MULTIPLE SURVEYORS LTD. v. YU TAI HING CO. LTD.

HCA 10460/94

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 10460 OF 1994

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J U D G M E N T

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A. The subject-matter of the Action

1. On 29 September 1993, Wellcherry Limited ("Wellcherry") signed two sale and purchase agreements whereby it agreed to acquire the Basement and the Lower Ground, Ground, Upper Ground, First and Second Floors of a building in Tsim Sha Tsui East known as Inter-Continental Plaza ("the Property"). The total purchase price was $493 million and completion took place on 28 January 1994.

2. The vendor of the Second Floor was Erith Limited and Lane Crawford Limited was the vendor of all the other floors. The vendors were both members of the group of companies headed by The Wharf (Holdings) Limited ("the Wharf Group") and the transaction had been negotiated on their behalf by Harriman Realty Co. Ltd. ("Harriman").

3. The Defendant is a private company owned or controlled by members of the Law family, including Mr. Francis Law Sau Fai ("Law"), its general manager and one of its directors. It is involved in a substantial way in various businesses, including property investment and development. Wellcherry is a Hong Kong company which (for the purposes only of the present proceedings) the Defendant accepts may properly be considered a company "associated with" itself. In its pleadings, the Defendant states that Wellcherry is beneficially owned by Law.

4. The Plaintiff describes itself in its pleadings as a company carrying on business as a property consultant. It claims that in consequence of Wellcherry's acquisition of the Property, it is contractually entitled to be paid by the Defendant a commission in the sum of $4,930,000, equivalent to 1% of the abovementioned purchase price. The alleged contract is pleaded as follows:-

"By an oral contract made on 6th August, 1993 between Stephen Fung on behalf of the Plaintiff and Law on behalf of the Defendant and evidenced by a letter dated 26th August, 1993 from the Plaintiff to the Defendant, the Plaintiff and the Defendant agreed that in consideration of the Plaintiff introducing the Property to the Defendant for the purpose of negotiating its purchase, in the event of the subsequent signing of a formal sale and purchase agreement between the vendor and the Defendant or any company or firm associated with the Defendant or in which the Defendant had control or interest, the Defendant would pay the Plaintiff fees at 1% of the price agreed."

5. Mr. Stephen Fung ("Fung") was at the time one of the Plaintiff's directors, having joined in May 1993. Mr. Richie Tsoi ("Tsoi") was at the time, and still is, the managing director of the Plaintiff. He and Fung were the two witnesses who gave evidence on the Plaintiff's behalf. Law was the only witness testifying for the Defendant.

6. It is the Plaintiff's pleaded case that it "introduced the Property to the Defendant by releasing to Law the relevant details of the Property" on 6 August 1993 or, alternatively, that it did so on 17 August 1993, "when the Plaintiff presented a written offer to purchase the Property to the vendor in the name of Kincheer Limited ("Kincheer"), allegedly a nominee of the Defendant, "and as a result of which, negotiations began between the Defendant and the vendor for the sale and purchase of the Property". The Plaintiff contends that the eventual acquisition of the Property by Wellcherry "subsequent to and/or as a result of the introduction" and negotiations perfected its entitlement to the 1% commission since Wellcherry is a "nominee of the Defendant or a company associated with the Defendant or in which the Defendant had control or interest".

B. The issues

7. Where the parties fundamentally differ is as to whether they ever entered into an oral contract on 6 August 1993 in the terms alleged or at all. There was a conflict of evidence on practically every significant allegation relevant to this issue.

8. If such an oral agreement is found to have been established, the Defendant argues that the conditions for entitlement to commission have not been satisfied. The Defendant submits, for instance, that on the evidence, the Plaintiff cannot be said to have "introduced" the Property to the Defendant, such introduction being a condition of entitlement. Secondly, the Defendant argues, because of the way that the negotiations developed and the way that the deal was ultimately struck, any original introduction of the property by the Plaintiff cannot properly be regarded as the effective cause of the Defendant's eventual acquisition of the Property, again disentitling the Defendant to commission.

9. Right up to the first day of the trial, the Statement of Claim asserted an alternative claim based on a quantum meruit. It was alleged that at the Defendant's request, the Plaintiff rendered "professional services to the Defendant in relation to the preparation and conduct of its negotiations to purchase the Property" during the period between about 6 August 1993 and 15 September 1993. Such work was alleged to have involved 3 directors and 7 "specialized staffs" in work totalling 1,050 man-hours which produced, among other things, valuation reports spanning some 1,500 pages. It was alleged that a reasonable fee for such work was the sum of $4,930,000 (i.e., the same amount as the commission claimed) or alternatively, on the basis of charging-out rates and 1,050 man-hours, the sum of $2,415,000.

10. At the start of his opening, Mr. Ronny Wong SC, who appeared for the Plaintiff with Mr. Louis Chan, abandoned the quantum meruit claim. However, Tsoi maintained in the witness box that the work in question had in fact been done as alleged and had provided the basis upon which he had assessed an appropriate price for the Property. Accordingly, Mr. Jason Pow, who appears for the Defendant, launched an extensive attack on Tsoi's credibility in relation to his reliance upon the valuations and other work allegedly done.

C. The Plaintiff's version of events

11. The oral evidence took up the better part of 5 days. The substance of the evidence given by the Plaintiff's witnesses may be summarised as follows.

C.(i) Background to the transaction

12. Fung had held many jobs before joining the Plaintiff company. He had worked for the Government in the Housing Department, then, between 1980 and 1984, he was employed by the Hongkong Land Property Co. Ltd. as a property manager and became acquainted with certain directors and employees of the Wharf Group. He had then joined Harriman, where he became acquainted with, among others, Mr. Bernard Chow ("Chow"). Fung then worked for China Light & Power Co. Ltd., followed by the Shui On Group. He left for Canada in 1988 and, on his return, joined Colliers Jardine as a director, working there from 1992 to May 1993, after which he moved to the Plaintiff company. He resigned from the Plaintiff in February 1994 and now works in Shanghai, as property manager of a building known as CITIC Tower.

13. It was during his time with Colliers Jardine that Fung first came across Law and the Defendant company. When he joined them, Colliers Jardine was managing the V. Huen Building which housed the Defendant's headquarters. Later, Colliers Jardine was asked to manage two residential properties in Sai Kung belonging to the Defendant.

C.(ii) 6 August 1993

14. Fung first heard that the Property was on the market in early August 1993 from Anita Chan, a member of the Defendant's staff. She had been told this by a surveyor named Victor Ng. Seeing this as a possible business opportunity, Fung telephoned his contacts at Harriman on 6 August 1993 and they confirmed that the Property was indeed for sale and that Chow was the person in charge.

15. He then telephoned Chow who again confirmed that it was for sale. Chow also told him that two offers had already been received at prices of $5,300 and $5,500 per square foot respectively and that the vendors wanted completion within 6 months. He was also told that Harriman was the exclusive agent for the Wharf Group and that no money would be paid to any other agents. Chow also said that particulars of the Property would only be provided after the name of the person wanting them was registered with Harriman.

16. Fung thought the Defendant was a good prospect as a purchaser because, from previous conversations, he knew that Law was interested in shopping malls. He therefore telephoned Law in the afternoon of 6 August 1993 and told him about the Property. Law indicated his interest and appeared excited at the prospect, authorising Fung to register the Defendant with Harriman as an interested party, which Fung did.

17. Fung then went to Chow's office in Wheelock House to get the particulars. These consisted of (i) a schedule setting out the areas, in square feet, of the various floors constituting the Property (and also of office floors not material to this Action); (ii) schedules of tenancies identifying inter alia the tenants, the areas occupied, unit rates and rentals and (iii) floor plans showing the partitioning of units.

18. After reading these documents carefully, Fung went to see Law at some time after 5.00 pm. The documents were copied and they went through the floor plans and schedules together, discussing vacancies and rents.

19. Fung told Law that since Harriman had exclusive agency rights from the Wharf Group, he would have to look to him for a 1% commission on the transaction price. Fung asked him: "Any problems?" Law answered: "No problems". It was agreed that the 1% would be payable on the signing of a sale and purchase agreement. Law asked Fung not to put the particulars to any other persons and to work only with the Defendant from that moment on.

C.(iii) Between 6 August 1993 and 22 August 1993

20. Tsoi organized staff in the company to study the Property and to produce valuations to enable advice to be given to Law about price. Tsoi himself did some basic calculations. His staff arrived at a figure of $530 million as an acceptable price. Tsoi himself concluded that an acceptable figure was $503 million. He conveyed his views to Fung.

