Chan Chan Cheung and Another v. Cheerrich Ltd.

HCA No. 18579/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 18579 OF 1999

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JUDGMENT

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1. This is an assessment of damages by Plaintiffs who, as Vendors, had entered into an Sale and Purchase Agreement (hereinafter referred to as "the Agreement") of the property known as House No. 83, Lychee Road North, Fairview Park, Section Q, Fairview Park, Yuen Long, New Territories (hereinafter referred to as "the Property") dated 21st October 1997 with the Defendant who were the purchaser. The Defendant had failed to complete the purchase of the property in accordance with the terms of the Agreement. The Plaintiffs issued the Writ in this action on the 2nd December 1999 claiming the sum of HK$2,949,300.00, together with interest on this sum and costs. The Vendors obtained Interlocutory Judgment for damages to be assessed and costs to be taxed.

2. The Defendant was absent at the hearing for assessment of damages despite due service of a notice of the hearing having been effected on them.

The Facts

3. The Facts are clearly set out in the statement headed "Damages to be Claimed" attached to the application dated 5 September 2000 issued by the Plaintiffs for assessment of damages. The 1st named Plaintiff gave evidence of the facts stated in this statement and verifying the truth of it.

4. The facts are that the Plaintiffs through their estate agents Centaline Property Agency Limited sold the property to the Defendant for the sum of $7,520,000.00. The parties signed a Provisional Sale & Purchase Agreement on the 4th October 1997. Payment terms stipulated therein, which is also evidenced in the 3rd Schedule of the Agreement dated 21st October 1998, provided as follows:-

(a) The Defendant should pay the sum of $500,000.00 as preliminary deposit and part payment of the purchase price. Payment of this sum was effected on 4th October 1998.

(b) A further deposit and part payment of the purchase price in the sum of $500,000.00 to be paid after the signing of the Formal Sale & Purchase Agreement on 21st October 1997.

(c) The remaining balance being $6,520,000.00 should be paid by the Defendant to the Plaintiff on completion of the purchase of the property scheduled to take place on or before the 7th April 1998.

5. Receipts for the first 2 deposits are endorsed on page 19 of the Agreement. The Plaintiffs paid estate agent's commission in the sum of HK$47,600 as evidenced by photocopy documents at items 8 and 9 attached to the Hearsay Notice.

6. In order to secure another place for residence, the Plaintiff through an estate agent entered into the purchase of two flats of a village house at DD28 Lot 904 in Lung Mei Village in Tai Mei Tuk from a Developer on 8th October 1997 at the price of $5,350,000.00. The Plaintiff paid a total of $535,000.00 as deposit which comprised $200,000.00 as initial deposit on 8th October 1997 and $335,000.00 as part payment of the purchase price on 8th November 1997. The Plaintiff was required to pay a further deposit of $535,000.00 on or before 30th April 1998 and further payments according to the schedule of payment in the agreement. A photocopy of this agreement is at item 15 of the bundle of documents attached to the Hearsay Notice in the file.

7. Property prices in the market indicated a downward trend in October 1997. The Defendant requested through the estate agent on the 21st October 1997, to defer completion date of the property to a further period of 3 months beyond the original scheduled completion date and offered to pay the sum of $1,000,000.00 as consideration for this. The 1st named Plaintiff explained that he had bought two flats at the cost of $5,350,000.00 at Lung Mei Village and he needed to use the proceeds of sale of the Property to pay for the purchase of this property. Therefore the Plaintiffs declined the proposal made by the Defendant.

8. The market price of properties continued to go down in January 1998. The Plaintiff felt the Defendant might not be able to complete the purchase on the 7th April 1998 as agreed. If that were to happen, the Plaintiff would be unable to pay the further deposit of $535,000,00 required to be paid by him to secure the purchase of the property at Lung Mei Village and he would stand to lose the deposits already paid, as they could be forfeited by the Developer. In order to minimize the loss, the 1st named Plaintiff requested the Developer through the agent to cancel the agreement and to refund the deposit of $535,000.00 to him. The Developer agreed on 13th January 1998 to cancel the agreement made between the Plaintiff and the Developer and refund the deposit paid in the sum of $535,000.00 to the Plaintiffs. However, the Plaintiffs had to compensate to the Developer the commission of the estate agents which was $53,500.00 which had been paid by the Developer. The photocopy of the Cancellation of Contract Agreement is at item 20 attached to the Hearsay Notice. It is stated therein that damages of 10% of the deposit, namely $53,500 had to be paid by the Plaintiff. This was apparently to compensate the Developer for the estate agents commission paid by them. The Plaintiff themselves had paid the agent the purchaser's commission in the sum of $53,500.00. This is evidenced by items 18 and 19 of the photocopy documents attached to the Hearsay Notice.

