CENTALINE PROPERTY AGENCY LTD v. CYBERSPEED TECHNOLOGY CO LTD

DCCJ5697/2005

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 5697 OF 2005

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JUDGMENT

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1.  The Plaintiff is an estate agency.  The Plaintiff claims against the Defendant for breach of contract of agency in the purchase of a property known as units A, B and C, 19/F, Hua Chiao Commercial Centre, 678 Nathan Road, Kowloon (“the said property”).

2.  The Defendant’s defence is that (1) it was not the purchaser of the property; (2) the 15 October 2004 agency agreement purportedly signed by one Mr. Joe Lai was signed in blank; (3) the purchaser of the property Wide China Co. Ltd. was not the Defendant’s nominee, undisclosed principal or agent; (4) the Plaintiff failed to perform its duties under the alleged agency agreement; and (5) the agency form was not in the prescribed form.

Background

3.  On 15 October 2004, through the arrangement of one of the Plaintiff’s agents Mr. Ricky Hui (“Ricky”), the Defendant’s general sales manager Mr. Joe Lai Yiu Cho (“Joe Lai”) inspected a commercial property known as 19^th Floor, Hua Chiao Commercial Centre, 678 Nathan Road, Kowloon (“the said property”) together with his colleagues Mr. Danny Ho and Mr. Michael Ng.  Ricky informed Joe Lai that the vendor was asking for $4,000 per square foot for the 3,000 odd sq. ft. premises.

4.  On the 18 October 2004, Mr. Kenny Leung (“Mr. Leung”), a director of the Defendant, went with Joe Lai to the said property where they met with Ricky.

5.  The Plaintiff claimed that at the 15 October 2004 inspection Joe Lai signed an agency agreement engaging the Plaintiff’s services (“the 1^st agreement”)； he signed a second agency agreement at the second visit on 18 October 2004 (“the second agreement”).

6.  The Plaintiff further claimed that a third visit took place when Mr. Leung met with a representative of the vendor, Mr. Yu, on or about 20 or 21 October 2004 at the said property.  The parties negotiated over the sale price but were not able to reach a deal at the meeting.

7.  In or about early November 2004, Ricky discovered the said property was sold for $12,973,200 to a company named Wide China Technology Ltd. (“Wide China”) under a sale and purchase agreement registered with the Land Office.

8.  A company search at the Company Registry revealed Wide China and the Defendant to have common directors and shareholders namely Mr. Leung and his wife Madam Ho Wai Ching.

9.  The address of the said property was used as the register address of Wide China and the Defendant at the Company Registry.  The Defendant is the tenant of a company called Sofmap Co. Ltd. whose director and shareholder is a company called Y2K IT Station (“Y2K”), the director and shareholder of which is Joe Lai.  Sofmap signed a tenancy agreement with Wide China for the said property, it in turn signed a sub-tenancy agreement with the Defendant.

The Plaintiff’s case

10.  The Plaintiff’s witness Mr. Ricky Hui Kuen (“Ricky”) gave evidence in support of the Plaintiff’s case.  It was his evidence that he first came to know Mr. Leung in or about September 2003 when Mr. Leung engaged the Plaintiff’s services in the search of office premises for the use of his businesses.  Ricky successfully introduced premises at Room 1903-1904, Nathan Centre, 19^th floor, 580G-580K Nathan Road, Kowloon to Mr. Leung leading to one of Mr. Leung’s companies, the Defendant, purchasing those premises on 29 November 2003 (“Property I”).

11.  In or about 10 February 2004, through the introduction of Ricky, Mr. Leung purchased the second office premises at Rooms 05-06, 11^th floor, Dundas Square, 43H Dundas Street, Kowloon (“property II”).  Both properties were viewed by Mr. Leung and Joe Lai prior to the Defendant’s purchases of the two properties.

12.  In or about September 2004, Mr. Leung informed Ricky that he was looking for a 3,000 sq. ft. office property because he was expanding his business and wanted to combine his two offices at properties I and II in the Mongkok area.

