ASIA PROPERTY AGENCY CO., LTD v. CHEUNG WUN YEE JAMIE

HCA 298/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 298 of 2013

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(By original action)

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(By counterclaim)

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J U D G M E N T
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Introduction

1.  This is the trial of a dispute concerning the sale and purchase of the property known as Shop A on G/F., together with a lavatory thereto on 1/F Haven Commercial Building, Nos 6 – 8 Tsing Fung Street (“the Property”).  The present action was commenced by Asia Property Agency Co Limited (“Asia Property”) against Cheung Wun Yee Jaime (“Cheung”) in the District Court for unpaid commission.  This was transferred to the High Court and subsequently Full Chances Limited (“Full Chances”) and Hui Ling Ling (“Hui”) were added as defendants by way of counterclaim. The counterclaim against the defendants is that they acted together by buying property which they knew that Cheung was interested in and resold the same to Cheung at a profit, taking advantage of the difference between what the original vendor was willing to accept and what Cheung was willing to pay, and by so doing there was a breach of fiduciary duty.

2.  No other defence is raised as to the entitlement to commission.  If follows that if Cheung’s counterclaim fails, then Asia Property’s claim succeeds ipso facto.  Thus, although Cheung was the defendant by original action, the roles were reversed and she took over the role of plaintiff opening her case against the other parties.  In order to avoid confusion, I will refer to the parties by their names instead of as plaintiff or defendant.  Where I refer generally to Asia Property, Full Chances and Hui, I will refer to them as “Asia Property et al”.

3.  Cheung is the purchaser of the shop.  However, she very much took a back seat at the trial, and did not herself give evidence. Instead, her husband Mak Siu Lun (“Mak”) gave evidence on her behalf, as it was Mak who was personally involved in the negotiations over the transaction.

4.  On the other side is Asia Property, an estate agency company with a number of branches in Hong Kong.  Hui is one of the directors of Asia Property, and is regarded as the “boss” of Asia Property together with her husband.  Full Chances is a company which Hui acquired to purchase the Property and which sold the Property to Cheung.  Choi Yee Ting (“Choi”) was and is an estate agent working for Asia Property.  Alain Yiu (“Yiu”) was an estate agent working for Asia Property at the material time.

5.  Bright View Investments (Asia) Limited (“Bright View”) was the original vendor of the Property which it sold to Full Chances.  Chung Wai Hung (“Chung”) was a shareholder and director of Bright View and the controlling mind of Bright View.

Background

6.  The Property in question is a shop on Tsing Fung Street, in the Tin Hau area.  The shop was purchased by Bright View in September 2009.  The events leading to the present litigation occurred within a short space of time in March 2012.

7.  The Property was first put up for sale by Bright View in January or February 2012, who listed the Property with various estate agencies, including Asia Property.

8.  On 15 March 2012, Chung accepted an offer to sell the Property to Full Chances for $15 million.  The Provisional Agreement for Sale and Purchase (“1^st PASP”) was dated 11 March 2012.  There is no dispute that the PASP was entered into on 15 March 2012 and not 11 March 2012 as appears on the documents.  Yiu was the agent from Asia Property who negotiated the transaction on behalf of Bright View and Full Chances.  A supplemental agreement was also signed at the time (“the 1^st Supplemental Agreement”), Clause 4 of which provided:

“The Vendor agrees that the Purchaser purchases the aforementioned Property under the name of a limited company and agrees to the addition of a director of Asia Property Agency Co., Ltd. as one of its shareholders.”

9.  Subsequently, Mak made offers to purchase the Property.  The exact sequence of offers is disputed and will be examined in greater detail below, but the crucial point is that Mak says that he first made an offer to purchase the Property on 14 March 2012 for the price of $15 million. This is the exact date when the PASP between Bright View and Full Chances was signed, and for the same amount.  This offer is denied by Asia Property et al.

10.  After some negotiation, Mak finally bought the property from Full Chances at a price of $16,590,000.  Full Chances sold as confirmor.  The Provisional Agreement for Sale and Purchase between Full Chances and Cheung (“2^nd PASP”) was dated 21 March 2012. At the same time as signing the 2^nd PASP, Cheung also signed a Supplemental Agreement (“the 2^nd Supplemental Agreement”), Clause 4 of which provided that:

“The Purchaser clearly understands that one of the directors of the Vendor Company is a shareholder of this Agent Company.”

