FORDPOINTER SHIPPING CO LTD v. SINO DEVELOPMENT HOLDINGS LTD AND ANOTHER

HCMP 292/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 292 OF 2004

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ASSESSMENT OF DAMAGES

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Background

1. The 1st Defendant Sino Development Holdings Limited was the registered owner of the property known as Units Nos.1601, 1602 and 1603, 16th Floor, West Tower, Shun Tak Centre, Nos.168-200 Connaught Road Central, Hong Kong (“the Property”).  At all material times, the Property was mortgaged to Industrial and Commercial Bank of China (Asia) Limited (“the Bank”) by way of a Legal Charge dated 4 March 2002.

2. By an agreement made between the Plaintiff and the 1st Defendant dated 28 November 2003 (“the Agreement”), the 1st Defendant agreed to sell and the Plaintiff agreed to purchase the Property at the price of $13,475,000 (“the Purchase Price”).  A deposit in the sum of $1,347,500 was paid by the Plaintiff to the 2nd Defendant Messrs. Boughton Peterson Yang Anderson as stakeholder.  The sale and purchase of the Property was to be completed on 13 January 2004.  It is one of the terms of the Agreement that the 1st Defendant should discharge the said Legal Charge executed in favour of the Bank on or before the completion of the sale and purchase.

3. Pursuant to a request by the 1st Defendant, the Plaintiff agreed to postpone the completion date to 27 January 2004.

4. On 19 January 2004, the 1st Defendant further requested to postpone the completion date to 30 April 2004.  This was rejected by the Plaintiff.

5. By an Originating Summons dated 30 January 2004, the Plaintiff claimed against the 1st Defendant for, inter alia, specific performance of the Agreement.

6. On 9 February 2004, and pursuant to the powers contained in the said Legal Charge, the Bank appointed a Receiver to take over the Property.

7. By an agreement dated 26 March 2004, the Bank, as mortgagee of the Property, exercised its power of sale and sold the Property to a Billion Gainer International Limited (“Billion”) at the price of $22,000,000.  Completion was to take place on or before 3rd May 2004.

8. As the sale of the Property by the Bank to Billion had rendered specific performance of the Agreement no longer possible, on 21 May 2004, the Plaintiff was allowed to amend the Originating Summons.  The Plaintiff was allowed to claim against the 1st Defendant for, inter alia, damages for breach of the Agreement in lieu of specific performance.

9. On 10 September 2004, judgment on liability was entered in favour of the Plaintiff against the 1st Defendant with damages to be assessed.  This is the hearing for the assessment of damages.

10. It is to be noted that the claim against the 2nd Defendant for the return of the deposit was discontinued on 9 September 2004.  According to the further written submissions from Counsel for the Plaintiff dated 23 February 2005, the deposit in the sum of $1,347,500 had been returned to the Plaintiff.

The Assessment

11. At the assessment hearing, the 1st Defendant failed to turn up despite that notice of the hearing was given.  As such, the hearing proceeded in the absence of the 1st Defendant.

12. At the hearing, the Plaintiff’s director, a Mr. Chan Chi Sun (“Mr. Chan”) was called to give evidence.  He adopted his witness statement dated 27 September 2004 as his evidence-in-chief.  He confirmed that the 1st Defendant had failed to complete the sale and purchase of the Property on 27 January 2004.  He also confirmed that the Property was sold by the Bank to Billion at the price of $22,000,000.  He stated that the Plaintiff would like to claim for damages in lieu of specific performance of the Agreement.  As the evidence of Mr. Chan is not challenged, I accept his evidence as set out in his witness statement of 27 September 2004.

13. Mr. Wong Chi Wai (“Mr. Wong”), a Chartered Surveyor was also called to give expert evidence for the Plaintiff.  He produced his two valuation reports dated 19 July 2004 and 13 December 2004 and respectively marked as exhibits P1 and P2.  According to the 1st report of Mr. Wong dated 19 July 2004, he assessed the open market value of the Property as at 20 May 2004 was $23,400,000 (i.e. the date the Plaintiff accepted the 1st Defendant’s repudiation of the Agreement).  He stated that his valuation was arrived at after having considered all the relevant comparables as set out in his 1st report and having taken into account of all the adjustment factors which included the size and the floor level of the comparables; and whether the comparables had a seaview or not.

