CHEUNG HING (HK) INVESTMENT LTD v. WONG YU CHOI

HCA 14441/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 14441 OF 1999

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J U D G M E N T

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Introduction

1.  In this case, the Plaintiff is seeking to recover from the Defendant, Mr Wong Yu Choi, the sum of $1.2 million paid to him in August 1997 as a commission for which he would facilitate the sale to it of a piece of land at Tai Po with vacant possession, the vendor being a company called Goodwill Gate Limited (“Goodwill”) of which he was a shareholder and one of four directors.  In the event, Goodwill was not able to complete the sale with the result that the Plaintiff seeks repayment of that commission.

2.  The Defendant says that he has earned his commission because all that he was engaged to do was to persuade his fellow directors at Goodwill to enter into a sale and purchase agreement with the Plaintiff which is what it did, this sale and purchase having been executed on 14 August 1997.

3.  In order to decide this matter, I am required to construe the effect of the contract between the Plaintiff and the Defendant which was, fortunately, reduced into writing.  Before I do so it will be helpful to provide some background against which this dispute has arisen.

Background

4.  Goodwill had entered into a sale and purchase agreement to purchase the property in question which is Section A of Lot No. 1200 in Demarcation District No. 29 located at Tai Po.  I will refer to it as “the property”.  The vendor was a Mr Lai and he lived on the property which comprises about 5,000 sq. feet close to the sea shore.  Upon it was constructed a small house which is where Mr Lai resided.  Having purchased the property, the Defendant and his fellow directors were undecided (this being the Defendant’s account) as to whether to hold onto the property, perhaps for re-development by themselves or, to sell it on for a profit.  This being at a time of steeply rising property prices shortly before the handover in 1997.

5.  The property was introduced to Mr Lee Wai Hong, a director of the Plaintiff, who has given evidence as its only witness, in early August 1997 by an estate agent Mr Lam Kiu Cheong.  The Plaintiff is a property development company in the New Territories and this plot of land was put forward as having good development potential enhanced by its proximity to the sea shore.  Mr Lee was then introduced to the Defendant to see if they might come to an agreement for the sale of the property by Goodwill to the Plaintiff.

6.  By this time, Mr Lai who had sold the property to Goodwill had decided that he would not give up possession and required to be paid more before he would move, no doubt persuaded by rising property prices to try and hold on for more money.  This resulted in Goodwill bringing proceedings against him in the District Court to obtain vacant possession.

7.  That was the state of play when Mr Lee and the Defendant had their discussions about a possible sale of the property to the Plaintiff by Goodwill.  Mr Lee had been informed of the on-going litigation between Goodwill and Mr Lai.

The Dispute

8.  This action raises a short but fundamentally important dispute as to precisely what agreement was entered into between the Plaintiff and the Defendant.  It is common ground that on 14 August 1997, Goodwill and the Plaintiff entered into a sale and purchase agreement whereby Goodwill agreed to sell the property to the Plaintiff for $3 million.  I will need to make specific reference to certain parts of this agreement presently.  Contemporaneously, or at all events on the same day, the Plaintiff entered into an agreement with the Defendant whereby it paid him a consideration of $1.2 million.  The short point is this.  The Plaintiff says that on its face the terms of this agreement, which is the subject of the action, are perfectly clear.  It paid him $1.2 million to bring about for the Plaintiff the delivery to it of the property with vacant possession.  He was to earn his fee for doing this.  If that could not be achieved then he would be obliged to repay this amount.  I will come to the precise terms of the agreement shortly.  The Defendant’s case is different.  He says that because his fellow directors were uncertain as to whether they wished to hold onto the property, given rising property prices or, to sell on for a short term profit he was paid this commission to persuade them to sell the property to the Plaintiff which is precisely what happened when the sale and purchase agreement was entered into between Goodwill and the Plaintiff for the sale of the property to the Plaintiff for a consideration of $3 million.  Once that agreement was executed he did what he was contracted to do by the Plaintiff — he earned his commission which he is under no obligation to repay.

The Course of Events

9.  I do not need to analyse the two agreements at this stage.  It is sufficient for me to note that in the sale and purchase agreement between the Plaintiff and Goodwill that if Goodwill, as vendor, was unable to complete the sale by giving vacant possession on or before 15 August 1998 (a year after the execution of the agreement) then the Plaintiff, as purchaser, could, at its option, rescind the agreement and take back all of the monies paid under the agreement or, re-negotiate the terms of the sale.  This is set out in Part V, page 110.  Earlier completion was contemplated in Part VI, also at page 110, in the event that the then on-going litigation between Goodwill and Mr Lai was determined or Mr Lai voluntarily surrendered the property.  In such circumstances, completion would occur within 30 days of either of those events, whichever was the later of the two.  This meant that the Plaintiff could insist on completion in those circumstances earlier than on or before 15 August 1998 as appears in Part V.

