GREAT CHOICE INVESTMENT LTD. v. KAM WAI CHEE

H.C.A. NO. 13015 OF 1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CIVIL ACTION NO 13015 OF 1998

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ASSESSMENT OF DAMAGES

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Introduction

1. The plaintiff was the vendor of the property, namely Unit 6 on the 11th floor of Block 39 of Heng Fa Chuen, Hong Kong (the Property) and the defendant was the purchaser under an Agreement for Sale and Purchase dated 10th February 1998 (the Agreement). The Agreement provided that completion of the sale and purchase should take place on or before 30th June 1998 (the date of Completion), time being the essence of the

2. Agreement. The defendant had failed to complete. The plaintiff had on 1st October 1998 sold the Property to another purchaser by signing another agreement for sale and purchase. The transaction was completed on 9th November 1999. The plaintiff claimed against the defendant for damages for breach of the Agreement. The defendant had not filed notice of intention to defend. On 4th September 1999, interlocutory judgment was entered against the defendant to pay to the plaintiff damages to be assessed with interest thereon to be assessed and costs to be taxed.

Damages to be Assessed

3. Under the Agreement, the defendant agreed to purchase the Property for the price of HK$3,500,000.00. The defendant had, pursuant to the Agreement, paid a deposit of HK$350,000.00. The defendant had failed to pay the balance of the purchaser price for the sum of HK$3,150,000.00 on the date of completion.

4. In exercise of the right under the Agreement, the plaintiff had, on 1st October 1998 by an agreement sold the Property to Lam King Yin and Siou Shie Tai (the new purchasers) for the price of HK$2,580,000.00. The transaction was completed by an Assignment on 9th November 1998. The plaintiff now claims the deficiency in the price of the Property and the expenses incurred by them for the resale of the Property. The total amount claimed is HK$620,025.00, which is made up of the following items:

Item description

HK$

HK$

(a)	Balance of purchase price receivable from the defendant had the Agreement been completed:	3,150,000.00
(b)	Less:
	The purchase price received by the plaintiffs under the Assignment	(2,580,000.00)	_________
			570,000.00
(c)	Expenses incurred by the plaintiff:

	(i)	legal costs and disbursements incurred in the sale between the plaintiff and the defendant		14,335.00
	(ii)	legal costs for the resale of the Property		22,790.00
	(iii)	estate agent's commission for the resale of the Property		12,900.00

	Total amount due from the defendant		620,025.00

The Evidence

5. The defendant was absent. Having confirmed that notice had been duly served on him, I proceeded to hear the matter.

6. Solicitor for the plaintiff called Madam Yip Fung Wah, the director of the plaintiff as the witness. Madam Yip had submitted her statement filed on 19th March 1999. She had confirmed that the contents of her statement were true and correct. In her statement, she said that by the Agreement, the plaintiff agreed to sell the Property to the defendant for HK$3,500,000.00. Pursuant to the Agreement, the defendant had paid the deposit of HK$350,000.00, leaving a balance of HK$3,150,000.00 to be paid upon completion on 30th June 1998. Clause 20 of the Agreement provided that time was the essence of the Agreement. However, the defendant had failed to pay the said balance of the purchase price on the date of completion. The plaintiffs had through its solicitors by a Memorandum dated 7th July 1998 and registered in the Land Registry by Memorial No.7425786 terminated the Agreement.

7. In order to mitigate the damage, the plaintiff had immediately after rescission of the Agreement, instructed the estate agents in Heng Fa Chuen district to sell the Property. The property market was at that period of time going down. The potential purchasers were making very low offer to her. It was only until 1st October 1998 that she had agreed the purchase price with the new purchasers.

8. The plaintiff had in early August 1998 obtained a valuation report from the surveyor of Messrs. Peter Cheung Surveyors Limited. Mr. Cheung had given his opinions on the open market value of the Property in his report (P.50 of the bundle). In his opinion, the open market value of the Property was HK$2,650,000.00 as at 30th June 1998. The plaintiff had to pay the agency commission and the legal fees for the resale as set out in the above account.

Reasons for Decisions

9. I accept the evidence of Madam Yip that the defendant was in breach of the Agreement and as a result of which, the plaintiff has suffered damages. The plaintiff is entitled to claim damages under the Agreement. The question is whether what the plaintiff had done between 30th June 1998 and 1st October 1998 was reasonable for the mitigation of the damage.

10. Condition 10 to Schedule 9 of the Agreement provides as follows:

"If the Purchaser shall fail to comply with any of the terms and conditions of the agreement the deposit money shall be absolutely forfeited as and for liquidated damages (and not as a penalty) to the vendor who may ... rescind the agreement and either retain the property ... or resell the same, either as a whole or in lots, and either by public auction or by private contract, ... as the vendor may think fit. Any deficiency arising from such resale and all reasonable expenses attending the same or any attempted resale shall be made good and paid by the Purchaser as and for such liquidated damages, and any increase in price realized by any resale shall belong to the vendor. ...This clause shall not prevent the vendor recovering, in addition to liquidated damages, damages representing interest paid or lost by him by reason of the purchaser's failure."

11. It is on the basis of the above provision of the Agreement that the plaintiff claims damages for the loss and expenses as a result of the breach of the Agreement by the defendant.

12. It is not provided in the above clause within what period the plaintiff should resell the Property after the breach. There is an implied term that the plaintiff has to act in good faith in effecting the resale. It cannot sit on the matter and wait for the convenience. Immediate resale of the Property is not required and one must have regard to the reality of the situation.: see Alucase Company Limited & Credit Champion Development Limited v. Keen Lloyd (Holdings) Limited HCMP 3577 of 1998, per Mr. Justice Cheung.

13. In Madam Yip's statement, she has not explained why it had taken 3 months to resell the property. In her evidence in court in response to my questions, she said that she had given instructions to all the estate agents in Heng Fa Chuen area to put the property in the market for sale. There were a lot of people coming to inspect the property. However, the price they had offered was far below the market price.

14. I accept that the property market at that 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.

15. 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 10222 of 1998 as per J. Yuen at page 7. There is no evidence that it was a sham resale.

16. In conclusion, I decide to adopt the resale price for the assessment of the damages.

17. As to the plaintiff's claim for the expenses for the resale, the plaintiff claims for the legal costs. Solicitor acting for the plaintiff admits that plaintiff should not seek legal costs incurred between it and the defendant for the reason that such legal costs would be incurred if the defendant had performed the Agreement. He applies to withdraw this item.

18. As to the legal costs for the resale and the commission for the estate agent for the resale, I consider that they are reasonable. I allow them as claimed. The total damages as allowed is $620,025 - $14,335=$605,690.00.

Decision and Orders

19. I now make an award to the plaintiff for the sum of HK$605,690.00 for the damages with interest at judgment rate from 10th November 1998 until payment.

20. I also make an order nisi that the defendant pays the costs of this assessment to the plaintiff; such costs shall be taxed if not agreed. The order nisi is to be made absolute after the expiration of 14 days from the date of the handing down of the assessment.