WONG SUK CHING v. CHOW YING CHU

[English Translation – 英譯本]

CACV 339/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 339 OF 2006

(ON APPEAL FROM HCA NO. 1257 OF 2005)

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BETWEEN

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JUDGMENT

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Hon Cheung JA (delivering the judgment of the Court):

Facts

1. The Defendant is the owner of Flat A, 19^th Floor, Block 9, Park Island, New Territories, Hong Kong (hereinafter “the Property”). On 17 May 2005, the Defendant entered into a sale and purchase agreement with the Plaintiff by which the Property was sold to the Plaintiff for a price of $8,410,000. The agreement provided that the Defendant was to sell to the Plaintiff the Property together with the furniture and fittings set out in the checklist in the agreement.

2. The date of completion was agreed to be 23 June 2005. Upon completion, however, the Defendant did not leave to the Plaintiff all the furniture and fittings set out in the checklist. Of the 74 items set out in the checklist, 35 were removed from the Property by the Defendant, including tables, chairs, curtains and lamps.

3. This notwithstanding, the Plaintiff did not refuse to complete on account of the Defendant’s failure to perform the agreement; on the contrary, completion took place as scheduled. Subsequently, the Plaintiff commenced proceedings against the Defendant for breach of contract and claimed damages as detailed below:

(1)   $797,000. This represented the difference between the agreed purchase price of the Property (i.e. $8,410,000) and the estimated value of the Property without the furniture and fittings in question (i.e. $7,613,000);

(2)   $29,887.50;

(3)   $7,970.00;

(4)   Loss suffered by the Plaintiff arising from loss of enjoyment of the Property.

Items (2) and (3) represented the stamp duty and agent’s commission overpaid by the Plaintiff on the basis of the difference between the values of the Property as set out in item (1).

4. The Defendant admitted liability to pay damages to the Plaintiff.

5. The assessment of damages was heard before Master Lung. After a 2-day hearing, Master Lung held that the Defendant was liable to pay the following two items of damages to the Plaintiff:

(1)   $51,400, being the total value of the furniture and fittings that the Defendant was contractually required to leave to the Plaintiff but had removed from the Property at the time of completion.

(2)   $12,000, being the loss suffered by the Plaintiff by reason of her being unable to move into the Property immediately upon completion. This amount was calculated as follows: the rent paid by the Plaintiff at the time of completion was $18,000 per month. By reason of the Defendant’s breach of contract, the Plaintiff was unable to move into the Property immediately upon completion on 23 June 2005. On 11 July 2005, the Defendant offered to the Plaintiff’s solicitors to move back to the Property all the furniture and fittings that she had removed on the date of completion. Master Lung held that, had the Plaintiff accepted the Defendant’s offer, she would have been able to move into the Property on 13 July. Therefore, the Plaintiff lost her use of the Property for 20 days (i.e. from 23 June to 12 July) and such loss was quantified at $12,000 ($18,000 x 20/30).

6. Master Lung also ordered the Defendant to pay interest on the damages.

7. Master Lung did not make any order as to costs of the hearing of assessment of damages.

8. The Plaintiff appealed to this Court against the above judgment. The parties filed grounds of appeal and reasons for objection respectively. At the appeal hearing, the Plaintiff said that she did not have supplemental oral submissions to make, whereas the Defendant made supplemental oral submissions. However, as the Defendant had not served her reasons for objection on the Plaintiff prior to the appeal hearing, we adjourned the hearing to allow the Plaintiff to submit a written response to the Defendant’s reasons for objection, and thereafter the appeal would be dealt with on the basis of the documents submitted. The Plaintiff subsequently filed a written response.

