Jones Lang Lasalle Ltd v. China Faith Ltd and Others

HCA 2767/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2767 OF 2001

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BETWEEN

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Before: Deputy High Court Judge To in Court

Dates of Hearing: 20 - 22 and 25 - 27 September 2006

Date of Judgment:  12 October 2006

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J U D G M E N T

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INTRODUCTION

1.This is an action by the Plaintiff, for agency fee in the amount of $2.65 million and service fee in the amount of $97,200.  Summary judgment in respect of the claim for service fee had been entered against the 1^st Defendant and there was no appeal therefrom.  The primary claim for agency fee is against the 1^st Defendant, the purchaser of a commercial property at 1 Lyndhurst Terrace (the “Property”).  If the Plaintiff’s claim against the 1^st Defendant fails, the Plaintiff relies on a secondary claim against the 2^nd and 3^rd Defendants for breach of warranty of authority.

Dramatis Personae

2.Jones Lang LaSalle Limited,the Plaintiff, is a leading real estate agency company in Hong Kong, which needs no introduction.

3.Mr Fung Kin Keung is an International Director, Regional Head and Managing Director of the Plaintiff.  He had overall conduct of introducing the Property on behalf of its former owner, Maintown Development Limited (“Maintown”) to prospective purchasers at the material time.  He is the sole witness called by the Plaintiff in this trial.

4.Mr Andy Wong was a Senior Associate Director of the Plaintiff.  He was the estate agent of the Plaintiff responsible for marketing the Property on behalf of Maintown under a sole agency agreement between Maintown and the Plaintiff.  Later, he was jointly involved with Mr Fung in the introduction of the Property to the 1^st Defendant.  He gave a witness statement for the purpose of these proceedings on 9 September 2002.  He has left employment of the Plaintiff and declined to give evidence in this trial. 

5.Mr Chen Dacheng is the real purchaser of the Property.  He is a businessman in Shenzhen.  Through another businessman in Shenzhen, Mr Ma Zhujiang, he was introduced to a Mr Charles Lai and the 2^nd Defendant.  Mr Chen does not come to Hong Kong regularly and he engaged Mr Charles Lai as his consultant to advise him on the purchase of properties in Hong Kong.  Mr Chen conducted his investment through a number of corporate vehicles, including China Main Investment (HK) Company Limited (“China Main”) and the 1^st Defendant, China Faith Limited.  Between June and November 2000, Mr Chen acquired some very substantial properties in Hong Kong through China Main.  Those properties included the Asia Pacific Centre at 8 Wyndham Street, four houses in Tai Tam, a block on the Peak, an office unit in Wanchai and the Property.  The offices of China Main and the 1^st Defendant were situated on 27^th floor of Asia Pacific Centre.  At the material time, the office of the 2^nd Defendant was also situated there.

6.Mr Charles Lai was a speculator in real estate well known to Mr Fung.  He was adjudged bankrupt on 11 April 2000 and discharged on 11 April 2004.  At the material time, he was engaged by Mr Chen Dacheng as his consultant to advise Mr Chen in the purchase of properties.  Presumably because he was an undischarged bankrupt at the material time, he did not hold any office in Mr Chen’s companies.  He was the man in de facto control of China Main and the 1^st Defendant, at least so far as the real estate business of those companies were concerned. 

7.Mr Morris Chu, the 3^rd Defendant, was employed as Principal of the Property Investment Department of China Main.  He was the assistant to Mr Charles Lai.  At the material time, he was also an undischarged bankrupt.  Hence, the action is not pursued against him.  His salary was paid in cash by China Main so as to keep his salary out of reach of the trustee in bankruptcy and the Inland Revenue Department.  He signed a letter dated 11 October 2000 (the “Letter”) purportedly for and on behalf of the 1^st Defendant, which formed the basis of the Plaintiff’s claim.  He gave a statement for the purpose of these proceedings on 11 July 2001, about a month after the issue of the Statement of Claim by the Plaintiff.  At the time he was not yet made a defendant in this action.  He was not called to give evidence in this trial.

8.Mr Sidney Law was an employee of China Main.  He was the assistant to Mr Morris Chu.

9.Mr Joe Li was employed as a Marketing Researchist of the Property Investment Department of China Main.  He was an assistant to Mr Sidney Law.

10.China Main Investment (HK) Company Limited is Mr Chen Dacheng’s corporate vehicle for the purpose of carrying out his investment in Hong Kong.  It was incorporated as a shelf company under the name of Fortune Business Limited on 19 July 2000.  It was acquired on or about 7 September 2000 when its two subscribers’ shares were transferred to companies under the control of Mr Charles Lai and the 2^nd Defendant.  On the same day, the 2^nd Defendant and Mr Ma were appointed as first directors of the China Main and Mr Charles Lai’s and the 2^nd Defendant’s shareholdings were increased to 1,500 shares each while another 1,000 shares were allotted to a company controlled by Mr Ma.  On 20 September 2000, Mr Chen Dacheng was appointed as a third director and 6,000 shares were allotted to him.  On the same day, a resolution was passed to change the name of Fortune Business Limited to China Main.  Then on 5 March 2001, a month after the sale of the Property to the 1^st Defendant, Miss Ma Xiaoling and Mr Luo Xiao were appointed as directors to replace the 2^nd Defendant and Mr Ma.  The shareholding structure remained the same.

11.China Faith Limited, the 1^st Defendant,was a wholly owned subsidiary of China Main.  It was a corporate vehicle acquired for the purpose of acquiring the Property for sub-sale.  It was a shelf company incorporated on 21 August 2000.  It was acquired on or about 11 October 2000.  On that day, one of the two subscribers’ shares was transferred to China Main and the other to Mr Ma who held it on trust for China Main.  Mr Ma and the 2^nd Defendant were appointed as first directors of the 1^st Defendant and 9,998 shares were issued to China Main.  On 5 March 2001, the 2^nd Defendant resigned from his directorship while Miss Ma Xiaoling and Mr Luo Xiao were appointed as directors.  On 24 April 2001, Mr Ma also resigned from his directorship.  On 19 July 2002, Miss Ma Xiaoling and Mr Luo Xiao were replaced by Mr Liu Zhihe and Mr Liu Ming Hui as directors.  On 1 August 2002, all the shares in China Faith were transferred to two other companies, signifying the end of China Main’s or Mr Chen Dacheng’s ownership in the Property.  Thus, in term of shareholding, the 1^st Defendant which is now being sued is a differently constituted company from the one which was allegedly in breach of its payment obligation to the Plaintiff.

12.Maintown Development Limited was the former owner of the Property prior to its sale to the 1^st Defendant.  At the material time, Mr Frank Yip and his brother John Yip were directors of Maintown. 

13.Mr Frank Yip was one of the directors of Maintown.  He gave evidence on behalf of the 2^nd Defendant in this trial.  He was adjudged bankrupt on 8 May 2002, about two months after the sale of the Property.  He was discharged on 8 May 2006.

