LUI CHUN WAI v. TSAN HING CHUNG

HCA 20373 of 1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 20373 OF 1998

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Assessment of Damages

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1. This assessment arises out of an aborted sale and purchase of a flat in To Kwa Wan ("the suit premises"). The suit premises is an old type tenement flat constructed in or about 1959. It is located above some shops, on the 5th floor of a 7-storey building. It is about 605 square feet. The address is 5/F, No 81 Tam Kung Road, Kowloon, Hong Kong.

2. The defendant agreed to buy the plaintiff's flat for $1,430,000 Hong Kong dollars. The agreement for sale and purchase was dated 30 October 1997. The defendant had paid the sum of $143,000 by way of deposit. Completion was originally due to take place on or before 26 November 1997. By mutual agreement the date of completion was postponed to December 1997. The defendant failed to complete. The plaintiff accepted the defendant's reputation, and forfeited the deposit.

3. The plaintiff was unable to resell the suit premises until 7 October 1998 for $700,000. The plaintiff now claims damages.

McGregor on Damages 16th edition states at paragraph 992 :-

"The normal measure of damages is the contract price less the market price at the contractual time fixed for completion."

4. This measure was first stated in Laird v Pym by Baron Parke, (1841) 7M&W474.

5. The case of Johnson v Agnew [1980] AC 367 established that in certain circumstances damages may be assessed by reference to the value of the property at a date other than the contractual date fixed for completion.

6. Barnsley's Conveyancing Law and Practice 4th edition at page 657 is relevant and helpful on this point.

"(b) Date for assessment for damages

At common law damages for breach of contract, whether claimed by the vendor or purchaser, are assessed as a general rule at the date of the breach. This follows from the basic principle considered on page 654 that damages are compensatory. Nevertheless, a rigid application of this rule is likely to cause severe hardship during times of high inflation, leaving an injured party considerably out of pocket by the time his case comes to trial. The problem is well illustrated in Wroth v Tyler, where property bought for ￡6000 in 1971 was worth ￡7700 at the time of the breach (the completion date) and had risen in value to ￡11,500 by the date of the judgment some 15 months later.

The House of Lords has now hold in Johnson v Agnew that the common law rule is not inflexible. The court has power to fix such other date for assessment as is appropriate to avoid injustice to the innocent party. Depending on the circumstances the date selected may be the date of the hearing, the date when the contract is finally lost, or some other date. In one case the court moved back the date for valuing the property one year before the judgment date because of the purchaser's tardiness in bringing proceedings to a conclusion. In other situations the appropriate date for calculation will clearly be the date of breach and not any later date, eg where the property decreases in value after a wrongful repudiation."

7. The plaintiff was the only witness. He said in evidence that despite the efforts of his estate agent Bo Yee Realty Agency Co., and despite his reduction of the asking price, and despite arranging the suit premises to be put on sale with vacant possession to make it more marketable, no one made an offer at all until the latter part of 1998. The plaintiff struck a deal with the first people who showed an interest in the suit premises after the defendant's breach. In August 1998, a couple called Mr. Chan and Miss Lee made an offer an offer of 700, 000. The plaintiff agreed to sell the property for that sum. It was the best price the plaintiff could obtain.

8. The plaintiff produced a valuation report by Memfus Wong Surveyors Ltd. dated 27 May 1999. In that report the surveyors estimated the open market value of the suit premises as at 7 October 1998 (the date of the resale) to be HK$800,000. That sum is HK$100,000 more than the resale price obtained by the plaintiff.

9. Memfus Wong's report was written without having inspected the interior of the suit premises. The surveyors were not instructed until months after the resale. The report states that comparables had been used, but gave no details of the comparables. It was not clear which comparables had been selected and why. As a result, the HK$800,000 can at best be only a "guestimation".

10. I found the plaintiff to be a straightforward and believable witness. I accept his evidence that the offer in August 1998 was the only offer he had received since the defendant's breach in December 1997. The plaintiff said that he was worried that the property market would slide down even more. (Judicial notice can be taken of the fact that there was a great slump in the Hong Kong property market from the end of 1997 due to the Asian Pacific region's economic downturn.) As the seller of an older tenement type property he felt that he was at greater risk to a volatile market. The plaintiff said that his property was in need of repair, and the prospective purchasers had used that as a bargaining chip to his detriment.

11. Having considered the contents of the surveyor's report, and all the available evidence I was satisfied that it was reasonable for the plaintiff to have sold the suit premises on 7 October 1998 for HK$700,000.

12. I find that a case has been made out for damages to be assessed by reference to the value of the property at a date other than the completion date. The economic downturn at the material time was wholly unexpected and unprecedented. The plaintiff had shown that he had down all he could to mitigate his damages in a hostile environment.

13. In these circumstances I find the quantum of damages to be the contract price less the resale price and the amount of deposit paid (that is HK$1,430,000 - HK$700,000 - HK$143,000) = HK$587,000.

14. This sum of HK$587,000 shall carry interest at judgment rate from the date of the writ 28 November 1998 to 25 April 2000, and until payment.

15. The costs of the plaintiff's Affirmation dated 20 April 2000 shall be borne personally by the solicitors for the plaintiff. Through counsel, an opportunity was given for the solicitors pursuant to Order 62 r8, to address the Court on why such an order should not be made. The offer to address the Court on this issue was declined.

16. In these circumstances the Costs order will be: save and except for the costs of the Affirmation of the plaintiff dated 20 April 2000, the defendant shall pay to plaintiff's costs to be taxed if not agreed, and with certificate for counsel.