C.(iv) 11 August 1993

21. At a luncheon meeting at the Peking Garden Restaurant in Alexandra House attended by Tsoi, Fung, Law and one of the latter's staff members, Law confirmed that he would pay a commission of 1% of the Property's sale price.

C.(v) 11 August to 16 August 1993

22. Fung regularly telephoned Law to ask about progress and was told that the matter was receiving consideration.

C.(vi) 17 August 1993

23. At about 10:28 a.m., as shown by the date and time printed on the fax cover sheet, Law sent to Fung a draft letter containing a subject to contract offer to be made by Kincheer to Harriman for purchase of the Property. The cover sheet stated: "Please see attached. After consideration please telephone me to discuss further".

24. The draft offer was addressed to Harriman "c/o Multiple Surveyors Ltd., 1605, Nine Queen's Road Central", i.e., the Plaintiff's address. In its caption, it referred to the relevant floors of the Property and in its text, the offer was of a purchase price of $430 million, with completion to take place within 6 months of signing a sale and purchase agreement.

25. After receiving this fax, Fung telephoned Law saying that he thought the price on the low side and that the Plaintiff's in-house view was that the price could be over $500m. This was based on Tsoi having said that $503m was about right. It also reflected Chow's comment that there had been previous offers of over $500m. The fact that the draft letter was addressed to Harriman c/o the Plaintiff was not discussed. However, no changes were made and Fung collected the letter from Law that afternoon and delivered it to Chow.

26. Law told Fung not to disclose to Chow that the Defendant was behind Kincheer. Fung promised that he would act accordingly. When he met Chow, the first question he was asked was : "Where did this offer come from?" Fung replied: "From my client". When asked whether it was an offer from Yu Tai Hing, he said "No".

27. Chow went through the offer and told Fung (i) that the price was too low; (ii) that completion must be within 6 months or less; and (iii) that the identity of purchaser had to be disclosed in writing or his offer would not be entertained any further.

28. Fung went back to the office and sent Law a fax dated 17 August 1993 conveying Chow's three points to Law. It is captioned "Project In-Hand" and states: "This afternoon I presented the written offer of Kincheer Limited to Chow of Harriman Realty in person. Before further negotiation can be proceeded, the Vendor's representative would like to receive in writing the following 3 criteria: (1) Purchaser's identity; (2) Better price; (3) Earlier completion date. I will call on you to discuss about the details."

29. Fung also telephoned Law to tell him of what had happened at the meeting and offering to make contact with members of the Wharf Company's main board with a view to by-passing Chow. Law declined the offer and said that he had his own contacts through which he would contact Chow directly.

30. Thereafter, until he was hospitalised, Fung called Law every day to see if he had made any further progress on the deal.

C.(vii) 22 August to 4 September

31. Fung was in hospital for an operation over this period. However, he continued to call Law asking about progress and whether he should try to bypass Chow. Law said that this would not be necessary and promised to let Fung know of any progress.

C.(viii) 23 August 1993

32. Tsoi telephoned Law to say that Fung had been hospitalized and that he would be taking over his role.

C.(ix) 25 August 1993

33. Law forwarded to Tsoi a fax which had been sent to him by Messrs. Y.T. Chan & Co. ("Y.T. Chan"), solicitors who were acting for him in connection with the Property. Attached to this fax was a letter dated 25 August 1993 from Y.T. Chan to Harriman, marked for the attention of Chow, containing a new offer to purchase the Property, this time on behalf of a company called Hillgold Limited ("Hillgold"). The price had been raised to $493 million and completion was still proposed for 6 months after signing a sale and purchase agreement. In the caption referring to the Property, reference to the Ground Floor was erroneously omitted. Although the letter bears a stamp suggesting that it is a draft, it also bears a signature and, on the evidence, had already been sent to Harriman before the copy was faxed to Law.

34. Tsoi telephoned Law and pointed out that the caption had omitted to mention the Ground Floor. He also commented that the steep increase in the offered price might make the other party greedy for more. However, Law said that the price was all right and that he would get his lawyer to correct the caption to mention the Ground Floor.

C.(x) 26 August 1993

35. To follow up his comments on the telephone, Tsoi wrote a letter dated 26 August 1993 which he had delivered by hand and sent by fax to Law. The letter acknowledged receipt of the fax of 25 August 1993 and continued as follows: -

" ....... I would like to draw your attention to the heading of the said letter of offer that the Ground floor appeared to be omitted.

Furthermore, I would like to take this opportunity to confirm again that in the event of this introduction or negotiation resulting in signing a formal Sale & Purchase Agreement between the vendor and your company (the purchaser) or your nominee, our fees at 1% of the price concluded shall be payable by your goodselves to this firm at that time. Any company or firm associated with the purchaser or in which the purchaser has control or interest shall be deemed a nominee of the purchaser for the purpose of this clause.

Naturally, I will keep you fully informed as to the progress of this negotiation. However in the meantime, if you have any queries please feel free to contact me."

No response was received.

C.(xi) 16 September 1993

36. Fung was told by Law in early September that he was working with his solicitors and that they were very close to a deal. However, Fung was surprised and shocked to see an announcement in the newspapers on 16 September that the Property had been sold on the previous day, without prior notice to the Plaintiff. The announcement was made by the Wharf Company and Lane Crawford, identifying the buyer as Wellcherry and disclosing that the total price was $493 million, with completion expected on or before 28 January 1994.

37. An article published in the Hong Kong Economic Journal on the same day (also seen by Fung), discussed the transaction and stated inter alia that:-

"People of the real estate sector said that Inter-Continental Plaza has been put up for sale for some time already. Initially Wharf intended to sell the shopping mall and all the offices of Inter-Continental Plaza together which would include 6 storeys of the shopping mall and offices on 9th to 12th floor. However, the buyer would like to buy the shopping mall only and so they changed to negotiate on the buying of the shopping mall."

C.(xii) 16 September to 29 September 1993

38. Fung telephoned Law many times but got the impression that the latter was evading him. He did however manage to speak to him on 3 or 4 occasions and was told that there were matters behind the scenes which prevented him from paying the Plaintiff any commission but which he could not explain to Fung.

C.(xiii) 29 September 1993

39. Fung sent a debit note in the sum of $4.93 million addressed to Hillgold, c/o the Defendant and marked for the attention of Law. The amount was described as "commission for introducing the captioned property to your goodselves and negotiating the same for a Sale & Purchase Agreement of consideration of $493 million. Our fees, as agreed, to be 1% of the price concluded." The covering letter was similarly addressed.

C.(xiv) 30 September 1993

40. The debit note was rejected by letter from the Defendant dated 30 September 1993, signed by Law, stating: "We write to advise you that our Company has not incurred such expense and accordingly, the said letter together with its enclosures are returned herewith for your cancellation."

C.(xv) 5 October 1993

41. An unsigned and undated typewritten letter was received by Fung on 5 October 1993. It came in an enveloped post-marked 2 October (exhibited at the trial) and was in the following terms:-

"Mr Fung
(Present)

I think I owe you an explanation concerning the commission 'arrangements' for the deal. In actual fact, right after the actual signing of the memorandum, we had to pay a commission close to almost 2% of the purchase price to a designated party who collected the money on 'somebody's' behalf. AND THAT I was told up-front not to deal further with you but to deal with him direct. The happenings which led to the ultimate signing of the deal was very complicated and it would not be possible for me to tell you everything behind the scene. It is unfortunate that only by this way the deal can be worked out or otherwise, we would not be able to get what we want.

I hope you'll give the entire matter your very kind understanding.

F.L."

C.(xvi) 7 October 1993

42. Fung replied by sending a letter in the following terms:-

"Dear F.L.

I write to appraise your wisdom to complete a good deal that justifies your paying the alleged about 2% extra and saving lots of money and time for negotiation in return. As your good friend, I wish to congratulate you again because the concluded price of the property is very reasonable and value-added.

Nevertheless, real estate business is so practical that MSL's benefits cannot be waived or forgotten. Therefore please be considerate in this matter.

Your early settlement of our agency fee within a short period will be much appreciated or otherwise, I am in a very embarrassing position.

Your sincerely

S.F."

There was no reply.

C.(xvii) 11 October 1993

43. Fung responded to Law's letter of 30 September, describing it as a repudiation of "your agreement on behalf of Yu Tai Hing Group of Companies to pay 1% commission to us". It adds that legal advisers had been retained and that their preliminary advice was that the Plaintiff had a good claim for breach of contract. The debit note (still addressed to Hillgold c/o Yu Tai Hing) was resubmitted, with the threat that if payment was not received within a reasonable time, the matter would be put into the hands of the lawyers.