The Defendant’s explanation and offers

9. In respect of her failure to leave to the Plaintiff all the furniture and fittings set out in the checklist of the agreement, the Defendant explained that her mother was a superstitious person who thought that all the furniture and fittings purchased upon the Defendant’s marriage had to be removed from the Property. Hence she did not leave the furniture to the plaintiff pursuant to the contract (sic).  Upon completion, when the Defendant knew that her mother had removed some of the furniture and fittings, she immediately stopped the delivery company from removing the furniture and fittings and asked that company to deliver those items to a warehouse for temporary storage. The Defendant left Hong Kong on the day following the completion. On 11 July, the Defendant and her mother went to the office of the Plaintiff’s solicitors and offered to take remedial measures such as moving the contractually specified furniture and fittings back to the Property, or paying to the Plaintiff the value of the furniture and fittings that she had bought, or moving the contractually specified furniture and fittings back to the Property as well as paying to the Plaintiff an amount equal to the value of those furniture and fittings as compensation. The Defendant also agreed to pay to the Plaintiff $50,000 being legal fees incurred between the date of completion and 11 July. The Plaintiff refused to accept any of the above offers.

10. In the transaction in question, the Defendant completely disregarded the promise that she had made in the agreement. Nevertheless, as she has admitted liability for breach of contract, it is unnecessary for us to look into the reasons for the breach. We only have to consider whether the assessment made by Master Lung is correct.

Principle governing damages for breach of contract

11. As Master Lung pointed out, the purpose of awarding damages for breach of contract is to return, as far as this can be done by pecuniary compensation, the innocent party to the position he would have been in had the contract been completely performed. In the present case, the Plaintiff did not refuse to complete the property transaction by reason of the Defendant having removed some of the furniture and fittings. On any view of the matter, the direct loss suffered by the Plaintiff is confined to the value of the furniture and fittings that the Defendant has removed. The only question is: how should the value of these items be assessed?

The Plaintiff’s “difference in property price” approach

12. We see no legal justification for the approach suggested by the Plaintiff based on the difference in the price of the Property. The property assessment by the surveyor instructed by the Plaintiff has been made on the basis of the sale price of another unit at Park Island (i.e. Flat A, 19^th Floor, Block 8) (hereinafter “the Unit”) as at 4 March 2005. The sale price of the Unit was $7,500,000, with the date of completion being 31 March 2005. The relevant sale and purchase agreement stated that “the price of the property includes all in-wall installations and electrical appliances given by the developer as gifts”. The surveyor was of the view that the Unit was the same as the Property in terms of fittings, floor level, view and area. As the sale and purchase agreement of the Property was dated 17 May, which was subsequent to the completion of the sale and purchase of the Unit, the surveyor added $112,500 to the sale price of $7,500,000 and, after making some adjustments, adopted the figure of $7,613,000 as the estimated value of the Property.

13. In our view, this estimated value does not show that the Plaintiff’s loss is the difference between the sale price of that Property (i.e. $8,410,000) and the estimated value of $7,613,000. First, the surveyor has completely overlooked the value of the furniture and fittings set out in the checklist of the agreement and the value of furniture and fittings that the Defendant had removed. Hence the so-called difference in price does not reflect the value of the furniture and fittings removed by the Defendant and, therefore, cannot be used as the basis of the damages payable to the Plaintiff. Although the price at which the Plaintiff sold the Property at about the same time was higher than that of another unit at the same housing estate, this difference in price was not purely the result of the furniture and fittings in the properties. The property market is a free market, and the price of a property is determined by its owner who is willing to sell it and someone who is willing to purchase it. Although the Plaintiff may have paid more in the transaction in question, this does not mean she can claim by means of the present claim the amount that she thinks she has overpaid. The estimation made by the surveyor instructed by the Plaintiff is of no assistance whatsoever to the court in assessing the Plaintiff’s loss. For the same reason, the Plaintiff’s claim for the overpaid stamp duty and agent’s commission also fails.

