WIN PROFIT CORPORATION LTD v. WORLD ORIENT INVESTMENT LTD

HCA 1487/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1487 OF 2009

J U D G M E N T

_______________________

INTRODUCTION

1.  By a formal sale and purchase agreement dated 23 October 2007 (“the Agreement”), the plaintiff agreed to sell and the defendant agreed to purchase a property known as 8^th floor of Tower A, Mandarin Plaza (also known as New Mandarin Plaza), No. 14 Science Museum Road, Kowloon, Hong Kong (“the Property”) at the price of $107,200,000, with completion set to take place on 17 September 2008.  Pursuant to the Agreement, the defendant had paid a deposit of $10,720,000.

2.  The Property was subsequently subsold several times with completion set at the same date of completion.

3.  Shortly before the completion date, i.e. on 16 September 2008, the plaintiff agreed to the defendant’s proposal to extend completion for 2 months on payment of further deposit of 5% of purchase price.  The defendant however did not respond and failed to complete the transaction on 17 September 2008.

4.  The plaintiff later resold the Property at $80,019,900 in April 2009.

5.  It now claims damages in the sum of $17,234,949.61, particulars of which are as follow:

6.  Alternatively, plaintiff claims for damages to be assessed.

7.  On 24 August 2009 defendant conceded liability and judgment on liability was entered against the plaintiff with damages to be assessed.

APPLICABLE LEGAL PRINCIPLES

8.  Ms G Lan, counsel for the plaintiff invited this court to consider the case of Lui Chun Wai HCA 20373 of 1998, where Master B Kwan in her judgment considered McGregor on Damages 16^th edition paragraph 992: -

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

9.  In that case, Master Kwan was satisfied that the plaintiff had made out a case for damages to be assessed by reference to the value of the property at a date other than the completion date.  She said the plaintiff had shown that he had done all he could to mitigate the damages in a hostile environment.  The resale took place over 10 months later.

10.  Ms Lan said the plaintiff here only managed to resell the Property 7 months after the aborted sale in April 2009 at $80,019,900.  She submitted that the plaintiff was entitled to damages representing the price difference between the contract price and the resale price.

11.  She relied on clause 15 of the Agreement which reads: -

“Should the Purchaser fail to complete the purchase in accordance with the terms and conditions herein contained the Vendor may (without tendering an Assignment to the Purchaser) forthwith determine this Agreement by giving notice of termination in writing to the Purchaser or its solicitors to such effect and the Vendor shall thereupon be entitled to re-enter upon the Property and repossess the same and the Furniture if possession shall have been given to the Purchaser free from my right or interest of the Purchaser therein and the Vendor shall be entitled to forfeit the deposit. Upon determination of this Agreement the Vendor may resell the Property and the Furniture either by public auction or by private contract or partly by one and partly by the other subject to such stipulations as the Vendor may think fit and any increase in price on resale shall belong to the Vendor. Without prejudice to the Vendor’s right to recover the actual loss arising from the Purchaser’s breach of this Agreement, on such resale any deficiency in price shall be made good and all reasonable expenses attending such resale shall be borne by the Purchaser and such deficiency and expenses shall be recoverable by the Vendor as and for liquidated damaged. On the exercise of the Vendor’s right to determine this Agreement as aforesaid the Vendor shall have the right, if this Agreement shall have been registered in the Land Registry to register in the Land Registry an instrument signed by the Vendor evidencing determination as aforesaid of the sale of the Property and the Furniture.”

12.  Ms Lan also cited the case of Teng Fuh Company Limited v Keen Lloyd (Holdings) Limited, HCMP 2348 of 1998, 27 May 1999, unreported, where the seller only resold the property 4 months after the aborted sale.  The seller sought damages on the basis of the difference between the contract price ($82 million) and the price at which it was able to resell the property ($31 million) based upon clause 21 of the agreement, a provision almost identical to clause 15 in this case.

13.  At the hearing before Findlay J, the learned judge said, at page 8 of the judgment:

“… The obligation on the plaintiff was to re-sell with proper diligence; in other words to mitigate its damages reasonably. There is no suggestion in the evidence that the plaintiff did other than its best to sell for the best price in a very rocky market. Indeed, the plaintiff would have been very foolish to have done otherwise. I do not accept that the plaintiff can properly be criticized for selling when it did.”

“In any event, even without this specific contractual provision, I would have assessed damages on the basis contended for by the plaintiff. The defendant reneged on his deal knowing that the plaintiff wanted to sell, leaving the plaintiff with a property to sell in a very uncertain market. The defendant must have contemplated that the plaintiff would be able to sell only after considerable effort, making difficult decisions and in a market that was very volatile. The defendant cannot now reasonably complain that the plaintiff did not do the right thing. To do justice to the plaintiff, I would have felt obliged, in these circumstances, to assess its damages in the sum it actually suffered.”

14.  Later, the Court of Appeal in CACV No. 193 of 1999, 5 November 1999, unreported, affirmed the decision and at page 11 of the judgment, Cheung J (as he then was) said:

“Re-sale within a reasonable time

As to the time in which the Plaintiff was to exercise the resale, Mr. Warren Chan SC, Counsel for the Plaintiff, accepted that the resale must be carried out within a reasonable time. An implied term to those effect forms part of the Agreement.

We agree.  To give business efficacy to this Agreement, such a term must be implied, without which the Agreement would be ineffective.  As to the difficulties in deciding what is a reasonable time, that, by itself, is not a reason for not implying the term.  In any event, in our view any resale within six months after the determination of the Agreement should be considered as reasonable.”

15.  Ms Lan agreed that the plaintiff here was entitled to rely on clause 15 and to claim damages for loss being the difference between the contract price and the resale price.  She asked this court to consider whether a resale effected in a period of 7 months after the breach was within a reasonable time under the then prevailing market conditions.

16.  Ms Lan contended that the six-month period mentioned in the case of Teng Fuh was not a strict jacket in determining whether any resale was carried out within a reasonable time and that this court should decide on the reasonable period according to facts of an individual case.

17.  The case of First Shanghai Enterprises Ltd v Dahlia Properties Ltd (No 2) [2003] 2 HKC 297, was also referred to where the learned master helpfully summarized the guiding principle in this regard at 301A:

“9. It is accepted that the normal measure of damages is the contract price less the market price at the contractual date stipulated for formal completion: see McGregor on Damages (16^th Ed) para 992. Damages are assessed so as to place an innocent party in the position he would have found himself, so far as is possible, where the contract to have been performed: Chitty on Contracts (28^th Ed) Vol 1, 1-061. Where injustice may ensue, a subsequent assessment date can be taken instead for the purpose of calculating loss: Johnson v Agnew [1980] AC 367.”

