LEE CHI HOI v. LAW YU KIN TRADING AS HO WAN ESTATE AGENCY

IN THE SUPREME COURT OF HONG KONG

SMALL CLAIMS TRIBUNAL APPEAL NO. 40/88

(CLAIM NO. H6882/88)

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JUDGMENT

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1. This is an appeal from the decision of the Small Claims Tribunal where the Adjudicator found in favour of the respondent/claimant, an estate agent, who had sued the appellant/defendant for the recovery of its commission amounting to $4,690.00 at the rate of 1% of the agreed purchase price of a flat on the 8th floor of the Wing Hing Building which the appellant had agreed to purchase through the estate agency by entering into its provisional agreement for sale and purchase, Exh. C2, and which he later did not complete.

2. According to the facts found by the Adjudicator, the appellant approached the estate agency looking for a flat to buy. He was taken to view two flats, of which he indicated his preference for the second but the deal later fell through. He was then taken to the flat in question on the 2nd June, 1988. Negotiations took place in the offices of the estate agency and the price having been agreed between the vendor and the appellant at $469,000.00, the latter paid a deposit of $10,000.00. At the same time the parties entered into a provisional agreement for sale and purchase of property, Exh. C2, which they signed after they had read it and its terms fully explained to them by an employee (C.W.2) of the respondent.

3. The fact that such an agreement was signed is not denied by the appellant but he maintained that he entered into it on the basis of an assurance given to him by the agency employee that he would be able to get up to 80% bank mortgage and he denied that the agreement was read and explained to him.

4. The Adjudicator found the claimant and his witness truthful and reliable. This finding is based upon her assessment of the witnesses by her "observation of their demeanour". Amongst the various findings of fact is one about the agreement having been fully explained before the parties signed it.

5. The question which the appellant has raised, as indeed he had at the hearing before the Tribunal, is whether he was liable to pay the full commission to the estate agent when the sale of the flat had not been completed. This necessitates a close scrutiny of the agreement which the parties signed on 2nd June, 1988, according to which the sale was to be completed at the offices of a named solicitor's firm on the 4th June. It is on a standard form of the estate agency and is in Chinese, with English translation beneath the Chinese characters. The translation by a Court Interpreter "I" differs in some respects from what is printed on the form and for the purposes of citing the relevant parts of it, the Court interpreter's translation is reproduced. The part headed "Commission for service" in so far as it is relevant for purposes of this appeal, states:

"Purchaser pays a commission of 1% of the purchase price to our company when signing the Sale and Purchase Agreement at the solicitor's firm ($4,690.00).

Vendor pays a commission of 1% of the purchase price to our company when signing the Sale and Purchase Agreement at the solicitor's firm (HK$-).

6. The appellant said that he went to his bank to check on the mortgage and was told that he could get one for "roughly half of the purchase price", and as he could not afford the purchase price he had "to have the deposit forfeited".

7. The general principles are stated in Article 58 in Bowstead on Agency, 15th Edn. at p. 216 as follows:-

"  (1)    Where an agent is entitled to his remuneration upon the happening of a future event, his entitlement does not arise until that event has occurred.

 

    (2)    The event upon which the agent's entitlement to remuneration arises is to be ascertained from the terms of the agency contract.

 

    (3)    Where the event upon which the agent's entitlement to remuneration arises does not occur, the agent will not be entitled to receive remuneration on a quantum meruit unless provision for this is expressly made in the agency contract, or unless a term to such effect can he implied into the agency contract in order to give it business efficacy or otherwise to effect the intentions of the parties."

8. It is the third item that is relevant and it is based on the decision in Luxor (Eastbourne) Ltd. v. Cooper (1941) A.C. 108(H.L.) where Lord Russell of Killowen said at p. 124:-

"No general rule can be laid down by which the rights of the agent or the liability of the principal under commission contracts are to be determined. In each case these must depend upon the exact terms of the contract in question, and upon the true construction of those terms. "

This authority lays down also that clear and unambiguous words must be used if the commission is to be payable without an actual sale taking place.

        The Adjudicator referred to the agreement and said:-

 

"Under the agreement the defendant was liable to pay the claimant commission of $4,690.00 being 1% of the agreed price of $469,000.00. The claimant has performed his part as estate agent. The agreement was not harsh, unreasonable or illogical as alleged by the defendant. "

9. It was not a question, as the Adjudicator seems to have thought, whether the estate agent had performed his part or not so as to be entitled to his commission; the sole question was whether the parties had expressed their intention in clear and unequivocal terms concerning payment of commission in the event of the specified event, that is, the completion of the sale, not going through due to the default of the appellant.

10. Considering the terms of the agreement, it is obvious that they provide in unambiguous language for the liability of the parties to the sale transaction to pay the commission in the event of not completing the sale on the 4th June. Various terms have been incorporated to deal with the failure of each or both of them to complete the sale, and, upon a true construction of those terms, it is manifest that the respondent estate agent had protected himself sufficiently to have become entitled to the remuneration stated therein in complete accord with the terms of the advice of Viscount Simon L.C. in the Luxor case (supra) at p.120:-

"The agent is promised a reward in return for an event, and the event has not happened. He runs the risk of disappointment, but if he is not willing to run the risk he should introduce into the express terms of the contract the clause which protects him. "

11. In my opinion the Adjudicator came to the correct decision but for a different reason. The appellant is clearly bound by the express terms of the agreement to pay the estate agent's commission upon his admitted default to complete the sale.

12. I see no merit in this appeal and it is dismissed with costs, which are fixed at $200.00.