LegCo Paper No. CB(1) 2030/95-96
(These minutes have been seen by the Administration)
Ref : CB1/BC/11/95/2

Bills Committee on Estate Agents Bill

Minutes of Meeting
held on Wednesday, 19 June 1996 at 8:30 am
in Conference Room B of the Legislative Council Building

Members Present :

    Hon Andrew CHENG Kar-foo (Chairman)
    Hon Albert CHAN Wai-yip
    Hon LEE Wing-tat
    Hon CHAN Yuen-han
    Dr Hon LAW Cheung-kwok
    Hon NGAN Kam-chuen

Members Absent :

    Hon Mrs Selina CHOW, OBE, JP
    Hon Edward S T HO, OBE, JP
    Hon Ronald ARCULLI, OBE, JP
    Hon LI Wah-ming
    Hon James TO Kun-sun
    Hon CHAN Kam-lam

Public Officers Attending :

Mr William SHIU
Principal Assistant Secretary for Housing
Miss Eva TO
Assistant Secretary for Housing
Ms Sherman CHAN
Senior Assistant Law Draftsman (Atg)

Staff in Attendance :

Mrs Vivian KAM
Chief Assistant Secretary (1)2
Mr Stephen LAM
Assistant Legal Adviser 4
Miss Becky YU
Senior Assistant Secretary (1)3

I. Matters Arising

Luncheon Meeting with Jones Lang Wootton

The Chairman reminded members of the luncheon meeting with representatives of Jones Lang Wootton scheduled for Tuesday, 25 June 1996, in the Ritz Carlton Hotel. Members’ attendance had been called for vide LegCo Paper No. CB(1) 1622/95-96.

Case of Golden Garden

2. The Chairman reported that an outline of the complaint relating to the Golden Garden case had been circulated to members vide Appendix V to LegCo Paper No. CB(1) 1622/95-96. He invited members to have reference to the case when considering the proposal from the Duty Roster Members for making it an estate agent’s responsibility to verify the contents of the advertisements of the properties in connection with Clause 47 on Advertising.

II. The Meeting

Clause 41. Certain employment prohibited

3. No particular comments were made on this clause.

Clause 42. Notice of certain events

4. In reply to members, Mr William SHIU confirmed that reference had been made to other legislation on the requirement for estate agents to notify the Estate Agents Authority (EAA) of certain events within a period of 31 days. He undertook to set out in writing a comparison with other legislation with similar requirements.

Clause 43. Giving of notices

5. No particular comments were made on this clause.

Clause 44. Liability of directors, etc

6. In reply to a member, Mr SHIU confirmed that the provisions in Clause 44 were consistent with the general law.

Clause 45. Vicarious liability of estate agents

7. Some members considered that the clause as drafted would have the risk of creating liability stricter than might be necessary in that employers were made to bear the legal consequence of criminal acts of fraud of the employees of which they had no prior knowledge. They questioned the need for this clause having regard to the provision under the common law on vicarious civil liability and enquired about the impact if the clause were to be deleted. A member however took a different view and considered that the clause should remain subject to inclusion of an escape clause of "due diligence" whereupon employers who had taken all necessary precautions to ensure the conduct of business of their employees would not be unduly penalized. The Assistant Legal Adviser (ALA) cautioned that the proposed inclusion might result in greater protection for employers than that under the common law.

8. In response, Mr SHIU advised that the objective of the clause was to remove any doubt over the relationship of a licensed estate agent and a licensed salesperson. The clause had not created additional burden under the common law on estate agents as far as vicarious liability was concerned. He held the view that the proposed deletion of the clause would undermine the regulatory system. Ms Sherman CHAN supplemented that an employer would be vicariously liable for any actionable act or omission on the part of the employee in the course of employment only if an employer-employee relationship had been established. The intention of the clause was to protect the interest of customers. On the inclusion of an escape clause, Ms CHAN advised that by virtue of sub-clause 45(2), any addition or deletion of clauses in the Bill should not be taken as affecting the application of the common law.

9. A member was worried that the clause might alter the existing employer-employee relationship in the trade as employers might try to get away with their obligations by not engaging into employment contracts with the employees. He sought clarification on whether similar provisions on vicarious liability existed in other legislation such as the Insurance Companies and the Securities and Futures Ordinances. Mr SHIU conceded that the existing employer-employee relationship was subject to interpretation. To eliminate any possible grey area, it was necessary to define clearly such relationships in the Bill. Ms CHAN considered that the situation envisaged by the member was common in tax avoidance. Under the common law, an employer would be held vicariously liable for someone under his direct control even in the absence of an employer-employee agreement.