13.  Ricky called up Mr. Leung in or about mid October 2004 in order to introduce him to the said property.  He could not reach Mr. Leung but had successfully talked to Joe Lai who agreed to a viewing of the said property on 15 October 2004.  The viewing took place at 10 a.m. on 15 October 2004 and Joe Lai brought with him 2 of his colleagues.  Ricky claimed Joe Lai had met him at the lift lobby of Hua Chiao Commercial Centre before going up to view the said property and it was there that Ricky filled out the agency engagement agreement and explained the contents to Joe Lai before he signed on the agreement.  After viewing the said property, Ricky told Joe Lai the asking price for the said property was $13,500,000.

14.  On 18 October 2004, Ricky claimed he successfully reached Mr. Leung on the telephone and he arranged a viewing of the said property at 11 a.m. on the same day.  He claimed he met Mr. Leung, Joe Lai and 2 or 3 other persons at the lobby of Hua Chiao Commercial Centre.  He filled in the agency engagement agreement at the lobby and explained the contents to Mr. Leung, Joe Lai and a Mr. Michael Ng of the Defendant’s company.  He claimed Joe Lai again signed the agency agreement form.

15.  Ricky claimed that Mr. Leung called him on or about 20 or 21 October 2004, and requested him to set up a meeting with the vendor of the said property in order to negotiate the purchase price of the said property.  A meeting took place at 12 noon on the same day between the vendor Mr. Yu and Mr. Leung, Mr. Leung was accompanied by Joe Lai, Michael Ng and one other person.

16.  Ricky claimed the meeting took 30 minutes and Mr. Leung had offered to pay $3,500 per sq. ft. for the property while Mr. Yu asked for $3,800 per sq. ft.  Ricky claimed Mr. Leung had also offered to pay the Plaintiff a reduced agency fee of $10,000, which offer he had rejected.

17.  In the following days, Ricky kept calling up Mr. Leung to follow up on the said property.  Mr. Leung told him his offer remained at $3,500 per sq. ft.  On 25 October 2004, Ricky was told by Mr. Leung to stop pursuing the said property on his behalf and asked him to look for other suitable premises for him instead.

18.  It was not until early November 2004 that Ricky discovered the said property was purchased by Wide China at $12,973,200.  He conducted a company search of Wide China and discovered it had the same shareholders and directors as the Defendant.

The Defence Case

19.  It is the Defence case that both Mr. Leung and Joe Lai came to know Ricky in September 2003 when the Plaintiff was approached by Mr. Leung to locate suitable office premises for his use.  Mr. Leung admitted he had asked his staff Joe Lai, the General Sales Manager of the Defendant, to call up Ricky or the Plaintiff’s staff for services relating to the search for office properties between September 2003 and January 2004.

20.  Joe Lai claimed that on or about 14 October 2004, he received a cold call from Ricky who introduced to him the entire 19^th floor of Hua Chiao Commercial Centre on Nathan Road.  Joe Lai inspected the said property on the next day, he was told the asking price was $4,000 per sq. ft.  He claimed he was not asked to sign any document or engagement agreement at the inspection.  He denied he had signed the 1^st agreement – exhibit P.1.

21.  Joe Lai claimed that when Ricky called him 2 days later, he told Ricky unless the price was reduced to $3,800 per sq. ft. his boss would not consider buying the said property.  Joe Lai claimed Ricky had promised him he could persuade the vendor to accept a reasonable price for the said property.  He invited Mr. Leung and Joe Lai to meet the vendor.

22.  Both Mr. Leung and Joe Lai claimed the meeting took place on 18 October 2004 at the said property.  The parties sat round a conference table when Ricky began negotiating with Mr. Yu, the vendor, after a brief introduction.  Mr. Leung and Joe Lai denied they overheard the conversation between Ricky and Mr. Yu.  When Mr. Yu walked away from the conference table, Mr. Leung claimed he knew the negotiation had fallen through.  He said he realised Ricky had lied to him about his ability to persuade the vendor to accept the price offered by him, so he left without viewing the said property.

23.  At the ground floor lift lobby, before Joe Lai left the building, Ricky came up with a blank document which he recognised as an “inspection of property” document and asked him to sign on it.  He claimed the document was not explained to him but trusting Ricky who told him it was only a matter of formality, he signed on the document before Ricky filled in the details.  He admitted he was given a copy of the document before he left the building.

24.  Mr. Leung admitted he and his wife are the directors and shareholders of the Defendant company and Wide China.  Joe Lai admitted he would act on the instruction of Mr. Leung whether it be the business of the Defendant or otherwise.  He agreed he did not know in what name the said property would be purchased until after the purchase had taken place.

