LAM HON WING v. CENTALINE PROPERTY AGENCY LTD AND OTHERS

DCCJ 5441/2008

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 5441 OF 2008

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JUDGMENT

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1.  The counterclaim of this action was a claim issued by the 1^st defendant in the Small Claims Tribunal against the plaintiff for unpaid agency fees and/or damages in the sum of $53,000 in relation to their service as an estate agent in a sale and purchase of Flat D on 14^th Floor of Tower 3 of Park Belvedere, No 188 Ma On Shan Road, Shatin (“the Premises”). 

2.  At about the same time, the plaintiff started this action against all the defendants asking for damages against the defendants for the sum of $98,000, being his damage suffered from the non-completion of the sale and purchase of the Premises.  These 2 actions should be heard together and sensibly, the 1^st defendant discontinued its action in the Small Claim Tribunal and pleaded the claim for agency fees/damages as the counterclaim herein.

3.  Subsequently, by his re-amended Statement of Claim filed herein on 5 August 2012, the plaintiff had abandoned his claim for damages against the defendants, and only asked for an order that (a) the agency agreement with the 1^st defendant, and (b) the preliminary sale and purchase agreement with the vendors be declared invalid.  The 1^st defendant continued with its counterclaim.

Background

4.  I believe I have to set out some background history from the pleadings, which is not disputed.

5.  The 1^st defendant is and was at the material time carrying on the business of property agency in Hong Kong.  The 2^nd and 3^rd defendants were at the material time estate agent in the employ of the 1^st defendant.

6.  In late 2007, the plaintiff wanted to sell or let out his own property and instructed some estate agents including the 1^st defendant to introduce purchasers to him.  He was also interested in acquiring a new property.  And during closing, the plaintiff also confirmed that he agrees to the following facts :–

(a)   On 1 December 2007, the plaintiff told the 2^nd defendant that he was interested in purchasing a property in Ma On Shan.

(b)   On 31 December 2007, the 2^nd and 3^rd defendants brought the plaintiff to inspect the Premises at an asking price of $2.7M. During the inspection, one of the vendors Ms Sin was present.

(c)   The plaintiff indicated that he wanted to purchase the Premises and instructed the 2^nd and 3^rd defendants to negotiate the price with Ms Sin.  After rounds of negotiation conducted by the agents, Ms Sin eventually agreed to sell and the plaintiff agreed to buy at $2.65M.

(d)   The 2^nd defendant prepared the preliminary sale and purchase agreement (“preliminary agreement”) and the estate agency agreement (“the agency agreement”).  [It is disputed if the contents of the preliminary agreement and the agency agreement had been explained to the plaintiff.]  The plaintiff executed both the preliminary agreement and the agency agreement as well as issuing a cheque of $50,000 (“the Cheque”) for the initial deposit.

(e)   In particular, clause 10 of the preliminary agreement provides that if either the purchaser or vendor fails to complete, the defaulting party shall compensate the agents $53,000 as liquidated damages.

(f)    On 4 January 2008, the Cheque had been dishonoured.

(g)   On 8 January 2008, the Cheque had been dishonoured again.

(h)   The plaintiff did not proceed to the sale and purchase of the Property.

The Issue in Dispute

7.  It is the plaintiff’s case as stated in his re-amended Statement of Claim that during inspection of the Premises, the 2^nd and 3^rd defendants misled and induced him to purchase the Premises by “declaring to provide financial mortgage loan from Mr Si（施先生）or the 1^st defendant or its associate financial institutions.”  But after signing the preliminary agreement, all defendants had failed to provide the financial mortgage loan, leading to non-completion of the sale and purchase of the Premises.

8.  The defendants denied that they or any of them have made any promise or representation to the plaintiff that the 1^st defendant or its associated financial institutions would provide any financial mortgage loan to the plaintiff as alleged or at all.  They further counterclaim for the damages under clause 10 of the preliminary agreement.

9.  The Premises were resold by the vendor for $2,748,000, which is $98,000 higher than the price agreed in the preliminary agreement.  The plaintiff originally claims the sum of $98,000 as his damages, but this has now been abandoned.

