LUI YUEN SHUN v. MAK CHUI PING

HCA 886/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 886 OF 2012

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J U D G M E N T
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Background

1.  These proceedings were commenced by Mr Lui Yuen Shun (“Plaintiff”) against Madam Mak Chui Ping (“Defendant”) for recovery of damages, on the basis of the Defendant’s breach of an agreement for the Plaintiff’s sale to the Defendant of the Plaintiff’s interests in a village house being constructed at Lots 209 SA and 210 in DD 209 in Sai Keng, Tai Po in the New Territories (“Property”). The Plaintiff had himself purchased the Property at the price of $9.16 million, for sale to the Defendant at the price of $13.68 million, and when the Defendant failed to complete the purchase, the Plaintiff seeks damages of HK $4.52 million, being the difference in what he had paid for the Property and the price at which the Defendant had contractually agreed to pay to the Plaintiff.

2.  There is no dispute that the Plaintiff purchased the Property from Mr Lok Yuen Kwan (“Lok”) (Lok acting as agent for and on behalf of Shek Wai Sing (“Shek”)) under an agreement in writing dated 11 May 2009 (“1^st Agreement”).  The Property was under construction, Shek being the grantee of a licence issued by Government to build a small house on the relevant lots.  The 1^st Agreement (said to have been prepared by the estate agent) referred to the house on the lots being in the course of construction, provided for Shek’s duty to make payment of the premium to Government upon completion of the construction, and required a provisional sale and purchase agreement to be executed by Shek and the Plaintiff within 3 days of the payment of premium to Government.  The Plaintiff had the express right under the terms of the 1^st Agreement to sell the Property as confirmor, provided that he pays the tax on the difference in the purchase and sale price, and a transfer fee of $10,000.

3.  On 30 January 2011, the Plaintiff entered into an agreement for the sale of the Property with the Defendant (“2^nd Agreement”), on terms substantially similar to those of the 1^st Agreement.  The 2^nd Agreement recites the Plaintiff’s agreement, as confirmor, to sell to the Defendant his rights under the 1^st Agreement; the fact that the Property was awaiting the valuation of the premium payable for the Property; and the Plaintiff’s liability to make payment of the premium to Government.  It also recites the fact that upon payment of the premium, the Plaintiff was required to arrange for Lok to sign a provisional sale and purchase agreement with the Defendant.

4.  Under the 2^nd Agreement, the Defendant was to pay the purchase price of $13.68 million in stages.  The 1^st payment of the provisional deposit of $2.26 million was to be paid to the Plaintiff upon the parties’ signing of the 2^nd Agreement.  Upon the plaintiff’s receipt of the notice of payment of the premium, the Defendant was to pay the 2^nd provisional deposit of $2.26 million. 

5.  Under clauses 8 and 9 of the 2^nd Agreement, the Plaintiff was required to arrange for Lok to sign a “provisional sale and purchase agreement” within 3 days of the due payment of the premium, and within 14 days thereafter, to sign a formal sale and purchase agreement.  The 3^rd provisional deposit of $1.832 million was payable upon the signing of the provisional sale and purchase agreement.

6.  The balance of the purchase price under the 2^nd Agreement, in the sum of $7.328 million, was to be paid by the Purchaser to Lok upon completion of the purchase within 45 days of the signing of the formal sale and purchase agreement.

7.  Clause 14 of the 2^nd Agreement states that the confirmor sale of the Property under the agreement was on a “must buy must sell” basis:

“ 此為必買必賣之以確認人身份轉售物業協議書”

8.  The 2^nd Agreement was signed by the Plaintiff, the Defendant, and Joan Huen (“Joan”) of Homelife Property Agency Co (“Estate Agent”) as witness.

