CHUNG KAI KWAN v. DAH SING PROPERTY AGENCY LTD

DCCJ2397/2003

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 2397 OF 2003

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JUDGMENT

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1. The plaintiff’s mother-in-law, Madam Lam Lin, wanted to buy a property, but she could not get a mortgage in her own name, so it was agreed that she should use the name of the plaintiff and act as his agent for the purchase of the property in his name.

2. The defendant is an estate agent and a subsidiary of the Dah Sing Bank. At the relevant time, December 2001, it had been retained by a vendor, Lee Gay Wan to sell his property at 2/f No. 228 Tung Choi Street, Kowloon.

3. In late December 2001 Madam Lam went to the office of one Pak Lane Real Estate, where she signed a provisional sale and purchase agreement ( the “Agreement”) for the purchase of this property for $880,000.00 and by so doing appointed Pak Lane to act as her estate agent. It is averred that the defendant was also appointed as the plaintiff’s estate agent, but this the defendant denies, averring that it acted only for the vendor, Lee Gay Wan.

4. Madam Lam gave Pak Lane’s employee, a Ms Yip, a cheque for $30,000.00 in favour of the vendor. The cheque and the agreement were passed over to the defendant. The vendor was then out of Hong Kong and the Agreement remained unsigned by him for some days.

5. On 4 January 2002, Madam Lam stopped the cheque. She decided to cancel the transaction. However, on 5 January 2002 the vendor signed the Agreement and presented the cheque, which was dishonoured. On 26 January 2002 the vendor sued on the cheque in the Small Claims Tribunal in case no. SCTC 4334 of 1992, and on 26 November 2002 he obtained judgment, after trial, against the plaintiff for $30,000.00 with interest and costs. On 24 March 2003 the vendor obtained a charging order against the plaintiff’s property in Sai Yee Street, on the basis of this judgment.

6. The vendor had, on 18 December 2001, entered into another provisional sale and purchase agreement to sell the property in Tung Choi Street to purchasers named Cheung and Woo, also for $880,000.00. I will call this “Cheung’s agreement”. This agreement required payment of an initial deposit of $25,000.00 and a further deposit of $63,000.00 was to be paid on 31 December 2001. One of the purchasers had drawn a cheque dated 17 December 2001 for this initial deposit but that cheque had been dishonoured on presentation.

7. The plaintiff avers that Cheung’s agreement was an encumbrance, and that it was unknown to him or Madam Lam when she signed the Agreement on 27 December 2001. In breach of contract and/or duties owed to the plaintiff the defendant and its servant, Mr Kan, had failed to inform the plaintiff or Madam Lam of it, and failed to tell the plaintiff when the Agreement must have been signed by the vendor, failed to advise the vendor that the plaintiff’s offer had been withdrawn on 4 January 2002 and failed to get back the cheque from the vendor. The plaintiff avers that if he or Madam Lam had known of the encumbrance the Agreement would not have been signed, nor the cheque for $30,000.00 issued.

8. Accordingly the plaintiff now claims against the defendant for $30,000.00 plus his own legal costs of $20,000.00 and an indemnity against all further loss and damage suffered by the plaintiff arising from the vendor’s claim and the charging order.

9. The defendant’s case is, as I have indicated, that it was never appointed as the plaintiff’s estate agent whether jointly with Pak Lane or otherwise but only acted for the vendor. As the vendor’s agent the defendant dealt only with Pak Lane as the purchaser’s agent, and never with the plaintiff or Madam Lam. The defendant by its servant Mr Kan communicated the vendor’s acceptance of the Agreement to Pak Lane’s servant, Ms Yip on 5 January 2002. At that time the defendant had no notice that the plaintiff’s offer was or would be withdrawn. The defendant puts the plaintiff to strict proof of the encumbrance and its effect on the vendor’s right to sell. It also puts the plaintiff to strict proof of its losses and in particular the legal costs claimed.