10.  The plaintiff argues that the preliminary agreement and agency agreement should be invalid for misrepresentation and hence he would not be liable for the agency fees/damages under clause 10 of the preliminary agreement.

11.  The plaintiff also argues that, the agency agreement has only been signed after or upon the signing of the preliminary agreement.  The address of the Premises has not been put down in the agency agreement before the inspection.  He also set out a number of complaints in paragraph 16 and 17 of his re-amended Reply and Defence to the re-re-amended Defence of the 1^st 2^nd and 3^rd defendants and the counterclaim of the 1^st defendants dated 6 September 2012 which I would come to later.  The plaintiff argues that by reason therefore, the 1^st defendant would not be entitled to claim commission in any event.

12.  The plaintiff stated in paragraph 22 of his re-amended Reply to re-re-amended Defence of the 1^st 2^nd and 3^rd defendants and counterclaim of the 1^st defendant that –

“The incident is a planned scheme in order to gain money. The Plaintiff avers that the agency agreement and the [preliminary agreement] both are not going to stand and invalid.”

13.  The plaintiff originally pleaded that the incident is “a conspiracy scheme”.  The contention of conspiracy has been deleted on his re-amendment.  There is no particular of the scheme so contended and I shall come back to this point later.

14.  The defendants have averred that the plaintiff signed the agency agreement before he signed the preliminary agreement.  It is now clear from the evidence of the defendants that the agency agreement was signed with or immediately before the preliminary agreement.  They contend that even if there is a breach of the provisions of the Estate Agents Ordinance (“EAO”) or the subsidiary legislation, they are not prohibited from recovering their commission or payment.

15.  On the counterclaim, it is the defendant’s case that according to clause 10 of the preliminary agreement, the 1^st defendant is entitled to receive from the plaintiff the sum of $53,000 as liquidated damages if the plaintiff failed to complete the sale of the Premises.  The defendants claim that the Cheque of the plaintiff in payment of the initial deposit has been dishonoured.  And as a result, the sale had not been completed by reason that the plaintiff failed to complete.  The plaintiff is liable under clause 10 to pay the sum of $53,000.

16.  And for record, clause 10 reads:–

“If in any case either the Vendor or the Purchaser fails to complete the sale and purchase in the manner herein contained, the defaulting party shall compensate at once the Agent HK$53,000 as liquidated damages. The defaulting party shall be responsible for the payment of the stamp duty.”

17.  This case turns on the finding of facts whether the 2^nd and 3^rd defendants had made the representation as contended by the plaintiff.  And if they did, does that amount to misrepresentation and what should be the relief.  And if there is no such representation, is there any other reason that the 1^st defendant cannot recover the damages.

18.  Though the plaintiff has abandoned his monetary claim, he is still seeking a declaration that the preliminary agreement and agency agreement are invalid.  Parties agree that the plaintiff should open the case.  And all the pleadings are in English.  While witnesses gave evidence in Chinese, given the legal authority referred, I decided to give my judgment in English.

The Plaintiff’s Case

19.  For convenience, the Plaintiff called his son Lam Hiu Hei as the first witness.

20.  Mr Lam Hiu Hei adopted his witness statement dated 3 February 2012 as his evidence in chief.  He confirmed that his had no knowledge in any aspect on 31 December 2007 of the plaintiff’s intent of purchasing the Premises. And he had no intent of marriage in late 2007 or early 2008.  His evidence is not disputed.

21.  The plaintiff also gave evidence and adopted his witness statement dated 3 February 2012 and supplemental witness statement dated 31 May 2012 as his evidence in chief.

22.  The plaintiff said by July 2007, he was over 59.  He intended to let out or sold his premises at Vista Paradiso, Ma On Shan and appointed the 1^st defendant as his agent.  He then came to know the 2^nd defendant.

23.  And for personal reason, the plaintiff intended to buy another property for his girl friend whom he had been living together and had a child. He had made enquiry with the banks and was given to understand that the banks would only grant loan repayable in full before he reached 65.  Hence he could only obtain a short term loan of 5 years.  The exception is Standard Chartered Bank, which would consider granting loan to borrower repayable when he reached 75.