14. In his 2nd report dated 13 December 2004, Mr. Wong assessed the open market value of the Property as at 26 March 2004 was $23,400,000 (i.e. the date the remedy for specific performance was aborted because of the sale of the Property by the Bank to Billion pursuant to the sale and purchase agreement dated 26 March 2004).  According to Mr. Wong, the open market value of the Property as at 26 March 2004 is identical to the open market value as at 20 May 2004 namely $23,400,000.  He explained that between this period of time from March to May 2004, and according to the comparable transactions that he had looked at, the market price for high quality office premises was very stable.  In support of his conclusion, Mr. Wong produced to the Court and marked as exhibit P.3 the ‘Price Indices By Grade – Private Office’ prepared by the Rating and Valuation Department for the months of June and December 2004.

15. Mr. Wong pointed out that according to exhibit P.3, the price indices for private office had been going upward from end of year 2003 up to March 2004.  Then it became rather stable between March to May 2004.  On the unchallenged evidence of Mr. Wong, I accept and find that the open market value for the Property as at 26 March 2004 and 20 May 2004 to be the same namely in the sum of $23,400,000.

16. At common law, the normal measure of damages for breach of sale and purchase agreement is the contract price less the market price at the contractual time fixed for completion (see McGregor On Damages 17th edition, para. 22-034).  However, at the hearing, Mr. Kent Yee, Counsel for the Plaintiff, submitted that the Plaintiff should be entitled to damages in the sum of $9,925,000 being the market price of the Property as at 26 March 2004 (the date on which the Plaintiff’s pursuit for the remedy of specific performance became aborted) less the purchase price (i.e. $23,400,000 – $13,475,000 = $9,925,000).  Mr. Yee relied on the authority of Johnson and Another v Agnew [1980] A.C. 367.  At page 401, Lord Wilberforce states:-

“	In cases where a breach of a contract for sale has occurred, and the innocent party reasonably continues to try to have the contract completed, it would to me appear more logical and just rather than tie him to the date of the original breach, to assess damages as at the date when (otherwise than by his default) the contract is lost.  Support for this approach is to be found in the cases.  In Ogle v. Earl Vane (1867) L.R. 2 Q.B. 275; L.R. 3 Q.B. 272 the date was fixed by reference to the time when the innocent party, acting reasonably, went into the market; in Hickman v. Haynes (1875) L.R. 10 C.P. 598 at a reasonable time after the last request of the defendants (buyers) to withhold delivery.  In Radford v. De Frober-ville [1977] 1 W.L.R. 1262, where the defendant had covenanted to build a wall, damages were held measurable as at the date of the hearing rather than at the date of the defendant’s breach, unless the plaintiff ought reasonably to have mitigated the breach at an earlier date.
	In the present case if it is accepted, as I would accept, that the vendors acted reasonably in pursuing the remedy of specific performance, the date on which that remedy became aborted (not by the vendors’ fault) should logically be fixed as the date on which damages should be assessed.  Choice of this date would be in accordance both with common law principle, as indicated in the authorities I have mentioned, …”

17. I agree with the submission of Counsel and accept that the Plaintiff had acted reasonably in pursuing the remedy of specific performance and that since that remedy had become aborted not due to the fault of the Plaintiff, the date on which that remedy became aborted (i.e. on 26 March 2004) should be fixed as the date on which the Plaintiff’s damages should be assessed.  Accordingly, I award damages to the Plaintiff in the sum of $9,925,000 ($23,400,000 – $13,475,000) plus interest thereon at the judgment rate from 30 January 2004 until full payment.  I also agree with Counsel’s further submission that the deposit in the sum of $1,347,500 need not be deducted from the damages awarded (see Kwok Chung Hon & Anor. v Lo On Wa [1997] 2 HKLRD 980).

18. I also make an order nisi that the 1st Defendant do pay the costs of the Plaintiff for the assessment hearing such costs to be taxed if not agreed with Certificate for Counsel.  The order nisi is to be made absolute upon the expiration of 14 days from the date this decision is handed down.