LAM CHUI SHAN AND ANOTHER v. MANFUL GLOBAL DEVELOPMENT LTD

DCCJ 1263/2023 & DCCJ 1264/2023

(Consolidated)

[2026] HKDC 13

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NOS 1263 OF 2023 AND 1264 OF 2023

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BETWEEN

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(Actions consolidated by Order of Master T.K. Lam dated 20^th June 2023)

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JUDGMENT

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A. INTRODUCTION

1.  This case concerns sale and purchase of two first-hand uncompleted residential units (unit 15J in Tower 6, and unit 16E in Tower 5) (respectively the “15J Property or 15J” and “16E Property or 16E”) by the 1^st named Plaintiffs and 2^nd named Plaintiffs (referred to herein after as the “Plaintiffs” or “Purchasers”) in respect of uncompleted property development called Solaria situated in Tai Po, New Territories.

2.  Both the 15J Preliminary Agreement for Sale and Purchase (“15J PASP”) and the 16E Preliminary Agreement for Sale and Purchase (“16E PASP”) were signed on 2 June 2018. Both the Plaintiffs (the Purchasers) and the Defendant (the Vendor) signed subsequently on 8 June 2018 the formal Sale and Purchase Agreements for the 15J (“15J ASP”) and the 16E (“16E ASP”).

3.  For 15J, the Plaintiffs paid three deposits of HK$314,300.00 in accordance with the terms of Schedule 5 of the 15J ASP; for 16E, three deposits of HK$472,700.00 were also paid in accordance with the terms of Schedule 5 of the 16E ASP.

4.  On 4 September 2019, the Purchasers sent a message to the Vendor’s solicitors instructing that the Vendor be notified of the intended cancellation of the purchases which eventuated in the aborted sales of 15J and 16E.

5.  This case concerns the Purchasers’ claim for refund of the 2^nd and 3^rd Deposits and the Vendor’s counterclaim for loss and damage suffered due to the Purchasers’ breach of the 15J ASP and 16E ASP: namely, the obligation to complete the 15J and 16E transactions.

B. BACKGROUND FACTS

6.  The background facts are uncontroversial and are supported by transactional documents and correspondences.

7.  Under Schedule 5 of the 15J ASP, the first three deposits were made in accordance with the terms of Schedule 5:

(a) HK$314,300.00 as first deposit was paid to the Defendant upon signing of the 15J PASP by Cheque/Cashier Order No HSBC-995849, BOC- 100001 and signed received by the Vendor and/or its representative or agent;

(b) A second deposit of HK$314,300.00 was paid to Messrs Baker McKenzie, the then solicitors acting for the Vendor, on 31 August 2018 by Nanyang Commercial Bank cashier’s order no 001733; and

(c) A third deposit of HK$314,300.00 was paid to Messrs Baker McKenzie on 29 November 2018 by Nanyang Commercial Bank cashier’s order no 001877.

8.  Under Schedule 5 of the 16E ASP, the first three deposits were made:

(a) HK$472,700.00 as first deposit was paid to the Vendor upon signing of the 16E PASP by Cheque/Cashier Order No HSBC-995846, BOC- 100002 and signed received by the Vendor and/or its representative or agent;

(b) A second deposit of HK$472,700.00 was paid to Messrs P C Woo & Co, the then solicitors acting for the Vendor, on 31 August 2018 by Nanyang Commercial Bank cashier’s order no 001731; and

(c) A third deposit of HK$472,700.00 was paid to Messrs P C Woo & Co, on 29 November 2018 by Nanyang Commercial Bank cashier’s order no 001876.

9.  On 4 September 2019, the Purchasers’ solicitors wrote to the then respective law firms of the Vendor to seek consent to cancel the purchase of 15J and 16E. Only the then solicitors for 16E (Messrs P C Woo & Co) wrote back on 3 October 2019 to decline the cancellation request, with no reply from the then solicitors for the 15J (Messrs Baker McKenzie).

10.  On 11 March 2020, both respective Vendor’s solicitors for 15J and 16E wrote to the Purchasers’ solicitors indicating the Occupation Permit and Certificate of Compliance for the properties have been issued and the Vendor was in a position to validly assign the properties to the Purchasers, and that completion should be done by 27 March 2020.

11.  On 12 March 2020, the Purchasers’ solicitors wrote again to Messrs Baker McKenzie seeking consent to cancel the sale of 15J. Again, this letter went unanswered.

12.  On 6 April 2020, the respective solicitors for the Vendor of 15J and 16E wrote to the Purchasers’ solicitors informing the Purchasers to pay the balance of the sales prices for 15J and 16E within 21 days or else all monies already paid under Schedule 5 will be forfeited absolutely and the respective 15J and 16E ASPs will be determined, and thereafter, Vendor will enforce all its rights under Clause 17 of the 15J and 16E ASPs and/or common law.

13.  On 21 May 2020, the solicitors for the Vendor of 15J wrote to the Purchasers, giving notice to determine the 15J ASP and that all deposits under Schedule 5 were to be forfeited accordingly (“the 15J Termination Notice”). The same notice was sent to the Purchasers’ solicitors on 25 May 2020.

14.  Likewise, on 22 May 2020, the solicitors for the Vendor of 16E wrote to the Purchasers, giving notice to determine the 16E ASP and that all deposits under Schedule 5 were to be forfeited accordingly (“the 16E Termination Notice”).