14.Mr Patrick Chung, the 2^nd Defendant, is a practising solicitor.  He was the sole proprietor of Messrs Patrick Chung & Co, which operated in an adjacent office to the 1^st Defendant on 27^th floor of Asia Pacific Centre.  He is now practising as a consultant in Messrs Michael Cheuk, Wong & Kee.  He gave evidence in this trial.

15.Ms Twinky Poon was the former secretary of the 2^nd Defendant.  She has ceased her employment with the 2^nd Defendant when his solicitors firm ceased business in October 2002.  She gave evidence on behalf of the 2^nd Defendant.

The background

16.On 9 March 2000, Maintown entered into a sole agency agreement with the Plaintiff to sell the Property by tender.  Mr Andy Wong was the estate agent of the Plaintiff who had conduct of that matter.  That sole agency agreement expired on 26 May 2000 with no tender having been offered.  Thereafter, the Plaintiff continued to act for Maintown as a non-exclusive agent at a fee subject to negotiation and provided that the sale price was above $330 million.  Since then, Mr Fung assumed the overall conduct on behalf of the Plaintiff in respect of the sale of the Property.

17.At about the same time, i.e. March 2000, the 2^nd Defendant and his former client, Mr Charles Lai, came to know a businessman from Shenzhen, Mr Ma.  Mr Ma introduced them to Mr Chen Dacheng, another businessman from Shenzhen who was interested in investing in real estate in Hong Kong.  After further discussions, it was agreed that Mr Charles Lai would act as Mr Chen Dacheng’s consultant to advise him on the purchase of the Property and the 2^nd Defendant would act as solicitor for the purchase.  It was also agreed that Mr Charles Lai and the 2^nd Defendant would be entitled to 15% share of profit made on the sale of the Property.

18.It was in that setting that Mr Fung came to discuss with Mr Charles Lai about the Property.  Mr Fung had been acquainted with Mr Charles Lai and his assistant, the 3^rd Defendant since the late 1980’s, having assisted Mr Charles Lai in a number of property transactions.  At the beginning of year 2000, Mr Fung met Mr Charles Lai and was invited to Mr Charles Lai’s office on 27^th floor of Asia Pacific Centre.  There he was introduced to the 2^nd Defendant as Mr Charles Lai’s legal adviser.  Mr Charles Lai indicated his interest in buying properties and Mr Fung suggested some properties, including the Property for Mr Charles Lai’s consideration.  This discussion led to further meetings and viewing of the Property by Mr Charles Lai, Mr Ma, the 3^rd Defendant, Mr Sidney Law and Mr Joe Li.  Mr Charles Lai proposed a purchase price in the region of $265 million to Mr Fung who relayed it to Maintown.  But Maintown considered the offer too low.

19.Towards the end of August 2000, Mr Charles Lai hosted a dinner on a pleasure boat, the Helena, in Aberdeen Marina Club to discuss the purchase of the Property with Maintown.  During that meeting the parties discussed about the terms of the sale and whether the purchaser could re-name the Property.  The identity of the would-be purchaser was not yet made known and at that time Mr Chen Dacheng had not yet acquired China Main and China Faith.  No agreement was reached on the purchase price.  That was only one of the preliminary discussions.

20.It should be noted that while the meeting on the Helena is not in dispute, the Plaintiff’s case is that the meeting took place in early October 2000, just a few days before execution of the provisional sale and purchase agreement in respect of the Property.  It is also the Plaintiff’s case that when Mr Fung and Mr Andy Wong arrived at the Helena, they were told by Mr Charles Lai that the parties had reached agreement on the sale and purchase of the Property at a price in the region of $265 million and that the purchaser would take care of the Plaintiff’s 1% agency fee.  This is the “Tripartite Agreement” referred to in the Plaintiff’s Amended Statement of Claim (the “ASOC”), Re-Amended Statement of Claim (the “RASOC”) and the Re-Re-Amended Statement of Claim (“RRASOC”).  For reasons as I shall explain, I reject Mr Fung’s evidence as to the date of the meeting and the Tripartite Agreement.

21.On or about 7 September 2000, China Main was acquired by Mr Chen Dacheng; and Mr Ma and the 2^nd Defendant were appointed as its first directors.  On 12 September 2000, the 2^nd Defendant commenced correspondence with the solicitors of Maintown, Messrs Johnson Stokes & Master (“JSM”) about the sale and purchase of the Property by requesting them for the draft provisional sale and purchase agreement for his approval.  A series of correspondence ensued which eventually resulted in JSM forwarding engrossments of two sets of a provisional sale and purchase agreement and an option agreement in respect of the Property and in respect of a store room on the roof to the 2^nd Defendant on 12 October 2000.  It should be noted that the 1^st Defendant was acquired on 11 October 2000 or probably having been acquired shortly before but put in action on that day with execution of the share transfer agreement in favour of China Main and Mr Ma; and the appointment of the 2^nd Defendant and Mr Ma as its first directors.  It should also be noted that the Plaintiff’s case is that the 3^rd Defendant signed the Letter in the presence of the 2^nd Defendant on that day.  Then on 13 October 2000, the parties executed the provisional sale and purchase agreements and option agreements in the office of the 2^nd Defendant.  Mr Sidney Law signed on behalf of the 1^st Defendant in the presence of the 2^nd Defendant as its solicitor and Mr Frank Yip signed on behalf of Maintown in the presence of its solicitor, Ms Sally Chan of JSM.  Mr Fung and Mr Andy Wong were also present.  After the execution, all of them, except Ms Sally Chan, went to Yung Kee Restaurant for dinner to mark the occasion.

22.It is not in dispute that some time in October 2000, the 3^rd Defendant countersigned over the 1^st Defendant’s company chop on the Letter dated 11 October 2000 which had been signed by Mr Fung confirming the 1^st Defendant’s agreement to pay the Plaintiff 1% of the purchase price in the event of successful introduction by the Plaintiff of a purchaser leading to the successful completion of the purchase of the Property.  The Plaintiff could only produce a photocopy of the Letter and could not account for the original copy or its photocopy with the original signatures.  The Plaintiff’s case is that the Letter contained and evidenced the agreement between the Plaintiff and the 1^st Defendant which is the “Agreement” pleaded in paragraph 13 of the Plaintiff’s RRASOC and on which the Plaintiff’s claim is based.  Both Defendants dispute the circumstances under which the Letter was signed.  Despite a number of reminders and a letter before action issued by the Plaintiff’s then solicitors, Messrs Sit Fung Kwong & Shum (“SFKS”), the 1^st Defendant did not pay and did not respond to deny liability for the agency fee.