10. The Agreement concerned here is in Chinese; no certified translation was available but counsel agreed an uncertified one. It is in the usual printed form with the names of the parties, the name of the property, the price, instalments, commission and so on written in by hand. The agreement is dated 31 December 2001. Pak Lane Real Estate is described on the face of the agreement as “Agent”. The other parts of the Agreement which are relevant to the appointment of estate agents read as follows:

The Parties having appointed estate agents and through agents’ services and based on the terms and conditions of this agreement the Vendor agrees to sell and the purchaser agrees to buy the following property

1….

7.   Agents’ commission: the Purchaser shall upon signing of the Formal Agreement/upon completion pay the agents’ commission: HK$8,800.00.

The vendor shall upon signing of the Formal Agreement/upon completion pay the agents’ commission: HK$8,800.00.

(Handwritten above this clause are characters which translate as “Co-operated with Dah Sing Bank”)

8. Breach of Contract:

(1)….

(3) The default party shall bear all the agents’ commission and pay the stamp duty.

(4) If the parties cancel this agreement not in accordance with this agreement, both parties shall jointly and severally pay the stamp duty and pay all the agents’ commission.

(5) …

11. The evidence of Madam Lam as it appears from her statement which she adopted, as well as oral evidence is as follows. She was fully authorised by the plaintiff to buy the property in his name. At about 3-4 p.m. on 27 December 2001 she went to Pak Lane’s shop with Tsang Lai Man. He is the son of a friend of hers who lives in an old people’s home and the two of them were going to visit that friend. Pak Lane’s employee Ms Yip was there as was a gentleman who was introduced as Mr Kan, representing the vendor’s agent, namely the defendant. She signed the Agreement, undated, and the cheque which was dated the same day. Mr Kan told her that the vendor was not in Hong Kong and the agreement was to be passed to the vendor for signing. At the same time she asked Mr Kan and Ms Yip if the title was clean and good. Neither of them told her that it was affected by an earlier agreement with another purchaser. If she had known this, she would never have signed.

12. From then until 4 January 2002 Madam Lam telephoned Ms Yip every day to find out if the vendor had signed the Agreement, but was told that he had not. Eventually she and the plaintiff decided not to wait indefinitely for the vendor to sign, and on 4 January 2002 she and the plaintiff decided to withdraw the offer. On that day she told Ms Yip of this decision and asked her to get the Agreement and the cheque back. Ms Yip agreed to inform the defendant of this decision. Madam Lam then stopped the cheque. It was dishonoured on presentment, on 5 January.

13. Madam Lam went on to deal with the Small Claims Tribunal proceedings and the claims arising therefrom. She said that Pak Lane had been sued for negligence also, in Case No. DCCJ 8007 of 2002; and in fact this had been withdrawn because Pak Lane had agreed to pay legal costs of $25,000.00.

14. She said that it was on seeing the defendant’s statement in the Small Claims Tribunal proceedings that she found out about Cheung’s agreement. Had she known of it, and had Mr Kan not misled her by telling her that title was clean, she would not have signed the provisional agreement. In fact in her oral evidence in chief, though she confirmed this, she also said that she had withdrawn the offer because it had gone on for a long time, and she had another good property that could buy; and this was the sole reason for the withdrawal.

15. Madam Lam also sought to explain an attachment to her Form 9 in the Tribunal proceedings, applying for leave to appeal. The first paragraph of this attachment reads (in agreed translation)

At the time when the defendant signed the provisional contract, Pak Lane Real Estate’s representative Ms Yip Ying Lung informed that as the property concerned had some unsettled procedure about a former contract, the claimant could not sign the said contract until 31 December 2001. However, despite the repeated reminders of the defendant, the claimant did not sign the contract up to 4 January 2002. It was right of the defendant to terminate the contract as the defendant could not tolerate to wait indefinitely. The defendant’s termination of the contract could not be treated as unreasonable. 

16. Madam Lam’s evidence was that she had meant to say that Ms Yip had not informed her of the former contract. The attachment had been drafted for her by a solicitor’s clerk, not belonging to the firm now representing her, and she being illiterate had simply signed it, believing it to express the true position. She re-iterated this in oral evidence in chief.