11.  Completion of the Sale and Purchase went ahead on 14 August 2012.  Two days after completion, Mak was approached by Chung who alleged that he had been cheated by Asia Property who he alleged had wrongfully taken advantage of its position to obtain a profit which could otherwise have gone to the real vendor and/or purchaser (“食價”) and wished to find out whether Mak had been so cheated as well.  This set Mak onto a train of enquiry leading to the present action.

Undisputed facts

12.  On 10 March 2012, an invoice was issued by Kingfield Consultants Limited (“Kingfield”) to Full Chances for secretarial services in respect of incorporation of a company.  This coincides with the date when Hui says she arranged with Kingfield to purchase Full Chances for the purchase of the Property.

13.  On 11 March 2012, a cheque in the sum of $500,000 was issued from the joint account of Hui and her husband Tsoi Chi Chung (“Tsoi”) in favour of Bright View.

14.  On 12 March 2012, Choi emailed Mak with pamphlets for the Property and another property in Tsing Fung Street, inviting Mak to find some time to go and view the properties, stating that there had recently been many shop transactions.  In the pamphlets, the asking price of the Property was stated to be $18 million.[1]

15.  On 15 March 2012, Full Chances entered into the 1^st PASP with Bright View.  The date of the 1^st PASP was recorded as 11 March 2012.  At the same time, a supplemental agreement was entered into between the parties, the material part of which provided at Clause 4 that:

“The Vendor agrees that the Purchaser purchases the aforementioned Property under the name of a limited company and agrees to the addition of a director of Asia Property Agency Co., Ltd. as one of its shareholders.”

Again, at the same time, a side agreement was entered into between Chung and Asia Property to reduce the commission due to Asia Property from $150,000 to $127,500.  Both the supplemental and the side agreements were dated 11 March 2012, although they were both signed on 15 March 2012.

16.  On 19 March 2012 at 18:29, Choi emailed Mak urging him to purchase the Property.

17.  Sometime in the evening of 20 March 2012, Choi and Yiu went to the home of Mak and Cheung.  Mak and Cheung instructed Choi and Yiu to make an offer to purchase the Property on their behalf for $16,280,000.  Cheung signed on the 2^nd PASP, with the price set out at being $16,280,000.  Mak issued a cheque for $500,000 which was to be applied as the deposit for the intended purchase.

18.  This offer was not accepted.  The rejection was communicated to Mak and Cheung the next day, 21 March 2012.

19.  On 21 March 2012 at around 18:21 hrs, a text message was sent to Mak by Yiu/Choi again urging him to buy the Property, saying that the vendor had set a deadline, that they had got the best price working till late the previous night, that the Property was worth more than $18 million, and that the present price of $16,580,000 was a price which was achievable only through the efforts of Yiu.

20.  Shortly thereafter, Mak and Cheung finally agreed to purchase the Property at the price requested, except that they wished to avoid paying $16,580,000 since the figures were inauspicious.  Instead, they suggested that the price be set at $16,590,000.  The 2^nd PASP was then signed with the appropriate corrections.

21.  Completion of the sale and purchase took place on 14 August 2012.

22.  Another set of proceedings between Asia Property et al and Bright View was settled.  The claims of Bright View in those proceedings was the mirror image of the present proceedings in that Bright View claimed that Asia Property et al interposed Full Chances so that it could take advantage of the difference between what Bright View was willing to accept and what Mak and Cheung were willing to pay.  The terms of the settlement were confidential to the parties involved and were not disclosed to me.  I will say at once that the fact of those proceedings and their settlement played no part whatsoever in my decision.  Indeed, without knowing what the terms of settlement were, they could have played no part.

Cheung’s case

23.  Cheung’s case is based on (1) breach of fiduciary duty on the part of Asia Property, Choi and Yiu, and (2) deceit and conspiracy to injure on the part of Asia Property et al.

24.  Cheung called Chung and Mak.  Chung was a subpoenaed witness who declined to provide a witness statement on account of the settlement agreement between himself and Asia Property et al.

25.  Chung said that in about January – February 2012, he listed the Property with various estate agents including Asia Property, at an asking price of between $17 million to $18 million.  He confirmed the contents of Bright View’s Defence and Counterclaim.

26.  Bright View’s Defence and Counterclaim alleged that:

(1) Yiu told Chung he could introduce a potential purchaser from Mainland China who was a good friend of his boss.

(2) On 14 March 2012, Yiu informed Chung that the purchaser from Mainland China offered $14 million for the Property.  Chung refused.

(3) On 15 March 2012, Yiu informed Chung that the offer was increased to $15 million without informing Chung that any other person was interested.