9.  The Plaintiff claims that in breach of the 2^nd Agreement, the Defendant failed to make payment of any of the deposits and failed to complete the purchase of the Property, when completion was due after the premium was assessed by Government, and paid. The Plaintiff thereafter proceeded to complete his purchase of the Property from Shek, by procuring a limited company of his to acquire the Property at the agreed price of $9.16 million, and seeks the profit he had lost from the Defendant’s repudiation of the purchase under the 2^nd Agreement.

10.  By way of defence, the Defendant made various assertions.  She admits, however, that none of the deposits were paid under the 2^nd Agreement, since she had retrieved the cashier order of $2.26 million which she had initially deposited with a solicitor for the payment of the 1^st preliminary deposit required under the 2^nd Agreement.  She claims in her defence that the 2^nd Agreement was never intended by the parties to be legally binding.  She initially claimed that the 2^nd Agreement was not stamped and therefore inadmissible as evidence, but this was not pursued at trial.  The Defendant also claims that the Plaintiff had agreed to cancel the 2^nd Agreement, and had accordingly waived all his rights thereunder, including the right to the payment of the deposits, and that the Plaintiff is estopped from seeking any relief under the 2^nd Agreement.  Finally, the Defendant disputes that the Plaintiff has suffered any loss as a result of the aborted sale, and alternatively, claims that the Plaintiff has failed to mitigate his loss.

11.  The issues for determination at trial, arising from the pleaded matters pursued at trial, are:

(1) Was the 2^nd Agreement intended by the parties to be binding?

(2) Had the 2^nd Agreement been cancelled by the parties?

(3) Was the Defendant in breach of the 2^nd Agreement?

(4) Is the Plaintiff entitled to the damages claimed?

Was the 2^nd Agreement intended by the parties to be binding?

12.  On behalf of the Defendant, Mr Chan advocates that the intentions of the parties must be considered objectively by the court in the light of the surrounding circumstances (Kwan Siu Man Joshua v Yaacov Ozer 1 HKCFAR 343). I do not believe that this legal principle is disputed.  However, it does not assist the defence relied upon in this case.

13.  It is clear from the evidence, including that of the Defendant, that the parties had regarded the 2^nd Agreement to be binding.  There is no evidence suggesting otherwise.  Counsel referred to the provisions of the building licence issued in respect of the Property, which contained the warranty of the licensee, ie Shek, that he had not entered into any agreement with any person to transfer, alienate, dispose or deal with the lots or any interest therein.  Mr Chan argued that the licensee, Shek, would be in breach of the warranty if he had entered into an agreement to dispose of any parts of the Property to the Plaintiff or the Defendant, before the premium was paid.  It was argued that because the Plaintiff and the Defendant were both aware that the premium in respect of the Property had not been paid when the 2^nd Agreement was executed, they could not have intended the 2^nd Agreement to be legally binding, as otherwise there would be a breach of the building licence, or illegality would taint some unspecified transaction.

14.  I cannot accept such argument.  There is no pleading of illegality, nor evidence of any illegality tainting the 2^nd Agreement.  Whether or not Shek was in breach of any covenant in the building licence, cannot be evidence of the intention of the Plaintiff and the Defendant, or of whether they intended to create a binding relationship when they entered into the 2^nd Agreement.

15.  The Defendant’s own evidence destroys the plea that she had not intended the 2^nd Agreement to be a legally binding document.  On the strength of the parties’ execution of the 2^nd Agreement, she had proceeded to make the arrangements for making payment of the requisite deposit, to the extent of purchasing a cashier order on 31 January 2011 and depositing it with a solicitor for the payment under the 2^nd Agreement.  She so testified in court, notwithstanding the claims made in her witness statement that she did not “give” the deposit to the Plaintiff, and that the Plaintiff had never demanded payment of the deposit from her.  She accepted that the Plaintiff’s wife had asked her for the cheque in payment.  The Defendant never maintained in her evidence that she had retrieved the cashier order she had issued, and that she had failed to complete the purchase, because she had never intended the 2^nd Agreement to be a legally binding document, or because she had never intended to enter into legally binding relations with the Plaintiff.  Her only excuse was the assertion that the Plaintiff had agreed to cancel the 2^nd Agreement some time after the signing of the document.