C.(xviii) 12 October 1993

44. The debit note was again rejected and returned. The Defendant wrote in the following terms:-

"We are indeed baffled by your repeated allegation which we hereby categorically deny that we have agreed to pay any commission to your Company in connection with a certain property transaction.

As expressly stated in our letter to you dated 30th September 1993, we have not incurred any such expenses, as alleged or at all. Perhaps you may wish to enlighten us on the basis on which you have arrived at the conclusion as alleged and to furnish us with documentary evidence purportedly in support of the claim."

C.(xix) After 12 October 1993

45. Although it is not clear from the evidence whether this meeting took place on 11 October or on some subsequent date, Fung managed to meet Law after having had much difficulty trying to see him. Law explained that though Fung was his agent, he found it difficult to explain why the situation prevented payment of commission. He tried to comfort Fung with potential future benefits. He also said he feared Fung might have a tape recorder on him, so that he did not wish to have further meetings. That was the last time that they met before the start of proceedings.

C.(xx) 12 October 1994

46. Messrs. Philip Chan & Co. ("Philip Chan & Co.") sent a letter before action addressed to the Directors of Yu Tai Hing alleging that a debt of $4.93 million was due and owing pursuant to an agreement between the Plaintiff and the Defendant on 6 August 1993 in respect of purchase of the Property.

D. The Defendant's version of events

47. The substance of the evidence given by Law for the Defendant may be summarised as follows.

D.(i) Background to the transaction

48. Law had known since 1992 that floors in Inter-Continental Plaza were on the market. He had first heard this from Mr. K.L. Lau of the Wharf Group at a luncheon meeting of the Institute for Real Estate Administrators. He had obtained particulars of the property then being offered. While some of the details differed, these particulars, like those obtained by Fung from Chow in August 1993, consisted of a schedule setting out the square footage of the relevant floors (including those constituting the Property), a schedule of tenancies identifying the tenants, the areas occupied, unit rates, rentals, etc. and a set of floor plans.

49. These particulars were evaluated by the Defendant's staff and it was decided that an acquisition did not meet the Defendant's investment strategy at the time. Market sentiment was then not as favourable and the Defendant not as well funded, so that the asking price of about $400m was considered unattractive. The particulars were therefore simply put on file (and produced in the Defendant's discovery).

50. At the beginning of August 1993, there was much interest in real estate circles concerning properties in Tsim Sha Tsui East because there had been a highly successful deal involving the shopping arcade in New Mandarin Plaza, a building also in Tsim Sha Tsui East. As Mr. Wong S.C. put it, such properties were "hot".

51. Law knew Fung from the time when the latter was working for Colliers Jardine and managing properties owned by the Yu Tai Hing Group. In August 1993 he had known him for one to two years as a property manager.

D.(ii) 6 August 1993

52. In the morning, Fung called on Law at his office without a prior appointment. It was a courtesy call to inform Law that he had left Colliers Jardine and joined the Plaintiff company. Law assumed that Fung wanted simply to maintain contact and, if possible, to obtain business from the Defendant.

53. The conversation covered various topics, including the Sai Kung property. It was Law who mentioned the New Mandarin Plaza transaction in passing as it was then "the talk of the town". He told Fung that he recalled that Harriman had put Inter-Continental Plaza on the market and that he thought it had not yet been sold, commenting that it might offer a better deal than the New Mandarin Plaza.

54. In the afternoon, Law received a clip of documents relating to Inter-Continental Plaza with a compliments slip from Chow attached. Law knew Chow from a transaction concerning a North Point property the latter had handled for the Defendant when he was working with Chestertons. They had since become friends.

55. Law then received a telephone call from Fung asking if the documents had been received. He confirmed that they had and told Fung that he knew Chow personally, asking Fung to convey his regards and thanks for the documents. Fung asked Law to consider the deal and the latter said that he would do so, asking him whether Chow had mentioned a price. Fung said that Chow had hoped that it would be about $500m. Law then passed the documents to his staff for their evaluation. Such staff included professionally qualified individuals, including a surveyor and a lawyer.

56. Thereafter, until 16 August 1993, Fung called from time to time asking if Law had decided to make an offer for the property. He was told that the matter was under consideration.

D.(iii) 16 August 1993

57. Law prepared a draft letter putting an offer of $430m for the Property to Harriman. At that time, joint venture partners were potentially involved.

58. Fung called again and was told that a draft offer had been prepared. Fung asked for its details and a copy, saying that he could receive the letter on behalf of Harriman. Law faxed the draft to him, under the impression that he was in some way working for Harriman.

59. Fung then called back pointing out that the caption in the draft had omitted to mention the Ground Floor and asking for the addressee to be changed so that the letter would be addressed to Harriman c/o the Plaintiff, at the Plaintiff's address. Law agreed to these suggestions and had the necessary changes made.

D.(iv) 17 August 1993

60. As a result of Fung's comments, the letter containing the Kincheer offer was sent to Harriman c/o the Plaintiff and had "Ground Floor" restored to the caption.

61. This corrected letter was faxed to Fung under a fax cover sheet mentioned above. It bore a fax-generated date and time stamp of 17 August 1993, 10:28 a.m. and stated: "Please see attached. After consideration please telephone me to discuss further."

62. This fax cover sheet was in fact used twice, once as the sheet covering the 16 August 1993 draft, and again as the sheet covering the Kincheer offer. This can be seen from the fact that a "16 Aug 1993" date is stamped near Law's signature at the foot of the page and, in the space for the date at the top, the figure "17" next to a stamp of "Aug 1993" appears to have been written using a felt tip pen, possibly replacing some other date. The original of this document however could not be found and was not available at the trial.

63. In the afternoon, Fung telephoned and also sent a fax dated 17 August 1993. The fax mentioned three points made by Chow, as set out in C.(vi) above. There is also in discovery, a copy of the same fax with Law's handwritten annotations. Those annotations were made while speaking to Fung. In relation to the purchaser's identity, Fung reported that Chow had asked whether any joint venturers with a mainland background were involved. Law told Fung that no such mainland interests would be involved although it had not yet been decided whether other joint venturers might participate. He also said that he would discuss the other two matters, namely, the price and completion date, directly with Chow. The fax was then forwarded to a Mr. Alex Lui, with a request to discuss it further, Alex Lui then being a potential joint venture partner.

64. Chow then called Law and they met at Chow's office on the same afternoon. Law was asked if a better price could be offered. He replied that after a detailed examination of the tenancies and related matters, an improved price might be offered. Chow invited Law to approach him directly at any time if he wanted to look at the tenancies or needed anything else in relation to the Property.

D.(v) 17 to 23 August 1993

65. Fung called from time to time, asking about progress and suggesting that Law raise his price. He was told that the matter was still under consideration. Fung was then hospitalized on 22 August 1993. A day or so later, Tsoi telephoned to inform Law of this fact and to say that he would take over from Fung in relation to the Property. He asked about progress and was told that the matter was still under consideration.

D.(vi) 25 August 1993

66. A second offer in respect of the Property was sent to Harriman. The offer had been prepared with the help of Y.T. Chan and went out under their letter head, identifying the intending purchaser as Hillgold. The price offered was now $493 million and completion was still proposed for 6 months from the sale and purchase agreement. Reference to the Ground Floor was missing from the caption.

67. When Tsoi called again to ask about progress, Law told him that an offer had been sent and, at his request, faxed him a copy of the Hillgold offer.

D.(vii) 26 and 27 August 1993

68. The Hillgold offer was discussed by Law with Chow and this led to it being revised. On 26 August 1993, Law faxed instructions to Y.T. Chan and, in consequence, by their letter dated 27 August 1993, a revised offer was made on behalf of Hillgold. This letter provided for completion to take place within 4 months of signing. However, in the caption, "Ground Floor" is still missing.

D.(viii) 27 August 1993 to 15 September 1993

69. During this period, detailed examination of matters like title, the tenancies and distribution of the common areas took place. This was done largely through Y.T. Chan acting for the Defendant and Messrs. Baker & McKenzie acting for the vendors. The Plaintiff played no part. On 15 September 1993, Memoranda of Agreement were entered into between Wellcherry as purchaser and two Vendors.

D.(ix) 29 and 30 September 1993

70. A letter and a debit note addressed to Hillgold (in terms set out in C.(xiii) above) were received from the Plaintiff. They were rejected by the Defendant on 30 September as set out in C.(xiv) above.

D.(x) 30 September to 11 October 1993

71. Fung telephoned Law on several occasions saying that he wanted to discuss the matter. Law said that there was nothing to discuss and indicated that he had already sought legal advice.