(4) At around 8:30pm on 15 March 2012, Chung attended the City Garden branch of Asia Property and signed the 1^st PASP and the 1^st Supplemental Agreement and received a cheque for $500,000 as deposit.

(5) Before Chung signed the 1^st PASP, Yiu represented that the purchaser was a company held by the purchaser from Mainland China who might not be able to obtain finance for the purchase, in which case Yiu’s boss agreed to become a shareholder and provide financing for the purchase.  In reliance on such representation, Chung signed the 1^st Supplemental Agreement.

27.  In cross‑examination, he said that:

(1) About a week before 14 March 2012, Yiu called him with an offer of $14 million for the Property, which was refused.

(2) On 14 March 2012, Yiu called him again to ask if he would accept $15 million.  Yiu made the offer of $15 million on 15 March 2012.

(3) No other agents approached him with interested purchasers.

(4) If he had known that Full Chances was connected to Asia Property, he would not have sold at the price he did, because he would have suspected an unidentified buyer.

28.  Mak gave evidence for Cheung, adopting his witness statement, which described the sale as follows:

(1) He was and is the husband of Cheung.  Although the Property was bought in Cheung’s name, he was mostly involved in the negotiations.

(2) They first became interested in the Property when they came across a leaflet on 10 March 2012.  The leaflet was issued by Asia Property in respect of the Property setting out its asking price as being $19 million and that the Property was sold on the basis of vacant possession.

(3) They were interested in the Property because of the location and the price, and certain remarks in the leaflet.

(4) At about 2:45pm on 10 March 2012, Mak called Choi to enquire about the Property.  Choi said that she would get back to Mak with updated information about the Property and other shops in the vicinity.

(5) On 12 March 2012, Choi sent Mak an email with updated information for the Property, as well as information about another shop on Tsing Fung Street.  The asking price for the Property was now $18 million, but subject to tenancy.

(6) Mak and Cheung decided to make an offer of $15 million for the Property.  Mak telephoned Choi in the afternoon of 14 March 2012 with instructions for her to make an offer to the vendor of the Property to purchase at $15 million.  Choi’s reaction was that the price offered was low but she would try to persuade the vendor.  In the same telephone call, Mak also asked Choi to enquire with banks she was familiar with to see what the Property was worth.

(7) On or about 16 March 2012, Mak telephoned Choi to ask about their offer and the bank valuation.  Choi said that she was still negotiating with the vendor, and that a Mr Wong from the North Point branch of Bank of Communication would reply in the following 1 – 2 days.  Mak telephoned again on 17 March 2012 and the answer was the same. Choi said that the offer of $15 million had been communicated to the vendor on 14 March 2012.

(8) At about noon on 19 March 2012, Choi called Mak and said:

(a) the bank valuation was “successful”, ie the bank’s valuation supported the price enquired of (whether this was $15 million or $18 million is not elaborated in the witness statement, although he later said in cross‑examination that Choi informed him the valuation was $14 million which was in line with the valuation usually being 70 – 80% of the real value of the property); and

(b) the vendor rejected their offer of $15 million and counter‑offered $16.8 million.

In the course of the conversation, the call was handed by Choi to Yiu who tried to persuade Mak to accept the counter‑offer saying that $16.8 million was a bargain.

(9) Later the same day at about 6:19pm, Choi sent a text message to Mak in an effort to persuade Mak to accept the counter‑offer.

(10) On 20 March 2012, Mak telephoned Choi with instructions to make another offer at $16.5 million.  Choi asked to meet with Mak and Cheung and it was arranged that Choi and Yiu would go to Mak and Cheung’s home at 11:00pm that evening.

(11) Choi and Yiu duly went to Mak and Cheung’s home where they engaged in further persuasion of Mak and Cheung.  In the course of this conversation, it was revealed that the Property had been sold at $15 million on 11 March 2012 and that Mak and Cheung would be buying from the purchaser as confirmor.

(12) In the end, Mak and Cheung lowered their counter‑offer to $16.28 million.  Their stated reason for doing so was because of the confirmor sale and because Yiu appeared eager to conclude the deal.  Cheung signed on the pro forma 2^nd PASP and a cheque was drawn for the initial deposit.  Cheung also signed the 2^nd Supplemental Agreement.

(13) Mak and Cheung asked the reason for Clause 4, and Yiu said that the actual buyer of the Property was a friend of Choi and Yiu’s employer which had bought the Property on 11 March 2012, that the purchase was through a limited company, and if necessary Choi and Yiu’s employer agreed to be guarantor to obtain financing.

