Top Faith Property Ltd v. Wong Ben, Wong Wing Ki Shirley & Liu Sing Wai
Read the full judgment text of HCMP 1060/2012 on BabelCite. This High Court CFI judgment was delivered on 17 August 2021.
1. This is the trial of the Action.
Cited by 1 case · Cites 3 cases
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HCMP 1060/2012 [2021] HKCFI 2278 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE MISCELLANEOUS PROCEEDINGS NO 1060 OF 2012 _________________
_________________ BETWEEN
_________________ Before: Hon Ng J in Court Dates of Hearing: 3-6 & 9 November & 1 December 2020 Date of Judgment: 17 August 2021 ________________ J U D G M E N T ________________ Introduction 1.This is the trial of the Action. 2.The Action arose out of a provisional agreement dated 10 May 2012 (“Provisional Agreement”) entered into between the Plaintiff as purchaser and the Defendants as vendors for the sale and purchase of the entire issued share capital of Hero Wealth Corporation Limited (“Company”), including all rights and interests of the property owned by the Company as set out below, at the price of HK$250 million. 3.The Company was at the material time the registered owner of the property known as Units 3802-03 and 3805-11 (“Units”) on 38th Floor, Tower Two, Lippo Centre, 89 Queensway, Hong Kong (“Property”). Clause 1 Schedule 1 of the Provisional Agreement identified the Property as:
4.Two 38th Floor plans were indeed annexed to the Provisional Agreement (“Plans”). One of them set out the saleable area of each of the Units in question, together with the common area assigned for their exclusive use (“Plan A”). The other one identified each unit on the entire 38th Floor by colour without the saleable area (“Plan B”). The Plans were prepared by Ms Cordelia Wing Mui Chan, Chartered Architect-Authorised Person, sometime in 2011. 5.The total saleable area of the Property, according to Plan A, was 758.46 sq m as follows:
6.While in form the Provisional Agreement was for the sale and purchase of the entire issued share capital of the Company, in substance, what the parties had agreed was the sale and purchase of the Property. 7.The Defendants were at the material time all the shareholders of the Company. Mr Wong Tseng Hon (“Wong Senior”) is the father of the 1st and 2nd named Defendants and husband of the 3rd named Defendant. According to the Re-amended Defence and Counterclaim (“DNC”)[2], it was Wong Senior who, in about April 2012, engaged the services of the Third Party (“Centaline”) to look for suitable purchasers for the Company, including the Property, after Centaline’s employee Miss Amanda Lau (“Lau”) had called him with a view to introducing potential purchasers to him. Indeed, it is the Defendants’ pleaded case against Centaline that there was an oral agreement sometime in April 2012 whereby Centaline was engaged by the Defendants to market the entire issued share capital of the Company including the Property (“Estate Agency Agreement”)[3]. 8.Lau was an employee of Centaline who liaised with the Plaintiff and the Defendants in handling the sale and purchase transaction. At all material times, there was no direct contact between the Plaintiff and the Defendants. 9.According to clause 1 (a) to (c) of the Provisional Agreement, the manner for payment thereunder was as follows:
10.There is no dispute that on 10 May 2012 the Plaintiff had paid the initial deposit of HK$12.5 million to Joseph Lee & Co pursuant to clause 1 of the Provisional Agreement. 11.Clauses 5, 8 and 9 of the Provisional Agreement provide:
12.According to the Plaintiff, after signing the Provisional Agreement, it caused 2 separate surveyors to carry out on-site survey and measurement of the Property on 21 and 23 May 2012 in order to verify its saleable area. The saleable area according to (1) the 1st survey by WHW & Associates was only 489 sq m and (2) the 2nd survey by Stirling Appraisals Limited was only 482.236 sq m. Both measurements were substantially less than what was stated in Plan A. 13.By a letter dated 24 May 2012 from the Plaintiff’s then solicitors to Joseph Lee & Co, the Plaintiff gave notice to rescind the Provisional Agreement by reason of the Defendants’ misrepresentation, via Lau, as to the saleable area of the Property ie 758.46 sq m and/or to cancel the transaction in accordance with clause 5 of the Provisional Agreement. The Plaintiff also demanded for the return of the initial deposit of HK$12.5 million. 14.On 28 May 2012, Joseph Lee & Co issued the present proceedings by originating summons as an interpleader action naming the Defendants as 1st defendant therein and the Plaintiff as 2nd defendant therein and required them to state the nature and particulars of their respective claims to the sum of HK$12.5 million. 15.By a further letter dated 29 May 2012 from the Plaintiff’s present solicitors Fan Wong & Tso (“FWT”), the Plaintiff again demanded for the return of the initial deposit of HK$12.5 million. 16.Pursuant to the consent Order of To J dated 20 June 2012, Joseph Lee & Co paid a sum of HK$12.496 million ie the initial deposit minus their agreed costs of HK$4,000 into Court on 22 June 2012. 17.The parties’ claims against each other have gone through some fine-tuning in the course of the trial. As per this court’s direction on 1 December 2020, they have submitted to this court the “definitive” relief that they seek as follows. 18.First, the Plaintiff claims against the Defendants for:
