RICACORP PROPERTIES LTD v. GOLDEN COSMOS CORPORATION LTD AND ANOTHER

HCA 2339/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2339 OF 2012

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JUDGMENT
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1. The plaintiff’s claim is for estate agent’s commission on an aborted sale and purchase of land.

2. The defendants, being the purchaser, deny liability raising by way of defence misrepresentation and breaches of duties by the plaintiff.

3. There is also a counterclaim by the defendants for the forfeited initial deposit.

BACKGROUND

4. The plaintiff carries on the business of an estate agency in Hong Kong.

5. The 1^st defendant is a company registered in Hong Kong and the intended purchaser of the Property known as 17B, Tower One, Century Tower, Nos 1 & 1A Tregunter Path and Car Parking Space No 32 (“the Property”).

6. The 2^nd defendant is the sole director and shareholder of the 1^st defendant.

7. On 5 May 2012, the 1^st defendant entered into a Provisional Sale and Purchase Agreement (“PSPA”) to purchase the Property at the purchase price of $47.5 million.

8. The 2^nd defendant signed the PSPA for and on behalf of the 1^st defendant.

9. An initial deposit of $2.375 million was paid by the purchaser upon signing of the PSPA.

10. A further deposit was due to be paid on 18 May 2012.

11. However, the 1^st defendant failed to pay the further deposit when it became due.  As a result, the vendor, treating this as wrongful repudiation by the 1^st defendant, forfeited the initial deposit paid.

THE PLAINTIFF’S CLAIM

12. The plaintiff’s claim is for liquidated damages in the amount of $522,500.  This amount claimed is made up of $237,500 being the amount of commission which would have been payable by the vendor (0.05% of purchase price) together with the amount of $285,000 being the amount of commission payable by the purchaser (0.06% of purchase price).

13. The plaintiff’s claim for the amount of the liquidated damages is made against both the 1^st and the 2^nd defendants.  Both claims are based on contract.

14. As against the 1^st defendant, the plaintiff’s claim is based on clause 12(a) of the PSPA which reads as follows:

“If in any case, either the Vendor or the Purchaser fails to complete the sale or purchase in the manner herein contained, the defaulting party shall forthwith compensate the Agent the total of the commission payable by the Vendor and the Purchaser respectively pursuant to Clause 11 hereinabove as liquidated damages.”

15. It is the plaintiff’s case that because the 1^st defendant defaulted in paying the further deposit under the PSPA, the 1^st defendant therefore becomes liable under clause 12(a) to compensate the plaintiff the liquidated damages in the sum of $522,500.00

16. As against the 2^nd defendant, the plaintiff’s claim is based on clause 18 of the PSPA which provides that:

“Should the signatory be an agent(s) or attorney(s) of the Vendor/Purchaser, the agent(s) or attorney(s) shall be personally liable for all the liabilities arising from this agreement.”

17. It is the plaintiff’s case that since the 2^nd defendant signed the PSPA for and on behalf of the 1^st defendant, under clause 18 thereof, the 1^st defendant becomes personally liable for the liquidated damages now claimed by the plaintiff.

THE DEFENCE

18. The 1^st defendant denies liability to the plaintiff’s claim and alleges fraudulent/negligent misrepresentation and breaches of duties.

19. It is the defence case that the following Representations were made by Ms Chau Hoi Sze Helen (“Helen”) and/or Ms Yau Hoi Ki Fiona (“Fiona”), both being estate agents of the plaintiff:

(a) the owner of the Property had recently reduced the asking price of the Property from $51 million to $49 million;

(b) there were a number of interested parties in the Property and to avoid ‘losing out’ the 2^nd defendant should decide on that day to buy;

(c) the Property was in high demand and more reputable than Clovelly Court (which the 2^nd defendant was interested in);

(d) the Property has a useable floor area of 83%, compared to 84% of Clovelly Court;

(e) the price per square foot of Century Tower (where the Property is) was on par with Clovelly Court and represented an exceptional bargain when compared with the then latest transaction price of Unit C, 25/F, Block 2, Clovelly Court;

(f) Century Tower has a very active rental market and the market rent of the Property could fetch about $125,000 per month; and

(g) thus a yield of about 3% could be achieved.

(collectively “the Representations”.)

20. It is the defence case that relying on the Representations, the 1^st defendant was induced into entering into the PSPA and an agency agreement dated 5 May 2012.

21. The defendants discovered some time between 7 to 14 May 2012 that the Representations were false.

22. It is also the defence case that the Representations were made in breach of the following duties:

(a) Statutory duties:

(1) Section 36(1)(a)(ii) and (2)(b) of the Estate Agents Ordinance (Cap 511) which provides that a licensed estate agent “shall be reasonably satisfied as regards the accuracy of information” including the total or entire area;

(2) Regulation 8(1) of the Estate Agents Practice (General Duties and Hong Kong Residential Properties) Regulations (Cap 511C) to the effect that when seeking an instruction from a client, a licensed estate agent shall not supply any false or misleading information.

(b) Contractual Duty:

  Schedule 2 of the Agency Agreement which provides that the plaintiff has a duty to obtain information in relation to the Property for the 1^st defendant and make reasonable efforts to ensure that the information obtained was accurate and reliable.

(c) Part III of the Practice Directions issued by the Estate Agency Authority (“the Code of Ethics’) to the effect that:

(1) The plaintiff has failed to be informed of the essential facts and developments in the real estate market, including the useable area and monthly market rent.

(2) The plaintiff has failed to provide services with honesty, fidelity and integrity and to protect the 1^st defendant against misrepresentation.

(3) The plaintiff has failed to exercise due care and due diligence in making the Representations.

(d) Implied contractual terms:

(1) The plaintiff has failed to provide services to the 1^st defendant with good faith, honesty, fidelity and integrity by making the Representations.

(2) The plaintiff has failed to protect the 1^st defendant’s interest by making the Representations.

(3) The plaintiff has failed to exercise due care, skill and diligence in making the Representations.

23. As for the 2^nd defendant, he denies liability to the plaintiff on the basis that:

(a) He was not a party to the PSPA, but merely signed the PSPA for and on behalf of the 1^st defendant.

(b) Before the PSPA was signed, he had informed the plaintiff that the Property would be purchased under the name of a limited company.

(c) There was no discussion or agreement between him and the plaintiff that he would be personally liable for the liquidated damages and that neither Fiona nor Helen had explained to him clause 18 of the PSPA

(d) Relying on clause 14 of the PSPA which provides: “This agreement supersedes all prior negotiations, representation, understanding and agreements of the parties hereto”, it is contended by the 2^nd defendant that even if Fiona had explained clause 18 of the PSPA to him, that would not have any contractual effect because it could not constitute an “oral part” of a contract between the plaintiff and the 2^nd defendant.

24. On the same basis of the defence put forward by the defendants, the 1^st defendant counterclaims against the plaintiff for $2,375,000 being the initial deposit paid under the PSPA (and forfeited by the seller) because of the plaintiff’s misrepresentation and breach of duties.

THE ISSUES

25. The issues can be categorized into five main areas as follows:

(a) misrepresentation;

(b) breach of duties;

(c) the effect of the misrepresentation and breach of duties upon the 1^st defendant’s liability to the plaintiff under clause 12 of the PSPA;

(d) the effect of clause 18 of the PSPA in so far as the liability of the 2^nd defendant is concerned; and

(e) whether the plaintiff is liable to compensate the defendants the amount of $2,375,000 forfeited by the seller.

26. In so far as misrepresentation goes, the issue can be further broken down to:

(a) whether Fiona and/or Helen made the Representations;

(b) whether the Representations were fraudulently or negligently made;

(c) and if made, whether the Representations were untrue; and

(d) whether the defendants had relied on the Representations and were thereby induced into entering the PSPA and/or Agency Agreement.

27. As for breach of duties, this can be further broken down to:

(a) Whether the plaintiff has a duty under Schedule 2 of the Agency Agreement to make reasonable efforts to ensure that the information obtained is accurate and reliable?

(b) Whether the plaintiff has a duty under the implied term of the Agency Agreement to provide accurate, complete and reliable information concerning the Property, including the useable area and monthly market rent?

(c) Whether the plaintiff is in breach of that duty in making the Representations?

THE PLAINTIFF’S EVIDENCE

28. The plaintiff called three witnesses, namely, Helen, Fiona and Lai Sin Ting Mag (“Mag”).

(a)  Helen’s evidence

29. Helen’s evidence can be summarized as follows.

30. She is a licensed estate agent working for the plaintiff since April 2006.

31. In November 2011 she was told by her colleague, Fiona, that clients named Mr and Mrs Cheng (being the 2^nd defendant and his wife) were interested in purchasing a Property in Central Mid‑levels with a budget of $40 million.

32. Between December 2011 and May 2012 she had recommended several properties for Fiona to introduce to Mrs Cheng and had also accompanied Mrs Cheng to inspect several properties.  She had also told Fiona of the asking prices of such properties which were obtained from the plaintiff’s database system and would double check with the vendors to confirm such asking prices or whether there is any change thereto.

