Archive for the ‘Fraudulent misrepresentation’ Category

Misrepresentation as to the identity of the purchaser

November 26, 2016

In Greatland Property Consultants Ltd v Charis Patria Ltd ([2016] HKEC 2518) C signed sale and purchase agreements to sell two floors of a building to P (a company that owned two other floors of the building) for a total consideration of HK$ 6 million. This meant that P owned 80% of the shares in the building and could apply for a compulsory sale of the property under the Land (Compulsory Sale for Redevelopment) Ordinance. The sale was arranged by L, an estate agent. C had made it clear to L that it was prepared to sell for HK$6 million but that the price for a sale to P would be much higher. L represented to C that the buyer was a businessman from the mainland. On this basis, C agreed to sell for HK$ 6 million. The provisional sale and purchase agreements provided for C to pay L HK$60,000 by way of commission (or agreed damages if the sale did not go ahead). When C discovered that P was the purchaser it rescinded the sale and purchase agreements and paid P HK$300,000 by way of liquidated damages.

L brought proceedings against C claiming the HK60,000 she alleged was due under the sale and purchase agreements. C’s defence was that L had misrepresented the identity of the purchasers. To facilitate this, L had written the purchasers’ name in Chinese so that C would not realise that the purchaser was P. Although P’s company chop was placed next to the signature of the authorised signatory, this was only done after C’s representative had signed so that C had no way of seeing it before the contract was entered into. Overturning the finding at first instance that this misrepresentation had not induced the contract, the Court of Appeal (Chu JA giving the main judgment) held that C’s defence was successful. Its counterclaim to recover from L the HK$300,000 it had paid in damages to P was also successful.

Michael Lower



Misrepresentation: failure to disclose landlord’s objections to alterations to the property

February 19, 2013

InĀ Santani Ltd v Shum Shuk Fong ([2013] HKEC 104, CFI) S sold a flat to C. C agreed to pay an extra HK$2m on top of the value of the flat because of the prospect of being able to enjoy the adjacent large garden. The garden had been leased to S by the Hong Kong Government at a very low rent. S told C that there would be no problem that would prevent C from enjoying the garden as it was at the time of the sale provided she made no additions or alterations. In fact, the District Lands Office had already served an Order on S requiring her to remove certain unauthorised structures. S did not disclose this. The Order had not been complied with fully even by the date of the hearing. The Government would not grant a new lease until the works specified in its Order had been carried out.

The court held that there had been a misrepresentation that had induced the contract. The representation that there was no problem concerning the tenancy was false and S either knew this or was reckless as to whether it was true or not. C was awarded damages to reimburse her for the extra sum that she had agreed to pay (on top of the market value of the flat) because of her expectation of being able to enjoy the garden.