25.  Mr. Leung claimed he had not considered which one of the 20 odd companies he owned would purchase the said property until the day the provisional sale and purchase agreement was signed on 26 October 2004.  Upon consulting his accountant, he was advised to use Wide China which was incorporated on 24 September 2004 with no previous trading record to hold the property.

26.  Mr. Leung agreed that the purchase was financed by a mortgage and a second legal charge was executed guaranteed by the Defendant for the Defendant’s general banking facilities.  The mortgage payments were $59,588.28 per month and the property was let to a company named Sofmap at $60,600 per month.  Sofmap is controlled by Mr. Leung through Joe Lai (as the shareholder and director of the Y2K IT Station Co. that held the shares of Sofmap) which sub-let the property to the Defendant at $61,600 per month.

27.  Mr. Leung claimed the estate agent from Midland Realty was able to persuade the vendor of the said property to sell at $3,800 per sq. ft. and that was the sole reason for engaging Midland Realty.  He denied the reason Wide China was used to hold the property was to avoid paying commission to the Plaintiff.  He further denied he had attempted to reduce the Plaintiff’s commission to $10,000.

28.  The Defendant claimed it is not liable to the Plaintiff because no agency agreement had been entered into by Wide China and, in any event, the Plaintiff had failed to exercise due care, skill and diligence to carry out its duty as the Defendant’s agent.

The Issues

29.  The question before the Court is whether the Plaintiff has an enforceable claim under contract against the Defendant.  To answer this question, the following issues have to be considered:

a)  Did Joe Lai sign the 15 October 2004 engagement agreement?

b)  What was Joe Lai’s capacity when he inspected the property on 15 October 2004; he and Mr. Leung’s capacity when they visited the property on 18 October 2004;

c)  Was Wide China the nominee, undisclosed principal or agent of the Defendant?

d)  Was the Plaintiff in breach of an implied duty under the agreement?

Finding of Facts

Inspections on 15 and 18 October 2004

30.  Joe Lai admitted to have visited the property on two occasions, 15 and 18 October 2004.  At the earlier visit, he had gone with his 2 colleagues, Mr. Danny Ho, the operations manager of the Defendant, and Mr. Michael Ng a clerk in charge of properties at the Defendant .  At the second visit, they were joined by Mr. Leung.

31.  The Plaintiff disputed the evidence of Mr. Leung and Joe Lai, it claimed the meeting with the vendor took place on or about 20 or 21 October 2004 after the second visit.  It is, however, not disputed that there was a visit to the property by Mr. Leung’s party on 18 October.

32.  Joe Lai admitted that he attended the first visit on 15 October 2004 with his 2 colleagues but denied he was asked to sign a property viewing document.  He gave a report to Mr. Leung on the said property after the visit.  Mr. Leung was obviously interested in the property because he agreed to visit the property and meet the vendor on 18 October 2004.

33.  Mr. Leung claimed he did not speak to Ricky at the 18 October 2004 visit and all conversations were channelled through Joe Lai.  He obviously trusted Joe Lai’s judgment because he had agreed to meet with the vendor at the said property on 18 October 2004 without viewing it.  The Defence denied Mr. Leung had set down any criteria for Ricky in the search for suitable commercial properties in September 2004, yet Ricky was able to locate the said property in mid October which had interested Mr. Leung so much that he should agree to meet with the vendor without having personally inspected the property beforehand.  This indicated his satisfaction of the performance of Ricky as an estate agent.

34.  Mr. Leung’s acceptance of Ricky’s services probably came from their previous dealings.  It is not disputed that Ricky had successfully introduced two commercial properties to Mr. Leung in November 2003 and January 2004 leading to the Defendant’s purchases of the office at 1903-1904 Nathan Centre, 580G-K Nathan Road, Kowloon. (“Property I”) on 29 November 2004 (p. 151-157) and 1105-1106 Dundas Square, 43H Dundas Street, Kowloon (“Property II”) on 5 March 2004 (p. 159-168).

35.  It is also not disputed that Joe Lai had inspected over 50 commercial properties on Mr. Leung’s instruction between September 2003 and October 2004.  Though it was not disclosed how many of the 50 properties were introduced by the Plaintiff, it is clear that Joe Lai had readily accepted Ricky’s introduction to the said property and paid an inspection visit to the property on 15 October 2004.  The fact that Mr. Leung attended the meeting with the vendor indicated he must be satisfied with and interested in the said property with a view to purchase.