33. On 3 May 2012, she noticed from the internal database of the plaintiff that the Property was available for sale with an asking price of $48 million.

34. She called the vendor of the Property to ask if it can be inspected and was told by the vendor that there were a lot of inspection appointments the following day as well as for the morning of 5 May, and that the only available time slot left was 3 pm on 5 May.  When confirming with the vendor the asking price, she was told by the vendor that the asking price for the Property was now $49 million.

35. She called Fiona about the Property and told her that the asking price was $49 million as well as the available time for inspection.  Fiona called back a short while later to say Mrs Cheng was interested.  She then arranged with the vendor the time for inspection at 3 pm on 5 May.

36. On 5 May at around noon time she called the vendor to confirm the time for inspection, and at the same time enquired for the latest bank valuation of the Property which was given at $50 million.

37. At 3.30 pm she arrived at the Property to find Fiona introducing Mr and Mrs Cheng to the vendor.  She then introduced the Property to the clients.  During the inspection inside the Property Mr and Mrs Cheng inspected the Property separately.  She accompanied Mr Cheng and Fiona accompanied Mrs Cheng.

38. They later inspected the clubhouse and the car park as well altogether.

39. During the inspection inside the Property, Mr Cheng commented that it appeared to him the Property looked more spacious than those in Clovelly Court and the useable area of the Property was as good as the units in Clovelly Court.

40. At all times, from her experience as an estate agent, she was aware that the useable area of Century Tower was under 80% and the useable area of Clovelly Court was around 82%.  With this knowledge, she said to Mr Cheng that the useable area of Century Tower was under 80% and of Clovelly Court it was around 82%.  She also told Mr Cheng that the gross area of Century Tower was bigger than Clovelly Court.

41. During the inspection, the vendor told her that many people have inspected the Property and she informed Mr Cheng of same.  She also told Mr Cheng the bank valuation of the Property being $50 million the asking price of $49 million was worth considering.

42. The inspection finished at about 4.15 pm.  Before leaving, she told Mr Cheng that they should make up their mind as soon as possible.  In reply Mr Cheng said that they would consider the Property when they got home.

43. She went back to her office.  Shortly afterwards, Fiona called her saying that Mr Cheng had called and said he had checked the recent transaction records of Century Tower on the internet and had asked them to go to his home at Robinson Place to collect an initial deposit cheque as he intend to make an offer of $47.5 million for the Property.  They then arranged to meet up at 5.30 pm at the lobby of Robinson Place.

44. She emailed Lisa Chau of HSBC to confirm once more the bank valuation for the Property as at 5 May 2012.  This was confirmed at $50 million.

45. She called up the vendor to say that there will be a firm offer for the Property by Mr Cheng and asking where to meet up to discuss the offer and to collect the cheque and sign the provisional agreement.

46. She met up with Fiona at 5.30 pm and went to the home of Mr and Mrs Cheng. They together with Mr and Mrs Cheng sat in the living room.  Fiona asked Mr Cheng for his Hong Kong identity card to fill in the details of the Agency Agreement as well as the PSPA.

47. Mrs Cheng showed her around their home while Fiona was filling in the paperwork.

48. When Fiona finished the paperwork, Fiona explained the Agency Agreement to Mr Cheng who endorsed on the same.

49. Mr Cheng said he intended to use a company to purchase the Property.  Since it was then a Saturday evening, he would have to wait until the following Monday to give the name of the company.

50. She called the vendor in the presence of Mr and Mrs Cheng to ask if the vendor was willing to wait until Monday for the company name to be given.  The vendor was agreeable but it had to be done before 1 pm on Monday.  This was related to Mr and Mrs Cheng.

51. At about 6 pm Fiona started to explain the contents of the PSPA clause by clause.  When Fiona came to the purchase price, Mrs Cheng pointed to the computer saying that she had checked the internet and that Unit B, 12/F, Century Tower was sold recently at $48 million.  Mrs Cheng asked her if that was so, and she replied “Yes”.  Mrs Cheng then said that it would be attractive and worth buying at $47.5 million if the deal could be done.

52. Fiona continued explaining the PSPA.  When Fiona came to the commission amount of 1% of purchase price, Mr Cheng asked for a discount.  Helen then said that since the offer price of $47.5 million was below the asking price it was likely that the vendor would ask for a discount on the commission.  But if the vendor does not ask for a reduction of commission then they will consider giving Mr Cheng a discount.

53. Fiona finished explaining all the clauses in the PSPA including clause 18.  When Fiona finished, Mr and Mrs Cheng indicated no problem and Mr Cheng endorsed his signature on the PSPA.  Mr Cheng also handed over a cheque for $2,375,000 as being the initial deposit for the Property and requested them to hand over the PSPA and cheque to the vendor that same night.

54. She and Fiona left the home of the Chengs and proceeded to the home of the vendor to present the PSPA.  As the offer price fell below $49 million, the vendor indicated he was only prepared to pay 0.5% of the purchase price as commission.  That was agreed after some negotiation and the vendor signed the PSPA telling her to keep all the copies since amendments still had to be made on Monday for the company name.  She and Fiona then left the vendor’s home.

55. On 6 May in the morning Fiona called her to say that Mr Cheng had requested to reduce his commission to 0.6% of the purchase price, but that Fiona’s supervisor found that unreasonable.

56. Helen then informed her supervisor who also found that unreasonable.  Thus Helen told Fiona to refuse the request of Mr Cheng.

57. Later Fiona called to say that Mr Cheng insisted, but the supervisors refused to give way.

58. As a result, both Helen and Fiona unilaterally took it upon themselves to agree to Mr Cheng’s request despite the objections from their supervisors.

59. On 7 May, Fiona called Helen to say that she would be meeting Mr Cheng at 10 am in Pacific Place to amend the name of the purchaser and asked Helen to go with her.

60. When she arrived at Pacific Place, Mr Cheng and Fiona was already there and Mr Cheng was initialling against the amendments on the Agency Agreement and the PSPA.

61. Mr Cheng also said that his lawyer had advised him to add an additional term to the PSPA and began to insert the additional term under clause 22 despite their asking him not to do so.  The additional term was to the effect that there was no unauthorized alteration to the original approved plans of the Property.  Mr Cheng initialled the additional term and asked them to ask the vendor to also initial it.

62. She and Fiona then went to see the vendor who agreed to initial against the amended purchaser’s name but not against the additional term inserted by Mr Cheng. Fiona then informed Mr Cheng of same.

63. At about 1 pm she received a call from the vendor who said that he was unable to have Mr Cheng’s cheque for the initial deposit “mark good” at the issuer’s bank as there were insufficient funds in the account and also enquired if Mr Cheng was no longer proceeding with the transaction.  She asked the vendor for some time and the vendor was agreeable to wait until the next (ie Tuesday) morning or else he would consider Mr Cheng was not going to proceed.  She then immediately called Fiona telling Fiona what the vendor had said.

64. About 9 am on 8 May, Fiona called her to say that Mr and Mrs Cheng had already deposited the money in their bank account.  She then informed the vendor of same.

65. On 14 May 2012, Fiona called her in the morning to say that Mr Cheng had informed her that he may not be using the Property for his own use and was considering keeping it as an investment and requested Fiona to send him the rental price lists and the recent rental records of Century Tower for his information.  Fiona therefore asked her to provide such information.

66. As a result, she looked up the internal database of the plaintiff and provided the requested information as follows: three rental properties available for rent at that time being:

(a) Unit 30B asking for $125,000;

(b) Unit 25A asking for $100,000; and

(c) Unit 25B asking for $85,000.  

67. She also looked up the internal database for the past rental transaction for the period 1 January 2011 to 14 May 2012 and provided Fiona with the following actual rental transaction records:

(a) Unit 18A leased at $85,000 in June 2011;

(b) Unit 24B leased at $95,000 in August 2011;

(c) Unit 14A leased at $80,000 in November 2011;

(d) Unit 9A leased at $77,000 in June 2011; and

(e) Unit 22A leased at $88,000 in February 2011.

68. She further clarified in her evidence that for the rental transaction record of Unit 18A, the landlord had refused to disclose the actual rent and therefore a staff of the plaintiff had put down the asking price of $95,000 in the internal database as being the rental transaction price.  From her experience she knew that the actual rental would be lower and so told Fiona that the rent was about $85,000. After almost a year, the landlord disclosed that the actual rental was $90,000.

69. Likewise for Unit 24B, the landlord had refused to disclose the actual rent and the internal database recorded the asking rent of $100,000.  Again believing the actual rent should be lower, she told Fiona that the actual rent was about $95,000.

70. On 14 May 2012, Fiona called her and said that Mr Cheng may be considering renting out the Property after completion and asked her to enquire if the vendor would consider renting back the Property. She then passed the same message to the vendor.