24.  The plaintiff attended the said inspection of the Premises on 31 December 2008 on invitation of the 2^nd defendant.  The 3^rd defendant went along.  It was his intention that on obtaining the information of the Premises, he would discuss further with the banks for a mortgage loan.  If he could obtain a confirmation of mortgage from a bank, he would then sign the preliminary agreement.

25.  During inspection, the plaintiff said the 2^nd defendant kept him inside the master bedroom.  The 3^rd defendant discussed the price with the vendor at the sitting room.  And the 2^nd defendant passed on the message between the plaintiff and the vendor.  And finally, the price of $2,650,000 was agreed.

26.  The plaintiff said he had told the 2^nd and 3^rd defendant that he is 60.  He might not obtain a mortgage or just a short term loan.  He would not sign the agreement until he got the confirmation from the bank that he could have a mortgage loan.

27.  This is the evidence on the representation given by the 2^nd and 3^rd defendants, as stated in his witness statement:–

“可是，[第二被告人]表示可以代表/協助本人向（施永青先生的）中原財務有限公司申請貸款。她表示曾經代表一位買家在另一宗物業買賣申請貸款，並且獲得批準，而該買家年齡比本人更高齡。因此，以本人年齡相對年輕的情況，她說她自已有十足把握可以代表/協助本人取得貸款。而 [第三答辯人] 則在旁表示支持 [第二被告人] 的説法。”

28.  The plaintiff said, upon hearing the representation of the 2^nd defendant, and believing that the 2^nd defendant would arrange a meeting with中原財務有限公司（“中原財務”） to discuss a mortgage on the next working day, he then signed the preliminary agreement and paid the initial deposit by the Cheque.

29.  In his supplemental witness statement, the plaintiff said the 2^nd defendant “聲明施先生或其中原機構可以提供按揭予本人。”  He said if not for the misrepresentation of the 2^nd Defendant, he would not sign the preliminary agreement immediately, and would wait for confirmation of mortgage from the bank to decide if he would sign.

30.  When being cross examined by Mr Choy, solicitor for the defendants, the plaintiff stated a 3^rd version of the representation of the 2^nd defendant:–

“我揾施先生借比你。我帶來睇樓對夫婦，年紀重大過你，佢都借到。你後生過佢，我幫你搞掂佢。”

31.  When cross examined by Mr Choy, the plaintiff said he understands Mr Sze to mean Mr Sze Wing Ching and中原財務or other companies in the Centaline Group.  He agreed with Mr Choy that the 2^nd defendant had not mentioned中原財務in the conversion.

32.  Mr Choy questioned the plaintiff that his version in court is different from those in his witness statement.  The plaintiff  said the 2^nd defendant brought the potential buyer to inspect his house.  Therefore he wrote in his statement that the 2^nd defendant assisted another buyer in another deal to apply for a loan（“代表一位買家在另一宗物業買賣申請貸款”）.  He explained that when the 2^nd defendant mentioned  施先生, he understood she meant施永青先生, 中原財務, or other companies in the Centaline Group.  But he has not explained why he had such understanding.

33.  The plaintiff said on 1 January 2008, the 2^nd defendant asked him to contact中原財務 to ask for a mortgage loan.  He objected and said this is in breach of their agreement.  He asked the 2^nd defendant to arrange for an interview with 中原財務 on 2 January 2008.

34.  And on 2 January 2008, he called the 2^nd defendant and urged her to arrange the interview with 中原財務.  He further warned the 2^nd defendant that if she did not arrange the interview, she should inform the vendor not to present the Cheque, which would only be honoured after the interview.

35.  On 3 January 2008, he did not receive any call from the 2^nd defendant for the interview.  And in the afternoon, he was told by the 2^nd defendant that the Cheque had been dishonoured.  (Given the agreed facts as stated above, the plaintiff adopted the version of the 2^nd defendant’s witness statement that she was informed on 4 January 2008 that the Cheque was first dishonoured).

36.  The plaintiff said he had repeatedly asked the 2^nd defendant to arrange the interview and the 2^nd defendant only asked him to contact 中原財務 direct. And on 8 January 2008, the 2^nd defendant told him that the Cheque was again dishonoured.

