ESTATE AGENT – acting for potential Vendor and Purchaser – breach of duty – failure to exercise due diligence – failure to communicatepotential purchaser’s counter offer expeditiously and in manner stipulated by Vendor – Loss of “good chance” of buying property dueto Vendor’s later acceptance of higher offer from third party – damages.
Chaplin v Hicks  2 KB 786 considered.
IN THE DISTRICT COURT OF HON GKONG
CASE NO. 1489 OF 1991
Coram: H.H. Judge Downey
Date: 30 July 1991
1. By a writ, issued on the 25th February 1991, the Plaintiff (“Mr. Chan”) claimed “liquidated damages of HK$51,200″ in respect of the”defaults and malpractice” of the Defendant, a well-known firm of estate agents. Mr. Chan has acted in person at all stages of theseproceedings. The Defendant filed its own defence on the 9th March 1991; but, since the 26th April 1991 it has been represented bya firm of solicitors, whose senior partner or proprietor is also a consultant to the Defendant. Mr. Ho of that firm was present ata hearing before Mr. Registrar Jennings on the 29th April 1991, when this action was set down for trial. On that day an order formutual. discovery was made. The Plaintiff complied with that order by sending to the Defendant’s solicitors photocopies of all documentsin his possession. The Defendant failed to comply with that order. When I asked for an explanation, Mr. Ho informed me that the Defendanthad lost all documents and his firm had obtained copies from the bundle supplied by the Plaintiff. This explanation was later contradictedby the only witness called on behalf of the Defendant, Miss Anne Ho, who told me that various documents material to this case werein the Defendant’s office. Yet, none of them has been produced by the Defendant.
2. Yesterday, on the date set for the trial, Mr. Ho sought to have the action struck out on the ground that it disclosed no reasonablecause of action. Although the particulars of Mr. Chan’s claim would attract legitimate criticism from an expert in legal pleading,I did not think its imperfections or defects are such as to call for that extreme action at this late stage. The details of Mr. Chan’scomplaint were given in the writ, and had been more fully set out in a letter (dated 6.2.1991) included in his efforts to complywith the order of discovery nearly three months before the trial. The Defendant had not been prejudiced by any ineptitude on Mr.Chan’s part. In all the circumstances, it is and was clear that he was claiming damages, not exceeding $51,200, for the alleged failureof the Defendant to carry out its duties as Mr. Chan’s agent in his endeavour to purchase a flat in Arts Mansions, Conduit Road (“theflat”) at a price of $1.08 million.
3. I heard evidence from Mr. Chan and Miss Ho. Not surprisingly, their evidence differed in certain respects. In respect of such differences,I prefer the evidence of Mr. Chan. Miss Ho was an unsatisfactory witness in many ways. She was extremely evasive. She frequentlycontradicted herself; and some of her explanations were just not credible. In my view, she was less than frank in her reasons fordisregarding the Vendor’s request that Mr. Chan’s offer to purchase the flat should be sent to the Vendor’s solicitors. She claimedthat her decision to get Mr. Chan to sign the Provisional Agreement for Sale and Purchase (Exh. P1) was to protect Mr. Chan, sincesending an offer letter to the solicitors would not bind the. Vendor. Of course, the signature of Mr. Chan on Exh. P1 would not bindthe Vendor. But it would bind Mr. Chan to pay $26,200 to the Defendant if Mr. Chan failed to go through with the purchase. That,in my judgment, was the only reason for getting Mr. Chan to sign that document. It was done solely to secure the Defendant’s interestin getting the commission it expected to receive from acting for both parties! In essence, it is Mr. Chan’s complaint that his interestand expectation of becoming the owner of the flat was disregarded and defeated by the Defendant’s obsession with its desire to secureits commission, and its unreasonable delay in commuicating his offer to the Vendor, and failure to do so in accordance with the Vendor’sclear request, i.e. a letter addressed to its solicitors.
4. In my judgment, Mr. Chan’s complaints are fully justified. I find the following facts. Having seen the flat on the 30th January 1991he made an offer to buy it for HK$1.08 million. Miss Ho conveyed that offer to the Vendor’s agent the next morning. At or about 11am on the 31st January, Miss Ho told Mr. Chan that his offer had been accepted, subject to preparation of a Provisional Agreementfor Sale and Purchase. That may not have been an accurate representation since it is not clear whether the Vendor’s agent (“Mr. Au”)indicated that Mr. Chan’s offer was accepted or would be considered by the Vendor. But, having regard to Miss Ho’s experience anddifficulties in selling the flat, and the apparent close relationship between the Vendor and the Defendant, I am satisfied that MissHo conveyed to Mr. Chan her confidence that the Vendor would accept his offer. After all, the flat had been placed with the Defendantfor some 3 or 4 months without attracting buyer at the Vendor’s asking price. Mr. Chan’s offer, . which I find was actually and recommendedby Miss Ho, was only $30,000 below the asking price. There was, in my view, a good chance that Mr. Chan’s offer would have been acceptedby the Vendor if it had been effectively communicated to the Vendor’s solicitors on the 31st January 1991. I find that it was notcommunicated until late on the afternoon of Saturday, the 2nd February 1991. It could and should have been sent to the Vendor’s solicitorson the afternoon of the 31st January 1991. That was never done. In effect, Mr. Chan’s serious intentions of purchasing the flat neverreached the Vendor’s solicitors or other agents in time to prevent the Vendor accepting a higher offer from another purchaser, whosuddenly appeared in the scene. There is no concrete evidence to show when that purchaser appeared and showed its interest in theflat. But, in all the circumstances of the case, I think that I am entitled to infer that Mr. Chan stood a good chance of becomingthe owner of the flat on the 31st January 1991 or on the following day. He lost that chance because of the Defendant’s breach ofits duty as Mr. Chan’s agent in failing to carry out his instructions with reasonable diligence.
5. I now turn to the more difficult question of the assessment of damages. Mr. Chan is entitled to damages for the loss of the chanceof acquiring the flat. As it is not clear that the Vendor had orally accepted Mr. Chan’s offer, he is not entitled to damages onthe basis of the difference between his offer and the value of the flat. He is, however, entitled to more than nominal damages. Heis to be compensated for the loss of the chance of becoming the owner and for disappointment through the frustration of his plans.(See Mcgregor on Damages 15th Ed. 1988 paras. 356-365). The sums claimed by Mr. Chan are based on what he would have lost if he had repudiated a binding agreementwith the Vendor. That contingency never materialised. In any event the sum claimed would be greater than the loss of bargain, whichI find not to be recoverable in this case. Insofar as the sum claimed includes the amount of the deposit, no loss has been sustainedsince his cheque was returned. One way of approaching what is essentially a “jury function” (cf. Chaplin v Hicks  2 KB 786, at 791-2) is to consider what Mr. Chan would have had to pay the Defendant for its services if they had been carried out successfully.There is some evidence that Mr. Chan had agreed to pay a commission of 1% to the Defendant. The amount entered in clause 5 of theProvisional Sale and Purchase Agreement (Ex. Pl) was apparently entered in error. The commission which Mr. Chan would have had topay if his offer had been accepted would have been $10,800. In effect that was the value which the Defendant put on its services,which I find they did not perform until after the Vendor had received a higher offer for the flat. In all the circumstances, I considerthat a reasonable sum to compensate Mr. Chan for his lost chance and the associated disappointment would be $10,000. There will bejudgment against the Defendant in favour of the Plaintiff in that amount.
Plaintiff in person.
Mr. HO Fu-wah of Messrs. Joseph C.T. Lee & Co. for defendant.