10.  Unhappily, the litigation with Mr Lai dragged on.  There were two actions, one in the District Court and another in the High Court.  The District Court case was removed to the High Court to be heard together with the High Court action.  In the event, the 15 August 1998 came and went.  The Plaintiff exercised its right to rescind and/or re-negotiate.  A supplemental agreement was proposed and drafted, page 122, extending time and requiring a payment of $150,000 to be paid to the Plaintiff as liquidated damages and, additionally, the Plaintiff required Goodwill’s four directors to enter into a joint and several guarantee to guarantee repayment of the $1.5 million that it had paid as part payment of the $3 million selling price.  The directors would not agree to this but proposed a fixed liability of $375,000 each.  The Plaintiff would not agree and so the supplemental agreement was not entered into.  In those circumstances, the Plaintiff required rescission and repayment to it of the $1.5 million which was not forthcoming.  It sued Goodwill and has now obtained judgment for this amount which it has not been able to enforce.

11.  In view of the fact that this conveyance fell through in the way that I have described the Plaintiff then sought repayment from the Defendant of the $1.2 million because he had failed to deliver to it his promise of vacant possession of the property.  I therefore need to decide the precise nature of the Defendant’s obligation under the agreement.  Is it, as he says, only to persuade his fellow directors to enter into the sale and purchase agreement which they did, in which circumstances he keeps his commission or, was he required to see the matter through to vacant possession in order to keep his commission?

The Agreement

12.  The Agreement is at pages 92 and 93 in certified English translation.  It is in these terms:

“Agreement to Assist in Obtaining Possession and Compensation

Party A:  Pearl Billion Investment Limited

Address:

Party B:  Wong Yu Choi <I/D C.339663(9)

Address:  66 Sa Po Village, Yuen Long

The representative of Pearl Billion Investment Limited (herein below referred to as Party A) invites Mr Wong Yu Choi (herein below referred to as Party B) to assist this company to complete the matters relating to obtaining vacant possession of DD 29 Lot 1200A.  This company will pay Mr Wong Yu Choi Hong Kong dollars one million and [blank] tens of thousands as the fee for obtaining vacant possession.  A sum of Hong Kong dollars one hundred thousand is paid on 7^th day of August 1997, the balance of one million and one hundred thousand dollars will be paid on the 15^th day of August 1997 after the signing of the formal agreement.

Signature of Party A:  representative LEE WAI HONG

Signature of Party B:  (signed) (illegible)

Witness:  (signed) (illegible) Lam Wai Cheung (E614408(3))

Date:  7^th August 1997

Remark:  I will repay the fee of Hong Kong dollars one million and two hundred thousand for assisting in obtaining vacant possession if the vendor and the purchaser cannot complete the sale and purchase transaction.”

13.  Mr Hon, for the Plaintiff, submits that nothing could be clearer.  There is simply no reference to the commission being earned merely on the signing of the sale and purchase agreement nor any reference to the commission being payable for persuading the Defendant’s fellow directors to sell the property to the Plaintiff.

14.  The Defendant was paid his fee in two cheques.  Firstly, on 7 August 1998, when the Agreement was signed, a cheque for $100,000.  He receipted the payment by recording on a photocopy of the cheque and of his identity card (page 95) the following words:

“Deposit for assisting in obtaining vacant possession of DD 29, Lot 1200A.”

15.  He received the balance on 14 August 1997 being $1.1 million.  On the equivalent photocopy he wrote as follows (page 97):

“I, Wong Yu Choi, C339633(9), now having received from Pearl Billion Investment Limited the sum of one million one hundred thousand dollars, together with a sum of one hundred thousand dollars, for assisting Peal Billion Investment Limited in completing in the matter of obtaining vacant possession of DD 29, Lot 1200A.  If delivery of vacant possession and the parties to the sale and purchase fail to strike a deal, and I will also return the fee for assisting delivery of vacant possession i.e. HK$1.2 million to the purchaser.”

The last sentence of the receipt has been interpreted by the trial interpreter from the original Chinese and is agreed to be correct, although I am bound to say that its effect is precisely the same as the original translation at page 97.

What does all of this mean?

16.  Mr Hon says that this can only admit of one conclusion which favours the Plaintiff.  The Defendant, an honourable man and a District Board member who does a lot of good work for his community, says that he had earned his fee on the execution of the sale and purchase agreement. The Plaintiff having failed to have its judgment against Goodwill satisfied cannot now seek to get its money back from him by some sort of back or side door. 

17.  Unfortunately, for the Defendant he has simply misunderstood the effect of his own agreement with the Plaintiff.  Mr Hon is right; this commission could only be kept, unusually I suppose for a commission it was pre-paid no doubt in the expectation that all would go well, if the Plaintiff received vacant possession of the property within the terms of its sale and purchase agreement with Goodwill.  For reasons which I have already considered this did not happen.  The consequence of this, based on the clearest terms of the agreement between these two parties, is that the Defendant, Mr Wong must now repay the sum of $1.2 million.  There is simply no other way of viewing his agreement with the Plaintiff.  There must therefore be judgment to the Plaintiff in the sum of $1.2 million.  I will now hear the parties as to costs and interest.