18.  In IKI Trading Limited v Ho Ting Sun, HCA No. 20745 of 1998, 1 February 2000 unreported, the Buyer agreed to purchase the property for $7,080,000 but failed to complete the sale on 21 March 1998.  On 7 November 1998, over 7 months later, the seller resold the property at $3,450,000.  The learned Master referred to the conservative view in that the date of breach is the usual assessment date for common law damages, and, at page 8 of the judgment, said:

“… But it has been recognized that this is not an absolute rule of law if to follow would give rise to injustice. The court has power to assess damages by reference to the value at a different date if it would be more just to do so: Johnson v Agnew [1980] AC 367. As Mr. Justice Cheung pointed out in Alucase Company Limited and Another v. Keen Lloyd (Holdings) Ltd. HCMP 3577/98 (unreported) that one must regard the reality of the situation. One just cannot expect a vendor to conduct a sale of the property on the same date as the termination of the agreement. In the present action, and having considered the evidence admitted by agreement and the reality of the situation, I am of the view that it is unjust to adopt the market value of the Property at the date of the completion for measuring the damages suffered by the plaintiff. It is common knowledge and well-known fact that the property market in Hong Kong had collapsed after October 1997. This is supported by the surveyors’ reports produced by the parties. In a falling market, one cannot expect the plaintiff to be able to achieve a sale of the Property on the same date the agreement was terminated by the plaintiff. I therefore reject the contentions by Mr. Lam that the market value at the date of the breach should be used for assessing damages. I accept that the market value should be determined by the price obtained, or obtainable, on a resale within a reasonable time of the breach, but excluding any inflated price which the property might fetch by nursing it: see Yeung Leung Wai Kwan v. Tsang Nui Tai [1993] 3 HKC 618 citing Kech v. Faber, Jellet and Keeble (1915) 60 Sol Jo 253. However, the questions in the present case are whether the resale of the Property by the plaintiff about 8 months after the date of the breach is a reasonable time; and whether the steps taken by the plaintiff to resell the Property amounted to reasonable efforts to mitigate his loss.”

19.  The court there held that as the property market at the material time had dropped drastically, the resale that took place almost 8 months later was still within a reasonable time after the breach.

20.  Ms Lan relied also on the case of Lau Suet Ling v Ng Goon Lau, HCA No. 20587 of 1998, 8 October 1999, unreported, where in an aborted sale, the seller resold it 4 months later.  The buyer complained that the seller had failed to act promptly and reasonably by setting the appropriate price to resell the property as soon as possible after the breach.  The learned master allowed the seller’s claim for deficiency in price.  At page 8 of the judgment, the learned master said:

“… One has to bear in mind that the property market situation was very fluctuating at that period of time. The Plaintiffs could not possibly know the trough of the market at a given time. If the Plaintiffs had lowered the price too much, they failed to mitigate their loss. This will also be contrary to their own benefit because there is no guarantee that they can recover damages from the Defendant at the end of the day. That they could not resell the Property within a short time could be explained by the fact that the market for the property of the size of the Plaintiff’s Property was particularly poor at that time. This is born out by the reports of the surveyors of both parties. Both surveyors said in evidence that during the period of June to 10 November, only 3 properties of the same size were sold. This includes the Property in question. Other properties of small sizes in the same building had a better market. Having considered all those factors, I come to conclude that the Plaintiffs had acted reasonably to resell the Property after the breach.

As I hold that the Plaintiffs are entitled to rely on Clause 24 of the Agreement, the measure of damages is to be considered at the time of the actual resale of the Property. I therefore do not have to deal with the expert evidence on the value of the property on 17 October 1998: See Alucase Company Limited & Credit Champion Development Limited v Keen Lloyd (Holdings) Limited HCMP 3577 of 1998. Per Mr. Justice Cheung at page 7.

Even if I were to consider the experts’ evidence, I am of the opinion that the assessed open market value of the Property can only serve as an indication.  They are not reliable because there are only 2 samples of similar size for comparison … In Keck v Faber [1915] 60 S.J. 36, C.A., the court held that the price to be taken was the selling price realized within a reasonable time of the breach.  In the absence of any evidence that it was a sham resale, the actual sale price should be the best evidence of the market price: see Central Gem Limited v Harvest Fair Investment Limited, HCA No. 10222 of 1998 as per J. Yuen at page 7.”

21.  Again, in Teng Fuh Company Limited v Keen Lloyd (Holdings) Limited, supra, the Court of Appeal, in considering whether damages should be assessed at the date of the breach, held that the court has the discretion to fix such other dates as may be appropriate in the circumstances, citing Lord Wilberforce’s judgment in Johnson v Agnew [1980] AC 367, and at page 12:

“In this case, in October 1997, Hong Kong was faced with a financial crisis and the value of properties had a sudden drastic drop. The parties agreed that by 28^th May 1998 the market value of the property had dropped from $82 million to $50.5 million. There is evidence in this case that the Plaintiff had, after the termination of the Agreement, immediately put the property in the market but was only able to effect a sale in September 1998 for $31 million. In the circumstances, it is clearly unjust to hold the Plaintiff to the date of the breach in measuring the damages.”

22.  The Court of Appeal upheld the award of damages representing the deficiency in price upon resale conducted 4 months after the aborted sale.

23.  In Great Choice Investment Limited v Kam Wai Chee, HCA No. 13015 of 1998, 24 December 1999, unreported, the buyer agreed to purchase the property but failed to complete the sale and the seller resold it over 4 months later.  The seller gave evidence that the property market was at that period of time going down, with potential purchasers making very low offers.  Regarding the market condition, the learned master observed, at page 6 of the judgment:

“I accept that the property market at that [time] was falling, which is the reason for the defendant to back out on the Agreement. I also appreciate that in a falling market, the potential purchasers will make counter-offers that are far below the market price. This is a common phenomenon. The plaintiff would have difficulty in fixing the market price for the property as the property market was fluctuating more vigorously than in normal market condition.”

24.  Further, in Alucase Company Limited v Keen Lloyd, HCMP 3577 of 1998, 21 June 1999, unreported, the buyer failed to complete and the seller resold the property 2 months later.  Cheung J (as he then was) held that immediate sale was not required and that the measure of damages was to be considered at the time of the actual resale of the property.

25.  He said one must regard the reality of the situation and one just cannot expect a vendor to conduct a sale of the property on the same date as the termination of the agreement.

26.  He said further that while the common law principle is that damages of breach of contract are assessed at the date of the breach, it has been recognized that this is not an absolute rule if to follow it would give rise to injustice.  The Court has power to fix such other date as may be appropriate in the circumstances: Johnson v Agnew [1980] AC 367, and Barnsleys Conveyancing Law and Practice, 4^th Ed. p.657.  It is a well-known fact that the property market in Hong Kong collapsed after September/October 1997.  In a falling market, to use the date of the breach as the yardstick for measuring damages would prejudice the vendor who might only be able to sell the property at some time after the breach.

“I will accordingly hold that the Plaintiffs are entitled to rely on Clause 14(b) and the measure of damages is to be considered at the time of the actual resale of the property.”

“The Plaintiffs had clearly demonstrated that they had made reasonable efforts to sell the property. The offers they had received were in fact lower than the actual resale price of the property. The Plaintiffs are entitled to the deficiency in price as claimed.”

27.  Ms Lan agreed that when the seller was unable to resell the property immediately after the aborted sale due to difficult market condition, the Courts would not assess the damages as at the date of breach but a later date, usually the actual resale date in order to avoid injustice to the seller.

28.  But is it the case here?

29.  This court, agrees, as submitted by Ms Lan, the issue was whether it was reasonable for the plaintiff to resell the property 7 months after the aborted sale.  This was a question of fact having regard to the circumstances of the case.