D.(xi) 11 and 12 October 1993

72. Fung's reply to Law's letter of 30 September was received. As set out in C.(xvii) above, it described that letter as a repudiation of "your agreement on behalf of Yu Tai Hing Group of Companies to pay 1% commission to us" and threatened legal proceedings if the debit note was not paid. This letter and the enclosed debit note were again rejected and returned, the Defendant asserting that it was baffled by the Plaintiff's allegations and asking for documentary evidence in support of the claim.

D.(xii) 12 October 1994

73. After one year's silence, the letter before action from Philip Chan & Co. was received.

E. Key differences between the parties

74. It will be evident from the two versions that the major disagreements are as follows.

75. The first, and crucial, disagreement concerns what happened on 6 August 1993. The Plaintiff alleges an express oral agreement to pay 1% commission, but the Defendant denies that any agreement was made. Indeed, the Defendant even denies that it was Fung who mentioned Inter-Continental Plaza in the first place, contending that this was something brought up in passing by Law, so that it cannot be said that the Defendant was "introduced" to the Property by the Plaintiff.

76. Fung says that the initiative concerning the Property was entirely his. The Defendant's case is that it was only after hearing Law mention his possible interest in Inter-Continental Plaza in the context of "hot" Tsim Sha Tsui East properties, that Fung opportunistically obtained particulars of the Property from Chow and delivered them to Law, thereafter constantly volunteering the Plaintiff's services in the hope of financial gain. However, the Defendant contends, at no stage was it ever agreed that the Plaintiff should be paid any commission in the event that the Property was acquired.

77. The second crucial dispute concerns 11 August 1993. The Plaintiff alleges that at lunch on that day, Law acknowledged the commission agreement in the presence of both Tsoi and Fung (as well as a member of the Defendant's staff). Law says that he never even attended any such lunch.

78. Thirdly, Law says that he showed Fung the draft Kincheer offer on 16 August 1993 and, at his suggestion remedied the omission of "Ground Floor" from the caption and, more importantly, agreed to change the addressee of this offer to Harriman c/o the Plaintiff. Fung says that he never even saw the 16 August draft and that he did not request a change of addressee.

79. Fourthly, the Plaintiff relies on the letter dated 26 August 1993 from Tsoi (set out at C.(x) above) as evidencing the agreement to pay commission. The Defendant denies ever having received it and accuses the Plaintiff of manufacturing a self-serving letter which was never sent in an attempt to put forward some documentary support for the alleged oral contract.

80. Fifthly, the Plaintiff relies on the unsigned letter received on 5 October 1993 (set out at C.(xv) above) as an admission by the Defendant that there had been an agreement to pay commission and that Law had reneged because of outside pressures. Law denies that this is his document at all and also denies receiving Fung's reply of 6 October to the unsigned letter.

81. Sixthly, the Plaintiff alleges that in several conversations with Fung, Law acknowledged the agreement but said that for reasons which he was unable to explain to Fung, commission could not be paid. The Defendant says that such conversations never took place.

F. Findings

82. I have come firmly to the conclusion that the Defendant's evidence is to be preferred and that the Plaintiff's evidence must be rejected in major respects. I find that on the evidence, no oral agreement to pay commission came into being, whether as a result of the meeting between Fung and Law on 6 August 1993 or otherwise. I have arrived at this conclusion after considering (i) the commercial probabilities; (ii) the absence of documentary evidence of a commission agreement; (iii) the unacceptable character of certain disputed documents relied upon by the Plaintiff; (iv) an important inconsistency in the evidence of the Plaintiff's witnesses; and (v) the attitude of the Defendant towards adducing evidence in support of the quantum meruit claim. In my judgment, looked at cumulatively, these matters weigh heavily against the Plaintiff.

F.(i) The commercial probabilities

83. According to the Plaintiff, Law agreed to pay a 1% commission, which he must have known would amount to some $4 million or $5 million, from the very first time the Property was mentioned between them, without any reservations or even any attempt at negotiating a lesser sum. In assessing credibility, it is helpful to ask why, commercially, this should have occurred. What commercial benefit could have led Law to undertake such an immediate obligation?

84. Three benefits have broadly been suggested by the Plaintiff. First, Fung stated that the availability of the Property on the market was secret and therefore a valuable piece of commercial intelligence. Secondly, he suggested that his contacts were useful to the Defendant to help secure the Property. Thirdly, the professional expertise and experience of the Plaintiff's directors were said to be of value to the Defendant.

(a) Secrecy and commercial intelligence

85. It is unclear from Fung's evidence why the Property's availability on the market was secret. He appeared to suggest that the Wharf Group considered its intention to sell a sensitive matter because of Lane Crawford's relationship with certain shops and designer labels sold in the arcade. As I understand it, one reason for secrecy was that news of an intended sale might have an adverse impact on such tenants.

86. I find this suggestion, both as to the secrecy in general and as to the particular sensitivity alleged, impossible to accept for the following reasons.

(1) It is not in dispute that, as early as 1992, floors of Inter-Continental Plaza, including the floors constituting the Property, were for sale and known by the Defendant to be for sale. At the trial, the Plaintiff argued that the earlier marketing of the Inter-Continental Plaza was a separate and severable exercise for various legal purposes. However, the fact that the shopping arcade, presumably including spaces occupied by the allegedly sensitive tenants, was for sale and known by the Defendant to be for sale, was not challenged. Moreover, Law says that he heard of the availability of the property in 1992 in the course of general conversation with someone from the Wharf Group itself, at a luncheon meeting of the Institute for Real Estate Administrators. He was thereafter given particulars. It was therefore evidently not secret in 1992 and the alleged sensitivity was then not a factor.

(2) The article published in the Hong Kong Economic Journal on 16 September 1993 recorded that the availability of Inter-Continental Plaza for sale had been known for some time to those in the real estate business.

(3) Fung himself had heard of its availability from Anita Chan who in turn had heard about it from Victor Ng. When Fung telephoned Harriman staff, they readily confirmed its availability and referred him to Chow. Chow readily confirmed it as well. All of these Harriman personnel must have known or suspected that Fung was asking for the information in the hope of brokering a sale. They gave him the information that it was for sale without imposing any restrictions.

(4) According to Chow, by 6 August 1993, two offers had already been received from other potential purchasers, suggesting that its availability was at least to some extent known in the market.

(5) Fung disclosed to Law the identity of the Property and its owners in the very first telephone conversation they had on the matter, before making any attempt to secure a promise of commission or of being appointed the Defendant's agent. In other words, he simply gave away the allegedly secret commercial intelligence.

(b) Fung's contacts

87. I also reject the suggestion that Law was willing to pay a 1% commission to secure access to Fung's contacts.

(1) This suggestion must be viewed against the unchallenged evidence that Law joined Yu Tai Hing in 1982 and had himself been active in the real estate business as a substantial "player" for over 10 years by 1993. In contrast, although he had held various jobs in the real estate sector earlier (as outlined above) Fung had left for Canada in 1988 and had only returned to Hong Kong in 1992 to take up employment with Colliers Jardine, which he then left in May 1993, to join the Plaintiff. Most of his previous experience appears to have been in property management rather than in brokering property deals.

(2) Although Fung sought to suggest that it was through his rapport with Chow that he had been able (i) to secure the particulars of the Property and (ii) to submit the Kincheer offer to Harriman, this is not borne out by the rest of his own evidence. Thus, he testified that Chow had required him to register, i.e., disclose the identity of, the person interested in obtaining the particulars as a condition of releasing such particulars. This suggests that it was not the mere fact that it was Fung who was asking for them that secured release of the particulars. On the contrary, it was only if Chow was satisfied that the interested party might be someone worth dealing with that Fung would be given the documents.

(3) In fact, far from relying on Fung's contacts, the evidence is that Law declined to place any reliance on them. Thus, Law refused Fung's offer to approach members of the Wharf main board to by-pass Chow. Law personally knew Chow and dealt directly with him.

(4) In this context, Fung contradicted himself in his evidence. He stated in cross-examination that he had made contact with Mr. Peter Woo and Mr. Gonzaga Li of the Wharf Company in spite of being specifically asked by Law not to do so. However, in re-examination, he stated that he had not contacted these gentlemen.

88. The fact remains that there is no evidence that Law either needed or wanted access to any contacts Fung may have had. Such contacts did not supply the commercial reason for agreeing to pay the Plaintiff commission.

(c) Professional experience and expertise

89. The picture is the same in relation to the Plaintiff's ability to offer the Defendant its professional expertise and experience. The evidence shows that the Plaintiff did not either seek or need such assistance. It is no doubt true that Fung and Tsoi did from time to time express their views to Law as to what they considered an appropriate price and Law may well have been interested to hear their views. However, it is clear, as Fung accepted, that Law was himself very experienced in property matters and was fully alive to the development potential of the shopping arcade. It is also clear that Law had access to the Defendant's in-house professional advisors qualified in relevant disciplines.

