2. While some members considered it necessary for a prescribed estate agency agreement to be drawn up by the Estate Agents Authority (EAA), Hon James TO Kun-sun expressed reservations on such an approach as the use of prescribed forms was not common in other trades. Mr William SHIU and Ms Sherman CHAN advised that according to the definition of "prescribed" under Clause 2 on Interpretation and the provisions under sub-clauses 49(1)(a) and 57(1)(k), EAA was empowered to prescribe by regulation the form and the particulars to be included in documents embodying estate agency agreements, subject to the approval of the Secretary for Housing and normal legislative procedures. Ms CHAN supplemented that the use of exact wordings in a prescribed form was not compulsory according to the Interpretation and General Clauses Ordinance. Agreements which were devised otherwise were acceptable so long as the substance of the agreement prescribed under the Bill was not affected. She quoted the example of the Companies Ordinance whereby companies could furnish their own printed forms which might deviate from the statutory form for submission to the Registrar. Members considered a need to specify certain essential information in estate agency agreements to ensure consistency. Mr SHIU advised that sub-clauses 50(2) to (4) had already provided the basis upon which agreements should be drawn up.

3. As to whether the Administration would consider borrowing the experience in Singapore whereby commission for property transactions was collected through solicitors to avoid defaults in payment, Mr SHIU advised that the estate agency agreement itself would provide sufficient protection for both estate agents and clients. Disputes as regards commission could be referred to EAA for adjudication.

4. Members considered that the rate of commission payable, as opposed to the amount, should be specified in sub-clause 50(3) having regard to actual experience. Mr SHIU explained that the clause referred to had provided for specification of both the rate and the amount of commission payable but undertook to refine the wordings as appropriate to eliminate any possible grey areas. Members sought elaboration on the relationship between sub-clauses 50(3)(b) and (c). Ms CHAN advised that the former stipulated the duty of an estate agent to disclose to his client all pecuniary and other beneficial interests in the property concerned which were known to the agent at the time when an agreement was signed, while the latter stipulated the obligations of the agent to inform the client of subsequent changes such as new undertakings which had not been stated in the agreement.

5. Members considered that operational details under sub-clause 50(4), in particular 50(4)(d), should be excluded from the principal legislation to allow for flexibility for EAA. Mr SHIU advised that the clause referred to had already provided EAA the flexibility to prescribe conditions in addition to sub-clause 50(3) if circumstances so required. He added that subsequent changes to agreements such as the amount or rate of commission payable could be accommodated by supplementary agreements provided under sub-clause 50(4)(d). Ms Eva TO supplemented that sub-clause 50(4)(d) only prescribed the manner in which supplementary agreements should be made, subject to the consent of both estate agents and clients.

6. Members enquired about the possibility of including other next of kin of estate agents apart from spouses, such as parents and siblings, in the application of sub-clause 50(5) in order to extend the protection for customers. Ms CHAN said in response that the extent of control in this respect was a matter of policy. She quoted the example of the Companies Ordinance where offspring were included. Mr SHIU undertook to consider members views in this respect.

7. While some members considered it necessary to include provisions in the Bill to preclude the inclusion of exemption clauses in estate agency agreements as these would be against the consumers interests, others felt that this should be decided by EAA. Mr SHIU undertook to consider members views taking into account provisions in the Control of Exemption Clauses Ordinances.

Clause 51. Duty to supply copy of unexecuted estate agency agreement

Clause 52. Duty to supply copy of executed estate agency agreement

8. In reply to members, Ms CHAN explained that Clause 51 aimed to prescribe the manner in which copies of unexecuted estate agency agreements should be presented. Sub-clause 51(1) required that when an unexecuted estate agency agreement was presented in person by an estate agent for signature of a client before signature by any other party, a copy of the agreement so signed should be delivered to the client on the spot. If the unexecuted agreement was sent for signature, a copy of this should be sent at the same time to the person whose signature was sought in accordance with sub-clause 51(2). Ms CHAN emphasized that an agreement would become an executed document only if it was signed by both the vendor and the purchaser and that would be covered by Clause 52. The objective of Clause 51 was to ensure that the party who first signed the unexecuted agreement had a copy for reference.