30.  Ms Lan submitted further that in the event that the court is not satisfied that the plaintiff had resold the property within a reasonable time after the breach, the defendant being the wronger doer is still liable for loss that the plaintiff would suffer had the plaintiff sold the property at the time when plaintiff could and should.

31.  In the First Shanghai Enterprises Ltd case, where the property was not resold 5 years after the aborted sale, the Court of Appeal gave judgment in favour of the seller with damages to be assessed.  At the hearing for assessment of damages, the property had by then remained unsold for 5 years, the learned master held that the seller was not entitled to hold on to the property for as long as 5 years.  He fixed the date for assessment of damages to be 12 months after the aborted sale, which was the date when the first offer was received.  The learned master, at 302I, said:

“ 16. When ought the defendant to have re-sold the property? Was the defendant acting reasonably in rejecting the few offers made to date?

17. The plaintiff contends that had the property been swiftly unloaded immediately after the breach in October 1997, no loss would have been sustained. The agreed valuation for 31 October 1997 reflected an enhanced value of $232m, some $8m over the contract price. In my view, to expect the property to be sold in such a short time displays ignorance of real world conditions. Agents were taken on board almost immediately by mid November 1997. By 17 December 1997, the agreed valuations reflected a drop in the value of the property. On that date, its value was $193m. From then, its value continued to plummet as evidence from the valuations adduced and accepted by both sides, save the valuation for January 1998 to which I shall revert. By 8 February 2003, the realistic resale value was put at $83,684,970.

  18.     In my considered judgment, the defendant was not entitled to hold on to the property as it did.  Such behavior tantamounted to nursing the property in the vain hope of seeing a reversal of market conditions which, as transpired from agreed valuations, never happened.  It would neither be equitable nor right to expect the plaintiff to have to make good the resulting fall in property value.  The defendant wholly aware that there was very little genuine interest in the property between 31 October 1997 and November 1998 when two offers had been received for the first time, ought to have resold the property for $74,470,000.  That was the best market price it could legitimately have obtained at the time.  It matters little that subsequently obtained valuation for November 1998 demonstrated a higher value of $90,973,800, a fact unknown at the material time.  The reality was that no one was prepared to make any higher offer than those actually received in November 1998.”

32.  Both parties agree to the principle as set out in McGregor on Damages, 18^th Ed, 7-004: -

“(1) The first and most important rule is that a claimant must take all reasonable steps to mitigate the loss to him consequent upon the defendant’s wrong and cannot recover damages for any such loss which he could thus have avoided but failed, through unreasonable action or inaction, to avoid. Put shortly, the claimant cannot recover for avoidable loss.”

33.  It is said in Chitty on Contracts, 30^th Ed, Vol 1, at 26-013: -

“… The onus of proof is on the defendant, who must show that the claimant ought, as a reasonable man, to have taken certain steps to mitigate his loss, and that the claimant could thereby have avoided some part of his loss. Any loss which is directly caused by a failure to meet this standard is not recoverable from the defendant.”

34.  Mr Yu SC for the defendant said it is established principle that plaintiff has a duty to take all reasonable steps to mitigate its losses caused by defendant’s breach.

35.  He said a reasonable vendor seeking to mitigate his damages would do his best to resell the property immediately upon the termination of the agreement, and would consider each and every offer on its merits, bearing in mind the state of the property market at the time (see Kwok Wai Kong v Luk Ping Hung (unreported, HCA 4447/1998, 4 November 1999, at page 5).

36.  He submitted also that if a vendor adopts a wait and see attitude and refrains from actively taking steps to effect a resale of the property, he would not be considered as having taken reasonable steps to mitigate his losses.  Any loss that is occasioned by reason of the fall in value of the property between the date of breach and the subsequent resale would not have been caused as a result of the breach (see First Shanghai Enterprises Ltd v Dahlia Properties Ltd [2003] 2 HKC 297, 303C-D; AKAS Jamal v Moola Dawood [1916] 1 AC 175, 179 (Privy Council); The “Elena D’Amico” [1980] 1 Lloyd’s Rep 75, 87-89 per Robert Goff J; Treitel, The Law of Contract, 12^th ed, §§20-098 and 20-099).

37.  Mr Yu SC contended that even if one relied on contractual terms in relation to recover the difference between the contact price and the price at which the property was subsequently resold, it would not abrogate or affect the principle that the plaintiff must take reasonable steps to mitigate his damages and was subject to the implied term that plaintiff had to act reasonably and in good faith in effecting the resale within reasonable time and at a reasonable price in the circumstances (see Teng Fuh Company Limited v Keen Lloyd (Holdings) Limited (unreported, CACV 193/1999, 5 November 1999) at §§28-29, 34; First Shanghai Enterprises Ltd v Dahlia Properties Ltd supra at p. 301C).

38.  Ms Lan said however that Chitty on Contracts, 30^th Ed, Vol 1, at 26-104 stated: -

“The claimant is not ‘under any obligation to do anything other than in the ordinary course of business’; the standard is not a high one, since the defendant is a wrongdoer.”

39.  It is said also that in Strong Offer Investment Limited (In Liquidation) v Nyeu Ting Chuang, CACV No. 384 of 2004, 4 April 2006, unreported, the Court of Appeal, on the issue of mitigation, at para. 46, said:

“46. Before referring to the evidence relied on by the parties, it is relevant to point out that it is well settled that the onus of proof on the issue of mitigation is on the defendant (see McGregor on Damages, 17^th Ed para. 7-019). Hindsight is to be avoided in reviewing the relevant circumstances, and the plaintiff is not under any obligation to do anything other than in the ordinary course of business. In Banco de Portugal v Waterlow and Sons [1932] AC 452 at 506, Lord Macmillan stated:

‘… where the sufferer from a breach of contract finds himself in consequence of that breach placed in a position of embarrassment the measure which he may be driven to adopt in order to extricate himself ought not to be weighted in nice scales at the instance of the party whose breach of contract has occasioned the difficulty.  It is often easy after an emergency has passed to criticize the steps which have been taken to meet it, but such criticism does not come well from those who have themselves created the emergency.  The law is satisfied if the party placed in a difficult situation by reason of the breach of a duty owed to him has acted reasonably in the adoption of remedial measures, and he will not be held disentitled to recover the cost of such measures merely because the party in breach can suggest that other measures less burdensome to him might have been taken.”

EVIDENCE

Market Condition

40.  In this case, defendant failed to complete the purchase 2 days after Lehman Brothers filed Chapter 11 bankruptcy petition.

41.  The Property was a whole floor premises of 19,980 sq ft in a grade A office building in Tsim Sha Tsui East area.

42.  This court was referred to the bimonthly magazine “Office Skeleton” issued by Centaline (CIS) Property Agency in October 2008, December 2008, February 2009 and April 2009.

43.  It was said in the Office Skeleton that the property market in Hong Kong at the time was adversely affected as investment confidence dropped and property buying sentiment was less eager.  A lot of the investors and users of properties adopted a cautious wait and see attitude or alternatively they expected to buy property at lower prices.  Property sales registered dropped substantially, so was the total consideration.  Both office sales market and prime office lease market also contracted sharply.