15.  On 23 August 2022, the Purchasers’ solicitors wrote to the then respective solicitors for the 15J and 16E seeking return of the deposits withheld under Schedule 5(b) and 5(c) of the respective 15J and 16E ASPs.

16.  On 30 December 2022, the Purchasers’ solicitors issued its letters before action to the then respective solicitors for 15J and 16E in final attempt to seek the return of the deposits withheld under Schedule 5(b) and 5(c) of the respective 15J and 16E ASPs.

17.  Total deposits claimed by Purchasers withheld under Schedule 5(b) and 5(c) of the respective 15J and 16E ASPs are:

15J Property	HK$628,600.00
16E Property	HK$945,400.00
TOTAL	HK$1,574,000.00

18.  Both the Purchasers and the Vendor agree at the hearing that the Vendor is entitled to forfeit the 1^st Deposit in respect of 15J and 16E held under Schedule 5(a).

The Issues

19.  The Issues for trial are these:

Issue 1: “Whether the Plaintiffs have breached the 15J and 16E ASPs”.

Issue 2: “Whether the Plaintiffs are entitled to the return of the second and third deposits of 15J and 16E”.

Issue 3: “Whether as contended by the Purchasers, the Residential Properties (First-hand Sales) Ordinance, Cap 621, together with the Consent Scheme of the Lands Department will lead to a bar against the Vendor from electing common law damages arising from the Purchasers’ breach of the 15J and 16E ASPs?”

Issue 4: “What are the legal basis of common law damages for breach?”

Issue 5: “Whether the Defendant is entitled to price deficiency and expenses arising from the re-sale of 15J and 16E? A connected sub-issue is that of mitigation”.

Issue 6: “Whether the Vendor is entitled to following items of expenses in connection with the re-sale?, and if so, for what periods and in what sums: (i) Government Rent, Rates & Management Fees; (ii) Marketing Expenses; (iii) Additional Agency Fee; (iv) Loss of interest; and (v) Additional Legal Fee.”

C. THE WITNESSES

20.  At the trial the following witnesses gave evidence:

(1) Chan Tat Yan (2^nd named Plaintiffs) (“Mr Chan”);

(2) Lam Chui Shan (1^st named Plaintiffs) (“Ms Lam”); and

(3) Fu Wai Ping for the Defendant (“Ms Fu”).

21.  I read: (i) Chan Tat Yan’s Witness Statement and Supplemental Witness Statement; (ii) Lam Chui Shan’s Witness Statement; and (iii) Fu Wai Ping’s Witness Statement and 2^nd Witness Statement. I have also had the benefit of the documentary evidence and correspondences of the 15J and 16E transactions.

D. EVIDENCE

22.  In this case, Mr Chan is the primary witness for the Plaintiffs. It is his evidence he was university educated, worked as site manager and bi-lingual in English and Chinese. It is to note both Mr Chan and Ms Lam were not 1^st time purchasers of property in Hong Kong. Ms Lam purchased and still holds中嘉閣（Central Plaza）which she has rented out, to be resold to pay for purchases of 15J and 16E. As for Mr Chan, he had previously purchased翠河花園 (Jade Garden) with his ex-wife and the flat has been left vacant (not rented out) since his ex-wife passed away in 2013-2014. Mr Chan blames “cash flow problem” for his inability to complete the 15J and 16E transactions. But that is not a credible explanation. He had neither sought nor approached bank nor the developer for financing.

23.  Both Mr Chan and Ms Lam refused to admit they were in breach of the 15J and 16E ASPs, even though as purchasers, they had their lawyer wrote to the Vendor in attempt to get out of the 15J and 16E transactions. The two transactions may just be speculative that had not turned out as they had anticipated.

24.  Ms Lam when examined accepted that when the Vendor has to resell the units, some costs would have to be incurred. Mr Chan also accepted that estate agent’s commissions would have to be paid and also some marketing expenses. He also accepted that when he purchased 15J and 16E, the estate agent agreed to refund part of the commissions to him.

25.  As to Ms Fu, she was and is with K Wah Group as sales administrative manager and was responsible for the sales “flow” of the projects that included the Solaria project. She was questioned that re-sale agency fees were settled by K Wah International Holdings Limited (“K Wah”) and not directly by the Defendant. In response, she gave evidence that both the Defendant and K Wah were under the same mother company (see the Sales Brochure of Solaria in which the holding companies of the Vendor was disclosed - it includes K Wah International Holdings Limited and K Wah Properties Investment Limited). Ms Fu added what mattered was not who settled the incurred liability, as a reconciliation of the companies’ accounts would be carried out at fixed intervals.

E. ANALYSIS AND FINDINGS ON THE ISSUES

The Operation of the Residential Properties (First-hand Sales) Ordinance, Cap 621 (“the Ordinance”), the Consent Schedule and the requirement of the terms of the standard for contract

26.  Before going into the Issues, it is important to understand Operation of the Ordinance Cap 621, the Consent Schedule and the requirement of the standard contract form.

27.  Background to and purpose of the Ordinance can be seen at paragraphs 2 and 3 of the Legislative Council Paper dated 21/6/2012 entitled: “Report of the Bills Committee on Residential Properties (First-hand Sales) Bill”:

“2. Inadequate and misleading sales information on uncompleted residential properties is of concern to prospective buyers as they have no opportunity to view the properties before purchase. Problems such as inaccurate size of the property, misleading descriptions of fittings and finishes, sketchy layout and location plans were rampant in Hong Kong in the 80s and early 90s. In recent years, concerns have been raised about the provision and dissemination of misleading information on the prices of property transactions and sales figures. As the number of such complaints grows, there are increasing calls for measures to address the problems.