71. On around 16 May 2012, Fiona called to say that Mr Cheng called to say that he had a lot of capital caught up in the falling stock market and was also concerned that the purchaser of his Property at Robinson Place may not complete as scheduled in which case he would be in trouble.  Mr Cheng also requested Fiona to assist him to sell the Property before signing the formal sale and purchase agreement even if he has to suffer a small loss.  In the alternative, he instructed her to ask the vendor if the vendor was willing to postpone the day for signing of the formal sale and purchase agreement for one month.

72. She then called the vendor and related Mr Cheng’s request, but was rejected by the vendor.  She related same back to Fiona.

73. On 19 May, Fiona called her to say that Mr Cheng did not sign the formal sale and purchase agreement and did not pay the further deposit explaining that he and his wife had experienced a stressful day the day before.  Mr Cheng requested Fiona to explain to the vendor on his behalf saying he was deeply sorry and wanted to proceed with the transaction.  Fiona asked her to call the vendor to see if the vendor was still willing to proceed.

74. She called the vendor explaining the situation.  The vendor replied that he could not decide as there were a lot of potential purchasers.  The vendor commented that Mr Cheng was not reliable and sincere, being late with the initial deposit and failed to pay the further deposit and sign the formal agreement.  The vendor said he was undecided and had to seek legal advice from his lawyer and instructed her to put the Property back on the market with the asking price of $49 million.

75. She relayed the vendor’s words to Fiona.

76. On 21 May 2012, she noticed that the plaintiff had issued an invoice to Mr Cheng’s company (the 1^st defendant) in the sum of $522,500.

77. Thereafter the matter was passed over to the legal department of the plaintiff.  She learned from the legal department of the plaintiff after legal proceedings had started that Mr Cheng had complained about her and Fiona.

(b)  Fiona’s evidence

78. Fiona was called as the second witness by the plaintiff.  Her evidence can be summarized as follows.

79. She had been working with the plaintiff as a licensed estate agent since October 2009.

80. In June 2011 she became acquainted with Mr and Mrs Cheng (ie the 2^nd defendant and his wife) when introducing clients to units in Robinson Place where Mr and Mrs Cheng lives.

81. Mrs Cheng had indicated to her that if they can find a suitable Property to relocate to of around 2,000 sq ft at a budget of around $30 million, they were prepared to sell their present home.

82. Since then she had introduced several properties to Mrs Cheng.  In September 2011 Mrs Cheng indicated that they were prepared to increase their budget to $40 million.

83. Since December 2011, she had focused on properties in Central Mid‑levels to introduce to Mrs Cheng who was looking for properties convenient for Mr Cheng to travel to work.

84. In December 2011, she had introduced some properties to Mrs Cheng in Central Mid‑levels including Wealthy Heights, Dragon View and Glory Mansion but Mr and Mrs Cheng indicated that they would wish to have more inspections.

85. About the same time, through Helen, Unit C, 34/F, Block 2, Clovelly Court (“Unit 34C”) was introduced to Mr and Mrs Cheng with an asking price of $38 million but no inspection was available since it was subject of an existing tenancy.  As an alternative, Mr and Mrs Cheng was taken to inspect Unit C, 22/F of the same block which had a similar layout.  After inspection, Mrs Cheng was happy with the layout but had concerns over the view of Unit 34C.

86. On 1 February 2012, Mrs Cheng called her saying that they had decided to make an offer of $36,880,000 for Unit 34C and asked her to go to the Cheng’s home in Robinson Place to collect a cheque for the initial deposit and to sign a provisional agreement for sale and purchase of Unit 34C.  She explained that the vendor could only sign the provisional agreement the next day.

87. However in the morning of the following day, Mrs Cheng sent a Whatsapp message to her countermanding Mrs Cheng’s earlier instruction telling her to withhold the deal in respect of Unit 34C.

88. Later when Mrs Cheng came to her office to collect the cheque for the initial deposit, Mrs Cheng explained that Mr Cheng may be working in Mainland China such that the whole family may move there and would no longer need to find a Property in Hong Kong.

89. Nevertheless she continued to provide Property market information to Mrs Cheng thereafter.

90. At the end of March 2012, Mrs Cheng, during a phone conversation with her, informed her that the Cheng’s home at Robinson Place had been sold for $21 million.

91. On 31 March she informed Mrs Cheng that Unit 25C, Clovelly Court (“Unit 25C”) was available for sale with existing tenancy with an asking price of $36.8 million.

92. In early April, she was told by Mrs Cheng that since the Cheng’s home in Robinson Place had been sold, they would now consider properties for both rent and sale and wanted to inspect properties with nice views.

93. On 6 April, she asked Mrs Cheng if she was still interested in Unit 22C being still available for renting, but Mrs Cheng said they were not interested to rent Unit 22C adding that she could ask the owner of Unit 22C if the owner had any intention to sell.

94. On 7 April, she messaged Mrs Cheng to say that the owner of Unit 22C would not sell and also provided the details of the tenancy agreement in respect of Unit 25C to Mrs Cheng.  One hour later Mrs Cheng replied that Mr Cheng was no longer interested in Clovelly Court.

95. She then provided Mrs Cheng with details of four other properties but Mrs Cheng rejected all of them, saying to stick to Mid‑levels of around $40 million.

96. Following those instructions, she continued to introduce properties in Mid‑levels to Mrs Cheng between mid‑April and early May 2012.

97. On 14 April in the afternoon, she informed Mrs Cheng that she could get a copy of the tenancy agreement in respect of Unit 25C but Mrs Cheng replied that Mr Cheng was not interested.

98. On 16 April, she asked Mrs Cheng if Mrs Cheng would reconsider Unit 25C but Mrs Cheng replied in the negative.  Nevertheless contrary to those words, Mrs Cheng asked her to make an offer of $36.8 million for Unit 25C. However, by then Unit 25C had already been sold to another purchaser.

99. On 22 April 2012, Helen told her that the owner of Unit 11A, Block 2, Clovelly Court, (“Unit 11A”) although saying the Property was not for sale but if an offer of $45 million could be made, he would consider selling.  This was relayed to Mrs Cheng and transaction records for Block A, Clovelly Court were also sent to Mrs Cheng.

100. On 24 April, Mrs Cheng requested from her details of properties in Robinson Place available for rental.  She supplied same later that same evening.

101. Some two days later, Mrs Cheng instructed her to make an offer to the vendor for Unit 11A at the offer price of $43 million.  However, the vendor’s wife decided not to sell and nothing came of it.

102. On 26 April, she invited Mrs Cheng to inspect two properties at 11/F and 12/F at Silvercrest on 28 April with asking prices of $43 million for 11/F only and $90 million for both units.  After the first inspection, the Chengs wished to have a second inspection the following Saturday but the properties were sold on 29 April.

103. On 2 May she introduced Mrs Cheng to a rental Property at Robinson Place.  After the inspection, Mrs Cheng did not like the interior renovation and did not consider same.

104. It appeared to her that Mrs Cheng was only interested in properties for sale despite saying she would consider rental properties.  Even if the properties for sale were well above their budget of $40 million Mrs Cheng would still be interested and would attend for inspection.  In fact most of the properties Mrs Cheng inspected were over $40 million.

105. On 3 May at around 6 pm Helen told her that the Property was available asking for a price of $49 million and that it was available for inspection at 3 pm on 5 May.  She relayed that message to Mrs Cheng who replied that they would be interested to inspect the Property.  Arrangements were then made with Helen.

106. Helen called on 4 May to confirm the inspection at the appointed time and date.  She then arranged with Mrs Cheng to meet at 2.45 pm at the lobby of the Cheng’s home.

107. On 5 May, she took the Chengs to inspect a unit at Birchwood Place asking for $45 million, and then to inspect the Property, arriving at the Property at about 3.30 pm. Helen arrived as she was introducing the Chengs to the vendor at the Property.

108. During the inspection inside the Property, she accompanied Mrs Cheng while Helen went around with Mr Cheng.  Thus the Chengs inspected the Property separately.

109. Later they also inspected the clubhouse and the car park of Century Tower and Mrs Cheng asked about the maintenance fees.

110. The inspection took about half an hour.  Before leaving Helen told the Chengs they should make up their minds as soon as possible.  Mr Cheng said they would consider it when they got home.

111. She drove the Chengs home and then separated with Helen.  Shortly afterwards she received a call from Mr Cheng saying he had checked the transaction records of Century Tower on the internet and asked her to attend his home to collect a cheque for initial deposit as he intended to offer $47.5 million for the Property.

112. She then called Helen and arranged to meet up at 5.30 pm at the lobby of Robinson Place.  She then prepared the Agency Agreement and the PSPA filling in those parts of the blanks that she can at that time.

113. After meeting up with Helen at 5.30 pm they went up to the home of the Chengs.

114. Her evidence as to what transpired and what was said in the home of the Chengs was similar to what was said by Helen in her evidence.

115. All four of them sat in the living room.  She confirmed with Mr Cheng that he would be signing the documents and asked him for his Hong Kong identity card for filling in the details.  Mrs Cheng showed Helen around their home while she filled in the forms.

116. When she had finished filling in the forms, Mrs Cheng and Helen had rejoined them.  She explained the Agency Agreement to Mr Cheng who endorsed same.