90. It is furthermore not in dispute that the Plaintiff's assistance was never sought in formulating the terms (whether as to price, time for completion or otherwise) of the offers made by Kincheer, Hillgold or Wellcherry to the vendors. The Kincheer offer price was thought by Fung to be too low but this did not deter Law from putting it forward. The Hillgold price was thought to involve an increase involving too great an increment, but this had already gone forward to Harriman. When detailed checking of the tenancies, etc., was undertaken, Law relied on Y.T. Chan and not on the Plaintiff.

F.(ii) The absence of documentary evidence

91. When giving evidence, Fung stated: "I have to live on commissions." There was therefore no doubt that it would have been important to him to secure some form of acknowledgment from Law or Yu Tai Hing that a 1% commission had been agreed with the Plaintiff, knowing, as he did, that he was not to get any payment from Harriman. An estate agent may obviously be in a precarious position without some such confirmation as he risks being cut out of the deal after contact is directly made between principals. It is therefore generally in his interest to have early confirmation of his entitlement, before the deal becomes too far advanced. It is also common sense that an agent will want to avoid later arguments as to precisely when or subject to what conditions the entitlement to commission arises.

92. In my judgment, it is telling that on the undisputed evidence Fung himself never, at any time, sought a letter from Law or the Defendant appointing the Plaintiff as the Defendant's agent in and about the purchase of the Property. Neither did Fung (as opposed to Tsoi, whose letter of 26 August 1993 is discussed later) at any time prior to 16 September (when the sale was announced) write seeking unilaterally to confirm a commission arrangement with the Plaintiff. Indeed, on any view, no written confirmation of any kind was issued for some 20 days after the agreement had allegedly been concluded. This was so even though all the Plaintiff's directors knew that Law had at least gone so far as to make the Kincheer offer to Harriman.

93. Fung was asked in cross-examination why he did not seek a letter of appointment. If, as he and Tsoi both alleged, Law had stated that the commission was "no problem" on 6 August 1993 and had readily acknowledged their entitlement at lunch on 11 August, why should they have felt reluctant to ask for an appointment letter?

94. I found Fung's answer extremely difficult to accept. He alleged that it was well known in the market, firstly, that the Defendant, and then secondly, that "all big tycoons", would refuse to sign such appointment letters. A request would be construed as an expression of distrust and was likely to lead to the loss of the business. While Fung accepted that the Plaintiff had standard letters and forms to confirm its appointment as agent, he said that these were used only for small deals.

95. Fung nevertheless accepted that when he was with Colliers Jardine, the Defendant did confirm in writing, by an exchange of letters, its appointment of Colliers Jardine to manage two Sai Kung houses, after having reached an oral agreement for such management. It is therefore difficult to see why Yu Tai Hing should be thought to have had an entrenched view against ever signing appointment letters for other purposes.

96. While the fear, in some cases, of offending a possibly recalcitrant prospect by insisting on a formal appointment is understandable, the giving of such offence does not appear to have been an obvious danger in the present case, given Law's alleged readiness to acknowledge his promise to pay commission.

97. Even if Fung was reluctant to ask Law or the Defendant to put pen to paper, there was nothing stopping him from himself writing to them, couching his letter in suitably inoffensive language. For instance, one may have expected Fung to make some mention of the Plaintiff's appointment as a commission agent in the Plaintiff's first written communication to Law in the fax dated 17 August 1993, when he was passing on Chow's three points (as set out in C.(vi) above). As it stands, the fax does not make clear the capacity in which he was writing and it certainly does not evidence any agreement to pay commission.

98. That there was in truth no objection in principle to the Plaintiff itself writing a letter referring to a commission agreement with the Defendant is shown by the fact that Tsoi claims to have written precisely such a letter on 26 August 1993. I shall shortly consider whether that letter was ever received by the Defendant. However, the fact remains that Tsoi evidently did not consider that he should feel inhibited about writing such a letter to Law. He said that he had done so without discussing it with Fung.

99. In the circumstances, I consider the lack of documentation evidencing the oral agreement allegedly entered into on 6 August 1993 a significant point against the Plaintiff. Of course, if there had been no agreement to pay commission (as the Defendant alleges), then such absence of documentation would make good sense. Any claim would immediately have been refuted, as occurred when the debit notes were eventually sent. However, if Law had in fact readily committed himself to payment of commission, it is hard to believe that the Plaintiff would not, in one way or another, have produced some document reflecting that fact.

F.(iii) The disputed documents

(a) The letter of 26 August 1993 from Tsoi

100. My findings in the previous section are made without treating the letter dated 26 August 1993 from Tsoi to Law as a document evidencing the alleged 6 August agreement. This is because I am not satisfied that it was ever sent to or received by the Defendant or Law. I find that, on the evidence, it is much more probable that the letter was never received. I might also add that this letter does not actually mention that the basis of the claimed entitlement to commission is an oral agreement made on 6 August 1993. The reasons for my conclusions against its having been received are as follows.

(1) There was no response to the letter from the Defendant or Law. If it had been received, it is extremely likely that there would have been a reply.

The evidence shows that at this stage, Law was in direct negotiation with Chow and, on the same day, 26 August, had instructed Y.T. Chan to put forward a revised offer in terms which proved to be the final terms of the deal. It therefore appears that by 26 August 1993, the negotiations had virtually been completed. What later followed was the checking of the title deeds, tenancies, etc., until 15 September, when the Memoranda of Agreement were signed.

In my judgment, if Law had received Tsoi's letter at this stage, it is most likely that he would have issued an immediate denial of liability to pay commission just as he did when the Plaintiff's letters of September and October enclosing the debit note were received. While it is true that those responses were given after the sale and purchase agreement had been signed, I do not see any material difference in the circumstances existing on 26 August 1993 upon which a different reaction, or a non-reaction, on the Defendant's part should be postulated.

Quite apart from a desire to reject the claim for commission, the last two sentences are likely to have attracted a riposte. Tsoi wrote: "Naturally, I will keep you fully informed as to the progress of this negotiation. However in the meantime, if you have any queries please feel free to contact me." Tsoi was of course in no position to keep anyone informed of the negotiations as he had played, and was playing, no part at all in them. A letter purporting to suggest that the Plaintiff was providing the service of conducting negotiations for the Defendant when it patently was not doing so, would, in my judgment, almost certainly have attracted a swift refutation.

(2) In cross-examination, Tsoi said that he wrote this letter because he had noticed from the file that there was nothing in writing which mentioned the 1% commission. He says that he had it sent by fax and by hand. This indicates that the letter was intended to serve as a written record of the Plaintiff's entitlement, or at least of its claim, to be paid commission. If so, then it is surprising that, unlike other documents sent by the Plaintiff to the Defendant, Tsoi's letter bears no receipt chop and shows no evidence of having been duly faxed to, let alone received by, the Defendant.

The unchallenged evidence was that if a document was delivered to the Defendant by hand and a receipt chop requested, the Defendant's practice was to oblige the sender. Many examples appear in the trial bundle. Yet, despite the alleged desire to create a record of the entitlement no receipt chop was obtained.

(3) The contents of a subsequent letter from the Defendant to Harriman are consistent with the proposition that Tsoi's letter was not received. Part of Tsoi's letter refers to the fact that (as had occurred in the case of the 16 August 1993 draft) "Ground Floor" was missing from the caption. If this letter had been received, whatever Law may have thought of the alleged commission agreement, he would have seen that it was in the Defendant's interests to correct the error and to have the missing words inserted. It is therefore likely that if Tsoi's letter had been received, the subsequent letter would no longer have contained the error. Yet "Ground Floor" continued to be missing from the caption in the letter dated 27 August 1993 sent to Harriman, containing the revised Hillgold offer.

(4) When challenged by the Defendant in its 12 October letter to provide documentary evidence of its claim, Tsoi's letter was not mentioned. Indeed, there was silence for a whole year after that challenge was issued. If Tsoi had written the letter in order to provide a written record, such reticence is very hard to understand and remains unexplained.

(b) The unsigned "F.L." letter and the alleged oral admissions

101. In making my findings about the absence of documentary evidence, I have also ignored the unsigned letter allegedly received by the Plaintiff on 5 October. Its terms are set out in C.(xv) above. I have ignored it because I am far from satisfied that this was a letter which emanated from Law, as it purports to suggest. I am also far from satisfied that Fung's purported reply dated 7 October 1993 was in fact ever sent to Law. I am likewise not persuaded that Law made any of the admissions referred to in C.(xii) and C.(xix) above. My reasons are as follows.