The parties’ case

23.This case took five years to come up to trial.  The Plaintiff’s case changed course twice and made three amendments to its statement of claim.  The Plaintiff’s sole witness, Mr Fung, was searchingly cross-examined in respect of the amendments and was subject to adverse criticism by counsel.  I have summarised the critical parts of the Plaintiff’s pleaded case under its original Statement of Claim (the “SOC”), the ASOC and the RASOC in the second column of the annexed Schedule, the corresponding part of Mr Fung’s witness statement in relation thereto in the third column of the Schedule and the corresponding part of his evidence  in Court in the fourth column of the Schedule.  I have not included the RRASOC in the Schedule as the amendments contained therein are only related to what I accept as an obvious typographical error in paragraph 13(bb) of the RASOC, in which an obvious reference to the 3^rd Defendant was pleaded as the “2^nd Defendant”.  The Schedule shows how the Plaintiff’s case changed course and what Mr Fung said in his witness statement subsequent to the amended pleading and where Mr Fung’s evidence in Court departed from his witness statement.  The Schedule forms an integral part of this Judgment.

24.The Plaintiff original pleaded case under its SOC dated 19 June 2001 was based on an agency agreement as evidence by the Letter dated 11 October 2000 signed by the 3^rd Defendant.  At that stage, the claim was against the 1^st Defendant only.  That SOC was drafted by the Plaintiff’s then solicitors, SFKS.  The 1^st Defendant filed a defence dated 30 July 2001 pleading, inter alia, that the 3^rd Defendant had no authority to bind the 1^st Defendant.

25.In response, the Plaintiff filed the ASOC dated 4 November 2001 drafted by Miss Jennifer Tsang of counsel on the instruction of SFKS.  The Plaintiff’s amended case was based on the Tripartite Agreement.  Presumably to overcome problem of pre-incorporation contract, the Plaintiff pleaded that the Tripartite Agreement was ratified by the Letter and the Letter was signed by the 3^rd Defendant in the presence of Mr Charles Lai and the 2^nd Defendant with the authority of the 1^st Defendant.  The Plaintiff relied on the 2^nd Defendant as a director of the 1^st Defendant providing the company chop as conduct warranting that the 3^rd Defendant had authority to sign the Letter.  The 1^st Defendant was still the sole defendant.  The 1^st Defendant filed its amended defence on 20 February 2002.

26.Presumably, following a change of solicitors, the Plaintiff had a more critical review of the action.  It filed the RASOC dated 31 March 2003 to include an alternative claim against the 2^nd and 3^rd Defendants for breach of warranty of authority and of the Tripartite Agreement.  The claim for breach of the Tripartite Agreement was abandoned by the Plaintiff at trial.  The RASOC was drafted by Mr Paul Shieh of counsel on the instruction of JSM.  It introduced two significant changes to the Plaintiff’s pleaded case.  Firstly, it pleaded that the 2^nd and 3^rd Defendants undertook to procure the purchaser to pay the agency fee.  This is a new version of the Tripartite Agreement.  Secondly, it pleaded that the 2^nd Defendant told Mr Fung that the 3^rd Defendant was to sign the Letter.  This strengthens the Plaintiff’s case against the 2^nd and 3^rd Defendants for breach of warranty of authority.  The Plaintiff’s claim is now based on the Agreement contained or evidenced by the Letter, instead of the Tripartite Agreement.  But this Agreement is not the same agency agreement pleaded in the SOC.

27.The 1^st Defendant’s case is that the 3^rd Defendant was only an employee of China Main and had no authority to sign the Letter to bind the 1^st Defendant.  The 1^st Defendant does not admit the existence of the Tripartite Agreement and the circumstances under which the Letter was signed.  It also pleads in an obscure way that the Tripartite Agreement, even if proven, did not have the legal effect of binding Maintown to sell the Property at $265 million.  As this defence unfolds, it is the 1^st Defendant’s defence that Maintown and the 1^st Defendant had entered into two option agreements, which broke the chain of causation thereby disentitled the Plaintiff to agency fee under the Agreement, i.e. it was the option agreements and not the introduction of the Property by the Plaintiff which brought about the successful completion of the purchase of the Property.

28.If the Plaintiff’s claim against the 1^st Defendant fails for the 3^rd Defendant’s want of authority to bind the 1^st Defendant, but not otherwise, I have to consider the Plaintiff’s case against the 2^nd Defendant.  The 2^nd Defendant also disputes the Tripartite Agreement.  As the Plaintiff is no longer making a claim under the Tripartite Agreement against the 1^st or 2^nd Defendant, that agreement is no longer a live issue for all the parties except for consideration of Mr Fung’s credibility.  The 2^nd Defendant also disputes that the Letter was signed in his presence.

29.If the Plaintiff’s claim against the 1^st Defendant is successful, i.e. if the 1^st Defendant fails in its defence of lack of authority, the 1^st Defendant seeks a contribution from the 2^nd Defendant on the ground that he had wrongfully caused, procured, allowed and/or suffered the 3^rd Defendant to countersign on the Letter knowing or under circumstances that he ought to have known that the 3^rd Defendant had no authority to do so.  The 2^nd Defendant’s defence to the Contribution Notice is that it would not be just and equitable to order him to make any contribution.

30.Despite the pleadings raised many factual issues, I think there are only two main factual issues in this dispute.  There is no dispute that the Letter was signed by the 3^rd Defendant with the company chop of the 1^st Defendant affixed on it.  The first main issue is whether the 3^rd Defendant had actual authority, express or implied, or ostensible authority to bind the 1^st Defendant.  Mr Lee, counsel for the 1^st Defendant, disputes the date when the Letter was signed.  But, in the light of the available evidence, that is not capable of serious dispute.  Mr Lee also queries the failure of the Plaintiff to produce the copy of the Letter with the original signatures of Mr Fung and the 3^rd Defendant.  At the highest that may have an impact on the credibility of Mr Fung.  The second main issue is what were the circumstances under which the Letter was signed.  I shall turn to the questions of law after I have made the necessary finding of fact.

finding of fact

31.The Plaintiff called one witness to give evidence, Mr Fung.  The 1^st Defendant relied on the evidence of the 2^nd Defendant and called no witness.  The 2^nd Defendant gave evidence himself and called two witnesses, Mr Frank Yip of Maintown and his former secretary, Ms Twinky Poon.  The outcome of this case turns very much on my finding of credibility of the witnesses, particularly the credibility of Mr Fung as the Plaintiff bears the burden of proof.

Mr Fung

32.Mr Fung is a very impressive and persuasive witness.  He was well educated and has made remarkable achievement in his profession.  He is obviously a very intelligent person.  These make me all the more careful with his evidence.

33.I have summarised in the Schedule the Plaintiff’s pleadings in relation to a number of important issues at various times, the evidence in Mr Fung’s witness statements at the corresponding time and his evidence in Court.  His witness statement of 9 September 2002 is very consistent with the ASOC of 4 November 2001.  Mr Charles Lai arranged the meeting on the Helena and was presumably on board, but played no part in informing Mr Fung of the Tripartite Agreement.  At the time, the 1^st Defendant was the sole defendant in this action.