19.Second, the Defendants counterclaim against the Plaintiff for:
20.Third, the Defendants claim against Centaline for:
21.Fourth, Centaline counterclaims against the Defendants for:
The cases of the Plaintiff and the Defendants and the issues 22.The Plaintiff’s pleaded case against the Defendants, as well as the evidence of its witnesses, in particular Mr Au Chat Kwan (“Au”), its CEO, is rather straightforward and can be summarized as follows. 23.In March 2012, the Plaintiff, an existing tenant of Lippo Centre, decided to buy a larger office in the same building for self-use by its Group. Lau found out about it and, in early April 2012, contacted Au and recommended the Property to him. She also gave Au Centaline’s printed sales particulars of the Property which provided that the gross floor area of the Property was 11,655 sq ft with an asking price of HK$25,000 per sq ft. Au inquired with Lau about the saleable area of the Property and required documentary proof of it. Lau then passed the inquiry to Ms May Wong Wai Ki (“May”), assistant to Wong Senior. On 16 April 2012, May responded by sending the Plans to Lau by email. 24.It is accepted by May that from time to time, she would answer inquiries about the Property raised by Lau and that on 16 April 2012, she did send the Plans to Lau as requested. It is common ground that the Defendants did not prepare or cause to be prepared the Plans themselves. According to May’s evidence, which is not disputed, Plan A was annexed to a provisional sale and purchase agreement dated 20 June 2011 entered into by the Company as purchaser of the Property. Plan B was annexed to the assignment dated 30 June 2011 whereby the Property was assigned to the Company. In other words, the Plans were provided by the previous owner of the Property. 25.On 17 April 2012, Lau passed the Plans to the Plaintiff. She also repeatedly assured Au that the saleable area of the Property was as shown in Plan A (“Assurance”). While Lau admits that she had passed the Plans to the Plaintiff at a meeting on 17 April 2012 with Au and Mr Tung Yan Yeuk (“Tung”) who held the holding company of the Plaintiff, she denies giving any assurance to them about the Property’s saleable area. 26.The Plaintiff contends that the handing over of the Plans and the Assurance constituted a representation, implied and express, by the Defendants, via Lau, that the saleable area of the Property was as per Plan A ie 758.46 sq m (“Representation”)[5]. The Plaintiff further contends that, induced by and in reliance on the Representation, it eventually agreed to accept the price of HK$250 million proposed by the Defendants, to effect the property transaction by way of transferring the entire share capital of the Company to the Plaintiff and to enter into the Provisional Agreement. 27.Regarding the Plans, they were annexed to the Provisional Agreement when Lau delivered it to the Plaintiff for execution. Upon the advice of the Plaintiff’s then legal adviser Tan Yee Boon (“Tan”) and after discussion with Au, Tan amended Schedule 1 of the Provisional Agreement by inserting the handwritten words “as per the two (2) floor plans hereto”. Both the Plans and the handwritten words were initialed by representatives of the Plaintiff and the Defendants. 28.The Plaintiff contends that the Representation was untrue in that the saleable area was substantially less than 758.46 sq m. 29.The Plaintiff’s claim for the return of the initial deposit is primarily based on the Defendants’ misrepresentation that the saleable area of the Property was 758.46 sq m. The Plaintiff’s alternative case under clause 5 of the Provisional Agreement amounts to this: the inflation of the saleable area by the Defendants is both a “misrepresentation” and a “material adverse matter” within clause 5 and the Plaintiff is therefore entitled to cancel the transaction and obtain a refund of the initial deposit according to its terms. 30.As far as the Defendants are concerned, their case is as follow. 31.First, the Defendants deny that Lau was their agent in finding out about the saleable area of the Property and providing proof thereof to the Plaintiff. Rather, in so doing, Lau acted as the Plaintiff’s agent or in her own capacity as a broker. 