(1) The context in which the "F.L." letter is alleged to have been received is relevant. According to Fung, after reading in the newspapers on 16 September that the Property had been acquired by Wellcherry, he was shocked and upset with the Law. He said that in several subsequent conversations, when pressed, Law had made it clear that the Defendant did not intend to pay any commission, saying that this was due to matters behind the scenes which he felt unable to explain to Fung. However, Fung had put nothing down in writing to protest this repudiation of the alleged agreement. He had merely sent a debit note on 29 September 1993, which again, incidentally, did not identify the agreement as one made on 6 August 1993. In any event, that debit note was immediately rejected by Law on 30 September.

(2) In such circumstances, the "F.L." letter, if in fact sent by Law on 2 October (this being the date of the postmark on the envelope), represents an abrupt reversal of Law's stance three days after his unequivocal rejection of the debit note. Why, if Law had consistently refused an explanation when pressed, should he suggest of his own accord that he "owed" Fung an explanation? Why, if it remained Law's intention not to pay commission, should he place a highly incriminating piece of evidence in the Plaintiff's hands? Why should Law provide evidence of a doubly incriminating character: not only admitting by implication, the existence a commission arrangement with the Plaintiff, but also adverting to his participation in some sinister, under-the-table deal? Use of "F.L." was hardly a disguise as the contents made it perfectly clear to anyone familiar with the background that this was a reference to Law.

(3) Law gave evidence that after receiving the first debit note a few days before the "F.L." letter was allegedly received by him, he had spoken to the Defendant's in-house lawyer and was well aware that litigation might eventuate. This makes it hard to accept that he would gratuitously have written such a self-incriminating letter, for no apparent purpose.

(4) According to Fung, no more than a week after the "F.L." letter was allegedly received, Law had declined to speak further to him, saying teasingly that he feared Fung might have a tape recorder on him. Whether or not this is true, it emphasises everyone's realisation that litigation might arise and that it was desirable not to say anything that might be adversely construed. If such was Law's attitude then, it is extremely hard to believe that he would have sent the incriminating document to the Fung a few days earlier.

(5) Perhaps most significantly, in all of the Plaintiff's subsequent correspondence in 1993 and even in the Statement of Claim filed in October 1994, no mention is made of the "F.L." letter, nor of Fung's purported reply. Thus, when on 11 October 1993, Fung re-submitted the debit note and threatened legal action, these documents were not mentioned. Neither were they mentioned when, on 12 October, Law challenged him to produce documentary evidence in support of the Plaintiff's claim. In the Statement of Claim, the only document pleaded as evidencing the agreement is the Tsoi letter of 26 August 1993, discussed above. The incriminating "F.L." letter and the purported reply did not surface until the Plaintiff's list of documents was filed on 14 September 1995.

(6) I similarly decline to accept that oral admissions were made in the conversations mentioned above. Those alleged admissions are wholly out of line with the Defendant's documented conduct. They are also not mentioned either in the Statement of Claim or in the particulars served thereunder. In Fung's witness statement, there is no mention of any such admissions in conversations during September. An oral admission is first alleged in paragraph 22, his witness statement which states as follows:-

"On 11th October 1993, I took a reminder letter of Plaintiff to the office of FL and asked him to pay the commission. FL said he had difficulty as he had already spent several millions on the deal and therefore could not pay Plaintiff the 1% commission. He said he owed me a personal favour and would give me favour in other deals. ......."

I note however that (although he subsequently stated otherwise) Fung's evidence in chief was that the letter of 11 October had been delivered to the Defendant by messenger and not by himself. Fung's evidence also went considerably further than what is stated in paragraph 22, stressing Law's alleged inability to disclose matters occurring behind the scenes which prevented him from paying commission.

F.(iv) An important inconsistency

102. As I have stated, Law denied attending any luncheon meeting with Fung and Tsoi on 11 August 1993. Because of the inconsistency between the accounts of the meeting given by Fung and Tsoi respectively, the Plaintiff has failed to satisfy me that any such meeting took place.

103. Fung was carefully examined by Mr. Wong S.C. as to precisely what words were used on that occasion. My note of his evidence in chief reads as follows:-

"RWSC: When you said you raised this question of commission, what words did you use?

A: I cut it short to 1% of the sales price.

RWSC: Did you mention when payable?

A: Not particularly. Our practice is on sale and purchase agreement signing.

RWSC: Did you mention who is going to sign the sale and purchase agreement?

A: Not yet.

RWSC: When you raised 1%, Law's response?

A: He just nodded his head. No dispute.

RWSC: Any discussion as to price?

A: Talked about general market. Did not touch much on price."

104. Fung's evidence was therefore that few words were said, with him referring only to "1% of the purchase price" and with Law, in response, merely nodding his head.

105. My note of Tsoi's evidence in chief reads as follows:-

"RWSC: What was discussed during this luncheon?

A: As it was the first time I met Law, at the beginning, we just had chit chat on casual matters. Later we mentioned the purchase of this property. I gave him some advice and I told him that there were quite a lot of options for him after purchasing this property. I remember that afterwards, Fung said to Law 'Well don't forget after you have purchased this property you have to give 1% to our company.' Law said to me, well perhaps because was the first time he met me, said: 'Mr Tsoi, don't worry if our company succeeds in purchasing, we will give commission to you.' He also said to Stephen : 'You should have confidence in me.'

RWSC: What options did you outline during this luncheon?

A: Could re-sell shortly after. Or divide into smaller units after renovation. Or buy for the longterm, for the rent."

106. In my view, the two accounts are significantly different and raise real doubts as to the reliability of the evidence regarding the alleged meeting.

107. I also consider it significant that in the Statement of Claim, there was no mention of any confirmation of the oral agreement at any 11 August 1993 meeting. In the pleadings bundle, that meeting is first mentioned in the answers filed on 31 July 1998 to a request for particulars of the Statement of Claim filed on 19 October 1994.

108. In those answers, the meeting is referred to only in support of the now abandoned quantum meruit claim. In the answer to Request 4 under paragraph 7, the Plaintiff inter alia said that at that luncheon, "FL confirmed to SF and RT that if the Defendant was to make any offer of purchase, it could be made through the Plaintiff." Later, this is put in the following terms: "During the lunch, FL said that he was investigating the facts and figures of the Property and confirmed to SF and RT that if the Defendant should make any offer for the Property, it would be presented through the Plaintiff."

109. The particulars therefore do not suggest that an entitlement to commission was mentioned at the alleged 11 August 1993 meeting. Conversely, neither of the Plaintiff's witnesses gave evidence that Law made the statements alleged in the particulars.

110. Accordingly, I reject the evidence of Fung and Tsoi that the alleged meeting took place.

F.(v) The Plaintiff's quantum meruit claim

111. As I have stated above, right up to the opening speech of Mr. Wong S.C., the Plaintiff had maintained an alternative claim based on a quantum meruit. It had been alleged that at the Defendant's request, the Plaintiff had rendered "professional services to the Defendant in relation to the preparation and conduct of its negotiations to purchase the Property" between 6 August 1993 and 15 September 1993. Such services were said to have involved 3 directors and 7 "specialized staffs" in 1,050 man-hours of work and the production of valuation reports spanning some 1,500 pages relating to rental units in the Property. This formed the basis of a claim for $2,415,000 based on the charging out rates of the directors and specialist staff mentioned above.

112. Tsoi gave evidence that the valuation reports were the result of at least 60% of those man-hours, that is, some 600-odd man-hours during August 1993. He also testified that the 3 directors had each indeed spent on average about 3 hours a day for 35 days (totalling some 105 hours each and 315 hours altogether) working on the project. He said that he had personally consulted the valuation reports dealing with open market rental values and the Property's valuation on an income approach when deciding what price to put forward to the Defendant, via Fung.

113. He explained that the claim had been dropped, notwithstanding the huge efforts that had been made, because the valuation reports were never shown to Law or the Defendant. He did not clearly explain why they were not shown to the Defendant since he continued to maintain that the work had been done at the Defendant's request.

114. In any event, in responding to the quantum meruit claim, the Defendant commissioned an expert report from Jones Lang Lasalle dated 22 March 1999, prepared by Mr. Esmond Yu BSc., ARICS, AHKIS, RPS (GP). His comments on the valuation reports are scathing. Among the deficiencies he identified were the following. None of the reports referred to any instructions as to the purpose of the valuation nor to any assumptions adopted in making the valuations. No details of any registered encumbrances were mentioned. Details of occupancy were much more limited than one would normally expect. No reference was made to the valuation methodology and the process by which the valuation was arrived at was not disclosed. No market overview was provided. The unit valuations did not match the units shown on the floor plans.

