BRIGHT GOLD LTD v. MEGA WELL DEVELOPMENT LTD

CACV 66/2019

[2020] HKCA 575

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 66 OF 2019

(ON APPEAL FROM HCA 2194/2011)

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REASONS FOR JUDGMENT

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Hon Lam VP (giving the Judgment of the Court):

I. Introduction

1.  On 9 January 2019, Anthony Chan J (the “Judge”) handed down a judgment (the “Judgment”) in the action after trial.  The action concerned disputes arising from the sale and purchase of a landed property known as Duplex Flat B on 32 & 33/F of Block 1 and car parking spaces No 165, 166 and 167 on Level 1 (collectively “Duplex B”) of Hill Paramount (the “Development”), Shatin. 

2.  Bright Gold Limited (“Bright Gold”), a subsidiary of the Henderson Group, was the developer of the Development and the vendor of Duplex B.  Mega Well Development Limited (“Mega Well”) was the purchaser of Duplex B, which acquired Duplex B in August 2011 at the price of HK$69.8 million.  Centaline Property Agency Limited (“Centaline”) was the estate agent involved in the sale and purchase of Duplex B.  Messrs Woo Kwan Lee & Lo (“WKLL”) were the solicitors acting for Mega Well for the purchase.

II. Background

3.  The focus of the dispute concerns parts of the roof which were to be sold as part of Duplex B.  Duplex B included 2 areas on the roof of Block 1 (the “Roof”).  Physically, the Roof is situated on two different levels.  First, on 33/F of Duplex B, there was an internal staircase which led onto the Roof.  At the top of the stairwell (the “Stairwell”), there was a glass door (the “Glass Door”) and by opening that outwards one could enter the roof of Block 1.  However, only a narrow strip of the roof area just outside the stairwell of about 25 sq ft (about 0.5m x 4.7m) (the “Strip”) belonged to Duplex B.  The second area was located on top of the stairwell where the outdoor units of air-conditioners and boilers serving Duplex B were situated (the “B Upper Roof”), and it was only accessible by way of a cat ladder.  According to the Sales Brochure for the Development (the “Sales Brochure”), Duplex B had an “Extra Roof Area” of 199 sq ft (saleable area) which is the total area adding up the Strip and the B Upper Roof.

4.  Apart from Duplex B, there were 2 other duplexes – Duplex A (which was on the same floors as Duplex B) and Duplex C (which was one floor level lower than Duplex B and at a different wing of the building) at Block 1:

(a)  Duplex A came with a significant part of the Roof which was located immediately above the 33/F area of Duplex A, as well as part of the Upper Roof.  According to the Sales Brochure for the Development, the area of the “Extra Roof Area” was 483 sq ft.

(b)  Duplex C included an area on the Roof (“C Roof”), almost a square shape, which was located right above the covered area of and was only accessible from Duplex C.  It appears from the Sales Brochure that the outdoor air-conditioner units (probably also the boilers) for Duplex C were located there.  There is no evidence on the area of C Roof.

5.  Duplex B was introduced by a staff of Centaline, Ms Stella Wong (“Wong”) to Ms Katherine Cheng (“Cheng”), who was the sole director and shareholder of Mega Well.  Wong had acted for Cheng in her previous dealings of real estate properties.  On this occasion, Cheng wanted to find a new residence.  She first approached Wong in around May or June 2011 to consult her about another property which she had viewed with another agent.  Later, Wong introduced her to various properties in August 2011, including (but not limited to) the properties in the Development.  

6.  There were two viewings at the Development on 14 and 15 August 2011 respectively (the “1^st Viewing” and the “2^nd Viewing”).  It is Mega Well’s case that during those viewings, misrepresentations were made by Wong to the effect that the roof area of Duplex B included a much larger part of the Roof immediately outside the Stairwell (the “Misrepresentation”).  This much larger part of the Roof was identified and coloured yellow (the “Yellow Area”) in a copy of the Roof Plan attached to the Defence and Counterclaim of Mega Well filed in the action.  In truth, the Yellow Area (apart from the Strip) was part of the common area of the Development.  

7.  At the time of these viewings, Duplex B was furnished and was used by the developer as a show flat.  The area right outside the Stairwell was decorated with a circular artificial lawn, plant in pots and garden furniture.  There was no marking on the Roof to demarcate the area which was allocated to Duplex B.

8.  On 16 August 2011, the provisional agreement for the sale and purchase of Duplex B (the “PSPA”) was signed at a temporary sales office (converted from one of the units in the Development).  The PSPA was contained in a printed form prepared by Henderson Real Estate Agency Ltd (“Henderson Agency”) who acted as agent for Bright Gold and signed the PSPA and other documents on that date on its behalf. 

9.  After the PSPA was signed, Mega Well signed a document which authorized Centaline to get commission from Henderson Agency.  The Chinese document was headed “買客/地產介紹人聲明 (Purchaser / Estate Agent Declaration)” (the “Declaration”).  Mega Well was stated as purchaser and Centaline was described as the introducer (介紹人).  The following terms can be found in the Declaration:

“ 介紹人以「恒基兆業地產代理有限公司」 (後稱 “恒代”) 中介人身份，向本人推介上述單位，…

本人 (等) 現應「恒代」要求，確認下列聲明：

(一)  介紹人並無代「恒代」許下任何承諾或存在任何「恒代」須承擔之責任，而「恒代」亦無義務為介紹人履行任何承諾或責任；

(二)  本人 (等) 與介紹人之任何轇轕，概與「恒代」無涉，本人 (等) 不會以此拖延買賣之正常交易。

(三)  買方不反對「恒代」支付佣金予介紹人。”

10.  On 19 August 2011, Cheng signed the formal sale and purchase agreement (the “SPA”) on behalf of Mega Well at WKLL’s office (“WKLL Meeting”).  The draft of the SPA was provided by Bright Gold’s solicitors, Messrs Fairbain Catley Lo & Kong (“FCLK”).  The plans attached to the SPA identified the constituent parts of Duplex B by colouring them pink.  Amongst others, on the “Part Plan of Upper Roof” (the “Part Plan of Upper Roof”), the B Upper Roof was coloured pink; on the plan of the roof level (the “Roof Plan”), apart from the Stairwell and the Strip, C Roof (which did not belong to Duplex B but belonged to Duplex C instead) was also mistakenly coloured pink.  Further, C Roof was marked “B” on the Roof Plan, similar to the Stairwell and the Strip and the B Upper Roof.  Prior to the signing of the document, Ms Joey Lau (“Lau”) of WKLL had asked Cheng to check the plans carefully.  Cheng did so and discussed with Wong.  Lau reiterated that the areas attached to Duplex B were only those coloured pink.

11.  On 20 August 2011, Cheng went with Tam, a large part of her family members as well as a friend, Mr Passador (“Passador”), to look at Duplex B and the roof area (the “3^rd Viewing”).  Wong was also present.  Mega Well’s case was that Wong repeated the Misrepresentation on that occasion.

12.  On 29 November 2011, the Assignment was signed by Cheng at WKLL’s office.  When Mega Well went to collect the keys for Duplex B on 3 December 2011, it was discovered that the Roof Plan annexed to the SPA included C Roof erroneously as part of Duplex B.  It was also discovered that Cheng could not use the Yellow Area as she was allegedly led to believe by the Misrepresentation.

13.  After unfruitful negotiations between Mega Well and Bright Gold, on 22 December 2011 Bright Gold commenced the action seeking reliefs against Mega Well for rectification of the Roof Plan attached to the SPA so that C Roof would be excluded from Duplex B.

14.  On the other hand, Mega Well by its counterclaim sought various reliefs against Centaline, WKLL and Bright Gold.  Mega Well counterclaimed against Bright Gold for rescission of the transaction due to the Misrepresentations and the return of the purchase price of HK$69.8 million, or alternatively, damages. Mega Well also claimed damages against Centaline and WKLL for breach of their duties. 

III. The Trial before Anthony Chan J

15.  The trial lasted for eight days on 26-30 November, 3, 4 and 11 December 2018.  In total 14 factual witnesses (4 for Mega Well, 3 for Centaline, 2 for WKLL, and 5 for Bright Gold) gave evidence at the trial.