34.After a change of solicitors, the 2^nd and 3^rd Defendants were made parties to the proceedings.  The RASOC dated 31 March 2003 was drafted by a very competent and more senior counsel, Mr Paul Shieh.  A positive case was pleaded against the 2^nd and 3^rd Defendants, i.e. they undertook to procure the purchaser of the Property to pay the agency fee, that Mr Charles Lai told Mr Fung that the 2^nd Defendant would take care of the signing of the Letter and that the 2^nd Defendant personally told Mr Fung that the 3^rd Defendant would sign on behalf of the 1^st Defendant.  Counsel could not have invented all these allegations without instruction.  As the execution of the Letter was only attended to by Mr Fung on the part of the Plaintiff, no one other than Mr Fung could have given those instructions.  However, Mr Fung’s supplemental witness statement made on 16 September 2005, two and half years later showed significant departures from the pleading in the RASOC.  Mr Fung’s memory could not have improved over the two and half years.  He watered down much of the allegation against the 2^nd Defendant.  He said it was Mr Charles Lai who informed him about the content of the Tripartite Agreement.  The RASOC and his previous statement were silent about Mr Charles Lai’s involvement on this matter.  Next he qualified what was pleaded in the RASOC by saying that Mr Charles Lai qualified the 2^nd Defendant’s involvement in taking care of the matter only as solicitor of the 1^st Defendant.  Lastly, he totally played down the 2^nd Defendant’s role by saying it was he (Mr Fung) himself who relayed to the 2^nd Defendant what Mr Charles Lai had told him, i.e. that the 3^rd Defendant would sign the Letter.  Thus the effect of his supplemental witness statement is that the instruction to the 3^rd Defendant to sign the Letter did not come from the 2^nd Defendant’s mouth. 

35.His evidence in Court is a departure from his witness statement in further minimising the role of the 2^nd Defendant.  He said while Mr Charles Lai was informing him on board the Helena about the Tripartite Agreement, the 2^nd Defendant was drinking and said nothing, though he was within hearing range.  He also minimised his involvement in relation to the signing of the Letter.  He said in evidence that it was the 3^rd Defendant who relayed Mr Charles Lai’s instruction that the 3^rd Defendant was to sign the Letter to the 2^nd Defendant.

36.It appears that before the 2^nd Defendant was made a defendant, Mr Fung was keen to build a case of ostensible or implied authority by imputing certain acts to the 2^nd Defendant.  However, when the Plaintiff’s current solicitor saw fit to institute proceedings against the 2^nd and 3^rd Defendants based on breach of warranty of authority, he tried to back off, in his supplemental witness statement and even further in his evidence in Court.  Whether that is out of his benevolence to the 2^nd Defendant or out of his conscience, his evidence in these respects is suspect and unreliable.  He has totally destroyed his credibility.  I do not believe in his evidence.  He was not telling the whole truth.

Mr Frank Yip

37.The evidence of the other three witnesses lies within a very small compass.  It is not difficult to be impressive.  I shall start with Mr Frank Yip of Maintown.  He is a truly independent witness and has no apparent interest in the outcome of this litigation.  He was not known to the Defendants before the sale and purchase and presumably has no connection with them thereafter.  His answers under cross-examination are spontaneous as if he had a clear memory and was telling the truth.  I give full weight to his evidence.

Ms Twinky Poon

38.Ms Twinky Poon has ceased employment with the 2^nd Defendant.  She may have some attachment to his former employer.  However, her evidence is about how she handled company kits in the 2^nd Defendant’s office.  Her evidence is cogent, inherently credible and makes sense.  I accept her evidence.

The 2^nd Defendant

39.Having assessed the credibility of the other two defence witnesses, what is left is that of the 2^nd Defendant.  His evidence is directly in conflict with Mr Fung’s, such that either one of them must be lying and deliberately so.  Both of them are reputable professionals.  However, on two crucial issues of conflict, the 2^nd Defendant’s evidence is supported by Mr Frank Yip as to the date of the meeting on the Helena and by Ms Twinky Poon that he could not have had the 1^st Defendant’s company chop in his office to give to the 3^rd Defendant to affix on the Letter.  I accept his evidence.  Even if I do not, it would make no difference as the burden of proof in respect of the principal action is on the Plaintiff whose witness has been shown to be unreliable and the burden of proof in respect of the Contribution Notice is on the 1^st Defendant who adduced no evidence.

40.Having stated my views on the assessment of these witnesses, I now turn to consider the facts.

The meeting on the Helena

41.The date of this meeting is not very important as the Plaintiff’s case is based on the Agreement contained or evidence by the Letter and not on the Tripartite Agreement.  In his evidence in Court, Mr Fung pinned down the date of the meeting to be a few days before the date of the Letter of 11 October 2000.  His evidence is that at the meeting, Maintown and Mr Charles Lai and his group reached the Tripartite Agreement under which Maintown would sell the Property at a price in the region of $265 million and the would-be purchaser would pay the agency fee which should have been borne by Maintown.  The 2^nd Defendant’s evidence is that this meeting took place a few days before 5 September 2000.  He had a clear recollection of the date as that was the date when he had a car accident near Aberdeen Marina Club for which he was summonsed for careless driving.  He produced the summons in support of his evidence of the date.  He said that at the meeting on the Helena, nothing had been agreed as the negotiation was still at an early stage.  Mr Charles Lai and his group were discussing their concern whether the purchaser had the right to re-name the Property as some of the units in the Property had already been sold by Maintown.  He said he had mentioned that traffic accident and the meeting on the Helena during the dinner in Yung Kee on 13 October 2000 attended by Mr Sidney Law, Mr Frank Yip, Mr Fung, Mr Andy Wong and himself.  This evidence is supported by the evidence of Mr Frank Yip.  Mr Frank Yip said that the 2^nd Defendant told him that his car had hit the victim sending him up in the air but the victim miraculously suffered no injury.  He said he had a good recollection of that piece of conversation as it was very remarkable.  On the other hand, in his subsequent supplemental witness statement, Mr Fung did not respond to those evidence contained in the witness statements of Mr Frank Yip and the 2^nd Defendant.  In his evidence in Court, Mr Fung did not contradict the 2^nd Defendant’s evidence either.  Another aspect of Mr Frank Yip’s evidence which contradicts Mr Fung’s is this.  Mr Frank Yip said that Maintown had no agency fee agreement with the Plaintiff.  He would only pay a fee to be negotiated depending on the sale price and would not pay any agency fee if the sale price was below $330 million.