117. Mr Cheng said he intended to use a company to purchase the Property and that he could only give the name of the company on the following Monday.

118. Helen then phoned the vendor seeking his agreement and the vendor agreed that the company name be provided by 1 pm on the following Monday.

119. At about 6 pm she explained the contents of the PSPA clause by clause.  When she came to the price of $47.5 million, Mrs Cheng pointed to the computer and said that she had checked from the internet that Unit B, 12/F of Century Tower was recently sold for $48 million asking Helen if that was so.  Helen replied ‘Yes’.  Mrs Cheng said she could give it a try at $47.5 million and if the deal could be done it would be quite attractive.

120. She continued to explain the PSPA.  When she came to the commission payable at 1% Mr Cheng requested for a discount.  Helen then explained that the offer price of $47.5 million was below the asking price of $49 million and that the vendor would likely ask for a discount on the commission.  Helen further said that she would consider giving Mr Cheng a discount if the vendor did not reduce their commission.

121. She then continued to explain the remaining clauses in the PSPA.  As Mr Cheng had already indicated that he intended to use a company to purchase the Property, when she came to clause 18, she explained it to him in Cantonese in the following way:

“This contract is signed by the authorized person of the purchaser or the vendor. The authorized person is liable for all the responsibilities which arise from this contract, including the commission and the liquidated damages owed by the company”

122. After she finished explaining the PSPA, the Chengs indicated no problem. Mr Cheng signed the PSPA and made out a cheque for the initial deposit in the sum of $2,375,000.  Mr Cheng also requested them to present the PSPA and the cheque to the vendor that same night.

123. She and Helen then proceeded to the home of the vendor.  Because the offer was below the asking price, the vendor requested and ultimately they agreed to reduce the vendor’s commission to 0.5% of the purchase price.  The vendor then signed the PSPA.  The vendor told Helen to keep the vendor’s copy of the PSPA until the amendment to the purchaser in the company name had been made.

124. They left the home of the vendor and she called Mr Cheng to inform him that the PSPA had been signed by the vendor.  At that time the Chengs were having dinner at Star Street and at around 8 pm she met Mr Cheng outside the restaurant in Star Street and gave him the purchaser’s copy of the PSPA.

125. On 6 May, Mr Cheng requested a reduction to the commission from 1% to 0.6% of the purchase price.  She declined but Mr Cheng insisted.  She informed Helen and her supervisor of his request to reduce the commission.  Her supervisor took the view that Mr Cheng’s request was unreasonable and Helen’s supervisor also rejected same.

126. She called Mr Cheng to inform him that his request was not acceptable but Mr Cheng insisted.  As a result, she and Helen then decided to agree to Mr Cheng’s request for reduction of the commission despite the views taken by their superiors.

127. On 7 May Mrs Cheng called her to say that they have now got the company name as well as the business registration.  Mrs Cheng sent her a copy of the business registration and a meeting was set up with Mr Cheng at Pacific Place.  She informed Helen of the meeting.

128. At 10 am she met Mr Cheng at Pacific Place and Mr Cheng initialled against the amendments made to the PSPA in respect of the name of the purchaser which was changed to that of the company.  At that time Helen arrived.

129. She then gave similar evidence to what Helen said as to Mr Cheng wanting to insert a further term on the PSPA to the effect that there had been no change to the original floor plan of the Property.  However, that was not accepted by the vendor who only initialled against the amended name of the purchaser in the PSPA.

130. She also gave similar evidence to what Helen said about the vendor complaining that he was unable to have Mr Cheng’s cheque for the initial deposit “mark good” by the issuing bank due to insufficient money in the account.

131. She relayed that complaint of the vendor to Mr Cheng at about 4 to 5 pm and Mr Cheng said that since the additional term has not been agreed, he would not pay the initial deposit yet.

132. In the evening, at about 7 pm Mr Cheng called her to say that his solicitors had advised him that they could cancel the additional term and that he would carry on the transaction and would transfer the money for the initial deposit the morning of the next day.

133. On 8 May in the morning, she reminded Mrs Cheng to make the bank transfer and later the same morning received a message from Mrs Cheng that the money had been transferred which she relayed to Helen.

134. On 14 May Mr Cheng called her to say that the Property may not be for self‑use but for investment and requested from her the recent rental records of Century Tower which, after she had obtained them from Helen, was relayed to Mr Cheng in the evening of that day.

135. She also noticed that the vendor was looking for a rental place after moving out of the Property and informed Helen to enquire if the vendor would consider renting back the Property.

136. On 15 May Mrs Cheng contacted her to say that the vendor had approached their solicitors and was prepared to pay $105,000 monthly rental for two years for the Property

137. On 16 May Mr Cheng called her to say that he had a lot of capital caught up in the falling stock market and was concerned that the purchaser of Mr Cheng’s Property at Robinson’s Place may not complete as scheduled in which case he would be in trouble.  Mr Cheng also requested her to assist him to sell the Property before signing the formal agreement even if he had to suffer some small loss, alternatively to ask if the vendor was prepared to postpone the signing of the formal agreement by a month.

138. However, this was rejected by the vendor and she told Mr Cheng of the vendor’s refusal to his suggestions.

139. On 18 May she called Mr Cheng several times but he did not answer the phone.

140. On 19 May Mr Cheng called her telling her that he did not sign the formal agreement and asked her to explain to the vendor that Mr Cheng was deeply sorry and wanted to proceed with the transaction.

141. She called Helen who then called the vendor.  Afterwards, Helen told her that the vendor considered Mr Cheng not reliable and sincere and the vendor would seek legal advice before answering.  The vendor also instructed Helen to put the Property back on the market for sale.

142. She then told Mr Cheng what the vendor said to Helen.  She also suggested to Mr Cheng to prepare a cashier’s order on Monday with a letter from his solicitors to the vendor’s solicitors to indicate that he would continue with the transaction.

143. On 21 May she was told by Mrs Cheng that the vendor had indicated that if the Chengs were willing to lease the Property back to the vendor for two years with two months rent‑free, the vendor would be willing to continue the transaction.  However, Mr Cheng considered that request to be unreasonable and refused that proposal.

144. On 21 May, the plaintiff issued an invoice to the 1^st defendant for $522,500.

145. She tried to contact Mr Cheng on 23 May.  Mr Cheng called back on 24 May to say that he was out of town for the next 10 days.  She informed him of the invoice by the plaintiff and a demand letter from the plaintiff’s solicitors.

146. On 25 May Mr Cheng asked her for the full name of Helen which she gave. When she asked Mr Cheng what was the matter, Mr Cheng did not reply.

147. On 21 May Mr Cheng also asked for the details of her manager.

148. Thereafter the matter was passed to the legal department of the plaintiff.  Only after legal proceedings had been started that she was informed by the legal department of the plaintiff that Mr Cheng had, for the first time, complained about her and Helen.

(c)   Evidence of Mag

149. She is a licensed estate agent with the plaintiff, and the superior of Fiona.

150. On 5 May 2012, she went with Fiona to meet Mr Cheng in Wanchai to pass the purchaser’s copy of the PSPA to Mr Cheng.  They met Mr Cheng outside a restaurant in Star Street about 8 pm.  Fiona indicated to Mr Cheng where the vendor had signed.  Mr Cheng read through the copy and thanked them.

151. On 6 May, Fiona called her to say that Mr Cheng had requested a reduction of the commission from 1% to 0.6% of the purchase price.  She instructed Fiona to reject the request of Mr Cheng.

152. Despite her instruction, she found out that Fiona and Helen had reduced the commission of Mr Cheng to 0.6% without authorization and was furious with Fiona.

153. On about 16 May Fiona called her to say that Mr Cheng wanted to sell the Property before the signing of the formal agreement by transfer of shares of the 1^st defendant.  Fiona was not familiar with the procedure and asked her to give Mr Cheng a call.

154. She then called Mr Cheng and explained to Mr Cheng that he would need to ask his solicitors to prepare the relevant paper work to sell the Property by transferring shares before completion.  During that phone conversation Mr Cheng did not mention any complain against Fiona or Helen.

155. About the end of May 2012, the plaintiff’s solicitors had issued a demand letter to the defendants claiming liquidated damages of $522,500.

156. About the end of June 2012, Mr Cheng called her to complain about Fiona.  That was the first time she heard of such complaint from Mr Cheng.  Mr Cheng also said he would sue the plaintiff.

157. The matter was then passed to the legal department of the plaintiff to handle.

DEFENDANT’S EVIDENCE

158. The defendants called Albert Chi Leung Cheng, being the 2^nd defendant (referred in this judgment as “Mr Cheng”), and his wife Kwong Shuk Yee Annie (referred in this judgment as “Mrs Cheng”).

(d)  Evidence of Mr Cheng

159. He is the 2^nd defendant, an accountant by profession, and a partner in a venture capital firm.  He lived with his family previously at 26C Robinson Place since about 1996 which has a harbour view that the family liked very much.

