WING WONG CO LTD v. MINGSON INDUSTRIES LTD AND OTHERS

1984 No.2541

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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ASSESSMENT OF DAMAGES

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1. This action arose out of a Sale and Purchase Agreement dated 18th February 1981 under which the Plaintiff agreed to sell and the Defendants agreed to purchase the property known as Flat A, 6th floor, Beverley Heights (Block B), Belair Garden, Shatin, New Territories ("the flat") at the price of $1,106,000.00. The Defendants failed to accept a conveyance of the flat and the Plaintiff took out the present proceedings on 14th April 1984 against them for, inter alia, a declaration that the said sale has been lawfully rescinded by the Plaintiff, for the forfeiture of the deposit and other monies paid by the Defendant, damages to be assessed and interest. Summary judgment, under Order 86 Rule 1 and Order 27 Rule 3, was entered against the Defendants on 27th February 1987 for (a) a declaration that the Plaintiff has lawfully rescinded the sale and is entitled to resell the flat, (b) forfeiture of $221,200.00 being the deposit and money paid by the Defendant, (c) damages and interest to be assessed and (d) costs.

2. An affidavit of one Godfrey Siu Kwok Fai, the Assistant Manager of the Plaintiff, exhibiting a valuation report by Messrs. Jones Lang Wootton and the assignment in the resale of the flat was filed in May 1987 on behalf of the Plaintiff prior to the hearing of the assessment.

3. Hearsay Notice under Order 38 was served by the Plaintiff relating to the said Sale and Purchase Agreement, the assignment in the resale of the flat and a value report dated 6th August 1982. The Plaintiff called a total of 2 witnesses, one Peter Siu Yat Man (P.W. 1), the Manager of the Plaintiff, and one Lawrence Pang Ho Chuen (P.W.2), the Associated Director of Dominion (Surveyors) Ltd. The 1st Defendant called only 1 witness, one Wong Sin Yee (D.W.1) an associate of Messrs. A.G. Wilkinson & Associates.

4. It is common ground that a total sum of $221,200.00 was paid by the Defendants as deposit and part payment of the said purchase price of $1,106,000.00, leaving an outstanding balance of $884,800.00 at the time of the Defendants' breach. The completion date for the sale of the flat should be 22nd February 1982 (i.e. within 14 days upon being notified by the Plaintiff of the issuance of the Temporary Occupation Permit of Stage I) pursuant to Clause 6(a) of the Agreement. On 29th March 1982 further notice was given by the Plaintiff's former solicitors requiring the Defendants to complete on or before 5th April 1982. By a letter dated 15th November 1982 the Plaintiff gave notice of the "rescission" of the sale. The flat was subsequently sold for $663,228.00 under an assignment dated 15th July 1985, after the commencement of these proceedings.

5. The Plaintiff claims that it is entitled to the following damages and interest:-

6. The Plaintiff is the developer of Belair Gardens, a complex consisting of a total of 14 blocks of residential buildings with various recreational amenities to be completed in 4 stages. The flat is in Phase I of the project and was completed in 1982. Messrs. Jones Lang Wootton, the valuer of the Plaintiff, put the market value of the flat as at 6th August 1982 at $763,000.00 in their report addressed to Chinachem Group dated the same date. The said report was prepared for the purpose of a block finance valuation by the Chinachem Group (parent company of the Plaintiff). P.W.2 assessed the value of, the flat at $715,000.00 as at 3rd May 1985 (the date of the "Instruction Form" in the resale since the relevant Sale and Purchase Agreement was undated). It was submitted on behalf of the Plaintiff that the market value of the flat in 1982 should not be taken as the basis of assessing damages. It was urged upon me that I should take the actual resale price of $663,228.00 in 1985 as the basis. The Defendants valuer, Messrs. A.G. Wilkinson placed market values at $786,000.00 and $805,000.00 on the flat as at 6th August 1982 and 23rd August 1985 respectively. D.W.1said the market value of the flat in May 1985 should be $770,000.00. The 1st Defendant said the relevant date for assessment ought to be the day of the breach i.e. 5th April 1982. The not insignificant difference in the values of the flat in 1982 and 1985 was brought about by the sharp drop in property value since November 1982 after the British Prime Minister visited China and discussed the future of the territory.