44.  I take the view that these issues told merely of the view of Centaline on the property market in general during the period covered but could not be used to tell with certainty whether a particular property was actually well sought in the market.  In fact, it was pointed out by Lam Nan (“LN”), an estate agent in court that even in the period after the Lehman Incident, there were investors who wanted to buy.  It was also the evidence of Jess Tai (“JT”) another estate agent that in September/October 2008, there were more enquiries by interested purchasers, usually end users who could not afford to buy previously in the rapidly rising market.

45.  Although plaintiff said the property was unappealing as a lot of companies would be downsizing their office or relocating to less prime areas to save cost, defendant retorted and said that according to the only witness of the plaintiff, Frank Chu (“Chu”), there were a lot of offers and letters of intent sent to them immediately after the Agreement fell through.

46.  Further, according to both estate agents Phoebe Leung (“PL”) and JT, the Property was rare in the market and in short supply at the material times.

47.  Plaintiff insisted that the Property was not attractive as the subsubsub-purchaser of the property De Monsa Investments Limited (“De Monsa”) had since May 2008 put the Property back to the market for sale, despite efforts of the estate agents, the Property could not be sold.  Defendant said however that it might be because De Monsa was asking for $7,000/sq ft, a much higher price for the Property than that in the ultimate resale.

Experts’ evidence

48.  During the period from the date of the aborted sale on 17 September 2008 and the date of resale on 17 April 2009, only 3 sale transactions were recorded for Mandarin Plaza and their price ranged roughly from $4,980 to $6,000/sq ft (gross).  These transactions all involved small size properties of less than 1,500 sq ft.

49.  Parties’ experts agreed that there was a lack of transactions for larger units or whole floor office with similar quality to the Property to make a comparison and therefore both agreed to use the small size office within the same building as comparables.

50.  Parties also agreed that the average figure for the experts valuation of the Property shall be the agreed market price of the Property.  The agreed market value of the Property as at 17 September 2008 was $127,150,000.

Plaintiff’s Evidence

51.  Mr Frank Chu (“Chu”) was plaintiff’s only witness.  He was at the material time the corporate legal counsel of plaintiff and together with his supervisor Wong Wai Chung (“Wong”) were the only persons within the plaintiff responsible for handling matters concerning the Property.

52.  Chu admitted having experience in dealing with conveyancing transactions in the past, prior to the aborted sale.  It was said that Chu’s conveyancing experience was limited to block sale by developers.

53.  Wong was not called by the plaintiff to give evidence at trial.  No explanation has been given as to why he was not called.

54.  It was submitted by Mr Yu SC that an adverse inference should be drawn against such failure.  He submitted that this court can property infer that even if Mr Wong was called, his evidence would not be able to rebut the case that plaintiff failed to mitigate its loss (see Ip Man Shan Henry & Anor v Ching Hing Construction Co Ltd & Ors (No. 2) [2003] 1 HKC 256).

55.  According to Chu, the Property was purchased by plaintiff’s holding company as an investment and thus plaintiff’s intention was all along to sell it as opposed to leasing it out.  He said all along, the instructions from the senior management of plaintiff’s Australian head office (the “Head Office”) was to sell the Property and thus there was no basis to suggest that plaintiff would have deliberately refused to sell the Property shortly after the subject transaction fell through, although plaintiff did not rule out leasing the Property if no reasonable offer to buy was forthcoming.

56.  He said after the aborted sale, plaintiff was anxious to sell the Property and therefore the Property was “put back to the market for sale immediately after the aborted sale” and “All along, the Plaintiff invited offers from everybody in the market”.

57.  Chu said although he was the person responsible for handling the resale of the Property, he was not familiar with selling property or dealing with estate agents.

58.  Chu said also that the news about the aborted sale to defendant “spread like wild fire” in the estate agency field and that the agents were “anxious” to get their clients to consider purchasing the Property.

59.  Chu said further in his 2^nd affirmation that he would, on receipt of genuine offers, pass the same to the Head Office for their consideration as he himself did not have authority to make the decision to sell or to lease the Property.

60.  He confirmed that in the one or two weeks after 17 September 2008, plaintiff’s office received everyday at least 20 phone calls from estate agents, 8 to 10 communications by fax and 3 to 4 groups of estate agents coming to plaintiff’s office all claiming to have interested buyers with genuine offers.  Some came with a price and some did not.

61.  Chu also said as plaintiff was being approached by “lots of agents”, in person or by fax, he was unable to have any clear recollection of any individual offers sent to him.

62.  Despite what was said in the Office Skeleton, the Property was said by Chu to be well sought after in the market after the aborted sale.

63.  After the aborted sale, there were large number of offers received for the purchase of the Property.  He said in order to screen out the genuine offers, he as instructed, later told all estate agents that plaintiff would only consider the offer evidenced by a signed provisional agreement with a cheque, or at least a copy of it, for initial deposit.

64.  Chu admitted the market value of the Property at September 2008 was around HK$120M i.e. much higher than the contract price in the Agreement.

65.  According to Chu, plaintiff had been advised by their legal adviser by 18 September 2008 that the Property could be resold.

66.  However, the Australian Head Office of plaintiff who had the authority to give instructions as to the resale of the Property, including the price and sale terms, did not give such instructions until 7 months later in April 2009. No explanation was given as to why they took so long to give instructions.

67.  Chu did say that Wong told him in around early/mid October 2008 that if they received offers of over HK$90 m with signed provisional agreement, they could pass to the Head Office for consideration.

68.  Chu admitted in examination that he might not have told every estate agent in detail the need for signed provisional agreement and cheque before the offer would be considered.  He could not therefore deny LN’s saying that she was not so informed.

69.  Despite the large numbers of offers and letters of intent tendered to the plaintiff during the period from 17 September 2008 to early October 2008, evidence before the court was that plaintiff did not proceed to enquire or negotiate with any of the estate agents any of the offers, letters of content nor did they disclose the price they were willing to sell.

70.  Chu only said the reason why he did not carry out any negotiations was because he had not yet received any instructions from the Australian Head Office as to the price at which the Property should be resold until April 2009.

71.  Chu admitted that he did not take active steps to contact estate agents to negotiate better offers.  Despite Chu admitted that the plaintiff received a lot of offers or letters of intent without provisional agreement and deposits, Chu did not proceed to inform/remind these interested persons the need for signed provisional agreements and deposit payments.  He did not even keep record of the many offers the plaintiff received save and except three which were dated 20 February 2009, 30 March 2009 and 31 March 2009, the offers of which were not more than $70,000,000.

72.  Chu accepted also that very often, the estate agents could not get hold of him.  In fact, in the first few days after the aborted sale, he received numerous calls a day but he never replied them.

73.  Chu admitted that copies of the numerous offers received from estate agents were not kept as evidence despite plaintiff was aware that the matter in respect of the aborted sale of Property may have to be litigated.  Chu confirmed that there were a large number of documents which have been discarded.

74.  Chu accepted that there was not a single document disclosed in these proceedings that went to show the steps taken by plaintiff in mitigation of its losses.

75.  Chu also did not pay much attention to whether there was advertisement of the Property in the bulletins or property magazines.