10. Members urged the Administration to consider re-phrasing the term "omission" in sub-clause 45(1) as this might be taken as imposing vicarious criminal liability, as opposed to vicarious civil liability for an actionable act on the part of the employers. Ms CHAN advised that the word "actionable" in the clause applied to both the terms "act" and "omission". To allay members’ concern, Ms CHAN proposed to include the word "actionable" before the term "omission". Members generally agreed with such an approach but considered that there might be a need to include in Clause 2 on Interpretation legal definitions for the terms "actionable act" and "actionable omission". They also considered it useful to include an explanatory note to supplement the intention of the clause.

Clause 46. Estate agents’ liability for certain money received

11. Members sought clarification on the extent of control of estate agents on the moneys received. Mr SHIU advised that estate agents should only use the moneys for the purposes of making payments in accordance with the client’s instructions. As regards the suggestion of drawing up separate guidelines on moneys received by estate agents for dual and separate representation respectively, Mr SHIU considered this unnecessary since Clause 39 had stipulated the obligations of estate agents to keep the moneys received from clients (including both vendors and purchasers) in separate accounts.

Clause 47. Advertising

12. In referring to the Administration’s response on this clause in paragraph 6 of Appendix III to LegCo Paper No. CB(1)1622/95-96, members questioned the rationale for including property prices in estate agency agreements as these would fluctuate according to market trends. They also expressed concern about the validity of verbal agreements and considered a need to define explicitly the position of verbal agreements and if properties overseas were similarly covered. A member further suggested deleting or deferring the implementation of sub-clause 47(1)(b) since the clause as drafted was at variance with current practices of the trade and would increase the operation costs of estate agents.

13. Mr SHIU advised that since complaints about advertisements related mainly to the supply of misleading information, it was necessary to have in place measures to guard against malpractices in this respect. The Bill empowered the EAA to make regulations on advertising and prescribe particulars to be included in advertisements, subject to the approval of the Secretary for Housing. The intention of the clause was to require an estate agent to obtain prior consent from a vendor before the agent advertised the property on behalf of his client. The price of a property was only one possible item of information contained in an estate agency agreement. Mr SHIU agreed with members that property prices might fluctuate, but was of the view that the requirement for full disclosure of information including offers being made had already provided a safety net to enable parties concerned to reach their own decisions based on available information. As regards verbal agreements, Ms CHAN raised two possible approaches for members’ consideration: to include in Clause 2 on Interpretation a definition for advertisements, or to add the word "verbal" or "written" before "advertisements" to eliminate any possible grey areas. On the last point concerning sub-clause 47(1)(b), Mr SHIU conceded that the Bill would bring about changes in the operation of the trade but this would be inevitable taking into account the unprecedented nature of the Bill and its objective for protecting the interest of all parties concerned including estate agents. He assured members that public education and arrangements such as phased implementation would be considered to ensure a smooth transition after passage of the Bill. A member remarked that as advertising was a marketing ploy, the Bill should not be over-restrictive in this aspect. Members requested the Administration to provide for their reference samples of prescribed statements or particulars to be included in advertisements.

14. A member considered that a potential vendor should be identified before an estate agent could advertise the property concerned. In the event of an agent acting for a prospective purchaser, he should also inform his client whether he had the type of potential property in hand. Mr SHIU said in response that it was the responsibility of estate agents to disclose fully the requisite information to contracting parties to estate agency agreements.

15. In reply to members on the rationale for excluding Clause 47 from the application of Clause 56 on Offences, Ms CHAN advised that since regulations on advertising had yet to be prescribed by the EAA, it was not possible to include in the Bill the respective offences on non-compliance when the actual requirements had not been prescribed. However, the level of penalties for offences would follow the parameters set out under sub-clause 57(2). In reply to a related question, Ms CHAN explained that provisions under sub-clause 56(1)(g) applied to general offences concerning the supply of false or misleading information.

16. Members sought elaboration on whether the transfer of cases among estate agents was allowed and considered a need to include specific provisions in the Bill. Mr SHIU advised that the transfer of cases among estate agents would not create problems so long as the vendor concerned agreed to such an arrangement in an estate agency agreement. The details had yet to be worked out by the EAA. Ms CHAN emphasized the importance of agreements to estate agents as this would be the pre-requisite for payment of commission.

17. In response to members on the definition of "false, inaccurate or misleading" information, Ms CHAN advised that the Administration would consider re-phrasing the term. Mr SHIU assured members that the EAA would draw up guidelines in this respect.

Clause 48. Section 37(4) not to apply to certain licensed estate agents

18. In reply to members on the rationale for inclusion of such a clause in the Bill, Ms CHAN advised that the intention of the clause was to exclude application of various clauses of the Bill to a licensed estate agent acting in the course of his employment as a salesperson by another estate agent. Sub-clause 37(4) dealt with the duty of an estate agent and accordingly if it were to be retained, it should not apply to such a licensed estate agent, who would instead be covered by sub-clause 37(3)(b).

19. There being no other business, the meeting closed at 10:40 am.

LegCo Secretariat
4 September 1996

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