LAU SUET LING AND ANOTHER v. NG GOON LAU JOSEPH

HCA 20587/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CIVIL ACTION NO 20587 OF 1998

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ASSESSMENT OF DAMAGES

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Introduction

1. The Plaintiffs were the vendors of the property, namely Flat R5 on 23rd floor of Block R, Sunshine City, No.8 On Shing Street, Shatin, New Territories (the Property) and the Defendant was the purchaser under an Agreement for Sale and Purchase dated 17th April 1998 (the Agreement, P.1 of bundle). The Agreement provided that completion of the sale and purchase should take place on or before 18th June 1998 by 5:00 p.m.(the date of Completion), time being the essence of the Agreement. The Defendant had failed to complete. The Plaintiffs had on 17th October 1998 sold the Property to another purchaser by signing another agreement for sale and purchase. The transaction was completed. The Plaintiffs claimed against the Defendant for breach of the Agreement. On 1st February 1999, Judgment was entered against the Defendant. The Defendant was adjudged to pay to the Plaintiff damages to be assessed with interest thereon from 2nd December 1998 to 1st February 1999 at 13% and thereafter at judgment rate until payment and costs to be taxed, if not agreed.

Damages to be Assessed

2. Under the Agreement, the Defendant agreed to purchase the Property for the price of HK$2,850,000.00. The Defendant had, pursuant to the Agreement, paid a deposit of HK$285,000.00. The Defendant had failed to pay the balance of the purchaser price for the sum of HK$2,565,000.00 on the date of completion.

3. In exercise of the right under the Agreement, the Plaintiffs had, on 17 October 1998 by an Agreement sold the Property to Lam Yi Wa and Lai Chi Chiu (the new purchasers) for the price of HK$2,150,000.00. The transaction was completed by an Assignment on 30th November 1998. The Plaintiffs now claim the deficiency in the price of the Property and the expenses incurred by them for the resale of the Property. The total amount claimed is HK$449,500.00, which is made up of the following items:

The Evidence

4. Counsel for the Plaintiffs called Madam Lau Suet Ling, the 1st Plaintiff and the surveyor Mr. Wong Chi Wai as the witnesses. The statement of the 2nd Plaintiff was admitted as evidence by consent. But this statement adds nothing to the evidence of the 1st Plaintiff.

5. Madam Lau had submitted her statement filed on 7th May 1999 pursuant to Order 38 of the Rules of the High Court. She had confirmed that the contents of her statement were true and correct. In her statement, she said Mr. Lee Chun Sing, the other Plaintiff was her husband. They had agreed to sell the Property to the Defendant for HK$2,85,000.00. A provisional agreement for sale and purchase of the Property was signed on 4th April 1998, followed by the signing of the Agreement on 17th April 1998. Pursuant to the Agreement, the Defendant had paid the deposit of HK$285,000.00, leaving a balance of HK$2,565,000.00 to be paid upon completion on 18th June 1998. Clause 8 of the Agreement provided that time was the essence of the Agreement. However, the Defendant had failed to paid the said balance of the purchase price on the date of completion. The Plaintiffs had on 18th June 1998, through their solicitors given notice to the Defendant to terminate the Agreement.

6. In order to mitigate the damage, the Plaintiffs had immediately after rescission of the Agreement, instructed several estate agents in Ma On Shan district such as Ricacorp Properties Limited, Midland Realty (Holdings) Limited, Centaline Property Agency Limited and Fortune Realty Company Limited to sell the Property. The asking price was HK$2,800,000.00. The Plaintiffs had also advertised the Property on the Oriental Daily News for sale at the price of HK$2,900,000.00 for about 10 consecutive days between late June and early July. The response to the offer was poor. The Plaintiffs were advised by the estate agents to lower the price. In about mid-July, the Plaintiffs lowered the asking price to HK$2,600,000.00. But there was no offer from any purchaser. In mid-August, the Plaintiffs again lowered the price to HK$2,400,000.00. At late September, the property agents Centaline and Ricacorp advised the Plaintiff to lowered the price to HK$2,000,00.00. The Plaintiffs did not take such advice. In early October, the Plaintiffs had lowered the asking price to HK$2,300,000.00. On 17th October 1998, Ricacorp introduced 2 purchasers to purchase the property. The purchasers offered to buy the property at HK$2,100,000.00. On the same day, there were another 2 purchasers introduced by another property agent, Fortune. The Plaintiffs would sell the Property at the higher offer. However, the purchasers of Fortune did not make an offer. Through hard bargaining between the 1st Plaintiff and the purchasers introduced by Ricacorp, the Plaintiffs agreed to sell the Property to the purchasers for the price of HK$2,150,000.00. This transaction was finally put through. The Plaintiffs had instructed the same firm of solicitors to act for them for the resale of the Property.