16.  The Defendant’s assertion as to the existence of a cancellation agreement between the parties further goes against her case that there was never any binding agreement made.  As counsel for the Plaintiff emphasized, if the parties had never intended the 2^nd Agreement to be legally binding, there was no necessity for the Defendant to ask for the Plaintiff’s consent to her withdrawal from the purchase, or to seek the Plaintiff’s agreement to cancel the 2^nd Agreement.  The contents of the purported cancellation agreement dated 28 June 2011 signed by the Defendant (“Cancellation Agreement”) contradict the Defendant’s claim that there was never any binding agreement between the parties.  If there was no legally binding agreement, there would be no “rights” (“權利”) for the Defendant to abandon or forego (“放棄”) under clause 1 of the Cancellation Agreement, and nothing for her to “pursue” (“追究”) under clause 2.

17.  The express terms of the 2^nd Agreement provide for “must purchase” and “must sell” (“必買必賣”), and these contradict the claim that the 2^nd Agreement was not intended to be legally binding.  The fact that the 2^nd Agreement provides for the parties’ or the Defendant’s execution of a further provisional sale and purchase agreement with Lok does not mean that the 2^nd Agreement was not intended to be binding.  The mere fact that the Plaintiff was stated to be selling as confirmor suggests that there would be further agreements to be signed with the seller from whom the Plaintiff had purchased the Property.

18.  None of the other matters referred to by Mr Chan supports the claim that the 2^nd Agreement was not intended to be legally binding on the parties.  The fact that clause 4 provides for the parties’ right to cancel the agreement upon the occurrence of specified events (the premium not having been assessed and paid by 30 July 2011, or the provisional sale and purchase agreement not being signed by 30 July 2011) does not mean that the agreement itself is not, at the time of its execution, intended to be binding. All the essential terms as to parties, the Property to be sold, the price of $13.68 million and the time for performance are set out in the 2^nd Agreement, and all the terms are certain.  It is only the Defendant’s assertion that after the signing of the 2^nd Agreement, the Plaintiff suggested some other price to be stated in the agreements to be executed between the Defendant and Lok.

19.  Mr Chan seeks to rely on the fact that the 2^nd Agreement only provides for commission to be payable to the Estate Agent upon the signing of the provisional sale and purchase agreement with Lok.  I cannot see how this renders the 2^nd Agreement not constituting, or intended to be, a binding agreement.  The relevant provision in the 2^nd Agreement in fact goes on to provide that the party in breach is liable to pay the total commission to the Estate Agent.  If the 2^nd Agreement does not constitute, or is not intended to be, a binding agreement, I fail to see how a party can be said to be in breach, and to be made liable for the Estate Agent’s commission.

20.  An agreement which is made “subject to contract” and is not intended to be legally binding may not be stampable.  However, the converse is not true.  The fact that an agreement is not stamped by the parties does not necessarily mean that it is not a binding agreement.

21.  To conclude, I reject the defence that the 2^nd Agreement was not intended to be legally binding.

Had the 2^nd Agreement been cancelled by the parties?

22.  The Defendant alleges that immediately after the 2^nd Agreement was signed, the Plaintiff suggested to her that she should enter into a preliminary sale and purchase agreement and a formal sale and purchase agreement with the owner of the lots (ie Lok), at the consideration of $9.16 million (which is the price stated in the 1^st Agreement), and that the Defendant should pay him the difference of $4.52 million in cash.  The Defendant claims that this was to enable the Plaintiff to avoid paying tax on the difference.  She claimed in her statement that there was “problem” in such suggestion and that this caused her to inform Joan later that she intended to withdraw from the purchase, and to ask Joan to relay the message to the Plaintiff.  In her testimony in Court, the Defendant claimed that she did not agree to the Plaintiff’s suggestion, as it would not be possible for her to obtain the necessary mortgage loan from the bank if the price of the Property was stated as $9.16 million in the 2^nd Agreement, instead of $13.68 million.