115. In cross-examination, it soon became clear that the documents, at least as they stood in the trial bundle, were useless as valuation reports.

116. The floor plans in the reports showed tenanted units which were not mentioned at all in the valuations. Tsoi sought to explain that this was because the valuations were based on floor plans different from those incorporated in the reports, namely, other floor plans that the owners had provided. This of course meant that any reader of the reports would have been thoroughly misled by the floor plans annexed. Furthermore, his evidence as to reliance on the owner's floor plans was inconsistent with what he had stated with a view to justifying the vast amount of time allegedly spent in preparing the valuations. He had earlier claimed that his staff had discovered that the owner's (or as he put it, the landlord's) floor plans "could not be wholly relied upon" and so had been required to do extra work to ensure that their income valuations were correct.

117. Any rental and income-based valuations allegedly made would have taken into account the tenancy position as at August 1993. This would have involved floor plans showing units partitioned and occupied as at that date. Obviously, as old tenants leave, new tenants arrive and existing tenants expand or contract the spaces occupied, details of the tenancies and the units shown on floor plans will change. That the units and tenancies shown in the floor plans annexed to the reports did not correspond with the text of the valuations therefore suggested that the wrong floor plans or plans relating units as they existed at a different period of time had been incorporated into the reports, casting doubt on the integrity of the reports themselves.

118. Their integrity suffered another blow when the comparables used in valuing the Property on an income approach, based on open market rental values, were scrutinised. It was demonstrated in cross-examination that the figures purportedly used as comparables for this purpose were not in fact rental comparables at all. They were records of prices paid on the sale of units in a nearby Tsim Sha Tsui East building. The purported use of sale records as rental comparables was a pervasive error in the valuations.

119. To try to excuse these glaring errors, Tsoi said that he believed the original valuation reports prepared in 1993 had used correct comparables, but that when the reports in the trial bundle were assembled for the purposes of the present litigation, his staff had erroneously inserted the wrong comparables. This prompted the Court to require the status of the valuation reports in the trial bundle to be fully investigated and for an explanation to be provided both by Tsoi and Mr. Philip Chan Wing Hung ("Philip Chan"), the principal partner of Philip Chan & Co., representing the Plaintiff.

120. As a result of this investigation, Tsoi explained that when asked by his solicitors in 1994 for valuation reports to support the alternative quantum meruit claim, he had informed them that the originals had been lost. However, he had also told them that he thought copies could be printed up from the Plaintiff's computers. Philip Chan told him to produce such copies and Tsoi accordingly instructed his staff to do so. However, Anita Chan, who had been in charge of the original reports had left the Plaintiff's employment and the present staff were unable to find in the computers, the comparables used for the original reports. They therefore had inserted wrong comparables in their efforts to re-constitute the reports. Moreover, they had got floor plans from a source unknown to Tsoi so that the units shown thereon differed from the units discussed in the valuation reports.

121. It follows that the reports in the trial bundle are not in fact copies of reports prepared in 1993 (as the Plaintiff's List of Documents states), but are documents cobbled together by the Defendant's staff who did not know and could not fully ascertain what had actually been in the original reports.

122. In the light of the explanations given, doubts must exist as to whether the original reports ever existed at all. It seems to me quite possible that the present reports were simply put together to produce documentary support for the quantum meruit claim. I find it hard to believe, for example, that if they had been produced in 1993, the 1,500 pages could have been lost or mislaid without trace. This is particularly so since the Plaintiff was making claims for payment against the Defendant and it would have been known that the reports might be relevant evidence to support the claim.

123. It is of particular significance that Fung gave evidence in the witness box that he had never seen any of the valuation reports before. If 600 man-hours had in fact been invested by the Plaintiff in producing the reports in order to assist Fung in advising Law as to price, it seems extremely unlikely that no one showed him any examples of the work being done to ensure that the product was something he would find useful.

124. Tsoi was aware of these problems with the valuation reports. He knew that, contrary to what he had told his solicitors, copies of the original valuation reports could not be produced simply by printing out what was stored on the computers' hard disks. Yet he did not tell his solicitors of the difficulties. Nor did he mention that his staff had reported to him that they could not find the comparables that had been used previously. He claims that he did not know that they had inserted such comparables as they guessed (erroneously) might have been used. Nor did he realise that they were annexing to the reports the wrong floor plans obtained from elsewhere, although he admitted that he knew that the floor plans were not stored in the computer and could not simply be printed out. Nonetheless, he knew that a large stack of purported valuation reports had been prepared for the purpose of the litigation and handed over to the solicitors.

125. I find Tsoi's evidence that he did not know of the deficiencies in the reports produced impossible to accept. He undoubtedly directed the Plaintiff's staff to re-constitute the reports and admits that they told him that they were having trouble, at least in identifying the comparables used. I cannot believe that they did not tell him how they resolved that difficulty before producing the final product.

126. In my judgment, Tsoi's approach to this evidence was wholly unacceptable and betrays a willingness on his part to put forward evidence which he knows or has reason to believe may be misleading in order to suit his cause.

127. I also have no hesitation in rejecting his evidence that the three directors had each put in some 3 hours a day for 35 days in relation to the Property. In the first place, there is no evidence at all of any work whatsoever done in relation to the Property by Mr. Benson Wong, the third director, who was in charge of the surveying department. No survey was done by the Plaintiff on the Property and Benson Wong is not mentioned as having otherwise participated in relevant events.

128. Secondly, apart from the time when Fung was in hospital, Tsoi himself seems to have done little more than "monitor" progress. When he took over between 22 August and about 4 September, he appears to have made several phone calls to Law asking about progress and then received a copy of the Hillgold offer, upon which he made comments. His comments on price were apparently based on the "in-house" view which he checked by making a simple arithmetical calculation. I find it hard to see how such involvement on his part remotely approached 105 hours of work.

129. Fung was the director most actively involved. However, even in his case, it is extremely unlikely that he spent anything near 105 hours working on the Property between 6 August 1993 and 15 September 1993. Apart from his busy day on 6 August 1993, apart from the alleged luncheon meeting on 11 August (which, according to Tsoi lasted for 1 hour) and apart from his dealing with the Kincheer offer (which occupied him for less than a day), his activity was largely confined to making phonecalls to Law asking about progress and being told only that Law was still considering the matter. No doubt there were also some in-house discussions. However, from 22 August 1993 to about 4 September 1993, he was in hospital and, thereafter, nothing much appears to have happened before he read the announcement of the Property's sale in the newspapers on 16 September.

130. It may be said on the Plaintiff's behalf that it availed itself of a locus poenitentiae in dropping the quantum meruit claim. However, Tsoi continued to maintain the truth of the allegations grounding that claim and saying that he had relied on the work done in advising on price.

131. In the present case, a great deal turns on the credibility of the witnesses and on evidence as to whether documents relied upon genuinely came into existence contemporaneously, as suggested on the face of the documents. That the Plaintiff continued to rely upon documents misleadingly presented as copies of contemporaneous documents until their true nature was exposed, is a fact that must damage its credibility and provide an adverse backdrop against which its reliance on other disputed documents is assessed.

132. I have however been conscious of the need to avoid letting my disapproval of this aspect of the Plaintiff's case excessively colour my views regarding the authenticity or provenance of disputed documents such as the Tsoi letter of 26 August 1993 or the "F.L." letter. I have accordingly previously dealt with the unacceptability of those items of evidence on quite separate and independent grounds which, in my view, provide a sufficient basis for their rejection. In my view, the damage done by the quantum meruit evidence to the Plaintiff's credibility merely adds weight to my prior rejection of the Plaintiff's evidence on key issues in the Action.

G. The Plaintiff's attack on the Defendant's case

133. Before I leave the evidence, I should comment briefly on the Plaintiff's broad attack on the Defendant's case. Its main thrust was to suggest that Law's willingness to treat with Fung to the extent that he actually did shows that he regarded Fung as the Defendant's commission agent in and about the acquisition of the Property. Why did Law let Fung convey the Kincheer offer to Chow save pursuant to the alleged oral agreement of 6 August 1993? Why otherwise invite further discussion from Fung, as in the covering fax sheet? Why give Tsoi a copy of the 25 August 1993 Hillgold offer unless for the same reason?

134. In my judgment, Law's broad answer, namely, that he did these things because he regarded Fung and Tsoi as in some way working for Harriman, was credible and acceptable.

(1) In the first place, I accept that Law formed the impression that Fung had opportunistically approached Harriman to help market the Property for them when, unbidden, Fung sent him a clip of particulars with a compliments slip from Chow.