7. The Plaintiffs had obtained a valuation report from the surveyor Mr. Wong Chi Wai of Lawson David & Sung Surveyors Limited. Mr. Wong had given his opinions on the open market value of the Property in his report (P.50 of the bundle). In his opinion, the open market value of the Property was HK$2,18,000.00 as at 17th October 1998 (date of the resale agreement). The Plaintiffs had to pay the agency commission and the legal fees for the resale as set out in the above account.

8. Mr. Wong, the surveyor who had compiled this valuation report, was called to give evidence. He confirmed that he had compiled the valuation report by comparing the other properties on the same block of building of similar views. He confirmed that the contents of his report were true and correct. He also said that the value of property was at that period of time falling. But the property market was fluctuating very vigorously between the period of July and December 1998 as can be seen from exhibit P2, the data for analysis. Announcements from the Government and the property developers had affected the falling trend of the property market. The overall trend was falling.

Disputes raised by defence

9. Mr. Yu, counsel for the defendant had raised the following objections:

1. The Plaintiffs had failed to mitigate the loss by acting reasonably and promptly to resell the Property after 18th June 1998.

2. The Plaintiffs had sold the Property below the open market price on 17th October 1998, the date of the resale agreement.

10. Mr. Yu did not raise serious dispute to the evidence of Madam Lau, the 1st Plaintiff. Madam Lau admitted that after the Defendant had failed to complete, they put the Property onto the market for sale. At that time, she was advised by the estate agents that the property market was going down. Nevertheless, she instructed the agents to ask for the price of 2.8 million dollars. She advertised in the Oriental Daily News for 2.9 million dollars. She explained that she wanted to mitigate her loss as far as possible. In fact, if she could sell the Property at the price of 2.8 million dollars, the Plaintiffs would have gained more profit because they had forfeited HK$285,000.00 as the deposit. The Plaintiffs only agreed to lower the price after they had discovered that their asking prices received no offer from any purchaser. As from 18th June 1998, the date of Completion to 17th October 1998, the date the Property was sold under another agreement, there was a period of 4 months. Mr. Yu submitted that it was due to the Plaintiffs' failure to take prompt action and to have set the price too high that caused a delay in the resale of the Property. However, after the Property had been sold on 17th October 1998, the property market had shot up a bit in November, the following month.

11. Miss Sandra Lau Si Ling, the surveyor of Messrs. Francis Lau & Company (Surveyors) Ltd. was called by the defence. In her report she was of the view that the open market price of the Property as at 2nd November 1998 was HK$2,560,000.00. She had made adjustment at the hearing that the open market price of the Property as at 17th October 1998 should be HK$2,459776.00. This shows that the property market in November 1998 was higher than that in October. This also reflects the fluctuation of the property market at that time.

Reasons for Decisions

12. Having considered the evidence of the matter, I accepted the evidence of Madam Lau. The question is then whether what the Plaintiffs had done between 18th June 1998 and 17th October 1998 was reasonable for the mitigation of the damage.

Clause 24 of the Agreement provides as follows:

"If the Purchaser shall for any cause (other than the default of the Vendor) fail to complete the purchase of the Property in accordance with the terms and conditions of this Agreement the Vendor may ... rescind this Agreement and either retain the Property ... or resell the same, either as a whole or in lots, and either by public auction or by private contract, ... as the Vendor may think fit. Any deficiency arising from such resale and all reasonable expenses attending the same or any attempted resale shall be made good and paid by the Purchaser as and for such liquidated damages, and any increase in price realized by any resale shall belong to the Vendor..... This clause shall not prevent the Vendor from recovering damages including and not limited to interest paid or lost by him by reason of the Purchaser's failure."

13. It is on the above basis that the Plaintiffs claim damages for the loss and expenses as a result of the breach of the Agreement by the Defendant.

14. It is not provided in the above clause within what period the Plaintiffs should resell the Property after the breach. There is an implied term that the Plaintiffs have to act in good faith in effecting the resale. They cannot sit on the matter and wait for the convenience. Immediate resale of the Property is not required and one must have regard to the reality of the situation.: see Alucase Company Limited & Credit Champion Development Limited v. Keen Lloyd (Holdings) Limited HCMP 3577 of 1998, per Mr. Justice Cheung.