76.  Chu in fact confirmed in court that the article in the Sing Tao financial news dated 21 September 2008 which said that after the aborted sale, plaintiff forfeited the deposit paid by the defendant and did not intend to take further action at that time was correct.

77.  When questioned, Chu was also unable to explain the statement in the affirmation of Aaron Chow, plaintiff’s solicitor, which said that since the aborted sale, plaintiff did not receive any offer to purchase the property at a price higher than HK$80,019,900, which was obviously untrue.

78.  Despite the many offers received, as admitted by Chu, save for 3 offers which were dated February and March 2009, no other offers were disclosed by plaintiff.  Chu explained that the other offers were lost or discarded but when cross-examined, he could not explain why plaintiff had only kept copies these 3 offers but not any of any other offers.  He admitted that he knowingly allowed disposal of such offer documents although he knew plaintiff might litigate over the aborted sale.

79.  Chu and the plaintiff likewise failed to produce any internal correspondence evidencing any communications between plaintiff and the Australian Head Office in respect of the resale of the Property.  Chu testified and explained that all communications between plaintiff and the Head Office was oral, which was considered by the defendant to be rather incredible.  Plaintiff also failed to show any communications with estate agents or interested purchasers during the material time.

80.  Chu was also not able to produce any written correspondence or communications in relation to the resale of the Property in April 2009 to Sunrich Traders Limited, save for the signed agreements which had already been disclosed.

81.  It was submitted by Mr Yu SC that a party should not be allowed to gain an advantage from his own wrong in intentionally destroying a document or record that may materially assist his opponent in the proof of his case (see HSBC v Chan Yiu-wah & Anor [1988] 1 HKLR 457).  The maxim omnia praesummuntur contra spoliatorem applies here.  The Court should presume against plaintiff that the documents which have been destroyed would have proved that the plaintiff did not suffer any loss.  At the very least, the presumption leads to the conclusion that the plaintiff failed to show that it has mitigated its loss.

Defendant’s evidence

82.  Mr Yu SC for the defendant submitted that estate agents called to give evidence were independent witnesses with no interest to serve.

83.  Plaintiff on the other hand said that the court should note that since the defendant were, as opposed to plaintiff, well known property investors who used to be or would possibly in future be clients of these estate agents, they might testify with a view to assist the defendant in order to gain business from the defendant in future.

a)  Phoebe Leung (“PL”)

84.  PL was an estate agent with Livingstone, an estate agency at the time.

85.  PL said that as she had expected the defendant to abort the sale, she had, in August 2008, prepared a proposal to her client suggesting the purchase of the Property when the sale aborted and subdivide the Property for resale. She produced the said written proposal to court.  She said her client was interested and she did make an offer of HK$88,000,000 for the Property.

86.  She said on the day after the sale aborted, she drafted a letter of intent (addressed to Wong and Chu) on behalf of her client offering to purchase the property at HK$88,000,000.  She left the same at the reception of plaintiff’s office, in an envelope with her name card and addressed to Wong, stating that it related to the Property.

87.  She heard nothing from the plaintiff and so on 19 September 2008, PL personally delivered another letter addressed to Wong, also copied to Chu referring to the letter of intent the day before and asked whether plaintiff would accept the offer.  At the same time, she enclosed with the letter a provisional agreement signed by her stating the purchase price to be HK$88,000,000.  As Wong was not in the office, she left the documents.  Later, she called and as she could not reach Wong, she left messages for him to return call.

88.  Further since about 23 September 2008, PL again personally visited plaintiff’s office in the morning with a copy of the letter of intent dated 18 September 2008 trying to see Wong but was told that Wong was not in the office. She was also told that Chu was responsible for the Property but he was not in Hong Kong.  PL left a message for Chu to call back.  She then went back to the office to draft another letter dated 23 September 2008 and faxed it to Chu and then also personally delivered it to plaintiff’s office in the afternoon together with the letter of intent, in case Chu had an assistant who handled the Property whilst he was away.

89.  She again went to plaintiff’s office 4 to 5 days after 23 September 2008 but was unable to meet either Wong or Chu.  Neither of them returned her phone calls.  She therefore thought plaintiff had no intention to sell the Property.

90.  PL said in her experience, if plaintiff was willing to sell the property for HK$88,000,000, her client would certainly have agreed to purchase it.  She also had confidence that as long as the counter-offer was within 2-3% of HK$88,000,000, she would have been able to persuade her client to agree to such price ie $906,400 or at $4,500/sq ft, totalling around $89,910,000.

91.  PL said market price of the Property at that time was around $4,500 to $4,800/$4,900 per sq ft and that as the Property was a whole floor unit, it was rare in the market.

92.  She confirmed that Chu never told her about any need for a signed provisional agreement and a cheque before the offer would be considered.

93.  For the purpose of the present proceedings, Livingstone did produce a signed letter which said that in September 2008, there were numerous enquiries concerning the Property but despite their many attempts to contact the plaintiff, plaintiff never responded and showed no interest to sell.

94.  Chu in court said he could not remember receiving the letter of intent or offer from PL.  He further said as the offer did not come with a provisional agreement and a cheque and it came the day after the aborted sale, the plaintiff would not have accepted it anyway.

95.  It was noted however that if Chu did not respond to offers received without a signed provisional agreement and a cheque, it was not possible for the estate agent to be aware of the provisional agreement and cheque requirement of the plaintiff.  I agree.  The stated intent of the plaintiff to sell the Property was, in my view, very doubtful.  It was reasonable that PL formed the view that the plaintiff was not really interested in selling the Property at the time.

b)  Jess Tai (“JT”)

96.  JT was an estate agent with Midland until November 2008 when she left.

97.  According to JT, in around October/November 2008, she had faxed to the plaintiff an offer of $4,500/sq ft ie $89,910,000 for the Property for one of her clients who was very interested in purchasing the Property.

98.  JT said that at the time, the bank had valued the Property at $5,000/sq ft, ie $99,900,000.  She said around that time, there were 2 transactions in the same building with unit price per sq ft at $4,950 and $5,895 respectively. She said her client was willing to pay more than the offer price of $89,910,000 to purchase the Property.  She said before she faxed the offer, she did ring and talk to Chu whom she understood at the time was the one responsible for the resale.  She said Chu never told her about the provisional agreement and cheque requirement.  She was later told by Chu that plaintiff was waiting for instructions from head office in Australia and since then she received no further response from Chu or anyone from the plaintiff.

99.  JT was asked why she did not increase her offer if there was no response from the plaintiff.  She replied that she would not do so because she knew plaintiff in Hong Kong could not decide what to do.

100.  Later, she e-mailed the Managing Director of the Australian Head Office (Toll Holdings Limited) Mr Paul Little to persuade him to sell the Property. In return, a Mr Michael Fox (“Fox”) of the Head Office replied her by e-mail on 27 November 2008 stating that the Property could be sold or leased out.

101.  Subsequently, there was a meeting in Hong Kong at Grand Hyatt Hotel with JT (who had then already resigned from Midland), Tony Kam (“TK”) from Midland and Fox on 15 December 2008.