23.  The Defendant’s assertions as to what the Plaintiff had said, and that what the Plaintiff had suggested was a departure from what was agreed in the 1^st Agreement, are not entirely credible. The 1^st Agreement itself provides for the Plaintiff’s sale as “confirmor”, and for the Defendant’s execution of the further provisional sale and purchase agreement and the formal sale and purchase agreement with Lok.  There was nothing novel in what the Defendant claims to be the Plaintiff’s “suggestion”, or at least the first part of it (not affecting the price), and why this should pose a “problem”.  This sheds some doubt as to whether the Defendant had misunderstood what the Plaintiff was allegedly “suggesting” to her.

24.  In any event, the Defendant claims that she was informed by Li Wah Kwong (“Li”) of the Estate Agent, Joan’s colleague, on 28 June 2011 that the Plaintiff had agreed to cancel the 2^nd Agreement, but that the Plaintiff requested her to sign some confirmation of the cancellation and to return the original signed 2^nd Agreement.  On the Defendant’s case, she signed the Cancellation Agreement which was presented to her by Li at 11:30 pm on 28 June 2011.  This refers to the Defendant’s purchase of the Property from the Plaintiff on 30 January 2011, and provides :

“1. 本人現同意放棄認購該物業之權力。

2．2011年6月28日後，確認人(雷遠純)可自由買賣，本人恕不追究。”

(1. I hereby agree to give up the right to purchase the Property.

2. After 28 June 2011, the confirmor (Lui Yuen Shun) may freely buy and sell, I will not pursue.)

25.  The Defendant claims that Li assured her that upon signing the Cancellation Agreement, the 2^nd Agreement would be effectively cancelled, and that both the Plaintiff and her would have no claims against each other.  After the Defendant signed the Cancellation Agreement, it was given to Li and the Defendant also returned the original 2^nd Agreement to Joan on 30 June 2011.

26.  The Plaintiff denies that he had made any suggestion of an illegal scheme to save profit tax.  He claims that it was Joan who had proposed such a scheme to him before the signing of the 2^nd Agreement, when she had asked for a discount to the sale price the Plaintiff had asked for the Property.  He had rejected the scheme, but agreed to the sale price being reduced to $13.6 million.  The Plaintiff claims that he did not even know that the cashier order for payment of the preliminary deposit under the 2^nd Agreement had been retrieved by the Defendant, until after the event, and he had made protests to Joan about it.  He was then informed by the Estate Agent that the Defendant no longer wished to purchase the Property, but the Plaintiff denies that there was any agreement to cancel the sale to the Defendant as she claimed.  The Plaintiff claims that, after the 2^nd Agreement had been signed, the Defendant had only asked again for a discount to the agreed price, which he refused to acede to. 

27.  On the Plaintiff’s case, when the time for payment of the premium and the signing of the preliminary sale and purchase agreement was due under the 2^nd Agreement, he had called Joan to arrange for the Defendant’s signing of the necessary documents to transfer the Property.  He also arranged for a letter to be delivered to the Estate Agent on 28 June 2011 (“Notice”).  The Notice was addressed to the Defendant, and to the Estate Agent as witness, and was signed by the Plaintiff.  By the Notice, the Plaintiff stated that he had been informed by Lok that the formalities for the transfer of the Property could be dealt with, and that he had notified Joan of this on 23 June 2011.  The Notice further stated that a final extension had been given by Lok up to 29 June 2011, and that in the event of the Defendant failing to deal with the formalities for the transfer of the Property by 4:00 pm on 29 June 2011, the Plaintiff would treat the Defendant as having given up her right, and would cancel the sale and purchase agreement without assuming any further liabilities, but reserving the right to claim compensation for his injury. 