42.If the meeting took place in early October 2000, what Mr Fung said about the Tripartite Agreement and purchase price is credible as everything had by that time been agreed and the parties were about to sign the provisional sale and purchase agreement.  If, on the other hand, the meeting took place in late August 2000, what the 2^nd Defendant said is credible because it was not until 12 September 2000 that the 2^nd Defendant started correspondence with JSM and the purchase price then demanded by Maintown was $270 million and was not yet agreed.  In that case, what Mr Fung said about the Tripartite Agreement and purchase price is incredible.  In the ASOC dated 4 November 2001, the Plaintiff pleaded that this meeting took place in mid September 2000.  It must have been Mr Fung’s instruction in November 2001 that the meeting took place in mid September 2000.  Between mid September 2000 and the date of the Letter of 11 October 2000 was one month.  Mr Fung’s evidence in Court five years later is that the interval was just a few days.  I find that incredible.  If the duration appeared like a month to him back in November 2001 instead of a few days, the meeting must have been some time before the date of the Letter making it all the more likely that the 2^nd Defendant was right about the date.  Mr Fung’s evidence about the date of the meeting could be an honest mistake, but not his evidence of what was discussed during the meeting.  This impacts adversely on Mr Fung’s credibility.  If the meeting was before 5 September 2000, Mr Fung’s evidence about the Tripartite Agreement was a fabrication as the purchase price was not agreed until 20 September 2000 as shown in the correspondence between the 2^nd Defendant and JSM.  He must have made up this Tripartite Agreement only to discover later that it is inconsistent with contemporaneous correspondence between the 2^nd Defendant and JSM.  Hence he amended the date of the meeting to late September or early October 2000 in his witness statement dated 9 September 2002 and to early October in the RASOC dated 31 March 2003.  I find that the meeting on the Helena took place in late August and that the Tripartite Agreement was a concoction of Mr Fung to strengthen the Plaintiff’s case against the 1^st Defendant. 

The Letter

43.Mr Lee disputes that the Letter was signed by the 3^rd Defendant on 11 October 2000, but he could offer no positive evidence when it was signed.  There is no dispute that the Letter was signed by the 3^rd Defendant with the 1^st Defendant’s company chop affixed on it but the date when it was signed was left blank.  The 2^nd Defendant also said that he had been shown the Letter by the 3^rd Defendant in one of their regular meetings, probably after 11 October 2000.

44.According to Mr Fung, he took the Letter to the office of the 1^st Defendant on 11 October 2000 as dated on the Letter for Mr Charles Lai to countersign.  Mr Lee queried why in his position he would have acted like a messenger to deliver that Letter and why he did not sent it by post or by fax.  Mr Fung felt too contemptuous to reply.  The Letter was an agreement to pay $2.65 million and must be worthy of his personal attention.  The execution of the provisional sale and purchase agreement was imminent.  Mr Fung must have been keen to see to the signing of the Letter before the execution of the provisional sale and purchase agreement.  I think if Mr Fung had personally taken the Letter to Mr Charles Lai for his signature, that could be a reasonable explanation.

45.However, Mr Fung’s evidence did not end there.  He continued and gave an account that after reading the Letter, Mr Charles Lai said, “I’ll have Morris Chu and Patrick Chung to deal with this Letter and Morris will sign”.  Then Mr Fung went to the office of the 2^nd Defendant with the 3^rd Defendant.  The 3^rd Defendant told the 2^nd Defendant that he was going to sign the Letter and asked the 2^nd Defendant to have a look at the Letter.  The 2^nd Defendant denied having seen Mr Fung on 11 October 2000 and that the 3^rd Defendant had signed the Letter in his presence.  He could recall that never occurred because he could recall witnessing the execution of the provisional sale and purchase agreement on 13 October 2000 but had no recollection of seeing Mr Fung two days prior to that. 

46.More importantly is that Mr Fung’s evidence about seeing the 2^nd Defendant retrieving the company chop from the 1^st Defendant’s company kit is contradicted by the evidence of Ms Twinky Poon.  It is Ms Twinky Poon’s evidence that these shelf companies were bought in a lot.  When the company kits were delivered to the office of the 2^nd Defendant, she would remove the company chops and put them in her drawer.  She would make copies of the corporate documents and put them in the company file to work on them and then put the company kits on the shelf inside the 2^nd Defendant’s room.  If I accept her evidence, then what Mr Fung said about seeing the 2^nd Defendant retrieving the 1^st Defendant’s company chop from the company kit was not credible.  Ms Twinky Poon has ceased employment with the 2^nd Defendant.  Though it is possible that she might have some attachment or residual loyalty to her former employer, I do not think she would have lied on such a straight forward matter as how she used to handle company kits.  Her account of the procedure accords with common sense and good management so that she did not have to go into her employer’s room every time when the chop was needed. 

47.Mr Fung’s evidence, as I have shown in the Schedule and in paragraphs 33 to 36 above, is inconsistent with the Plaintiff’s pleadings, his own witness statement and supplemental witness statement.  He has been shown to have lied about the date of the meeting on the Helena and about what took place there.  He took the liberty to concoct the Tripartite Agreement to build a case for the Plaintiff.  He took the liberty to change his instructions to his solicitors and to change his evidence to protect the 2^nd Defendant.  He has been discredited and his evidence is so inconsistent with his two witness statements and with the pleadings that I could place no weight in it at all.  If the Letter had not been signed by the 3^rd Defendant inside the 2^nd Defendant’s office in the presence of the 2^nd Defendant, it is unlikely that Mr Fung would have been to the office of the 1^st Defendant and saw Mr Charles Lai and told that the 2^nd and 3^rd Defendants would deal with the Letter and that the 3^rd Defendant would sign.  I reject his evidence about the circumstances as to how the Letter came to be signed by the 3^rd Defendant.

48.According to the 2^nd Defendant, he had been shown a copy of the Letter by the 3^rd Defendant on one of their regular meetings afterwards.  He was told by the 3^rd Defendant that the 3^rd Defendant had signed the Letter and that there were some other terms which had not been included in the Letter.  He queried the 3^rd Defendant why he did not put down all the agreed terms in writing.  The 3^rd Defendant replied that Mr Fung said that would complicate the matter and as he had had numerous dealings with Mr Fung for a long time before there should not be any problem.  The 3^rd Defendant made a statement on 11 July 2001 before he was made a party to these proceedings.  That statement does not conform to the requirement under Order 38.  In that statement, he said in about mid October 2000, Mr Fung and Mr Andy Wong had a meeting with him to discuss agency fee concerning the purchase of the Property.  Mr Fung requested him to sign the Letter confirming payment of agency fee, but he replied that as the property market was gloomy, agency fee should be paid by the vendor.  Mr Fung said that as the purchase price was very low, Maintown was not willing to pay agency fee.  Mr Fung said the purchase was very favourable to the 1^st Defendant and it could immediately re-sell the Property.  Mr Fung promised to give full support in marketing the Property, shoulder advertising expenses, publication costs and to arrange a team of not less than five salesmen to market the Property for the 1^st Defendant.  Mr Fung also said the Plaintiff would not charge agency fee if the re-sale result was not ideal.  The 3^rd Defendant then requested Mr Fung to reduce his promise into writing but Mr Fung said that would complicate the matter and told the 3^rd Defendant to trust him.  On the strength of those assurances, the 3^rd Defendant signed the Letter but he did not immediately give it to Mr Fung.  He said subsequently Mr Fung did not keep his promise in providing support for marketing the Property and did not follow up on completion date.   He said as Mr Fung had promised not to seek agency fee if the re-sale result was not ideal, he did not pay further attention to the matter. 

