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HCA3775/2001
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
ACTION NO.3775 OF 2001
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BETWEEN
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JOPARD HOLDINGS LIMITED |
Plaintiff |
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and |
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LADEFAITH LIMITED |
1st Defendant |
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CENTALINE PROPERTY AGENCY LIMITED |
2nd Defendant |
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Before : Recorder B. Yu, SC, in Court
Dates of Hearing : 1 - 5 November 2004
Date of Judgment : 12 November 2004
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J U D G M E N T
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Introduction
1. This action concerns an aborted sale and purchase of an apartment on the5th floor in a development in Yau Yat Chuen, Kowloon, Hong Kong (“theProperty”). The agreement for sale and purchase was entered into on 30 June2001. It was in the 2nd defendant’s standard form. I shall refer to thisagreement as the “Provisional Agreement”. There were three parties to thatagreement : the plaintiff as purchaser (“the Purchaser”), the 1st defendant asvendor (“the Vendor”) and the 2nd defendant as agent (“the Agent”).
2. The Purchaser is a company controlled by Mr Shum Wai Lung (“Mr Shum”). The Vendor is a company controlled by Mr Leung Sai Tat (“Mr Leung”). Mr Leung and his family previously resided in the Property. Thefoundation for the proceedings is a tragic accident which occurred about a yearbefore the Provisional Agreement. In July 2000, Mr Leung’s son, who was then about four years old, accidentally fell from the balcony of the Property to the ground floor. He was taken to hospital and was certified dead about eight hours later. The accident was reported in the press at the time, although the parties have notadduced any evidence of the extent of the publicity.
The agreements
3. Mr Leung moved out of the Property in November 2000 into rentedaccommodation. In January 2001, he decided to sell the Property and engagedthe Agent in looking for a buyer. He signed, on behalf of the Vendor, an EstateAgency Agreement with the Agent in a form prescribed by the Estate Agents Authority (see Form 3 of the Estate Agents Practice (General Duties and Hong Kong Residential Properties) Regulation). Clause 2 of that agreement makes itclear that the agency relationship between the Vendor and the Agent was to bea dual agency, in other words, that the Agent would also act for the Purchaser. Schedule 1 to that agreement lists the duties of the Agent. It provided that
the Agent shall :
(a) market the Property on behalf of theVendor;
(b) obtain information in relation to the Property for the Vendor;
(c) arrange for purchasers to inspect the Property;
(d) conduct negotiation and submit all offers in relation to the Property to theVendor; and
(e) assist the Vendor in entering into a binding agreement for sale andpurchase with a purchaser.
Under Schedule 2, the Vendor agrees to pay the Agent commission at the rate of 1% of the transacted price of the Property if a binding agreementto sell is entered into between a specified period, but the Vendor wouldbe under no obligation to pay any commission if completion of thetransaction fell through without fault on the part of the Vendor.
4. In March 2001, Mr Shum was in the happy position of having recentlybecome a father and was looking for a new home for his family. He engagedthe Agent to introduce properties to him. The person he contacted was oneJacky Lee, who was working in the Whampoa Branch.
5. In June, Jacky Lee introduced Mr Shum to Mr Victor Yeung at the YauYat Chuen branch of the Agent. Mr Yeung was held out as specialising inproperties in Yau Yat Chuen. It is common ground that on 28 June 2001, Mr Yeung took Mr Shum and his wife to view the Property and on Mr Shum’srequest, a second inspection of the Property was carried out on the same day. At the time of the inspection, the Property was furnished but unoccupied. Access to the Property was gained through the assistance of a Filipino maidhired by the Leung family.
6. After the two inspections, Mr Shum expressed his interest in purchasingthe Property. Negotiation ensued, and ended with Mr Shum signing theProvisional Agreement on behalf of the Purchaser on 30 June. Mr Leungsigned for the Vendor on the same day.
7. The agreed price was HK$10 million. The Purchaser paid a deposit ofHK$300,000 upon signing. Under the terms of the Provisional Agreement, theAgent was entitled to receive HK$100,000 as commission from each of the Vendor and the Purchaser, and if either the Vendor or the Purchaser fails tocomplete the sale and purchase, the defaulting party shall compensate the Agent HK$200,000 as liquidated damages.