37.  The main complaint by the plaintiff is that the 2^nd defendant had failed to arrange the interview.  On cross-examination, Mr Choy asked the plaintiff why he had not called the 3^rd defendant who was the senior of the 2^nd defendant to make the arrangement.  The plaintiff said he believed the 2^nd defendant was more experienced.  When the 2^nd defendant refused, there was no point in calling the 3^rd defendant.

38.  On his relationship with the 2^nd defendant, the plaintiff said he had authorized the 1^st defendant as one of the agents to sell/let his own property.  At the initial stage, other estate agencies could handle the sale.  And around July/August, the 2^nd defendant approached him.  And later, he said he appointed the 1^st defendant through the 2^nd defendant as his sole agent.  It is noted in the bundle that the plaintiff signed a Form 3 on 1 December 2007 appointing the 1^st defendant as sole agent for the sale of his property for the period from 4 December 2007 to 31 January 2008.

39.  The plaintiff said he had good relationship with the 2^nd defendant.  He said in October 2007, the 2^nd defendant introduced him to work for the 1^st defendant as an agent.  And as another example of their relationship, he had taught the 2^nd defendant how to communicate with her son in Australia by email.

40.  The 2^nd defendant knew about his intention to acquire a new property and had made recommendation over the phone.

41.  It was put to him that he asked the 2^nd and 3^rd defendants to bargain for him at the Premises on 31 December knowing that he might not get the mortgage.  The plaintiff agreed. 

42.  Mr Choy asked the plaintiff if he had enquired with banks about mortgage after signing the preliminary agreement, which he confirmed he did not.  He said he had visited the banks in July.  There is no hope.  After further cross examination, the plaintiff said he might have gone to the Standard Chartered Bank but they were not very kin with his loan application.

43.  The plaintiff also confirmed with Mr Choy that he had not asked the 2^nd defendant on any details of the old couples that he said the 2^nd defendant mentioned, including the period of mortgage loan, the interest rate, their financial position, or how long it took for their mortgage to be approved.

44.  Mr Choy also refers to the land search record of the property of the plaintiff which shows that on or about 27 November 2009, he obtained a mortgage loan from the Hang Seng Bank.  He explains that he is not the borrower, which is his company.

45.  That is the Plaintiff’s case.

The Defendants’ case

46.  The 3^rd defendant gave evidence.  He adopted his witness statement dated 3 February 2012 as his evidence in chief.

47.  He joined the 1^st defendant in or about 1999 and was at the material time a real estate agent.  He worked as the branch manager of Ma On Shan Plaza Branch No 2 of the 1^st defendant.  And the 2^nd defendant worked under his supervision.

48.  In the morning of 31 December 2007, the 2^nd defendant informed him that the plaintiff was interested in the Premises and she had arranged an inspection with the plaintiff and the vendors.  He was asked to go along, which he agreed.

49.  During inspection, only one of the vendors, Ms Sin was present. After the inspection, the plaintiff told the 2^nd defendant he was interested in the Premises and instructed the 2^nd and 3^rd defendants to negotiate the price.  During negotiation, Ms Sin contacted the other vendor Mr Cheng by phone and finally, the plaintiff agreed to purchase the Premises at a price of $2,650,000.

50.  He said the 2^nd defendant prepared the preliminary agreement and the agency agreement.  She explained the contents to the plaintiff who then signed both documents.  On cross-examination, he said he also helped in preparing the documents.  The plaintiff issued the Cheque.  As the other vendor had not signed the preliminary agreement, he kept the Cheque.

51.  After signing of the agreements, the 3^rd defendant left to find the second vendor.  He met him at around 8 pm and gave him the Cheque after he signed the preliminary agreement.

52.  He denies that he had asked the plaintiff if he had to arrange for mortgage.  He also denies hearing the 2^nd defendant saying about Mr Sze before the preliminary agreement was signed.

53.  The 3^rd defendant said after they left the Premises, the 2^nd defendant asked the plaintiff if he needed to arrange for a mortgage.  The plaintiff’s answer was affirmative and the 2^nd defendant told the plaintiff that she would refer the application to the bank.

54.  On re-examination, he agrees that if he successfully referred a customer to a bank, he would receive a small commission.  And he would also have commission for successful referral to中原財務.

