Yau Fook Hong Co. Ltd. v. Chan Yu Ming

HCA 7521/1997

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 7521 OF 1997

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ASSESSMENT OF DAMAGES

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1. This is an assessment of damages for breach of contract in respect of the sale of a commercial premises.

2. By a written agreement signed on 22 April 1992 the plaintiff agreed to sell and the defendant agreed to buy workshop Unit 5 on the 7th floor of Wah Lok Industrial Centre, Phase II, Sha Tin, New Territories (hereinafter called "the Workshop") at the purchase price of HK$869,850.

3. Pursuant to the agreement the defendant undertook to pay to the plaintiff the following sums:-

(a) an initial deposit of HK$86,985;

(b) the balance of the purchase price of HK$782,865, to be paid off by 120 consecutive equal monthly instalments from 1 May 1992 onwards; and

(c) further interest at the rate of 4.75% per month on any defaulting sum.

4. It was also a term of the agreement that the plaintiff would be entitled to receive from the defendant an occupational rental equal to interest at 15% on the whole of the purchase price upon the defendant's default. (Whether such clause would be considered penal was not the subject matter before court in the present hearing)

5. Pursuant to the agreement the defendant paid the plaintiff the initial deposit of HK$86,985 and 55 instalments of HK$550,604.60 up to 31 November 1996. The defendant made no further payment since.

6. On 26 June 1997 solicitor on behalf of the plaintiff wrote to the defendant to terminate the agreement. The present claim was instituted on 18 July 1997.

7. Judgment in default was entered on 7 November 1997 and re-affirmed on 7 April 2000 at the hearing of a setting aside application, whereby the plaintiff was granted the following reliefs:-

(a) the defendant do forthwith deliver vacant possession of the Workshop to the plaintiff;

(b) the defendant do pay to the plaintiff HK$13,700 being arrears of insurance premium from 2 April 1994 to 1 April 1998 at the rate of HK$3,425 per year;

(c) the defendant do pay the plaintiff the sum of HK$17,935.90 being arrears of management fee from 1 December 1995 to 31 December 1996 at the rate of HK$876.00 per month; and arrears of management fee from 1 January 1997 to 30 June 1997 at the rate of HK$937 per month; and interest on arrear of management fees in the sum of HK$275.90; and collection charges on arrears of management fee in the sum of HK$500; and costs on arrears of management fees in the sum of HK$150;

(d) the defendant do pay to the plaintiff occupational rent at the rate of 15% per annum on HK$869,850 from 26 June 1997 to the date when vacant possession of the premises was delivered;

(e) the defendant to pay the plaintiff further management fee at the rate of HK$937 per month from 1 July 1997 to the date when vacant possession was delivered; and

(f) damages against the defendant to be assessed for breach of the said agreement of sale and purchase dated 22 April 1992, with any claim for damages, relating to deficiency in price and expenses in resale of the Workshop to be excluded.

8. During the setting aside application on 7 April 2000 the defendant obtained the leave of the court to defend the following reliefs:-

(a) the forfeiture of the initial deposit of HK$86,985 and the 55 instalment payments of HK$550,604.60;

(b) payment of HK$72,201 of arrears of instalment from 1 December 1996 to 31 May 1997 at the rate of HK$10,306 per month and at the rate of HK$10,365 per month from 1 June 1997 to 30 June 1997;

(c) the sum of HK$15,046.87 being the accrued interest from 1 September 1996 to 30 June 1997; and

(d) further interest of HK$72,201 from 1 July 1997 to day of payment.

9. On 14 November 1997 the parties, by consent, obtained the leave of the court, to stay the proceeding except for the purpose of assessing the damages granted in the default judgment stated in para 7(f) above. This was the background upon which the present assessment was brought.

10. Before the commencement of the evidence of the witnesses in the present hearing, the plaintiff sought an amendment to the pleading to include a claim for the sum of HK$10,586 government rents and rates paid by the plaintiff in respect of the Workshop. As the defendant raised no defence to the claim of the said sums of government rents and rates, judgment was entered against the defendant in favour of the plaintiff for the said sum of HK$10,586.

