Ng Kam Yuen Terence and Another v. Pun Yan Hing and Another

HCA No. 11581/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 11581 OF 1998

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ASSESSMENT OF DAMAGES

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1. The plaintiffs were the owners of the property known as all those 38,952nd parts or shares of and in New Kowloon Inland Lot No. 6161 and of and in the messuages erections and buildings erected thereon now known as "Parc Oasis" together with the sole and exclusive right and privilege to hold use occupy and enjoy all that Flat D, 4th Floor, Tower 27, of Parc Oasis (hereinafter referred to as "the Property"). They entered into a written Agreement for Sale and Purchase dated 22nd October 1997 ("the Agreement"), whereby, the plaintiffs agreed to sell and the defendant agreed to buy the Property at the purchase price of HK$6,820,000.00. The sale is subject to a tenancy agreement for a term of 2 years from 15th February 1997 at a monthly rental of HK$19,000.00 as particularized in Part VIII of the First Schedule to the Agreement. Pursuant to the Agreement, the defendants paid a total deposit of HK$682,000.00. The Agreement provided that completion should be on or before 17th May 1998, whereupon the defendants would pay the balance of the purchase price in the sum of HK$6,138,000.00. The defendants failed to complete the purchase on or before the stipulated date.

2. In this action, the plaintiffs claimed among other things damages for repudiation of the Agreement. Interlocutory Judgment was entered on the 28th December 1998 for damages to be assessed with costs of the action. The assessment of damages came before me on the 8th February 2001.

The Evidence

3. Mr. Ng Kam Yuen gave evidence on behalf of himself and the 2nd plaintiff. Mr. Ng gave evidence verifying the facts aforesaid. A photocopy of the Agreement had been annexed to an affirmation made by him on the 28th April 1998 marked Exhibit "NYKT-1". Although he was willing and able to complete the sale of the property to the defendants, the defendants failed to pay the balance of the purchase price of HK$6,138,000.00 on the 27th May 1998. On the 28th May 1998, the plaintiffs' solicitors Messrs. Tony Lam & Harrace Lau wrote to the defendants' then solicitors stating the breach of the Agreement by the defendants in their failure to complete the purchase of the property. By the letter the plaintiffs forfeited the deposit paid by the defendants and determined the Agreement reserving the plaintiffs' rights to claim damages for all loss suffered including any deficiency in the purchase price upon resale. A Memorandum of Determination of Agreement was registered at the Land Registry thereafter. This is shown at pages 41 - 45 of the Bundle of Documents.

4. The plaintiffs immediately placed the Property on the market for resale with Midland Realty. At that time, only a few prospective purchasers viewed the Property. On the 1st July 1998, the plaintiffs entered into an Agreement for Sale and Purchase with Tse Kam Wing & Kok Lai Wa for the price of HK$3,600,000.00. A copy of the said Agreement is at page 50 of the Bundle. The sale was subsequently completed on the 5th October 1998.

5. The plaintiffs claimed the following items of loss when he gave evidence:-

1. Additional interest he had to pay on his own mortgage loan to the Property. He produces Exhibit P2 a letter from his mortgagee bank to show the additional interest he had to pay from 3rd June 1998 to 3rd October 1998 in the total sum of HK$101,632.42. The basis of this claim is that the defendants well knew about his mortgage on the Property as it is disclosed at Part VII at page 12 of the Agreement.

2. The Land Registry fees for the Registration of the Memorandum of Determination in the sum of HK$210.00.

3. Deficiency between the sale price to the defendants and the sale price of the subsequent resale pursuant to Clause 11(1) of the Agreement in the sum of HK$2,538,000.00

Damages

6. Clause 11(1) and (2) of the Agreement states,

"11. (1) If the Purchaser should (save the default of the Vendor) fail to complete the purchase in accordance with the terms and conditions of the Agreement, the deposits and other money paid by the Defendants to the Plaintiffs should be absolutely forfeited as liquidated damages (and not as penalty) by the Plaintiffs who may determine the Agreement and resell the Property, by public auction or by private contract and subject to such conditions and stipulations as to title or otherwise as the Plaintiffs may think fit. Any deficiency arising from such resale and all expenses attending the same shall be made good and paid by the Defendants as and for liquidated damages, and any increase in price realized by any such resale should belong to the Plaintiffs.