36.  The aforesaid factors supported Ricky’s evidence that he was given Mr. Leung’s criteria in the search of suitable commercial properties in September 2004 i.e. the property should be around 3,000 sq. ft., under 10 years old and located in the Mongkok district.  The said property did fulfil those criteria.  It follows that Joe Lai’s visit to the said property with his colleagues from the Defendant company on 15 October 2004 was on account of Mr. Leung and they had gone as the staff of the Defendant.

The engagement agreements

37.  There are two engagement agreements produced by the Plaintiff.  Of the two exhibits, Joe Lai admitted to have signed only P.2 in blank, he claimed he did not sign P.1.  The Plaintiff’s pleaded case relies on the 1^st agreement of 15 October 2004 Exh. P.1.

38.  P.1 and 2 are identical except for the dates of the documents, the date of inspection and a slight difference in the description of the property in the “premises to be inspected” column.  Exhibit P.1 contained a fuller description of the address of the property: “19/F Whole Floor 華僑商業中心，彌敦道678號”, whereas P.2 stated only “19/F華僑商業中心”.  Both documents bore signatures under the “signed by prospective purchaser” and “confirmed by prospective purchaser” columns which the Plaintiff claimed were all signed by Joe Lai.

39.  The Defence alleged the 2 signatures on Exh. P.1 to be forged; unfortunately, there was no report made to the police of the alleged forgery.  Neither had P.1 and P.2 been submitted to a handwriting expert for examination.  It would be helpful if a handwriting expert’s opinion is available on the signatures in P.1 and P.2.  The burden of proof is on the Defence who made the allegation to prove the 2 signatures alleged to be Joe Lai’s on Exh. P.1 were forged and that P.1 should not be admitted as evidence.  The Defence has failed to discharge this burden.  There was no independent evidence on Joe Lai’s signatures, the only evidence before the Court is the evidence of Joe Lai and Ricky.

40.  Taking into consideration that Joe Lai had inspected on Mr. Leung’s account over 50 office premises, he should possess a good knowledge of the contents of the usual agency engagement agreement for commercial properties (the inspection of property document).  Furthermore, Joe Lai admitted he was given a copy of Exh. P.2 after he signed and Ricky had filled in the details in his presence.  Consequently, the contents of Exhs. P.1 and 2 must be well known to him.  Judging from Exhs. P.1 and 2, comparing the two alleged signatures of Joe Lai on Exh. P.1 and the two on Exh. P.2, they appear to me to be similar.  Based on the evidence of Ricky which I find to be more reliable, it is likely that Joe Lai had signed exhibits P.1 and 2 on the two occasions he inspected the said property in October 2004.

The meeting with the vendor at the property

41.  Mr. Leung claimed that he had consented to attend the meeting at the property to meet with the vendor on the basis of Ricky’s assurance he would be able to negotiate the price to a reasonable and comparatively lower figure than the $4,000 odd per sq. ft. asking price.  The price Mr. Leung had in mind was $3,800 per sq. ft.  He was disappointed with Ricky when he failed to honour his promise at the meeting to persuade the vendor to accept his offer of $3,800 per sq. ft.

42.  On the other hand, Ricky claimed that at the 30 minutes meeting, the vendor did agree to accept $3,800 per sq. ft. but Mr. Leung’s offer was $3,500 per sq. ft. with a reduced commission to the Plaintiff of $10,000.  Mr. Leung’s offer of $3,500 per sq. ft. was rejected by the vendor and Ricky had also rejected the reduced commission offer.  On those basis, the parties failed to reach a deal at the meeting.

43.  Ricky claimed that following the meeting, he had instructions from Mr. Leung and Joe Lai that the offer remained at $3,500 per sq. ft. and he had followed up with the vendor with the same offer until he was told by Mr. Leung on 25 October 2004 to stop pursuing the said property and to look for other properties which fit the same criteria.

