PRO PLAN ASIA LTD. v. LEE KUM KEE PROPERTIES LTD.

DCCJ3650/2001

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 3650 OF 2001

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JUDGMENT

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Plaintiff's claim

1. The Plaintiff's claim is for $250,000 being the success fee for successfully obtained a written confirmation from the Town Planning Board to development on the Defendant's site with a total GFA in excess of 0.4% plot ratio with or without conditions.

Facts

2. It is not in dispute that the Plaintiff had attended the objection hearing on the CDA zoning to the Town Planning Board on behalf of Defendant on 23/10/98. On 12/11/98 the Town Planning Board by letter informed the Plaintiff that the Town Planning Board had made a decision to increase the development intensity on the subject landholding to plot ratio 0.75 which is an 87.5% increase from the original plot ratio 0.4.

3. The Plaintiff relied on Clause 14 of the Consultancy Proposal dated 2/7/94 it submitted to the Defendant in respect of the proposed Residential Development in Comprehensive Development Area Zone at Ho Chung, Sai Kung.

Cl.14 (i) stated, "Upon submission of the Objection Statement on the CDA zoning to the Town Planning Board, a lump sum payment of HK$25,000.

Sub clauses (ii) & (iii) dealt with S.16 application to the Town Planning Board.

Cl.14(iv) stated:

"Upon receipt of written confirmation from the Town Planning Board to development on the Company's site with a total GFA in excess of Plot ratio O.4 with or without conditions, a lump sum payment of HK$250,000."

4. The Defendant did not sign on this document but the Plaintiff said that the Defendant had agreed to the terms of that proposal.

Issue

5. The only issue in this proceeding is whether the Defendant had agreed to the terms in respect of Consultation Fees set out at Cl.14 of the Proposal dated 2/7/94.

Plaintiff's case

6. Mr. Black gave evidence. He said in 1994 he was acquainted with Mr. Laurence Lai then the General Manager in respect of the Defendant's property development.

7. He submitted the proposal dated 2/7/94 to the Defendant. He was asked to attend a meeting with the Lai on 8/7/94 and had discussion as to the approach to the Town Planning Board. He was instructed to proceed. Lai said he would be paid according to the proposal.

8. He said it was common practice to lower the project fee and include a success fee to take risk because once confirmation was given as to the increase in PR a lump sum would be payable.

9. Laurence Lai agreed that Black should proceed to submit the objection statement on the CDA zoning to the Town Planning Board and would be paid according to the proposal but he was not asked to proceed with S.16 application.

10. He said almost 95% of his clients do not sign on the proposal, even if they did it would be after the project had been completed. As he had dealings with Laurence Lai previously he did not ask Plaintiff to sign on the proposal.

11. On 4/9/97 the Town Planning Board gave preliminary consideration to the objection and partially agreed to the objection. As a result Plaintiff was invited to attend the objection hearing.

12. By this time Laurence Lai had left the Defendant and Wanky Chan took over. Black was asked to attend meetings and had telephone conversation with Wanky Chan.

13. After a series of postponements at the Defendant's request Black attended the objection hearing on 23/10/98. After the objection hearing Plaintiff received letter from the Town Planning Board to say that they agreed to meet the Plaintiff's objections and the Plot Ratio was increased from 0.4 to 0.75.

14. Wanky Chan was impressed with the Plaintiff's work. So the Plaintiff demanded the success fee but was not paid.

Defendant's case

15. Mr. Laurence Lai gave evidence. He had been employed by the Defendant between 92-96 as project manager.

16. On 7/94 he contacted Mr. Black of the Plaintiff company and told Black that the Defendant was about to develop a site. He heard that the Town Planning Board was going to do something with the site.

17. Plaintiff submitted the proposal after preliminary discussion. The Plaintiff then submitted the objection statement on behalf of the Defendant on 19/7/94. After submission of the objection statement and the Plaintiff was duly paid in accordance with Cl. 14(1) of its proposal. The proposal was not signed, the Defendant just committed the Plaintiff on the 1st stage. It was the mutual understanding that any further work by the Plaintiff would depend on the performance of the Plaintiff in respect of the outcome of the objection statement.

18. He agreed that any substantial increase in plot ratio cannot be achieved under S.16 application.

19. He also agreed that success fee is common. In fact apart from the Plaintiff, Townland (another company), had also submitted a proposal which also included a success fee structure. Plaintiff company was engaged because its fee was cheaper and he knew Black would be personally involved. So it was beneficial to the Defendant.

20. It was the Defendant's practice not to sign on the contract at the initial stage. It was only a mutual understanding that any subsequent performance of work would be in terms of the first proposal.

21. Lo Woon Fai also gave evidence for the Defendant. He was only involved in the Defendant's projects in Hong Kong after 3/00 when Wanky Chan retired. He had communicated with Laurence Lai and Wanky Chan in respect of this case. Both of them said they had not signed any document or agreement in respect of payment.

FINDING

22. Laurence Lai is a qualified building surveyor. He recognized the concept of success fees and that they were common in the industry. In fact both Plaintiff and Townland included success fees in their proposal.

23. Lai also agreed that it was their mutual understanding that any further work would be in terms of the 1st proposal.

24. Apart from the evidence of Lai there was no evidence from the Defendant as to what was the agreed fee pending the outcome of the objection hearing. Lo's evidence was not only hearsay but was also futile as he said he inquired from both Lai and Chan and they both said they had not signed any document.

25. From the evidence on balance I find that there was a tacit agreement between the Plaintiff and Defendant as to the payment of success fee.

26. The next issue this Court has to decide is when was the success fee payable.

27. On the plain reading of Cl.14(iv) Plaintiff is entitled to its claim upon written confirmation of the Town Planning Board to development on Defendant's site with a total GFA in excess of Plot ratio 0.4. This confirmation is contained in the letter dated 12/11/98.

28. I do not agree with counsel for Defendant that the word "development" in Cl. 14(iv) has the same definition of "development" in the Town Planning Ordinance. This is inconsistent with the ordinary reading of Cl. 14(iv). Cl. 14(iv) makes reference to a total GFA in excess of Plot ratio 0.4.

29. Hence I find that the success fee of $250,000 is payable upon written confirmation from the Town Planning Board on 12/11/98.

30. In the premises there be judgment for the Plaintiff in the sum of $250,000 with interests agreed at 10.8% p.a. from 12/11/98 to judgment and thereafter at judgment rate until payment.

30. In the event I erred in my finding that the Plaintiff is entitled to the success fee Mr. Black estimated his work would be in the region of $100,000. There is no challenge to this figure. The Plaintiff is entitled on quantum merit basis to at least $100,000 with interests at 10.8% p.a. from 12/11/98.

31. Order nisi that costs be to the Plaintiff with certificate for counsel.