49.Quite apart from the fact that the 3^rd Defendant’s statement does not conform to the requirement of Order 38, the statement is inherently incredible.  It is incredible that the Plaintiff would have given up the opportunity to earn agency fee in the re-sale by not marketing the Property.  Had Mr Fung made those assurances, it is incredible that he would have broken them before the Plaintiff was paid the agency fee.  What the 3^rd Defendant said is also inconsistent with contemporaneous documents.  Actually, there were sales brochure and advertisements in October and November 2000 showing that the Plaintiff was marketing the Property.  Indeed, there is evidence that the 1^st Defendant was negotiating a sole agency agreement with the Plaintiff and FPD Savills jointly to sell the Property.  The 3^rd Defendant’s explanation for not paying the agency fee on the basis of Mr Fung’s promise not to seek agency fee for the re-sale if the re-sales result was not ideal was a non-reason.  I have serious doubts as to whether what was said in that statement was said in good faith and was true.  I give no weight to that statement.

50.Thus, in the end, I am left with a vacuo as to what had happened which led to the signing of the Letter by the 3^rd Defendant.  All that I am satisfied is that it was signed by the 3^rd Defendant with the company chop of the 1^st Defendant affixed on it, but it was not signed in the presence of the 2^nd Defendant on 11 October 2000.  Having rejected Mr Fung’s evidence about the circumstances leading to the signing of the Letter and the 3^rd Defendant’s statement, it remains unexplained how and why the 3^rd Defendant signed that Letter with the 1^st Defendant’s company chop affixed on it.

the plaintiff’s claim against the 1^st defendant 

The Agreement

51.The Plaintiff’s claim against the 1^st Defendant is based on the Agreement, which is identified in paragraph 12 of its RRASOC.  In paragraphs 12 and 13(a), the Plaintiff pleaded as follows:

“12.   The effect of the Tripartite Agreement in respect of payment of commission by the purchaser to the Plaintiff was set out in a letter dated 11 October 2000 (“the Letter”) from the Plaintiff to the 1^st Defendant and countersigned by the 3^rd Defendant on behalf of the 1^st Defendant.  The Letter contained or evidenced an agreement between the Plaintiff and the 1^st Defendant (“the Agreement”) to the effect that in the event of the Plaintiff’s successful introduction of the Property leading to the successful completion of the purchase of the Property, by the 1^st Defendant, the 1^st Defendant shall pay to the Plaintiff agency fee being 1% of the agreed purchase price upon completion of the sale and purchase of the Property.

13. (a)  The Letter was signed on or about 11^th October 2000 at the 1^st Defendant’s Office by the 3^rd Defendant on behalf of the 1^st Defendant in the presence of Mr KK Fung of the Plaintiff and the 2^nd Defendant in circumstances particularized hereinbelow.”

On the pleading as it stands, the Agreement is either the Letter itself which is or contains the Agreement or it is another agreement the terms of which are evidenced in the Letter.  Under cross-examination, Mr Fung said the Agreement was the Tripartite Agreement reached on the Helena.  The 1^st Defendant could not have been a party to the Tripartite Agreement, even if it I were to find there was such an agreement.  The meeting on the Helena was held on or about 30 August 2000.  The 1^st Defendant was not incorporated until 21 August 2000, but even then it was only a dormant company on sale on the shelf.  It was acquired by the 2^nd Defendant on behalf of Mr Chen Dacheng or China Main on or about 11 October 2000.  In opening the Plaintiff’s case, Mr Kwan, counsel for the Plaintiff, said the Plaintiff was not suing on the Tripartite Agreement.  There is no evidence of any other agreement entitling the Plaintiff to agency fee.  Thus the Agreement pleaded could not have meant any agreement other than the one contained in the Letter.  Indeed, Mr Kwan confirms in his closing submission that the Agreement is contained in the Letter which also evidences the terms of the Agreement.

52.The Letter reads as follows:

“Further to our various discussion, we write to confirm our agreement to that in the event of our successful introduction of the above property leading to the successful completion of the purchase of the said property our agency fee will be 1% of the agreed purchase price payable by your Company (China Faith Limited) to Jones Lang LaSalle Ltd upon completion of the sale and purchase of the said property.

Yours truly,	Confirmed & Accepted by:-
For and on behalf of
Jones Lang LaSalle Ltd
…”

Both Mr Lee on behalf of the 1^st Defendant and Mr Ismail on behalf of the 2^nd Defendant, submit that the words “confirm our agreement” point to the existence of a separate agreement evidenced in the Letter or confirmed by the Letter and that agreement could not be anything else other than the Tripartite Agreement which they say is fictitious.  Hence, their submission is that the Letter failed to prove any agreement at all.

53.However, Mr Kwan ingenuously argues on the authority of Lord Hoffmann NPJ’s oft-cited dicta in Jumbo King and Faithful Properties Ltd & Others (1999)2 HKCFAR 279 that construction of a document is not a game with words and the court must bear in mind that the Letter was drafted by a layman who may be careless with the language and might have said things which if taken literally, mean something different from what the parties obviously intended.  The following dicta of Lord Hoffmann NPJ at 296 is apposite:

“The construction of a document is not a game with words.  It is an attempt to discover what a reasonable person would have understood the parties to mean.  And this involves having regard, not merely to the individual words they have used, but to the agreement as a whole, the factual and legal background against which it was concluded and the practical objects which it was intended to achieve.  Quite often this exercise will lead to the conclusion that although there is no reasonable doubt about what the parties meant, they have not expressed themselves very well.  Their language may sometimes be careless and they may have said things which, if taken literally, mean something different from what they obviously intended.  In ordinary life people often express themselves infelicitously without leaving any doubt about what they meant.  Of course in serious utterances such as legal documents, in which people may be supposed to have chosen their words with care, one does not readily accept that they have used the wrong words.  If the ordinary meaning of the words makes sense in relation to the rest of the document and the factual background, then the court will give effect to that language, even though the consequences may appear hard for one side or the other.  The court is not privy to the negotiation of the agreement – evidence of such negotiations is inadmissible – and has no way of knowing whether a clause which appears to have an onerous effect was a quid pro quo for some other concession.  Or one of the parties may simply have made a bad bargain.  The only escape from the language is an action for rectification, in which the previous negotiations can be examined.  But the overriding objective in construction is to give effect to what a reasonable person rather than a pedantic lawyer would have understood the parties to mean.”

54.I agree with and am bound by the above principle of construction.  The word “agreement” is capable of a number of meanings.  It could mean a legally binding contract comprising of offer, acceptance and consideration.  It could mean a written document setting out the terms of a legally binding contract.  It could mean meeting of the minds, i.e. thinking in the same way or having the same opinion, but without committing to any binding obligations.  Thus, the words “confirm our agreement” could mean as what Mr Lee and Mr Ismail contend, to confirm a prior contract by reducing it in writing.  Or they could mean to formally affirm the meeting of the minds by turning it into a legally binding contract through offer and acceptance.  In short, they could mean, in layman’s language, to say ‘yes’ to a proposal, or in more legalistic terms to confirm acceptance of an offer.

