) was the estate agent entitled to be paid commission and/or agreed damages under clauses 9a and 10a. P simply relied on the express terms of the PASP which, as Mr Lam submitted, did not give the appearance of legal rights or obligations that the contracting parties (ie Foo Tak, D and P) did not intend to create.

61.  In any event, I cannot see how as a matter of law the PASP could have been a “sham” document. In Hui Cheung Fai & anor v Daiwa Development Limited & ors[35] which Mr Chu cited, DHCJ Eugene Fung SC explained as follows:

“71. The classic definition of “sham” is Diplock LJ’s formulation in Snook v London and West Riding Investments Ltd [1967] 2 QB 786. A sham exists where (1) the parties intended that the documents or acts they have done would not create the legal rights or obligations they appear to create and (2) it was intended that the documents or acts would mislead a third party into believing the parties had created those rights and obligations. At p 802C-F, Diplock LJ said:

“......a “sham” ...... means acts done or documents executed by the parties to the “sham” which are intended by them to give to third parties or to the court the appearance of creating between the parties legal rights and obligations different from the actual legal rights and obligations (if any) which the parties intend to create. But one thing, I think, is clear in legal principle, morality and the authorities ... that for acts or documents to be a “sham”, with whatever legal consequences follow from this, all the parties thereto must have a common intention that the acts or documents are not to create the legal rights and obligations which they give the appearance of creating. No unexpressed intentions of a “shammer” affect the rights of a party whom he decided.”

72. In Hitch v Stone [2001] STC 214, Arden LJ at 230a-e gave the following guidance as to whether an act or document is a sham:

“......

Second, as the passage from Snook makes clear, the test of intention is subjective. The parties must have intended to create different rights and obligations from those appearing from (say) the relevant document, and in addition they must have intended to give a false impression of those rights and obligations to third parties.

......

Fifth, the intention must be a common intention ...” (my emphasis)

As Mr Chu eventually conceded at the Appeal Hearing, there was simply no evidence that P and D (let alone Foo Tak) had any common intention for the PASP to give an appearance of legal rights and obligations which the parties did not intend to create.

62.  Mr Chu next argued that in the Order 14 context the court should not come to any firm view on applying statutory provision(s) “against contractual terms” and rather should let the matter proceed to trial as explained by Lord Hoffman in System Control plc v Munro Corporate plc & ors.[36] In that case, the plaintiff’s claim for summary judgment was based on breach of contract and a statutory cause of action. The issue in dispute was that, having previously contended it had accepted the defendant’s repudiation and the contract was at an end, whether the plaintiff could amend its claim and affirm the contract and claim damages. Lord Hoffman at pp 666-667 held there was a triable issue of law as to whether the plaintiff’s purported termination of the contract precluded it from asserting the contract’s continued validity where the foundation for the right to rescind remained in dispute, and there was also question as to whether the statutory claim could be maintained if the contract claim could not, so an Order 14 application was unsuitable in that case.

63.  I agree with Mr Lam that the decision in System Control plc was nothing more than an application of trite Order 14 principles, albeit in the context of statutory and contractual causes of action. The factual context in that case was far removed from the present case where there was simply an action on contract with no statutory cause of action. The real question must be whether there was any triable issue or arguable defence, and on the aforesaid analysis there was none in the present action.

VI. CONCLUSION

64.  The Appeal is dismissed. There is no reason why costs should not follow event. I grant a costs order nisi that D shall forthwith pay P costs of the Appeal to be summarily assessed. I also give directions for the summary assessment of costs as follows:

(a)  P do within 14 days from the date hereof lodge and serve statement of costs not exceeding 1 page pursuant to Practice Direction 14.3;

(b)  D do within 7 days thereafter lodge and serve succinct summary of objections of not more than 1 page in respect of P’s statement of costs (“Objection Summary”);

(c)  if no application is made to vary the costs order nisi within 14 days from the date hereof, the summary assessment of costs will be by paper disposal (unless otherwise directed);

(d)  if application is made to vary the costs order nisi within 14 days from the date hereof, the party seeking variation of the costs order nisi do within 14 days from the date hereof fix a date with the Listing Clerk for the hearing of the application for variation of the costs order nisi and summary assessment of costs before me in chambers (open to the public) on a date not before 28 days from the date hereof with half hour reserved.

VII. POSTSCRIPT

65.  At the Appeal Hearing, I raised with Mr Chu the issue of actual/ potential conflict of interest between D and his present solicitors LHC, and urged him to consider the matter with D and LHC. D’s stance was set out in paragraph 11 above, ie Yancy and not P was D’s estate agent for the Transaction. However, LHC were the solicitors who acted for D in relation to the Cancellation Agreement which reiterated and confirmed the PASP, and which recited P as D’s agent and also the terms of the PASP including clause 10a without any mention of Yancy at all. This did not sit well with D’s case put forward to this court at the Appeal Hearing. As a matter of professional conduct, it is essential that LHC should properly address such apparent conflict.