LI SZE FAT v. CHENG KA LEUNG TOMMY AND ANOTHER

HCA No. 14280/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 14280 OF 1998

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ASSESSMENT OF DAMAGES

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Introduction

1. The 1st defendant was at all material times and still is the registered owner of the property known as Flat No. 5 on the 15th Floor of Block B of Sun Lai Garden, No. 2 King Tung Street, Kowloon, Hong Kong ("the Property").

2. The 2nd defendant is the mother of the 1st defendant and claims to be the beneficial owner of the Property because of the payments made by her for the acquisition of the Property.

3. The Property was acquired under the Housing Ownership Scheme and the provisions of the Housing Ordinance applied.

4. By a provisional agreement for sale and purchase dated 16th February 1997 ("the Provisional Agreement"), the 1st defendant agreed to sell and the plaintiff agreed to purchase the Property at the price of $1,668,000.00.

5. In pursuance of the Provisional Agreement, a formal sale and purchase agreement dated 13th March 1997 ("the Agreement") was executed between the 1st defendant and the plaintiff. The Agreement stipulated that the 1st defendant was to sell the Property to the plaintiff as beneficial owner and the completion date was to be on or before 28th August 1997.

6. In breach of the Agreement, the 1st defendant failed to send any title deeds and documents of the Property to the plaintiff's solicitors on or before the agreed completion date. By a letter dated 29th August 1997, the 1st defendant's solicitors informed the plaintiff's solicitors that they had no further instructions to act for the 1st defendant in the transaction. Thus, the completion did not take place.

7. On 25th August 1998, the plaintiff issued the proceedings herein against the 1st defendant to recover, inter alia, his loss and damages for the 1st defendant's wrongful repudiation of the Agreement.

8. On 12th January 2000, Master Lau entered final judgment for the plaintiff against the 1st defendant for the return of deposit of $166,800.00 paid by the plaintiff together with interest as well as interlocutory judgment for the plaintiff in this action against the 1st defendant for damages to be assessed.

9. The 1st defendant appealed against the decision of Master Lau, but on 13th April 2000 Yuen J. dismissed the appeal.

10. The assessment of damages was heard before me on 4th April 2001.

The plaintiff's claims

11. In the Re-Amended Statement of Claim, the plaintiff alleged that his loss and damages were as follows:-

1. Loss of profits in the sum of $282,000.00 in respect of the sub-sale agreement ("the Sub-sale Agreement") between the plaintiff and his sub-purchaser, Fortune Luck Trading Limited ("the Sub-purchaser"), for the sub-sale of the Property at the price of $1,950,000.00.

2. Compensation of $19,562.90 paid to the Sub-Purchaser.

3. Agent's commission of $19,500.00 paid to Ricacorp Limited in respect of the Sub-sale Agreement.

4. Deposit of $166,800.00 paid to the 1st defendant under the Agreement.

5. Stamp duty of $25,020.00 paid by the plaintiff in respect of the Agreement.

6. Legal costs and expenses of $5,205.00 wasted in the aborted sale.

12. There is no need for me to deal with the claim for the deposit of $166,800.00, as Master Lau has already entered final judgment for the same.

13. At the hearing of the assessment, Mr Yang, on behalf of the plaintiff, submitted that the loss of the plaintiff should just be the loss of profits of $282,000.00 and the compensation of $19,562.50 paid to the Sub-purchaser, totaling $301,562.50.

14. In the premises, there is also no need for me to deal with the claims for the aforesaid agent's commission, stamp duty, legal costs and expenses.

15. The plaintiff has also claimed for interest on the amount due to him pursuant to s. 48 of the High Court Ordinance, Cap. 4.

Evidence

16. At the hearing of the assessment, the plaintiff gave evidence in support of his claims. He testified that after he signed the Agreement with the 1st defendant, he resold the Property to the Sub-purchaser for the price of $1,950,000.00. The completion date for the sub-sale was fixed on the same date as the completion date for the Agreement, i.e. 28th August 1997. It would not be necessary for him to pay any money out of his own pocket because the purchase money from the Sub-purchaser would be used to pay the balance purchase price to the 1st defendant. In fact, he would have received the amount for the difference in price between the sale and the sub-sale. However, he could not complete the sub-sale because the 1st defendant failed to give the title deeds of the Property to his solicitors.

17. By a letter dated 1st September 1997 from the Sub-purchaser's solicitors to the plaintiff's solicitors, the Sub-purchaser demanded the plaintiff to return the deposits of $195,000.00 and pay compensation for the costs of conveyancing in the sum of $5,000.00, the stamp duty of $14,625.00 and the agent's commission of $19,500.00. The Sub-purchaser threatened to commence legal proceedings against the plaintiff should the plaintiff fail to accede to the demand. The plaintiff then negotiated with the Sub-purchaser through their respective solicitors and they finally agreed that the plaintiff could return the said deposits and pay half of the said compensation to the Sub-purchaser in full and final settlement of the Sub-purchaser's claims. The plaintiff hence returned the deposits of $195,000.00 and paid the sum of $19,562.50 to the Sub-purchaser as compensation.

18. The plaintiff further testified that if the 1st defendant did not breach the Agreement, he could earn the difference in price between the sale and the sub-sale and there was no need for him to pay the compensation to the Sub-purchaser.