(14) In the afternoon of 21 March 2012, Yiu telephoned Mak saying that their offer of $16.28 million was not accepted, and that the vendor wanted $16.58 million.  Mak told Yiu that he would have to speak with Cheung and they would think about it.  Later that day, Yiu sent Mak a text message saying that the vendor had set a deadline, and further sought to persuade Mak to buy the Property.

(15) Shortly thereafter, Mak telephoned Yiu to inform him that they were willing to purchase the Property and arrangements were made to make the necessary changes to the 2^nd PASP to go ahead with the purchase.  However, instead of agreeing the price at $16.58 million, at Mak and Cheung’s suggestion the price was set at $16.59 million to avoid the inauspicious sounding (in Cantonese) price of $16.58 million.

29.  In cross‑examination:

(1) Mak related how he and Cheung had bought and sold a number of properties with resulting profit, that Cheung had just disposed of a shop on 6 March 2012 and they were sitting on cash which they wanted to invest in real property at a target price of between $15 – 20 million.

(2) He had first noticed the Property some time previously, but only became serious after Cheung had disposed of her shop.

(3) When he first called Choi, he did not ask her to introduce other shops to him as he had previously asked other agents in Tin Hau about their listings but there was nothing available.

(4) In answer to the basis of his first offer of $15 million, he said that it was a figure which they considered affordable, although he did not know whether $15 million was cheap or expensive.  He did not get a valuation before making the offer, because he did not consider it critical to his decision making.  He considered $15 million to be the market price, which was based on his reading the newspapers and keeping a lookout on the prices of shops.

(5) He said that he asked Choi to obtain a bank valuation to show to Choi that he was serious so she would not brush him off, and she would be more persuasive on his behalf in negotiations.  His practice was usually not to get a valuation before making an offer, and said that the bank valuation was not accurate but just gives an indication as to how much the bank would be willing to lend on the security of the property.  He did not issue a cheque to demonstrate his sincerity because he was not asked.

(6) Mak was asked why he should lower his offer from $16.5 million to $16.28 million upon learning that the sale was to be conducted as a confirmor sale.  He said that they had no experience of confirmor sale and it was Yiu who suggested that they try a lower price.  When it was pointed out to him that this was inconsistent with his witness statement, the only answer he could come up with was that it was maybe (his) lawyer had misinterpreted his instructions.

30.  Cheung’s primary case as encapsulated in her opening submissions by Mr Jason Wong was that the whole exercise was dishonest and was to conceal from Cheung an opportunity to purchase the Property at $15 million and then for Hui to make a quick profit through Full Chances.

31.  As a fallback position, even if they are unable to prove conspiracy to injure/deceit, Asia Property was in breach of its fiduciary duty to Cheung by withholding Mak and Cheung’s offer on 14 March 2012 in favour of Hui, and/or failing to inform Mak and Cheung that Hui alone was behind Full Chances, and was not only a shareholder holding shares in Full Chances with a mainland client.

Asia Property et al’s case

32.  Asia Property et al called three witnesses, Hui, Choi and Yiu.

33.  Hui adopted her witness statement, which provided:

(1) She was a shareholder of Asia Property and Full Chances.

(2) She had been engaging in real property investment.  Her interest in real property is well known by her colleagues and employees in Asia Property.

(3) In about mid‑February 2012, Yiu recommended the Property to her as a good investment.

(4) On about 10 March 2012, she decided to make an offer to purchase the Property and arranged with a company secretarial company Kingfield Consultants Limited (“Kingfield”) to acquire a company off the shelf for this purchase.  This company was Full Chances.

(5) Before making the offer, she requested Yiu to propose $14 million to the vendor, which Yiu said was a low offer but he would try anyway.  This offer was rejected.

(6) On 11 March 2012, she raised her offer to $15 million.  She issued a cheque for the initial deposit in the sum of $500,000 and signed on the 1^st PASP.  Both cheque and 1^st PASP was dated 11 March 2012, being the date when she signed on both documents.

(7) The offer was initially rejected on 11 March 2012, but on or about 14 or 15 March 2012, she was informed by Yiu that the vendor accepted her offer of $15 million, and that Chung had been arranged to attend at Asia Property’s City Garden office to deal with the arrangements.

(8) On 19 March 2012, Yiu called and asked if Hui would be willing to sell the Property onwards at the sum of $15.8 million, to which she replied in the negative, but she might consider if the price was right, say at $16.8 million.