28.  The Notice bears the chop of the Estate Agent, Li’s signature, and the date 28 June 2011.

29.  The Defendant denies ever having received the Notice.  According to the Estate Agent, the Notice was only delivered to the Estate Agent’s office by the Plaintiff on about 13 July 2011.  Li’s evidence is that he only saw the Notice on 14 July 2011 which had been left at his office, and that it was only on 15 July 2014 that the Plaintiff took a copy of the Notice to him and asked him to sign the Notice and to put the date 28 June 2011.

30.  On the key issue of whether there was an agreement to cancel the 2^nd Agreement, I find the evidence of the Defendant and of Li to be unreliable, and contradictory in material respects. 

31.  As counsel for the Plaintiff highlighted, the defence on the basis of the Cancellation Agreement had only been raised in the Defence filed on 12 July 2012.  There was no mention of the Cancellation Agreement in the correspondence exchanged between the parties’ solicitors prior to the commencement of proceedings in May 2012.  As Mr Cheung pointed out, when the Plaintiff demanded for damages in August 2011, and again in May 2012, on the basis of the Defendant’s breach, it would have been a simple thing for the Defendant to refer to the fact that the 2^nd Agreement and the whole transaction for sale and purchase had been cancelled by mutual agreement, if that was indeed the case, but that was never raised until July 2012.  There is some merit in Mr Cheung’s submissions, since the existence of the Cancellation Agreement is not a simply question of making legal points, but a factual one of whether or not the Defendant thought that the Plaintiff had agreed to cancel the sale and purchase.

32.  Even in her witness statement, the Defendant’s case was that after the Plaintiff had allegedly referred to the tax avoidance scheme and to her signing the preliminary and formal sale and purchase agreements with Lok for $9.16 million, she informed Joan (and not the Plaintiff) that she intended to withdraw from the purchase.  Her case, on the witness statement, is that she was informed by Joan that Li had informed the Plaintiff of the Defendant’s intention to withdraw, and that it was only on 28 June 2011 that Li informed the Defendant by telephone that the Plaintiff had agreed to cancel the 2^nd Agreement, but requested her to sign a confirmation.  Thereupon, the Cancellation Agreement was produced and signed by her on 28 June 2011.

33.  In the course of her cross-examination, the Defendant’s evidence was that what she had informed Joan was that if the Plaintiff wished to state the purchase price of $9.16 million in the agreements with Lok, she would not purchase the Property.  On the Defendant’s evidence, Joan’s response was that they should talk to the Plaintiff later, after the Chinese New Year.  The Defendant confirmed in her testimony that at the time when the cashier order was produced to the Plaintiff on 31 January 2011, she had not yet decided not to proceed with the purchase.  On the Defendant’s evidence, she had a meeting with the Plaintiff after the Chinese New Year in 2011, which meeting was attended by the Plaintiff’s wife, the Defendant’s husband, Joan and Li.  There may have been some haggling over the price, but even on the Defendant’s evidence, there was no agreement reached to cancel the sale and purchase.  The Defendant claims that Li had not reverted to her even in May or June 2011, as to whether the sale and purchase was to be cancelled.  At most, the Defendant’s evidence amounted to her having told Li during this interim that she would not purchase the Property if the agreements did not state the price at $13.68 million, and that she only decided in mid-2011 not to purchase the Property, since the Plaintiff never reverted to her on her queries. 

34.  The evidence of Joan and Li are accordingly material as to whether the Plaintiff had agreed to cancel the 2^nd Agreement, since the Defendant never sought to claim that she had been told by the Plaintiff directly that the 2^nd Agreement was cancelled.

35.  Neither Joan nor Li ever asserted that the Plaintiff had agreed to cancel the 2^nd Agreement before the end of June 2011.  Joan claimed in her witness statement that there was no outcome (結果) to the Defendant’s request for the cancellation of the purchase.  She only claimed that she witnessed Li preparing the Cancellation Agreement (which was, on Li’s evidence, on 27 June 2011), and that Li told her that the Plaintiff had asked him to prepare the document. (Joan’s evidence in this regard contradicts Li’s evidence that he had to prepare the Cancellation Agreement on 27 June 2011 because he could not locate Joan on the day.) Joan further claimed that she was informed by Li on 29 June 2011 that the Cancellation Agreement had been signed.