11. By the consent order of 14 November 1997 trial in respect of the 4 issues specified in para. 8 above were held in abeyance. Parties simply invited this court to rule on the quantum of loss of bargain in the present hearing. Without determining whether the plaintiff would be entitled to forfeit the deposit and the instalment payments already paid and whether the plaintiff would be entitled to claim payment of arrears of instalments till 30 June 1997, one simply could not finalise on the quantum of damages the plaintiff suffered as a result of the defendant's breach.

13. On the quantum of loss of bargain, the non-contentious factual events were:-

(a) Since December 1996 the defendant had ceased making payment and was in breach of his agreement to pay;

(b) the plaintiff wrote to terminate the agreement on 26/6/1997;

(c) the plaintiff took out a writ of summons on 18/7/1997 to sue for damages and to obtain the court's order for vacant possession;

(d) default judgment for vacant possession was granted on 7 November 1997; and

(e) the plaintiff obtained vacant possession of the Workshop on 26/2/98 with the assistance of the bailiff.

15. Mr. Ho on behalf of the plaintiff testified that he learnt from his colleagues that the defendant had ceased making payment after November 1996 and that his colleagues has lost touch with the defendant. Court record showed that the defendant had not attended court on the hearing on 20 October 1997 during which default judgment was granted in favour of the plaintiff.

16. The defendant did not deny the fact that he had defaulted payment after November 1996 when his own tenant terminated his tenancy. The defendant said he was in liaison with the staff of the plaintiff company for resolution until March 1997 when no further negotiation was possible. He received demand letters from solicitors representing the plaintiff to demand payment of the outstanding sums. He was aware of the court's order in the granting of vacant possession to the plaintiff. He took no steps to approach the plaintiff to surrender vacant possession of the premises.

17. On the evidence I am satisfied that the plaintiff had lost touch with the defendant since the issuing of the writ and the defendant had made no positive efforts to surrender the Workshop to the plaintiff upon termination of their relationship. The earliest available date for the plaintiff to exercise his right of re-sale as an owner was on the date that vacant possession was obtained, i.e. on 26 February 1998.

18. The plaintiff contended that this court should accept 2 months as a reasonable time to effect re-sale and the date of assessment ought be pitched at 26 April 1998. However there was no evidence before me about the efforts made by the plaintiff in effecting re-sale. In the absence of supporting information, the date of assessment remained at 26 February 1998.

19. Both the plaintiff and the defendant called upon their own surveyors to testify on their assessments of the open market value of the Workshop. According to the plaintiff's surveyor the open market value of the Workshop should be HK$600,000 on 26 February 1998. While the defendant's surveyor suggested the open market value of the Workshop should be HK$610,000. Both surveyors chose different comparables. The defendant's surveyor included comparables beyond the subject development. The plaintiff's surveyor, on the other hand, included the sale of Unit 28 on the 19th floor at Block A, B which was off the usual range of purchase price comparing with the sale of other units. Hence I accept the open market price of the Workshop on 26 February 1998 to be the median between the two figures assessed by both surveyors, i.e. HK$605,000.

20. The deficiency of the purchase price of the Workshop would therefore be HK$264,850. (HK$869,850 - HK$605,000)

21. This court is, however, unable to finalise on the quantum of damages suffered by the plaintiff without first resolving the issues in paras 8(a) & (b) above. Moreover, regarding the deficiency loss the plaintiff would be precluded from claiming the deficiency loss or the expenses in resale unless the Workshop was sold within 6 months of the determination of the agreement. See clause 20 of the agreement for sale and purchase which reads:-

"....... The Purchaser shall not be called upon to bear such deficiency or expense unless the said premises are resold within six months of the determination of this Agreement.........."

22. Costs for the present assessment hearing is reserved for argument on the suitability of proceeding with the present assessment.