16.  At the trial, the central factual dispute was whether Duplex B was purchased by Mega Well under the Misrepresentation made by Centaline and Bright Gold.  In this respect, Mega Well relied on: first, that Bright Gold decorated the Yellow Area with a circular artificial lawn, plants in pots and garden furniture (“Implied Misrepresentation”); and second, what Cheng was told by Wong (“Oral Misrepresentation”) during the 3 viewings. 

17.  There were conflicts of evidence between Mega Well’s witnesses and Centaline’s witnesses relating to the Oral Misrepresentation.  The differences in the parties’ evidence in this regard are contained in [33] to [51] of the Judgment.

18.  According to Mega Well, during the 1^st Viewing, in response to Cheng’s query about the location of the roof which formed part of Duplex B, Wong said that “the roof which formed part of Duplex B extended from the Glass Door to 2 pillars at a distance away, ie, the Yellow Area”.  Mega Well contended that this representation was repeated during the 2^nd Viewing and the 3^rd Viewing.

19.  On Centaline’s case, Wong denied having made the Oral Misrepresentation at any of the 1^st, 2^nd and 3^rd Viewings.  Rather, Wong’s evidence was that during the 1^st Viewing, in response to Cheng’s query about the location of the roof which formed part of Duplex B, she had identified the Stairwell, the Strip and B Upper Roof to Cheng and said to Cheng that save for those parts, the Roof was part of the common area[1].  After the 1^st Viewing, upon checking the size information at the sales office, she also told Cheng that the Strip only extended to the artificial lawn and gave her a copy of the Sales Brochure. 

20.  It was also Centaline’s case that though Ng (another agent of Centaline) had told Cheng that she could use part of Roof in addition to the Strip surreptitiously and Wong had told Cheng that she could use additional part of Roof practically, they had made a clear distinction between areas which went into the ownership of Duplex B (入契) which were the pink areas and the other area.  Wong had also told Cheng that she could not keep her furniture at such other part of the Roof which was common area.  At the time when the PSPA was signed, Ng used the plans contained in a Sales Brochure to explain to Cheng about the various constituents of Duplex B, including the roof which was “coloured pink”. 

21.  In the Sales Brochure there was a roof plan (the “Brochure Plan”) which identified the Stairwell, the Strip and B Upper Roof Plan in brown colour, indicating that only those areas belonged to Duplex B.  Moreover, it referred to Duplex B having an Extra Roof Area of 199 sq ft. 

22.  As to Wong’s assertion that she gave a copy of the Sales Brochure to Cheng after the 1^st Viewing, Cheng and Tam said that they only saw a copy of the Sales Brochure after Mega Well had instructed its solicitors for this action in early 2012.

23.  Having considered the evidence, the Judge rejected Mega Well’s case on Implied Misrepresentation.  He found that the state of the Yellow Area (namely, with a circular artificial lawn, plants in pots and garden furniture) at the time of the Viewings was not sufficient to constitute an implied representation that the area formed part of Duplex B.

24.  However, he found in favour of Mega Well on Oral Misrepresentation.  The Judge preferred the evidence of Mega Well’s witnesses to that of Centaline’s witnesses.  Accordingly, the Judge found that Wong had made the Oral Misrepresentation to Cheng or in her presence during each of the 3 Viewings.  He also found that Mega Well relied on the Oral Misrepresentation in purchasing Duplex B.  The Judge held that Centaline was in blatant breach of its duty of care owed to Mega Well. 

25.  As regards Bright Gold, the question was whether Centaline was acting as Bright Gold’s agent for the purpose of providing information about Duplex B’s roof to Mega Well.  Based on various matters which we shall examine at greater length below, the Judge found Centaline to be Bright Gold’s agent in making the Oral Misrepresentation.

26.  The Judge also rejected Bright Gold’s arguments that the Declaration gave rise to a contractual estoppel in [112] of the Judgment:

“ 112. Firstly, Bright Gold relied upon the Declaration as constituting a contractual estoppel. However, the document did not in anywhere suggest that it had anything to do with [Bright Gold]. Clause 1 of the Declaration was poorly drafted in that it purported to refer to a state of affairs (there was an absence of any responsibility on Henderson Agency’s (“或存在任何「恒代」須承擔之責任”) but it was not clear how that state of affairs was to be applied. It was not a matter of the absence of a punctuation in the sentence. The document was provided by Henderson Agency, and it must be construed contra proferentum and any ambiguity in a document of such nature cannot be resolved against Mega Well.”.

27.  Based on such findings, the Judge found that Centaline was acting for Bright Gold in the sale of Duplex B and that it was impliedly authorised by the latter in providing to Mega Well information about the property.  The Judge therefore held that Bright Gold was liable for the Misrepresentation.

28.  As between Mega Well and WKLL, the Judge rejected Mega Well’s case against WKLL based on an alleged failure to ascertain the subject matter of the sale and purchase before Mega Well was asked to sign the SPA. 

29.  Turning to the question of remedy, the Judge held that had the court rejected the claim of misrepresentation, it would accede to Bright Gold’s claim for rectification on the ground that there was a common mistake over the C Roof.

30.  On rescission as sought by Mega Well, the Judge rejected Bright Gold’s argument that Mega Well had affirmed the contract and therefore lost the right to rescission.  The reasons in this regard are set out in [131] to [136] of the Judgment.  He held that due to the mistake on the C Roof, there could not be affirmation.  Further, he held there was no affirmation as Mega Well had all along disputed about the roof areas and had not given up its claims.  In the circumstances of the case, he did not find the registration of the assignment on behalf of Mega Well or the actual use and occupation of Duplex B as inhibition or unfairness to the grant of the relief of rescission.

31.  While Bright Gold argued that there should be, as a consequence of rescission, an account of mesne profit by Mega Well for the use of the property and depreciation, the Judge considered that: first, Bright Gold had adduced no evidence of such profit, and there was no order for a split trial.  Second, Bright Gold had kept the purchase price whilst Mega Well had shouldered the responsibility of paying the mortgage interest. In such circumstances, allowing Bright Gold to keep such benefit would do practical justice between the parties.  Third, Bright Gold had never agreed to take back the property, and therefore cannot simply blame the situation on Mega Well.

32.  The Judge also considered that if the court were to refuse to order rescission of the SPA, Mega Well would be entitled to damages in lieu in the amount of HK$3,050,000, being the difference in the value of Duplex B with and without the Yellow Area. 

33.  In this regard, the Judge rejected: (i) WKLL’s argument that the amount of damages should be reduced by reason of the fact that the purchase price paid by Mega Well was below what was assessed by the expert as the market price of Duplex with the Yellow Area; and (ii) Centaline’s argument that Mega Well had suffered no loss because Bright Gold had reimbursed the stamp duty paid to it in the transaction and therefore the net price paid for the property was less than the assessed market value of it with the Yellow Area.  The Judge reasoned that these arguments overlooked the position that Mega Well had been saddled with a property which was worth HK$3.05 million less than what it should be.  Moreover, in respect of the latter, it was not raised in a transparent manner in Centaline’s opening submissions; and the matter should have been raised with the expert because the properties used in his comparison approach were all from the same Development and it is unclear whether the same “incentive” were given in those sales by Bright Gold.

34.  By the Judgment, the Judge held that Mega Well is entitled to rescind and has rescinded the provisional agreement for sale and purchase dated 16 August 2011 and the formal agreement for sale and purchase dated 22 August 2011, and ordered that: (1) Bright Gold do pay to Mega Well the sum of HK$69.8 million within 14 days from the date of the Judgment, with interest at judgment rate(s) from the date of the Judgment until payment; and (2) upon payment of the said sum within interest, Mega Well do such necessary acts and execute such necessary documents as to transfer the legal and beneficial title of Duplex B to Bright Gold free from encumbrances with reasonable expedition.  Further, the Judge ordered that Centaline do pay damages to Mega Well in the sum of HK$100.  The Judge, however, dismissed Mega Well’s counterclaim against WKLL.

35.  These are the appeals and cross-appeals brought by Mega Well, Bright Gold, and Centaline, against the Judge’s Judgment.  Though Mega Well had appealed against the dismissal of the claim against WKLL, such appeal was no longer pursued and it had been dismissed by consent.

IV. The appeals and cross-appeals

36.  By its Notice of Appeal dated 8 February 2019, Mega Well appeals against the Judgment, seeking, among other things, judgment be entered in favour of Mega Well against Bright Gold for interest on commercial rate from the dates of payment of the purchase price up to the date of judgment and thereafter at judgment rate until payment. 