36.  Joan was never called to testify at trial, despite her having made a witness statement for the Defendant, and despite her attendance in court at the trial.  No explanation has ever been proffered as to why she did not give evidence.  In view of the materiality of her evidence, and the fact that she was in court, I can infer that she was not called because her evidence would not assist the Defendant, or would in fact contradict the evidence of the Defendant and/or Li.

37.  According to Li, the Plaintiff had never given him instructions to respond to the Defendant’s request to cancel the transaction.  Li’s evidence is that it was only on 27 June 2011, that the Plaintiff telephoned him to say that the premium had been paid for the Property, and that he would agree to the cancellation of his transaction with the Defendant, so that he could complete the purchase himself, but required the Defendant to sign an agreement in order to confirm that she would give up her rights to acquire the Property, and would not pursue the Defendant in respect of any claims.  Li alleges that the Plaintiff requested him to prepare an agreement along these lines, and to arrange for the Defendant to sign it and to return the signed 2^nd Agreement to him.

38.  On Li’s evidence, he prepared the Cancellation Agreement, read the contents of the Cancellation Agreement to the Plaintiff on the telephone, and obtained the Plaintiff’s approval.  He then telephoned the Defendant, informed her that the Plaintiff had agreed to cancel the 2^nd Agreement, and then made arrangements with the Defendant to meet her that same night, at 11:30 pm, for her to sign the Cancellation Agreement.  After the Cancellation Agreement was signed by the Defendant, Li telephoned the Plaintiff to inform him of the fact.  When the Defendant returned the signed 2^nd Agreement to Joan on 30 June 2011, Li had telephoned the Plaintiff, but the Plaintiff simply told Li to keep the 2^nd Agreement.

39.  Li’s evidence, on the preparation of the Cancellation Agreement at the Plaintiff’s instructions, is denied by the Plaintiff as sheer fabrication.  The Plaintiff maintains that he had never seen the Cancellation Agreement until after the commencement of these proceedings, and had never agreed to its contents.

40.  If the Defendant’s version of events is to be believed, that she had sought to cancel the 2^nd Agreement since very shortly if not immediately after the signing of the 2^nd Agreement, it is odd that she would have agreed to the contents of the Cancellation Agreement.  It referred to her agreement to give up her rights to acquire the Property, and it acknowledged that the Plaintiff would be free to sell, without any reference to the abandonment or cancellation of the Plaintiff’s rights, or to the Plaintiff not pursuing the Defendant in respect of her withdrawal from the purchase, as she called it.  The document is more consistent as a written confirmation of the request made by the Defendant throughout to withdraw from the purchase, whether such confirmation be as requested by the Plaintiff, or as provided by the Defendant on her own accord or under advice by the Estate Agent, as the next stage of the scheduled performance under the 2^nd Agreement became imminent.

41.  Whether the Plaintiff had agreed to the signing of the Cancellation Agreement on 28 June 2011, and the effect of the Cancellation Agreement, should also be considered in the context of the Notice, which the Plaintiff had signed and issued to the Defendant and the Estate Agent on 28 June 2011.  By that, the Plaintiff had clearly recorded the final extension of 29 June 2011 for the Defendant to deal with the formalities for the transfer of the Property, and had pointed out that if the Defendant should default in so doing by 4:00 pm on 29 June 2011, the Plaintiff would treat the Defendant as giving up the right to purchase the Property, would treat the 2^nd Agreement as “cancelled”, and that the Plaintiff would have the right to seek compensation for his damage sustained.