3. At present, the Government regulates the sales of first-hand uncompleted residential properties through the Lands Department (LandsD)’s Consent Scheme (the Consent Scheme) and the guidelines issued by the Real Estate Developers Association of Hong Kong (REDA). To strengthen the regulation of the sales of first-hand private residential properties, a Steering Committee on the Regulation of the Sale of First-hand Residential Properties by Legislation (the Steering Committee) was set up … The Steering Committee recommended that legislation should be introduced to regulate the sale of first-hand residential properties, including projects developed under old lease conditions, Consent Scheme projects, and projects outside the Consent Scheme. It also came up with detailed recommendations on the requirements on sales brochures, price lists, show flats, transaction information, advertisement, sales arrangements, prohibition on misrepresentation and dissemination of false and misleading information, penalties, enforcement authority and exemption arrangements.” [my emphasis]

28.  These then are the ills the Ordinance sought to cure for consumer protection, and not, as suggested by Mr Lok, Counsel for the Plaintiffs, to be extended beyond the stated ills to cover forfeiture of deposits and to an interpretation of Clause 17(1) and 17(2) of the 15J and 16E ASPs to exclude common law remedies for breach by the Purchasers.

29.  At clause 12 of Schedule 4 of the Residential Properties (First-hand Sales) Ordinance, Cap 621 (“the Ordinance”), it is stipulated:

“12. (a) Before you execute the formal agreement for sale and purchase which you have to sign if you go on with your purchase you should instruct a solicitor to protect your interests and to ensure that your purchase is properly completed.

(b) You can instruct your own independent solicitor to act for you to conduct the purchase or you can instruct the Vendor’s solicitor to act for you as well as for the Vendor.

(c) YOU ARE RECOMMENDED TO INSTRUCT YOUR OWN SOLICITOR, who will be able, at every stage of your purchase, to give you independent advice.”

30.  Going to the Lands Department’s Consent Scheme, it sets out that if a registered land owner wants to sell any units in the development before it is completed, the sale is governed by the Lands Department Consent Scheme, and before issuance of consent, where the land is subject to a restriction on alienation prior to compliance with all the conditions in the land grant, a number of criteria must be fulfilled and the consent given is at the sole discretion of the Director of Lands and may be subject to various conditions imposed.

31.  The attachment to CM No 72C [Circular Memorandum of the Legal Advisory and Conveyancing Office] sets out an Index of Annex which at Section III (A) detailed the “Criteria to be fulfilled for acceptance of Application and issue of Consent”: (1) Checklist and Mandatory Documents, (2) Development Finance, (3) Development Progress, (4) Appointment of Solicitors (as trustees to hold the deposits), (5) Statutory Declaration and Agreement for Sale and Purchase, (6) Authorized Person and Authorized Person’s Certificate, etc, (7) Disclosure of Relationships between Parties involved in the Development, (8) Lease Approvals, and (9) Other General Requirements.

32.  One of the key objectives of the Consent Scheme is to ensure that the Vendor (developer) must be able to meet all the outstanding development costs, with the solicitors’ firm acting a stakeholder of sales proceeds and each Agreement for Sale and Purchase (ASP) must be in the form at Appendix III or in the form approved by the Director of Lands. It is specifically stated at 5.3.1 of Section III that “the form of SD (solicitors’ declaration) at Appendix II and the form of the ASP at Appendix III should normally be adopted as standard forms without any variation.”

33.  Importantly Clause 17(1) and 17(2) of the form of ASP at Appendix III (the mandatory form) under the heading of Default of Purchaser was also adopted for the 15J and 16E ASPs. It reads:

15J ASP

“Default of Purchaser

17. (1) Should the Purchaser fail to observe or comply with any of the terms and conditions contained in this Agreement or to make the payments in accordance with Schedule 5 or any interest payable under this Agreement within 7 days after the due date, the Vendor may (subject to clause 3(3)) give to the Purchaser notice in writing calling upon the Purchaser to make good his default. If the Purchaser fails within 21 days after the date of service of such notice fully to make good his default, the Vendor may by a further notice in writing forthwith determine this Agreement and in such event:-

(a) the sums paid by the Purchaser under paragraph (a) of Schedule 5 by way of deposit shall be forfeited to the Vendor; and

(b) where the Purchaser has entered into possession of the Property, the Vendor is entitled to re-enter upon the Property and repossess the same free from any right or interest of the Purchaser in the Property and to receive from the Purchaser as occupation fee a sum equal to interest at the rate of 2% per annum above the prime rate specified by The Hongkong and Shanghai Banking Corporation Limited from time to time on the unpaid balance of the purchase price for the period during which the Purchaser was in occupation.