15. Mr. Yu complained that the Plaintiffs had failed to act promptly and reasonably by setting the appropriate price to resell the property as soon as possible after the breach. The Plaintiffs chose to set the price too high, therefore the Property could not be resold quickly.

16. It is true that the Plaintiffs had set the price at 2.9 million on the newspaper and 2.8 million to the estate agents to sell for them after the breach. But I do not think that setting the price of 2.8 million was unreasonable, bearing in mind that the contracted price to the Defendant was 2.85 million. The Plaintiffs lowered the price to 2.6 million in mid-July and further down to 2.4 million in mid-August. Centaline had advised them to lower the price to 2 million, which they did not accept in September. This had proved that the Plaintiffs were right because they could resell the property at 2.15 million on 17th October. This price was reached against their original asking price of 2.3 million and the counter-offer of 2.1 million from the purchasers. One has to bear in mind that the property market situation was very fluctuating at that period of time. The Plaintiffs could not possibly know the trough of the market at a given time. If the Plaintiffs had lowered the price too much, they failed to mitigate their loss. This will also be contrary to their own benefit because there is no guarantee that they can recover damages from the Defendant at the end of the day. That they could not resell the Property within a short time could be explained by the fact that the market for the property of the size of the Plaintiffs' Property was particularly poor at that time. This is born out by the reports of the surveyors of both parties. Both surveyors said in evidence that during the period of June to 10th November, only 3 properties of the same size were sold. This includes the Property in question. Other properties of small sizes in the same building had a better market. Having considered all those factors, I come to conclude that the Plaintiffs had acted reasonably to resell the Property after the breach.

17. As I hold that the Plaintiffs are entitled to rely on Clause 24 of the Agreement, the measure of damages is to be considered at the time of the actual resale of the Property. I therefore do not have to deal with the expert evidence on the value of the property on 17th October 1998: See Alucase Company Limited & Credit Champion Development Limited v. Keen Lloyd (Holdings) Limited HCMP 3577 of 1998, per Mr. Justice Cheung at page 7.

18. Even if I were to consider the experts' evidence, I am of the opinion that the assessed open market value of the Property can only serve as an indication. They are not reliable because there are only 2 samples of similar size for comparison. The surveyor of the defence even ignored the sample of 2 million dollars on the 6th floor. She thought that the price was too low. So she had only one sample of the similar type for comparison. In Keck v. Faber [1915] 60 S.J. 36, C.A. the court held that the price to be taken was the selling price realized within a reasonable time of the breach. In the absence of any evidence that it was a sham resale, the actual sale price should be the best evidence of the market price: see Central Gem Limited v. Harvest Fair Investment Limited HCA 10222 of 1998 as per J. Yuen at page 7.

19. In conclusion, I decide to adopt the resale price for the assessment of the damages.

20. As to the Plaintiffs' claim for the expenses for the resale, the Plaintiffs claim for the legal costs. However, there is no evidence of any receipt from the firm of solicitors. I note that the same firm of solicitors is retained for the original sale and the resale. It could be the case that the solicitors did not charge the Plaintiffs for the aborted sale. In the absence of evidence from the Plaintiffs, I disallow the Plaintiffs' claim for the legal expense of HK$6,000.00.

21. As to the estate agent's commission for HK$28,500.00. This is for the original abortive sale to the Defendant. Again, there is no receipt from the Plaintiffs. I hold that the Plaintiffs are not entitled to claim this amount. If the defendant had not been in breach of the Agreement, the Plaintiffs had to pay HK$28,500.00 as commission for their own agent. The Plaintiffs can only claim commission for the resale. The Property was resold at 2.15 million dollars. There is no reason why the Plaintiffs had to pay HK$28,500.00 to the agent. There could be the occasion that the estate agent did not charge the vendor for commission. It only charged the Purchaser for the commission. Since the Plaintiffs have no receipt for the commission for the resale, I have no evidence that such commission had been paid for the resale. I do not award damages for the Plaintiffs for the commission too.

Decision and Orders

22. I now make an award to the Plaintiffs for the sum of HK$415,000.00 for the damages with interest at 13% per annum from 2nd December 1998 to 1st February 1999 and thereafter at judgment rate until payment.

23. I also make an order nisi that the Defendant pays the costs of this assessment to the Plaintiffs; such costs shall be taxed if not agreed. The order nisi is to be made absolute after the expiration of 14 days from the date of the handing down of the assessment.