8. The Provisional Agreement called for a further sum of HK$700,000 tobe paid upon signing of a formal agreement for sale and purchase on or before16 July 2001. This never happened. A few days after the ProvisionalAgreement was signed, Mr Shum learnt about the tragic incident from a friendwhom he said also worked as an estate agent. He said he felt cheated and gavenotice in early July to terminate the Provisional Agreement. The Vendor denied that thePurchaser had any right to terminate the Provisional Agreement and duly forfeited thedeposit. The Agent in turn claims that since the sale was aborted by reason ofthe Purchaser’s default, the Purchaser should compensate the Agent for its lossin commission.
9. Before I outline the disputes between the parties from which the issuesarise, I must mention one other fact. On the same day as the date of theProvisional Agreement for sale and purchase, the Purchaser signed an estateagency agreement with the Agent. That agreement was in a form prescribed by the Estate Agency Authority (see Form 4 under the Estate Agents PracticeGeneral Duties and Hong Kong Residential Properties) Regulation). Schedule2 of that agreement sets out the duties of the Agent, which are :
| (a) |
obtain information in relation to the properties for the Purchaser; |
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| (b) |
arrange for the Purchaser to inspect the properties if requested to do soby the Purchaser; |
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| (c) |
conduct negotiation and submit all offers to the vendor of the propertiesas instructed by the Purchaser; and |
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| (d) |
assist the Purchaser in entering into a binding agreement for sale andpurchase with the Vendor of any one or more of the properties. |
There are also provisions as to the payment of commission, which aresimilar to those found in the Estate Agency Agreement for the Vendor.
The dispute of fact and evidence
10. What is in dispute is what happened during and after the inspections. ThePurchaser’s case is that during the second inspection of the Property, Mr Shumasked Mr Yeung the questions “有無古靈精怪” and “無嘢唔妥呀嗎” (translated as : is there anything weird or unusual), to which Mr Yeungallegedly responded in Chinese “no, no, no” and said that the Vendor wasselling the Property because the Vendor’s family was emigrating to Australia. According to Mr Shum, he made a remark at the time “呢個時候仲移民” (translated as : emigrating at this time?).
11. The Purchaser’s case is that two days later on 30 June 2001, when Jacky Lee and Mr Yeung went to Mr Shum’s office with the form for theProvisional Agreement, Mr Shum repeated the same questions after he signedthe agreement and the cheque for the deposit but before handing over the cheque, and drew a similar definite response from Mr Yeung.
12. The Agent does not dispute that Mr Shum did ask the questions, but itscase is that the questions were only asked once, and that was inside Mr Shum’scar after the second inspection. More importantly, the Agent’s case is that Mr Yeung answered Mr Shum by saying “not to my knowledge” rather than witha definite negative and denied he made any remark about the Vendoremigrating
13. There is another relatively inconsequential factual dispute between thePurchaser and the Vendor as to what Mr Shum allegedly said to Mr Leung inthe presence of Jacky Lee and Victor Yeung some days after Mr Shum foundout about the tragic incident. On the whole, Mr Yeung supported Mr Shum’sversion. I regard this episode as of marginal relevance even on credibility.
14. Each party called one witness. The Purchaser called Mr Shum. TheVendor called Mr Leung and the Agent called Mr Yeung.
15. All three parties filed valuation reports. At the trial, counsel for thePurchaser indicated that he was not going to rely on any valuation evidence asagainst the Vendor. Consequently, counsel for the Vendor abandoned anyreliance on valuation evidence. As between the Purchaser and the Agent, bothparties agreed the contents of a Joint Report dated 21 October 2004 compiledby the valuers engaged by the Purchaser and that engaged by the Agent. Thisreport expresses a joint opinion that the open market value of the Propertywould be reduced by 7.5% by reason of the accident. The valuers also agreedthat in the case of suicide or murder, property values would be reduced between25 to 30%.
16. Thedifficulty I find with this evidence is that the report does not deal with a numberof matters which common sense suggests would be relevant, such as (1) whether the amount of reduction would depend on (a) the extent of publicity givento the tragic incidents, and (b) the time lag between the occurrence of theincidence and the notional valuation date, and (2) the extent, if any, to whichproperty prices (and the comparables relied on) could be affected by whetherthere was any urgency on the part of the vendor in selling the property after thetragic event. Nevertheless, the significance of this evidence is that the Agent accepts that the tragicincident does have a bearing on the open market value of the Property.
The claims
17. In this action, the Purchaser seeks rescission of the ProvisionalAgreement and the return of the deposit of HK$300,000 paid to...
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