LEE LUN IVAN v. CHEUNG SUN YU (in his personal capacity and in his capacity as executor of the estate of Cheung Wo)

HCA 288/2022

[2023] HKCFI 28

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 288 OF 2022

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J U D G M E N T

(on assessment of damages)

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A.   Introduction

1.  The Plaintiff commenced the action in DCCJ 382/2020 on 20 January 2020 against the Defendant for his breach of the Provisional Agreement for Sale and Purchase (the “Agreement”)  dated 26 November 2011 in respect of the property at G/F and Cockloft, No 22 Yeung Uk Tsuen, Tsuen Wan, New Territories (the “Property”). 

2.  By an Order of Registrar Lui dated 21 May 2021 (which was subsequently amended on 16 June 2021), judgment was entered against the Defendant.  It was ordered that the Agreement be specifically performed and carried into execution; and the Defendant do pay the Plaintiff mesne profit from the Property for his use and benefit from 30 March 2012 to the completion date being 1 March 2022, to be assessed (the “Order of Registrar Lui”).  

3.  By an Order dated 6 January 2022, his Honour Judge Harold Leong granted a declaration that the Agreement be rescinded with ancillary and consequential orders.  The Defendant was ordered to pay to the Plaintiff damages for his breach of the Agreement to be assessed and that the action be transferred to the Court of First Instance for assessment of damages (the “Order of Judge Leong”).  

4.  The assessment of damages was fixed to be heard before me on 9 December 2022.  

5.  Despite the Defendant’s absence at the hearing, I was satisfied on the affidavits of service filed by the Plaintiff that sufficient notice had been given to the Defendant of the hearing and it was appropriate to proceed to hear the Plaintiff’s evidence and submissions.  

6.  This is my judgment on the assessment of damages.  

B.   The Material Factual Background

7.  The Property was owned by a Cheung Wo (the “Deceased”)  and a Cheng Ngan Kiu as joint tenants.  Mr Cheng passed away in or about 1999, leaving the Deceased as the sole legal and beneficial owner of the Property. 

8.  The Deceased in turn passed away on or about 1 June 2003.  

9.  The Defendant is the grandson of the Deceased.  He is also the sole executor and sole beneficiary named in the last will of the Deceased made on 26 August 1999.  

10.  Pursuant to the Agreement, the Defendant in the purported capacity as the executor of the Deceased’s estate [1] agreed to sell the Property to the Plaintiff as buyer at the purchase price of HK$2,450,000.  

11.  According to the Plaintiff, the Defendant had made it clear to him at all times that he had yet to obtain a grant of probate in respect of the Deceased’s estate.  The parties therefore understood at all times that (1)  the Agreement would be specifically enforceable; and (2)  completion would not happen before the parties’ solicitors having verified the grant of probate or good title of the Property.  This is reflected by the fact that:-

(1)  The standard terms pertaining to the non-availability of specific performance in the Agreement have been intentionally crossed out by the parties; and

(2)  The incorporation of an express term providing that  “此合約為必買必賣，當律師確認業權後，便可將訂金轉交賣方”.

12.  On 12 December 2011, the Plaintiff paid the Defendant’s then solicitors ie Messrs Chan, Wong & Yip Solicitors (“CWY”)  , a sum of HK$249,500.  The said sum comprised (1)  the deposits for the sale and purchase of the Property ie HK$245,000; and (2)  the remaining HK$4,500 to be held by CWY as cost on account. 

13.  Between June and July 2013, the Plaintiff also paid CWY a further sum of HK$44,450 to cover the stamp duty for the sale and purchase of the Property.  

14.  According to the Plaintiff, since the execution of the Agreement, the Defendant had been delaying the completion by repeatedly requesting extensions of time for completion.  This is so, despite the Plaintiff having continued to follow up on the Defendant’s progress in obtaining the grant of probate to show good title of the Property. 

15.  By 6 November 2019, the Plaintiff via his then solicitors, requested that the Defendant do produce a concrete and realistic timeline for completion of the sale and purchase of the Property.  