55.  The 2^nd defendant also gave evidence and adopted her witness statement dated 3 February 2012 as evidence in chief.  She is an estate agent since 1992 and joined the 1^st defendant in 2004.  She is now working with another estate agency.

56.  By around November 2007, she noticed from the computer data of the 1^st defendant that the plaintiff had put his property in the market for sale.  And on 1 December 2007, she called the plaintiff to arrange an inspection by one of her clients.  She said that during the telephone conversation, the plaintiff told her that he was looking for a property of around 900 to 1,200 square feet, and with a good sea view in Vista Paradiso for investment.  She also said she met the plaintiff for the first time during this inspection.

57.  The 2^nd defendant later proposed some properties for sale to the plaintiff, the asking prices were near the upper end of $5,000,000.  The plaintiff was not interested as they were too expensive.  He did not like the directions of the properties as well.

58.  Later, at the request of the plaintiff, the 2^nd defendant introduced to the plaintiff some properties for sale in Sunshine City.  The asking prices of these properties were around $3,500,000.  Again the plaintiff was not interested.

59.  In or around end of December, the plaintiff told the 2^nd defendant that he was interested in purchasing the property in Park Belvedere, either Flat C or Flat D with three bedrooms and a square living room.  She introduced some properties to the plaintiff with an asking price of around $3,100,000 to $3,200,000.  The plaintiff was not interested.  It is not disputed that these introduction were made on the phone and no inspection arranged.

60.  On 31 December 2007, the 2^nd defendant noticed the Premises put on sale with an asking price of $2,700,000.  She informed the plaintiff who was interested, and asked for an inspection.  The 2^nd defendant arranged with one of the vendors, Ms Sin for an inspection and asked the 3^rd defendant to assist her.

61.  The 2^nd defendant said this is the second time she met the plaintiff (besides the telephone calls).  They met at the lobby of Park Belvedere where the Premises situate.  On cross-examination, she said she did ask the plaintiff to sign the agency agreement but the plaintiff said it could be signed later. 

62.  She said after the inspection, the plaintiff confirmed his interest in the Premises and asked her and the 3^rd defendant to negotiate the price with the vendors.  In the end, the plaintiff agreed to purchase the Premises at the price of $2,650,000. 

63.  The 2^nd defendant said she prepared the agency agreement and the preliminary agreement and explained both to the plaintiff. The plaintiff signed both the agency agreement and the preliminary agreement, and he signed the agency agreement first.  He then issued the Cheque.  As the second vendor has not signed on the preliminary agreement, it was kept by the 3^rd defendant.

64.  She was later told by the 3^rd defendant that the preliminary agreement had been signed by the second vendor and she asked the plaintiff to collect a copy of the preliminary agreement from her office.

65.  On 1 January 2008, the 2^nd Respondent called up one Mr Yung Wai Kit of Standard Chartered Bank and arranged a meeting with the plaintiff. She said the plaintiff met Mr Yung a few days later.

66.  On cross-examination, the plaintiff put to the 2^nd defendant that, before he signed the preliminary agreement, he had told the 2^nd defendant that he was about 60.  He could only obtain short term loan and he had to ask the bank before he signed the agreement.  The 2^nd defendant denied the case of the plaintiff.  She also denied the case of the plaintiff that she said she would ask Mr Sze to lend him the money.

67.  When asked about the details of Mr Yung, the 2^nd defendant could not recall the office address of Mr Yung.  She said Mr Yung did not work in the branch but the office of the Standard Chartered Bank.  He came to the Ma On Shan office of the 1^st defendant to meet the plaintiff.  She was present in the branch office but not in the meeting between the plaintiff and Mr Yung.

68.  The 2^nd defendant denied having tea with the plaintiff on 1 January or 2 January 2008.

69.  The 2^nd defendant said on 4 January 2008, she was informed by Ms Sin that the Cheque was dishonoured.  She called the plaintiff who asked Ms Sin to deposit the Cheque again.  On 8 January 2008, Ms. Sin complained that the Cheque had been dishonoured again.  She called the plaintiff and was informed that his son was going to get married and needed to use some money.  Therefore his family did not agree with the purchase of the Premises and the plaintiff decided not to continue with the purchase.  She informed Ms Sin and the 3^rd defendant.