(9) At about 2am on 21 March 2012, Yiu and Choi called Hui and said that Choi’s client had made a formal offer to purchase the Property at $16.28 million and signed a provisional sale and purchase agreement and had issued a cheque for initial deposit.  Hui refused, saying that the price was too low.  They nevertheless went to the bar where she then was and after some persuasion, Hui made a counter‑offer of $16.58 million and the provisional sale and purchase agreement was amended accordingly.

(10) In the evening of 21 March 2012, Yiu telephoned Hui saying that the counter‑offer was accepted except that the buyer wanted to increase the purchase price to $16.59 million to avoid the inauspicious sounding numbers “1658”, to which suggestion Hui agreed.

(11) About 1 to 1½ months before completion, solicitors acting for Full Chances in the conveyancing of the Property notified Hui that the buyer’s solicitors were raising requisitions concerning the lavatory of the Property being on the 1^st Floor and the solicitors could not come to agreement.  She instructed Full Chances’ solicitor to inform the buyer that Hui was willing to cancel the sale and refund the buyer the deposit.  This was subsequently communicated to the buyer through Choi and no more was made of the matter.

(12) In mid‑August 2012, after completion, Yiu and Choi reported that Chung demanded $1,000,000 payment to him and $1,590,000 to Mak and Cheung as “compensation” or else they would report to the ICAC and the Estates Agents Authority.  As a result Choi made a report about this demand to the police.

34.  Under cross‑examination, Hui said that:

(1) She invested in property mostly through introduction of other estate agencies (not Asia Property), and mostly through limited companies.

(2) When she purchased properties through the introduction of Asia Property, she would instruct employees of Asia Property to inform the counterparty that the buyer is a company in which Asia Property’s shareholders had an interest.

(3) When she was prepared to enter into a transaction to buy property, she would not notify the managers at Asia Property that she was ready to buy.

(4) Disclosure of her interest in a particular transaction is only to the concerned parties, not to all managers.

(5) She seldom worked at the company, her husband usually took charge of meetings.  She could not access Asia Property’s computer network (for listings and information about properties) at home.

(6) When she decided to buy the Property, she notified Yiu.  She asked if anyone had negotiated about the price, and Yiu answered in the negative.  She told Yiu that if she did buy, Yiu had to tell the vendor that the purchaser was a shareholder [of Asia Property] and if the vendor did not agree, she would not buy.

(7) She told Yiu that she would be buying a company to acquire the Property, and she did buy a company on 10 March 2012, the name of which she gave to Yiu.

(8) She made the initial offer of $14 million based on her knowledge of the market condition.  Specifically, a friend had bought a bigger property for $12 million a few months previously, so she decided to offer $14 million.  She did not seek a bank valuation because she did not need to borrow money to buy the Property.

(9) Yiu brought the 1^st PASP for her to sign, which she did.  It was dated 11 March 2012, the same date as the cheque for the initial deposit.

(10) When she issued her cheque, she did not know that any other employee of Asia Property had handled this property, nor that Choi had obtained details of the Property.  She did not ask or hear that any other potential buyer was interested in the Property.  If she had known, she would have let the other buyer go ahead.

(11) The wording of Clause 4 in the 1^st Supplemental Agreement was of Yiu’s own making, that he did not know how many shareholders there would finally be in Full Chances as she herself had not yet decided then. She disagreed that the date set out (11 March 2012) made it a misleading statement because the date of 11 March was the date of her cheque, nor was it misleading because Full Chances was to be held by one shareholder as the important thing was to disclose the identity of the shareholder.

35.  The next witness was Yiu.  His witness statement provided:

(1) He had been an estate agent since 1994.  He joined Asia Property in 2009, and at the material time he was Sales Director of City Garden office of Asia Property.  He left employment of Asia Property on 31 May 2012.

(2) He introduced the Property to various clients in about mid to late February 2012, including Hui.  Except from Hui, none of the people he approached indicated any interest or made an offer to buy.

(3) He recalled that the Property had been on offer by many property agencies for some time.

(4) On or about 10 March 2012, Hui expressed her interest in the Property and asked him to propose $14 million as the purchase price to the vendor.  He called Chung and conveyed the offer, which was rejected outright.

(5) On 11 March 2012, Hui decided to make a formal offer to buy the Property at $15 million using Full Chances.  She signed the 1^st PASP and issued a cheque in the sum of $500,000 for the initial deposit.

(6) In the late afternoon of 11 March 2012, he relayed the offer to Chung who did not accept the offer.  He persisted and called Chung again the next day whereupon Chung said he would think about it.

