YEUNG LUENG WAI KWAN v. TSANG NUI TAI

HCA No. 9477 of 1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO. 9477 OF 1998

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Assessment of Damages

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Introduction

1. This assessment arises from an abortive sale of House Type A, No. 48 Willow Path, Palm Springs Phase 1A, Yuen Long ("the Property").

2. The Plaintiff was at all material times the registered owner of the Property. She entered into a provisional agreement on 1st December 1997 with the Defendant whereby she agreed to sell and the Defendant agreed to purchase the Property at the price of HK$7.9 million. The Defendant paid an initial deposit of $300,000 upon signing of the provisional agreement. On 12th December 1997, the parties entered into the formal sale and purchase agreement ("the Agreement"). The Defendant duly paid a further deposit of HK$490,000. The Plaintiff allowed the Defendant to occupy the Property for the purpose of carrying out decoration and renovation works therein.

3. The completion date fell on 1st June 1998. In breach of the Agreement, the Defendant failed to complete. Pursuant to Clause 12 of the Agreement, the Plaintiff forfeited the deposits. On 11th June, the Plaintiff commenced the present action. On 14th October, in default of notice of intention to defend, the Plaintiff obtained (a) a final judgment for a declaration that the Defendant had repudiated the Agreement and that the deposits be forfeited to the Plaintiff and (b) an interlocutory judgment for damages to be assessed.

4. In the Amended Statement of Claim, the Plaintiff seeks to recover the following items of losses:

(a) Damages representing the price difference between the Agreement and the subsequent resale less the deposits forfeited: HK$2.86 million;

(b) Agency commission: HK$79,000;

(c) Unpaid rates for the period between 1st April and 31st May 1998: HK$3,572;

(d) Unpaid management fees for the period between 1st March and 31st May 1998: HK$7,513.;

(e) Legal fees for the sale to the Defendant: HK$25,735;

(f) Expenses for renovation of floor tiles: HK$6,500;

(g) New set of keys, photographs and travelling expenses: 1,230; and

(h) Expenses and disbursements on resale: HK$18,550.

Evidence

5. The Plaintiff's evidence, in brief, is as follows:

(1) She had given, shown and proven a good title of the Property and there was no requisition outstanding on or before the completion date. The Defendant had accepted the title of the Property prior to completion. She was at all material times ready and willing to perform the Agreement. It was the Defendant who had wrongfully failed to complete.

(2) The property market had dropped substantially since the date of the Agreement. She managed to resell the Property to another buyer at the price of HK$4.43 million within a relatively short time. The assignment for the resale (Exh. P2) was made on 15th August 1998. This was the only offer she obtained since the Defendant's breach. According to the Valuation report prepared by one Jointgoal Surveyors Limited dated 3rd June 1999 (Exh. P11), the market value of the Property as at 1st August 1998 was HK$4.43 million.

(3) Upon re-entering the Property after 5:00 p.m. on 1st June 1998, she discovered that the state of the Property deteriorated as the wooden floor tiles had been damaged by the Defendant. She had subsequently spent HK$6,500 for reinstatement. Copy invoices in support are produced as Exh. P4.

(4) During the Defendant's occupation of the Property, rates and management fees in the respective sum of HK$3,572 and 5,888 remained unpaid. The relevant demand note and reminder are produced as Exh.P6 and 5.

(5) She had paid legal fees of HK$12,610 and agency commission of HK$79,000 for the sale of the Property to the Defendant. See Exh. P3 and P7 respectively.

(6) She had incurred expenses and disbursements on the resale in the sum of HK$19,090. Copy Bills are produced as Exh. P8.

(7) She had further incurred a sum of HK$1,230 for a new set of keys, photographs and travelling expenses. The receipts in support are produced as Exh. P9.

(8) She also paid additional mortgage installments interest in the sum of HK$131,156.67. See Exh. P10, which is a copy Mortgage Rate Change Notice dated 30th of March 1998.

6. The Defendant being absent, there is no evidence to contradict the Plaintiff's case.

Direct Loss

7. The immediate and direct loss suffered by the Plaintiff as a result of the Defendant's failure to complete is the difference between the price under the Agreement and the market value of the Property at the time of completion: McGregor on Damages (16th Edn.), para. 992 at p.657. The market value is determined by the price obtained, or obtainable, on a resale with a reasonable time of the breach, but excluding any inflated price which the property might fetch by nursing it: Keck v. Faber, Jellet and Keeble (1915) 60 Sol. Jo. 253. In assessing damages, credit must be given for any deposit that has been paid: Ockenden v. Henry (1858) EB. & E. 485; Shuttleworth v Clews [1910] 1 Ch. 176.

8. I accept that the resale in August 1998 was within a reasonable time of the Defendant's breach. It was made within 2 months in a falling market. I also accept that the resale price was the market value of Property at the material time. Further, I am satisfied that the Plaintiff had done what she could reasonably do to mitigate her loss. It was the only offer and was much lower than the contract price under the Agreement. But it was at the market price. The market was falling and it was reasonable for her to accept it.