17. Under cross-examination Madam Lam said that she did not know who had paid the solicitor’s bill for $20,000.00; but later said that she had paid it and that she knew when she paid it that it was for the work her solicitor had done in connection with the case before the Tribunal and the appeal therefrom. She agreed that the Form 9 and its annexure had been lodged by her present solicitor, though it was earlier prepared by a clerk in another firm. But as to how that clerk came to write what he did, and whether it was on her instructions, she was rather evasive.

18. It appeared from cross-examination that she did in fact hear of the existence of Cheung’s agreement on about 2 January from the tenant who was in the property. She had earlier said that she only knew of it when she saw Mr Kan’s statement in the Tribunal proceedings; but she explained that what she meant was that this was when it was confirmed to her; she did not believe earlier “rumours”.

19. The plaintiff himself was called to explain his position in the transaction and these proceedings. He said that he had given Madam Lam full authority in both. Cross-examined, he said that he also knew of his proceedings against Pak Lane and had instructed them too. In neither case had he directly instructed any solicitor. He did not know why the cheque was countermanded.

20. He had signed Form 9 and its annexure. He had been told the facts as stated therein and he had signed because he trusted her. He did not know about the solicitor’s bill; he had not paid it himself.

21. Re-examined, he said that he had read the contents but was not very concerned about them; he thought they corresponded with what he had been told about the incident before, but he could not remember if Madam Lam had talked about them in detail. He had not verified it, nor questioned her about them. The relevant excerpt was read to him but he said he could not remember if this corresponded with what he had been told.

22. Tsang Lai Man confirmed that he had gone to Pak Lane’s office with Madam Lam when she signed the Agreement. He was sure this was on 27 January, because on 31^st his water pipes had burst and he needed to fix them. He said that Mr Kan was there; he had been introduced; and it was the same Mr Kan whom he had seen outside the court. Madam Lam asked if the property was clean and Mr Kan said that there was no problem and the title deed was very clean.

23. Mr Tsang had given a statement for the Tribunal proceedings. The plaintiff sought to adduce it as a prior consistent statement and as such, of course, it is of little value. In the statement Mr Tsang had said that there was another man present in the office with Ms Yip but had not identified him and had said nothing about any statement to the effect that the title was clean. Under cross-examination he said that he only “sort of remembered” the conversation; he did not remember the words being said and the meeting had only lasted about 5 minutes. The words “co-operate with Dah Sing Bank” did not then appear on the face of the agreement, and various other parts were blank. In fact he had scolded Madam Kan for singing the agreement with the blanks in it.

24. Evidence for the defendant came from Mr Kan, the defendant’s employee. He said that on 27 December he had received a telephone call from Ms Yip that she had a purchaser for the flat in Tung Choi Street, and that the purchaser had left a cheque with her for the initial deposit. He told her that there was a contract with a former purchaser, whose cheque for the initial deposit had been dishonoured, and he would have to clarify the matter before he did anything. Later she asked him to go and discuss the matter, which he did.

25. When he got to the Pak Lane office, Mr Kan found Ms Yip and another employee there. She showed him Madam Lam’s cheque, but did not show him any signed agreement. He said that he wanted to play safe and wait until 31December to make sure that the other purchaser would withdraw. In fact that was the due date for the second and larger deposit; and his company had told him not to collect the cheque, for that reason.

26. On 31 December Mr Kan heard from Ms Yip that her intended purchaser was with her. He was asked to go and collect the initial deposit. After consulting his assistant manager, Mr Au Yeung, who was dealing directly with the vendor, he went to collect the deposit. He arrived at about 4 p.m. at Pak Lane’s office where he found Ms Yip, Madam Lam and another unknown man. He was shown the cheque again, and also the Agreement. He told Ms Yip, in front of Madam Lam that the vendor was in the USA and the agreement would need to be sent there for signature. He also told them that Dah Sing was only acting for the vendor, and would get its commission from the vendor.

27. He then gave Ms Yip a commission sharing agreement, which provided in effect that the Pak Lane would receive commission paid by the purchaser, and the defendant would receive commission paid by the vendor. He had signed the form. Ms Yip said that she would sign it and return it later. He saw that Ms Yip had written the words “Co-operated with Dah Sing Bank” on the Agreement. Then Ms Yip explained the contents of the Agreement and its attachment (which dealt with an order under the Buildings Ordinance) to Madam Lam, who signed, saying that she was signing for the plaintiff. He had then received the cheque and the Agreement and taken them away.