44.  I find the evidence of Mr. Leung and Joe Lai on the reason for the meeting with the vendor to be inconsistent and unreasonable for a number of reasons: firstly, on Ricky’s promise to Mr. Leung he would be able to persuade the vendor to reduce the price to a reasonable level.  According to the evidence of Joe Lai and Mr. Leung at the meeting in the said property, there was no consultation between Ricky and Mr. Leung or Joe Lai whatsoever.  If Ricky did make such a promise, there would not be the need for the parties to meet at all.  As Miss Leung, counsel for the Plaintiff, observed, Mr. Leung could show genuine interest by giving to Ricky a cheque for the payment of deposit reflecting his offer of $3,800 per sq. ft. to show to the vendor leaving Ricky to meet and negotiate with the vendor alone.

45.  Secondly, Mr. Leung claimed he had not inspected the property before the meeting with the vendor.  It is unusual for a shrew businessman who is an experienced commercial property investor to agree to meet the vendor at a negotiation conference without viewing it first.  Thirdly, Mr. Leung claimed he did not talk to the vendor even though they were sitting across the conference table, neither did he overhear the conversation between Ricky and the vendor.  I find this incredible.  If the sole purpose of the meeting was to negotiate over the price of the property, the two parties would have exchanged conversation.  Fourthly, I find it difficult to believe that Mr. Leung had no interest in viewing a property which he had made an offer to purchase, a property worth almost $13 million.

46.  After taking into consideration the background of the previous relationship between Ricky and Mr. Leung and the evidence of Ricky, Mr. Leung and Joe Lai, I am satisfied that Ricky is a more reliable witness, I accept Ricky’s evidence that Mr. Leung had full knowledge and had viewed the property before meeting the vendor, he had also participated at the meeting with the vendor, and that he had hoped to obtain a deal with the vendor at $3,500 per sq. ft. at the meeting.

47.  I find Ricky to be an honest witness and his evidence on what happened at both the inspection on 15 and 18 October 2004 and the meeting with the vendor to be credible.  I accept that Joe Lai after having viewed over 50 commercial properties between September 2003 and October 2004 would have possessed a good knowledge of the contents and terms of the engagement agreements and knew what he was signing.  I am convinced Joe Lai understood fully what he was signing on both 15 and 18 October 2004 and that he had signed it as an authorized agent of the Defendant.

48.  I am satisfied that Ricky did manage to persuade the vendor to reduce the sale price to $3,800 per sq. ft. from $4,000 per sq. ft.  He had therefore performed his duty as an estate agent.  It was Mr. Leung who had failed to make an offer higher than $3,500 per sq. ft at the meeting.

49.  Joe Lai admitted Mr. Leung did not require Midland Realty to arrange a visit to the property and that he had not visited the property again before Wide China purchased the property.  The Defence claimed that was the reason why Midland received a commission of less than 1% of the purchase price at $35,000.  This fully indicated that Mr. Leung had induced the Plaintiff to perform all the duties of an estate agent but had refused the Plaintiff the fruits of its labour.  The motive may be as the Plaintiff suggested the 1% commission when Midland Realty accepted a fee of less than 0.3%.

50.  It may be a matter of convenience that Wide China, a company controlled and owned by Mr. Leung and his wife, was chosen as the purchaser of the property, it would also give Mr. Leung a good excuse to avoid the payment of the 1% commission when Midland Realty’s fee was reduced to $35,000 for a property purchased at $12,973,200.

The Law

Wide China as a nominee, agent or undisclosed principal of the Defendant

51.  Bowstead on Agency 18^th ed. para. 1-001 stated:-

“

(1)

Agency is the fiduciary relationship which exists between two persons, one of whom expressly or impliedly manifests assent that the other should act on his behalf so as to affect his relations with third parties, and the other of whom similarly manifests assent so to act or so acts pursuant to the manifestation.  The one on whose behalf the act or acts are to be done is called the principal.  The one who is to act is called the agent.  Any person other than the principal and the agent may be referred to as a third party.”

52.  Black’s Law Dictionary 8^th ed. p. 1076 defines a nominee to be “a party who holds bare legal title for the benefit of others”.  West’s Legal Dictionary p. 519 refers a “nominee” to “agent” which is defined as “a person authorised to act for another; someone who conducts the business of another”.