160. In the summer of 2001, his wife started to have dealings with Fiona of the plaintiff’s West Mid‑levels office.  His wife suggested disposing the Robinson Place flat and acquiring another flat as she was concerned about the development of Merry Terrance at Seymour Road which would block the harbour view.  He agreed with the wife’s suggestion and left it to her to handle as he was in China much of the time due to work.

161. Fiona advised that Henderson Land had acquired over 90% of Merry Terrace thus a compulsory sale was imminent.  Fiona also suggested they should dispose of their Robinson Place flat quickly before Merry Terrace was redeveloped.

162. He and his wife considered a budget of around $30 million for the acquisition of a new flat and that was later raised to $40 million.  Not being speculators, they would not consider chasing prices for the new flat.

163. His wife would make the initial viewing of flats introduced by Fiona and if there were any of interest, he would be asked to go along for a second viewing.  He first met Fiona in September 2011.  Although they had viewed a number of properties, they had only made offers for three properties at that time, all of which were at Clovelly Court.

164. Of the three properties which they had made offers on, the first two were Unit 34C and Unit 25C.

165. As for the third one on which they had made an offer, initially in his first witness statement, he stated that it was Unit 15C Tower One, Clovelly Court. However, in his supplemental witness statement, he stated that after reading Fiona’s witness statement herein, he realized that there had been some confusion on his wife’s part and there had been a mix up at the time, with him thinking all along that he was making an offer for Unit 15C, but in fact he now realized that the offer was made in respect of Unit 11A, Block 2, Clovelly Court.

166. The offers for Unit 34C and what he thought was an offer for Unit 15C were made through Fiona.  The offer for Unit 25C was made through another agent.  Although offers were made for these three properties nothing came from these offers.

167. In the case of Unit 34C, he was at that time in China.  On 30 January 2012, he and his wife decided to make an offer of $36.88 million for Unit 34C and his wife would sign the provisional agreement on 1 February 2012.  However, on that day he got wind from his boss that he may be required to move permanently to China for work, so late that night he called his wife asking her to withdraw the offer before Fiona passed it over to the seller.

168. Unit 34C was eventually sold to another buyer for $36.5 million.

169. In or about 9 April 2012, they made an offer to buy Unit 25C for $38.5 million through another agent, but that offer was not successful.  Though not transacted through Fiona, that offer was known to Fiona as his wife had told Fiona about it subsequently.

170. As for the third offer, they had made an offer of $43 million for the flat (which he had thought was Unit 15C) but was later told by Fiona that the owner decided not to sell.

171. In late April 2012, they had used other estate agents to look for properties for rent also as it was still undecided whether he would be moving to China for work.

172. He was then told by his wife on 4 May 2012 that arrangements had been made for viewing some more properties one of which was the Property which was in Century Tower with asking price of $49 million.  Although he thought it was beyond their budget, they went to view it at the behest of Fiona since the arrangement had been made.  He was told by his wife that the price had been reduced from $51 million to $49 million.

173. They arrived at Century Tower about 3 pm, being driven there by Fiona.

174. They arrived at the Property and were received by the vendor and his wife.  Helen then showed up.  He does not recall having met Helen before that.

175. They viewed the Property on their own, the vendor and his wife remained in the study.  The viewing lasted some 30 minutes.  During the viewing, Helen told them:

(a) The asking price was brought down from $51 million to $49 million which is substantially below the market rate and mentioned a recent transaction of a flat five floors below recently sold for $48 million.

(b) The price was lowered only because the vendor needed cash.

(c) At that price, the Property would be attractive to many potential buyers and they should decide quickly to avoid losing out.

(d) The Property was in high demand and more reputable than Clovelly Court.

(e) When asked by him about the useable area, Helen told him the Property had a gross floor area of 2,565 sq ft and useable area of 83%.

(f) The asking price equated to around $19,000 per sq ft and was on par with Clovelly Court which was an exceptional bargain.

(g) Century Tower had a very active rental market and the rent that the Property could fetch was about $125,000 per month; he calculated on his mobile phone that would be a 3% yield which Helen said was a very good yield in the prevailing market.

(h) Unit 25C and Unit 34C were bargains and the Property was also a real bargain and in high demand and they needed to make the decision quickly, preferably the same day as property prices were running away.

(i) They had missed out on purchasing a unit in Clovelly Court and this would be the best opportunity to buy a high quality unit at a bargain price.

176. They were attracted by what was said by Helen, particularly the yield, the unit price per sq ft and the useable floor area percentage being comparable to Clovelly Court.

177. No mention was made of any bank valuation for the Property by Fiona or Helen.

178. They were then taken to view another property at Po Garden but his wife did not like it.

179. Fiona then drove them home after dropping off Helen.

180. When they got home he and his wife discussed about the Property and reflected on the information provided by Helen and Fiona.

181. They considered the Property to be beyond their budget but were worried that they would lose another bargain.  They also considered they could afford 50% deposit and have the monthly rental payment of $125,000 to cover the mortgage payments. This was critical for them.  They also compared the asking price of $49 million with the prices for Unit 34C and Unit 25C in the previous transactions.

182. They then decided to make a verbal offer of $47.5 million based on the calculations made in his notes which was produced in evidence.

183. They felt the pressure of having to make an offer soon as a result of what Helen had said to them.

184. After discussing with his wife, his wife phoned Fiona about 5:30 pm asking Fiona and Helen to come to their home.

185. Fiona and Helen came at about 6 pm and he told them they could only make an offer of $47.5 million.  Helen’s response was that the minimum offer should be $48 million in order to secure the Property.  He then showed his notes and calculation to Fiona and Helen to explain why he could not offer more than $47.5 million and saying that he needed the monthly rental income of $125,000 to cover the mortgage.  He then went through the notes with Fiona and Helen.  When going through the notes and calculations, neither Fiona nor Helen made the slightest indication that Helen’s statement that the Property could fetch $125,000 per month were subject to any qualifications or that he was wrong to rely on such figures.  Both of them well knew that he was relying on those figures given by Helen.

186. Nor did Fiona or Helen point out that any of the other data in the note was wrong or cannot be relied upon or should be treated with caution or qualification.  Nor did they indicate that the price per sq ft of the Property should not be compared with Clovelly Court units.

187. Helen then said she was not confident of getting the Property at $47.5 million as there were many people viewing the Property.

188. He also told Helen that he needed to set up a company to hold the Property.

189. Helen then stated to put pressure on them by saying:

(a) To wait till the following Monday the price may have gone up as there was a huge demand and it would be better to sign a provisional agreement to “lock up” the Property.

(b) The 3% yield based on the rental income of $125,000 per month was a very good yield in the prevailing market condition.

(c) The offer of $47.5 million would not be sufficient to “lock up” the deal and asked if they were prepared to increase that offer, but he indicated that was the maximum they could offer.

(d) Helen explained that the vendor was out at the time and on his return she would persuade him to sell but it would not be easy.

(e) That they should sign the provisional sale and purchase agreement using an individual’s name first and later amend it on Monday when the company was set up.  There was no mention at all about him having to personally pay commission or liquidated damages if the company did not pay commission.

190. He also asked her to check with the vendor that some interior alterations might breach government regulations.

191. From what was said, he then agreed to sign a provisional sale and purchase agreement using an individual’s name first with the understanding that later it would be in the name of a company.  Again there was no mention of him having to pay commission personally if the company failed to do so.

192. Fiona took out a blank form and started to fill in the details very quickly since Helen said she wanted to catch the vendor before anyone else does.  Helen also said that she may have to give up her commission from the owner to close the deal since the offer was not up to the asking price.

193. Fiona finished filling in the PSPA and asked him to check the details filled in.  Neither Fiona nor Helen explained the terms on the PSPA to him and neither of them said that he would have to personally pay the commission if the company did not honour its obligation.  After looking through what Fiona had filled in, he signed the PSPA on the understanding that the company would be substituted for his name when it had been set up.

194. The Agency Agreement was then also filled out and signed by him.  Again neither Fiona nor Helen told him that he would have to pay the commission if the company did not meet its obligation.

195. Helen and Fiona left his home about 6:45 pm.

196. At about 8 pm that same evening, he was having dinner in Wan Chai with friends when Fiona called to say that their offer of $47.5 million had been accepted by the vendor.

197. At about 8:30 pm Fiona and her superior came to the restaurant to ask him to initial on the PSPA where the vendor had made minor changes.  He reminded Fiona to change the commission he had to pay from 1% to 0.5% when he noticed the owner was paying 0.5% commission but Fiona said she had to discuss with Helen.

198. The following day, Helen called to say she had to check with her manager before she could respond about reducing the commission.  Ultimately it was reduced to 0.6%.

199. The following Monday, they provided the name of the 1^st defendant being the company purchasing the Property.  His lawyers also suggested adding a further clause to the PSPA to confirm that the interior alterations to the Property were legal.

200. Fiona brought the PSPA to meet him outside his office with the 1^st defendant’s name replacing his name as purchaser and the rate of commission changed to 0.6%.  He initialled against those changes and added a clause 22 relating to the interior alterations being legal.

