HO WAI CHING v. WONG SIU CHUNG AND ANOTHER

HCA No. 3521/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 3521 OF 1998

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ASSESSMENT OF DAMAGES

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Introduction

1. The defendants were the registered owners of the property known as Flat 16, 13th Floor, Man Yuen Building, No. 10 Man Yuen Street, Kowloon, Hong Kong ("the Property").

2. By a preliminary agreement written in Chinese language and made on 21st October 1997 between the defendants as vendors and the plaintiff as purchaser ("the Preliminary Agreement"), the defendants agreed to sell and the plaintiff agreed to purchase the Property at the price of $1,780,000.00.

3. By the Preliminary Agreement, the defendants also agreed to pay the estate agent, Manhing Fortune Property Agency ("Manhing"), a commission of $3,000.00. However, Mr Pedruco, counsel for the defendants, pointed out that the commission was wrongly stated as $3,000.00 in the Preliminary Agreement. The correct amount should in fact be $13,000.00.

4. In pursuance of the Preliminary Agreement, the defendants and the plaintiff entered into a formal written agreement for sale and purchase on 31st October 1997 ("the Agreement"), whereby the defendants and the plaintiff agreed to complete the sale and purchase of the Property on or before 21st February 1998.

5. By a letter dated 29th October 1997 from the plaintiff's solicitors to the defendants' solicitors, the plaintiff raised requisitions on the defendants' title to the Property. The plaintiff alleged that the cost of repair works done by the Buildings Department in respect of the Property together with interest accrued thereto were still outstanding.

6. By another letter dated 19th February 1998 from the plaintiff's solicitors to the defendants' solicitors, the plaintiff further objected to the defendants' title to the Property on the ground that there was an illegal structure erected at the Property in contravention of the Buildings Ordinance, Cap. 123.

7. By reasons of the matters aforesaid, the plaintiff refused to complete the purchase in accordance with the Agreement on 21st February 1998, and issued the Writ of Summons herein on 7th March 1998 to claim against the defendants, inter alia, for:-

(1) A declaration that the plaintiff had effectively rescinded the Agreement;

(2) Repayment of the deposit of $356,000.00 paid by the plaintiff to the defendants together with interest;

(3) Damages in the sum of $47,150.00;

(4) Interest; and

(5) A declaration that the plaintiff was entitled to a lien on the Property for the said deposit and interest as well as the costs and expenses incurred by the plaintiff in or about the sale and purchase of the Property and the costs recovered by the plaintiff in this action.

8. The plaintiff also caused the registration of the sealed copy Writ of Summons and certified true copy Statement of Claim against the Property at the Land Registry on 9th March 1998 and 31st March 1998 under memorial nos. 7428144 and 7445565 respectively.

9. On 25th May 1998, the defendants filed a Defence and Counterclaim (which was amended on 14th October 1998), whereby the defendants denied the plaintiff's claims and counterclaimed against the plaintiff, inter alia, for:-

(1) A declaration that the plaintiff had wrongfully repudiated the Agreement;

(2) A declaration that the Agreement had been effectively rescinded by the defendants by accepting the plaintiff's wrongful repudiation of the same;

(3) A declaration that the defendants were entitled to forfeit the deposits and part payment of the purchase price of the Property in the sum of $356,000.00 or part thereof paid by the plaintiff to the defendants;

(4) Further and alternatively, damages for the plaintiff's breach of the Agreement by wrongful repudiation of the same as the sum of $80,600.00 and continuing loss of rental at $8,600.00 per month, and/or damages pleaded in paragraph 25(b) of the Defence and Counterclaim;

(5) Interest pursuant to s. 48 of the High Court Ordinance, Cap. 4; and

(6) Further or other relief.

10. Paragraph 25(b) of the Amended Defence and Counterclaim stated that the defendants had suffered loss and damages as follows:-

(1) Wasted conveyancing expenses in the sum of $9,500.00;

(2) Payment as estate agent commission in the sum of 3,000.00;

(3) Further or alternatively, loss of bargain being the difference between the price of the Property or comparable property at the time to be decided by the Court.