(2) Upon determination of this Agreement pursuant to sub-clause (1), the Vendor may resell the Property either by public auction or private contract subject to such stipulations as the Vendor may think fit and any increase in price on a resale belongs to the Vendor. On a resale, any deficiency in price shall be made good and all expenses attending such resale shall be borne by the Purchaser and such deficiency and expenses shall be recoverable by the Vendor as and for liquidated damages Provided That the Purchaser shall not be called upon to bear such deficiency or expenses unless the Property is resold within 6 months after the determination of this Agreement”. [my emphasis]

16E ASP

“Default of Purchaser

17. (1) Should the Purchaser fail to observe or comply with any of the terms and conditions contained in this Agreement or to make the payments in accordance with Schedule 5 or any interest payable under this Agreement within 7 days after the due date, the Vendor may (subject to clause 3(3)) give to the Purchaser notice in writing calling upon the Purchaser to make good his default. If the Purchaser fails within 21 days after the date of service of such notice fully to make good his default, the Vendor may by a further notice in writing forthwith determine this Agreement and in such event –

(a) the sum paid by the Purchaser under paragraph (a) of Schedule 5 by way of deposit shall be forfeited to the Vendor; and

(b) where the Purchaser has entered into possession of the Property, the Vendor is entitled to re-enter upon the Property and repossess the same free from any right or interest of the Purchaser in the Property and to receive from the Purchaser as occupation fee a sum equal to interest at the rate of 2% per annum above the prime rate specified by The Hongkong and Shanghai Banking Corporation Limited from time to time on the unpaid balance of the purchase price for the period during which the Purchaser was in occupation.

(2) Upon determination of this Agreement pursuant to sub-clause (1), the Vendor may resell the Property either by public auction or private contract subject to such stipulations as the Vendor may think fit and any increase in price on a resale belongs to the Vendor. On a resale, any deficiency in price shall be made good and all expenses attending such resale shall be borne by the Purchaser and such deficiency and expenses shall be recoverable by the Vendor as and for liquidated damages Provided That the Purchaser shall not be called upon to bear such deficiency or expenses unless the Property is resold within 6 months after the determination of this Agreement.”

Appendix III (ASP)

“Default of Purchaser

17. (1) Should the Purchaser fail to observe or comply with any of the terms and conditions contained in this Agreement or to make the payments in accordance with Schedule 5 or any interest payable under this Agreement within 7 days after the due date, the Vendor may (subject to clause 3(3)) give to the Purchaser notice in writing calling upon the Purchaser to make good his default. If the Purchaser fails within 21 days after the date of service of such notice fully to make good his default, the Vendor may by a further notice in writing forthwith determine this Agreement and in such event –

(a) the sum paid by the Purchaser under paragraph (a) of Schedule 5 by way of deposit shall be forfeited to the Vendor; and

(b) where the Purchaser has entered into possession of the Property, the Vendor is entitled to re-enter upon the Property and repossess the same free from any right or interest of the Purchaser in the Property and to receive from the Purchaser as occupation fee a sum equal to interest at the rate of 2% per annum above the prime rate specified by The Hongkong and Shanghai Banking Corporation Limited from time to time on the unpaid balance of the purchase price for the period during which the Purchaser was in occupation.”

F. ANALYSIS AND FINDINGS ON THE ISSUES

Issue 1: Whether the Plaintiffs have breached the 15J and 16E ASPs

34.  On 4 September 2019, the Purchasers’ solicitors wrote to the law firms representing the Vendor in respect of the 15J and 16E ASPs to seek consent to cancel the purchases. It was declined. On 11 March 2020, the Defendant’s solicitors notified the Purchasers that the Occupation Permits and Certificates of Compliance of the 15J and the 16E had been issued and the Vendor was in the position to validly assign these properties to the Plaintiffs. Under Clause 6 of the relevant 15J and 16E ASPs, completion shall take place within 14 days after the giving of such notice by the Vendor to the Purchasers. The Purchasers failed to complete within the time stipulated under the 15J and 16E ASPs, ie by 27 March 2020. On 6 April 2020, the Vendor gave notices of determination of the 15J and 16E ASPs as the Purchasers failed to pay the balance of the purchase price of the 15J and 16E under Schedule 5.

35.  Clearly, as the Purchasers, namely the 1^st named and 2^nd named Plaintiffs, had failed to pay the balance of the purchase prices of 15J and 16E, they were in breach of the 15J and 16E ASPs, even though they refused to admit breach when questioned at the hearing.

Issue 2: Whether the Plaintiffs are entitled to the return of the second and third deposits of 15J and 16E

36.  The Purchasers pleaded for the return of the 2^nd and 3^rd deposits of 15J in the sum of HK$628,600.00 and that of 16E in the sum of HK$945,400.00 at the Prayer of the Consolidated Statement of Claim (“the Claim”).

37.  The Purchasers cited ss 53(3) and 53(4) and Schedule 4 of the Residential Properties (First-hand Sales) Ordinance, Cap 621(“the Ordinance”) which stipulated that if the preliminary agreement PASP is terminated or the purchaser failed to execute the ASP, the preliminary deposit is forfeited. But this is not the directly relevant to 15J and 16E in which the 15J and 16E ASPs were executed, and three deposits were paid.

38.  Sales of 15J and 16E were made with the consent of the Lands Department under its Consent Scheme for the sale of residential units of uncompleted developments. As can be seen attached to Circular Memorandum (“CM”) No 72C issued by the Legal Advisory and Conveyancing Office (“LACO”), developers are required by the Lands Department to have ASP in conformance to the standard form of Agreement for Sale and Purchase at Appendix III of CM No 72C (“Standard Form”).

39.  In relation to the issue of forfeiture of deposits paid, Clause 17(1)(a) of the 15J and 16E ASPs reads:

(a) the sum paid by the Purchaser under paragraph (a) of Schedule 5 by way of deposit shall be forfeited to the Vendor; and

40.  As to Schedule 5 of the 15J and 16E ASPs:

16E Schedule 5

“The purchase price is HK$9,454,000.00, payable by the Purchaser to the Vendor’s Solicitors as stakeholders as follows –

(a) the amount of HK$472,700.00 has been paid as deposit on the signing of the agreement preliminary to this Agreement;

(b) the amount of HK$472,700.00 being further deposit shall be paid on or before 31^st August 2018;

(c) the amount of HK$472,700.00 being part payment of the purchase price shall be paid on or before 29^th November 2018; and

(d) the amount of HK$8,035,900.00 being balance of the purchase price shall be paid within 14 days after the date of the notification to the Purchaser that the Vendor is in a position validly to assign the Property to the Purchaser.”

