WONG CHE CHING AND ANOTEHR v. CHAN SHING KWAN

HCA9128/98

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 9128 OF 1998

________________________

________________________

______________________________________

JUDGMENT ON ASSESSMENT OF DAMAGES

______________________________________

Background

By a written agreement ("original agreement") made between the Plaintiffs and the Defendant dated 3rd October 1997, the Plaintiffs agreed to sell and the Defendant agreed to buy House No.A11, Europa Garden, Lot No. 2166 in D.D. 95, New Territories ("the property") at a price of HK$13,200,000. The Defendant paid deposits in the total sum of $1,320,000 which represented 10% of the purchase price.

By a supplemental agreement ("supplemental agreement") dated 10th February 1998 made between the Plaintiffs and the Defendant, the purchase price of the property was reduced from $13,200,000 to $11,200,000. The balance of the purchase price payable was thus reduced to $9,900,000. Clause 3 of the supplemental agreement stipulated that terms and conditions of the original agreement continued to be effective save and except those expressly modified by the supplementary agreement.

Clause 5 of the original agreement (which was not modified) stipulated that the completion to take place on 23rd March 1998 ("the completion date"). The Defendant failed to complete the purchase on the completion date and the Plaintiffs forfeited the deposits of $1,320,000.

1. By a further agreement in writing ("compensation agreement") between the Plaintiffs and the Defendant dated 31st March 1998, in consideration of the Plaintiffs' forbearance to sue, the Defendant agreed to compensate the Plaintiffs in terms stipulated in the said agreement. The Defendant, however, failed to make the payments as agreed save and except $200,000 on 8th April 1998.

2. By a Writ dated 5th June 1998, the Plaintiffs claimed against the Defendant for damages as a result of the breach. No Notice of Intention to defend having been given by the Defendant, judgment was entered against the Defendant on 2nd July 1998 with damages to be assessed and costs to be taxed.

Assessment of damages

The evidence

3. At the hearing of the assessment of damages, the Defendant is still absent. The Plaintiffs only called one witness: Ms Lam Chor Wan, the 2nd Plaintiff herein. Ms Lam gave evidence regarding the Defendant's repeated failure to honour the agreements between the parties. She also testified that the forbearance to sue was on condition that the Defendant would pay compensation as stipulated in the agreement. Since the Defendant failed to comply with the compensation agreement save the payment of $200,000, the Plaintiffs took action to sue for damages. She gave evidence that the Plaintiffs paid $82,000 commission fees to the real estate agent and $12,510 legal fees to their lawyer. As a result of the Defendant's failure to complete, the Plaintiffs have to continue paying mortgage interest to the bank. The Plaintiffs adduced a schedule of payment prepared by the Hang Seng Finance Limited and their monthly statements showing the instalment payment (exhibit "P1"). The instalment figure was fixed at $20,637.70 with interest rate at 8.75 % per annum. Ms. Lam testified, with reference to the auto-pay per month, that the interest payment was in fact higher than what was shown on the schedule. The Plaintiffs are, however, prepared to adopt the figures used in the said schedule as they do not have document supporting the actual payment of the interest. The interest from the date of completion to 15th February 1999 amounts to $55,966.76.

4. The Plaintiffs have commissioned a surveyor to assess the open market value of the property as at 23rd March 1998. A report dated 10 September 1998 was prepared by Mr. Lo Hon Cheung, Sam of the Chung Sen Surveyors Limited ("Chung Sen"). According to Mr. Lo, the said open market value was $8,880,000. Mr. Lo was not called to give evidence and the Plaintiffs rely on such an evaluation to substantiate their claim.

The law

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, 14th ed. Para. 745). The first relevant price is therefore the contractual price and the second one is the market price at the contractual time fixed for conveyance (i.e. the completion date).

5. Further, the damages "are not confined to the actual bargain 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.). The Plaintiff is therefore entitled to consequential losses.

Findings and assessment

6. I find Ms Lam an honest and reliable witness. Her claims are supported by documents. I find as a fact that the Plaintiffs did pay $82,000 commission fees to the real estate agent and $12,510 legal fees to their lawyer. I also accept that the Plaintiffs had paid mortgage interest more than what was set out in the schedule as shown by the auto-pay. In the absence of actual evidence as to the amount, I accept the Plaintiffs' claim for $55,966.76 as calculated accordint to the schedule.

7. In the absence of evidence to the contrary, I also accept the evaluation prepared by Mr. Lo of Chung Sen and find that the open market value of the property as at 23rd March 1998 was $8,880,000. I find that the Plaintiffs are entitled to claim consequential loss in the form of "wasted" legal fees and the mortgage interest.

8. Although the Plaintiffs did not specifically claim for the commission fees in the Particulars of Claim, I accept the submission of Mr. Ng, counsel for the Plaintiffs, that such a claim was already within the contemplation of parties when they entered into the compensation agreement. I find that the Plaintiffs are entitled to claim such sum as consequential loss and under the heading of "Further or other relief" in the Particulars of Claim.

Amount

9. The Plaintiffs are therefore entitled to claim against the Defendant in the sum of $970,476.76. There will be interest on the judgment sum from Date of Writ until full payment at the judgment rate with costs to the Plaintiffs, to be taxed if not agreed.