(2) This clause shall not preclude or be deemed to preclude the Vendor from taking other steps or remedies to enforce the Vendor's rights under this Agreement or from recovering in addition to liquidated damages, other damages or loss or otherwise."

7. After the hearing for Assessment of Damages on the 8 February 2001, upon consideration of Clause 11(1) which was the sub-clause relied on by the plaintiff for the assessment of damages claimed, I felt that it was necessary for the plaintiff's solicitor to make submission on the construction of Clause 11(1) in that the sub-clause provided for two sets of liquidated damages. On the 19 February 2001, I requested my clerk to inform the plaintiff's solicitor that I wished him to make submissions on Clause 11(1), which he had not previously done, in the light of paragraph 485 at page 322 of McGregor on Damages 16th Edition under the section entitled "Effect of holding a stipulated sum to be liquidated damages or a penalty". Further I required him to make submission on the construction and effect of Clause 11(1) in the light of paragraph 997 of the same book entitled "Effect of a deposit on the damages".

8. The plaintiff's solicitor came back to make submission on the Clause 11(1) and (2) on 8 March 2001. After submission on Clause 11(1) and in my response to him that I did not think that he had addressed my concerns, he stated that he would rely on the plaintiffs' remedy for common law damages in lieu of the forfeiture of deposit as liquidated damages and the deficiency of the purchase price upon resale as liquidated damages when he was questioned by me as to the provision in Clause 11(1) for having two sets of liquidated damages. He relied on the case of Woomera Co. Ltd. v. Provident Centre Development Ltd. [1985] HKLR 263 and also on the provision in Clause 11(2) above to state that in the alternative to damages pursuant to Clause 11(1), his client could claim common law damages. He therefore submitted that his client would pursuant to Clause 11(2) claim common law damages in lieu of that provided by Clause 11(1) of the Agreement. In addition his client would claim only the item of registration fee for the Memorandum for Determination of the Sale and Purchase Agreement in the Land Registry by Memorial No. 7500522 in the sum of HK$210. He agreed that his clients should give credit for the deposit forfeited by them.

9. The normal measure of damages is stated in McGregor on Damages 16th Edition at paragraph 992 as follows:

"The normal measure of damages is the contract price less the market price at the contractual time fixed for completion."

10. The date of contractual time fixed for completion is the 27th May 1998. The contract price is HK$6,820,000.00. The Valuation Report of Francis Lau & Co. state the valuation of the Property subject to the tenancy particularized in Part VIII of the First Schedule of the Agreement as at 14th July 1998 to be HK$3,600,000.00. 14th July 1998 is about 6.5 weeks from the date of the contractual time for completion. In valuing the subject Property which was subject to the existing tenancy, the valuation report adopted a combination of the income approach and the comparative approach by taking into account the current passing rent receivable from the existing tenancy and the reversionary potential. The valuation of the reversionary potential of the subject Property was calculated with reference to a number of comparable sale prices of properties in the same development over a period of time from 12th June 1998 to 21st December 1998. The unit rate per square foot used to calculate the reversionary value of the suit Property as at 14th July 1998 was HK$6,910. The comparable sale price of properties relied on for the valuation of the reversionary potential of the suit property included the following:-

(1) A unit rate per square foot of a comparable value for a Property at Flat D, 6/F, Tower 19, Parc Oasis sold on the 20th June 1998, was HK$6,965.

(2) The unit rate per square foot of a property at Flat E, 9/F, Tower 27, Parc Oasis sold on the 12the June 1998 at HK$7,080.

(3) The unit rate per square of Flat E, 6/F, Tower 7, Prac Oasis sold on 19th June 1998 was HK$6,897.

11. In view of the aforesaid, although the valuation report gave the valuation of the suit property as at a date on the 14th July 1998, I am satisfied that the valuation of the property as at 27th May 1998 would have been about the same.

12. Hence, the contract price less the market price at the contractual time fixed for completion is HK$6,820,000.00 less $3,600,000.00 = $3,220,000.00. To this I add the registration fee for the Memorandum for Determination of the Agreement in the sum of $210. This comes to $3,220,210.00. From this I deduct the deposit forfeited in the sum of $682,000.00. This comes to $2,538,210.00.

13. I assess total damages in the sum of $2,538,210.00 and give judgment for the plaintiff for this sum together with interest thereon from the date of writ to date of judgment at judgment rate and thereafter until payment at judgment rate. I award costs of the assessment to the plaintiff to be taxed if not agreed.