42.  The Defendant disputes the authenticity of the Notice so far as it purports to have been issued, and acknowledged to have been received by Li, on 28 June 2011.  The Defendant and the witnesses from the Estate Agent claim that the Notice was only delivered on 13 July 2011, and signed by Li on 15 July 2011.

43.  I find Li’s evidence on the circumstances of his preparation of the Cancellation Agreement and his signing of the Notice to be inconsistent, contradictory to the witness statement of Joan (as to why it was he and not Joan who had to prepare the Cancellation Agreement), and hence unreliable.  The evidence of Li and Cheng (another employee of the Estate Agent) as to the Plaintiff’s visit to the Estate Agent’s office on 15 July 2011, and Li’s telephone conversation with the Plaintiff on 14 July 2011, have also been put in doubt (at the very least) by the Plaintiff’s production of his passport, showing that he was in Cambodia on 14 and 15 July 2011. 

44.  Most significantly, the assertion that the Notice had been produced not in June but in July 2011, or later, is disproved by the production in Court of copies of the Notice which bear the date of 30 June 2011 and 2 August 2011, when they were faxed by the Plaintiff to his solicitors.  It is a serious allegation to make, that a solicitor and officer of the Court would fabricate or tamper with evidence of the documents the solicitor’s firm had received, and there is no basis to accept such a claim or to reject such evidence.  It was open to the Defendant to call the Plaintiff’s solicitor to cross-examine him, if there were indeed grounds to question the genuineness of the date appearing on the document, but the Defendant did not choose so to do.

45.  On all the evidence, I reject the defence that the Cancellation Agreement serves as evidence of the Plaintiff’s agreement with the Defendant that the 2^nd Agreement was to be treated as cancelled, or with no effect, so as to bar him from seeking remedies against the Defendant in respect of her breach, and her default in the purchase of the Property in accordance with the provisions of the 2^nd Agreement.

Was the Defendant in breach of the 2^nd Agreement?

46.  One point can be quickly disposed of.  Clause 4 of the 2^nd Agreement has no application in this case.  It only gives the Defendant the option to cancel the 2^nd Agreement in the event that the premium for the Property was not duly paid by 30 July 2011, or if, due to “any uncertain factor” the Defendant was not able to sign the preliminary sale and purchase agreement on or before 30 July 2011.  On the facts and evidence of this case, the premium was assessed, became payable and was paid before 30 July 2011, and the provisional sale and purchase agreement was ready to be signed on 29 June 2011.  The Defendant never had the option to cancel the 2^nd Agreement under clause 4.

47.  Secondly, the claim that there was insufficient notice served by the Plaintiff after payment of the premium on 27 June 2011, for the Defendant to perform the 2nd Agreement, was never pleaded.

48.  Thirdly, the Plaintiff was not required under the provisions of the 2^nd Agreement to serve any written notice on the Defendant before she was required to sign the provisional sale and purchase agreement pursuant to clause 8, or to make payment of the 3^rd preliminary deposit.  The Defendant does not dispute, and her evidence is, that she had been notified through the Estate Agent that the premium had been paid, and that she had been asked to attend to the signing of the documents on 29 June 2011. 

49.  Nor has the Defendant disputed that she failed to make payment of any of the deposits provided for in the 2^nd Agreement.

50.  Having rejected her defence on the basis of an agreement made with the Plaintiff to cancel the 2^nd Agreement, it is beyond doubt that the Defendant is in breach, by failing to make payment of the deposits and failing to complete the purchase of the Property.

51.  At the end of closing submissions, I raised query as to whether there had been acceptance of the Defendant’s repudiation of the 2^nd Agreement.  On behalf of the Plaintiff, Mr Cheung argued that by the latest, the letter dated 6 August 2011 sent by the Plaintiff’s solicitors to the Defendant, in which claim was made by the Plaintiff for damages with reference to the Defendant’s repudiation, should constitute valid notice of acceptance of the Defendant’s repudiatory breach.  Mr Chan argued that the Defendant had not received the said letter, despite its having been sent by ordinary and registered post. 

