WINFOONG HOTEL LTD. v. GRANDABLE PROPERTY INVESTMENT LTD.

HCA 13043/98

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 13043 OF 1998

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ASSESSMENT OF DAMAGES

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Background

1. By a written agreement made between the Plaintiff and the Defendant dated 16th June 1997 ("the agreement"), the Plaintiff agreed to sell and the Defendant agreed to purchase Shop No. 35 on the Ground floor and First floor (including the Flat Roof thereof) of Kwan Yick Building, Phase III, Nos. 271-285, Des Voeux Road West and No. 158A, Connaught Road West, Hong Kong ("the property") at the price of HK$120,000,000 to be completed on 16th December 1997 ("the completion date"). An initial deposit in the sum of $5,000,000 was paid prior to, and a further deposit in the sum of $7,000,000 was paid upon the signing of, the agreement by the Defendant to the Plaintiff. A further sum of $12,000,000 being part payment of the purchase price was also paid by the Defendant to the Plaintiff. The balance of the purchase price in the sum of $96,000,000 was to be paid on the completion date.

2. The Defendant failed to complete the purchase and fail to pay the balance purchase price on the completion date. The Plaintiffs accepted the Defendant's breach and forfeited the deposit of $12,000,000.

3. By a Writ of Summons issued on 19th August 1998, the Plaintiff claimed against the Defendant, inter alia, damages for the breach of the agreement. On 16th December 1998, the Plaintiff obtained judgment against the Defendant with damages to be assessed.

The evidence

4. The Plaintiff calls one witness, Ms. Cheung Mo Sai ("PW1"), to give evidence. Apart from relating the Defendant's breach, PW1 also testified that the Plaintiff had put the property up for public auction, which was subsequently aborted when the reserved price was not reached. The Plaintiff claims against the Defendant for the auctioneer's expenses $10,000, advertising fees $39,284 and legal costs $ 50,400 in relation to the aborted public auction. As to the sum of $39,284, PW1 said that this exact figure was obtained from the Plaintiff's accounts department though the Plaintiff could not locate all the relevant receipts in support. A sum of $7,000 was thus unsupported by documentary evidence.

5. By an agreement dated 29th April 1998 made between the Plaintiffs as the vendor and Grand Lake International Investment Limited as the purchaser ("the ultimate purchaser"), the Plaintiff agreed to sell the property at the price of $70,000,000. The Plaintiffs duly assigned the property to the ultimate purchaser on 10th June 1998. PW1 also relied on an evaluation report prepared by FPDSavills as to the open market value of the property as at 29th April 1998, i.e. the date of the subsequent agreement for sale of the property. The Plaintiff claims against the Defendant the difference in the contract price and the resale price in the sum of $50,000,000.

6. PW1 also referred to an agreement dated 31st May 1997 with Metrobase, the estate agent handling the sale of the property. The Plaintiff has agreed to pay commission equivalent to 1% of the purchase price upon a legally binding Agreement for Sale and Purchase was signed. She testified that Metrobase was prepared to charge commission at the rate of 1% of the actual amount received by the Plaintiff instead despite the agreement. As the Plaintiff had received a total amount of $24,000,000, the Plaintiff paid commission amounting to $240,000 to Metrobase and the Plaintiff is claiming the same from the Defendant.

7. Finally, the Plaintiff claims against the Defendant for the legal costs incurred as a result of the non-completion of the sale and the subsequent sale to the ultimate purchaser.

The law

8. 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, 15th ed. Para. 937). The first relevant price is the contractual price and the second one is the market price at the contractual time fixed for conveyance (i.e. the completion date). The learned author further said: "[t]he price at which the seller has resold is strictly not to be taken in preference to the market price, but it has been taken in most cases .......... This would seem to be on the ground that the resale price affords good evidence of the market price, and there is no suggestion in these cases awarding the difference between the contract price and the resale price that the latter differed at all from the market price" (McGregor, ibid, para.938).

9. Further, the damages "are not confined to the actual margin 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.) (see McGregor, ibid, Para. 939). The Plaintiff is therefore entitled to consequential losses.

Findings and assessment

10. I find PW1 to be an honest and reliable witness and I accept her evidence. I am satisfied that the actual resale price of $70,000,000 together with the evaluation report, in the absence of any evidence to the contrary, affords good evidence that the market value of the property as at the completion date was $70,000,000. In any event, the Plaintiff did try to mitigate its loss by offering the property for public auction which was unsuccessful. The Plaintiff is entitled to claim the difference in price. As to the aborted public auction, I am satisfied that that Plaintiff has proved its case (even though an amount of $7000 was not support by documentary evidence).

11. I am also satisfied that the estate agent' s commission and the legal costs on the failed transaction and the subsequent sale are recoverable.

12. The Plaintiff is entitled to forfeit the deposit of $12,000,000 and to set off the part payment of $12,000,000 against the damages to be assessed as per the judgment dated 16th December 1998.

Amount assessed

1.	Deficiency in purchase price		$50,000,000
2.	Expenses re aborted public auction
	a. Auctioneer's expenses	$10,000
	b. Advertisement	$39,284
	c. Legal costs	$50,400	$99,684
3.	Commission of Estate Agent		$240,000
4.	Legal Costs re conveyancing		$119,850

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			$50,459,534
	Less	Deposit	$12,000,000
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		Total	$38,459,534

The Plaintiff has to set off the part payment of $12,000,000 against the assessed sum of $38,459,534, leaving a balance of $26,456,534.

Interest

13. The Plaintiff is entitled to have interest at judgment rate from date of Writ to date of full payment.

Costs

14. I make the following nisi order as to costs, such order to be made absolute if no application to review is made within 14 days.

15. "Cost of and incidental to the assessment of damages be to the Plaintiff, to be taxed, if not agreed".