102.  JT said as TK and Fox talked in English and it was quite noisy at the time, she could not hear much of the conversation.  However, they were definitely talking about the Property and whether it was to be sold or leased out.  She said she did not hear any price being mentioned or offered on behalf of plaintiff by Fox.

103.  JT said this client of her was interested in the Property for his own use as an office as his existing office in Nanyang Centre in Tsim Sha Tsui was not big enough.  Property of such size was rare at the time.

104.  JT said therefore she believed that she could have persuaded him to purchase the property at the then market price of HK$5,000/sq ft in November 2008 ie $99,900,000.

105.  Unfortunately there was again no response from the plaintiff.

106.  JT said the market in November 2008 was affected by Lehman incident but still not as bad as SARS especially when the Property was rare on the market. She said there were still cautious end user buyers eager to buy quality property for own use.

107.  JT opined that had the plaintiff been genuine in selling the Property, they could also have conducted public auction, advertising the Property in papers and magazines, arrange open days to allow inspection etc.  The plaintiff did nothing to secure the resale in this case.

108.  JT said throughout Chu never mentioned any price figure nor did he indicate if the offer by JT was low.

109.  In court, Chu said he could not remember receiving JT’s offer nor did he know anything about the email from JT to Paul Little.  He also said he knew nothing about the meeting in Grand Hyatt and he was not asked to follow up after the Grand Hyatt meeting.

110.  JT said had the plaintiff responded then, plaintiff could have resold the property at $5,000/sq ft, if not at least at $4,500/sq ft.

Lam Nam (“LN”)

111.  LN, an estate agent with Centaline, gave evidence and said that before the aborted sale of the Property on 17 September 2008, there were serious buyers for the Property.  The negotiations failed as the price seeked for was too high.

112.  After the sale aborted, these interested buyers tried to buy at a lower price, on the assumption that the plaintiff would be willing to sell at a lower price because it had forfeited 10% deposit paid by the defendant already.  They were keen to get a good deal.  LN said she advised clients to use a 10% discount on the price in the Agreement as the basis for negotiations.  She said that in September/October 2008, there were still a lot of interested purchasers.

113.  LN told the court that from around 15to 16 September onwards for a few days, she paid daily visits to plaintiff’s office.  She also made phone calls to Chu several times a day and make enquiries on the Property.

114.  In fact, she said on or about 18 September 2008, she had made an offer to plaintiff on behalf of her client, Three Garden Limited, to purchase the Property at HK$89,910,000 (equivalent to $4,500/sq ft).  A signed provisional agreement and a cheque for the initial deposit were also tendered to the plaintiff.

115.  At the time, LN said there were also other interested buyers.  LN said as Three Garden had provided a cheque, the colleagues would not, as a rule, approach other interested buyers for cheques to compete with Three Garden for purchase of the same property.  LN added that at that time there were many clients who inquired about the Property, so they negotiated on behalf of the first client who provided a cheque.  LN stated that if Three Garden had not issued the cheque for the Property, she would have approached other interested clients to consider the Property.

116.  LN testified that at the time ie on 18 September 2008, apart from the Property, there was no vacant property of the size comparable to the Property in Tsim Sha Tsui for sale (although there were some with existing tenancy).

117.  That morning, she went to plaintiff’s office with two other colleagues and met Chu.  She told Chu that her client was interested to purchase the Property and had provided a signed provisional agreement and a cheque as the initial deposit.  LN said Three Garden asked that the provisional agreement had to be signed at or before 12 noon on 22 September 2008 as the property price fluctuated and a deadline had to be imposed.  Plaintiff or Chu never responded nor did they seek for any extension of the deadline.

118.  LN said Chu indicated at the time that plaintiff had not decided whether to sell or to lease the Property and that they would confirm later.

119.  On 2 October 2008, Three Garden increased their offer to HK$91,908,000. LN informed Chu of the same by e-mail.

120.  Again, plaintiff did not respond.  LN said she opined that plaintiff was not serious in considering the offers.

121.  In response to evidence of LN, Chu did not question the authenticity of the second offer HK$91,908,000.  Chu never requested LN to ask the client for a signed provisional agreement and cheque in respect of the second offer.

122.  According to LN, Chu never told her that plaintiff would only consider offers with signed provisional agreement and cheque for initial deposit.

123.  Chu did not respond to the second offer although LN had chased him.  Chu however did also ask LN to fax over to him transaction records, which she did on 3 October 2008.

124.  LN was cross-examined on the transaction records, in particular concerning Unit 20-21 on 3^rd Floor of Mandarin Plaza Tower B which was sold at HK$4,800/sq ft on 26 August 2008.  LN said that the preliminary sale and purchase agreement for this transaction was signed in August 2008 ie prior to the Lehman incident.  LN said she would have told Chu (although she did not remember whether she had done so) that such price could not taken as a good indicator of the market price of the Property after the aborted sale.

125.  LN said that it was not necessarily the case that smaller units are generally more expensive, it depends on the supply in the market.

126.  She also told the court that Tower A of New Mandarin Plaza in which the Property situate was more popular with users than Tower B as it had better view and higher usable area.  Further the unit on the 3^rd Floor would carry a higher management fee as it was supposed to be a unit in the shopping arcade converted into an office and it was also less bright as it was on a lower floor than the Property.  LN said that she should have mentioned these matters to Chu after the transaction records were sent to him although she could not actually remember.

127.  LN said she continued to call Chu even up to around end of October 2008 but there was no feedback and so eventually she stopped chasing Chu.  In late October 2008, LN said Chu told her that he was still waiting for instruction from plaintiff’s holding company and thus was not in a position to respond to the offer.  Chu did not tell her whether plaintiff would sell or lease the Property, let alone the sale price acceptable to the plaintiff.  LN said she regarded plaintiff having no intention to sell the Property.

128.  LN said throughout the entire period between the aborted sale in September 2008 and when the Property was actually resold in April 2009, Chu or plaintiff never informed LN or anyone of their intention.

129.  LN said in around November 2008, a person called Mark from plaintiff’s Singapore office indicated that plaintiff had not decided whether they would sell or lease the Property and asked LN to prepare a proposal for plaintiff’s head office to consider.  LN suggested that plaintiff should appoint Centaline as sole agent to which Mark agreed and the Sole Agency Proposal was issued on 27 November 2008.

130.  However, plaintiff refused to accept proposal later.

131.  LN had produced such proposal to court to support her contention that plaintiff and/or its Head Office had not made up their mind to sell or to lease.

132.  LN said further that in around November 2008 or close to the new year, plaintiff indicated that they would put a hold on the Property and that no decision would be made until after the new year.

133.  The computer records of Centaline apparently indicated that a lot of estate agents had contacted plaintiff from September to December 2008 and had obtained the message that plaintiff had not yet decided whether to sell or lease out the Property as they were awaiting instructions from the head office.

134.  The computer records of Centaline entered by LN on 18 September 2008 and 21 October 2008 respectively were also indicative of the fact that plaintiff then had not yet decided on whether to sell or lease the Property.  As regards the “may have decision next month” entry by LN on 21 October 2008.  LN explained that she may have put this down by reason that Chu told her during their telephone conversations at around end of October that they were not expecting any news that month, that LN might contact him again next month.

