KYUNG MIN SOO, TOM v. LEE HEE KYUNG

DCCJ 3571/2010

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 3571 OF 2010

--------------------

--------------------

------------------

JUDGMENT

------------------

1. The plaintiff, Mr Kyung Min-soo, Tom, (hereinafter referred to as “Mr Kyung”), claims against the defendant, Madam Lee Hee Kyung, (hereinafter referred to as “Madam Lee”), for outstanding commission in his successful introduction of a buyer to Madam Lee of the Gu Gu Korean Japanese Restaurant, in September 2010, (hereinafter referred to as “the restaurant”).

2. The defendant, Madam Lee, denies she had ever agreed to pay Mr Kyung 10% commission on the $700,000 sale price for the restaurant.  However, she admitted she did agree to pay Mr Kyung tea money or a nominal sum to be determined by her.

3. The issue of dispute between the parties therefore is whether there was an agreed fee for Mr Kyung’s introduction of a buyer of Madam Lee’s restaurant business, and if there was no agreed fee, what is the reasonable fee for his services? 

The plaintiff’s case

4. Mr Kyung came to know Madam Lee over 10 years ago when he was an employee at the Korean Trade Centre of the Korean Consulate in Hong Kong, and Madam Lee worked as a part-time interpreter.  In or around June 2010, they met again and became friendly with each other.  Mr Kyung started to help out at Madam Lee’s restaurant, the Gu Gu Korean Japanese Restaurant, situated at 153 Woosung Street, Jordan, Kowloon, in or about July 2010.  Madam Lee started to operate the restaurant in January 2010.

5. Mr Kyung claimed that Madam Lee was complaining to him about the hard work at the restaurant and the difficulties with staff, she asked Mr Kyung to find a buyer for her restaurant business.  Madam Lee told him she would pay 10% commission to him if he could find a buyer willing to pay $1 million or above for her restaurant business.  He began to look for a buyer for her and introduced the restaurant to five teams of potential buyers.  He later told her that the potential buyers found the price she asked for at $1 million was too high.  She agreed to lower her price to $700,000.  He claimed he managed then to find or successfully persuade a buyer for the restaurant at $700,000.  The buyer was his golf students, Mr and Mrs Lee. 

6. On 19 September 2010, the buyer, Mr and Mrs Lee Seo Joo, on behalf of their company, Han Sung Company, paid a deposit of $100,000 for the transfer of the restaurant.  The balance of $600,000 was paid on 27 September 2010 to Madam Lee. 

7. It is on the successful sale of the restaurant that Mr Kyung demands the payment of 10% commission from Madam Lee.  He claimed that it was due to his effort in finding the buyer that the sale was successful.  He claimed also that he had no role to play after the initial introduction of the buyer to Madam Lee who was willing to purchase Madam Lee’s restaurant at $700,000, that the negotiation of sale details was a matter between the buyer and Madam Lee.

The defence case

8. Madam Lee claimed that she did not promise to pay Mr Kyung 10% commission for finding a buyer for her restaurant business. She admitted he is entitled to tea money, or tips only, as he did not take part in the details of the negotiation.  She also said that he had failed to tell her that the buyer had asked for one-month delay in the payment of the balance price which was $600,000.  In short, she was not happy with his services. 

9. Madam Lee further claimed that the transfer sum of $700,000 included 3 months’ rental deposit of $135,000 because the monthly rental was $45,000 a month; the gas, electricity and water rate deposits of a total of $95,000 (at $40,000, $49,000 and $6,000 respectively).  That she had also paid the buyer, Mr Lee Seo Joo and Mrs Lee Kim So, Seob, $8,000 interests for the $600,000 loan they had to borrow from a finance company in order that Madam Lee could cash in the $600,000 cheque on 29 September 2010.

10. According to Madam Lee, that was a compromise between the buyer and herself because Madam Lee did not wish to delay the sale of the restaurant or have the restaurant transferred to the buyer before she received the balance.  Madam Lee does not deny that Mr Kyung is entitled to be paid some tea money for having introduced the buyer for her restaurant. 

Findings

11. Based on the defendant’s admission, an agency commission is payable.  The only issue is what is the amount payable.  If there was an agreed fee, then the agreed fee.  If it was not agreed, what is the reasonable amount? 

12. Though Mr Kyung claims a sum representing 10% of the purchase price was agreed and he insisted it was an oral agreement between him and Madam Lee for introducing a buyer if the sale price was $700,000, in his letter to Madam Lee written shortly after the completion of the transfer of the restaurant, Mr Kyung said in the letter the agreement was 10% if the sale price was over $1 million and 7% or 8% if the sale price was $700,000.  The letter can be found from page 67 of the bundle. 

13. Furthermore, in paragraph 5 of his reply in these proceedings, he admitted he had asked Madam Lee to pay him $57,500 that is 7.5% of the purchase price, for a quick settlement.  He mentioned in the same paragraph the agreement was 7.5% if the purchase price was over $1 million.  Clearly, there are different versions of what the agreement was on the commission. 

14. When confronted in court as to what was agreed between Madam Lee and himself, Mr Kyung claimed he had wrongly reversed the percentage of commission in his letter to Madam Lee.  This letter served as a letter before action of the present proceedings.