(7) On 14 or 15 March 2012, Chung called him to say that he accepted the offer to sell the Property at $15 million.  He arranged Chung to attend his office where Chung signed the 1^st PASP and took the cheque from Hui as initial deposit.  At the same time, the 1^st Supplemental Agreement was signed.

(8) Yiu explained to him the documents, including the 1^st Supplemental Agreement.  Clause 4 in the 1^st Supplemental Agreement was amended at Chung’s request.  Yiu said that Hui might purchase the Property together with a friend from the mainland, but she had not decided yet.

(9) At the time of signing the 1^st PASP, Yiu was not aware of any other offer from any other party through Asia Property.

(10) On about 19 March 2012, he received a call from Choi who said she had a client who would like to purchase the Property for $15.8 million.  He informed Choi that it was Hui who bought the Property through Full Chances.  Choi requested Yiu to ask Hui if she would resell the Property and he duly did so.  Hui’s reply was that she did not intend to sell, but might consider it if the price was right.  However, $15.8 million was too low but she might sell if the price was $16.8 million.  He passed this on to Choi.

(11) On 20 March 2012, Choi called and said Mak would like to make an offer to purchase supported by a cheque for the initial deposit.  He and Choi attended Mak’s residence at around 8:00pm that evening bringing with them a provisional sale and purchase agreement.

(12) Upon meeting with Mak, Mak told Yiu and Choi that he wanted to make an offer to buy the Property at $16.8 million, and issued a cheque in the sum of $500,000 for the initial deposit.  He also signed on the 2^nd PASP and the 2^nd Supplemental Agreement.

(13) They left Mak’s home at about 2:00am of 21 March 2012, and then went to meet Hui at the bar where she was then having drinks, despite Hui telling them that she was not interested in the price of $16.28 million. After some persuasion, Hui agreed to sell if the price was $16.58 million and the 2^nd PASP was amended accordingly.

(14) Yiu then left it to Choi to follow up with Mak. In the evening of 21 March 2012, Choi told him that Mak asked them to come to his home once more, which they did.  After further persuasion, Mak and Cheung agreed to Hui’s counter‑offer save that they changed the price to $16.59 to avoid the inauspicious sounding number “1658”.

(15) Two days before completion, Chung called Yiu and accused Asia Property of cheating him.  Yiu denied, but met Chung for dinner on 15 August 2012 at which occasion Chung informed Yiu that he had been in contact with Mak and Cheung, that they demanded $1 million in compensation for Chung and $1.59 million in compensation for Mak and Cheung, otherwise they would make a report to the ICAC and the EAA.  In response to this threat, they made a report to the police at North Point police station.

36.  Under cross‑examination, Yiu said:

(1) He had been an estate agent since 1994, and had been promoted to district sales director in the North Point district with Asia Property.  He was stationed at the City Garden shop.

(2) He left employment with Asia Property in June 2012 to start his own estate agency partnership in Tin Hau.

(3) If any other agent were looking at a property or offering it to someone, he would not know from Asia Property’s system, unless the particular agent asked him for assistance, as agents were concerned about their own commission.

(4) When he recommended the Property to various people including Hui in February 2012, he considered that the price was good based on his experience.

(5) He was the one who drafted the words in Clause 4 of the 1^st Supplemental Agreement.  He disagreed that it was inaccurate, specifically she was a shareholder and he thought Hui might have other shareholders.

(6) He was adamant that the contract could not be left undated, and that the date had to correspond with the date of the cheque for the initial deposit.

(7) When he explained to Mak and Cheung about Full Chances, he did not mention that there might be a mainlander involved.

37.  The last witness in the case was Choi.  Her witness statement corroborated that of Yiu’s.  In addition:

(1) She was senior account manager at the Provident Centre Branch of Asia Property.  She had been working for Asia Property as an estate agent since the 1990’s except for some time away from the mid 1990’s to 2006.

(2) On about 10 March 2012, she received a telephone call while in the office from Mak asking about the availability of commercial premises in North Point and Tin Hau around Electric Road.

(3) In that call, there was no specific mention of the Property at all, not to speak of asking whether the vendor would be willing to come down on quoted price.

(4) Subsequent to that telephone conversation, she recommended some commercial premises to Mak, the majority of which Mak was uninterested in.  Eventually, she recommended two properties in Tsing Fung Street for Mak’s consideration, one of which was the Property.  Mak asked her to send her the details of these two properties which she did in her email of 12 March 2012 at 9:50pm.