201. That afternoon, Fiona called to say that the vendor did not accept the additional clause 22.  Pending the resolution of that additional clause 22, they held up allowing the vendor to cash the cheque for the deposit.

202. The evening of 7 May 2012, he was told by another estate agent that:

(a) the offered price was not a bargain price;

(b) the useable floor area is below 80% and not 83% as represented by Helen;

(c) Century Tower has a limited market and usually valued at a discount to Clovelly Court;

(d) it might not be easy to rent out due to its round shape and being an old building; and

(e) Unit 12B sold at $48 million was an exceptional case because the owner had spent a substantial amount to renovate and the buyer liked the renovation.

203. He was very concerned with such revelations and realized that they had been misled by the misrepresentations made by Fiona and Helen with regard to the Property.

204. Between 10 and 13 May he looked up information of past transactions to verify what he had been told and to compare the unit prices of Clovelly Court and Century Tower One, and found that historically Century Tower One traded at a substantial discount to Clovelly Court.

205. He then realized that Fiona and Helen had misled them on many facts and needed to check the rent of $125,000 per month was genuine.

206. On 14 May 2012 he asked Fiona to provide details of the rental market for Century Tower One.  He was shocked to find that the latest rental transaction was in November 2011 which was only $80,000 per month for Unit 14A, three floors below the Property, and that the “asking” rental for 25/F and 30/F ranged between $80,000 to $125,000 all of which were on higher floors with a better view than the Property.

207. He then realized it would not be possible to achieve a rental income of $125,000 per month to cover the mortgage payment and that Helen had misled him as to the rental for the Property.

208. At the same time the vendor had approached their lawyers enquiring if they could lease the Property back.

209. Given the circumstances, they asked for a rental of $105,000 per month hoping to minimize their loss.  The vendor’s feedback was lukewarm.

210. He called Fiona on 16 or 17 May complaining about her misconduct and misrepresentation and said he would follow this up later but Fiona did not respond.

211. At that time, his dilemma was whether to forego the transaction and suffer the loss of the deposit paid or to go ahead with the transaction and suffer a depletion in value of some 20% to 30% based on the historical price comparison as well as a financial burden of mortgage payments beyond his means.

212. On 18 May he decided to minimize his potential loss and forego the transaction for the Property with the knowledge that the deposit already paid would be forfeited by the vendor.

213. On 19 May Fiona called and suggested to complete the transaction and she would try to find a buyer for the Property over the next few months since completion was due at end of August so as to lessen the loss.

214. He was persuaded to have another attempt to close the transaction on 21 May and instructed his lawyers to liaise with the vendor’s lawyers but was told that the vendor wanted additional terms including two months rent‑free stay in the Property and additional costs in acquiring certain fixture and fittings previously agreed as part of the purchase price.

215. On 24 May Fiona told him that the plaintiff had issued an invoice for the commission which he later received dated 21 May for $522,500.

216. He then decided to pursue legal remedies for the misrepresentation by Fiona and Helen and sought legal advice.  On 25 May he asked Fiona for the full name of Helen.

217. In late June he called Fiona’s branch manager, Mag, complaining that Fiona and Helen had misled him and he would be seeking legal remedy.  He was told by Mag that the matter had been passed to the legal department of the plaintiff to handle.

218. The plaintiff later re‑issued an invoice for $285,000 which they received in late August 2012.  He took this to mean that the plaintiff acknowledged that the plaintiff was in the wrong.

219. He later found out that the Property was sold towards the end of 2012 for $47 million suggesting it was not as “hot” as Helen had represented it to be.

220. Had it not been for the Representations made by Fiona and Helen, they would not have made the offer which they did for the Property.  Thereafter he and his wife have not purchased any other property despite selling off their flat in Robinson Place and are now living in rented property.

221. He produced into evidence his own working notes which he had made in calculating the amount of the offer which was made for the Property.

222. He also produced into evidence the working notes he had made in calculating the three earlier offers which were made or intended to be made in respect of Unit 34C, Unit 25C and the one he had wrongly thought to be for Unit 15C when it was actually for Unit 11A.

Evidence of wife of 2^nd defendant

223. Kwong Shuk Yee Annie, the wife of the 2^nd defendant, was also called by the defendants as a witness.

224. Her evidence totally confirmed the evidence given by Mr Cheng.  In those circumstances it will not be necessary to repeat the evidence given by her save to say that her evidence corroborated in all material respects to that given by her husband.

FINDINGS OF FACT

225. There are a number of areas of disputed facts between the parties.

226. Much time was spent in cross examination on background matters as well as on the hand written notes made by Mr Cheng in relation to the three earlier transactions in which he and his wife had attempted to make offers for Unit 34C, Unit 25C and the unit they wrongly thought at the time to be Unit 15C, when it was actually Unit 11A.

227. These notes were contained in two notebooks used by Mr Cheng in his work, to show that those notes were made contemporaneously and that Mr Cheng had the habit of making notes in relation to matters which he had to apply his mind and thoughts to.

228. Counsel for the plaintiff not only challenged that these notes were not contemporaneous and that they were made up by Mr Cheng to support his evidence in this case in relation to the notes made by him in relation to the Property when deciding on the offer price of $47.5 million.  She also went as far as to suggest that the mistake or confusion with Unit 15C and Unit 11A were a deliberate ruse on the part of the defendants which somehow enhanced the defendants’ case.

229. Furthermore, a large part of the final submission of counsel for the plaintiff related to the comparison of the notes made in the earlier three transactions with the note made by the 2^nd defendant in relation to the Property.

230. I take the view, after hearing all the evidence and cross examination in this case, that the notes made in the earlier three transactions can have little or no direct bearing on the dispute between the parties in this case.

231. I have no difficulty coming to the finding that those notes in relation to the earlier three transactions were made at the respective times of those transactions and that they were for the purpose of calculating the price which the 2^nd defendant ultimately offered or attempted to offer in relation to those three properties.

232. I also have no difficulty in coming to the finding that the confusion relating to Unit 15C and Unit 11A was a genuine confusion which came about because the 2nd defendant’s wife had mixed up the two properties.  Indeed the fact that the 2^nd defendant’s note on that third property was headed “15C” showed that the confusion was already there when he made the note at the time it was made.  I also accept that such confusion was only discovered by the 2^nd defendant and his wife when they read the witness statement of Fiona in these proceedings.

233. These findings are not strictly speaking material to the decision I have to make in these proceedings, but because so much argument had been made in this case over the notes, it is best to dispose of them at the outset so as to be able to concentrate on the material and relevant parts of the evidence relevant to the dispute in these proceedings.

234. The most significant factual dispute between the parties concerns whether the Representations were made by Helen and/or Fiona.

235. Of the Representations which the defendants say was made by Helen during the inspection of the Property on 5 May 2012, it is accepted by the plaintiff that Helen did say to the 2^nd defendant and his wife that there were a lot of interested parties to the Property and that they should make up their minds as soon as possible (but not on the same day as alleged by the defendants).

236. Both Helen and Fiona deny that the rest of the Representations were made by them or either of them.

237. It is therefore a question of credibility between Fiona and Helen on the one hand, and Mr Cheng and Mrs Cheng on the other hand. In this case there were a number of quite irrelevant factual disputes.  An example was Helen and Fiona saying that on the 5 May, apart from the Property, they had also taken Mr Cheng and Mrs Cheng to inspect Birchwood Place, which is disputed by Mr Cheng and Mrs Cheng both of whom say they were taken to Po Garden after inspecting the Property.  In assessing credibility of the various witnesses, I attach no significance to those insignificant factual disputes which were no doubt the result of defective memory rather than a desire not to reveal the truth.

238. I found Fiona to be an honest and truthful witness.  She was not dented in the least in her cross examination.

239. Helen, a very experienced estate agent who has been working in that field for a very long time was not as straightforward as Fiona.

240. There were two areas in her evidence when cross‑examined which gave rise to some concern.

241. The first relates to the asking price of $49 million.  From the Printscreen of the plaintiff, counsel for the defendants had indicated that the Printscreen only showed an asking price of $48 million in the latest entry before 5 May 2012.  Helen answered that she called the vendor on 3 May to arrange for an inspection and when she confirmed with the vendor the asking price, the vendor indicated to her that his asking price was now $49 million which she relayed to Fiona.  Helen accepted that she did not update the Printscreen giving the excuse that she was seldom the one to update the Printscreen.  However, the vendor was not called as a witness and there is no evidence to contradict what Helen said as to the vendor informing her on the phone that the asking price for the Property was now set at $49 million on 3 May 2012.  A further indication that that was the asking price by the vendor comes from the fact that after the 1^st defendant had defaulted in this transaction for the Property, the Property was put back on the market by the vendor on 19 May 2012 at the asking price of $49 million.

242. Given the above, I accept Helen’s evidence that she had been told on the phone by the vendor on 3 May 2012 that the asking price for the Property to be at $49 million, but that Helen had failed to update that data on the Printscreen of the plaintiff.