37.  Bright Gold also appealed against the Judgment. By its Re-Amended Respondent’s Notice and Respondent’s Notice by way of Cross Appeal dated 12 May 2020:

(a)     Bright Gold seeks orders that (1) Mega Well’s counterclaim against Bright Gold be dismissed; and (2) judgment be entered in favour of Bright Gold’s claim against Mega Well for rectification of the sale and purchase agreement.

(b)    In the event that the Court of Appeal upholds Mega Well’s counterclaim against Bright Gold for misrepresentation, Bright Gold seeks orders to the effect that: first, Mega Well’s counterclaim for rescission be dismissed; and second, Mega Well is not entitled to any damages, or alternatively, judgment be entered for damages in the sum of HK$3,050,000 in lieu of rescission to be paid by Bright Gold and Centaline jointly and severally in favour of Mega Well within interest on such sum at commercial rate from 3 December 2011 until judgment and thereafter at judgment rate until payment.

(c)     As further alternative, in the event that Mega Well’s appeal in relation to interest payable by Bright Gold is allowed, Bright Gold seeks an order that Mega Well do account for and pay to Bright Gold the mesne profits for its use and occupation of Duplex B and for the deterioration and depreciation of the decoration, fittings, equipment and furniture at Duplex B since 3 December 2011 until delivery of possession by Mega Well to Bright Gold.

38.  By Respondent’s Notice & Respondent’s Notice by way of Cross Appeal dated 22 March 2019, Centaline appealed against the Judgment, seeking, among other things, an order that Mega Well’s counterclaim against Centaline be dismissed.  Alternatively, Centaline seeks, among other things, an order that it be declared that Mega Well is not entitled to any award of damages against Centaline.

39.  Further, Mega Well filed an Amended Respondent’s Notice in respect of Bright Gold’s Cross Appeal dated 13 May 2020 and a Respondent’s Notice in respect of Centaline’s Cross Appeal dated 13 May 2020 to contend that the Judge’s decision on rescission on the ground of misrepresentation should be affirmed and that, in the event that Mega Well is eventually denied rescission and damages in the sum of HK$3,050,000, Mega Well ought to be awarded damages in lieu of rescission in the sum of HK$2,210,000.

40.  A number of issues were raised in the appeal and the cross-appeals.  They can be summarised as follows:

(a)     Whether the Judge overlooked or misapprehended the significance of the evidence and testimony regarding Cheng’s visits to other units and the time when Cheng/Tam first saw the Sales Brochure, and what happened at the WKLL Meeting, and made a flawed assessment of credibility of the witnesses and erred in finding that (i) the Oral Misrepresentation was made by Centaline and (ii) reliance was placed by Mega Well on the Oral Misrepresentation (the “Oral Misrepresentation and Reliance Issue”);

(b)    Whether the Judge erred in (i) failing to give due weight to the admission made by Bright Gold’s witness that a potential purchaser would get the impression that the Yellow Area formed part of Duplex B; and (ii) failing to hold that Mega Well had a duty to ascertain the truth of a representation, and hence was erroneous in finding that the state of the Yellow Area at the time of the Viewings was insufficient to constitute the Implied Misrepresentation (the “Implied Representation Issue”);

(c)     If the Judge’s findings on misrepresentation made by Centaline and reliance placed by Mega Well were upheld, whether the Judge erred in finding that Bright Gold was liable for Centaline’s Oral Misrepresentation:

(i)    Whether the Judge failed to appreciate that the capacity of Centaline was that of a “broker” or “middleman” and not an agent in the legal sense, and whether the matters took into account by the Judge were sufficient to support the finding that Centaline was an agent in the legal sense and had implied authority to act on Bright Gold’s behalf in relation to the Misrepresentation (the “Agency Issue”);

(ii)   Whether the Judge erred in finding that Bright Gold could not rely on the Declaration and that the terms of the Declaration were not clear and sufficient to give rise to a contractual estoppel against Mega Well in relation to any liability for the Oral Misrepresentation made by Centaline’s estate agent (the “Contractual Estoppel Issue”);

(d)    If Bright Gold was liable for Centaline’s Misrepresentation, whether the Judge, in ordering rescission, was erroneous in finding that the contract for the purchase of Duplex B was incapable of affirmation and/or in finding that Mega Well had not by its conduct affirmed the contract for the purpose of Duplex B (the “Affirmation Issue”);

(e)     If the relief of rescission in favour of Mega Well were upheld:

(i)    Whether the Judge erred in refusing to order pre-judgment interest on the purchase price to be refunded by Bright Gold to Mega Well (the “Pre-Judgment Interest Issue”);

(ii)   If pre-judgment interest should be awarded, whether Mega Well should be liable to pay to Bright Gold mesne profits for its use and occupation of Duplex B for the deterioration and depreciation of the decoration, fittings, equipment and furniture at Duplex B (the “Mesne Profits Issue”);

(f)    If the Judge erred in granting rescission to Mega Well:

(i)    Whether rectification of the SPA ought to be ordered (the “Rectification Issue”);

(ii)   Whether the Judge’s assessment of the amount of damages in lieu was incorrect – in particular, whether the proper measure of damages should be the difference in value of Duplex (as the Judge held) or the difference between the price paid and the market value of Duplex B without the Yellow Area; and if the latter is correct, whether the Judge ought to have taken into account the stamp duty rebate in ascertaining the price paid by Mega Well (the “Damages Issue”).

41.  After hearing submissions from counsel, we allowed the cross-appeals of Centaline and Bright Gold and dismissed the appeal by Mega Well on 19 June 2020.  We set aside the judgment of the Judge and granted the relief of rectification to Bright Gold.  We dismissed the counterclaim by Mega Well against Bright Gold for Misrepresentation.  We remitted the claim by Mega Well against Centaline to another judge of the Court of First Instance for re-trial.

42.  We also ordered Mega Well to pay the costs of Bright Gold here and below.  Such order is without prejudice to Mega Well asking for indemnity for such costs against Centaline in the re-trial.  As for the costs between Mega Well and Centaline, we ordered Mega Well to pay Centaline’s costs of the appeal whilst the costs below shall be in the cause of the re-trial. 

43.  We now give reasons for our judgment.  In light of our determination on the Oral Misrepresentation and Reliance Issue, the Implied Misrepresentation Issue and the Agency Issue, it is not necessary for us to address the other issues between Bright Gold and Mega Well.  The Rectification Issue is not contentious as there was no appeal against the Judge’s finding in that regard.  Since there will be a re-trial as between Mega Well and Centaline, the Damages Issue should form part of the re-trial and we shall not say anything in that regard at this stage.

V. The Oral Misrepresentation and Reliance Issue

44.  Mr Yan SC (appearing with Ms Leung for Centaline) submitted that in his assessment of the evidence pertaining to Oral Misrepresentation, the Judge erred in failing to apprehend the significance of several parts of the evidence.  For present purposes, it is sufficient to concentrate on two aspects of evidence which are of great significance to the Oral Misrepresentation and Reliance Issue:

(a)     The evidence on the Sales Brochure;

(b)    The evidence regarding the WKLL Meeting.

45.  Whilst this is an appeal against factual findings by the Judge on the Oral Misrepresentation and the reliance by Mega Well on the Oral Misrepresentation, we are persuaded by Mr Yan that the Judge’s assessment of the material evidence was tainted by misapprehension as to the significance of such evidence in the overall context of the dispute. 

46.  It is well-established that this court must have regard to the advantage enjoyed by a trial judge who received evidence on the disputed issues of fact at first hand, and would not disturb the findings of fact by the trial judge unless such findings are plainly wrong.  In the absence of palpable errors in the judge’s consideration of the evidence, this court would not interfere with the assessment of evidence and the weight attached by the trial judge to a particular piece of evidence: see Ting Kwok Keung v Tam Dick Yuen (2002) 5 HKCFAR 336; China Gold Finance Ltd v CIL Holdings Ltd CACV 11/2015 (unreported, 27 November 2015); ZJW v SY CACV 10/2017 (unreported, 1 December 2017).