53.  Miss Leung further relied on the judgment of Yam J. in 郭婉芬經營新意域地產公司訴何世盛及另一人HCSA 15 & 16 of 2006, (judgment on 13 December 2006) where 2 brothers inspected a property but only one signed the engagement agreement with the plaintiff.  Afterwards, the brother who did not sign the agreement purchased the same property through Midland Realty which agreed it would not charge him a commission.  Yam J. held in paras. 16 and 17of the judgment that the brother who signed the engagement agreement was signing on the purchaser’s behalf as his agent, therefore the agreement was binding on both brothers.  At para. 31, he held that since the 2 brothers signed two different engagement agreements with two different estate agents, both should be liable for their acts under the law.

54.  Miss Leung submitted that at the time the agreement was signed the Defendant was either acting as the agent for Wide China or vice versa, therefore the Defendant is liable for Wide China’s commission to the Plaintiff.  She referred to para. 31-087 of Chitty on Contract 29^th ed.:

“Undisclosed Principal – A very important exception to the rule that an agent is neither entitled to sue nor liable to be sued on a contract made by him in a representative capacity is to be found where an authorized agent makes the contract in his own name without disclosing the fact that he is acting on behalf of another.”

55.  Miss Leung submitted that because the Defendant did not tell the Plaintiff the purchaser would be Wide China when the two engagement agreements was entered into, Wide China was the undisclosed principal, nominee and/or agent of the Defendant.

56.  Mr. Leung admitted in his evidence that he had only decided to use a recently incorporated company Wide China to hold the property after he consulted his accountant shortly before the provisional agreement for sale and purchase was signed on 26 October 2004.  It is not disputed the said property is now occupied by the Defendant, Wide China also used the same address as its registered business address though it has not done much business.

57.  On the same basis as the 郭婉芬case, where one brother signed the engagement agreement and the other brother purchased the property through a different estate agent, Mr. Leung decided on 26 October 2004 to used a newly incorporated company Wide China to hold the said property which would be used as an office for the Defendant.  In his two previous provisional sale and purchase agreements of 29 November 2003 (p. 105 – 109), Mr. Leung had signed the 2 agreements in the capacity of “Leung Chi Keung, Kenny or its nominee” as the purchaser for the 19^th Floor Nathan Centre office which was used as the Defendant’s office after the purchase.  The purchaser named on the assignment of the Nathan Centre property was the Defendant (p. 151 – 157).  It is obvious Mr. Leung had been keeping his options opened before he named the Defendant as the purchaser in the Nathan Centre purchase.  The same pattern applied in the purchase of the said property here where Mr. Leung decided to name Wide China in the provisional agreement for sale and purchase on 26 October 2004 (p. 112 - 113).

58.  It is quite clear that in the circumstances of this case, Mr. Leung was the boss who made the decisions.  It was up to him to decide which of his companies would hold the said property.  In the two previous purchases through the Plaintiff, the Defendant was named the purchaser after the provisional sale and purchase agreements were signed.  In the said property, the Defendant is clearly the beneficiary even though the Defendant is paying rental as a tenant to Sofmap and a sub-tenant of Wide China.  The Defendant is also the guarantor for banking facilities taken out by Wide China using the said property as security.

59.  In the case of Gunn v. Showell’s Brewery Co. and Crosswell’s Co. Times Law Reports Vol. XVII 563; Weekly Reporter Vol. L, 659 C.A., the defendant brewery desired to acquire some public-houses in a particular district and agreed to pay the plaintiff commission on all licensed property they might purchase through his introduction.  Subsequently, the defendants abandoned that idea, and instead promoted a new company, which ultimately acquired certain licensed property originally brought to the notice of the defendants by the plaintiff.  Channel J. found for the Plaintiff and held at the first instance:-

“Suppose a man gave a commission note, but instead of purchasing the property himself promoted a company to purchase it, and the company did purchase it, was the commission earned?  He thought it was.  Was this a purchase within the meaning of the commission note?  Showell’s were principals in the matter, as they brought into being a company which did purchase.”