28. He said that at no time was he asked, nor did he say that the title was clean.

29. Mr Kan said that he had handed over the Agreement to Mr Au Yeung. On 5 January at about 11 a.m., the latter told him that the vendor had signed it. So he telephoned Ms Yip to say that the vendor had signed, and the defendant would cash the cheque. Ms Yip did not say anything about the plaintiff’s intention to withdraw the offer; and indeed he did not know anything about that, until he was told on 7 January that the cheque had been dishonoured.

30. Mr Kan was cross-examined at some length about the requirements of the Estate Agents’ Ordinance. He said that he was familiar with them and held a licence under that Ordinance. He admitted that neither he nor the defendant had prepared a Form 3 or a Form 1 in respect of the property. His understanding was that since the defendant was the direct vendor, under the instructions of the owner, there was not need to provide these forms; and he would not admit that he or the defendant had failed in any duty to comply with the Ordinance or practice directions issued by the relevant authority. I will deal with the effect of these directions and forms below if necessary.

31. So far as Cheung’s agreement was concerned Mr Kan agreed it could be, but had not been terminated for dishonour of the cheque by 31 December. He said that his instructions were to wait until 5 p.m. on that date to see if the buyer would appear. He  did not know that Cheung’s agreement was only formally terminated on 8 January 2002; he had just been following his company’s instructions. He had gone to Pak Lane at 4 p.m. but had not finished his business there until 6 p.m. He could not, however, explain what took so long. He agreed that it was his duty and that of the defendant, before receiving the plaintiff’s cheque, to make sure that the Cheung’s agreement had been terminated. He had not told the plaintiff directly of Cheung’s agreement but he maintained that he had told Pak Lane all along about the existence of it.

32. So far as the termination was concerned Mr Kan maintained that he had heard nothing from Ms Yip on 4 January of Madam Lam’s decision to withdraw. He agreed that on the face of the Agreement, the defendant should be the agent for both the buyer and the seller. The defendant was entitled to commission from both parties, but the arrangement between the agents was that each party would pay commission to his own agent. He maintained that he only owed duties to his own client and none to the purchaser.

33. No evidence was received from Ms Yip. Apparently she told the Tribunal that she had received Madam Lam’s instructions to withdraw the offer on 4 January 2002. I have not seen a translation of the whole of the Adjudicator’s judgment but it appears that he accepted that the vendor had signed the agreement on 2 January. What evidence was given, or what finding was made as to the date when the acceptance was communicated by the defendant to Pak Lane is not clear.

34. The plaintiff’s case on fact is based primarily on the averment that Mr Kan told  Madam Lam that the title was clean or that the property could be sold. This is not directly pleaded, nor is there any direct pleading of misrepresentation although the plaintiff avers that the defendant had duties to advise the plaintiff on and inform Madam Lam of all matters which may affect her decision to purchase the premises and sign the document, and not to mislead or give misrepresentation to the plaintiff in order to induce the plaintiff to sign the document. So the plaintiff’s case appears to be either that the fact of the previous agreement was wrongly hidden, or else there was a misrepresentation as to the title.

35. There is a major problem for the plaintiff in the shape of the Annexure to the Form 9 in the application for leave to appeal against the decision of the Tribunal. It says clearly that Ms Yip told Madam Lam about Cheung’s agreement and that because of it the plaintiff could not sign the Agreement until 31 December. If this is right it gives the lie to Madam Lam’s lack of knowledge of Cheung’s agreement and by extension probably to the evidence that she was told that the title was clean, or that there was no problem with it, or that it could be sold. Even if Madam Lam was told these things, in the context of knowing of Cheung’s agreement (and this is not her evidence) it would give the lie to her evidence that she would never have signed if she had known about it.

36. Madam Lam has attempted to meet this head-on. She says that the Annexure should have said that Ms Yip did not inform her about Cheung’s agreement; and because she is illiterate, she signed it, and got the plaintiff to sign it, without realising what was written.