15J Schedule 5

“The purchase price is HK$6,286,000.00 payable by the Purchaser to the Vendor's Solicitors as stakeholders as follows -

(a) the amount of HK$314,300.00 has been paid as deposit on the signing of the agreement preliminary to this Agreement;

(b) the amount of HK$314,300.00 being further deposit shall be paid on or before 31 August 2018;

(c) the amount of HK$314,300.00 being part payment of the purchase price shall be paid on or before 29 November 2018; and

(d) the amount of HK$5,343,100.00 being balance of the purchase price shall be paid within 14 days after the date of the notification to the Purchaser that the Vendor is in a position validly to assign the Property to the Purchaser”

41.  By the clear wordings of Clause 17(1) of the 15J and 16E ASPs read together with Schedule 5 (a), it is clear only the 1^st deposit on the signing of the PASP was to be forfeited. There were no terms for the forfeiture of the 2^nd payment, described as further deposit, nor the 3^rd payment described as part payment.

42.  In another ASP discovered by the Vendor, the forfeiture of deposit clause was worded differently:

“Default of Purchaser

17. (1) Should the Purchaser failed to observe or comply with any of the terms and conditions contained in this Agreement or to make the payments in accordance with Schedule 4 or any interest payable under this Agreement within 7 days after the due date, the Vendor may give to the Purchaser notice in writing calling upon the Purchaser to make good his default. If the Purchaser fails within 21 days after the date of service of such notice fully to make good his default, the Vendor may by a further notice in writing forthwith determine this Agreement and in such event:-

(a) all sums paid by the Purchaser up to 10% of the purchase price by way of deposit shall be forfeited to the Vendor; and

(b) where the Purchaser has entered into possession of the Property, the Vendor is entitled to re-enter upon the Property and repossess the same free from any right or interest of the Purchaser in the Property and to receive from the Purchaser as occupation fee a sum equal to interest at the rate of 2% per annum above the prime rate specified by the Hongkong and Shanghai Banking Corporation Limited from time to time on the unpaid balance of the purchase price for the period during which the Purchaser was in occupation.”

43.  This shows that the Vendor could have, but it was not written into the 15J and 16E ASPs for the Vendor to be entitled to forfeit all deposits in the event of breach by the Purchasers. Hence, the Vendor had wrongfully withheld, by the 15J Termination Notice issued on 21 May 2020 to terminate of 15J ASP and similarly by the 16E Termination Notice issued on 22 May 2020 to terminate of 16E ASP, “all deposits”, which the Vendor was not entitled to do. And the Vendor had therefore acted in breach of the 15J and 16E ASPs.

44.  For completeness, on the legal nature of deposits, at paragraph 50 of the judgment of the CFA in Richly Bright International Ltd v De Monsa Investments Ltd (2015) 18 HKCFAR 232 wrote:

“50. It is almost universally the practice in Hong Kong for vendors to require purchasers to pay a deposit if there is any appreciable gap in time between contract and completion. The legal nature of a deposit was considered by this Court in Polyset Ltd v Panhandat Ltd. It is a sum representing a percentage of the purchase price provided by the purchaser as an earnest to guarantee his performance of the contract and consideration for the vendor’s withdrawal of his property from the market. Provided the amount paid as a deposit is reasonable, the deposit amount stands to be forfeited to the payee in the event of non-performance by the payer.”

But the 15J and 16E ASPs prepared by the Vendor only provided for the forfeiture of the first payment, described as deposit, paid on the signing of the 15J and 16E PASPs.

Issue 3: Whether the Residential Properties (First-hand Sales) Ordinance, Cap 621, together with the Consent Scheme of the Lands Department and Clause 17(2) will lead to a bar against the Vendor from electing common law damages arising from the Purchasers’ breach of the 15J and 16E ASPs?

45.  From the above analysis, clearly it is not the stated purpose of the Ordinance nor the Consent Scheme to bar the Vendor from seeking common law damages arising from the purchasers’ breach of the 15J and 16E ASPs.

46.  In the Re-Amended Defence, for 15J, it is pleaded:

(i) at paragraph 10(c), by an amendment, that pursuant to Clause 17(2) of the 15J ASP, the Defendant (Vendor) was entitled to resell the15J Property and “on a resell, any deficiency in price shall be made good and all expenses attending such resale shall be borne by the Plaintiffs and such deficiency and expenses shall be recoverable by the Defendant as and for liquidated damages and/or alternatively under the common law”; and

(ii) at paragraph 10(ca) that “It is further averred that Clause 17(2) of the 15J ASP does not preclude the Defendant’s claim for damages under the common law and the Defendant is entitled to claim and do now claim such common law damages from the Plaintiffs for their breach of contract.”