135.  LN also doubted if plaintiff was eager to sell the Property as it had not taken any steps to procure a sale such as a public auction, appointing sole agent etc.

136.  LN echoed what JT said and stated that after the collapse of Lehman, some investors were still optimistic and would still buy properties, although starting October/November 2008, purchasers began to adopt a wait and see attitude.

137.  She stated that in September/October 2008, there were still a lot of purchasers interested in the Property as the price had reduced significantly and those who were unable to buy before would look for bargain deals and good quality properties.

138.  LN gave evidence that had plaintiff been willing to sell at HK$89 m to HK$91 m, she was sure that Three Garden would have agreed to purchase the Property at that price.  She further testified that even if plaintiff had counter-offered a price equivalent to 90% of the original sale price ie $4,828/sq ft or below, she was confident that Three Garden would have agreed to purchase the Property as Three Garden was already interested in this Property even before the aborted sale.

139.  LN stated that she in fact did discuss the price of HK$4,828/sq ft with Three Garden on about 17 September 2008 but they wanted her to try a lower price first.  This price (which was 10% below the price in the Agreement) was used on the assumption that plaintiff would be agreeable to sell at the price given it had already forfeited 10% deposit from the defendant and thus the price would result in no loss being suffered by plaintiff.

140.  According to LN, if price of HK$4,828/sq ft was not acceptable to the client, it would not even have issued the cheque on the basis of HK$4,500/sq ft.

141.  Plaintiff however did not respond.

142.  LN also gave evidence and said she had a client interested in the Property in about April 2009 at a price higher than the price at which the Property was actually resold.  However, although such offer was tendered to the plaintiff, plaintiff did not follow up on such offer.

143.  As regards Chu’s evidence in respect of LN’s offers:

(1)       Chu admitted having received the first offer from LN, the signed provisional agreement and the cheque and that he informed LN that plaintiff had not decided on the sale price of the Property.

(2)       He admitted also that he did not tell LN if the price was too low.

(3)       Even after receiving the record of transactions from LN, Chu should have known by then that the price offered was roughly the market price, and they should have then started negotiation but they did not.

144.  Chu did not deny having received the $91,908,000 offer from LN in cross-examination but stated that he did not recall whether he had received the same and/or had followed up on the same.

145.  He confirmed that he never asked LN for an extension of time beyond 22 September 2008 to sign the provisional agreement in respect of the first offer from LN as he was still waiting for instructions from the head office.  This was consistent with LN’s evidence.

Tung Che Keung (“TCK”)

146.  TCK was a director of the defendant.

147.  According to TCK, he had various conversations with TK after the aborted sale and was told that TK did give a written offer to plaintiff in late September 2008 on behalf of an intended purchaser to purchase the Property at HK$98,000,000 (ie HK$4,904.90/sq ft) which plaintiff did not accept.  TCK said TK had, despite his request, failed to provide a copy of the offer or to make affirmation in this action to confirm such facts.  It was said that Tung did not obtain approval from the legal department of the Midland Group to do so.

148.  TCK said he was told that the same client had offered to purchase the Property at $100,000,000 before the scheduled completion date but as the completion date was not postponed, no agreement was reached.

149.  Ms Lan for the plaintiff criticized that as JT also came from Midland, why was it that JT could make witness statement for the present proceedings and TK could not.  This court noted that when JT made her witness statement on 3 September 2010, she had already left the employ of Midland.  TK however was then still in the employ of Midland.

150.  In face of this piece of hearsay evidence from TCK, Chu in his second affirmation said he had no recollection of such a written offer or even the person TK.  He admitted he was unable to verify whether he had been sent such offer as alleged.  He said he could only safely say that had there been such an offer, the same did not come with a signed provisional agreement and a cheque as he might have not considered offer without a signed provisional agreement and a cheque.

151.  There was no denial of such an offer from Chu.

152.  TCK also gave hearsay evidence in respect of the offers to plaintiff given by JT, LN and PL which was largely consistent with the evidence given by these witnesses.

153.  He also mentioned the written confirmation provided by Office One Property Consultants by letter dated 17 August 2009 to defendant that it too had tried to contact Chu to enquire about the sale of the Property but Chu failed to respond and showed no interest to sell the Property.  Such letter also showed that in late September 2008, there were still many enquiries about the purchase of the Property from plaintiff but plaintiff indicated that it would not even allow inspection of the Property which led potential buyers to think that plaintiff was not sincere in selling the Property and thus did not make any offer.

154.  This court noted however that at that time, Lehman incident had not occurred.

155.  It was said that evidence of TCK or indeed that of the testifying estate agents should be preferred because firstly, Chu had deliberately allowed the destruction of all written offers received at the material times in September 2008 (except three), from which the court was entitled to draw an adverse inference that TK’s offer was amongst the many offers destroyed by him.  This court however reminded itself most of the evidence of TCK was hearsay and that for those relating to TK, TK was not cross-examined though he had been made available for such purpose.

156.  Secondly, though Chu himself said he had no recollection, he could not deny the possibility of having received higher offers than those from LN because according to his evidence, he would only consider offers when the same was evidenced in signed provisional agreement with cheque payment of deposit.

157.  Ms Lan however urged this court to prefer evidence of Chu over those from the defence witnesses.

DISCUSSION

158.  From the authorities cited, it is clear that although the plaintiff was entitled to rely on clause 15 of the Agreement, he had to make reasonable efforts to sell in order to mitigate the loss as there was this implied duty to mitigate the loss: Alucase Company Ltd case.

159.  Mr Yu SC on behalf of the defendant criticized the plaintiff for failing their duty to mitigate its loss after the aborted sale.

160.  In fact, Chu admitted that on the day after the aborted sale, the plaintiff had obtained legal advice and was aware that they could resell the Property.

161.  It was also clear from the evidence before this court, unchallenged, that immediately after the aborted sale, there were a lot of offers received by the plaintiff everyday for at least 2 weeks.

162.  Chu, the only witness for the plaintiff admitted receiving the offer of $89,910,000 from LN and he did not challenge the authenticity of the second offer of $91,908,000 on 2 October 2008 from LN although he said he could not remember such offer.

163.  PL said her client offered $88,000,000 to purchase the Property the day after the sale aborted and she was confident that her client would increase the offer to $906,400,000.  Again though Chu could not remember if there were such offers, he admitted he could not deny the evidence of these offers.

164.  JT said October/November 2008, she faxed to plaintiff offer in sum of $89,910,000.  She believed her client would be willing to buy at $99,900,000.

165.  If plaintiff was to resell without suffering any loss, the resale price needed only be 90% of the contract price in the Agreement, i.e. $96,480,000, or $4,828.8/sq ft.

166.  On Chu’s admission, a lot of other offer documents were discarded.

167.  The court was therefore not assisted in knowing the price in these other offers.

168.  It was submitted by Mr Yu SC that a party should not be allowed to gain an advantage from his own wrong in intentionally destroying a document or record that may materially assist his opponent in the proof of his case (see HSBC v Chan Yiu-wah & Anor [1988] 1 HKLR 457).  The maxim omnia praesummuntur contra spoliatorem applies here.  The court should presume against plaintiff that the documents which have been destroyed would have proved that the plaintiff did not suffer any loss.  At the very least, the presumption leads to the conclusion that the plaintiff failed to show that it has mitigated its loss.