    "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. 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 1983. But 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. In cases where a breach of a contract for sale has occurred, and the innocent party reasonably continues to try to have the contract completed, it would appear to me more logical and just rather than tie him to the date of the original breach to assess damages as at the date when (otherwise than by his default) the contract is lost." per Lord Wilberforce in Johnson v. Agnew 1979 2W.L. R. 487 at 499. In that case the vendor elected for specific performance of a contract for sale of the land when the purchaser refused to complete. Before the order for specific performance could be carried out the mortgagees enforced their securities and sold the land. The vendor then claimed against the purchaser for the difference between the contract price and the selling price In overruling a host of Court, of Appeal decisions. The House of Lords held that subsequent to an order for specific performance which was not complied with, the vendor is not barred from claiming damages after applying, to Court to put an end to the contract. In the course of his judgment Lord Wilberforce clearly held that the rule for assessing damages as at the date of the breach is not an absolute rule and is not to be applied if to do so would bring injustice.

7. In the present case, P.W.1 testified that subsequent to the Defendants' breach the Plaintiff was unable to sell the flat until 1985. He said the Plaintiff put the flat up for sale together with all the other flats remaining unsold in the Plaintiff's hand. He conceded that the Plaintiff would, in offering the flat for sale, have insisted upon a price which would be at the same rate as the other unsold flats in the Plaintiff's hand so as not to affect the market value of those other flats. The Plaintiff generally would not entertain any attempt to negotiate the asking price of the flats. There is no evidence to suggest the asking price of the flat was at the fair market value at the material time. The Plaintiff was in fact manipulating the market price of the flats which would likely than not have rendered the asking price of the flat not to be at a fair market value. P.W.1 was not the actual officer in charge of the day to day sale of flats and he admitted he did not know what was the actual price of the flat offered at any particular point of time, though he had knowledge that the price of the flat had been adjusted a few times. The evidence of D.W.1, the 1st Defendant's valuer, was that the comparables used by their firm for 1982 were mostly "first hand transactions" i.e. sales from the Plaintiff and not "secondary transaction" i.e. resale by the first purchaser. P.W.2 agreed that there were only 1 or 2 transactions in the secondary market in 1982. The real market value usually is the "secondary market" as the "first hand price" is a price artificially fixed by the developer and not one determined by natural forces of the market. The report of Messrs. Jones Lang Wootton did not quote any comparables. It is not clear from the evidence as to which of the comparables quoted by the 1st Defendant's valuers were secondary sales. According to Messrs. A.G. Wilkinson's report, Flat A, 7th floor of Carmel Height (similar to the flat in size, direction and other features) was sold at $786,600.00 in June 1982. Messrs. Jones Lang Wootton assessed the value of that same flat to be in the sum of $768,000.00 in August 1982 (2.3% less than actual selling price). Messrs. Jones Lang Wootton assessed the flats in Block C (Carmel Heights) to have the same value as the corresponding flats in Block B (Beverley Heights). The evidence of all valuers supported this approach.

8. Whilst accepting that taking the date for completion to be the date for assessment of damages is not an absolute rule, I am not satisfied at all that the actual selling price in 1985 should be taken as the basis for assessing damages in the present case. I am not satisfied upon the evidence before me that the Plaintiff was unable to sell the flat earlier due to no fault of it's own. I am not satisfied that the Plaintiff had acted reasonably in its attempt to offer the flat for sale. I do not find any sufficient justification exists not to apply the general rule that damages ought to be assessed at the date of the breach i.e. the date for completion on 5th April 1982. The "rescission" by the Plaintiff only came more than 7 months later and there is no reasonable excuse offered for the lapse of time. Upon a comparison of the actual selling price of the 8 flats (in Blocks A and D) between March and May 1982 listed in Messrs. A.G. Wilkinson's report and the assessed value of the same flats in Messrs. Jones, Lang Wootton's report, the assessed value in August 1982 is in general (apart from 3 exceptions) about 0.02% to 2.31% less than the actual selling price between March and May 1982. The difference grew larger to reach up to 5% and more after September 1982. Such a trend in the movement of market price of flats after mid-1982 was also corroborated by the oral testimony of the valuers. There was no sale completed in April 1982. There is also no evidence from any of the valuers as to the market value of the flat in April 1982. I shall take the market value of the flat on 5th April 1982 to be $771,889.00 (i.e. at the mean rate of 0.02% + 2.31÷2 over the assessed value in Messrs. Jones Lang Wootton's report.) The damages is thus awarded in the sum of $112,911.00 ($884,800.00 - $771,889.00).