47.  Likewise, for 16E, in the Re-Amended Defence it is pleaded:

(i) at paragraph 22(c), by an amendment, that pursuant to Clause 17(2) of the 16E ASP, the Defendant (Vendor) was entitled to resell the16E Property and “on a resell, any deficiency in price shall be made good and all expenses attending such resale shall be borne by the Plaintiffs and such deficiency and expenses shall be recoverable by the Defendant as and for liquidated damages and/or alternatively under the common law”; and

(ii) at paragraph 22(ca) that “It is further averred that Clause 17(2) of the 16E ASP does not preclude the Defendant’s claim for damages under the common law and the Defendant is entitled to claim and do now claim such common law damages from the Plaintiffs for their breach of contract.”

48.  The above amendment for common law damages was countered by paragraph 5(b) of the Re-Amended Reply for 15J and paragraph 10(b) of the Re-Amended Reply for 16E in which the Purchasers denied:

(i) that liquidated damages under the common law is available as an alternative; and

(ii) that Clause 17(2) of the 15J and 16E ASPs stipulates a time limitation proviso:

“… Provided That the Purchaser shall not be called upon to bear such deficiency or expenses unless the Property is sold within 6 months after the determination of this Agreement.”

49.  It may be for the avoidance of the limitation in Clause 17(2) that the Vendor opted for common law damages instead of the contractual liquidated damages.

50.  At paragraph 23 of Volly Best Investment Limited v Joinland Holdings Limited [2018] HKCFI 977, dealing with a Clause similar to Clause 17(2), Recorder Yvonne Cheng SC wrote at paragraphs 23(1) to 23(4):

“(1) the clause was a liquidated damages clause;

(2) the clause was in a standard form and provisions virtually identical to it had previously been considered by the courts;

(3) a substantially identical clause was considered in Woomera Co Ltd v Provident Centre Development Ltd [1985] HKLR 263. In that case, the Court of Appeal had held that the clause was not an exhaustive statement of the vendors’ rights and did not preclude a claim for common law damages;

(4) the conclusion that clause 17(3) (in the agreement in King’s City Holdings Ltd) did not preclude a common law claim for damages against the defaulting purchaser was sufficient to support the grant of summary judgment for damages to be assessed.”

51.  At King’s City Holdings Limited v De Monsa Investments Ltd [2013] 4 HKC 450, Judgment of Fok, Lam JJA and McWalters J, it was held at p 451:

“Held, dismissing the appeal: Clause 17(3) of the Agreement precluded P’s claim

(1) It was clear from authority that clause 17(3) was not a clause excluding liability but was a liquidated damages clause. It was in a standard form and provisions virtually identical to it had previously been considered by the courts. Clause 17(3) did not preclude a common law claim for damages against D and was sufficient to support the trial judge’s grant of summary judgment for damages to be assessed. Diamond Jubilee Investment Ltd v Chan Yiu Chung Sidney [2010] 1 HKLRD 638, [2010] HKCU 155 and Goldspeed Investment Ltd v Easy Success Enterprises Ltd [2000] 2 HKC 183, [2000] 2 HKLRD 103 considered. Woomera Co Ltd v Provident Centre Development Ltd [1985] HKLR 263, [1985] HKCU 27 applied (paras 24-28).”

52.  I am equally bound by the authorities cited, in that the wordings of Clause 17(2) in this case, virtually identical to Clause 16(3) in Volley Best and Clause 17(3) in King’s City Holdings Ltd, does not preclude a claim by the Vendor for common law damages. This accords with my view that Clause 17(2) did not provide for the liquidated damages remedy available to be exhaustive.

Issue 4: Common Law damages for breach

53.  Damages for breach of contract, paragraphs 15-19 of Richly Bright International Ltd (ante) wrote:

“D. Damages for breach of contract

D.1 The basic principle

15. …

16. Accordingly, in the mid-19^th century landmark case of Hadley v Baxendale, Alderson B formulated the test for remoteness of damage for breach of contract in the following well-known terms:

“Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered either arising naturally, ie, according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it. Now, if the special circumstances under which the contract was actually made were communicated by the plaintiffs to the defendants, and thus known to both parties, the damages resulting from the breach of such a contract, which they would reasonably contemplate, would be the amount of injury which would ordinarily follow from a breach of contract under these special circumstances so known and communicated. But, on the other hand, if these special circumstances were wholly unknown to the party breaking the contract, he, at the most, could only be supposed to have had in his contemplation the amount of injury which would arise generally, and in the great multitude of cases not affected by any special circumstances, from such a breach of contract. For, had the special circumstances been known, the parties might have specially provided for the breach of contract by special terms as to the damages in that case, and of this advantage it would be very unjust to deprive them.

17. The limiting purpose of the rule in Hadley v Baxendale is explained by Lord Pearce in Koufos v C Czarnikow Ltd (The Heron II) as follows:

The underlying rule of the common law is that “where a party sustains a loss by reason of a breach of contract, he is, so far as money can do it, to be placed in the same situation with respect to damages, as if the contract had been performed” (Parke B in Robinson v Harman (1848) 1 Ex 850, 855, 154 ER 363, 365). But since so wide a principle might be too harsh on a contract-breaker in making him liable for a chain of unforeseen and fortuitous circumstances, the law limited the liability in ways which crystallised in the rule in Hadley v Baxendale.

And:

The whole rule in Hadley v Baxendale limits damages to that which may be regarded as being within the contemplation of the parties.