52.  Under O 18 r 8(1) RHC, a party must, in any pleading, plead specifically any matter which he alleges make any claim of the opposite party not maintainable, or which, if not specifically pleaded might take the opposite party by surprise. If the Defendant had wished to rely on the fact that the Plaintiff had not unequivocally accepted the Defendant’s alleged breach and repudiation of the 2^nd Agreement, this fact should have been pleaded.  In the absence of such a pleading in the Defence, the Plaintiff had not adduced evidence of facts which may have been relevant to his acceptance of the Defendant’s repudiation, and I will not pay heed to the arguments made relating to the letter of 6 August 2011, and whether that constituted valid acceptance of repudiation. 

53.  In any event, any argument as to alleged absence of acceptance of repudiation does not assist the Defendant in this case.

54.  By 28 June 2011, the undisputed evidence is that first, the Defendant had not paid any part of the deposit provided for in the 2^nd Agreement, and further, that the Defendant knew by then that the premium for the Property had been paid, and that the Plaintiff had asked her to attend to the signing of the documents to transfer the Property.  On her case, she signed the Cancellation Agreement on 28 June 2011, foregoing her right to purchase the Property under the 2^nd Agreement.  The Defendant’s evidence is that she also knew that the Plaintiff had proceeded to complete his purchase of the Property from Lok after 28 June 2011.  She was never under any misapprehension that the 2^nd Agreement was subsisting after 28 June 2011, or that the Plaintiff was in any way affirming the continuation of the 2^nd Agreement and still required her to complete the purchase from Lok.  It has never been the Defendant’s case that she was ready and able at any time to complete her purchase under the 2^nd Agreement. 

55.  Hence, on the evidence, I am satisfied that the Defendant was in breach in failing to pay the deposit and refusing to complete under the 2^nd Agreement; that the Notice had made it clear to the Defendant that if she failed to complete the purchase by 4:00 pm on 29 June 2011, the Plaintiff would treat the 2^nd Agreement as having been terminated; that the Plaintiff’s completion of the purchase from Lok was an unequivocal overt act on the Plaintiff’s part which is inconsistent with the subsistence of the 2^nd Agreement, and that this was known to the Defendant.

Is the Plaintiff entitled to the damages claimed?

56.  The Plaintiff bought the Property from Lok at $9.16 million under the 1^st Agreement.  Had the 2^nd Agreement been duly performed by the Defendant, the Plaintiff would have made a profit of $4.52 million from his sale to the Defendant. 

57.  In contract, the measure of damages for breach is that the claimant is entitled to be put into the position he would have been in if the contract had never been broken, as if the contract had been performed (para 22-003, McGregor on Damages 19^th edition).  I agree that the Plaintiff is entitled to claim the difference between the contract price at which he had bought the Property and the price at which the Defendant had agreed to purchase the Property from him.  The damages of $4.52 million are allowed.

58.  The burden is on the Defendant to show that the Plaintiff has failed to mitigate his loss.  On the evidence, the Plaintiff took reasonable steps to mitigate his loss, by procuring his own company to proceed with the purchase of the Property from Lok, on 29 June 2011, at the price of $9.16 million under the 1st Agreement.  The offers made by the Defendant to purchase the Property were only made in August 2012, January 2013 and October 2013, all after the commencement of these proceedings in May 2012.  By that time, the Plaintiff had incurred expenses in renovating and improving the Property.  In the absence of any evidence adduced by the Defendant as to the market price of the Property at the time when her offers were made, I find no basis to rule that it was unreasonable for the Plaintiff to have rejected the Defendant’s offers to purchase the Property at the price she offered.

Conclusion

59.  I grant judgment in favor of the Plaintiff for the sum of $4.52 million, as sought in the Statement of Claim, with interest on $4.52 million from the date of the Writ to the date of payment at judgment rate, and make an order nisi that the Defendant is to pay to the Plaintiff the costs of the action, with certificate for counsel.