11. On 8th November 2000, Yeung J. ordered that the plaintiff's claim be struck out for want of prosecution and judgment was entered against the plaintiff on the following:-

(1) A declaration that the Plaintiff had wrongfully repudiated the Agreement;

(2) A declaration that the Agreement had been effectively rescinded by the defendants' accepting the plaintiff's wrongful repudiation of the same;

(3) A declaration that the defendants were entitled to forfeiture of the deposits and part payments of the purchase price of the Property in the sum of $356,000.00 paid by the plaintiff to the defendants; and

(4) Damages to be assessed.

12. On 29th March 2001, as a result of the said judgment of Yeung J., I gave an order that the registration of the sealed copy Writ of Summons and certified true copy Statement of Claim at the Land Registry as aforesaid be vacated.

13. The assessment of damages was heard before me on 2nd April 2001.

The defendants' claims

14. At the hearing on 2nd April 2001, Mr Pedruco on behalf of the defendants submitted that the defendants were claiming the following loss and damages:-

(1) Agent's commission - $13,000.00;

(2) Legal costs including disbursements on sale of the Property - $11,130.00;

(3) Compensation to former tenant - $30,000.00;

(4) Rates and/or government rent - $11,934.30;

(5) Management fees from March 1998 to March 2001 at $380.00 per month - $14,060.00;

(6) Decrease in the value of the Property - $990,000.00;

(7) Costs of repairs and maintenance - $33,000.00.

15. Mr Pedruco, however, conceded that if the Court were to assess damages by reference to the decrease in value of the Property, the defendants would not be entitled to claim the aforesaid items (1) to (3). Mr Pedruco also conceded that the defendants had to give credit to the deposits of $356,000.00 received by the defendants.

16. Moreover, Mr Pedruco also confirmed that the defendants would not claim for the loss of rental income for the Property.

Evidence

17. Mdm Ho Mei Ho, the 2nd named defendant, gave evidence at the hearing on 2nd April 2001. She adopted the contents of her Affirmation made on 28th March 2001. She testified that she had to pay the government rent and rates from March 1998 to March 2001 in the sum of $11,934.30 (supported by exhibit "HMH-2" in the said Affirmation). She also testified that she had to pay the management fees from March 1998 to March 2001 at $380.00 per month amounting to $14,060.00. In addition, Mdm Ho also produced two credit advices (marked as exhibits HMH-10 and HMH-11 respectively) to confirm that she had paid a total sum of $33,000.00 to the Incorporated Owners of Man Yuen Building as the costs of repairs and maintenance for the Property. If the plaintiff had completed the purchase of the Property on 21st February 1998, the defendants would not have incurred all these expenses.

18. There is also a valuation report dated 15th March 2001 and prepared by Accuracy Estate Surveying Co. (exhibit "HMH-8") produced by the defendants to confirm the open market value of the Property on 15th March 2001 was at $790,000.00.

19. Mdm. Ho testified that she and her husband, i.e. the 1st named defendant, did not live in the Property, but in Mainland China. They let the Property to a tenant at the rate of $8,600.00 per month from January 1997 onwards. As a result of the sale of the Property to the plaintiff, the defendants had to request the tenant to move out of the Property before 30th December 1997. The defendants finally had to pay compensation in the sum of $30,000.00 to the tenant for the tenant to move out on or about 20th December 1997. The defendants could not then let or sell the Property because of the registration of the sealed copy Writ of Summons and certified true copy Statement of Claim at the Land Registry against the Property.

20. Mdm. Ho also testified that she and her husband were not aware of the Judgment of Yeung J. until January 2001 when her husband returned from Thailand to Hong Kong. It was only in January 2001, when her husband was asked by their solicitors to get a valuation report of the Property for the purpose of assessment of damages. The valuation report, i.e. exhibit "HMH-8", was available only on 15th March 2001.

21. The defendants therefore claim for $990,000.00 being the difference between the purchase price of $1,780,000.00 and the market value of the Property on 15th March 2001 estimated at $790,000.00 together with the aforesaid expenses as their loss and damages. The defendants, however, will give credit to the plaintiff for the deposits of $356,000.00.