32.Second, the Defendants do not admit Lau had made the Representation to the Plaintiff. They point to Centaline’s pleaded case that Lau had never made the Representation to the Plaintiff. But even if Lau had, neither she nor Centaline had instructions from the Defendants to do so. 33.Third, by reason of the words “The plan is for reference and identification purpose only” on Plan A, the Plaintiff and Centaline knew or ought to have known that the figures on Plan A did not represent the saleable area of the Property, but for identification of boundary only. 34.Fourth, the Defendants deny the Plaintiff was induced by or relied on the Representation in entering into the Provisional Agreement. In this regard, the Defendants point to the fact that the Provisional Agreement did not contain any express term on or reference to the saleable area of the Property. 35.Lastly, the Defendants contend that they were entitled to accept the Plaintiff’s failure to complete as a repudiation of the Provisional Agreement. 36.On the pleadings, the Defendants also join issue with the Plaintiff as to whether the alleged saleable area of 758.46 sq m was “justified”. But if one considers the parties’ expert evidence, it is clear that there is no serious dispute that the saleable area was indeed substantially less than 758.46 sq m. 37.First, according to Joint Expert Report on the saleable area of the Property dated 20 October 2020, both parties’ experts agreed that the saleable area of a commercial building may be measured by using the definition in the Code of Measuring Practice 1st Edition (“Code”) issued by the Hong Kong Institute of Surveyors (“HKIS”) in 1999 and its Supplement issued on 1 July 2014 as a reference, even though the Code is only a professional guide without statutory force. The Code, however, was the only available professional guide on the term “Saleable Area” at the material time. 38.Second, in the 2 Supplemental Reports to the Joint Expert Report both dated 4 November 2020 (“Supplemental Reports”) prepared by the Plaintiff’s expert Lam Tin Cho Eric (“Eric Lam”) and the Defendants’ expert Lee Hoi Tat Nathan (“Nathan Lee”) respectively, the saleable area of the Property was stated to be 540.67 sq m by Eric Lam and 508.04 sq m by Nathan Lee when measured by reference to the Code. In either case, the actual saleable area was substantially less than 758.46 sq m. 39.Third, while testifying on Day 5 of the trial, Nathan Lee also confirmed to this court that, in his opinion, the saleable area of the Property was 508.04 sq m. 40.While counsel for the Plaintiff and the Defendants have agreed a list of issues between them, it seems to this court that the real issues can be boiled down to the following:
Deliberation Issue 1 41.In Yili Concepts (HKG) Ltd v Lee Wai Chuen & Anor unrep, HCA 12911 of 1997, 29 September 2000, at p 21 DHCJ Kwan (as she then was) observed that:
42.The above passage was quoted with approval by the Court of Appeal in Bright Gold Limited v Mega Well Development Limited [2020] 4 HKLRD 24 at [89]. 43.So what are the facts of this case as admitted by the Defendants or as proved to the satisfaction of this court on the available evidence? 44.First, there was an oral Estate Agency Agreement reached in April 2012 between Centaline and the Defendants to the effect that Centaline was engaged to market the entire issued share capital of the Company including the Property. It is contended by the Defendants that inter alia it was a term of the Estate Agency Agreement that Centaline was to represent the Defendants in dealing with purchasers according to their instructions. Further, under clause 8 of the Provisional Agreement, the Defendants expressly agreed to pay HK$1.75 million to Centaline for the services it rendered to them. This is to be contrasted with clause 7 of the Provisional Agreement under which the Plaintiff was not required to pay any service charge or commission to Centaline. 45.Second, it is not in dispute that Lau was at the material time the person who liaised with the Plaintiff and the Defendants in handling the sale and purchase transaction. At all material times, there was no direct contact between the Plaintiff and the Defendants. 46.Third, it is again not in dispute by the Defendants that May, as Wong Senior’s assistant[6], would from time to time answer inquiries about the Property raised by Lau. There is no suggestion from the Defendants that May was not authorized by the Defendants to do so. 47.Fourth, Au was authorized by the Plaintiff to handle the purchase of the Property. He testified that he was concerned to find out about its saleable area in order to assess the real market value of the Property and to negotiate the purchase price with the owners. Au had enquired with Lau about the saleable area of the Property and asked for documentary proof. Lau corroborated Au’s aforesaid testimony and testified that she had duly contacted May on the phone to relay Au’s enquiry about the saleable area to her and asked her if she had any documents to provide. Afterwards, she received the Plans from May. In this regard, both Au and Lau impressed this court as forthcoming and truthful witnesses and their testimony withstood the vigor of cross-examination. Au’s testimony is also corroborated by an email he sent to Lau on 28 May 2012. 