19. The plaintiff's evidence is well supported by the documents before me. In particular, the Sub-sale Agreement confirms that the price for the sub-sale was at $1,950,000.00 and hence the plaintiff suffered a loss of profits in the sum of $282,000.00. The cancellation agreement dated 22nd October 1997 between the plaintiff and the Sub-purchaser also confirms that the plaintiff did pay a total sum of $214,562.50 (i.e. the deposits of $195,000.00 plus the compensation of $19,562.50) to the Sub-purchaser.

20. The plaintiff was cross-examined by the 1st defendant. The 1st defendant also gave evidence himself. The 1st defendant raised various matters, such as the plaintiff giving a false address, the 1st defendant refusing to give the keys of the Property to the plaintiff, the payment of premium to the Hong Kong Housing Authority and the plaintiff was a property speculator, etc. However, none of the matters raised by the 1st defendant has any relevance to the assessment of damages at all. The plaintiff's evidence concerning his loss and damages remained unchallenged.

Assessment

21. Since the 1st defendant did not raise any matter that could challenge the evidence of the plaintiff, I accept the plaintiff's evidence that he did suffer loss and damages amounting to $301,562.00 as follows:-

1. Loss of profits for the resale of the Property in the sum of $282,000.00; and

2. Compensation paid to the Sub-purchaser in the sum of $19,562.50.

22. The normal measure of damages is the market value of the property at the contractual time for completion less the contract price (see McGregor on Damages, 16th ed., para. 964). There is, however, no valuation report produced by the plaintiff to establish the market value of the Property at the contractual time for completion. The price at which the plaintiff had contracted to resell the Property to the Sub-purchaser is strictly irrelevant per se (see Brading v. McNeill [1946] Ch. 145).

23. Nevertheless, the price of the resale can be taken as prima facie evidence of the market value. This was done in Engell v. Fitch (1869) L.R. 4 Q.B. 659, where the plaintiff had given evidence of the resale and the defendant had not countered with any evidence that the resale price did not represent the market price.

24. Since the 1st defendant also did not counter with any evidence that the resale price to the Sub-purchaser did not represent the market price, I will therefore adopt the approach in Engell v. Fitch, supra., and find that the plaintiff is entitled to recover the loss of $282,000.00 (i.e. the resale price of $1,950,000.00 less the contract price of $1,668,000.00).

25. Moreover, the plaintiff is entitled to recover consequential losses arising naturally from the breach of contract or losses which have been in the contemplation of the parties (see Hadley v. Baxendale (1854) 9 Exch.341).

26. I accept Mr Yang's submission that the possibility of sub-sale of properties is not uncommon in Hong Kong, and a reasonable vendor should be able to foresee such a possibility. This was particularly so during the first half of the year 1997 when property prices were escalating at a very quick pace. That was exactly the reason why the plaintiff resold the Property before completing the purchase. Whether the plaintiff was a property speculator or a user, the possibility of a sub-sale by the plaintiff should be clearly in the contemplation of the 1st defendant.

27. In addition, clause 3(1) of the Agreement stipulates that:-

"...the Vendor and all other necessary parties (if any) will execute a proper assurance of the Property to the Purchaser or his nominee(s) or sub-purchaser(s) in accordance with this Agreement..."

Clause 17 of the Agreement also stipulates that:-

"Each party shall bear and pay his own solicitors' costs of and incidental to the preparation completion and registration of this Agreement and the subsequent Assignment. If the purchase price to be mentioned in the subsequent Assignment shall be higher than the purchase price mentioned herein or if the Purchaser shall require the Vendor's solicitors to approve and/or execute more than one assignment then the additional costs charged by the Vendor's solicitors at half scale charge for approving the assignment or additional Assignment (as the case may be) shall be paid and discharged by the Purchaser upon completion."

28. These two clauses in the Agreement clearly show that the parties were in the contemplation of the possibility of a sub-sale. It should also be in the contemplation of the 1st defendant that if he failed to complete the sale, the plaintiff would be unable to complete the sub-sale and would have to pay compensation to the Sub-purchaser.

29. Thus, I find that the loss of profits from the sub-sale in the sum of $282,000.00 and the compensation of $19,562.50 paid to the Sub-purchaser are losses which have been in the contemplation of the parties and the plaintiff is entitled to recover the same.

30. The plaintiff had in fact done his best to mitigate his losses by negotiating with the Sub-purchaser to lower the amount of the compensation.

31. In the circumstances, I assess the damages that the plaintiff is entitled to recover from the 1st defendant to be in the sum of $301,562.50 (i.e. $282,000.00 plus $19,562.50).

Interest

32. The plaintiff is entitled to have interest on the sum of $282,000.00 at judgment rate from the intended completion date, i.e. 28th August 1997, to the date of the judgment pursuant to s. 48 of the High Court Ordinance.

33. The plaintiff is also entitled to have interest on the sum of $19,562.50 at judgment rate from the date of payment to the Sub-purchaser, i.e. 14th October 1997, to the date of the judgment pursuant to s. 48 of the High Court Ordinance, Cap. 4.

Order

34. Accordingly, I enter judgment for the plaintiff against the 1st defendant for the sum of $301,562.50 together with interest on the sum of $282,000.00 and interest on the sum of $19,562.50 at judgment rate from 28th August 1997 and 14th October 1997 respectively to the date of this judgment.

35. I also make an order nisi that the 1st defendant do pay the plaintiff costs of this assessment, to be taxed if not agreed, and the order shall be made absolute after the expiration of 14 days from the date of the judgment.