9. The market price of the Property continued to go down in April 1998. The Defendant failed to complete the purchase of the Property on the scheduled completion date being on or before 7th April 1998. Even though the Plaintiff through their solicitors offered to extend the completion date to the 15th April 1998, the Defendant still failed to pay the balance of the purchase price in the sum of $6,520,000.00. They therefore breached the Agreement dated 21st October 1997. Messrs Yeung Law & Co., the Plaintiffs, then solicitors by their letter dated 15.4.98 to the Defendant's solicitors Messrs Chow & Ho, gave Notice of Termination of the Agreement pursuant to Clause 22 of the Agreement and thereby forfeited all deposits and other moneys paid under the Agreement, further informing the Defendants that the Plaintiffs would "exercise all their rights conferred upon them by the Agreement including but not limited to the said Clause 22 thereof". A copy of this letter is at item 5 attached to the Hearsay Notice.

10. The Plaintiffs immediately put the property on the market for sale. Through Centaline Property Agency the Plaintiff entered into an agreement for the sale of the Property to a Mr. Luk Ching-ho at a price of $4,680,000 on the 25th October 1998. This sale was completed on the 5th December 1998. By this agreement the Plaintiff was obliged to pay estate agent's commission in the sum of $46,800.00. A photocopy of this agreement is at item 10 of the documents attached to the Hearsay Notice.

11. The Plaintiffs incurred solicitors fees on the aborted sale to the Defendant in the sum of $10,000. The bill of Messrs Yeung Law & Co. Solicitors is at item 12 attached to the Hearsay Notice. They also incurred solicitors fees in the sum of $5,500 in respect of the sale to the subsequent purchaser of the Property Mr. Luk Ching-ho. The receipt of the Solicitors Messrs. Raymond Hung & Co. is at item 13 attached to the Hearsay Notice.

Damages

12. The normal measure of damages is the market value of the property at the contractual time for completion less the contract price. This measure of damages is referred to in McGregor on Damages 16th Edition at paragraph 964. However, Clause 22 of the Sale & Purchase Agreement entered into between the parties dated 21st October 1997 provided that should the Purchaser fail to complete the purchase of the Property in accordance with the terms and conditions of the said Agreement, the Vendor, upon notice of termination in writing to the Purchaser "shall be entitled to forfeit all the said deposit or further deposit paid to the Vendor absolutely. Upon determination of this Agreement the Vendor may resell the Property either by public auction or by private contract . . .and any increase in price on resale shall belong to the Vendor. Without prejudice to the Vendor's right to recover the actual loss which may flow from the Purchaser's breach of this Agreement, on such resale any deficiency in price shall be made good and all reasonable expenses attending such resale or any attempted resale within 6 months shall be borne by the Purchaser and such deficiency and expenses shall be recoverable by the Vendor." The Plaintiffs submitted that apart from forfeiture of the deposit which they have done, upon termination of the Agreement, they are also entitled by virtue of Clause 22 aforesaid to claim the deficiency in price upon resale. Clause 22 states that "on such resale any deficiency in price shall be made good". On a reading of that Clause, it seems that there is no time restriction related to the resale whereupon the deficiency in price should be made good. However there is a stipulation as to time when the attending expenses of such resale should be made good and the time limit is within 6 months. I therefore am of the view that the Plaintiffs are entitled to the deficiency in price upon resale of the property apart from forfeiture of the deposit. It would seem that the expenses of such resale are not recoverable by virtue of the resale having been completed outside of the 6 months period. I have to decide whether the compensation paid by the Plaintiffs to the Developer of the property at Lung Mei Village could be recoverable by them from the Defendant or whether such would be too remote. I have to find whether such damage is foreseeable by the Defendant and not too remote according to the rule in Hadley v. Baxendale. It seems to me that apart from having informed the Defendant that he had contracted to purchase another property, and he needed to complete the sale of the property on the contracted completion date in order to enable the Plaintiffs to complete their purchase of this property, the Defendant did not know any details of the Plaintiff's contract to purchase the property at Lung Mei Village. I am of the view that he would have had no comprehension of the compensation that the Plaintiff would have had to pay to the Developer upon the Defendant's failure to complete the purchase of the property. He would not have known of the fact that the Plaintiff had to pay estate agent's commission on his purchase of the property at Lung Mei Village. Therefore, I am of the view that the Plaintiff's claim for such compensation and the estate agent's commission on the Plaintiff's purchase of the Lung Mei Village property is too remote and the Plaintiff is not entitled to claim these from the Defendant. Further these items are beyond the "normal measure of damages" referred to. Damages the Plaintiff is entitled to claim apart from the deficiency of the price on resale would be the expenses of the aborted sale and I list out the items of loss as follows:-

13. I therefore assess damages at $2,840,000 + $47,600 + $10,000 totaling $2,897,600.00. I give final judgment for the Plaintiff in the sum of $2,897,600.00 together with interest from date of Writ to date of handing down of Assessment of Damages, at judgment rate and thereafter at judgment rate until payment. Costs of the action having been awarded by the Interlocutory Judgment, I order that the Defendant do pay the costs of the assessment to be taxed if not agreed.