XCHRX CENTALINE PROPERTY AGENCY LTD. v. HOPRICH INTERNATIONAL INDUSTRIAL LTD.

HCA 10312/98

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 10312 OF 1998

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J U D G M E N T

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1. This is an appeal by the Defendant from the decision of Master Poon given on 8th January 1999. By that decision, Master Poon ordered that the Defendant's summons dated 13th October 1998 to strike out the Plaintiff's Statement of Claim be dismissed with costs to the Plaintiff in any event and also that the Plaintiff's summons dated 24th September 1998 to amend the Statement of Claim be allowed.

2. The Plaintiff is an estate agent which was successful in introducing the Defendant as a Purchaser and Gold Quest Company Limited as the Vendor of premises known as Unit A092 and A093, 1st Floor, Nan Fung Centre, Nos. 264-298 Castle Peak Road, Nos. 64-98 Sai Lau Kok Road, Tsuen Wan, New Territories ("the premises").

3. By a provisional agreement for sale and purchase, which is in the standard form of the Plaintiff, made on 8th August 1997 between Gold Quest Company Limited as the Vendor and the Defendant as the Purchaser, the premises were sold by the Vendor to the Defendant for the price of HK$15,500,000.00. The provisional agreement provided for payment terms by the Defendant as set out in clause 2.

4. Clause 8 of the provisional agreement provided as follows: -

"In consideration of the service rendered by the Agent, the Agent shall after this agreement be entitled to receive HK$155,000.00 from the Vendor and HK$155,000.00 from the Purchaser as commission such commission shall be paid not later than 15th August 1997."

Thus, under the agreement, both the Vendor and the Defendant as Purchaser were each obliged to pay 1% commission to the Plaintiff.

5. Clause 9 of the provisional agreement provided as follows: -

"If in any case either the Vendor or the Purchaser fails to complete the sale and purchase in the manner herein contained the defaulting party shall compensate at once the agent HK$310,000.00 as liquidated damages. The defaulting party shall be responsible for the payment of the stamp duty."

6. Clause 10 of the provisional agreement provided as follows: -

"Should the Vendor and Purchaser after signing that agreement both agree to cancel this agreement without the consent of the Agent they will jointly and separately become the defaulting parties of this agreement and will still be liable for the payment of their own commission mentioned herein before."

7. The provisional agreement also provided for the entering into a formal agreement for sale and purchase and, as I have said, for the payment of further sums by the Defendant as Purchaser. And by the provisional agreement, completion was to be on or before 10th May 1998.

8. On or about 15th August 1997, the Vendor and the Defendant each paid the Plaintiff the sum of HK$155,000.00. Completion of the sale and purchase, however, did not take place as it is alleged by the Plaintiff that the Defendant defaulted in making payments under the agreement of the balance of the purchase price. It is alleged that the deal fell through because of the default of the Defendant as Purchaser.

9. The Statement of Claim in this action was issued on 24th June 1998. The Defence was filed on 13th July 1998. It is alleged by the Defendant that as it has already paid the commission that the Plaintiff was entitled to under clause 8 of the agreement, the Plaintiff is no longer entitled to commission under the agreement and that there is no cause of action by the Plaintiff against the Defendant.

10. By a summons to amend dated 24th September 1998, the Plaintiff sought to amend the Statement of Claim. The effect of the amendment is really to take into account the HK$155,000.00 which had already been paid by the Defendant and to recognise that as a set off from the original claim of HK$310,000.00 made under clause 9 of the provisional agreement. That amendment was allowed by Master Poon on 8th January 1999.

11. It is trite law that the court will only strike out a Statement of Claim in plain and obvious cases. It has been submitted by counsel for the Plaintiff that on the true construction of the agreement, taking into account what is set out in clauses 8, 9 and 10 of the provisional agreement, the Plaintiff, although it had been paid the sums of money by the Vendor and the Defendant as Purchaser, did not in fact earn the commission as provided for in the provisional agreement until and unless the transaction has been completed as scheduled, or cancelled by the parties without the Plaintiff's consent. If the completion falls through by default of any of the parties, it was submitted that what the Plaintiff was entitled to receive was only liquidated damages to be borne by the defaulting party. It seems to me that that is certainly reasonably arguable. On the construction of the agreement, it is not plain and obvious to me that the Plaintiff has no cause of action against the Defendant. The Plaintiff no doubt will have a liability to repay HK$155,000,00 to the Vendor if it is established that indeed the Defendant was the defaulting party under the agreement.

12. I also see no merit in challenging the decision to allow the Plaintiff leave to amend the Statement of Claim.

13. In the circumstances, the appeal is dismissed.

[After hearing submissions]

14. I will not interfere with the order for costs below. Costs of the appeal to the Plaintiff to be taxed and paid forthwith.