243. The second matter which gave me further concern in the cross examination of Helen related to her obtaining the bank valuation from one Lisa Chau of HSBC for the Property.  In obtaining that bank valuation for the Property Helen had emailed Lisa Chau on 5 May 2012 and stated in that email to Lisa Chau that the asking price was $50 million.  When cross examined on this, the only excuse she could given for supplying Lisa Chau with the figure of $50 million as being the asking price was that she had obtained that figure from the internet as an evaluation of the Property and wanted to double confirm that valuation with HSBC’s bank valuation of the Property.  The bank’s valuation by HSBC turned out to be also a figure of $50 million.

244. I do not think much of that explanation of Helen’s since it is clear on that email that what she was providing to the bank was expressly stated to be the asking price.  This piece of evidence may show that she has not been entirely candid in her evidence to the court.  However, on the defendants’ case, the bank’s valuation had no impact on Mr Cheng and Mrs Cheng since it is their case that no bank valuation had been mentioned by Helen to them on 5 May 2012 or at any time.  There is also no evidence before me to show that the bank valuation was in any way influenced by the asking price, which should normally be the case since valuation by a bank should itself be independent.

245. As for the evidence given by Mr Cheng, there are a number of areas which adversely affect his credibility as a witness in quite a few material and significant aspects of this case.

246. Firstly, it is his evidence that the terms of the PSPA were never explained to him by Fiona before he signed it, in particular clause 18 thereof and he had no knowledge that he, signing on behalf of the 1^st defendant, would become personally liable for the commission if the 1^st defendant was in default thereof.  He does not dispute, however, that he was allowed to and did go through the terms of the PSPA himself and had more than one opportunity to do so at his home when the PSPA was first signed by him, then again that evening outside the restaurant in Wanchai and also on the Monday morning outside his office.

247. It is inconceivable that Fiona would not have explained the terms of the PSPA to Mr Cheng before he was asked to sign on it since it was Fiona’s evidence that she had already been told by Mr Cheng that he wanted to have a company as the purchaser.  This made it all the more important for her to draw his attention to clause 18 as that clause would impact upon the commission payable to the plaintiff if there was any default on the part of the 1^st defendant. I fully accept that Fiona did explain all the terms of the PSPA to Mr Cheng, including clause 18 of the PSPA, at his home before he was asked to sign on the PSPA and I reject the evidence of Mr Cheng in this respect.

248. It is also the evidence of Mr Cheng that when Fiona and Helen was at his home on the late afternoon of 5 May 2012, no phone call had been made by Helen to the vendor as opposed to the evidence of both Fiona and Helen that Helen had called the vendor once they were told by Mr Cheng that he wanted a company to be the purchaser of the Property so as to obtain the consent of the vendor for the name of the purchaser to be altered into the name of the company which could only be set up the following Monday.  It was only by so obtaining the consent of the vendor and given the vendor’s reply that it had to be done before 1 pm on the following Monday that this transaction could have proceeded in the way it did.

249. Again I accept the evidence of both Fiona and Helen in that respect and reject the evidence of Mr Cheng.

250. It was the evidence of Mr Cheng that on the evening of 7 May 2012 he was told by another estate agent that the price he had paid for the Property was not a bargain price, that the useable floor area of the Property was below 80% and not 83% as told to him by Helen, that Century Tower was valued at a substantial discount to Clovelly Court, that the Property was not easy to rent out and the rent would not be high.  When he was told this, he realized that he had been misled by the Representations.

251. Yet with that realization of being so misled by the Representations, it was on the following day, 8 May 2012, that the money was transferred into the bank account of Mr Cheng by Mrs Cheng to meet the cheque paid to the vendor by way of deposit.

252. His explanation that he had been advised by a lawyer friend that once he had made out a cheque, it would be a criminal offence not to meet it is unbelievable and against common sense since the reason for Mr Cheng delaying the transfer of money into his bank account on Monday, 7 May 2012 was because the additional clause 22 dealing with the alterations to the interior of the Property had not yet been resolved.

253. I do not accept the explanation so given by Mr Cheng.

254. I further find that the transfer of the money into Mr Cheng’s bank account on 8 May 2012 does not sit well with his evidence that he had realized being misled by the Representations on the evening of 7 May 2012.

255. Not only that Mr Cheng had caused to be transferred money to meet the cheque paid for the deposit, but there were no complaints made to the plaintiff by Mr Cheng of the Representations made which one would have expected to be in written form, so as to put the matter on record, upon his discovering on the evening of 7 May that he had been misled by the Representations.

256. The excuse given by Mr Cheng for there not being any complaint was that he was looking up information of past transactions between 10 and 13 May.

257. On 14 May, Mr Cheng requested rental details which were provided by Fiona.  The asking rent ranged from $80,000 to $125,000 for the 25/F to 30/F of Century Tower, and the current rental transaction was in November 2011 for the 14/F at $80,000.

258. Upon those details being provided to Mr Cheng, it was his evidence that he realized that the Property could not fetch rent of $125,000 as earlier represented to him by Helen and that he had been completely misled by the earlier representation as to the rent which the Property could achieve made by Helen.

259. Once again with that realization in mind, no immediate action or complaint was made by Mr Cheng.  On his evidence, it was only on 16 or 17 May, some two days later, that he phoned Fiona to complain about the conduct and the Representations made by Fiona and Helen, a matter denied by Fiona.

260. Not only were there nothing in writing by Mr Cheng to put his complaint on record at the time, but he still trusted Fiona sufficiently to accept her suggestion to see if she could assist him in finding a buyer in the next few months for him to sell the Property as a confirmor and it was on that basis that he was persuaded to give it another try and to instruct his solicitors to write to the vendor’s solicitors to sound out whether the vendor would revive the transaction despite his default in paying the further deposit on 18 May 2012.  There is a ring of falsity about that evidence from Mr Cheng given the circumstances according to him.

261. It was not until 12 June that there was a written complaint made by the solicitors acting for the 1^st defendant alleging misrepresentation by Helen and Fiona in this matter.

262. The lack of complaint by Mr Cheng in this matter causes me to greatly doubt whether the Representations were made as alleged by the defendants.

263. Quite apart from the lack of complaint by Mr Cheng, another aspect in the evidence of Mr Cheng gives rise to further cause for concern as to his credibility.

264. It is his evidence that his budget was in the region of $30 million to $40 million.  It is also his evidence that beyond that it would be stretching his budget.

265. In this case, in deciding upon an offer of $47.5 million, his budget was so stretched that he had to bank on a rental return of $125,000 per month in order to be able to meet the mortgage repayment for 50% of the purchase price.

266. The expected rental of $125,000 per month was therefore crucial to the entire transaction where Mr Cheng was concerned.

267. It is therefore quite inconceivable to me that when Mr Cheng asked Helen on 5 May 2012 for the rental return, Helen, an experienced estate agent would simply answer by giving one figure saying “around $125,000” as opposed to a range of the expected rental.

268. It is also inconceivable that Mr Cheng, no stranger to the Property market, would not ask for further details such as the rental details that were given to him on 14 May 2012 being separated into actual rentals and asking prices.

269. Furthermore, without asking for or being given further details, Mr Cheng takes that one flimsy figure given of “around $125,000” as being the gospel truth and building his entire case of financing for the Property around that one figure as if there was already a secured tenant willing to pay such rental.  After all, estate agent can only supply statistics from past transaction, they cannot guarantee that there will be a tenant willing to pay similar rent.

270. Yet nine days later, on 14 May 2012, Mr Cheng knew sufficiently to ask Fiona for the details of rental pertaining to Century Towers.

271. For all the reasons given above, I find that the Representations (to the extent that they are disputed by the plaintiff) were not made by either Fiona or Helen to Mr and Mrs Cheng.

272. I accept the evidence given by Helen and Fiona as to what was said by them to Mr Cheng and I reject the evidence of Mr Cheng and Mrs Cheng as to the Representations.

273. Having found as a fact that the Representations were not made whether by Fiona or Helen or both, I also do not accept the evidence of Mr Cheng and Mrs Cheng that the note on which Mr Cheng had made calculations in relation to the Property was shown to Fiona and Helen at the home of the Chengs on the late afternoon of 5 May 2012.

274. Those calculations, according to the evidence of Mr Cheng and Mrs Cheng, were made when they returned home after the inspection of the Property.  It is therefore clear that Mr Cheng and Mrs Cheng had worked out the offer price of $47.5 million by themselves at home since that note contains only that figure as being the offer price and no other offer prices.  That is therefore in line with the evidence of Fiona that Mrs Cheng told her they had arrived at an offer price of $47.5 million when she called Fiona on the phone asking Fiona and Helen to come to their home later that afternoon.

275. Furthermore, the evidence from Mr Cheng was that none of the earlier three notes in relation to Unit 34C, Unit 25C and the mistaken Unit 15C (actually Unit 11A) were shown to any of the estate agents at the time those notes were made.