(5) On about 14 March 2012, she had a telephone conversation with Mak during which he disparaged the Property by saying that the lavatory was on the first floor and there was no back door.  She introduced him to other shops along Electric Road, but he was not interested and she then asked him to reconsider the Property.  Mak then asked her to obtain a bank valuation for further consideration, which she then proceeded to do by contacting relevant persons at the Bank of Communication and China Construction Bank.

(6) She denies that Mak had asked her to make an offer of $15 million for the Property on 14 March 2012.  In fact, she had specifically asked Mak whether he would put forward a figure for negotiation with the vendor, but Mak replied that he would not make any offer before obtaining the bank valuation.

(7) She also denies that Mak enquired with her on 17 March 2012 whether the vendor accepted his offer of $15 million, nor did she inform Mak in the afternoon of 19 March 2012 that the vendor rejected his offer and counter‑offered $16.8 million because no such offer of $15 million was put forward at all.

(8) Instead, on 19 March 2012, Mak telephoned her to instruct her to make an offer to purchase the Property for $15.8 million, which she did by contacting Yiu after checking with the computer database of Asia Property.  Yiu informed her that Hui was behind the purchase of the Property from Bright View.  He passed her offer to Hui and informed her that Hui rejected the offer but said that she might consider to sell at $16.8 million.

(9) The text message to Mak on 21 March 2012 at about 6:21pm was sent by her.

(10) Sometime in July 2012, she received a call from Hui who asked her to contact Mak and Cheung to tell that if they did not want to buy the Property, they could cancel the agreement and refund the purchase money.  It transpired that Mak and Cheung’s solicitors raised requisitions about the first floor lavatory about which the respective solicitors could not agree, and Hui was prepared to cancel the sale if Mak and Cheung insisted.  She duly called Mak who said he would follow up with his solicitors.

38.  Under cross‑examination:

(1) She elaborated that when Mak first called her on 10 March 2012, it was a general enquiry about shops in the Tin Hau area.  He was looking for shops from Tin Hau to North Point along Electric Road as he had sold a shop on Electric Road.

(2) Mak did not say he was interested in the Property on 10 March 2012, it was only after she contacted him on 12 March 2012 that he expressed interest in the Property.

(3) She stressed that Mak was adamant about obtaining a bank valuation in respect of the Property before he considered making an offer.

(4) On 20 March 2012 when Mak asked Choi and Yiu to go to his home, she had told him that $15.8 million was not enough. Mak had expressed that he would make an offer at a higher price and give them a [deposit] cheque to negotiate but without specifying the offer price over the telephone.

39.  Asia Property et al’s case is by comparison quite simple.  There was no offer put forward by Mak and Cheung on 14 March 2012, that the first offer only came on 19 March 2012, which was well after the Property had been purchased by Full Chances.  Clause 4 of the 2^nd Supplemental Agreement is factually correct in that Hui was a director of Full Chances.

The issues

40.  The Parties have separately identified a number of issues.  In my view, the crux of the matter is whether or not Mak and Cheung gave instructions to Choi to make an offer on 14 March 2012 to buy the Property from Bright View for $15 million.

41.  If no instruction had been given to Choi to make that offer on 14 March 2012, the primary case of deceit and conspiracy falls away.  There can then have been no over‑arching scheme to allow Hui through Full Chances to take advantage of a low price to the detriment of Cheung, and there would have been no deception as to the actual date when Full Chances bought the Property.  Whether it was bought on 11 March 2012, or 15 March 2012 would have no effect whatsoever on Mak and Cheung’s decision to buy.

42.  Conversely, if Mak and Cheung had given instructions to Choi to make that offer on 14 March 2012, the failure of Choi to convey that offer to Chung becomes inexplicable and would (in light of the other facts and circumstances) support the inference that Asia Property et al were acting in concert to further the purpose alleged by Mak and Cheung.

43.  The other issue that I have to determine is whether representations were made that the person behind Full Chances was a mainland friend of Hui, and that Hui was the sole shareholder/director of Full Chances.

Analysis

44.  I have sought to summarize the pertinent points of each witness’ evidence, and the general background facts surrounding the case.  It should not be taken from such a summary that those are the only points that I take from the evidence.  In the course of considering the evidence of the witnesses, I have carefully considered their testimony and the documents referred to by counsel.  I have also carefully considered the helpful submissions of counsel.  The lack of mention of any particular piece of evidence or any argument raised by counsel should not be taken as an indication that such has not been considered, but merely that it has not been central to my findings.

