WONG MAN KIT RAYMOND v. CHAN NAM FAN

HCMP4391/97

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO.4391 OF 1997

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J U D G M E N T

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1. On 18th May 1998, this Court was seized with a Vendor and Purchaser Summons, issued by the Plaintiff in originating form on 16th December 1997, wherein the Plaintiff had requested declarations, an order for the refund of a deposit, and an order that the Defendant do pay to the Plaintiff certain consequential sums of money. In addition to opposing the Plaintiff's application, the Defendant had a counterclaim for damages which, by interlocutory Order of Madam Justice Yuen of 5th March 1998, was ordered to stand on the terms outlined in specific paragraphs within two affirmations which had been filed on the Defendant's behalf.

2. In its Judgment of 18th May 1998, which decided what was a vigorously contested argument between the Plaintiff and Defendant, the Court held (at page 17 thereof) that the Plaintiff was not entitled to the relief sought by its Originating Summons, which was ordered do stand dismissed. An order nisi was further made that the costs of and occasioned by the Plaintiff's application be to the Defendant, to be taxed if not agreed.

3. As this earlier judgment makes clear, this left outstanding the Defendant's counterclaim for damages. The way the matter was left in May was that the Court would hear the parties further on this particular issue at a time and date to be fixed. That date has now arrived, after one false start when the matter was fixed in September for a short 9:30 appointment, and it has been adjourned to today for the hearing of the quantification of damages. One of the difficulties, however, which regrettably has arisen, is that I am told by Counsel for the Defendant, Mr Earnest Cheung, that the Plaintiff appears to have abandoned this action and that although notice of this hearing has been duly served on the Plaintiff, no-one has appeared today on his behalf; indeed a Notice of Appeal, issued by the Plaintiff, against the original judgment of 18th May 1998, has, I understand, now been struck out for failure to set down. So the situation is that for today's application the Court has had the advantage of hearing one side of the argument only.

4. The application involves a consideration of what is the proper measure of damage in a case such as the present. The relevant facts can be shortly stated. The purchase price of this flat in Mei Foo Sun Chuen, which was originally the subject of a Sale and Purchase Agreement with the Plaintiff dated 24th June 1997, was HK$5.388 million. The completion date scheduled under that Sale and Purchase Agreement was 3rd November 1997. The actual resale of the flat took place pursuant to a Provisional Sale and Purchase Agreement dated 26th March 1998, and the flat was resold for the sum of HK$3.728 million.

5. The evidence of the Defendant appears in an affidavit dated 5th September 1998 wherein, at paragraph 3, the Defendant informs the Court that after the Plaintiff failed to complete the purchase of the property on 20th November 1997, the Defendant put the property on the market for resale through almost all of the estate agents in Mei Foo Sun Chuen. However, difficulties were encountered because the Plaintiff had caused to be registered against the property the Originating Summons herein in which he claimed against the property a lien representing the deposit he had paid, and legal costs. The Court is further told (at paragraph 4) that since the property was put on the market at the end of November 1997, no offer was received until on or about 26th March 1998 when an estate agent approached the Defendant and offered on behalf of the Purchaser the purchase of the property at the price which was subsequently achieved, that is HK$3.728 million. The Defendant goes on to say that he had checked with other agents and believed that the price offered was the then market price of the property.

6. I understand that the sale of the property now has been completed at this price, and that, as Mr Cheung comments, it is clear on the evidence that the Defendant, his client, took the first available offer.

7. The only other piece of information relevant to the present application is that there is evidence that as at the date of breach, namely the failure of the Plaintiff to complete the sale of the property on 3rd November 1997, the market price of the property was HK$4.8 million.

8. The question therefore bluntly arises : should the measure of damage in this case be the difference between the original sale price and the market price as at the date of breach, or should it be between the original sale price and the actual sale price obtained after giving credit for the deposit which has been forfeited? That is the question for this Court today.

9. Mr Cheung, in the course of his address this afternoon, has drawn my attention to two cases, the first being Johnson v. Agnew [1980] AC 367 at pages 400-401, where in his speech in that case, Lord Wilberforce opines that :-

"The general principle for the assessment of damages is compensatory, i.e., that the innocent party is to be placed, so far as money can do so, in the same position as if the contract had been performed."

Accordingly, continued Lord Wilberforce :-

"Where the contract is one of sale, this principle normally leads to assessment of damages as at the date of the breach - a principle recognised and embodied in section 51 of the Sale of Goods Act 1893."

