LEE SIU CHING v. TSEUNG SO CHING AND ANOTHER

HCMP 568/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 568 OF 2008

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ASSESSMENT OF DAMAGES

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1.  These proceedings arise out of a vendor and purchaser summons issued by the plaintiff as a result of a failed property transaction following the inability of one Wong Kin Chung (the vendor) to answer requisitions and show good title to a property in Kwun Tong the subject of a sale and purchase agreement signed by the plaintiff and the vendor on 29 June 2007 with a completion date of 31 December 2007.

2.  By consent, judgment was entered against the vendor on 18 December 2008 for, inter alia, breach of the agreement and damages to be assessed, including the conveyancing legal costs for investigating title.  The vendor has since died and the present defendants are the administrators of his estate and were substituted for the vendor on 17 August 2010.

3.  Mr. Li for the defendants has conceded the conveyancing legal costs of $40,700.00 leaving only the damages for breach of the agreement to be assessed by me.  He also agrees that the measure of damages for this is the difference between the market value at the date for completion and the contract price.  It is not in dispute that the contract price was $6,230,000.00.  I must therefore determine the market value of the property at 31 December 2007.

4.  The only witness called in the hearing was Mr. Law Kam Pui, Brian, who had prepared a valuation report for the plaintiff in March 2008 which he produced, together with some amendments and updating owing to the passage of time since then. Mr. Law is a member of the Royal Institute of Chartered Surveyors, since 1992, a member of the Hong Kong Institute of Surveyors and a Registered Professional Surveyor.  He has had nearly 20 years of post qualification experience and is an executive director of Prudential Surveyors International Ltd.  I accept that he is an expert in surveying and valuing.

5.  The property is described as Unit B (Rear Portion) on 5^th Floor of No. 169 Wai Yip Street, Kowloon, also known as Jone Mult Industrial Building, and is divided into seven smaller units named B1, B2, B2A, B3, B3A, B4 and B4A.  The total saleable area is 395.9 sq. m.  At 31 December 2007 all but two of the units were leased with a total monthly rental of $40,100.00.

6.  Mr. Law’s valuation approach is to take the sale prices of a number of comparable properties in the area, adjusting the prices by a number of formulae which I will come to shortly, and adding to that a sum to capitalize the rent for the unexpired period of the tenancies, to arrive at a market valuation. Although this approach, particularly the capitalization of the rent, was criticised by Mr. Li, it is noted that it is the same approach that was taken by the defendants’ expert, who, in the event, was not called to give evidence or to be cross-examined on his report.  Mr. Law also agreed with the defendants’ expert on his choice of comparables and incorporated them into his updated valuation.

7.  The method of calculation used was to take the sale price of each comparable, divide it by the saleable area to arrive at a unit rate per square metre, then adjust that by a percentage to reflect what Mr. Law considered the standard of building management and services, the age of the building, its location, a time adjustment using indices compiled by the Rating and Valuation Department of the Hong Kong Government, and the size of the property, larger properties having a lower unit rate.  He said in evidence that he would not make any adjustment for floor levels as few of these units are used for manufacturing purposes today but mainly as offices.  Thus while a lower floor would be more valuable as a factory unit for moving goods in and out, a higher floor would be more desirable as an office.  He therefore considered that the two would cancel each other out.  I accept that evidence and agree with the approach.

8.  In calculating the percentage adjustments, Mr. Law said that the figures he used for the standards of building management and services, and location, were his own personal views arrived at using his experience in this field over many years.  Similarly, he said that the 1% a year adjustment for age was arrived at the same way and he disagreed with Mr. Li’s suggestion that a more accurate figure was 0.25% a year.  I accept this evidence and find no reason to doubt the way these adjustments have been arrived at.  Mr. Li also questioned some of the other percentage adjustments, including the 5% for building services for item 5, a unit in the same building, although in an older part, as others which had been given 0%, and the percentage for location of item 10, and suggested that I should disregard these and others which were Mr. Law’s personal views.  I regret that I cannot do that.  I have accepted that Mr. Law is an expert in this field, and in a very inexact science such as this it is knowledge of the market generally and his experience that I have to rely on. While some figures to the untrained eye may seem slightly at variance with others, I am satisfied with Mr. Law’s explanations and the fact that these were arrived at by him properly and in accordance with his knowledge acquired over many years.

9.  The adjusted rates he calculated for all the comparables varied from a low of $12,527.00 a square metre to a high of $21,341.00 a square metre.  This gives an average unit rate of $17,025.00 a square metre.  He accepted that there are sometimes anomalies and frequently removed the lowest and highest valuations as possible anomalies.  He suggested that one might remove the two lowest valuations in his list and the highest one as possible anomalies, numbers 1, 10 and 11, leaving the range between $16,905.00 and $19,889.00 a square metre.  He also said that on reflection number 6 should not be there as, unlike the other comparables, it was tenanted.  If I were to do this, the average unit rate would rise to $17,523.00.  In my judgment it is fairer for both parties if I were to leave the list of comparables as it has been compiled by Mr. Law and the average unit rate of $17,025.00.

10.  It follows from this that I accept the evidence of Mr. Law and the revised calculations he has made as to the average unit rate.  I further have no cause to doubt the addition of the rental capitalization as calculated by him as a proper method of arriving at a final valuation as at 31 December 2007, which is $6,930,000.00.  Subtracting from this the contract price of $6,230,000.00 gives a sum of $700,000.00 and I accordingly find that this is the damage suffered by the plaintiff from the vendor’s breach of agreement to which must be added the sum of $40,700.00 being the legal conveyancing costs incurred.

11.  There will accordingly be judgment for the plaintiff for $740,700.00 with interest thereon at judgment rate from 1 January 2008.  There will also be an order nisi that the defendants pay the plaintiff’s costs of this assessment to be taxed if not agreed.