60.  The Court of Appeal dismissed the appeal and Collins M.R. held:-

“Now it is clear that although those were two separate companies their interests were intimately connected the one with the other.  For instance, Mr. Charles Showell, who was the leading spirit, was a director of each company.  It appeared that the directors felt it was very desirable that the business in Wales should be extended, and with that view it was decided to purchase public-houses that might come into the market which would be suitable for tied houses.  It was on that footing that Mr. Young, who was a director of Crosswell’s only, approached the plaintiff, and the result of his interview was the sending of the commission note.  It was said that this commission note did not bind Showell’s Brewery because there was no evidence that Mr. Young had authority from that company to make a contract.  It seems to me clear on the evidence that Mr. Young had first consulted and had in fact obtained the authority of Mr. Charles Showell, who as managing director had unquestionably power to bind the appellant company, before he gave the note.  There is cogent evidence that Mr. Charles Showell knew that the contract note was to be sent; and it is clear that the document was given by Mr. Young under circumstances that bound the appellant company.”

61.  He further held the sale was brought about by the introduction of the plaintiff.  Though the purchase was by a new company promoted by Showell Co., the scheme was for the benfit of Showell’s:-

“It was said that this was not a purchase by the two defendant companies of the property within the meaning of the commission note.  If Showell’s Brewery had purchased the Caerphilly Co., and then transferred that property to the new company, the state of affairs would have been the same and this question could not have been raised.  In my view the mere buying to sell again to the new company was but an immaterial link in the chain of events.  By it being cut out, the position of the parties was not changed.  Here, then, there is evidence, first, that if the property was bought through the introduction of the plaintiff the defendants are liable to pay him commission, and there is evidence that the property had been purchased under those circumstances.  Therefore the plaintiff is entitled to his commission, and the judgment appealed from must stand and this appeal be dismissed with costs.”

62.  I am satisfied that Mr. Leung’s position is similar to that of Mr. Showell in the Gunn case.  Mr. Showell was the director of both the defendant companies and he had devised the scheme which resulted in the promotion of a new company that eventually purchased the Caerphilly brewery which was introduced by the plaintiff.  Mr. Leung in the present case admitted to have made the decision upon the advice of his accountant to use Wide China to hold the said property introduced by Ricky.  Joe Lai admitted he was employed as the general sales manager of the Defendant but he would help Mr. Leung and would do what Mr. Leung instructed him to do.  Furthermore, as a director and shareholder of Y2K IT Station, the majority shareholder of Sofmap, Joe Lai signed the tenancy agreement on behalf of Sofmap as the tenant and Mr. Leung on behalf of Wide China (p. 253).  The sub-tenancy agreement between Sofmap and the Defendant was signed by Mr. Leung acting on behalf of both the Defendant and Sofmap.

Lifting of the Corporate Veil

63.  It is abundantly clear that Mr. Leung was the mastermind behind the purchase.  He was the boss and was in control from the beginning.  He alone would decide which one of his 20 odd companies would hold the said property.  There may be certain variations in the shareholders and directors in his 20 odd companies, he admitted they were all controlled by him.  Out of the 20 odd companies the Defendant was admittedly the one with the largest trading operation, turnover and profit.  The Defendant also occupied the said property and was responsible for the payment of mortgage, rates and ground rent on the said property. 

64.  Sir Andrew Morritt V.C. held in Trustor AS v. Smallbone (No. 2) [2001] 1 WLR 1177 at p. 1185 para. 23:

“In my judgment the Court is entitled to “piece the corporate veil” and recognise the receipt of the company as that of the individual(s) in control of it if the company was used as a device or façade to conceal the true facts thereby avoiding or concealing any liability of those individual(s).”

65.  Mr. Koo, counsel for the Defendant, submitted that liability did not exist until the specified condition appeared i.e. Wide China purchased the property.  As Mr. Leung was not aware that Wide China had been incorporated until he was reminded of it by his accountant shortly before the signing of the provisional sale and purchase agreement, the corporate veil should not be lifted.  He relied on the case of China Ocean Shipping Co. v. Mitrans Shipping Co. [1995] 3 HKC 123.  Boklary J.A. (as he then was) at p. 127 C – D:

“Using a corporate structure to evade legal obligations is objectionable.  The court’s power to lift the corporate veil may be exercised to overcome such evasion so as to preserve legal obligation.  But using a corporate structure to avoid the incurring of any legal obligation in the first place is not objectionable.  And the court’s power to lift the corporate veil does not exist for the purpose of reversing such avoidance so as to create legal obligations.”     

66.  The court has a strong power.  In the exercise of this power, the court has to consider whether this is a suitable case to do so, not merely because justice so requires it, but whether the evidence supports its exercise. 

