WONG MEI LAN AND YUEN CHI FUNG v. TAM KAM POR AND KOT KWAN CHUN

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CIVIL ACTION NO. HCA12471 OF 1998

_______________________

__________________

J U D G M E N T

__________________

This is an assessment of damages following an aborted sale of property.

The Facts

1. I find the following matters proved, there being no evidence from the defence to contradict the case mounted by the plaintiffs who were, at all material times, the registered owners of a property known as Flat B, 1/F, Block 9 and car park space No. 420 on Level 1, Car Park (South Wing), Woodland Crest, 33 Tin Ping Road, Sheung Shui, New Territories ("the property").

2. By a provisional agreement for sale and purchase, Exhibit P1, dated 27 October 1997, the plaintiffs contracted with the defendants to sell the property to the defendants at the price of $6,700,000. The formal agreement for sale and purchase dated 12 November of the same year followed. Under the agreement for sale and purchase, deposits representing 10 per cent of the total purchase price, that is to say, $670,000, were paid by the defendants.

3. The defendants' breach was accepted by the plaintiffs as can be seen by the letter Exhibit P3. As a result of that repudiation, the plaintiffs forfeited the deposits, credit for which would be given in this assessment.

4. Interlocutory judgment with damages to be assessed before a master was entered. The plaintiffs were also given the costs of the action.

The plaintiffs' various heads of claim

5. The principal claim is for loss of bargain. The evidence revealed that following the breach of the contract for sale and purchase, the plaintiffs had instructed, over a very short period of time, four real estate agencies in order to mitigate their loss to find another purchaser. That exercise proved ultimately to be successful and the property was subsequently sold to a second purchaser for $3,600,000.

6. The provisional sale and purchase agreement as well as the formal agreement for sale and purchase relating to that subsequent sale are exhibited respectively as P5 and P6. It can be seen that the plaintiffs were very quick off their mark in seeking an alternative purchaser against a generally falling market, a fact demonstrated most vividly by the two valuation reports submitted.

7. Loss of bargain has been put at $3,100,000 being the difference between the original contract price and the subsequent sale price. This amount is claimed.

8. I am satisfied on the evidence, which is completely uncontroverted, that the plaintiffs have acted expeditiously and reasonably by instructing real estate agents to look for a subsequent purchaser in order to mitigate their losses. I am also satisfied that the subsequent sale at $3.6 million represented the best price and the open market price that could reasonably be obtained, given the market conditions prevailing at the time. That amount is clearly competent and I shall award that as damages. The basis for such an award is clearly maintainable on the authorities.

9. The second item formally pursued was for commission payable to Midland, but that has been abandoned as the amount has indeed not been paid.

10. The next item or head of claim concerns the interests paid to the Bank of East Asia Limited. The basis of the claim is that the plaintiffs have had to continue to pay interest to the bank in question from 30 June 1998 to the date of redemption, which was 25 November 1998, in the amount of $85,658.74. That claim is patently sustainable, and I will also allow for that amount in the final award in this case.

11. Moving on to the next item, that is to say, management fees claimed in the sum of $10,790, this sum covered the period from 1 July 1998 through to and including 30 November 1998. This represented an obligation which the plaintiffs have had to discharge following the breach of the agreement for sale by the defendants. This head of damage, like the previous ones which have been allowed, is clearly recoverable loss and damage coming within the contemplation of the parties as a result of the repudiation by the defendants.

12. The same also applies to the next head of damage, namely rates and government rent, which the plaintiffs have had to pay for the same period, that is to say from 1 July 1998 to 30 November 1998. But for the breach, this loss would not have been occasioned. This head of damage also arises fairly and naturally from the breach of contract by the defendants within the meaning of that phrase as used in the well-known case of Hedley v Baxendale [1854] 9 Exch 341.

13. Because of the defendants' repudiation of the contract, the plaintiffs have had to incur additional liability in the form of extra insurance payments in respect of the property. The amount claimed under this head is $1,862.30. That amount should be included in the award to be made today as it is plainly recoverable. So, too, are the following two heads. These relate to the commission paid to Centaline Property Agency Limited in the amount of $26,000 and the legal costs paid to the firm of solicitors, Messrs Wong & Poon, $6,500. These two sums were incurred by the plaintiffs in respect of the subsequent resale of the property.

14. Somewhat unusually, the plaintiffs have also presented and pursued a claim for loss of use of the balance of the purchase price. In my view, there is sufficient authority to support such a claim.

15. Miss Ho, acting for the plaintiffs, has provided me with a breakdown for this claim. It can be seen from the documents supplied, which I shall adopt and annex to this judgment, that interests are claimed on the difference between the balance of the purchase price standing at $6.03 million and the redemption amount paid on 25 November 1998 of $2,415,085.17. In support of her claim for the plaintiffs, Miss Ho has put in a schedule of judgment rate interest from 1 May 1998. That will also be annexed to this judgment.

16. I have perused the calculations in respect of the interest loss, that is to say, the amount representing the loss of use of funds, and I am satisfied that the amount she calculated does come to $174,313.62. Interest in respect of this particular exercise is calculated up to and including today and commencing from 1 July 1998, the date of the breach.

17. In summary, I will award damages to the plaintiffs as follows:

(1) Deficiency in the purchase price, $3,100,000;

(2) interests paid to the Bank of East Asia Limited, $85,658.74;

(3) management fees paid, $10,790;

(4) rates and government rent paid, $4,216.33;

(5) additional insurance premium paid, $1,862.30;

(6) commission paid to Centaline Property Agency Limited, $26,000;

(7) legal costs of the resale paid to Messrs Wong & Poon, $6,500.

(8) loss of use of funds, $174,313.62.

18. So the sub-total amounts to $3,409,340.99. To that must be deducted the deposits of $670,000 forfeited by the plaintiffs following the repudiation of the defendants. That produces a final figure of $2,739,340.99.

19. There shall be judgment for this amount for the plaintiffs against the defendants. Additionally, there will be interest at judgment rate from the date of the writ on all the above heads that I have set out, save and except item (8), namely, loss of use of the funds, at judgment rate from the date of the writ until today. Thereafter, there shall be interest on all the above items at judgment rate until full payment.

20. The plaintiffs will also have their costs of this assessment hearing, taxed if not agreed.