169.  In my judgment, it is understandable that others would suspect why Chu, corporate legal counsel of the plaintiff, allowed this to happen when he admitted knowing that the plaintiff might litigate on the breach of the Agreement by the defendant.  Obviously, he should be aware of the duty to mitigate the loss by the plaintiff.

170.  His explanation that the plaintiff did not have any records of communication between the plaintiff and their head office in Australia as these were all conducted orally was unbelievable, despite he being found an honest witness in the case of Nan Fung Finance Ltd v Chan Chun Huen & others HCMP 2765/2003, 1 November 2004.

171.  Chu said plaintiff would only consider offer with signed provisional agreement and cheque deposit payment but he admitted he might not have informed the estate agents in detail of the same.  The estate agents who testified in court, PL, JT and LN all said they were not aware of such requirement from the plaintiff.  Obviously, a lot of offers and letters of intent were discarded without even being forwarded to the Australian Head Office.  There was simply no follow up by plaintiff to achieve possibly better offers.

172.  It was said by the defendant that despite not disclosing their selling price, that should not affect the estate agents helping in selling the Property. The problem in this case was that there was simply no response to offers and letters of intent, even to the offer evidenced in signed provisional agreement and cheque deposit payment.

173.  Despite all these offers, the plaintiff never responded.  Chu explained that the plaintiff needed to wait for instruction from head office.  Evidence showed that Chu maintained such response on enquiries/chasers from estate agents for a substantial period.  In fact, Chu admitted that he had no instructions as to how the Property was to be sold until the Property was sold in April 2009.  There was no explanation at all from the plaintiff for this inaction for 7 months.

174.  The circumstances of this case clearly could be distinguished from the cases where despite efforts, the plaintiff only managed to sell the Property after long period of time: Lui Chun Wai case and Teh Fuh Company Ltd case.  Here, the plaintiff was flooded with offers and they did not even start negotiating with any of these interested purchasers.

175.  Despite Chu said plaintiff all along intended to resell the Property, he agreed that if that was not possible, they would consider leasing the Property.

176.  In my view, the sole agency proposal (sale or lease) prepared for the plaintiff by LN was supportive of plaintiff’s true intention at the time.

177.  According to Findlay J in Teng Fuh Company Ltd case, the plaintiff was under an obligation to resell the Property with proper diligence. That was an implied term to our clause 15 which was nearly identical to clause 21 of the agreement in Teng Fuh case.

178.  I agree, as submitted by Mr Yu SC that plaintiff had failed this implied duty to mitigate his loss.  Before arriving at this conclusion, I have fully considered the difficulty of the purchaser in a volatile market.

179.  I accept the submission of Mr Yu SC that once the plaintiff had failed his duty as aforesaid, then following the guiding principle in the First Shanghai Enterprises Ltd case, we should adopt the normal measure of damages as being the contract price less the market price at the contractual date stipulated for formal completion.

180.  Ms Lan argued that even if this court finds the plaintiff had failed to mitigate, then the defendant still had to pay for loss suffered by the plaintiff.  The question was “what was the loss suffered by the plaintiff?”

181.  Parties agreed that market price of the Property at 17 September 2008 was $127,150,000.

182.  According to the report of defendant’s expert Mark Staples, “market value” is defined as “estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and with compulsion.

183.  Plaintiff’s expert Kevin CY Chu did not disagree to this definition when commenting the report by Mr Staples.

184.  In fact, his valuation of the Property at time of the aborted sale on 17 September 2008 was higher than that by Mr Staples being $129,309,000 as opposed to the valuation of $125,000,000 by Mr Staples.

185.  Accordingly, there would be no loss to the plaintiff as the value of $127,150,000 was higher than the contract price in the Agreement.

186.  In fact, in the circumstances of this case, the plaintiff could have easily resold the Property much earlier and at higher price than the actual resale price in April 2009.  It would be unfair for the defendant to have to bear the loss as I did not find the same had resulted from the defendant’s breach.

187.  Had I been wrong and the damages should be assessed having reference to resale at reasonable time, what the reasonable time within which the plaintiff should have resold the Property in this case?  My answer was that since the plaintiff were advised by their legal adviser that they could resell on the day after the sale aborted, in view of the volume of interests in the Property at the time, the same would be no more than three months.

188.  As the plaintiff failed to negotiate with these intended purchasers, the best evidence that we could have in order to reasonably estimate the price that the plaintiff would be able to fetch on resale would be evidence from the estate agents.  There would and should also be adverse inference drawn against the plaintiff as they had discarded a lot of these other offers.  Again, as said, on evidence before this court, I do not find proved in these circumstances that there would be any loss to the plaintiff.

189.  Had the plaintiff here discharged their duty to mitigate and had made reasonable efforts to sell at the best price in a volatile market and yet only been able to secure a sale few months later and suffered loss, I have no hesitation to rule that the court should assess the damages by reference to the date of resale i.e. relying on clause 15 but this was not what happened in our case here.

190.  Further, I do not find assessing the damages by reference to the difference between the contract price in the Agreement and the market price of the Property on the scheduled completion date would result in injustice in this case although I am aware that this court has power to assess damages by reference to the value at a different date if it could be more just so to do: Johnson v Agnew [1980] AC 367.

191.  From evidence of JT, which I accept, her client would be willing to pay $99,900,000 which would not result in any loss to the plaintiff anyway.

192.  Again, according to LN, she was confident that Three Garden would agree to pay a price equal to 90% of the contract price of the Agreement, which would again result in no loss to the plaintiff.

193.  I placed little weight as far as evidence relating to TK was concerned.

194.  One should also not forget further that Chu had discarded a lot of offers, the offer amount of which he could not tell.

195.  The evidence of the estate agents were in my view not shaken after cross examination and I accept their evidence, in particular those from PL, JT and LN, that had the plaintiff been negotiating with their clients, it was more probable than not that the Property could be resold at a price not less than $96,480,000 or 90% of the contract price in the Agreement.

196.  As the plaintiff should not suffer any loss should the plaintiff effect the resale earlier, there was no good reason for them to hold onto the Property and asked the defendant to bear their loss.  Their loss did not result from the breach of the defendant.

197.  It would be totally unfair to the defendant if plaintiff were allowed to have damages assessed, relying on clause 15 of the Agreement, using the actual resale period 7 months later when they had totally disregarded their duty to mitigate.

198.  I do not find it reasonable for the plaintiff in this case to resell the Property only 7 months later.

199.  Obviously the plaintiff here had been nursing the Property for too long and was not, as said by Chu, eager to resell until 7 months later.  In fact, Chu/Fox of the plaintiff had confirmed to JT their interest also to lease the Property despite so many offers to purchase the Property given to them.

CONCLUSION

200.  By reasons of matters aforesaid, I do not find any loss and damages of the plaintiff proved.

COSTS

201.  As costs normally follow the event, I make an order nisi that the plaintiff shall pay the defendant costs of the proceedings (including all costs reserved), the same to be taxed if not agreed, with certificate for two counsels.

202.  I thank all counsels for their assistance.