CHAN YIU MING v. L AND D ASSOCIATES, HEAD OFFICE AND ANOTHER

HEADNOTE

ESTATE AGENT - acting for potential Vendor and Purchaser - breach of duty - failure to exercise due diligence - failure to communicate potential purchaser's counter offer expeditiously and in manner stipulated by Vendor - Loss of "good chance" of buying property due to Vendor's later acceptance of higher offer from third party - damages.

                    Chaplin v Hicks [1911] 2 KB 786 considered.

IN THE DISTRICT COURT OF HON GKONG

CIVIL JURISDICTION

CASE NO. 1489 OF 1991

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BETWEEN

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JUDGMENT

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1. By a writ, issued on the 25th February 1991, the Plaintiff ("Mr. Chan") claimed "liquidated damages of HK$51,200" in respect of the "defaults and malpractice" of the Defendant, a well-known firm of estate agents. Mr. Chan has acted in person at all stages of these proceedings. The Defendant filed its own defence on the 9th March 1991; but, since the 26th April 1991 it has been represented by a firm of solicitors, whose senior partner or proprietor is also a consultant to the Defendant. Mr. Ho of that firm was present at a hearing before Mr. Registrar Jennings on the 29th April 1991, when this action was set down for trial. On that day an order for mutual. discovery was made. The Plaintiff complied with that order by sending to the Defendant's solicitors photocopies of all documents in his possession. The Defendant failed to comply with that order. When I asked for an explanation, Mr. Ho informed me that the Defendant had lost all documents and his firm had obtained copies from the bundle supplied by the Plaintiff. This explanation was later contradicted by the only witness called on behalf of the Defendant, Miss Anne Ho, who told me that various documents material to this case were in the Defendant's office. Yet, none of them has been produced by the Defendant.

2. Yesterday, on the date set for the trial, Mr. Ho sought to have the action struck out on the ground that it disclosed no reasonable cause of action. Although the particulars of Mr. Chan's claim would attract legitimate criticism from an expert in legal pleading, I did not think its imperfections or defects are such as to call for that extreme action at this late stage. The details of Mr. Chan's complaint were given in the writ, and had been more fully set out in a letter (dated 6.2.1991) included in his efforts to comply with the order of discovery nearly three months before the trial. The Defendant had not been prejudiced by any ineptitude on Mr. Chan's part. In all the circumstances, it is and was clear that he was claiming damages, not exceeding $51,200, for the alleged failure of the Defendant to carry out its duties as Mr. Chan's agent in his endeavour to purchase a flat in Arts Mansions, Conduit Road ("the flat") at a price of $1.08 million.

3. I heard evidence from Mr. Chan and Miss Ho. Not surprisingly, their evidence differed in certain respects. In respect of such differences, I prefer the evidence of Mr. Chan. Miss Ho was an unsatisfactory witness in many ways. She was extremely evasive. She frequently contradicted herself; and some of her explanations were just not credible. In my view, she was less than frank in her reasons for disregarding the Vendor's request that Mr. Chan's offer to purchase the flat should be sent to the Vendor's solicitors. She claimed that her decision to get Mr. Chan to sign the Provisional Agreement for Sale and Purchase (Exh. P1) was to protect Mr. Chan, since sending an offer letter to the solicitors would not bind the. Vendor. Of course, the signature of Mr. Chan on Exh. P1 would not bind the Vendor. But it would bind Mr. Chan to pay $26,200 to the Defendant if Mr. Chan failed to go through with the purchase. That, in my judgment, was the only reason for getting Mr. Chan to sign that document. It was done solely to secure the Defendant's interest in getting the commission it expected to receive from acting for both parties! In essence, it is Mr. Chan's complaint that his interest and expectation of becoming the owner of the flat was disregarded and defeated by the Defendant's obsession with its desire to secure its commission, and its unreasonable delay in commuicating his offer to the Vendor, and failure to do so in accordance with the Vendor's clear request, i.e. a letter addressed to its solicitors.

4. In my judgment, Mr. Chan's complaints are fully justified. I find the following facts. Having seen the flat on the 30th January 1991 he made an offer to buy it for HK$1.08 million. Miss Ho conveyed that offer to the Vendor's agent the next morning. At or about 11 am on the 31st January, Miss Ho told Mr. Chan that his offer had been accepted, subject to preparation of a Provisional Agreement for Sale and Purchase. That may not have been an accurate representation since it is not clear whether the Vendor's agent ("Mr. Au") indicated that Mr. Chan's offer was accepted or would be considered by the Vendor. But, having regard to Miss Ho's experience and difficulties in selling the flat, and the apparent close relationship between the Vendor and the Defendant, I am satisfied that Miss Ho conveyed to Mr. Chan her confidence that the Vendor would accept his offer. After all, the flat had been placed with the Defendant for some 3 or 4 months without attracting buyer at the Vendor's asking price. Mr. Chan's offer, . which I find was actually and recommended by Miss Ho, was only $30,000 below the asking price. There was, in my view, a good chance that Mr. Chan's offer would have been accepted by the Vendor if it had been effectively communicated to the Vendor's solicitors on the 31st January 1991. I find that it was not communicated until late on the afternoon of Saturday, the 2nd February 1991. It could and should have been sent to the Vendor's solicitors on the afternoon of the 31st January 1991. That was never done. In effect, Mr. Chan's serious intentions of purchasing the flat never reached the Vendor's solicitors or other agents in time to prevent the Vendor accepting a higher offer from another purchaser, who suddenly appeared in the scene. There is no concrete evidence to show when that purchaser appeared and showed its interest in the flat. But, in all the circumstances of the case, I think that I am entitled to infer that Mr. Chan stood a good chance of becoming the owner of the flat on the 31st January 1991 or on the following day. He lost that chance because of the Defendant's breach of its duty as Mr. Chan's agent in failing to carry out his instructions with reasonable diligence.

5. I now turn to the more difficult question of the assessment of damages. Mr. Chan is entitled to damages for the loss of the chance of acquiring the flat. As it is not clear that the Vendor had orally accepted Mr. Chan's offer, he is not entitled to damages on the basis of the difference between his offer and the value of the flat. He is, however, entitled to more than nominal damages. He is to be compensated for the loss of the chance of becoming the owner and for disappointment through the frustration of his plans. (See Mcgregor on Damages 15th Ed. 1988 paras. 356-365). The sums claimed by Mr. Chan are based on what he would have lost if he had repudiated a binding agreement with the Vendor. That contingency never materialised. In any event the sum claimed would be greater than the loss of bargain, which I find not to be recoverable in this case. Insofar as the sum claimed includes the amount of the deposit, no loss has been sustained since his cheque was returned. One way of approaching what is essentially a "jury function" (cf. Chaplin v Hicks [1911] 2 KB 786, at 791-2) is to consider what Mr. Chan would have had to pay the Defendant for its services if they had been carried out successfully. There is some evidence that Mr. Chan had agreed to pay a commission of 1% to the Defendant. The amount entered in clause 5 of the Provisional Sale and Purchase Agreement (Ex. Pl) was apparently entered in error. The commission which Mr. Chan would have had to pay if his offer had been accepted would have been $10,800. In effect that was the value which the Defendant put on its services, which I find they did not perform until after the Vendor had received a higher offer for the flat. In all the circumstances, I consider that a reasonable sum to compensate Mr. Chan for his lost chance and the associated disappointment would be $10,000. There will be judgment against the Defendant in favour of the Plaintiff in that amount.