18. The two limbs are “the practical expression of a single principle … that parties should only be liable for damages which were when they contracted within their contemplation in the event of a breach” and both limbs turn on an objective assessment of what the contract-breaker knew or ought to have known. As Lord Walker of Gestingthorpe observed in Jackson v Royal Bank of Scotland plc [2005] 1 WLR 377:

The common ground of the two limbs is what the contract-breaker knew or must be taken to have known, so as to bring the loss within the reasonable contemplation of the parties.” [my emphasis]

54.  As for sales of goods, it is trite that the measure of damages in basic situations are covered by statute. Section 51(3) of the Sale of Goods Act 1979 (UK) which provided a prima facie basis for calculating damage when the buyer fails to deliver. Section 51(3) states:

“where there is an available market for the goods in question the measure of damages is prima facie to be ascertained by the difference between the contract price and the market or current price of the good at the time or times when they ought to have been delivered or (if no time was fixed) at the time of the refusal to deliver.”

Of course, he might not have brought suitable goods on that day, but the duty to mitigate will normally confined his damages to that sum even where he delays of purchasing and the market price rises further. The duty to mitigate, does not allow the injured party to recover damages for a loss which he could have avoid by behaving reasonably after the breach and Section 53 (3) further states that the prima facie loss is the “difference between the value of goods at the time of delivery to the buyer and the value they would have had if they had” not been defective. [my emphasis]

55.  In McGregor on Damages, 22^nd Edn the learned authors wrote at:

§10-003: “The principal meaning comprises three different, although closely interrelated, rules. … The three rules are these:”

§10-004: “(1) the first and most important rule is that … the claimant cannot recover for reasonably avoidable loss.”

§10-005: “(2) the second rule is … whether the claimant does take reasonable steps to mitigate the loss to him consequent upon the defendant’s wrong they can recover for loss incurred in so doing; this is so even though the resulting damage is in the event greater than it would have been had the mitigating steps not been taken. Put shortly, the claimant can recover for loss incurred in reasonable attempts to avoid loss.”

§10-006: “(3) the third rule is that … where the claimant takes ordinary or reasonably necessary steps to mitigate the loss to them consequent upon the defendant’s wrong, and where these steps are successful. Then, the defendant is entitled to the benefit accruing from the claimant’s action and is liable only for the loss as lessened; … Put shortly, the claimant cannot generally recover for avoided loss.”

§10-016: “(2) - A question of fact not a question of law. In Payzu v Saunders, both Bankes and Scrutton L JJ said that the question of mitigation of damage is a question of fact; in The Solholt Sir John Donaldson MR said that: “whether a loss is avoidable by reasonable action on the part of the claimant is a question of fact not law” and that “this was decided in Payzu v Saunders”. It has never been doubted since; today it tends to be regarded as trite law. One result of this is that, once the court of first instance has decided that there has been, or has not been, a failure to mitigate, it is difficult to persuade an appellate court to come to a different view. Mitigation being a question of fact, “it is therefore rarely appropriate”, said Potter LJ In Standard Chartered bank v Pakistan National Shipping Corp, “to interfere with the conclusions of the trial judge based as they are on the evidence (or lack of satisfactory evidence) before him”. The Solholt and Standard Chartered Bank v Pakistan National Shipping Corp, themselves both provide good illustrations of this, the Court of Appeal upholding the trial judges’ findings of failure to mitigate in the earlier case and of no failure to mitigate in the later one.”

§10-017: “Of course what was being referred to in all these cases was whether a claimant, required to take all reasonable steps to mitigate their loss if they are to recover for that loss, has or has not failed to do so; whether there is in the particular circumstances a need to mitigate in the first place will be a question of law.”

Issue 5: Whether the Defendant is entitled to price deficiency and expenses arising from the re-sale of 15J and 16E? A connected sub-issue is that of mitigation

56.  It is to note that the Vendor had made revisions of the price list from 04/06/2018 to 22/05/2020 on 11 occasions, namely Price Lists No 1A to No 1K [C2/485]. The date of the Revised Price List 1A was 04/06/2018. It is closest to the signing date of the 15J and 16E PASPs of 02/06/2018. We are not shown Price List No 1A and the payment options and discounts available. As such, it is unclear how the transacted prices of 15J and 16E at HK$6,286,000.00 and HK$9,454,000.00 were arrived at and what discounts and payment options were chosen.

57.  Selectively, the Vendor only produced pages 22 and 31 of Revised Price List No 1K and not all the pages. At page 22 [C2/486] of the Revised Price List No 1K, which was closest to the date of termination of 6/4/2020 of 15J and 16E ASPs, it is shown the revised prices of 6 units of Tower 5 and the listed price of 16E was revised upwards on 22/5/2020 from HK$11,057,000 to HK$11,463,000.

58.  Similarly, at page 31 [C2/487] of the Revised Price List No 1K, for 15J, it is shown the revised prices of 6 units of Tower 6 and the listed price of 15J was revised upwards on 22/5/2020 from HK$7,351,000 to HK$8,090,000.

59.  Pages 40 to 47 of the Revised Price List No 1K [C2/488 to 495] detailed Other Information including the various payment terms, options and discounts available [C2/489, 490-491].

60.  First observation is that aside from page 1 of the Revised Price List No 1K [C/485] for Part I: Basic Information, the rest of the pages from page 2 to page 39 could each have listed the revised prices of 6 units, available for sale. Second, the prices as revised and listed must have been considered by the Vendor as transactable prices, in short “market prices”.

61.  Even though the Revised Price List No 1K was dated 22/5/2020, unit 16E was not put to resell until 18/9/2020 in the Information on Sales Arrangements (No 67) [C2/497-498].