16.  As the Plaintiff had not heard further from the Defendant nor CWY, he commenced the action in DCCJ 382/2020 by issuing a writ of summons on 20 January 2020 seeking an order for specific performance or, alternatively, damages in lieu thereof.  

17.  By letter dated 22 January 2020, the Defendant’s then solicitors ie CWY informed the Plaintiff’s solicitors that they have tried to reach the Defendant but in vain and that they do not have instruction to accept service for the Defendant in DCCJ 382/2020. 

18.  Notwithstanding the Order of Registrar Lui for specific performance of the Agreement, the Plaintiff had not been able to locate the Defendant and CWY had repeatedly informed the Plaintiff that they have no instruction to accept service of court documents on behalf of the Defendant.  As the Agreement did not contain any separate address of the Defendant, there was also no other means to communicate with the Defendant. 

19.  Upon enquiries of the Plaintiff’s current solicitors ie Vitus Lawyers (previously known as Messrs Leung, Tam & Wong Solicitors)  and as confirmed by the Probate Registry on or about 3 August 2021, no grant of probate in respect of the Deceased’s estate had been issued under been issued to the Defendant.  

20.  In the circumstances, the Plaintiff made a second application which led to the Order of Judge Leong.  

C.   The Evidence

C1.  The Plaintiff’s Evidence

21.  For the purpose of this assessment, Master D To ordered that the Plaintiff’s Affirmation and 2^nd Affirmation respectively dated 16 April 2021 and 10 December 2021 shall stand as evidence in chief unless otherwise directed.  

22.  The Plaintiff attended the assessment hearing before me on 9 December 2022 and adopted the contents of his two Affirmations.  He also provided elaborations on relevant matters to the court.  

23.  Apart from the above background matters, the Plaintiff’s evidence essentially focused on the loss and damage suffered by him.  A summary of his evidence is provided below.  

C2.  The Valuation Report Prepared By RHL Appraisal Limited

24.  The Plaintiff relied on the valuation report prepared by Mr Keith L H Siu (“Mr Siu”)  of RHL Appraisal Limited dated 7 July 2021 (the “Valuation Report”). 

25.  Pursuant to Master D To’s order dated 2 September 2022, the Valuation Report was adduced without the need of calling Mr Siu.  The Valuation Report concluded that:-

(1)  The market value of the Property as at 1 March 2021 was about HK$5,847,846; and

(2)  The projected rental value of the Property from 1 March 2012 to 1 March 2021 are as follows:-

Valuation Date	Monthly Rental (HK$)		Term Rental (HK$)
1/3/2021	HK$12,600.00		HK$53,250.00 (till the report date)
1/3/2020	HK$12,800.00		HK$153,600.00
1/3/2019	HK$13,700.00		HK$164,400.00
1/3/2018	HK$13,500.00		HK$162,000.00
1/3/2017	HK$12,800.00		HK$153,600.00
1/3/2016	HK$12,000.00		HK$144,000.00
1/3/2015	HK$12,500.00		HK$150,000.00
1/3/2014	HK$11,500.00		HK$138,000.00
1/3/2013	HK$11,500.00		HK$138,000.00
1/3/2012	HK$10,200.00		HK$122,400.00
HK$1,379,250.00

26.  In the absence of any challenge to this evidence, I accept the entirety of the evidence of the Plaintiff’s expert in this matter.   

C3.  Loss and Damage

27.  On 31 January 2022, CWY returned the deposit paid in the sum of HK$245,000 to the Plaintiff. 

28.  On the above basis, and as set forth in the Plaintiff’s 2^nd Affirmation and his oral evidence, the Plaintiff has quantified the loss and damage in the manner tabulated below:-

Head of Damage	Calculation	Amount Claimed
Loss of Bargain	The difference between the market value of the Property as of 1 March 2021 and the contract price of the Property (ieHK$5,847,846-HK$2,450,000)	HK$3,397,846
Loss of Rental Income/Mesne Profit	For the period from 30 March 2012 to 9 December 2022	HK$1,580,400
Estate Agent Commission		HK$25,000
Conveyancing Expenses		HK$48,950
	Total:	HK$5,052,196

D.   Assessment of Damages

29.  Where a seller of property refuses to proceed with the contract in such circumstances as amounting to a repudiation or discharging breach, the buyer may sue for damages, which should in no way be prejudiced by the existence or the pursuit, other than to finality, of the other remedies: McGregor on Damages (21^st ed) at §27-004.  