But, as Lord Wilberforce further recognised,

"... this is not an absolute rule : if to follow it would give rise to injustice, the court has power to fix such other date as may be appropriate in the circumstances."

10. In this case, Mr Cheung does not ask me to fix such other date as a mere arbitrary matter. He says, and this is the main thrust of his submission, that the normal rule that damages be assessed as at the date of breach is, in this case, modified by a specific contractual term, namely Clause 16 of the Original Sale and Purchase Agreement entered into between the Plaintiff and the Defendant. Clause 16 provided as follows :-

"If the Purchaser shall fail to comply with any of the terms and conditions of the agreement the deposit money shall be absolutely forfeited to the vendor and may (without being obliged to tender an assignment to the Purchaser) rescind the agreement and either retain the Property the subject of the agreement or any part or parts thereof or resell the same, either as a whole or in lots, and either by public auction or by private contract, or partly by the one and partly by the other, and subject to such conditions and stipulations as to title or otherwise as the Vendor may think fit. Any deficiency arising from such resale and all expenses attending the same or any attempted resale shall, if the same cannot be covered by the deposit money hereby forfeited, be made good and paid by the Purchaser and any increase in price realised by any such resale shall belong to the Vendor. This clause shall not preclude or be deemed to preclude the Vendor from taking other steps or remedies to enforce the Vendor's rights under the agreement or otherwise. On the exercise of the Vendor's right of rescission under the agreement the Vendor shall have the right, if the agreement shall have been registered in the Land Registry, to register at the Land Registry an instrument to rescind the sale of the Property. This clause shall not prevent the Vendor recovering further damages representing interest paid or lost by him by reason of the Purchaser's failure if the same cannot be covered by the deposit money hereby forfeited." (Emphasis added)

11. Mr Cheung says it is clear that by the parties' agreement the Plaintiff purchaser will make good the actual damages caused to the Defendant vendor by the Plaintiff's breach of contract. In connection with this Clause, he also drew to my attention to the Court of Appeal case of Yau Fook Hong Co. Ltd. & Ors. v. Pang Cheung So [1986] HKC 313, which involved a sale and purchase agreement which contained a clause, clause 8 in that case, in virtually identical terms to the present Clause 16. However, I am bound to say I have been able to glean little from this case, which was a consideration by the Court of Appeal of whether the particular claim in that case could be brought within the various provisions of Order 86 rule 1(1), and whether there are any impediments in Order 86 to the Court granting any appropriate relief which flowed from, and was not alternative to, the relief of rescission. The highest Mr Cheung can put it, I think, is that that case involved a like clause and that no comment was made either by the learned Master, or by the learned Deputy Judge, or indeed by the Court of Appeal, which in any way impugned the validity of the relevant clause; indeed, in that case, the terms of that clause had been pleaded and specifically relied upon.

12. So, says Mr Cheung, although the normal rule is as per Lord Wilberforce's speech in Johnson v. Agnew, Clause 16 makes the contractual situation quite clear between these particular parties.

13. I am bound to say that in a situation where only one side of the argument has been presented, I am not particularly happy about having to decide the case in the absence of contrary submission. However, if the Plaintiff has chosen not to come, or to be represented in argument before me, that is a matter for him. Despite certain reservations about departing from the normal rule as to damages in these circumstances, and although I should have thought that there would have been ample authority on the point albeit Mr Cheung says that he has been unable to discover any such authority, I can see no reason this afternoon, in light of the existence of Clause 16 in the contract between these parties, not to grant the Order that is now sought. I do so with some reservations but, as I have said, those reservations are merely the product of a residual unease about not having heard both sides of what might have been an interesting debate.

14. Mr Cheung says that the order as to damages he seeks from the Court is the difference in price between the original price and the actual resale price, after giving credit for the deposit which has already been forfeited, the recovery of which deposit having been the subject of the Plaintiff's application to the Court, an application which was, as I have said, dismissed in May.

15. In all the circumstances, therefore, I am minded to grant an Order in the terms of the draft which has been placed before me. I believe the mathematics is correct, and I hence will order that there be judgment upon the Plaintiff's counterclaim for damages in the sum of HK$1,121,200.00, and that the Plaintiff do pay to the Defendant the costs of his counterclaim, to be taxed if not agreed. I therefore formally make an Order in terms of the draft Order, as amended.