67.  The undisputed facts are: Wide China and the Defendant are sharing the same office premises at the said property; the two companies have common directors (Mr. Leung and his wife); Wide China employed no staff and shared the Defendant’s staff; Joe Lai and Leung visited the said property on the Defendant’s behalf and they did not need to re-visit the property before the purchase by Wide China on 26 October 2004; Leung and Joe Lai were present at the property when Ricky negotiated with the vendor on the Defendant’s behalf; Joe Lai had signed the engagement agreements on the Defendant’s behalf and the Defendant guaranteed Wide China’s mortgage; furthermore, the said property is used as security for the Defendant’s banking facilities and the monthly rental paid by the Defendant neatly covered the monthly mortgage payments by Wide China to the bank.

68.  Based on the aforesaid, the corporate veil should be lifted.  The sole purpose of Wide China is and was to hold the said property for the use of the Defendant, it therefore should be regarded as the same entity as the Defendant.  The property having been introduced to the Defendant by the Plaintiff, the Defendant is liable to the Plaintiff for the commission chargeable under para. 3 of the engagement agreement.

Implied Duty

69.  I am not satisfied the Defence had shown Ricky had failed to perform his duty as an estate agent under the agreement.  I found Ricky did obtain a reasonable price from the vendor i.e. the sale price of $3,800 per sq. ft. which Mr. Leung had rejected on the occasion of the meeting with the vendor at the property but eventually accepted on 26 October 2004 through Midland Realty.

70.  As Wide China did purchase the property within three months of the Plaintiff’s introduction to the Defendant, its agent and servant and that Ricky did obtain a sale price within a reasonable range for the Defendant.  I adopt the reason set out in the judgment of the Ontario Supreme Court in McBrayne v. Imperial Loan Co. 13 DLC 448 at p. 453 :

“The principle to be deduced from these cases, as applicable to a case like the present, where the original purchase does not entirely drop out, seems to be that, if the purchaser originally introduced remains throughout the transaction either directly or indirectly interested in and by the final outcome, the agent does not lose the right to commission established by the original introduction ……”

71.  In the Canadian case of Stratton v. Vachon 44 SCR 395 where the agent introduced a prospective purchaser to the owner, the prospective purchaser’s associates negotiated with the owner personally resulting in the purchase, the Supreme Court of Canada found for the agent because “the agent’s acts have really been the effective cause of the sale”.  Duff J. of that court (at p. 8 of his judgment) referred to Lord Atkinson’s judgment in the Privy Council in Burchill v. Gowrie and Blackhouse Colleries [1910] AC 614 at p. 624:

“There was no dispute about the law applicable to the first question.  It was admitted that, in the words of Erle C.J. in Green v. Barlett (1863) 14 C.B. (N.S.) 681, “if the relation of buyer and seller is really brought about by the act of the agent, he is entitled to commission, although the sale has not been effected by him.” or in the words of the later authorities, the plaintiff must show that some act of his was the causa causans of the sale (Tribe v. Taylor (1876) 1 CPD 505 at p. 510), or was an efficient cause of the sale (Millar v. Radford (1903) 19 Times LR 575.”

72.  The court in McBrayne v. Imperial Loan went further in its interpretation of the Burchell case at p. 452:-

“But it was laid down in the Burchell case that the rule to be applied was that, if an agent bring his principal into touch with a purchaser, the principal, if he negotiates further, has accepted part of the agent’s services, which are thus the effective cause of the sale; and that this is so notwithstanding that the sale is at a price below the limit given to the agent, or that the consideration is altered.”

73.  Ricky was obviously the effective cause of the sale having introduced the property to the Defendant through Joe Lai and having brought Mr. Leung to the property to meet the vendor in person.  The result was Mr. Leung felt no need to re-visit the said property before committing Wide China on 26 October 2004.  Furthermore, Ricky did achieve a reasonable purchase price for the purchase from the vendor.

74.  As the Defence had abandoned the agency engagement form was not in the prescribed form defence, I shall not go into this issue. 

75.  For the aforesaid reasons, I give judgment in the sum of $129,732.00 to the Plaintiff with interest from the date of writ to date of judgment at half judgment rate, thereafter at judgment rate.

76.  Costs nisi to the Plaintiff to be taxed if not agreed.  Parties may apply to be heard on costs within 14 days hereof, failure of which the order will be made absolute.