9. The Plaintiff has been guilty of inordinate and substantial delay throughout the prosecution of its claim. The breach was committed in April 1982. The letter of "rescission" was sent in November 1982. These proceedings were commenced in April 1984. Defence was served in June 1984. The flat was sold in May 1985. Interlocutory judgment on admissions embodied in the Defence was only entered in February 1987. Notice of appointment for assessment of damages was taken out in June 1987. Though I do appreciate the Defendants would have the use of the money during the period of the Plaintiff's delay, it would not be just to allow the Plaintiff to benefit from its own delays. I am unable to find any reasonable excuse to explain such delays. I find a period of 3 months delay to be reasonably excusable in the circumstance of this case prior to commencing proceedings against the Defendant. As judgment was obtained on admissions embodied in the defence the delay after the close of pleadings to the date of applying for such judgment is not reasonable save to the extent of 1 month. The delay between the date of judgment and the date of filing notice of appointment for assessment is also unreasonable save to the extent of 1 month. Tn the premises I disallow interest for the following periods of delay:-

(a)    From 4th July 1982 (3 months after the date of the breach) to 13th April 1984 inclusive (the day before the date of the writ);

(b)    From 9th September 1984 (1 month after the date of close of pleadings) to 5th February 1987 inclusive (the day before the date of the summons under Order 27 Rule 3); and

(c)    From 28th March 1987 (1 month after the date of the interlocutory judgment) to 3rd June 1987 (the day before the date of the Notice of Appointment for assessment of damages).

10. The Plaintiff had undertaken at the time of obtaining judgment on 27th February 1987 not to enforce the provisions of Clause 4 of the Sale and Purchase Agreement dated 18th February 1981 which provided the contractual rate of interest to be at 5% per month from the date of default until payment. No evidence has been adduced by either party as to what rate of interest should be appropriate. The Plaintiff alleged that Clause 3 in the Third Schedule to the said Agreement which provided interest at the rate of 1.4% per month was applicable. I find the said Clause to be applicable only to a situation where there had been delay in completion under stipulated circumstances where the payment of the balance of the price is to be postponed. I do not find there to be any other contractual rate agreed by the parties in the said Agreement governing the present situation apart from Clause 4. The rate of interest applicable is thus to be assessed. In the absence of any evidence of any special loss, I find the judgment rate to be a reasonable rate to compensate the Plaintiff for the loss of use of the money. Upon the resale of the flat the Plaintiff was paid $66,322.00 on 3rd May 1985 and $596,906.00 on 15th July 1985. In the premises, interest at the judgment rate under S.49(1)(b) of Cap.10 is awarded, subject to the said 3 periods of delay which is disallowed as aforesaid, on the sum of $112,911.00 from 5th April 1982 until payment.

11. Despite obtaining a judgment on 27th February 1987 for an order that "the Plaintiff has lawfully forfeited all deposit and other monies paid by the Defendants in the total sum of $221,200.00 under the said Agreement", counsel for the Plaintiff conceded that such sums should be given credit to in assessing damages. It is abundantly clear that the Plaintiff is not entitled to forfeit part payments for the purchase price under a sale of land and claimed damages without taking the said part payments into account in the assessment. In the premises I have taken into account all the part payments made in the total sum of $221, 200.00 in my assessment.

12. The Plaintiff is to have the costs of the assessment with certificate for counsel to up to 30.6.1988. The dependants are to have their costs against the plaintiff from. 1.7.1988. up to and including 10.2. 1988 with certifrcate for counsel.