30.  The onus of proving the plaintiff’s failure to have acted reasonably in taking certain steps to mitigate its loss consequent upon the breach is on the defendant.  The question as to what was reasonable for a person to do in mitigation of damage is not a question of law but one of fact in the circumstances of each particular case: Chitty on Contracts (33^rd ed) at §§26-090 to 26-090.  

31.  In this respect, the Defendant has not adduced any evidence seeking to contend and prove the Plaintiff had failed to mitigate his loss.  If and insofar as relevant, I also accept the unchallenged evidence of the Plaintiff that:-

(1)  he had exhausted all means to push through the sale and purchase transaction with the Defendant; and

(2)  the payment of conveyancing expenses and deposit had caused financial constraints in the search for a comparable alternative property, and he had not been able to find one for around the initial agreed price notwithstanding he had tried his best to do so. 

D1.  Loss of Bargain

32.  I accept the Plaintiff’s submissions that in a rising market, the material time to calculate the difference between the market price and the contractual price in cases of sales of land is at the date of judgment: Silver Mart Trading Limited v Hong Kong Four Seas Tours Limited HCA 9559/1999 (Unrep)  29 November 2004 at §10. 

33.  Accordingly, the damages for loss of bargain are to be assessed as the difference between the market price at the time of the Order of Registrar Lui (ie 21 May 2021, being the date of entering judgment)  and the contractual price of HK$2,450,000. 

34.  It is the Plaintiff’s submissions that the market value of the Property as of 1 March 2021 set out in the Valuation Report should be adopted as this is the closest estimate of the market value of the Property as of 21 May 2021.  I agree but I will simply adopt the rounded-off marked value of HK$5,800,000 as set out in Paragraph 43 of the Valuation Report.  As will be set out below, the monthly rental and projected monthly rental set out in Paragraphs 44 and 45 of the Valuation Report are also rounded-off. 

35.  As such, the difference between the market value of the Property as of 21 May 2021, namely HK$5,800,000 and the contractual price of HK$2,450,000 comes to HK$3,350,000. 

D2.  Loss of Mesne Profit

36.  It is also well-established that after the contractual date of completion, the purchaser becomes entitled in equity to the property and so becomes entitled to the rental income and profits less outgoings after that date: Wise Think Global Ltd v Finance Worldwide Ltd (No 2) (2014)  17 HKCFAR 190 at §14. 

37.  If rental value varies due to market fluctuation during the period of wrongful occupation, these fluctuations should be taken into account.  Where the defendant makes improvements on the land, the rental value should be assessed upon the unimproved value: McGregor on Damages (21^st ed) at §39-049. 

38.  The Plaintiff submits and I accept that as per Paragraph 6 of the Order of Registrar Lui, the Defendant is to pay the Plaintiff mesne profit from 30 March 2012 to the completion date ie 1 March 2022, to be assessed.  This part of the Order of Registrar Lui was neither varied nor discharged by HH Judge Harold Leong.  

39.  At the hearing, the Plaintiff’s counsel accepted that the Plaintiff would only be entitled to claim loss of mesne profit up to the date when the Agreement was lost ie the date of the Order of Judge Leong being 6 January 2022. 