37. I have considerable difficulty with this. The instructions to the writer of the Annexure came from Madam Lam herself. It may be that she did not have much schooling in her youth but she is an old lady, and apparently experienced in buying and selling property, so while she may be uneducated there is no reason to accept that she is ignorant of the ways of the world or of commerce, or of the need to make sure that when one puts one’s signature to a document, it says what one intends it to say.

38. Further when one looks at the first paragraphs of the Annexure it is clear that what is being said is that the claimant could not sign the Agreement until 31 December 2001 because of the information from Ms Yip concerning unsettled procedure about a former contract. It would not make sense if it were said that because Ms Yip did not give that information, the claimant could not sign the contract until that date.

39. The plaintiff himself said under cross-examination that he had been told the facts as stated in the Annexure and had signed it because he trusted Madam Lam. Re-examined, he said that he had read the contents but was not very concerned about them; he thought they corresponded with what he had been told about the incident before. This suggests that he had been told beforehand that Ms Yip had given Madam Lam information about Cheung’s agreement though, to be fair, the plaintiff was very vague about this, as I suppose he might have been when he was simply lending his name to a transaction which did not interest him.

40. I was not impressed with Madam Lam as a witness. She contradicted herself on the matter of who paid the solicitor’s bill. As I have indicated she was evasive when cross-examined about how the Annexure came to be written as it was. Further there is the matter of when she found out about Cheung’s agreement. Throughout the case – it appears in further and better particulars – her position was that she never knew, until she saw Mr Kan’s statement in the Tribunal proceedings. But from evidence it appeared that she had heard of it from the tenant by 2^nd January. Of course she sought to explain this by saying that she did not believe a rumour. But if, as she says, she would never have signed the Agreement if she had known of Cheung’s agreement, she would naturally, on hearing this rumour, have made immediate inquiries of Ms Yip about it. This she did not do. So either her evidence of hearing of this matter from the tenant is untrue, or the passage in the statement, adopted in evidence, that she did not know of it until she saw Mr Kan’s statement is untrue.

41. The other witness, Mr Tsang appeared straightforward but under cross-examination he had to admit that his memory of what was said was unclear.

42. Mr Kan himself seemed reasonably credible. It is true that he made various admissions that suggest that he did not do all he should have done in respect of the various forms which an estate agent now has to complete. But his story of refusing to take the signed agreement and the cheque from Pak Lane until 31 December rings true. The previous purchaser’s cheque had been dishonoured and of course it would have been open to the defendant to rescind that purchaser’s provisional agreement immediately; but it was also prudent to wait until the date of payment of the second and larger deposit before receiving another offer to put to the client. Leaving aside any legal questions concerning incumbrances, if the previous purchaser missed the deadline for the second deposit, the defendant could be pretty sure, in practical terms, that it was completely out of the picture, and it was safe to proceed with the Agreement with the plaintiff. Of course Mr Kan’s story that he was at the Pak Lane office from 4 to 6 p.m. that day seems very unlikely, and to have been made up to explain why he did not wait until 5 p.m., as he said he was supposed to do, for the previous purchaser to appear; but I do not think that this makes the rest of his evidence incredible.

43. Overall where there is a conflict I prefer the evidence of Mr Kan to that of Madam Lam and Mr Tsang. I do not believe that Mr Kan told her that the title was clean or anything to that effect. I do not believe that when she signed the Agreement she did not know anything about the previous agreement.

44. It follows that the plaintiff’s claim must fail because the primary fact on which it is based is not made out; nor is causation made out. I do not need to go into the law although I find it difficult to see how the effect of the Agreement read as a whole would be to bring the plaintiff into a direct contractual relationship with the defendant. Quite obviously, Pak Lane was the purchaser’s agent and the defendant the vendor’s agent and each owed duties to, and was to be paid (except perhaps in case of default) by its own client. As to the allegations of breach of statutory duty (which, incidentally, is not pleaded) given that the plaintiff has failed to make out causation, it would appear that even if the defendant was in breach of its duties to fill in and hand over a Form 1, that would make no difference.

45. The plaintiff’s claim is accordingly dismissed with costs to the defendant to be taxed if not agreed, with certificate for counsel.