Part VII - Miscellaneous

Clause 53. Disputes as regards commission

9. In reply to members, Mr SHIU confirmed that with the agreement of the agent and the client, or both clients in the event of dual representation, disputes as regards commission could be referred to EAA for adjudication. Members were worried that this would restrict EAAs role as a redress channel since some estate agents might decline to proceed with the claims. Ms CHAN advised that on the contrary, estate agents would be more eager to seek expeditious redress as far as commission was concerned. She emphasized that the provision did not preclude other redress avenues, such as the Small Claims Tribunal for claims for an amount up to $15,000, and District Courts for claims for an amount above $15,000 to $120,000, or the High Court for claims for an amount beyond that, if either party refused to bring the case to EAA for adjudication.

10. While members agreed with the need for a cheaper and faster redress alternative, they were of the view that the EAAs decision should not be final and binding if either party raised objection to such a decision. Mr SHIU advised that since referral to EAA was made out of the free will of both parties, the decision of EAA should be final. Some members considered that estate agents might tend to include an adjudication clause in future estate agency agreements to avoid possible disputes in this respect.

11. As to whether disputes arising from verbal agreements could be resolved under Clause 53, Mr SHIU advised that sub-clause 53(1)(c) had spelt out clearly the need for written estate agency agreements for the purposes of Clause 53. Subsequent changes to the agreement such as the rate or amount of commission payable should be reflected through supplementary agreements. Ms CHAN added that sub-clause 50(4)(d) had provided for stipulation of the manner in which supplementary agreements should be made. Members were worried that consumers might not be aware of any requirements made under sub-clause 50(4)(d) regarding the invalidity of verbal agreements as opposed to their application in the common law. To rectify the situation, a member suggested making non-compliance with Clauses 49 and 50 a criminal offence. Ms CHAN advised that related penalties on non-compliance had yet to be prescribed by EAA. She added that it was possible for EAA to introduce subsidiary legislation to negate the use of verbal agreements in estate agency agreements. The Assistant Legal Adviser advised that as a matter of general principle, amendments to an agreement should follow the manner in which the agreement was made. In the event that verbal agreements were prohibited, any losses to clients due to misrepresentation on the part of the estate agents could be recovered through civil proceedings in accordance with the Contract Law.

12. Members expressed reservations at the proposed exclusion of verbal agreements as this was at variance with the common law. They urged the Administration to re-consider the liabilities of estate agents in the event of failure to inform clients concerned of subsequent modifications to estate agency agreements. Mr SHIU undertook to consider members views.

Clause 54. Partnerships

13. No particular comments were made on this clause.

Clause 55. Immunity

14. Members considered that sub-clause 55(2)(b) as drafted would erode the right of silence of persons under investigation and that the power to require a person to "answer questions put to him in any investigation" should only be conferred upon organizations where the nature of work involved had significant impact on the society. They were not convinced that similar provisions should apply to estate agency work which was regarded as a trade. Miss TO took note of members views but emphasized that the intention of the clause was to facilitate investigations so that persons could answer questions freely and fearlessly. She supplemented that the Administration was liasing with the Attorney Generals Chambers with a view to refining the clause. At members request, Miss TO undertook to provide a list of regulatory bodies where similar provisions were applicable.

III. Any other business

15. Two meetings were scheduled as follows:

- Friday, 19 July 1996, after the meeting of the Finance Committee; and

- Monday, 29 July 1996, at 2:30 pm.

(Post-meeting note: The meeting scheduled for 19 July 1996 was subsequently cancelled.)

16. There being no other business, the meeting closed at 12:45 pm.

Legislative Council Secretariat

12 November 1996

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