TAIFUND INDUSTRIES LTD. v. FOREXTIME CONSULTANTS LTD.

HCA 4267/98

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 4267 OF 1998

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ASSESSMENT OF DAMAGES

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Background

1. By a written agreement made between the Plaintiff and the Defendant dated 15th October 1997 ("the agreement"), the Plaintiff agreed to sell and the Defendant agreed to purchase Flat F on the 1st Floor, together with the Garden appurtenant thereto, of Tower 20, Parc Oasis, Kowloon, Hong Kong ("the property") at the price of HK$8,970,000. An initial deposit in the sum of $500,000 was paid prior to, and a further deposit in the sum of $397,000, was paid upon the signing of, the agreement by the Defendant to the Plaintiff

Clause 3 read in conjunction with Schedule 3 Part II of the agreement stipulated that the purchase shall be completed on or before 5th November 1997. The Defendant was to pay to the Plaintiff the balance purchase price in the sum of $8,073,000 on or before 5th November 1997. By mutual agreement, the completion date was postponed to 10th November 1997("the completion date").

The Defendant failed to pay the balance purchase price on 10th November 1997. The Plaintiff, through its solicitors by a letter dated 11th November 1997, gave notice to the Defendant's then solicitors that the deposit has been forfeited. The Defendant's attention was drawn to clause 15 of the said agreement which stipulated that the Defendant was responsible for payment of the stamp duty and to keep the Plaintiff indemnified in respect thereof. The Plaintiff later paid the stamp duty with the penalty imposed upon the Defendant failing to do so.

2. By an agreement dated 23rd December 1997 made between the Plaintiff as the vendor and Chan Shing Yin and Lam Yin Wing Anna as the purchasers (the ultimate purchasers), the Plaintiff agreed to sell the property at the price of $7,380,000. On 27th January, 1998, the Plaintiff and the purchasers executed a Supplemental Agreement to reduce the purchase price to $7,280,000. The property was duly assigned to the purchasers by the Plaintiff. The Plaintiff incurred legal costs in the sum of $10,680 in respect of the resale.

3. By a Writ of Summons issued on 18th March 1998 the Plaintiff claims against the Defendant, inter alia, damages to be assessed. The Plaintiff obtained Summary interlocutory Judgment against the Defendant before Master Poon with damages to be assessed on 12th November 1998. The Defendant's appeal to the High Court and the Court of Appeal were unsuccessful.

The evidence

4. The Plaintiff claims for the difference in the sale of the property, legal fees for the resale, stamp duty with penalty and costs.

Two witnesses were called by the Plaintiff: Mr. Li Wing Kang (PW1), a qualified surveyor and a director of Dudley Surveyors Limited and Madam Hung Shu Mei (PW2), a director of the Plaintiff. PW1, with reference to the survey report he prepared dated 24th November 1998, assessed the open market value of the property as at 29th November 1997 at $7,370,000. In his oral testimony, he further explained how he had used four comparable situated in the same development, with necessary adjustment on their characteristics, such as size; floor level; view; date of completion etc., to arrive at the figure of $7,370,000.

PW2 gave evidence regarding the general history of the claim. In particular, she testified that as the Defendant failed to pay the stamp duty, in order to have the agreement used as evidence in court to pursue the present claim against the Defendant, the Plaintiff paid the stamp duty in the sum of $246,675. The Plaintiff also paid a penalty in the sum of $4,700 levied due to lateness. PW2 also testified that as the Plaintiff had already entered into another Sale and Purchase agreement to purchase a flat in Kowloon City, in the face of a falling market and with the ultimate purchasers threatening to cancel the sale, the Plaintiff agreed to a reduction in the purchase price in the sum of $100,000 so as to avoid having to forfeit the deposit already paid for the Kowloon City flat.

The law

5. The normal measure of damages is the contract price less the market price at the contractual time fixed for completion. As stated by Parke B. in Laird v. Pim (1841) 7 M & W. 474 at 478: " The measure of damages ........ is the injury sustained by the Plaintiff by reason of the Defendants not having performed their contract. The question is , how much worse is the Plaintiff by the diminution in the value of the land, or the loss of purchase-money, in consequence of the non-performance of the contract? (see McGregor on Damages, 15th ed. Para. 937). The first relevant price is the contractual price and the second one is the market price at the contractual time fixed for conveyance (i.e. the completion date). The learned author further said: "[t]he price at which the seller has resold is strictly not to be taken in preference to the market price, but it has been taken in most cases .......... This would seem to be on the ground that the resale price affords good evidence of the market price, and there is no suggestion in these cases awarding the difference between the contract price and the resale price that the latter differed at all from the market price" (McGregor, ibid, para.938).

6. Further, the damages "are not confined to the actual margin between the sum realised and the contract price; there may be incidental expenses which have necessarily flowed from the breach of contract" - per Pollock M.R. in York Glass Co. V. Jubb (1926), 134 L.T. 36, 40 (C.A.) (see McGregor, ibid, Para. 939). The Plaintiff is therefore entitled to consequential losses.

Findings of fact

7. The Plaintiff's various claims are well supported by documents. I find PW2 an honest and reliable witnesses and I accept her evidence. I find that the Plaintiff has made out its claim for the legal costs on resale, the stamp duty with the penalty. I will now turn to the damages on the difference in the contractual price and the market value. Whilst I find that PW1 is qualified to give an assessment of the open market value of the property, the relevant date adopted by PW1 (on the instruction of the Plaintiff's solicitors) was 29th November 1997, not 10th November 1997 which was the completion date (albeit deferred). It is unclear why 29th November 1997 was chosen. Nevertheless, I do take into account that in late December 1997, the Plaintiff managed to enter into an agreement to sell the property to the ultimate purchasers at $7,380,000, a price very close to the evaluation of $7,370,000 by PW1. I am of the view that the agreed resale price of $7,380,000 did afford good evidence of the market price at the time of completion. Bearing in mind the fact that the property market was indeed falling in 1997, I also find it reasonable for the Plaintiff to have agreed to a further reduction of the purchase price under the circumstances to ensure that the subsequent sale would go through. The Plaintiff was indeed mitigating its loss arising out of the Defendant's breach of the agreement. I find that the Plaintiff is entitled to its loss of bargain represented by the contractual price minus the actual resale price.

Assessment

The Plaintiff is therefore entitled to claim damages against the Defendant assessed at $1,055,055; a breakdown of which are as follows:-

1.	Loss of bargain
	Contractual price	$8,970,000
	Less: re-sale price	$7,280,000
	Less: deposits paid	$897,000
			$ 793,000
2.	Legal costs of resale		$10,680
3.	Stamp duty		$246,675
4.	Penalty of stamp duty		$4,700
		Total:	$1,055,055

Interest

8. The Plaintiff is also entitled to interest at the judgment rate from the date of Writ until full payment.

Costs

I make the following nisi order as to costs, such order to be made absolute if no application to review is made within 14 days.

"Cost of and incidental to the assessment of damages be to the Plaintiff, to be taxed, if not agreed".