(2) Secondly, I accept that Law did send to Fung a draft of the Kincheer offer on 16 August 1993 and afterwards, did modify the addressee to make it "Harriman c/o the Plaintiff" at Fung's request, reinforcing his impression that the Plaintiff was in some way working for Harriman.

It is clear that after being prepared, the draft was superseded by the Kincheer offer dated 17 August 1993. It was not suggested that the draft was a subsequent fabrication. Therefore, if one asks why the draft was superseded by the offer letter, one looks for the answer in the changes made in the letter as sent. One of the two changes made was to the addressee (directing the letter to Harriman c/o the Plaintiff rather than directly to Harriman). That was a change that could only sensibly have been requested by Fung as no one else would have had any reason to ask for the letter to take this indirect route to Harriman.

Additionally, I note, as discussed in F.(iv) above, that the Plaintiff pleaded in its particulars (although they led no evidence to such effect) that Law had agreed to put forward offers of purchase through the Plaintiff. This is exactly what Law says Fung asked him to do in relation to the Kincheer offer, leading to the change of addressee.

135. The fact that the cover sheet invites further discussion was explained by Law as an invitation directed at someone believed to be able to make comments from Harriman's point of view, particularly in the light of comments already received on the 16 August draft. I accept that explanation.

136. While Mr. Wong S.C. demonstrated that Law's evidence that the 16 August draft had been discussed in a single telephone discussion conflicted with his witness statement which said that there had been two telephone calls, I do not consider this more than a memory slip which does not damage Law's overall credibility in the witness box.

137. When Law gave Tsoi a copy of the first Hillgold offer, it had previously been formulated without input from the Plaintiff and had already been sent to Harriman. Accordingly, the act of providing Tsoi with a copy was not indicative of Law treating him or the Plaintiff as the Defendant's agent. On the contrary, if he had viewed Tsoi as an agent, he would surely have asked him for his views when putting the offer together and before it had already gone out. I also note that Tsoi was not provided with a copy of the revised Hillgold offer sent by Y.T. Chan on 27 August, nor was the Plaintiff privy to the "due diligence" exercise or the detailed negotiation of terms conducted between solicitors.

138. Mr. Wong S.C. sought to attack Law's alleged impression that Fung and Tsoi were in some way working for Harriman on the footing that Law must have surely have realised from Chow and from other indications that they were not in fact (or law) Harriman's agents. Law also agreed that Fung and Tsoi had never claimed to be Harriman's agents and that Harriman was obviously content to negotiate directly with Law without any involvement of the Plaintiff on their behalf. This, it was suggested, undermined Law's evidence that he thought that they were working for Harriman.

139. In my view, the attack falls far short of what is needed for the Action to succeed. A property consultant like the Plaintiff may secure for itself the status of purchaser's agent or vendor's agent in relation to a property transaction. However, it may often be the case that despite diligent efforts to be helpful and to infiltrate one camp or the other, a property consultant fails to become either party's agent. Attempts made by such persons to be useful to one party, e.g., by conveying to the vendor offers made by the prospective purchaser, or by conveying intimations as to minimum acceptable prices from the vendor, could easily give the impression that the consultant is in some sense "working for" the party being assisted, without any legal relationship actually existing between the two. In my view, this is what happened in the present case.

140. In any event, whether or not Law had good grounds for his impression that Fung and Tsoi were in some sense working for Harriman, I am firmly of the view that the evidence does not come close to establishing that Law had appointed the Plaintiff the Defendant's agent for acquiring the Property with an obligation to pay commission if the acquisition materialised.

141. In cross-examination by Mr. Wong S.C., Law agreed that the Defendant's interest in Inter-Continental Plaza only revived as from 6 August 1993, i.e., from the date of his contact with Fung. The suggestion was that the acquisition of the Property by Wellcherry was therefore causally attributable to such contact. Even if one accepts that this is so, the problem which, in my view, the Plaintiff cannot surmount is its inability to show the existence of any contractual obligation to pay commission in consequence of such acquisition. In Toulmin v. Millar (1887) 58 L.T. 96 (H.L.), Lord Watson put the proposition as follows:-

"It is impossible to affirm, in general terms, that A. is entitled to a commission if he can prove that he introduced to B. the person who afterwards purchased B.'s estate, and that his introduction became the cause of the sale. In order to found a legal claim for commission, there must not only be a causal, there must also be a contractual relation between the introduction and the ultimate transaction of sale. If A. had no employment to sell, express or implied, he could have no claim to be remunerated."

142. The citation relates to a person claiming to be entitled to commission as a vendor's agent, but the principle obviously applies equally where the person claims commission as a purchaser's agent.

H. Conclusion

143. I have therefore come to the conclusion that the Plaintiff has failed to establish its claim and that the Action must be dismissed.

144. Although Counsel on both sides of the Court helpfully addressed me on further issues (referred to in B. above) all such issues only arise if an oral agreement is established. As I have rejected such a finding, it would be unrealistic and pointless for me to enter into a discussion, for example, of what the precise terms of the agreement might have been, and whether, given such terms, there was "an introduction" to the Property by the Plaintiff or whether any other obstacles to an entitlement arise.

I. The position of the Plaintiff's solicitor

145. The role of Mr. Philip Chan Wing Hung in the unacceptable treatment of the valuation reports described above caused me concern. I directed him to provide an affirmation explaining how the unsatisfactory position had come about. He provided an initial affirmation with a brief explanation which I found quite inadequate. It did not, for instance, explain why, when he had been told by Tsoi that the original valuation reports had been lost, the Plaintiff's List of Documents nevertheless represented the valuation reports to be copies of the originals, listing them in Part 1 of Schedule 1 and stating that they had been made by the Plaintiff in tranches on 16, 23 and 30 August 1993 respectively. I indicated that I was not at all happy with the explanation and a fuller affirmation made on 27 September 1999 was provided.

146. In it, Mr. Chan confirms that he had in fact been told by Tsoi that the originals had been lost and that the latter would get a fresh set printed up from the Plaintiff's computers. Mr. Chan explains that when he received the documents from Tsoi he assumed that they were printouts of the originals and handed them to his then assistant, forgetting to mention that they were fresh printouts and not copies of the originals. The assistant then prepared the List of Documents, presumably without making relevant inquiries of the client.

147. The assistant later left the employment of Philip Chan & Co. and a hearsay notice was prepared on 8 April 1999, this time by Mr. Chan himself. It was decided to include the valuation reports in the hearsay notice and once again, the valuation reports were described as having been made by the Plaintiff on dates in August 1993. Mr. Chan states that it did not occur to him that the notice contained a misrepresentation.

148. I asked Mr. Chan why the true position had not come back to him when the valuation reports had been subjected to a scathing attack in the Jones Lang Lasalle report dated 22 March 1999. I suggested that if he had sought instructions on the points there made, it must surely have occurred to him that the deficiencies might have something to do with the fact that the originals had been lost. Mr. Chan however told me that he had not taken on board the effect of the expert report.

149. Mr. Chan has tendered his apology to the Court and has undertaken to exercise extra care in future discovery exercises. However, I am compelled to find that his conduct of the discovery in the present case was highly negligent and that he failed to discharge his responsibility of ensuring that his client properly complied with its duties on discovery.

150. Having expressly been told by Tsoi that the original documents were lost, there was no excuse for failing to ensure that this information was conveyed to the assistant solicitor in charge of preparing the List of Documents. Having been told by the client that a printout could be produced, Mr. Chan ought at least to have made some basic inquiries to satisfy himself that this could in fact be achieved. When presented with the fresh set of documents, he ought to have examined them with his client to satisfy himself that they could fairly be regarded as true copies of the originals and that there was nothing misleading about them. He obviously had to ensure that the other side were told that the documents disclosed did not purport to be copies of documents that had come into existence in 1993, but had since been brought into existence in the belief that they reproduced 1993 documents.

151. Mr. Chan did none of these things but allowed his assistant to deal in ignorance with the documents handed over by his client. If the true nature of the documents had been known, other avenues of inquiry might have been open to the Plaintiff before the trial and time would not have had to be spent during the trial prising the true position out of Tsoi. I am sure that Mr. Chan's default has also caused both parties and their Counsel to spend time out of Court devoted to getting to the bottom of this problem.

152. In these circumstances, I am minded to require Mr. Chan to bear personally the costs of one day of the trial to reflect the additional work, in and out of court, that his neglect has generated and also as an expression of the Court's disapproval of his conduct. Mr. Chan indicated to me that he was prepared to provide an undertaking to pay costs along such lines. If so, then I will accept such an undertaking, suitably worded. If such an undertaking is not forthcoming, I will adjourn this matter for him to show cause why an Order should not be made for his bearing such costs.

153. I will now hear the parties as to costs generally.