45.  In a case such as this one, the inherent probabilities present the best yardstick with which to assess the testimony of the witnesses.  This is particularly so when the central issue concerns whether a single event happened or not, and there is little in the way of contemporaneous documentation that could point in one direction or other.

46.  In considering the testimony and the differing accounts given on behalf of each side, I find that neither side’s story is completely convincing or consistent.  Valid criticisms can be found in both side’s closing submissions and I do not propose to repeat them here.  On the part of the Asia Property et al, the matter that sticks out is the dating of the 1^st PASP which was dated 11 March 2012 when agreement was actually only achieved on 15 March 2012.

47.  However, after a full consideration of the differing versions, I am persuaded that no instruction had been given to Choi to make an offer on behalf of Mak and Cheung on 14 March 2012.  I find that it is inherently improbable that if Mak had indeed given firm instructions to Choi to put forward that offer, that she would not do so.  After all, she did seek bank valuations in respect of the Property at or about the same time. More importantly, an estate agent’s earnings depends on the amount of commission he/she can earn, and if a potential buyer makes an offer, it would be foolish not to put forward that offer to the vendor as soon as reasonably practicable.  In a competitive market, any delay might mean that a competing agent would be able to get in and make the sale and take the commission.  The listing was not a sole agency listing.  Chung’s evidence was that he had listed the Property with a few agencies.

48.  Choi’s testimony that Mak was not prepared to make an offer before obtaining a bank valuation rings true, in my mind.  One normally gets a bank valuation before instructing an agent to put forward an offer, because the availability and extent of available financing would have a big effect on whether a property is affordable and therefore whether an offer should be made at a particular price point.  In considering this, I have not forgotten that Mak’s evidence was that he could buy the Property without the need to resort to financing from a bank.  However, the fact of the matter is that he did obtain an “all moneys” mortgage to complete the purchase, with a bank which was one of the banks which Choi approached to seek a valuation from.

49.  The explanation given by Mak for asking Choi to help obtain a bank valuation, on the other hand, does not ring true.  There was no indication whatsoever that Choi was not taking Mak’s enquiries seriously, or was brushing him off.  She had responded on 12 March 2012 (a Monday) to his enquiries on 10 March 2012 (a Saturday).  I accept the submission of Mr Chang that the best way to show sincerity would be to arm the estate agent with a cheque for the initial deposit to let she/he negotiate.  Asking for a bank valuation does not have the same effect, and may even have a counter‑effect because it signals to the agent that the buyer may not even be able to afford to buy if the valuation is unfavourable.

50.  In coming to my finding above, I have also borne in mind the various criticisms of the testimony of Asia Property et al’s witnesses mounted by Mr Wong in relation to events before and after 14 March 2012.  Whilst those matters do give some pointers in the direction of general credibility, a similar amount of criticism could also be fairly levelled against Cheung’s witnesses.

51.  Furthermore, in coming to this conclusion, I have borne in mind the principle that the more serious the allegation, the more cogent the evidence that is required to establish such an allegation.  The allegation by Cheung is by any reckoning a very serious one, involving a conspiracy between at least three individuals to defraud a client of an estate agency.  The evidence presented falls far short of that necessary to make out such a serious allegation.

52.  In the end, I find that the evidence, on the balance of probabilities, points against the likelihood of an offer being made by Cheung on 14 March 2012.

53.  As to breach of fiduciary duty, I find firstly that Clause 4 of the 2^nd Supplemental Agreement is factually correct, viz that one of the directors of Full Chances was a director of Asia Property.  The fact that Hui was the only director does not detract from the fact that Hui being a director of Asia Property, was a director of Full Chances.

54.  Secondly, I find that the important aspect of disclosure is that there was a potential conflict of interest in that Hui had an interest in the sale.  That had been disclosed.  The extent of her interest would not have mattered, unless it was the case that she had no beneficial interest, or that her beneficial interest was de minimis.  Mak was eager to buy, to the extent that he was willing to pay even more for the Property to avoid the purchase price sounding inauspicious, rather than taking the risk that the vendor would refuse to sell if he made a counter‑offer of a bit less.

Conclusion

55.  I find that Asia Property has proved its case and I give judgment in the sum of $140,900 together with interest at the commercial rate, which I find to be 1% above the best lending rate as published by HSBC from time to time, from 14 August 2012 (date for payment as set out in the 2^nd PASP) until date of judgment, and thereafter at the judgment rate.

56.  Cheung’s Counterclaim is dismissed.

57.  I make an order nisi that costs of the action are to Asia Property, Full Chances and Hui, to be taxed if not agreed.

58.  I thank counsel for their assistance.