70.  The 2^nd defendant agreed that she had introduced the plaintiff to have an interview by one Mr Thomas Lee of the 1^st defendant, for the post of estate agent with the 1^st defendant.  She said the plaintiff asked her to do the introduction.

71.  That is the defendants’ case.

Discussion and Ruling

72.  The first issue for my determination is whether the 2^nd defendant and/or 3^rd defendant had represented to the plaintiff as claimed.

73.  Mr Choy submits that the plaintiff’s evidence is not consistent. As I have set out above, Mr Choy gave more than one versions of the representation he said was made by the 2^nd defendant.  He said the 2^nd and 3^rd defendants had been “declaring to provide financial mortgage loan from Mr Si（施先王）or D1 or its associate financial institution” in his re-amended Statement of Claim.  He expanded in his first witness statement that the 2^nd defendant said she could represent or assist him to apply for a loan from “（施永青先生）的中原財務有限公司”.  As set out above, in his cross examination, he gave yet another version of the alleged representation given by the 2^nd defendant. 

74.  Further, he said the 2^nd defendant quoted the example of an elderly couple who were older than the plaintiff who could obtain a loan.  He believed the 2^nd defendant would arrange a meeting with 中原財務 which caused him to sign the preliminary agreement.

75.  It is clear from his answer to cross examination that the 2^nd defendant had not mentioned anything about中原財務 in the conversation on the date of inspection.  This is a very important part of his evidence, and the backbone of his case.  I cannot see why such important mistake could be made.  The plaintiff seeks to explain that when the 2^nd Defendant mentioned Mr. Sze, he understands Mr Sze to mean Mr Sze Wing Ching and中原財務 and other companies in the Centaline Group.  I see no basis for such understanding or belief. 

76.  I also note that when he is being cross examined by Mr Choy, the plaintiff is evasive in his answer.

77.  The plaintiff claims that the 3^rd defendant misled him by agreeing with the statement of the 2^nd defendant.  If that is the case, it is not logical that he had not call up the 3^rd defendant to request for an appointment with 中原財務 or assistance.  His explanation that the 2^nd defendant is more experienced and once she refused, there is no purpose in calling the 3^rd defendant is not believable. 

78.  And it is illogical for the plaintiff to refuse to approach the 中原財務 unless the appointment is arranged by the 2^nd defendant.  It is his evidence that the 2^nd defendant had asked him to call up 中原財務.  But he refused.  He had not shown any of his financial documents to the 2^nd defendant and I failed to see why he thought that the appointment by the 2^nd defendant would have a better result. 

79.  And when being cross examined on if he did approach any Bank after the inspection for a mortgage.  At one stage he said he had not approached any bank.  Later in cross examination he said he had enquired with the Standard Chartered Bank.

80.  Having considered all the evidence, I found that the plaintiff is not a reliable witness.  I am not satisfied that on balance that the 2^nd  Defendant had made the representation as claimed.  As for the 3^rd Defendant, the allegation is only that he supported the 2^nd Respondent’s statement. The allegation against the 3^rd Defendant must also fail. The Plaintiff had not made out his case of misrepresentation against the defendants.

81.  Alternatively, taking the plaintiff’s case to the highest, he said the 2^nd defendant represented to him that she would ask Mr Sze to let him have a loan.  I cannot see how a reasonable man would interpret that as saying that she would arrange an appointment to meet中原財務on the following date. 

82.  In his closing submission, the plaintiff said he was not familiar with law and had not made any submission on legal issue.  While I appreciate that he is unrepresented, the burden rest on him to satisfy this court that there is legal basis and supporting evidence to grant the declaration he is now seeking. 

83.  In particular, his claim for declaration is based on misrepresentation of the 2^nd and 3^rd defendants.  Mr Choy has kindly provided this court with his research on the law on actionable misrepresentation. 

84.  Mr Choy refers to paragraph 275.007 of Halsbury’s Laws of Hong Kong which states that “a mere promise that something will or will not be done or occur in the future is in itself not a statement of a matter of present or past fact, and therefore not a representation.”  I agree the alleged statement of the 2^nd Defendant if proven would be no more than a promise.

