Mrs Chu had a terrible first experience with buying a flat and vowed that she would exercise great care when dealing with a limited company again. Three months before, on the introduction of an estate agent, Mrs Chu inspected a flat. The price was more than 10% lower than that of other flats in the same district, and she liked the flat very much. So she wanted to sign a provisional agreement for sale and purchase with the owner immediately. In the afternoon, the owner showed up and handed Mrs Chu his name card. His title was Manager, ABC Co Ltd. He said that the property belonged to the company and he had only come to sign the agreement on behalf of the company. The man further said that as he was in a hurry he had not brought with him the relevant papers. He promised to supply them later. Because the papers were not ready, he would not take too much deposit from Mrs Chu but only $5,000 in cash as a token of Mrs Chu's intention. Unaware of any fraud, Mrs Chu signed an agreement with him and gave him $5,000 in cash.
Quite some time later, the solicitor acting for Mrs Chu informed her that he had not been able to contact the solicitor acting for the owner. Mrs Chu then called ABC Co Ltd and asked for the manager, only to learn that the man had left his job the previous month. The flat used to be staff quarters occupied by the man when he was employed by the company. Mrs Chu at once realized that she had been taken in and lost $5,000. Of course, the manager was nowhere to be found.
In the above incident, if Mrs Chu had not been rushed into signing the agreement but had demanded such proof of authorization as the seal of the company, the power of attorney issued by the company, and board resolutions approving the sale of the flat and the authorization of representative, she would not have sustained such losses. At the very least, the deposit should have been made by cheque drawn in favour of the limited company. Another point to be noted is that once a limited company goes into liquidation, it is in no position to perform a contract or to make any compensation. As a limited company is a separate legal entity, its directors may not have to bear personal liabilities. At the same time, it is advisable for an estate agent to be especially careful in handling transactions involving a limited company and to give the purchaser appropriate advice.
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