Read the full judgment text of HCA 2032/2007 on BabelCite. This Court of First Instance judgment was delivered on 30 April 2010 before M H Lam.
Agency agreement – construction of Clauses 3, 4 and 5 – entitlement to commission – agent's obligation to follow up with collection of purchase price – whether agent required to pursue arbitration or legal proceedings at its own cost – whether effective-cause test applies – whether six-month period in Clause 5 cuts off commission – disputed payments of RMB 1 million on 16 May 2000 and HK$3 million on or about 18 August 2000 – whether payments made on account of commission – counterclaim for misrepresentation – 委 託 協 議 書 dated 15 January 2000 for the sale of 26.8% of the shares in White Cat in Shanghai – shares held by SKY, sold on 5 May 2000 to a PRC purchaser at RMB 108 million – purchaser paid RMB 75 million then defaulted – balance of RMB 33 million plus interest recovered on 13 January 2007 after arbitration and enforcement – Plaintiff claimed commission of RMB 15.75 million – Defendant paid RMB 3 million (or RMB 3,141,564.49 per Defendant's case) and counterclaimed. Held, on construction of Clause 4, that '跟進收取有關款項' does not include an obligation to commence arbitration or legal proceedings at the Plaintiff's cost; the Agreement contains no authority for the Plaintiff to act in the Defendant's name and no costs indemnity, and Clause 3 merely regulates timing. No effective-cause condition is to be implied; the Plaintiff's procurement of the sale was the basis of the eventual recovery. The six-month period in Clause 5 governs the duration of the agency to find a buyer, not a condition subsequent to commission. The Defendant failed to prove that the RMB 1 million payment to 上海文昌科技 was made on account of commission; the detailed receipt of 14 June 2000 made no reference to it and there was no documentary link to the Plaintiff. The Defendant also failed to prove that the HK$3 million paid in August 2000 was advanced commission; Mr Cheung's alternative account was rejected but Mr Lam's evidence was inconsistent and no receipt was obtained, so the burden was not discharged. The counterclaim in misrepresentation failed because the Plaintiff was contractually entitled to the commission and the sums paid were within the Defendant's commission liability; the 14 June 2000 receipt moreover showed Mr Lam was not misled as to the nature of the $3 million. Judgment for the Plaintiff on liability; counterclaim dismissed; quantum to be computed on agreed conversion rates, otherwise to be argued; costs reserved for a half-day hearing, the court flagging the Defendant's refusal to consider mediation and other conduct as relevant to the basis of taxation.
Legal issues: Construction of Clause 4 – whether Plaintiff was obliged to pursue arbitration/legal proceedings at its own costs against defaulting purchaser · Whether the effective-cause test qualified the Plaintiff's entitlement to the balance of the commission · Effect of the six-month period in Clause 5 on the Plaintiff's commission · Whether the RMB 1 million paid on 16 May 2000 was on account of commission to the Plaintiff · Whether the $3 million paid on or about 18 August 2000 was on account of commission to the Plaintiff · Whether the Defendant's counterclaim for misrepresentation succeeds
Outcome: Judgment for the Plaintiff; counterclaim dismissed. Quantum to be worked out on the basis of the parties' agreement on currency conversion rates, failing which there will be a further hearing on that issue.
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