9. Accordingly, the Plaintiff's direct loss is HK$3.47 million, being the difference between HK$7.9 million and HK$4.43 million. Against this, credit must be given to the deposits of HK$790,000. The net loss is therefore HK$2.86 million.

Consequential Losses

10. It is trite law that the Plaintiff can also recover consequential losses. Such losses include incidental expenses and losses which flow necessarily from the breach of the Agreement: York Glass Co. v. Jubb, (1926) 134 L.T. 36, C.A.

11. I will deal with the various items one by one.

12. Commission and Legal Fees of the Abortive Sale

13. These items are in fact wasted expenditure of the abortive sale. In principle, a vendor is not entitled to recover in addition to damages his expenses incurred in connection with the abortive sale: Barnley's Conveyancing Law and Practice at p.654. These expenses "would have been incurred even had the buyer not defaulted; putting the seller into the position he would have been in had the contract been performed still entails his having incurred these expenses": McGregor on Damages, supra, para.995 at p.658.

14. Accordingly, in the absence of any contractual provision, the Plaintiff is not entitled to recover the commission and legal fees paid under the abortive sale.

15. Expenses and Disbursement of the Resale

16. In the Amended Statement of Claim, the amount claimed for this item is HK$18,550. In para. 19(h) of the Plaintiff's witness statement, the amount is said to be HK$19,090. Three copy Bills issued by the solicitors responsible for the sales had been produced. Two are dated 26th June 1998. One is for HK$12,610 and the other, HK$13,125. The sum total is HK$25,735, being the amount of legal fees of the abortive sale. The third one is dated 1st August 1998 for a sum of HK$5,965. The Plaintiff does not explain how she had incurred the sum of HK$19,090. Apparently, it is the sum total of the second and the third bill. However, there is no explanation why the 2nd bill was for both the abortive sale and the resale. I therefore only accept HK$5,965 as the actual expenses and disbursement of the resale.

17. Unpaid Rates and Management Fees

18. Under Clause 27(a) of the Agreement, while in occupation of the Property, the Defendant should be responsible for the payment of, inter alia, all rates and management fees and should keep the Plaintiff fully indemnified against the non-payment of the same. The Defendant occupied the Property for the period between 12th December 1997 and 31st May 1998 but failed to pay the rates and management fees as claimed. The Plaintiff is entitled to recover the same from the Defendant.

19. Reinstatement Costs

20. Under Clause 27(h) of the Agreement, when the Defendant failed to complete, the license to occupy the Property should forthwith determine and the Defendant should forthwith deliver up vacant possession of the Property and the Defendant should, if so required, inter alia, restore and reinstate the Property to its original state and condition. It is the Plaintiff's case that the Defendant having caused damage to the floor tiles, failed to reinstate it to its original condition. In my judgment, the reinstatement costs of HK$6,500 incurred by the Plaintiff falls within the rule in Hadley v. Baxendale (1854) 9 Exch. 341 and is recoverable from the Defendant.

21. Keys, Photographs and Travelling Expenses

22. It is not clear which particular clause of the Agreement the Plaintiff seeks to rely on in support of this item. Both the Amended Statement of Claim and the Plaintiff's witness statement refer to Clause 28 of the Agreement which deals with the return of the key when the license is terminated. However, it is applicable only when the Agreement is rescinded by the Plaintiff under Clauses 6 and 12. Here the Agreement was wrongfully repudiated by the Defendant. Further, the Plaintiff does not elaborate on the basis in support of her claim. Accordingly, I am not satisfied that this item is recoverable.

23. Additional Mortgage Payments

24. The Plaintiff had paid the mortgage installments for the months of June and July 1998. Had the Defendant not defaulted, the Plaintiff's obligation to pay mortgage installments after completion on 1st June 1998 would cease. This item is clearly incidental loss which flows necessarily from the Defendant's breach.

25. The difficulty is, however, this. It is altogether a new claim. It has not been raised in the Amended Statement of Claim at all. Nor is there any application to re-amend the Amended Statement of Claim to include it. In the circumstances, I cannot give relief.

Conclusion

26. The total amount of damages which the Defendant is liable to pay to the Plaintiff is therefore assessed as follows:

Items	Amount (HK$)
(1) Direct Loss	$2,860,000
(2) Expenses and Disbursement of Resale	$5,965
(3) Unpaid Rates	$3,572
(4) Unpaid Management Fees	$7,513
(5) Reinstatement Costs	$6,500
Total:	$2,883,550

27. Accordingly, there will be judgment for the Plaintiff for the sum of HK$2,883,550 together with interest at the judgment rate from the date of the writ, i.e. 11th June 1998, to the date of payment.

28. I also make an order nisi that the Plaintiff shall have the costs of the assessment, to be taxed if not agreed. The order nisi will become absolute after the expiration of 14 days from the date of handing down this decision.