55.The factual matrix surrounding the signing of the Letter is that the Plaintiff as estate agent introduced the 1^st Defendant to Maintown and introduced the Property.  Estate agents do not work gratuitously.  They work for a fee, either to be paid by the vendor or the purchaser.  This is usually agreed before or during the course of introducing the property or during the negotiation of its sale and purchase.  There is no dispute that there was no prior agreement for agency fee between the Plaintiff and the 1^st Defendant and the Tripartite Agreement, on my finding of fact, never existed.  Execution of the provisional sale and purchase agreement was imminent.  Under such factual matrix, the words “confirm our agreement” could not convey to a reasonable reader that they mean to confirm a prior agreement or loosely an understanding in a prior negotiation which never existed.  Thus, the meaning which a reasonable reader having knowledge of the factual matrix would understand by those words is that the writer, i.e. the Plaintiff, was requesting the 1^st Defendant to confirm its acceptance of the offer contained in the Letter.  The offer was the Plaintiff’s services in introducing the Property and to continue to provide its services leading to successful completion of its purchase by the 1^st Defendant.  This intention is borne out very clearly by the words “Confirmed & Accepted by” which had been pre-typed by the Plaintiff and below which the 3^rd Defendant signed his name and affixed the company chop of the 1^st Defendant.  I have no doubt that this was what the Plaintiff meant and what the 3^rd Defendant understood by those words.  By putting down his signature and affixing the company chop of the 1^st Defendant, the 3^rd Defendant intended to accept the offer and to make a validly binding contract on behalf of the 1^st Defendant.

Whether the 3^rd Defendant had authority to sign the Letter on behalf of the 1^st Defendant

56.When a party relies on a contract entered into by an agent purportedly on behalf of the principal, he bears the burden of proving that the agent has authority to bind the principal.  The authority may be actual authority or ostensible authority.  Actual authority may be express or implied.  It is express when it is given by express words, such as a resolution passed by a board of directors or other forms of written authorisation or a power of attorney.  It is implied when existence of such authority could be reasonably inferred from the conduct of the parties and the circumstances of the case.  Ostensible authority is the authority of an agent as it appears to others.  There is no dispute that the 3^rd Defendant did not have express authority to enter into the agreement under the Letter.  Has he implied or ostensible authority?

57.Where an officer or an employee signs a contract expressly for and on behalf of a company and affixes the company chop on the document, it is usually sufficient proof of authority.  That is some evidence of ostensible authority or implied authority if the contract is one which is usual for an agent of his position to make.  The difficulty of the Plaintiff is that the 3^rd Defendant was not an employee of the 1^st Defendant but of its parent company, China Main.  The Plaintiff had a copy of the name card of the 3^rd Defendant describing him as the Principal of the Property Investment Department of China Main.  He was nevertheless not an employee or officer of the 1^st Defendant.  Though there is no dispute that the 1^st Defendant was a wholly own subsidiary of China Main acquired for the purpose of holding the Property, that it had no employee of its own and that it operated through the office of China Main, there is no evidence of the 3^rd Defendant’s involvement in the affairs of the 1^st Defendant up to the time when he signed the Letter.  He was the assistant to Mr Charles Lai who made the important decisions for China Main or the 1^st Defendant.  He had no implied authority to bind the 1^st Defendant.  Even Mr Fung himself said all his dealing in relation to the Property was with Mr Charles Lai and he did not believe the 3^rd Defendant had authority to enter into any agreement to pay agency fee.  He said he only took comfort from the fact that the 3^rd Defendant signed the Letter in front of the 2^nd Defendant as solicitor of the 1^st Defendant.  Thus it was clear to Mr Fung that the 3^rd Defendant had no ostensible authority either.

58.On this issue, Mr Ismail joined force with Mr Kwan.  They referred to three sub sale and purchase agreements entered into by the 1^st Defendant and sub-purchasers.  Those agreements were signed by the 3^rd Defendant on behalf of the 1^st Defendant.  They also referred to one service agreement which formed the subject matter of the other claim in this action for which summary judgment had been entered into.  That service agreement was also signed by the 3^rd Defendant on behalf of the 1^st Defendant.  They submit that the validity of those documents were not disputed by the 1^st Defendant and showed that the 3^rd Defendant had implied or ostensible authority to enter into the agreement contained in the Letter.    Unfortunately, all those agreements were made subsequent to the date of the Letter.  It is impossible for the Plaintiff to argue that those documents could have clothed the 3^rd Defendant with implied or ostensible authority before the those agreements were brought into existence.  I find that the 3^rd Defendant had no authority by virtue of his employment with China Main to act for the 1^st Defendant. 

59.Mr Kwan seeks to circumvent this problem by relying on the authority of the 2^nd Defendant as director and solicitor of the 1^st Defendant.  He argues that in that position, especially as a professional agent, the 2^nd Defendant has implied authority to do whatever is normally incidental to the execution of his express authority, including the making of representations on behalf of his principal or client, i.e. the 1^st Defendant as to who was an authorised signatory to sign documents in relation to the purchase of the Property or incidental matters.  He therefore argues that the circumstances of the execution of the Letter by the 3^rd Defendant were such that it appeared to the Plaintiff that the 3^rd Defendant had ostensible authority to sign the Letter to bind the 1^st Defendant.  That would be arguable if I were to accept Mr Fung’s evidence about the circumstances leading to the execution of the Letter by the 3^rd Defendant.  Though Mr Charles Lai was not a director or employee of the 1^st Defendant, he was instrumental in bringing about the sale and purchase of the Property, a transaction which the 1^st Defendant ratified or adopted.  Mr Charles Lai must have implied and ostensible authority to enter into the agency fee agreement with the Plaintiff which was reasonably incidental to the sale and purchase of the Property and to delegate an appropriate person to sign the Letter.  He so delegated the 3^rd Defendant when he told Mr Fung “I’ll have Morris Chu and Patrick Chung to deal with this Letter and Morris will sign”.  Then when the 2^nd Defendant, as a director and solicitor of the 1^st Defendant, gave its company chop to the 3^rd Defendant knowingly for the purpose of signing the Letter, it could be argued that he had implied authority to make representation on behalf of the 1^st Defendant that the 3^rd Defendant had authority to sign the Letter and hence clothe him with authority.  However, I have rejected Mr Fung’s evidence.  There is no evidence that Mr Fung had been to the office of Mr Charles Lai and had been informed that the 3^rd Defendant would sign the Letter.  There is no evidence that the 2^nd Defendant retrieved the company chop and gave it to the 3^rd Defendant to affix on the Letter and to sign it in his presence.  Mr Kwan’s argument must therefore fail.