85.  Mr Choy also refers to paragraph 275.065 of Halsbury’s Laws of Hong Kong:–

“No misrepresentation, however gross or fraudulent, draws with it any civil consequences unless it was material and was intended to, and did, influence the mind of the representee so as to affect his conduct. Inducement in fact and materiality are distinct and separate matters, and in any form of proceedings it is necessary to establish both.

Actual inducement must be shown, irrespective of materiality.  In other words, however antecedently probable it may have been in any case that the misrepresentation alleged would influence a normal person take just the steps which the representee did, yet, if in fact he was not so influenced, he has no cause of action.”

86.  And it is a question of law whether any representation is capable of being construed as material, and also whether there is any evidence of actual inducement.  (Halsbury’s Laws of Hong Kong [275.066]).  And the burden rest on the plaintiff to prove that he has relied on the misrepresentation.

87.  As Mr Choy rightly pointed out, he had not made further enquiry on the loans granted to the old couples.  In fact he has not made any enquiry as to how the 2^nd defendant could ask Mr Sze to let him have a loan, or on what terms, or for how long.  The plaintiff cannot show that he has relied on the alleged representation of the 2^nd defendant in signing the agency agreement and the preliminary agreement.

88.  The plaintiff tried to explain that he trusted the 2^nd defendant because of their good relationship.  What he shows is no more than the 2^nd defendant had introduced him to have an interview by the 1^st defendant to join as an estate agent.  And he had assisted the 2^nd defendant with email.  He had appointed the 1^st Defendant as his sole agent for a limited period.  But with a statement that the 2^nd defendant would ask Mr Sze to lend him the money, and if he were to rely on the statement, I would be surprised that he would not at least make enquiry as to which Mr Sze, or which company would give him the loan, or some details on the terms of loan. 

89.  He had not provided the 2^nd Defendant with any information of his financial position.  It is his evidence that before the inspection, he had been careful enough to enquire with Banks and he said he knew that most of the Bank would only grant a short term loan, which would not be up to his requirement.  If he had relied on the alleged statement of the 2^nd Defendant, one would expect him to make further enquiry and to check against the particulars of his financial position.  He had not asked or provided any of his financial details to the 2^nd or 3^rd Defendant.  Nothing suggests that he had relied on this statement.

90.  Hence, even on the above alternative analysis, the plaintiff could not establish he had relied on the alleged misrepresentation before he signed the agreements or his claim of actionable misrepresentation against the defendants.

91.  And there is a plea of scheme.  But the plaintiff has not introduced evidence on the scheme.  And he has not explained what is the legal basis of this claim and I found he has not established any cause of action on this plea.

92.  Finally, the contract between the plaintiff and the 1^st defendant are recorded in 2 documents.  It is not disputed that the plaintiff signed the agency agreement, which is the statutory form under the Estate Agents Ordinance (“EAO”).  The agency agreement provides inter alia that for the successful introduction of the purchase of a property to the plaintiff, he has to pay the commission as set out in Schedule 1, 3 and 5 of the agency agreement.

93.  Section 45 of EAO provides:–

“(1) Where a person (in this section referred to as "the agent") proposes or undertakes (whether for a commission or other fee or not) to perform estate agency work for a client, whether as regards a particular property or not, a right or other cause of action whereby damages or any other relief or remedy may be recovered or obtained in legal proceedings as regards the proposal or undertaking shall lie at the suit of the agent if, and only if-

(a) an agency agreement (in this Ordinance referred to as an "estate agency agreement") embodying the terms of the proposal or undertaking, being an agreement between the agent and the client which is in the prescribed formand which contains such particulars (if any) in respect of the proposal or undertaking as are prescribed for the purposes of this section has been entered into and, in the case of a written document, properly executed;and

(b)    the agent was a licensed estate agent at the time when the estate agency agreement was so entered into and executed.”

94.  It is not disputed that the 2^nd and 3^rd defendants are licensed estate agents.  Prima facie, there is no breach of section 45 of the EAO.

95.  I accept the evidence of the 2^nd and 3^rd defendants that the agreements have been explained to the plaintiff.  The plaintiff complained that the agency agreement has only been signed after inspection and upon or after he signed the preliminary agreement and therefore not actionable or invalid.