Expenses incurred by the Plaintiff in purchasing furniture

14. The Plaintiff claims that she has spent approximately $400,000 on new furniture and fittings. The Plaintiff is not entitled to claim against the Defendant for the expenses in purchasing furniture and fittings; the Plaintiff can only recover the value of the furniture and fittings that the Defendant had removed or the value of the same goods. For example, tables of the same size may nevertheless vary in price due to differences in material or brand, and the variations may be considerable. The fact that the Defendant had removed a table does not mean that the Plaintiff can claim against her for the cost of another table that the Plaintiff has purchased.

Invoices of the removed items

15. On the other hand, the value of the items removed by the Defendant is evidenced by invoices. The Plaintiff has taken issue with the authenticity of the invoices. It is for the trial judge to determine the reliability or otherwise of witnesses and exhibits, and unless the trial judge has overlooked crucial evidence, the appellate court will not overturn findings of fact that the trial judge made after hearing and observing the witnesses at trial. The Plaintiff was legally represented at the assessment hearing, and in paragraph 18 of his written Assessment of Damages, Master Lung stated that Counsel for the Plaintiff had not raised doubts about the value of the furniture and fittings that the Defendant had removed. In our judgment, Master Lung was correct in holding that the Defendant had to pay damages of $51,400.

Damages for loss of use of the Property

16. In respect of the Plaintiff’s loss in not being able to use the Property immediately upon completion, the Plaintiff claims that, due to her heavy workload, she spent two months purchasing furniture and fittings. She did not finish placing orders for all the items until end of August 2005, and those items were not delivered to the Property until end of November 2005, and therefore she did not move into the Property until November 2005.

17. Another legal principle governing damages for breach of contract is that the innocent party is under a duty to mitigate his loss. The Plaintiff is not entitled to damages for losses that she could have avoided. In assessing the relevant loss, the court should make allowance for the fact that the Plaintiff needed a reasonable period of time for purchasing the necessary furniture and fittings. In the present case, the Plaintiff was unable to move into the Property not only because it lacked furniture and fittings, but also because the Plaintiff was so busy at work that she was unable to purchase furniture and fittings for the Property. This shows that she had not taken reasonable steps to mitigate her loss.

18. In our view, no matter whether the offers for compensation put forward by the Defendant on 11 July 2005 were reasonable and should have been accepted by the Plaintiff, it was reasonable for Master Lung to adopt 20 days as the basis of his assessment of the Plaintiff’s loss of use of the Property. In light of the Plaintiff’s duty to mitigate her loss, 20 days was a reasonable period within which the Plaintiff could move into the Property. In any event, we concur with Master Lung’s judgment. The offers made by the Defendant on 11 July 2005 were reasonable. It was unreasonable for the Plaintiff to say that she lacked confidence in the Defendant without seeing the furniture and fittings that had been stored in the warehouse. The Plaintiff had no reason for rejecting outright any of the Defendant’s offers.

Other matters

19. One of the Plaintiff’s grounds of appeal is that, at the assessment hearing, Master Lung read certain materials concerning settlement proposals made by the parties. The court records reveal that Master Ho had removed the documents regarding settlement proposals from the bundles and put them in two sealed envelopes, and those documents were not among the materials that Master Lung consulted at the assessment hearing.

20. Furthermore, with leave of this Court, the parties inspected the relevant files of the Court of First Instance. The Plaintiff then conceded that the documents filed with the court did not include documents involving settlement proposals.

21. The Plaintiff has also requested us to admit, for appeal purposes, a supplemental witness statement made by an estate agent involved in the property transaction in question. We will not admit this new item of evidence. The Plaintiff was under a duty to adduce all relevant evidence at the assessment hearing before Master Lung. In fact, at the hearing, the Plaintiff called that witness and adduced the witness statement and supplemental witness statement of that witness.

Costs of the assessment

22. As the Plaintiff failed to convince Master Lung to accept her case on assessment of damages, his order that each party was to bear her own costs is a reasonable order. We see no reason for making any other costs order in its place.

Costs of the appeal

23. Neither party is legally represented. We make no order as to costs of the appeal. At the appeal hearing, both parties agreed to this order being made.