Reaffirming the Boundaries of Agency and Misrepresentation in Property Transactions:

Kwan Kwok Ki v Wong Tung Hung & Ors [2025] HKCFI 1600

The recent decision of the Court of First Instance in Kwan Kwok Ki v Wong Tung Hung, Choi Chi Chung, and Centaline Property Agency Limited (HCA 1343/2014; [2025] HKCFI 1600) provides a timely and authoritative restatement of the legal principles governing fraudulent misrepresentation, fiduciary duties of estate agents, and the scope of vicarious liability in the context of high-value commercial property transactions.

Factual Matrix

The plaintiff, Mr. Kwan Kwok Ki, acquired a commercial building—K.K. Centre on Temple Street, Kowloon—for HK$347 million. The defendants, comprising two individual estate agents (D1 and D2) and their employer, Centaline Property Agency Ltd (D3), acted as his agents in the transaction. Central to the dispute was the plaintiff’s allegation that he was induced to overpay due to fraudulent misrepresentations, including the presentation of a fabricated provisional sale and purchase agreement (the “Purported Savills Agreement”) purporting to show a competing offer of HK$338 million.

The plaintiff claimed that the actual market value of the property at the time of purchase was only HK$267 million and sought damages for the HK$80 million differential. D3 counterclaimed for commission under the agency agreement.

Legal Issues and Analysis

The Court, in a detailed 180-page judgment by Yeung J, addressed several interlocking legal issues:

1. Fraudulent Misrepresentation and Reliance

The Court found that D1 and D2 had knowingly presented a forged document to the plaintiff, with the intent to induce him to increase his offer. The Court accepted the plaintiff’s evidence that he relied on the misrepresentations in deciding to raise his offer from HK$340 million to HK$347 million. The judgment reaffirms the principle that reliance need not be the sole cause of entry into a contract, but must be a material inducement (see Zurich Insurance Co plc v Hayward [2017] AC 142).

2. Fiduciary Duties of Estate Agents

The Court held that D1 and D2, as estate agents, owed fiduciary duties to act in good faith and in the best interests of their client. Their conduct—particularly the use of a forged document to manipulate the client’s decision—constituted a clear breach of those duties. D3, as their employer, was held liable both directly and vicariously.

This aspect of the judgment is particularly instructive for the real estate industry, as it underscores the heightened obligations of transparency and loyalty that estate agents owe to their clients, especially in transactions involving substantial sums.

3. Vicarious Liability

The Court applied orthodox principles of agency and employment law to find D3 vicariously liable for the acts of D1 and D2. The judgment aligns with the reasoning in I-Cable Webserve Ltd v The Telecommunications Authority [2009] 6 HKC 275, affirming that employers are liable for misrepresentations made by employees acting within the scope of their authority.

4. Causation and Mitigation

The defendants argued that subsequent negotiations and the plaintiff’s refusal to cancel the transaction broke the chain of causation. These arguments were rejected as unpleaded and unsupported by evidence. The Court emphasized that causation in misrepresentation cases is a question of fact, and that the plaintiff’s reliance on the misrepresentation was both reasonable and proximate.

The Court also dismissed the argument that the plaintiff failed to mitigate his loss by refusing a subsequent offer to resell the property at HK$390 million. The Court found that the offer was never properly communicated and, in any event, did not negate the original loss.

5. Valuation and Quantum

The Court preferred the evidence of the plaintiff’s expert valuer, Mr. Charles Chan, over that of the defendants’ expert, Mr. Ian Cullen. The Court found Mr. Chan’s methodology—particularly his use of the direct comparison approach and his treatment of conversion costs—more robust and grounded in local market realities.

The market value of the property as at 6 June 2012 was assessed at HK$267 million. The plaintiff was awarded damages of HK$80 million, representing the difference between the purchase price and the assessed market value.

Implications for the Legal and Property Sectors

This decision is a cautionary tale for estate agents and property professionals. It reinforces the legal and ethical standards expected of agents, particularly in high-stakes transactions. The judgment also serves as a reminder that fiduciary duties are not merely aspirational but are enforceable obligations with serious consequences for breach.

For legal practitioners, the case offers a comprehensive treatment of the interplay between misrepresentation, fiduciary duty, and agency law. It also illustrates the evidentiary rigour required to establish fraud and the importance of expert evidence in valuation disputes.

Conclusion

Kwok v Wong is a landmark decision that will likely be cited in future disputes involving estate agency conduct and misrepresentation in property transactions. It affirms the judiciary’s commitment to upholding professional integrity and protecting clients from deceptive practices in the real estate market.