47.  In China Gold Finance Ltd v CIL Holdings Ltd, supra, the Court referred to the judgment of Lord Neuberger in In re B (A Child) (Care Proceedings: Threshold Criteria) [2013] 1 WLR 1911 at [53] to identify the palpable errors which warrant an appellate court to interfere with a finding of primary fact:

“ … where that conclusion was one (i) which there was no evidence to support, (ii) which was based on a misunderstanding of the evidence, or (iii) which no reasonable judge could have reached …”

48.  Misunderstanding of evidence includes a failure to appreciate the significance of a piece of material evidence in the context of a crucial factual dispute.  An example of this kind of error can be found in Yap Sui Kong v Yip Fong Tim [2018] 4 HKLRD 791 at [65] to [71].  There the trial judge failed to have regard to the inherent probative value of some evidence which actually were main planks of a plaintiff’s case on lineage and thus misapprehend their significance and did not address the same in the judgment.  The Court said at [68],

“ Whilst a judge is not obliged to address every point raised and discuss all the evidence in minutiae, the judgment must inform the appellate court and the parties how important issues raised in a trial have been resolved, see Welltus Ltd v Fornton Knitting Co Ltd [2013] 5 HKC 106. In contrast, the omission to discuss minor issues or those obviously without merit in light of the determination of a judge on other issues are unlikely to form a valid basis for disturbing a judgment: see Yui Chung Yin v Ng Kit Sum CACV 25/2013, 27 November 2015; Hoptai Sharkfins Co Ltd v Productos Pesqueros Gallegos SL CACV 240/2014, 7 December 2015.”

49.  We start by examining the Judge’s treatment of the evidence on the Sales Brochure.  As mentioned above, the Sales Brochure contained accurate information regarding the Roof which would form part of Duplex B, including its locations and size.  The plan on the Sales Brochure showed that the roof area at the 33th Floor was the Strip which was a small area outside the staircase and the bigger B Upper Roof was on another level.

50.  Thus, if Cheng and Tam had obtained a copy of the Sales Brochure before the signing of the PSPA, it would be highly germane in assessing the credibility of the witnesses in terms of the Oral Misrepresentation and Reliance Issue.  In terms of inherent probability, given Mega Well’s case on the importance placed by Cheng on the Roof, it is likely that she and her family members would have checked the information contained in the Sale Brochures regarding the Roof attached to Duplex B and questioned Wong if the Oral Misrepresentation had been made.  

51.  As Mr Yan submitted, it was a main plank of Centaline’s factual case at the trial that a Sales Brochure had been given to Cheng when the parties went to the Sales Office on the site after the 1^st Viewing with the relevant accurate information on the Roof attached to Duplex B orally explained by Wong to her.

52.  Tam and Cheng denied having obtained a copy of the Sales Brochure at that stage.  Mega Well’s case was that they only had sight of the Sales Brochure in the course of the litigation in 2012 when their solicitors showed it to them after discovery. 

53.  At the trial, this part of their evidence was demonstrated to be wrong because there was a reference to the 199 square feet as stated in the Sales Brochure in the recorded conversation between Cheng and Lau on 24 December 2011. 

54.  The Judge’s finding in this respect is contained in [80] of the Judgment:

“ 80. Thirdly, serious criticisms were made about the evidence of Cheng and Tam that they only saw a copy of the Sales Brochure after Mega Well had instructed its solicitors for this action in early 2012. Such evidence is inconsistent with what Cheng had said in the Recorded Conversation, which may suggest that she had seen the Brochure Plan before that day. Whilst I agree that this is one of the matters to be taken into account in assessing the credibility of Mega Well’s evidence, I do not see anything sinister in it. Bearing in mind that this was about events after the purchase had been concluded, I am unable to see why Cheng and Tam would deliberate lie about this matter. It would not materially improve Mega Well’s case. Cheng and her husband might have been confused or their recollection was flawed. I have to bear in mind that the circumstances at the material times must have been testing for them.”

55.  In that paragraph, the Judge acknowledged that the recorded conversation was inconsistent with Cheng’s and Tam’s evidence.  Though he accepted this to be a relevant matter, he thought it was only “about events after the purchase had been concluded”.  On that basis, he did not think Cheng and Tam would deliberately lie about it.

56.  With respect, we agreed with Mr Yan’s submission that the Judge had failed to grapple with the true significance of such mistake in Cheng’s and Tam’s evidence.  Though the recorded conversation took place in December 2011 long after the signing of the PSPA, it did not follow that Cheng and Tam only had access to the Sale Brochure in December 2011.  The significance of the recorded conversation was to show that Cheng spontaneously referred to the Sales Brochure stipulating 199 square feet as relevant information on the Roof after the dispute had arisen.  On the competing versions of event put before the court by Mega Well and Centaline, the recorded conversation had the effect of negating Mega Well’s case as to the source of knowledge of Cheng and Tam about the Sales Brochure.

57.  Given the significance of the information contained in the Sales Brochure as explained above, it served Mega Well’s interest to disclaim knowledge of the same prior to discovery.  Once Mega Well had tied its colour to the mast in the way Cheng and Tam did in their respective witness statements, it also served Mega Well’s interest for Cheng to provide some form of explanation once the mistake had been exposed in cross-examination. Instead of treating the matter as an innocuous and immaterial flaw in recollection of events, the Judge should have considered carefully the explanation given by Cheng and assessed the credibility of such explanation and its implication for her credibility in general.

58.  Unfortunately, the Judge did not examine the explanation of Cheng at [80] and it is not clear if the Judge accepted that explanation and the reasons for doing so.  Nor did he discuss the submissions of Mr Yan on such explanation and the inherent likelihood in terms of the timing of the Sale Brochures given or came to the knowledge of Mega Well.  In our judgment, in light of the significance of the source of information contained in the Sales Brochure, such treatment of the evidence on Sales Brochure is plainly wrong.

59.  At the same time, we are not saying that the explanation of Cheng could not be accepted.  But it had to be considered by careful assessment of the competing versions of events and the inherent probabilities based on evidence before the court.  It would be a task for the judge presiding in the re-trial.

60.  Mr Dawes relied on the Judge’s finding that Cheng was the kind of person who “might place reliance on what they see rather than reading up the details”[2], and that “some of the evidence of [the WKLL Meeting] militate against the suggesting that Cheng had been shown the Brochure Plan and was told that the Duplex B was made up of only the Strip and an area for air-conditioners”[3].  The Judge also found that Cheng was evidently in doubt or confused about the Roof Plan at the WKLL Meeting[4].  

61.  We were unable to accept these as valid grounds for the dismissive approach of the Judge towards the mistake in the evidence of Tam and Wong on the date of knowledge of the Sales Brochure.  We shall have more to say about the WKLL Meeting and it suffices to say at this stage we had difficulties with the Judge’s findings on the evidence regarding that meeting. In respect of Cheng’s attitude, it was not Mega Well’s case that she might have read the Sale Brochures but she paid no attention to the information in it concerning the Roof.  For us, the inherent probability would point against such proposition as Cheng had emphasized the importance of the Roof in her decision to purchase Duplex B and there was no clear demarcation of the Roof areas attached to that unit at the time of physical viewings.  These are real important issues which the Judge had not addressed his mind to.  Hence, the timing when Cheng and Tam first acquired knowledge of the Sale Brochures was of critical importance in the overall assessment of the evidence on Oral Misrepresentation.

62.  It is convenient at this juncture to address the Judge’s assessment of the evidence on the WKLL Meeting.  He set out the respective evidence of Cheng and Wong in respect of this meeting at [50] and [51] of the Judgment respectively. 

50.   According to Cheng, during the course of the meeting, after having referred to Schedule 3, Lau told her that the parts coloured pink on the Roof Plan attached to the draft SPA belonged to her and that she should check it carefully.  Thereupon, Wong said to Cheng that the roof was so big and well sufficient for her use.  Lau then said that it should not be exaggerated and that only the parts highlighted in pink belonged to the unit Cheng had bought.  Wong also said to Cheng that part of the roof was for storing the air-conditioners and the like.  At that time, Cheng was confused about the Plan.  Her evidence is that she did not know how to interpreted plans.  However, Wong, who was sitting opposite her, picked up the document in front of Cheng, took a look and said that there was no error and that Cheng could sign it. 