40.  In the circumstances, the loss of mesne profit from 30 March 2012 to 6 January 2022 based on the projected rental value of the Property set out in Paragraph 25 above comes to HK$1,441,800:-

Start of Term	End of Term	Term Length (Months)	Monthly Rental (HK$)	Term Rental (HK$)
1/4/2012	28/2/2013	11	HK$10,200.00	HK$112,200.00
1/3/2013	28/2/2014	12	HK$11,500.00	HK$138,000.00
1/3/2014	28/2/2015	12	HK$11,500.00	HK$138,000.00
1/3/2015	29/2/2016	12	HK$12,500.00	HK$150,000.00
1/3/2016	28/2/2017	12	HK$12,000.00	HK$144,000.00
1/3/2017	28/2/2018	12	HK$12,800.00	HK$153,600.00
1/3/2018	28/2/2019	12	HK$13,500.00	HK$162,000.00
1/3/2019	29/2/2020	12	HK$13,700.00	HK$164,400.00
1/3/2020	28/2/2021	12	HK$12,800.00	HK$153,600.00
1/3/2021	6/1/2022	10	HK$12,600.00	HK$126,000.00
Total:				HK$1,441,800.00

D3.  Estate Agent’s Commission

41.  As per Paragraph 4 of the Order of Judge Leong, the Defendant was ordered to indemnify the Plaintiff for the Estate Agent’s Commissions liable to be paid incidental to the Agreement.  However, under Clause 10a of the Agreement, if in any case either the Vendor or the Purchaser fails to complete the sale or purchase, the defaulting party shall compensate the Estate Agent HK$49,000 as agreed damages.  

42.  At the hearing, the Plaintiff confirmed in his oral testimony that he had never paid the HK$25,000 under Clause 9 of the Agreement.  In these circumstances and given that it is the Defendant as vendor who is the defaulting party, I am not satisfied that the Plaintiff is still liable to pay the Estate Agent’s Commissions.  

43.  Accordingly, there is no basis for the Plaintiff to recover the same from the Defendant. 

D4.  Conveyancing Expenses

44.  If and insofar as it is necessary, I also accept that pursuant to Paragraph 4 of the Order of Judge Leong, the Plaintiff is entitled to recover from the Defendant the Conveyancing Expenses paid in the sum of HK$48,950.

E.   Equitable Lien

45.  Pursuant to Paragraph 7 of the Order of Judge Leong, the Plaintiff has a lien on the Property and on its original title deeds in respect of, inter alia, the deposits paid in the sum of HK$245,000, Conveyancing Expenses paid in the sum of HK$48,950 and/or other loss and/or damages to be assessed. 

46.  At the hearing, the Plaintiff’s counsel asked for the lien to extend to the damages assessed by me together with interest and the costs of the assessment hearing.  

47.  In this respect, equitable lien is an equitable remedy, the fundamental basis of which is to enable the Court to do justice between the parties as it sees necessary.  There is no reasons in principle to limit the remedy only to cover the purchaser’s deposit: Lee Fu Wing v Yau Po Ting Paul [2009] 5 HKLRD 513 at §§125, 127(b)  and 129. 

48.  Applying the aforesaid well-established principle, I agree with the submissions of the Plaintiff’s counsel that the scope of equitable lien is wide.  Further, on the basis of Paragraph 7 of the Order of Judge Leong, there is no good reason why the damages assessed by me together with interest and costs should not be so covered by the equitable lien.  I find it just to do so in the circumstances of this case. 

F.   Conclusion

49.  In the circumstances, I make an order that:-

(1)  The Defendant do pay the Plaintiff the total amount of loss and damages under Paragraph 5 of the Order of Judge Leong being HK$4,791,800 (ie HK$3,350,000 + HK$1,441,800)  together with interest on such sum at judgment rate from the date of the Order of Judge Leong (ie 6 January 2022)  until payment;  

(2)  The Plaintiff do have a lien on the Property situated at and otherwise known as G/F and Cockloft, No 22 Yeung Uk Tsuen, Tsuen Wan, New Territories, Hong Kong and on its original title deeds in respect of the total amount of loss and damages assessed in sub-paragraph (1)  above together with interest and costs of and incidental to this assessment hearing. 

50.  Insofar as costs is concerned, there is no reason why costs should not follow the event.  I make an order that costs of this assessment of damages, summarily assessed at HK$120,000, be paid by the Defendant to the Plaintiff forthwith.  For the avoidance of doubt, I also grant a certificate for counsel for the attendance of the hearing of the assessment of damages.  

51.  It remains for me to thank the Plaintiff’s counsel for their assistance.