48.In this regard, May’s testimony differs from Lau’s in that she denies in cross-examination that Lau told her that a purchaser had asked for the saleable area and documentary proof. May’s oral testimony was simply that Lau asked if she had any floor plans to send to her and that Lau only wanted to take a look at them. Subsequently, when May found the Plans, she sent them to Lau as requested. 49.Pausing here, it seems to this court May’s evidence in this regard is so unreliable and improbable that it must be rejected. 50.To start with, May never gave any details in her witness statement on Lau’s request for floor plans. At paragraph 4 of her statement, she simply stated “[o]n or about 16th April 2012, at the request of the Agent, 2 floor plans … were provided to the Agent by me.” If May genuinely could not remember the details of Lau’s request at the time the witness statement was prepared, it is difficult to accept that she could remember what Lau had said to her by the time of the trial. 51.Further, as a matter of inherent probabilities, if Lau was informed of Au’s inquiry about the saleable area and his request for documentary proof, there was no reason why she would not relay that to May. Even if Lau did not at first make clear to May the purpose of asking for the Plans, one would expect May to have asked her about it but there is no evidence that she had done so. After the telephone conversation, May did send inter alia Plan A to Lau which contained the saleable area of the Units. 52.For these reasons, this court accepts Lau’s evidence and finds as a fact that she had told May on the phone that a purchaser had asked for the saleable area of the Property with proof and in response May sent her the Plans in order to answer the purchaser’s ie the Plaintiff’s inquiry. Lau then, with the knowledge and assent of May, acting on behalf of the Defendants, duly passed the Plans to Au and Tung at a meeting with them. 53.In Bright Gold Limited v Mega Well Development Limited supra, one of the central issues was whether an estate agent was acting as the vendor’s agent in making certain oral misrepresentation about the extent of the roof which was said to be part of the property to be sold by the vendor. After reciting extensively from Haringey LBC v Ahmed [2018] HLR 9, UBS AG (London Branch) v Kommunale Wasserwerke Leipzig GmbH [2017] EWCA Civ 1567 and Bowstead and Reynolds on Agency (21st ed) at paragraph 1-001, Lam VP (as he then was) made the following observation at [97]:
54.On the facts as found by this court, in light of the general context in which there was an admitted contractual engagement of Centaline by the Defendants to market the Property and the specific context in which the Defendants (via May) passed the Plans to Lau in reply to Au’s inquiry on the saleable area of the Property, this court is satisfied that there existed a manifestation of assent between the Defendants and Lau on the conferral of authority on her to pass the Plans to the Plaintiff for the purpose of proving the saleable area of the Property. 55.In his Closing Submissions, Mr Wong submits that Lau was just playing her role as a broker, as opposed to an agent of the Defendants, when she passed the Plans to the Plaintiff. Mr Wong also submits that there was no control on the part of the Defendants as to how Centaline would use the information provided. These submissions ignore the Defendants’ own case that there was a contractual arrangement whereby Centaline was to represent the Defendants in marketing the Property and dealing with purchasers and it was contemplated, under that arrangement, Centaline would pass on information to the Plaintiff or any other purchaser. These submissions also ignore the fact that the Plans came from the Defendants themselves and not from Centaline’s own database - the Defendants obviously had control over whether or not to send the Plans to Lau or the manner in which Lau was permitted to make use of them. Yet, the Defendants sent the Plans to Lau without imposing any restrictions on their use. 56.The present case is therefore the converse of cases like Cheng Kwok-fai v Mok Yiu-wah [1990] 2 HKLR 440 in which Godfrey J (as he then was) concluded at 445H-I that when a purchaser asked the estate agent for a plan and was supplied with one from the agent’s own records, the agent was acting on behalf of the purchaser, not the vendors. Similarly, in Montrio Ltd & Anor v Tse [2013] 4 HKC 505, a case on misrepresentation by an estate agent of the gross area of the units the subject of the transaction, the trial judge found that the vendors had not authorized an estate agent or her employer, an estate agency, to be the vendors’ agent in marketing the units and did not know the estate agent had done so by the use of a leaflet prepared by the estate agency. The trial judge held the alleged misrepresentation was not made by the estate agent on behalf of the vendors but rather on behalf of her employer. The trial judge’s finding was upheld on appeal. 57.Looking at all the matters in the round, this court is satisfied that when Lau passed the Plans to the Plaintiff, she was authorized by the Defendants to do so and was acting as an agent on their behalf. 58.The next question is what representation, if any, was made by Lau when she passed on the Plans to the Plaintiff. In this regard, Mr Hung refers this court to the following passage in IFE Fund SA v Goldman Sachs International [2006] EWHC 2887 (Comm) at [50]:
59.Mr Hung submits and this court agrees that in the factual context outlined above, a reasonable person in the position of Au and Tung for the Plaintiff would have understood the Plans as the Defendants’ answer to the Plaintiff’s enquiry concerning the saleable area of the Property. As such, the provision of the Plans to the Plaintiff would naturally and implicitly carry with it the representation that the saleable area of the Property was as shown on Plan A ie 758.46 sq m. This is so even assuming that the Defendants had not expressly vouched for the figures in Plan A. 60.Mr Wong submits that the words “The plan is for reference and identification purpose only” on Plan A means the Plaintiff and Centaline knew or ought to have known that the figures on Plan A did not represent the saleable area of the Property, but for identification of boundary only. This court does not agree. 61.First, the words “The plan is for reference and identification purpose only” do not stand alone - rather they form part of the legend[9] on Plan A in which areas marked as “X”, “Y” and “Z” were carved out from the original common area of the 38th Floor and attributed to various units on the 38th Floor for their exclusive use. Reading the legend as a whole, this court agrees with Mr Hung that the purpose of the words was to serve as a rider to the delineation of the units and the areas marked as “X”, “Y” and “Z”, rather as a qualification to the saleable areas appearing on it. 62.Second, Plan A was a “historical” document prepared in 2001 and the words “The plan is for reference and identification purpose only” were already printed there when Plan A was prepared. They were not added to Plan A by the Defendants when May passed it to Lau for the purpose of qualifying the accuracy of the figures of saleable area on it or warning her or the Plaintiff not to rely on those figures. 63.Third, despite diligent research by counsel, no authority has been cited to this court in order to establish that the phrase “for reference and identification purpose only” is a term of art with a universally accepted meaning when it appears on a plan. In Neilson v Poole (1969) 20 P & CR 909, a case cited by Mr Wong purportedly on the meaning of the phrase, the issue in dispute was the location of the boundary between the plaintiff’s and the defendant’s adjoining gardens. It was in this context that Megarry J concluded at p 916 that the effect of the phrase “for the purposes of identification only” on a plan was “to confine the use of the plan to ascertaining where the land is situated”. This court does not read Megarry J as having ascribed a universal meaning to the phrase which is applicable irrespective of the factual context. 64.In the present case, there was no suggestion that May passed the Plans to Lau or Lau passed the Plans to the Plaintiff for the purpose of showing the boundary of each of the individual unit as well as the common area on the 38th Floor. Rather, the Plans were sent to the Plaintiff as an answer to the latter’s request for proof of the saleable area of the Units. Hence, applying the test in IFE Fund SA v Goldman Sachs International, it seems to this court a reasonable person in the position of Au and Tung would still have understood Plan A as the Defendants’ answer to the Plaintiff’s enquiry on the saleable area of the Units, notwithstanding the appearance of the words “The plan is for reference and identification purpose only” in the legend. 65.To conclude, the answer to Issue 1 is that when Lau passed the Plans to the Plaintiff, she was acting as an agent for the Defendants and that the handing over of the Plans, specifically Plan A, constituted an implied representation by the Defendants, via Lau, that the saleable area of the Property was as per Plan A ie 758.46 sq m. Issue 2 66.As to whether Lau had given the Assurance to the Plaintiff, Au’s testimony has fallen far short of supporting the Plaintiff’s case. 67.In Au’s 1st witness statement, he did say Lau repeatedly assured him that the saleable area of the Property was as shown on Plan A. However, during cross-examination by Mr Wong in the afternoon on Day 1, Au failed to come up to proof regarding Lau’s alleged Assurance. The relevant part of the transcript reads:
68.During cross-examination by Ms Leung in the morning on Day 3, Au again failed to support the Plaintiff’s case on Lau’s alleged Assurance. Instead, he simply confirmed his answer to Mr Wong as transcribed above. 69.As far as Lau is concerned, she was very firm in the box in standing by what she had said in paragraph 11 of her witness statement ie on 17 April 2012, when she passed the Plans to Au and Tung, she only told them the Plans were obtained from the previous owner when the Company purchased the Property and she had never orally assured the two that the saleable area of the Property was as shown on the Plans. Her testimony has not wavered notwithstanding Mr Hung’s cross-examination. This court accepts her testimony as truthful. 70.Further, as a matter of inherent probabilities, this court does not see why Lau would have expressly vouched for the accuracy of the saleable area on Plan A when she was in absolutely no position to do so. It seems to this court more likely than not that what was said between Au and Lau was as transcribed above. 71.Given the state of the evidence summarized above, this court finds the Plaintiff has failed to prove on balance of probabilities that Lau had repeatedly assured Au that the saleable area of the Property was as shown on Plan A. 72.To the credit of Mr Hung, in his Closing Submissions, he has all but abandoned any reliance on Lau’s alleged Assurance as an express representation to the Plaintiff. Instead, Mr Hung focuses his submissions on the implied representation by virtue of Lau passing on the Plans to the Plaintiff, in line with the test laid down in IFE Fund SA v Goldman Sachs International supra. 73.To conclude, the answer to Issue 2 is that this court is not satisfied on the evidence that Lau had given the alleged Assurance to the Plaintiff. It is therefore academic to consider she was or was not acting as the Defendants’ agent in doing so. Issue 3 74.On the basis of the parties’ expert evidence, there is no doubt that the Representation was false. 75.Once it is proved that a false statement was made which is “material”, in the sense that a reasonable man would have been influenced by it in deciding whether to enter into the contract, and the representee did enter into the contract, it is a fair inference of fact that he was influenced by the statement. The evidential burden of proving a claimant’s decision to enter into the contract was not induced by a misrepresentation normally lies on the defendant: Chitty on Contracts supra at paras 7-037, 7-0411 - 7-042. 76.In the present case, this court has little doubt that a representation on the salable area of the Property is material in that a reasonable man in the position of the Plaintiff would have been influenced by it in deciding whether to enter into the Provisional Agreement. After all, saleable area represents how large the space the Plaintiff could exclusively enjoy for use as its office whereas gross floor area includes common area to be shared with others. 77.What is more, this court accepts Au’s testimony that he understood there could be a substantial difference between the gross and saleable area of the office units in Lippo Centre and that the Plaintiff needed to know the saleable area of the Property in considering whether to acquire the Property and at what price. Whether or not Au’s subjective understanding was correct is beside the point. The important point is that this court accepts the Plaintiff’s evidence that it was concerned with the saleable area of the Property and that it was in reliance on the saleable area shown in Plan A that it decided to acquire the Property and eventually entered into the Provisional Agreement. 78.Chronologically, it is indisputable that it was after the Plaintiff had received the Plans that Lau, on its behalf, made the first offer of HK$233.1 million to the Defendants on 19 April 2012 and began negotiation with the Defendants. It is also indisputable that on 24 April 2012, Lau sent a draft Provisional Agreement to the Plaintiff with Plan A attached at the latter’s request. Subsequently, at the Plaintiff’s request, the Plans were attached to the Provisional Agreement. 79.Further evidence in support of the Plaintiff’s case comes with Tan’s testimony who confirmed the Plaintiff’s concern with the saleable area of the Property and it was he who personally amended Schedule 1 of the Provisional Agreement by adding the words “as per the two (2) floor plans hereto” before Au signed on it. Tan is a straightforward and truthful witness. He is also an independent witness who had left the Plaintiff’s employment in early 2013. This court has no difficulty accepting his testimony aforesaid. 80.In his Closing Submissions, Mr Wong makes the point that if the Plaintiff considered the saleable area of the Property seriously, it could have instructed surveyors to conduct measurements before asking Centaline to send its offer to the Defendants. The short answer to that argument is that, as a matter of law, if the representee did not know that the representation was false, it is no defence to an action for recission that the representee might have discovered its falsity by the exercise of reasonable care: Chitty on Contracts supra at para 7-044. In the present case, this court is satisfied on the evidence that at the time of entering into the Provisional Agreement, the Plaintiff did not know that the saleable area on Plan A had been grossly inflated. Otherwise, it is most unlikely that it would have requested Centaline to attach the Plans to the Provisional Agreement or inserted the handwritten words “as per the two (2) floor plans hereto” to Schedule 1. 