51.   Wong’s evidence is that when Lau explained the Plans, Cheng discussed them with Tam.  Cheng then pointed at the area where the air-conditioners were located (B Upper Roof) and asked Wong how to get there. To which she replied that it was accessible via a cat ladder.  Cheng then said that the roof was too small.  Wong then told her that the roof available for her use was so big.  After Lau having pointed out that Cheng was only entitled to the parts coloured pink and the rest was common area, Wong explained to Cheng that although Duplex B only came with the parts coloured pink, normally no one would use the Roof and therefore as a matter of fact she could use it as she liked (Wong’s evidence is that, apart from the occupants of Duplexes A and B of Blocks 1 and 2 who could access the Roof via internal staircases, the other occupants could only access the Roof via fire exits and fire doors.  The use of fire door would trigger an alarm.  Hence, normally the other occupants would not access the Roof.).”

63.  The Judge did not set out the evidence of Lau though he said at [62] that Lau’s evidence supported Cheng’s evidence what took place at the WKLL Meeting.

64.  At the hearing of the appeal, Mr Yan submitted orally that if one were to consider Lau’s evidence carefully, it supported Wong’s version of what happened at the WKLL Meeting rather than Cheng’s version. 

65.  In particular, Lau’s evidence was that she had taken Wong through the plans and identified to her the areas coloured pink to be the areas attached to Duplex B, with the Strip being the part at the staircase[5].  She had also told Wong that the total roof area was only 18.53 square metres.  Her evidence was also that Wong did not indicate in the course of that explanation that she could not read plans[6].  Lau also testified that Wong had told Cheng that part of the Roof (the B Upper Roof) was to be accessed by a cat ladder.  When Lau heard Wong mentioned that Cheng could use a roof of several thousand square feet, Lau had immediately corrected that impression by reminding Cheng that she only had exclusive possession of the areas coloured pink which only added up to 18.53 square metres.  Then she heard Wong telling Cheng that she could “practically use” the other parts of the roof as nobody would go up there.  Lau reiterated again that Cheng would not have exclusive use of areas other than those coloured pink[7].   

66.  Mr Yan submitted that the Judge’s comment at [68] demonstrated that he failed to have proper regard to Centaline’s case as set out in [20] above.  The alleged Oral Misrepresentation was that the Yellow Area would be included as part of the exclusive area attached to Duplex B.  Centaline denied that such representation had been made by its agents.  On the other hand, Centaline accepted that its agents had told Cheng that she could surreptitiously or practically make use of parts of the roof which were not included in the Strip and B Upper Roof. 

67.  Counsel said the evidence of Lau supported this line of defence.  The sequence of events, according to Lau, was that she had pointed out to Cheng at WKLL Meeting the areas coloured pink exclusive possession of which would attach to Duplex B.  Counsel said, as per the evidence of Wong, Cheng queried the small size of the Strip.  Wong then told Cheng she could practically use the other parts of the roof.  Lau reiterated that only the pink areas attached to Duplex B in terms of exclusive possession. Thus a distinction was drawn between areas for which exclusive possession would be attached to Duplex B and the other areas on the Roof which Cheng could practically use. 

68.  The Judge rejected this part of Centaline’s defence at [68] of the Judgment,

“ …I reject Wong’s suggestion that she was merely explaining that the common area could be used by Cheng. I see no honest reason why Wong would have said that when Cheng was asked by Mega Well’s solicitors to check the Plans carefully to ensure that they reflected what she was buying.”

69.  In so doing, the Judge failed to have regard to the evidence of Lau which did support Wong’s evidence about how Wong’s reference to practical use came about.  In terms of finding of facts, the Judge should assess Wong’s and Cheng’s evidence in light of other evidence, including Lau’s evidence.  Insofar as the Judge rejected Wong’s evidence on what she said in terms of practical use at the WKLL Meeting, the Judge should explain if he also rejected Lau’s evidence in this regard.  He did not do so.

70.  Perhaps the Judge did not think much of the distinction drawn by Centaline between representation on title and representation on practical use.  In our judgment, Mr Yan’s submission in this regard is a valid one.  The case on Oral Misrepresentation as pleaded is a case on representation on the Yellow Area being included as part of Duplex B[8] instead of a representation on the practical use of the Yellow Area even though it was not part of Duplex B.  The Agreed List of Issues of 23 August 2018 was formulated accordingly[9].

71.  In addition, Lau’s evidence also contradicted Cheng’s evidence in the following important respects,  

(a)     Cheng disagreed that Wong had told her at the WKLL Meeting that part of the Roof had to be accessed through a cat ladder[10];

(b)    Cheng said Lau did not tell her where the Strip was located[11].

(c)     Lau’s evidence was that after dispute had arisen since the discovery of the mix-up with the C Roof, Tam requested to have the C Roof[12] whilst Cheng said Lau knew that they wanted to have the Yellow Area[13].  Lau said Cheng had not instructed her that the Yellow Area was included in the purchase[14] and her evidence under cross-examination was that even up to the time of the Recorded Conversation, she had no idea about the Yellow Area[15]. 

72.  The Judge did not allude to such significant inconsistencies between Lau’s evidence and Cheng’s evidence in the Judgment.  These aspects of the evidence were directly relevant to the assessment of Oral Misrepresentation and Reliance Issue in the following manner,

(a)     As Lau’s evidence was corroborative of Wong’s evidence about the WKLL Meeting, the Judge should consider the same before preferring Cheng’s evidence to Wong’s regarding what had been said at the meeting;

(b)    Lau’s evidence on her identification of the location of the Strip was prejudicial to Cheng’s case that she could not understand the plans at all and the Judge should have assessed Cheng’s assertion in that light;

(c)     Lau’s evidence about her lack of knowledge regarding the Yellow Area and the demand of Tam as to the C Roof instead of the Yellow Area after dispute arose should also be taken into account in assessing the credibility of the claim of Oral Misrepresentation.  In this respect, the Judge at [74] of the Judgment appeared to have misunderstood the evidence of Lau[16].

73.  Further, Lau’s evidence on repeated reminders given at the WKLL Meeting that the areas attached to Duplex B were the areas coloured pink had an obvious bearing on the question of reliance.    

74.  The failure on the part of the Judge to take proper account of the evidence of Lau is a palpable error as such evidence, coming from a witness who was independent from Centaline as well as Mega Well, could have materially affected the core findings on the Oral Misrepresentation and Reliance Issue.

75.  In our judgment, the errors on the Judge’s treatment of evidence relating to Sales Brochure and Lau’s evidence constituted sufficient bases for this Court to set aside his findings on Oral Misrepresentation and Reliance and to order a retrial on the claim of Mega Well against Centaline. 

76.  Mr Yan also advanced submissions on the treatment of the other aspects of the evidence relating to that claim by the Judge.  Counsel said the Judge failed to take into account of the conflict between the evidence of Centaline’s and Mega Well’s witnesses regarding (i) which other units had been viewed; and (ii) why Centaline had taken Cheng and Tam to view such units.  Mr Yan criticised the Judge for not taking into account Cheng’s purchase history and failing to appreciate that Cheng must have been familiar and sensitive to areas and dimensions of properties.   

77.  Whilst these are points that counsel may wish to urge upon the judge presiding over the re-trial between Mega Well and Centaline, they are less prominently related to the core issues and we would not rely on those as constituting our bases for setting aside the Judge’s findings. 

VI. The Implied Representation Issue

78.  Mega Well seeks to cross-appeal against the Judge’s finding that the state of the Yellow Area at the time of the Viewings was insufficient to constitute the Implied Misrepresentation.  There is no dispute that the Judge had identified the correct legal test, namely “what a reasonable person would have inferred as being impliedly represented by the representor’s words and conducts in their context” in considering if there was an implied representation.   

79.  Mr Dawes’ submission was that the Judge erroneously dismissed the argument on the basis that: (1) the decorations at most “contributed” to the belief that the Yellow Area formed part of Duplex B; and (2) a reasonable person in Mega Well’s position would have made further enquiry about the roof which formed part of Duplex B. 

80.  In respect of (1), Mr Dawes placed reliance on the evidence of Bright Gold’s sales manager Mr Lai[17] that a potential purchaser might get that impression.  The Judge obviously had that answer in mind as he referred to it when he addressed the Implied Representation Issue at [108].  However, the answer was ambivalent if one were to read the relevant part of the evidence on such line of cross-examination altogether[18].  Earlier on, Lai had disagreed with the suggestion that any person viewing Duplex B would be so misled and explained that they had decorated the roof as they did in respect of other common areas.  The Judge then put the proposition as a possibility instead of a fact to him and he just agreed.  Such an answer cannot be treated in the same way as an admission of fact.   