60.In the circumstances, what is left of the Plaintiff’s case is that it obtained the Letter affixed with the company chop of the 1^st Defendant but signed by someone knowingly not its officer or employee under unknown circumstances.  That Letter is as worthless as one signed by a total stranger.  The Plaintiff has therefore failed to prove the Letter was signed by the 3^rd Defendant with the authority of the 1^st Defendant.

Whether the option agreements disentitled the Plaintiff to agency fee

61.Having reached the above conclusion, there is no need for me to deal with the 1^st Defendant’s defence based on the option agreements.  I shall deal with this defence briefly.  Mr Lee submits that the Plaintiff is not entitled to agency fee because the introduction of the Property by the Plaintiff was not the effective cause of the successful completion of the purchase of the Property and that the effective cause was the option agreements.  This is a defence which has been obscurely pleaded.  I have nevertheless allowed the defence to be argued.  The following relevant facts are not in dispute.  In the course of negotiating the purchase price of the Property, Maintown learned that the 1^st Defendant intended to sub-sell the units in the Property as soon as the provisional sale and purchase agreement was signed.  Should that occur and should the 1^st Defendant fail to complete, Maintown was concerned that the forfeiture of the usual 10% deposit might not be adequate to compensate its loss.  Maintown would not agree to the sub-sale unless the 1^st Defendant would put up a higher up front payment which it could legally forfeit in the event of the 1^st Defendant’s default.  Thus, Maintown’s solicitors suggested the option arrangement.  Under this arrangement, the 1^st Defendant was to enter into an agreement at a consideration of $9.5 million in exchange for an option to be granted by Maintown to the 1^st Defendant to purchase the Property at the price of $265 million as originally agreed.  To offset the additional option fee of $9.5 million, it was further agreed that Maintown would pay the stamp duty which was usually to be borne by the purchaser.  Thus two sets of sale and purchase agreement and option agreement, one for the Property and one set for a storeroom on the roof of the Property were prepared.  Both sets of agreements were executed on 13 October 2000 together.  The option fee of $9.5 million and the deposit of $0.5 million under the provisional sale and purchase agreements were paid at the same time.

62.On the above facts, Mr Lee argues and along with him Mr Ismail, that it was the option agreements, which brought about the successful completion of the sale and purchase of the Property and not the Plaintiff’s introduction of the Property.  Mr Ismail referred me to the case of Tribe and Others v Taylor (1876) CPD 505.  In that case the defendant requested the plaintiffs to introduce capital or purchaser for his business for a commission of 5%.  The plaintiffs introduced one Wood to advance a loan of 10,000l.  The plaintiffs were paid his 5% commission.  Some few months later, the defendant and Wood entered into an agreement for partnership by advancing a further 4,000l.  The plaintiffs’ claim in respect of commission for the additional advance was dismissed.  Brett J held at 509:

“The true construction of this contract, as it seems to me, is, that the plaintiffs are to have a commission of 5 percent for the introduction by them of capital into the defendant’s business at any time after the date of the contract. …  The question which arose at the trial was this, whether the advance of the 4000l was the result of any act of the plaintiffs.  …  If they had induced Wood to become a partner and to introduce further capital, I should have thought they would have been entitled to commission on that.  But I think Mr Bremner was right in saying that the question is whether the partnership was caused by any act of the plaintiffs.  Now, the only act they do is the original act of introduction which led to the advance of 10,000l.  Was the subsequent partnership the result of that introduction or of an independent negotiation between the defendant and Wood?  Causa proxima is not the question: the plaintiffs must shew that some act of theirs was the causa causans.”

Lindley J was of the same opinion.  He held the test is whether the 4000l brought into the defendant’s business by Wood can be considered as capital brought in through the intervention of the plaintiffs.  It is Mr Ismail’s submission that applying this test, the sale and purchase of the Property was brought about by the option agreements and not the act of introduction by the Plaintiff.

63.Even accepting this test, the finding is one of fact.  Looking at the conduct of the 1^st Defendant and Maintown, their primary objective in entering into the option agreements was to sell and purchase the Property at $265 million.  The sale and purchase of the Property was an event certain or intended to take place and not a fortuitous event as Wood’s joining the partnership in Tribe and Others v Taylor, which was wholly unforeseeable or un-intended by the parties at the time of the first advance of 10,000l.  The option agreements were the means to an end, the end being the sale and purchase of the Property.  The parties’ liabilities were nicely taken care of so that the 1^st Defendant’s option fee is off-set by saving in stamp duty.  The whole arrangement was designed to achieve the end of sale and purchase of the Property at $265 million.  I find as a fact that the option agreements did not have the effect of breaking the chain of causation as to disentitle the Plaintiff to agency fee, had I found the 3^rd Defendant had authority to sign the Letter.

Conclusion

64.I am not satisfied that Maintown and Mr Charles Lai and his group had reached the Tripartite Agreement on the Helena.  I am satisfied that on its true construction the Letter is an agreement and not a confirmation of an earlier agreement.  But I am not satisfied that the Plaintiff has proved that the 3^rd Defendant who purportedly signed the Letter for and on behalf of the 1^st Defendant had authority to bind the 1^st Defendant.  Accordingly, the Plaintiff’s claim against the 1^st Defendant must be dismissed.  I make a costs order nisi that the Plaintiff shall pay the 1^st Defendant’s costs.

the plaintiff’s claim against the 2^nd defendant

65.Counsel have no dispute that I only need to consider this claim if the Plaintiff’s claim against the 1^st Defendant is dismissed but I nevertheless accept the evidence of Mr Fung.  I have rejected Mr Fung’s evidence about the circumstances under which the Letter was signed and have accepted the evidence of the 2^nd Defendant.  Not only has the Plaintiff failed to prove the 2^nd Defendant had warranted the 3^rd Defendant had authority to sign the Letter, the 2^nd Defendant has actually proved that he had not made any such warranty.  In the circumstances, the Plaintiff’s claim against the 2^nd Defendant must be dismissed.  I make a costs order nisi that the Plaintiff shall pay the 2^nd Defendant’s costs.

the 1^st defendant’s contribution notice against the 2^nd defendant

66.Having reached the above conclusions, the 1^st Defendant’s Contribution Notice against the 2^nd Defendant must be dismissed.  I also make a costs order nisi that the 1^st Defendant shall pay the 2^nd Defendant’s costs on the Contribution Notice.

conclusion

67.The Plaintiff’s action against the 1^st Defendant and 2^nd Defendant is dismissed with costs.  The 1^st Defendant’s Contribution Notice against the 2^nd Defendant is dismissed with costs.  All costs orders are orders nisi.

Mr. Steven Kwan, instructed by Messrs Johnson, Stokes & Master, for the Plaintiff

Mr. Lee Yee Hung and Ms. Yvonne So, instructed by Messrs Michael Cheuk, Wong & Kee, for the 1^st Defendant

Mr. Anthony Ismail, instructed by Messrs Mike So, Joseph Lau & Co., for the 2^nd Defendant

Schedule