276. The reason given by the 2^nd defendant for saying that he did show the note relating to the Property to Fiona and Helen was so that he could justify the offer of $47.5 million to them.  I do not see why he had to justify an offer.  That offer, especially if it was an offer which will not be increased on by the Chengs, will either be accepted or not accepted by the vendor.  There was no need to justify the offer to the estate agent.

277. I find that the only reason why that evidence came about and the denial of having mentioned the offer of $47.5 million on the phone, was to pave the way for saying that the note was shown to Fiona and Helen with all the figures made in the Representation written down on the note in an attempt to prop up the evidence of Mr Cheng and Mrs Cheng as to the Representations having been made.

278. I reject that evidence in its entirety from Mr Cheng and Mrs Cheng.

279. The corollary is that I also find that the note relating to the Property was not made by the 2^nd defendant on 5 May but at a later time in an attempt to enhance the case of the defendants as to the Representations being made, probably after the plaintiff’s invoice for $522,500 and after the demand letter from the plaintiff’s solicitors dated 28 May 2012 to the 1^st defendant.

DECISION

280. On the findings made in respect of the disputed facts, it would be sufficient for me to enter judgment for the plaintiff against the 1^st defendant based on clause 12(a) of the PSAP which has not been disputed by the defendants and to dismiss the counterclaim of the 1^st defendant.

281. In so far as the liability of Mr Cheng is concerned, I have found as a fact that the terms of the PSPA including clause 18 thereof was explained to Mr Cheng by Fiona.

282. The evidence in chief given by Fiona was that she had explained clause 18 of the PSPA to Mr Cheng by using the Chinese words stated in paragraph 47 of her witness statement.  The translation of those Chinese words reads “This contract is signed by the authorized person of the purchaser or vendor.  The authorized person is liable for all the responsibilities which arise from this contract, including the commission and the liquidated damages owed by the company”.

283. In cross examination when asked what it was she said to Mr Cheng by way of explanation of clause 18, her answer omitted the latter part of those words, namely, ‘including the commission and the liquidated damages owed by the company’.

284. In re‑examination, she confirmed that she had said all the Chinese words as stated in paragraph 47 of her witness statement, and when asked whether she had read clause 18 out to the 2^nd defendant, answered that she had told him the approximate meaning of clause 18.

285. A further point was taken by counsel for the defendants that even if Fiona had said all the Chinese words to Mr Cheng as stated in paragraph 47 of her witness statement, that explanation was in fact different from clause 18 in the sense that clause 18 begins with the word “Should” which is absent in the explanation given by Fiona.

286. I accept that what was said by Fiona in cross examination was an inadvertent omission by her and that what is contained in her evidence in chief and in re‑examination reflects what actually happened.

287. As for the further point taken by the defendants, that the explanation given was not an accurate explanation of clause 18, I am of the view that this is not a case of non est factum, where the person being explained to is illiterate and cannot read or understand the written words by himself and has to rely entirely on a full and accurate explanation given to him by someone interpreting or explaining the document to him.

288. In this case, the 2^nd defendant is a fully literate person who can understand read and write both English and Chinese.

289. Therefore accepting that those Chinese words used by Fiona when explaining clause 18 to the 2^nd defendant may not be the most accurate way to explain clause 18, the gravamen of the matter is that the attention of Mr Cheng was drawn by Fiona to clause 18 and for which he was in a position to read for himself both the printed words in English and Chinese.

290. His attention having been drawn to clause 18, Mr Cheng, being a fully literate person in both English and Chinese, and having signed the PSPA, cannot now be heard to say that he did not know what was stated in clause 18 of the PSPA and which therefore has no binding effect on him.

291. As for the law, two points were taken by counsel for the defendants as to the effect of clause 18.

292. The first was that Mr Cheng signed the PSPA as a director of the 1^st defendant and not as agent or attorney of the 1^st defendant therefore clause 18 has no application.

293. That point can be dealt with shortly.

294. When Mr Cheng signed the PSPA as director of the 1^st defendant, he was undoubtedly signing as an agent of the 1^st defendant as was said by Lord Cranworth LC in the case of Aberdeen Railway Company v Blaikie Brothers [1854] 1 Macq 461 at page 471:

“The directors are a body to whom is delegated the duty of managing the general affairs of the company. A corporate body can act only by agents.”

295. If further authority is needed for that proposition of the law, it was also said by Cairns LJ in the case of Ferguson v Wilson [1866] LR 2 Ch App 77 at page 89:

“What is the position of directors of a public company? They are merely agents of a company. The company itself cannot act in its own person, for it has no person; it can only act through directors, and the case is, as regards those directors, merely the ordinary case of principal and agent.”

296. This time‑honoured principle of law is so basic, even to a law student, that I am surprised such a point was even taken by counsel for the defendants.

297. The second point taken was that since Mr Cheng was not himself a party to the PSPA, he can have no liability pursuant to the PSPA or arising from it.

298. It is true that as a matter of fact, Mr Cheng was not a party to the PSPA.

299. The law is that where an agent signs a contract, and that signature is unqualified, the presumption is that the person signing would himself be personally liable.  Where, however, the signature is sufficiently qualified usually by words such as “for and on behalf of…” to show that the person signing signs as agent for another, then the presumption is that the agent who signs the contract would not be personally liable.  In either case, the presumption may be rebutted.  It must therefore always be a question of construction of the document involved in order to determine whether the presumption is or is not rebutted.

300. That principle of the law was clearly stated by by Bankes LJ in the case of Ariadne Steamship Co v James McKelvie & Co [1922] 1 KB 518 at page 525 where he said:

“My own view is that it is a sound rule of construction, applicable to cases like the present, that where the signature is unqualified the presumption is that the agent is personally liable, but that where sufficient words of qualification are annexed to the signature to indicate that the person signing signs as agent the presumption is the other way. No doubt the presumption in either case may be rebutted, and it must always be a question of construction merely whether, taking the document as a whole, the presumption is or is not rebutted.”

301. The same principle of law was stated by Melnick J in the Supreme Court of British Columbia in the case of Barnett v Rademaker et al [2004] BCSC 1060 at paragraph 38 of his judgment where he said:

“If the agent signs without any qualification at all, it is presumed that he or she made the contract in his or her own name and he or she will be personally liable (see Parker v Winlow (1857) 7 El & Bl 942). However, both the presumption that the agent is liable because he or she did not qualify his or her signature and the presumption that the agent is not liable because he or she did qualify his or her signature are rebuttable (see Ariadne Steamship Co v James McKelvie & Co [1922] 1 KB 518).”

302. In construing the identity and capacity of a signatory, one needs to:

(a) look at the contract as a whole;

(b) ascertain the intention of the parties; and

(c) look at the surrounding circumstances.

303. As was said by Giles J in the  case of Clark Equipment Credit of Australia Ltd v Kiyose [1989] 21 NSWLR 160 at page 174”:

“In the result I conclude that the proper approach is to inquire whether there is to be found an intention that the signatory be personally bound to the contract evidenced in the document, meaning thereby not a subjective intention but an intention to be found objectively, notwithstanding a qualification attached to the signature. That intention, or lack thereof, is to be found upon the construction of the document as a whole, including but not being limited to the qualification attached to the signature, in the light of the surrounding circumstances to the extent to which evidence thereof is permissible. The inquiry is not limited to consideration of the signature and its qualification in order to determine whether or not the signature indicates an assent to be personally bound.”

304. Therefore applying the above principles of law to our present case, there can be no doubt in my mind that on a proper construction of clause 18, although Mr Cheng had signed the PSPA as a director, and therefore as agent, ‘for and on behalf of’ the 1^st defendant, it was the intention of the parties to the PSPA and agreed to by Mr Cheng, based on the express wording of clause 18, for Mr Cheng, as agent of the 1^st defendant, to be personally liable for all the liabilities of the 1^st defendant arising from the PSPA.

305. That hardly surprises me since the 1^st defendant was set up by Mr Cheng and his wife to be the purchaser and to hold the Property for them (and likely for that purpose alone).  Moreover, the purchase price was paid by Mr Cheng himself a matter which, on the evidence, must have been obvious to all concerned including the estate agents.

306. I have no difficulty coming to the conclusion therefore that Mr Cheng is, pursuant to clause 18 of the PSPA, also liable to the plaintiff for the amount as claimed by the plaintiff.

ORDER

307. Accordingly, there will be judgment to the plaintiff as against both the 1^st and 2^nd defendants for the sum of $522,500 as claimed.

308. Interest will be awarded at the rate of 1% above prime from 21 May 2012 being the date of the plaintiff’s invoice until judgment and thereafter at judgment rate.

309. The counterclaim of the 1^st defendant is dismissed.

COSTS

310. This case was originally commenced by the plaintiff in the District Court, but had to be transferred to the High Court by reason of the amount claimed by the 1^st defendant in its counterclaim.

311. In those circumstances, there will be a costs order nisi that the costs of the action as well as the costs of the plaintiff in defending the counterclaim of the 1^st defendant be to the plaintiff to be borne by both the 1^st and 2^nd defendants and to be taxed on the High Court scale if not agreed.