81.  After taking that part of the evidence into account, the Judge came to the view he did at [110].  In such circumstances, we are unable to say that the Judge failed to give due weight to Lai’s evidence.  Plainly, the Judge also had regard to other evidence as well in coming to that conclusion, including various photographs showing the state of the Yellow Area at that time.  There were photographs which showed that various other parts of the Roof were decorated/furnished, including areas obviously/known to Mega Well as fire escapes/common area.  There was a large sign fixed on the wall abutting the Yellow Area and at the fire escape identifying the location as “Refuge Floor”/ “Floor Temporary Rest During Emergency Escape”.

82.  More significantly, the Judge borne in mind that there was no partition at the Roof and there was no marking on the Roof to demarcate the area which formed part of Duplex B.  All these matters (apart from Lai’s evidence) informed the Judge as to whether, given the state of the Yellow Area, a reasonable person would have formed the impression that the Yellow Area formed part of Duplex B. 

83.  We are of the view that, having considered all these matters, the Judge was plainly right in finding that the state of the Yellow Area was not sufficient to constitute such implied representation.

84.  In respect of (2), Mr Dawes argued that the Judge fell into error by holding at [110] that a reasonable person would have made inquiries to ascertain the true position.  He submitted that it is no defence that the representee might have discovered the falsity of a misrepresentation by the exercise of reasonable care.  He relied on Redgrave v Hurd (1881) 20 Ch D 1 at 13-15 and Green Park Properties Ltd v Dorku Ltd [2000] 2 HKLRD 400 at 410D-G.

85.  With respect, that submission proceeded on the premise that a representation had been made.  But the Judge was addressing the prior question of whether a representation had been made.  He held that no representation could have been implied from the state of the Yellow Area.  His reference to the making of enquiry was simply another way of saying that the state of the Yellow Area per se was insufficient to constitute such implied representation.

86.  For the above reasons, we dismissed Mega Well’s cross-appeal on the Implied Representation Issue.

VII.   The Agency Issue

87.  The Judge took into account the following matters to infer that Centaline was acting as the agent of Bright Gold in making the Oral Misrepresentation[19]:

(a)     First, while Henderson Agency would promote the Development with their own clients or potential buyers sourced by them, buyers (in this case, Mega Well) introduced by outside estate agents (in this case, Centaline) would be handled by those estate agents (i.e. Centaline).  No one else promoted the Development for those buyers, and there was no contact between Mega Well and Bright Gold prior to the signing of the PSPA.  In the course of promoting the Development to potential purchasers, “obviously Centaline would, and was expected by Bright Gold to, provide information about the properties, such as the roofs which came with the top floor duplexes”;

(b)    Second, Centaline’s interest aligned with that of Bright Gold in attaining a higher selling price, and Centaline was looking after the interest both of itself and Bright Gold in the negotiations over the price;

(c)    Third, Centaline would get commission from Bright Gold if it resulted in a sale;

(d)    Fourth, the negotiations over the purchase price between Mega Well and Bright Gold were carried out via Centaline;

(e)    Fifth, the existence of the Declaration by which Henderson Agency attempted to exclude its liability for, inter alia, misrepresentation made by Centaline fortified the finding that it knew and expected that representations would be made by the latter to potential purchasers.

88.  Mr Ho SC (appearing with Mr Lee for Bright Gold) submitted that the Judge was erroneous in reaching such a conclusion as an estate agent is not an “agent” in its strict legal sense.  He referred to ING Baring Securities (Hong Kong) Ltd v Commissioner of Inland Revenue (2007) 10 HKCFAR 417 at paragraphs 137-138, where Lord Millett NPJ stated as follows:

“137.  In Kennedy v. De Trafford [1897] AC 180 Lord Herschell observed (at p.188) that “No word is more commonly and constantly abused than the word ‘agent’”. An agent properly so called is a person who acts on behalf of another, called the principal, so as to affect the principal’s legal relations with a third party: see the definition in Bowstead and Reynolds on Agency (op. cit.) p.1. Where a contract is entered into by an agent acting on behalf a principal, it is the principal who obtains rights and incurs liability under the contract, not the agent. In such a case it is not inaccurate to describe the contract as the contract of the principal and not the agent.

138.    But many professional persons who act for clients and who are popularly described as agents are not agents in this sense at all. Estate agents are an obvious example. Stockbrokers are another. They transact business on the stock exchange as principals, not as agents for their clients. Stockbrokers are liable as principals on the contracts which they make with each other; their clients have no liability under those contracts. The only contractual liability which the client undertakes is to his own stockbroker under the contract between them in which each acts as principal.”

89.  In the Hong Kong context, Godfrey J held on the facts in Cheng Kwok Fai v Mok Yiu Wah Peter [1990] 2 HKLR 440 at p.445F that the representation by an estate agent on the area of a property was not made on the vendor’s behalf, drawing a distinction between a broker and an agent in the legal sense.  On the other hand, there are authorities stressing that whether there was an agency for providing information to purchasers is a question depending on the facts of the case.  This is well explained by DHCJ S Kwan (as Kwan VP then was) in Yili Concepts (HKG) Ltd v Lee Wai Chuen HCA 12911/97 (unreported, 29 September 2000) at pp. 21-22:

“ It is a question of fact in each case whether an estate agent is authorised by and therefore acting for a particular party in providing information relating to a property to another party. Although an estate agent in Hong Kong usually acts as a broker taking commission from both sides, he may assume different roles at different stages of the negotiation leading to the transaction…”

90.  To challenge the Judge’s finding in this respect, Mr Ho analysed each of the matters relied upon by the Judge and submitted that none of these matters is sufficient to support the Judge’s finding that Centaline had authority to bind Bright Gold in relation to the Oral Misrepresentation.  Mr Ho’s submission is summarised as follows:

(a)     The fact that Centaline promoted the Development cannot support the finding that Centaline was Bright Gold’s agent.  Centaline introduced the Development to Cheng because of Cheng’s request to Wong to assist her search of properties, and it was only when none of the other recommended properties found favour with Cheng that she was taken to view the Development.  Also, Centaline was not entrusted with the keys or free access to show the premises to potential purchasers.  These indicate that Centaline was a broker, but not Bright Gold’s agent.

(b)    The fact that there was no contact between Mega Well and Bright Gold prior to the signing of the PSPA cannot support the finding that Centaline was an agent, as the reality of property transactions in Hong Kong involving estate agents was that vendors and purchasers generally would not have any direct contact prior to signing PSPA.

(c)     The fact that Centaline’s interest aligned with that of Bright Gold and that Centaline was looking after the interest both of itself and Bright Gold cannot support the finding that Centaline was Bright Gold’s agent, and Centaline’s paramount concern was to conclude the deal, which would have to be at the price acceptable to both vendor and purchaser.  This is consistent with Centaline being a broker.  It is also a “unjustified leap” in the logic to say that because of the ‘alignment of interest’ Centaline had authority to bind Bright Gold in relation to the Oral Misrepresentation.

(d)    The fact that commission would be paid by Bright Gold on a successful transaction does not show that Centaline was Bright Gold’s agent, as brokers also get paid commission from clients.  That Centaline required Mega Well’s consent to receive commission from Bright Gold shows that Centaline’s principal was Mega Well.

(e)     The fact that the negotiation on price was conducted via Centaline is no basis for implying Centaline was Bright Gold’s agent to bind Bright Gold in relation to the Oral Misrepresentation. Centaline’s role was only to convey offers and counteroffers and to get both sides to offer better terms in hope of bringing about a deal.  This is consistent with Centaline being a broker.

91.  On the other hand, Mr Dawes submitted that the issue is whether an inference of agency can be drawn in light of the primary facts before the Court and it is a multifactorial assessment.  Counsel also said the Judge’s conclusion can only be overturned if it was one which is unsupported by the evidence or which no reasonable judge could have reached, citing Haringey LBC v Ahmed [2018] HLR 9 at [29] to [32].