62.  The Vendor also further revised the prices on 24/6/2020, 10/11/2020 and 21/12/2020 in Revised Price List Nos 1L, 1M and 1N [C2/500-501] and the price of 16E further revised up to HK$11,463,000 [C2/502] and the price of 15J further revised up to HK$8,090,000 [C2/503].

63.  On price deficiency, without knowing the listed base prices, the payment options and discounts then available and taken by the Purchasers in respect of 16E, it may be difficult to compare and arrive at price deficiency.

64.  For 15J, the property was resold on 20 November 2020 for the consideration of HK$6,351,000.00, for more than the transacted price of the aborted sale of 15J at HK$6,286,000.00 and there was no deficiency.

65.  For 16E, the property was resold at HK$8,655,000.00 being less than the transacted price of the aborted transaction at HK$9,454,000.00. The deficiency is HK$799,000.00. The Vendor accepts that “the normal measure of damages is the contract price less the market price at the contractual time fixed for completion” (McGregor on Damages, 22^nd Edn, at §28-037). But whether the contract price differs from the market price depends on the time of resale. A point is whether damages in this case is to be assessed based on market price at the time of breach as suppose to the much later resale transaction price. As the market price point had not been taken by the Purchasers and taking note of the reality that residential properties, even with market prices, may be less liquid and harder to transact than commodities, I would allow recovery of the 16E price deficiency. As for 15J, loss is avoided upon resale with no deficiency. I would have more to say on the Vendor’s delay in putting 16E on the market for resale and the apparent lack of effort by the injured Vendor to resell, as 16E and 15J were simply listed for sale together with pages of other units of Solaria.

Issue 6: Whether the Vendor is entitled to following items of expenses in connection with the re-sale?, and if so, for what periods and in what sums: (i) Government Rent, Rates & Management Fees; (ii) Marketing Expenses; (iii) Additional Agency Fee; (iv) Loss of interest; and (v) Additional Legal Fee.

66.  The Purchasers take the point they were not expressly warned of the specific heads of loss and damage, namely, the various items of expenses necessarily or possibly incur or flow from the resale, at the time of entering into the 15J and 16E ASPs, and therefore these items of expenses are not recoverable. This is plainly wrong. Such heads of necessary expenses are damages that arise naturally according to the usual course of things from the breach of the 15J and 16E ASPs, and objectively this is something purchasers can be found to know or ought to have known.

67.  However due to and if not for the delay in putting up 16E for resale, the actual sum of time related items of expenses should be less. At paragraph 55 above, an important point is that the Vendor cannot recover for avoidable loss.

68.  At Annex A to the Vendor’s Opening Submissions, it is recorded that in respect of 15J, the number of days from the date of breach to the date of resale is 238 days, whereas in respect of 16E is 363 days, that is a difference for 125 days. At paragraph 61 above, it is noted that 16E was not put to resell until 18/9/2020 namely 176 days of delay. Hence, I should not allow time related items of expenses to go beyond 20/11/2020, that is 238 days, the matter of avoidable loss.

Items of Expenses

For 16E

69.  “Loss of Interest on unpaid balance” as calculated by the Vendor is HK$559,430.74, to be divided by 363 days times 238 days, resulting in HK$366,789.30.

70.  Additional Government rent, rates, and management fees of HK$32,513 to be divided by 363 days times 238 days is HK$21,317.

71.  Additional marketing expenses of HK$25,000. This is a figure from internal allocation, not actual and is disallowed. It is also abandoned by the Vendor.

72.  Additional agency fee [B/137] in the sum of HK$256,030 is disallowed. The Purchasers did not have to pay agency fee for the aborted purchase, and agency fee of the aborted 16E was to be incurred by the Vendor as part of business expense of the 16E transaction. It was not within the contemplation of the Purchasers they would have to pay additional agency fee for resale. Agency Fee as shown [C2/563] comprised of 3% of the sales price of HK$8,655,000 plus a bonus of HK$280,000. The bonus, being discretionary on the part of the Vendor is clearly excessive.

73.  Additional Legal Fee of HK$2,000. This is not a time related item and is allowed in full.

74.  The total of the items of expenses for 16E is HK$390,106.30.

For 15J

75.  “Loss of Interest on unpaid balance” of HK$243,879.58 is allowed.

76.  Additional Government rent, rates, and management fees of HK$13,071 is allowed.

77.  Additional marketing expenses of HK$25,000 is disallowed.

78.  Additional agency fee for 15J in the sum of HK$197,665, for reasons as in 16E, is disallowed.

79.  Additional Legal Fee of HK$2,000. This is not a time related item and is allowed in full.

80.  The total of the items of expenses for 15J is HK$258,950.58.

G. CONCLUSION

81.  For the Claim, I find that the Vendor shall return forthwith to the Purchasers the 2^nd and 3^rd deposits of 15J and 16E transactions.

(i) for 16E in two sums of HK$472,700 totaling HK$945,400;

(ii) for 15J in two sums of HK$314,300 totaling HK$628,600.

82.  For the Counterclaim, I find that the Purchasers shall pay the Vendor forthwith the following:

(i) Price deficiency for 16E in the sum of HK$799,000;

(ii) Resale expenses for 16E of HK$390,106.30 and 15J of HK$258,950.58.

83.  The sums of the Claims when set off against the sums of Counterclaim will result in a net amount of HK$125,943 payable by the Vendor to the Purchasers.

84.  As to Costs, I make no order as to costs, on nisi basis, with liberty for the parties to apply to me for variation within 14 days of the date of this judgment.

85.  Lastly, I thank Counsel for their useful assistance.