81.Mr Wong also argues that by reason of the words “The plan is for reference and identification purpose only” appearing on Plan A, that means the Plaintiff knew that the Defendants were not vouching for the truthfulness of the figures on Plan A. For reasons already explained above in relation to Issue 1, this court does not agree that the said words were “disqualifying words” as described by Mr Wong such that the Defendants have discharged the evidential burden that the Plaintiff had not been induced by their misrepresentation in entering into the Provisional Agreement. 82.Lastly, Mr Wong argues that the failure to expressly include the Property’s saleable area in the Provisional Agreement means the saleable area of the Property was not a term of the Provisional Agreement. In this court’s view, the argument is a complete non sequitur. What is at issue here is whether the Plaintiff was induced by the Defendants’ representation as to the saleable area of the Property in entering into the Provisional Agreement. Whether or not the saleable area of the Property was a term of the Provisional Agreement is irrelevant. 83.To conclude, the answer to Issue 3 is that the Plaintiff was induced by the Defendants’ implied representation as to the Property’s saleable area in entering into the Provisional Agreement. Further, this court is satisfied on the evidence that the saleable area of the Property was substantially less than 758.46 sq m. In other words, the Defendants’ representation was false. Issue 4 84.As Mr Hung submits in his Closing Submissions, the Plaintiff relies on clause 5 of the Provisional Agreement only as a fallback position so that if this court rules in its favor on the misrepresentation claim, there is no need to further consider clause 5. In view of this court’s finding on the misrepresentation claim, no useful purpose will be served by dwelling on Issue 4. Issue 5 85.In light of this court’s findings aforesaid, the answer to Issue 5 is that the Plaintiff was entitled to rescind and had rescinded the Provisional Agreement on 24 May 2012 and is further entitled to obtain a refund of the initial deposit. It goes without saying that the Defendants are not entitled to forfeit the initial deposit. The claims of the Defendants and Centaline 86.As stated earlier, the Defendants’ principal claim against Centaline is for an indemnity in respect of the Plaintiff’s claim whereas Centaline’s principal counterclaim against the Defendants is for its service charge in the sum of HK$1.75 million. 87.Just to re-cap, this court’s findings of fact in relation to Issues 1 and 2 are as follows.
88.In light of the aforesaid findings of fact, the issues previously agreed between the Defendants and Centaline have been substantially simplified - many of them have either been resolved or have become irrelevant or academic. This court can therefore quickly deal with the claims of the Defendants and Centaline against each other. 89.Concerning the Defendants’ claim for an indemnity, the Defendants have pleaded a number of implied terms under the Estate Agency Agreement as well as common law duties in their Amended Statement of Claim. These implied terms are to the effect that (a) Centaline was to represent the Defendants in dealing with potential purchasers according to the Defendants’ instructions; (b) Centaline should be reasonably satisfied as regards the accuracy of the information to be passed to the Plaintiff; (c) Centaline should explain the offer made by or any agreement to be reached with the Plaintiff; (d) Centaline should treat the Defendants and the Plaintiff in an equal and fair manner; (e) Centaline should carry out its service with reasonable care and skill. 90.In his closing submissions, Mr Wong has made only minimal effort in explaining why any of these terms should be implied into the Estate Agency Agreement according to the guidelines set out in Kensland Realty Ltd v Whale View Investment Ltd & Anor (2001) 4 HKCFAR 381. Be that as it may, for the present purpose, this court is content to accept that Centaline was under an implied contractual duty to act in accordance with the Defendants’ instructions and to carry out its service with reasonable care and skill, but not the others. 91.Notwithstanding the prolix list of breaches of duties and negligence on the part of Centaline pleaded by the Defendants, most of which are not pursued in the Defendants’ closing submissions, the crux of their complaint against Centaline is in fact quite straightforward ie without instructions or authority from the Defendants, Centaline had wrongly represented to the Plaintiff that the saleable area of the Property was as shown on Plan A ie 758.46 sq m. This is described in Mr Wong’s closing submissions as “the main matter” between the Defendants and Centaline. 