15. It is rather surprising for a creditor who was demanding a debt from the debtor to have got the percentages on what the debt was calculated on wrongly.  A creditor would not write a letter before action on an impulse without thinking through his story and the basis of his claim.

16. Based on the evidence, there are clear discrepancies in Mr Kyung’s evidence.

17. I have also considered the evidence of Madam Hong giving evidence on Mr Kyung’s behalf, namely that she was also told by Madam Lee that Madam Lee wanted to sell the restaurant and the commission would be 10% of the sale price.  It is unclear from her evidence on what basis the 10% would be calculated on, on a sale price of $1 million or the sale price of $700,000?

18. In any event, the Court should look at what was agreed between Mr Kyung and Madam Lee at the time.  Based on the evidence, I am not satisfied that the 10% demanded was what the parties have agreed.  It is possible that they had discussed 10% commission or 7% or 8% commission depending on the sale price.

19. I am led to believe from the evidence disclosed that Madam Lee was agreeable to pay a commission during the period of negotiation of the sale price and Mr Kyung was negotiating with his golf student, Mr Lee, and his wife, Mrs Lee Kim So, Seob, that she would pay 10% if the sale price was over $1 million and 7% if the sale price was $700,000.

20. I am satisfied that Mr Kyung acted as an introducer and he had tried to take  a more active role for he had prepared a written agreement for the parties to sign, but Madam Lee refused to execute the written agreement, the draft of that agreement appears on page 67 to 68 of the bundle.

21. According to the contents of this draft agreement, it was clear to all parties that the $700,000 price was inclusive of rental deposit and the utilities deposits.  Even though Mr Kyung had wrongly believed the rental deposit consisted of two months’ rental instead of three months, he had got most of the other terms correctly.  Madam Lee did not involve Mr Kyung, she probably did not wish to include him after the oral agreement was reached between herself and the buyer, Mr and Mrs Lee. 

The law

22. In paragraph 7-003 of Bowstead and Reynolds on Agency, 19th edition, at page 281 to 282, the authors set out the legal principle in common law on the remuneration of an agent.  It said:

“1. An agent is only entitled to remuneration for his services as agent if either the express or implied terms of the agency contract, if any, so provide or he has a right in restitution to claim on a quantum meruit.

2. Where the contract contains express terms providing for remuneration to be paid, the agent cannot normally claim remuneration other than in accordance with those terms. In the absence of such express terms the right to claim any remuneration, and the amount and terms of payment of such remuneration, are determined by such terms as may be implied into the contract.

3.  In deciding what terms are to be implied the court will have regard to all the circumstances of the case, including the nature and length of the services, the express terms of the contract and the customs, usages and practices of the particular area of activity.  In the absence of any factors to the contrary, a term will be implied that the agent is entitled to reasonable remuneration.”

23. At paragraph 7-004 on page 282, the authors said the following:

“Contractual claim. Apart from claims in restitution, the rendering of services to another, however long continued, creates no right to remuneration unless the agency contract expressly or impliedly makes provision for such payments. If there are no express terms relating to remuneration, terms providing for remuneration will only be implied where the circumstances are such as to indicate that the parties intended that there should be remuneration. In general, however, the mere employment of a professional person raises a presumption that it was intended that he should be remunerated unless there are circumstances indicating the contrary. The position is different with company directors, who are entitled to remuneration only if express provision is made therefor. In respect of some contracts, particularly the contract of sale, failure to agree on the price would be a very strong indication that no contract had been concluded. In the case of the contract of agency, however, the question of the agent’s remuneration is less central, and if it is found that remuneration was intended, its amount can be determined by reference to scales or even by what is reasonable.”

24. At page 283, the authors said further:

“What terms may be implied into the contract will depend upon the normal rules for the implication of terms into contract.”

And at the end of the paragraph, the authors added:

“In the absence of a contrary indication as to the amount payable, the term which will be implied is for a reasonable sum on reasonable terms. What is reasonable will depend upon all the circumstances of the case.”

25. I found, under the circumstances, even if the agreement on the percentage of commission was not agreed, that 7% of the sale price to be a reasonable amount, there was no agreement between the parties what services other than introduction of a buyer Mr Kyung had to perform, it is also clear that Madam Lee did not wish Mr Kyung to prepare the draft written agreement.  On that basis, I do not think Mr Kyung should be deprived of the commission that he had worked for in obtaining a buyer for the restaurant. 

26. On the aforesaid basis, the defendant, Madam Lee, is liable to pay to the plaintiff, Mr Kyung, a sum equivalent to 7% of the transfer fee of $700,000 which is $49,000.  I therefore grant to the plaintiff judgment in the sum of $49,000 to be paid by the defendant forthwith. Interests at half judgment rate from the date of writ to the date of judgment and thereafter at full judgment rate until full payment. 

Costs

27. Although neither party are represented, I will still make an order of costs.  Though the amount recovered is in the small claims category, I would maintain costs to follow the event, to be taxed, if not agreed.

28. It is further ordered that :

1.  the defendant to pay the judgment sum of $49,000 plus the interests of $4,140.16, (from 19.10.2010 to 27.11.2012 (771 days), $49,000 x 4% x 771 days ÷ 365 days = $4,140.16) into Court within 21 days hereof; and

2.  there be payment out of $7,000 of the defendant’s payment in to the defendant.