WONG WING MAN v. LAM YUEN YEE

HCA 1043/2018

[2019] HKCFI 2848

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1043 OF 2018

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JUDGMENT

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INTRODUCTION

1.  This is the hearing for assessment of damages suffered by the Plaintiff. 

2.  By an interlocutory judgment dated 15 August 2018, judgment was entered against the Defendant with damages to be assessed and costs to be taxed as the Defendant gave no notice of intention to defend. 

3.  The Defendant was unrepresented and did not appear at the hearing for assessment of damages.  

4.  Upon reading the affirmations of service provided by the Plaintiff, I was satisfied that the Defendant was notified of the present proceedings.  Thus, the hearing proceeded in her absence. 

BACKGROUND

5.  By a written provisional sale and purchase agreement dated 9 October 2017 (“Provisional Agreement”), the Plaintiff agreed to purchase and the Defendant agreed to sell her property known as Apartment No. 30 on the 50^th Floor and Residential Parking Space No. P41 on the 2^nd Floor, Celestial Heights, No. 80 Sheung Shing Street, Kowloon, Hong Kong (“Property”) for a consideration of HK$24,380,000. 

6.  A formal written agreement for sale and purchase dated 25 October 2017 (“Formal Agreement”) was subsequently entered into between the Plaintiff and the Defendant, which was duly registered in the Land Registry by Memorial No. 17110201180102. 

7.  Under the Formal Agreement:

(a)   The Defendant vendor shall give good title to the Property free from encumbrances upon completion, which was scheduled to take place on 10 January 2018 (Clauses 3, 6 & 7). 

(b)   The Defendant shall at her own costs and expenses pay off two existing mortgages dated 20 May 2015 and 13 July 2017 registered against the Property on or before the actual date of completion (Clauses 21 & 22). 

(c)   “In the event of the Vendor failing to complete the sale of the Property in accordance with the terms and conditions hereof, all moneys paid by the Purchaser to the Vendor pursuant to the provisions of this Agreement shall be returned to the Purchaser forthwith who shall also be entitled to recover from the Vendor damages which the Purchaser may sustain by reason of such failure on the part of the Vendor and it shall not be necessary for the Purchaser to tender an Assignment to the Vendor for execution.” (Clause 18)

8.  On 5 January 2018, the Defendant through her then solicitors requested to extend the completion date to 12 February 2018.  The Plaintiff agreed and the completion date was thereby extended to 12 February 2018 (“Extended Completion Date”). 

9.  However, the Defendant failed to complete by the Extended Completion Date.  

10.  On 12 February 2018, the Plaintiff via a letter from his solicitors terminated the Formal Agreement and demanded the return of the deposits totalling HK$2,438,000 (“Deposit”) previously paid to the Defendant under the Provisional Agreement and the Formal Agreement (together the “Agreements”).  

11.  On 14 February 2018, the Defendant returned the Deposit to the Plaintiff. 

12.  On 7 May 2018, the Plaintiff commenced this action against the Defendant to recover the loss and damage suffered as a result of her breach of the Formal Agreement pursuant to Clause 18 thereof (as set out in paragraph 7(c) above). 

13.  According to the Statement of Damages filed on 7 December 2018, the Plaintiff claims the following 3 heads of loss and damage:

(a)   Wasted conveyancing legal fees for the Property: HK$17,000 (“Wasted Legal Fees Claim”).

(b)   Wasted bank handling charge for the Plaintiff’s mortgage application: HK$3,600 (“Wasted Mortgage Handling Charge Claim”).

(c)   Increase in the value of the Property: HK$2,500,000 (“Loss of Bargain Claim”).

14.  At the hearing for assessment for damages, upon query from this Court as to whether the Plaintiff could recover wasted legal costs in addition to his claim for the loss of bargain represented by the increase in value of the Property, the Plaintiff decided to withdraw his Wasted Legal Fees Claim. 

LEGAL PRINCIPLES

15.  As far as a purchaser’s claim for loss suffered as a result of the failure by the vendor to complete is concerned, the normal measure of damages for the loss of bargain is the market value of the property at the contractual time for completion less the contract price: McGregor on Damages (2018, 20^th ed), §27-005. 

16.  It is also trite law that where two parties have made a contract which one of them has broken, the damages which the other party ought to receive should be such as may fairly and reasonably be considered either arising naturally from such breach itself or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it.  In appropriate cases, it may also be necessary to examine the contract breaker’s assumption of responsibility in a transaction in order to decide whether it is or is not proper to hold him liable for loss of a particular type (see Richly Bright International Ltd v De Monsa Investments Ltd (2015) 18 HKCFAR 232 at §§15-41). 

EVIDENCE

17.  The Plaintiff attended the hearing to give evidence.  He adopted as his evidence in chief his witness statement dated 11 October 2018 which described his entering into the Agreements, the Defendant’s failure to complete and the loss and damage suffered. 