92.Since this court has found Lau had not given the Assurance regarding the saleable area of the Property to the Plaintiff, there was simply no breach by Centaline of the duty to act in accordance with the Defendants’ instructions and to carry out its service with reasonable care and skill. Indeed, in Mr Wong’s opening submissions at paragraph 12, he frankly accepts that “certainly if the court finds that the version of [Centaline] holds water, then there is no justification for the indemnity to be sought by the Defendants.” The version of Centaline is of course that Lau had never represented to or reassured the Plaintiff that the saleable area of the Property was as shown in the Plans. 93.As for the passing of the Plans to the Plaintiff, Mr Wong confirms during his oral submissions, and rightly so, that the Defendants are not complaining that Centaline lacked instructions or authority to pass them to the Plaintiff. In any event, this court has found that when Lau passed the Plans to the Plaintiff, she was duly authorized by the Defendants to do so and was acting as an agent on their behalf. 94.In the premises, this court finds the Defendants have failed to establish Centaline had been in breach of any duty to them and they are therefore not entitled to an indemnity from Centaline. 95.Concerning Centaline’s counterclaim for its service charge of HK$1.75 million, on the pleadings, it is common ground that sometime in April/May 2012, the Defendants agreed to pay Centaline a commission[10] of 0.7% of the sale price if the Defendants, through Centaline, entered into a binding agreement of sale and purchase of the Property with a purchaser introduced by Centaline. According to the Defendants’ Re-Amended Reply and Defence to Counterclaim at paragraph 8, the relevant provisions of the commission were set out under clauses 8 to 11 of the Provisional Agreement. In fact, it is only clauses 8 and 9 as set out above which are relevant for the present purpose. 96.There is no dispute that on or around 10 May 2012, through the assistance of Centaline, the Plaintiff and the Defendants entered into the Provisional Agreement for the sale and purchase of the entire issued share capital of the Company, including the Property, at the price of HK$250 million, and that 0.7% of the sale price of HK$250 million amounts to HK$1.75 million. 97.There is also no dispute that the parties did not proceed to complete the Provisional Agreement. The Defendants’ case is that that they were entitled to accept the Plaintiff’s failure to complete as a repudiation of the Provisional Agreement. 98.Hence, the only defence raised by the Defendants is that the sale and purchase of the shares of the Company and the Property was not completed due to the “fault” of the Plaintiff. Given this court’s rulings above, the failure to complete was actually due to the “fault” of the Defendants, this defence naturally falls away. Under clause 9 of the Provisional Agreement, the Defendants are liable to pay the HK$1.75 million to Centaline should they fail to complete. Disposition and costs order nisi As between the Plaintiff and the Defendants 99.There shall be judgment in favour of the Plaintiff as follows:
100.The Defendants’ Counterclaim against the Plaintiff be dismissed. 101.The Defendants do bear the Plaintiff’s costs of the Action, including costs of the Counterclaim, to be taxed if not agreed, and paid by the Defendants forthwith, certificate for leading counsel. As between the Defendants and Centaline 102.The Defendants’ claim against the Third Party be dismissed. 103.There shall be judgment in favour of the Third Party in the sum of HK$1.75 million together with interest thereon at the rate of 1% over HSBC prime rate from the date of the Third Party’s Counterclaim ie 6 December 2012 until judgment and thereafter at judgment rate until payment. 104.Costs of the Third Party Action, including costs of the Counterclaim, be to the Third Party, to be taxed if not agreed, and paid by the Defendants forthwith, certificate for counsel.
Mr Andy Hung and Mr Alex Lai, instructed by Fan Wong & Tso, for the Plaintiff Mr Wong Chao Wai Brian, instructed by Joseph CT Lee & Co, for the Defendants Ms Shannon Leung, instructed by Cheung & Choy, for the Third Party [1] The words underlined were inserted into Schedule 1 by hand. [2] Paras 10(b) and (c). [3] Para 10 of the Defendants’ Amended Statement of Claim. [4] The Plaintiff was not required to pay service charge to Centaline under the Provisional Agreement: clause 7. [5] Paras 9(c) and (d) of the Re-amended Statement of Claim read together. [6] May is also Wong Senior’s sister. [7] In Tonto Home Loans Australia PTY Limited v Tavares & Others [2011] NSWCA 389 at [177]. [8] Cited with approval in Chitty on Contracts (33rd ed) Vol 1 para 7-015. [9] Described as “Note” on Plan A. [10] Described as service charge in the Provisional Agreement. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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