96.  It is provided in the Estate Agents Practice (General Duties and Hong Kong Residential Properties) Regulation No 6 that a licensed estate agent shall enter into an estate agency agreement with the purchaser prior to arranging an inspection of the residential property concerned.

97.  It is not disputed that the agency agreement was signed with the preliminary agreement and hence after the inspection.  There is a breach of Regulation No 6.  Mr Choy argues that while there is a breach, but EAO make no provision for depriving the agent from recovering commission.  Only by section 45(3) when it is provided that the agent who is in breach of section 45(1), and do not have a agency agreement in the statutory form, he would not be entitled to bring an action to recover commission or damages.

98.  Mr Choy refers me to the judgment of HH Judge Leung (as he then was) given in Centaline Property Agency Ltd v Yip Yuk Fai DCCJ 5321/2009. One of the complaints raised against Centaline in that case is the agency agreement being entered after inspection.  And HH Judge Leung after analysing the EAO, found that breach of any regulation may be an offence, there is no provision that deprive the agent of commission or damages.  I agree with the able judgment.

99.  Accordingly, the complaint of the plaintiff is not sufficient to bar the 1^st defendant from enforcing the agency agreement. 

100.  I am aware of the other complaints by the plaintiff as set out in paragraph 16 and 17 of the Reply and Defence to Counterclaim.  Generally speaking, these irregularities would not invoke any provision in the EAO to prevent the defendants from recovering the commission.  The Plaintiff has not referred to any.

101.  There is complaint that the defendants fails to provide in writing the rate and amount of commission they are to receive from the vendor. They also failed to disclose that they acted for both the vendors and the purchaser.  But the agency agreement must be read with the preliminary agreement. This is a tri-parties agreement.  On the one hand, it records the sale and purchase agreement between the plaintiff and the vendors.  Then it records the agreement between the plaintiff and the 1^st defendant on payment of the commission.  And then it records the agreement between the vendors and the 1^st defendant on payment of commission.  The amount of commission payable is set out and all parties must have full notice.  And it is obvious that the defendants act for both the vendors and the purchaser.

102.  Mr Choy has also set out the hypothetical argument that if the breach is serious, or goes to the root of the contract, or otherwise justifies the principal’s repudiation of the liability to pay, the principal is excused from paying commission.  (per Deputy High Court Judge To (as he then was) in Centaline Property Agency Limited v Lai Yuk Chun [2002] 2 HKLRD 241 at 253).

103.  I do not think that I have to deal with this argument as repudiation has not been raised.  But I agree with Mr Choy that on the evidence before, it is not sufficient to suggest that there is serious breach that goes to the root of the contract.

104.  It is provided in the preliminary agreement that if the plaintiff or the vendor failed to complete, as liability to the agent, the defaulting party had to pay a liquidated damages fixed at $53,000 in this contract.  There is no suggestion that this is penal in nature.

105.  The evidence is clear that the plaintiff has failed to honour his Cheque and the sale was not completed by his fault.  He is liable under the preliminary contract to the 1^st defendant for the liquidated sum of $53,000.

106.  In conclusion, the Plaintiff fails to prove that he is entitled to a declaration that the preliminary and/or the agency agreement are invalid or unenforceable.  I dismiss his claim.  I found that the Plaintiff is liable on the counterclaim to the 1^st defendant for $53,000 with interest thereon from date of writ until today at 8% per annum and thereafter at judgment rate until payment.

107.  Finally, I come to the issue of costs.  This is a case which only involves $53,000.  And now given the various amendments to the pleadings, and the trial taking 3 days, the legal cost out-proportioned the claim.  I am sad to see the case having to end with a trial.

108.  Mr Choy indicated at the closing that if the defendants are successful with the counterclaim, they would apply for costs on indemnity principle.  The plaintiff indicated that he would resist and may have to file evidence.  In the circumstance, I would adjourn the argument on costs.  I would direct the plaintiff to file any evidence in opposition to the claim of cost within 21 days from today and that the defendants may file evidence in reply, if necessary within 14 days thereafter.  The defendants shall set down the issue of cost for argument before me with 1 hour reserved.