OCEANIC GLORY INDUSTRIES LTD. v. PALACE DEVELOPMENT LTD.

1989 No. A2000

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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ASSESSMENT OF DAMAGES

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1. By a sub-sale agreement dated 8th March 1989 the Defendant agreed to sell and the Plaintiff agreed to purchase Office Unit 8, 20th floor, of Witty Commercial Building, Nos. 1A-1J Tung Choi Street, Kowloon at a consideration of $550,000. Pursuant to the terms of the contract the Plaintiff paid and the Defendant accepted a deposit of $110,000 in part payment of the purchase price on the signing of the contract. The date for completion of the contract was fixed for 14th April 1989 with vacant possession to be given by the Defendant on that date. The contract also provided that in every respect time shall be of the essence but that upon payment of daily interest of $55.00 the Defendant had the right to extend the date for completion provided that the Plaintiff was given 10 days prior written notice of any such extension.

2. Evidence was given for the Defendant that 7 days oral notice was given to the firm of solicitors acting for both parties in this transaction and to the Plaintiff directly that completion could not proceed on 14th April 1989 as vacant possession would not be delivered up until 24th April 1989 when settlement could proceed. The Plaintiff did not agree to any extension of the completion date and claimed for the return of its deposit and damages for breach of contract being the difference between the market value of the property as at the date of the breach and the agreed sale price of $550,000 and also the legal costs of preparing an assignment and perusing the title to the property claimed at $6,625.00. Despite a demand by the Plaintiff's new solicitors on 17th April 1989 the Defendant failed and/or refused to return the deposit of $110,000 to the Plaintiff.

3. On 18th May 1989 interlocutory judgment was entered for the Plaintiff that the Defendant forthwith return the deposit of $110,000 to the Plaintiff and for damages under the contract to be assessed with interest and costs to the Plaintiff to be taxed, if not agreed. It was further ordered that the sum of $110,000 paid into Court by the Defendant on 13th May 1989 be paid out to the Plaintiff immediately. The first hearing of the assessment of damages was fixed for 19th July 1989. At the assessment the Plaintiff produced a surveyor's valuation of the property as at the proposed completion date of 14th April 1989 to be $580,000 and the Defendant produce a surveyor's valuation of the said property on the said relevant date to be $540,000. The principal head of damages claimed by the Plaintiff at the assessment of damages was the sum of $30,000 being the difference between the agreed purchase price of $550,000 and the market valuation of $580,000 at the proposed completion date, or in other words, the damages for his loss of bargain as at 14th April 1989. The 2 issues to determine at this assessment were firstly, whether, as a matter of law, the Plaintiff was entitled to recover damages for the loss of his bargain, and secondly, if the answer to the first question is in the affirmative, whether the Plaintiff has actually suffered and proved loss.

4. In determining the first issue it is necessary to decide whether the rule in Bain v. Fothergill (1874) L.R. 7H.L. 158 applies in this case to exclude the Plaintiff's claim for damages for loss of bargain. In this respect the reasoning and conclusions of Master Perrior on Pages 3, 4, 5 and 6 of his decision given on 6th May 1987 in Poon Hoi Tin v. Melot Investment Limited (1986) HCA A6464 are adopted. In particular, the conclusion that failure to give vacant possession of the property on the agreed completion date may be a matter of title and not merely a matter of conveyancing. As was pointed out by Mervyn Davies J. in the recent authority of Sharneyford Supplied Ltd. v. Edge [1985] 1 All E.R. 976, relied on by Master Perrior, it depends on the status of the tenant of the property and the defendant's power to have them removed so as to be able to give vacant possession.

5. In the present action the only evidence relating to vacant possession of the property was given by D.W.2, CHOW Chi Ming, a director of the Defendant. He said that the Defendant only purchased this property under a sale and purchase agreement dated 27th January 1989 and that the Defendant's title to the property depended on the completion of this earlier transaction on the same date. The Defendant could not complete the subsequent transaction with the Plaintiff on the due date (14th April 1989) because the previous owner was unable to deliver up vacant possession to the Defendant on the completion date, which was the same under both contracts. The Defendant was only advised 7 days prior to completion date that vacant possession could only be delivered up 10 days after the due completion date, that is, on 24th April 1989. The Defendant completed the transaction with the previous owners on 24th April 1989 when vacant possession was provided.

6. The Defendant advised the Plaintiff by telephone and the solicitors acting for both parties of the position 7 days before completion date but was in breach of the 10 days written notice required under the contract to seek an extension of the completion date with the Plaintiff. As was pointed out in cross-examination the Defendant could have sued the vendors under the earlier agreement for failure to complete settlement on the due date but did not do so and elected to proceed with the transaction on 24th April 1989 (that is, some 10 days later).

7. If the Defendant is to make the issue one of title rather than one of conveyancing, it has to show that it was not within the Defendant's power to provide vacant possession by the completion date. The Defendant did nothing to this end but was not in a position to have the occupier of the property removed on or before the completion date as it was not the owner of the property at that time. As it was not within the Defendant's power to have to occupants of the property removed and to provide vacant possession by the completion date the difficulty that arose was one of title rather than one of conveyancing. In such circumstances the Defendant can rely on the rule in Bain v. Fothergill supra to exclude the Plaintiff's right to claim damages for loss of bargain under the law of contract.

8. The result is that the Plaintiff is only entitled to recover the expenses he has incurred as a result of the Defendant's breach of contract. In this respect the Plaintiff has claimed in Paragraph 7(2) of the Statement of Claim the sum of $6,625.00 as its legal costs for preparing an assignment of the property and perusing the title to the property. Although the Plaintiff has not proved these costs in evidence called on its behalf, the Defendant for its part has not challenged these legal costs and they will be allowed as being reasonable in the circumstances. Accordingly, judgment will be entered for the Plaintiff against the Defendant for the sum of $6,625.00 with interest thereon @ 10% per annue from the date of the writ to the date of this judgment. As the Plaintiff has failed on its principal claim of damages for loss of bargain the costs of this assessment should follow the event and will be awarded to the Defendant with a Certificate for Counsel and are to be taxed, if not agreed.