18.  As regards the Wasted Mortgage Handling Charge Claim, the Plaintiff explained that he had paid HK$3,600 as bank handling charge for his mortgage application.  He said that had the sale and purchase of the Property been completed and that the mortgage was proceeded with, the bank would not have levied such a handling charge.  As to whether the Defendant would know that the Plaintiff needed to take out a mortgage to fund his purchase of the Property, the Plaintiff testified that he had never met the Defendant and he told the real estate agent acting on the transaction at around the time of signing the Provisional Agreement that he would need to apply for a mortgage.  The Plaintiff said that he guessed that the agent would have told the Defendant about his need to apply for a mortgage.

19.  As to the Loss of Bargain Claim, the Plaintiff’s expert surveyor, Mr Kenneth C Y Cheung of Citiland Surveyors Limited, attended the hearing to give evidence on his valuation of the Property’s market value.  He adopted as his evidence in chief his valuation report dated 22 August 2018 (“Valuation Report”) whereby he opines that the market value of the Property as at the Extended Completion Date was HK$26,880,000.  

20.  The Defendant has not otherwise filed any witness statement or expert report in these proceedings.

DISCUSSION

          Loss of Bargain Claim

21.  In relation to the Loss of Bargain Claim, Ms Van Ma, Counsel for the Plaintiff, submits that the normal measure of damages (as mentioned in paragraph 15 above) should apply and that her client’s loss would therefore be HK$2,500,000, being the difference between the market value of the Property as at the Extended Completion Date (HK$26,880,000) and the contract price of the Property (HK$24,380,000).  

22.  In the circumstances of the present case, I see no reason why I should depart from the normal measure of damages.  In light of the unchallenged expert evidence of Mr Cheung that the market value of the Property as at the Extended Completion Date was HK$26,880,000, I assess the damages suffered by the Plaintiff in respect of his Loss of Bargain Claim to be HK$2,500,000. 

          Wasted Mortgage Handling Charge Claim

23.  As regards the Wasted Mortgage Handling Charge Claim, Ms Ma submits that the Plaintiff would not have incurred the HK$3,600 bank handling charge for his mortgage application but for the Defendant’s default on her obligation to complete the sale of the Property to the Plaintiff. 

24.  However, apart from causation, there is also the question of whether the loss claimed by the Plaintiff is too remote to be irrecoverable.

25.  Applying the test mentioned in paragraph 16 above, it seems to me that the HK$3,600 wasted mortgage handling charge is too remote to be recoverable by the Plaintiff. 

26.  On the Plaintiff’s own evidence, he had never met the Defendant and had only told the real estate agent acting on the transaction that he would need to fund his purchase by applying for a mortgage.  The Plaintiff’s guess that the real estate agent would then inform the Defendant of his need to apply for a mortgage is nothing more than mere speculation. 

27.  The Plaintiff has not otherwise called the real estate agent to give evidence at this hearing as to what he/she told the Defendant (if any) about the Plaintiff’s intention to apply for a mortgage. 

28.  Ms Ma submits that given the amount of the purchase price involved, it would be reasonable to assume that the vendor would expect the purchaser to finance his purchase with a mortgage.  With respect, I am simply not in a position to assume or to infer, based on the purchase price involved alone, that the Defendant would necessarily expect the Plaintiff to have financed his purchase of the Property by way of a mortgage. 

29.  For the sake of argument, even if one were to conclude that it was within the Defendant’s contemplation that the Plaintiff would apply for a mortgage to fund his purchase of the Property, it is a quantum leap to infer that the Defendant would necessarily have contemplated that the Plaintiff’s bank would impose a handling charge on his mortgage application if he did not eventually proceed with the mortgage transaction.  There is simply no evidence before me, for example, that such a handling charge for aborted mortgage transactions is normal market practice and/or that the Defendant was or ought to have been aware of such a charge being levied on the Plaintiff in the event that the present sale and purchase transaction did not proceed. 

30.  For the abovementioned reasons, I am not satisfied that the HK$3,600 mortgage handling charge could be considered as either arising naturally from the Defendant’s breach or was within her contemplation at the time of entering into the Agreements as being the probable result of her breach.  Nor do I consider it proper to hold that the Defendant could reasonably be regarded as having assumed contractual responsibility for this particular type of loss.  Accordingly, I reject the Plaintiff’s Wasted Mortgage Handling Charge Claim.

ORDER

31.  Having thus assessed, I make the following Order:

(a)   The Defendant do pay the Plaintiff the sum of HK$2,500,000 as damages for her breach of the Formal Agreement. 

(b)   The Defendant shall pay to the Plaintiff interest on the HK$2,500,000 sum mentioned in paragraph (a) above at prime rate plus 1% from 12 February 2018 to the date of judgment and thereafter at judgment rate until payment in full. 

(c)   An order nisi that costs of and incidental to the assessment of damages (including the hearings on 3 & 31 October 2019) be paid by the Defendant to the Plaintiff with certificate for counsel, such costs to be taxed if not agreed.  The costs order nisi shall become absolute 14 days after the date of handing down of this judgment.