Assessment

22. The normal measure of damages is the contract price less the market price at the contractual time fixed for completion (see McGregor on Damages, 16th ed., para. 992 and Laird v. Pim (1841) 7 M. & W. 474).

23. In this case, however, the plaintiff had registered the Writ of Summons and the Statement of Claim at the Land Registry since March 1998. The registrations were only vacated on 29th March 2001. I accept that during the period when there were such registrations against the Property, the defendants could not resell or let the Property to another party. The Property was also of no use to the defendants as they had moved to live in the Mainland China. Thus, I think it is justified for the defendants to claim damages representing the loss suffered by the defendants during the period when there were such wrongful registrations at the Land Registry against the Property. The measure of damages I adopt is therefore the difference between the contract price and the market value at the time when the defendants could reasonably vacate the wrongful registrations at the Land Registry.

24. I accept that the defendants were only aware of the Judgment of Yeung J. in January 2001 and they had done their best to obtain the valuation report on 15th March 2001 and vacate the registrations on 29th March 2001. It is a known fact that the property price in Hong Kong had dropped tremendously during the period from 1998 to 2000. In the absence of evidence to the contrary, I accept the valuation in the said valuation report and find that the market value of the Property on 15th March 2001 was at $790,000.00. I do not think that the market value of the Property would have any significant change from 15th March 2001 to 29th March 2001. Hence, I assess the market value of the Property on 29th March 2001 also to be at $790,000.00. Thus, based on the measure of damages I adopt as aforesaid, the loss suffered by the defendants is in the sum of $990,000.00 ($1,780,000.00 less $790,000.00).

25. The defendants are also entitled to claim incidental expenses which have necessarily flowed from the breach of contract as their consequential losses (see McGregor on Damages, supra, para, 994 and York Glass Co. v. Jubb, (1926) 134 L.T. 36). I find that the government rent and rates, the management fees and the costs of repairs and maintenance claimed by the defendants are such consequential losses and they are entitled to recover the same from the plaintiff.

26. I also find that the defendants had done their best to mitigate their losses, as they had applied to vacate the registrations as soon as they learned about the Judgment of Yeung J.

27. I, however, will not make any award for the agent's commission, legal costs and disbursements for the sale of the Property, compensation to the tenant as well as the loss of rental income as conceded by Mr Pedruco.

28. The defendants, of course, will have to give credit to the plaintiff for the deposits of $356,000.00 received by them.

29. In the premises, I assess the defendants' loss and damages in the sum of $692,994.30 as follows:-

Decrease in value of the Property	$990,000.00
Government rent and rates	$11,934.30
Management fees	$14,060.00
Costs of repairs and maintenance	$33,000.00
LESS: Deposits received by the defendants	$356,000.00
Total:	$692,994.30

Interest

30. Mr Pedruco asked for interest on the decrease in value of the Property from the intended completion date till the date of judgment and interest on the other sums from the date of judgment.

31. As I have not used the intended completion date, but the date when the registrations at the Land Registry were vacated, to assess the damages, the amount of damages was consolidated only on 29th March 2001. The defendants are therefore not entitled to have interest from the intended completion date, but from 29th March 2001 on the decrease in value in the sum of $990,000.00 less the deposits of $356,000.00.

32. Thus, I find that the defendants are entitled to have interest on the sum of $634,000.00 at judgment rate from 29th March 2001 to the date of this judgment pursuant to s. 48 of the High Court Ordinance, Cap. 4.

33. It is not necessary to order interest for any sum from the date of this judgment, because it will be covered by s. 49 of the High Court Ordinance, Cap. 4.

Order

34. Accordingly, I enter judgment for the defendants against the plaintiff for the sum of $692,994.30 together with interest on the sum of $634,000.00 at judgment rate from 29th March 2001 to the date of this judgment.

35. I also make an order nisi that the defendants do have the costs of the assessment, to be taxed if not agreed, and the order shall be made absolute after the expiration of 14 days from the date of the judgment.

36. Mr Pedruco asked for certificate for counsel, but it is not necessary to give such a certificate as the assessment was heard in open court. Nevertheless, for the avoidance of doubt, I order that there be certificate for counsel.