92.  Mr Dawes referred to the Judge’s finding that Bright Gold instructed Centaline to market the Development[20] and Bright Gold’s arrangement was that buyers (in this case, Mega Well) introduced by outside estate agents (in this case, Centaline) would be handled by those outside estate agents but no one else[21].   

93.  In respect of such findings, Mr Ho submitted that there is no evidence that Bright Gold had provided Centaline, or had conferred actual authority on Centaline to provide to others, such information on the Yellow Area.  Counsel also argued that implied authority for Centaline to make the Oral Misrepresentation was negated because correct information about the roof area was published and made available by Bright Gold via the Sales Brochure and the Marketing Brochure A, and also Approved Building Plans and DMC at on-site sales office, all of which clearly show that the Yellow Area was common area and not part of Duplex B. 

94.  In our judgment, as reiterated in the recent English Court of Appeal decisions in Haringey LBC v Ahmed, supra and UBS AG (London Branch) v Kommunale Wasserwerke Leipzig GmbH [2017] EWCA Civ 1567 at [82] to [91], in the assessment of whether a relationship constituted agency in the legal sense, it would be useful to start from some basic propositions concerning agency.  In this connection, the definition of agency in Bowstead and Reynolds on Agency 21^st Edn at paragraph 1-001 provides a good starting point:

“ (1) Agency is the fiduciary relationship which exists between two persons, one of whom expressly or impliedly manifests assent that the other should act on his behalf so as to affect his relations with third parties, and the other of whom similarly manifests assent so to act or so acts pursuant to the manifestation. The one on whose behalf the act or acts are to be done is called the principal. The one who is to act is called the agent. Any person other than the principal and the agent may be referred to as a third party.

(2) In respect of the acts to which the principal so assents, the agent is said to have authority to act; and this authority constitutes a power to affect the principal’s legal relations with third parties.

(3) Where the agent’s authority results from a manifestation of assent that he should represent or act for the principal expressly or impliedly made by the principal to the agent himself, the authority is called actual authority, express or implied. But the agent may also have authority resulting from such a manifestation made by the principal to a third party; such authority is called apparent authority.

(4) A person may have the same fiduciary relationship with a principal where he acts on behalf of that principal but has no authority to affect the principal’s relations with third parties.  Because of the fiduciary relationship such a person may also be called an agent.”

95.  In Haringey LBC v Ahmed, supra at [28], Hamblen LJ (as he then was) had this to say after quoting this passage,

“ The usual characteristics of an agency relationship may be said to be authority for the agent to affect the principal’s relationship with third parties, a fiduciary duty owed by the agent to the principal, and an ability on the part of the principal to exercise a degree of control over the agent. As this court observed in UBS AG (London Branch) v Kommunale Wasserwerke Leipzig GmbH [2017] EWCA Civ 1567 at [91]: ‘the absence of any of these main characteristics must …. be a significant pointer away from the characterisation of a particular relationship as one of agency, even though there may be rare exceptions.’ ”

96.  The importance of the existence of these characteristics were explained by Allsop P in Tonto Home Loans Australia PTY Limited v Tavares & Others [2011] NSWCA 389 at [177], which was cited in UBS AG (London Branch) v Kommunale Wasserwerke Leipzig GmbH, supra, at [90]:

“ [177] These expressions of the central characteristics of the relationship reveal the closeness of identity that is required for the relationship to exist. Not every independent contractor performing a task for, or for the benefit of, a party will be an agent, and so identified as it, or as representing it, and its interests. Agency is a consensual relationship, generally (if not always) bearing a fiduciary character, in which by its terms A acts on behalf of (and in the interests of) P and with a necessary degree of control requisite for the purpose of the role. Central is the conception of identity or representation of the principal: Colonial Mutual at 48–9; Seavey op cit at 859. Examples and contexts may be infinite, and any arrangement must be understood and characterised by reference to its legal terms in context. In McKenzie v McDonald [1927] VLR 134 at 144 Dixon AJ, in saying that not every agent stands as a fiduciary, was recognising that the word ‘agent’ is used in many senses and is apt to mislead, citing Kennedy v De Trafford at 188. That is, however, no more than to say that the word ‘agent’ has a potentially wide and varying meaning in life and business and that, on some occasions, the business description will be given to someone who is not a fiduciary. See also Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 71–2; BC8400480 (per Gibbs CJ), compare at 96–7 (per Mason J), Boardman v Phipps [1967] 2 AC 46 at 127; [1966] 3 All ER 721, F E Dowrick, "The Relationship of Principal and Agent" (1954) 17 Modern Law Review 24 and R P Meagher, J D Heydon and M J Leeming (eds) Meagher, Gummow and Lehane's Equity: Doctrines and Remedies (4th ed, LexisNexis, 2002) at 191–192 [5–195]. It is sufficient to recognise that the essential characteristic is that one party (A) acts on the other’s (P’s) behalf, and that this will generally be in circumstances of a requirement or duty not to act otherwise than in the interests of P in the performance of the consensual arrangement. Bowstead and Reynolds on Agency, the Restatement and Seavey op cit at 863 include in the conception of agency the characteristic of fiduciary duty. The duty will, of course, conform with the extent and scope of the agency and thus be of potentially varied content, recognising that context (in particular, perhaps, a market or commercial context) may attenuate the rigour or content of the fiduciary duty: Birtchnell v Equity Trustees, Executors and Agency Co Ltd (1929) 42 CLR 384 at 408; BC2900019; Re Goldcorp Exchange Ltd [1995] 1 AC 74 at 98; Meagher, Gummow and Lehane (4th ed) at 161–2 [5–010]); Finn J in South Sydney v News at [136], and in his text Fiduciary Obligations (LawBook Co, 1977) at 201. The necessary good faith implicit in a fiduciary character in the relationship reflects the character of identity or representation that the relationship essentially carries.”

97.  Bearing these in mind, for the purposes of the present appeal, we can start our analysis on the Agency Issue by making two observations derived from paragraph 1-001 of Bowstead and Reynolds on Agency. First, as emphasized under propositions (1) and (2), there has to be manifestation of assent, whether express or implied, for an agency to come into existence.  As held by Allsop P, it is a consensual relationship.  The assent must be in respect of the conferral of authority by the principal to the agent regarding the acts in question.

98.  Second, as discussed under propositions (3) at paragraph 1-001, there are two kinds of authority: (a) actual authority (either express or implied); or (b) apparent authority.

99.  Though the Judge did not analyse the matter with reference to these propositions, it appears from [107] of the Judgment (as Mr Dawes very properly submitted) that he decided Agency Issue on the ground of implied actual authority.  This was in line with Mega Well’s pleaded case on agency at paragraph 4 of its Amended Reply to Bright Gold’s Re-amended Defence to the Counterclaim.  Mega Well did not plead a case of apparent authority.

100.  Since we are dealing with actual authority, it follows that the analysis should focus on examining if there was any manifestation of assent between Bright Gold (as principal) and Centaline (as agent) on the conferral of authority in making representations on the inclusion of the Yellow Area in Duplex B.

101.  In coming to the finding as he did, the Judge was under the impression that Bright Gold had instructed Centaline to market the Development.  This was the basis he distinguished[22] Montrio Ltd v Tse Ping Shun David [2013] 4 HKC 505.  In that case, Kwan JA held at [31],

“ … The mere expectation that an estate agent might try to market a property cannot be treated as any kind of permission or authority for the agent to do so. Nor was there any obligation on the owner’s part to stop or prevent an agent in attempting to find potential buyers as a broker … Whether the information given out by the estate agent as a broker to potential purchasers was usual or otherwise, the owner would have no control over this …”

102.  The observations were made against the submission of counsel for the purchaser in that case that the owner must be treated as giving the agent the permission to provide information on the property because it was within the expectation and knowledge of the owner that the agent would market the property, see [28] of that judgment.  This was a line of argument similar to the one relied upon by the Judge at [100] and [104] of the Judgment.

103.  The Judge’s notion of Bright Gold having instructed Centaline to promote the Development apparently stemmed from his understanding of the evidence of Lai and the payment of commission by Bright Gold to Centaline.

104.  We have examined the relevant part of Lai’s evidence carefully[23].  Counsel for Mega Well cross-examined Lai in respect of the role of Ng in the discussion on the terms of the sale and purchase after Cheng decided to negotiate for the purchase of Duplex B with the developer.  Lai testified that Ng acted for Mega Well in the negotiation[24]. After some debate on the utility of such line of questioning between counsel, the cross-examination continued again in the context of such negotiation.  Lai explained why he thought Ng acted for Mega Well[25].  Counsel tried to steer him away from that position by drawing an analogy with the marketing of the Development by Centaline and suggested that the negotiation process was part of such marketing[26].  Lai initially disagreed and explained that the agent also introduced other properties to the purchasers[27].

105.  The Judge intervened and put the proposition to Lai that Centaline was engaged to promote the Development and they would get commission on a successful sale.  Lai agreed.  The Judge then related the role of the agent in the negotiation as playing a similar role as promotion and bringing the same to fruition.  Lai again agreed.[28] 

106.  In re-examination, Lai reiterated his view that Centaline acted for the purchaser and gave the same explanation he had previously given.  He also testified that Centaline’s main concern was to take care of the purchaser and they had to show various properties to purchasers in order to have business[29]. 

107.  In our judgment, there is a distinction between promotion of the Development by Centaline and Centaline being instructed to act as Bright Gold’s agent in such promotion.  As an estate agent in the sense of a broker, Centaline would naturally promote the Development to its customers when such properties fit the profile of properties the latter looked for.  Such promotion would incidentally be beneficial to Bright Gold in terms of the marketing of the Development.  But as observed by Allsop P in Tonto Home Loans Australia PTY Limited v Tavares & Others, supra, the performance of a task which is beneficial to another party would not necessarily constitute agency in the legal sense.  Likewise, as held in Montrio Ltd v Tse Ping Shun David, supra, the expectation on the part of Bright Gold of such promotion being done by Centaline would not make the latter the agent of the former. 

108.  Similar analysis appears in the discussion on canvassing agent in Bowstead and Reynolds on Agency, at paragraph 1-020. The latest version can be found in the Second Cumulative Supplement to the 21^st Edn.  Such intermediary is simply hired to introduce parties desirous of contracting and in effecting such introductions the intermediary is remunerated by commission.  The learned editors said it is difficult to generalise because the extent of involvement of such a person may differ in different cases.

109.  Hence, the mere payment of commission for someone who acted as an introducer is not sufficient for the purpose of establishing authority to make representations on the marketing of a property. It must depend on the function that the person was entrusted with.     

110.  Before the court can properly reach the conclusion that Bright Gold had conferred actual authority on Centaline to market the Development on its behalf, it must consider if there had been manifestation of assent by Bright Gold to Centaline for the latter to make marketing representations on its behalf as opposed to Centaline being permitted to show the Development to those potential purchasers who were in law the purchasers’ agent. 

111.  In this connection, the Declaration is an important piece of evidence.  With respect, the Judge failed to properly apprehend the significance of such evidence in the context of the Agency Issue when he regarded[30] the Declaration as reinforcing his “common sense view” that Bright Gold expected that representation would be made and limited its significance to that.  In our judgment, the Declaration, read in light of the factual matrix in which it was executed, was a clear intimation by Henderson Agency on behalf of Bright Gold to Centaline as well as Mega Well that Centaline was only an introducer and had no authority to incur any liability for Bright Gold in the dealings between Centaline and Bright Gold.  In considering the effect of the Declaration, the Judge only focused on Clause 1 in the Declaration without paying regard to Clause 2[31].  Further, the Judge failed to have regard to Henderson Agency also executed the PSP for Bright Gold in holding that the Declaration had nothing to do with Bright Gold.

112.  In the present case, having regard to the above analysis on canvassing agent and the effect of payment of commission to such agent, there is no evidence to support a finding of assent by Bright Gold for Centaline to market Duplex B on its behalf.  Contrary to the apprehension of the Judge, the evidence of Lai cannot support a finding that Bright Gold had instructed Centaline to promote the Development.  As we have seen, the answer was in response to a question by the Judge in the context of negotiations and the promotion of the Development was referred to in a general manner.  The reference was linked up with payment of commission which Lai had to agree.  The Judge’s impression that Lai had resiled from his evidence was not supported by the evidence as he had explained under cross-examination by Mega Well’s counsel why Centaline could not be regarded as acting for Bright Gold and simply reiterated the same in re-examination. 

113.  With respect, the Judge dismissed[32] Lai’s point that Centaline also showed properties of other vendors to its customers too readily.  First, the Judge had placed undue significance on the payment of commission.  In so doing, the Judge failed to have regard to the legal status of a canvassing agent as discussed above.  Second, the showing of properties of other vendors would be an indication of lack of fiduciary duty owed by Centaline to Bright Gold.  Whilst it may not be conclusive, it is a relevant consideration.  Third, the Judge failed to have regard to the distinction between promoting a property and being instructed by the owner of the property to promote the property when he placed emphasis on the estate agent doing promotion to buyers brought along by them.    

114.  The clear evidence was that Centaline acted for Cheng in the transaction (as indeed it was the pleaded case of Mega Well against Centaline that the Oral Misrepresentation was made by Cheng in such capacity[33]).   The Judge failed to understand that this would be sufficient to provide the incentive to Centaline to promote Duplex B. 

115.  As for the other factors taken into account by the Judge – viz. its interest aligned with that of Bright Gold; there was no contact between Mega Well and Bright Gold prior to the signing of the PSPA; and the negotiation on price was conducted via Centaline – we agree with Mr Ho that these are matters perfectly consistent with Centaline acting for Mega Well only and one could not derive from these matters any inference which go against the clear evidence that there was no manifested assent by Bright Gold to Centaline to make representations on its behalf in marketing Duplex B.

116.  Of the three main characteristics of agency relationship discussed by Hamblen LJ in Haringey LBC v Ahmed, supra at [28], there is no evidence in the present case that Bright Gold had any control over what Centaline’s agents would say to Cheng in marketing Duplex B.  Nor is there any evidence to support any finding of fiduciary duty owed by Centaline to Bright Gold in such marketing exercise.  As explained above, there is also no evidence to support a finding that authority had been conferred by Bright Gold to Centaline to affect the former’s relationship with potential purchasers. All these pointed away from any suggestion of legal agency relationship between Centaline and Bright Gold.

117.  Having considered all the matters in the round, we are of the view that the Judge’s inference of agency is plainly wrong and unsupported by evidence.  We therefore allowed Bright Gold’s appeal and dismissed Mega Well’s claims against Bright Gold.

VIII. The other Issues as between Bright Gold and Mega Well

118.  Mr Ho further argued that Clauses (1) and (2) of the Declaration gave rise to a contractual estoppel against Mega Well.  In light of our conclusion above on the Agency Issue, it is not necessary for us to express any view on this line of argument. 

119.  Likewise, it is not necessary for us to address the Affirmation Issue, the Pre-Judgment Interest Issue and the Mense Profit Issue.

120.  As we held that Bright Gold was not liable for the Misrepresentation and rescission should not have been ordered, based on the finding of the judge at [130] of the Judgment, rectification of the SPA should be ordered.  We granted such relief to Bright Gold accordingly.

IX. The Damages Issue

121.  The Judge ordered Centaline to pay Mega Well damages in the sum of $100 on the basis that there were to be rescission of the SPA.  We set aside the judgment and ordered a retrial as between Centaline and Mega Well.

122.  In view of our reversal of the Judge’s judgment as between Mega Well and Bright Gold, there would not be any rescission of the SPA.  The question of damages, if Mega Well succeeds in the re-trial in establishing the liability of Centaline, would have to be considered afresh.

123.  The Judge had indicated at [145] that he would have awarded damages in the sum of HK$3,050,000 had he not minded to order rescission.  There were arguments between Centaline and Mega Well if such conclusion were correct under the Damage Issue.

124.  Since we have set aside the Judge’s judgment, the judge presiding over the re-trial is not bound by the Judge’s view in this regard.  We have ordered the Damage Issue to be within the remit of the re-trial.

X. ;Disposition

125.  For the reasons stated above, we make an order in terms of the draft submitted by solicitors for Bright Gold (which, except paragraph 15 thereof, was agreed by the other parties).  The Court did give the indication as per paragraph 15 of the draft.  We would make an order including that paragraph to preserve the right of Mega Well in the event that it succeeds in the re-trial in establishing its claims against Centaline.

126.  Last but not least, we express our gratitude to counsel for their very able assistance in this appeal.